Sunday, August 29, 2010
Microsoft cofounder drops patent bomb on Apple, Google, Facebook
By Jacqui Cheng | Ars Technica | Aug 28, 2010
Paul Allen, entrepreneur and cofounder of Microsoft, has filed a lawsuit against 11 companies for infringements on his Web search patents. Announced on Friday afternoon, the suit names Apple, Google, Facebook, Netflix, YouTube, and Microsoft partner Yahoo as defendants for violating four Interval Licensing LLC patents, though the court will likely have to weigh whether the patents in question are "obvious" or not.
The patents revolve around three main concepts: browser use for navigating through information, managing a user's peripheral attention while using a device, and alerting users to items of current interest. They collectively address the general concept of presenting searched-for information to a user along with related news articles, media (such as music or videos), status updates from friends, or data (such as stock or weather info).
Needless to say, numerous Internet companies make use of such concepts, including, of course, Microsoft. However, Microsoft has managed to escape Allen's ire for the time being, while the 11 other companies seem to share the oddly coincidental characteristic of being wildly popular with the public. In its announcement, Interval has declared itself a "ground-breaking contributor to the development of the internet economy" and says all it wants to do is "protect [its] investment in innovation."
It's hard not to see the lawsuit as a patent troll—especially given the fact that Interval doesn't actually produce any products and the word "licensing" is right in the company's name. Still, Allen and his spokesperson David Postman clearly believe that they are defending a concept that is not practically universal among search engines and web browsers, but rather something that would not exist at all had Interval not come up with it.
"We are not asserting patents that other companies have filed, nor are we buying patents originally assigned to someone else," Postman said in a statement. "These are patents developed by and for Interval."
A Google spokesperson responded to the lawsuit by saying that it uses the patent system to work against innovation, not for it. "This lawsuit against some of America's most innovative companies reflects an unfortunate trend of people trying to compete in the courtroom instead of the marketplace," the spokesperson said. "Innovation—not litigation—is the way to bring to market the kinds of products and services that benefit millions of people around the world." (Apple did not respond to our request for comment by publication time.)
Some of the defendants, such as Apple and Google, have gone on record in support of serious patent reform in the US, though such reform is still a ways away. Courts have increasingly put patents through the "obviousness test" in recent years when deciding patent cases, too, which will undoubtedly come into play if this lawsuit doesn't end in a settlement.
Paul Allen, entrepreneur and cofounder of Microsoft, has filed a lawsuit against 11 companies for infringements on his Web search patents. Announced on Friday afternoon, the suit names Apple, Google, Facebook, Netflix, YouTube, and Microsoft partner Yahoo as defendants for violating four Interval Licensing LLC patents, though the court will likely have to weigh whether the patents in question are "obvious" or not.
The patents revolve around three main concepts: browser use for navigating through information, managing a user's peripheral attention while using a device, and alerting users to items of current interest. They collectively address the general concept of presenting searched-for information to a user along with related news articles, media (such as music or videos), status updates from friends, or data (such as stock or weather info).
Needless to say, numerous Internet companies make use of such concepts, including, of course, Microsoft. However, Microsoft has managed to escape Allen's ire for the time being, while the 11 other companies seem to share the oddly coincidental characteristic of being wildly popular with the public. In its announcement, Interval has declared itself a "ground-breaking contributor to the development of the internet economy" and says all it wants to do is "protect [its] investment in innovation."
It's hard not to see the lawsuit as a patent troll—especially given the fact that Interval doesn't actually produce any products and the word "licensing" is right in the company's name. Still, Allen and his spokesperson David Postman clearly believe that they are defending a concept that is not practically universal among search engines and web browsers, but rather something that would not exist at all had Interval not come up with it.
"We are not asserting patents that other companies have filed, nor are we buying patents originally assigned to someone else," Postman said in a statement. "These are patents developed by and for Interval."
A Google spokesperson responded to the lawsuit by saying that it uses the patent system to work against innovation, not for it. "This lawsuit against some of America's most innovative companies reflects an unfortunate trend of people trying to compete in the courtroom instead of the marketplace," the spokesperson said. "Innovation—not litigation—is the way to bring to market the kinds of products and services that benefit millions of people around the world." (Apple did not respond to our request for comment by publication time.)
Some of the defendants, such as Apple and Google, have gone on record in support of serious patent reform in the US, though such reform is still a ways away. Courts have increasingly put patents through the "obviousness test" in recent years when deciding patent cases, too, which will undoubtedly come into play if this lawsuit doesn't end in a settlement.
The State’s Bad Math
Posted by David D'Amato on Aug 28, 2010
On Friday, Federal Reserve Chairman Ben Bernanke delivered a message that — for those of us who inveigh against widespread, institutionalized violence — sounded a lot like a threat, that “much of the work of implementing financial reform lies ahead of us.” Fortunately for libertarians, the ciphers of the state, broadcast by its many mouthpieces, are not difficult to decode, transparently glorifying the policies of coercion that begot the “Panic of 2008.”
Still, appraisal of the ways that the state disseminates its economic message is a worthwhile project considering Orwell’s shrewd, ever-relevant observation that “[p]olitical language … is designed to make lies sound truthful and murder respectable, and to give an appearance of solidity to pure wind.” It is an enduring and reliable frustration for anarchists that the state and its media pawns are intent on making statements such as “the economy is bad,” or “the economy is unhealthy,” but there is a reason, if not an outright calculated one, underlying the employment of this construct.
The notion that the economy, no more than the aggregate of consensual exchanges made by individuals, could be “bad” or “unhealthy” is completely incoherent. It would be more accurate (but less convenient for agents of government agitprop) to say that violent state intervention in the economy is “bad” or “unhealthy.” The arguments of the state rely on presenting “the economy” as a self-contained and distinct entity in and of itself, as something that can be acted upon or refined from without, as a doctor might act upon a patient, or a mechanic upon a car. Through this rhetorical misdirection, parasites like Bernanke assume the shape of beneficent caregivers, possessed of the antidotes for the country’s economic maladies.
“The Federal Reserve,” boasted Bernanke, “is already supporting the economic recovery by maintaining an extraordinarily accommodative monetary policy, using multiple tools.” He’ll have to pardon me for not saying “thank you,” for wishing that the state would keep its “tools” of power and brutality tucked in the tool belt instead of monkeywrenching around in the lives and decisions of free and competent individuals.
Just as the economy is not some elephantine life form capable of being tweaked or of concerted movement in any one direction, the state is not really an institution itself; more precisely, it is a category of human action, distinguished not by ornate buildings or volumes of Byzantine legal code, but by the initiation of physical force. And, it is important to remember, this initiation of force is undertaken by people — real, flesh and blood like you and I — not by gods, angels or neoclassical monuments in Washington. The state, then, is no more than an abstraction we use to represent these existing individuals who act in this particular way, and who do things that, if attempted by anyone else, would not enjoy the same presumption of legitimacy.
If, for instance, I wanted to buy something costing two dollars by tendering a torn in half one dollar bill and asserting that it had become two dollars, no one would consider that a justifiable position. When the surrogates of the state, however, maintain that their manipulations of monetary policy will hasten economic recovery, the truth of what that really means is obscured by their oratorical flourishes. The calibration of interest rates, taxation, regulations, all of these things steal your property and your labor, forcing you to work within an invisible scheme designed to siphon wealth to the colluding Big Business and Big Government.
Most individuals do not have a giant, well-paid lobby in Washington securing tailor-made policy (i.e., violence) to entrench their interests, so they should not for one instant harbor the delusion that the workings of the criminal Federal Reserve System are designed to do anything to alleviate their economic woes.
A famous passage from Orwell’s novel 1984 reads, “In the end the Party would announce that two and two made five, and you would have to believe it. It was inevitable that they should make that claim sooner or later: the logic of their position demanded it. Not merely the validity of experience, but the very existence of external reality was tacitly denied by their philosophy.” Through his suggestion that, due to theft and the watering-down of our money, “we have come a long way,” Bernanke is asking us to believe that two and two make five, but — as is always true of the state — the numbers just don’t add up.
On Friday, Federal Reserve Chairman Ben Bernanke delivered a message that — for those of us who inveigh against widespread, institutionalized violence — sounded a lot like a threat, that “much of the work of implementing financial reform lies ahead of us.” Fortunately for libertarians, the ciphers of the state, broadcast by its many mouthpieces, are not difficult to decode, transparently glorifying the policies of coercion that begot the “Panic of 2008.”
Still, appraisal of the ways that the state disseminates its economic message is a worthwhile project considering Orwell’s shrewd, ever-relevant observation that “[p]olitical language … is designed to make lies sound truthful and murder respectable, and to give an appearance of solidity to pure wind.” It is an enduring and reliable frustration for anarchists that the state and its media pawns are intent on making statements such as “the economy is bad,” or “the economy is unhealthy,” but there is a reason, if not an outright calculated one, underlying the employment of this construct.
The notion that the economy, no more than the aggregate of consensual exchanges made by individuals, could be “bad” or “unhealthy” is completely incoherent. It would be more accurate (but less convenient for agents of government agitprop) to say that violent state intervention in the economy is “bad” or “unhealthy.” The arguments of the state rely on presenting “the economy” as a self-contained and distinct entity in and of itself, as something that can be acted upon or refined from without, as a doctor might act upon a patient, or a mechanic upon a car. Through this rhetorical misdirection, parasites like Bernanke assume the shape of beneficent caregivers, possessed of the antidotes for the country’s economic maladies.
“The Federal Reserve,” boasted Bernanke, “is already supporting the economic recovery by maintaining an extraordinarily accommodative monetary policy, using multiple tools.” He’ll have to pardon me for not saying “thank you,” for wishing that the state would keep its “tools” of power and brutality tucked in the tool belt instead of monkeywrenching around in the lives and decisions of free and competent individuals.
Just as the economy is not some elephantine life form capable of being tweaked or of concerted movement in any one direction, the state is not really an institution itself; more precisely, it is a category of human action, distinguished not by ornate buildings or volumes of Byzantine legal code, but by the initiation of physical force. And, it is important to remember, this initiation of force is undertaken by people — real, flesh and blood like you and I — not by gods, angels or neoclassical monuments in Washington. The state, then, is no more than an abstraction we use to represent these existing individuals who act in this particular way, and who do things that, if attempted by anyone else, would not enjoy the same presumption of legitimacy.
If, for instance, I wanted to buy something costing two dollars by tendering a torn in half one dollar bill and asserting that it had become two dollars, no one would consider that a justifiable position. When the surrogates of the state, however, maintain that their manipulations of monetary policy will hasten economic recovery, the truth of what that really means is obscured by their oratorical flourishes. The calibration of interest rates, taxation, regulations, all of these things steal your property and your labor, forcing you to work within an invisible scheme designed to siphon wealth to the colluding Big Business and Big Government.
Most individuals do not have a giant, well-paid lobby in Washington securing tailor-made policy (i.e., violence) to entrench their interests, so they should not for one instant harbor the delusion that the workings of the criminal Federal Reserve System are designed to do anything to alleviate their economic woes.
A famous passage from Orwell’s novel 1984 reads, “In the end the Party would announce that two and two made five, and you would have to believe it. It was inevitable that they should make that claim sooner or later: the logic of their position demanded it. Not merely the validity of experience, but the very existence of external reality was tacitly denied by their philosophy.” Through his suggestion that, due to theft and the watering-down of our money, “we have come a long way,” Bernanke is asking us to believe that two and two make five, but — as is always true of the state — the numbers just don’t add up.
In cyberwar, who's in charge?
The president for sure, but after that, it's pretty murky
By Tim Greene, Network World
08 07 2010
When the first salvos of cyberwar are fired against the United States, the responsibility to defend the country falls to the president who, aided by advisers from the broad spectrum of government agencies and also the private sector, must feel his way along an uncertain path to decide the appropriate response.
Because possible return fire could come from traditional military, intelligence, diplomatic or economic agencies -- and perhaps even from private business -- the United States needs a set of policies and procedures for cyberwarfare that are still in the making, experts say.
The president's top cyber adviser, Howard Schmidt, has said in interviews that the responsibility for cybersecurity is a shared responsibility between public and private sectors. And within the government it will be shared among government agencies but not in a well-defined way. "Who's in charge?" asks Jamie Sanbower, the director of security for Force 3, an integrator that works with the federal government. "That's the number-one challenge we're facing right now."
Emerging as a powerful player is the appointed head of the U.S. military Cyber Command Army Lt. Gen. Keith Alexander, who is the director of the National Security Agency (NSA) and would retain that title if his appointment to CyberCom is approved by the U.S. Senate, indicating the broad reach and central authority the president believes is needed to respond to attacks. But it makes Congress jumpy, and it has reportedly sought explanation from the Department of Defense about what shape the relationship between the Defense Department and the NSA would take.
Meanwhile, Schmidt's role as White House adviser on cybersecurity has no such concentrated authority. His direct boss is not the president, but rather two separate groups, the National Security Council and the National Economic Council, both of which report to the president. That assignment of authority appears to limit Schmidt, but also points to the broad nature of the cyber threat.
Contributing to the difficulties creating a cyberwar framework is that rules of engagement remain uncertain. In a conventional military confrontation -- known as kinetic war -- centuries of conflict have yielded a set of agreed-upon procedures for what constitutes war and what acceptable responses are to attacks. Cyberwar, ill-defined as it is, has no such procedures.
That leaves the U.S. government scrambling to establish a chain of command for cyberwar in which threats can vary, Sanbower says, from cyber spying on government and industry to defacement and take-down of government Web sites to attacks on critical infrastructure that incapacitate, for example, the country's electrical grid.
In response to public concern about its cyber defenses, Schmidt recently released a declassified version of the Comprehensive National Cybersecurity Initiative (CNCI) that contains a 12-point list of things that ought to be done to protect against attacks that includes defining who will do what in response.
"Our Nation's senior policymakers must think through the long-range strategic options available to the United States in a world that depends on assuring the use of cyberspace," the document says. "To date, the U.S. Government has been implementing traditional approaches to the cybersecurity problem -- and these measures have not achieved the level of security needed."
The CNCI also points up shortcomings of the current cyber defenses. "This Initiative is aimed at building an approach to cyber defense strategy that deters interference and attack in cyberspace by improving warning capabilities, articulating roles for private sector and international partners, and developing appropriate responses by both state and non-state actors."
The CNCI calls for a cyber counter-intelligence plan to deter cyber spying by other countries.
The plan calls for the Department of Homeland Security to partner with owners of critical infrastructure -- power, water, communications systems -- to make their systems more resilient and includes sharing information about cyber threats.
The CNCI calls for locking down government networks by limiting access to outside networks including the Internet. It also calls for a government-network intrusion detection/prevention system, the coordination of all government R&D into cybersecurity, and the coordination of the the activities of six established but independent cyber operations centers under the National Cybersecurity Center, part of the Department of Homeland Security.
It urges establishment of cyber education initiatives to train a sophisticated network-security workforce that will be attracted to the promise of rewarding career paths. It also calls for rolling the dice on "high-risk/high-payoff" schemes to solving critical cybersecurity problems in the hopes of leap-frogging the current body of threats.
The CNCI urges supply chain risk management for government network infrastructure to assure that it is not penetrated by enemies looking to steal or alter data or to interrupt communications.
But a version of the Defense Department's "Information Operations Roadmap" declassified in 2006 calls for protection "of networks with a real defense in depth strategy," as well as a "robust offensive suite of capabilities to include full-range electronic and computer network attack, with increased reliability through improved command and control, assurance testing and refined tactics and procedures." The public version of the report doesn't detail these measures.
