If the Patriot Act hadn't been approved for another year, Sunday would have looked much different.
Sunday could have meant the government was no longer given permission to wiretap the phones of Americans and seize their records and property.
But since the bill was approved by Congressional Democrats earlier this week and signed into law by President Obama on Saturday, this Sunday is just another Sunday for Americans living with the Patriot Act.
To be fair, many Democrats asked for additional protections for the privacy rights of American citizens.
But Republicans said that would detract from the ability of the country's intelligence agencies to track down terrorists. Lacking a 60-vote supermajority in the Senate to pass the bill with the extra provisions, Democrats left them out.
Democratic Rep. Jane Harman opposed the House's approval of the extension, citing abuses during the administration of President George W. Bush.
"While I strongly support using the most robust tools possible to go after terrorists, Congress must revise and narrow -- not extend -- Bush era policies," Harman said.
Glenn Greenwald of Salon.com had the following to say of the overwhelming support of the law's extension:
One of the strangest prongs of conventional Beltway wisdom is the lament that there is not enough bipartisanship. The opposite is true: many of the most damaging acts inflicted on the country by Washington are enacted on a fully bipartisan basis -- the most destructive political act of this generation, the invasion of Iraq, was fully bipartisan, as were most of the post-9/11 civil liberties abuses and other Bush-era initiatives-- and, at least in certain areas, the harmonious joining together of Republicans and Democrats continues unabated.
Most publications and politicians expected Obama to sign the Patriot Act.
Sunday, February 28, 2010
Tsunami waves reach Japan’s coast
The first tsunami from Chile's earthquake has hit Japan's outlying islands, but the initial waves are small," the Associated Press reports.
The article continues, "Japan's Meteorological Agency said the first tsunami to reach Japan after the magnitude 8.8 quake off Chile was recorded in the Ogasawara islands early Sunday afternoon. It was just 10 centimeters high. There were no reports of damage."
Japan and Russia went on alert Sunday, clearing tens of thousands of people out of vulnerable coastal areas as a tsunami triggered by Chile's massive killer quake powered across the Pacific.
Tsunami warnings were lifted in other nations across the Pacific Basin's "Ring of Fire" as fears of destructive waves eased, but Tokyo and Moscow were taking no chances after one of the biggest earthquakes on record.
Waves pummelled Chile and rolled through into Hawaii, French Polynesia and the South Pacific as the tsunami moved at jet-speed across the vast ocean after Saturday's 8.8-magnitude quake, which left at least 300 people dead. Related article: Chile quake kills over 300
Warning sirens wailed as about 50 countries and territories along an arc stretching from New Zealand to Japan were put on alert, five years after the Indian Ocean tsunami disaster that killed more than 220,000 people.
Five people were killed on the remote Robinson Crusoe archipelago far off the coast of Chile, the first reported tsunami casualties, but elsewhere no significant damage was reported and surges of water were smaller than expected.
The Hawaii-based Pacific Tsunami Warning Center lifted its tsunami warning for everywhere except Japan and Russia, but the Philippines was also bracing for outsized waves.
Japan warned that waves of up to three metres (10 feet) could hit its northern Pacific coastline, ordering more than 50,000 people living near the shore to leave and closing ports.
The Chilean disaster revived raw memories for Japan, where 140 lives were lost in 1960 when a 9.5-magnitude earthquake in the South American nation -- the largest on record -- sent a tsunami roaring across the Pacific.
"Last time, waves that hit after the first one became even more powerful," said Japan Meteorological Agency official Yasuo Sekita.
"We believe it will be the case this time, too," he said, as Prime Minister Yukio Hatoyama set up an emergency task force. "The agency will keep the tsunami alert for quite a long time."
Russia issued a similar warning and launched an evacuation in its Pacific peninsula of Kamchatka.
"We are expecting waves of up to two metres, which is a dangerous height, and so people are asked to evacuate from dangerous zones," Sakhalin island's tsunami centre chief, Tatyana Ivelskaya, said.
Thousands of families in the Philippines also fled coastal areas.
"The most important thing is that for people not to panic. We have prepared all our local government units since last night," said Albay provincial official Joey Salceda.
The Hawaii center, set up by Pacific governments after the 1960 tsunami, had warned of possible "widespread damage" from waves as high as three metres.
In Hawaii itself, the tsunami led to the evacuation of thousands of people and triggered panic buying of food, water and fuel. But there was little damage in the event.
US President Barack Obama, who was born in Hawaii, had warned that the US western seaboard may see dangerous waves and currents throughout the day.
"In the hours ahead, we'll continue to take every step possible to prepare our shores and protect our citizens," he said.
One tsunami measuring nearly 2.5 metres slammed into Talcahuano, one of about 11 coastal towns in Chile pounded by the surge. Trawlers were sent shooting inland to the town square where they lay oddly marooned next to abandoned cars.
Chilean President Michelle Bachelet announced a partial evacuation of Easter Island, but the island of about 4,000 people, known for its monolithic stone statues, received a relatively small onrush of water.
In the island paradise of French Polynesia, schools were closed, the port in Papeete was evacuated and thousands in Tahiti's hillside areas were taken to safer areas as the waves hit.
Waves up to 1.5 metres rammed New Zealand's eastern Chatham Islands, while in Australia, the size of the surge dropped to around 40 centimetres although strong currents rolled up the east coast.
In Tonga and the Cook Islands, residents made their way to higher ground, still jittery after a tsunami trashed entire villages in the South Pacific in September, killing more than 180.
Japan and Russia are on the outer edge of the "Ring of Fire", a belt of seismic fury responsible for most of the world's tremors and volcanoes.
The article continues, "Japan's Meteorological Agency said the first tsunami to reach Japan after the magnitude 8.8 quake off Chile was recorded in the Ogasawara islands early Sunday afternoon. It was just 10 centimeters high. There were no reports of damage."
Japan and Russia went on alert Sunday, clearing tens of thousands of people out of vulnerable coastal areas as a tsunami triggered by Chile's massive killer quake powered across the Pacific.
Tsunami warnings were lifted in other nations across the Pacific Basin's "Ring of Fire" as fears of destructive waves eased, but Tokyo and Moscow were taking no chances after one of the biggest earthquakes on record.
Waves pummelled Chile and rolled through into Hawaii, French Polynesia and the South Pacific as the tsunami moved at jet-speed across the vast ocean after Saturday's 8.8-magnitude quake, which left at least 300 people dead. Related article: Chile quake kills over 300
Warning sirens wailed as about 50 countries and territories along an arc stretching from New Zealand to Japan were put on alert, five years after the Indian Ocean tsunami disaster that killed more than 220,000 people.
Five people were killed on the remote Robinson Crusoe archipelago far off the coast of Chile, the first reported tsunami casualties, but elsewhere no significant damage was reported and surges of water were smaller than expected.
The Hawaii-based Pacific Tsunami Warning Center lifted its tsunami warning for everywhere except Japan and Russia, but the Philippines was also bracing for outsized waves.
Japan warned that waves of up to three metres (10 feet) could hit its northern Pacific coastline, ordering more than 50,000 people living near the shore to leave and closing ports.
The Chilean disaster revived raw memories for Japan, where 140 lives were lost in 1960 when a 9.5-magnitude earthquake in the South American nation -- the largest on record -- sent a tsunami roaring across the Pacific.
"Last time, waves that hit after the first one became even more powerful," said Japan Meteorological Agency official Yasuo Sekita.
"We believe it will be the case this time, too," he said, as Prime Minister Yukio Hatoyama set up an emergency task force. "The agency will keep the tsunami alert for quite a long time."
Russia issued a similar warning and launched an evacuation in its Pacific peninsula of Kamchatka.
"We are expecting waves of up to two metres, which is a dangerous height, and so people are asked to evacuate from dangerous zones," Sakhalin island's tsunami centre chief, Tatyana Ivelskaya, said.
Thousands of families in the Philippines also fled coastal areas.
"The most important thing is that for people not to panic. We have prepared all our local government units since last night," said Albay provincial official Joey Salceda.
The Hawaii center, set up by Pacific governments after the 1960 tsunami, had warned of possible "widespread damage" from waves as high as three metres.
In Hawaii itself, the tsunami led to the evacuation of thousands of people and triggered panic buying of food, water and fuel. But there was little damage in the event.
US President Barack Obama, who was born in Hawaii, had warned that the US western seaboard may see dangerous waves and currents throughout the day.
"In the hours ahead, we'll continue to take every step possible to prepare our shores and protect our citizens," he said.
One tsunami measuring nearly 2.5 metres slammed into Talcahuano, one of about 11 coastal towns in Chile pounded by the surge. Trawlers were sent shooting inland to the town square where they lay oddly marooned next to abandoned cars.
Chilean President Michelle Bachelet announced a partial evacuation of Easter Island, but the island of about 4,000 people, known for its monolithic stone statues, received a relatively small onrush of water.
In the island paradise of French Polynesia, schools were closed, the port in Papeete was evacuated and thousands in Tahiti's hillside areas were taken to safer areas as the waves hit.
Waves up to 1.5 metres rammed New Zealand's eastern Chatham Islands, while in Australia, the size of the surge dropped to around 40 centimetres although strong currents rolled up the east coast.
In Tonga and the Cook Islands, residents made their way to higher ground, still jittery after a tsunami trashed entire villages in the South Pacific in September, killing more than 180.
Japan and Russia are on the outer edge of the "Ring of Fire", a belt of seismic fury responsible for most of the world's tremors and volcanoes.
Gates Calls European Mood a Danger to Peace
Gates Calls European Mood a Danger to Peace
http://www.nytimes.com/2010/02/24/w...ope/24nato.html
(Gold9472: Wanting peace is bad for peace.)
By BRIAN KNOWLTON
Published: February 23, 2010
WASHINGTON — Defense Secretary Robert M. Gates, who has long called European contributions to NATO inadequate, said Tuesday that public and political opposition to the military had grown so great in Europe that it was directly affecting operations in Afghanistan and impeding the alliance’s broader security goals.
Secretary of Defense Robert Gates spoke at the National Defense University at in Washington on Tuesday.
Notes from Afghanistan, Pakistan, Iraq and other areas of conflict in the post-9/11 era. Go to the Blog »
Recent developments on the war in Afghanistan with background, analysis, timelines and earlier events from NYTimes.com and Google.
“The demilitarization of Europe — where large swaths of the general public and political class are averse to military force and the risks that go with it — has gone from a blessing in the 20th century to an impediment to achieving real security and lasting peace in the 21st,” he told NATO officers and officials in a speech at the National Defense University, the Defense Department-financed graduate school for military officers and diplomats.
A perception of European weakness, he warned, could provide a “temptation to miscalculation and aggression” by hostile powers.
The meeting was a prelude to the alliance’s review this year of its basic mission plan for the first time since 1999. “Right now,” Mr. Gates said, “the alliance faces very serious, long-term, systemic problems.”
Mr. Gates’s blunt comments came just three days after the coalition government of the Netherlands collapsed in a dispute over keeping Dutch troops in Afghanistan. It now appears almost certain that most of the 2,000 Dutch troops there will be withdrawn this year. And polls show that the Afghanistan war has grown increasingly unpopular in nearly every European country.
The defense secretary, putting a sharper point on his past criticisms, outlined how NATO shortfalls were exacting a material toll in Afghanistan. The alliance’s failure to finance needed helicopters and cargo aircraft, for example, was “directly impacting operations,” he said.
Mr. Gates said that NATO also needed more aerial refueling tankers and intelligence-gathering equipment “for immediate use on the battlefield.”
Yet alliance members, he noted, were far from reaching their spending commitments, with only 5 of 28 having reached the established target: 2 percent of gross domestic product for defense. By comparison, the United States spends more than 4 percent of its G.D.P. on its military.
Dana Allin, a senior fellow with the International Institute of Strategic Studies in London, called Mr. Gates’s remarks “very striking.”
“Whether this is a conscious statement to sound a real sharp warning, there’s no question that the frustration among the American military establishment is palpable regarding coalition operations in Afghanistan,” he said.
Mr. Gates did soften his message a bit, noting that, not counting United States forces, NATO troops in Afghanistan were to increase to 50,000 this year, from 30,000 last year.
“By any measure,” he said, “that is an extraordinary feat.”
More sobering, he said, was that just two months into the year, NATO was facing shortfalls of hundreds of millions of euros — “a natural consequence of having underinvested in collective defense for over a decade.”
NATO’s problems — greatly magnified by the expansion of its mandate beyond European borders, following 9/11 — called for “serious, far-reaching and immediate reforms,” Mr. Gates said.
Indeed, the secretary general of NATO, Anders Fogh Rasmussen, last month turned to an unlikely source — Russia — to request helicopters for use in Afghanistan, arguing that this would help reduce the terrorism threat and drug trade on a border of the former Soviet Union.
Mr. Rasmussen, speaking at the same meeting as Mr. Gates, said that NATO’s members needed to better coordinate their weapons purchases. The European Union and NATO should collaborate on developing capabilities like heavy-lift helicopters, he said, and avoid “spending double money.”
http://www.nytimes.com/2010/02/24/w...ope/24nato.html
(Gold9472: Wanting peace is bad for peace.)
By BRIAN KNOWLTON
Published: February 23, 2010
WASHINGTON — Defense Secretary Robert M. Gates, who has long called European contributions to NATO inadequate, said Tuesday that public and political opposition to the military had grown so great in Europe that it was directly affecting operations in Afghanistan and impeding the alliance’s broader security goals.
Secretary of Defense Robert Gates spoke at the National Defense University at in Washington on Tuesday.
Notes from Afghanistan, Pakistan, Iraq and other areas of conflict in the post-9/11 era. Go to the Blog »
Recent developments on the war in Afghanistan with background, analysis, timelines and earlier events from NYTimes.com and Google.
“The demilitarization of Europe — where large swaths of the general public and political class are averse to military force and the risks that go with it — has gone from a blessing in the 20th century to an impediment to achieving real security and lasting peace in the 21st,” he told NATO officers and officials in a speech at the National Defense University, the Defense Department-financed graduate school for military officers and diplomats.
A perception of European weakness, he warned, could provide a “temptation to miscalculation and aggression” by hostile powers.
The meeting was a prelude to the alliance’s review this year of its basic mission plan for the first time since 1999. “Right now,” Mr. Gates said, “the alliance faces very serious, long-term, systemic problems.”
Mr. Gates’s blunt comments came just three days after the coalition government of the Netherlands collapsed in a dispute over keeping Dutch troops in Afghanistan. It now appears almost certain that most of the 2,000 Dutch troops there will be withdrawn this year. And polls show that the Afghanistan war has grown increasingly unpopular in nearly every European country.
The defense secretary, putting a sharper point on his past criticisms, outlined how NATO shortfalls were exacting a material toll in Afghanistan. The alliance’s failure to finance needed helicopters and cargo aircraft, for example, was “directly impacting operations,” he said.
Mr. Gates said that NATO also needed more aerial refueling tankers and intelligence-gathering equipment “for immediate use on the battlefield.”
Yet alliance members, he noted, were far from reaching their spending commitments, with only 5 of 28 having reached the established target: 2 percent of gross domestic product for defense. By comparison, the United States spends more than 4 percent of its G.D.P. on its military.
Dana Allin, a senior fellow with the International Institute of Strategic Studies in London, called Mr. Gates’s remarks “very striking.”
“Whether this is a conscious statement to sound a real sharp warning, there’s no question that the frustration among the American military establishment is palpable regarding coalition operations in Afghanistan,” he said.
