..seems to be trying to get people to think she had some sort of victory in all this...Fools!
The Scam Wall Street Learned From the Mafia
How America’s biggest banks took part in a nationwide bid-rigging conspiracy – until they were caught on tape
by: Matt Taibbi, Rolling Stone
Someday, it will go down in history as the first trial of the modern American mafia. Of course, you won’t hear the recent financial corruption case, United States of America v. Carollo, Goldberg and Grimm, called anything like that. If you heard about it at all, you’re probably either in the municipal bond business or married to an antitrust lawyer. Even then, all you probably heard was that a threesome of bit players on Wall Street got convicted of obscure antitrust violations in one of the most inscrutable, jargon-packed legal snoozefests since the government’s massive case against Microsoft in the Nineties – not exactly the thrilling courtroom drama offered by the famed trials of old-school mobsters like Al Capone or Anthony “Tony Ducks” Corallo.
But this just-completed trial in downtown New York against three faceless financial executives really was historic. Over 10 years in the making, the case allowed federal prosecutors to make public for the first time the astonishing inner workings of the reigning American crime syndicate, which now operates not out of Little Italy and Las Vegas, but out of Wall Street.
The defendants in the case – Dominick Carollo, Steven Goldberg and Peter Grimm – worked for GE Capital, the finance arm of General Electric. Along with virtually every major bank and finance company on Wall Street – not just GE, but J.P. Morgan Chase, Bank of America, UBS, Lehman Brothers, Bear Stearns, Wachovia and more – these three Wall Street wiseguys spent the past decade taking part in a breathtakingly broad scheme to skim billions of dollars from the coffers of cities and small towns across America. The banks achieved this gigantic rip-off by secretly colluding to rig the public bids on municipal bonds, a business worth $3.7 trillion. By conspiring to lower the interest rates that towns earn on these investments, the banks systematically stole from schools, hospitals, libraries and nursing homes – from “virtually every state, district and territory in the United States,” according to one settlement. And they did it so cleverly that the victims never even knew they were being cheated. No thumbs were broken, and nobody ended up in a landfill in New Jersey, but money disappeared, lots and lots of it, and its manner of disappearance had a familiar name: organized crime.
In fact, stripped of all the camouflaging financial verbiage, the crimes the defendants and their co-conspirators committed were virtually indistinguishable from the kind of thuggery practiced for decades by the Mafia, which has long made manipulation of public bids for things like garbage collection and construction contracts a cornerstone of its business. What’s more, in the manner of old mob trials, Wall Street’s secret machinations were revealed during the Carollo trial through crackling wiretap recordings and the lurid testimony of cooperating witnesses, who came into court with bowed heads, pointing fingers at their accomplices. The new-age gangsters even invented an elaborate code to hide their crimes. Like Elizabethan highway robbers who spoke in thieves’ cant, or Italian mobsters who talked about “getting a button man to clip the capo,” on tape after tape these Wall Street crooks coughed up phrases like “pull a nickel out” or “get to the right level” or “you’re hanging out there” – all code words used to manipulate the interest rates on municipal bonds. The only thing that made this trial different from a typical mob trial was the scale of the crime.
USA v. Carollo involved classic cartel activity: not just one corrupt bank, but many, all acting in careful concert against the public interest. In the years since the economic crash of 2008, we’ve seen numerous hints that such orchestrated corruption exists. The collapses of Bear Stearns and Lehman Brothers, for instance, both pointed to coordinated attacks by powerful banks and hedge funds determined to speed the demise of those firms. In the bankruptcy of Jefferson County, Alabama, we learned that Goldman Sachs accepted a $3 million bribe from J.P. Morgan Chase to permit Chase to serve as the sole provider of toxic swap deals to the rubes running metropolitan Birmingham – “an open-and-shut case of anti-competitive behavior,” as one former regulator described it.
More recently, a major international investigation has been launched into the manipulation of Libor, the interbank lending index that is used to calculate global interest rates for products worth more than $3 trillion a year. If and when that case is presented to the public at trial – there are several major civil suits in the works here in the States – we may yet find out that the world’s most powerful banks have, for years, been fixing the prices of almost every adjustable-rate vehicle on earth, from mortgages and credit cards to interest-rate swaps and even currencies.
But USA v. Carollo marks the first time we actually got incontrovertible evidence that Wall Street has moved into this cartel-type brand of criminality. It also offered a disgusting glimpse into the enabling and grossly cynical role played by politicians, who took Super Bowl tickets and bribe-stuffed envelopes to look the other way while gangsters raided the public kitty. And though the punishments that were ultimately handed down in the trial – minor convictions of three bit players – felt deeply unsatisfying, it was still a watershed moment in the ongoing story of America’s gradual awakening to the realities of financial corruption. In a post-crash era where Wall Street trials almost never make it into court, and even the harshest settlements end with the evidence buried by the government and the offending banks permitted to escape with no admission of wrongdoing, this case finally dragged the whole ugly truth of American finance out into the open – and it was a hell of a show.
1. THE SCAM
This was no trial scene from popular lore, no Inherit the Wind or State of California v. Orenthal James Simpson. No gallery packed with rapt spectators, no ceiling fans set whirring to beat back the tension and the heat, no defense counsel’s resting a sympathetic hand on the defendant’s shoulder as opening statements commence. No, the setting for USA v. Carollo reflected the bizarre alternate universe that exists on Wall Street. Like so many court cases involving big banks, the proceeding looked more like a roomful of expensive lawyers negotiating a major corporate merger than a public search for justice.
The trial began on April 16th in a federal court in Lower Manhattan. The courtroom, an aerielike setting 23 stories up, offered a panoramic view of the city and the East River. Though the gallery was usually full throughout the three-plus weeks of testimony, the spectators were not average citizens come to witness how they had been robbed blind by America’s biggest banks. Instead, there were row after row of suits – other lawyers eager to observe a long-awaited case, one that could influence the outcome in a handful of civil suits pending across the country. In fact, the defendants themselves, whom the trial would reveal as easily replaceable cogs in a much larger machine of corruption, were barely visible from the gallery, obscured by the great chattering congress of prosecution and defense attorneys.
Only the presence of the mostly nonwhite and elderly jury, which resembled the front pew of a Harlem church, served as a reminder that the case had any connection to the real world. Even reporters from most of the major news outlets didn’t bother to attend. The judge in the trial, the right honorable and amusingly cantankerous Harold Baer, acknowledged that the case was not likely to set the public’s pulse racing. “It is unlikely, I think, that this will generate a lot of media publicity,” Baer sighed to the jury in his preliminary instructions.
Once opening statements began, it was easy to see why the press might stay away. One of the main lines of defense for corrupt Wall Street institutions in recent years has been the extreme complexity of the infrastructure within which these crimes are committed. In order for prosecutors to win convictions, they have to drag ordinary Americans, people who watch and enjoy reality TV, up the steepest of learning curves, coaching them into game shape with regard to obscure financial vehicles like swaps and CDOs and, in this case, Guaranteed Investment Contracts.
So it was no surprise that both the prosecution and the defense began their opening remarks to the jury by apologizing for the hellishly dull maze of “convoluted” and “boring” and “tedious” financial transactions they were about to spend weeks hearing about. Only Wendy Waszmer, the feisty federal prosecutor with straight brown hair and an elfin build who presented the government’s case, succeeded in cutting through the mountainous dung heap of acronyms and obfuscations and explaining what the case was about. “Even though some aspects of municipal bond finance are complex, the fraud here was simple,” she told the jurors. “It was about lying and cheating cities and towns in a bidding process that was in place to protect them.”
The “simple fraud” Waszmer described centered around public borrowing. Say your town wants to build a new elementary school. So it goes to Wall Street, which issues a bond in your town’s name to raise $100 million, attracting cash from investors all over the globe. Once Wall Street raises all that money, it dumps it in a tax-exempt account, which your town then uses to pay builders, plumbers, the chalkboard company and whoever else winds up working on the project.
But here’s the catch: Most towns, when they raise all that money, don’t spend it all at once. Often it takes years to complete a construction project, and the last contractor isn’t paid until long after the original bond is issued. While that unspent money is sitting in the town’s account, local officials go looking for a financial company on Wall Street to invest it for them.
To do that, officials hire a middleman firm known as a broker to set up a public auction and invite banks to compete for the town’s business. For the $100 million you borrowed on your elementary school bond, Bank A might offer you 5 percent interest. Bank B goes further and offers 5.25 percent. But Bank C, the winner of the auction, offers 5.5 percent.
In most cases, towns and cities, called issuers, are legally required to submit their bonds to a competitive auction of at least three banks, called providers. The scam Wall Street cooked up to beat this fair-market system was to devise phony auctions. Instead of submitting competitive bids and letting the highest rate win, providers like Chase, Bank of America and GE secretly divvied up the business of all the different cities and towns that came to Wall Street to borrow money. One company would be allowed to “win” the bid on an elementary school, the second would be handed a hospital, the third a hockey rink, and so on.
How did they rig the auctions? Simple: By bribing the auctioneers, those middlemen brokers hired to ensure the town got the best possible interest rate the market could offer. Instead of holding honest auctions in which none of the parties knew the size of one another’s bids, the broker would tell the prearranged “winner” what the other two bids were, allowing the bank to lower its offer and come in with an interest rate just high enough to “beat” its supposed competitors. This simple but effective cheat – telling the winner what its rivals had bid – was called giving them a “last look.” The winning bank would then reward the broker by providing it with kickbacks disguised as “fees” for swap deals that the brokers weren’t even involved in.
The end result of this (at least) decade-long conspiracy was that towns and cities systematically lost, while banks and brokers won big. By shaving tiny fractions of a percent off their winning bids, the banks pocketed fantastic sums over the life of these multimillion-dollar bond deals. Lowering a bid by just one-100th of a percent, called a basis point, could cheat a town out of tens of thousands of dollars it would otherwise have earned on its bond deposits.
That doesn’t sound like much. But when added to the other fractions of a percent stolen from basically every other town in America on every other bond issued by Wall Street in the past 10 to 15 years, it starts to turn into an enormous sum of money. In short, this was like the scam in Office Space, multiplied by a factor of about 10 gazillion: Banks stole pennies at a time from towns all over America, only they did it a few hundred bazillion times.
Given the complexities of bond investments, it’s impossible to know exactly how much the total take was. But consider this: Four banks that took part in the scam (UBS, Bank of America, Chase and Wells Fargo) paid $673 million in restitution after agreeing to cooperate in the government’s case. (Bank of America even entered the Justice Department’s leniency program, which is tantamount to admitting that it committed felonies.) Since that settlement involves only four of the firms implicated in the scam (a list that includes Goldman, Transamerica and AIG, as well as banks in Scotland, France, Germany and the Netherlands), and since settlements in Wall Street cases tend to represent only a tiny fraction of the actual damages (Chase paid just $75 million for its role in the bribe-and-payola scandal that saddled Jefferson County, Alabama, with more than $3 billion in sewer debt), it’s safe to assume that Wall Street skimmed untold billions in the bid-rigging scam. The UBS settlement alone, for instance, involved 100 different bond deals, worth a total of $16 billion, over four years.