It is clear from the document that the military wants the tools and the rules to be the aggressor. "Defensive (electronic warfare) capabilities are overemphasized in comparison to electronic attack capabilities. There is no central investment strategy or vision for EW," the road map says.
In addition, the report says defense of Defense Department computer networks "lacks up to date policy and legal guidance (including newly acquired authorities provided by the patriot and Homeland Security Acts) to guide responses to intrusions or attacks on DoD networks."
While the administration is working out its cyberwar plans, legislation called the Cybersecurity Act is winding its way through Congress, pointing out shortcomings of the current cyber defense plans that need to be addressed.
The act would give the president authority to declare cyber emergencies and to respond to them within the powers already granted to the president. It calls for the Commerce Department to assess the security of its infrastructure. It calls for the Department of State to direct international work toward developing cybersecurity standards. It would order the FCC to keep an eye on how well network providers secure their commercial broadband networks and educate their customers in cybersecurity.
It also calls for rehearsing responses to "clarify specific roles, responsibilities and authorities" of government agencies and the private sector during cyber emergencies.
The law would let the president set rules for when private business would have to share "actionable cybersecurity threat and vulnerability information and relevant information with the Federal Government."
This is in response to the Obama administration's somber conclusion about the state of national cybersecurity: "The architecture of the nation's digital infrastructure is not secure or resilient," the administration says in its Cyberspace Policy Review. "Without major advances in the security of these systems or significant changes in how they are constructed or operated, it is doubtful that the United States can protect itself from the growing threat of cybercrime and state-sponsored intrusion and operations."
Beyond the work of the government to protect the United States, the United Nations needs to start writing language surrounding cyberwar on its warfare charters," says John Bumgarner, research director of security technologies at U.S. Cyber Consequences Unit, a nonprofit research group investigating strategic and economic consequences of cyberattacks.
International treaties are needed to set the rules, he says. "These treaty talks will debate the classification of cyber weapons, proliferation issues for these weapons [e.g. cyber arm dealers], verification programs for these weapons, sanction use for these weapons against an opponent, legality issues for these weapons and proportionate response to a cyberattack," he says.
"In kinetics, we have proven national level response strategies. [In cyberwar] we really don't even have the response strategy," he says.
By Tim Greene, Network World
08 07 2010
When the first salvos of cyberwar are fired against the United States, the responsibility to defend the country falls to the president who, aided by advisers from the broad spectrum of government agencies and also the private sector, must feel his way along an uncertain path to decide the appropriate response.
Because possible return fire could come from traditional military, intelligence, diplomatic or economic agencies -- and perhaps even from private business -- the United States needs a set of policies and procedures for cyberwarfare that are still in the making, experts say.
The president's top cyber adviser, Howard Schmidt, has said in interviews that the responsibility for cybersecurity is a shared responsibility between public and private sectors. And within the government it will be shared among government agencies but not in a well-defined way. "Who's in charge?" asks Jamie Sanbower, the director of security for Force 3, an integrator that works with the federal government. "That's the number-one challenge we're facing right now."
Emerging as a powerful player is the appointed head of the U.S. military Cyber Command Army Lt. Gen. Keith Alexander, who is the director of the National Security Agency (NSA) and would retain that title if his appointment to CyberCom is approved by the U.S. Senate, indicating the broad reach and central authority the president believes is needed to respond to attacks. But it makes Congress jumpy, and it has reportedly sought explanation from the Department of Defense about what shape the relationship between the Defense Department and the NSA would take.
Meanwhile, Schmidt's role as White House adviser on cybersecurity has no such concentrated authority. His direct boss is not the president, but rather two separate groups, the National Security Council and the National Economic Council, both of which report to the president. That assignment of authority appears to limit Schmidt, but also points to the broad nature of the cyber threat.
Contributing to the difficulties creating a cyberwar framework is that rules of engagement remain uncertain. In a conventional military confrontation -- known as kinetic war -- centuries of conflict have yielded a set of agreed-upon procedures for what constitutes war and what acceptable responses are to attacks. Cyberwar, ill-defined as it is, has no such procedures.
That leaves the U.S. government scrambling to establish a chain of command for cyberwar in which threats can vary, Sanbower says, from cyber spying on government and industry to defacement and take-down of government Web sites to attacks on critical infrastructure that incapacitate, for example, the country's electrical grid.
In response to public concern about its cyber defenses, Schmidt recently released a declassified version of the Comprehensive National Cybersecurity Initiative (CNCI) that contains a 12-point list of things that ought to be done to protect against attacks that includes defining who will do what in response.
"Our Nation's senior policymakers must think through the long-range strategic options available to the United States in a world that depends on assuring the use of cyberspace," the document says. "To date, the U.S. Government has been implementing traditional approaches to the cybersecurity problem -- and these measures have not achieved the level of security needed."
The CNCI also points up shortcomings of the current cyber defenses. "This Initiative is aimed at building an approach to cyber defense strategy that deters interference and attack in cyberspace by improving warning capabilities, articulating roles for private sector and international partners, and developing appropriate responses by both state and non-state actors."
The CNCI calls for a cyber counter-intelligence plan to deter cyber spying by other countries.
The plan calls for the Department of Homeland Security to partner with owners of critical infrastructure -- power, water, communications systems -- to make their systems more resilient and includes sharing information about cyber threats.
The CNCI calls for locking down government networks by limiting access to outside networks including the Internet. It also calls for a government-network intrusion detection/prevention system, the coordination of all government R&D into cybersecurity, and the coordination of the the activities of six established but independent cyber operations centers under the National Cybersecurity Center, part of the Department of Homeland Security.
It urges establishment of cyber education initiatives to train a sophisticated network-security workforce that will be attracted to the promise of rewarding career paths. It also calls for rolling the dice on "high-risk/high-payoff" schemes to solving critical cybersecurity problems in the hopes of leap-frogging the current body of threats.
The CNCI urges supply chain risk management for government network infrastructure to assure that it is not penetrated by enemies looking to steal or alter data or to interrupt communications.
But a version of the Defense Department's "Information Operations Roadmap" declassified in 2006 calls for protection "of networks with a real defense in depth strategy," as well as a "robust offensive suite of capabilities to include full-range electronic and computer network attack, with increased reliability through improved command and control, assurance testing and refined tactics and procedures." The public version of the report doesn't detail these measures.
It is clear from the document that the military wants the tools and the rules to be the aggressor. "Defensive (electronic warfare) capabilities are overemphasized in comparison to electronic attack capabilities. There is no central investment strategy or vision for EW," the road map says.
In addition, the report says defense of Defense Department computer networks "lacks up to date policy and legal guidance (including newly acquired authorities provided by the patriot and Homeland Security Acts) to guide responses to intrusions or attacks on DoD networks."
While the administration is working out its cyberwar plans, legislation called the Cybersecurity Act is winding its way through Congress, pointing out shortcomings of the current cyber defense plans that need to be addressed.
The act would give the president authority to declare cyber emergencies and to respond to them within the powers already granted to the president. It calls for the Commerce Department to assess the security of its infrastructure. It calls for the Department of State to direct international work toward developing cybersecurity standards. It would order the FCC to keep an eye on how well network providers secure their commercial broadband networks and educate their customers in cybersecurity.
It also calls for rehearsing responses to "clarify specific roles, responsibilities and authorities" of government agencies and the private sector during cyber emergencies.
The law would let the president set rules for when private business would have to share "actionable cybersecurity threat and vulnerability information and relevant information with the Federal Government."
This is in response to the Obama administration's somber conclusion about the state of national cybersecurity: "The architecture of the nation's digital infrastructure is not secure or resilient," the administration says in its Cyberspace Policy Review. "Without major advances in the security of these systems or significant changes in how they are constructed or operated, it is doubtful that the United States can protect itself from the growing threat of cybercrime and state-sponsored intrusion and operations."
Beyond the work of the government to protect the United States, the United Nations needs to start writing language surrounding cyberwar on its warfare charters," says John Bumgarner, research director of security technologies at U.S. Cyber Consequences Unit, a nonprofit research group investigating strategic and economic consequences of cyberattacks.
International treaties are needed to set the rules, he says. "These treaty talks will debate the classification of cyber weapons, proliferation issues for these weapons [e.g. cyber arm dealers], verification programs for these weapons, sanction use for these weapons against an opponent, legality issues for these weapons and proportionate response to a cyberattack," he says.
"In kinetics, we have proven national level response strategies. [In cyberwar] we really don't even have the response strategy," he says.
INSIDE JOB Official Trailer
Narrated by Academy Award® winner Matt Damon, INSIDE JOB was made on location in the United States, Iceland, England, France, Singapore, and China
This Economy Is Ripping The Dignity Of Millions Of Unemployed Americans To Shreds
By Michael Snyder - BLN Contributing Writer
Published on 08-28-2010
If you can still put a roof over your head and food on the table for your family, you should consider yourself to be very fortunate. There are millions of Americans out there right now that are really, really suffering. The cold, hard reality of it is that there aren't even close to enough jobs out there for everyone right now. It is almost as if we are all caught in a really bizarre game of musical chairs where the losers get stripped of their tickets to the middle class. What this horrible economy is doing to the dignity of millions of middle class Americans is incredibly saddening. There are a lot of very highly educated and very hard working Americans who cannot seem to get jobs no matter what they do and now find themselves doing whatever they can just to survive. It can be really hard to keep your dignity when you played by all the rules and you worked as hard as you could all your life and now you find yourself a half step away from being homeless. Those of us who are still doing okay should never look down on those who are struggling in this economy, because the truth is that any of us could be next.
If you really want to read some horror stories about what long-term unemployment is doing to some people in America, you should go spend an hour or two over at Unemployed-Friends some time. It is a great forum with a lot of great resources for the unemployed, but it also contains dozens and dozens and dozens of heartbreaking stories from middle class Americans who have had their lives shattered by this economic downturn.
The following is a typical story on Unemployed-Friends. It is from a 48 year old Air Force veteran who has lost everything and is now sleeping in his vehicle. It turns out that Scott48's job was shipped off to India and now he has been out of work for over two years....
"I am a 48 year old USAF Vet. I got my house in 1996 with the help of the VA. In 2009 the company I worked for went out of buisness(gone to India) I then became a 99er. I notified Wells Fargo that I lost my job and they said they would work with me, the next mortgage statement I got they conveniently increased my mortgage! With what I got from UE was enough for the house but I had to cut out the luxury of food, gas, utillities, insurance, entertainment and alcohol. That was it for me, so the forecloser ball was in motion. I had to give my dog to my cousin so he would get fed, I took everything I owened to the auction( execpt tools, clothes, pictures, tech manuals and my Saxophone) and sold it. I went to a half-way house the VA recomended for a week and it was joke, so my cousin said I could stay with her. After 4 months she diecided that I wasnt looking hard enough and kicked me out, and Ive applied for everything except selling myself. This summer I was staying in an abandoned house due to forecloser and the real estate company has now put it on the market, and I am now on the street sleeping in my vehicle or a friend here and there. Keeping clean is going to be a challenge cuz the Flying J truck stops charge $10 for a shower, rip-off. What a country!"
The truth is that this economy is driving many Americans to the brink of desperation. Even recent college graduates are becoming desperate enough to actually consider suicide. The following story is from an Unemployed-Friends user known as 08pacollegegrad....
"I could just take any job like working at fast food places, but I hear people who try can't even get hired there. I went to Wendy's for lunch the other day and I thought of picking up an application...but the slot where they keep the applications was completely empty. That should say it all. Plus, I feel like if I take just any job...I will be set back further and never be able to gain experience in my chosen fields.
I follow up on job applications, but employers ignore me for the most part when I try to contact them. I sent five follow up e-mails last week and got no responses. I contacted an employer expressing my interest in working for them, but all they gave me is the link to their online application system that I have never gotten a job from.
I am thinking of applying for more internships (I have already done two), but I don't want employers to think why I am applying for an internship when I should have had a full fledged job by now.
I have almost killed myself over my situaion and am taking anti-depressants right now. I see a psychiatrist every 4-6 weeks, but I still have days where I feel so empty. I am sick of sitting at home searching for jobs and praying for a response that never comes."
Many Americans spend day after day after day looking for a job that never comes. The sense of hopelessness that can build after doing this for a few years is almost indescribable. The following is another incredibly sad story from an Unemployed-Friends user known as feuxdejoie....
"I lost my job in June 2008, my husband was working but sentenced to prison for 4 years, for DUI, no accidents or injuries. I had been using my unemployment to pay bills but my last check came June 12, 2010. I'm alone and scared. The city that I live in has the highest unemployment in the State, Illinois. Our children are grown and I sit alone all day searching for jobs. My husband can only call once a month because of the outrageous rates for telephone calls. I'm at the end of my rope and don't know where to turn if they don't pass a tier V for unemployment or open up some jobs.
I turned 50 in April and had worked all of my life, starting at age 14 with a work permit! My employer stated to me that they needed someone bilingual and terminated me even after I told them that I would take classes to learn. I signed up for college and began classes in January then unemployment told me that I wasn't elgible for unemployment while attending school."
There are millions of Americans who believe that their lives are over because they can't get decent jobs. When you lose your job, your home, your car, your health insurance and then finally your unemployment insurance runs out, it is easy to lose all hope as an Unemployed-Friends user named Ember has done....
"so i feel pretty much hopeless. been unemployed since July 2008. in over two years i haven't even been called for an interview. tired of looking and applying for jobs outside of my field that require experience i don't have. it's all for naught. i have two bachelor of science degrees. my BS degrees, cuz that's what they're worth. since losing my job i've gotten divorced. lost my house. lost my health insurance. totalled my car and sustained chronic back pain. and moved in with my mom. and did i mention, when all this started i was a new mom, just back from maternity leave? so (now) i'm raising a toddler on my own, with no income. my unemployment insurance ran out a few weeks ago. i don't even know what to do now. i just want to disappear. i'm tired of trying. i'm tired of being a burden on everyone. if i didn't have the responsibility to take care of my child i wouldn't be around anymore."
This final example is from an Unemployed-Friends user identified as Faith1028. Be warned that this one will shake you to your core if you have any sensitivity at all. As you read this, keep in mind that this kind of thing is literally happening to millions of Americans these days....
"HI, y'all! This is my story. I'm from Chicago.
I lost my job 11.06.09 - I did my best to remain positive & confident that I would get a job by the end of November.
December 2009 - Still no job. I'm getting food stamps (LINK card) & Unemployment Benefits. Not much money at all, but I'm surviving. Thanks to all this stress, my stomach has been burning and/or been painful daily for all December. I puked my guts out on the 26th.
January 2010 - My stomach is still hurting every day. I had to close out my savings account. I haven't told my slumlord or my fellow tenants that I lost my job; I go on pretending I'm still going to work everyday. Unfortunately on the 26th, I got my eviction notice. I called the office to ask why. The response was "I don't know." I became hysterical. I've no job, no money, no family/friends to help. (I have many *relatives*, but no *family*.) I truly believed my only alternative was suicide. I wanted to say good-bye to my brother (my only sibling), but we haven't spoken to each other for over 4 years; I no longer have his address/phone number. I found him on Facebook. I didn't bring up my situation because I felt he wouldn't care. We exchanged a few messages and that was it. I haven't heard from him since. Good riddance.
February 2010 - Someone found a family that I can stay with for only $250/month! My own room! They turned out to be aquaintances of mine. Vegetarian, too! At least I have a place to stay. I'd rather live alone, but, hey, I'm desperate! -- And I'm not too crazy about the bedbugs. OW!
June/July 2010 - Thanks to daily/nightly use of citrine crystals since 30 May, I have no more stomach problems!