Mr. Gates did soften his message a bit, noting that, not counting United States forces, NATO troops in Afghanistan were to increase to 50,000 this year, from 30,000 last year.
“By any measure,” he said, “that is an extraordinary feat.”
More sobering, he said, was that just two months into the year, NATO was facing shortfalls of hundreds of millions of euros — “a natural consequence of having underinvested in collective defense for over a decade.”
NATO’s problems — greatly magnified by the expansion of its mandate beyond European borders, following 9/11 — called for “serious, far-reaching and immediate reforms,” Mr. Gates said.
Indeed, the secretary general of NATO, Anders Fogh Rasmussen, last month turned to an unlikely source — Russia — to request helicopters for use in Afghanistan, arguing that this would help reduce the terrorism threat and drug trade on a border of the former Soviet Union.
Mr. Rasmussen, speaking at the same meeting as Mr. Gates, said that NATO’s members needed to better coordinate their weapons purchases. The European Union and NATO should collaborate on developing capabilities like heavy-lift helicopters, he said, and avoid “spending double money.”
1.5 Million Displaced After Chile Quake
RIO DE JANEIRO — A strong aftershock struck Chile on Sunday, a day after a destructive 8.8-magnitude earthquake left hundreds of people dead and a long swath of the country in smoky rubble.
The death toll was expected to rise, particularly around Concepción, Chile's second-largest metropolitan area, which is roughly 70 miles from the quake's center. The aftershock was reported around 8:30 local time Sunday morning from the capital of Santiago, where it shook buildings, according to Reuters.
More than 1.5 million people have displaced by the quake, according to local news services that quoted the director of Chile's emergency management office. In Concepción, which appeared to be especially hard hit, the mayor said Sunday morning that 100 people were trapped under the rubble of a building that had collapsed, according to Reuters.
Elsewhere in Concepción, cars lay mangled and upended on streets littered with telephone wires and power cables. A new 14-story apartment building fell, while an older, biochemical lab at the University of Concepción caught fire.
In the nearby port of Talcahuano, a giant wave flooded the main square before receding and leaving behind a large fishing boat on the city streets.
“It was terrible, terrible,” said Adela Galaz, a 59-year-old cosmetologist who said glasses and paintings fell to the floor of her 22nd-floor apartment in Santiago, 200 miles from the quake’s center. “We are grateful to be alive.”
President Michelle Bachelet, speaking at a news conference on Saturday night, called the quake “one of the worst tragedies in the last 50 years” and declared a “state of catastrophe.”
While this earthquake was far stronger than the 7.0-magnitude one that ravaged Haiti six weeks ago, the damage and death toll in Chile are likely to be far less extensive, in part because of strict building codes put in place after devastating earthquakes.
The quake Saturday, tied for the fifth largest in the world since 1900, set off tsunami waves that swamped some nearby islands before moving across the Pacific. Hawaii began evacuations before dawn, but by early afternoon there — more than 15 hours after the earthquake first struck 6,500 miles away — the fears of a destructive wave had passed. Countries including Japan and the Philippines were on alert and ordered limited evacuations in anticipation of waves hitting Sunday.
Chileans were only just beginning to grapple with the devastation before them, even as more than two dozen significant aftershocks struck the country.
In Santiago, the capital, residents reported having been terrified as the city shook for about 90 seconds.
Some people ran screaming from their downtown apartments, while car alarms and sirens wailed during the middle of the night. At least one apartment building collapsed, according to local media, and one highway buckled, flipping cars.
“We are in panic because it has been trembling all day,” said Cecilia Vial, 65, an interior decorator in Santiago, who dashed out of her apartment only to return at night because she had nowhere else to go.
“We cannot go against nature,” she said. “This is something that nature did.”
Paul E. Simons, the United States ambassador to Chile, said in a telephone interview from Santiago that people he spoke with at the embassy said those 90 seconds “felt like five minutes.” He added: “It was definitely an emotional experience.”
Mr. Simons said that although the United States had offered aid, Chile’s government had not yet requested assistance. All international relief groups were on standby, and the International Federation of Red Crosses and Red Crescents said the Chilean Red Cross indicated that it did not need external assistance at this point.
Although there were long lines at supermarkets and gas stations, and damaged buildings and roads, the capital city, according to residents there, was mostly calm by the late afternoon Saturday. But the scene was grimmer in Concepción and surrounding areas to the south.
In Talca, 167 miles south of Santiago, almost every home in the center of the city was severely damaged, and on Saturday night, people slept on the streets in the balmy night air near fires built with wood from destroyed homes. All but two of the local hospital’s 13 wings were in ruins, said Claudio Martínez, a doctor at the hospital. “We’re only keeping the people in danger of dying,” he said.
Dr. Martínez said the hospital staff had tried to take some people to Santiago for treatment in the morning, but the roads were blocked at the time.
Eduardo Martínez, 57, a local resident, said many people on his street had died and that he and his five brothers all lost their homes.
In Chillán, 69 miles from Concepción, a crumbling wall allowed 300 prisoners to escape and incite a riot, according to La Tercera, the nation’s largest newspaper. The police captured 60 inmates, but more than 200 were still at large, the newspaper reported on its Web site. With major highways and bridges destroyed, and slabs of concrete jabbing diagonally into the air, transportation slowed or was halted altogether.
Major seaports and airports, including the main airport in Santiago, were out of operation across the central region, Chilean officials said. TV Chile reported that part of the ceiling at the airport had collapsed, but that runways appeared intact. Cellphone and Internet service was sporadic throughout the country, considered one of the most wired in Latin America, complicating rescue efforts.
On Robinson Crusoe, one of the coastal islands hit by early waves, authorities said at least four people had been killed.
President Obama spoke briefly outside the White House on Saturday afternoon, expressing concern for the country and saying the United States would offer aid in rescue and recovery efforts.
“Early indications are that hundreds of lives have been lost in Chile and the damage has been severe,” Mr. Obama said.
He told Mrs. Bachelet that the United States was ready to help if needed. “We will be there for her should the Chilean people need assistance,” he said
State Department officials said that Secretary of State Hillary Rodham Clinton, who had been planning a trip to South America beginning on Monday, was also contacting Mrs. Bachelet, with whom she has long had warm personal relations.
Ban Ki-moon, the United Nations secretary general, also offered his condolences, as well as longer-term aid should Chilean officials signal the need for it.
The earthquake struck at 3:34 a.m. in central Chile, centered roughly 200 miles southwest of Santiago at a depth of 22 miles, the United States Geological Survey reported.
The Geological Survey said that another earthquake on Saturday, a 6.3-magnitude quake in northern Argentina, was unrelated. In Salta, Argentina, an 8-year-old boy was killed and two of his friends were injured when a wall collapsed, The Associated Press reported.
The most powerful earthquake ever recorded was also in Chile: a 9.5-magnitude quake struck in the spring of 1960 that struck near Concepción and set off a series of deadly tsunamis that killed people as far away as Hawaii and Japan.
But that earthquake, which killed nearly 2,000 people and left more than two million homeless at the time, prepared officials and residents in the region for future devastating effects.
Shortly after a 7.8-magnitude earthquake struck in Valparaíso in 1985, the country established strict building codes, according to Andre Filiatrault, the director of the Multidisciplinary Center for Earthquake Engineering Research at the University at Buffalo.
“There is a lot of reinforced concrete in Chile, which is normal in Latin America,” Professor Filiatrault said. “The only issue in this, like any earthquakes, are the older buildings and residential construction that might not have been designed according to these codes.”
This was in direct contrast to Haiti, which was unprepared for the Jan. 12 earthquake, Professor Filiatrault added.
“If you are considering this magnitude is 8.8, I would be very surprised if the death tolls come close,” Professor Filiatrault said.
The death toll was expected to rise, particularly around Concepción, Chile's second-largest metropolitan area, which is roughly 70 miles from the quake's center. The aftershock was reported around 8:30 local time Sunday morning from the capital of Santiago, where it shook buildings, according to Reuters.
More than 1.5 million people have displaced by the quake, according to local news services that quoted the director of Chile's emergency management office. In Concepción, which appeared to be especially hard hit, the mayor said Sunday morning that 100 people were trapped under the rubble of a building that had collapsed, according to Reuters.
Elsewhere in Concepción, cars lay mangled and upended on streets littered with telephone wires and power cables. A new 14-story apartment building fell, while an older, biochemical lab at the University of Concepción caught fire.
In the nearby port of Talcahuano, a giant wave flooded the main square before receding and leaving behind a large fishing boat on the city streets.
“It was terrible, terrible,” said Adela Galaz, a 59-year-old cosmetologist who said glasses and paintings fell to the floor of her 22nd-floor apartment in Santiago, 200 miles from the quake’s center. “We are grateful to be alive.”
President Michelle Bachelet, speaking at a news conference on Saturday night, called the quake “one of the worst tragedies in the last 50 years” and declared a “state of catastrophe.”
While this earthquake was far stronger than the 7.0-magnitude one that ravaged Haiti six weeks ago, the damage and death toll in Chile are likely to be far less extensive, in part because of strict building codes put in place after devastating earthquakes.
The quake Saturday, tied for the fifth largest in the world since 1900, set off tsunami waves that swamped some nearby islands before moving across the Pacific. Hawaii began evacuations before dawn, but by early afternoon there — more than 15 hours after the earthquake first struck 6,500 miles away — the fears of a destructive wave had passed. Countries including Japan and the Philippines were on alert and ordered limited evacuations in anticipation of waves hitting Sunday.
Chileans were only just beginning to grapple with the devastation before them, even as more than two dozen significant aftershocks struck the country.
In Santiago, the capital, residents reported having been terrified as the city shook for about 90 seconds.
Some people ran screaming from their downtown apartments, while car alarms and sirens wailed during the middle of the night. At least one apartment building collapsed, according to local media, and one highway buckled, flipping cars.
“We are in panic because it has been trembling all day,” said Cecilia Vial, 65, an interior decorator in Santiago, who dashed out of her apartment only to return at night because she had nowhere else to go.
“We cannot go against nature,” she said. “This is something that nature did.”
Paul E. Simons, the United States ambassador to Chile, said in a telephone interview from Santiago that people he spoke with at the embassy said those 90 seconds “felt like five minutes.” He added: “It was definitely an emotional experience.”
Mr. Simons said that although the United States had offered aid, Chile’s government had not yet requested assistance. All international relief groups were on standby, and the International Federation of Red Crosses and Red Crescents said the Chilean Red Cross indicated that it did not need external assistance at this point.
Although there were long lines at supermarkets and gas stations, and damaged buildings and roads, the capital city, according to residents there, was mostly calm by the late afternoon Saturday. But the scene was grimmer in Concepción and surrounding areas to the south.
In Talca, 167 miles south of Santiago, almost every home in the center of the city was severely damaged, and on Saturday night, people slept on the streets in the balmy night air near fires built with wood from destroyed homes. All but two of the local hospital’s 13 wings were in ruins, said Claudio Martínez, a doctor at the hospital. “We’re only keeping the people in danger of dying,” he said.
Dr. Martínez said the hospital staff had tried to take some people to Santiago for treatment in the morning, but the roads were blocked at the time.
Eduardo Martínez, 57, a local resident, said many people on his street had died and that he and his five brothers all lost their homes.
In Chillán, 69 miles from Concepción, a crumbling wall allowed 300 prisoners to escape and incite a riot, according to La Tercera, the nation’s largest newspaper. The police captured 60 inmates, but more than 200 were still at large, the newspaper reported on its Web site. With major highways and bridges destroyed, and slabs of concrete jabbing diagonally into the air, transportation slowed or was halted altogether.
Major seaports and airports, including the main airport in Santiago, were out of operation across the central region, Chilean officials said. TV Chile reported that part of the ceiling at the airport had collapsed, but that runways appeared intact. Cellphone and Internet service was sporadic throughout the country, considered one of the most wired in Latin America, complicating rescue efforts.
On Robinson Crusoe, one of the coastal islands hit by early waves, authorities said at least four people had been killed.
President Obama spoke briefly outside the White House on Saturday afternoon, expressing concern for the country and saying the United States would offer aid in rescue and recovery efforts.
“Early indications are that hundreds of lives have been lost in Chile and the damage has been severe,” Mr. Obama said.
He told Mrs. Bachelet that the United States was ready to help if needed. “We will be there for her should the Chilean people need assistance,” he said
State Department officials said that Secretary of State Hillary Rodham Clinton, who had been planning a trip to South America beginning on Monday, was also contacting Mrs. Bachelet, with whom she has long had warm personal relations.
Ban Ki-moon, the United Nations secretary general, also offered his condolences, as well as longer-term aid should Chilean officials signal the need for it.
The earthquake struck at 3:34 a.m. in central Chile, centered roughly 200 miles southwest of Santiago at a depth of 22 miles, the United States Geological Survey reported.
The Geological Survey said that another earthquake on Saturday, a 6.3-magnitude quake in northern Argentina, was unrelated. In Salta, Argentina, an 8-year-old boy was killed and two of his friends were injured when a wall collapsed, The Associated Press reported.
The most powerful earthquake ever recorded was also in Chile: a 9.5-magnitude quake struck in the spring of 1960 that struck near Concepción and set off a series of deadly tsunamis that killed people as far away as Hawaii and Japan.
But that earthquake, which killed nearly 2,000 people and left more than two million homeless at the time, prepared officials and residents in the region for future devastating effects.
Shortly after a 7.8-magnitude earthquake struck in Valparaíso in 1985, the country established strict building codes, according to Andre Filiatrault, the director of the Multidisciplinary Center for Earthquake Engineering Research at the University at Buffalo.
“There is a lot of reinforced concrete in Chile, which is normal in Latin America,” Professor Filiatrault said. “The only issue in this, like any earthquakes, are the older buildings and residential construction that might not have been designed according to these codes.”
This was in direct contrast to Haiti, which was unprepared for the Jan. 12 earthquake, Professor Filiatrault added.
“If you are considering this magnitude is 8.8, I would be very surprised if the death tolls come close,” Professor Filiatrault said.
PEACE CAMP DEMANDS THAT PRESIDENT OBAMA MEET WITH A PEACE COUNCIL
PEACE CAMP DEMANDS THAT PRESIDENT OBAMA MEET WITH A PEACE COUNCIL
http://peaceoftheaction.org/2010/02...-peace-council/
( Please spread this as far and as wide as you possibly can. Thank you.)
February 23, 2010
Dear President Obama,
A contingent of Peace Groups and Activists will be setting up a Peace Camp across the street from your house on the lawn of the Washington Monument called, Camp OUT NOW.
After over one year of your presidency, it’s become crystal clear to even many of those who supported you, that your foreign policy is as much of a disaster as was George Bush’s.
On Sunday, 33 civilians were killed in a bombing raid on a caravan in Afghanistan, and no matter how many times you or your generals say, “Sorry,” innocent civilians will always be killed in these insane wars of profit and occupation. Since, by your regime’s own admission, civilian slaughter “can’t be avoided,” these wars must come to an immediate end.
It’s also quite tragic that your war in Afghanistan has victimized more of our troops than when Bush was president, and more of our returning vets are committing suicide with most of their needs still going unmet.
For all intents and purposes, Mr. Obama, you have had a blank-check from the U.S. anti-war movement since you were elected. Certainly being awarded the Nobel Peace Prize gave these wars some international legitimacy, but those days of your free pass to carry out and magnify the Bush regime’s crimes against humanity are over.
