Wall Streeters Want Our Pity -- Gimme a Break
By Jim Hightower, Creators Syndicate
Posted on February 13, 2009, Printed on February 13, 2009
http://www.alternet.org/story/126505/
Editor's Note: It looks like the language to cap exec pay may end up being cut from the stimulus bill by Congress.
Listen intently, and you can hear the faint music of the band coming from over the hills. Their drums are pounding out a steady cadence, the bagpipes are wheezing mournfully, and the fifes are trilling plaintively. Coming straight at you, it's The Musicale Marching Pity Corps from Wall Street!
This big banker band -- including a line of baton-twirling lobbyists and a chorus of right-wing talk show yakkers -- is on the march because Obama and other dastardly Democrats have proposed to cap the outrageous pay, bonuses and perks that bailed-out Wall Streeters keep grabbing for themselves. The band's whining refrain (note: You might want to reach for your hankie before reading this) is that these princes of high finance are being picked on.
Yes, trumpet the bankers, we make a lot of money, but we deserve it, and the system cannot function without such rewards for us. Indeed, sniffs a Wall Street consultant, "taxpayers should want banks to retain the cream of the crop." Uh, sir -- wouldn't that be the same cream that has soured America's entire financial system?
Well, they snap, you riff-raffers just don't get it. "The pay scale for Wall Street is different (than) the pay scale for America," explained the chief lobbyist for the Financial Services Roundtable in an ABC News interview this month. "So these numbers look large, but the market value for these executives -- there's a very small talent pool of individuals that have the education, experience and knowledge to operate a global, international services firm in this day and age."
The lobbyist then tried tugging at our heartstrings: "I don't think the issue is a dollar amount. It's being paid what you're worth. Would you be willing to work for less than what you think you're worth?" he asked.
If ignorance is bliss, this guy must be ecstatic. Most Americans are working for less than they think they're worth! Ask a schoolteacher.
In a January New York Times op-ed, one investment banker conceded that there have been excesses in pay, but that the system itself is sound. "Without those bonuses," he wrote, "firms simply couldn't attract the best and the brightest." Apparently, he counts himself as one of the B&Bs, noting that the yearly "euphoria" of bonus cash that he received was what "justified the days on end of working into the wee hours, the months on end without a single day off."
Sheesh. Do they not look around and see that millions of us (from schoolteachers to farmers) are working the same long hours at a fraction of their pay? Do they actually think that "best and brightest" is measured in dollars? His op-ed drew a number of sharp responses from readers, including one who noted that he, too, has a job with "days on end of working into the wee hours," yet -- no bonus. "I am what is called a physician," he revealed.
Mark Twain said it well years ago, "I am opposed to millionaires, but it would be dangerous to offer me the position." Americans are not against making money, even great big wads of it. We're against greed. That's why there is broad public support for Obama's proposal. As he rightly said when announcing the pay cap, the bankers' shameful grab for their own enrichment in the midst of a national economic collapse is "exactly the kind of disregard for the costs and consequences of their actions that brought about this crisis -- a culture of narrow self-interest and short-term gain at the expense of everything else."
The only problem with the president's compensation cap is that it has too many loopholes (it doesn't apply, for example, to the outsized paychecks going to the honchos of Citigroup, Bank of America and other giants that have already ripped us off for hundreds of billions of dollars in bailout money).
Congress should toughen it. But at least it finally lays an ethical marker that can begin to reverse the corporate culture of greed that has so severely harmed our country.
COPYRIGHT 2009 CREATORS SYNDICATE INC.
Jim Hightower is a national radio commentator, writer, public speaker, and author of the new book, "Swim Against the Current: Even a Dead Fish Can Go With the Flow." (Wiley, March 2008) He publishes the monthly "Hightower Lowdown," co-edited by Phillip Frazer.
http://www.alternet.org/workplace/126505/wall_streeters_want_our_pity_--_gimme_a_break/
Tim Geithner, Tell Us Why You're Rescuing the Very Private Interests that Led Us to Ruin
By William Greider, The Nation
Posted on February 13, 2009, Printed on February 13, 2009
http://www.alternet.org/story/126682/
The look and tone of the Treasury Secretary reminds me of the third grade. The smartest kid in the class, the one teachers loved, was the boy who always raised his hand and waved it impatiently while some other student fumbled for an answer. If the teacher stepped out of the room for a moment, bedlam usually followed and this kid would try to restore order. "Be quiet or I will tell." Kids threw things and tormented him until the teacher returned.
Timothy Geithner reminded me of that type as he lectured the country on how the Obama administration intends to save the financial system. The country is apparently responding in kind -- hurling blistering comments at him and the "best and brightest" who are now in high office. How could these smart people be so dumb about things everyone else already understands? Americans do not need to be told, as Geithner did, that they have "lost faith." The remark is condescending and infuriates further.
What people wanted to hear, in plain English, were hard answers and an honest acknowledgment of the extreme irregularity of events -- government is rushing to rescue the very private interests that led us to sorrow. Instead, Geithner told us he has a "plan." He will share the details at some later date. Be calm. Stay tuned.
It's unfair, I know, to pick on Geithner. Everyone says he is a nice guy and maybe so. But his opacity is staggering and fairly representative of the governing elites in this country. Events of the last six months have transformed the context of American politics and government. People do not need to be told things are bad because the bad things are happening to them. Nor do they need a scolding tone from official Washington, since they also know Washington was fully complicit as the titans of finance went wild. I wouldn't say Americans have been radicalized -- not yet -- but the unsatisfying political events are driving people in that direction. So is the lack of honest explanations and the refusal of Democrats and Republicans to confess error or offer apologies: silence feeds a popular suspicion that politicians are still working for the other side.
The question about Geithner that intrigues me is why. Why do brainy technocrats like him often seem so clueless (or, if you like, indifferent) to the social reality once they have risen to the top of the governing heap? I think it may have something to do with the experience of being the smartest kid around and being told so from an early age. This could encourage a narrow kind of arrogance, but maybe also insecurity. Over many years, I have seen a certain type both in politics and private life who climbs the slippery pole by applying intellectual firepower and performing for the teacher. Superiors are impressed and always like this dutiful type. Promotions take them higher and higher. Then they get to the top and it becomes obvious something is missing -- a capacity to think creatively in strange new circumstances or the human empathy required to lead others.
My curbstone analysis could be dead wrong about Geithner but might aptly describe the career path of Larry Summers, Obama's economic advisor. Summers rose to the top -- president of Harvard -- on his well-known brilliance and he was done in there by his personal arrogance. He ingratiated himself with superiors on the way up and adjusted his economic thinking to seasonal changes in ideological fashion. He also learned the bureaucratic skills needed for policy infighting -- how to cut other economists with opposing views out of the debate. He somehow did so in the Obama White House.