Thanks to weekly use of a natural (green!) pesticide from PlusNaturalEnzymes.com, I no longer have a problem with bedbugs! However...
Mid-June, my Unemployment Benefits ran out. Of course, I'm still looking for a job! What am I supposed to do - put a gun to someone's head and force them to hire me? As of this date, I have $12 left to my name; $0 in my chequeing account. I recently reapplied for and am now receiving food stamps. Before I got my food stamps back, I've eaten whatever (Vegetarian!) food I can get, even stuff I'm allergic to. As a result, I've become sick: cold-like symptoms, pain in lower intestines...and a rash over my arms, legs, & neck. Oh, does it itch! At least my food allergies are not life-threatening.
Needless to say, my depression has gotten worse.
I am really trying hard to remain positive -- and alive.
But why? Is it really all worth it?
I haven't paid July's rent, and the people I'm staying with are getting very *impatient*; I fear I'll be evicted again! The money is coming! It's not my bloody fault!
Someone on Twitter sent me a link to this site. I know I'm not the only one suffering; some folks have already committed suicide. I don't want to die, but I don't want to be homeless, either. I am so bloody scared.
Just give me money that my tax dollars paid for!
--Or better yet: GIVE ME A BLASTED JOB!!"
The really sad thing is that there are countless other stories just like these being posted all over the Internet all the time.
People are hurting.
People are losing hope.
So how did we get here?
Well, it turns out that the "haves" have figured out that they really don't need the "have nots" after all. Incredible advances in technology have increasingly enabled employers to replace humans with machines and computers. In addition, as we have detailed previously, millions upon millions of middle class American jobs are being shipped off to China and to dozens of third world nations where workers are more than happy to work for less than a tenth of what an American worker would make.
All of those jobs that have been lost to technology and that have been sent overseas are not going to come back. The hordes of long-term unemployed that we are seeing now is just the beginning. It is going to get a lot worse.
So the next time you hear a hard luck story from an unemployed American, don't look down on that person.
You might be next.
Published on 08-28-2010
If you can still put a roof over your head and food on the table for your family, you should consider yourself to be very fortunate. There are millions of Americans out there right now that are really, really suffering. The cold, hard reality of it is that there aren't even close to enough jobs out there for everyone right now. It is almost as if we are all caught in a really bizarre game of musical chairs where the losers get stripped of their tickets to the middle class. What this horrible economy is doing to the dignity of millions of middle class Americans is incredibly saddening. There are a lot of very highly educated and very hard working Americans who cannot seem to get jobs no matter what they do and now find themselves doing whatever they can just to survive. It can be really hard to keep your dignity when you played by all the rules and you worked as hard as you could all your life and now you find yourself a half step away from being homeless. Those of us who are still doing okay should never look down on those who are struggling in this economy, because the truth is that any of us could be next.
If you really want to read some horror stories about what long-term unemployment is doing to some people in America, you should go spend an hour or two over at Unemployed-Friends some time. It is a great forum with a lot of great resources for the unemployed, but it also contains dozens and dozens and dozens of heartbreaking stories from middle class Americans who have had their lives shattered by this economic downturn.
The following is a typical story on Unemployed-Friends. It is from a 48 year old Air Force veteran who has lost everything and is now sleeping in his vehicle. It turns out that Scott48's job was shipped off to India and now he has been out of work for over two years....
"I am a 48 year old USAF Vet. I got my house in 1996 with the help of the VA. In 2009 the company I worked for went out of buisness(gone to India) I then became a 99er. I notified Wells Fargo that I lost my job and they said they would work with me, the next mortgage statement I got they conveniently increased my mortgage! With what I got from UE was enough for the house but I had to cut out the luxury of food, gas, utillities, insurance, entertainment and alcohol. That was it for me, so the forecloser ball was in motion. I had to give my dog to my cousin so he would get fed, I took everything I owened to the auction( execpt tools, clothes, pictures, tech manuals and my Saxophone) and sold it. I went to a half-way house the VA recomended for a week and it was joke, so my cousin said I could stay with her. After 4 months she diecided that I wasnt looking hard enough and kicked me out, and Ive applied for everything except selling myself. This summer I was staying in an abandoned house due to forecloser and the real estate company has now put it on the market, and I am now on the street sleeping in my vehicle or a friend here and there. Keeping clean is going to be a challenge cuz the Flying J truck stops charge $10 for a shower, rip-off. What a country!"
The truth is that this economy is driving many Americans to the brink of desperation. Even recent college graduates are becoming desperate enough to actually consider suicide. The following story is from an Unemployed-Friends user known as 08pacollegegrad....
"I could just take any job like working at fast food places, but I hear people who try can't even get hired there. I went to Wendy's for lunch the other day and I thought of picking up an application...but the slot where they keep the applications was completely empty. That should say it all. Plus, I feel like if I take just any job...I will be set back further and never be able to gain experience in my chosen fields.
I follow up on job applications, but employers ignore me for the most part when I try to contact them. I sent five follow up e-mails last week and got no responses. I contacted an employer expressing my interest in working for them, but all they gave me is the link to their online application system that I have never gotten a job from.
I am thinking of applying for more internships (I have already done two), but I don't want employers to think why I am applying for an internship when I should have had a full fledged job by now.
I have almost killed myself over my situaion and am taking anti-depressants right now. I see a psychiatrist every 4-6 weeks, but I still have days where I feel so empty. I am sick of sitting at home searching for jobs and praying for a response that never comes."
Many Americans spend day after day after day looking for a job that never comes. The sense of hopelessness that can build after doing this for a few years is almost indescribable. The following is another incredibly sad story from an Unemployed-Friends user known as feuxdejoie....
"I lost my job in June 2008, my husband was working but sentenced to prison for 4 years, for DUI, no accidents or injuries. I had been using my unemployment to pay bills but my last check came June 12, 2010. I'm alone and scared. The city that I live in has the highest unemployment in the State, Illinois. Our children are grown and I sit alone all day searching for jobs. My husband can only call once a month because of the outrageous rates for telephone calls. I'm at the end of my rope and don't know where to turn if they don't pass a tier V for unemployment or open up some jobs.
I turned 50 in April and had worked all of my life, starting at age 14 with a work permit! My employer stated to me that they needed someone bilingual and terminated me even after I told them that I would take classes to learn. I signed up for college and began classes in January then unemployment told me that I wasn't elgible for unemployment while attending school."
There are millions of Americans who believe that their lives are over because they can't get decent jobs. When you lose your job, your home, your car, your health insurance and then finally your unemployment insurance runs out, it is easy to lose all hope as an Unemployed-Friends user named Ember has done....
"so i feel pretty much hopeless. been unemployed since July 2008. in over two years i haven't even been called for an interview. tired of looking and applying for jobs outside of my field that require experience i don't have. it's all for naught. i have two bachelor of science degrees. my BS degrees, cuz that's what they're worth. since losing my job i've gotten divorced. lost my house. lost my health insurance. totalled my car and sustained chronic back pain. and moved in with my mom. and did i mention, when all this started i was a new mom, just back from maternity leave? so (now) i'm raising a toddler on my own, with no income. my unemployment insurance ran out a few weeks ago. i don't even know what to do now. i just want to disappear. i'm tired of trying. i'm tired of being a burden on everyone. if i didn't have the responsibility to take care of my child i wouldn't be around anymore."
This final example is from an Unemployed-Friends user identified as Faith1028. Be warned that this one will shake you to your core if you have any sensitivity at all. As you read this, keep in mind that this kind of thing is literally happening to millions of Americans these days....
"HI, y'all! This is my story. I'm from Chicago.
I lost my job 11.06.09 - I did my best to remain positive & confident that I would get a job by the end of November.
December 2009 - Still no job. I'm getting food stamps (LINK card) & Unemployment Benefits. Not much money at all, but I'm surviving. Thanks to all this stress, my stomach has been burning and/or been painful daily for all December. I puked my guts out on the 26th.
January 2010 - My stomach is still hurting every day. I had to close out my savings account. I haven't told my slumlord or my fellow tenants that I lost my job; I go on pretending I'm still going to work everyday. Unfortunately on the 26th, I got my eviction notice. I called the office to ask why. The response was "I don't know." I became hysterical. I've no job, no money, no family/friends to help. (I have many *relatives*, but no *family*.) I truly believed my only alternative was suicide. I wanted to say good-bye to my brother (my only sibling), but we haven't spoken to each other for over 4 years; I no longer have his address/phone number. I found him on Facebook. I didn't bring up my situation because I felt he wouldn't care. We exchanged a few messages and that was it. I haven't heard from him since. Good riddance.
February 2010 - Someone found a family that I can stay with for only $250/month! My own room! They turned out to be aquaintances of mine. Vegetarian, too! At least I have a place to stay. I'd rather live alone, but, hey, I'm desperate! -- And I'm not too crazy about the bedbugs. OW!
June/July 2010 - Thanks to daily/nightly use of citrine crystals since 30 May, I have no more stomach problems!
Thanks to weekly use of a natural (green!) pesticide from PlusNaturalEnzymes.com, I no longer have a problem with bedbugs! However...
Mid-June, my Unemployment Benefits ran out. Of course, I'm still looking for a job! What am I supposed to do - put a gun to someone's head and force them to hire me? As of this date, I have $12 left to my name; $0 in my chequeing account. I recently reapplied for and am now receiving food stamps. Before I got my food stamps back, I've eaten whatever (Vegetarian!) food I can get, even stuff I'm allergic to. As a result, I've become sick: cold-like symptoms, pain in lower intestines...and a rash over my arms, legs, & neck. Oh, does it itch! At least my food allergies are not life-threatening.
Needless to say, my depression has gotten worse.
I am really trying hard to remain positive -- and alive.
But why? Is it really all worth it?
I haven't paid July's rent, and the people I'm staying with are getting very *impatient*; I fear I'll be evicted again! The money is coming! It's not my bloody fault!
Someone on Twitter sent me a link to this site. I know I'm not the only one suffering; some folks have already committed suicide. I don't want to die, but I don't want to be homeless, either. I am so bloody scared.
Just give me money that my tax dollars paid for!
--Or better yet: GIVE ME A BLASTED JOB!!"
The really sad thing is that there are countless other stories just like these being posted all over the Internet all the time.
People are hurting.
People are losing hope.
So how did we get here?
Well, it turns out that the "haves" have figured out that they really don't need the "have nots" after all. Incredible advances in technology have increasingly enabled employers to replace humans with machines and computers. In addition, as we have detailed previously, millions upon millions of middle class American jobs are being shipped off to China and to dozens of third world nations where workers are more than happy to work for less than a tenth of what an American worker would make.
All of those jobs that have been lost to technology and that have been sent overseas are not going to come back. The hordes of long-term unemployed that we are seeing now is just the beginning. It is going to get a lot worse.
So the next time you hear a hard luck story from an unemployed American, don't look down on that person.
You might be next.
Bad statistics for summer employment for youth
By Diane Stafford | Kansas City Star
The share of young people aged 16 to 24 who were employed this summer fell to 48.9 percent -- the lowest rate on record since 1948.
Meanwhile, the raw number of youth who held jobs in July 2010 actually rose by 1.8 million from July 2009 to 18.6 million.
But as a percentage of the population, the share of workers in that age group fell, according to annual data from the U.S. Bureau of Labor Statistics, released today.
The youth employment rate always rises in the summer -- and it went up this year by 571,000 from April. But that was half as much as in each of the two previous summers, the bureau said.
For the summer of 2010, the youth labor force totaled 22.9 million workers in July, an 11.5 percent growth from April youth payrolls.
Knowledge of the recession and bad job market may have kept young people from even looking for work. Also, many in that age group could have been enrolled in summer classes and not seeking employment.
For whatever reason, the proportion of the 16-24 age group that was working or looking for work also dropped this summer to its lowest percentage on record -- 60.6 percent. That was 2.5 percentage points below the rate recorded in Juy 2009 and 17 percentage points below the peak of labor force participation for that age group in July 1989.
About 4.4 million youth were actively searching for work and considered unemployed in July this year. That produced a youth unemployment rate of 19.1 percent, the highest rate on record for the month.
The share of young people aged 16 to 24 who were employed this summer fell to 48.9 percent -- the lowest rate on record since 1948.
Meanwhile, the raw number of youth who held jobs in July 2010 actually rose by 1.8 million from July 2009 to 18.6 million.
But as a percentage of the population, the share of workers in that age group fell, according to annual data from the U.S. Bureau of Labor Statistics, released today.
The youth employment rate always rises in the summer -- and it went up this year by 571,000 from April. But that was half as much as in each of the two previous summers, the bureau said.
For the summer of 2010, the youth labor force totaled 22.9 million workers in July, an 11.5 percent growth from April youth payrolls.
Knowledge of the recession and bad job market may have kept young people from even looking for work. Also, many in that age group could have been enrolled in summer classes and not seeking employment.
For whatever reason, the proportion of the 16-24 age group that was working or looking for work also dropped this summer to its lowest percentage on record -- 60.6 percent. That was 2.5 percentage points below the rate recorded in Juy 2009 and 17 percentage points below the peak of labor force participation for that age group in July 1989.
About 4.4 million youth were actively searching for work and considered unemployed in July this year. That produced a youth unemployment rate of 19.1 percent, the highest rate on record for the month.
Generation X More Loyal To Religion Than Previous Generation
A recent survey analysis reveals that Gen-Xers are more likely than Baby Boomers to remain loyal to religion.
Christie Nicholson reports. August 28, 2010
Research published this week reveals a surprising trend among the American Generation X—the group who came of age in the late 1980s and 1990s and are known for their rejection of all things conventional. It appears that in comparison to the Baby Boomers, Gen-Xers are significantly more loyal to religion.
Scientists analyzed survey responses from more than 37,000 people between the years 1973 to 2006. Their results are published in The Journal for the Scientific Study of Religion. They found that Boomers are 40 to 50 percent more likely to abandon their religious faith, than Gen-Xers.
Interesting to note, from those surveyed, the number of Americans with no religious affiliation doubled in the 1990s and continues to increase through the first decade of this century.
The researchers attribute this drop off to the Boomers who were likely to have abandoned religion in young adulthood perhaps due to the rejection of organized authority or what the researchers call the “1960s effect.”
So what’s up with this newfound loyalty in the younger Generation X?
Well the authors note that it probably has to do with the expansion of the “religious marketplace” in recent decades, and suggest that instead of this trend watering down religious faith, they say that more choices is influencing the increase in affiliation and commitment to religion.
Christie Nicholson reports. August 28, 2010
Research published this week reveals a surprising trend among the American Generation X—the group who came of age in the late 1980s and 1990s and are known for their rejection of all things conventional. It appears that in comparison to the Baby Boomers, Gen-Xers are significantly more loyal to religion.
Scientists analyzed survey responses from more than 37,000 people between the years 1973 to 2006. Their results are published in The Journal for the Scientific Study of Religion. They found that Boomers are 40 to 50 percent more likely to abandon their religious faith, than Gen-Xers.
Interesting to note, from those surveyed, the number of Americans with no religious affiliation doubled in the 1990s and continues to increase through the first decade of this century.
The researchers attribute this drop off to the Boomers who were likely to have abandoned religion in young adulthood perhaps due to the rejection of organized authority or what the researchers call the “1960s effect.”
So what’s up with this newfound loyalty in the younger Generation X?
Well the authors note that it probably has to do with the expansion of the “religious marketplace” in recent decades, and suggest that instead of this trend watering down religious faith, they say that more choices is influencing the increase in affiliation and commitment to religion.