Even though there have been those of us in the anti-war movement who never dropped the ball, or passed it to the Democratic Party, many of the ones who supported you are also starting to awaken to the harsh reality that you are only keeping your campaign promises and they don’t like that.
Mr. Obama, your anti-war base is an awakening giant that you will have to deal with in this election year. People are fleeing your party with the same regularity that they fled the other party when Bush was president. This waking giant is also realizing that with a Democratic majority everywhere, your failure in proceeding with a progressive agenda is abysmal.
Every time you are “contemplating” sending more troops to Afghanistan, you have countless meetings with what you have called your “War Council.” The very name implies a foregone conclusion that you will send more troops and that other, more rational, more humane, and more peaceful solutions are never even considered.
In 2005, I asked for a meeting with President Bush that was never granted, and as you know, Camp Casey in Crawford became the spark that lit a prairie fire of anti-war sentiment that swept you and your cohorts in the Democratic Party back into power and now we are coming to collect the spoils of that victory–which is not more war–but more Peace. You Democrats owe much to your anti-war base–and we will not be quiet nor be ignored as we were in the previous administration. It’s time for you to pay the Peace-piper, Mr. Obama.
Our demands are profound, yet simple for you to perform: troops out of Iraq, Afghanistan, and Pakistan (where three soldiers were just killed); no more drone bombings anywhere; close the permanent bases and torture prisons; and bring the mercenary soldiers home, too. We will not be closing up Camp, or the movement, until positive progress in the direction of Peace is noted.
The first week of Camp (March 13-20), we are asking for a meeting with you to discuss setting up a Peace Council that you will regularly meet with that will have a seat at the table when decisions that will kill, maim, displace, or harm our troops or civilians in any way are being discussed. We also demand that this Peace Council be comprised of grassroots members of the Peace Movement and not rubber-stamp status quo worshippers, or other “Peace” Prize laureates like Henry Kissinger, who already, reportedly, has your ear.
If you do not meet with representatives from Camp OUT NOW, we will be a thorn in the side of the War Machine, and we will not go away without a struggle. If you do meet with us and agree to a Peace Council, we will pack up our tents, but we will still be a thorn in the side of the War Machine until Peace is finally achieved–the only difference is that we won’t be camped across the street from your home.
During your campaign, you often quoted Roosevelt as saying that if the voters wanted him to do the right thing, they would have to “make him.” Well, Mr. Obama, we are the bosses of you–not your corporate masters–and we will be in DC to “make you” do the right thing.
I can be reached at anytime through my email:
Cindy@PeaceoftheAction.org
In struggle until there is finally Peace,
Cindy Sheehan
Mother of Spc. Casey Sheehan who was murdered on 04 April, 2004, by the U.S. War Machine.
And the Peace of the Action Coalition
www.PeaceoftheAction.org
http://peaceoftheaction.org/2010/02...-peace-council/
( Please spread this as far and as wide as you possibly can. Thank you.)
February 23, 2010
Dear President Obama,
A contingent of Peace Groups and Activists will be setting up a Peace Camp across the street from your house on the lawn of the Washington Monument called, Camp OUT NOW.
After over one year of your presidency, it’s become crystal clear to even many of those who supported you, that your foreign policy is as much of a disaster as was George Bush’s.
On Sunday, 33 civilians were killed in a bombing raid on a caravan in Afghanistan, and no matter how many times you or your generals say, “Sorry,” innocent civilians will always be killed in these insane wars of profit and occupation. Since, by your regime’s own admission, civilian slaughter “can’t be avoided,” these wars must come to an immediate end.
It’s also quite tragic that your war in Afghanistan has victimized more of our troops than when Bush was president, and more of our returning vets are committing suicide with most of their needs still going unmet.
For all intents and purposes, Mr. Obama, you have had a blank-check from the U.S. anti-war movement since you were elected. Certainly being awarded the Nobel Peace Prize gave these wars some international legitimacy, but those days of your free pass to carry out and magnify the Bush regime’s crimes against humanity are over.
Even though there have been those of us in the anti-war movement who never dropped the ball, or passed it to the Democratic Party, many of the ones who supported you are also starting to awaken to the harsh reality that you are only keeping your campaign promises and they don’t like that.
Mr. Obama, your anti-war base is an awakening giant that you will have to deal with in this election year. People are fleeing your party with the same regularity that they fled the other party when Bush was president. This waking giant is also realizing that with a Democratic majority everywhere, your failure in proceeding with a progressive agenda is abysmal.
Every time you are “contemplating” sending more troops to Afghanistan, you have countless meetings with what you have called your “War Council.” The very name implies a foregone conclusion that you will send more troops and that other, more rational, more humane, and more peaceful solutions are never even considered.
In 2005, I asked for a meeting with President Bush that was never granted, and as you know, Camp Casey in Crawford became the spark that lit a prairie fire of anti-war sentiment that swept you and your cohorts in the Democratic Party back into power and now we are coming to collect the spoils of that victory–which is not more war–but more Peace. You Democrats owe much to your anti-war base–and we will not be quiet nor be ignored as we were in the previous administration. It’s time for you to pay the Peace-piper, Mr. Obama.
Our demands are profound, yet simple for you to perform: troops out of Iraq, Afghanistan, and Pakistan (where three soldiers were just killed); no more drone bombings anywhere; close the permanent bases and torture prisons; and bring the mercenary soldiers home, too. We will not be closing up Camp, or the movement, until positive progress in the direction of Peace is noted.
The first week of Camp (March 13-20), we are asking for a meeting with you to discuss setting up a Peace Council that you will regularly meet with that will have a seat at the table when decisions that will kill, maim, displace, or harm our troops or civilians in any way are being discussed. We also demand that this Peace Council be comprised of grassroots members of the Peace Movement and not rubber-stamp status quo worshippers, or other “Peace” Prize laureates like Henry Kissinger, who already, reportedly, has your ear.
If you do not meet with representatives from Camp OUT NOW, we will be a thorn in the side of the War Machine, and we will not go away without a struggle. If you do meet with us and agree to a Peace Council, we will pack up our tents, but we will still be a thorn in the side of the War Machine until Peace is finally achieved–the only difference is that we won’t be camped across the street from your home.
During your campaign, you often quoted Roosevelt as saying that if the voters wanted him to do the right thing, they would have to “make him.” Well, Mr. Obama, we are the bosses of you–not your corporate masters–and we will be in DC to “make you” do the right thing.
I can be reached at anytime through my email:
Cindy@PeaceoftheAction.org
In struggle until there is finally Peace,
Cindy Sheehan
Mother of Spc. Casey Sheehan who was murdered on 04 April, 2004, by the U.S. War Machine.
And the Peace of the Action Coalition
www.PeaceoftheAction.org
Monday, February 22, 2010
Citigroup Warns Customers It May Refuse To Allow Withdrawals
The image of banks locking their doors to keep customers from making withdrawals during a bank run is what immediately came to mind when we heard that Citigroup was telling customers it has the right to prevent any withdrawals from checking accounts
for seven days.
"Effective April 1, 2010, we reserve the right to require (7) days advance notice before permitting a withdrawal from all checking accounts. While we do not currently exercise this right and have not exercised it in the past, we are required by law to notify you of this change," Citigroup said on statements received by customers all over the country.
What's going on? It seems that this is something of an error. The seven day notice policy only applies to customers in Texas, Ira Stoll reports at The Future of Capitalism. It was accidentally included on customer statements nationwide.
"Whatever the explanation, it doesn't exactly inspire confidence in Citi," Stoll writes. "But it's hard to believe a bank would be sending out a notice like that on its statements."
UPDATE: According to Stoll, Citi issued a statement saying that it has been required to make this change by Federal regulations--and it no longer sounds like it's limited to Texas:
Update: Citibank has now released the following statement by way of explanation: "When Citibank moved to unlimited FDIC coverage in 2009, we had to reclassify many checking accounts to allow for immediate withdrawals in order to ensure all customers qualified for the additional coverage. When we moved back to standard FDIC coverage with most major banks in 2010, Citibank decided to reclassify those accounts back to make them eligible again for promotional incentives. To do so, Federal Reserve Reg D requires these accounts, called NOW accounts, to reserve the right to require a 7-day notice of withdrawal. We recently communicated this technical requirement to our customers. However, we have never exercised this right and have no plans to do so in the future."
for seven days.
"Effective April 1, 2010, we reserve the right to require (7) days advance notice before permitting a withdrawal from all checking accounts. While we do not currently exercise this right and have not exercised it in the past, we are required by law to notify you of this change," Citigroup said on statements received by customers all over the country.
What's going on? It seems that this is something of an error. The seven day notice policy only applies to customers in Texas, Ira Stoll reports at The Future of Capitalism. It was accidentally included on customer statements nationwide.
"Whatever the explanation, it doesn't exactly inspire confidence in Citi," Stoll writes. "But it's hard to believe a bank would be sending out a notice like that on its statements."
UPDATE: According to Stoll, Citi issued a statement saying that it has been required to make this change by Federal regulations--and it no longer sounds like it's limited to Texas:
Update: Citibank has now released the following statement by way of explanation: "When Citibank moved to unlimited FDIC coverage in 2009, we had to reclassify many checking accounts to allow for immediate withdrawals in order to ensure all customers qualified for the additional coverage. When we moved back to standard FDIC coverage with most major banks in 2010, Citibank decided to reclassify those accounts back to make them eligible again for promotional incentives. To do so, Federal Reserve Reg D requires these accounts, called NOW accounts, to reserve the right to require a 7-day notice of withdrawal. We recently communicated this technical requirement to our customers. However, we have never exercised this right and have no plans to do so in the future."
Sunday, February 21, 2010
Wall Street's Bailout Hustle
Wall Street's Bailout Hustle
Goldman Sachs and other big banks aren't just pocketing the trillions we gave them to rescue the economy - they're re-creating the conditions for another crash
http://www.rollingstone.com/politic...ut_hustle/print
MATT TAIBBI
Posted Feb 17, 2010 5:57 AM
On January 21st, Lloyd Blankfein left a peculiar voicemail message on the work phones of his employees at Goldman Sachs. Fast becoming America's pre-eminent Marvel Comics supervillain, the CEO used the call to deploy his secret weapon: a pair of giant, nuclear-powered testicles. In his message, Blankfein addressed his plan to pay out gigantic year-end bonuses amid widespread controversy over Goldman's role in precipitating the global financial crisis.
The bank had already set aside a tidy $16.2 billion for salaries and bonuses — meaning that Goldman employees were each set to take home an average of $498,246, a number roughly commensurate with what they received during the bubble years. Still, the troops were worried: There were rumors that Dr. Ballsachs, bowing to political pressure, might be forced to scale the number back. After all, the country was broke, 14.8 million Americans were stranded on the unemployment line, and Barack Obama and the Democrats were trying to recover the populist high ground after their bitch-whipping in Massachusetts by calling for a "bailout tax" on banks. Maybe this wasn't the right time for Goldman to be throwing its annual Roman bonus orgy.
Not to worry, Blankfein reassured employees. "In a year that proved to have no shortage of story lines," he said, "I believe very strongly that performance is the ultimate narrative."
Translation: We made a shitload of money last year because we're so amazing at our jobs, so fuck all those people who want us to reduce our bonuses.
Goldman wasn't alone. The nation's six largest banks — all committed to this balls-out, I drink your milkshake! strategy of flagrantly gorging themselves as America goes hungry — set aside a whopping $140 billion for executive compensation last year, a sum only slightly less than the $164 billion they paid themselves in the pre-crash year of 2007. In a gesture of self-sacrifice, Blankfein himself took a humiliatingly low bonus of $9 million, less than the 2009 pay of elephantine New York Knicks washout Eddy Curry. But in reality, not much had changed. "What is the state of our moral being when Lloyd Blankfein taking a $9 million bonus is viewed as this great act of contrition, when every penny of it was a direct transfer from the taxpayer?" asks Eliot Spitzer, who tried to hold Wall Street accountable during his own ill-fated stint as governor of New York.
Beyond a few such bleats of outrage, however, the huge payout was met, by and large, with a collective sigh of resignation. Because beneath America's populist veneer, on a more subtle strata of the national psyche, there remains a strong temptation to not really give a shit. The rich, after all, have always made way too much money; what's the difference if some fat cat in New York pockets $20 million instead of $10 million?
The only reason such apathy exists, however, is because there's still a widespread misunderstanding of how exactly Wall Street "earns" its money, with emphasis on the quotation marks around "earns." The question everyone should be asking, as one bailout recipient after another posts massive profits — Goldman reported $13.4 billion in profits last year, after paying out that $16.2 billion in bonuses and compensation — is this: In an economy as horrible as ours, with every factory town between New York and Los Angeles looking like those hollowed-out ghost ships we see on History Channel documentaries like Shipwrecks of the Great Lakes, where in the hell did Wall Street's eye-popping profits come from, exactly? Did Goldman go from bailout city to $13.4 billion in the black because, as Blankfein suggests, its "performance" was just that awesome? A year and a half after they were minutes away from bankruptcy, how are these assholes not only back on their feet again, but hauling in bonuses at the same rate they were during the bubble?
The answer to that question is basically twofold: They raped the taxpayer, and they raped their clients.
The bottom line is that banks like Goldman have learned absolutely nothing from the global economic meltdown. In fact, they're back conniving and playing speculative long shots in force — only this time with the full financial support of the U.S. government. In the process, they're rapidly re-creating the conditions for another crash, with the same actors once again playing the same crazy games of financial chicken with the same toxic assets as before.
That's why this bonus business isn't merely a matter of getting upset about whether or not Lloyd Blankfein buys himself one tropical island or two on his next birthday. The reality is that the post-bailout era in which Goldman thrived has turned out to be a chaotic frenzy of high-stakes con-artistry, with taxpayers and clients bilked out of billions using a dizzying array of old-school hustles that, but for their ponderous complexity, would have fit well in slick grifter movies like The Sting and Matchstick Men. There's even a term in con-man lingo for what some of the banks are doing right now, with all their cosmetic gestures of scaling back bonuses and giving to charities. In the grifter world, calming down a mark so he doesn't call the cops is known as the "Cool Off."
To appreciate how all of these (sometimes brilliant) schemes work is to understand the difference between earning money and taking scores, and to realize that the profits these banks are posting don't so much represent national growth and recovery, but something closer to the losses one would report after a theft or a car crash. Many Americans instinctively understand this to be true — but, much like when your wife does it with your 300-pound plumber in the kids' playroom, knowing it and actually watching the whole scene from start to finish are two very different things. In that spirit, a brief history of the best 18 months of grifting this country has ever seen:
CON #1 THE SWOOP AND SQUAT
By now, most people who have followed the financial crisis know that the bailout of AIG was actually a bailout of AIG's "counterparties" — the big banks like Goldman to whom the insurance giant owed billions when it went belly up.
What is less understood is that the bailout of AIG counter-parties like Goldman and Société Générale, a French bank, actually began before the collapse of AIG, before the Federal Reserve paid them so much as a dollar. Nor is it understood that these counterparties actually accelerated the wreck of AIG in what was, ironically, something very like the old insurance scam known as "Swoop and Squat," in which a target car is trapped between two perpetrator vehicles and wrecked, with the mark in the game being the target's insurance company — in this case, the government.
This may sound far-fetched, but the financial crisis of 2008 was very much caused by a perverse series of legal incentives that often made failed investments worth more than thriving ones. Our economy was like a town where everyone has juicy insurance policies on their neighbors' cars and houses. In such a town, the driving will be suspiciously bad, and there will be a lot of fires.
