Matt Taibbi's Great Squid Hunt

In Griftopia Matt Taibbi argues that America has been corrupted by the merger of government and finance.
By Chris Lehmann, The Nation
Posted on December 12, 2010

The epic failure of America's financial system in 2008 was, among other things, a sobering gloss on the American romance with technical expertise. The tidal onrush of securitized debt that kept the housing bubble afloat was more than the simple byproduct of decades of deregulation in the nation's financial sector; it was also the handiwork of a new generation of market analysts known as the Quants. These ingenious souls harnessed arcane financial instruments like collateralized debt obligations (CDO) and credit default swaps (CDS) to magically scrub bad housing debt of all apparent risk as it was traded up the Wall Street food chain.

 The rickety structure was bound to collapse, but the amazing thing is that even though the Quants and all their schemes have been exposed as fraudulent, the cult worship of market savants has gone on unabated. Look no further than the Obama administration, which met the challenge of leading the economy out of the worst recession in seventy years by retaining Ben Bernanke, the Fed chair who'd presided over the meltdown; promoting Timothy Geithner, a principal architect of the shoddy TARP bailout of Wall Street, to treasury secretary; and recruiting Larry Summers, a stalwart advocate of Clinton-era deregulation during his own treasury tenure, as its chief economic adviser. (Summers announced that he would decamp from his post at the head of the Council of Economic Advisers in September, only to return to that other citadel of technocratic hubris he had long ago captained and, not incidentally, helped steer into its own economic peril: Harvard University.) It was a bit like the government subcontracting all future deepwater drilling oversight to BP.

When the idolatry of the market, and market expertise, becomes this perverse and unchecked, the value of a stubborn autodidact like Matt Taibbi stands out in high relief. Heeding the shifting tenor of the times, Taibbi, a contributing editor for Rolling Stone, moved from the campaign beat into finance journalism shortly after the 2008 meltdown. At the outset, he muffed a few things. In his now (in-)famous July 2009 takedown of Goldman Sachs, which placed the investment house at the center of three signature market bubbles—the 1920s joint stock fiasco, the '90s Internet mania and the recent housing Guignol—he overstated the firm's power to drive markets while mischaracterizing crucial Goldman operations such as CDO exchanges as derivatives deals. But despite such missteps—which earned Taibbi the concerted scorn of most of the financial press—the brunt of his argument about Goldman's particular outsize role in the housing debacle has been proven correct, and has gained remarkable traction in our emerging and impressionistic understanding of the past decade of Wall Street larceny. When Taibbi quoted a hedge-fund operator as saying that Goldman's initiative to sell short on the same mortgage deals it systematically inflated in pitches to other investors was nothing less than "securities fraud," the same financial journalists derided Taibbi as an irresponsible naïf—until the SEC charged the bank with securities fraud for constructing just those kinds of deals, in a prosecution that eventually produced the largest civil settlement in the regulatory agency's history. After Goldman-brokered interest-rate swaps proved instrumental in the debt meltdown of the Greek economy in February, Atlantic business and economics editor Megan McArdle's earlier, airy dismissal of Taibbi's reporting on Goldman's hand in the interest-rate markets sounded like a grim joke: "No one, as far as I know, is now proposing that we need to curtail the use of interest-rate swaps." Well, perhaps someone should have.

In Griftopia, Taibbi revisits the whole Goldman saga, and does cop, in very general terms, to his past oversights, noting that in retrospect he and his Rolling Stone editors "left out quite a lot, a problem I've tried to rectify here by adding some to the original text." Happily, though, the pugnacious Taibbi—whom, I should note, I've edited but never met, and have previously defended in my own autodidactic and regrettably imprecise way—doesn't confine his new book to Goldman score-settling. Rather than burrowing further into the financial-press turf wars, Taibbi builds an account of bailout America around a broad indictment of the way the political class and the investor class intersect and sometimes collude. "What has taken place over the last generation," he writes, "is a highly complicated merger of crime and policy, of stealing and government.... The financial leaders of America and their political servants have seemingly reached the cynical conclusion that our society is not worth saving and have taken on a new mission that involves not creating wealth for all, but simply absconding with whatever wealth remains in our hollowed-out economy. They don't feed us, we feed them."

* * *

It's a social contract that transcends the tedious partisan shadow play Taibbi dutifully recorded during the 2008 campaign, and at key points in Griftopia he underscores the painful irrelevance of our political process to the consolidation of a new political economy. The American electoral scene "grounds our new and disturbing state of affairs in familiar forty-year-old narratives," he observes. "The right is eternally fighting against Lyndon Johnson; the left, George Wallace." Meanwhile, "political power is simply taken from most of us by a grubby kind of fiat, in little fractions of a percent here and there each and every day, through a thousand separate transactions that take place in fine print and in the margins of a vast social mechanism that most of us are simply not conscious of."

These fine-grained transactions lie at the heart of the mortgage fiasco. For example, the interest-rate swaps that upended Greece and were a key factor in our housing market's collapse also midwifed an ingenious investment tool called the "CDO squared"—that is, a debt instrument composed wholly of other debt instruments. These contrivances allowed substandard BBB or lower mortgages to get nudged back up into AAA territory; and in the heat of a bubble, all that a broker of fluid capital usually needs to hear is the simple "AAA" incantation to set the geysers loose. As Taibbi explains, the Quants' brave new parcels of repackaged debt were also appealing to international bankers because of their transaction fees, measured in hundredth-percentage "basis points."

Taibbi brings home the dramatically out-of-kilter state of the bubble market by recounting the global investing adventures of an anonymous banker he calls Andy. (As Taibbi explains in a note on sourcing, he grants anonymity to sources in the financial industry in order to protect their professional standing. He uses anonymous sources mainly to confirm already reported details of the meltdown; in only one case—the back-room deal to bail out the moribund American International Group—does Taibbi rely on an anonymous source to break news.) As Taibbi sums up the process, CDO-squared transactions "allowed Andy's bank to take all the unsalable BBB-rated extras from these giant mortgage deals, jiggle them around a little using some mathematical formulae, and—presto! All of a sudden 70 percent of your unsalable BBB-rated pseudo-crap ('which in reality is more like B-minus-rated stuff, since [consumer lending] scores aren't accurate,' reminds Andy) is now very salable AAA-rated prime paper, suitable for selling to would-be risk-avoidant pension funds and insurance companies. It's the same homeowners and the same loans, but the wrapping on the box is different." At the crest of the bubble, another global banker, whom Taibbi calls Miklos, recalls fielding a bond deal offering him fifty basis points above the standard international borrowing rate, known as the London Interbank Offered Rate; he was then able to turn around and repackage the original bonds into a credit default deal with the now-infamous flamed-out-and-bailed-out AIG for ten points above the London rate. In other words, Miklos's bank would collect forty basis points—translating into millions in fees—for nothing more than rechristening debt instruments with different nomenclature. "It was so unreal, my bosses wouldn't let me book this stuff as profit," Miklos says now. "They just didn't believe it could be true." Miklos had lucked into the early part of a global run on these AIG-brokered deals—but it couldn't last. "Suddenly someone is buying like five hundred million dollars of this stuff and getting the same swap deal from AIG," he says. "I'm getting blown out of the water."

It's worth remembering, in the thick of all this surreal detail, that these wild market lurches happened because credit default insurance was completely unregulated: no bank had to show underlying assets to any counterparty, let alone to the public. "Wall Street is frequently compared by detractors to a casino," Taibbi writes in summing up this asinine state of affairs, "but in the case of the CDS, it was far worse than a casino—a casino, at least, does not allow people to place bets they can't cover."

The other deformed stepchild of deregulation in this set piece was, of course, AIG, the firm that became the CDS guarantor of first resort for profit-hungry investors. AIG was once a simple insurance company, but under the dispensation of the 1999 Gramm-Leach-Bliley law, which wiped out New Deal prohibitions against the consolidation of insurers, investment banks and commercial banks, AIG soon morphed into an extremely shortsighted purveyor of securitized debt. (Whether credit default swaps can technically be viewed as insurance is, rather hilariously, still a subject of controversy among state and federal regulators.) The AIG Financial Products division is already a byword for bubble excess in the nation's new financial lexicon; under the deranged leadership of division head Joe Cassano, the financial products team leveraged some $500 billion into the CDS market (thereby permitting Cassano to pocket $280 million during an eight-year period of his twenty-year run of the shop) before the gradual collapse of the housing market caused a run of collateral claims on all the default-swap debt as borrowers defaulted.

Leading the pack of collateral claimants was Taibbi's old nemesis, Goldman Sachs. What's more, as Cassano's division brutally unwound during the crazed 2008 run of Wall Street lenders on the firm, Goldman mounted a pincer-like assault on another troubled AIG division, Asset Management, whose woes jeopardized the health of the company's erstwhile core business of insurance—as well as the scores of state insurance and pension plans that were lashed to the mast of the sinking division. But as Taibbi explains in an illuminating account of the behind-the-scenes negotiations to rescue AIG from oblivion, the run on the company's Asset Management arm didn't really make sense, since its insurance securities, unlike the dismal CDS operation, still retained a good deal of underlying value.

At the time, federal and state regulators urged caution on creditors holding Asset Management paper, but Goldman was having none of it. In the conclave of bankers frantically convened to help determine AIG's fate, Goldman CEO Lloyd Blankfein insisted long and loudly, as one of Taibbi's informants put it, "that he wanted his fucking money." As a result, the deal's overseers faced a Hobson's choice: "Either the state would pour massive amounts of public money into the hole in the side of the ship, or the Goldman-led run on AIG's sec-lending business would spill out into the real world. In essence, the partners of Goldman Sachs held the thousands of AIG policyholders hostage, all in order to recover a few billion bucks they'd bet on Joe Cassano's plainly crooked sweetheart CDS deals."

