Tuesday, September 25, 2012

ARIZONA DAILY STAR: MEXICAN MIDDLE CLASS FLOWERS AS U.S. MIDDLE CLASS WITHERS. MEANWHILE ARIZONA'S NEW RACIAL-PROFILING-BASED STOP-AND-SEARCH LAWS ARE DRIVING LEGAL, AS WELL AS ILLEGAL, MEXICAN ALIENS WITH EXPERTISE LEARNED IN THE U.S. TO TAKE THEIR SKILLS BACK SOUTH OF THE BORDER, WHERE THEY WILL BE PRACTICALLY GUARANTEED A JOB ...AND A HOME!



Booming economy overshadowed by Mexico's violence


Go to original

Tucson Mayor Jonathan Rothschild, left, and Phoenix Mayor Greg Stanton, center, are hoping to lure trade through Arizona. Rogelio Granguillhome, a Mexican international development official, is at right.























September 23, 2012 12:00 am  • 

Overshadowed by drug violence, Mexico's emerging economy surprises many.

Forbes Magazine reports that Mexico is "the little darling of emerging market investors" and poised to become Latin American's largest economy, surpassing Brazil.

"Stars appear to be increasingly aligned for an economic outperformance" by Mexico, says a report by Nomura Securities, cited in The New York Times. "A changing of the guard is slowly but surely taking place."

Most headlines around the globe for the past six years have focused on outgoing president Felipe Calderón's war with the drug cartel.

"The sight of miles upon miles of factories outside the industrial capital of Monterrey attracts far less attention than the image of nine bodies hanging from a bridge in the border city of Nuevo Laredo," the Times wrote.

In his final state-of-the nation report earlier this month, Calderón defended his war and cited the government's programs that helped turn Mexico's economy.

A huge investment in infrastructure - from airports to seaports, highways and railroads - boosted trade and caught the eye of manufacturers from around the world.

With better infrastructure came better manufacturing jobs.

Calderón said more than 2 million jobs were created during his six years in office.

The economic downturn in the United States and anti-illegal immigrants sentiments in states such as Arizona also sent many Mexicans home.

That boosted the middle class, analysts say, as those workers put their U.S.-learned skills toward opening businesses or working in manufacturing plants.

This, in turn, attracted retailers such as Walmart, Costco, Home Depot and Sam's Club to open stores in Mexico.

"Not only is Mexico doing better, macroeconomically speaking, than the false stereotypes would have us think, Mexico is actually doing better than the United States," Richard Fisher, president of the Federal Reserve Bank of Dallas told The Washington Post.

In their report, "Mexico: A Middle Class Society, Poor No More, Developed Not Yet," economists Luis De La Calle and Luis Rubio of the Mexico Institute at the Woodrow Wilson Center for Scholars, discuss the impact of this growth.

"The implications of this change are immeasurable, and among its consequences is the appearance of a society that values stability and demands more accountability from its authorities," they wrote. "The rise of the Mexican middle class is the most relevant development of the last decade in the country.

"Therefore, the consolidation of this sector is perhaps the most important issue on the agenda for the future."

Contact reporter Gabriela Rico at grico@azstarnet.com or 573-4232.


STAR SPECIAL REPORT: SONORAN ECONOMY OUTPACING ARIZONA'S

Southern Arizona scrambling for Sonora business

NEIGHBORING STATES WOOING MEXICAN COMPANIES WITH PROMISES OF EASIER ENTRY INTO THE US
Go to original

Porfirio Lopez Miranda is part of a construction crew that is building a planned community of middle-income homes in Guaymas, Sonora, that includes underground utilities. Similar housing projects are going up in Nogales, Sonora, and Hermosillo.


























September 23, 2012 12:00 am  • 

Port of Guaymas
It is the fastest-growing state with the fastest-growing middle class in Mexico.

In 2011, its economy grew 7.5 percent and a housing boom - unlike anything seen in the region for decades - is under way.

Now Sonora's aerospace, medical, automotive and produce industries are being wooed by Arizona's neighboring states with promises of faster and friendlier entry into U.S. markets.

Faced with the threat of losing a vital economic opportunity, Southern Arizona political and business leaders are trying to build relationships and secure deals in Mexico.

Tucson Mayor Jonathan Rothschild recently conducted a trade mission to Mexico, determined to show his southern neighbors that the city and region want to be business partners.

"We have got to stop dithering," the mayor said after his visits to Guaymas, Hermosillo and Mexico City. "We're going to see our community shrink and our economy shrink if we don't work on every economic advantage we have … such as being the closest large city north of Sonora."

Rothschild said it was "eye opening" to visit the manufacturing sites in Sonora and see the level of sophistication and the number of international companies operating there.

For part of his visit, Rothschild was joined by Phoenix Mayor Greg Stanton, who had a large group of city leaders in tow.

"We're competing with California and Texas, but we're also competing with Phoenix," Rothschild said.

If warehousing, shipping or intermodal facilities aren't plentiful in this region, manufacturing companies in Sonora could simply change routes and bring goods into the U.S. through ports of entry where they are being courted with incentives such as twin plant operations and investments in technology.

"They can head west, they can head east or they can drive right through," Rothschild said. "They don't need us."

Relationship worth billions

Mexico is now the No. 1 maker of television screens in the world and exports more cars than Japan, Korea or Germany.

In Hermosillo, Ford Motor Corp., is doubling production and hiring 1,000 workers to build the new Fusion model that will roll out of the factory this year.

Forty-three countries have trade agreements with Mexico and The World Bank says the country outranks China, India and Brazil for ease of doing business.

A recent example: In July, British turbine manufacturer JJ Churchill signed a lease for a new, $9.6 million plant in Guaymas, Sonora. One month later, the land was being cleared and prepped for the facility.

The Port of Guaymas, which received its first shipment of container cargo in February, is doubling its size and capacity by expanding into the bay with neighboring Empalme.

And just on the other side of the border in Nogales, Sonora, houses with underground utilities are popping up in planned communities to accommodate the growing middle class working in the manufacturing industry.

Southbound, Arizona's top export partner is Mexico.

Of the $17.7 billion in exports from Arizona last year, $6 billion went to Mexico; $2 billion to Canada and $1 billion to China, the Arizona Commerce Authority said. The amount of other countries' imports of Arizona goods are in the millions of dollars.

Unlike China, Mexico relies on U.S. distributors for manufacturing materials.

"Most of the $6 billion worth of trade is in materials that go to those factories and operations," said Fernando Jimenez, the Commerce Authority's international trade and investment vice president. "We're really plugged in to the supply-chain part."

He said for every $1 million worth of exports, 14 to 16 jobs are supported or created in the exporting state.

"That's paying the bills on this side," Jimenez said. "We tend to forget that we are in an exciting geographical location."

Rising transportation costs and a desire for more oversight has high-tech manufacturers pulling plants out of China and opting for "nearshoring" in Mexico.

"This is a real opportunity for us," Luis Felipe Seldner III, president of Tucson-based The Offshore Group, told the mayor and his entourage during their visit to the company's industrial parks. Offshore operates manufacturing plants in Mexico and is the largest private-sector employer in Sonora.

"When it comes to low-skill, high-volume manufacturing, we can't compete with China," Seldner said, referring to items such as T-shirts and toys. "But in the highly skilled manufacturing arena, Mexico is getting some attention."

