Obama's True-Grit Moment: His Veto of a Bill Passed in the Dead of Night by a Gutless, Heartless, or Brainless Congress at the Behest of the Criminal Mortgage Industry

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Elizabeth Warren Helped Shoot Down Bill That Would Have Sped Foreclosures, Calendar Shows

First Posted: 11-24-10 05:13 PM | Updated: 11-24-10 05:37 PM

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Read More: Bureau Of Consumer Financial Protection, Cfpa, Cfpb, Consumer Financial Protection Agency, Consumer Financial Protection Bureau, Elizabeth Warren, Foreclosure Crisis, Foreclosure Fraud, Foreclosuregate, Fraudclosure, The Financial Fix, Business News


Elizabeth Warren was the first senior Obama administration official to recognize the potentially incendiary impact of a bill that would have made it significantly easier for mortgage companies to foreclose on homes, and her subsequent warnings played a crucial role in persuading the President to veto the measure, according to freshly released documents and people familiar with the deliberations.

The disclosure that Warren was instrumental in halting a bill that would have streamlined the foreclosure process comes as she confronts fierce criticism from Republicans on Capitol Hill for the way she was appointed to construct a new consumer financial protection bureau, and characterizations that she is inclined to take an overly punitive tack with Wall Street.

A long-time advocate for greater regulation of the financial system and a prominent critic of predatory lending, Warren now finds herself at the center of an intensifying debate over the relationship between the Obama administration and the business world.

For consumer advocates, who have long decried what they portray as Wall Street's outsized influence in Washington, Warren represents their greatest hope that big banks will be more tightly supervised following the worst financial crisis since the Great Depression. For a vocal group of business leaders and their Republican allies, Warren has become Exhibit A in their case that the Obama administration is anti-business.

The decisive way in which she labored behind the scenes to stymie a bill that would have eased requirements for documentation in the foreclosure process underscores how her arrival has altered the administration's relationship with major banks.

The bill, which passed both houses of Congress and awaited President Obama's signature to become law, essentially would have compelled notaries to accept out-of-state notarizations, regardless of the rules in those states.

State officials across the country--who have been pursuing probes looking into wrongdoing within the foreclosure process-- feared that those jurisdictions with lax standards could have become hotbeds for foreclosure documentation fraud. Lenders and mortgage companies could have used those states as central clearing houses to produce bogus foreclosure paperwork, and then export those documents to other states with more stringent regulations--an expedient bypass around the strictures.

Obama ultimately declined to sign the law, and the House of Representatives failed to override the veto.

Officials said Warren was among the first federal officials to recognize the significance of the notary bill, titled the Interstate Recognition of Notarizations Act of 2010. She met with authorities from several states and then relayed their concerns to influential administration officials.

During the morning of Oct. 6, Warren's team at the Treasury Department wrote the first memos on the bill, raising questions about the possible consequences if it became law, these people said.

That evening, Warren met for 30 minutes with Peter Rouse, Obama's interim chief of staff, her calendar shows. She later spent an hour on the phone with Illinois Attorney General Lisa Madigan, who once sued Countrywide Financial and exacted an $8.4 billion multi-state settlement.

The next day, Warren participated in an afternoon meeting on the bill, her calendar shows. During that meeting one of Obama's top spokesmen, Dan Pfeiffer, posted an entry on the White House Blog explaining why Obama would not sign the bill.

On Oct. 8, Obama declined to sign the bill into law, citing the need for "further deliberations about the possible unintended impact" of the bill on "consumer protections, including those for mortgages."

Documents released Wednesday show that Warren met or spoke with at least eight state officials leading a 50-state investigation into possibly-fraudulent mortgage documentation practices.

The state attorneys general, secretaries of state and bank supervisors are probing the way in which major mortgage companies have pushed through thousands of foreclosure cases at a time, as if on a factory assembly line, by short-cutting the required documentation process.

Recent weeks have featured a host of unsavory disclosures about how mortgage companies employed so-called robo-signers-- people whose sole job was to sign foreclosure documents without reading them or confirming basic facts, as required by law. The volume of cases and shoddy handling of paperwork is reflective of the messy and indiscriminate lending practices that characterized the nation's housing boom, as Wall Street eagerly handed mortgages to seemingly anyone willing to sign off.

The states' investigation and a parallel multi-agency federal probe are now roiling the mortgage industry, heightening the possibility that major lenders could face potentially huge fresh losses as bad loans continue to emerge. With legal and regulatory uncertainty now enshrouding the industry and public outrage trained on foreclosures, the banks could have trouble limiting those losses by selling off the homes pledged against bad mortgages.

The nation's biggest lender, Bank of America, has seen its share price drop 18 percent through yesterday's market close since the day before the states announced their joint inquiry.