This is relevant now because Barack Obama has chosen to rely on Geithner and Summers for managing the economy and reforming it. If they are too narrow in perspective, too defensive in behalf of the failed status quo, the Obama presidency will be crippled by their lack of imagination. That leads to another question: why did Obama feel the need to select such a confining list of familiar technocrats -- competent and brainy like himself -- to run the government? The president is neither arrogant nor insecure -- he exudes the opposite -- yet he must feel more comfortable dealing with folks vetted by the same ladder of success. Perhaps he believes the "best and the brightest" will protect him from failure. Or maybe he thinks his presidency will have more power to change things if he sticks with people drawn from among the influential elites, safely aligned with the existing power structure.
The fact is, we do not yet know the answer. Events are rapidly revealing the nature of this new president, and we have a lot to learn. We know how smart he is, how easily he empathizes with people across the usual dividing lines. We do not yet know if he is wise enough -- tough enough -- to lead the country to new ground.
William Greider is the author of, most recently, "The Soul of Capitalism" (Simon & Schuster).
private_interests_that_led_us_to_ruin/
Published on Friday, February 13, 2009 by The New York Times
Failure to Rise
by Paul Krugman
By any normal political standards, this week's Congressional agreement on an economic stimulus package was a great victory for President Obama. He got more or less what he asked for: almost $800 billion to rescue the economy, with most of the money allocated to spending rather than tax cuts. Break out the Champagne!
Or maybe not. These aren't normal times, so normal political standards don't apply: Mr. Obama's victory feels more than a bit like defeat. The stimulus bill looks helpful but inadequate, especially when combined with a disappointing plan for rescuing the banks. And the politics of the stimulus fight have made nonsense of Mr. Obama's postpartisan dreams.
Let's start with the politics.
One might have expected Republicans to act at least slightly chastened in these early days of the Obama administration, given both their drubbing in the last two elections and the economic debacle of the past eight years.
But it's now clear that the party's commitment to deep voodoo - enforced, in part, by pressure groups that stand ready to run primary challengers against heretics - is as strong as ever. In both the House and the Senate, the vast majority of Republicans rallied behind the idea that the appropriate response to the abject failure of the Bush administration's tax cuts is more Bush-style tax cuts.
And the rhetorical response of conservatives to the stimulus plan - which will, it's worth bearing in mind, cost substantially less than either the Bush administration's $2 trillion in tax cuts or the $1 trillion and counting spent in Iraq - has bordered on the deranged.
It's "generational theft," said Senator John McCain, just a few days after voting for tax cuts that would, over the next decade, have cost about four times as much.
It's "destroying my daughters' future. It is like sitting there watching my house ransacked by a gang of thugs," said Arnold Kling of the Cato Institute.
And the ugliness of the political debate matters because it raises doubts about the Obama administration's ability to come back for more if, as seems likely, the stimulus bill proves inadequate.
For while Mr. Obama got more or less what he asked for, he almost certainly didn't ask for enough. We're probably facing the worst slump since the Great Depression. The Congressional Budget Office, not usually given to hyperbole, predicts that over the next three years there will be a $2.9 trillion gap between what the economy could produce and what it will actually produce. And $800 billion, while it sounds like a lot of money, isn't nearly enough to bridge that chasm.
Officially, the administration insists that the plan is adequate to the economy's need. But few economists agree. And it's widely believed that political considerations led to a plan that was weaker and contains more tax cuts than it should have - that Mr. Obama compromised in advance in the hope of gaining broad bipartisan support. We've just seen how well that worked.
Now, the chances that the fiscal stimulus will prove adequate would be higher if it were accompanied by an effective financial rescue, one that would unfreeze the credit markets and get money moving again. But the long-awaited announcement of the Obama administration's plans on that front, which also came this week, landed with a dull thud.
The plan sketched out by Tim Geithner, the Treasury secretary, wasn't bad, exactly. What it was, instead, was vague. It left everyone trying to figure out where the administration was really going. Will those public-private partnerships end up being a covert way to bail out bankers at taxpayers' expense? Or will the required "stress test" act as a back-door route to temporary bank nationalization (the solution favored by a growing number of economists, myself included)? Nobody knows.
Over all, the effect was to kick the can down the road. And that's not good enough. So far the Obama administration's response to the economic crisis is all too reminiscent of Japan in the 1990s: a fiscal expansion large enough to avert the worst, but not enough to kick-start recovery; support for the banking system, but a reluctance to force banks to face up to their losses. It's early days yet, but we're falling behind the curve.
And I don't know about you, but I've got a sick feeling in the pit of my stomach - a feeling that America just isn't rising to the greatest economic challenge in 70 years. The best may not lack all conviction, but they seem alarmingly willing to settle for half-measures. And the worst are, as ever, full of passionate intensity, oblivious to the grotesque failure of their doctrine in practice.
There's still time to turn this around. But Mr. Obama has to be stronger looking forward. Otherwise, the verdict on this crisis might be that no, we can't.
http://www.commondreams.org/view/2009/02/13
Published on Thursday, February 12, 2009 by Forbes
Nationalize Insolvent Banks
by Nouriel Roubini
A year ago I predicted that losses by U.S. financial institutions would be at least $1 trillion and possibly as high as $2 trillion.
At that time, the consensus was that such estimates were gross exaggerations--the naïve optimists had in mind about $200 billion of expected subprime mortgage losses. But, as I pointed out, losses would rapidly mount well beyond subprime mortgages as the U.S. and global economy spun into a severe financial crisis and ugly recession.
I argued that we would see rising losses on subprime, near-prime and prime mortgages; commercial real estate; credit cards, auto loans and student loans; industrial and commercial loans; corporate bonds, sovereign bonds and state and local government bonds; and massive losses on all of the assets--collateralized debt obligations (CDOs), collateralized loan obligations, asset-backed securities and the entire alphabet of credit derivatives--that had securitized such loans.
By now, write-downs by U.S. banks have already passed the $1 trillion mark (my floor estimate of losses), and institutions such as the International Monetary Fund and Goldman Sachs predict losses over $2 trillion (close to my original expected ceiling for such losses).
But if you think $2 trillion is already huge, our latest estimates at RGE Monitor (available in a paper for our clients) suggest that total losses on loans made by U.S. financial firms and the fall in the market value of the assets they are holding will be, at their peak, about $3.6 trillion. The U.S. banks and broker-dealers are exposed to half of this much, or $1.8 trillion; the rest is borne by other financial institutions in the U.S. and abroad.