Competing for Mexico

Although expansion of the Mariposa Port of Entry in Nogales is under way, the state is way behind the infrastructure improvements in other border states.

For years, the commercial port has been plagued by bottlenecks and long lines of idling trucks, especially during the peak produce season.

And Mexico's coveted produce industry is something Texas is trying to lure.

Earlier this year, the Rio Grande Valley's congressional delegation was successful in lobbying the USDA to allow McAllen, Texas, to construct border facilities that blast fruits and vegetables with a beam of electricity to kill pathogens and pests versus using heat, which reduces the produce's shelf life.

"The difference between Texas and Arizona is that Texas is very focused on the economic impact that their ports have," Nogales Port Director Guadalupe Ramirez said. "They are very aggressive in courting new business."

Jaime Chamberlain, president of Nogales, Ariz.-based J-C Distributing Inc. and past chairman of the Fresh Produce Association of the Americas, cringes at the contrast between the two states.

"We need to be talking about economics and how to make our state and region stronger," he said. "Arizona's thinking is really small. We have made ourselves the state of controversy."

Chamberlain said any significant loss of produce suppliers to Texas could devastate Southern Arizona.

"I have a 100,000 square-foot building here and if it becomes easier for me to do business in McAllen, Texas because their port is open 24 hours a day, then I'll move to Texas and take my $80 million worth of business with me," he said. "And I'm just one."

Ramirez is hopeful the expansion of the port will keep Arizona competitive and become a 24-hour operation.

"The new facility gives Arizona a fighting chance to keep the business we have and recruit more," he said. "When the economy is in the state that it's in, your ports of entry can help spark things."

Renewed focus

The one clear message that Mayor Rothschild said he got from his visit south of the border was that Southern Arizona has much to gain - and lose - as Mexico's economy continues to grow.

He wants to restart the effort to develop a regional logistics hub.

For more than a decade, the city operated Puerto Nuevo, a project to create a site where trade from Mexico could be received and stored, then shipped by rail or truck throughout the country.

That effort folded in 2007 and the city handed the project to Tucson Regional Economic Opportunities, Inc.

A year later, TREO unveiled a "strategic map" to highlight the logistics companies operating in the area with the hope of luring more of those businesses to the region, but the recession pulled TREO's attention in other directions.

More than 150 companies in the Tucson area specialize in trade logistics, from warehouse operations to intermodal facilities.

On Tucson's southeast side, the Port of Tucson to many validates the viability of turning Tucson into an inland port. The 16-year-old port has added warehouses and rail and is again expanding.

Tucson City Manager Richard Miranda wants to hire an international business expert who understands the relationship with Sonora and its potential impact on Tucson.

"We are now seeing some cautious recovery and making some investments in Sonora makes sense," he said. "It's important for me to have someone in city hall. We need to send the message that Tucson is open for business."

One step being spearheaded by the city is trying to secure a direct flight from Tucson to different cities in Mexico.

Along with TREO, city leaders are negotiating with a Mexican airline to fly in and out of Tucson International Airport. City and state officials in Sonora are also looking at offering incentives for airlines to restart those flights.

TIA lost its last direct flight to Mexico in 2008.

"There's a lot of buzz about logistics right now," TREO CEO Joe Snell said. "We were on that path, then the recession put things on hold. Now, the timing is right and there's renewed interest.

"The mayor's visit was the tip of the spear."

Potential benefits

A study by Princeton, N.J.-based The Boyd Co. Inc. says Pima County could add more than 5,000 jobs with wages and salaries totaling more than $200 million annually by 2030 if the region created an inland port by recruiting more logistics companies to the region.

And the Metropolitan Tucson Convention and Visitors' Bureau estimates that Mexican visitors to Arizona's malls, restaurants and hotels spend more than $1 billion each year.

Business leaders say it's critical for politicians to join the private sector in pushing for more staffing at the ports of entry in Nogales to ease the entry of trade and tourists.

"All city and county governments should be lobbying hard to insure funding for the new Mariposa Port of Entry," said Michael Hammond, president and CEO of Picor Commercial Real Estate Services, which does extensive business in Mexico.

"The average time to cross into the U.S. should be 10 minutes or less," he said. "If so, we would see an impact in retail sales immediately."

The man overseeing the northern flow of trade and tourists at the Nogales ports of entry would like to do just that.

"As residents of Arizona, we have to recognize that economic indicators show that there should be more trade and travel," Ramirez said. "The ports of entry are your front door."

He said it's "inevitable" the new port become a 24-hour operation.
"It's too large of an investment," Ramirez said.

Rothschild said he plans to spearhead advocating for increased port staffing and hours of operation by lobbying Arizona's congressional representatives. If need be, the mayor plans to go to Washington, D.C., to make the case for funding.

"If a large part of a mayor's job is to help stimulate the economy then I have to focus on those areas where our region has an advantage over other regions," he said. "It's silly for a region of 1 million people to cut itself off from another region of 1 million people."

By the numbers

Princeton, N.J.-based The Boyd Co. Inc., outlined the impact on Pima County if the region were to create an inland port to receive, store, transfer and ship trade throughout the country or recruit more logistics operations into the area:
• 4,292 additional jobs by 2020
• 5,236 additional jobs by 2030
• $165 million in annual wages and salaries by 2020
• $202 million in annual wages and salaries by 2030
Editor's note

Sonora's growing economy and middle class will have a significant impact on Southern Arizona. The Star will publish an occasional series on the subject in the coming months.

Contact reporter Gabriela Rico at grico@azstarnet.com or 573-4232.


MONDAY, SEPTEMBER 24, 2012                                                                                 Permalink

As Anti-Immigrant "Papers" Law Takes Effect, Jeff Biggers on Arizona, the "State Out of the Union" 



Last week a federal judge lifted an injunction against a key component of Arizona’s controversial anti-immigrant law, S.B. 1070, requiring police to check the immigration status of people they stop before releasing them. On Saturday, hundreds of protesters marched in Phoenix to protest the law, which they say enables racial profiling. As the "show me your papers" law goes into effect, we’re joined by journalist Jeff Biggers, author of the new book, "State Out of the Union: Arizona and the Final Showdown Over the American Dream." [Original includes rush transcript] 

Guest: Jeff Biggers, journalist and author of several books, most recently, State Out of the Union: Arizona and the Final Showdown Over the American Dream.

Monday, September 24, 2012

DISTINGUISHED RESEARCH PROFESSOR OF ECONOMICS, MICHAEL HUDSON, DESCRIBES BEN BERNANKE'S QE3 AS "BASICALLY A PROGRAM FOR THE FEDERAL RESERVE TO GIVE MONEY TO THE BANKS UNTIL BEETHOVEN WRITES HIS 10TH SYMPHONY. THERE IS NO CONNECTION TO EMPLOYMENT WHATSOEVER."


 theREALnews                                                                               Permalink
September 23, 2012

Michael Hudson: QE3 Another Fed Give Away to the Banks

Shoveling money to the banks not meant to create jobs, it’s a way to give banks even more speculative capital and prepare them for another meltdown


More at The Real News

Bio

Michael Hudson is a Wall Street Financial Analyst, Distinguished Research Professor of Economics at the University of Missouri, Kansas City and author of Super-Imperialism: The Economic Strategy of American Empire (1968 & 2003), Trade, Development and Foreign Debt (1992 & 2009) and of The Myth of Aid (1971).

