Obama's America

Tyranny and Permanent War

January 6th, 2012

by Stephen Lendman

December 31, 2011 will be remembered as a day of infamy. More on it below. October 17, 2006 was an earlier one under Bush.

In a White House ceremony, he signed the infamous Military Commissions Act (MCA). It authorized torture as official policy.

It also enacted sweeping unconstitutional powers to arrest, interrogate, and prosecute alleged terrorist suspects and collaborators (including US citizens), detain them (without evidence) indefinitely in military prisons, and deny them habeas and other constitutional protections.

It lets presidents call anyone anywhere an "unlawful enemy combatant," order them arrested, detained and denied all rights.

On the same day, Bush quietly signed the FY 2007 National Defense Authorization Act (NDAA). Included were hidden Sections 1076 and 333. Major media scoundrels ignored them.

They amended the 1807 Insurrection Act and 1878 Posse Comitatus Act. They prohibited using federal and National Guard troops for law domestic enforcement except as constitutionally allowed or expressly authorized by Congress in times of insurrection or other national emergency.

Henceforth, the executive, by diktat, can claim emergency powers, declare martial law, suspend the Constitution on "national security" grounds, and deploy federal and/or National Guard troops on US streets to suppress whatever's called disorder - including lawful peaceful protests. 

At issue is abolishing fundamental First Amendment freedoms without which all others are at risk. They include free expression, assembly, religion, and right to petition government for redress. No longer.

In 2009, Obama assured military commission continuity by signing the FY 2010 Defense Authorization Act. Its hidden Section 1031 contained the 2009 Military Commissions Act (MCA). The phrase "unprivileged enemy belligerent" replaced "unlawful enemy combatant." 

Language changed but not intent or lawlessness. Obama exceeds Bush extremism.

Guantanamo and other torture prisons remain open. US citizens are treated as lawlessly as foreign nationals. Ahead things got worse.

On December 31, he signed the FY 2012 National Defense Authorization Act (NDAA). It gives presidents unchecked power to order military force arrests and indefinite detentions of US citizens, based solely on uncorroborated accusations of terrorist group associations.

Constitutional, statute and international law protections don't apply.  
America's military may snatch and grab anyone, throw them in torture prisons, and hold them indefinitely without charge or trial, based solely on suspicions, spurious allegations or none at all.

Earlier by Executive Order, Obama authorized indefinite detentions of anyone designated national security threats. Specifically intended for Guantanamo detainees, it's now for everyone, including US citizens at home or abroad.

Moreover, CIA operatives and Special Forces death squads got presidential authorization to kill targeted US citizens abroad. As a result, they can be hunted down and murdered in cold blood for any reason or none at all.

As of December 31, anyone anywhere, including US citizens, can be called national security threats and judged guilty by accusation. Activists opposing America's imperium risk arrest, permanent detention or assassination.

So do social justice protesters. Military dungeons or FEMA camps await them. Martial law may authorize it, claiming "catastrophic emergency" powers. The original Senate bill excluded US citizens. Obama demanded their inclusion.

Inviolable rights no longer apply. Protesting imperial lawlessness, social injustice, corporate crime, government corruption, or political Washington run of, by and for rich elites can be criminalized. So can free speech, assembly, religion, or anything challenging America's right to kill, destroy and pillage with impunity.

It's official. Tyranny arrived in America. The nation's unsafe to live in. There's no place to hide. They're coming for anyone challenging injustice.

Lawlessness At Home and Abroad 
They also target independent states. At issue is making them client ones. Tactics include threats, destabilization, violence, sanctions and war if other methods fail.

In 2011, Libya became NATO's latest charnel house. It was ravaged and destroyed for profit. For months, Syria's been ruthlessly targeted. Pressure's building for more. Anything ahead is possible, including replicating the barbarism inflicted on Libya.

Iran's next. Washington's pushing the envelope aggressively.

Tactics include provocations, subversion, fake accusations, isolation, covert or direct confrontation, cyberwar, and punishing sanctions, coming perilously close to acts or war.
In the past five years, four harsh rounds were imposed. In mid-December, Congress enacted another. They're included in the FY 2012 NDAA. They're aimed at penalizing foreign financial institutions doing business with Tehran's central bank. It's the main oil revenue conduit. US corporations, including banks, already can't deal with Iran.

Additional measures expanded sanctions on companies doing oil related business, including investments, selling Iran refinery goods and services, as well as providing Tehran with refined products worth $5 million or more annually.

On December 31, Obama signed the new law. He has 180 days to implement it. He calls it the stiffest measure yet, saying:

"Our intent is to implement this law in a timed and phased approach so that we avoid repercussions to the oil market and ensure that this damages Iran and not the rest of the world."

He has discretionary power to grant waivers, provided they're in America's national interest. Energy analysts fear enactment means disruptively higher oil prices. Others worry that confrontation may follow rogue bullying.

Navy Commander Rear Admiral Habibollah Sayyari said Iran's naval forces can readily block the Strait of Hormuz in response to hostile Western actions.

He spoke a day after Vice President Mohammad Reza Rahimi warned not a drop of oil would pass through the Strait if Iran's oil exports are sanctioned. If so, expect energy prices to skyrocket until normal flows resume. Also expect retaliation, perhaps including direct US-Iranian confrontation.

Targeting Iran's nuclear program is a ruse. Tehran insists it's peaceful. Nothing proves otherwise. The most recent March 2011 US intelligence consensus agrees. It found no evidence of weapons development. At issue is regime change. Reasons are invented as pretext.

As a result, anything ahead is possible, including potentially devastating general war with nuclear weapons targeting underground Iranian facilities.

No matter the risk, Obama seems headed for the unthinkable.

Rep. Paul Ryan warns anti-piracy bill may lead to Internet ‘censorship’

By Stephen C. Webster - RAW Story
Monday, January 9, 2012

One of the most conservative members of Congress signaled on Monday what may be the beginning of the end for the Stop Online Piracy Act (SOPA): Congressman Paul Ryan (R-WI), chairman of the House Budget Committee and one of the GOP’s frontmen against so-called “job killing regulations,” has officially come out against it.

Taking issue with its potential for abuse, Ryan said that SOPA could actually be a new kind of onerous regulation — the one thing Republicans hate most.

“The Internet is one of the most magnificent expressions of freedom and free enterprise in history,” Ryan explained in a prepared statement. “It should stay that way. While H.R. 3261, the Stop Online Piracy Act, attempts to address a legitimate problem, I believe it creates the precedent and possibility for undue regulation, censorship and legal abuse. I do not support H.R. 3261 in its current form and will oppose the legislation should it come before the full House.”

Ryan’s statement comes days after a group of activists with the social media forum Reddit.com launched a campaign called “Pull Ryan,” in reaction to rumors that he was in favor of SOPA. Ryan later disavowed those rumors and insisted he hadn’t made up his mind.

Ryan is not the only prominent conservative to come out against SOPA. Although the bill was sponsored by Rep. Lamar Smith (R-TX) and supported by many of his fellow Republicans, Rep. Darrell Issa (R-CA), who chairs the House Oversight and Government Reform Committee, is also opposed.

“As a former tech entrepreneur and patent holder, I know that innovation depends on strong intellectual property rights and robust enforcement tools,” Issa explained to Raw Story in December. “SOPA, however, goes far beyond what is necessary to protect the rights of intellectual property owners from foreign rogue sites. It would put tremendous new regulatory and monitoring burdens on legitimate commerce in the digital space, leave the internet less secure and ultimately handicaps the policies that have allowed digital job creators to flourish.”

He also changed the profile photo on his personal Facebook page to a black box with the word “CENSORED” in the middle, in protest of the bill. Issa has a history working with technology products for automobiles. He is also part of a bipartisan group of lawmakers in the House and Senate who’ve proposed an alternative to SOPA, called the Online Protection and Enforcement of Digital Trade (OPEN) Act.

Instead of using the courts to force search engines and ISPs to block websites accused of copyright infringement, as SOPA and Protect IP would, the alternative suggests simply cutting them off from all sources of funding, just like the banks did to WikiLeaks.

The lawmakers would accomplish this by regulating illegal downloads as a matter of international commerce. Doing so, the group of lawmakers hope to see the International Trade Commission (ITC) take charge of combating piracy, instead of judges. The ITC would be tasked with reviewing claims of online infringement against foreign website owners, and ordering them cut off from funding sources if the claims prove true.

It would also set up a rapid-response mechanism for temporary disconnections from funding if an imminent harm can be demonstrated by a copyright holder, such as broadcasters who air live events that are being illegally streamed online.

The House has delayed further hearings on SOPA until later in January, when it’s expected to come up for a vote before the House at-large.