Warren serves as an assistant to Obama and a special adviser to Treasury Secretary Timothy Geithner as she leads the effort to create the new Bureau of Consumer Financial Protection, a watchdog designed to protect borrowers from abusive lenders. Her calendar from Sept. 20 to Nov. 2 was released per a Freedom of Information Act request.

The longtime Harvard Law School professor and consumer advocate met or spoke with the state attorneys general from Iowa, Illinois, Texas, North Carolina, Massachusetts and Ohio, her calendar shows. She also met with Ohio Secretary of State Jennifer Brunner, and spoke with New York's top banking regulator, Richard H. Neiman. They are among the leaders of the combined state probe.

Warren has long chided federal regulators for their lax oversight of the financial industry and slipshod protection of consumers. She's championed state regulators, however, who have often been ahead of their federal counterparts when it comes to consumer finance issues.

Warren's calendar also shows numerous meetings with bankers and their representatives. Financial executives and lobbyists have noted that Warren was reaching out to them more than they initially expected. The calendar confirms her outreach.

On Sept. 20, the same day she took a photo for her Treasury Department badge, Warren spent an hour and a half meeting with bankers from Oklahoma, her calendar shows. She spent an hour having lunch with Geithner that day as well.

Since then she's met with the chief executives of the nation's largest banks, including Vikram Pandit of Citigroup; Jamie Dimon of JPMorgan Chase; John Stumpf of Wells Fargo; James Gorman of Morgan Stanley; Richard Davis of U.S. Bancorp; W. Edmund Clark of TD Bank Financial Group; David Nelms of Discover Financial Services; Niall Booker of HSBC North America Holdings; and Kenneth Chenault of American Express.

The calendar entry for Chenault's one-hour meeting on Oct. 13 notes that "He's flying here for us."

Warren also met with officials from Goldman Sachs and Deutsche Bank, Germany's biggest lender and one of the world's biggest financial institutions.

Notably absent from Warren's calendar are officials from Bank of America, the biggest bank in the U.S. by assets and branches, including its chief executive, Brian Moynihan.

Warren's calendar includes meetings with investors and trade groups, like the Consumer Bankers Association, the Independent Community Bankers of America, the Financial Services Roundtable and the Securities Industry and Financial Markets Association.

Though Warren is known for her vigorous advocacy on behalf of consumers, she's spent more time with bankers and their lobbyists than with consumer groups and advocates during her roughly two months on the job.

Warren's 2007 journal article calling for the creation of a dedicated consumer agency inspired policymakers to enact it into law. Big banks opposed it.

Warren has also met with nearly two dozen members of Congress from both sides of the aisle, including the likely incoming chair of the House Financial Services Committee, Rep. Spencer Bachus, and the top Republican on the Senate Banking Committee, Richard Shelby. The Alabama Republicans have been particularly critical of Warren and her new agency.

Warren's calendar features numerous White House meetings, like a two-hour dinner on Sept. 23 with top Obama adviser David Axelrod and breakfasts and lunches with another top Obama counselor, Valerie Jarrett. She's also met with the heads of all the major federal financial regulatory agencies, including Federal Reserve Chairman Ben Bernanke.

Among Warren's early initiatives are efforts to make credit card disclosure forms shorter and easier to read, and simplifying mortgage documents. Her first major speech since joining the administration was a Sept. 29 address to the Financial Services Roundtable, a Washington trade group representing firms like JPMorgan Chase, BlackRock and State Farm. She asked the assembled executives to work with her to create a new system of consumer regulation focused on core principles rather than a mountain of specific rules.

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Shahien Nasiripour is the business reporter for The Huffington Post. You can send him an e-mail; bookmark his page; subscribe to his RSS feed; follow him on Twitter; friend him on Facebook; become a fan; and/or get e-mail alerts when he reports the latest news. He can be reached at 646-274-2455.

PBS Is Dead. Long Live Press TV!

Blogger's Note: There is no way this video will ever be found on YouTube, so I couldn't find a way to embed it. Rather I present only a single frame of this stunning set of interviews of three American patriots by Judy Woodruff's counterpart in Tehran. Please link to it here. If for any reason it doesn't play, please read the transcript.

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'America wages wars for profit'

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Thu Nov 11, 2010 2:38PM

Interview with Stephen Lendman, writer and radio host from Chicago; Bill Jones with the Executive Intelligence Review from Washington; and Jeff Gates, US attorney and author from California
Again, here's the link.

Former US President George W. Bush has in his book said that by going to war in Iraq, the US has saved British lives as it stopped possible terrorist attacks.

What he did not reveal was that the Iraq war created much terrorism inside the country as many sources say the war has led to the deaths of over a million Iraqi lives.

To discuss the issue, Press TV had an interview with Stephen Lendman, writer and radio host from Chicago, Bill Jones with the Executive Intelligence Review from Washington and Jeff Gates, US attorney and author from California. The following is the transcription of the interview.