The capital backing the banks' assets was just $1.4 trillion (last fall), leaving the U.S. banking system some $400 billion in the hole, or close to zero even after the government and private-sector recapitalization of such banks. Thus, another $1.4 trillion will be needed to bring back the capital of banks to the level it had before the crisis, and such massive additional recapitalization is needed to resolve the credit crunch and restore lending to the private sector.
These figures suggests the U.S. banking system is effectively insolvent in the aggregate; most of the U.K. banking system looks insolvent, too, and many other banks in continental Europe are also insolvent.
There are four basic approaches to a clean-up of a banking system that is facing a systemic crisis:
No. 1: Recapitalization together with the purchase by a government "bad bank" of the toxic assets;
No. 2: Recapitalization together with government guarantees--after a first loss by the banks--of the toxic assets;
No. 3: Private purchase of toxic assets with a government guarantee and/or--semi-equivalently (a provision of public capital to set up a public-private bad bank where private investors participate in the purchase of such assets--something similar to the U.S. government plan presented by Treasury Secretary Timothy Geithner for a public-private investment fund);
No. 4: Outright government takeover (call it nationalization--or "receivership" if you don't like the N-word) of insolvent banks, to be cleaned after takeover and then resold to the private sector.
Of the four options, the first three have serious flaws. In the bad-bank model (the first, above) the government may overpay for the bad assets, at a high cost for the taxpayer, as their true value is uncertain; if it does not overpay for the assets, many banks are bust, as the mark-to-market haircut they need to recognize is too large for them to bear.
Even in the guarantee-after-first-loss model (No. 2 above), there are massive valuation problems, and there can be very expensive risk for the taxpayer, as the true value of the assets is as uncertain (as in the purchase of bad assets model).
The shady guarantee deals recently done with Citigroup and Bank of America were even less transparent than an outright government purchase of bad assets, as the bad-asset-purchase model at least has the advantage of transparency of the price paid for toxic assets.
In the bad-bank model, the government has the additional problem of having to manage all the bad assets it purchased, something that it does not have much expertise in. At least in the guarantee model, the assets stay with the banks. The banks know better how to manage--and also have a greater incentive than the government to eventually work out such bad assets.
The very cumbersome U.S. Treasury proposal to dispose of toxic assets, presented by Geithner, taking the toxic asset off the banks' balance sheets as well as providing government guarantees to the private investors that will purchase them (and/or public capital provision to fund a public-private bad bank that would purchase such assets). But this plan is so non-transparent and complicated it got a thumbs-down from the markets as soon as it was announced. All major U.S. equity indexes dropped sharply.
The main problem with the Treasury plan--that in some ways may resemble the deal between Merrill Lynch and Lone Star--is the following: Merrill sold its CDOs to Lone Star for 22 cents on the dollar. Even in that case, Merrill remained on the hook in case the value of the assets were to fall below 22 cents, as Lone Star paid initially only 11 cents (i.e., Merrill guaranteed the Lone Star downside risk). But today, a bank like Citi has similar CDOs that, until recently, were still sitting on its books at a deluded value of 60 cents.
Since the government knows no one in the private sector would buy those most toxic assets at 60 cents, it may have to make a guarantee (formally or informally) to limit the downside risk to private investors from purchasing such assets. But that guarantee would be hugely expensive if you needed to convince private folks to buy at 60 cents assets that are worth only 20--or even 11--cents.
So the new Treasury plan would end up being again a royal rip-off of the taxpayer if the guarantee is excessive in relation to the true value of the underlying assets. And if, instead, the guarantee is not excessive, the banks need to sell the toxic assets at their true underlying value, implying that the emperor has no clothes.
A true valuation of the bad assets--without a huge taxpayer bailout of the shareholders and unsecured creditors of banks--implies that banks are bankrupt and should be taken over by the government.
Thus, all the schemes that have so far been proposed to deal with the toxic assets of the banks may be a big fudge--one that either does not work or works only if the government bails out shareholders and unsecured creditors of the banks.
So, paradoxically, nationalization may be a more market-friendly solution to a banking crisis. It creates the biggest hit for common and preferred shareholders of clearly insolvent institutions and, most certainly, even the unsecured creditors, in case the bank insolvency hole is too large; it also provides a fair upside to the taxpayer.
Nationalization can also resolve the problem of the government managing the bad assets: If you're selling back all the banks' assets and deposits to new private shareholders after a clean-up, together with a partial government guarantee of the bad assets (as was done in the resolution of the Indy Mac bank failure), you avoid having the government manage the bad assets.
Alternatively, if the bad assets are kept by the government after a takeover of the banks and only the good ones are sold back, through a reprivatization scheme, the government could outsource the job of managing these assets to private asset managers. In this way, the government can avoid creating its own Resolution Trust Corp. bank to work out such bad assets.
Nationalization also resolves the too-big-to-fail problem of banks that are systemically important, and that thus need to be rescued by the government at a high cost to the taxpayer. This too-big-to-fail problem has now become an even-bigger-than-too-big-to-fail problem, as the current approach has led weak banks to take over even weaker banks.
Merging two zombie banks is like having two drunks trying to help each other stand up. The JPMorgan Chase takeover of insolvent Bear Stearns and WaMu; the Bank of America takeover of insolvent Countrywide and Merrill Lynch; and the Wells Fargo takeover of insolvent Wachovia, all show that the too-big-to-fail monster has become even bigger.
In the Wachovia case, you had two wounded institutions (Citi and Wells Fargo) bidding for a zombie, insolvent one. Why? They both knew that becoming even bigger than too big to fail was the right strategy to extract an even greater bailout from the government. Instead, with the nationalization approach, the government can break up these financial supermarket monstrosities into smaller pieces to be sold to private investors as smaller (better) banks.
This "nationalization" approach was successfully undertaken by Sweden, while the current U.S. and U.K. approach may end up looking like the zombie banks of Japan that were never properly restructured and ended up perpetuating the credit crunch and credit freeze.
Japan wound up with a decade-long near-depression because of its failure to clean up the banks and the bad debts. The U.S., U.K. and other economies risk a similar near-depression and stag-deflation (multi-year recession and price deflation) if they fail to appropriately tackle this most severe banking crisis.
So why is the U.S. government temporizing and avoiding doing the right thing, i.e., taking over the insolvent banks?There are two reasons.
First, there is still some small hope (and a small probability) that the economy will recover sooner than expected, that expected credit losses will be smaller than expected, and that the current approach of recapping the banks and somehow working out the bad assets will work in due time.
Second, taking over the banks--whether you call it nationalization or, in a more politically correct way, "receivership"--is a radical action that requires most banks be clearly beyond the pale. Today, Citi and Bank of America look blatantly near-insolvent and ready to be taken over, but JPMorgan and Wells Fargo as yet do not.