A spokesman for Rep. Ryan did not return a request for comment.

Fracking Nonsense: The Job Myth of Gas Drilling

Monday, January 9, 2012 by CEPR Blog

by Helene Jorgensen 

 

Natural gas companies are trying to sell fracking as the solution to all of the economic ills ailing this country.  Supposedly fracking can bring the economy out of its current stagnation by creating uncountable new jobs, without running up government deficits, and even save us from global warming in the process.  So how come local residents and environmentalists oppose fracking? The short answer is that fracking does not create local jobs, it lowers property values, and pollutes the water we drink and the air we breathe.

Hydraulic fracturing, or fracking for short, is drilling for gas buried more than a mile under ground in hard rock layers. In order to extract the gas, a toxic cocktail of chemicals is pumped deep into the ground to fracture the rock. In recent years, the state of Pennsylvania has embraced the fracking boom and more than 4,500 wells have been drilled there since 2007. The state of New York has taken a more prudent approach by implementing a moratorium until the environmental and economic effects have been evaluated. The New York Department of Environmental Conservation is currently seeking public comments on the issue (deadline January 11).

In an intensive lobbying campaign to influence a skeptical public’s opinions about fracking, the gas industry has commissioned a number of economic studies that find huge job gains from fracking. A recent study by the economic forecasting company IHS Global Insight Inc., paid for by the America’s Natural Gas Alliance, projects that fracking will create 1.1 million jobs in the United States by year 2020. However, a closer read of the study reveals that the analysis also projects that fracking will actually lead to widespread job losses in other sectors of the economy, and would result in slightly lower overall employment levels the following 10 years, compared to what it would be if fracking were restricted. In another study, commissioned by the Marcellus Shale Coalition, researchers with Penn State University estimated that gas drilling would support 216,000 jobs in Pennsylvania alone by 2015. The most recent data from the Bureau of Labor Statistics show employment in the oil and gas industry to be 4,144 in Pennsylvania.

Rather than trying to project what will happen in the future, one could look at what the employment impact has been from Pennsylvania’s love affair with fracking since 2007, using actual employment data readily available from the Bureau of Labor Statistics.
What the data tell us is that fracking has created very few jobs. In fact, employment in five northeast Pennsylvania counties (McKean, Potter, Tioga, Bradford and Susquehanna) with high drilling activity declined by 2.7 percent. Of course, the economy was in a recession, and it is possible that employment would have decreased by more had it not been for fracking.  To evaluate this, one can look at the employment trend in five adjacent New York counties (Allegany, Steuben, Chemung, Tioga and Broome) which had a moratorium on fracking.  By assuming that the change in employment in the five PA counties would have been the same as in the five NY counties, a baseline for employment can be established if no hydraulic fracturing had occurred. In the five NY counties, employment declined by 5.2 percent over the three year period.  Had employment declined by the same rate in the PA counties as in the NY counties since 2007, employment would have been 51,950 instead of 53,300 in 2010. This suggests that hydraulic fracturing contributed to the creation of around 1,350 jobs – this includes both direct jobs in the gas industry, indirect jobs in the supply chain and induced jobs from spending by workers and landowners. (An industry-funded study by the Public Policy Institute of New York projects that the same drilling level would create 62,620 jobs in New York).

In rural areas with few job opportunities and high unemployment rates, the creation of 1,350 jobs would still be good news, if it were not for the fact that most of the jobs go to workers from out-of-state.  A survey of gas companies, conducted by the Marcellus Shale Education & Training Center, showed that 70 to 80 percent of workers were out of state. Including the many truck drivers bringing in fracking water and trucking out the fracking wastewater to be deposited in underground wells in Ohio in such large quantities that it has triggered earthquakes.

Essentially, fracking in Pennsylvania became a job program for people from Texas and Oklahoma.  The costs are borne by the local population in terms of polluted drinking water, deteriorating roads from heavy truck traffic, smog, a noise-level equaling that of a busy interstate, a landscape marred by wells, pipelines and holding pools. The latter also poses a risk of leaking chemicals into the surrounding grass pastures. In many cases this has lead to illness or death of livestock. Moreover, a number of landowners have reported a rise in fracking-related illnesses, including asthma, heavy metal poisoning, and allergies, afflicting their families, especially children.

Still landowners lease their lands with the expectation of income from leasing bonuses and royalty payments. Leasing bonuses range from $500 per acre to over $20,000 per acre near Fort Worth, TX. For struggling farmers, unemployed workers and others affected by the economic downturn, leasing of land can provide much-needed extra income. But looking at the bottom-line, land leasing may not be such a good deal.  Gas drilling lowers property values.  The underground rights have been leased off, and landowners in the process have lost full control of land use above ground. Active gas wells devalue the land and lower the quality of life of residents and their neighbors. If something goes wrong, such as contamination of underground water due to faulty well casting, the property may not be sellable at any price.

Leasing land for gas drilling does not miraculously create a big pot of money for landowners and gas companies. The costs may very well outweigh the revenues generated. And local residents are left bearing most of the risks.

Occupiers Target Chicago 'Mayor 1%' Emanuel's Anti-Protest Ordinance

Monday, January 9, 2012 by CommonDreams.org
Occupy Rogers Park, Occupy the South Side campaign against Chicago Mayor Rahm Emanuel's NATO/G-8 ordinance; "This measure is a permanent attack on public protest in the City of Chicago."

Last month, Chicago Mayor Rahm Emanuel introduced anti-protester legislation for the upcoming NATO and G-8 summits in Chicago.

Chicago's WBEZ reported:

"During the summits, which could draw thousands of protesters, Emanuel wants to increase the minimum fine from $25 to $200 and double the maximum fine to $1,000. His proposed ordinance would also close parks, playgrounds and beaches overnight for longer periods of time."

This past Tuesday, Emanuel clarified that these measures would in fact be permanent, and not just during the time of the summits. From WBEZ:

In fact, Emanuel said his proposal to dramatically increase fines for protesters who resist arrest - even passively - should be permanent. Some of the other sweeping powers the mayor is seeking - one would allow his office to unilaterally approve some city contracts - would expire once the May summits are over, he said.

This morning, Occupy Chicago reacted harshly to Emanuel's plan, which they call the 'Sit Down and Shut Up' ordinance. From the Occupy Chicago website:

This ordinance consists of a host of bureaucratic tools created by and for the 1% to relegate, abridge, fine, arrest, and silence our speech. It is an attempt to bully and intimidate with increased police power and fines the brave working people who demand the ability to participate democratically in the organizing of our society. It is an attempt, by the 1%, to restrict and regulate the voice of the people when it upsets the structure that put them in power. The timing of the ordinance demonstrates that it has nothing to do with public safety but that its sole purpose is to stifle the voice and trample upon the constitutional liberties of all the people of Chicago. It is the blatant criminalizing of any public assembly that does not serve the interest of the 1%. It is the handcuffing of democracy. Occupy Chicago condemns this ordinance and demands that they be revoked. Those who are on the side of the democracy of the 99% will stand with us.

This morning, Occupy the South Side and Occupy Rogers Park delivered a warning to all of the city's aldermen, indicating that if they supported the mayor's resolution, they should expext strong resistance.

From their letter to the aldermen:

As you are no doubt aware, Mayor Emanuel sponsored this ordinance and has promoted it in the media as a "temporary" measure aimed at controlling protesters during specified events taking place later this year. As you've surely read, the Mayor has since been forced to retract his claim that these changes were ever meant to be temporary. Another blatant inconsistency is that the ordinance applies to the entire city, while the NATO and G8 summits occur only downtown. Other inconsistencies in the presentation of this ordinance are similarly problematic.

Given what the ordinance actually says, it cannot be construed as an effort to protect the integrity of G8 and NATO conferences. This measure is a permanent attack on public protest in the City of Chicago. The consequences of this attack will be far reaching, and will be felt by protesters throughout the city, most of whom will never have any connection to the protests associated with these events.

As you are also aware, we celebrate the legacy of the Reverend Dr. Martin Luther King, Jr. on January 16, 2012. Dr. King's legacy is not one of obedience to municipal authorities, but rather the inspiring story of a man who led a community that was willing to face down oppressive lawmakers by violating exactly the type of ordinance the Mayor is asking you to support.

It is difficult to overstate the contrast between celebrating the life and work of Dr. King on Monday, and codifying the suppression of dissent on Wednesday.

Occupy Chicago intends to keep the campaign up until January 18th, when the vote on the ordinances is scheduled.

Occupy New Hampshire Derides Both Parties

Sunday, January 8, 2012 by CommonDreams.org

'Why Does the Top 1% Have Two Parties and We Have None?'