Contracting corruption has been around since the construction of the Appian Way. The difference here is the almost unimaginable scope of the crime – and the fact that it’s mobsters from Wall Street who are getting in on the action. Until recently, such activity has traditionally been the almostexclusive domain of the Mafia. “When I think of bid rigging, I think of the convergence of organized crime and the government,” says Eliot Spitzer, who prosecuted two bid-rigging cases in his career as a New York prosecutor, one involving garbage collection, the other a Garment District case involving the Gambino family. The Mafia moved into bid rigging, he says, because it observed over time that monopolizing public contracts offers a far more lucrative business model than legbreaking. “Organized crime learned their lessons from John D. Rockefeller,” Spitzer explains. “It’s much more efficient to control a market and boost the price 10 percent than it is to run a loan-sharking business on the street, where you actually have to use a baseball bat and collect every week.”
What Spitzer saw was gangsters moving in the direction of big business. When I ask him if he is surprised by the current bid-rigging case, which looks more like big business moving in the direction of gangsters, he laughs. “The urge to become a monopolist,” he says, “is as old as capitalism.”
2. THE TAPES
The defendants in the case – Dominick Carollo, Steven Goldberg and Peter Grimm – worked together at GE, which was competing for bond business against banks like Chase, Wells Fargo and Bank of America. Carollo was the boss of Goldberg and Grimm, who handled the grunt work, submitting bids. Between August 1999 and November 2006, the three executives participated in countless rigged bids by telephone, conspiring with middleman brokers like Chambers, Dunhill and Rubin. We know this because prior to the start of the Carollo trial, 12 other individuals, including several brokers from CDR, had already pleaded guilty in a wide-ranging federal investigation.
How did the government manage to make a case against so many Wall Street scam artists? Hubris. As was the case in Jefferson County, Alabama, where Chase executives blabbed criminal conspiracies on the telephone even though they knew they were being recorded by their own company, the trio of defendants in Carollo wantonly fixed bond auctions despite the fact that their own firm was taping the conversations. Defense counsel even made an issue of this at trial, implying to the jury that nobody would be dumb enough to commit a crime by phone when “there was a big sticker on the phones that said all calls are being recorded,” as Grimm’s counsel, Mark Racanelli, put it. In fact, Racanelli argued, the conversations on the tapes hardly suggested a secret conspiracy, because “no one was whispering.”
But the reason no one was whispering isn’t that their actions weren’t illegal – it’s because the bid rigging was so incredibly common the defendants simply forgot to be ashamed of it. “The tapes illustrate the cavalier attitude which the financial community brought toward this behavior,” says Michael Hausfeld, a renowned class-action attorney whose firm is leading a major civil suit against Bank of America, Wells Fargo, Chase and others for this same bid-rigging scam. “It became the predominant mode of transacting business.”
How and when the government got hold of those tapes is still unclear; the prosecution is not commenting on the case, which remains an open investigation. But we do know that in November 2006, federal agents raided the offices of CDR, the broker firm that was working with Carollo, Goldberg and Grimm. Caught redhanded, many of the firm’s top executives agreed to turn state’s witness. One after another, these hangdog, pasty-faced men were led up to the stand by prosecutors and forced to recount how they’d been snatched up in the raid, separated and blitz-interviewed by FBI agents, and plunged into years of nut-crushing negotiations, which resulted in almost all of them pleading guilty. Prosecutors would eventually accumulate 570,000 recorded phone conversations, and to decipher them they worked these cooperating witnesses like sled dogs, driving them in for dozens of meetings and grilling them about the details of the scam.
The state’s first witness, confusingly, was a CDR broker named Doug Goldberg (no relation to the defendant Steven Goldberg). Almost every executive involved in the trial was absurdly young; many were just out of college when the bid-rigging scam started in the late Nineties. Doug Goldberg graduated from USC in 1993, and his fellow CDR executive Evan Zarefsky still looks to be about 15 years old, suggesting a suit-and-tie version of Napoleon Dynamite. The extreme youth of some of the conspirators was an obvious subtext of the trial, underscoring the fact that far more senior executives from bigger banks like Chase and Bank of America had been permitted by the government to evade testifying.
Right off the bat, in fact, Doug Goldberg explained that while at CDR, he had routinely helped the cream of Wall Street rig bids on municipal bonds by letting them take a peek at other bids:
Q: Who were some of the providers you gave last looks to?
A: There was a whole host of them, but GE Capital, FSA, J.P. Morgan, Bank of America, Société Générale, Lehman Brothers, Bear. There were others.
Goldberg went on to testify that he repeatedly rigged auctions with the three defendants. Sometimes he gave them “last looks” so they could shave basis points off their winning bids; other times he asked them to intentionally submit losing offers – called cover bids – to allow other firms to win. He told the court he knew he was being recorded by GE. When asked how he knew that, he drew one of the trial’s rare laughs by answering, “Either they told me or some of them, like Société Générale, you can hear the beeping.”
Because of the recordings, he went on, he and the defendants used “guarded language.”
“I might tell him, if I’m looking for an intentionally losing bid, ‘I need a bid,’ or something like that,” he said.
Q: With whom specifically did you use this guarded type of language?
A: With Steve Goldberg and others.
Q: In your dealings with Steve Goldberg, what, if any, language or other signal did he use that you understood as a request for a last look?
A: He might ask me where I “saw the market,” or he might ask me for, as I mentioned, an “indication of where the market is,” an “idea of the market.”
The broker went on to detail how he had worked with the GE executives to manipulate a number of auctions. In several cases, he was pushed to make deals with GE by his boss at CDR, Stewart Wolmark, who seemed smitten with GE’s Steve Goldberg; jurors listening to the tapes couldn’t miss the pair’s nauseatingly tight, cash-fueled bromance. In December 2000, for instance, Wolmark helped Goldberg win a rigged bid for a bond in Onondaga County, New York. After the auction, he calls his buddy Steve:
WOLMARK: Hey, congratulations. You got another one.
GOLDBERG: Yeah. Yeah, thank you. Thank you.
WOLMARK: You’re hot!
GOLDBERG: I’m hot? Hot with your help, sir.
Later on, Wolmark basically tells Goldberg he owes a service to his fellow gangster. “I deserve the big lunch now,” Wolmark chirps.
“Yeah,” says Goldberg. “I owe you something, huh?”
A few months later, in March 2001, Wolmark and Goldberg do another deal, this time for a $219 million construction bond for the Port Authority of Allegheny County, Pennsylvania. Wolmark rings up his payola paramour and scolds him for not calling him during a recent trip to Vegas, where Goldberg doubtless spent a nice chunk of the money Wolmark had helped him steal from places like Onondaga County.
“Good time in Vegas, you can’t even call me back?” Wolmark laments.
“I don’t have time to sleep in Vegas,” Goldberg says suggestively.
“There’s sleeping,” Stewart Wolmark chides, “and there’s Stewart.”
From there, the clothes just start flying off as the pair jump into a steamy negotiation over the monster Allegheny deal. “I’m all set with $200 million,” Goldberg says. “Everything’s ready to go.”
Then Wolmark asks if GE is ready to pay CDR its bribe. “You got some swaps coming up?”
Goldberg assures him they do. Wolmark then passes the deal off to his own Goldberg, Doug, who handles the actual auction.
When prosecutors tried to explain these telephone auctions at trial, projecting the transcripts of the calls on a huge movie screen set up across the courtroom from the jury, you could see the sheer bewilderment on the jurors’ faces. The men on the tapes seemed to be speaking a language from another planet – an insanely dry and boring planet, where there’s no color and no adverbs, maybe, and babies are made by rubbing two calculators together. One of the jurors, an older white man, spent the first few days of the trial yawning repeatedly, fighting a heroic battle to stay awake in the face of all the mind-numbing jargon about Guaranteed Investment Contracts. “Who needs Lunesta,” joked one lawyer who attended the proceedings, “when you can hear a lawyer talk about GICs right out of the gate?”
The language of the auctions was a kind of intellectual camouflage. If you didn’t listen closely, you’d have thought the two Goldbergs were a couple of airmen exchanging weather balloon data, rather than two Wall Street executives plotting a crime to rip off the good citizens of Allegheny County. In that deal, Steve Goldberg of GE originally bid “503, 4″ on the $219 million bond, only to be guided downward by Doug Goldberg of CDR. The broker explained in court:
Q: Can you explain what you understood Mr. Goldberg to say when he was saying 503, 4? What was he bidding?
A: That was the rate he was willing to bid on this investment agreement.
Q: How much was it?
A: 5.04 percent.
Q: What did you do as a response to his bid of 5.04 percent?
A: I brought his bid down to 5.00 percent.
In other words, even though GE was willing to pay an interest rate of 5.04 percent, Allegheny County ended up earning just 5.00 percent on its $219 million bond. How much money that amounted to is difficult to calculate, given the way the bond account diminished each year as the county used it to pay contractors; even Doug Goldberg couldn’t put a number on the scam. But if the account was full at the start of the deal, GE may have cheated the county out of as much as $87,600 a year to start.
In any case, GE certainly chiseled the Pennsylvanians out of a sizable sum, because soon after, the company paid CDR a kickback of $57,400 in the form of “fees” on a swap deal. The whole deal pleased CDR’s higher-ups. “I went to Stewart Wolmark and told him that not only did Steve Goldberg win but that I was able to reduce his rate down four basis points,” said Doug Goldberg. “Stewart was very happy and excited.”
Over and over again, jurors heard cooperating witnesses translate the damning audiotapes. In one lurid sequence, the bat-eared, bespectacled CDR broker Evan Zarefsky explained how he helped the GE defendant Peter Grimm win a bid for a bond put out by the Utah Housing Authority. The pair had apparently reamed Utah so many times that it had become a sort of inside joke between the two of them. From a call in August 2001:
GRIMM: Utah, let’s see, how we look on that?
ZAREFSKY: Good old Utah!
Grimm complains about how much he’ll have to pay to win the deal. “These levels are really shitty,” he says.
Zarefsky comforts him. “Well, I can probably save you a couple of bucks here,” he says.
From there, Grimm rattles off numbers, ultimately settling on a bid of 351 – 3.51 percent. Zarefsky, in almost motherly fashion, guides the manic Grimm downward, telling him, in code, that his bid is 10 basis points too high. “You actually got like a dime in there,” Zarefsky says. “You want to come down a dime?”
So Grimm comes back with a bid of 3.41 percent, which turned out to be the winning bid. Utah lost out on 10 basis points, GE bilked the state out of untold sums, and CDR got another nice kickback.
This, basically, is how a lot of the calls went. The provider would tentatively offer a number, and the broker would guide him to a new bid. “You have a little bit of room there,” he might say, or “That’s gonna put you about a nickel short.” Guiding the bidders to the lowest possible bid was called “figuring out the level” or being “in the market”; obtaining information about other bids was called “giving an indicative” or “seeing the market.”