But with the sharp rise in delinquencies and charge-off rates that we are experiencing now on mortgages, commercial real estate and consumer credit, even JPMorgan and Wells will likely look near-insolvent in six to 12 months (as suggested by Chris Whalen, one of the leading independent analysts of the banking system).
Thus, if the government were to take over only Citi and Bank of America today, wiping out common and preferred shareholders and forcing unsecured creditors to take a haircut, a panic may ensue for other banks, and the Lehman fallout that resulted from having unsecured creditors taking losses on their bonds will be repeated.
On the other hand, if, as is likely, the current "fudging" strategy does not work, and most banks--the major four and the a good number of the remaining regional banks--all look clearly insolvent in six to 12 months, you can then take them all over, wipe out common and preferred shareholders and even force unsecured creditors to accept losses.
So, the current strategy--Plan A-- may not work, and Plan B (or better, "Plan N," for nationalization) may end up the way to go later this year. Wasting another six to 12 months may risk turning a U-shaped recession into an L-shaped near-depression.
The political constraints the new administration faces--and the remaining small probability that the current strategy may, by some miracle or luck, work--suggest Plan A should be first exhausted before there is a move to Plan N.
But with the government forcing Citi to shed some of its units and assets, and starting stress tests to figure out which institutions are so massively undercapitalized that they need to be taken over by the Federal Deposit Insurance Corp., the administration is laying the groundwork for the eventual, necessary takeover of the insolvent banks.
So while Plan A is now underway, the very negative market response to this Treasury plan suggests it will not fly. Markets were expecting a more clear plan, but also one that would bail out shareholders and creditors of insolvent banks. Unfortunately, that is politically and fiscally unfeasible. It is time to start to think and plan ahead for for Plan N.
http://www.commondreams.org/view/2009/02/12-3
Published on Thursday, February 12, 2009 by The American Prospect
The TARP Dog and Pony Show
by Dean Baker
Treasury Secretary Timothy Geithner's long-awaited plan for rescuing the banks left people even more confused about the Obama administration's agenda than they had been before the announcement. This is best demonstrated by the plunge in the market, including bank stocks, that immediately followed.
While it is generally foolish to assess the merits of a policy based on the market's response, it is a safe bet that if the plan were the unambiguous bonanza for the banks that many of us feared, bank stocks would rally based on their good fortune. At this point, we cannot be sure that it is not a giveaway, but apparently the banks do not seem to think that it is. This is one of those cases where everything will depend on the details, which we have not yet seen.
The one program that Geithner did outline with some clarity was a plan to buy up newly issued investment-grade securities backed up by car loans, credit-card debt, and student loans. This plan would expand a Federal Reserve Board initiative, which has not yet been started, from $100 billion to $1 trillion.
There is nothing obviously wrong with this proposal. It will help to extend credit in these markets, although people with questionable credit histories or who have recently lost their jobs will still have difficulty qualifying for loans. One issue that is not clear is whether there will be public disclosure of the assets purchased under this program. The Fed had not been in the practice of disclosing the details of its activities under its other programs. Either the Fed will have to change its practice, or Geithner's commitment to openness is not as great as claimed.
This brings us to the other program that Geithner only vaguely outlined. He said that he wanted to partner with private firms to arrange for purchases of the banks' bad assets. The Treasury would provide guarantees that would limit the losses that private firms would incur, as it has done with hundreds of billions of assets held by Citigroup, J.P. Morgan, and Bank of America.
In principle, government guarantees could make bad assets attractive to private investors. The problem is that the guarantees are in effect a subsidy to the banks, since they add an enormous amount of value to their assets. It may be difficult to know the full extent of the subsidy, since many of the prospective buyers of the banks' junk are likely to be private-equity funds and hedge funds, both of whom have very little by way of disclosure requirements.
Fortunately, we don't have to follow the individual trades to know whether the taxpayers are being ripped off. We just need to ask some more basic questions like "How much will this thing cost?" If the answer is anywhere much more than zero -- as Geithner suggested it will be -- and we still see that bank stocks carry significant value and bank executives continue to hold on to their high-paying jobs, then we will know that we have been had.
The basic point is extremely simple. We have a large number of bankrupt banks. We have a public interest in keeping the banks functioning, but we have zero public interest in giving taxpayer dollars to bank shareholders or to the executives that wrecked the banks they ran.
Geithner can design as complex a dog and pony show as he wants, but if his plan takes up hundreds of billions of taxpayer dollars and does not involve wiping out the shareholders and sending the bank executives packing, then he has ripped us off.
Chalk it up to business as usual.
http://www.commondreams.org/view/2009/02/12-2
Bubble Economy 2.0: The Financial Recovery Plan from Hell
By Michael Hudson
Global Research, February 11, 2009
Martin Wolf started off his Financial Times column today (February 11) with the bold question: “Has Barack Obama’s presidency already failed?”[1] The stock market had a similar opinion, plunging 382 points. Having promised “change,” Mr. Obama is giving us more Clinton-Bush via Robert Rubin’s protégé, Tim Geithner. Tuesday’s $2.5 trillion Financial Stabilization Plan to re-inflate the Bubble Economy is basically an extension of the Bush-Paulson giveaway – yet more Rubinomics for financial insiders in the emerging Wall Street trusts. The financial system is to be concentrated into a cartel of just a few giant conglomerates to act as the economy’s central planners and resource allocators. This makes banks the big winners in the game of “chicken” they’ve been playing with Washington, a shakedown holding the economy hostage. “Give us what we want or we’ll plunge the economy into financial crisis.” Washington has given them $9 trillion so far, with promises now of another $2 trillion– and still counting.
A true reform – one designed to undo the systemic market distortions that led to the real estate bubble – would have set out to reverse the Clinton-Rubin repeal of the Glass-Steagall Act so as to prevent the corrupting conflicts of interest that have resulted in vertical trusts such as Citibank and Bank of America/Countrywide/Merrill Lynch. By unleashing these conglomerate grupos (to use the term popularized under Pinochet with Chicago Boy direction – a dress rehearsal of the mass financial bankruptcies they caused in Chile by the end of the 1970s) The Clinton administration enabled banks to merge with junk mortgage companies, junk-money managers, fictitious property appraisal companies, and law-evasion firms all designed to package debts to investors who trusted them enough to let them rake off enough commissions and capital gains to make their managers the world’s highest-paid economic planners.