All political eyes were on New Hampshire this weekend, and members of the Occupy movement hoped to take advantage of the swirl of coverage ahead of Tuesday's Republican Party primary, the first of this election year.
 
 From New Hampshire Public Radio:

Members of Occupy New Hampshire returned to Manchester Saturday to demonstrate outside of the Republican Presidential Debate at St. Anselm's College and spread their message of economic inequality.

Nearly five months after Occupy New Hampshire’s last tents were torn down in Veteran’s Park, the ninety-nine percenters returned to Manchester to demonstrate against what they perceive to be growing economic inequality across the nation.

This time around, though, protesters hope to garner the attention of the national media, who have descended on New Hampshire for the first in the nation primary.

According to Occupy organizer, Michael Grosse, they’re already succeeding:

“Well I think we’ve already gotten a lot of coverage when you really think about it...When a group of about 30 people being able to get national press attention for an event, that’s an accomplishment right there.”

CNN reports today:

Occupy protestors know that many Republicans view them as an extension of the Democratic Party. Elizabeth Grunewald tried to dispel that notion by speaking with folks who are willing to stop and listen to what the group has to say.

"You can't have a slogan that says we are the 99% without including Republicans also," said Grunewald. "It's not aligned with the Democratic Party. It's aligned with the free thinking party."

Doug Bowen tried to sway voters while holding a sign that read "Why does the 1 percent have 2 parties but we have none?"

He said his message to the candidates and voters is "Get money out of politics, pass a constitutional amendment to ban corporate personhood and have publicly funded elections. It's the only way the 99% will get represented rather than the 1%."

There has not been any friction between the people in the small encampment and local police. But there has been plenty of debate on the sidewalks.

Last night, outside of the GOP Presidential debate at St. Anselm's College, protesters gathered to make their voices heard. Among their calls, "How do you fix the deficit? End the wars and tax the rich!"

Patch.com has video.

SecDef Panetta: Iran NOT Building a Nuclear Weapon

Sunday, January 8, 2012 by CommonDreams.org

Secretary of Defense Leon Panetta appeared on CBS' Face the Nation this morning and declared--despite enormous public rhetoric among pundits and many US government officials, not to mention GOP presidential candidates--that Iran is not currently trying to build a nuclear weapon.

The Associated Press reports today:

[Panetta] says Iran is laying the groundwork for making nuclear weapons someday, but is not yet building a bomb and called for continued diplomatic and economic pressure to persuade Tehran not to take that step.

As he has previously, Panetta cautioned against a unilateral strike by Israel against Iran's nuclear facilities, saying the action could trigger Iranian retaliation against US forces in the region.

The comments suggest the White House's assessment of Iran's nuclear strategy has not changed in recent months, despite warnings from advocates of military action that time is running out to prevent Tehran from becoming a nuclear-armed state.

Iran says its nuclear program is only for energy and medical research, and refuses to halt uranium enrichment

And although such comments pair with Iran's insistence that its nuclear program is strictly for domestic non-military purposes, and despite renewed warnings to US-allied Israel not to strike Iran prematurely, Chairman of the Joint Chiefs of Staff Gen. Martin Dempsey, who joined Panetta on Face the Nation rattled the US saber without mistake, saying:

he wanted the Iranians to believe that a U.S. military strike could wipe out their nuclear program.

"I absolutely want them to believe that's the case," he said.

Panetta did not rule out launching a pre-emptive strike.

As such threats from both Israel and the United States continue it's little wonder the Iranians would seek to put their nuclear facilities beyond the reach of incoming airstrikes. As Reuters reports:

Iran will in the "near future" start enriching uranium deep inside a mountain, a senior [Iranian] official said.

[...]

A decision by the Islamic Republic to conduct sensitive atomic activities at an underground site - offering better protection against any enemy attacks - could complicate diplomatic efforts to resolve the long-running row peacefully.

Iran has said for months that it is preparing to move its highest-grade uranium refinement work to Fordow, a facility near the Shi'ite Muslim holy city of Qom in central Iran, from its main enrichment plant at Natanz.

Responding to threats by Iran to close the Strait of Hormuz to oil shipments, Panetta did not hesitate to raise the possibility of military intervention yet again. According the Agence France-Presse:

"We made very clear that the United States will not tolerate the blocking of the Straits of Hormuz," Panetta told CBS television. "That's another red line for us and that we will respond to them."

Panetta was seconded by General Martin Dempsey, the chairman of the Joint Chiefs of Staff, who said Iran has the means to close the waterway, through which 20 percent of the world's oil passes.

"But we would take action and reopen the Straits," the general said.

Corporations Hate Taxes, So They Let the Children Pay

Monday, January 9, 2012 by CommonDreams.org

by Paul Buchheit

 

 

Two recent studies, both rather troubling on their own, are even more disturbing when the relationship between the two is considered.

The first is a study by Citizens for Tax Justice (CTJ) that shows tax avoidance at the state level. The CTJ study, which evaluated 265 large companies, determined that an average of 3% was paid in state taxes, less than half the average state tax rate of 6.2%. The ten states with 10 or more companies in the study all collected between 2.5% and 3.55%: Ohio, Texas, New Jersey, Pennsylvania, Illinois, Minnesota, Virginia, California, North Carolina, and New York.

CTJ notes that "these 265 companies avoided a total of $42.7 billion in state corporate income taxes over the three years." That's about $14 billion per year.

The second study, from the Center on Budget and Policy Priorities (CBPP), reports that "Elementary and high schools are receiving less state funding than last year in at least 37 states, and in at least 30 states school funding now stands below 2008 levels - often far below."

Combining CBPP figures with enrollment data from the National Center for Education Statistics reveals that total K-12 education cuts for fiscal 2012 are about $12.7 billion.
To summarize:

• Corporate state tax avoidance is about $14 billion for one year.

• State education cuts amount to about $12.7 billion for one year.

The connection becomes clearer with a look at the details. The figures for all 20 states represented by four or more companies in the CTJ tax avoidance study are listed at PayUpNow.org. A comparison with the CBPP study on education cuts shows that 19 of these 20 states cut education funding in Fiscal 2012. The nine states that increased educational funding were largely absent from the CTJ study, with a total of only 15 (out of 265) tax avoiding companies.

In general, the states with significant tax-avoiding corporations tended to make sizable cuts in education.

It might be argued that no direct connection exists between corporate state tax shortfalls and school cuts, or that the unpayed tax money might have been earmarked for other expenditures.

But the amounts of corporate savings and student loss are distressingly similar. Big companies refuse to meet their tax obligations, and our children end up paying through cuts to their educations.

The News Networks' SOPA Blackout

Monday, January 9, 2012 by Save the Internet

by Josh Levy

 

You may have heard about the Stop Online Piracy Act, or SOPA. Simply put, this Web-censorship bill in the House could open the door to widespread Internet censorship.

Opposition to the bill has reached a boiling point. Millions of activists, hundreds of startups, social media sites like Tumblr, Reddit and Twitter and even big companies like Google, Yahoo! and eBay have joined with Free Press and other Internet advocacy groups against it.

This is one of the biggest tech stories of the year. Yet as a recent report from Media Matters for America shows, TV news has ignored it.

According to the report, SOPA — and Protect IP, its cousin in the Senate — have “received virtually no coverage from major American television news outlets during their evening newscasts and opinion programming.” Among the offenders are ABC, CBS, Fox News, MSNBC and NBC.

A likely reason for the media blackout? The big networks — and their parent companies — support these two Internet-censorship bills.

This is what happens when the interests of big business get in the way of the need to inform the public and protect free speech. These same media giants are lobbying the Federal Communications Commission to loosen its ownership rules and allow for even more media consolidation — another issue they’ve failed to cover. If the FCC permits runaway consolidation, media blackouts like the one affecting SOPA could become even more common.

Meanwhile, rank-and-file journalists are coming out strong against these censorship bills. And print media have reported on them. Earlier this month New York Times columnist David Carr wrote that SOPA was “alarming in its reach.” Time, the Atlantic, Forbes and the Boston Globe have all reported on the legislation in the past week.

What is TV news afraid of?

These networks — ABC, CBS, Fox News, MSNBC and NBC — need to be held accountable for failing to provide coverage of such damaging legislation.

How the 1 Percent Could Do Its Share to Rebuild America

Monday, January 9, 2012 by Other Words
When Taxes Were Higher, This Nation Built a Vibrant Middle-class Life for Millions
by Susan Adelman

I'm a member of the 1 percent. I've watched my income tax rates fall over my lifetime, from a top rate of 91 percent under President Dwight Eisenhower to the current low rate of 35 percent.

When taxes were higher, this nation built a vibrant middle-class life for millions. Our schools, libraries, bridges, railways, and roads made the United States the envy of the world.