AIG was the ultimate example of this dynamic. At the height of the housing boom, Goldman was selling billions in bundled mortgage-backed securities — often toxic crap of the no-money-down, no-identification-needed variety of home loan — to various institutional suckers like pensions and insurance companies, who frequently thought they were buying investment-grade instruments. At the same time, in a glaring example of the perverse incentives that existed and still exist, Goldman was also betting against those same sorts of securities — a practice that one government investigator compared to "selling a car with faulty brakes and then buying an insurance policy on the buyer of those cars."
Goldman often "insured" some of this garbage with AIG, using a virtually unregulated form of pseudo-insurance called credit-default swaps. Thanks in large part to deregulation pushed by Bob Rubin, former chairman of Goldman, and Treasury secretary under Bill Clinton, AIG wasn't required to actually have the capital to pay off the deals. As a result, banks like Goldman bought more than $440 billion worth of this bogus insurance from AIG, a huge blind bet that the taxpayer ended up having to eat.
Thus, when the housing bubble went crazy, Goldman made money coming and going. They made money selling the crap mortgages, and they made money by collecting on the bogus insurance from AIG when the crap mortgages flopped.
Still, the trick for Goldman was: how to collect the insurance money. As AIG headed into a tailspin that fateful summer of 2008, it looked like the beleaguered firm wasn't going to have the money to pay off the bogus insurance. So Goldman and other banks began demanding that AIG provide them with cash collateral. In the 15 months leading up to the collapse of AIG, Goldman received $5.9 billion in collateral. Société Générale, a bank holding lots of mortgage-backed crap originally underwritten by Goldman, received $5.5 billion. These collateral demands squeezing AIG from two sides were the "Swoop and Squat" that ultimately crashed the firm. "It put the company into a liquidity crisis," says Eric Dinallo, who was intimately involved in the AIG bailout as head of the New York State Insurance Department.
It was a brilliant move. When a company like AIG is about to die, it isn't supposed to hand over big hunks of assets to a single creditor like Goldman; it's supposed to equitably distribute whatever assets it has left among all its creditors. Had AIG gone bankrupt, Goldman would have likely lost much of the $5.9 billion that it pocketed as collateral. "Any bankruptcy court that saw those collateral payments would have declined that transaction as a fraudulent conveyance," says Barry Ritholtz, the author of Bailout Nation. Instead, Goldman and the other counterparties got their money out in advance — putting a torch to what was left of AIG. Fans of the movie Goodfellas will recall Henry Hill and Tommy DeVito taking the same approach to the Bamboo Lounge nightclub they'd been gouging. Roll the Ray Liotta narration: "Finally, when there's nothing left, when you can't borrow another buck . . . you bust the joint out. You light a match."
And why not? After all, according to the terms of the bailout deal struck when AIG was taken over by the state in September 2008, Goldman was paid 100 cents on the dollar on an additional $12.9 billion it was owed by AIG — again, money it almost certainly would not have seen a fraction of had AIG proceeded to a normal bankruptcy. Along with the collateral it pocketed, that's $19 billion in pure cash that Goldman would not have "earned" without massive state intervention. How's that $13.4 billion in 2009 profits looking now? And that doesn't even include the direct bailouts of Goldman Sachs and other big banks, which began in earnest after the collapse of AIG.
CON #2 THE DOLLAR STORE
In the usual "DollarStore" or "Big Store" scam — popularized in movies like The Sting — a huge cast of con artists is hired to create a whole fake environment into which the unsuspecting mark walks and gets robbed over and over again. A warehouse is converted into a makeshift casino or off-track betting parlor, the fool walks in with money, leaves without it.
The two key elements to the Dollar Store scam are the whiz-bang theatrical redecorating job and the fact that everyone is in on it except the mark. In this case, a pair of investment banks were dressed up to look like commercial banks overnight, and it was the taxpayer who walked in and lost his shirt, confused by the appearance of what looked like real Federal Reserve officials minding the store.
Less than a week after the AIG bailout, Goldman and another investment bank, Morgan Stanley, applied for, and received, federal permission to become bank holding companies — a move that would make them eligible for much greater federal support. The stock prices of both firms were cratering, and there was talk that either or both might go the way of Lehman Brothers, another once-mighty investment bank that just a week earlier had disappeared from the face of the earth under the weight of its toxic assets. By law, a five-day waiting period was required for such a conversion — but the two banks got them overnight, with final approval actually coming only five days after the AIG bailout.
Why did they need those federal bank charters? This question is the key to understanding the entire bailout era — because this Dollar Store scam was the big one. Institutions that were, in reality, high-risk gambling houses were allowed to masquerade as conservative commercial banks. As a result of this new designation, they were given access to a virtually endless tap of "free money" by unsuspecting taxpayers. The $10 billion that Goldman received under the better-known TARP bailout was chump change in comparison to the smorgasbord of direct and indirect aid it qualified for as a commercial bank.
When Goldman Sachs and Morgan Stanley got their federal bank charters, they joined Bank of America, Citigroup, J.P. Morgan Chase and the other banking titans who could go to the Fed and borrow massive amounts of money at interest rates that, thanks to the aggressive rate-cutting policies of Fed chief Ben Bernanke during the crisis, soon sank to zero percent. The ability to go to the Fed and borrow big at next to no interest was what saved Goldman, Morgan Stanley and other banks from death in the fall of 2008. "They had no other way to raise capital at that moment, meaning they were on the brink of insolvency," says Nomi Prins, a former managing director at Goldman Sachs. "The Fed was the only shot."
In fact, the Fed became not just a source of emergency borrowing that enabled Goldman and Morgan Stanley to stave off disaster — it became a source of long-term guaranteed income. Borrowing at zero percent interest, banks like Goldman now had virtually infinite ways to make money. In one of the most common maneuvers, they simply took the money they borrowed from the government at zero percent and lent it back to the government by buying Treasury bills that paid interest of three or four percent. It was basically a license to print money — no different than attaching an ATM to the side of the Federal Reserve.
"You're borrowing at zero, putting it out there at two or three percent, with hundreds of billions of dollars — man, you can make a lot of money that way," says the manager of one prominent hedge fund. "It's free money." Which goes a long way to explaining Goldman's enormous profits last year. But all that free money was amplified by another scam:
CON #3 THE PIG IN THE POKE
At one point or another, pretty much everyone who takes drugs has been burned by this one, also known as the "Rocks in the Box" scam or, in its more elaborate variations, the "Jamaican Switch." Someone sells you what looks like an eightball of coke in a baggie, you get home and, you dumbass, it's baby powder.
The scam's name comes from the Middle Ages, when some fool would be sold a bound and gagged pig that he would see being put into a bag; he'd miss the switch, then get home and find a tied-up cat in there instead. Hence the expression "Don't let the cat out of the bag."
The "Pig in the Poke" scam is another key to the entire bailout era. After the crash of the housing bubble — the largest asset bubble in history — the economy was suddenly flooded with securities backed by failing or near-failing home loans. In the cleanup phase after that bubble burst, the whole game was to get taxpayers, clients and shareholders to buy these worthless cats, but at pig prices.
One of the first times we saw the scam appear was in September 2008, right around the time that AIG was imploding. That was when the Fed changed some of its collateral rules, meaning banks that could once borrow only against sound collateral, like Treasury bills or AAA-rated corporate bonds, could now borrow against pretty much anything — including some of the mortgage-backed sewage that got us into this mess in the first place. In other words, banks that once had to show a real pig to borrow from the Fed could now show up with a cat and get pig money. "All of a sudden, banks were allowed to post absolute shit to the Fed's balance sheet," says the manager of the prominent hedge fund.
The Fed spelled it out on September 14th, 2008, when it changed the collateral rules for one of its first bailout facilities — the Primary Dealer Credit Facility, or PDCF. The Fed's own write-up described the changes: "With the Fed's action, all the kinds of collateral then in use . . . including non-investment-grade securities and equities . . . became eligible for pledge in the PDCF."
Translation: We now accept cats.
The Pig in the Poke also came into play in April of last year, when Congress pushed a little-known agency called the Financial Accounting Standards Board, or FASB, to change the so-called "mark-to-market" accounting rules. Until this rule change, banks had to assign a real-market price to all of their assets. If they had a balance sheet full of securities they had bought at $3 that were now only worth $1, they had to figure their year-end accounting using that $1 value. In other words, if you were the dope who bought a cat instead of a pig, you couldn't invite your shareholders to a slate of pork dinners come year-end accounting time.
But last April, FASB changed all that. From now on, it announced, banks could avoid reporting losses on some of their crappy cat investments simply by declaring that they would "more likely than not" hold on to them until they recovered their pig value. In short, the banks didn't even have to actually hold on to the toxic shit they owned — they just had to sort of promise to hold on to it.
That's why the "profit" numbers of a lot of these banks are really a joke. In many cases, we have absolutely no idea how many cats are in their proverbial bag. What they call "profits" might really be profits, only minus undeclared millions or billions in losses.
"They're hiding all this stuff from their shareholders," says Ritholtz, who was disgusted that the banks lobbied for the rule changes. "Now, suddenly banks that were happy to mark to market on the way up don't have to mark to market on the way down."
CON #4 THE RUMANIAN BOX
One of the great innovations of Victor Lustig, the legendary Depression-era con man who wrote the famous "Ten Commandments for Con Men," was a thing called the "Rumanian Box." This was a little machine that a mark would put a blank piece of paper into, only to see real currency come out the other side. The brilliant Lustig sold this Rumanian Box over and over again for vast sums — but he's been outdone by the modern barons of Wall Street, who managed to get themselves a real Rumanian Box.
How they accomplished this is a story that by itself highlights the challenge of placing this era in any kind of historical context of known financial crime. What the banks did was something that was never — and never could have been — thought of before. They took so much money from the government, and then did so little with it, that the state was forced to start printing new cash to throw at them. Even the great Lustig in his wildest, horniest dreams could never have dreamed up this one.
The setup: By early 2009, the banks had already replenished themselves with billions if not trillions in bailout money. It wasn't just the $700 billion in TARP cash, the free money provided by the Fed, and the untold losses obscured by accounting tricks. Another new rule allowed banks to collect interest on the cash they were required by law to keep in reserve accounts at the Fed — meaning the state was now compensating the banks simply for guaranteeing their own solvency. And a new federal operation called the Temporary Liquidity Guarantee Program let insolvent and near-insolvent banks dispense with their deservedly ruined credit profiles and borrow on a clean slate, with FDIC backing. Goldman borrowed $29 billion on the government's good name, J.P. Morgan Chase $38 billion, and Bank of America $44 billion. "TLGP," says Prins, the former Goldman manager, "was a big one."
Collectively, all this largesse was worth trillions. The idea behind the flood of money, from the government's standpoint, was to spark a national recovery: We refill the banks' balance sheets, and they, in turn, start to lend money again, recharging the economy and producing jobs. "The banks were fast approaching insolvency," says Rep. Paul Kanjorski, a vocal critic of Wall Street who nevertheless defends the initial decision to bail out the banks. "It was vitally important that we recapitalize these institutions."
But here's the thing. Despite all these trillions in government rescues, despite the Fed slashing interest rates down to nothing and showering the banks with mountains of guarantees, Goldman and its friends had still not jump-started lending again by the first quarter of 2009. That's where those nuclear-powered balls of Lloyd Blankfein came into play, as Goldman and other banks basically threatened to pick up their bailout billions and go home if the government didn't fork over more cash — a lot more. "Even if the Fed could make interest rates negative, that wouldn't necessarily help," warned Goldman's chief domestic economist, Jan Hatzius. "We're in a deep recession mainly because the private sector, for a variety of reasons, has decided to save a lot more."
Translation: You can lower interest rates all you want, but we're still not fucking lending the bailout money to anyone in this economy. Until the government agreed to hand over even more goodies, the banks opted to join the rest of the "private sector" and "save" the taxpayer aid they had received — in the form of bonuses and compensation.
The ploy worked. In March of last year, the Fed sharply expanded a radical new program called quantitative easing, which effectively operated as a real-live Rumanian Box. The government put stacks of paper in one side, and out came $1.2 trillion "real" dollars.
The government used some of that freshly printed money to prop itself up by purchasing Treasury bonds — a desperation move, since Washington's demand for cash was so great post-Clusterfuck '08 that even the Chinese couldn't buy U.S. debt fast enough to keep America afloat. But the Fed used most of the new cash to buy mortgage-backed securities in an effort to spur home lending — instantly creating a massive market for major banks.
And what did the banks do with the proceeds? Among other things, they bought Treasury bonds, essentially lending the money back to the government, at interest. The money that came out of the magic Rumanian Box went from the government back to the government, with Wall Street stepping into the circle just long enough to get paid. And once quantitative easing ends, as it is scheduled to do in March, the flow of money for home loans will once again grind to a halt. The Mortgage Bankers Association expects the number of new residential mortgages to plunge by 40 percent this year.
CON #5 THE BIG MITT
All of that Rumanian box paper was made even more valuable by running it through the next stage of the grift. Michael Masters, one of the country's leading experts on commodities trading, compares this part of the scam to the poker game in the Bill Murray comedy Stripes. "It's like that scene where John Candy leans over to the guy who's new at poker and says, 'Let me see your cards,' then starts giving him advice," Masters says. "He looks at the hand, and the guy has bad cards, and he's like, 'Bluff me, come on! If it were me, I'd bet everything!' That's what it's like. It's like they're looking at your cards as they give you advice."
In more ways than one can count, the economy in the bailout era turned into a "Big Mitt," the con man's name for a rigged poker game. Everybody was indeed looking at everyone else's cards, in many cases with state sanction. Only taxpayers and clients were left out of the loop.
At the same time the Fed and the Treasury were making massive, earthshaking moves like quantitative easing and TARP, they were also consulting regularly with private advisory boards that include every major player on Wall Street. The Treasury Borrowing Advisory Committee has a J.P. Morgan executive as its chairman and a Goldman executive as its vice chairman, while the board advising the Fed includes bankers from Capital One and Bank of New York Mellon. That means that, in addition to getting great gobs of free money, the banks were also getting clear signals about when they were getting that money, making it possible to position themselves to make the appropriate investments.
One of the best examples of the banks blatantly gambling, and winning, on government moves was the Public-Private Investment Program, or PPIP. In this bizarre scheme cooked up by goofball-geek Treasury Secretary Tim Geithner, the government loaned money to hedge funds and other private investors to buy up the absolutely most toxic horseshit on the market — the same kind of high-risk, high-yield mortgages that were most responsible for triggering the financial chain reaction in the fall of 2008. These satanic deals were the basic currency of the bubble: Jobless dope fiends bought houses with no money down, and the big banks wrapped those mortgages into securities and then sold them off to pensions and other suckers as investment-grade deals. The whole point of the PPIP was to get private investors to relieve the banks of these dangerous assets before they hurt any more innocent bystanders.
But what did the banks do instead, once they got wind of the PPIP? They started buying that worthless crap again, presumably to sell back to the government at inflated prices! In the third quarter of last year, Goldman, Morgan Stanley, Citigroup and Bank of America combined to add $3.36 billion of exactly this horseshit to their balance sheets.
This brazen decision to gouge the taxpayer startled even hardened market observers. According to Michael Schlachter of the investment firm Wilshire Associates, it was "absolutely ridiculous" that the banks that were supposed to be reducing their exposure to these volatile instruments were instead loading up on them in order to make a quick buck. "Some of them created this mess," he said, "and they are making a killing undoing it."