Press TV: Mr. Lendman, Bush has boasted about giving the okay on water-boarding alleged terrorist suspects in American custody. Both the current president and attorney general have said that water-boarding is torture. Where exactly does that leave Bush?

Stephen Lendman: Well, water-boarding is absolutely torture. Torture is illegal under international law and the US law. All treaties, Geneva, the UN Convention against Torture 1984, the US War Crimes Act, and the international treaties that America has signed before Geneva treaties, under the supremacy cause of the US constitution. They are automatically US law. The UN charter I might add as well.

Torture is illegal. Unequivocally illegal at all times and under all circumstances with no allowed exceptions. Water-boarding is torture. I've written about it. I do a lot of writing. I've written about water-boarding. Water-boarding simulates drowning but it's worse than that. It literally endangers the lives of the people submitted to it. For example, I've written about Khalid Sheikh Mohammed, the supposed 9/11 mastermind who I think had nothing whatsoever to do with it. He was water-boarded 186 times. Now just imagine that. That means maybe 186 times he thought he was going to die. Besides all the other tortures inflicted on him for many years. 9/11, I have discussed it on my program, I have written about it. I don't have a smoking gun to prove it, but I think my own government is responsible for 9/11.

My own belief is that it literally was a co-effort between the CIA and the Israeli Mossad. It had nothing to do with the people they blamed it on.

Press TV: We definitely need to do a program looking into 9/11 again, but, getting back to the situation that we are looking at right now, you said in all cases that water-boarding is torture. Now George W. Bush has said that he would ask his legal advisers. And they said that it was absolutely no torture. Do you think he is lying or his advisers told him something wrong? What do you think is going on here?

Stephen Lendman: Well, his advisers told him what he wanted to hear. That's the way the system works. One of them was the infamous John Yoo. He wrote two torture memos authorizing torture which basically as Donald Rumsfeld, former Defense Secretary, put it, "We can do anything to anybody short of causing organ failure. In other words, if you don kill them, you can inflict anything on them, any amount of pain, any amount of discomfort. You can call it torture, you can call it whatever you want. As long as we don't kill them, it's legal. Well, sorry. International law says it's illegal.

Now lawyers like John Yoo [, he] absolutely knows that when he wrote torture memos authorizing these procedures to be committed. John Yoo is complicit with George Bush, Rumsfeld and everyone else in the administration, administering torture.

Press TV: Mr. Jones, Bush seems to have no remorse for the loss of lives which have taken place based on a fabrication of Iraq having weapons of mass destruction. What do you think about this? He was not apologetic. He was basically not saying that he was sorry that he went to war, but said that he would do the same thing again.

Bill Jones: Well, I think basically Bush is a fool. He was placed into office because he was the son of a president by people who were more powerful and more intelligent than him. And he was basically a stooge for them. And he has proven that gross ignorance in the fact that he can come out and say the things he is saying now. I think he did it because of the tremendous defeat of the Obama administration in the latest elections. He probably thought time was right to stick his head up. He has been in hiding for quite a while, reviled by many people as the worst president we have ever had. But now he feels that he can come out and try and speak in his defense. The issue of the 9/11 is of course that he's tallying the whole time as the reason, I'm in agreement with the former speaker, although you have to look at the Saudi and British role in that development, but it was used in the same way that the Reich Stag fire was used by the Nazis. Whoever may have perpetrated it, it was used to turn up and down the thinking in the United States that these kinds of things that occurred post-9/11 would have been unthinkable, illegal and immoral prior to that period, but because of the so-called emergency laws that were put in, Bush was able, at the instigation of Cheney and other people in control, to move in the direction of what was really, what I would consider, a fascist policy.

Press TV: Mr. Gates, Under the international law, Bush's admission that he authorized acts that amount to torture are enough to trigger Washington's obligations to investigate his admissions and if substantiated, to prosecute him. Do you think that will happen?

Jeff Gates: Probably not, for the same reason that he became president to begin with. If you watch the president's election closely, in effect, he preempted that in the primary of 2000 when this syndicate raised about 50 million dollars in about a six week period. It then had a brand name of politicians to put into office, who a national security column says were a classic asset. An asset of someone with the profile of sufficient debts, but you know if you place them in a time and place and circumstance, by which you have considered an influx, the behavior consistent with that …he could be charged with war crimes …He could probably be charged with … we know that he had facts in front of him that he did not make his decision on instead based on his belief. He came to office as a Christian Zionist not unlike Harry Truman who recognized Israel over … one or two close advisors. You fast forward it to 2000 and you bring in another Christian Zionist into the Presidency, recovering alcoholic, out of source with his dad and a long range of dysfunctions and that's what made him a classic asset. No wonder you can blame him but you also blame a whole series of previous presidents that set this up. But I think this misses the point. The point is how do we continue to do this presidency after presidency. And how do we as Americans end up … called guilt by association. How destruction and self-deceit commit America to war, as we were truly deceived to go to war. If you look back at all that intelligence it doesn't go to Bush and Cheney and Rumsfeld; those are faces on a far more systemic and frankly more sinister phenomenon.