America has been good to my family. My grandfather was a Lithuanian immigrant who owned a general store in Waco, Texas. He helped my father start his business — the Tivoli Theatre in Fort Worth — during the Great Depression. Times were tough. Going to the movies was a way to escape and a ticket cost only a nickel. The business grew to a chain of eight independent theaters in Texas and Oklahoma. My dad invested the money he made wisely.

As tax rates have fallen, our schools, libraries, bridges, railways, and roads have begun to crumble. Millions of Americans have lost their jobs in this Great Recession. Congress continues to resist raising taxes on the wealthy, even though those higher taxes could create the jobs and rebuild the infrastructure that this country so desperately needs.

The 1 percent made billions of dollars during the boom years. Each time Congress reduced the tax rates, we made even more. When President George W. Bush took office, the top income tax rate was just under 40 percent. Congress cut it to 35 percent. Moreoever, many wealthy Americans make a lot of money earning interest on investments, buying and selling stocks, and banking the dividends those stocks produce. Most of those financial gains are taxed at just 15 percent.

A few years ago, Warren Buffett vowed to give a million bucks to any Fortune 500 CEO who could prove he paid a higher tax rate than his secretary. Not one came forward.

Our government taxes work much more than it taxes wealth. What does that say about our values?

Even if tax rates for the 1 percent had been maintained at year-2000 levels, the wealthiest of us would pay more than we do now, but not as much as we should. Still, there would be several trillion dollars more in the nation's treasury, and we 1-percenters would all still be rich.

Some of us get it. We've come together in groups like Patriotic Millionaires to make the case to Congress and the public that we should push those tax rates up to reasonable levels.

As long as Congress refuses to act, here's a simple proposal: I call on other members of the 1 percent to come together to set up a temporary fund to be run by someone with a commitment to rebuilding America, someone like Warren Buffett or Melinda Gates. Those who like the idea would pay in the amount of money they've saved from the lower tax rates. The fund would be used to support our country's long-term economic health, from infrastructure projects to making our schools energy-efficient. Other projects could help rebuild vibrant and green Main Streets.

This is properly the role of government, but government right now isn't doing its job. Just imagine how many jobs we could create if we taxed ourselves as we should be taxed in a decent and fair society.

I believe others would join me in this effort. As more joined in, we millionaires and hopefully some billionaires could challenge others to do the same thing. This would prove that many rich people are ready and willing to raise taxes on themselves.

I was raised to understand that I am part of a privileged minority. I'm getting tired of standing out here by myself yelling, "Tax me!"

Business is Booming for the Prison Profiteers

The GEO Group Cashes In
by JAMES KILGORE

Private corrections company The GEO Group celebrated the holiday season by opening a new 1,500 bed prison in Milledgeville, Georgia on December 12th. The $80 million facility is expected to generate approximately $28.0 million in annual revenues.

Though GEO (formerly Wackenhut) is hardly a household name, they are a major player in the private corrections sector, combining a self righteous amorality in profiting from human misery with a ruthless sense of just how to make a buck in this business. The GEO Group is so notorious that they were the target of an Occupy Washington D.C. action in early December. In addition, the United Methodist Church sold off more than $200,000 in stock in GEO Group over the holiday season, judging that holding these shares was “incompatible with Bible teaching.”

While such actions may irritate a few within the company’s rank, the GEO Group is thick-skinned. Over the years journalists have exposed a long history of violence, abuse and corruption in the company’s facilities. Such scandals would have driven most firms out of business, but GEO has always managed to find the way back to prosperity. While the U.S. economy has plummeted in the past eighteen months, GEO has been positioning itself for the future. In addition to opening the Georgia facility, during this period the company has:

• bought up competitor Cornell Corporation and its prisons in 15 states, an acquisition expected to add about $400 million a year to GEO’s revenues. 
• acquired BI Incorporated for $415 million. BI is the U.S.’ largest producer and provider of electronic monitoring units with 60,000 “customers” for their ankle bracelets begun the intake of new detainees at the 650 bed Adelanto ICE Processing Center East in Southern California. Adelanto West is scheduled to bring a further 650 beds online in August 2012.
• expanded their first facility, Aurora Detention Center (founded in 1987) from 400 to 525 beds
• moved ahead with plans to develop a 600 bed Civil Detention Center in Karnes County Texas, expected to generate $15 million in annual revenues

For the first nine months of 2011, GEO reported total revenues of $1.2 billion, an 11% rise over 2010. Shareholders are gloating with the company’s success. A hundred dollars invested in GEO in 2005 would have risen to $322 by 2010. At the top of the profiteers stands long-time CEO George Zoley. The owner of 70% of GEO’s stock, Zoley consistently pulls down annual compensation in excess of $3 million, landing him squarely in the ranks of the one per centers. His Chief Operations Officer Wayne Calabrese, is not far behind at around two million a year.

GEO’s rising profitability is a result of their capacity to change with the times. While the War on Drugs and facility construction were the cash cows of the industry from 1980 to 2001, 9/11 and the sinking economy have shifted the terrain. Immigration and alternatives to incarceration are the new windows of opportunity in the freedom deprivation sector. GEO, as usual, is right on the money. In Zoley’s prosaic jargon, the company is developing a “full continuum of care with leading competitive positions in every key market segment in corrections, detention and treatment rehabilitation services.”

Along with the new centers at Adelanto and expanding Aurora, the acquisition of BI has enhanced GEO’s potential to capitalize on anti-immigrant crackdowns. The takeover included BI’s five year, $372 million contract with ICE for monitoring 27,000 immigrants under Federal supervision but not held in detention centers.

Grabbing BI has also put GEO in a position to take advantage of the early release programs being implemented in California and other states. BI operates a network of daily reporting centers which offer drug treatment, anger management workshops, counseling, and a host of other services to individuals on parole and probation. These centers stand ready to help state agencies address the increasing need for supervision of people released or diverted from prison. In the long run, the large scale privatization of probation and parole functions is an obvious aim.

Further moves in line with the changing times are the firm’s forays into the psychiatric field through their GEO Care division. With mainstream mental hospitals suffering massive cutbacks, GEO Care has found a niche market in facilities for the involuntarily institutionalized, in other words, psychiatric prisons. GEO Care runs three such facilities in Florida alone. Their prize plum is the 720 bed Florida Civil Commitment Center. (Courts impose a civil commitment on those judged a threat to public safety though not convicted of any crime. People with sex offense histories are the most frequent targets.) In addition to its Florida operations, GEO Care has a presence in Texas as well, having gained a contract to run a 100 bed facility for people awaiting trial in 2009.

Predictably, GEO could not have achieved these financial successes without the usual assortment of dirty tricks and influence peddling. The firm’s team of 63 lobbyists has been active in 16 states over the past decade. In the first quarter of this year alone GEO spent more than $100,000 on lobbying in Florida as the legislature was considering a plan to privatize 29 state prisons. Unfortunately for Zoley and company, the initiative stalled this time around but is likely to resurface in upcoming legislative sessions.

GEO complements its lobbying activities with political campaign contributions, which totaled just over $2.4 million between 2003 and 2010.

Perhaps even more worrying than the GEO Group’s political maneuverings, however, are their efforts to export the U.S. model of mass incarceration and immigration detention. In the late 1990s, GEO (then Wackenhut) had a financial stake in Australia’s notorious Woomera Immigration Detention Center. UN Envoy Justice Bhagwati visited the facility and said he felt he was “in front of a great human tragedy.” Barbara Rogalia who worked there as a nurse, echoed these sentiments: “It reminded me of a Nazi concentration camp I visited in Czechoslovakia, now a museum. The only thing that was missing from the gate, at the top near the razor wire, was a sign saying ‘Arbeit macht frei‘ (‘Work sets (you) free’).”

Following massive demonstrations by community activists, a string of uprisings by those detained and a series of escapes the center closed in 2003. A corporate restructuring process ensued and the company’s corrections wing re-emerged as GEO Australia and continues to operate four prisons.

GEO’s ventures in the UK have had a slightly smoother landing. In 2011 GEO UK won a contract for prison escort services worth $150 million a year. In addition, they took over management of the 217-bed Immigration Removal Center in Glasgow, Scotland.

GEO Group’s last overseas venture is a 3,000 plus bed prison in the Limpopo Province of South Africa. Not long ago, it appeared that South Africa was preparing to embark on a large-scale prison privatization project, with GEO in the lead. However, a change in cabinet personnel landed Nosiviwe Mapisa-Nqakula as Minister of Corrections. She has declared her intention to keep all facilities in state hands. Unlike in the U.S., at least someone in a national position of power in South Africa is prepared to say no to the private prison industry.