The brokers and providers used a dizzying array of methods for rigging deals. In some cases, the broker helped the “winner” by simply excluding other bidders, who may or may not have been in on the scam. In one hilarious sequence that sounds like something out of a wiretap of a Little Italy social club, CDR executive Dani Naeh tells GE’s Steve Goldberg that he’s not sure he can guarantee a win on a bid for a New Jersey hospital bond. There were too many triple-A-rated companies interested in the bond, Naeh explains, and he couldn’t control their bids the way he could those of the lesser, double-A-rated companies he usually did business with. “It would be easier for us to contact other providers who were rated double-A and ask them to submit an intentionally losing bid,” Naeh testified. He sounded exactly like a mobster, talking about “our guys” and “our friends.”
In some of the calls, jurors could hear the entirety of the dirty deals negotiated, including the bribe paid back to the broker. In one deal involving a bond for the Port of Oakland, California, Steve Goldberg of GE starts to ask his pal Stewart Wolmark of CDR what kind of kickback the broker wants for rigging the deal. Such conversations about payoffs were so commonplace that Wolmark doesn’t even have to wait for Goldberg to finish the question:
GOLDBERG: What are we building in here for the…
In his testimony, Wolmark explained that he was asking for a swap deal in return for rigging the bid. “He wanted to know what we were going to get paid on the back end,” Wolmark explained.
In the call, Wolmark and Goldberg start haggling over the price of CDR’s kickback. Wolmark tells Goldberg he only wants what’s fair. “Listen, I’m not a chazzer,” Wolmark says.
Fans of the movie Scarface will remember Tony Montana’s inspired translation of this Yiddish term: “Thas a pig that don’ fly straight.”
Wolmark reassures Goldberg that as pigs go, he’s a straight flier. “You see the kind of mensch I am,” he says.
Negotiations ensue. Goldberg tells Wolmark that he can pay him more on the bribe – the swap deal – if Wolmark can help GE save money on the Port of Oakland deal. “I’d like to see if we can pull a nickel out of that swap,” Wolmark says. Translation: He wants to boost CDR’s take on the kickback by five basis points.
“If I could get to the right level,” Goldberg answers, referring to the Port of Oakland deal. Translation: Goldberg will help Wolmark get his “nickel” on the swap deal if Wolmark can help GE “get to the right level” on the bid.
3. THE POLITICIANS
The Carollo case provides far more than a detailed look at the mechanics and pervasiveness of bid rigging; it offers a clear and unvarnished blueprint of the architecture of American financial and political corruption. In an attempt to discredit the CDR witnesses, defense counsel hounded them about other revelations that surfaced in the government’s investigation, particularly those that involved bribery, illegal campaign contributions and pay-for-play schemes.
The defense’s cross-examinations were surreal. It was certainly true that some of the government’s cooperating witnesses had dubious résumés, so it may have made sense to highlight their generally duplicitous history of tax evasion or lying to investigators. But in their zeal, defense counsel went far beyond simply discrediting the witnesses, spending an inordinate amount of time eliciting even more details about the grotesque corruption scheme their own clients had taken part in. The result was a rare and somewhat confusing spectacle: high-octane lawyers from Wall Street working to rip the lid off Wall Street corruption in open court.
Defense counsel showed us, for instance, how CDR employees were routinely directed by their boss, David Rubin, to make political contributions to select candidates, only to be reimbursed by Rubin for those contributions later on. This kind of corporate skirting of campaign finance limits is something we’ve always suspected goes on, but we rarely get to see direct evidence of it.
More interesting, though, were the stories about political payoffs. In 2001, CDR hired a consultant named Ron White, a Philadelphia bond attorney who happened to be the chief fundraiser for then-mayor John Street. CDR gave White two tickets to the 2003 Super Bowl in San Diego plus a limo – a gift worth $10,000. As his “guest,” White took Corey Kemp, the city treasurer for Philadelphia, who, 16 days later, awarded CDR a $150,000 contract to advise the city on swap deals. But that wasn’t the end of the gravy train: CDR doled out those swap deals to selected banks, who in return kicked back $515,000 to CDR for steering city business their way.
So a mere $10,000 bribe to a politician – a couple of Super Bowl tickets and a limo – scored CDR a total of $665,000 of the public’s money. If you want to know why Wall Street has been enjoying record profits, here’s your answer: Corruption is a business model that brings in $66 for every dollar you invest.
Even more startling was the way that a notorious incident involving former New Mexico governor and presidential candidate Bill Richardson resurfaced during the trial. Barack Obama, you may recall, had nominated Richardson to be commerce secretary – only to have the move blow up in his face when tales of Richardson accepting bribes began to make the rounds. Federal prosecutors never brought a case against Richardson: In 2009, an inside source told the AP that the investigation had been “killed in Washington.” Obama himself, after Richardson bowed out, praised the former governor as an “outstanding public servant.”
Now, in the Carollo trial, defense counsel got Doug Goldberg, the CDR broker, to admit that his boss, Stewart Wolmark, had handed him an envelope containing a check for $25,000. The check was payable to none other than Moving America Forward – Bill Richardson’s political action committee. Goldberg then went to a Richardson fundraiser and handed the politician the envelope. Richardson, pleased, told Goldberg, “Tell the big guy I’m going to hire you guys.”
Goldberg admitted on the stand that he understood “the big guy” to mean Wolmark. After that came this amazing testimony:
Q: Soon after that, New Mexico hired CDR as its swap and GIC adviser on a $400 million deal, right?
Q: You learned later that that check in that envelope was a check for $25,000, right?
A: Yes. I learned it later.
Q: You also learned later that CDR gave another $75,000 to Gov. Richardson, right?
Q: CDR ended up making about a million dollars on this deal for those two checks?
Q: In fact, New Mexico not only hired CDR, they hired another firm to do the actual work that they needed done?
A: For the fixed-income stuff, yes.
What we get from this is that CDR paid Bill Richardson $100,000 in contributions and got $1.5 million in public money in return. And not just $1.5 million, but $1.5 million for work they didn’t even do – the state still had to hire another firm to do the actual job. Nice non-work, if you can get it.
To grasp the full insanity of these revelations, one must step back and consider all this information together: the bribes, yes, but also the industrywide, anti-competitive bid-rigging scheme. It turns into a kind of unbroken Möbius strip of corruption – the banks pay middlemen to rig auctions, the middlemen bribe politicians to win business, then the politicians choose the middlemen to run the auctions, leading right back to the banks bribing the middlemen to rig the bids.
When we allow Wall Street to continually raid the public cookie jar, we’re not just enriching a bunch of petty executives (Wolmark’s income in 2008, two years after he was busted in the FBI raid, was $2,464,210.18) – we’re effectively creating an alternate government, one in which money lifted from the taxpayer’s pocket through mob-style schemes turns into a kind of permanent shadow tax, used to maintain the corruption and keep the thieves in place. And that cuts right to the heart of what this case is all about. Wall Street is tired of making money by competing for business and weathering the vagaries of the market. What it wants instead is something more like the deal the government has – regularly collecting guaranteed taxes. What’s crazy is that in order to justify that dream of regular, monopolistic tribute, they’ve begun to see themselves as a type of shadow government, watching out for the rest of us. Amazingly enough, this even became a defense at trial.
4. THE DEFENSE
There were times, sitting in the courtroom, when I wondered, How did this case even go to trial? What defense attorney would look at the thousands of recorded phone calls, the parade of cooperating witnesses, the stacks of falsified documents, and conclude that airing all of this in court was a smart play? Listening to tape after damning tape played in open court while the defendants cringed in a corner seemed increasingly like a gratuitous ass-kicking, one that any smart defense lawyer would have made a deal to avoid.
But as the weeks passed, I started to get a feel for the defense strategy, which made a kind of demented sense. The lawyers for Carollo, Goldberg and Grimm didn’t even bother trying to argue the facts of the case. Instead, in one cross-examination after another, they kept hitting the same theme. Despite the fact that the rigged bids resulted in lower returns, wasn’t it true that the cities and towns still received, technically speaking, the highest bid? If a town received a 5.00 percent return on a $219 million bond instead of 5.04 percent, who’s to say that wasn’t a good price?
John Siffert, the gray-faced and unlikable attorney for Steve Goldberg, put it this way in his cross-examination of CDR executive Stewart Wolmark. Asking about the Allegheny deal, he boomed: “Isn’t it fair to say that you believed that by lowering… Steve’s bid to 5 percent, Steve’s bid was still a fair price to pay?”
Wolmark’s answer was both quick and sensible: “I don’t determine the fair price,” he replied. “The market does.” GE was supposed to pay the highest price the market would pay. It wasn’t a competitive auction, as required by law.
But Siffert had made his point, and his rhetoric got right to the heart of the defense, which was going to center around the definition of the word “fair.” The men and women who run these corrupt banks and brokerages genuinely believe that their relentless lying and cheating, and even their anti-competitive cartelstyle scheming, are all legitimate market processes that lead to legitimate price discovery. In this lunatic worldview, the bidrigging scheme was a system that created fair returns for everyone. If a bunch of Pennsylvanians got a 5.00 percent return on their money instead of 5.04 percent, and GE and CDR just happened to split the extra .04 percent, that was a fair outcome, because that’s what the parties negotiated. True, the Pennsylvanians had no idea about the extra .04 percent, and true, they had hired CDR precisely to make sure they got that extra 0.4 percent. But hey, it’s not like they were complaining: Until someone told them they were being brazenly cheated, they were happy with their bond service. And besides, it’s not like ordinary people understand this stuff anyway. So how is it the place of some busybody federal prosecutor to waltz in here and say what’s a fair price?
Walter Timpone, who represented Carollo, tried to lay this outrageous load of balls on the jury using a faux-folksy analogy. “When your refrigerator breaks down, if you’re not mechanically inclined, you’re at the mercy of that repair person,” he told the jury. “And if he repairs the refrigerator, makes it work well, charges you a fair price, you’re likely to call on him again when the stove breaks.” What he was essentially telling jurors was: This shit is complicated, so best just to leave it to the experts. Whether they’re fixing a fridge or fixing a bond rate, they get to set the price, because we’re all morons who are dependent on them to make our world work. Timpone, in his lawyerly way, was actually telling us an essential economic truth: You’re at the mercy of that repair person.
This incredible defense, which the attorneys for all three defendants led with, perfectly expresses the awesome arrogance of the modern-day aristocrats who run our financial services sector. Corrupt or not, they built this financial infrastructure, and it’s producing the prices they genuinely think are fair for us – and for them. And fair to them is the customer getting the absolute bare minimum, while they get instant millions for work they didn’t do. Moreover – and this is the most important part – they believe they should get permanent protection from the ravages of the market, i.e., from one another’s competition. Imagine Jack Nicholson on the witness stand, dressed in a repairman’s uniform and tool belt. Who’s gonna fix those refrigerators? You? You, Lieutenant Weinberg? You can’t handle the truth!