CON #6 THE WIRE
Here's the thing about our current economy. When Goldman and Morgan Stanley transformed overnight from investment banks into commercial banks, we were told this would mean a new era of "significantly tighter regulations and much closer supervision by bank examiners," as The New York Times put it the very next day. In reality, however, the conversion of Goldman and Morgan Stanley simply completed the dangerous concentration of power and wealth that began in 1999, when Congress repealed the Glass-Steagall Act — the Depression-era law that had prevented the merger of insurance firms, commercial banks and investment houses. Wall Street and the government became one giant dope house, where a few major players share valuable information between conflicted departments the way junkies share needles.
One of the most common practices is a thing called front-running, which is really no different from the old "Wire" con, another scam popularized in The Sting. But instead of intercepting a telegraph wire in order to bet on racetrack results ahead of the crowd, what Wall Street does is make bets ahead of valuable information they obtain in the course of everyday business.
Say you're working for the commodities desk of a big investment bank, and a major client — a pension fund, perhaps — calls you up and asks you to buy a billion dollars of oil futures for them. Once you place that huge order, the price of those futures is almost guaranteed to go up. If the guy in charge of asset management a few desks down from you somehow finds out about that, he can make a fortune for the bank by betting ahead of that client of yours. The deal would be instantaneous and undetectable, and it would offer huge profits. Your own client would lose money, of course — he'd end up paying a higher price for the oil futures he ordered, because you would have driven up the price. But that doesn't keep banks from screwing their own customers in this very way.
The scam is so blatant that Goldman Sachs actually warns its clients that something along these lines might happen to them. In the disclosure section at the back of a research paper the bank issued on January 15th, Goldman advises clients to buy some dubious high-yield bonds while admitting that the bank itself may bet against those same shitty bonds. "Our salespeople, traders and other professionals may provide oral or written market commentary or trading strategies to our clients and our proprietary trading desks that reflect opinions that are contrary to the opinions expressed in this research," the disclosure reads. "Our asset-management area, our proprietary-trading desks and investing businesses may make investment decisions that are inconsistent with the recommendations or views expressed in this research."
Banks like Goldman admit this stuff openly, despite the fact that there are securities laws that require banks to engage in "fair dealing with customers" and prohibit analysts from issuing opinions that are at odds with what they really think. And yet here they are, saying flat-out that they may be issuing an opinion at odds with what they really think.
To help them screw their own clients, the major investment banks employ high-speed computer programs that can glimpse orders from investors before the deals are processed and then make trades on behalf of the banks at speeds of fractions of a second. None of them will admit it, but everybody knows what this computerized trading — known as "flash trading" — really is. "Flash trading is nothing more than computerized front-running," says the prominent hedge-fund manager. The SEC voted to ban flash trading in September, but five months later it has yet to issue a regulation to put a stop to the practice.
Over the summer, Goldman suffered an embarrassment on that score when one of its employees, a Russian named Sergey Aleynikov, allegedly stole the bank's computerized trading code. In a court proceeding after Aleynikov's arrest, Assistant U.S. Attorney Joseph Facciponti reported that "the bank has raised the possibility that there is a danger that somebody who knew how to use this program could use it to manipulate markets in unfair ways."
Six months after a federal prosecutor admitted in open court that the Goldman trading program could be used to unfairly manipulate markets, the bank released its annual numbers. Among the notable details was the fact that a staggering 76 percent of its revenue came from trading, both for its clients and for its own account. "That is much, much higher than any other bank," says Prins, the former Goldman managing director. "If I were a client and I saw that they were making this much money from trading, I would question how badly I was getting screwed."
Why big institutional investors like pension funds continually come to Wall Street to get raped is the million-dollar question that many experienced observers puzzle over. Goldman's own explanation for this phenomenon is comedy of the highest order. In testimony before a government panel in January, Blankfein was confronted about his firm's practice of betting against the same sorts of investments it sells to clients. His response: "These are the professional investors who want this exposure."
In other words, our clients are big boys, so screw 'em if they're dumb enough to take the sucker bets I'm offering.
CON #7 THE RELOAD
Not many con men are good enough or brazen enough to con the same victim twice in a row, but the few who try have a name for this excellent sport: reloading. The usual way to reload on a repeat victim (called an "addict" in grifter parlance) is to rope him into trying to get back the money he just lost. This is exactly what started to happen late last year.
It's important to remember that the housing bubble itself was a classic confidence game — the Ponzi scheme. The Ponzi scheme is any scam in which old investors must be continually paid off with money from new investors to keep up what appear to be high rates of investment return. Residential housing was never as valuable as it seemed during the bubble; the soaring home values were instead a reflection of a continual upward rush of new investors in mortgage-backed securities, a rush that finally collapsed in 2008.
But by the end of 2009, the unimaginable was happening: The bubble was re-inflating. A bailout policy that was designed to help us get out from under the bursting of the largest asset bubble in history inadvertently produced exactly the opposite result, as all that government-fueled capital suddenly began flowing into the most dangerous and destructive investments all over again. Wall Street was going for the reload.
A lot of this was the government's own fault, of course. By slashing interest rates to zero and flooding the market with money, the Fed was replicating the historic mistake that Alan Greenspan had made not once, but twice, before the tech bubble in the early 1990s and before the housing bubble in the early 2000s. By making sure that traditionally safe investments like CDs and savings accounts earned basically nothing, thanks to rock-bottom interest rates, investors were forced to go elsewhere to search for moneymaking opportunities.
Now we're in the same situation all over again, only far worse. Wall Street is flooded with government money, and interest rates that are not just low but flat are pushing investors to seek out more "creative" opportunities. (It's "Greenspan times 10," jokes one hedge-fund trader.) Some of that money could be put to use on Main Street, of course, backing the efforts of investment-worthy entrepreneurs. But that's not what our modern Wall Street is built to do. "They don't seem to want to lend to small and medium-sized business," says Rep. Brad Sherman, who serves on the House Financial Services Committee. "What they want to invest in is marketable securities. And the definition of small and medium-sized businesses, for the most part, is that they don't have marketable securities. They have bank loans."
In other words, unless you're dealing with the stock of a major, publicly traded company, or a giant pile of home mortgages, or the bonds of a large corporation, or a foreign currency, or oil futures, or some country's debt, or anything else that can be rapidly traded back and forth in huge numbers, factory-style, by big banks, you're not really on Wall Street's radar.
So with small business out of the picture, and the safe stuff not worth looking at thanks to the Fed's low interest rates, where did Wall Street go? Right back into the shit that got us here.
One trader, who asked not to be identified, recounts a story of what happened with his hedge fund this past fall. His firm wanted to short — that is, bet against — all the crap toxic bonds that were suddenly in vogue again. The fund's analysts had examined the fundamentals of these instruments and concluded that they were absolutely not good investments.
So they took a short position. One month passed, and they lost money. Another month passed — same thing. Finally, the trader just shrugged and decided to change course and buy.
"I said, 'Fuck it, let's make some money,'" he recalls. "I absolutely did not believe in the fundamentals of any of this stuff. However, I can get on the bandwagon, just so long as I know when to jump out of the car before it goes off the damn cliff!"
This is the very definition of bubble economics — betting on crowd behavior instead of on fundamentals. It's old investors betting on the arrival of new ones, with the value of the underlying thing itself being irrelevant. And this behavior is being driven, no surprise, by the biggest firms on Wall Street.
The research report published by Goldman Sachs on January 15th underlines this sort of thinking. Goldman issued a strong recommendation to buy exactly the sort of high-yield toxic crap our hedge-fund guy was, by then, driving rapidly toward the cliff. "Summarizing our views," the bank wrote, "we expect robust flows . . . to dominate fundamentals." In other words: This stuff is crap, but everyone's buying it in an awfully robust way, so you should too. Just like tech stocks in 1999, and mortgage-backed securities in 2006.
To sum up, this is what Lloyd Blankfein meant by "performance": Take massive sums of money from the government, sit on it until the government starts printing trillions of dollars in a desperate attempt to restart the economy, buy even more toxic assets to sell back to the government at inflated prices — and then, when all else fails, start driving us all toward the cliff again with a frank and open endorsement of bubble economics. I mean, shit — who wouldn't deserve billions in bonuses for doing all that?
Con artists have a word for the inability of their victims to accept that they've been scammed. They call it the "True Believer Syndrome." That's sort of where we are, in a state of nagging disbelief about the real problem on Wall Street. It isn't so much that we have inadequate rules or incompetent regulators, although both of these things are certainly true. The real problem is that it doesn't matter what regulations are in place if the people running the economy are rip-off artists. The system assumes a certain minimum level of ethical behavior and civic instinct over and above what is spelled out by the regulations. If those ethics are absent — well, this thing isn't going to work, no matter what we do. Sure, mugging old ladies is against the law, but it's also easy. To prevent it, we depend, for the most part, not on cops but on people making the conscious decision not to do it.
That's why the biggest gift the bankers got in the bailout was not fiscal but psychological. "The most valuable part of the bailout," says Rep. Sherman, "was the implicit guarantee that they're Too Big to Fail." Instead of liquidating and prosecuting the insolvent institutions that took us all down with them in a giant Ponzi scheme, we have showered them with money and guarantees and all sorts of other enabling gestures. And what should really freak everyone out is the fact that Wall Street immediately started skimming off its own rescue money. If the bailouts validated anew the crooked psychology of the bubble, the recent profit and bonus numbers show that the same psychology is back, thriving, and looking for new disasters to create. "It's evidence," says Rep. Kanjorski, "that they still don't get it."
More to the point, the fact that we haven't done much of anything to change the rules and behavior of Wall Street shows that we still don't get it. Instituting a bailout policy that stressed recapitalizing bad banks was like the addict coming back to the con man to get his lost money back. Ask yourself how well that ever works out. And then get ready for the reload.
Goldman Sachs and other big banks aren't just pocketing the trillions we gave them to rescue the economy - they're re-creating the conditions for another crash
http://www.rollingstone.com/politic...ut_hustle/print
MATT TAIBBI
Posted Feb 17, 2010 5:57 AM
On January 21st, Lloyd Blankfein left a peculiar voicemail message on the work phones of his employees at Goldman Sachs. Fast becoming America's pre-eminent Marvel Comics supervillain, the CEO used the call to deploy his secret weapon: a pair of giant, nuclear-powered testicles. In his message, Blankfein addressed his plan to pay out gigantic year-end bonuses amid widespread controversy over Goldman's role in precipitating the global financial crisis.
The bank had already set aside a tidy $16.2 billion for salaries and bonuses — meaning that Goldman employees were each set to take home an average of $498,246, a number roughly commensurate with what they received during the bubble years. Still, the troops were worried: There were rumors that Dr. Ballsachs, bowing to political pressure, might be forced to scale the number back. After all, the country was broke, 14.8 million Americans were stranded on the unemployment line, and Barack Obama and the Democrats were trying to recover the populist high ground after their bitch-whipping in Massachusetts by calling for a "bailout tax" on banks. Maybe this wasn't the right time for Goldman to be throwing its annual Roman bonus orgy.
Not to worry, Blankfein reassured employees. "In a year that proved to have no shortage of story lines," he said, "I believe very strongly that performance is the ultimate narrative."
Translation: We made a shitload of money last year because we're so amazing at our jobs, so fuck all those people who want us to reduce our bonuses.
Goldman wasn't alone. The nation's six largest banks — all committed to this balls-out, I drink your milkshake! strategy of flagrantly gorging themselves as America goes hungry — set aside a whopping $140 billion for executive compensation last year, a sum only slightly less than the $164 billion they paid themselves in the pre-crash year of 2007. In a gesture of self-sacrifice, Blankfein himself took a humiliatingly low bonus of $9 million, less than the 2009 pay of elephantine New York Knicks washout Eddy Curry. But in reality, not much had changed. "What is the state of our moral being when Lloyd Blankfein taking a $9 million bonus is viewed as this great act of contrition, when every penny of it was a direct transfer from the taxpayer?" asks Eliot Spitzer, who tried to hold Wall Street accountable during his own ill-fated stint as governor of New York.
Beyond a few such bleats of outrage, however, the huge payout was met, by and large, with a collective sigh of resignation. Because beneath America's populist veneer, on a more subtle strata of the national psyche, there remains a strong temptation to not really give a shit. The rich, after all, have always made way too much money; what's the difference if some fat cat in New York pockets $20 million instead of $10 million?
The only reason such apathy exists, however, is because there's still a widespread misunderstanding of how exactly Wall Street "earns" its money, with emphasis on the quotation marks around "earns." The question everyone should be asking, as one bailout recipient after another posts massive profits — Goldman reported $13.4 billion in profits last year, after paying out that $16.2 billion in bonuses and compensation — is this: In an economy as horrible as ours, with every factory town between New York and Los Angeles looking like those hollowed-out ghost ships we see on History Channel documentaries like Shipwrecks of the Great Lakes, where in the hell did Wall Street's eye-popping profits come from, exactly? Did Goldman go from bailout city to $13.4 billion in the black because, as Blankfein suggests, its "performance" was just that awesome? A year and a half after they were minutes away from bankruptcy, how are these assholes not only back on their feet again, but hauling in bonuses at the same rate they were during the bubble?
The answer to that question is basically twofold: They raped the taxpayer, and they raped their clients.
The bottom line is that banks like Goldman have learned absolutely nothing from the global economic meltdown. In fact, they're back conniving and playing speculative long shots in force — only this time with the full financial support of the U.S. government. In the process, they're rapidly re-creating the conditions for another crash, with the same actors once again playing the same crazy games of financial chicken with the same toxic assets as before.
That's why this bonus business isn't merely a matter of getting upset about whether or not Lloyd Blankfein buys himself one tropical island or two on his next birthday. The reality is that the post-bailout era in which Goldman thrived has turned out to be a chaotic frenzy of high-stakes con-artistry, with taxpayers and clients bilked out of billions using a dizzying array of old-school hustles that, but for their ponderous complexity, would have fit well in slick grifter movies like The Sting and Matchstick Men. There's even a term in con-man lingo for what some of the banks are doing right now, with all their cosmetic gestures of scaling back bonuses and giving to charities. In the grifter world, calming down a mark so he doesn't call the cops is known as the "Cool Off."
To appreciate how all of these (sometimes brilliant) schemes work is to understand the difference between earning money and taking scores, and to realize that the profits these banks are posting don't so much represent national growth and recovery, but something closer to the losses one would report after a theft or a car crash. Many Americans instinctively understand this to be true — but, much like when your wife does it with your 300-pound plumber in the kids' playroom, knowing it and actually watching the whole scene from start to finish are two very different things. In that spirit, a brief history of the best 18 months of grifting this country has ever seen:
CON #1 THE SWOOP AND SQUAT
By now, most people who have followed the financial crisis know that the bailout of AIG was actually a bailout of AIG's "counterparties" — the big banks like Goldman to whom the insurance giant owed billions when it went belly up.
What is less understood is that the bailout of AIG counter-parties like Goldman and Société Générale, a French bank, actually began before the collapse of AIG, before the Federal Reserve paid them so much as a dollar. Nor is it understood that these counterparties actually accelerated the wreck of AIG in what was, ironically, something very like the old insurance scam known as "Swoop and Squat," in which a target car is trapped between two perpetrator vehicles and wrecked, with the mark in the game being the target's insurance company — in this case, the government.
This may sound far-fetched, but the financial crisis of 2008 was very much caused by a perverse series of legal incentives that often made failed investments worth more than thriving ones. Our economy was like a town where everyone has juicy insurance policies on their neighbors' cars and houses. In such a town, the driving will be suspiciously bad, and there will be a lot of fires.