Today’s economic collapse is the direct result of their planning philosophy. It actually was taught as “wealth creation” and still is, as supposedly more productive than the public regulation and oversight so detested by Wall Street and its Chicago School aficionados. The financial powerhouses created by this “free market” philosophy span the entire FIRE sector – finance, insurance and real estate, “financializing” housing and commercial property markets in ways guaranteed to make money by creating and selling debt. Mr. Obama’s advisors are precisely those of the Clinton Administration who supported trustification of the FIRE sector. This is the broad deregulatory medium in which today’s bad-debt disaster has been able to spread so much more rapidly than at any time since the 1920s.
The commercial banks have used their credit-creating power not to expand the production of goods and services or raise living standards but simply to inflate prices for real estate (making fortunes for their brokerage, property appraisal and insurance affiliates), stocks and bonds (making more fortunes for their investment bank subsidiaries), fine arts (whose demand is now essentially for trophies, degrading the idea of art accordingly) and other assets already in place.
The resulting dot.com and real estate bubbles were not inevitable, not economically necessary. They were financially engineered by the political deregulatory power acquired by banks corrupting Congress through campaign contributions and public relations “think tanks” (more in the character of Orwellian doublethink tanks) to promote the perverse fiction that Wall Street can be and indeed is automatically self-regulating. This is a travesty of Adam Smith’s “Invisible Hand.” This hand is better thought of as covert. The myth of “free markets” is now supposed to consist of governments withdrawing from planning and taxing wealth, so as to leave resource allocation and the economic surplus to bankers rather than elected public representatives. This is what classically is called oligarchy, not democracy.
This centralization of planning, debt creation and revenue-extracting power is defended as the alternative to Hayek’s road to serfdom. But it is itself the road to debt peonage, a.k.a. the post-industrial economy or “Information Economy.” The latter term is another euphemistic travesty in view of the kind of information the banking system has promoted in the junk accounting crafted by their accounting firms and tax lawyers (off-balance-sheet entities registered on offshore tax-avoidance islands), the AAA applause provided as “information” to investors by the bond-rating cartel, and indeed the national income and product accounts that depict the FIRE sector as being part of the “real” economy, not as an institutional wrapping of special interests and government-sanctioned privilege acting in an extractive rather than a productive way.
“Thanks for the bonuses,” bankers in the United States and England testified this week before Congress and Parliament. “We’ll keep the money, but rest assured that we are truly sorry for having to ask you for another few trillion dollars. At least you should remember our theme song: We are still better managers than the government, and the bulwark against government bureaucratic resource allocation.” This is the ideological Big Lie sold by the Chicago School “free market” celebration of dismantling government power over finance, all defended by complex math rivaling that of nuclear physics that the financial sector is part of the “real” economy automatically producing a fair and equitable equilibrium.
This is not bad news for stockholders of more local and relatively healthy banks (healthy in the sense of avoiding negative equity). Their stocks soared and were by far the major gainers on Tuesday’s stock market, while Wall Street’s large Bad Banks plunged to new lows. Solvent local banks are the sort that were normal prior to repeal of Glass Steagall. They are to be bought by the large “troubled” banks, whose “toxic loans” reflect a basically toxic operating philosophy. In other words, small banks who have made loans carefully will be sucked into Citibank, Bank of America, JP Morgan Chase and Wells Fargo – the Big Four or Five where the junk mortgages, junk CDOs and junk derivatives are concentrated, and have used Treasury money from the past bailout to buy out smaller banks that were not infected with such reckless financial opportunism. Even the Wall Street Journal editorialized regarding the Obama Treasury’s new “Public-Private Investment Fund” to pump a trillion dollars into this mess: “Mr. Geithner would be wise to put someone strong land independent in charge of this fund – someone who can say no to Congress and has no ties to Citigroup, Robert Rubin or Wall Street.”[2]
None of this can solve today’s financial problem. The debt overhead far exceeds the economy’s ability to pay. If the banks would indeed do what Pres. Obama’s appointees are begging them to do and lend more, the debt burden would become even heavier and buying access to housing even more costly. When the banks look back fondly on what Alan Greenspan called “wealth creation,” we can see today that the less euphemistic terminology would be “debt creation.” This is the objective of the new bank giveaway. It threatens to spread the distortions that the large banks have introduced until the entire system presumably looks like Citibank, long the number-one offender of “stretching the envelope,” its euphemism for breaking the law bit by bit and daring government regulators and prosecutors to try and stop it and thereby plunging the U.S. financial system into crisis. This is the shakedown that is being played out this week. And the Obama administration blinked – as these same regulators did when they were in charge of the Clinton administration’s bank policy. So much for the promised change!
The three-pronged Treasury program seems to be only Stage One of a two-stage “dream recovery plan” for Wall Street. Enough hints have trickled out for the past three months in Wall Street Journal op-eds to tip the hand for what may be in store. Watch for the magic phrase “equity kicker,” first heard in the S&L mortgage crisis of the 1980s. It refers to the banker’s share of capital gains, that is, asset price inflation in Bubble #2 that the Recovery Program hopes to sponsor.
The first question to ask about any Recovery Program is, “Recovery for whom?” The answer given on Tuesday is, “For the people who design the Program and their constituency” – in this case, the bank lobby. The second question is, “Just what is it they want to ‘recover’?” The answer is, the Bubble Economy. For the financial sector it was a golden age. Having enjoyed the Greenspan Bubble that made them so rich, its managers would love to create yet more wealth for themselves by indebting the “real” economy yet further while inflating prices all over again to make new capital gains.
The problem for today’s financial elites is that it is not possible to inflate another bubble from today’s debt levels, widespread negative equity, and still-high level of real estate, stock and bond prices. No amount of new capital will induce banks to provide credit to real estate already over-mortgaged or to individuals and corporations already over-indebted. Moody’s and other leading professional observers have forecast property prices to keep on plunging for at least the next year, which is as far as the eye can see in today’s unstable conditions. So the smartest money is still waiting like vultures in the wings – waiting for government guarantees that toxic loans will pay off. Another no-risk private profit to be subsidized by public-sector losses.
While the Obama administration’s financial planners wring their hands in public and say “We feel your pain” to debtors at large, they know that the past ten years have been a golden age for the banking system and the rest of Wall Street. Like feudal lord claiming the economic surplus for themselves while administering austerity for the population at large, the wealthiest 1% of the population has raised their appropriation of the nationwide returns to wealth – dividends, interest, rent and capital gains – from 37% of the total ten years ago to 57% five years ago and it seems nearly 70% today. This is the highest proportion since records have been kept. We are approaching Russian kleptocratic levels.
The officials drawn from Wall Street who now control of the Treasury and Federal Reserve repeat the right-wing Big Lie: Poor “subprime families” have brought the system down, exploiting the rich by trying to ape their betters and live beyond their means. Taking out subprime loans and not revealing their actual ability to pay, the NINJA poor (no income, no job, no audit) signed up to obtain “liars’ loans” as no-documentation Alt-A loans are called in the financial junk-paper trade.