O.K. NOW LISTEN TO A PROMINENT REPUBLICAN ECONOMIST'S TAKE ON QE3






David Stockman on Federal Reserve Arrogance and Monetary Mission Creep! 

http://youtu.be/6QBiaq9OBgc

Published on Sep 21, 2012 by CapitalAccount 

Follow us @ 
http://twitter.com/laurenlyster 
http://twitter.com/coveringdelta 

Welcome to Capital Account. Now that the Fed has announced QE3 and Japan announced QE 8, Brazil is threatening defensive measures and bringing talk of Currency wars back, according to multiple press reports. Brazil's finance minister coined the term 'Currency Wars' two years ago as governments battled to lower exchange rates to boost competiveness. We talk to David Stockman, former director of the Office for Management and Budget during the Reagan administration, about the malignant effects of Federal Reserve policy and the lack of market-set interest rates! 

Our guest, David Stockman, author of "The Triumph of Politics," recently had some choice words Federal Reserve, stating:"The Fed (and the lunatics that run it) are telling the whole world untruths about the cost of money and the price of risk." We talk to him about monetary policy, taxes, sound money, and more. 

Plus, the U.S. Senate panel probing JP Morgan's multibillion dollar 'Whale Trade' loss plans to unveil its findings to press regulators to tighten the Volcker Rule. We ask David Stockman if this would be enough to rein in too big to fail bank risk. 

Also we launch our Facebook page today! Check it out at www.facebook.com/pages/Capital-Account. Lauren shows off the new page and discusses your comments in Viewer Feedback. 

Saturday, September 22, 2012

THIS SHOULD BE REQUIRED READING FOR ALL AMERICANS. PAUL CRAIG ROBERTS IS THE EPITOME OF THE "MAN FOR ALL SEASONS." AS RONALD REAGAN'S HIGHLY QUALIFIED ASSISTANT SECRETARY OF THE TREASURY FOR POLICY, HE REIGNED IN THE STAGFLATION THAT AROSE ON JIMMY CARTER'S WATCH AND ADVISED REAGAN'S ARMS RACE THAT BROUGHT DOWN THE SOVIET UNION WITHOUT A SHOT FIRED. SUBSEQUENTLY, ROBERTS TOOK UP A COMFORTABLE POSITION AS A WALL STREET JOURNAL EDITOR, ONLY TO FORFEIT IT WHEN HE BEGAN TO RECOGNIZE -- AND PUBLICLY DECRY -- THE FACTS THAT THE MILITARY/SECURITY COMPLEX AND GLOBAL CORPORATIONS HAVE NOT ONLY BECOME CRIMINALS ABOVE THE LAW, BUT HAVE LITERALLY TAKEN CONTROL OF THE U.S. GOVERNMENT, TURNING IT INTO A POLICE STATE EVEN WORSE THAN STALIN'S.


WORLD WITHOUT TORTURE: THE RESPONSIBILITIES OF THE WEST



Paul Craig Roberts was interviewed by Nilantha Ilangamuwa, editor of Torture, a print and online magazine published by the Asian Human Rights Commission based in Hong Kong and the Rehabilitation and Research Centre for Torture Victims in Denmark. Torture: Asian and Global Perspectives is a new initiative which focuses on torture and its related issues globally. Writers interested in having their research on this subject published, may submit their articles to torturemag@ahrc.asia

TORTURE
August 2012

WORLD WITHOUT TORTURE: THE RESPONSIBILITIES OF THE WEST

Dr. Paul Craig Roberts was educated at Georgia Tech, the University of Virginia, the University of California, Berkeley, and Oxford University where he was a member of Merton College. He has been the Assistant Secretary of the US Treasury in the Reagan administration, a member of the US Congressional staff, an associate editor and columnist for the Wall Street Journal, and a columnist for Business Week, the Scripps Howard News Service, and Creators Syndicate. He was also a Senior Research Fellow for the Hoover Institution at Stanford University and was appointed to the William E. Simon Chair in Political Economy at Georgetown University’s Center for Strategic and International Studies. He is currently the chairman of the Institute for Political Economy and has authored or coauthored ten books and numerous articles in scholarly journals. He has testified before committees of Congress on 30 occasions. Dr. Roberts was awarded the US Treasury’s Meritorious Service Award for “outstanding contributions to the formulation of US economic policy,” and France’s Legion of Honor as “the artisan of a renewal in economic science and policy, after half a century of state interventionism.”

NI: You worked at the US treasury as Assistant Secretary during the Reagan administration, when the world economy changed towards neo-liberalism, and you are famous for being a co-founder of Reaganomics. How did this happen? What was your contribution to changing the model of world economy?

PCR: Reaganomics is a term the media attached to an innovation in economic theory and policy known as supply-side economics. Supply-side economics is not an ideology and it is not neo-liberalism.

I do not think that the Reagan administration changed the model of the world economy or that the administration thought of itself as neoliberal. What the Reagan administration did was to change the macroeconomic policy that had prevailed in the post-war English speaking world. That policy, known as Keynesian demand management, relied on government fiscal policy and monetary policy in order to maintain full employment and low inflation. If unemployment was the problem, government would enact a budget deficit and the central bank would expand money and credit. The monetary and fiscal stimulus would boost aggregate demand, and the increased spending would raise the level of employment. If inflation was the problem, the government would enact a budget surplus and the central bank would reduce the growth rate of money and credit.

This was how the policy was supposed to work. For example, in the early 1960s US economists understood the reduction in marginal income tax rates championed by President John F. Kennedy as a stimulus to consumer demand. Prior to Reagan, economists did not understand that fiscal policy could increase or decrease aggregate supply.

The demand management policy broke down during the Carter presidency. Each boost to employment had to be “paid for” with a higher rate of inflation, and each attack on inflation had to be “paid for” with a higher rate of unemployment. These worsening trade-offs became known as “stagflation.”

The only economists who had an answer to the problem of stagflation were the few supply-side economists of which I was one. Supply-side economics was an innovation in economic theory and in economic policy. Supply-side economists said that fiscal policy directly impacts aggregate supply. For example, a reduction in marginal tax rates (the rate of tax on additional income) changes important relative prices. It makes leisure more expensive in terms of foregone current income, and it makes current consumption more expensive in terms of foregone future income. Therefore, a reduction in marginal tax rates does not merely increase consumer demand. The lower tax rates result in an increase in labor and investment inputs, and aggregate supply increases. The demand management policy had stimulated demand, but the high marginal tax rates discouraged or made weaker the response of supply to demand. Therefore, prices rose. Supply-side economists said that the solution to stagflation was to change the policy mix: a tighter monetary policy and a looser fiscal policy. In other words, reduce the monetary stimulus and increase the supply incentives.

The policy worked, and the worsening “Phillips curve” trade-offs between employment and inflation disappeared. President Reagan had two main goals: to end stagflation and to end the Cold War. He campaigned on the supply-side policy. In order to get the policy implemented, he appointed me Assistant Secretary of the Treasury for Economic Policy. Later he associated me with his second goal by appointing me to a secret committee. Reagan thought that the Soviet economy was too decrepit to withstand the stress of a high-tech arms race. He believed that by threatening the Soviets with an arms race, he could bring them to negotiate the end of the Cold War.