That, ultimately, is what this case was about. Capitalism is a system for determining objective value. What these Wall Street criminals have created is an opposite system of value by fiat. Prices are not objectively determined by collisions of price information from all over the market, but instead are collectively negotiated in secret, then dictated from above.
“One of the biggest lies in capitalism,” says Eliot Spitzer, “is that companies like competition. They don’t. Nobody likes competition.”
To the great credit of the jurors in the Carollo case, they didn’t buy Wall Street’s ludicrous defense. On May 11th, nearly a month after the trial began, they handed down convictions to all three defendants. Carollo, Goldberg and Grimm, who will be sentenced in October, face as many as five years in jail.
There are some who think that the government is limited in how many corruption cases it can bring against Wall Street, because juries can’t understand the complexity of the financial schemes involved. But in USA v. Carollo, that turned out not to be true. “This verdict is proof of that,” says Hausfeld, the antitrust attorney. “Juries can and do understand this material.”
In the end, though, the conviction of a few bit players seems like far too puny a punishment, given that the bid rigging exposed in Carollo involved an entrenched system that affected major bond issues in every state in the nation. You find yourself thinking, America’s biggest banks ripped off the entire country, virtually every day, for more than a decade! A truly commensurate penalty would be something like televised stonings of the top 10 executives of every guilty bank, or maybe the forcible resettlement of every banker and broker in Lower Manhattan to some uninhabited Andean wasteland… anything to address the systemic nature of the crime.
No such luck. Instead of anything resembling real censure, a few young executives got spanked, while the offending banks got off with slap-on-the-wrist fines and were allowed to retain their pre-eminent positions in the municipal bond market. Last year, the two leading recipients of public bond business, clocking in with more than $35 billion in bond issues apiece, were Chase and Bank of America – who combined had just paid more than $365 million in fines for their role in the mass bid rigging. Get busted for welfare fraud even once in America, and good luck getting so much as a food stamp ever again. Get caught rigging interest rates in 50 states, and the government goes right on handing you billions of dollars in public contracts.
Over the years, many in the public have become numb to news of financial corruption, partly because too many of these stories involve banker-on-banker crime. The notorious Abacus deal involving Goldman Sachs, for instance, involved a hedge-fund billionaire ripping off a couple of European banks – who cares? But the bid-rigging scandal laid bare in USA v. Carollo is a totally different animal. This is the world’s biggest banks stealing money that would otherwise have gone toward textbooks and medicine and housing for ordinary Americans, and turning the cash into sports cars and bonuses for the already rich. It’s the equivalent of robbing a charity or a church fund to pay for lap dances.
Who ultimately loses in these deals? Well, to take just one example, the New Jersey Health Care Facilities Finance Authority, the agency that issues bonds for the state’s hospitals, had their interest rates rigged by the Carollo defendants on $17 million in bonds. Since then, more than a dozen New Jersey hospitals have closed, mostly in poor neighborhoods.
As Carollo showed us, in open court, this is what Wall Street learned from the Mafia: how to reach into the penny jars of dying hospitals and schools and transform their desperation and civic panic into fat year-end bonuses and the occasional “big lunch.” Unlike the Mafia, though, they were smart enough to do their dirt without anyone noticing for a very long time, which is what defense counsel in this case were talking about when they argued that towns and cities “were not harmed” by the rigged bids. No harm, to them, means no visible harm, i.e., that what taxpayers didn’t know couldn’t hurt them. This is logical thinking, to the sociopath – like saying it’s not infidelity if your wife never finds out. But we did find out, and the scale of betrayal unveiled in Carollo was epic. It was like finding out your husband didn’t just cheat, but had a frequent-flier account with every brothel in North America for the past 10 years. At least now we know how bad it was. The trick is to find a way to make the cheaters pay.
Tyler Durden on 07/02/2012
With Europe, the BBA, and virtually everyone shocked, shocked, that the global bank cabal schemed and colluded for years to manipulate interest rates, so far only America appears relatively blase, and totally ignorant, about the issue. Perhaps it is because the first bank exposed in the manipulation scheme so far is European, perhaps because it is just tired of all the endless crime coming out of the criminal complex known as Wall Street. It is unclear.
Then again, America will soon have its own manipulation scandals to deal with: and if it is not the US BBA member banks, all of whom were just as guilty as Barclays, and the only question is which bank will be the sacrificial scapegoat whose CEO will have to demonstratively depart (to warmer, non-extradition climes), it will be the following story from Bloomberg which will likely pick up much more steam over the next weeks and months, detailing how the bank which just barely avoided a triple notch downgrade (wink wink) has had previous dealings with the very same rating agencies seeking to, picture this, artificially inflate ratings!
Morgan Stanley successfully pressured Standard & Poor’s and Moody’s Investors Service Inc. to give erroneous investment-grade ratings in 2006 to $23 billion worth of notes backed by subprime mortgages, investors claimed in a lawsuit, citing documents unsealed in federal court.
So to summarize: Fed manipulates capital markets, HFT manipulates bid ask spreads, "self-policing" CDS pricing market groups fudge the prices on trillions in Credit Default Swaps, bank cabals collude and manipulate short-term interest rates, and now banks are confirmed to have manipulated the ratings on tens of billions of bonds using monetary incentives and threats. Is there anything in this "market" that was fair over the past several decades, and was actual price discovery ever actually possible? Because by now it should be very clear going forward all the things that actually make a free and fair market are forever gone, and that without endless fraud and manipulation by all the market participants who realize that anyone defecting the ponzi group means immediate and terminal losses for all, and all those calls for an S&P 400 would actually prove to be overly optimistic.
Breaking the Vicious Cycle, 82nd Annual Report, 24 June 2012
"The world is now five years on from the outbreak of the financial crisis, yet the global economy is still unbalanced and seemingly becoming more so as interacting weaknesses continue to amplify each other. The goals of balanced growth, balanced economic policies and a safe financial system still elude us.
In advanced economies at the centre of the financial crisis, high debt loads continue to drag down recovery; monetary and fiscal policies still lack a comprehensive solution to short-term needs and long-term dangers; and despite the international progress on regulation, the condition of the financial sector still poses a threat to stability.
From time to time, encouraging signs raise hopes – but they are quickly dashed, delivering another blow to the confidence of consumers and investors."
Bank for International Settlements,
GEAB N°66 is available! Red alert / Global systemic crisis – September-October 2012: When the trumpets of Jericho ring out seven times for the world before the crisis
By Paul B. Farrell, MarketWatch
July 3, 2012
SAN LUIS OBISPO, Calif. (MarketWatch) — In mid-2005, three years before Wall Street’s credit meltdown, the Economist warned of the “Biggest Bubble in History.” In five short years after the 2000 dot-com crash property prices across the world had risen an unprecedented 75%. Real estate had become the new dot-com.
In his April 2007 quarterly newsletter, Jeremy Grantham, founder of the $95 billion GMO firm, reinforced the warning: “First Truly Global Bubble, impacting all countries, all assets worldwide.”
By midyear 2007, a deeply concerned Grantham was “watching a very slow motion train wreck.” By October, the “train hits end of track at full speed.” A year later, on schedule, Wall Street’s credit train did crash.
Flash forward: in Grantham’s early 2012 newsletter he saw a bigger train accelerating: When he focused on the “common good, it became quickly apparent that capitalism in general has no sense of ethics or conscience. And probably its greatest weakness is its absolute inability to process the finiteness of resources and the mathematical impossibility of maintaining rapid growth in physical output.”
This we call the Myth of Perpetual Growth, the pseudo-scientific justification for modern capitalism.
Grantham concludes that capitalism’s flaws are so deadly that while it does “a thousand things better than other systems,” it fails in those three crucial areas. And “unfortunately for us all, even a single one of these failings may bring capitalism down and us with it.”
Get it? Capitalism is committing suicide and destroying America too. Here are 10 explosive bubbles that warn of this trend’s accelerating trajectory:
Dr. Marcia Angell, of the Harvard Medical School, writes in HuffingtonPost: “Why the Court’s Ruling Is Bad for Obama and Bad for American Health Care.”
“The Supreme Court’s decision to uphold Obamacare puts me in mind of the old proverb: Be careful what you wish for.” Why? Angell warns that “with or without Obamacare, the American health system will continue to unravel, quickly if Romney is elected, slowly if Obama is re-elected.”
At 15% of GDP, the highest of all developed nations and destined to go higher, heath-care costs will remain a drag on the economy, especially with 3,300 lobbyists fighting to keep the cost rising.
When will this bubble explode? In a Time feature the “Bubble on the Potomac,” Andrew Ferguson warns, America’s massive debt has created “new affluence flooding the nation’s capital” making Washington society “a world apart from the country it governs,” adding that “this insularity has consequences for the rest of the country.”
The average American may be struggling, but government is “for sale,” in this center of the trillion-dollar government-contracting business, where the federal budget is sold off to the highest bidders. Lobbying is the city’s “biggest business,” with more than 20 lobbyists for every elected official, all publicly advertising the huge benefits they generate, often hundreds of times over an “investment” in their lobbying fees.
That same mind-set isolates Wall Street. While the average American flat-lines, bank CEOs are doing great. Bloomberg Markets reports that bank “CEO compensation jumped 20.4% in 2011” while “most bank stocks declined.”
Biggest loser? Citibank’s shareholders. Their stock has dropped 61% in three years while CEO Vikram Pandit was paid $14.9 million.
More evidence of America’s growing inequality gap: The Fed says that in the past three years the top 1% gained 2% while our vast middle class lost 39%. In fact, family net worth in 2010 was about the same as 1992.
Nobel economist Joseph Stiglitz shines in his new book “The Price of Inequality:” “America likes to think of itself as a land of opportunity,” he writes in Project Syndicate. But while we all have individual examples “what really matters are the statistics: to what extent do an individual’s life chances depend on the income and education of his or her parents?”
And unfortunately, today the “numbers show that the American dream is a myth … the gap’s widening.” Since 2008 “the top 1% of U.S. income earners captured 93% of the income growth. … The clear trend is one of concentration of income and wealth at the top, the hollowing out of the middle, and increasing poverty at the bottom.”
For more evidence of the gap see the amazing cover on Utne, a cartoonish Albert Einstein serving a McDonald’s hamburger special: “Fries with that? What’s a college degree worth these days?” Not much.
And in Good magazine’s “Minimum Rage,” many stories about grads handicapped by college debt. We’re killing our competitive future: 27-year-old NYU grad “Emily Sanders has been a waitress or bartender, on and off, for almost a decade. … She has no health insurance, no 401(k), and a pathetic savings account. Most days, she gets to her first job at noon and leaves her second after midnight. If she’s sick but a little short on cash, she downs some DayQuil and goes into work anyway.”
In “The Fallen,” Rolling Stone’s Jeff Tietz gives us another snapshot of capitalism’s accelerating train wreck: A “sharp, sudden decline of America’s middle class … They had good stable jobs, until the recession hit. Now they’re living out of their cars in parking lots.”