U.S. schools: grooming students for a surveillance state
August 28, 2010 by Dissent
Schools are increasingly invading student privacy both in school and outside of school. Are schools grooming youth to passively accept a surveillance state where they have no expectation of privacy anywhere? A PogoWasRight.org commentary.
The increasing use of student surveillance and intrusion of school districts into students’ extra-curricular conduct should alarm us all. Whether it is a district surveilling students in their bedrooms via webcam, conducting random drug or locker searches, strip-searching students, lowering the standard for searching students to “reasonable suspicion” from “probable cause,” disciplining students for conduct outside of school hours, searching their cellphones and text messages, or allegedly forcing them to undergo pregnancy testing, student privacy is under increasing threat.
The other day I mentioned a Connecticut school district that wanted to require students to carry an ID card with an RFID chip so that they could track their location. The surveillance capability included locating the student if they were off school premises and in town. Today, I came across another news story from earlier this month that also involves tracking students. KTVU in California reported that the Contra Costa County School District began introducing a tracking system for preschool students that would alert staff when a student leaves school premises. In order to accomplish that, students will reportedly be required to wear a jersey that contains the RFID tag that uses Wi-Fi to send signals to sensors located throughout the school.
I realize that some might argue that these are just little pre-schoolers and of course, we want to protect their safety, etc., but keep in mind that one of the major justifications for the program is to save staff time in terms of having to manually record attendance, etc. In exchange for that time and cost-saving, what price do we pay psychologically as a society? It strikes me that schools are grooming our youth to simply accept being tracked and monitored wherever they go and that anything they do, anywhere, can be used against them in school or elsewhere.
Is this really how we want to raise our children? To be sheep who accept being tracked and who have little sense of privacy or entitlement to privacy?
A study released last year by Fordham Law’s Center on Law and Information Privacy found that the education sector was not doing enough to protect the privacy of student information. It did not, however, look at the question of whether schools were actually invading student privacy and systematically eroding student privacy rights and autonomy. It’s time for a national dialogue about student privacy, while there are still some remnants of it left.
Schools are increasingly invading student privacy both in school and outside of school. Are schools grooming youth to passively accept a surveillance state where they have no expectation of privacy anywhere? A PogoWasRight.org commentary.
The increasing use of student surveillance and intrusion of school districts into students’ extra-curricular conduct should alarm us all. Whether it is a district surveilling students in their bedrooms via webcam, conducting random drug or locker searches, strip-searching students, lowering the standard for searching students to “reasonable suspicion” from “probable cause,” disciplining students for conduct outside of school hours, searching their cellphones and text messages, or allegedly forcing them to undergo pregnancy testing, student privacy is under increasing threat.
The other day I mentioned a Connecticut school district that wanted to require students to carry an ID card with an RFID chip so that they could track their location. The surveillance capability included locating the student if they were off school premises and in town. Today, I came across another news story from earlier this month that also involves tracking students. KTVU in California reported that the Contra Costa County School District began introducing a tracking system for preschool students that would alert staff when a student leaves school premises. In order to accomplish that, students will reportedly be required to wear a jersey that contains the RFID tag that uses Wi-Fi to send signals to sensors located throughout the school.
I realize that some might argue that these are just little pre-schoolers and of course, we want to protect their safety, etc., but keep in mind that one of the major justifications for the program is to save staff time in terms of having to manually record attendance, etc. In exchange for that time and cost-saving, what price do we pay psychologically as a society? It strikes me that schools are grooming our youth to simply accept being tracked and monitored wherever they go and that anything they do, anywhere, can be used against them in school or elsewhere.
Is this really how we want to raise our children? To be sheep who accept being tracked and who have little sense of privacy or entitlement to privacy?
A study released last year by Fordham Law’s Center on Law and Information Privacy found that the education sector was not doing enough to protect the privacy of student information. It did not, however, look at the question of whether schools were actually invading student privacy and systematically eroding student privacy rights and autonomy. It’s time for a national dialogue about student privacy, while there are still some remnants of it left.
Company recalls ground beef after E. coli reports
By the CNN Wire Staff | August 28, 2010
(CNN) -- Cargill Meat Solutions Corp. has recalled about 8,500 pounds of ground beef that may be contaminated with E. coli, the U.S. Department of Agriculture announced Saturday.
The move came after three people, two in Maine and one in New York, were identified as becoming ill from a strain of E. coli, the government said.
None of the three required hospitalization, said Cargill Inc. spokesman Mike Martin.
"It was a relief it wasn't more serious," he told CNN.
The USDA says it believes certain BJ's Wholesale Club stores in Connecticut, Maine, Maryland, Massachusetts, New Hampshire, New Jersey, New York and Virginia received the products.
The recalled ground beef was shipped June 11 to distribution centers, where it was repackaged into consumer-size packages and sold under different retail brand names. The USDA did not identify the brands.
The recalled beef bears the USDA establishment number "EST. 9400," a product code of "W69032" and a "use/freeze by" date of July 1.
The USDA's Food Safety and Inspection Services, which said it became aware of the problem on August 5, "determined that there is an association between the ground beef products subject to recall and the cluster of illnesses in the states of Maine and New York."
Saturday's statement identified the strain as E. coli 026, which can cause bloody diarrhea, dehydration and, in severe cases, kidney failure.
The government "strongly encourages consumers to check their freezers and immediately discard any product subject to this recall."
The government lists the recall as Class 1, meaning "there is a reasonable probability that the use of the product will cause serious, adverse health consequences or death."
Consumers with questions regarding the recall should contact the Cargill consumer line at (877) 788-4953.
Martin said Cargill is working with the USDA to learn what happened.
"We decided to take swift action to do the right thing," he said of the recall.
(CNN) -- Cargill Meat Solutions Corp. has recalled about 8,500 pounds of ground beef that may be contaminated with E. coli, the U.S. Department of Agriculture announced Saturday.
The move came after three people, two in Maine and one in New York, were identified as becoming ill from a strain of E. coli, the government said.
None of the three required hospitalization, said Cargill Inc. spokesman Mike Martin.
"It was a relief it wasn't more serious," he told CNN.
The USDA says it believes certain BJ's Wholesale Club stores in Connecticut, Maine, Maryland, Massachusetts, New Hampshire, New Jersey, New York and Virginia received the products.
The recalled ground beef was shipped June 11 to distribution centers, where it was repackaged into consumer-size packages and sold under different retail brand names. The USDA did not identify the brands.
The recalled beef bears the USDA establishment number "EST. 9400," a product code of "W69032" and a "use/freeze by" date of July 1.
The USDA's Food Safety and Inspection Services, which said it became aware of the problem on August 5, "determined that there is an association between the ground beef products subject to recall and the cluster of illnesses in the states of Maine and New York."
Saturday's statement identified the strain as E. coli 026, which can cause bloody diarrhea, dehydration and, in severe cases, kidney failure.
The government "strongly encourages consumers to check their freezers and immediately discard any product subject to this recall."
The government lists the recall as Class 1, meaning "there is a reasonable probability that the use of the product will cause serious, adverse health consequences or death."
Consumers with questions regarding the recall should contact the Cargill consumer line at (877) 788-4953.
Martin said Cargill is working with the USDA to learn what happened.
"We decided to take swift action to do the right thing," he said of the recall.
Virus-Built Wearable Batteries Could Power Military
Virus-Powered Batteries Could Be Sprayed on to Uniforms
By ERIC BLAND - Aug. 29, 2010
Batteries, built by viruses, could someday be sprayed onto military uniforms as wearable power sources.
Teams of researchers, one from MIT, one from the University of Maryland, have used two different viruses to create the cathode and anode for a lithium ion battery.
If the Maryland research pans out, the parts for lithium ion batteries could be grown in and harvested from tobacco plants. The MIT research, meanwhile, could produce lithium ion batteries that could be woven into clothing to power a wide range of electronic devices, from unmanned aerial vehicles to cell phones.
"Typical soldiers have to carry several pounds of batteries. But if you could turn their clothing into a battery pack, they could drop a lot of weight," said Mark Allen, a postdoc in Angela Belcher's lab at MIT. "The same could be true for frequent business travelers, the road warriors."
As anyone with a bad case of the flu knows, viruses are amazingly efficient at breaking into cells, hijacking their machinery, and then using that machinery to make new copies of themselves.
For centuries doctors have done everything in their power to stop or slow viruses. Now scientists are turning viruses' extraordinary ability to produce large amounts of identical, microscopic structures to the benefit of humanity.
MIT, Maryland Scientists Use Viruses That Are Harmless to Humans
Scientists can already build similar structures, but not as quickly or as efficiently as viruses.
"Normally it takes some top-down process like lithography to produce these structures," said James Culver, a scientist from the University of Maryland and co-author of a recent paper in the journal ACS Nano, which details the creation of a silicon anode for a li-ion battery.
"We have a solution of the virus, we let it sit overnight, and the virus does everything."
The MIT and Maryland scientists used two viruses that are harmless to humans. The MIT scientists used M13, a virus that infects bacteria. The Maryland scientists used the tobacco mosaic virus (TMV), a common pathogen of tobacco plants. The viral hosts might be different, but the shapes of each virus are similar; long, thin and cylindrical.
Battery Could Power Unmanned Aerial Vehicles, Cell Phones and More
As Allen reported at this week's meeting of the American Chemical Society in Boston, M13 can be tweaked to produce an iron fluoride cathode for a lithium ion battery.
Allen and his colleagues eventually hope to scale up their battery-part production so they can spray on lightweight, rechargeable and long-lasting lithium ion batteries that could power everything from unmanned aerial vehicles used by the military to cell phones carried by civilians.
The new cathode, which builds on the MIT group's earlier work building a battery anode and cathode, is also environmentally friendly because it happens at room temperature and in water. The MIT research is green in name, but the University of Maryland research could literally be green.
"For our purposes now, we do everything with the virus in growth chambers in the lab," said Culver. "But growing them in the field, that's the whole idea. That's something that would be cheap and relatively easy to do."
Farmers won't harvest battery parts anytime soon, said Culver, but their new anode is already powerful. The silicon-based lithium ion battery anode showed a nearly 10-fold increase in capacity over existing graphite anodes, said Culver.
By ERIC BLAND - Aug. 29, 2010
Batteries, built by viruses, could someday be sprayed onto military uniforms as wearable power sources.
Teams of researchers, one from MIT, one from the University of Maryland, have used two different viruses to create the cathode and anode for a lithium ion battery.
If the Maryland research pans out, the parts for lithium ion batteries could be grown in and harvested from tobacco plants. The MIT research, meanwhile, could produce lithium ion batteries that could be woven into clothing to power a wide range of electronic devices, from unmanned aerial vehicles to cell phones.
"Typical soldiers have to carry several pounds of batteries. But if you could turn their clothing into a battery pack, they could drop a lot of weight," said Mark Allen, a postdoc in Angela Belcher's lab at MIT. "The same could be true for frequent business travelers, the road warriors."
As anyone with a bad case of the flu knows, viruses are amazingly efficient at breaking into cells, hijacking their machinery, and then using that machinery to make new copies of themselves.
For centuries doctors have done everything in their power to stop or slow viruses. Now scientists are turning viruses' extraordinary ability to produce large amounts of identical, microscopic structures to the benefit of humanity.
MIT, Maryland Scientists Use Viruses That Are Harmless to Humans
Scientists can already build similar structures, but not as quickly or as efficiently as viruses.
"Normally it takes some top-down process like lithography to produce these structures," said James Culver, a scientist from the University of Maryland and co-author of a recent paper in the journal ACS Nano, which details the creation of a silicon anode for a li-ion battery.
"We have a solution of the virus, we let it sit overnight, and the virus does everything."
The MIT and Maryland scientists used two viruses that are harmless to humans. The MIT scientists used M13, a virus that infects bacteria. The Maryland scientists used the tobacco mosaic virus (TMV), a common pathogen of tobacco plants. The viral hosts might be different, but the shapes of each virus are similar; long, thin and cylindrical.
Battery Could Power Unmanned Aerial Vehicles, Cell Phones and More
As Allen reported at this week's meeting of the American Chemical Society in Boston, M13 can be tweaked to produce an iron fluoride cathode for a lithium ion battery.
Allen and his colleagues eventually hope to scale up their battery-part production so they can spray on lightweight, rechargeable and long-lasting lithium ion batteries that could power everything from unmanned aerial vehicles used by the military to cell phones carried by civilians.
The new cathode, which builds on the MIT group's earlier work building a battery anode and cathode, is also environmentally friendly because it happens at room temperature and in water. The MIT research is green in name, but the University of Maryland research could literally be green.
"For our purposes now, we do everything with the virus in growth chambers in the lab," said Culver. "But growing them in the field, that's the whole idea. That's something that would be cheap and relatively easy to do."
Farmers won't harvest battery parts anytime soon, said Culver, but their new anode is already powerful. The silicon-based lithium ion battery anode showed a nearly 10-fold increase in capacity over existing graphite anodes, said Culver.
Bank of America Must Defend Claims It Concealed Merrill Bonuses
By Joel Rosenblatt and Patricia Hurtado | August 28, 2010
Aug. 28 (Bloomberg) -- Bank of America Corp. must defend lawsuit claims it concealed bonuses and losses at Merrill Lynch & Co after it agreed to acquire the brokerage firm, a judge ruled.
U.S. District Judge Kevin Castel in Manhattan yesterday granted some of Bank of America’s requests to dismiss claims in the consolidated class-action securities-fraud and derivative lawsuits, while denying others.
Bank of America, the largest U.S. bank, acquired Merrill Jan. 1, 2009, in a deal criticized by lawmakers, regulators and investors over its cost and the U.S. bailout that followed. Castel yesterday rejected Bank of America’s argument that one claim in the case should be dismissed because the bank’s proxy materials didn’t misstate or omit Merrill’s intention to award employee bonuses made in December 2008.
Investors also claim in the suits that the merger agreement triggered a duty to disclose negative events before the shareholder vote because the agreement said “no material adverse effects” would arise between the time the agreement was made and the closing of the acquisition. Castel granted Bank of America’s request to dismiss that claim.
Bank of America spokesman Bob Stickler said the company is studying yesterday’s ruling and declined to comment further.
Andrew Entwistle, a lawyer representing shareholders, declined to comment.
$150 Million Settlement
In February, Bank of America agreed to pay investors $150 million to settle a Securities and Exchange Commission suit claiming the Charlotte, North Carolina-based bank misled shareholders about bonuses and losses after announcing it would acquire Merrill. The settlement also requires the bank to take steps over the next three years to strengthen its corporate governance.
Also in February, New York Attorney General Andrew Cuomo also sued Bank of America along with former Chief Executive Officer Kenneth Lewis and former Chief Financial Officer Joe Price. Cuomo accused them of misleading investors by failing to disclose losses at Merrill Lynch. Lewis has asked the court to throw the case out.
The case is In Re Bank of America Corp. Securities, Derivative, and ERISA Litigation, 10-05563, U.S. District Court, Southern District of New York (Manhattan). The SEC case is Securities and Exchange Commission v. Bank of America Corp., 09- cv-06829, U.S. District Court, Southern District of New York (Manhattan). The Cuomo case is People of State of New York v. Bank of America, 450115-2010, State Supreme Court (Manhattan).
Aug. 28 (Bloomberg) -- Bank of America Corp. must defend lawsuit claims it concealed bonuses and losses at Merrill Lynch & Co after it agreed to acquire the brokerage firm, a judge ruled.
U.S. District Judge Kevin Castel in Manhattan yesterday granted some of Bank of America’s requests to dismiss claims in the consolidated class-action securities-fraud and derivative lawsuits, while denying others.