All of this traces back to … notion of Zionism. I as a lawyer call it trans-generation organized crime…

The attitude in the US and the Middle East has not changed with the shift from the Republicans to the Democrats, it is only the same policies with a different face on the same problem.

Press TV: Mr. Lendman, the US is a signatory to the UN Convention against Torture. What exactly has happened? Why hasn't the UN gotten involved and do you expect that perhaps the UN would play a role in this and get involved, being that the US is a signatory to this [UN convention]?

Stephen Lendman: Not at all, the US was instrumental in setting up the UN in the 1940s after the World War II. And of course we have a Security Council with a veto. America can veto all the other countries of the world combined. It could be the whole world going one way and America going the other way. And as long as you have a UN run like that, the UN is literally a tool of US policy.

And the US is the only country that has egregiously used that veto. Once in a blue moon, another country does. Only four others can do it besides the US. But America has egregiously used the veto power. So the UN can do absolutely nothing to stop America. An important point for people to know is America may have two major parties but America is a one-party state. It doesn't matter whether Democrats are in power or the Republicans. It's referred to as the money party or the property party. And Barack Obama is merely George Bush's third term. Bill Clinton was worse than Ronald Reagan. George Bush was worse than Bill Clinton and Barack Obama, believe it or not, is worse than George Bush. It's hard to believe. But he's worse than George Bush. He is smoother but before his term runs out, people will catch on. They are catching on now slowly. I think he'd be a one-term president. But the policies are seamless. The wars are planned in advance. The pretexts come about after the plans are made.

We went to war with Afghanistan four weeks after 9/11. It takes months to plan a war like that. The plan to go to war with Iraq was already conceived. The blueprint was written. It was on the shelf ready to take out. The only decision was which country we go to war with first. They picked Afghanistan. Iraq and Afghanistan of course had nothing whatsoever to do with 9/11. They didn't threaten the US. George Bush lied. Everybody else in the administration lied. I agree George Bush was a tool. Obama is a tool. And it doesn't matter whether it's Obama or whoever comes after him. It's the system that needs to be indicted.

Press TV: If what you are saying is true, where are the American people in the middle of this? If nothing really changes and it's the system that is consistent and as you said is getting worse. Are the American people not informed about this? Why isn't there a lot being said about this in general, this perspective that you have just brought out? Why no analyses are being made?

Stephen Lendman: It's such an important point. I have read about it and talked about it on my radio program. People get more informed all the time. The problem is even though the majority are not… the majority get the news and information from TV which means the cable channels, CNN, FOX, the broadcast channels; the CBS the NBC. They lie, they do not inform. They produce managed news not real news and information. They bring on a host, they bring on pundits and they lie. They misinform, they censor. But even people who do know what's going on, most of them are indifferent. They have their own lives. They worry about nonsensical things like shopping, like the latest films, the latest fashions. That's crazy but that's what they think about. And they say, "Well I need to go to work, I need to support my family." They worry about these things. So in France, you see strikes, a million, two or three million people come out on the streets day after day after day after day. None of us in America [is doing the same]. We are having our liberty stolen. We are having our wealth stolen. And people are just indifferent to the possibility that some day what they think is a country that is free will turn out to be … a police state. And all the benefits are gone, and when they finally awaken to that it will be too late.

Press TV: Mr. Jones, in the light of what Mr. Lendman has said, there are human rights organizations that try to keep a tab on things. For example, according to the Amnesty International, Bush's admittance to knowing and approving water-boarding makes him accountable. What would it take in the United States for someone like Bush to be held accountable?

Bill Jones: Well, it will probably take a general mass uprising which could indeed occur at certain points. The problem with the American people is that they are concerned about what's going on. They were concerned when they elected Barack Obama because they elected Barack Obama because he wasn't George Bush. But Barack Obama was much more George Bush than people thought, which is why his popularity now has gone down the tubes rapidly, putting him in a position, I think the latest polls proved it, that his popularity is worse than Bush's.

The real problem is the lack of leadership. I would say the cowardice of what leadership is in this country. I will give you an example. Barack Obama has basically through Nancy Pelosi horsewhipped the Congress into accepting a policy that most of them probably admitted was wrong. Namely, to spend over one trillion dollars in bailing out Wall Street when our cities were falling apart, when our bridges were coming down, when there are all kinds of infrastructures that needed money. This trillion dollars plus went to Wall Street to bail out the bankers and the people suffered. Most of the congressmen who were hearing from their districts on what the problems were knew that that was a wrong policy but they were too cowardly...