At the moment there doesn’t seem to be a Mapisa-Nqakula emerging in the Obama administration. Instead, the GEO Group looks set to make an increasing variety of projects “shovel ready.” If the halting of private profiteering from freedom deprivation is to become a reality, we will need a lot more Occupiers and political leaders with the courage to listen and act.

The Golden Age of Tycoons

by JOHN FEFFER - Counterpunch - 01/09/12

John F. Kennedy essentially bought his way into politics. His father, the wealthy Joseph Kennedy, picked out a nice congressional seat in Massachusetts and basically paid the occupant of the position to step down and run instead for the Boston mayoralty. JFK’s father then tried to pay off the Democratic frontrunner to drop out of the race, and when that didn’t work, persuaded William Randolph Hearst not to run any of the candidate’s ads or pictures in Hearst-owned newspapers. Joe Kennedy even paid a janitor named Joseph Russo to run in the race in order to dilute support for another leading candidate named Joseph Russo. Recognizing the importance of PR, the Kennedy family contributed $600,000 – an enormous sum in 1946 – for a children’s hospital in the district where JFK was running for office.

It would be reassuring if this interpenetration of wealth and politics were simply part of the old style of American politics where deals were brokered in Tammany Hall back rooms and dead men voted in Chicago. But money is still king in U.S. politics. In the 2010 elections, the most expensive in history, winning a congressional seat cost about $1.4 million, and each Senate seat set the winners back by $9.8 million. In 2008, Barack Obama broke fundraising records in his presidential bid when he took in $750 million, and he’s on track to break the record again in 2012.

Sometimes candidates rely on their rich fathers. But if not born to wealth, they quickly mature into 1 percenters. Nearly half of the members of Congress are millionaires. While the median net worth of all Americans dropped by 8 percentfrom 2004 to 2010, the net worth of our elected representatives climbed over the same period by 15 percent. It’s still the best Congress that money can buy, and it’s only going to get worse, thanks to the Supreme Court and its 5-4 Citizens United decision. The wealthy can now spend unlimited amounts of money to influence the 2012 elections.

Money has full-spectrum dominance of U.S. politics, from the “street money” that party machines hand out at the community level for get-out-the-vote campaigns to the immense contributions from a financial sector that has already chosen Mitt Romney as the Republican candidate. Then there’s the perfectly legal “revolving door” by which retiring politicians leverage their invaluable political connections to amass great wealth in the private sector. The stock reason for retirement – “I want to spend more time with my family” – should really be “I want to spend more time with my financial advisor.”

We don’t call any of this corruption. We reserve that term for dolts like former Illinois governor Rod Blagojevich, who recently received a 16-year sentence for trying to sell a Senate seat, or former Prince George’s County executive Jack Johnson, who is getting a seven-year sentence for taking as much as $1 million in bribes. These abuses are the exception, rather than the rule, or so we would prefer to believe. But that’s only because we write the rules to permit the rich to run our democracy.

Corruption, after all, is what happens in other countries, particularly those that rank below the United States (at number 24) in Transparency International’s 2011 Corruption Index. One of those countries is Russia, which registers at a dismal 143rd place in the index, tied with Nigeria.

Russians recently went to the polls to elect a new parliament (Duma). United Russia, the party of Prime Minister Vladimir Putin and President Dmitry Medvedev, saw a major slip in support in the December 3 elections, though it will still remain the largest parliamentary faction. Even this poor showing, Russian observers allege, was inflated by fraud.

“The Russian election-observer Golos identified 5,300 allegations of electoral violations,” writes Foreign Policy In Focus (FPIF) contributor Dimitar Indzhov in Russians United against United Russia. “International observers also judged the elections fraudulent. Concerned citizens took 18 videos of people stuffing ballot boxes with votes for United Russia and uploaded them onto YouTube. These are pretty stark images of unfairness. But Russian people have put up with United Russia for some time, despite its autocratic tendencies.”

This time, however, Russians did not simply grumble into their vodka. They poured into the streets on December 10 and then again on December 24, despite freezing temperatures in Moscow.

The explicit protest has been around voting irregularities. But the complaints run deep and implicate the role that money plays in Russian politics. After all, United Russia is in bed with the most profitable and powerful industries in Russia – oil, gas, timber. “Under President Vladimir Putin’s watch, the Russian state has turned into something like Russia Inc., with top Kremlin staffers and senior ministers sitting on the boards of various state-owned corporations and taking an active interest in their progress and profits,” Dmitri Trenin wrote several years ago inWashington Quarterly.

The most obvious example is Gazprom, the largest Russian company and the largest extractor of natural gas in the world. It is a state within a state, administering a series of towns along its pipeline from Siberia westward. It runs a TV station, maintains 26 cultural centers, and promotes its operations with this catchy music video (with the chorus “Let’s drink to you, let’s drink to us, let’s drink to all the Russian gas”). Dmitry Medvedev served as the head of the board of directors at Gazprom when he was first vice prime minister, relinquishing the job only when he became president. The company has received the lowest rating from Transparency International.

Russia’s heavy reliance on energy exports and the widening gap between its rich and poor demonstrate that, thanks to Gazprom, the country is suffering from the “resource curse.” Instead of using the revenues from its natural gas exports to diversify its economy and raise the living standards of all, the Russian leadership has merely consolidated its power and its support among the wealthy. Corruption has settled upon the land like a toxic cloud. Russia has become Nigeria with nukes.

“At its core,” writes David Remnick in The New Yorker, “Putin’s Russia is not a democracy, sovereign or otherwise. Rather, power for power’s sake and the accumulation of vast wealth in the hands of various ‘clans’ and friends of the Kremlin are at the center of things. Very few owners of the mansions outside Moscow were able to buy those properties, and hold onto them, without close connections, and complete fealty, to the regime.”

The collapse of the Soviet Union produced a Gilded Age of tycoons and their political supporters. Such a Gilded Age might have given way, through the influence of Russian trust-busters and civil society watchdogs, to a political economy that was corrupt in the more conventional U.S. sense of everyday influence peddling. But when Putin took over in 2000, he further consolidated state power and punished any dissenting tycoons. U.S. corruption is legitimated by the market; Russian corruption is legitimated by the state.

The backlash happening today in Moscow is a combination of the tea party movement and Occupy Wall Street. Anarchists stand side-by-side with great-power nationalists; libertarians and old-style communists protest in rough unison. There is tremendous resentment toward the small group of people – politicians and tycoons – that has profited from both privatization and nationalization. What will emerge from this confrontation between Putin and the people is hard to forecast. But it will certainly be nationalist in orientation, for that seems to be the strongest unifying force in Russia today. In a recent poll, 59 percent of Russians approved of the ominous slogan “Russia for Russians.” As Alexei Navalny, the most prominent blogger-critic of Putin, explains of this sentiment, ”We have a huge number of migrants whose behavior and cultural code is way out of joint with the cultural codes of those living here, the Russians.”

Millions of people have thronged the streets of cities all over the world this last year to protest the influence of money on power – the corruption in Mubarak’s Egypt and Ben Ali’s Tunisia, the malign effects of Wall Street and other financial institutions, the power elite in Russia. It is truly galling when the wealthy and powerful steal elections, whether JFK in 1946 or Vladimir Putin in 2011.

Democracy must not be yet another method by which the rich stay rich. In the United States as in Russia, democracy must serve the people, particularly those not already helped by the market or the state.

Fracks in the Foundation

Fracking, Keystone XL, Mountaintop Removal and More

by STEPHANIE PENN SPEAR

 

On Jan. 10 at 1 p.m. on the west lawn of the Ohio Statehouse in Columbus, Ohio, concerned citizens from all over the state will gather to ask Gov. Kasich to impose an indefinite moratorium on Ohio’s oil and gas wastewater injection well sites and the natural gas extraction process that has become well-known as fracking, until further research and proper regulations are put in place to protect human health and the environment.

This protest is in response to the 11 earthquakes that have hit the Youngstown, Ohio area since March 2011. The most recent earthquake, with a 4.0 magnitude that was felt nearly 200 miles away, shook the community on New Year’s Eve. Won-Young Kim, a research professor of seismology geology at Columbia University who is advising the state of Ohio on the Dec. 31 earthquake, said that circumstantial evidence suggests a link between the earthquake and high-pressure well activity. Kim believes that the recent earthquake did not occur naturally and may have been caused by high-pressure liquid injection related to oil and gas exploration and production.

Fracking is a method of gas extraction that involves injecting a brew of toxic, heavy metal lubricants, chemicals and sand deep underground to fracture rock formations that release oil and gas. Hydraulic fracturing uses enormous quantities of fresh water, which gas companies take from nearby streams, ponds and rivers, or truck in if there is no immediate water source. Every time a gas well is fracked, four to nine million gallons of water are injected into the ground with a secret brew of chemicals. A single well can be fracked up to 12 times, totaling more than 100 million gallons of freshwater used in the lifetime of a well.