The ultimate reasons for Goldman's hardline stance are still inscrutable, like much of the detail involving the AIG bailout, though it's hard to dispute Taibbi's dour assessment. In his view, Goldman's AIG ultimatum was like the Mafia's neighborhood business model as laid out in Martin Scorsese's Goodfellas: pump up a local restaurant or bar with supplies extorted from your protection-paying debtors, and when the thing is leached of its last profit, set it afire for the insurance money. "In the end, Blankfein and Goldman...did a mob job on AIG, burning it to the ground for the 'insurance' of a government bailout they knew they would get, if that army of five hundred bankers could not find the money to arrange a private solution." In this, Taibbi argues, Goldman was no different from the shakedown artists pumping out "no down payment" adjustable-rate mortgages to borrowers who had no earthly hope of making their adjusted ARM payments—"the kind of shameless con man who preyed on families and kids and whom even other criminals would look down on.... The only difference with Goldman was one of scale."

Such rhetorical flourishes can often seem excessive, and Taibbi can be something of a Hunter S. Thompson 2.0, both in his exuberant way with profanity (his analytically spot-on chapter on former Fed chair Alan Greenspan, for instance, bears the frattish title "The Biggest Asshole in the Universe") and his penchant for colorful metaphor (thanks to his 2009 Rolling Stone article about Goldman, he and the firm will forever be yoked together on Google with the expression "vampire squid"). Yet Taibbi is correct to insist that at a moment of maximum crisis, when other bankers as well as government regulators were feverishly trying to work out a scheme to stave off a ruinous run on insurance and pension funds, Goldman's behavior in the AIG episode makes sense only as a textbook example of gangster capitalism. And it's hard to avoid the corollary conclusion that a federal economic team that has extravagantly rewarded this bottom-feeding operation with virtually free money at the Fed discount window is a hopelessly corrupt police force, of the sort moviegoers might recall from Serpico or Training Day.

* * *

It bears reminding that throughout the nation's history, the lords of finance have not hesitated to ransack the economy during a national emergency. In 1895, for instance, the nation was suffering an acute contraction of gold reserves, under the administration of Grover Cleveland—another stolid probusiness Democrat in the Clinton-Obama mold. As the nation's bankers hoarded their private reserves of gold, Cleveland grew increasingly desperate in his efforts to persuade investment titans to negotiate a gold-backed bond sale in order to prevent the already ruinous financial panic from escalating to a full-scale depression. Enter the financier J.P. Morgan—whose name lives on, fittingly enough, in Morgan Stanley, which together with Goldman is the only investment banking colossus left standing after the '08 calamity. Through his firm's extensive connections in London, Morgan assembled a syndicate of global bankers to rig a $65 million government-issued bond sale at what was then an unheard-of rate of 3.75 percent. When the hapless Cleveland staged an eleventh-hour meeting with the banking titan, a Treasury official informed him that, in the wake of the latest run, New York gold reserves had dwindled to $9 million. At that point, Morgan interjected: "Mr. President, the Secretary of the Treasury knows of one cheque outstanding for 12,000,000 dollars. If this is presented today it is all over."

Cleveland promptly caved to Morgan's demands; the overnight yield on the deal for the Morgan syndicate was placed at somewhere between $5 million and $9 million—real money back in 1895. Plus, there was an abundance of longer-term returns, which in structural terms at least, closely parallel the sort of deal-making Taibbi describes at the dark heart of the housing bubble some 110 years later. The Morgan "syndicate borrowed exchange in London, on its own credit, and thus sold bills for American currency, pegging the world exchange rate of the dollar at a point favorable to their gold operations," wrote muckraking journalist Matthew Josephson in his chronicle of the episode. "Morgan also supervised and controlled for several months the gold reserve of the Treasury. Every banking house and exchange dealer in New York having important European connections was bound to the undertaking by being given an allotment of the syndicate's bonds at profitable rates."

In retrospect, even Cleveland—a diehard gold bug—blanched at the scope of the shakedown. "I am afraid as we triumph our party loses and the country does not gain as it should," he confided to Thomas Bayard, the US ambassador to Britain. The insurgents within Cleveland's Democratic Party took a much harsher view. When the Morgan deal was announced, Nebraska Congressman William Jennings Bryan—a bitter foe of the gold standard who would supplant Cleveland as the party's national leader the following year—rose on the floor of Congress to denounce it as an illicit deal "with the representatives of foreign money loaners. It is a contract made with men who are desirous of changing the financial policy of this country...they come to us with the insolent proposition, 'we will give you $16,000,000, paying a proportionate amount each year, if the United States will change its financial policy to suit us.' Never before has such a bribe been offered to our people by a foreign syndicate."

The chief distinction between the present Gilded Age and its nineteenth-century forerunner is that the lines of extortion are reversed. Whereas Morgan and other private bankers used their own ample access to credit and gold reserves to shore up the public treasury on the most favorable terms they could dictate, now capital-starved lending institutions turn on one another in the scrum for government bailout money.

Also, Congress no longer harbors any crusading populist reformers like Bryan. Instead, we have the pasteboard populism of Tea Party conservatism, which tirelessly advertises its superior heartland virtues in pursuit of banker-friendly tax policies. As Taibbi dryly notes, one key bailout deal—the government-orchestrated merger of the failed Wachovia Bank with Wells Fargo—was announced on October 12, 2008, "the same day that Barack Obama had his infamous encounter with Samuel 'Joe the Plumber' Wurzelbacher in Ohio. When the last McCain-Obama debate took place three days later...there was plenty of talk about which candidate was a bigger buddy to middle America's plumbers, but neither man bothered to mention that week's sudden disappearance of the country's fourth-largest commercial bank."

Nor did either man note the exceedingly generous terms that Treasury Secretary Hank Paulson used to induce Wells Fargo to swallow Wachovia's toxic debt: $25 billion in bailout funds, together with an alteration in the tax code to net Wells Fargo another $25 billion or so. In other words, Taibbi writes, "America's fourth-largest bank goes broke gambling on mortgages, then gets sold to Wells Fargo for $12.7 billion after the latter receives $50 billion in bailout cash and tax breaks from the government. The resulting postmerger bank is now the second-largest commercial bank in the country, and, presumably, significantly more 'systemically important' than even Wachovia was. Fattened by all this bailout cash, incidentally, postmerger Wells Fargo would end up paying out $977 million in bonuses for 2008."

A populace habituated to a bubble economy and a political system fattened by its spoils isn't equipped to process a bubble's inevitable bursting. As Taibbi writes in the bleak concluding pages of Griftopia, the financial crisis briefly "forced a nation of people accustomed to thinking that their only political decisions came once every four years to consider, for really the first time, the political import of regular or even daily items like interest rates, gasoline prices, ATM fees, and FICO scores." And that, he rightly notes, isn't a thinkable outcome for the leaders of the American financial oligarchy. "If the people must politick," as he paraphrases their thinking, "then let them do it in the proper arena, in elections between Wall Street-sponsored Democrats and Wall Street-sponsored Republicans. They want half the country lined up like the Tea Partiers against overweening government power, and the other half, the Huffington Post crowd, railing against corporate excess. But don't let the two sides start thinking about the bigger picture and wondering if the real problem might be a combination of the two."

If this deadlock is ever to be broken, Taibbi's angry, astute and detailed indictment is a great starting point for citizens looking to shake off the past decades of pseudo-populist stupor stoked by the leaders of both major parties. Should the mobbed-up status quo continue to hold, well, then we should all recall that Martin Scorsese's de facto sequel to Goodfellas was Casino.

The Rise of the Wall Street Ruling Class

The Largest Welfare Check Ever Written
By THOMAS VOLSCHO

Who rules America? Sociologists and political scientists have debated this question since C. Wright Mills published his 1956 book The Power Elite. Writing in the 1950s, Mills argued that the United States was ruled by a triangle of power between the federal government, large corporations, and the military industrial complex (with many people moving between these sectors). Robert McNamara went from CEO of Ford Motor Company to Secretary of Defense under the Kennedy-Johnson administrations (modern examples include Dick Cheney, Henry Paulson, Robert Rubin, Larry Summers, etc). Since the late 1960s, sociologist G. William Domhoff has revised, updated, and increased the sophistication of power elite theory. If we look at the composition of cabinet-level and other White House appoints since the Reagan administration, it is clear that there is a significant movement between Wall Street and the Federal Reserve Bank and Treasury Department. But why? The answers are found in the social and economic crises of the 1960s and 1970s.

The rate of profit in the non-financial sector fell after peaking in 1966 and continued its fall into the mid 1970s. At the same time, the Civil Rights, anti-war, feminist, brown power, black power, American Indian Movement, student revolts, prison riots, and other rebellions against the establishment were taking place. Regulatory victories by Ralph Nader and other challenges to the power of the capitalist establishment were increasingly seen as a threat in the 1970s. Lewis F. Powell (a corporate lawyer, board member, and future Supreme Court Justice) wrote a memo to the Chamber of Commerce in 1971 and opened the document by stating, “No thoughtful person can question that the American economic system is under broad attack.” But what was most alarming was that “ Although New Leftist spokesmen are succeeding in radicalizing thousands of the young, the greater cause for concern is the hostility of respectable liberals and social reformers.” The great fear was that mainstream liberals were becoming more radical. A further fear was that Yale's graduating classes (composed of old and new money and elites-to-be) in the late 1960s and 1970s included those who were versed in the “politics of despair.”

In response capitalists mobilized politically and ideologically. By 1976, the U.S. Chamber of Commerce's membership started increasing rapidly and doubled by 1980. In 1975, there were just under 200 Corporate Political Action Committees (PACs) but about 1400 by 1981. The ideological factions of the right in the late 1970s included Supply-Siders, Monetarists, and Neoconservatives. Each of these factions were in power at the Treasury Department, White House, and Federal Reserve Bank beginning in 1979. While they didn't necessarily always get along, they put policies into place that led to the rise of the Wall Street Ruling Class.