Bank of America, the largest U.S. bank, acquired Merrill Jan. 1, 2009, in a deal criticized by lawmakers, regulators and investors over its cost and the U.S. bailout that followed. Castel yesterday rejected Bank of America’s argument that one claim in the case should be dismissed because the bank’s proxy materials didn’t misstate or omit Merrill’s intention to award employee bonuses made in December 2008.
Investors also claim in the suits that the merger agreement triggered a duty to disclose negative events before the shareholder vote because the agreement said “no material adverse effects” would arise between the time the agreement was made and the closing of the acquisition. Castel granted Bank of America’s request to dismiss that claim.
Bank of America spokesman Bob Stickler said the company is studying yesterday’s ruling and declined to comment further.
Andrew Entwistle, a lawyer representing shareholders, declined to comment.
$150 Million Settlement
In February, Bank of America agreed to pay investors $150 million to settle a Securities and Exchange Commission suit claiming the Charlotte, North Carolina-based bank misled shareholders about bonuses and losses after announcing it would acquire Merrill. The settlement also requires the bank to take steps over the next three years to strengthen its corporate governance.
Also in February, New York Attorney General Andrew Cuomo also sued Bank of America along with former Chief Executive Officer Kenneth Lewis and former Chief Financial Officer Joe Price. Cuomo accused them of misleading investors by failing to disclose losses at Merrill Lynch. Lewis has asked the court to throw the case out.
The case is In Re Bank of America Corp. Securities, Derivative, and ERISA Litigation, 10-05563, U.S. District Court, Southern District of New York (Manhattan). The SEC case is Securities and Exchange Commission v. Bank of America Corp., 09- cv-06829, U.S. District Court, Southern District of New York (Manhattan). The Cuomo case is People of State of New York v. Bank of America, 450115-2010, State Supreme Court (Manhattan).
Deepwater Horizon Fears Resurface as Rigs Probe for Oil Under Arctic Ice
ExxonMobil and Shell compete to drill in wilderness despite Greenpeace's fears a broken well could gush for years
by Robin McKie, Science editor | Sunday, August 29, 2010 | The Guardian/UK
In a few days' time, officials at the Bureau of Minerals and Petroleum in Greenland will reveal the winners of a new round of licences to drill for oil and gas in its waters. The announcement promises to be explosive.
Among those waiting are most of the world's leading oil companies, including ExxonMobil, Shell and Norway's StatOil. Watching with equal attention will be the planet's leading green groups, who they have pledged to block every effort to drill in the Arctic.
An arctic wolf tries to escape from a fragment of melting ice floe. Greenpeace fear the region is gravely threatened by oil companies. (Photograph: Jim Brandenburg/Getty Images/Minden Pictures RM)"The Arctic is the last pristine refuge in the northern hemisphere and it is simply not acceptable for oil companies to come here to drill and risk triggering a disaster that would dwarf the Deepwater Horizon spill," said Ben Ayliffe, senior energy campaigner at Greenpeace. Its ship, the Esperanza, is currently trying to disrupt drilling in the Davis Strait off the Greenland mainland. "We are going to make a real fight of this,"he said.
Last week the future of drilling in the Arctic hit the headlines when it emerged that BP, in the wake of the disastrous oil spill off America's Gulf Coast, would not be bidding for contracts in the region. But the other oil giants will. And it is not hard to understand why.
Last year, the US Geological Survey estimated that there were more than 90bn barrels of oil beneath the Arctic seabed – an estimated 13% of the world's undiscovered reserves – with the waters around Greenland, as well as the Beaufort and Chukchi seas, pinpointed as the most promising zones.
Only a handful of test wells have been sunk so far, and no oil has yet been discovered. Oil companies are confident of success, however, while environmentalists are grimly resigned to the idea of wells being sunk. Greenland, Beaufort and Chukchi are all likely to become sites of future drilling – and of major battles with ecologists.
The irony of this battle is not lost on environmentalists. At present, increased fossil fuel emissions are raising global temperatures and melting ice caps, a process that is making it much easier to drill for fossil fuels, as ice sheets break apart and expose shallower waters in the far north.
The divisive nature of these issues is highlighted in sparsely populated Greenland, the world's largest island. Most of its citizens currently view the prospect of major oil revenues as mouth-watering. At present, Greenland's 57,000 inhabitants rely on fishing and a £400m annual handout from the Danish government to maintain their livelihoods. Oil money could replace the latter and give the country independence from its Danish overlords. Hence the swift reaction last week to accusations that drilling in "iceberg alley" – as the Davis Strait is known – was environmentally hazardous. The country was well prepared, claimed Kuupik Kleist, Greenland's premier. "Of course, we are influenced by what happened in the Gulf of Mexico," he said. "We know that we are talking a huge responsibilty on our shoulders." Most islanders support this view.
But such assurances do little to comfort campaign groups such as Greenpeace. "These waters, like all Arctic waters, are incredibly dangerous," said Ayliffe last week. "They have to have ships on standby to push away icebergs or fire water cannons to deflect them. And then you only have a short window in summer to drill before the ice moves back in."
Greenpeace has targeted Scottish oil company Cairn Energy as its most dangerous foe. Cairn – which is run by former rugby international Bill Gammell, a friend of George Bush and Tony Blair – recently raised several billion pounds from the sale of its stake in its Indian oilfields in Rajasthan and has selected Greenland to be the site of all future exploration efforts. Last week, it announced the discovery of gas reserves there, though it admitted it has yet to find oil. Greenpeace has pledged to block its operations there.
Should there be a blowout of a well in this pristine wilderness, it says, it would be considerably more difficult to drill a relief well than it was in the Gulf of Mexico after a catastrophic explosion crippled BP's Deepwater Horizon rig earlier this year. Oil could be left gushing from a broken well for years, it is claimed.
Such fears have fuelled environmentalists' determination to try to block all drilling efforts in the high latitudes as new licensing rounds are lined up in Greenland for 2011 and 2012.
Other countries, such as the US, Canada and Norway, have imposed tougher new regulations on deep-water drilling. How long they are kept in operation, as Greenland opens up its waters, remains to be seen. At the same, Russia – which already has vast oil and gas drilling operations at Sakhalin – is known to be eyeing the Chukchi Sea, farther north, beyond the Bering Straits that divide Alaska and Asia. All are thought to possess rich oilfields that will become more and more important as the rest of the world's reservoirs dry up over the next two decades.
The pressure on the far north is becoming relentless.
by Robin McKie, Science editor | Sunday, August 29, 2010 | The Guardian/UK
In a few days' time, officials at the Bureau of Minerals and Petroleum in Greenland will reveal the winners of a new round of licences to drill for oil and gas in its waters. The announcement promises to be explosive.
Among those waiting are most of the world's leading oil companies, including ExxonMobil, Shell and Norway's StatOil. Watching with equal attention will be the planet's leading green groups, who they have pledged to block every effort to drill in the Arctic.
An arctic wolf tries to escape from a fragment of melting ice floe. Greenpeace fear the region is gravely threatened by oil companies. (Photograph: Jim Brandenburg/Getty Images/Minden Pictures RM)"The Arctic is the last pristine refuge in the northern hemisphere and it is simply not acceptable for oil companies to come here to drill and risk triggering a disaster that would dwarf the Deepwater Horizon spill," said Ben Ayliffe, senior energy campaigner at Greenpeace. Its ship, the Esperanza, is currently trying to disrupt drilling in the Davis Strait off the Greenland mainland. "We are going to make a real fight of this,"he said.
Last week the future of drilling in the Arctic hit the headlines when it emerged that BP, in the wake of the disastrous oil spill off America's Gulf Coast, would not be bidding for contracts in the region. But the other oil giants will. And it is not hard to understand why.
Last year, the US Geological Survey estimated that there were more than 90bn barrels of oil beneath the Arctic seabed – an estimated 13% of the world's undiscovered reserves – with the waters around Greenland, as well as the Beaufort and Chukchi seas, pinpointed as the most promising zones.
Only a handful of test wells have been sunk so far, and no oil has yet been discovered. Oil companies are confident of success, however, while environmentalists are grimly resigned to the idea of wells being sunk. Greenland, Beaufort and Chukchi are all likely to become sites of future drilling – and of major battles with ecologists.
The irony of this battle is not lost on environmentalists. At present, increased fossil fuel emissions are raising global temperatures and melting ice caps, a process that is making it much easier to drill for fossil fuels, as ice sheets break apart and expose shallower waters in the far north.
The divisive nature of these issues is highlighted in sparsely populated Greenland, the world's largest island. Most of its citizens currently view the prospect of major oil revenues as mouth-watering. At present, Greenland's 57,000 inhabitants rely on fishing and a £400m annual handout from the Danish government to maintain their livelihoods. Oil money could replace the latter and give the country independence from its Danish overlords. Hence the swift reaction last week to accusations that drilling in "iceberg alley" – as the Davis Strait is known – was environmentally hazardous. The country was well prepared, claimed Kuupik Kleist, Greenland's premier. "Of course, we are influenced by what happened in the Gulf of Mexico," he said. "We know that we are talking a huge responsibilty on our shoulders." Most islanders support this view.
But such assurances do little to comfort campaign groups such as Greenpeace. "These waters, like all Arctic waters, are incredibly dangerous," said Ayliffe last week. "They have to have ships on standby to push away icebergs or fire water cannons to deflect them. And then you only have a short window in summer to drill before the ice moves back in."
Greenpeace has targeted Scottish oil company Cairn Energy as its most dangerous foe. Cairn – which is run by former rugby international Bill Gammell, a friend of George Bush and Tony Blair – recently raised several billion pounds from the sale of its stake in its Indian oilfields in Rajasthan and has selected Greenland to be the site of all future exploration efforts. Last week, it announced the discovery of gas reserves there, though it admitted it has yet to find oil. Greenpeace has pledged to block its operations there.
Should there be a blowout of a well in this pristine wilderness, it says, it would be considerably more difficult to drill a relief well than it was in the Gulf of Mexico after a catastrophic explosion crippled BP's Deepwater Horizon rig earlier this year. Oil could be left gushing from a broken well for years, it is claimed.
Such fears have fuelled environmentalists' determination to try to block all drilling efforts in the high latitudes as new licensing rounds are lined up in Greenland for 2011 and 2012.
Other countries, such as the US, Canada and Norway, have imposed tougher new regulations on deep-water drilling. How long they are kept in operation, as Greenland opens up its waters, remains to be seen. At the same, Russia – which already has vast oil and gas drilling operations at Sakhalin – is known to be eyeing the Chukchi Sea, farther north, beyond the Bering Straits that divide Alaska and Asia. All are thought to possess rich oilfields that will become more and more important as the rest of the world's reservoirs dry up over the next two decades.
The pressure on the far north is becoming relentless.
Banks' Created Fake Demand to Boost Profits and Yearly Bonuses
Over the last two years of the housing bubble, Wall Street bankers perpetrated one of the greatest episodes of self-dealing in financial history.
By Jake Bernstein and Jesse Eisinger, ProPublica
By Jake Bernstein and Jesse Eisinger, ProPublica
Posted on August 27, 2010
Over the last two years of the housing bubble, Wall Street bankers perpetrated one of the greatest episodes of self-dealing in financial history.
Faced with increasing difficulty in selling the mortgage-backed securities that had been among their most lucrative products, the banks hit on a solution that preserved their quarterly earnings and huge bonuses:
They created fake demand.
A ProPublica analysis shows for the first time the extent to which banks -- primarily Merrill Lynch, but also Citigroup, UBS and others -- bought their own products and cranked up an assembly line that otherwise should have flagged.
The products they were buying and selling were at the heart of the 2008 meltdown -- collections of mortgage bonds known as collateralized debt obligations, or CDOs.
As the housing boom began to slow in mid-2006, investors became skittish about the riskier parts of those investments. So the banks created -- and ultimately provided most of the money for -- new CDOs. Those new CDOs bought the hard-to-sell pieces of the original CDOs. The result was a daisy chain [1] that solved one problem but created another: Each new CDO had its own risky pieces. Banks created yet other CDOs to buy those.
Individual instances of these questionable trades have been reported before, but ProPublica's investigation, done in partnership with NPR's Planet Money [2], shows that by late 2006 they became a common industry practice.
[3]
An analysis by research firm Thetica Systems, commissioned by ProPublica, shows that in the last years of the boom, CDOs had become the dominant purchaser of key, risky parts of other CDOs, largely replacing real investors like pension funds. By 2007, 67 percent of those slices were bought by other CDOs, up from 36 percent just three years earlier. The banks often orchestrated these purchases. In the last two years of the boom, nearly half of all CDOs sponsored by market leader Merrill Lynch bought significant portions of other Merrill CDOs [3].
ProPublica also found 85 instances during 2006 and 2007 in which two CDOs bought pieces of each other's unsold inventory. These trades, which involved $107 billion worth of CDOs, underscore the extent to which the market lacked real buyers. Often the CDOs that swapped purchases closed within days of each other, the analysis shows.
There were supposed to be protections against this sort of abuse. While banks provided the blueprint for the CDOs and marketed them, they typically selected independent managers who chose the specific bonds to go inside them. The managers had a legal obligation to do what was best for the CDO. They were paid by the CDO, not the bank, and were supposed to serve as a bulwark against self-dealing by the banks, which had the fullest understanding of the complex and lightly regulated mortgage bonds.
It rarely worked out that way. The managers were beholden to the banks that sent them the business. On a billion-dollar deal, managers could earn a million dollars in fees, with little risk. Some small firms did several billion dollars of CDOs in a matter of months.
"All these banks for years were spawning trading partners," says a former executive from Financial Guaranty Insurance Company, a major insurer of the CDO market. "You don't have a trading partner? Create one."
The executive, like most of the dozens of people ProPublica spoke with about the inner workings of the market at the time, asked not to be named out of fear of being sucked into ongoing investigations or because they are involved in civil litigation.
Keeping the assembly line going had a wealth of short-term advantages for the banks. Fees rolled in. A typical CDO could net the bank that created it between $5 million and $10 million -- about half of which usually ended up as employee bonuses. Indeed, Wall Street awarded record bonuses in 2006, a hefty chunk of which came from the CDO business.
The self-dealing super-charged the market for CDOs, enticing some less-savvy investors to try their luck. Crucially, such deals maintained the value of mortgage bonds at a time when the lack of buyers should have driven their prices down.
But the strategy of speeding up the assembly line had devastating consequences for homeowners, the banks themselves and, ultimately, the global economy. Because of Wall Street's machinations, more mortgages had been granted to ever-shakier borrowers. The results can now be seen in foreclosed houses across America.
The incestuous trading also made the CDOs more intertwined and thus fragile, accelerating their decline in value that began in the fall of 2007 and deepened over the next year. Most are now worth pennies on the dollar. Nearly half of the nearly trillion dollars in losses to the global banking system came from CDOs, losses ultimately absorbed by taxpayers and investors around the world. The banks' troubles sent the world's economies into a tailspin from which they have yet to recover.
It remains unclear whether any of this violated laws. The SEC has said [5] that it is actively looking at as many as 50 CDO managers as part of its broad examination of the CDO business' role in the financial crisis. In particular, the agency is focusing on the relationship between the banks and the managers. The SEC is exploring how deals were structured, if any quid pro quo arrangements existed, and whether banks pressured managers to take bad assets.
The banks declined to directly address ProPublica's questions. Asked about its relationship with managers and the cross-ownership among its CDOs, Citibank responded with a one-sentence statement:
"It has been widely reported that there are ongoing industry-wide investigations into CDO-related matters and we do not comment on pending investigations."