AIG was the ultimate example of this dynamic. At the height of the housing boom, Goldman was selling billions in bundled mortgage-backed securities — often toxic crap of the no-money-down, no-identification-needed variety of home loan — to various institutional suckers like pensions and insurance companies, who frequently thought they were buying investment-grade instruments. At the same time, in a glaring example of the perverse incentives that existed and still exist, Goldman was also betting against those same sorts of securities — a practice that one government investigator compared to "selling a car with faulty brakes and then buying an insurance policy on the buyer of those cars."
Goldman often "insured" some of this garbage with AIG, using a virtually unregulated form of pseudo-insurance called credit-default swaps. Thanks in large part to deregulation pushed by Bob Rubin, former chairman of Goldman, and Treasury secretary under Bill Clinton, AIG wasn't required to actually have the capital to pay off the deals. As a result, banks like Goldman bought more than $440 billion worth of this bogus insurance from AIG, a huge blind bet that the taxpayer ended up having to eat.
Thus, when the housing bubble went crazy, Goldman made money coming and going. They made money selling the crap mortgages, and they made money by collecting on the bogus insurance from AIG when the crap mortgages flopped.
Still, the trick for Goldman was: how to collect the insurance money. As AIG headed into a tailspin that fateful summer of 2008, it looked like the beleaguered firm wasn't going to have the money to pay off the bogus insurance. So Goldman and other banks began demanding that AIG provide them with cash collateral. In the 15 months leading up to the collapse of AIG, Goldman received $5.9 billion in collateral. Société Générale, a bank holding lots of mortgage-backed crap originally underwritten by Goldman, received $5.5 billion. These collateral demands squeezing AIG from two sides were the "Swoop and Squat" that ultimately crashed the firm. "It put the company into a liquidity crisis," says Eric Dinallo, who was intimately involved in the AIG bailout as head of the New York State Insurance Department.
It was a brilliant move. When a company like AIG is about to die, it isn't supposed to hand over big hunks of assets to a single creditor like Goldman; it's supposed to equitably distribute whatever assets it has left among all its creditors. Had AIG gone bankrupt, Goldman would have likely lost much of the $5.9 billion that it pocketed as collateral. "Any bankruptcy court that saw those collateral payments would have declined that transaction as a fraudulent conveyance," says Barry Ritholtz, the author of Bailout Nation. Instead, Goldman and the other counterparties got their money out in advance — putting a torch to what was left of AIG. Fans of the movie Goodfellas will recall Henry Hill and Tommy DeVito taking the same approach to the Bamboo Lounge nightclub they'd been gouging. Roll the Ray Liotta narration: "Finally, when there's nothing left, when you can't borrow another buck . . . you bust the joint out. You light a match."
And why not? After all, according to the terms of the bailout deal struck when AIG was taken over by the state in September 2008, Goldman was paid 100 cents on the dollar on an additional $12.9 billion it was owed by AIG — again, money it almost certainly would not have seen a fraction of had AIG proceeded to a normal bankruptcy. Along with the collateral it pocketed, that's $19 billion in pure cash that Goldman would not have "earned" without massive state intervention. How's that $13.4 billion in 2009 profits looking now? And that doesn't even include the direct bailouts of Goldman Sachs and other big banks, which began in earnest after the collapse of AIG.
CON #2 THE DOLLAR STORE
In the usual "DollarStore" or "Big Store" scam — popularized in movies like The Sting — a huge cast of con artists is hired to create a whole fake environment into which the unsuspecting mark walks and gets robbed over and over again. A warehouse is converted into a makeshift casino or off-track betting parlor, the fool walks in with money, leaves without it.
The two key elements to the Dollar Store scam are the whiz-bang theatrical redecorating job and the fact that everyone is in on it except the mark. In this case, a pair of investment banks were dressed up to look like commercial banks overnight, and it was the taxpayer who walked in and lost his shirt, confused by the appearance of what looked like real Federal Reserve officials minding the store.
Less than a week after the AIG bailout, Goldman and another investment bank, Morgan Stanley, applied for, and received, federal permission to become bank holding companies — a move that would make them eligible for much greater federal support. The stock prices of both firms were cratering, and there was talk that either or both might go the way of Lehman Brothers, another once-mighty investment bank that just a week earlier had disappeared from the face of the earth under the weight of its toxic assets. By law, a five-day waiting period was required for such a conversion — but the two banks got them overnight, with final approval actually coming only five days after the AIG bailout.
Why did they need those federal bank charters? This question is the key to understanding the entire bailout era — because this Dollar Store scam was the big one. Institutions that were, in reality, high-risk gambling houses were allowed to masquerade as conservative commercial banks. As a result of this new designation, they were given access to a virtually endless tap of "free money" by unsuspecting taxpayers. The $10 billion that Goldman received under the better-known TARP bailout was chump change in comparison to the smorgasbord of direct and indirect aid it qualified for as a commercial bank.
When Goldman Sachs and Morgan Stanley got their federal bank charters, they joined Bank of America, Citigroup, J.P. Morgan Chase and the other banking titans who could go to the Fed and borrow massive amounts of money at interest rates that, thanks to the aggressive rate-cutting policies of Fed chief Ben Bernanke during the crisis, soon sank to zero percent. The ability to go to the Fed and borrow big at next to no interest was what saved Goldman, Morgan Stanley and other banks from death in the fall of 2008. "They had no other way to raise capital at that moment, meaning they were on the brink of insolvency," says Nomi Prins, a former managing director at Goldman Sachs. "The Fed was the only shot."
In fact, the Fed became not just a source of emergency borrowing that enabled Goldman and Morgan Stanley to stave off disaster — it became a source of long-term guaranteed income. Borrowing at zero percent interest, banks like Goldman now had virtually infinite ways to make money. In one of the most common maneuvers, they simply took the money they borrowed from the government at zero percent and lent it back to the government by buying Treasury bills that paid interest of three or four percent. It was basically a license to print money — no different than attaching an ATM to the side of the Federal Reserve.
"You're borrowing at zero, putting it out there at two or three percent, with hundreds of billions of dollars — man, you can make a lot of money that way," says the manager of one prominent hedge fund. "It's free money." Which goes a long way to explaining Goldman's enormous profits last year. But all that free money was amplified by another scam:
CON #3 THE PIG IN THE POKE
At one point or another, pretty much everyone who takes drugs has been burned by this one, also known as the "Rocks in the Box" scam or, in its more elaborate variations, the "Jamaican Switch." Someone sells you what looks like an eightball of coke in a baggie, you get home and, you dumbass, it's baby powder.
The scam's name comes from the Middle Ages, when some fool would be sold a bound and gagged pig that he would see being put into a bag; he'd miss the switch, then get home and find a tied-up cat in there instead. Hence the expression "Don't let the cat out of the bag."
The "Pig in the Poke" scam is another key to the entire bailout era. After the crash of the housing bubble — the largest asset bubble in history — the economy was suddenly flooded with securities backed by failing or near-failing home loans. In the cleanup phase after that bubble burst, the whole game was to get taxpayers, clients and shareholders to buy these worthless cats, but at pig prices.
One of the first times we saw the scam appear was in September 2008, right around the time that AIG was imploding. That was when the Fed changed some of its collateral rules, meaning banks that could once borrow only against sound collateral, like Treasury bills or AAA-rated corporate bonds, could now borrow against pretty much anything — including some of the mortgage-backed sewage that got us into this mess in the first place. In other words, banks that once had to show a real pig to borrow from the Fed could now show up with a cat and get pig money. "All of a sudden, banks were allowed to post absolute shit to the Fed's balance sheet," says the manager of the prominent hedge fund.
The Fed spelled it out on September 14th, 2008, when it changed the collateral rules for one of its first bailout facilities — the Primary Dealer Credit Facility, or PDCF. The Fed's own write-up described the changes: "With the Fed's action, all the kinds of collateral then in use . . . including non-investment-grade securities and equities . . . became eligible for pledge in the PDCF."
Translation: We now accept cats.
The Pig in the Poke also came into play in April of last year, when Congress pushed a little-known agency called the Financial Accounting Standards Board, or FASB, to change the so-called "mark-to-market" accounting rules. Until this rule change, banks had to assign a real-market price to all of their assets. If they had a balance sheet full of securities they had bought at $3 that were now only worth $1, they had to figure their year-end accounting using that $1 value. In other words, if you were the dope who bought a cat instead of a pig, you couldn't invite your shareholders to a slate of pork dinners come year-end accounting time.
But last April, FASB changed all that. From now on, it announced, banks could avoid reporting losses on some of their crappy cat investments simply by declaring that they would "more likely than not" hold on to them until they recovered their pig value. In short, the banks didn't even have to actually hold on to the toxic shit they owned — they just had to sort of promise to hold on to it.
That's why the "profit" numbers of a lot of these banks are really a joke. In many cases, we have absolutely no idea how many cats are in their proverbial bag. What they call "profits" might really be profits, only minus undeclared millions or billions in losses.
"They're hiding all this stuff from their shareholders," says Ritholtz, who was disgusted that the banks lobbied for the rule changes. "Now, suddenly banks that were happy to mark to market on the way up don't have to mark to market on the way down."
CON #4 THE RUMANIAN BOX
One of the great innovations of Victor Lustig, the legendary Depression-era con man who wrote the famous "Ten Commandments for Con Men," was a thing called the "Rumanian Box." This was a little machine that a mark would put a blank piece of paper into, only to see real currency come out the other side. The brilliant Lustig sold this Rumanian Box over and over again for vast sums — but he's been outdone by the modern barons of Wall Street, who managed to get themselves a real Rumanian Box.
How they accomplished this is a story that by itself highlights the challenge of placing this era in any kind of historical context of known financial crime. What the banks did was something that was never — and never could have been — thought of before. They took so much money from the government, and then did so little with it, that the state was forced to start printing new cash to throw at them. Even the great Lustig in his wildest, horniest dreams could never have dreamed up this one.
The setup: By early 2009, the banks had already replenished themselves with billions if not trillions in bailout money. It wasn't just the $700 billion in TARP cash, the free money provided by the Fed, and the untold losses obscured by accounting tricks. Another new rule allowed banks to collect interest on the cash they were required by law to keep in reserve accounts at the Fed — meaning the state was now compensating the banks simply for guaranteeing their own solvency. And a new federal operation called the Temporary Liquidity Guarantee Program let insolvent and near-insolvent banks dispense with their deservedly ruined credit profiles and borrow on a clean slate, with FDIC backing. Goldman borrowed $29 billion on the government's good name, J.P. Morgan Chase $38 billion, and Bank of America $44 billion. "TLGP," says Prins, the former Goldman manager, "was a big one."
Collectively, all this largesse was worth trillions. The idea behind the flood of money, from the government's standpoint, was to spark a national recovery: We refill the banks' balance sheets, and they, in turn, start to lend money again, recharging the economy and producing jobs. "The banks were fast approaching insolvency," says Rep. Paul Kanjorski, a vocal critic of Wall Street who nevertheless defends the initial decision to bail out the banks. "It was vitally important that we recapitalize these institutions."
But here's the thing. Despite all these trillions in government rescues, despite the Fed slashing interest rates down to nothing and showering the banks with mountains of guarantees, Goldman and its friends had still not jump-started lending again by the first quarter of 2009. That's where those nuclear-powered balls of Lloyd Blankfein came into play, as Goldman and other banks basically threatened to pick up their bailout billions and go home if the government didn't fork over more cash — a lot more. "Even if the Fed could make interest rates negative, that wouldn't necessarily help," warned Goldman's chief domestic economist, Jan Hatzius. "We're in a deep recession mainly because the private sector, for a variety of reasons, has decided to save a lot more."
Translation: You can lower interest rates all you want, but we're still not fucking lending the bailout money to anyone in this economy. Until the government agreed to hand over even more goodies, the banks opted to join the rest of the "private sector" and "save" the taxpayer aid they had received — in the form of bonuses and compensation.
The ploy worked. In March of last year, the Fed sharply expanded a radical new program called quantitative easing, which effectively operated as a real-live Rumanian Box. The government put stacks of paper in one side, and out came $1.2 trillion "real" dollars.
The government used some of that freshly printed money to prop itself up by purchasing Treasury bonds — a desperation move, since Washington's demand for cash was so great post-Clusterfuck '08 that even the Chinese couldn't buy U.S. debt fast enough to keep America afloat. But the Fed used most of the new cash to buy mortgage-backed securities in an effort to spur home lending — instantly creating a massive market for major banks.
And what did the banks do with the proceeds? Among other things, they bought Treasury bonds, essentially lending the money back to the government, at interest. The money that came out of the magic Rumanian Box went from the government back to the government, with Wall Street stepping into the circle just long enough to get paid. And once quantitative easing ends, as it is scheduled to do in March, the flow of money for home loans will once again grind to a halt. The Mortgage Bankers Association expects the number of new residential mortgages to plunge by 40 percent this year.
CON #5 THE BIG MITT
All of that Rumanian box paper was made even more valuable by running it through the next stage of the grift. Michael Masters, one of the country's leading experts on commodities trading, compares this part of the scam to the poker game in the Bill Murray comedy Stripes. "It's like that scene where John Candy leans over to the guy who's new at poker and says, 'Let me see your cards,' then starts giving him advice," Masters says. "He looks at the hand, and the guy has bad cards, and he's like, 'Bluff me, come on! If it were me, I'd bet everything!' That's what it's like. It's like they're looking at your cards as they give you advice."
In more ways than one can count, the economy in the bailout era turned into a "Big Mitt," the con man's name for a rigged poker game. Everybody was indeed looking at everyone else's cards, in many cases with state sanction. Only taxpayers and clients were left out of the loop.
At the same time the Fed and the Treasury were making massive, earthshaking moves like quantitative easing and TARP, they were also consulting regularly with private advisory boards that include every major player on Wall Street. The Treasury Borrowing Advisory Committee has a J.P. Morgan executive as its chairman and a Goldman executive as its vice chairman, while the board advising the Fed includes bankers from Capital One and Bank of New York Mellon. That means that, in addition to getting great gobs of free money, the banks were also getting clear signals about when they were getting that money, making it possible to position themselves to make the appropriate investments.
One of the best examples of the banks blatantly gambling, and winning, on government moves was the Public-Private Investment Program, or PPIP. In this bizarre scheme cooked up by goofball-geek Treasury Secretary Tim Geithner, the government loaned money to hedge funds and other private investors to buy up the absolutely most toxic horseshit on the market — the same kind of high-risk, high-yield mortgages that were most responsible for triggering the financial chain reaction in the fall of 2008. These satanic deals were the basic currency of the bubble: Jobless dope fiends bought houses with no money down, and the big banks wrapped those mortgages into securities and then sold them off to pensions and other suckers as investment-grade deals. The whole point of the PPIP was to get private investors to relieve the banks of these dangerous assets before they hurt any more innocent bystanders.
But what did the banks do instead, once they got wind of the PPIP? They started buying that worthless crap again, presumably to sell back to the government at inflated prices! In the third quarter of last year, Goldman, Morgan Stanley, Citigroup and Bank of America combined to add $3.36 billion of exactly this horseshit to their balance sheets.
This brazen decision to gouge the taxpayer startled even hardened market observers. According to Michael Schlachter of the investment firm Wilshire Associates, it was "absolutely ridiculous" that the banks that were supposed to be reducing their exposure to these volatile instruments were instead loading up on them in order to make a quick buck. "Some of them created this mess," he said, "and they are making a killing undoing it."