I learned the reality a few years ago in London, talking to a commercial banker. “We’ve had an intellectual breakthrough,” he said. “It’s changed our credit philosophy.”
“What is it?” I asked, imagining that he was about to come out with yet a new magical mathematics formula?
“The poor are honest,” he said, accompanying his words with his jaw dropping open as if to say, “Who would have guessed?”
The meaning was clear enough. The poor pay their debts as a matter of honor, even at great personal sacrifice and what today’s neoliberal Chicago School language would call uneconomic behavior. Unlike Donald Trump, they are less likely to walk away from their homes when market prices sink below the mortgage level. This sociological gullibility does not make economic sense, but reflects a group morality that has made them rich pickings for predatory lenders such as Countrywide, Wachovia and Citibank. So it’s not the “lying poor.” It’s the banksters’ fault after all!
For this elite the Bubble Economy was a deliberate policy they would love to recover. The problem is how to start a new bubble to make yet another fortune? The alternative is not so bad – to keep the bonuses, capital gains and golden parachutes they have given themselves, and run. But perhaps they can improve in Bubble Economy #2.
The Treasury’s newest Financial Stability Plan (Bailout 2.0) is only the first step. It aims at putting in place enough new bank-lending capacity to start inflating prices on credit all over again. But a new bubble can’t be started from today’s asset-price levels. How can the $10 to $20 trillion capital-gain run-up of the Greenspan years been repeated in an economy that is “all loaned up”?
One thing Wall Street knows is that in order to make money, asset prices not only need to rise, they have to go down again. Without going down, after all, how can they rise up? Without a crucifixion for the economy, how can there be a resurrection? The more frenetic the price fibrillation, the easier it is for computerized buy-and-sell programs to make money on options and derivatives.
So here’s the situation as I see it. The first objective is to preserve the wealth of the creditor class – Wall Street, the banks and the other financial vehicles that enrich the wealthiest 1% and, to be fair within America’s emerging new financial oligarchy, the richest 10% of the population. Stage One involves buying out their bad loans at a price that saves them from taking a loss. The money will be depicted to voters as a “loan,” to be repaid by banks extracting enough new debt charges in the new rigged game the Treasury is setting up. The current loss will be shifted the onto “taxpayers” and made up by new debtors – in both cases labor, onto whose shoulders the tax burden has been shifted steadily, step by step since 1980.
An “aggregator” bank (sounds like “alligator,” from the swamps of toxic waste) will buy the bad debts and put them in a public agency. The government calls this the “bad” bank. (This is Geithner’s first point.) But it does good for Wall Street – by buying loans that have gone bad, along with loans and derivative guarantees and swaps that never were good in the first place. If the private sector refuses to buy these bad loans at prices the banks are asking for, why should the government pretend that these debt claims are worth more. Vulture funds are said to be offering about what they were when Lehman Brothers went bankrupt: about 22 cents on the dollar. The banks are asking for 75 cents on the dollar. What will the government offer?
Perhaps the worst alternative is that is now being promoted by the banks and vulture investors in tandem: the government will guarantee the price at which private investors buy toxic financial waste from the banks. A vulture fund would be happy enough to pay 75 cents on the dollar for worthless junk if the government were to provide a guarantee. The Treasury and Federal Reserve pretend that they simply would be “providing liquidity” to “frozen markets.” But the problem is not liquidity and it is not subjective “market psychology.” It is “solvency,” that is, a realistic awareness that toxic waste and bad derivatives gambles are junk. Mr. Geithner has not been able to come to terms with how to value this – without bringing the Obama administration down in a wave of populist protest – any more than Mr. Paulson was able to carry out his original Tarp proposal along these lines.
The hardest task for today’s banksters is to revive opportunities for creditors to make a new killing. (It’s the economy that’s being killed, of course.) This seems to be the aim of the Public/Private investment company that Mr. Geithner is establishing as the second element in his plan. The easiest free lunch is to ride the wave of a new bubble – a fresh wave of asset-price inflation to be introduced to “cure” the problem of debt deflation.
Here’s how I imagine the ploy might work. Suppose a hapless family has bought a home for $500,000, with a full 100% $500,000 adjustable-rate mortgage scheduled to reset this year at 8%. Suppose too that the current market price will fall to $250,000, a loss of 50% by yearend 2009. Sometime in mid 2010 would seem to be long enough for prices to decline by enough to make “recovery” possible – Bubble Economy 2.0. Without such a plunge, there will be no economy to “rescue,” no opportunity for Tim Geithner and Laurence Summers to “feel your pain” and pull out of their pocket the following package – a variant on the “cash for trash” swap, a public agency to acquire the $500,000 mortgage that is going bad, heading toward only a $250,000 market price.
The “bad bank” was not quite ready to be created this week, but the embryo is there. It will take the form of a public/private partnership (PPP) of the sort that Tony Blair made so notorious in Britain. And speaking of Mr. Blair, I am writing this from England, where almost every America-watcher I talk to has expressed amazement at Obama’s performance last week idealizing England’s counterpart to George Bush when it comes to unpopularity contests. Blair’s tenure in office was a horror story, not something to be congratulated for. He privatized the railroads and entering into the disastrous public/private partnership that doubled, tripled or quadrupled the cost of public projects by adding on a heavy financial overhead If Obama does not realize how he shocked Britain and much of Europe with his praise, then he is in danger of foisting a similar public/private financialized “partnership” on the United States
The new public/private institution will be financed with private funds – in fact, with the money now being given to re-capitalize America’s banks (headed by the Wall St. bank’s that have done so bad). Banks will use the Treasury money they have received by “borrowing” against their junk mortgages at or near par to buy shares in a new $5 trillion institution created along the lines of the unfortunate Fanny Mae and Freddie Mac. Its bonds will be guaranteed. (That’s the “public” part – “socializing” the risk.) The PPP institution will have the power to buy and renegotiate the mortgages that have passed into the hands of the government and other holders. This “Homeowner Rescue Trust” will use its private funding for the “socially responsible” purpose of “saving the taxpayer” and middle class homeowners by renegotiating the mortgage down from its original $500,000 to the new $250,000 market price.
Here’s the patter talk you can expect, with the usual Orwellian euphemisms. The Homeowners Rescue PPP will appear as a veritable Savior Bank resurrected from the wreckage of Bubble #1. Its clients will be families strapped by their mortgage debt and feeling more and more desperate as the price of their major asset plummets more deeply into Negative Equity territory. To them, the new PPP will say: “We’ve got a deal to save you. We’ll renegotiate your mortgage down to the current market price, $250,000, and we’ll also lower your interest rate to just 5.50%, the new rate. This will cut your monthly debt charges by nearly two thirds. Not only can you afford to stay in your home, you will escape from your negative equity.”