Time used a wider-angle lens on the new global “Jobless Generation” where “tens of millions of young people are unemployed.” This is bigger than Arab Spring and OWS. Governments are warned: Figure out “how to get them jobs before they become unemployable — and erupt in fury.”
But if Grantham’s right, governments won’t act till it’s too late, and anticapitalism revolutions sweep the planet.
Financial advisers say invest in emerging markets, the “new normal” for U.S. stock returns is too low. Maybe not: Foreign Policy’s Steve Levine warns that petro-rulers worldwide are watching the price of oil “plunge at a rate they have not experienced since the dreaded year 2008. Industry analysts are using phrases such as ‘devastation’ and ‘severe strain’ to describe what’s next,” possibly a “fresh round of Arab Spring-like” revolutions, “the nightmare scenario” for oil dictators.
Writing in Project Syndicate, Stephen Roach, former Morgan Stanley chairman, warns that since 2008 “the U.S. economy has been on a weak recovery trajectory.” Why? The American consumer went cold “in the aftermath of the biggest consumption binge in history.”
Since then “exports have accounted for 41%” of America’s rebound, with a whopping 83% of our export growth from Asia, Latin America and Europe. But since all three are now “in trouble, the U.S. could be quick to follow.”
Listen closely: Over 200,000 financial advisers across America already heard this report. Advisers have been warned to start “preparing clients for a low-return reality,” code for a new normal and austerity: “Slow economic growth, modest and selective improvements in equities, and interest rates remaining low.”
Get it? “Anemic growth in the second half,” with huge risks ahead. In fact, individual investors and American capitalism alike will face three doomsday scenarios in the near term: The Euroland crises, America’s post-election “fiscal cliff” and the risk of global recessions in emerging markets.
“The world is in a state of drift, transition or even increasing chaos,” writes Brent Scowcroft in the recent National Interest. Scowcroft’s a retired Air Force General and Bush-41 National Security Adviser.
In an update to his 1998 book, “A World Transformed,” Scowcroft says, “once we were viewed as trying to do our best for everyone: now we are seen a being preoccupied with our own special interests,” a myopic vision that reflects the trend among many politicians to govern using Ayn Rand’s extreme capitalism.
Now you know why Grantham warns of capitalism’s total lack of “ethics or conscience” and “its absolute inability to process the finiteness of resources and the mathematical impossibility of maintaining rapid growth in physical output.”
No moral compass. No vision of the future. No grasp of the consequences of their short-term thinking. These three threats are merging into a critical mass that will trigger a scenario that will “bring capitalism down and America with it.”
Bottom line: America’s new Ayn Rand style of extreme capitalism is self-destructive.
For John Roberts, it is Palm Sunday.
Out of relief and gratitude for his having saved Obamacare, he is being compared to John Marshall and Oliver Wendell Holmes.
Liberal commentators are burbling that his act of statesmanship has shown us the way to the sunny uplands of a new consensus.
If only Republicans will follow Roberts' bold and brave example, and agree to new revenues, the dark days of partisan acrimony and tea party intransigence could be behind us.
Yet imagine if Justice Stephen Breyer had crossed over from the liberal bench to join Antonin Scalia, Sam Alito, Clarence Thomas and Anthony Kennedy in striking down Obamacare. Those hailing John Roberts for his independence would be giving Breyer a public caning for desertion of principle.
Why did Roberts do it? Why did this respected conservative uphold what still seems to be a dictatorial seizure of power -- to order every citizen to buy health insurance or be punished and fined?
Congress can do this, wrote Roberts, because even if President Obama and his solicitor general insist the fine is not a tax, we can call it a tax:
"If a statute has two possible meanings, one of which violates the Constitution, courts should adopt the meaning that does not do so. ... If the mandate is in effect just a tax hike on certain taxpayers who do not have health insurance, it may be within Congress's constitutional power to tax."
Roberts is saying that if Congress, to stimulate the economy, orders every middle-class American to buy a new car or face a $5,000 fine, such a mandate is within its power.
Now, Congress can indeed offer tax credits for buying a new car. But if a man would prefer to bank his money and not buy a new car, can Congress order him to buy one -- and fine him if he refuses?
Roberts has just said that Congress has that power.
Clearly, the chief justice was searching for a way not to declare the individual mandate unconstitutional. But to do so, he had to go through the tortured reasoning of redefining as a tax what its author and its chief advocates have repeatedly insisted is not a tax.
Why did he do it? One reason Roberts gives is his innate conservatism.
As he wrote in his opinion: "We (the Court) possess neither the expertise nor the prerogative to make policy judgments. Those decisions are entrusted to our nation's elected leaders, who can be thrown out of office if the people disagree with them. It is not our job to protect the people from the consequences of their political choices."
This is a sentiment many of us seek in a jurist in a republic: a disposition to defer to the elected branches to set policy and make law. But Roberts here raises a grave question -- about himself.
While it is not the job of the Supreme Court "to protect the people from the consequences of their political choices," it is the job of the Supreme Court to pass on the constitutionality of laws.
Did Roberts look at that individual mandate and conclude that it passed the constitutionality test? Or did he first decide that he did not want to be the chief justice responsible for destroying the altarpiece of the Obama presidency and sinking that presidency -- and then go searching for a rationale to do what he had already decided to do?
Here we enter the area of surmise.
In the view of this writer, Roberts desperately does not want to seen by history as merely a competent but colorless member of the conservative bloc on the Supreme Court, another reliable vote in the Scalia camp. He does not want Anthony Kennedy, the swing justice, to be making history, while he is seen as a predictable conservative vote.
John Roberts aspires to be a man of history, to have this court known to historians as "the Roberts Court." And if there is to be a decisive vote in future great decisions, he wants that vote to be his.
He wants to be seen among the cognitive elite, in this capital city that voted 93-7 for Obama, as a large and independent thinker. And with this decision on Obamacare, for which he will be remembered, he has taken a great leap forward to establishing that new identity.
John Roberts likely has ahead of him a quarter of a century as chief justice. If he wants to be written of as another John Marshall or Oliver Wendell Holmes, and not Roger Taney, he must pay the price the city demands. If he does not wish to be remembered as a tea party justice, he must deliver the goods. And John Roberts just did.
Already they are saying of him that John Roberts has grown.
Liberals will never again see him in the same light. Nor will his old comrades. To attain the first, John Roberts is willing to accept the second. He has made his decision. John Roberts is moving on up.
Betrayal is hard to take, whether in our personal lives or in the political life of the nation. Yet there are people in Washington -- too often, Republicans -- who start living in the Beltway atmosphere, and start forgetting those hundreds of millions of Americans beyond the Beltway who trusted them to do right by them, to use their wisdom instead of their cleverness.
President Bush 41 epitomized these betrayals when he broke his "read my lips, no new taxes" pledge. He paid the price when he quickly went from high approval ratings as president to someone defeated for reelection by a little known governor from Arkansas.
Chief Justice John Roberts need fear no such fate because he has lifetime tenure on the Supreme Court. But conscience can be a more implacable and inescapable punisher -- and should be.
The Chief Justice probably made as good a case as could be made for upholding the constitutionality of ObamaCare by defining one of its key features as a "tax."
The legislation didn't call it a tax and Chief Justice Roberts admitted that this might not be the most "natural" reading of the law. But he fell back on the long-standing principle of judicial interpretation that the courts should not declare a law unconstitutional if it can be reasonably read in a way that would make it constitutional, out of "deference" to the legislative branch of government.
But this question, like so many questions in life, is a matter of degree. How far do you bend over backwards to avoid the obvious, that ObamaCare was an unprecedented extension of federal power over the lives of 300 million Americans today and of generations yet unborn?
These are the people that Chief Justice Roberts betrayed when he declared constitutional something that is nowhere authorized in the Constitution of the United States.
John Roberts is no doubt a brainy man, and that seems to carry a lot of weight among the intelligentsia -- despite glaring lessons from history, showing very brainy men creating everything from absurdities to catastrophes. Few of the great tragedies of history were created by the village idiot, and many by the village genius.
One of the Chief Justice's admirers said that when others are playing checkers, he is playing chess. How much consolation that will be as a footnote to the story of the decline of individual freedom in America, and the wrecking of the best medical care in the world, is another story.
There are many speculations as to why Chief Justice Roberts did what he did, some attributing noble and far-sighted reasons, and others attributing petty and short-sighted reasons, including personal vanity. But all of that is ultimately irrelevant.
What he did was betray his oath to be faithful to the Constitution of the United States.
Who he betrayed were the hundreds of millions of Americans -- past, present and future -- whole generations in the past who have fought and died for a freedom that he has put in jeopardy, in a moment of intellectual inspiration and moral forgetfulness, 300 million Americans today whose lives are to be regimented by Washington bureaucrats, and generations yet unborn who may never know the individual freedoms that their ancestors took for granted.
Some claim that Chief Justice Roberts did what he did to save the Supreme Court as an institution from the wrath -- and retaliation -- of those in Congress who have been railing against Justices who invalidate the laws they have passed. Many in the media and in academia have joined the shrill chorus of those who claim that the Supreme Court does not show proper "deference" to the legislative branch of government.
But what does the Bill of Rights seek to protect the ordinary citizen from? The government! To defer to those who expand government power beyond its constitutional limits is to betray those whose freedom depends on the Bill of Rights.
Similar reasoning was used back in the 1970s to justify the Federal Reserve's inflationary policies. Otherwise, it was said, Congress would destroy the Fed's independence, as it can also change the courts' jurisdiction. But is it better for an institution to undermine its own independence, and freedom along with it, while forfeiting the trust of the people in the process?
Anthony Daniels, who writes under the pen name Theodore Dalrymple, is a retired prison doctor and psychiatrist who tells of his experiences with his patients in "Life at the Bottom." It's an insightful book of essays about the self-destructive behavior and attitudes of the underclass.
In one essay, "We Don't Want No Education," reprinted by City Journal, Dalrymple says that he cannot recall meeting a 16-year-old from the public housing project near his hospital who could perform simple multiplication operations, such as nine times seven. One 17-year-old told him, "We didn't get that far." This was after 12 years of attending school. One of Dalrymple's patients took a drug overdose because of constant bullying from classmates. "She was stupid because she was clever." What her peers meant by that was anyone who worked hard and performed well at school was wasting his time when truancy and wandering downtown were deemed preferable. The underlying threat was: If you don't mend your ways and join us, we'll beat you up.
These weren't simply idle threats. Dalrymple says he's often met people in their 20s or 30s in his practice who gave up at school under such duress. Those who attend a school that has very high academic standards risk a beating if they venture into neighborhoods where the underclass live. He recalls treating two boys in the emergency room after they'd been beaten and two others who had taken overdoses for fear of being beaten at the hands of their neighbors.