None of ProPublica's questions had mentioned the SEC or pending investigations.
Posed a similar list of questions, Bank of America, which now owns Merrill Lynch, said:
Merrill Lynch Pioneers Pervert the Market
By 2004, the housing market was in full swing, and Wall Street bankers flocked to the CDO frenzy. It seemed to be the perfect money machine, and for a time everyone was happy.
Homeowners got easy mortgages. Banks and mortgage companies felt secure lending the money because they could sell the mortgages almost immediately to Wall Street and get back all their cash plus a little extra for their trouble. The investment banks charged massive fees for repackaging the mortgages into fancy financial products. Investors all around the world got to play in the then-phenomenal American housing market.
[1]
The mortgages were bundled into bonds, which were in turn combined into CDOs offering varying interest rates and levels of risk.
Investors holding the top tier of a CDO were first in line to get money coming from mortgages. By 2006, some banks often kept this layer, which credit agencies blessed with their highest rating of Triple A.
Buyers of the lower tiers took on more risk and got higher returns. They would be the first to take the hit if homeowners funding the CDO stopped paying their mortgages. (Here's a video explaining how CDOs worked [7].)
Over time, these risky slices became increasingly hard to sell, posing a problem for the banks. If they remained unsold, the sketchy assets stayed on their books, like rotting inventory. That would require the banks to set aside money to cover any losses. Banks hate doing that because it means the money can't be loaned out or put to other uses.
Being stuck with the risky portions of CDOs would ultimately lower profits and endanger the whole assembly line.
The banks, notably Merrill and Citibank, solved this problem by greatly expanding what had been a common and accepted practice: CDOs buying small pieces of other CDOs.
Architects of CDOs typically included what they called a "bucket" -- which held bits of other CDOs paying higher rates of interest. The idea was to boost overall returns of deals primarily composed of safer assets. In the early days, the bucket was a small portion of an overall CDO.
One pioneer of pushing CDOs to buy CDOs was Merrill Lynch's Chris Ricciardi, who had been brought to the firm in 2003 to take Merrill to the top of the CDO business. According to former colleagues, Ricciardi's team cultivated managers, especially smaller firms.
Merrill exercised its leverage over the managers. A strong relationship with Merrill could be the difference between a business that thrived and one that didn't. The more deals the banks gave a manager, the more money the manager got paid.
As the head of Merrill's CDO business, Ricciardi also wooed managers with golf outings and dinners. One Merrill executive summed up the overall arrangement: "I'm going to make you rich. You just have to be my bitch."
But not all managers went for it.
An executive from Trainer Wortham, a CDO manager, recalls a 2005 conversation with Ricciardi. "I wasn't going to buy other CDOs. Chris said: 'You don't get it. You have got to buy other guys' CDOs to get your deal done. That's how it works.'" When the manager refused, Ricciardi told him, "'That's it. You are not going to get another deal done.'" Trainer Wortham largely withdrew from the market, concerned about the practice and the overheated prices for CDOs.
Ricciardi declined multiple requests to comment.
Merrill CDOs often bought slices of other Merrill deals. This seems to have happened more in the second half of any given year, according to ProPublica's analysis, though the purchases were still a small portion compared to what would come later. Annual bonuses are based on the deals bankers completed by yearend.
Ricciardi left Merrill Lynch in February 2006. But the machine he put into place not only survived his departure, it became a model for competitors.
As Housing Market Wanes, Self-Dealing Takes Off
By mid-2006, the housing market was on the wane. This was particularly true for subprime mortgages, which were given to borrowers with spotty credit at higher interest rates. Subprime lenders began to fold, in what would become a mass extinction. In the first half of the year, the percentage of subprime borrowers who didn't even make the first month's mortgage payment tripled from the previous year.
That made CDO investors like pension funds and insurance companies increasingly nervous. If homeowners couldn't make their mortgage payments, then the stream of cash to CDOs would dry up. Real "buyers began to shrivel and shrivel," says Fiachra O'Driscoll, who co-ran Credit Suisse's CDO business from 2003 to 2008.
Faced with disappearing investor demand, bankers could have wound down the lucrative business and moved on. That's the way a market is supposed to work. Demand disappears; supply follows. But bankers were making lots of money. And they had amassed warehouses full of CDOs and other mortgage-based assets whose value was going down.
Rather than stop, bankers at Merrill, Citi, UBS and elsewhere kept making CDOs.
The question was: Who would buy them?
The top 80 percent, the less risky layers or so-called "super senior," were held by the banks themselves. The beauty of owning that supposedly safe top portion was that it required hardly any money be held in reserve.
That left 20 percent, which the banks did not want to keep because it was riskier and required them to set aside reserves to cover any losses. Banks often sold the bottom, riskiest part to hedge funds [6]. That left the middle layer, known on Wall Street as the "mezzanine," which was sold to new CDOs whose top 80 percent was ultimately owned by ... the banks.
"As we got further into 2006, the mezzanine was going into other CDOs," says Credit Suisse's O'Driscoll.
This was the daisy chain [1]. On paper, the risky stuff was gone, held by new independent CDOs. In reality, however, the banks were buying their own otherwise unsellable assets.
How could something so seemingly short-sighted have happened?
It's one of the great mysteries of the crash. Banks have fleets of risk managers to defend against just such reckless behavior. Top executives have maintained that while they suspected that the housing market was cooling, they never imagined the crash. For those doing the deals, the payoff was immediate. The dangers seemed abstract and remote.
The CDO managers played a crucial role. CDOs were so complex that even buyers had a hard time seeing exactly what was in them -- making a neutral third party that much more essential.
"When you're investing in a CDO you are very much putting your faith in the manager," says Peter Nowell, a former London-based investor for the Royal Bank of Scotland. "The manager is choosing all the bonds that go into the CDO." (RBS suffered mightily in the global financial meltdown, posting the largest loss in United Kingdom history, and was de facto nationalized by the British government.)
By persuading managers to pick the unsold slices of CDOs, the banks helped keep the market going. "It guaranteed distribution when, quite frankly, there was not a huge market for them," says Nowell.
The counterintuitive result was that even as investors began to vanish, the mortgage CDO market more than doubled from 2005 to 2006, reaching $226 billion, according to the trade publication Asset-Backed Alert.
Citi and Merrill Hand Out Sweetheart Deals
As the CDO market grew, so did the number of CDO management firms, including many small shops that relied on a single bank for most of their business. According to Fitch, the number of CDO managers it rated rose from 89 in July 2006 to 140 in September 2007.
One CDO manager epitomized the devolution of the business, according to numerous industry insiders: a Wall Street veteran named Wing Chau.
Earlier in the decade, Chau had run the CDO department for Maxim Group, a boutique investment firm in New York. Chau had built a profitable business for Maxim based largely on his relationship with Merrill Lynch. In just a few years, Maxim had corralled more than $4 billion worth of assets under management just from Merrill CDOs.
In August 2006, Chau bolted from Maxim to start his own CDO management business, taking several colleagues with him. Chau's departure gave Merrill, the biggest CDO producer, one more avenue for unsold inventory.
Chau named the firm Harding, after the town in New Jersey where he lived. The CDO market was starting its most profitable stretch ever, and Harding would play a big part. In an eleven-month period, ending in August 2007, Harding managed $13 billion of CDOs, including more than $5 billion from Merrill, and another nearly $5 billion from Citigroup. (Chau would later earn a measure of notoriety for a cameo appearance in Michael Lewis' bestseller "The Big Short [8]," where he is depicted as a cheerfully feckless "go-to buyer" for Merrill Lynch's CDO machine.)
Chau had a long-standing friendship with Ken Margolis, who was Merrill's top CDO salesman under Ricciardi. When Ricciardi left Merrill in 2006, Margolis became a co-head of Merrill's CDO group. He carried a genial, let's-just-get-the-deal-done demeanor into his new position. An avid poker player, Margolis told a friend that in a previous job he had stood down a casino owner during a foreclosure negotiation after the owner had threatened to put a fork through his eye.
Chau's close relationship with Merrill continued. In late 2006, Merrill sublet office space to Chau's startup in the Merrill tower in Lower Manhattan's financial district. A Merrill banker, David Moffitt, scheduled visits to Harding for prospective investors in the bank's CDOs. "It was a nice office," overlooking New York Harbor, recalls a CDO buyer. "But it did feel a little weird that it was Merrill's building," he said.
Moffitt did not respond to requests for comment.
Under Margolis, other small managers with meager track records were also suddenly handling CDOs valued at as much as $2 billion. Margolis declined to answer any questions about his own involvement in these matters.
A Wall Street Journal article [9] ($) from late 2007, one of the first of its kind, described how Margolis worked with one inexperienced CDO manager called NIR on a CDO named Norma, in the spring of that year. The Long Island-based NIR made about $1.5 million a year for managing Norma, a CDO that imploded.
"NIR's collateral management business had arisen from efforts by Merrill Lynch to assemble a stable of captive small firms to manage its CDOs that would be beholden to Merrill Lynch on account of the business it funneled to them," alleged a lawsuit filed in New York state court against Merrill over Norma that was settled quietly after the plaintiffs received internal Merrill documents.
NIR declined to comment.
Banks had a variety of ways to influence managers' behavior.
Some of the few outside investors remaining in the market believed that the manager would do a better job if he owned a small slice of the CDO he was managing. That way, the manager would have more incentive to manage the investment well, since he, too, was an investor. But small management firms rarely had money to invest. Some banks solved this problem by advancing money to managers such as Harding.
Chau's group managed two Citigroup CDOs -- 888 Tactical Fund and Jupiter High-Grade VII -- in which the bank loaned Harding money to buy risky pieces of the deal. The loans would be paid back out of the fees the managers took from the CDO and its investors. The loans were disclosed to investors in a few sentences among the hundreds of pages of legalese accompanying the deals.
In response to ProPublica's questions, Chau's lawyer said, "Harding Advisory's dealings with investment banks were proper and fully disclosed."
Citigroup made similar deals with other managers. The bank lent money to a manager called Vanderbilt Capital Advisors for its Armitage CDO, completed in March 2007.
Vanderbilt declined to comment. It couldn't be learned how much money Citigroup loaned or whether it was ever repaid.
Yet again banks had masked their true stakes in CDO. Banks were lending money to CDO managers so they could buy the banks' dodgy assets. If the managers couldn't pay the loans back -- and most were thinly capitalized -- the banks were on the hook for even more losses when the CDO business collapsed.
Goldman, Merrill and Others Get Tough
When the housing market deteriorated, banks took advantage of a little-used power they had over managers.
The way CDOs are put together, there is a brief period when the bonds picked by managers sit on the banks' balance sheets. Because the value of such assets can fall, banks reserved the right to overrule managers' selections.
According to numerous bankers, managers and investors, banks rarely wielded that veto until late 2006, after which it became common. Merrill was in the lead.
"I would go to Merrill and tell them that I wanted to buy, say, a Citi bond," recalls a CDO manager. "They would say 'no.' I would suggest a UBS bond, they would say 'no.' Eventually, you got the joke." Managers could choose assets to put into their CDOs but they had to come from Merrill CDOs. One rival investment banker says Merrill treated CDO managers the way Henry Ford treated his Model T customers: You can have any color you want, as long as it's black.
Once, Merrill's Ken Margolis pushed a manager to buy a CDO slice for a Merrill-produced CDO called Port Jackson that was completed in the beginning of 2007: "'You don't have to buy the deal but you are crazy if you don't because of your business,'" an executive at the management firm recalls Margolis telling him. "'We have a big pipeline and only so many more mandates to give you.' You got the message." In other words: Take our stuff and we'll send you more business. If not, forget it.
Margolis declined to comment on the incident.
"All the managers complained about it," recalls O'Driscoll, the former Credit Suisse banker who competed with other investment banks to put deals together and market them. But "they were indentured slaves." O'Driscoll recalls managers grumbling that Merrill in particular told them "what to buy and when to buy it."
Other big CDO-producing banks quickly adopted the practice.
A little-noticed document released this year during a congressional investigation into Goldman Sachs' CDO business reveals that bank's thinking. The firm wrote a November 2006 internal memorandum [10] about a CDO called Timberwolf, managed by Greywolf, a small manager headed by ex-Goldman bankers. In a section headed "Reasons To Pursue," the authors touted that "Goldman is approving every asset" that will end up in the CDO. What the bank intended to do with that approval power is clear from the memo: "We expect that a significant portion of the portfolio by closing will come from Goldman's offerings."
When asked to comment whether Goldman's memo demonstrates that it had effective control over the asset selection process and that Greywolf was not in fact an independent manager, the bank responded: "Greywolf was an experienced, independent manager and made its own decisions about what reference assets to include. The securities included in Timberwolf were fully disclosed to the professional investors who invested in the transaction."
Greywolf declined to comment. One of the investors, Basis Capital of Australia, filed a civil lawsuit in federal court in Manhattan against Goldman over the deal. The bank maintains the lawsuit is without merit.
By March 2007, the housing market's signals were flashing red. Existing home sales plunged at the fastest rate in almost 20 years. Foreclosures were on the rise. And yet, to CDO buyer Peter Nowell's surprise, banks continued to churn out CDOs.
"We were pulling back. We couldn't find anything safe enough," says Nowell. "We were amazed that April through June they were still printing deals. We thought things were over."
Instead, the CDO machine was in overdrive. Wall Street produced $70 billion in mortgage CDOs in the first quarter of the year.
Many shareholder lawsuits battling their way through the court system today focus on this period of the CDO market. They allege that the banks were using the sales of CDOs to other CDOs to prop up prices and hide their losses.
"Citi's CDO operations during late 2006 and 2007 functioned largely to sell CDOs to yet newer CDOs created by Citi to house them," charges a pending shareholder lawsuit against the bank that was filed in federal court in Manhattan in February 2009. "Citigroup concocted a scheme whereby it repackaged many of these investments into other freshly-baked vehicles to avoid incurring a loss."
Citigroup described the allegations as "irrational," saying the bank's executives would never knowingly take actions that would lead to "catastrophic losses."
In the Hall of Mirrors, Myopic Rating Agencies
The portion of CDOs owned by other CDOs grew right alongside the market. What had been 5 percent of CDOs (remember the "bucket") now came to constitute as much as 30 or 40 percent of new CDOs. (Wall Street also rolled out CDOs that were almost entirely made up of CDOs, called CDO squareds [11].)
The ever-expanding bucket provided new opportunities for incestuous trades.
It worked like this: A CDO would buy a piece of another CDO, which then returned the favor. The transactions moved both CDOs closer to completion, when bankers and managers would receive their fees.
ProPublica's analysis shows that in the final two years of the business, CDOs with cross-ownership amounted to about one-fifth of the market, about $107 billion.
Here's an example from early May 2007:
Just a few weeks earlier, CDO managers completed a comparable swap between Jupiter VI and another Merrill CDO called Forge 1.
Forge has its own intriguing history. It was the only deal done by a tiny manager of the same name based in Tampa, Fla. The firm was started less than a year earlier by several former Wall Street executives with mortgage experience. It received seed money from Bryan Zwan, who in 2001 settled an SEC civil lawsuit over his company's accounting problems in a federal court in Florida. Zwan and Forge executives didn't respond to requests for comment.
After seemingly coming out of nowhere, Forge won the right to manage a $1.5 billion Merrill CDO. That earned Forge a visit from the rating agency Moody's.
"We just wanted to make sure that they actually existed," says a former Moody's executive. The rating agency saw that the group had an office near the airport and expertise to do the job.