Press TV: Let me interrupt you there. If you say that basically the leaders in the US right now do not have the courage to do what they basically should do, they are cowards, then who is really running the show? If they are bowing obviously to some higher power, who do you think is behind the show in Washington?

Bill Jones: Well, primarily the ones who have been running the show during the Obama administration have been really the Wall Street banks. It's not just only the Wall Street banks. It's really the London banks, because Obama's policy has been to try and save the bankrupt financial system with the trillions and trillions of dollars of debt that cannot be paid instead of moving in the direction of, say, creating a new financial system and agreements between governments.

A lot of things could have been done to resolve this economic crisis. But the bankers were telling Geithner and Larry Summers "you've got to save Wall Street, whatever it's going to cost. Give them what they need." And then Bernanke and Geithner went to the president and said, "OK, give them what they want."

Press TV: Based on what you have said, would you say that it is not only Bush that is implicit in what he has said but the whole system has been implicit in basically allowing this to happen. Would you say that is true?

Bill Jones: It's fundamental corruption in the system which is ruled by the money that a lot of these people need in order to win their election. That is the case with Congress. The rule in Congress is "Go along to get along." That's once these guys get into the Congress and will see what happens to these Tea Party and all these other wild people who have been elected now... When word comes down, you want a position in the committee; you want a position in this and that. You have to follow the rules here.

And it's all about the money. Now if somebody opposes that… they could do it, if they mobilized the people, if they went to the people and said "we cannot allow this to happen." But nobody, up in to this point, in the US Congress, has shown the guts to try and do that. And that is, like I said, a problem of leadership. If anybody would do that, they would gain the immediate support from the American population who are totally disgusted with the way that Washington works.
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Press TV: Being that you have said, that it is a corrupt system, where does it go from here? And, basically, what happened to the so-called justice that the US said it stood for?

Stephen Lendman: Well, America says a lot of things, but what it does and what it says go in two different paths. Who runs America? It is very clear who runs America. Corporate America runs the country. Bankers [are] in the lead [of] really what is called the fire sector, finance, real state, insurance led by the big Wall Street banks. And of course the Federal Reserve is not federal. It is owned by the banks. The Wall Street banks have a controlling interest. They decide the way the country will be run, including waging wars. One reason for waging wars is they are so profitable. Not just to the defense contractors, [but also] to the big banks, to technology companies, all companies that supply goods and services including private contractors that have every incentive to want America to be in war.

America has a prominent war agenda, we just need to find new enemies, and if they don't exist, we need to create them. It is the system that is broken and corrupted, and I agree. Unless there is a mass uprising, that is nowhere in sight, this will not change. It will only get worse.

GHN/HJL/MB/AKM

Paul Craig Roberts received his Ph.D. from U. Virginia after doing his dissertation at Oxford on the theory of economic planning under the distinguished physical chemist and philosopher, Michael Polanyi. This background, coupled with his role as Assistant Secretary of Economic Policy under Reagan and his long stint as a columnist for Business Week and the WSJ, more than qualifies Roberts to project the end-game of the neocon/banksters' "chess match" with the rest of the world to determine what will be the solutions to and/or consequences of the U.S. budget and trade deficits now having become untenably large...

Paul Craig Roberts Archive
Paul Craig Robert's appeal on behalf of VDARE.COM

August 16, 2010

“Without A Revolution, Americans Are History.”

By Paul Craig Roberts

The United States is running out of time to get its budget and trade deficits under control.  Despite the urgency of the situation, 2010 has been wasted in hype about a non-existent recovery.  As recently as August 2 Treasury Secretary Timothy F. Geithner penned a New York Times Column, Welcome to the Recovery.

As John Williams (shadowstats.com) has made clear on many occasions, an appearance of recovery was created by over-counting employment and undercounting inflation. Warnings by Williams, Gerald Celente, and myself have gone unheeded, but our warnings recently had echoes from Boston University professor Laurence Kotlikoff and from David Stockman, who excoriated the Republican Party for becoming big-spending Democrats.

It is encouraging to see a bit of realization that, this time, Washington cannot spend the economy out of recession. The deficits are already too large for the dollar to survive as reserve currency, and deficit spending cannot put Americans back to work in jobs that have been moved offshore. 

However, the solutions offered by those who are beginning to recognize that there is a problem are discouraging. Kotlikoff thinks the solution is massive Social Security and Medicare cuts or massive tax increases or hyperinflation to destroy the massive debts. 

Perhaps economists lack imagination, or perhaps they don’t want to be cut off from Wall Street and corporate subsidies, but Social Security and Medicare are insufficient at their present levels, especially considering the erosion of private pensions by the dot com, derivative and real estate bubbles. Cuts in Social Security and Medicare, for which people have paid 15% of their earnings all their life, would result in starvation and deaths from curable diseases. 