The CIA told Reagan that the Soviets would win the arms race, because it was a centrally planned economy that controlled investment and could allocate as many resources as necessary to the military. Reagan did not believe the CIA and appointed a committee to make the determination. The committee concluded that the Soviet economy would be unable to compete in an arms race.

NI: The United States’ image was still reeling from the Vietnam War, which ended in 1975, when President Jimmy Carter came in to power. America had learnt an expensive lesson from the loss of more than 57,000 American servicemen in the jungles of Southeast Asia. However, during Carter administration there were also tremendous conflicts from Afghanistan to Iran, Grenada to Nicaragua. It was a hot time in the Cold War. Then in 1980 Ronald Reagan won the election, and had won the Cold War by the time he left office. How was the Reagan administration different from other presidencies?

PCR: Reagan achieved both of his goals, and that is what makes him different from other presidents. The military conflicts during the Reagan years were minor, and, unlike the military conflicts of the George W. Bush and Obama regimes, were not conflicts on behalf of US world hegemony. Reagan said that if he was to be successful in bringing the Soviets to an agreement to end the Cold War, he had to draw the line in the sand and prevent any further communist expansion, whether in Afghanistan, Grenada, or Nicaragua. He said that if more countries fell to communism and became Soviet clients, the Soviets would be too confident to negotiate an end to the Cold War.

NI: Your book entitled, “Alienation and the Soviet Economy”, has extensively examined the economic policy of the USSR and their weaknesses in planning. Could you please share with us how their weakness benefited the US to develop a neo-liberal economy and an identity as the leader of the West?


PCR: My book explains the Soviet economy as the outcome of an ideological attempt to remake human nature and society by substituting a planned economy for the unplanned market economy. Paradoxically, the collapse of the Soviet Union is one of the two developments (the other being the rise of the high speed Internet) that wrecked the US economy. When the Soviet Union collapsed, the American neoconservatives spoke of “the end of history,” by which they meant that American capitalism was the only viable socio-economic system. The Soviet collapse caused the communists in China and socialists in India to rethink their approaches and to get on the winning side. These two Asian giants opened their vast under-utilized labor forces to western capital.

The era of jobs offshoring began. US corporations, pressed by Wall Street for higher profits, by large retailers such as WalMart, and by the cap that Congress placed on executive pay that is not performance based, moved the production of goods for US markets offshore where labor costs were a small fraction of US wages. This development caused profits to rise, but separated American consumers from the incomes associated with the goods and services that they consume. The same happened to professional service jobs, such as software engineering, Information Technology, and research and design. The ladders for upward mobility for Americans were dismantled. Wages and employment fell, medical benefits were lost, and careers disappeared.

The system by which First World corporations offshore the production of goods and services that they market in their home countries is called “globalism.” Globalism is turning the US into a third world country. For the past two decades, the only jobs the US economy has been able to create are in lowly paid domestic services, such as waitresses, bartenders, and hospital orderlies. There has been no increase in real income for the bulk of the population. The gains in income and wealth are concentrated at the very top, and the distribution of income is now the worst in the developed world and worse than many Third World countries. The economy of the Reagan years is simply gone, disappeared.

NI: In more recent years, especially after 9/11, you became a critical analyst of US foreign policy. When did things start going wrong in the US and how did it happen?

PCR: Things began going wrong in the US when the US became “the sole superpower.” American neoconservatives had a triumphal attitude and spread their attitude to the public and Congress with their propaganda. They argued that American capitalism had to be spread to the rest of the world, even if it had to be imposed by force of arms. Americans, neoconservatives proclaimed, were “the indispensable people,” who had the right and the responsibility to impose their way on the world. Neoconservatives used the US Endowment for Democracy to foment “color revolutions” in former Soviet republics. The event of 9/11 provided neoconservatives with the opportunity to initiate US military invasions and “regime change” in the Middle East, Afghanistan, and North Africa.

NI: Let’s start talking about our main subject – torture. I recall from our very first communication that you said you didn’t have much of an idea about torture except in the context of the US and Israel. What analysis can you share, regarding torture involving the United States?

PCR: In the US torture is prohibited by the US Constitution and by US statutory law. It is also prohibited by the Geneva Conventions and international law. I do not know why the George W. Bush regime violated US and international law and tortured “detainees”, most of whom were hapless individuals kidnapped by war lords and sold to the Americans for the bounty. It is well known among intelligence services that torture does not produce reliable information. Generally, a tortured person invents a story to tell his tormentors in order to stop the torture. Soviet dissidents accused of fantastic plots and tortured to elicit the names of their coconspirators, would give the names of dead people.

One dissident wrote that, expecting to be arrested, he memorized the names on gravestones.

In my opinion, the Bush regime, a neoconservative regime, used the hyped fear about the threat of “Muslim terrorism” to get the acquiescence of the American public, Congress and the federal courts to torture, arguing that torture was necessary in order to protect Americans from events such as 9/11.

The neoconservatives reasoned that if the executive branch could violate, with impunity, both constitutional and legal prohibitions against torture, the precedent could be expanded to habeas corpus, due process, and to free speech, free assembly, (protests) and to criticism of the government’s policies, which is being redefined as “aiding and abetting terrorism.”

Once law and the Constitution could be side-lined, the regime could escape war criminal accountability for its wars of naked aggression. President Obama won the presidential election, because voters expected him to stop the wars, stop the torture, and to hold the Bush regime criminals accountable.

However, Obama found the new powers convenient and held on to them and expanded them. He refused to hold the Bush regime criminals accountable. He had the illegal and unconstitutional powers asserted by the Bush regime codified in US law. And Obama asserted new powers—the right to murder American citizens of whom he was suspicious, without due process of law. What the Bush and Obama regimes have done is to turn the United States into a Gestapo-like police state. Prior to Bush/Obama it was illegal for the government to spy on Americans without cause presented to a court, which, if convinced, would provide a warrant. Now every aspect of Americans’ lives are routinely watched, their movements, their emails, their internet usage, and even their purchases. Not only are air travelers subjected to intimate searches, but train and bus travelers too, and car and truck traffic on interstate highways is stopped and searched. There have been no terrorist attacks on trains, buses, or highway travel. Yet, the freedom of mobility in the US has been compromised even more than it was in the Soviet Union with the system of internal passports.

NI: What is your suggested solution to this critique? In other words how can the responsible governments correct things and lead their people towards freedom?

PCR: In the US, government is no longer accountable to law or to the people. Whoever is elected to the presidency or to Congress is accountable to the powerful private interest groups that provide the funds for the political campaign. Having purchased the government, the special interests expect government to serve them. The military/security complex makes billions of dollars in profits from wars, whether hot or cold. Peace is not in the interest of the military/security complex. Peace reduces the profits of the armaments industry and it reduces the power of the CIA, Homeland Security, Pentagon, FBI, and National Security Agency. In America today, peace is for sissies.

NI: Just hours after the release of the State Department’s annual human rights report, you wrote an opinion saying that the US government was the second worst human rights abuser on the planet and the sole enabler of the worst abuser –Israel. If this is true, US pressure for human rights reforms in other countries seems hypocritical. Do you want the US government to stop talking to these other countries? If the US doesn’t have the right to criticize human rights violence in other countries, who does?