Rating agencies regularly did such research on managers, but failed to ask more fundamental questions. The credit ratings agencies "did heavy, heavy due diligence on managers but they were looking for the wrong things: how you processed a ticket or how your surveillance systems worked," says an executive at a CDO manager. "They didn't check whether you were buying good bonds."
One Forge employee recalled in a recent interview that he was amazed Merrill had been able to find buyers so quickly. "They were able to sell all the tranches" -- slices of the CDO -- "in a fairly rapid period of time," said Rod Jensen, a former research analyst for Forge.
Forge achieved this feat because Merrill sold the slices to other CDOs, many linked to Merrill.
The ProPublica analysis shows that two Merrill CDOs, Maxim II and West Trade III, each bought pieces of Forge. Small managers oversaw both deals.
Forge, in turn, was filled with detritus from Merrill. Eighty-two percent of the CDO bonds owned by Forge came from other Merrill deals.
Citigroup did its own version of the shuffle, as these three CDOs demonstrate:
Not all cross-ownership deals were consummated.
In spring 2007, Deutsche Bank was creating a CDO and found a manager that wanted to take a piece of it. The manager was overseeing a CDO that Merrill was assembling. Merrill blocked the manager from putting the Deutsche bonds into the Merrill CDO. A former Deutsche Bank banker says that when Deutsche Bank complained to Andy Phelps, a Merrill CDO executive, Phelps offered a quid pro quo: If Deutsche was willing to have the manager of its CDO buy some Merrill bonds, Merrill would stop blocking the purchase. Phelps declined to comment.
The Deutsche banker, who says its managers were independent, recalls being shocked: "We said we don't control what people buy in their deals." The swap didn't happen.
The Missing Regulators and the Aftermath
In September 2007, as the market finally started to catch up with Merrill Lynch, Ken Margolis left the firm to join Wing Chau at Harding.
Chau and Margolis circulated a marketing plan for a new hedge fund to prospective investors touting their expertise in how CDOs were made and what was in them. The fund proposed to buy failed CDOs -- at bargain basement prices. In the end, Margolis and Chau couldn't make the business work and dropped the idea.
Why didn't regulators intervene during the boom to stop the self-dealing that had permeated the CDO market?
No one agency had authority over the whole business. Since the business came and went in just a few years, it may have been too much to expect even assertive regulators to comprehend what was happening in time to stop it.
While the financial regulatory bill passed by Congress in July creates more oversight powers, it's unclear whether regulators have sufficient tools to prevent a replay of the debacle.
In just two years, the CDO market had cut a swath of destruction. Partly because CDOs had bought so many pieces of each other, they collapsed in unison. Merrill Lynch and Citigroup, the biggest perpetrators of the self-dealing, were among the biggest losers. Merrill lost about $26 billion on mortgage CDOs and Citigroup about $34 billion.
A ProPublica analysis shows for the first time the extent to which banks -- primarily Merrill Lynch, but also Citigroup, UBS and others -- bought their own products and cranked up an assembly line that otherwise should have flagged.
The products they were buying and selling were at the heart of the 2008 meltdown -- collections of mortgage bonds known as collateralized debt obligations, or CDOs.
As the housing boom began to slow in mid-2006, investors became skittish about the riskier parts of those investments. So the banks created -- and ultimately provided most of the money for -- new CDOs. Those new CDOs bought the hard-to-sell pieces of the original CDOs. The result was a daisy chain [1] that solved one problem but created another: Each new CDO had its own risky pieces. Banks created yet other CDOs to buy those.
Individual instances of these questionable trades have been reported before, but ProPublica's investigation, done in partnership with NPR's Planet Money [2], shows that by late 2006 they became a common industry practice.
[3]Click to see how frequently the banks turned to their best customers -- their own CDOs.
ProPublica also found 85 instances during 2006 and 2007 in which two CDOs bought pieces of each other's unsold inventory. These trades, which involved $107 billion worth of CDOs, underscore the extent to which the market lacked real buyers. Often the CDOs that swapped purchases closed within days of each other, the analysis shows.
There were supposed to be protections against this sort of abuse. While banks provided the blueprint for the CDOs and marketed them, they typically selected independent managers who chose the specific bonds to go inside them. The managers had a legal obligation to do what was best for the CDO. They were paid by the CDO, not the bank, and were supposed to serve as a bulwark against self-dealing by the banks, which had the fullest understanding of the complex and lightly regulated mortgage bonds.
It rarely worked out that way. The managers were beholden to the banks that sent them the business. On a billion-dollar deal, managers could earn a million dollars in fees, with little risk. Some small firms did several billion dollars of CDOs in a matter of months.
"All these banks for years were spawning trading partners," says a former executive from Financial Guaranty Insurance Company, a major insurer of the CDO market. "You don't have a trading partner? Create one."
The executive, like most of the dozens of people ProPublica spoke with about the inner workings of the market at the time, asked not to be named out of fear of being sucked into ongoing investigations or because they are involved in civil litigation.
Keeping the assembly line going had a wealth of short-term advantages for the banks. Fees rolled in. A typical CDO could net the bank that created it between $5 million and $10 million -- about half of which usually ended up as employee bonuses. Indeed, Wall Street awarded record bonuses in 2006, a hefty chunk of which came from the CDO business.
The self-dealing super-charged the market for CDOs, enticing some less-savvy investors to try their luck. Crucially, such deals maintained the value of mortgage bonds at a time when the lack of buyers should have driven their prices down.
But the strategy of speeding up the assembly line had devastating consequences for homeowners, the banks themselves and, ultimately, the global economy. Because of Wall Street's machinations, more mortgages had been granted to ever-shakier borrowers. The results can now be seen in foreclosed houses across America.
The incestuous trading also made the CDOs more intertwined and thus fragile, accelerating their decline in value that began in the fall of 2007 and deepened over the next year. Most are now worth pennies on the dollar. Nearly half of the nearly trillion dollars in losses to the global banking system came from CDOs, losses ultimately absorbed by taxpayers and investors around the world. The banks' troubles sent the world's economies into a tailspin from which they have yet to recover.
It remains unclear whether any of this violated laws. The SEC has said [5] that it is actively looking at as many as 50 CDO managers as part of its broad examination of the CDO business' role in the financial crisis. In particular, the agency is focusing on the relationship between the banks and the managers. The SEC is exploring how deals were structured, if any quid pro quo arrangements existed, and whether banks pressured managers to take bad assets.
The banks declined to directly address ProPublica's questions. Asked about its relationship with managers and the cross-ownership among its CDOs, Citibank responded with a one-sentence statement:
"It has been widely reported that there are ongoing industry-wide investigations into CDO-related matters and we do not comment on pending investigations."
None of ProPublica's questions had mentioned the SEC or pending investigations.
Posed a similar list of questions, Bank of America, which now owns Merrill Lynch, said:
"These are very specific questions regarding individuals who left Merrill Lynch several years ago and a CDO origination business that, due to market conditions, was discontinued by Merrill before Bank of America acquired the company."This is the second installment of a ProPublica series about the largely hidden history of the CDO boom and bust. Our first story [6] looked at how one hedge fund helped create at least $40 billion in CDOs as part of a strategy to bet against the market. This story turns the focus on the banks.
Merrill Lynch Pioneers Pervert the Market
By 2004, the housing market was in full swing, and Wall Street bankers flocked to the CDO frenzy. It seemed to be the perfect money machine, and for a time everyone was happy.
Homeowners got easy mortgages. Banks and mortgage companies felt secure lending the money because they could sell the mortgages almost immediately to Wall Street and get back all their cash plus a little extra for their trouble. The investment banks charged massive fees for repackaging the mortgages into fancy financial products. Investors all around the world got to play in the then-phenomenal American housing market.
[1]Click to see how the CDO daisy chain worked.
Investors holding the top tier of a CDO were first in line to get money coming from mortgages. By 2006, some banks often kept this layer, which credit agencies blessed with their highest rating of Triple A.
Buyers of the lower tiers took on more risk and got higher returns. They would be the first to take the hit if homeowners funding the CDO stopped paying their mortgages. (Here's a video explaining how CDOs worked [7].)
Over time, these risky slices became increasingly hard to sell, posing a problem for the banks. If they remained unsold, the sketchy assets stayed on their books, like rotting inventory. That would require the banks to set aside money to cover any losses. Banks hate doing that because it means the money can't be loaned out or put to other uses.
Being stuck with the risky portions of CDOs would ultimately lower profits and endanger the whole assembly line.
The banks, notably Merrill and Citibank, solved this problem by greatly expanding what had been a common and accepted practice: CDOs buying small pieces of other CDOs.
Architects of CDOs typically included what they called a "bucket" -- which held bits of other CDOs paying higher rates of interest. The idea was to boost overall returns of deals primarily composed of safer assets. In the early days, the bucket was a small portion of an overall CDO.
One pioneer of pushing CDOs to buy CDOs was Merrill Lynch's Chris Ricciardi, who had been brought to the firm in 2003 to take Merrill to the top of the CDO business. According to former colleagues, Ricciardi's team cultivated managers, especially smaller firms.
Merrill exercised its leverage over the managers. A strong relationship with Merrill could be the difference between a business that thrived and one that didn't. The more deals the banks gave a manager, the more money the manager got paid.
As the head of Merrill's CDO business, Ricciardi also wooed managers with golf outings and dinners. One Merrill executive summed up the overall arrangement: "I'm going to make you rich. You just have to be my bitch."
But not all managers went for it.
An executive from Trainer Wortham, a CDO manager, recalls a 2005 conversation with Ricciardi. "I wasn't going to buy other CDOs. Chris said: 'You don't get it. You have got to buy other guys' CDOs to get your deal done. That's how it works.'" When the manager refused, Ricciardi told him, "'That's it. You are not going to get another deal done.'" Trainer Wortham largely withdrew from the market, concerned about the practice and the overheated prices for CDOs.
Ricciardi declined multiple requests to comment.
Merrill CDOs often bought slices of other Merrill deals. This seems to have happened more in the second half of any given year, according to ProPublica's analysis, though the purchases were still a small portion compared to what would come later. Annual bonuses are based on the deals bankers completed by yearend.
Ricciardi left Merrill Lynch in February 2006. But the machine he put into place not only survived his departure, it became a model for competitors.
As Housing Market Wanes, Self-Dealing Takes Off
By mid-2006, the housing market was on the wane. This was particularly true for subprime mortgages, which were given to borrowers with spotty credit at higher interest rates. Subprime lenders began to fold, in what would become a mass extinction. In the first half of the year, the percentage of subprime borrowers who didn't even make the first month's mortgage payment tripled from the previous year.
That made CDO investors like pension funds and insurance companies increasingly nervous. If homeowners couldn't make their mortgage payments, then the stream of cash to CDOs would dry up. Real "buyers began to shrivel and shrivel," says Fiachra O'Driscoll, who co-ran Credit Suisse's CDO business from 2003 to 2008.
Faced with disappearing investor demand, bankers could have wound down the lucrative business and moved on. That's the way a market is supposed to work. Demand disappears; supply follows. But bankers were making lots of money. And they had amassed warehouses full of CDOs and other mortgage-based assets whose value was going down.
Rather than stop, bankers at Merrill, Citi, UBS and elsewhere kept making CDOs.
The question was: Who would buy them?
The top 80 percent, the less risky layers or so-called "super senior," were held by the banks themselves. The beauty of owning that supposedly safe top portion was that it required hardly any money be held in reserve.
That left 20 percent, which the banks did not want to keep because it was riskier and required them to set aside reserves to cover any losses. Banks often sold the bottom, riskiest part to hedge funds [6]. That left the middle layer, known on Wall Street as the "mezzanine," which was sold to new CDOs whose top 80 percent was ultimately owned by ... the banks.
"As we got further into 2006, the mezzanine was going into other CDOs," says Credit Suisse's O'Driscoll.
This was the daisy chain [1]. On paper, the risky stuff was gone, held by new independent CDOs. In reality, however, the banks were buying their own otherwise unsellable assets.
How could something so seemingly short-sighted have happened?
It's one of the great mysteries of the crash. Banks have fleets of risk managers to defend against just such reckless behavior. Top executives have maintained that while they suspected that the housing market was cooling, they never imagined the crash. For those doing the deals, the payoff was immediate. The dangers seemed abstract and remote.
The CDO managers played a crucial role. CDOs were so complex that even buyers had a hard time seeing exactly what was in them -- making a neutral third party that much more essential.
"When you're investing in a CDO you are very much putting your faith in the manager," says Peter Nowell, a former London-based investor for the Royal Bank of Scotland. "The manager is choosing all the bonds that go into the CDO." (RBS suffered mightily in the global financial meltdown, posting the largest loss in United Kingdom history, and was de facto nationalized by the British government.)
Source: Asset-Backed Alert
The counterintuitive result was that even as investors began to vanish, the mortgage CDO market more than doubled from 2005 to 2006, reaching $226 billion, according to the trade publication Asset-Backed Alert.
Citi and Merrill Hand Out Sweetheart Deals
As the CDO market grew, so did the number of CDO management firms, including many small shops that relied on a single bank for most of their business. According to Fitch, the number of CDO managers it rated rose from 89 in July 2006 to 140 in September 2007.
One CDO manager epitomized the devolution of the business, according to numerous industry insiders: a Wall Street veteran named Wing Chau.
Earlier in the decade, Chau had run the CDO department for Maxim Group, a boutique investment firm in New York. Chau had built a profitable business for Maxim based largely on his relationship with Merrill Lynch. In just a few years, Maxim had corralled more than $4 billion worth of assets under management just from Merrill CDOs.
In August 2006, Chau bolted from Maxim to start his own CDO management business, taking several colleagues with him. Chau's departure gave Merrill, the biggest CDO producer, one more avenue for unsold inventory.
Chau named the firm Harding, after the town in New Jersey where he lived. The CDO market was starting its most profitable stretch ever, and Harding would play a big part. In an eleven-month period, ending in August 2007, Harding managed $13 billion of CDOs, including more than $5 billion from Merrill, and another nearly $5 billion from Citigroup. (Chau would later earn a measure of notoriety for a cameo appearance in Michael Lewis' bestseller "The Big Short [8]," where he is depicted as a cheerfully feckless "go-to buyer" for Merrill Lynch's CDO machine.)
Chau had a long-standing friendship with Ken Margolis, who was Merrill's top CDO salesman under Ricciardi. When Ricciardi left Merrill in 2006, Margolis became a co-head of Merrill's CDO group. He carried a genial, let's-just-get-the-deal-done demeanor into his new position. An avid poker player, Margolis told a friend that in a previous job he had stood down a casino owner during a foreclosure negotiation after the owner had threatened to put a fork through his eye.
Chau's close relationship with Merrill continued. In late 2006, Merrill sublet office space to Chau's startup in the Merrill tower in Lower Manhattan's financial district. A Merrill banker, David Moffitt, scheduled visits to Harding for prospective investors in the bank's CDOs. "It was a nice office," overlooking New York Harbor, recalls a CDO buyer. "But it did feel a little weird that it was Merrill's building," he said.
Moffitt did not respond to requests for comment.
Under Margolis, other small managers with meager track records were also suddenly handling CDOs valued at as much as $2 billion. Margolis declined to answer any questions about his own involvement in these matters.
A Wall Street Journal article [9] ($) from late 2007, one of the first of its kind, described how Margolis worked with one inexperienced CDO manager called NIR on a CDO named Norma, in the spring of that year. The Long Island-based NIR made about $1.5 million a year for managing Norma, a CDO that imploded.