CON #6 THE WIRE
Here's the thing about our current economy. When Goldman and Morgan Stanley transformed overnight from investment banks into commercial banks, we were told this would mean a new era of "significantly tighter regulations and much closer supervision by bank examiners," as The New York Times put it the very next day. In reality, however, the conversion of Goldman and Morgan Stanley simply completed the dangerous concentration of power and wealth that began in 1999, when Congress repealed the Glass-Steagall Act — the Depression-era law that had prevented the merger of insurance firms, commercial banks and investment houses. Wall Street and the government became one giant dope house, where a few major players share valuable information between conflicted departments the way junkies share needles.
One of the most common practices is a thing called front-running, which is really no different from the old "Wire" con, another scam popularized in The Sting. But instead of intercepting a telegraph wire in order to bet on racetrack results ahead of the crowd, what Wall Street does is make bets ahead of valuable information they obtain in the course of everyday business.
Say you're working for the commodities desk of a big investment bank, and a major client — a pension fund, perhaps — calls you up and asks you to buy a billion dollars of oil futures for them. Once you place that huge order, the price of those futures is almost guaranteed to go up. If the guy in charge of asset management a few desks down from you somehow finds out about that, he can make a fortune for the bank by betting ahead of that client of yours. The deal would be instantaneous and undetectable, and it would offer huge profits. Your own client would lose money, of course — he'd end up paying a higher price for the oil futures he ordered, because you would have driven up the price. But that doesn't keep banks from screwing their own customers in this very way.
The scam is so blatant that Goldman Sachs actually warns its clients that something along these lines might happen to them. In the disclosure section at the back of a research paper the bank issued on January 15th, Goldman advises clients to buy some dubious high-yield bonds while admitting that the bank itself may bet against those same shitty bonds. "Our salespeople, traders and other professionals may provide oral or written market commentary or trading strategies to our clients and our proprietary trading desks that reflect opinions that are contrary to the opinions expressed in this research," the disclosure reads. "Our asset-management area, our proprietary-trading desks and investing businesses may make investment decisions that are inconsistent with the recommendations or views expressed in this research."
Banks like Goldman admit this stuff openly, despite the fact that there are securities laws that require banks to engage in "fair dealing with customers" and prohibit analysts from issuing opinions that are at odds with what they really think. And yet here they are, saying flat-out that they may be issuing an opinion at odds with what they really think.
To help them screw their own clients, the major investment banks employ high-speed computer programs that can glimpse orders from investors before the deals are processed and then make trades on behalf of the banks at speeds of fractions of a second. None of them will admit it, but everybody knows what this computerized trading — known as "flash trading" — really is. "Flash trading is nothing more than computerized front-running," says the prominent hedge-fund manager. The SEC voted to ban flash trading in September, but five months later it has yet to issue a regulation to put a stop to the practice.
Over the summer, Goldman suffered an embarrassment on that score when one of its employees, a Russian named Sergey Aleynikov, allegedly stole the bank's computerized trading code. In a court proceeding after Aleynikov's arrest, Assistant U.S. Attorney Joseph Facciponti reported that "the bank has raised the possibility that there is a danger that somebody who knew how to use this program could use it to manipulate markets in unfair ways."
Six months after a federal prosecutor admitted in open court that the Goldman trading program could be used to unfairly manipulate markets, the bank released its annual numbers. Among the notable details was the fact that a staggering 76 percent of its revenue came from trading, both for its clients and for its own account. "That is much, much higher than any other bank," says Prins, the former Goldman managing director. "If I were a client and I saw that they were making this much money from trading, I would question how badly I was getting screwed."
Why big institutional investors like pension funds continually come to Wall Street to get raped is the million-dollar question that many experienced observers puzzle over. Goldman's own explanation for this phenomenon is comedy of the highest order. In testimony before a government panel in January, Blankfein was confronted about his firm's practice of betting against the same sorts of investments it sells to clients. His response: "These are the professional investors who want this exposure."
In other words, our clients are big boys, so screw 'em if they're dumb enough to take the sucker bets I'm offering.
CON #7 THE RELOAD
Not many con men are good enough or brazen enough to con the same victim twice in a row, but the few who try have a name for this excellent sport: reloading. The usual way to reload on a repeat victim (called an "addict" in grifter parlance) is to rope him into trying to get back the money he just lost. This is exactly what started to happen late last year.
It's important to remember that the housing bubble itself was a classic confidence game — the Ponzi scheme. The Ponzi scheme is any scam in which old investors must be continually paid off with money from new investors to keep up what appear to be high rates of investment return. Residential housing was never as valuable as it seemed during the bubble; the soaring home values were instead a reflection of a continual upward rush of new investors in mortgage-backed securities, a rush that finally collapsed in 2008.
But by the end of 2009, the unimaginable was happening: The bubble was re-inflating. A bailout policy that was designed to help us get out from under the bursting of the largest asset bubble in history inadvertently produced exactly the opposite result, as all that government-fueled capital suddenly began flowing into the most dangerous and destructive investments all over again. Wall Street was going for the reload.
A lot of this was the government's own fault, of course. By slashing interest rates to zero and flooding the market with money, the Fed was replicating the historic mistake that Alan Greenspan had made not once, but twice, before the tech bubble in the early 1990s and before the housing bubble in the early 2000s. By making sure that traditionally safe investments like CDs and savings accounts earned basically nothing, thanks to rock-bottom interest rates, investors were forced to go elsewhere to search for moneymaking opportunities.
Now we're in the same situation all over again, only far worse. Wall Street is flooded with government money, and interest rates that are not just low but flat are pushing investors to seek out more "creative" opportunities. (It's "Greenspan times 10," jokes one hedge-fund trader.) Some of that money could be put to use on Main Street, of course, backing the efforts of investment-worthy entrepreneurs. But that's not what our modern Wall Street is built to do. "They don't seem to want to lend to small and medium-sized business," says Rep. Brad Sherman, who serves on the House Financial Services Committee. "What they want to invest in is marketable securities. And the definition of small and medium-sized businesses, for the most part, is that they don't have marketable securities. They have bank loans."
In other words, unless you're dealing with the stock of a major, publicly traded company, or a giant pile of home mortgages, or the bonds of a large corporation, or a foreign currency, or oil futures, or some country's debt, or anything else that can be rapidly traded back and forth in huge numbers, factory-style, by big banks, you're not really on Wall Street's radar.
So with small business out of the picture, and the safe stuff not worth looking at thanks to the Fed's low interest rates, where did Wall Street go? Right back into the shit that got us here.
One trader, who asked not to be identified, recounts a story of what happened with his hedge fund this past fall. His firm wanted to short — that is, bet against — all the crap toxic bonds that were suddenly in vogue again. The fund's analysts had examined the fundamentals of these instruments and concluded that they were absolutely not good investments.
So they took a short position. One month passed, and they lost money. Another month passed — same thing. Finally, the trader just shrugged and decided to change course and buy.
"I said, 'Fuck it, let's make some money,'" he recalls. "I absolutely did not believe in the fundamentals of any of this stuff. However, I can get on the bandwagon, just so long as I know when to jump out of the car before it goes off the damn cliff!"
This is the very definition of bubble economics — betting on crowd behavior instead of on fundamentals. It's old investors betting on the arrival of new ones, with the value of the underlying thing itself being irrelevant. And this behavior is being driven, no surprise, by the biggest firms on Wall Street.
The research report published by Goldman Sachs on January 15th underlines this sort of thinking. Goldman issued a strong recommendation to buy exactly the sort of high-yield toxic crap our hedge-fund guy was, by then, driving rapidly toward the cliff. "Summarizing our views," the bank wrote, "we expect robust flows . . . to dominate fundamentals." In other words: This stuff is crap, but everyone's buying it in an awfully robust way, so you should too. Just like tech stocks in 1999, and mortgage-backed securities in 2006.
To sum up, this is what Lloyd Blankfein meant by "performance": Take massive sums of money from the government, sit on it until the government starts printing trillions of dollars in a desperate attempt to restart the economy, buy even more toxic assets to sell back to the government at inflated prices — and then, when all else fails, start driving us all toward the cliff again with a frank and open endorsement of bubble economics. I mean, shit — who wouldn't deserve billions in bonuses for doing all that?
Con artists have a word for the inability of their victims to accept that they've been scammed. They call it the "True Believer Syndrome." That's sort of where we are, in a state of nagging disbelief about the real problem on Wall Street. It isn't so much that we have inadequate rules or incompetent regulators, although both of these things are certainly true. The real problem is that it doesn't matter what regulations are in place if the people running the economy are rip-off artists. The system assumes a certain minimum level of ethical behavior and civic instinct over and above what is spelled out by the regulations. If those ethics are absent — well, this thing isn't going to work, no matter what we do. Sure, mugging old ladies is against the law, but it's also easy. To prevent it, we depend, for the most part, not on cops but on people making the conscious decision not to do it.
That's why the biggest gift the bankers got in the bailout was not fiscal but psychological. "The most valuable part of the bailout," says Rep. Sherman, "was the implicit guarantee that they're Too Big to Fail." Instead of liquidating and prosecuting the insolvent institutions that took us all down with them in a giant Ponzi scheme, we have showered them with money and guarantees and all sorts of other enabling gestures. And what should really freak everyone out is the fact that Wall Street immediately started skimming off its own rescue money. If the bailouts validated anew the crooked psychology of the bubble, the recent profit and bonus numbers show that the same psychology is back, thriving, and looking for new disasters to create. "It's evidence," says Rep. Kanjorski, "that they still don't get it."
More to the point, the fact that we haven't done much of anything to change the rules and behavior of Wall Street shows that we still don't get it. Instituting a bailout policy that stressed recapitalizing bad banks was like the addict coming back to the con man to get his lost money back. Ask yourself how well that ever works out. And then get ready for the reload.
Monday, February 15, 2010
Cheney: Waterboarding should have been an option for underbomber
Cheney: Waterboarding should have been an option for underbomber
http://rawstory.com/2010/02/cheney-...-waterboarding/
By David Edwards and Gavin Dahl
Sunday, February 14th, 2010 -- 12:06 pm
Former VP says 'I was a big supporter' of waterboarding, other torture techniques
Waterboarding should have been an option for the failed Christmas Day bomber, Umar Farouk Abdulmuttalab, former Vice President Dick Cheney says.
"I think you ought to have all of those capabilities on the table," Cheney told ABC's Jonathan Karl Sunday.
Cheney also said he opposed the Obama administration's ban on waterboarding.
"He announced when he came in last year that they would never use anything other than the U.S. Army manual, which doesn't include those techniques," Cheney said. "I think that's a mistake."
He went on to address his feelings about his own administration officially doing away with waterboarding policy during Bush's second term.
"I was a big supporter of waterboarding. I was a big supporter of the enhanced interrogation techniques," he said.
Over the course of the interview Cheney also commented on several current news stories.
He said it is time to reconsider the military's "Don't Ask, Don't Tell" policy for gays and lesbians in the armed services. He declined to support a 2012 presidential bid by Sarah Palin. And he is a "complete supporter" of Obama's Afghanistan policy, but Joe Biden is "dead wrong" on terrorism.
A complete transcript of Cheney's interview with Jonathan Karl is available here.
This video is from ABC's This Week, broadcast Feb. 14, 2010.
Video At Source
http://rawstory.com/2010/02/cheney-...-waterboarding/
By David Edwards and Gavin Dahl
Sunday, February 14th, 2010 -- 12:06 pm
Former VP says 'I was a big supporter' of waterboarding, other torture techniques
Waterboarding should have been an option for the failed Christmas Day bomber, Umar Farouk Abdulmuttalab, former Vice President Dick Cheney says.
"I think you ought to have all of those capabilities on the table," Cheney told ABC's Jonathan Karl Sunday.
Cheney also said he opposed the Obama administration's ban on waterboarding.
"He announced when he came in last year that they would never use anything other than the U.S. Army manual, which doesn't include those techniques," Cheney said. "I think that's a mistake."
He went on to address his feelings about his own administration officially doing away with waterboarding policy during Bush's second term.
"I was a big supporter of waterboarding. I was a big supporter of the enhanced interrogation techniques," he said.
Over the course of the interview Cheney also commented on several current news stories.
He said it is time to reconsider the military's "Don't Ask, Don't Tell" policy for gays and lesbians in the armed services. He declined to support a 2012 presidential bid by Sarah Palin. And he is a "complete supporter" of Obama's Afghanistan policy, but Joe Biden is "dead wrong" on terrorism.
A complete transcript of Cheney's interview with Jonathan Karl is available here.
This video is from ABC's This Week, broadcast Feb. 14, 2010.
Video At Source
Sunday, February 7, 2010
Peace Prize' President Submits Largest War Budget Ever Obama Seeks Record $708 Billion in Defense Budget
Peace Prize' President Submits Largest War Budget Ever
Obama Seeks Record $708 Billion in Defense Budget
http://www.commondreams.org/headline/2010/02/01-9
2/2/2010
WASHINGTON - President Barack Obama on Monday asked Congress to approve a record $708 billion in defense spending for fiscal year 2011, including a 3.4 percent increase in the Pentagon's base budget and $159 billion to fund U.S. military missions in Iraq, Afghanistan and Pakistan.
The White House budget request also included $33 billion in additional funding for fiscal 2010 to pay for increasing military and intelligence operations in Afghanistan and Pakistan, and drawing down U.S. forces in Iraq. That comes on top of $129.6 billion already provided for the current fiscal year, which ends September 30.
The Pentagon's base budget request of $549 billion is up $18 billion from $531 billion in fiscal 2010, and will pay for continued reforms of defense acquisitions, development of a ballistic missile defense system and care of wounded soldiers.
The budget also calls for cancellation of several major weapons programs, including Boeing Co's C-17 transport plane, saving $2.5 billion, and a second engine for the Lockheed Martin Corp F-35 fighter jet, saving $465 million in fiscal 2011 and more than $1 billion longer-term. The White House tried to kill both programs last year, but lawmakers revived them during the budget process.
The second engine is being developed by General Electric Co and Britain's Rolls-Royce as an alternate to the main engine built by Pratt & Whitney, a unit of United Technologies Corp.
The proposed budget also kills plans for development of a new Navy cruiser, scraps plans to replace the Navy's EP-3 intelligence aircraft and halts work on a missile early-warning satellite, opting instead to upgrade the Space Based Infrared System satellite already being developed by Lockheed.
The budget proposal also calls for a delay in replacing two new Navy command and control shops until after 2015, a move the White House said would save $3.8 billion across the Pentagon's five-year defense plan. The Navy had planned to buy one command ship in 2012, and a second one in 2014.
Procurement of a new amphibious vehicle being built by General Dynamics Corp for the Marine Corps would be delayed by one year, saving $50 million in fiscal 2011 and cutting risk by allowing more time for testing.
The Pentagon also said it would further reduce its use of high-risk contracts in areas that related to time, material and labor hours by 17 percent through the end of 2011.
The budget underscored the administration's commitment to a "robust defense against emerging missile threats," saying it would pay for use of increasingly capable sea- and land-based missile interceptors and a range of sensors in Europe.
The Pentagon's budget continues to fund new weapons already under development, including the F-35 fighter, a new ballistic missile submarine, a new family of ground vehicles and the P-8 surveillance aircraft built by Boeing.
It will also pay for more unmanned planes, helicopters, electronic warfare capabilities and cybersecurity measures.
Overall, the budget includes $112.8 billion for weapons procurement, up from $104.8 billion in fiscal 2010, and $76 billion for research and development, down from $80 billion.