PCR: To use biblical language, the US government focuses attention on the mote in Syria’s or Iran’s or China’s eye in order to direct attention away from the beam in its own eye. It is Washington that conducted war for eight years in Iraq, killing hundreds of thousands of people on false pretenses.

It is Washington that is conducting war for eleven years in Afghanistan on false pretenses, killing an unknown, but large, number of Afghans. It is Washington that is violating the sovereignty of Pakistan and Yemen, murdering people in these countries daily on false pretenses. It was Washington that organized the overthrow of the Libyan government, leaving the country in total chaos, with untold deaths. It is Washington that is responsible for endless violence in Somalia. It is Washington that has sent US troops to four African countries as part of the new imperialist venture known as the US Africa Command. How can a government that commits massive violations of human rights in Afghanistan, Pakistan, the Middle East, Africa, and at home lecture, or speak to, any other country about human rights? The world accepts this unbelievable hypocrisy because of the success of US propaganda during the Cold War. The propaganda placed the white hat firmly on the head of the US government.

NI: You opposed the war in Afghanistan, Iraq, Libya and other ongoing conflicts in East Asia as well. We saw how torture occurred in those wars. Perhaps the most high profile and visible case of torture in recent years was the public execution of Muammar Gaddafi. Torture has become a norm, regardless of the victim’s guilt or innocence. There are numerous international conventions against torture but torture still exists in many places. What are your feelings about this? Why are events moving in that direction?

PCR: In the 20th century, the West, which was hardly innocent, nevertheless stood for civil liberty, for law as a shield of the people instead of a weapon in the hands of the government. In Hitler’s Germany and Stalin’s Soviet Union, law was a weapon in the hands of the government. Today the US has caught up with Hitler and Stalin. Law in the US is a weapon in the hands of the government.

In my opinion, neoconservative triumphalism has destroyed American morality and left hubris in its place. Americans are overwhelmed by how great and good and moral and indispensable they are. American hubris raises Americans above everyone else in the world. Americans can torture, murder, invade, and still lecture the rest of the world about human rights.

NI: In one of your pieces published last April, you pointed out, “I agree that there is a lot of evil in every country and civilization. In the struggle between good and evil, religion has at times been on the side of evil. However, the notion of moral progress cannot so easily be thrown out.” As you say, in many countries liberty was lost, though the notion of moral progress cannot be easily thrown out. Can you explain more about this interesting conclusion?

PCR: I don’t know enough about the nonwestern world to answer this question with confidence. The point I was making is that the struggle between good and evil is ancient. In various historical periods evil prevails; in other periods good prevails. This means that moral concepts survive even during the periods of the prevalence of evil. As I have written, not far into the past, slavery was a fact of life, not a moral issue. Today, even the worst government would not openly legitimize slavery, although tax slavery, except for the mega-rich who control the governments, exists everywhere in the West.

The point is that we cannot give up hope that the world can be returned to a moral existence. What is discouraging is that it is no longer the West, and certainly not the US government, that is the upholder of “the rights of mankind.”

NI: How can we change for the better? Where should it start if we are to achieve a torture free society?

PCR. In my opinion, there is no prospect for a moral and torture free world until the West is held accountable for its crimes. The war crimes tribunal in Malaysia was a beginning. The convictions of the Bush regime monsters have no legal authority, but the convictions assert morality authority. If the Malaysian war crimes tribunal is repeated in many other countries, the US and UK war criminals and their NATO (The North Atlantic Treaty Organization) puppet criminals would not be able to travel beyond their own borders. The image would be created of Western leaders hunted by the rest of the world for their criminal actions. This is the only way to re-empower morality as a force in history.

Western governments have become the antithesis of morality.



Friday, September 21, 2012

ON DECEMBER 8, 2008, NEIL BAROFSKY WAS CONFIRMED AS TROUBLED ASSET PROGRAM (TARP) WATCHDOG. SEVEN MONTHS LATER HE ESTIMATED THAT THE $700 BILLION BAILOUT COULD BALOON TO $23.7 TRILLION! ACCOUNTABILITY WASN'T MANDATED BY TARP. INSTEAD OF LENDING TO STRUGGLING AMERICAN BUSINESSES, THE TOO-BIG-TO-FAIL BANKS WERE HOARDING OR USING THE MONEY FOR SPECULATIVE INVESTING. BAROFSKY HAD NO ENFORECEMENT POWER. MILLIONS OF HOME OWNERS WERE DEFRAUDED. GEITHNER BEARS FULL RESPONSIBILITY. ORDINARY PEOPLE WERE SOLD OUT AND LIED TO. WALL STREET CRIMINALS POCKETED THE BAILOUT MONIES AND PASSED THE BILL TO THE TAXPAYERS.













September 21, 2012 at 01:38:05

Promoted to Headline (H3) on 9/21/12:     Permalink


Bailout Fraud and Unaccountability

By (about the author)

opednews.com


Bailout Fraud and Unaccountability
TARP watchdog exposes fraud.

by Stephen Lendman

On December 8, 2008, the Senate confirmed Neil Barofsky's nomination as Troubled Asset Relief Program (TARP) watchdog. He assumed the post of SIGTARP (Special Inspector General for TARP).

On July 20, 2009, he estimated the $700 billion bailout fund could balloon to $23.7 trillion. Obama administration secrecy conceals what's essential to reveal. Over $9 trillion is known. Some analysts think true figures may be three times that amount. Only crooked bankers and corrupt bureaucrats know for sure.

In February 2009, Barofsky submitted an initial report to Congress. In the past two months, he said, Washington handed out hundreds of billions of dollars (like confetti) to troubled financial institutions.

Where did the money go, he asked? What assurances exist that it's not stolen or wasted?

TARP didn't require recipients to report or internally track funds used. Accountability wasn't mandated. Banks took full advantage. Instead of loans to stimulate recovery, they hoarded cash, acquired other financial institutions, paid off debt, speculated, and knew then and now there's plenty more help for the asking.

Fraud prevention standards weren't imposed. Barofsky doubts the program's longterm success.

On March 29, 2011, he headlined a New York Times op-ed "Where the Bailout Went Wrong," saying:

Two and a half years after legislation passed, Obama officials declared mission accomplished. "On my last day as the special inspector general".I regret to say that I strongly disagree."

TARP and what followed struck out. It "failed to meet some of its  most important goals." Main Street was sacrificed for  Wall Street.

Congress was told TARP funds would buy up to $700 billion of mortgages. Authorizing legislation (the Emergency Economic Stabilization Act - EESA) emphasized preserving homeownership.

Treasury officials promised help. EESA mandated it. Struggling homeowners got none. Legislative provisions were violated. Treasury changed the rules. Money went to banks with no accountability or mandate to extend credit.
"There were no strings attached: no requirement or even incentive to increase lending to home buyers, and against our strong recommendation, not even a request that banks report how they used TARP funds."
Instead of increased lending, it declined. As inspector general, Barofsky had no enforcement power. He could only recommend. Suggested policies fell on deaf ears. Treasury and Wall Street conspired to commit grand theft. Ordinary people were hung out to dry and scammed.