Supply-siders argued that radical tax cuts would increase economic growth so much that it would actually increase government tax revenues. This theory (known as the “Laffer Curve”) was drawn on a napkin at a bar and then presented in editorials in the Wall Street Journal. One of Reagan's wunderkind, Office of Management and Budget David Stockman, confided to a Washington Post reporter (William Greider) that Reagan's tax cut was really a “trojan horse” for cutting taxes on the rich.

At the same time, monetarists believed that the only cause of inflation was the money supply. Beginning in October 1979, one of the first applications of the “shock doctrine” came in the form of very high interest rates. The vague proclamations of the Federal Reserve Banker, Paul Volcker, that the Fed was only focusing on M1 (a measure of money supply) and that the Fed's hands were tied such that it was “the market” that determined interest rates was sold to the public. What this really was, was “bitter medicine” and Volcker was quoted in the New York Times as saying that Americans must get used to declining living standards. In essence, the Federal Reserve Bank was implementing the “shock and awe” phase of the first-strike of a thirty year class war.

In 1981 Reagan signed the “Kemp-Roth” tax bill about a week after he had taken the radical step of firing 11,000 striking federal air traffic controllers. This was accomplished within the context of the highest interest rates and subsequent unemployment rates of the postwar era (in 1981-1982). This strategy, as explained by Naomi Klein in her book The Shock Doctrine, requires that radical policy shifts must occur when the public is disoriented and confused. High interest rates, business failures, foreclosures, plant closures, downsizing, and rising unemployment can have this effect. The interest-rate shocks enabled elites to pursue radical anti-union policies and radically reduce taxes on the rich. At the same time, neoconservatives argued that “missile gaps” and “acoustic submarines” (the inability to detect them being given as evidence for their existence) developed by the Soviet Union were posing a major threat to the United States. This justified unprecedented defense spending increases. One of the failed moments of the Reagan revolution, of course, was the decision not to pursue “Social Security reform” while only having limited success at cutting other social programs. This left a problem. Tax cuts for the rich reduced the tax revenue of the Federal government while a defense-spending spree threatened to create the largest federal deficit in history.

In a widely ignored 2000 book, Wall Street Capitalism: A Theory of the Bondholding Class, economist E. Ray Canterbery explains what happened. The tax cuts drastically increased the incomes of the rich and they used their newfound money from the tax cuts to buy the Treasury bonds, notes, and bills that the Treasury Department had to issue in order to finance Reagan's deficits. The combination of monetarism (high interest rates), supply-side tax cuts, and the phantom Soviet threat created the bondholding class. In essence, a Wall Street Welfare institution known as the bond market came to dominate politics in the United States. Instead of using taxes to fund the federal government (and increasingly state and municipal governments), taxes on the rich were cut and they were handed an “investment opportunity” so that working and middle-class taxpayers now pay a “bondholder's tax” to firms like Goldman Sachs and JP Morgan Chase (as well as Japan and China). The domination had become quite apparent in early 1993 when President-elect Bill Clinton remarked "You mean to tell me that the success of the economic program and my re-election hinges on the Federal Reserve and a bunch of fucking bond traders?" Clinton ditched his 1992 campaign promises to the whims of the Wall Street Ruling Class and the Federal Reserve Bank.

Treasury securities come in maturities of 1 month, 3 months, 3 years, 7 years, 10 years, and 30 years. But rarely does the bondholding class hold their securities to maturity. Instead, they are circulated through high-volume secondary markets. In October of 2010, for instance, the average daily trading volume of Treasury bonds was $558 billion. Treasury, State, and Municipal bonds are highly concentrated among the rich. In the 2007 Survey of Consumer Finances, the Top 5 percent (ranked by net worth) held about 93.6 per cent of all bonds (this does not include the savings bonds that the working and middle classes are familiar with). Likewise, the Top 5 percent owned 82.4 per cent of all stocks. The bondholding class oscillates between bonds and stocks as market conditions dictate. The Wall Street Ruling Class manipulates the supply of bonds, bills, and notes of differing maturities through its “Treasury Borrowing Advisory Committee” to maximize the economic gains of the bondholding class. The current Chairman and Vice Chairman are from JP Morgan Chase and Goldman Sachs, respectively.

By implementing what Canterbery calls a “bondholding class strategy,” the Federal Reserve Bank managed interest rates so as to optimize returns for the bond and stock market. Studies indicate that bond prices and the stock market generally react negatively to what is good news for most Americans: strong employment growth, a decline in jobless claims, an increase in wages, or an uptick of inflation sends bond and stock prices falling. When news reports of slower housing starts, slower than expected employment growth, an increase in unemployment or jobless claims are released, the bond and stock markets rally. This is a major difference in the class interests between the vast majority of Americans whose primary income is from wages and salaries and the minority of rich asset holders. When the economy grows too fast, the ideology of the bondholding class dictates that the Federal Reserve Bank should raise interest rates (which increases the unemployment rate and reduces wages). Keep wage and commodity inflation in check by all means necessary while allowing for stock market and home mortgage inflation.

The last thirty years of the class war waged by the Wall Street Ruling Class and the Federal Reserve Bank has been about reducing wages and goods inflation while sustaining financial asset inflation to increase the enrichment of the bond and stock holders. Net interest payments on Treasury securities are welfare payments to the Wall Street Ruling Class. One of the propaganda functions of the highly concentrated (by ownership) mass media is to keep the masses confused about this great source of power. From the perspective of the elite, it is better to inflame and encourage hatred for Mexican immigrants, welfare recipients, and Muslims. But Mexican immigrants and Muslims, generally speaking do not run the country. Instead, the simple answer is: follow the money. By following the money you will be led to a street with a river at one end and a graveyard at the other. In fact, it is for whom the firms located on this street received the largest welfare check ever written. As the chorus of Ron Paul supporters, Tea Party activists and white supremacists continues rising and violence escalates, the question arises: Is there socialism in the United States? The answer is a resounding Yes! Socialism for the rich.

Why Judicial Corruption is Invisible

Institutional Rot
By JOHN BARTH, Jr.

We all would like to believe that, as when we were children in a family, there is in our society a final authority to whom we can turn in case we are seriously wronged. We are not predisposed to believe the accusers of the judicial process any more than the detractors of Santa Claus. Perhaps critics are merely sore losers or angry convicts, and perhaps judicial misconduct would be exposed by appeals courts or the mass media, and corrected. Why guess our way without the facts? Such pre-dispositions held by many otherwise educated adults allow pervasive institutional corruption of the judicial branch to remain hidden.

Judicial corruption is invisible to citizens, because lawyers are trained and motivated to deny and cannot safely speak of it, because mass media corporations agree with judicial prejudice and live in fear of judicial whims, because non-lawyers cannot obtain the facts without prohibitive cost and effort, and because the infantile myth of judicial salvation has broad appeal and is propagated as an opiate by the mass media. Judicial corruption is discovered by those of its victims willing to do years of tedious research, and only they will speak of it.

Lawyers do not speak against judges, on whom they depend for income stability and success, and often aspire to be judges. They do not criticize law practice and precedent, which they are selected and trained to accept regardless of validity, and which they could not otherwise use successfully. The mass media are silent because they and their advertisers are big businesses in agreement with judicial prejudice, advised by lawyers, and dependent upon judicial whim for protection from libel suits. They do not investigate judicial corruption.

The persistent citizen can only see judgments written by the selected winner to sound plausible. The other facts and argument are costly to obtain, and mountains of cases must be studied in each area to see how rules are misapplied and facts fabricated, and how false "principles of law" are abstracted from bad precedents. So we are dependent for information upon rare lawyers like Gerry Spence and the few independent citizens with persistent involvement in federal cases.

I had once sponsored a dozen orphans in Latin America, and had acquired the campus of the former Nasson College in Maine to establish an independent nonsectarian coeducational school, whose students would sponsor about 2000 orphans in developing nations to teach responsibility to the less fortunate, using my engineering income and extensive study of the founding and administration of schools. After twenty years of planning and renovating buildings, all this was destroyed by the nearby town encouraging the racing of ATVs on an abandoned railroad bed alongside the school. Many ignorant villagers had long harbored malice against the middle class, outsiders, and the former college, which they transferred to our school to preserve their devil. Dozens and later hundreds of them created an intolerable noise nuisance (92 to 112 dBA at the center of the campus) and committed hundreds of crimes annually large and small, including murder attempts, arson, ransacking our buildings, rifle fire into the campus, destroying all of our vehicles, and grand theft, to prevent us from using our facilities, with the enthusiastic help of their town government. The causes named were "elitism", "outsiders", and conflation with the hated college, but the motives were the local recreation of bullying, harassment, vandalism, and gang activity. After several years of social amelioration, political efforts, and enforcement, matters had only become worse. All laws and sensible precedents were on our side. Any honorable court would have jumped at the opportunity to defend a charity from such obvious wrongdoing.

But there were no honorable courts. I discovered in the eight-year legal battle to defend the school's right to use its facilities, that the judiciary is utterly corrupt from bottom to top, so completely that I would not have undertaken the defense, or my life-long effort to found the charity, if I had suspected the staggering corruption exposed. I had been deceived by popular myth and my belief that wrongs would be corrected where there was great gain to society and no significant cost. The experience of defending Springvale School against the hoodlums and town government of Sanford, Maine, and researching and fighting the legal cases all the way to the supreme court of Maine, and three times to the US Supreme Court, taught me not only the relevant law and procedure, but more about the corruption of the judicial branch than most want to know. The pervasiveness of such corruption had been invisible to me throughout my life and these efforts of so many years.

The Motives of Judicial Corruption

The motives of judicial corruption are the prejudices of wealth and power shared by judges, lawyers, and favored parties; the concealed economy of favors between lawyers and judges; and actual bribes by indirect cashflows.