Some of the fracking fluid used in the process of breaking apart the shale remains underground, but a large majority of it comes back to the surface mixed with hazardous chemicals, volatile organic compounds, and even radioactive material that was trapped underground and released in the process. This wastewater is then trucked to a disposal well and pumped back underground. With millions of gallons of hazardous liquid created during this process, a major challenge for the natural gas industry and regulators, has been the disposal of this toxic byproduct of fracking.

It is this toxic wastewater that is being high-pressure injected into many of Ohio’s deep wells, as far down as 9,000 feet, and blamed for the recent Youngstown earthquakes. Thanks to Ohio’s geology and the Kasich administration, along with other elected officials, Ohio now receives about 1,000 truckloads of frackwater everyday at disposal wells around Ohio. Ohio is home to 177 oil and gas wastewater injection well sites, 10 times more than surrounding states. More than half of the fracking wastewater coming into Ohio is from out of state, including New York and Pennsylvania.

Concerns on how to dispose of fracking wastewater are only one of the problems associated with natural gas extraction. Fracking has been linked to more than 1,000 incidents of groundwater contamination across the U.S., including cases where people can actually ignite their tap water. There is no doubt that proper regulations on the state and federal levels are lacking.

In New York state, opponents of fracking are asking lawmakers to extend the moratorium that was put into place in 2010, due to concerns that hydraulic fracturing, without proper regulation, could pollute groundwater.

Concerns over the extraction of natural gas are experienced worldwide and impact rural, suburban and urban communities. The number of anti-fracking groups is growing every day. Frustrations are running high as the U.S. continues to lack a sustainable energy policy that puts a cap on carbon and supports investment in renewable energy generation and manufacturing instead of supporting extreme fossil fuel extraction.

On the federal level and in Ohio and many other states, incentives for renewable energy projects and manufacturing need to be put back in place. Three years ago we were making some progress in moving toward a sustainable energy supply. But over the last couple years, states and the federal government have stripped away the incentives that were a first step in leveling the playing field between renewable and nonrenewable energy. Since the fossil fuel industry is so highly subsidized and externalizes much of its costs, the renewable energy industry cannot compete without the help of incentives.

In Ohio, we passed SB 221 in July 2008. It mandates that 25 percent of Ohio’s electricity generation come from advanced energy sources by 2025 with 12.5 percent from renewable sources including hydro. Half of the renewable energy generation has to come from within the state. It even contains a .5 percent solar carve out that has increased the value of solar renewable energy credits in the state. Coupled with this legislation was the Ohio Advanced Energy Fund grant program that provided a financial incentive to invest in renewable energy projects. However, the legislature failed to renew this grant program in 2010 and the number of projects in our state has greatly declined.

Creating jobs at the expense of human health and the environment is not sustainable. 

Energy generation is not a job vs. the environment issue. It’s a need for a cleaner environment creating jobs—green jobs that will transition our country to relying on cleaner, renewable sources of energy. Investment in renewable energy will create jobs, revitalize our strong manufacturing base and provide long-term solutions to our energy needs without contaminating our drinking water, polluting our air, displacing communities and making people sick.

I know there’s no perfect solution or silver bullet that will generate all the word’s energy needs, but it is clear that supporting extreme fossil fuel extraction—like fracking, mountaintop removal coal mining, tar sands mining or building pipelines like the proposed Keystone XL that would take the most toxic and corrosive oil from Alberta, Canada and pipe it through the breadbasket of America to ship it overseas—is not the answer. Energy efficiency, investment in distributed generation and grid-feeding renewable energy projects, rebuilding the electric grid, and investment in battery storage and innovative energy technologies is the direction our country needs to take.

The next several months are going to be interesting. As of right now, according to the House Energy & Commerce Committee clock, Obama has 43 days to decide on the Keystone XL pipeline as stated in the tax-cut bill passed at the end of last year. Gov. Cuomo will decide on the fate of New York’s moratorium on fracking as early as this week. Ohioans will speak out on Tuesday concerning their fears of continued natural gas extraction and disposal of toxic wastewater in their state. Public comments are being accepted on Obama’s proposal to allow drilling in the pristine Arctic Ocean and increased drilling in the Gulf of Mexico before adequate safety standards are in effect. Regulations aimed at limiting harmful power plant pollution that crosses state lines, including sulfur dioxide and nitrogen oxide, which would prevent 34,000 premature deaths, 15,000 heart attacks and 400,000 cases of asthma have been put on hold by a three-judge panel of the U.S. Appeals Court in Washington. Unfortunately, the list goes on.

I’ve been working in the grassroots environmental movement for more than 23 years.  I’ve never seen so many people so worried about the health of the planet and concerned for future generations as we continue to consume resources at an unprecedented rate, and allow corporations to run our government and privatize our natural resources. I’ve also never seen such incredible grassroots leadership and collaboration among environmental organizations as we have today. Like I said, the next several months are going to be really interesting. Be sure to stay-tuned to EcoWatch.org as we keep you up-to-date on all the issues.

Quotes ( & Don't forget to blog naked! )

"The true test of liberty is the right to test it, the right to question it, the right to speak to my neighbors, to grab them by the shoulders and look into their eyes and ask, “Are we free?” I have thought that if we are free, the answer cannot hurt us. And if we are not free, must we not hear the answer?" ~ Gerry Spence

"All government, of course, is against liberty." ~ H.L. Mencken

"When you think of the long and gloomy history of man, you will find more hideous crimes have been committed in the name of obedience than have ever been committed in the name of rebellion." ~ C.P. Snow

"You have rights antecedent to all earthly governments: rights that cannot be repealed or restrained by human laws...." ~ John Adams

"We now have so many regulations that everyone is guilty of some violation." ~ Donald Alexander

"Rightful liberty is unobstructed action according to our will within limits drawn around us by the equal rights of others. I do not add 'within the limits of the law,' because law is often but the tyrant's will, and always so when it violates the rights of the individual." ~ Thomas Jefferson

‎"Real integrity is doing the right thing, knowing that nobody's going to know whether you did it or not."
~Dorothy Draper

Fraud and Folly: General Electric's Subprime Debacle

The Untold Story
The industrial giant jumped into the subprime business in 2004, lending blue-chip respectability to the market for risky home loans.
By Michael Hudson, The Center for Public Integrity
Posted on January 6, 2012

For General Electric Co., hawking subprime mortgages was a long way from making light bulbs and jet engines.

That didn't stop the industrial giant from jumping into the subprime business in 2004, lending blue-chip respectability to the market for risky home loans by paying roughly half a billion dollars to buy California-based WMC Mortgage Corp.

What GE got in the bargain, former WMC employees say, was a place where erstwhile shoe salesmen, ex-strippers and even a former porn actress could sign on as sales reps and make big money pushing home loans. WMC's top salespeople earned a million dollars a year or more and lived fast, swigging $1,000 bottles of Cristal and wheeling around in $100,000 Ferraris and Bentleys.

In pursuit of these riches and perks, several ex-employees claim, many WMC sales staffers embraced fraud as a tool for pushing through loans that borrowers couldn’t afford.

Dave Riedel, a former compliance manager at WMC, says sales reps intent on putting up big numbers used falsified paperwork, bogus income documentation and other tricks to get loans approved and sold off to Wall Street investors.

One WMC official, Riedel claims, went so far as to declare: “Fraud pays.”

How well did GE address WMC’s fraud problems?

GE says it did plenty to deal with the issue. Some ex-employees counter that GE officials didn’t do enough to rein in illicit practices, despite warnings from Riedel and other whistleblowers inside the lender. GE dispatched emissaries to look into the problem, the ex-employees say, but their efforts were too little, too late.

“They sent in people we thought were going to bring us back in the right direction,” Victor Argueta, a former risk analyst at WMC, says. “But it just never happened.”

By 2007, WMC was bleeding bad loans and red ink. General Electric shut the lender and reported related losses totaling more than $1 billion.

‘Everyone knew’

How could General Electric — a corporate icon voted America’s most admired company in 2006 and 2007 — have stumbled so badly?

The story of GE’s subprime misadventure has earned little attention from news media or public officials amid headlines about bank failures and mega-bailouts at other big companies. But now, with the aftershocks still being felt by GE and by WMC's borrowers, lawsuits and former employees have begun to shed light on what happened and why.

It’s a tale of a 134-year-old industrial concern that’s transformed itself into a financial services juggernaut. It’s also a story about breakdowns in corporate compliance systems amid the chase to cash in on the latest innovations in high and low finance.