Tax increases make even less sense. It is widely acknowledged that the majority of households cannot survive on one job. Both husband and wife work and often one of the partners has two jobs in order to make ends meet. Raising taxes makes it harder to make ends meet—thus more foreclosures, more food stamps, more homelessness. What kind of economist or humane person thinks this is a solution?

Ah, but we will tax the rich. The usual idiocy. The rich have enough money. They will simply stop earning.

Let’s get real.  Here is what the government is likely to do.  Once the Washington idiots realize that the dollar is at risk and that they can no longer finance their wars by borrowing abroad, the government will either levy a tax on private pensions on the grounds that the pensions have accumulated tax-deferred, or the government will require pension fund managers to purchase Treasury debt with our pensions. This will buy the government a bit more time while pension accounts are loaded up with worthless paper. 

The last Bush budget deficit (2008) was in the $400-500 billion range, about the size of the Chinese, Japanese, and OPEC trade surpluses with the US. Traditionally, these trade surpluses have been recycled to the US and finance the federal budget deficit. In 2009 and 2010 the federal deficit jumped to $1,400 billion, a back-to-back trillion dollar increase. There are not sufficient trade surpluses to finance a deficit this large. From where comes the money?

The answer is from individuals fleeing the stock market into "safe" Treasury bonds and from the bankster bailout, not so much the TARP money as the Federal Reserve’s exchange of bank reserves for questionable financial paper such as subprime derivatives. The banks used their excess reserves to purchase Treasury debt.

These financing maneuvers are one-time tricks. Once people have fled stocks, that movement into Treasuries is over. The opposition to the bankster bailout likely precludes another. So where does the money come from the next time?

The Treasury was able to unload a lot of debt thanks to "the Greek crisis," which the New York banksters and hedge funds multiplied into "the euro crisis." The financial press served as a financing arm for the US Treasury by creating panic about European debt and the euro. Central banks and individuals who had taken refuge from the dollar in euros were panicked out of their euros, and they rushed into dollars by purchasing US Treasury debt. 

This movement from euros to dollars weakened the alternative reserve currency to the dollar, halted the dollar’s decline, and financed the massive US budget deficit a while longer.

Possibly the game can be replayed with Spanish debt, Irish debt, and whatever unlucky country swept in by the thoughtless expansion of the European Union.

But when no countries remain that can be destabilized by Wall Street investment banksters and hedge funds, what then finances the US budget deficit?

The only remaining financier is the Federal Reserve. When Treasury bonds brought to auction do not sell, the Federal Reserve must purchase them. The Federal Reserve purchases the bonds by creating new demand deposits, or checking accounts, for the Treasury. As the Treasury spends the proceeds of the new debt sales, the US money supply expands by the amount of the Federal Reserve’s purchase of Treasury debt.

Do goods and services expand by the same amount?  Imports will increase as US jobs have been offshored and given to foreigners, thus worsening the trade deficit.  When the Federal Reserve purchases the Treasury’s new debt issues, the money supply will increase by more than the supply of domestically produced goods and services. Prices are likely to rise.

How high will they rise? The longer money is created in order that government can pay its bills, the more likely hyperinflation will be the result.

The economy has not recovered. By the end of this year it will be obvious that the collapsing economy means a larger than $1.4 trillion budget deficit to finance. Will it be $2 trillion? Higher? 

Whatever the size, the rest of the world will see that the dollar is being printed in such quantities that it cannot serve as reserve currency. At that point wholesale dumping of dollars will result as foreign central banks try to unload a worthless currency. 

The collapse of the dollar will drive up the prices of imports and offshored goods on which Americans are dependent. Wal-Mart shoppers will think they have mistakenly gone into Neiman Marcus. 

Domestic prices will also explode as a growing money supply chases the supply of goods and services still made in America by Americans.

The dollar as reserve currency cannot survive the conflagration. When the dollar goes the US cannot finance its trade deficit. Therefore, imports will fall sharply, thus adding to domestic inflation and, as the US is energy import-dependent, there will be transportation disruptions that will disrupt work and grocery store deliveries.

Panic will be the order of the day.

Will farms will be raided? Will those trapped in cities resort to riots and looting?

Is this the likely future that "our" government and "our patriotic" corporations have created for us?

To borrow from Lenin, "What can be done?"

Here is what can be done. The wars, which benefit no one but the military-security complex and Israel’s territorial expansion, can be immediately ended. This would reduce the US budget deficit by hundreds of billions of dollars per year.  More hundreds of billions of dollars could be saved by cutting the rest of the military budget, which in its present size, exceeds the budgets of all the serious military powers on earth combined. 