Dalrymple says that most of the young people whom he's met in his practice cannot name a single writer and cannot recite a line of poetry. None of his young patients can give the dates of World War I, much less the second world war. Some patients never have heard of those wars, though one of his young patients who had heard of World War II thought it took place in the 18th century. In this atmosphere of total ignorance, Dalrymple says he was impressed that the young man had heard of the 18th century.
The education establishment aids and abets this state of gross ignorance. Dalrymple tells of one case in which the headmaster allows teachers to make only five corrections per piece of work, irrespective of the actual number of errors present. This is done so as not to damage student self-esteem. There are many other examples, but Dalrymple concludes that "it is extremely difficult to overturn these educational (or anti-educational) developments" because "teachers and the teachers of the teachers in the training colleges are deeply imbued with the kinds of educational ideas that have brought us to this pass."
The reader may have been misled, with my help, into thinking that "We Don't Want No Education" is about the black underclass, but it's about the white underclass in Britain. We can't use white racism and the legacy of slavery so frequently used to explain the black underclass to explain Britain's underclass. The welfare state and the harebrained ideas of the public education establishment are a far better explanation for the counterproductive and self-destructive attitudes and lifestyles of both underclasses.
A "legacy of slavery" surely cannot explain problems among blacks, unless we assume it skips whole generations. In my book "Race and Economics" (Hoover Press, 2011), I cite studies showing that in New York City in 1925, 85 percent of black households were two-parent households. In 1880 in Philadelphia, three-quarters of black families were composed of two parents and children. Nationally, in the late 1800s, percentages of two-parent families were 75.2 percent for blacks, 82.2 percent for Irish-Americans, 84.5 percent for German-Americans and 73.1 percent for native whites. Today just over 30 percent of black children enjoy two-parent families. Both during slavery and as late as 1920, a black teenage girl's raising a child without a man present was rare.
Dalrymple's evidence from Britain shows that the welfare state is an equal opportunity destroyer.
Linear thinkers always think things will work out for the best. They believe the world always progresses. They didn’t see the housing bubble. They didn’t see the debt crisis. They didn’t see the rampant Wall Street criminality. They didn’t see oil prices quadrupling over the last decade. They see no problem with $1.3 trillion annual deficits. They see no problem with a Debt to GDP ratio of 102%. They see no problem with spending $1 trillion per year to police the world. They will not see the coming crash. They never do and never will.
Blackstone’s Byron Wien is up with a new blog post, wherein he relays a conversation he had with someone he only refers to as The Smartest Man In Europe.
Wien doesn’t say who The Smartest Man In Europe is, but describes him as basically an incredibly brilliant, wordly, rich businessman.
Many of you remember The Smartest Man from earlier essays; I have been writing about him annually for more than a decade. He has been a friend for thirty years, and during that period he has shown an almost uncanny ability to see major events affecting the financial markets before other observers. Among these were the fall of Japan as an economic power in the 1980s, the economic changes in China and their significance the early 1990s, and the serious consequences of excessive borrowing in the developed world in the last decade.
His DNA endowed him with a certain amount of business acumen. His ancestors operated canteens along the Silk Road, selling food, weather protection and supplies to travelers to India and China. He apprenticed in finance in New York, but returned to Europe to take advantage of opportunities created during the post-war recovery there. Along the way he has acquired the ABC’s of European wealth – an airplane, a Bentley and a house on a Cap in the French Riviera. The depth and breadth of his art collection is impressive, but material things are not what gives him a high. He gets his thrills from identifying a problem, thinking it through and being right in determining how it gets resolved. In his ninth decade, he is an inspiration to me.
So what does TSMIE see now?
Basically that massive amounts of debt will bring the decline of Western Civilization, but that in the meantime, before that happens, policy makers would pull every trick they could in order to stave off a catastrophic event.
He started out by saying he had done some preparation for our visit. “I think the title of your essay should be ‘Dancing around the Fire of Hell.’ For years I’ve been telling you that the accumulation of debt was going to be the ending of the developed world and for years you have been telling me my views are too extreme. The problem is you are an optimist and I am a realist. You go around with a smile on your face thinking that there are serious problems facing us, but that everything will turn out favorably because the policy makers will do what they have to do to avoid disaster, and so far you have been right. The developed economies and their stock markets have plodded along and investors haven’t made or lost much money in spite of the challenges. At a certain point, however, the temporary measures that the policy makers put in place to avoid financial catastrophe prove insufficient and that’s where we are now. I’m not saying that it will happen tomorrow but events are falling into place that will take the smile off your face.
After getting to the point where fiscal stimulus no long works, the world’s central banks will go into overdrive (as is already happening)
“Before we experience widespread defaults the authorities will pull out every trick in the book to prevent catastrophe. That’s because there is a general belief that the European Union was a good idea. In order to compete against the United States and Asia, the European countries had to hang together. It was as much a geopolitical decision as an economic one. There needs to be more cooperation among the European leaders. The first step is to create a coordinated banking system to prevent a run on the banks. Deposit insurance won’t do the job. It’s too much to expect the various governments to agree to a political union at this time, but there could be a banking union to prevent the European banking system from collapsing.
“The next step will be for every central bank in the world to keep printing money. Ultimately this will bring on a higher level of inflation, but I think the world is ready to accept that. World leaders will agree that growth should be their objective and inflation will be the price they will have to pay for it. This may result in some instability among currencies. Before this happens there will have to be more suffering. Spain and Greece will default. There won’t be outright financial disaster because by the time the defaults take place the banks will have sold most of the troubled sovereign debt on their balance sheets to the European Central Bank. France’s deficit will get worse as Hollande implements some of the programs he talked about in his campaign. Human beings and governments have an unlimited imagination and they will use it to delay the day of reckoning. In the longer term the crisis may turn out to be a good thing because the pain of what we are about to go through will prevent it from ever happening again.
“So what am I doing with my money? It is hard to hide in stocks. Even Danone is reporting disappointing earnings; people are so worried they aren’t even buying yogurt. The French auto companies are in trouble. I think gold is going much higher. I am buying energy stocks because I want to own something real. Preserving capital is my focus now, not making money, but I like IBM and Apple. Also some Swiss multi-nationals. If Obama wins in November the market will go down. A Romney victory will create a rally, but once he gets into office he will find there is not much he can do to make things better.”
I left The Smartest Man’s office somewhat dazed. My optimism was clearly diminished by what he had to say, but I still believe that somehow disaster has a way of usually not happening. It seems clear that world leaders are going to do everything possible to avert a financial catastrophe and I think they have the resources to accomplish that goal. It does seem, however, that the developed world has to resign itself to a prolonged period of slow growth.
For what it’s worth, the story doesn’t sound that different from a lot of the Austrian fairy tales about printing and hyperinflation, but still, it’s a well-written read.
14 secrets of happy investors at world’s end
By Paul B. Farrell, MarketWatch
July 5, 2012, 12:03 a.m. EDT
SAN LUIS OBISPO, Calif. (MarketWatch) — Wow, and what an epiphany! Zen masters call it satori, enlightenment. One of those great a-ha moments!
I finished my last piece, was thinking about my fellow doomsday prognosticator, Jeremy Grantham, the guy whose firm managers $95 billion. He’s convinced that capitalism is one big engine driving the world headlong into doomsday, off a cliff, into a cosmic black hole.
I remembered so many times Grantham repeating the mantra, “this time is [never] different.” Why? Because it fits every other one of 300 prior bubbles Grantham’s studied. It fits not because capitalists will never change their self-serving, obsessive, more-is-never-enough greedy ways. They won’t, but it fits because the capitalists can’t change their ways.
Why? Because their behavior is wired and programmed into their collective brains and their individual genes, locked in forever, says Grantham.
And because that’s what makes the long-term “this time is different” market cycle repeat in all prior 300 crashes — driving off a cliff, time after time, after time. That’s why another crash is destined to repeat soon. It is inevitable, unavoidable and so very easy to predict, the biggest ever bubble will explode, like all 300 prior pops.
But … something really is different. This time capitalism itself is self-destructing. Then my great epiphany while driving to a meeting, listening to CNBC or CNN: All about the red-hot Chinese luxury-goods market. A few decades a poor nation. Now millionaires and billionaires with more money than the Koch Brothers. China’s luxury market’s bigger than U.S. and Europe combined. Growing 25% annually. Buying French handbags. Tiffany diamond earrings for a hundred grand plus.
Suddenly, Ferraris, and my a-ha moment: Ferraris are white-hot in China. Turns out one nouveau riche Chinese dude’s already collected six Ferraris. Bingo. A big light went on in my head: Hey, that “this time is never different” cycle really is locked deep in the DNA of the world’s capitalists. Whether in China, America, Africa, it’s the same everywhere, driving the rest of us headlong to the peak, to blow up the 301st bubble.
And there’s nothing (absolutely nothing) that’s going to change the trajectory. Nothing, till the bubble explodes in our faces, terminates Adam Smith’s “Era of Capitalism,” and yes, maybe even end the world as we know it, warns Grantham.
But get this: What’s happening with Ferrari collectors in capitalist China suddenly revealed itself as no different than the Koch Brothers wanting a few more billions … no different than an oil corporation’s payments to climate-denying pseudo-scientists … no different than campaign dollars flowing to keep the army of conservatives in an aggressive war to take absolute control of all branches of our government.
Remember, all this is programmed in each capitalist’s DNA … in America’s collective DNA … and it’s locked in the DNA of the inevitable, can’t-be-stopped, cosmic “this time is never different” bubble cycle that we’re all riding to an explosive peak.
And that triggered my epiphany: If collapse is inevitable, preprogrammed in our collective DNA, and preprogrammed in “Graham Cycle 301” … the cycles destined to self-destruct capitalism and end the world … someday in the future, maybe in a century or two … as we absolutely waste non-renewable resources, like potassium … resources essential to feeding the 10 billion people on earth in 2050 … if the crash, meltdown, collapse is really that certain, guaranteed … then why not stop fighting it … accept it, live with it and stop wasting your time and energy trying to change the trajectory of the end of capitalism and the end of the world with ineffective, futile countermeasures.
Seriously, let’s end ineffective projects like Bill Gates’s billions spent on vaccines, Matt Damon’s pure water for the Sahara, Bill McKibben’s 350.org’s fight to stop Keystone XL pipeline, Grantham’s Research Institute on Climate Change and Environment at the London School of Economics.
Why not just stop? Why? We already know the destined outcome of the 301st bubble. History is crystal clear, this time is never, never, never different. Why keep banging our heads against the wall created by Kochs, Ryan and BP?
Live in the Eternal Now. Enjoy the last days of capitalism: Maybe buy a Ferrari today. Take the kids to a great movie today. Enjoy a neighborhood barbecue. Read a trashy novel today. Accept that capitalism won’t be around much longer. Remember, in the last days of Earth that great film, “Avatar” may be more than a metaphor. So let’s live for today, in the Eternal Now.