Helping homeowners was shelved. The Home Affordable Modification Program (HAMP) was introduced. Obama promised four million families help. The program was "a colossal failure."

It was designed to fail. Its provisions included no accountability. Guidelines only were provided. Banks and other mortgage services ignored them. Foreclosures mounted. Millions of homeowners were defrauded. Nothing changed to this day.
One of HAMP's most pernicious abuses was letting servicers "direct borrowers who were current on their mortgages to start skipping payments, telling them that that would allow them to qualify for a HAMP modification," said Barofsky. "Homeowners who might have been able to ride out the crisis instead ended up in long trial modifications, after which servicers would deny them a permanent modification and send them an enormous 'deficiency' bill." "Borrowers who might otherwise never have missed a payment found themselves hit with whopping bills that they couldn't pay and now faced foreclosure. It was a disaster."
Geithner bears full responsibility. Understating problems, he admitted solutions "won't come close" to expectations. He refused to address glaring shortfalls. He abandoned Main Street for Wall Street. He's complicit in grand theft. He and banker cronies belong in prison.

Banks know they can steal with impunity. They're larger and more powerful now than when crisis conditions erupted. They can speculate recklessly. They'll be bailed whenever they get in trouble.

Treasury "ignore(d) rather than support(ed) real" reforms. Its "broken promises" turned TARP and other programs into a giant Wall Street "giveaway."

Its "mismanagement" and criminal complicity "damaged the credibility of the government"." Conditions are so out of control that future policy makers may be unable "to save the system the next time a crisis arises."

Perhaps that's TARP's "most lasting, and unfortunate, legacy."

Barofsky's new book "Bailout: An Inside Account of How Washington Abandoned Main Street While Rescuing Wall Street" explains. 

Writer/Roosevelt Institute fellow Matthew Stoller calls it "a very important" account of the financial crisis aftermath. In April 2010, Barofsky met a key adversary.

Herbert Allison formerly headed Merrill Lynch, TIAA-CREF and Fannie Mae. He came out of retirement to oversee TARP. He became Assistant Treasury Secretary for Financial Stability.
"Have you thought at all about what you'll be doing next," he asked. "Out there in the market, there are consequences for some of the things you're saying and the way you're saying them."
Barofsky knew he was being threatened "with lifelong unemployment." Going along instead of bucking the system assures revolving door plum positions. "It was gold or the lead," he explained.

Cooperate and get rich. Don't and lose out. At first, he "had no idea that the US government had been captured by" bankers. He was "shocked (at) how much control" they have over policy on their own terms. Treasury goes along deferentially. Republicans or Democrats agree on core issues.

He was hijacked and hamstrung. Too big to fail constitutes near omnipotence. Whatever Wall Street wants it gets. Contesting its power is futile.
Stoller calls "Bailout" an account of "the importance of Congressional oversight in reigning in corruption, and the problems of our imperial Presidency."
Barofsky hoped for press and congressional attention. "Our message was simple," he said. "Treasury's desperate attempt to bail out Wall Street was setting the country up for potentially catastrophic losses."

Throughout his tenure, he was obstructed. He faced road blocks, ambushes, trench warfare, and threats in trying to do his job.

On arrival at Treasury, he saw ornate large offices given top officials. He got a small, foul-smelling basement one with barred windows. He spent most of the next three years there. He wasn't welcome unless he played ball. It's not his style and he refused.

He explained what he saw graphically. Homeowners were abandoned and scammed. A tsunami of evictions, foreclosures, fraud, mortgage document robo-signings, blighted neighborhoods, and homelessness continues without relief.

Taxpayers got the bill. Bankers got benefits. So did lobbyists and go-along politicians. The combination of Treasury criminality, White House complicity, congressional laxity, and regulatory failure keeps the dirty game going.

Since crisis conditions erupted five years ago, ordinary people were sold out and lied to. Obama exceeded the worst Bush administration policies. Political corruption is rampant.

Barofsky's best efforts failed. Attempts to achieve accountability, transparency, controls, and consumer protections proved no match for entrenched bureaucratic power, privilege and complicity with Wall Street.

He issued numerous reports. Geithner and other Obama officials buried them. Media scoundrels largely ignored them.

Barofsky believes Geithner, complicit officials, and Wall Street crooks should be fired and prosecuted. Don't expect it as long as criminals run America.

Five years after crisis conditions erupted, no top Wall Street or government official faced charges. Unaccountability is institutionalized. An eventual greater crisis looms. Unresolved problems assure it. When is anyone's guess.


Stephen Lendman lives in Chicago and can be reached at Email address removed .

His new book is titled "How Wall Street Fleeces America: Privatized Banking, Government Collusion and Class War"

http://www.claritypress.com/Lendman.html


I was born in 1934, am a retired, progressive small businessman concerned about all the major national and world issues, committed to speak out and write about them.

Thursday, September 20, 2012

THOMAS JEFFERSON SAID: "IF A NATION EXPECTS TO BE IGNORANT AND FREE, IT EXPECTS WHAT NEVER WAS AND NEVER WILL BE." JOHN F KENNEDY SAID: "LET US THINK OF EDUCATION AS THE MEANS OF DEVELOPING OUR GREATEST ABILITIES, BECAUSE IN ALL OF US THERE IS A PRIVATE HOPE AND DREAM WHICH, FULFILLED, CAN BE TRANSLATED INTO BENEFIT FOR EVERYONE AND GREATER STRENGTH FOR OUR NATION." HE ALSO SAID: "A CHILD MISEDUCATED IS A CHILD LOST." IN STARK CONTRAST, KAREN LEWIS, PRESIDENT OF THE CHICAGO TEACHERS UNION, AFTER PRESSURING THE UNION'S HOUSE OF DELEGATES TO SELL OUT TO MAYOR EMANUEL'S PLAN TO CLOSE STILL MORE PUBLIC SCHOOLS: "WE FEEL GRATEFUL THAT WE HAVE A UNITED UNION, AND THAT WHEN A UNION MOVES TOGETHER AMAZING THINGS HAPPEN."













September 20, 2012 at 01:46:26


Promoted to Headline (H3) on 9/20/12:     Permalink

 


Unconditional Surrender in Chicago

By (about the author)

opednews.com

Unconditional Surrender in Chicago

Corrupt city officials and union bosses sold out teachers, parents and kids.

by Stephen Lendman

September 18, 2012 will be remembered in Chicago as a day of infamy. Corrupt city officials and union bosses won. Teachers, parents, and kids lost.

On September 10, teachers walked out. Core issues were at stake. Most important is saving public education. An American tradition is disappearing.

It's being commodified. Corporate predators are gaining control. Contract terms agreed on do nothing to stop them.

On Tuesday, Chicago Teachers Union (CTU) House of Delegates voted to suspend strike action and resume classes. By 9:00AM Wednesday morning, they reopened across the city.

Primary and secondary education in Chicago and across America is a shadow of its former self. An article written two years ago next month compared earlier America with today. Rewritten parts are below, saying:

A personal note. I grew up in Boston from the mid-1930s - mid-1950s through college. Post-graduate work followed military service.

Times were different, good and bad. Eisenhower was still president. Unemployment was low. Anyone wanting work found it. Financialization hadn't taken hold. Industrial America was strong. Most jobs were high pay/good benefit/full-time ones.