The prejudices common among judges and lawyers favor interests and parties with whom they share beliefs, circumstances of ethnicity, sex, or income, and aspirations of wealth, power, and prestige. Most struggle for upper class luxuries to measure up and overcome guilt: the grand residence, Mercedes, second homes and finest restaurant meals. Rejecting as unprofitable the moral dedication which deserves respect, they pretend that money and power measure respectability, that people without those merit contempt, that their duty is to trash cases without lawyers, and see that big businesses, wealthy persons, and sometimes government agencies (in that order) win their cases regardless of the facts. They do not criticize judges without major public pressure, and they do not defend constitutional rights against government or business unless the public is in rebellion. The many ordinary cases which do not trigger judicial prejudice conceal an underground river of prejudice. Law firms must match lawyers to the ethnicity and sex of the judge, and often try to match physiognomy, personality, and preferred style.

There is a concealed economy of favors and intangible benefits which influences judgments either through the judge or between opposing lawyers. This is apparent with long observation of the conduct of lawyers and judges. Lawyer favors to throw the case include technical mistakes, poor arguments, concessions, and omissions. Judge favors include the means of corrupt judgment stated. Lawyers and judges often "owe you one" and pay up invisibly.

The least quantifiable corruptions are bribes by indirect cashflows via law firms, relatives, and seemingly unrelated transactions. Judges, lawyers, law partners, and their relatives and agents have many investments which may be more or less favorable if someone "owes one", before or after a case has been thrown. A simple case is the judge's relative with high-profit speculations such as land, art, or securities. Smaller cashflows buy false transcripts and critical secretarial errors such as lost evidence and delays.

The Hypocrisy of the Judiciary

Although the middle class is threatened primarily by subsidies of the wealthy like wars, financial scams, inflated healthcare, and lawsuits, many are recruited to serve their exploiters by promises of wealth, and hypothetical threats like terrorists, communists, fair taxation, and social welfare programs. Within the judiciary and among lawyers, as within large business corporations, middle class aspirants see the path to wealth and power impaired by virtue and cleared by hypocrisy, and become evangelists for their overlords, despite their own middle class status and prospects. Most judges and lawyers seek to please and protect the wealthy and powerful, and will betray every moral code and public duty to humanity, in hope of advancement and indirect bribes. Most pretend to believe, and religiously ensure, that wealth and power to help or harm themselves should decide all legal contests.

There is a natural hierarchy of contempt among those who have earned little, but hold wealth or power by accidents of birth and business, or by collusion and scheming. Throughout history wealth and power have concealed their true sources, seeking to sanctify themselves by acquiring symbols of respectability, and creating myths of superiority of race or class. If wealth and power are the measure of respectability, then less is less respectable, and little is contemptible, unless in the service of wealth and power. And so most judges and lawyers believe that those who do not have the wealth and power to help or harm them deserve to lose their rights.

The Means Of Corrupt Judgment

It is usually a simple matter for a judge to choose the most wealthy or powerful party in a legal case, or the outcome which serves himself, and to allow or dismiss the case, corrupt the facts, and instruct the preferred side to write a judgment within the pseudo-law of precedents and rationalizations favorable to the wealthy, which is the chief product of lawyers.

The simplest corruption is systematic abuse of procedure rules to allow or dismiss cases. For example, a judge claims format defects, demands removal of the critical claims, facts and arguments, and dismisses the case as too lengthy if the plaintiffs refuse, or for insufficient fact if they comply. The judiciary does not allow appeals of fact judgments or dismissals for format issues, so as to establish themselves as an unconstitutional aristocracy, and outsiders cannot find the truth.

The next stage of judicial corruption is false statement of the facts. The judge simply states a false set of "facts" which would lead any other court to the desired conclusion, and the resulting judgment not only looks plausible but cannot be appealed. The corrupt side submits the judgment you will be allowed to see, which is rubberstamped without effort or risk of appeal. Any case not favored by the judiciary requires a jury trial and an intense battle over evidence, but the judge simply refuses to admit evidence which contradicts his prejudice. If enough facts are deleted, the case is given his "summary judgment" without trial. If tried, the outcome is determined by the false picture of fact.

Any cases remaining to be thrown are corrupted by false legal arguments. Judges and most lawyers spend their lives creating and searching for plausible deceptions and rationales for the most selfish and wrongful acts, which they celebrate as a professional skill. These are concealed by stating and misapplying corrupt "principles of law" from prior inadequate, irrelevant, and corrupt judgments. Threads of bad precedents form a fabric of false legal "principle" leading to any result desired, just as better precedents form reasonable legal arguments. So the resulting corrupt judgment seems logical and in accord with tradition despite irrational results, and reinforces the bad precedents. As "case law" accumulates to favor wealth and oppose the rights of citizens, the whole body of legal precedent becomes irreparable, and ever more defended by its adherents.

Corrupt Judges Destroy the Lives of Thousands

The legal contest between my charity school, Springvale School, and a small town in Maine went on for eight years, one case to the Maine supreme court and three cases all the way to the US supreme court, but none of the civil rights issues ever emerged in court, due to judicial prejudice that towns (and the US) beat charities regardless of the facts. "They're just going to dismiss it anyway" said the clerk of the federal court. Civil rights complaints were systematically dismissed, ordered to delete fact or argument until insufficient, or falsely claimed to be identical to prior cases. Nearly every statement by the many judges and lawyers involved was an astounding lie about the facts or the arguments, excuse after cover-up after excuse, the principal life skill of the judges and lawyers. The evidence is conclusive in case after case after case: corruption and only corruption drove the process. The result of this corruption was that the school could not be opened, even as its facilities were becoming ready for use.

The denial of fundamental rights to a charity is the lowest form of hypocrisy. The searching for pretexts to do so proves the intent of vindictive hypocritical attack upon the foundations of civilization. Such intent on the part of a judge indicates the most extreme abuse of public trust, and is grounds for removal and barring from any position of responsibility. The judiciary has established an hypocrisy and arrogance so extreme, that to spare themselves one second of work they would destroy the life of an orphan.

This is an utter disgrace to the judiciary, the cold-blooded destruction of lives like our own, for no gain and no principle of justice, at a rate seven times the murder rate for the entire state of Maine, which will now continue forever. Ten thousand children’s lives every fifty years. There is nothing more I can do to save these children; the judiciary has destroyed them. There is no particle of honor nor decency in the being of any of the numerous judges and lawyers; their hypocrisy, corruption and wickedness are absolute. Be proud, America: neither I, my school, nor any citizen can defend civil rights unless the denial of defense threatens the wealthy.

The Myth of Judicial Defense of Constitutional Rights

A first look at the failure of the federal government to enforce the constitutional rights of individuals suggests that the political will disappeared after the early federal era, with the transition from farming to trade, industrialism, and the lead-up to the Civil War. But the Bill of Rights was an afterthought tacked on to the Constitution to keep the more principled and educated delegates in the fold. To the majority who wanted the military security and economic gains of union, it was a pleasant declaration of noble sentiments, with little risk of actual enforcement.

The Constitution specified no means of enforce the Bill of Rights, and federal courts denied for almost a century that they had that power without specific federal laws, and then refused to enforce the Civil Rights Act of 1872 for almost another century. When they did enforce, they were motivated solely by the fear of increasing riots in the streets, rebellion threatening the wealthy and powerful. And they promptly afterward eviscerated the principle in those decisions to prevent less powerful minorities from enforcing the same general rights.

The wealthy and powerful of industrial democracies have little need for individual rights, a costly inconvenience in business: they can buy influence and respect, and their interests are granted as needed by sympathetic judges. Judges loudly declare their defenses of constitutional rights for the rich and powerful, and for others only when they are sufficiently numerous and angry that judges must appease them, but scorn the same rights when asserted by the poor, the few, or those without a voice.

Unfortunately, the Constitutional Convention also neglected to provide significant checks and balances upon the judicial branch. There were to be only 12 federal judges then versus about 900 today, and the much greater numbers of the Legislative and Executive branches, who controlled judicial pay, suggested to the delegates that the Judicial branch had better behave. The Constitution provides only that “judges shall serve during good behavior” without providing a definition or specifying who would exercise that power. So the judicial branch created a Judicial Conference in judgment of itself, denies that any other branch may provide checks and balances of itself, and claims privately to be an aristocracy prohibited by the Constitution and serving only themselves. Nothing could be further from the intent of the framers of the Constitution.

What Reforms Are Needed?

Numerous problems have emerged with the judicial branch of the federal government since its formation under the Constitution, some dealt with by legislation such as 28 USC. But fewfundamental reforms have been made to meet its many deficiencies. Law is now the only profession subject to no effective standard of performance, no reporting or monitoring to prevent corrupt practices, and no effective recourse for its malpractice victims. Fundamental reforms are long overdue.

There are inherent problems with any justice system regardless of reforms, such as problems of evidence quality, and conflicting principles of justice in complex situations, where any solution may seem arbitrary. Reform cannot change the fact that one side wins and the other loses. But many serious problems can be solved by well proven methods to improve the quality of justice.

Citizens, lawyers and courts must have access to a federal Legal Advisory Service, to provide mandatory guidelines for conduct and judgment, both in general and for any specific case, based upon multi-partisan research and reports compiled by a College of Legal Advisors in the legislative branch, structured to guarantee diversity of opinion. Judges and lawyers must be strictly monitored for compliance with the guidelines for judgment, and their financial and all other transactions reported and monitored for corrupt influence. Procedures must eliminate the ability of lawyers, police officers, and crime labs to influence evidence according to their prejudices. Citizens must be enabled to conduct actions without a lawyer by procedures ensuring that the best professional advice is available and that no tricks or penalties can be imposed, with a lawyer assigned at public expense when meritorious. No lawyers may be required for small or nonprofit corporations or class actions. Maximum lawyer fees must be regulated by type of case, service performed, and quality of work. No action should be dismissed without judgment on the merits. Appeal of any judgment including findings of fact should be allowed at least twice with judges of distinct legal philosophy, with or without new evidence or legal theory.