In interviews with iWatch News, eight former WMC employees claim WMC’s management ignored them when they reported loans supported by falsified documents, inflated incomes or other legerdemain. Two of them say they were transferred and demoted because they pressed too hard to expose corrupt practices.

Riedel, who worked as quality-control manager for the lender’s largest production division, claims that after he informed a GE official about fraud inside the lender, WMC’s management demoted him — reorganizing him out of his job, taking away his office and his staff and forcing him to sit at a desk for months without a job title.

“I didn’t have any files,” Riedel told iWatch News during a series of interviews. “I basically stared out a window.”

Two other former WMC employees confirm Riedel’s account of his transfer. “Everyone knew,” Argueta, the former risk analyst, says. “We all knew why he’d been moved to our section, from a nice comfy office out to the cubicles.”

General Electric didn’t answer questions from iWatch News about the accounts provided by Riedel and other ex-employees. It also declined to provide detailed answers to a series of questions about how much it knew about alleged fraud at the Burbank, Calif.-based lender and what steps it took to deal with it.

In a written statement, GE says that “following its acquisition by GE, WMC strengthened and expanded its compliance programs and standards. WMC held people to those standards. In those instances where WMC learned of violations of these standards, management took disciplinary action, including terminations of employment.”

‘All kinds of crazy loans’

WMC made a name for itself long before GE came courting.

Founded in 1955, it had been known for much of its life as Weyerhaeuser Mortgage, a subsidiary of the pulp and paper giant Weyerhaeuser Co.

By the late 1990s it had a new owner — billionaire financier Leon Black’s Apollo Management LP — and it had moved into the subprime game, spurring production by rolling out a “Race to the Top” program that gave top sales performers the use of Porsche Boxsters.

The push to book mortgage deals produced a rash of bad loans around the country. WMC claimed it had been victimized by on-the-ground fraudsters who’d used bogus appraisals and other deceits to get mortgages approved.

In Minnesota’s Twin Cities, however, so many WMC loans ended up in or near foreclosure that a local newspaper, the Star Tribune, suggested WMC had “self-inflicted some of its wounds by pushing too hard and fast” to sell loans. An assistant state attorney general told the paper that the company simply didn't do "some of that due diligence” needed to ensure loan deals made sense.

“I have never seen a company that has been this aggressive,” one mortgage broker told the Star Tribune. “They were doing all kinds of crazy loans. They were doing anything they could do to push these deals through.”

Questions about WMC’s lending tactics were also raised by an academic study that looked at a pool of 5,610 loans the company had made around the country in 1998. By December 1999 almost 25 percent of the loans were facing foreclosure or were seriously delinquent — more than five times the rate for loans originated by other major subprime lenders, the study found.

GE, meet WMC

Despite these problems, WMC’s aggressive sales culture helped it survive and grow.

One of the forces behind its resurgence was Amy Brandt, who had gone from practicing law to peddling mortgages for WMC, quickly rising to become WMC’s No. 1 salesperson and then executive vice president of production. When she joined the executive team in 2000, she later told a business magazine, the company was on the verge of bankruptcy, and she helped lead what was, in her words, an “unbelievable turnaround story.”

By the end of 2003, Brandt was WMC’s president and chief operating officer, and the lender was producing $8 billion a year in subprime home loans and boasting profits of $140 million a year. It had also attracted the interest of General Electric, which was looking to grow in what, since 2001, had been a slow-moving economy.

“We’re going to have to turn up the engines to drive growth,” GE’s chairman, Jeffrey Immelt, told a TV interviewer in late 2003, explaining his company’s overall growth strategy. “The economy is not going to give you much, so what do you do?”

One of the things General Electric did was to seek profits in a home loan market that was rapidly heating up.

The big deal was announced in April 2004.

General Electric has never publicly disclosed the purchase price, but Apollo later revealed in securities filings that GE paid nearly $500 million for WMC, providing a nice profit for Black’s firm, which had paid less than $200 million for the lender seven years before.

GE asked Amy Brandt to stay on. She added CEO to her title. Internal documents obtained by iWatch News indicate GE promised the 31-year-old executive as much as $20 million in compensation over three years — including a $10 million upfront bonus at the closing of the deal.

General Electric declined to answer questions from iWatch News about the acquisition. It won’t say how much scrutiny it gave the lender before it closed the deal, or whether it was aware of WMC’s earlier fraud problems.

GE officials made it clear at the time that their regard for Brandt played a role in the company’s decision to buy WMC. “A big part of us doing the acquisition was Amy, no question about it,” a top GE executive told American Banker.

Immelt and other GE honchos thought so much of what Brandt had done with WMC, Businessweek later noted, they invited her to talk before the parent company’s top 600 executives at its annual leadership summit in Boca Raton, Fla.

As she left the stage, Immelt gave her a high five.

Tricks of the trade

Dave Riedel started at WMC soon after General Electric took over.

Riedel had experience in the banking industry as a real-estate appraiser, loan underwriter and, most recently, mortgage fraud investigations manager at Washington Mutual Bank. At WaMu, he claims, higher ups had told him to keep quiet when he’d tried to warn them about fraud-tainted loans streaming into the company’s mortgage pipeline.

With General Electric in charge, Riedel thought things would be different at WMC. He thought he’d get a chance to do his job and, he says, “catch the bad guys.”

He supervised a quality-control team of a dozen or more people who watched over WMC’s lending in a broad area of Southern California where salespeople were pushing subprime loans as well as “Alt-A” mortgages, another type of risky home loan.

The team, Riedel says, found many examples of fraud committed by in-house staffers or the independent mortgage brokers who helped bring in customers to the lender. These included faking proofs of loan applicants’ employment and faking verifications that would-be home buyers had been faithfully paying rent for years rather than, say, living with their parents.

Some employees also fabricated borrowers’ incomes by creating bogus W-2 tax forms, he says. Some, he says, did it old-school, cutting and pasting numbers from one photocopy to another. Others, he says, had software on their computers that allowed them to create W-2s from scratch.

‘Branded as a whistleblower’

In 2005, Riedel’s team became concerned about a sales manager who oversaw the funding of hundreds of loans a month. An audit of these loans, Riedel says, found that many of the deals showed evidence of fraud or other defects such as missing documents.

This wasn’t enough to get the sales manager fired. At most, Riedel says, the guy got a stern lecture.

“He became a little more shy. He wasn’t so flamboyant,” Riedel says. “But nothing changed.”

Later, during a sit down with a visiting GE compliance official, Riedel recalls, he described the audit and the response.

Over the next few days, Riedel claims, his career was thrown into tumult.

He says a WMC official countered by telling the GE representative that Riedel didn’t know what he was talking about and that the company had already been planning to demote him.

Riedel was stripped of his title, he says, and idled for months with no assignments and no staff.

A former WMC executive, who spoke on the condition of anonymity, says the fact that GE knew about Riedel’s concerns about fraud may have prevented WMC officials from firing him, but it didn’t stop them from putting him into corporate limbo.

“He was kind of branded as a whistleblower and not a team player,” the former executive says. “They didn’t exactly fire him. They just marginalized him and he didn’t really have anything to do.”

‘Business as usual’

While Dave Riedel was fighting battles inside WMC’s California headquarters, Gail Roman was losing battles on the other side of the country.

Roman worked as a loan auditor at WMC’s regional offices in Orangeburg, N.Y. She and other colleagues in quality control, she says, dug up persuasive evidence of inflated borrower incomes and other deceptions on loan applications.

It did little good. Management ignored their reports and approved the loans anyway, she says.

“They didn’t want to hear what you found,” Roman told iWatch News. “Even if you had enough documentation to show that there was fraud or questionable activity.”

If GE made any progress against fraud at WMC, Roman says, she didn’t notice it. Fraud was as bad at WMC in 2006 as it was when she started at the lender in 2004, she says.

“I didn’t really see much of a change,” Roman says.

Victor Argueta, the former risk analyst, says he didn’t see much change either.

Meetings would be held. Executives from GE would agree fraud was a problem and something needed to be done. “But the next month it was business as usual,” Argueta says.

Argueta was barely a year out of college, with an undergraduate economics degree from the University of Southern California, when he started at the lender in 2004. What he encountered, he recalls, wasn’t what he had expected to find at a branch of a top-flight Fortune 500 corporation.

Twenty-something salespeople with little education or mortgage experience ran the show, he says. They pulled in $250,000 to $350,000 a year while sales managers made $1 million or $2 million, thanks to generous production bonuses and the network of independent mortgage brokers that fed the lender business.

“We had ex-strippers working there,” Argueta says. “The whole point was to have someone attractive to talk to the brokers. One of the salespeople did porn before she worked there. When someone told me that, I couldn’t believe it. Then I saw the video and I realized it was true.”