Obama Seeks Record $708 Billion in Defense Budget
http://www.commondreams.org/headline/2010/02/01-9
2/2/2010
WASHINGTON - President Barack Obama on Monday asked Congress to approve a record $708 billion in defense spending for fiscal year 2011, including a 3.4 percent increase in the Pentagon's base budget and $159 billion to fund U.S. military missions in Iraq, Afghanistan and Pakistan.
The White House budget request also included $33 billion in additional funding for fiscal 2010 to pay for increasing military and intelligence operations in Afghanistan and Pakistan, and drawing down U.S. forces in Iraq. That comes on top of $129.6 billion already provided for the current fiscal year, which ends September 30.
The Pentagon's base budget request of $549 billion is up $18 billion from $531 billion in fiscal 2010, and will pay for continued reforms of defense acquisitions, development of a ballistic missile defense system and care of wounded soldiers.
The budget also calls for cancellation of several major weapons programs, including Boeing Co's C-17 transport plane, saving $2.5 billion, and a second engine for the Lockheed Martin Corp F-35 fighter jet, saving $465 million in fiscal 2011 and more than $1 billion longer-term. The White House tried to kill both programs last year, but lawmakers revived them during the budget process.
The second engine is being developed by General Electric Co and Britain's Rolls-Royce as an alternate to the main engine built by Pratt & Whitney, a unit of United Technologies Corp.
The proposed budget also kills plans for development of a new Navy cruiser, scraps plans to replace the Navy's EP-3 intelligence aircraft and halts work on a missile early-warning satellite, opting instead to upgrade the Space Based Infrared System satellite already being developed by Lockheed.
The budget proposal also calls for a delay in replacing two new Navy command and control shops until after 2015, a move the White House said would save $3.8 billion across the Pentagon's five-year defense plan. The Navy had planned to buy one command ship in 2012, and a second one in 2014.
Procurement of a new amphibious vehicle being built by General Dynamics Corp for the Marine Corps would be delayed by one year, saving $50 million in fiscal 2011 and cutting risk by allowing more time for testing.
The Pentagon also said it would further reduce its use of high-risk contracts in areas that related to time, material and labor hours by 17 percent through the end of 2011.
The budget underscored the administration's commitment to a "robust defense against emerging missile threats," saying it would pay for use of increasingly capable sea- and land-based missile interceptors and a range of sensors in Europe.
The Pentagon's budget continues to fund new weapons already under development, including the F-35 fighter, a new ballistic missile submarine, a new family of ground vehicles and the P-8 surveillance aircraft built by Boeing.
It will also pay for more unmanned planes, helicopters, electronic warfare capabilities and cybersecurity measures.
Overall, the budget includes $112.8 billion for weapons procurement, up from $104.8 billion in fiscal 2010, and $76 billion for research and development, down from $80 billion.
US says it may kill Americans abroad
US says it may kill Americans abroad
http://rawstory.com/2010/02/kill-americans/
By John Byrne
2/4/2010
Update at bottom: Renowned blogger/lawyer Glenn Greenwald says program breaks US laws
In a striking admission from the Obama Administration's top intelligence officer, Director of National Intelligence Dennis Blair announced Wednesday that the United States may target its own citizens abroad for death if it believes they are associated with terrorist groups.
"We take direct action against terrorists in the intelligence community," Director of National Intelligence Dennis Blair told the House Intelligence Committee. He said US counter-terrorism officials may try to kill American citizens embroiled in extremist groups overseas with "specific permission" from higher up.
If "we think that direct action will involve killing an American, we get specific permission to do that," Blair said in response to questions from the panel's top Republican, Representative Pete Hoekstra.
Blair's comments came after The Washington Post reported that US President Barack Obama had embraced predecessor George W. Bush's policy of authorizing the killing of US citizens involved in terrorist activities overseas.
If a United States citizen was determined to have joined a foreign terrorist group, that person could be legally murdered under orders given by President George W. Bush after the 9/11 attacks.
"After the Sept. 11, 2001, attacks, Bush gave the CIA, and later the military, authority to kill U.S. citizens abroad if strong evidence existed that an American was involved in organizing or carrying out terrorist actions against the United States or U.S. interests, military and intelligence officials said," the Post reported. "The evidence has to meet a certain, defined threshold. The person, for instance, has to pose 'a continuing and imminent threat to U.S. persons and interests,' said one former intelligence official.
"The Obama administration has adopted the same stance. If a U.S. citizen joins al-Qaeda, 'it doesn't really change anything from the standpoint of whether we can target them,' said a senior administration official. 'They are then part of the enemy.'"
The Post, citing anonymous US officials, said the Central Intelligence Agency (CIA) and Joint Special Operations Command have three Americans on their lists of specific people targeted for killing or capture.
Blair said weighing whether to target a US national required determining "whether that American is involved in a group that is trying to attack us, whether that American is a threat to other Americans."
The intelligence chief said he was offering such unusually detailed information in public because "I just don't want other Americans who are watching to think that we are careless."
"In fact, we're not careless about endangering lives at all, but we especially are not careless about endangering American lives as we try to carry out the policies to protect most of the country," he said.
Hoekstra, the ranking Republican, asked what the standards were for targeting American citizens abroad. Blair didn't specifically articulate them.
"We don't target people for free speech," he said. "We target them for taking action that threatens Americans."
Hoekstra pressed him, citing a 2001 incident in which Peru's air force shot down a plane carrying US missionaries, killing a woman and her seven-month-old daughter, after the aircraft was misidentified as a drug-smuggler.
"We were careless and we were reckless," Blair replied. "I want to make sure that this committee does everything that it can and within its power that it does not allow the community to be reckless and careless again."
"While I'm in charge, we will not be careless and reckless," he pledged.
Renowned blogger/lawyer Glenn Greenwald says program breaks US laws
Two of the most respected bloggers from the left who focus on civil liberties and constitutional issues offered harsh criticisms of the assassination program on Thursday.
Salon's Glenn Greenwald, a former NYC lawyer and the 'author of two New York Times Bestselling books,' observes, "Although Blair emphasized that it requires 'special permission' before an American citizen can be placed on the assassination list, consider from whom that 'permission' is obtained: the President, or someone else under his authority within the Executive Branch. There are no outside checks or limits at all on how these 'factors' are weighed. In last week's post, I wrote about all the reasons why it's so dangerous -- as well as both legally and Constitutionally dubious -- to allow the President to kill American citizens not on an active battlefield during combat, but while they are sleeping, sitting with their families in their home, walking on the street, etc. That's basically giving the President the power to impose death sentences on his own citizens without any charges or trial. Who could possibly support that?"
Greenwald continues,
The severe dangers of vesting assassination powers in the President are so glaring that even GOP Rep. Pete Hoekstra is able to see them (at least he is now that there's a Democratic President). At yesterday's hearing, Hoekstra asked Adm. Blair about the threat that the President might order Americans killed due to their Constitutionally protected political speech rather than because they were actually engaged in Terrorism. This concern is not an abstract one. The current controversy has been triggered by the Obama administration's attempt to kill U.S. citizen Anwar al-Awlaki in Yemen. But al-Awlaki has not been accused (let alone convicted) of trying to attack Americans. Instead, he's accused of being a so-called "radical cleric" who supports Al Qaeda and now provides "encouragement" to others to engage in attacks -- a charge al-Awlaki's family vehemently denies (al-Awlaki himself is in hiding due to fear that his own Government will assassinate him).
The question of where First Amendment-protected radical advocacy ends and criminality begins is exactly the sort of question with which courts have long grappled. In the 1969 case of Brandenburg v. Ohio, the Supreme Court unanimously reversed a criminal conviction of a Ku Klux Klan leader who — surrounded by hooded indivduals holding weapons — gave a speech threatening ”revengeance” against any government official who “continues to suppress the white, Caucasian race.” The Court held that the First Amendment protects advocacy of violence and revolution, and that the State is barred from punishing citizens for the expression of such views. The Brandenburg Court pointed to a long history of precedent protecting the First Amendment rights of Communists to call for revolution — even violent revolution — inside the U.S., and explained that the Government can punish someone for violent actions but not for speech that merely advocates or justifies violence (emphasis added):
As we [395 U.S. 444, 448] said in Noto v. United States, 367 U.S. 290, 297 -298 (1961), "the mere abstract teaching . . . of the moral propriety or even moral necessity for a resort to force and violence, is not the same as preparing a group for violent action and steeling it to such action." See also Herndon v. Lowry, 301 U.S. 242, 259 -261 (1937); Bond v. Floyd, 385 U.S. 116, 134 (1966). A statute which fails to draw this distinction impermissibly intrudes upon the freedoms guaranteed by the First and Fourteenth Amendments. It sweeps within its condemnation speech which our Constitution has immunized from governmental control.
Blogger Empty Wheel, who published a highly acclaimed book on the Plame leak case under her real name Marcia Wheeler, writes, "Glenn’s point is important because it appears the government agrees with him on the First Amendment point: all of the speech al-Awlaki has engaged in for the last decade was not deemed worthy of even a criminal indictment. Yet all of a sudden, it got al-Awlaki on the kill list."
After news of the Yemen strikes broke on December 24, RAW STORY noted that many reports suggested the cleric was targeted.
http://rawstory.com/2010/02/kill-americans/
By John Byrne
2/4/2010
Update at bottom: Renowned blogger/lawyer Glenn Greenwald says program breaks US laws
In a striking admission from the Obama Administration's top intelligence officer, Director of National Intelligence Dennis Blair announced Wednesday that the United States may target its own citizens abroad for death if it believes they are associated with terrorist groups.
"We take direct action against terrorists in the intelligence community," Director of National Intelligence Dennis Blair told the House Intelligence Committee. He said US counter-terrorism officials may try to kill American citizens embroiled in extremist groups overseas with "specific permission" from higher up.
If "we think that direct action will involve killing an American, we get specific permission to do that," Blair said in response to questions from the panel's top Republican, Representative Pete Hoekstra.
Blair's comments came after The Washington Post reported that US President Barack Obama had embraced predecessor George W. Bush's policy of authorizing the killing of US citizens involved in terrorist activities overseas.
If a United States citizen was determined to have joined a foreign terrorist group, that person could be legally murdered under orders given by President George W. Bush after the 9/11 attacks.
"After the Sept. 11, 2001, attacks, Bush gave the CIA, and later the military, authority to kill U.S. citizens abroad if strong evidence existed that an American was involved in organizing or carrying out terrorist actions against the United States or U.S. interests, military and intelligence officials said," the Post reported. "The evidence has to meet a certain, defined threshold. The person, for instance, has to pose 'a continuing and imminent threat to U.S. persons and interests,' said one former intelligence official.
"The Obama administration has adopted the same stance. If a U.S. citizen joins al-Qaeda, 'it doesn't really change anything from the standpoint of whether we can target them,' said a senior administration official. 'They are then part of the enemy.'"
The Post, citing anonymous US officials, said the Central Intelligence Agency (CIA) and Joint Special Operations Command have three Americans on their lists of specific people targeted for killing or capture.
Blair said weighing whether to target a US national required determining "whether that American is involved in a group that is trying to attack us, whether that American is a threat to other Americans."
The intelligence chief said he was offering such unusually detailed information in public because "I just don't want other Americans who are watching to think that we are careless."
"In fact, we're not careless about endangering lives at all, but we especially are not careless about endangering American lives as we try to carry out the policies to protect most of the country," he said.
Hoekstra, the ranking Republican, asked what the standards were for targeting American citizens abroad. Blair didn't specifically articulate them.
"We don't target people for free speech," he said. "We target them for taking action that threatens Americans."
Hoekstra pressed him, citing a 2001 incident in which Peru's air force shot down a plane carrying US missionaries, killing a woman and her seven-month-old daughter, after the aircraft was misidentified as a drug-smuggler.
"We were careless and we were reckless," Blair replied. "I want to make sure that this committee does everything that it can and within its power that it does not allow the community to be reckless and careless again."
"While I'm in charge, we will not be careless and reckless," he pledged.
Renowned blogger/lawyer Glenn Greenwald says program breaks US laws
Two of the most respected bloggers from the left who focus on civil liberties and constitutional issues offered harsh criticisms of the assassination program on Thursday.
Salon's Glenn Greenwald, a former NYC lawyer and the 'author of two New York Times Bestselling books,' observes, "Although Blair emphasized that it requires 'special permission' before an American citizen can be placed on the assassination list, consider from whom that 'permission' is obtained: the President, or someone else under his authority within the Executive Branch. There are no outside checks or limits at all on how these 'factors' are weighed. In last week's post, I wrote about all the reasons why it's so dangerous -- as well as both legally and Constitutionally dubious -- to allow the President to kill American citizens not on an active battlefield during combat, but while they are sleeping, sitting with their families in their home, walking on the street, etc. That's basically giving the President the power to impose death sentences on his own citizens without any charges or trial. Who could possibly support that?"
Greenwald continues,
The severe dangers of vesting assassination powers in the President are so glaring that even GOP Rep. Pete Hoekstra is able to see them (at least he is now that there's a Democratic President). At yesterday's hearing, Hoekstra asked Adm. Blair about the threat that the President might order Americans killed due to their Constitutionally protected political speech rather than because they were actually engaged in Terrorism. This concern is not an abstract one. The current controversy has been triggered by the Obama administration's attempt to kill U.S. citizen Anwar al-Awlaki in Yemen. But al-Awlaki has not been accused (let alone convicted) of trying to attack Americans. Instead, he's accused of being a so-called "radical cleric" who supports Al Qaeda and now provides "encouragement" to others to engage in attacks -- a charge al-Awlaki's family vehemently denies (al-Awlaki himself is in hiding due to fear that his own Government will assassinate him).
The question of where First Amendment-protected radical advocacy ends and criminality begins is exactly the sort of question with which courts have long grappled. In the 1969 case of Brandenburg v. Ohio, the Supreme Court unanimously reversed a criminal conviction of a Ku Klux Klan leader who — surrounded by hooded indivduals holding weapons — gave a speech threatening ”revengeance” against any government official who “continues to suppress the white, Caucasian race.” The Court held that the First Amendment protects advocacy of violence and revolution, and that the State is barred from punishing citizens for the expression of such views. The Brandenburg Court pointed to a long history of precedent protecting the First Amendment rights of Communists to call for revolution — even violent revolution — inside the U.S., and explained that the Government can punish someone for violent actions but not for speech that merely advocates or justifies violence (emphasis added):
As we [395 U.S. 444, 448] said in Noto v. United States, 367 U.S. 290, 297 -298 (1961), "the mere abstract teaching . . . of the moral propriety or even moral necessity for a resort to force and violence, is not the same as preparing a group for violent action and steeling it to such action." See also Herndon v. Lowry, 301 U.S. 242, 259 -261 (1937); Bond v. Floyd, 385 U.S. 116, 134 (1966). A statute which fails to draw this distinction impermissibly intrudes upon the freedoms guaranteed by the First and Fourteenth Amendments. It sweeps within its condemnation speech which our Constitution has immunized from governmental control.
Blogger Empty Wheel, who published a highly acclaimed book on the Plame leak case under her real name Marcia Wheeler, writes, "Glenn’s point is important because it appears the government agrees with him on the First Amendment point: all of the speech al-Awlaki has engaged in for the last decade was not deemed worthy of even a criminal indictment. Yet all of a sudden, it got al-Awlaki on the kill list."
After news of the Yemen strikes broke on December 24, RAW STORY noted that many reports suggested the cleric was targeted.
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