Except during public emergency, any government entity must be allowed to be sued without its consent and without recourse to any immunity statute or special procedures, for all offenses including negligence, failure to enforce and selective enforcement. By a new form of action, limited only to prevent redundancy, a citizen should be allowed to sue any government entity including the judicial branch for noncompliance with law, without its consent and regardless of any involvement of the party bringing suit, and no judgment thereunder in favor of government should be final.

In addition, the personnel of the judiciary, lawyers, and the instructors and administrators of law schools must be thoroughly cleansed. Most are just the wrong people with the wrong motives to perform these functions. They have selected their careers and have caused these problems for personal gain, and have mastered skills which would enable them to ruin any reform and to restore their corrupt aristocracy. Their complete removal and replacement, regardless of the delays involved, would not cause significant injustice in comparison with the existing system in operation. The reforms of legal education and judge selection recommended by Gerry Spence in With Justice For None are good starting points.

Most of the existing body of "case law" must be discarded as the foundation of judicially fabricated "principles" on which corruption is based. The process of deciding cases on the basis of precedents is poor because Congress has legislated few guidelines. That situation can be corrected by the College of Legal Advisors, using the best legal precedents as the basis for legislated principles of law.

If these reforms are done well, the judicial branch could begin to serve the people rather than the wealthy and itself.

Phone Companies' $100 Billion Rip-off -- Where Is That Hidden $6 a Month Going in Our Phone Bills?

The phone companies are soaking all of us for a good chunk of money every month, and they're allowed to conceal it in the fine print of your monthly bill.
By David Rosen and Bruce Kushnick, AlterNet
Posted on December 11, 2010

Next time you open your phone bill, check out the numerous anonymous charges listed on it. In particular, note the one identified as the "FCC Line Charge" or the "Federal Subscriber Line Charge" (SLC). Ask yourself two questions: What is it for and why am I paying it?

If you look at your bill, you'll likely have a hard time finding the SLC. Each state's phone billing method is different and the SLC is often hidden in what is labeled the "taxes and surcharges" section or the "monthly service" section -- or completely missing but added to the bill.

[An example of an SLC can be found at http://www.newnetworks.com/dirtyphonebill.htm]

The SLC is a monthly fee imposed on every residential and business wireline phone customer. The FCC permits telephone companies to charge subscribers a fee which was originally intended to help them recoup part of the cost of having phone lines connect from the customer's home and office to a long distance service provider. It is currently capped at $6.50 a month for residential and businesses; multi-line businesses fees are up to $9.20 per month.

At the end of 2010, the U.S. will have an estimated 160 million business and residential telephone lines. Since 2000, it is estimated that the phone companies have pocketed about $100 billion or an estimated $750.00 per line through the SLC and have done little to benefit the customer.

Few known that, no matter what it is called, the SLC is not a tax, it is not a surcharge, it is not part of local service and - whatever it name implies -- it does not go to fund the FCC or any government. It is a direct subsidy to your telephone or wireline telecommunications provider; and, adding insult to injury, your pay taxes on this charge.

The SLC was originally created nearly three decades ago through a massive campaign called "CALLS," i.e., the Coalition for Affordable Local and Long Distance Service. CALLS is the model for what is known in the telecommunications world as "regulatory capture," the process by which the phone companies, astroturf shills and co-opted consumer groups have, in effect, taken control of the FCC and state Public Utilities Commissions (PUCs). [The CALLS regulatory capture is the subject of an upcoming article.]

* * *

The FCC first imposed line charges on telephone customers in 1984 in the wake of the breakup of AT&T. Then, AT&T was the largest company in the country serving as a regulated monopoly over 80 percent of U.S. telephone households, controlling 22 local phone companies as well as long distance service. Faced with an antitrust challenge from a tiny upstart, MCI, and others, AT&T, through a civil suit settlement, was broken into seven regional phone companies, the "Baby Bells"; AT&T and MCI would be long distance phone companies.

The SLC is part of a group "Access Fees" that the long distance telephone company pays the local telephone company for the use of or "access" to the parts of the local network necessary to complete a long distance call. They were originally designed to subsidize long distance costs of the local networks and it was passed through to the customer as an add-on to their monthly phone bill. The initial charge, imposed in 1985, was $1.00 per month; by 1992, it had increased to $3.50 per month; in 2000, it was again raised and capped at capped at $6.50 in 2004.

Access charges were fixed at a rate of return of 11.25 percent. However, based on company-supplied information, in 2007, AT&T, Verizon, Qwest and the other phone companies had profit margins more than three times great or 37.5 percent.

Adding insult to injury, New York wireline customers, for example, pay over 30 percent for an assortment of taxes, including the Universal Service Fund set at 15.2 percent.

As phone bill fees have steadily gone up, the cost of offering service has dropped - and, over the last two decades, the telecom companies have become enormously profitable. First, they cut employees-per-line costs by an estimated 65 percent and, over most of the last decade, they cut new construction costs by half. Second, since 1991, the original phone networks that were given to the Bell companies have been written-off and these companies continue to write-off more new construction than they replace.

The telecom's profitability is not simply an example of gouging the customer, but has social consequence: it is harming the economy. Excess profits are one of the reasons that the U.S.'s high-speed broadband and wireless services are inferior to that of the other developed countries.

* * *

The FCC adopted the SLC fee through the CALLS process, a very dubious procedure. At the time, former FCC commissioner Harold Furchtgott-Roth raised serious questions about the proceedings under which the charges were accepted. As he wrote in his dissent:

In the early part of [2000], [the FCC] held a series of meetings with a select group of some - but by no means all - of the parties with interests in this proceeding. And a number of parties with interests in the outcome of this proceeding, including the Ad Hoc Telecommunications Users Committee, Time Warner Telecom, and the Association for Local Telecommunications Services, (ALTS, the competitive carrier association) were not allowed to participate.

[I]t is undeniable that the [SLC] proposal was a product of the negotiations that took place between the Commission and those parties that were allowed to participate in the negotiations - that is, members of the Coalition and some groups that purport to represent the interests of residential and small-business consumers.

Commissioner Furchtgott-Roth's suspicions only get darker when assessed against the FCC's assurance that it would initiate and complete before July 1, 2002, a cost review to ensure that consumers were not overpaying for their telecom services. In 2002, FCC Commissioner Michael Copps identified the inherent problems associated with the SLC:

I am troubled that consumers will face an increase in the line charge of their local bill without the Commission undertaking a thorough analysis of forward-looking cost data. The Commission [has] failed to conduct its own independent analysis of the cost data. By failing to undertake the thorough analysis of cost data that was promised in the access reform order, we are neglecting our obligation to consumers.

Now, a decade later, the FCC has yet to conduct a cost review and the telecom companies have continued to pocket billions of dollars. Rumors are circulating that, under the FCC's new National Broadband Plan, the SLC fee will rise to $10.00 a month.

Next time you open your phone bill, check out the list of taxes and surcharges you pay every month. Ask yourself two questions: What are these charges for and why do I continue to pay them? If you feel ripped-off, focus your anger at the telecom companies, the regulators and the paid shills who promote corporate interest as the public good.

In a time of economic crisis, consumer interests should take priority over those of unearned corporate profits. And to meet the public good, telecommunications companies should once again become public utilities.

[Note: New Networks and Teletruth have filed multiple complaints pertaining to truth-in-billing violations of the FCC Line Charge:

http://www.teletruth.org/docs/FCC LineChargeTIB.pdf]

Douglas Rushkoff: Internet was never free or open and never will be

Author: If Americans want a truly free network, 'we've got to build it from scratch'
by Nathan Diebenow
Sunday, December 12th, 2010

Secrets outlet WikiLeaks' continuing struggle to remain online in the face of corporate and government censorship is a striking example of something few truly realize: that the Internet is not and never has been democratically controlled, a media studies professor commented to Raw Story.

"[T]he stuff that goes on on the Internet does not go on because the authorties can't stop it," Douglas Rushkoff, author of Program or be Programmed: Ten Commands for a Digital Age and Life, Inc.: How Corporatism Conquered the World and How to Take it Back, said. "It goes on because the authorities are choosing what to stop and what not to stop."

Rushkoff told Raw Story that the authorities have the ability to quash cyber dissent due to the Internet's original design, as a top-down, authoritarian device with a centralized indexing system.

Essentially, all one needs to halt a rogue site is to delete its address from the domain name system registry.

"This is not rocket science," said Rushkoff, who also teaches media studies at The New School University in Manhattan.

For example, the Dutch teenager arrested Thursday for helping to organize a denial of service attack an 'Operation Payback' online chatroom: "They just took him off. He had his own server, and they just go, 'Oh, nip this one!'" Rushkoff said.

This is why, he noted in a recent CNN editorial, the actual threat to PayPal, Visa, MasterCard and Amazon last week were "vastly overstated" in most media.

"The forces of bottom-up anarchy have reached a similar impass, and the authorities of the Internet have once again demonstrated their ability to fend off any genuine peer-to-peer activity," he explained. "This is a tightly controlled network, and you know, that's why I think the Chinese do have it right in that they understand, 'Oh, we can control this thing. We just censor the fuck out of it."

"[The general public] didn't realize that the only difference is now we can see that we've been censored."

Rushkoff said that until the recent WikiLeaks attacks, no one has talked about plans to create truly democratic, peer-to-peer alternatives to the Internet's centralized domain index since political activist Paul Garrin's work in the mid-to-late 1990s.

Garrin's anti-trust lawsuit NAME.SPACE v. Network Solutions, Inc. paved the way to lower domain registration costs by breaking up the monopoly-based domain name registration system into a wholesale-retail market.

"What [Garrin] showed was that if you don't want to use the domain name servers that are officially in charge of the net, you can create your own network of domain name servers," Rushkoff explained.