Argueta says one top sales staffer escaped punishment even though it was common knowledge he was using his computer to create fake documents to bolster applicants’ chances of getting approved.

“Bank statements, W-2s, you name it, pretty much anything that goes into a file,” Argueta says. “Anything to make the loan look better than what was the real story.”

In one instance, Argueta says, he sniffed out salespeople who were putting down fake jobs on borrowers’ loan applications — even listing their own cell phone numbers so they could pose as the borrowers’ supervisors and “confirm” that the borrowers were working at the made-up employers.

Management gave him a pat on the back for pointing out the problem, he says, but did nothing about the salespeople he accused of using devious methods to make borrowers appear gainfully employed.

Nightmare loans

Roman and Argueta weren’t alone in their concerns, according to other ex-employees who spoke on the condition they remain anonymous, because they still work in banking and fear being blackballed within the industry.

“It was ugly,” one former fraud investigator at WMC recalls. “I would have nightmares about some of the things I’d find in a file. I’d wake up in the middle of the night going, ‘Oh my God, how did this happen?’ ”

A former manager who worked for WMC in California claims that company officials transferred and essentially demoted her after she complained about fraud, including the handiwork of a sales rep who used an X-Acto knife to create bogus documents, cutting numbers from one piece of paper and pasting them onto another, then running the mock-up through a photocopier.

“They knew I had a lot of crap on them and I wasn’t going to shut up,” she says. “And the easiest way was to pay me off. Create a job where I could just sit and collect my money.”

Both Riedel and another former WMC employee confirm the woman’s account.

Two other ex-employees say that, in their experience, WMC managers didn’t condone fraud. When he identified fraud-tainted loans, one of the two recalls, his managers killed them.

Both add, though, that the lender did push loans that were likely to land borrowers in trouble in the long run. The desire to keep sales numbers growing often trumped good judgment, the other ex-employee recalls. “It was like hitting your head against a brick wall, trying to make sure the right thing was done,” she says.

‘Fraud pays’

By early 2006, Dave Riedel had begun to rebuild his career inside WMC.

He helped put together a presentation in May 2006 aimed at giving GE officials a sense of how serious WMC’s fraud problems were. Riedel says an audit of soured loans that investors had asked WMC to repurchase indicated that 78 percent of them had been fraudulent; nearly four out of five of the loan applications backing these mortgages had contained misrepresentations about borrowers’ incomes or employment.

Riedel also helped work on a computer program designed to dig out fraud across the company’s loan portfolio. It sifted through a swarm of data, including evidence that many borrowers submitted multiple applications with income figures that mysteriously grew from one application to the next. Then it spit out a fraud alert flagging applications that appeared to have false information.

Riedel hoped that the company would use the data-tracking program on a real-time, wide-scale basis, he says.

It was at a meeting about the computer program, Riedel says, that an executive declared “fraud pays” — explaining that it didn’t make sense to slow the gush of loans going through the company’s pipeline, because losses due to fraud were small compared to the money the lender was making from selling huge volumes of loans.

The anti-fraud algorithm was never put into regular use, Riedel says.

Final days

In October 2006, Dave Riedel changed his computer password to “finaldays107!” — reflecting his expectation the company would be out of business by October 2007 (10-7).

As home values were starting to fall and subprime loan defaults were starting to rise across the industry in late 2006, Amy Brandt stepped down as WMC’s top executive. She told a trade publication that her contract with GE was ending and, rather than re-enlist, it was time for her “to move on.”

“This was really my baby, and I wanted to wrap up this era because I really love the company,” Brandt explained.

By the spring of 2007, problems in the subprime mortgage market had grown more serious. Borrower defaults and investor alarm had spun the mortgage industry into chaos. In the first half of the year, WMC lost more than a half-billion dollars.

GE officials blamed the mortgage market’s swoon for WMC’s problems. In mid-July, GE revealed it had entered what its chairman, Immelt, described as an “active exit process.” Immelt told investors his company decided to end its three-year subprime experiment because “we just had too many other better choices. And I just think we wanted to get this off the table vis-a-vis the things that investors have to think about with GE.”

Along with taking an immediate hit to its balance sheet, GE also set aside hundreds of millions of dollars to cover investors’ demands that it buy back defective WMC loans.

By October 2007 — as Riedel had predicted — WMC Mortgage was effectively out of business, dead after having pumped out roughly $110 billion in subprime and “Alt-A” loans under GE’s watch, according to industry data tracker Inside Mortgage Finance.

‘Living it up’

And Amy Brandt?

She was “living it up,” at least according to Businessweek.

WMC’s former CEO had a 30-acre ranch outside Los Angeles where she kept a dozen horses. She’d used some of the millions she’d earned at the lender, the magazine said, to start an independent record label, YMA Music Group, which signed such artists as former Limp Bizkit guitarist Wes Borland. She’d also become CEO of Vantium Capital, a private equity fund that planned to make money off distressed mortgages.

Brandt told Businessweek that, looking back, she wished she’d done more to diversify the kinds of loans WMC made.

“We were too aggressive in some areas,” she said.

Others agreed that WMC had been too aggressive in its lending practices.

A study by federal regulators, “Worst Ten in the Worst Ten,” found WMC’s loans accounted for the second-highest number of foreclosures on subprime and “Alt-A” mortgages in the nation’s 10 hardest-hit foreclosure hotspots, trailing only New Century Financial.

In the Fort Pierce-Port St. Lucie area in Florida, for example, 47 percent of the loans WMC booked from 2005 through 2007 had ended up in foreclosure as of late 2009, the study found.

Washington State banking regulators accused WMC, Brandt and two other WMC executives of “deceptive and unfair practices.” The regulators claimed the lender failed to make sure all borrowers received legally required disclosures, including paperwork that reported how much they would be paying on their loans.

WMC reached a consent order with the agency that included modest cash payments to a few borrowers. It didn’t acknowledge wrongdoing.

Brandt told iWatch News she couldn’t comment on the state regulators’ allegations or answer other questions about her time at the lender.

One former employee, who spoke on the condition her name not be used, says she believes Brandt “was so far removed from daily operations that she probably didn’t know” how bad fraud was inside the company.

‘Stunning failure rate’

Mortgage investors also are taking a closer look at WMC’s practices.

A review of a $550 million pool of mortgages booked by WMC and another subprime lender, EquiFirst, found inflated borrower incomes, missing documents and other “material breaches” in 150 loan files out of a sample of 200 — a “stunning 75 percent failure rate,” according to an investor lawsuit filed in September in federal court in Minnesota.

One of the defective WMC loans, the suit claims, was supported by paperwork that said the borrower earned almost $180,000 a year doing “account analysis.” The borrower’s tax returns, the suit says, showed he actually made less than $20,000 per year driving a taxi.

GE told iWatch News that it will “vigorously defend” itself against the lawsuit. It says the suit’s claims are “based upon a flawed statistical sampling of a small number of loans.”

The Federal Housing Finance Agency, meanwhile, charges that General Electric misled investors in the sale of hundreds of millions of dollars in securities backed by WMC mortgages.

The agency’s lawsuit claims GE didn’t tell the truth about how well WMC followed its loan underwriting guidelines, or about how much borrowers owed on their homes or whether they intended to live in them or use them as investment properties.

GE denies the allegations, and insists that Freddie Mac, which invested in the securities, made out well on the deals.

On the record

Dave Riedel no longer reads the financial news. When someone brings up the mortgage crisis at a party, offering opinions about what happened and why, he keeps his mouth shut. Talking about it makes his blood pressure rise.

After WMC closed, he spent almost two years looking for work before he found a sales job outside the banking industry. Nobody in the banking business was interested in hiring him.

Of the 40 best fraud investigators he knows, Riedel estimates that maybe four of them still have jobs in banking. Meanwhile, he says, bureaucrats without the talent or temperament for fighting corruption have snapped up choice fraud-control jobs at many big banks.

Despite his desire to put his mortgage days behind him, he says he felt an obligation, when iWatch News contacted him, to tell what he knew.

Later, he had second thoughts, worrying there might be blowback against him for talking about what happened inside WMC and GE, even if he stuck to facts rather than opinion. He asked his comments be put “off the record.” When he was told it wasn’t possible to go off the record after the fact, he made peace with going public.

“I have an ethical problem with covering things up,” Riedel says.

Given a chance, he adds, he’d be willing to talk to the FBI about what he uncovered during his time at WMC.

The feds should be turning over rocks, he believes, across the mortgage industry. People who committed or condoned fraud and helped crash the economy, he says, need to be held accountable.

“I can’t tell you who broke the law and who should or shouldn’t go to jail,” he says. “But I can tell you that these people should have to answer to somebody about what happened.”