If you need help, here are my reminders, 14 Secrets of Happy Investors at World’s End. Maybe they’ll jar your memory, maybe bring a smile, maybe help you see that at this one moment in time, in your own unique way, you really are the happiest, richest and luckiest investor living in the whole wide world:
Like family: My wife loves Mary Engelbrecht’s calendars. We have several around the house. My perennial favorite’s a jolly, happy, bright-colored Santa strolling along with a huge bag of gifts and a cute dog. The caption from Oscar Wilde: “Some cause happiness wherever they go.” And there’s lots of pages from Mary’s smaller calendars tacked on our fridge with magnets … they all “cause happiness” with a smile.
“Success is getting what you want,” says Uncle Warren, the Sage of Omaha. “Happiness is wanting what you get.” And to University of Nebraska students he admitted: “If there is any difference between you and me, it may simply be that I get up every day and have a chance to do what I love to do, every day … I get to do what I like to do every single day of the year,” says Buffett. “I tap dance to work, and when I get there, I think I’m supposed to lie on my back and paint the ceiling. It’s tremendous fun.” Moreover he’d do it even if he had “$40 instead of his $40 billion.”
For Peanuts’ creator Charles Schultz, it’s very simple: “Happiness is a warm puppy.” And pure joy in Anna Quindlen’s “A Short Guide to A Happy Life”: “Get a life in which you pay attention to the baby as she scowls with concentration when she tries to pick up a Cheerio with her thumb and first finger. Turn off the cell phone. Turn off your regular phone, for that matter. Keep still. Be present. Get a life in which you are not alone. Find people you love, and who love you.” God bless Snoopy and cheery Cheerios!
Mihaly Csikszentmihalyi looks more like jolly St Nick than a psych professor. In Seligman’s “Authentic Happiness,” Mihaly says: “Isn’t it funny? I’ve been studying happiness for at least 40 years, but I still don’t have a definition of it. The closest one would be that happiness is the state of mind in which one does not desire to be in any other state. Being deeply involved in the moment, we do not have the opportunity to think about anything but the task at hand — hence, by default, we are happy.”
In “The Secret Power Within: Zen Solutions to Real Problems,” Chuck Norris says: “At heart, we all want the same thing, whether we call it ‘enlightenment,’ ‘happiness,’ or ‘love.’ Too many people spend their lives waiting for that something to arrive — and that’s not the Zen way. Zen is always on the side of action, always on the side of doing what is necessary and right.”
In “The Art of Doing Nothing,” Veronique Vienne relates this little de-stressing trick: “You know how to whistle, don’t you?” said Bacall to Bogart. “Just purse your lips and blow.” Vienne says if you “want to take some pressure off yourself or let the air out of a tense situation ... try whistling a few notes. …. You feel pretty sexy and carefree with your puckered lips, don’t you? Hold on to that feeling.”
In “The Way of the Peaceful Warrior,” Socrates tells his young disciple: “A fool is ‘happy’ when his cravings are satisfied. A warrior is happy without reason. That’s what makes happiness the ultimate discipline ... This is the final task I will ever give you, and it goes on forever. Act happy, feel happy, be happy, without a reason in the world. Then you can love, and do what you will.”
I love Roger Rosenblatt’s “The Rules of Aging”: “Rule 40. A long, happy life lasts five minutes.” And forever! In Hugh Prather’s poetic “Little Book of Letting Go” a tennis pro talks about a frustrated 12-year-old: “Her problem is that she thinks she should be happy. She hasn’t yet learned that happiness is an occasional good meal and, if you’re lucky, a good TV program now and then.” Hugh concluded, that’s “an apt description of the surprisingly limited role happiness plays in most adult lives.” Five minutes is forever.
Thich Nhat Hanh is a Vietnamese Buddhist monk, peace activist and was a close friend of the popular Trappist monk Thomas Merton. In “Stepping Into Freedom” Thich says: “Your notions of happiness may be very dangerous. The Buddha says happiness can only be possible in the here and now, so go back and examine deeply your notions and ideas of happiness. You may recognize that the conditions of happiness that are already there in your life are enough. Then happiness will be instantly yours.”
Remember Henry Miller’s famous opening line in “Tropic of Cancer”: “I have no money, no resources, no hopes, I am the happiest man alive.” Sounds similar to Buddhist monk Thich Nhat Hanh’s vows: “The Tenth Precept: On Not Accumulating Money or Possessions for Personal Use. Aware that the happiness of a monk or nun is found in solidity and freedom, I vow not to allow money or possessions to become a preoccupation in my life. … We are happy just by being aware of what is in front of us.” My mentor Joseph Campbell adds: “My life course is totally indifferent to money. As a result a lot of money has come in by doing what I feel I want to do from the inside.”
Americans know this truth, from Charles Dickens’s famous formula: “Annual income, 20 pounds; annual expenditure, 19 pounds; result happiness. Annual income, 20 pounds; annual expenditure, 21 pounds; result misery.” Money guru Andy Tobias included it in Parade’s “10 Smartest Things About Money.” Dan Millman echoes the message in “The Way of the Peaceful Warrior.” “The secret of happiness,” says the ol’ garage mechanic, Socrates, “is not found in seeking more, but in the capacity to enjoy less.”
“Why is it that only a minority of our population love their work? …. If you make one major decision correctly,” says Thomas Stanley in “The Millionaire Mind,” “if you are creative enough to select the ideal vocation, you can win, win big-time. The really brilliant multimillionaires are those who selected a vocation they love.”
In “The 7 Spiritual Laws of Success” Deepak Chopra says: “Everyone has a purpose in life, a unique gift of special talent to give others … ask yourself, ‘How am I best suited to serve humanity?’ Answer that question and put it into practice. Discover your divinity, find your unique talent, serve humanity with it, and you can generate all the wealth you want.”
“Instead of focusing almost exclusively on our finances,” says Ralph Warner in “Get A Life — You Don’t Need A Million To Retire Well,” we “should be thinking about the things that truly make a difference in our later years; our health, spiritual life, relationships with family and friends, and having a plate full of interesting things to do.”
Now add your comment, complete this sentence: “I am the happiest (and richest) investor because …”
The prize? It comes from within, an investment that will continue growing, making you richer in spirit and in fact as you cause happiness wherever you go today, and every day. And share this column: Email it to friends and loved ones.
Countrywide issued hundreds of VIP loans to buy influence, report says
… The three-year investigation, which was led by House Oversight and Government Reform Committee Chairman Darrell Issa, revealed the extent to which Countrywide was offering discounted loans and other perks to Congress members and other officials in order to benefit its business interests.
Countrywide, which Bank of America purchased in 2008, specialized in subprime loans, the risky mortgage products that began to record exceptionally high default rates in 2007 ushering in a wave of foreclosures. Richard Simon, a Bank of America spokesman, said he wouldn't comment on the report's findings. However, he did note that Bank of America discontinued Countrywide's VIP program at the time of the acquisition.
… The report said that Countrywide tried to use its influence on Capitol Hill to bolster support for Fannie Mae, with which it had established a special relationship. Fannie gave volume discounts on fees to Countrywide in exchange for the right to buy most of the mortgage loans it originated. Many of the risky loans defaulted, however, which generated billions of dollars in losses for Fannie.
"Other than Countrywide, no other entity's employees received more VIP loans than Fannie Mae," Issa said in a release. "These relationships helped Mozilo increase his own company's profits while dumping the risk of bad loans on taxpayers."
The late Sen. Daniel Patrick Moynihan famously remarked that, "The central conservative truth is that it is culture, not politics, that determines the success of a society. The central liberal truth is that politics can change a culture and save it from itself."
I've always liked that quote, but I think it misleads. That two plus two equals four is not a conservative truth or a liberal truth. It's simply the truth. (Moynihan himself recognized this when he even more famously said that people are entitled to their own opinions but not their own facts.)
Regardless, it's true that culture is more important than politics. You could impose Sweden's laws on the Middle East tomorrow, but you'd be well-advised not to hold your breath waiting for the Saudis to turn into the Swedes of the Arabian Peninsula.
But it's also true that politics -- specifically, government -- can change cultures. It can be loud and bloody work, as with the abolition of slavery. Or the change can be more subtle. Twenty years ago, it was simply uncool to put on your seat belt. Now, everyone seems to do it reflexively. The law changed the culture, for the better.
Still, my biggest problem with Moynihan's insight is that he didn't think it all the way through. The "liberal truth" that politics can change a culture and save it from itself is double-edged. For just as politics can save the culture, politics can also destroy it.
Which brings me to Thomas Lopez, a 21-year old lifeguard in South Florida.
Two days before the Fourth of July, Lopez was fired for helping rescue a man drowning 1,500 feet outside of his designated zone.
"It was a long run, but someone needed my help. I wasn't going to say no," Lopez told the South Florida Sun-Sentinel and other media outlets.
When Lopez filed his incident report, he was canned on the spot.
"They didn't tell me in a bad way. It was more like they were sorry, but rules are rules,'" Lopez said. "I couldn't believe what was happening."
The contractor that manages the lifeguard service has explained that the matter is out of their hands, too. Liability issues -- i.e., fear of lawsuits, insurance requirements, etc. -- demand a zero-tolerance policy for unauthorized lifesaving.
It's a small anecdote to be sure. But does anyone doubt that there's something about the legal regime in this country that's creating a headwind against basic human decency? And I'm not just talking about trial lawyers and the politicians who love them.
Last year, in Alameda, Calif., a man walked into the chilly -- but not exactly freezing -- waters of the Bay Area to commit suicide. It was a slow affair. The police and firefighters got there in plenty of time. But, due to union-backed rules, they simply declined to save the man's life. They just stood on the beach and watched.
Fire Chief Ricci Zombeck was asked what he would have done if it were a child, rather than a suicidal adult, slowly drowning out there. He responded that if he were on duty he'd have let the kid drown, but if he was off duty he would have saved him.
These are the symptoms of a sick culture.
These days, liberals are celebrating the moral triumph of their health-care reform. We're helping the uninsured! We're making government more humane and compassionate. And from one perspective, that's all true, I suppose.
But we're also changing the culture. In some areas it's obvious. For instance, religious institutions are being bullied into compliance with ObamaCare. In other ways the changes are far more subtle, even invisible (though if you follow the British media coverage of their state-run health system, you get a hint of what's coming; prepare for ever more debates about rationing, denying treatment to the "unworthy," euthanasia and the rest).
House Minority Leader Nancy Pelosi sold ObamaCare on the grounds that it would be culturally liberating. People no longer would be "job-locked" because of health care, she explained. So, "if you want to be creative and be a musician or whatever, you can leave your work" and pursue your dreams.
And if your dream is to be a fireman, a lifeguard or, perhaps very soon, a doctor who isn't allowed to save lives, you may not have to leave your job at all. But if that's not your dream, get ready for a headwind.
"Iran is not seeking to have the atomic bomb, possession of which is pointless, dangerous and is a great sin from an intellectual and a religious point of view."
Thus did supreme leader Ayatollah Ali Khamenei declare in February that Iran's possession of atomic weapons would be a mortal sin against Allah.
It is also the unanimous judgment of the U.S. intelligence community, declared in 2007 and affirmed in 2011, that Iran has abandoned any program to build nuclear weapons.