"You can set up your computer to look them up instead of the official ones where we can create our own names database, so I could be 'Douglas.Rushkoff,'" he said. "You know, we could have any name we want. It's arbitrary and artificial that they've limited domain at top-level registrates to what they have. I mean, they have their reasons for it, of course, but it's artificial."

Most people, he said, would rather "just stream Steve Jobs' authorized movies" than connect to an open public space that would almost certainly become demonized as a haven for terrorism and lawlessness.

"If we want to have a true peer-to-peer network, we now understand what it might look like," Rushkoff said. "If you want to have something real, we've got to build it from scratch."

Ron Paul to lead House Federal Reserve oversight

Iconoclastic Texas Republican defends WikiLeaks again, says US response 'an example of killing the messenger'

By Stephen C. Webster
Friday, December 10th, 2010 

The greatest critic of fiat currency perhaps anywhere in the world is about to take control of a congressional panel that would conduct oversight on the US Federal Reserve bank.

This could get interesting.

After November's Republican electoral wave crashed a Democratic majority in the US House of Representatives, Representative Ron Paul (R-TX) was one of several ardent critics of status-quo thought that GOP leadership thought about empowering.

To stifle Democratic efforts toward meaningful climate change legislation, they vowed to shut down funding for the House Select Committee on Energy Independence and Global Warming. To block new regulations of greenhouse gases, Republicans picked Rep. Fred Upton (R-MI), who called "poisonous" any attempt at regulation, to chair the House Energy and Commerce Committee. And now, to feed their libertarian-leaning base of supporters, Ron Paul is headed to the Fed.

The nomination was made by Rep. Spencer Bachus (R-AL), who will lead the House Financial Services Committee in the next Congress. A prior report by Bloomberg noted discussion by aides to incoming House Speaker John Boehner (R-OH) on how they might be able to prevent Paul's chairmanship.

Rep. Bachus dispelled any questions as to Paul's viability for the seat in a Thursday afternoon statement, promising "aggressive oversight" and an audit of the Fed.

"This is the leadership team that crafted the first comprehensive financial reform bill to put an end to the bailouts, wind down the taxpayer funding of Fannie Mae and Freddie Mac, and enforce a strong audit of the Federal Reserve," he wrote. "By working together, we will honor our commitment to aggressive oversight, reform of the [government-sponsored enterprises], and monitoring the implementation of the Dodd-Frank Act to ensure more jobs aren’t lost to unnecessary regulations on community banks and businesses. We are ready to hit the ground running, and I look forward to continuing our work in the next Congress."

Rep. Paul is one of the few elected Republicans to openly defend secrets outlet WikiLeaks in the wake of secret US diplomatic cables being passed along to the media. "What we need is more WikiLeaks," he suggested during a recent interview, suggesting that the Fed be targeted by whistleblowers. He's also a longtime critic of the Fed's manipulation of America's fiat currency, arguing that monetary value based on gold markets makes for a more stable economic system.

He's joined by Florida Republican Rep. Connie Mack, who told Napolitano that focusing on WikiLeaks and not the actions of the government is "a head-fake."

Most economists consider the position archaic and unwieldy, but he's not alone in the belief. Robert Zoellick, president of the World Bank, recently called for a renewed debate on what a global gold standard would mean. He suggested that gold markets were already being used as an alternative currency in the wake of severe financial instability seen across the industrialized world in recent years.

Speaking on the floor of the House yesterday, Paul again defended WikiLeaks to his colleagues.

"The hysterical reaction makes one wonder if this is not an example of killing the messenger for the bad news," he said, adding that the leaks had caused "no known harm to any individual."
Paul's same iconoclastic take on the Fed could cause serious divisions between Republicans, who've often defended the nation's central bank. “I think you’re going to see a significant dispute within the Republican Party," Rep. Barney Frank (D-MA) told Bloomberg. Frank is the senior Democrat on the House Financial Services Committee and a Paul ally in the push to see an audit of the Fed. "I do not believe that Ron Paul’s views on the Fed represent the views of most Republicans."

Paul's "Audit the Fed" bill, HR 1207, passed the House but was side-tracked into committee and had its language stripped out of the Senate's financial reform legislation. Paul's bill would have put the Fed's complete balance sheet under the US Comptroller General's microscope, but leading Senate Democrats bucked Paul's bipartisan alliance and effectively let the bank "keep its secrets," the Texas Congressman said.

Paul's son Rand was elected last November to become the next Republican US Senator from Kentucky.

This video is from C-Span, broadcast Thursday, Dec. 9, 2010, as snipped by MoxNews.

Sanders Filibusters Tax Deal As Key Senate Democrats Join Revolt

Friday, December 10, 2010 by The Nation
by John Nichols

Update: Senator Bernie Sanders concluded his filibuster at 6:50 pm after nearly 9 hours at the podium.

First House Democrats rejected the tax deal President Obama cut with Senate Democrats and told Speaker Pelosi to negotiate a better agreement.

Now, eight Senate Democrats have told Majority Leader Harry Reid that they want to amend the deal to cap tax breaks for the rich and protect Social Security.

In a letter circulated by Oregon Senator Jeff Merkley and Louisiana Senator Mary Landrieu, the senators say: "We have grave misgivings about the recent tax agreement.  We hope that the Senate can improve on it.  We look forward to working with you to ensure a vote on our amendment to strengthen Social Security in lieu of bonus tax cuts for people who are doing quite well."

They also offer an outline for a plan that would to restore tax rates on income over $1 million per year to the Clinton-era rates, and to dedicate the resulting revenues to shoring up the Social Security trust fund.

The White House will push back against any amendment strategy, fearing that changes might endanger Republican support for the agreement.

But the letter gives Reid a bargaining chip. He has a numbers problem. In addition to the eight signers of the letter -- Merkley, Landrieu. Alaska's Mark Begich, Hawaii's Daniel Akaka, Ohio's Sherrod Brown, Minnesota's Al Franken, Colorado's Mark Udall and California's Barbara Boxer -- several other members of the Senate Democratic Caucus have voiced strong objections to the agreement.

Vermont Senator Bernie Sanders is now filibustering to block the proposal. And his Vermont colleague, Patrick Leahy, has been bluntly critical.

So Reid can, and should, suggest to the White House that they really ought to talk to congressional Democrats about reworking the deal. At the very least, that strengthens Pelosi's hand -- especially as she raises concerns about the estate-tax exemption that has raised many objections on Capitol Hill.

In those negotiations, however, Reid and Pelosi should also focus on the concerns about Social Security raised in the letter from the senators, whose worries need to be addressed.
 Here's the letter to Reid:

"The tax package announced by President Obama and Congressional Republicans includes some important provisions that we strongly support, but also a deeply misguided allocation of resources at a time that the United States does not have resources to waste.  

"The Senate, however, can make it better.  We ask that you ensure an opportunity for the Senate to vote on an amendment that will give the American people a clear choice whether they would prefer to give bonus tax cuts to the very wealthiest among us, as the package currently proposes, or to use these resources to strengthen Social Security.

"Success in America should rightly be celebrated, but the very wealthy do not need bonus tax cuts and America cannot afford to give them.  As you know, the agreement would require American taxpayers to borrow over $50 billion in order to give, on average, $100,000 in additional annual tax cuts to people earning over $1 million per year.  These bonus tax cuts are on top of the $43,000 per year that millionaires will receive in tax cuts on their first million dollars of income.  The Congressional Budget Office ranked these tax cuts dead last in terms of effectiveness in boosting economic growth and job creation.  In a time of urgent national needs and long-term deficits, we believe the country has higher priorities than these huge tax cuts for the very wealthy.

"Specifically, we propose to amend the package to restore tax rates on income over $1 million per year to the Clinton-era rates, and to dedicate the resulting revenues to shoring up the Social Security trust fund.  The President’s National Commission on Fiscal Responsibility and Reform noted that in 2037, Social Security will exhaust its trust fund and be unable to pay full benefits, and consequently proposed a number of benefit cuts for seniors.  Improving Social Security’s finances is, in our opinion, a more important national priority than directing tens of billions of dollars in taxpayer money to a relative handful of families. 

"We have grave misgivings about the recent tax agreement.  We hope that the Senate can improve on it.  We look forward to working with you to ensure a vote on our amendment to strengthen Social Security in lieu of bonus tax cuts for people who are doing quite well."

Fixating on Tax Cuts; Ignoring Real Problems

A Nation in Need of Stimulus
By DEAN BAKER

In the Bush years the Democratic leadership made the battle over the Bush tax cuts the holy grail of American politics. People were thrown out of the party if they ever referred to the tax cuts without an adjective like "costly," "reckless" or "irresponsible."

To be sure, the tax cuts were a bad use of public money. As we know, they disproportionately went to the wealthy. This money could have been much better used rebuilding infrastructure, promoting renewable energy and conservation, or even as tax cuts oriented more towards middle-class and moderate-income families.

However, the tax cuts were not the economic disaster portrayed in the Democrats' attacks. The deficits were not especially large in the Bush years. And, the economy needed deficit spending to get out of the recession caused by the collapse of the stock market bubble. Furthermore, the trade deficit caused by the over-valued dollar inherited from the Clinton Administration, necessitated some alternative source of demand, like a budget deficit, to bring the economy anywhere near full employment.

Unfortunately, the political elites' fixation on the tax cuts and the deficits led them to ignore the economy's real problems.

The housing bubble grew to ever larger proportions, eventually reaching a point where its collapse would lead to the sort of recession that we are now experiencing.

At this point, the way out of the downturn is fairly simple to explain, even if the path might not be politically possible. In the long-run we have to replace the consumption and construction demand generated by the bubble with increased net exports (i.e. fewer imports and more exports). However, this is a long and difficult process involving the decline in the dollar against other currencies. It will also depend in part on the restoration of growth in our trading partners, a prospect that looks rather bleak as many of them are now overcome with austerity fever.

The short-run alternative is increased demand from the government -- yes, large deficits. In spite of the Bowles-Simpson clown show, for the foreseeable future the deficit is our friend. We need to get money into the economy to sustain demand and employment.