The family probably will say, “Great.” But they will have to make a concession. That’s where the new public/private partnership makes its killing. Funded with private money that will take the “risk” (and also reap the rewards), the Savior Bank will say to the family that agrees to renegotiate its mortgage: “Now that the government has absorbed a loss (in today’s travesty of “socializing” the financial system) while letting let you stay in your home, we need to recover the money that’s been lost. If we make you whole, we want to be made whole too. So when the time comes for you to sell your home or renegotiate your mortgage, our Homeowners Rescue PPP will receive the capital gain up to the original amount written off.”
In other words, if the homeowner sells the property for $400,000, the Homeowners Rescue PPP will get $150,000 of the capital gain. If the home sells for $500,000, the bank will get $250,000. And if it sells for more, thanks to some new clone of Alan Greenspan acting as bubblemeister, the capital gain will be split in some way. If the split is 50/50 and the home sells for $600,000, the owner will split the $100,000 further capital gain with the Homeowners Rescue PPP. It thus will make much more through its appropriation of capital gains (the new debt-fueled asset-price inflation being put in place) than it extracts in interest!
This would make Bubble 2.0 even richer for Wall Street than the Greenspan bubble! Last time around, it was the middle class that got the gains – even if new buyers had to enter a lifetime of debt peonage to buy higher-priced homes. It really was the bank that got the gains, of course, because mortgage interest charges absorbed the entire rental value and even the hoped-for price gain. But homeowners at least had a chance at the free ride, if they didn’t squander their money in refinancing their mortgages to “cash out” on their equity to support their living standards in a generation whose wage levels had stagnated since 1979. As Mr. Greenspan observed in testimony before Congress, a major reason why wages have not risen is that workers are afraid to strike or even to complain about being worked harder and harder for longer and longer hours (“raising productivity”), because they are one paycheck away from missing their mortgage payment – or, if renters, one paycheck or two away from homelessness.
This is the happy condition of normalcy that Wall Street’s financial planners would like to recover. This time around, they may not be obliged to make their gains in a way that also makes middle class homeowners rich. In the wake of Bubble Economy #1, today’s debt-strapped homeowners are willing to settle merely for a plan that leaves them in their homes! The Homeowners Rescue PPP can appropriate for its stockholder banks and other large investors the capital gains that have been the driving force of U.S. “wealth creation,” bubble-style. That is what the term “equity kicker” means.
This situation confronts the economy with a dilemma. The only policies deemed politically correct these days are those that make the situation worse: yet more government money in the hope that banks will create yet more credit/debt to raise house prices and make them even more unaffordable; credit/debt to inflate a new Bubble Economy #2.
Lobbyists for Wall Street’s enormous Bad Bank conglomerates are screaming that all real solutions to today’s debt problem and tax shift onto labor are politically incorrect, above all the time-honored debt write-downs to bring the debt burden within the ability to pay. That is what the market is supposed to do, after all, by bankruptcy in an anarchic collapse if not by more deliberate and targeted government policy. The Bad Banks, having demanded “free markets” all these years, fear a really free market when it threatens their bonuses and other takings. For Wall Street, free markets are “free” of public regulation against predatory lending; “free” of taxing the wealthy so as to shift the burden onto labor; “free” for the financial sector to wrap itself around the “real” economy like parasitic ivy around a tree to extract the surplus.
This is a travesty of freedom. As the putative neoliberal Adam Smith explained, “The government of an exclusive company of merchants, is, perhaps, the worst of all governments.” But worst of all is the “freedom” of today’s economic discussion from the wisdom of classical political economy and from historical experience regarding how societies through the ages have coped with the debt overhead.
How to save the economy from Wall Street
There is an alternative to ward all this off, and it is the classic definition of freedom from debt peonage and predatory credit. The only real solution to today’s debt overhang is a debt write-down. Until this occurs, debt service will crowd out spending on goods and services and there will be no recovery. Debt deflation will drag the economy down while assets are transferred further into the hands of the wealthiest 10 percent of the population, operating via the financial sector.
If Obama means what he says, he would use his office as a bully pulpit to urge repeal the present harsh creditor-oriented bankruptcy law sponsored by the banks and credit-card companies. He would campaign to restore the long-term trend of laws favoring debtors rather than creditors, and introduce legislation to restore the practice of writing down debts to reflect the debtor’s ability to pay, imposing market reality to debts that are far in excess of realistic valuations.
A second policy would be to restore the power of state attorneys general to bring financial fraud charges against the most egregious mortgage lenders – the prosecutions that the Bush Administration got thrown out of court by claiming that under an 1864 National Bank Act clause, the federal government had the right to override state prosecutions of national banks – and then appointing a non-prosecutor to this enforcement position.
On the basis of reinstated fraud charges, the government might claw back the bank bonuses, salaries and bank earnings that represented the profits from America’s greatest financial and real estate fraud in history. And to prevent repetition of the past decade’s experience, the Obama Administration might help popularize a new psychology of debt. The government could encourage “the poor” to act as “economically” as Donald Trumps or Angelo Mozilo’s would do, making it clear that debt write-downs are a right.
Also to ward off repetition of the Bubble Economy, the Treasury could impose the “Tobin tax” of 1% on purchases and options for stocks, bonds and foreign currency. Critics of this tax point out that it can be evaded by speculators trading offshore in the rights to securities held in U.S. accounts. But the government could simply refuse to provide deposit insurance and other support to institutions trading offshore, or simply could announce that trades in such “deposit receipts” for shares would not have legal standing. As for trades in derivatives, depository institutions – including conglomerates owning such banks – can simply be banned as inherently unsafe. If foreigners wish to speculate on financial horse races, let them.
Financial policy ultimately rests on tax policy. It is the ability to levy taxes, after all, that gives value to Treasury money (just as it is the inability to collect on debts that has depreciated the value of commercial bank deposits). It is easy enough for fiscal policy to prevent a new real estate bubble. Simply shift the tax system back to where it originally was, on the land’s site-rental value. The “free lunch” (what John Stuart Mill called the “unearned increment” of rising land prices, a gain that landlords made “in their sleep”) would serve as the tax base instead of burdening labor and industry with income taxes and sales taxes. This would achieve the kind of free market that Adam Smith, John Stuart Mill and Alfred Marshall described, and which the Progressive Era aimed to achieve with America’s first income tax in 1913. It would be a market free of the free lunch that Chicago Boys insist does not exist. But the recent Bubble Economy and today’s Bailout Sequel have been all about getting a free lunch.