Most years the economy grew during a post-WW II expansion. Inflation was low. The average new car cost $1,500. A typical home was under $10,000. College was affordable.

Harvard's 1952 full year tuition was $600. Four years later it was $1,000 - for a full, two-semester year. Anyone could attend evenings for $5 a course and get a Harvard degree for about $175.

My mother did it that way. On June 14, 1956, we graduated together in the same class. We were Harvard's first ever mother and son to do it. Perhaps no parent and child did it since.

America was unchallenged economically. Its manufacturing base was solid. It offered high paying/good benefits jobs. No longer.

Union representation was high. Today it's a shadow of its former self. Southern and northern US cities were segregated. They still are.

All 1960s civil rights gains plus most good jobs and benefits are gone. Alaska and Hawaii additions grew America to 50 states. The Korean War left an unsettled armistice. Six decades later, things haven't changed.

Cold War politics settled in. Mutually assured destruction (MAD) prevented WW III. Censure ruined Joe McCarthy. By May 1957, he was dead at age 48. He's not missed or mourned.

The CIA's first coup deposed Iran's democratically elected Mohammad Mosaddegh. A generation of terror followed. A year later, America toppled Guatemala's Jacobo Arbenz Guzman. Decades of genocide followed. Indigenous Guatemalans suffered horrifically. They still do.

Throughout the decade, few followed Vietnam events, France's defeat, and America's growing involvement. Palestine wasn't occupied. Israel was mostly out of sight and mind.

Times indeed changed, and not for the better, including in education.

June 14, 1956 reflected a different time. Thousands filled Harvard's yard that day. Dignitaries showed up. Jack Kennedy delivered the commencement address. Senator JFK. It was 1956.

He was thoughtful and scholarly. Politicians don't talk that way today. He said political parties and politicians only think of winning. Truth and honor are sacrificed for political advantage.

His entire address was full of scholarly references. He quoted Lowell, Milton, Bismark, Goethe, Macauley, and others. He had intellect and showed it.

He reminded listeners that long ago books were politicians' tools, not their enemies. Locke, Milton, Sydney, Montesquieu, Coke, Bollingbroke and others were widely read and quoted in political pamphlets.

"Our political leaders traded in the free commerce of ideas with lasting results" long ago. He named Jefferson, Madison, Hamilton, Franklin, Adams, his son John Quincy Adams, and Daniel Webster among others.

He said when freedom is endangered, politicians and intellectuals "should be natural allies, working more closely together for the common cause against the common enemy."
He ended saying "if more politicians knew poetry and more poets knew politics, I am convinced the world would be a little better place in which to live on this commencement day of 1956." He also said one of his contemporaries spoke of Jefferson as a man for all seasons. He called him "A gentleman of 32, who could calculate an eclipse, survey an estate, tie an artery, plan an edifice, try a cause, break a horse, dance a minuet, and play the violin."
He was also a statesman, third US president, and supporter of public and university education. He said "If a nation expects to be ignorant and free, in a state of civilization, it expects what never was and never will be."
"Whenever the people are well-informed, they can be trusted with their own government; that, whenever things get so far wrong as to attract their notice, they may be relied on to set them right."
He called education fundamental for democracy. He believed ignorance and sound government can't co-exist. He said government must provide education.
Only popular government can safeguard democracy. "Every government degenerates when trusted to the rulers of the people alone. The people themselves are its only safe depositories. And to render them safe, their minds must be improved to a certain degree." "Democracy cannot long exist without enlightenment." It cannot function without wise and honest officials."
In free societies, everyone "should be educated regardless of wealth, birth or other accidental conditions." Children of the poor must be educated at common expense."
On December 2, 1806, in his State of the Union Address, he urged Congress pass a constitutional amendment mandating federal support for education. He said:
"An amendment to our constitution must here come in aid of the public education. The influence over government must be shared among all people."
He never got what he wanted. It's our loss today. He believed primary and secondary education were vital.

He wanted them kept public. He had six objectives. He hoped they'd create a more productive, informed electorate. They included:
(1) "To give every citizen the information he needs for the transaction of his own business.
(2) To enable him to calculate for himself, and to express and preserve his ideas, his contracts, and accounts, in writing.
(3) To improve, by reading, his morals and faculties.
(4) To understand his duties to his neighbors and country, and to discharge with competence the functions confided to him by either.
(5) To know his rights; to exercise with order and justice those he retains; to choose with discretion the fiduciary of those he delegates; and to notice their conduct with diligence, with candor, and judgment.
(6) And, in general, to observe with intelligence and faithfulness all the social relations under which he shall be placed."
Hopefully he meant "she" as well as "he."

He devoted his later years to education. He wanted to create an "academic village." In 1819, he founded the University of Virginia. He envisioned a new kind of university. He wanted emphasis placed on practical affairs and public service.

It was America's first nonsectarian institution of higher learning. It was the first to adopt an elective course system. He called founding the university one of his greatest achievements.

He did it late in life. He planned its curriculum, recruited its first faculty, and designed its "academic village." In 1825, classes began with eight teachers and 68 students.
Kennedy also believed in the importance of education. He said "Our progress as a nation can be no swifter than our progress in education. The human mind is our fundamental resource." "Let us think of education as the means of developing our greatest abilities, because in each of us there is a private hope and dream which, fulfilled, can be translated into benefit for everyone and greater strength for our nation."
"A child miseducated is a child lost."
He supported keeping primary and secondary education public. He proposed aiding them with federal grants. He stressed investing in our youth from grade school through post-graduate studies. Imagine what he, Jefferson, and like-minded leaders would say today.

On September 19, the Chicago Tribune headlined "Teachers, students return to Chicago public schools," saying:

On Tuesday, Chicago Teachers Union (CTU) House of Delegates members voted to end strike action and return to classes.

Chicago Teachers Union (CTU) president Karen Lewis pressured them to accede. She should be hung in effigy, fired and replaced. Instead she practically gloated saying:
"We feel very positive about moving forward. We feel grateful that we have a united union, and that when a union moves together, amazing things happen."
Sugar-coating sellout doesn't wash.

Mayor Emanuel was no better. He called the deal "an honest compromise."

It was sellout. Money and power won. Teachers, parents and kids lost. At issue is how long will it take before they know? Then, what'll they do about it?

Short-term, it's too late. Across America, ordinary people are losing out consistently. Human, civil, and worker rights are being lost. A previous article said Occupy Wall Street is right. The only solution is world revolution. Nothing less will work.



Stephen Lendman lives in Chicago and can be reached at Email address removed .
His new book is titled "How Wall Street Fleeces America: Privatized Banking, Government Collusion and Class War"
http://www.claritypress.com/Lendman.html
Visit his blog site at sjlendman.blogspot.com and listen to cutting-edge discussions with distinguished guests on the Progressive Radio News Hour on the Progressive Radio Network Thursdays at 10AM US Central time and Saturdays and Sundays at noon. All programs are archived for easy listening.
click here

Wednesday, September 19, 2012






A Rare Look at Why The Government Won't Fight Wall Street

POSTED:


Wall Street sign in New York
Michael Evans/Getty Images

























The great mystery story in American politics these days is why, over the course of two presidential administrations (one from each party), there’s been no serious federal criminal investigation of Wall Street during a period of what appears to be epic corruption. People on the outside have speculated and come up with dozens of possible reasons, some plausible, some tending toward the conspiratorial – but there have been very few who've come at the issue from the inside.