For this reason, extending the tax cuts to the richest 2 percent for another two years is not especially harmful. It will hand money to people who will spend at least some it, thereby creating demand and generating jobs.

Of course we would be much better off if the $50 billion going to the rich each year instead went to other purposes, such as preventing cutbacks by state and local governments or rebuilding infrastructure, but if the question is whether the economy will do better with the tax cuts or a smaller deficit in 2011 and 2012, the answer is that we will unambiguously do better with the tax cuts to the rich.

There are huge dangers here but they are political not economic. The deficit hawks will whine about this will add to the national debt and create a huge interest burden.

The answer to this claim is that any resulting debt burden will be a political decision by the government. There is no reason that the Federal Reserve Board cannot simply buy and hold the debt issued to finance these tax cuts as well as the deficit more generally in these years of high unemployment.

There is no reason for concern about inflation, which would actually be good for the economy right now in any case. Japan's central bank is holding an amount of debt that is roughly equal to Japan's GDP ($15 trillion in the U.S.) and the country is still experiencing deflation. When the economy recovers and inflation does become a concern the Fed can simply raise reserve requirements to ensure that reserves created by buying debt do not become a problem. If the Fed refuses to go this route then it will be the result of a political decision on its part to put stress on the budget, not an outcome dictated by economic necessity.

The same logic applies to the repeal of the tax cuts on the wealthy at some future date. The government will need this revenue at some point. However, it is ridiculous to think that we can never take back these tax cuts. After all President Clinton raised taxes on the wealthy in 1993 and still managed to coast to re-election 3 years later.

So, progressives should not be happy about giving more money to the richest people in the country, but it is not the end of the world either. The key focus should be on getting the stimulus needed to boost the economy. It is outrageous that 25 million people are unemployed or underemployed because of the incompetence of the people who design economic policy.

Premature Capitulation

Yet Another Pyrrhic Victory for Obama
By MICHAEL WINSHIP

There's this old joke about the French Revolution. A group of prisoners is lined up before the guillotine. One by one, their heads are lopped off. Then, the next man is put in place. The lever is pulled, but the blade stops just inches above his neck. This must be a sign of divine intervention, the judge in charge declares, and the man is freed.

The same thing happens to the next prisoner, and the next and the next. Finally, as the very last man is prepared for execution, he looks up at the mechanism and exclaims, "Wait! I think I see your problem!"

Ladies and gentlemen, I give you President Barack Obama, providing needless aid and comfort to those who would do him wrong, handing over his own head without a fight, afflicted with a curious syndrome we men of science have decided to call Premature Capitulation.

Backing away from myriad campaign promises, giving in to health care, economic stimulus and financial reform compromises -- in some ways these were par for the course, the unfortunate price of governing and politics in a polarized America. But in the few weeks since the midterm elections, the affliction of Premature Capitulation has become more and more endemic, whether it's dissembling on our policy in Afghanistan or backing away from a moratorium on settlement building in the West Bank, announcing a Federal workers' wage freeze (which would have been appropriate for the higher ranking civil servants but is pandering to the right and downright cruel to those government employees who barely make enough to live on) or the continued kowtow to the moneyed interests who, if they pat him on the back, do so only to find the place to insert their knives.

And now this deal to extend the Bush tax cuts for two years, continuing breaks for the wealthiest Americans, as well as a similar extension of the capital gains top rate – 15% -- and a raise of the estate tax exemption to $5 million per person, with a maximum rate of 35%. In exchange, Obama is supposed to get a 13-month extension of unemployment benefits for the long term jobless, an expanded earned-income tax credit, equipment purchase write-offs for businesses, a reduction in the Social Security payroll tax and continuation of the college tuition tax credit.

Not so bad, you may think; in fact, many are viewing what Obama has gotten as a de facto second stimulus, but chances are Republicans would have yielded to public pressure on unemployment, especially during the holiday season, and as James Kwak points out on The Baseline Scenario website (which he founded with economist Simon Johnson):

"The Bush tax cuts were always bad policy. After the last election, President Obama will be able to accomplish precious little. But he could easily have killed the Bush tax cuts and thereby done more good for our nation's fiscal situation than anyone will be in a position to do for many years to come. Killing the tax cuts would alone reduce the national debt by roughly as much as the deficit commission's entire proposal. And killing the tax cuts was the path of least resistance. Obama could have done it by doing nothing. Or he could have done it by taking a strong negotiating position and being willing to walk away from the table…

"Instead we got a two-year extension as part of an overall package that adds $900 billion to the debt… And Obama will no longer be able to say the tax cuts were a mistake made by President Bush that he was letting expire. Now he owns the mistake."

What's more, while the president's brief announcement of the deal Monday night was matter of fact, the press conference on Tuesday – calling out progressives as sanctimonious purists -- was a defensive display of petulance more appropriate to the sandbox than the White House.

Mr. President, up to now at least, progressives have been the loyal opposition. You're wasting ammo on the wrong guys. Stand up, aim in the right direction, and fight.

Because if you think the tax breaks will lead to further logrolling or concessions from congressional Republicans you're wrong. Now that they've gotten what they want, for the next two years of your term they will not yield much of anything else. Their nihilistic, scorched earth brand of politics leaves nothing behind but ash.

And so this latest compromise may prove a Pyrrhic victory. Or is that being premature?

The Bankster Merry-Go-Round

On and On
By MISSY COMLEY BEATTIE

Obama apologists are on a low rung of the ladder to hope, hoping that the president will, suddenly, fulfill some of his promises of, yes, hope.

Articles and letters have been composed, direct pleas to the president, by historians, economists, former politicians, retired veterans, physicians, educators, the underemployed, unemployed, and others, all people who just want the man they supported to do something, anything, indicating that he is real, that he works for americaville, for them, for the woe-man on the street.

This week we saw a fired-up Obama, defending negotiations with Republicans. The president explained his position on tax breaks for the wealthy, saying he compromised to insure tax cuts for the middle class. A majority of Americans oppose extending Bush-era tax cuts to the rich.

Let's face it: Obama delivered what Wall Street expected of him. The GOP didn't exploit him; he received corruption's approval stamp before he snuggled in those high thread count sheets at 1600 Pennsylvania Avenue.

Once upon a time, Barack Obama bamboozled widely.

While campaigning, he talked hope, hope, hope, change, and "YES, WE CAN," even saying that tax cuts for the wealthy offended his conscience. His performance on the trail was worthy of an Academy Award.

If you listened closely back then, you perceived something beneath the rhetoric and beyond the measured words about Iraq—that we had "to be as careful getting out, as we were careless going in." A number of people heard dissonance—right-war-vs.-wrong-war ambiguity. Too many glommed on to "wrong war," interpreting (hoping) that Obama was antiwar, although he clearly stated the opposite.

The wrong war (Iraq) continues, despite Obama's declaration months ago that "now, it is time to turn the page." Repackaged as "Operation New Dawn," the occupation continues with 50,000 US forces remaining in "advisory and training" roles, at the ready for combat, if necessary. Plus, there are two combat aviation brigades in place as well as a large mercenary presence.

The right war (Afghanistan) was supposed to wind down in 2011. The date has been postponed to 2014, one digit easily manipulated. But who's paying attention, other than peace activists, those whose loved one is on his or her fifth, sixth, seventh, even 12th deployment, and, of course, people who live in the lands we've ravaged.

A few days ago, I watched a video. Each scene conveyed doom. Black Friday shoppers charged through a store in lustful pursuit of bargains, pushing and thrusting. I've seen seedy porn that was less vulgar. In the interest of research, of course.

On Thursday, Republicans filibustered the Zadroga bill, a measure to provide aid to sick 9/11 first responders who were hailed as heroes when they dug through the rubble at Ground Zero, in a tireless rescue of life that became a grim excavation for remains. These honorable men and women just received a "fuck you" from sociopathic Senate Republicans who have pledged among themselves to block anything until they're sure tax cuts for millionaires are a certainty.

Representative government by and for the people is dead, strangled by corporatism, codified by the Supremes.

So, what's the answer? This from a reader: conduct business through a small local bank. Cut up the plastic. Use cash. If you must have a credit card to book flights, purchase one that's prepaid. Thanks, Eliz.

This would work if enough of us agreed. I'm afraid we won't. Too many of us are those shoppers in the video. Probably, most buy with credit's revolving door of debt and high interest payments. Pick a card, any card. On and on it continues, a merry-go-round for banksters and a despairing ride for our growing underclass.

Fears Mount on TSA Body Scanners

Insiders Say New Machines Have Poor Detection
By PAM MARTENS

Over the past month, in the face of unprecedented airport screening procedures that left human dignity, radiation concerns, privacy and the Constitution in shambles on the tarmac, Americans have been repeatedly counseled by the Transportation Security Administration (TSA) that the new body scanner machines and humiliating pat downs are necessary to make air travel secure. Now documents have emerged, on the government’s own web sites, raising questions as to whether the machines are little more than overpriced metal detectors with a “beam me up Scotty” futuristic design.

A scientist associated with one of the body scanner manufacturers, Ronald J. Hughes, has submitted patent documents to the U.S. Patent and Trademark Office for various devices involved in airport screening of passengers to detect terrorist threats. In those documents, Mr. Hughes details serious failings of the x-ray body scanning equipment, including its lack of reliability to detect plastics or ceramics used in bomb making.

Mr. Hughes is not just any inventor. His patents have been regularly assigned to Rapiscan Systems, Inc., one of the companies which currently has over 200 body scanners in airports throughout the U.S.

The problems are explained as follows in Mr. Hughes’ patent documents. While metal objects (like guns and knives) can be easily visualized in the body scanner images, there is “poor detection capability for a wide range of dangerous objects composed of low atomic number elements, such as plastics or ceramics, which are often masked by the low atomic number elements which comprise the human body.”