US military spending reflects the unaffordable and unattainable crazed neoconservative  goal of US Empire and world hegemony. What fool in Washington thinks that China is going to finance US hegemony over China? 

The only way that the US will again have an economy is by bringing back the offshored jobs. The loss of these jobs impoverished Americans while producing over-sized gains for Wall Street, shareholders, and corporate executives. These jobs can be brought home where they belong by taxing corporations according to where value is added to their product. If value is added to their goods and services in China, corporations would have a high tax rate. If value is added to their goods and services in the US, corporations would have a low tax rate.

This change in corporate taxation would offset the cheap foreign labor that has sucked jobs out of America, and it would rebuild the ladders of upward mobility that made America an opportunity society. 

If the wars are not immediately stopped and the jobs brought back to America, the US is relegated to the trash bin of history.

Obviously, the corporations and Wall Street would use their financial power and campaign contributions to block any legislation that would reduce short-term earnings and bonuses by bringing jobs back to Americans. Americans have no greater enemies than Wall Street and the corporations and their prostitutes in Congress and the White House.

The neocons allied with Israel, who control both parties and much of the media, are strung out on the ecstasy of Empire. 

The United States and the welfare of its 300 million people cannot be restored unless the neocons, Wall Street, the corporations, and their servile slaves in Congress and the White House can be defeated.

Without a revolution, Americans are history.

Paul Craig Roberts [email him] was Assistant Secretary of the Treasury during President Reagan’s first term.  He was Associate Editor of the Wall Street Journal.  He has held numerous academic appointments, including the William E. Simon Chair, Center for Strategic and International Studies, Georgetown University, and Senior Research Fellow, Hoover Institution, Stanford University. He was awarded the Legion of Honor by French President Francois Mitterrand. He is the author of Supply-Side Revolution : An Insider's Account of Policymaking in Washington;  Alienation and the Soviet Economy and Meltdown: Inside the Soviet Economy, and is the co-author with Lawrence M. Stratton of The Tyranny of Good Intentions : How Prosecutors and Bureaucrats Are Trampling the Constitution in the Name of Justice . Click here for Peter Brimelow’s Forbes Magazine interview with Roberts about the recent epidemic of prosecutorial misconduct.

Robert Reich's Assessment the Newly Passed Finance Bill: "Mountain of Legislative Paper, Molehill of Reform"

New Finance Bill: Mountain of Legislative Paper, Molehill of Reform

by Robert Reich posted on Saturday, 17 July 2010

Thursday the President pronounced that “because of this [financial reform] bill the American people will never again be asked to foot the bill for Wall Street’s mistakes.”

As if to prove him wrong, Goldman Sachs simultaneously announced it had struck a deal with federal prosecutors to pay $550 million to settle federal claims it misled investor — a sum representing a mere 15 days profit for the firm based on its 2009 earnings. Goldman’s share price immediately jumped 4.3 percent, and the Street proclaimed its chair and CEO,  Lloyd (“Goldman is doing God’s work”) Blankfein, a winner. Financial analysts rushed to affirm a glowing outlook for Goldman stock.

Blankfein, you may recall, was at the meeting in late 2008 when Tim Geithner and Hank Paulson decided to bail out AIG, and thereby deliver through AIG a $13 billion no-strings-attached taxpayer windfall to Goldman. In a world where money is the measure of everything, Blankfein’s power and influence have grown. Presumably, Goldman can expect more windfalls in future years.

Although the financial reform bill may have clipped some of Goldman’s wings — its lucrative derivative business may require Goldman to jettison its status as a bank holding company, and the access to the Fed discount window that comes with it — the main point is that the Goldman settlement reveals everything that’s weakest about the financial reform bill.

The American people will continue to have to foot the bill for the mistakes of Wall Street’s biggest banks because the legislation does nothing to diminish the economic and political power of these giants. It does not cap their size. It does not resurrect the  Glass-Steagall Act that once separated commercial (normal) banking from investment (casino) banking. It does not even link the pay of their traders and top executives to long-term performance. In other words, it does nothing to change their basic structure. And for this reason, it gives them an implicit federal insurance policy against failure unavailable to smaller banks — thereby adding to their economic and political power in the future.

The bill contains hortatory language but is precariously weak in the details. The so-called Volcker Rule has been watered down and delayed. Blanche Lincoln’s important proposal that derivatives be traded in separate entities which aren’t subsidized by commercial deposits has been shrunk and compromised. Customized derivates can remain underground. The consumer protection agency has been lodged in the Fed, whose own consumer division failed miserably to protect consumers last time around.