A land tax would prevent housing prices from rising again. It is the most hated tax in America today, largely because of the disinformation campaign that has been mounted by the real estate interests and amplified by the banks that stand behind them. The reality is that taxing land appreciation rather than wages or corporate profits would save homeowners from having to take on so much debt in order to obtain housing. It would save the economy from seeing “wealth creation” take the form of the “unearned increment” being capitalized into higher bank loans with their associated carrying charges (interest and amortization).
The wealth tax originally fell mainly on real estate. The most immediate and politically feasible priority of the Obama Administration thus should be to repeal the Bush Administration’s drastic tax cuts for the top brackets and its moratorium on the estate tax. The aim should be to bring down the polarization between creditors and debtors that has concentrated over two-thirds of the returns to wealth in the richest 1% of the population.
If alternatives to the Bubble Economy such as these are not promoted, we will know that promises of change were mere rhetoric, Tony Blair style.
[1] Martin Wolf, “Why Obama’s new Tarp will fail to rescue the banks,” Financial Times, Feb. 11, 2009.
[2] “Geithner at the Improv,” Wall Street Journal editorial, February 11, 2009.
http://globalresearch.ca/index.php?context=va&aid=12265
The War on Terror is a Hoax
By Paul Craig Roberts
Global Research, February 12, 2009
Information Clearing House - 2009-02-04
According to US government propaganda, terrorist cells are spread throughout America, making it necessary for the government to spy on all Americans and violate most other constitutional protections. Among President Bush’s last words as he left office was the warning that America would soon be struck again by Muslim terrorists.
If America were infected with terrorists, we would not need the government to tell us. We would know it from events. As there are no events, the US government substitutes warnings in order to keep alive the fear that causes the public to accept pointless wars, the infringement of civil liberty, national ID cards, and inconveniences and harassments when they fly.
The most obvious indication that there are no terrorist cells is that not a single neocon has been assassinated.
I do not approve of assassinations, and am ashamed of my country’s government for engaging in political assassination. The US and Israel have set a very bad example for al Qaeda to follow.
The US deals with al Qaeda and Taliban by assassinating their leaders, and Israel deals with Hamas by assassinating its leaders. It is reasonable to assume that al Qaeda would deal with the instigators and leaders of America’s wars in the Middle East in the same way.
Today every al Qaeda member is aware of the complicity of neoconservatives in the death and devastation inflicted on Muslims in Iraq, Afghanistan, Lebanon and Gaza. Moreover, neocons are highly visible and are soft targets compared to Hamas and Hezbollah leaders. Neocons have been identified in the media for years, and as everyone knows, multiple listings of their names are available online.
Neocons do not have Secret Service protection. Dreadful to contemplate, but it would be child’s play for al Qaeda to assassinate any and every neocon. Yet, neocons move around freely, a good indication that the US does not have a terrorist problem.
If, as neocons constantly allege, terrorists can smuggle nuclear weapons or dirty bombs into the US with which to wreak havoc upon our cities, terrorists can acquire weapons with which to assassinate any neocon or former government official.
Yet, the neocons, who are the Americans most hated by Muslims, remain unscathed.
The “war on terror” is a hoax that fronts for American control of oil pipelines, the profits of the military-security complex, the assault on civil liberty by fomenters of a police state, and Israel’s territorial expansion.
There were no al Qaeda in Iraq until the Americans brought them there by invading and overthrowing Saddam Hussein, who kept al Qaeda out of Iraq. The Taliban is not a terrorist organization, but a movement attempting to unify Afghanistan under Muslim law. The only Americans threatened by the Taliban are the Americans Bush sent to Afghanistan to kill Taliban and to impose a puppet state on the Afghan people.
Hamas is the democratically elected government of Palestine, or what little remains of Palestine after Israel’s illegal annexations. Hamas is a terrorist organization in the same sense that the Israeli government and the US government are terrorist organizations. In an effort to bring Hamas under Israeli hegemony, Israel employs terror bombing and assassinations against Palestinians. Hamas replies to the Israeli terror with homemade and ineffectual rockets.
Hezbollah represents the Shi’ites of southern Lebanon, another area in the Middle East that Israel seeks for its territorial expansion.
The US brands Hamas and Hezbollah “terrorist organizations” for no other reason than the US is on Israel’s side of the conflict. There is no objective basis for the US Department of State’s “finding” that Hamas and Hezbollah are terrorist organizations. It is merely a propagandistic declaration.
Americans and Israelis do not call their bombings of civilians terror. What Americans and Israelis call terror is the response of oppressed people who are stateless because their countries are ruled by puppets loyal to the oppressors. These people, dispossessed of their own countries, have no State Departments, Defense Departments, seats in the United Nations, or voices in the mainstream media. They can submit to foreign hegemony or resist by the limited means available to them.
The fact that Israel and the United States carry on endless propaganda to prevent this fundamental truth from being realized indicates that it is Israel and the US that are in the wrong and the Palestinians, Lebanese, Iraqis, and Afghans who are being wronged.
The retired American generals who serve as war propagandists for Fox “News” are forever claiming that Iran arms the Iraqi and Afghan insurgents and Hamas. But where are the arms? To deal with American tanks, insurgents have to construct homemade explosive devices out of artillery shells. After six years of conflict the insurgents still have no weapon against the American helicopter gunships. Contrast this “arming” with the weaponry the US supplied to the Afghans three decades ago when they were fighting to drive out the Soviets.
The films of Israel’s murderous assault on Gaza show large numbers of Gazans fleeing from Israeli bombs or digging out the dead and maimed, and none of these people are armed. A person would think that by now every Palestinian would be armed, every man, woman, and child. Yet, all the films of the Israeli attack show an unarmed population. Hamas has to construct homemade rockets that are little more than a sign of defiance. If Hamas were armed by Iran, Israel’s assault on Gaza would have cost Israel its helicopter gunships, its tanks, and hundreds of lives of its soldiers.
Hamas is a small organization armed with small caliber rifles incapable of penetrating body armor. Hamas is unable to stop small bands of Israeli settlers from descending on West Bank Palestinian villages, driving out the Palestinians, and appropriating their land.
The great mystery is: why after 60 years of oppression are the Palestinians still an unarmed people? Clearly, the Muslim countries are complicit with Israel and the US in keeping the Palestinians unarmed.
The unsupported assertion that Iran supplies sophisticated arms to the Palestinians is like the unsupported assertion that Saddam Hussein had weapons of mass destruction. These assertions are propagandistic justifications for killing Arab civilians and destroying civilian infrastructure in order to secure US and Israeli hegemony in the Middle East.
http://globalresearch.ca/index.php?context=va&aid=12272 |