Mr. Hughes goes on to note that “conventional image processing techniques for protecting privacy… tend to diminish non-body images as well, and thus, degrade the image presented to the viewer. For example, but not limited to such example, employing a traditional combination of increased brightness and contrast to diminish anatomical features may also result in the washing out of smaller and thin threat objects, such as plastic explosives, because they have properties similar to human skin…When a filter is applied to the resultant images, using conventional image processing methods, almost all objects that are at the person's side or located inside of loose clothing tend to disappear.”

In a detailed report delivered to Congress on March 17, 2010, the U.S. Government Accountability Office (GAO) further revealed the limitations of the body scanner machines in use in U.S. airports, originally called “Whole Body Imager” but now rebranded as the more spiffy sounding Advanced Imaging Technology or AITs. The GAO stated in its report (GAO-10-484T): “The AIT produces an image of a passenger’s body that a screener interprets. The image identifies objects, or anomalies, on the outside of the physical body but does not reveal items beneath the surface of the skin, such as implants.” Hiding potentially dangerous objects in body cavities will not be detected by these machines, raising questions as to why our government is spending $170,000 each for the units at an increased staffing cost of $2.4 billion over the 7-year anticipated life of the machines according to the GAO. (Each machine costs $369,764 in staffing costs for operation annually.)

In another GAO report delivered to Congress in October 2009 (GAO-10-128), researchers found that “TSA has not assessed whether there are tactics that terrorists could use, such as the placement of explosives or weapons on specific places on their bodies, to increase the likelihood that the screening equipment would fail to detect the hidden weapons or explosives.” GAO went on to note in the same report: “TSA has relied on technologies in day-to-day airport operations that have not been demonstrated to meet their functional requirements in an operational environment. For example, TSA has substituted existing screening procedures with screening by the Whole Body Imager even though its performance has not yet been validated by testing in an operational environment… Furthermore, without retaining existing screening procedures until the effectiveness of future technologies has been validated, TSA officials cannot be sure that checkpoint security will be improved.” In a footnote to this passage, GAO notes that the specifics of what it’s talking about here has been classified by the TSA.

One of the individuals who has been widely quoted as disputing the effectiveness of the body scanners is Rafi Sela, an expert on Israeli airport security. Mr. Sela has over 30 years experience in security and defense technologies, was a special advisor to the Israeli security agencies for counter terrorism and is a Managing Partner in AR Challenges, a consulting firm for advanced security technology. According to the company’s web site, it has “participated in applied strategic design of the operations and security at the Ben Gurion airport [in Israel], which is now a standard for many other high security airports.”

I wanted to hear directly from Mr. Sela. These are his emailed remarks: “The whole security system used in North America is wrong. The body scanners are just one more obsolete technology that does not provide any more security…it can be circumvented not only in body cavities but in other ways that I do not want to share with the public. This has been a great lobbying-marketing effort on behalf of the manufacturers.” Between 2005 and 2009, Rapiscan spent $1,678,500 on lobbying, according to data compiled at the Center for Responsive Politics (OpenSecrets.org). Michael Chertoff, former head of the Department of Homeland Security, has been a paid consultant to Rapiscan. On January 26, 2010, Congresswoman Jane Harman wrote to Janet Napolitano, head of Homeland Security, noting that Rapiscan was a company in the Congresswoman’s district. She urged Ms. Napolitano to “expedite installation of scanning machines in key airports.” Congresswoman Harman closed with: “If you need additional funds, I am ready to help.”

Another security expert, Bruce Schneier, says what the TSA is increasingly looking for these days is pentaerythritol tetranitrate (PETN). Writing recently at The Atlantic, Mr. Schneier explains PETN is “the plastic explosive that both the Shoe Bomber and the Underwear Bomber attempted but failed to detonate…The problem is that no scanners or puffers can detect PETN; only swabs and dogs work.” (Puffers were the TSA’s last fiasco. Officially called Explosives Trace Portal or ETP, they puff air at the passenger in hopes of sniffing the air for traces of explosives. A highly critical GAO report found they were rolled out without proper testing.)

The Electronic Privacy Information Center (EPIC.org) has filed a Federal lawsuit against the Department of Homeland Security over the use of the machines as the primary screening device in U.S. airports, charging they violate the Fourth Amendment, the Privacy Act, the Religious Freedom Restoration Act, and the Video Voyeurism Prevention Act. In past statements, EPIC had this to say about the limited utility of the devices. “Keeping the radiation dose low enough to skim the skin's surface means that backscatter cannot detect weapons hidden in body folds. Nor is the technology the functional equivalent of a body cavity search.”

Rapiscan Systems Inc. is a subsidiary of the NASDAQ traded company, OSI Systems Inc., (symbol OSIS). It manufactured a little more than half of the 385 body scanners in use at 68 airports nationwide as of mid November. The Rapiscan machines, called the Secure 1000, use X-ray radiation, which reflects off the front and back of the body, producing separate images of each. This is called the backscatter system. The other highly visible system in airports, produced by L-3 Communications (New York Stock Exchange symbol LLL), is the ProVision, which uses a millimeter wave. This system emits beams of radio frequency energy. Both systems generate nude images of airline passengers, showing private body parts and highly personal details like colostomy bags.

According to the 2010 GAO report, the TSA projects that a total of 1,000 AIT systems will be deployed to airports by the end of December 2011. In fiscal year 2014, TSA plans to reach full operating capacity with a total of 1,800 units. TSA officials stated that the cost of $170,000 per unit excludes training, installation and maintenance. That would mean a total of $306 million for just the machines, tens of millions more for the peripheral costs, and $2.4 billion for the required increase in staff through the extremely limited anticipated life of 7 years.

Dr. Steven Smith’s name appears on the original patent for the body scanning technology currently in use by Rapiscan. Dr. Smith explained the history in an email: “I invented the technology in about 1990 and sold it to IRT in 1991, where I became an employee until 1997. In 1997, IRT divested the technology to Rapiscan, and I left to start Spectrum San Diego. Last year, Spectrum San Diego became Tek84 Engineering Group, which I still run. Rapiscan purchased the product and all associated items from IRT, including the patent, existing inventory, marketing information, and so on…I worked as a consultant for Rapiscan on the SECURE 1000 until about 2002. The products I have developed since that time (CastScope, CarScan, AIT84) are competitive with Rapiscan, so I don't have much contact with them.”

That this technology has been in existence for two decades and is just now being rolled out to airports deserves a few moments of equally intense probing. Under what societal norms would there be a market for routinely taking nude pictures of airline travelers via scientifically challenged skin radiation that reveal genitalia; with a necessary back up plan of hand inspections of the buttocks and genitalia for opt outs. This 20-year old technology could only be massively deployed because of a long line of images since 9/11 which has desensitized the American psyche to human rights through a bombardment of human degradations: the images of thumbs up torture at Abu Ghraib; the televised pictures of the hooded prisoners on their knees at Guantanamo or in monkey cages; the endless columns of typeset devoted to waterboarding, renditions, kidnappings and assassinations – all in the name of making us more secure.

It is apparently not enough that we as a nation are devolving. We now seek to export our devolution devices (ostensibly because that’s all we have to show for the past decade). Accompanying President Obama on his recent trip to India was Deepak Chopra (not that Deepak Chopra) the Chairman and CEO of OSI Systems Inc., parent of Rapiscan and the glorified disrobing machine. Rapiscan has a joint venture with the Electronics Company of India, an Indian government enterprise, called ECIL-Rapiscan. Rapiscan insiders, including Mr. Chopra and his first cousin, Ajay Mehra, who is Executive Vice President of OSI Systems, Inc., own 15 percent of the joint venture.

This has the familiar ring of Maurice “Hank” Greenberg’s company within a company at AIG. Hank became enormously wealthy from C.V. Starr while taxpayers bailed out a collapsing AIG. For the record, I think it is a decidedly bad idea for the U.S. government to give contracts to companies with crony conflicts of interest. According to SEC documents filed by OSI, the company has “contracted with entities owned by members of our Board of Directors and/or their family members to provide messenger services, auto rental and printing services. Included in cost of sales and selling, general and administrative expenses for the fiscal 2008, 2009, and 2010, are approximately $40,000, $54,000 and $64,000, respectively, for messenger service and auto rental; and $42,000, $45,000 and $60,000, respectively, for printing services.”

The ECIL-Rapiscan web site says it manufactures “the same equipment as that of Rapiscan U.K. and U.S.A with the same state of art technology. Requisite technology is supplied by Rapiscan and the final product is manufactured at ECIL facility.” If this body scanning equipment was a genuine matter of national security, would the U.S. let the technology be handed over to a foreign government enterprise?

From John Tyner’s warning to the TSA agent not to touch his “junk” or he’d have him arrested that went viral on YouTube around mid November, the TSA has ignored the public outrage over a policy that was not properly vetted or allowed public input at open hearings.

Now serious financial damage is looming for the nation’s airlines with Zogby International reporting in a poll taken between November 19 and 22 that 61 per cent of the 2,032 individuals polled oppose the use of body scanners and pat downs. The use of the backscatter x-ray machines and the more aggressive pat down procedures will cause 48 percent of individuals to seek an alternative means of travel. In addition, 52 per cent of respondents think the new security procedures will not prevent terrorist activity, 48 per cent consider it a violation of privacy rights and 32 per cent consider it to be sexual harassment, according to the Zogby poll.

At ACLU.org, the nonprofit organization reports it has received 900 complaints and has posted over 38 graphic accounts that can only be described as sexual molestation. Brief examples include: “The TSA agent used her hands to feel under and between my breasts. She then rammed her hand up into my crotch until it jammed into my pubic bone.” “I cried throughout the groping and have had intrusive thoughts since. It was humiliating.” “The procedure was violating, degrading, invasive and humiliating.” “It was so rough that I felt the effects of it throughout the day.” “I do not feel safer. I feel violated.”
Is this any way to run an airline – or a democracy?