We get one of those rare inside accounts in The Payoff: Why Wall Street Always Wins, a new book by Jeff Connaughton, the former aide to Senators Ted Kaufman and Joe Biden. Jeff is well known to reporters like me; during a period when most government officials double-talked or downplayed the Wall Street corruption problem, Jeff was one of the few voices on the Hill who always talked about the subject with appropriate alarm. He shared this quality with his boss Kaufman, the Delaware Senator who took over Biden's seat and instantly became an irritating (to Wall Street) political force by announcing he wasn’t going to run for re-election. "I later learned from reporters that Wall Street was frustrated that they couldn’t find a way to harness Ted or pull in his reins," Jeff writes. "There was no obvious way to pressure Ted because he wasn’t running for re-election."

Kaufman for some time was a go-to guy in the Senate for reform activists and reporters who wanted to find out what was really going on with corruption issues. He was a leader in a number of areas, attempting to push through (often simple) fixes to issues like high-frequency trading (his advocacy here looked prescient after the "flash crash" of 2010), naked short-selling, and, perhaps most importantly, the Too-Big-To-Fail issue. What’s fascinating about Connaughton’s book is that we now get to hear a behind-the-scenes account of who exactly was knocking down simple reform ideas, how they were knocked down, and in some cases we even find out why good ideas were rejected, although some element of mystery certainly remains here.

There are some damning revelations in this book, and overall it’s not a flattering portrait of key Obama administration officials like SEC enforcement chief Robert Khuzami, Department of Justice honchos Eric Holder (who once worked at the same law firm, Covington and Burling, as Connaughton) and Lanny Breuer, and Treasury Secretary Tim Geithner.

Most damningly, Connaughton writes about something he calls "The Blob," a kind of catchall term describing an oozy pile of Hill insiders who are all incestuously interconnected, sometimes by financial or political ties, sometimes by marriage, sometimes by all three. And what Connaughton and Kaufman found is that taking on Wall Street even with the aim of imposing simple, logical fixes often inspired immediate hostile responses from The Blob; you’d never know where it was coming from.

In one amazing example described in the book, Kaufman decided he wanted to try to re-instate the so-called "uptick rule," which had existed for seventy years before being rescinded by the SEC in 2007. The rule prevents investors from shorting a stock until the stock had ticked up in price. "Forcing short sellers to wait for the price to tick up before they sell more shares gives a breather to a stock in decline and helps prevent bear raids," Connaughton writes.

The uptick rule is controversial on Wall Street – I’ve had some people literally scream at me that it doesn’t do anything, while others have told me that it does help prevent bear attacks of the sort that appeared to help finally topple already-mortally-wounded companies like Bear Stearns and Lehman Brothers – but what’s inarguable is that Wall Street hates the rule. Hedge fund types or employees of really any company that engages in short-selling will tend to be most venomous in their opinions of the uptick rule.

Anyway, Connaughton and Kaufman were under the impression that new SEC chief Mary Schapiro would re-instate the uptick rule after taking office. When she didn’t, Kaufman wrote her a letter, asking her to take action. When that didn't do the trick, he co-sponsored (with Republican Johnny Isakson) a bill that would have required the SEC to take action.

Nothing happened, and months later, Kaufman gave a grumbling interview to Politico about the issue. One June 30, the paper’s headline read: "Ted Kaufman to SEC; Do Your Job."

The next day, the Blob bit back. Connaughton was in the basement of the Russell building when a Senate staffer whose wife worked for Shapiro shouted at him. From the book:
"Hey, Jeff, you’re in the doghouse." He meant: with his wife.
"Why?" I asked.
"That Politico piece by your boss."
I was taken aback but tried to downplay the matter. "We just want the SEC to get its work done."
"Remember," he said. "We all wear blue jerseys and play for the Blue Team. I just don’t think that helps."
When Connaughton told Kaufman over the phone what the staffer said, Kaufman exploded. "You call him back right now and tell him I said to go fuck himself in his ear," Kaufman said.

Similarly, when Kaufman tried to advocate for rules that would have prevented naked short-selling, Connaughton was warned by a lobbyist that it would be "bad for my career" if he went after the issue and that "Ted and I looked like deranged conspiracy theorists" for asking if naked short-selling had played a role in the final collapse of Lehman Brothers. Naked short-selling is another controversial practice. Essentially, when you short a stock, you're supposed to locate shares of that stock before you go out and sell it short. But what hedge funds and banks have discovered is that the rules provide "leeway" – you can go out and sell shares in a stock without actually having it, provided you have a "reasonable belief" that you can locate the shares.

This leads to the obvious possibility of companies creating false supply in a stock by selling shares they don't have. Without getting too much into the weeds here, there is an obvious solution to the problem, which essentially would be forcing companies to actually locate shares before selling them. In their attempt to change the system, Kaufman and Connaughton discovered that the Depository Trust Clearing Corporation, the massive quasi-private organization that clears most all stock trades in America, had come up with just such a fix on their own. Kaufman recruited some other senators to endorse the idea, and as late as 2009, Connaughton and Kaufman were convinced they were going to get the form. "I said to Ted, 'We’re going to change the way stocks are traded in this country.'"

But before the change could be made, Goldman, Sachs issued "data" showing that there was "no correlation" between naked short selling and price movements. When Connaughton asked an Isakson staffer what the data said, the staffer, intimidated by Goldman, replied, "The data proves we're full of shit." Connaughton looked at the data and realized instantly that it was a bunch of irrelevant gobbledygook, even firing off an angry letter to Goldman telling them the tactic was beneath even them.

But Goldman’s tactic worked. A roundtable to discuss the idea was scheduled by the SEC on September 24, 2009. Of the nine invited participants, "all but one" were for the status quo. Connaughton expected the DTCC representatives to unveil their reform idea, but they didn’t:
Afterwards, I went over to [the DTCC representatives] and asked, "What happened?" Sheepishly, and to their credit, they admitted: "We got pulled back." They meant: by their board, by the Wall Street powers-that-be.
Essentially the same thing happened in Kaufman’s biggest reform attempt, the amendment to the Dodd-Frank bill he co-sponsored with Ohio’s Sherrod Brown, which would have broken up the Too-Big-To-Fail banks. But the Brown-Kaufman amendment, which was really the meatiest thing in the original Dodd-Frank bill, the one reform that really would have made a difference if it had passed, just died in the suffocating mass of the Blob. The key Democrats one after another failed to line up behind it, and in the end it was defeated soundly, with Dick Durbin, the number two man in the Democratic leadership, giving it this epitaph: "a bridge too far."

Again, those interested in understanding the mindset of the people who should be leading the anti-corruption charge ought to read this book. It's the weird lack of concern that shines through, like Khuzami’s comment that he’s "not losing sleep" over judges reprimanding his soft-touch settlements with banks, or then Southern District of New York U.S. Attorney Ray Lohier’s comment that the thing that most concerned him – this is the period of 2008-2009, the middle of a historic crimewave on Wall Street – was "cyber crime."

On the outside we can only deduce the mindset from actions and non-actions, but Connaughton’s actually seen it, and with the book you get to see it too. It’s scary and definitely worth a read.