Is the Ayatollah lying? Is the entire U.S. intel community wrong?
Iran's plants, at Natanz, where uranium is enriched to 5 percent, and at Fordow, where it is enriched to 20 percent -- both below weapons grade -- are under constant U.N. monitoring. Iran has offered to surrender its 20 percent uranium and cease enriching to that level, if the West will provide isotopes for its nuclear medicine and lift some of the more onerous sanctions.
No deal, says the United States. Iran must give up enrichment entirely and indefinitely.
This is the sticking point in the negotiations. Iran contends that as a signatory to the Nuclear Non-Proliferation Treaty, she has the right to enrich uranium for peaceful purposes. On this, the Iranian people stand behind their government.
Should this deadlock be a cause for war?
Assume Iran did divert low-grade nuclear fuel to some secret plant to enrich it to weapons grade. The process would take months, if not years. Iran would then have to build and test an explosive device that the world would know about in hours. Iran would then have to weaponize the device.
The whole process would take longer than a year, perhaps several. We would learn about it and have time to exercise a military option long before it came to pass.
The Israelis, with hundreds of nuclear weapons, would probably have learned about it before us. And, fearing Iran more, they would not hesitate to use what they have to prevent an atom bomb in Tehran.
Comes the retort: President Mahmoud Ahmadinejad is a certifiable fanatic who has threatened to wipe Israel off the map. He cannot be allowed to get anywhere near a nuclear weapon.
Yet whatever Ahmadinejad said years ago, and that remains in dispute, he does not control the military, he does not decide on war, and he leaves the presidency next July and heads back to academia.
Is America afraid of Mahmoud Ahmadinejad?
Where, then, is the mortal threat to justify the U.S. preparations for war with Iran described in the national press this week?
The Financial Times' Gideon Rachman argues that our obsession with Iran is obscuring a far greater potential threat.
Pakistan possesses perhaps 100 nuclear bombs and is building more, and anti-Americanism there is far more rampant than in Iran. He writes:
"Pakistan provided nuclear technology to North Korea, Libya and Iran itself. It came dangerously close to nuclear conflict with India in 1999. As for terrorism, Osama bin Laden was actually living on Pakistani soil for many years, and the tribal areas in Pakistan are still al-Qaida's most important base.
"Pakistan was also the launch pad for the terrorist attacks in Mumbai in 2008, in which 164 people were killed. Although Pakistan's government condemned the attacks, there is strong evidence that the terrorists had links to Pakistan's intelligence. If the Mumbai attacks had been launched from Iran, the West would be shouting about 'state-sponsored terrorism.'"
Seven in 10 Pakistanis regard America as an enemy. And the drone strikes ramped up by President Obama, which have taken the lives of many innocent Pakistanis, have increased the animosity.
Yet, U.S. planes and warships are heading into the Persian Gulf, as 44 U.S. senators have urged the president to break off talks with Tehran, toughen the sanctions even further and prepare for war.
Meanwhile, Iran is testing missiles that can hit Israel and U.S. bases, and its large fleet of missile boats is exercising in the Gulf.
Otto von Bismarck said that preventive war was like committing suicide out of fear of death. Are we Americans headed for yet another unnecessary war?
In 1959, President Eisenhower invited Nikita Khrushchev, the Butcher of Budapest, to the United States for 10 days of touring and talks. In 1972, Richard Nixon traveled to Beijing to toast and talk with Chairman Mao, who was responsible for the deaths of tens of millions of Chinese and tens of thousands of Americans in Korea. Ronald Reagan sought constantly for an opportunity to sit down across from the rulers of the "evil empire."
Iran is not remotely in that league, either in crimes attributed to the regime or any actual or potential threat to the United States.
Have we no statesmen who can sit down, like Reagan at Reykjavik, and negotiate with Iran's leaders for verifiable guarantees that she is not moving to nuclear weapons in return for something approaching normal relations?
If we could sit down with Stalin and Mao, why are the Ayatollah or Ahmadinejad so far beyond the pale? Can we just not handle that?
Submitted by Tyler Durden
on 07/06/2012 09:08 -0400
The chart below is a representation of the Establishment Survey (B.1)showing workers in the Construction of Buildings Space, aka those who, as the name implies, build buildings. At 1,213,500 workers, this was not only the lowest number of 2012, but the lowest since May 2011, and is just 2100 workers above the last decade lows. Perhaps instead of relying on the NAR's self-promotional brochures and Housing Starts data which capture if and when a shovel has met the earth, one should perhaps track how much actual demand there is for building construction workers and how many jobs this critical component of the economy creates. Sadly, as the chart below shows, not much.
There Will Never Be Enough Jobs In America Again
Posted: 06 Jul 2012 02:32 PM PDT
by The American Dream
Well, we just had another bad jobs report. The U.S. economy created just 80,000 new jobs during the month of June. Normally, about 125,000 new jobs need to be created every month just to keep up with population growth. So it is a bit odd that the official unemployment rate did not rise above 8.2%. What is even more alarming is that the Social Security Administration is telling us that 85,000 U.S. workers "left the workforce" and enrolled in the Social Security Disability Insurance program during the month of June. That means that the number of Americans enrolling in Social Security Disability actually exceeded the number of new jobs that was created. That is definitely not a sign of recovery. Unfortunately, this is about as good as things are going to get. Right now corporate profits are at an all-time high and usually after a recession has ended the percentage of working age Americans that have jobs bounces back very strongly. But that has not happened this time, and when the next economic crisis hits things are going to get a lot worse.
The headline to this article states that there will never be enough jobs in America again.
How could that possibly be true?
Well, the sad truth is that it is very hard to make a profit on an employee in the United States today.
Every year, the control freaks that run things just keep dumping more taxes, more laws, more regulations and more demands on employers. Hiring even a low level employee today is very complicated and very expensive.
These days a lot of small business owners have decided that it is simply not worth the hassle to hire more employees. If you can't make a profit on them, what is the point?
If there was going to be a major rebound in hiring, we would have seen it by now. Corporate profits are at an all-time high as I mentioned earlier. How much more money do they need to make before they start hiring?
But I don't blame them. Our politicians have loaded the system with plenty of incentives NOT to hire workers.
Yesterday, I wrote about how Barack Obama has been a one man wrecking crew when it comes to killing jobs. But he is not the only one to blame. The truth is that politicians from both political parties have been making things more difficult for employers for decades.
Today, many employers are trying to replace as many employees as possible with computers, automation, robotics and other forms of technology. Those are jobs that are not ever going to come back.
However, sometimes human labor is still actually needed.
But instead of hiring American workers, many big corporations are taking advantage of the emerging "one world economy" and are setting up shop in countries where it is legal to pay slave labor wages.
So how are American workers supposed to compete with that?
The truth is that they can't.
Today, you aren't just competing for jobs with your neighbors. Your competition also includes millions upon millions of hard working people on the other side of the globe that will gladly work 12 hour shifts in nightmarish conditions for a dollar an hour.
The United States has been losing millions of jobs to lower wage countries, and the fierce competition for the jobs that remain is driving down wages in this country.
As a result, many of our greatest cities that were once the envy of the entire world have become cesspools of filth, decay and wretchedness.
We are going to continue to bleed jobs because both major political parties are fully convinced that merging our labor pool with the labor pool of the rest of the world is a grand idea.
Republicans have been brainwashed into believing that a one world economic system is actually "conservative". They have been told that it is "conservative" to merge our economy with countries ruled by third world dictators and brutal communist regimes that have no respect for human rights at all.
Democrats have been brainwashed into believing that merging our economy into a one world economic system is "good for American workers" and will bring more prosperity to this country.
Barack Obama is even negotiating a treaty right now that would reportedly ban all "Buy American" laws.
How stupid can we be?
If we merge our labor pool with the labor pool of the rest of the world with no protection, guess where our wages and our standard of living is going to go?
The answer is obvious.
The "giant sucking sound" that Ross Perot warned us about so many years ago has become a reality.
It is just basic economics.
If I go to the store and I see two similar products and one is priced at $10 and the other is priced at $100 I am going to go for the one priced $10.
Well, it is the same thing with employees.
U.S. workers can't compare with low wage workers on the other side of the world. It is simply no contest.
Meanwhile, our control freak politicians continue to shove more jobs out the door by piling on even more taxes, rules and regulations.
Unfortunately, these trends are not going to change. It doesn't matter who gets elected. The bleeding of jobs is going to continue.
In fact, we should probably be celebrating that things are still as good as they are.
In the future they will be a whole lot worse.
The period we are in right now was supposed to be the recovery. During the last recession the percentage of working age Americans with jobs fell dramatically. Since the end of the recession, that number has stayed remarkably flat....
Now the next major downturn is rapidly approaching.
When it hits, the unemployment rate is going to go well up into the double digits.
At the moment, our failing economy is being propped up by unprecedented amounts of debt.
When our debt-fueled false prosperity ends, the true horror of the decay of our economic system will be revealed.
If you think it is hard to find a job now, you just wait. What is coming is going to be a total nightmare. As I have written about before, many years of pain are ahead.
But that doesn't mean that you have to lose hope.
On my website, people often share how their lives have been absolutely devastated by this economy. Some of them are even so down that they are considering giving up completely.
But that is the exact wrong response to all of this!
The reason why I try so hard to explain what is coming is so that it will not be a surprise to people. If you make plans and preparations now, the times that are coming will not overwhelm you. I believe that there will be people that will be greatly blessed even in the midst of what is coming.
However, millions of Americans that are not listening to the warnings now will have their lives totally destroyed by what is coming.
The world is changing. Nothing is going to stop that. The unprecedented prosperity that we have been rolling in is going to shrivel up and go away.
But that does not mean that your life is over.
In fact, if you get yourself physically and mentally prepared for what is ahead the times that are coming can be the greatest times of your life.
One of my goals is to give people hope. There is hope in understanding what is coming. There is hope in being prepared. There is hope in being a light in the middle of the darkness. There is hope in being willing to love people in the midst of a world that is going crazy. The following is from a comment that one reader left on a recent article....
I wanted to thank you, the author of this article, whoever you are. I haven’t completely ruled out killing myself but you’ve certainly given me something to think about. And thank you for trying to give people like me a little hope. A little kindness, even if only through words, is at a premium these days especially in my life. I will think carefully about what you’ve said. Best wishes to you and your efforts. God bless.
Everyone out there that is in a similar position - please do not ever, ever, ever give up.
No matter how bad things look right now, there are people out there that care.
One thing I have learned in life is this - there is always a way that things can be turned around.
Sadly, in the future a lot of Americans are going to give in to despair and will completely give up on life. We saw it happen during the Great Depression of the 1930s and we are seeing this in Greece and other European countries right now.
But the truth is that your life is not over no matter how bad things get out there.
You can let the times that are coming destroy you, or you can make them the greatest adventure of your life.
The choice is up to you.
I urge you to get ready, to get more independent of the system and to start focusing on the things that really matter in life.