On every important issue the legislation merely passes on to regulators decisions about how to oversee the big banks and treat them if they’re behaving badly. But if history proves one lesson it’s that regulators won’t and can’t. They don’t have the resources. They don’t have the knowledge. They are staffed by people in their 30s and 40s who are paid a small fraction of what the lawyers working for the banks are paid. Many want and expect better-paying jobs on Wall Street after they leave government, and so are shrink-wrapped in a basic conflict of interest. And the big banks’ lawyers and accountants can run circles around them by threatening protracted litigation.

Why do you think Goldman got off so easily from such serious charges of fraud?

Reliance on the discretion of regulators rather than structural changes in the banking system plays directly into the hands of the big banks and their executives and traders who contribute mightily to Democratic and Republican campaigns. The flow of money virtually guarantees that regulatory agencies won’t be adequately staffed to enforce the law, that penalties for violations won’t be overly onerous, and that all loopholes (what’s a “derivative”? what has to be listed on exchanges? exactly how much capital must be on hand for which transactions? How are the various forms of predatory lending to be defined?) will be easily stretched in future years. Wall Street lawyers will have a field day. The profit-for-nothing sector of the economy (law, accounting, finance) will continue to grow buoyantly.

Make no mistake: As long as there’s no fundamental change in the structure of Wall Street — as long as the big banks stay as big and are allowed to grow bigger, and have every incentive to invent new financial gimmicks with which to bet other peoples’ money — they will remain too big to fail, and too politically powerful to control.

Goldman’s share price, as well as those of JP Morgan Chase, Citicorps, Morgan Stanley, and Bank of America, will no doubt soar the basis of the final bill because their future profits are almost guaranteed. The pay of their executives and traders, and of the managers of hedge funds and private-equity funds they deal with, will likewise accelerate. In the short term the economy will benefit, at least to the extent financial entrepreneurship is now the apex of American wealth and innovation. But over the longer term we will be much weaker for it.

Congress has labored mightily to produce a mountain of legislation that can be called financial reform, but it has produced a molehill relative to the wreckage Wall Street wreaked upon the nation.

Robert Reich is Professor of Public Policy at the University of California at Berkeley. He has served in three national administrations, most recently as secretary of labor under President Bill Clinton. He has written twelve books, including The Work of Nations, Locked in the Cabinet, and his most recent book, Supercapitalism. His "Marketplace" commentaries can be found on publicradio.com  and iTunes.

Wall Street Moons Us Again ...Thanks to a Bought-Off Congress

Reform Without Punishment

Friday, May 21, 2010 9:58 AM

By Daniel Gross

The Senate's passage Thursday night of far-reaching financial reform is being portrayed as a big loss for the financial sector. "No End to Banks' Capitol Punishment," reads the headline in The Wall Street Journal. But everything's relative. The legislative action is a defeat in large measure because Wall Street wanted no reform. And it seems like harsh punishment because the default situation for the last 30years has been that the financial sector gets precisely the regulation it wants.

Given what the financial sector put the nation through in the past three years, the case for punitive action was—and is—very compelling. But while there's stuff in there that the financial sector doesn't like, the legislation that is now headed to a House-Senate conference is, in fact, relatively tame.

Consider what's not in the bill. Earlier this year, President Obama came out in favor of the  Volcker rule, which would have prohibited regulated banks from engaging in the enormously profitable (but risky) business of proprietary trading. That would have punished the large investment banks. It is not part of this legislation. There's been some discussion of a  Tobin tax, the idea of levying a tax on financial transactions such as currency, stock, and derivative trades. That would raise revenue and provide disincentives for the socially useless algorithmic trading that creates risk for all investors. That would have punished many financial institutions. It is not part of the legislation. The House version of financial reform called for a $150 billion fund to be raised, largely by taxing big financial institutions, that would help wind down failed institutions. That would have exacted a significant (and, to my mind, justified) cost on big investment banks. It is not part of the Senate legislation. If health-care reform is any guide, the dynamics of Capitol Hill suggest that most House-Senate disputes are likely to be resolved in favor of the Senate.

Some of the most absurd prerogatives and loopholes are left untouched. This bill doesn't address carried interest, the absurd state of affairs under which private equity and hedge funds the ability to pay capital gains tax rates on money they make managing money for other people.

There are some  areas in which the Senate goes further than the House. The Senate bill would, as The New York Times reports, "force big banks to spin off some of their most lucrative business into separate subsidiaries." And the legislation would push most derivatives trading onto exchanges, a move that would bite into the existing profits of some financial firms. (It's difficult to see how greater transparency and liquidity in a massive market hurts the industry as a whole.)

Of course, oversight and regulation are always seen as negatives by the industry. But as I've argued, industry frequently doesn't know what's best for it. The bill that's emerging doesn't tax trading, doesn't force the industry to fund its own recklessness in advance, and preserves vital tax breaks, and that puts consumer protection under the auspices of the Federal Reserve, a generally conservative institution. Punishment? More like a slap on the wrist.