"NIR's collateral management business had arisen from efforts by Merrill Lynch to assemble a stable of captive small firms to manage its CDOs that would be beholden to Merrill Lynch on account of the business it funneled to them," alleged a lawsuit filed in New York state court against Merrill over Norma that was settled quietly after the plaintiffs received internal Merrill documents.
NIR declined to comment.
Banks had a variety of ways to influence managers' behavior.
Some of the few outside investors remaining in the market believed that the manager would do a better job if he owned a small slice of the CDO he was managing. That way, the manager would have more incentive to manage the investment well, since he, too, was an investor. But small management firms rarely had money to invest. Some banks solved this problem by advancing money to managers such as Harding.
Chau's group managed two Citigroup CDOs -- 888 Tactical Fund and Jupiter High-Grade VII -- in which the bank loaned Harding money to buy risky pieces of the deal. The loans would be paid back out of the fees the managers took from the CDO and its investors. The loans were disclosed to investors in a few sentences among the hundreds of pages of legalese accompanying the deals.
In response to ProPublica's questions, Chau's lawyer said, "Harding Advisory's dealings with investment banks were proper and fully disclosed."
Citigroup made similar deals with other managers. The bank lent money to a manager called Vanderbilt Capital Advisors for its Armitage CDO, completed in March 2007.
Vanderbilt declined to comment. It couldn't be learned how much money Citigroup loaned or whether it was ever repaid.
Yet again banks had masked their true stakes in CDO. Banks were lending money to CDO managers so they could buy the banks' dodgy assets. If the managers couldn't pay the loans back -- and most were thinly capitalized -- the banks were on the hook for even more losses when the CDO business collapsed.
Goldman, Merrill and Others Get Tough
When the housing market deteriorated, banks took advantage of a little-used power they had over managers.
Source: Thetica Systems
According to numerous bankers, managers and investors, banks rarely wielded that veto until late 2006, after which it became common. Merrill was in the lead.
"I would go to Merrill and tell them that I wanted to buy, say, a Citi bond," recalls a CDO manager. "They would say 'no.' I would suggest a UBS bond, they would say 'no.' Eventually, you got the joke." Managers could choose assets to put into their CDOs but they had to come from Merrill CDOs. One rival investment banker says Merrill treated CDO managers the way Henry Ford treated his Model T customers: You can have any color you want, as long as it's black.
Once, Merrill's Ken Margolis pushed a manager to buy a CDO slice for a Merrill-produced CDO called Port Jackson that was completed in the beginning of 2007: "'You don't have to buy the deal but you are crazy if you don't because of your business,'" an executive at the management firm recalls Margolis telling him. "'We have a big pipeline and only so many more mandates to give you.' You got the message." In other words: Take our stuff and we'll send you more business. If not, forget it.
Margolis declined to comment on the incident.
"All the managers complained about it," recalls O'Driscoll, the former Credit Suisse banker who competed with other investment banks to put deals together and market them. But "they were indentured slaves." O'Driscoll recalls managers grumbling that Merrill in particular told them "what to buy and when to buy it."
Other big CDO-producing banks quickly adopted the practice.
A little-noticed document released this year during a congressional investigation into Goldman Sachs' CDO business reveals that bank's thinking. The firm wrote a November 2006 internal memorandum [10] about a CDO called Timberwolf, managed by Greywolf, a small manager headed by ex-Goldman bankers. In a section headed "Reasons To Pursue," the authors touted that "Goldman is approving every asset" that will end up in the CDO. What the bank intended to do with that approval power is clear from the memo: "We expect that a significant portion of the portfolio by closing will come from Goldman's offerings."
When asked to comment whether Goldman's memo demonstrates that it had effective control over the asset selection process and that Greywolf was not in fact an independent manager, the bank responded: "Greywolf was an experienced, independent manager and made its own decisions about what reference assets to include. The securities included in Timberwolf were fully disclosed to the professional investors who invested in the transaction."
Greywolf declined to comment. One of the investors, Basis Capital of Australia, filed a civil lawsuit in federal court in Manhattan against Goldman over the deal. The bank maintains the lawsuit is without merit.
By March 2007, the housing market's signals were flashing red. Existing home sales plunged at the fastest rate in almost 20 years. Foreclosures were on the rise. And yet, to CDO buyer Peter Nowell's surprise, banks continued to churn out CDOs.
"We were pulling back. We couldn't find anything safe enough," says Nowell. "We were amazed that April through June they were still printing deals. We thought things were over."
Instead, the CDO machine was in overdrive. Wall Street produced $70 billion in mortgage CDOs in the first quarter of the year.
Many shareholder lawsuits battling their way through the court system today focus on this period of the CDO market. They allege that the banks were using the sales of CDOs to other CDOs to prop up prices and hide their losses.
"Citi's CDO operations during late 2006 and 2007 functioned largely to sell CDOs to yet newer CDOs created by Citi to house them," charges a pending shareholder lawsuit against the bank that was filed in federal court in Manhattan in February 2009. "Citigroup concocted a scheme whereby it repackaged many of these investments into other freshly-baked vehicles to avoid incurring a loss."
Citigroup described the allegations as "irrational," saying the bank's executives would never knowingly take actions that would lead to "catastrophic losses."
In the Hall of Mirrors, Myopic Rating Agencies
The portion of CDOs owned by other CDOs grew right alongside the market. What had been 5 percent of CDOs (remember the "bucket") now came to constitute as much as 30 or 40 percent of new CDOs. (Wall Street also rolled out CDOs that were almost entirely made up of CDOs, called CDO squareds [11].)
The ever-expanding bucket provided new opportunities for incestuous trades.
It worked like this: A CDO would buy a piece of another CDO, which then returned the favor. The transactions moved both CDOs closer to completion, when bankers and managers would receive their fees.
Source: Thetica Systems
Here's an example from early May 2007:
- A CDO called Jupiter VI bought a piece of a CDO called Tazlina II.
- Tazlina II bought a piece of Jupiter VI.
Just a few weeks earlier, CDO managers completed a comparable swap between Jupiter VI and another Merrill CDO called Forge 1.
Forge has its own intriguing history. It was the only deal done by a tiny manager of the same name based in Tampa, Fla. The firm was started less than a year earlier by several former Wall Street executives with mortgage experience. It received seed money from Bryan Zwan, who in 2001 settled an SEC civil lawsuit over his company's accounting problems in a federal court in Florida. Zwan and Forge executives didn't respond to requests for comment.
After seemingly coming out of nowhere, Forge won the right to manage a $1.5 billion Merrill CDO. That earned Forge a visit from the rating agency Moody's.
"We just wanted to make sure that they actually existed," says a former Moody's executive. The rating agency saw that the group had an office near the airport and expertise to do the job.
Rating agencies regularly did such research on managers, but failed to ask more fundamental questions. The credit ratings agencies "did heavy, heavy due diligence on managers but they were looking for the wrong things: how you processed a ticket or how your surveillance systems worked," says an executive at a CDO manager. "They didn't check whether you were buying good bonds."
One Forge employee recalled in a recent interview that he was amazed Merrill had been able to find buyers so quickly. "They were able to sell all the tranches" -- slices of the CDO -- "in a fairly rapid period of time," said Rod Jensen, a former research analyst for Forge.
Forge achieved this feat because Merrill sold the slices to other CDOs, many linked to Merrill.
The ProPublica analysis shows that two Merrill CDOs, Maxim II and West Trade III, each bought pieces of Forge. Small managers oversaw both deals.
Forge, in turn, was filled with detritus from Merrill. Eighty-two percent of the CDO bonds owned by Forge came from other Merrill deals.
Citigroup did its own version of the shuffle, as these three CDOs demonstrate:
- A CDO called Octonion bought some of Adams Square Funding II.
- Adams Square II bought a piece of Octonion.
- A third CDO, Class V Funding III, also bought some of Octonion.
- Octonion, in turn, bought a piece of Class V Funding III.
Not all cross-ownership deals were consummated.
In spring 2007, Deutsche Bank was creating a CDO and found a manager that wanted to take a piece of it. The manager was overseeing a CDO that Merrill was assembling. Merrill blocked the manager from putting the Deutsche bonds into the Merrill CDO. A former Deutsche Bank banker says that when Deutsche Bank complained to Andy Phelps, a Merrill CDO executive, Phelps offered a quid pro quo: If Deutsche was willing to have the manager of its CDO buy some Merrill bonds, Merrill would stop blocking the purchase. Phelps declined to comment.
The Deutsche banker, who says its managers were independent, recalls being shocked: "We said we don't control what people buy in their deals." The swap didn't happen.
The Missing Regulators and the Aftermath
In September 2007, as the market finally started to catch up with Merrill Lynch, Ken Margolis left the firm to join Wing Chau at Harding.
Chau and Margolis circulated a marketing plan for a new hedge fund to prospective investors touting their expertise in how CDOs were made and what was in them. The fund proposed to buy failed CDOs -- at bargain basement prices. In the end, Margolis and Chau couldn't make the business work and dropped the idea.
Why didn't regulators intervene during the boom to stop the self-dealing that had permeated the CDO market?
No one agency had authority over the whole business. Since the business came and went in just a few years, it may have been too much to expect even assertive regulators to comprehend what was happening in time to stop it.
While the financial regulatory bill passed by Congress in July creates more oversight powers, it's unclear whether regulators have sufficient tools to prevent a replay of the debacle.
In just two years, the CDO market had cut a swath of destruction. Partly because CDOs had bought so many pieces of each other, they collapsed in unison. Merrill Lynch and Citigroup, the biggest perpetrators of the self-dealing, were among the biggest losers. Merrill lost about $26 billion on mortgage CDOs and Citigroup about $34 billion.
Glenn Beck's Messiah Complex
Rupert Murdoch's community organizer says that God speaks through him. Does Beck think he's the Second Coming? (His followers just may think so.)
By Adele M. Stan, AlterNet
Posted on August 28, 2010
The record for self-appointed messiahs isn't good. (Kool-Aid anyone?) But that appears to be the path Glenn Beck is headed down -- not that he'd ask his followers to die for him; he just wants them, for a handful of self-righteous feel-good, to sell their grandchildren's future well-being into the coffers of billionaires David Koch and Rupert Murdoch.
In the months since his February appearance at the Conservative Political Action Conference in Washington, Beck has added a new element to his customary line of wild-eyed, secular political conspiracy theories: his implied anointment as God's messenger, ordained to save the country and "restore honor" to its culture.
This month, he added a morning prayer segment to his daily radio program, and has described as "divine providence" his purportedly accidental selection of the date for the rally he will lead tomorrow on both the anniversary of and at the same site as Martin Luther King's "I Have a Dream" speech. He has told his followers to expect a "miracle" on the day of the rally. And tonight, Beck's production company, Mercury Radio Arts, will produce a pre-game event at the (cough) Kennedy Center, modestly titled "Glenn Beck's Divine Destiny" (until it was apparently renamed "America's Divine Destiny" this morning, per the flyers handed ticket-seekers who were turned away).
However tempting it may be to dismiss Beck's faith-based grandiosity as delusional derangement, there's likely more than a bit of strategy involved in the revamped Beck formula, which is ultimately designed to marshal resentful white people to the anti-regulatory agenda of Rupert Murdoch, CEO of the parent company of Beck's employer, Fox News.
When the billionaire backers of the astroturf group, Americans for Prosperity Foundation (whose board is chaired by David Koch), first drew together the disparate pockets of discontent that formed the initial core of the Tea Party movement, they focused on the secular but personal issue of health care reform. This was a deliberate choice, a way of broadening the circle of those comprising the ranks of the right's ground troops, of bringing in those who share with the religious right a disdain for government, if not the evangelicals' intrusive agenda on issues of sexuality.
Now, it's election time. The dons of the Tea Party movement need the ground organizing know-how and data mines of the Religious Right, just as they need to rouse in secular, libertarian-minded types a fervor of religious proportions in order to keep these self-defined rugged individualists engaged to do the foot-work of get-out-the-vote efforts and phone-banking -- traditionally communitarian efforts, which is why church-based organizing was so effective in the 1980s. And so Beck has refashioned America's civic religion of Constitution and Founding Fathers as one with him at the center, taking orders from a Christian-ish God who whispers in his ear.
It's a clever 90-degree pivot. Tea Partiers already esteem Beck; a recent study by Democracy Corps shows Beck with a 75 percent "warm" rating among self-described Tea Partiers, making him the most esteemed figure the study's authors tested among those surveyed. Having already won their hearts, he is poised to win their souls, while also cleaving to his side a greater chunk of Christian evangelicals than had already found their remotes shifting from the Christian Broadcasting Network to Fox News.
The melding of religious predilections the Church of Beck represents may seem, at first glance, an unlikely draw for members of the Religious Right, not least because of Beck's Mormonism, which is deemed a terrible heresy among most Protestant Christians. And, as religion scholar Joanna Brooks has written, Beck's Founder-worship and tearful pleas are emblematic of his adopted faith.
But the Religious Right never was a theologically pure movement. It was, in fact, created by two paleo-Catholics and a Jew-turned-Christian-Reconstructionist (Paul Weyrich, Richard Viguerie and Howard Phillips), at a time when Catholicism was viewed as something quite as exotic and demonic as Mormonism may still seem today to evangelical Christians. It was this triumverate who essentially hired the segregationist Baptist minister, Rev. Jerry Falwell, to front their movement, named the Moral Majority.
Beck's reinvention into a more distinctly religious figure can be traced to a particular moment -- a moment that conferred on him a legitimacy among followers of the Religious Right because of his Mormon faith. It was the moment he took the stage at this year's commencement ceremony at Liberty University, which was founded by the late Jerry Falwell. At the moment that Beck was introduced to Liberty's Class of 2010 by Jerry Falwell, Jr., a new constituency opened unto him.
Though its leaders might be loathe to admit it, the Religious Right needs the Tea Party movement as much the Tea Party movement needs the precinct lists and campaign canvassers of the Religious Right. That's why, at the Family Research Council's Values Voter Summit next month, there will be significant crossover between the Tea Party movement and the Religious Right among such speakers as Sen. Jim DeMint, R-S.C., Rep. Michele Bachmann, R-Minn. and Amy Kremer of Tea Party Express. And hot on the heels of the aging Family Research Council is Ralph Reed's new and shiny Faith and Freedom Coalition, whose express purpose is to meld the two movements into an electoral juggernaut.
So, laugh, if you will, as Glenn Beck promises his followers that today, at the Lincoln Memorial -- as he attempts to subvert the message of Martin Luther King, they will "see the spirit of God unleashed, unlike you have probably ever seen it before, at least at a public function. You are going to see the power of God."
The force unleashed may not be that of God, but it will be a force, and one with a purpose. Resentment is powerful. It's the thing that Tea Partiers and followers of the Religious Right have in common: resentment of elites, resentment of the poor, resentment of any reminder that they enjoy any privilege at the expense of others by accident of birth. Through Beck, we are about to see resentment made holy.
By Adele M. Stan, AlterNet
Posted on August 28, 2010
The record for self-appointed messiahs isn't good. (Kool-Aid anyone?) But that appears to be the path Glenn Beck is headed down -- not that he'd ask his followers to die for him; he just wants them, for a handful of self-righteous feel-good, to sell their grandchildren's future well-being into the coffers of billionaires David Koch and Rupert Murdoch.
In the months since his February appearance at the Conservative Political Action Conference in Washington, Beck has added a new element to his customary line of wild-eyed, secular political conspiracy theories: his implied anointment as God's messenger, ordained to save the country and "restore honor" to its culture.
This month, he added a morning prayer segment to his daily radio program, and has described as "divine providence" his purportedly accidental selection of the date for the rally he will lead tomorrow on both the anniversary of and at the same site as Martin Luther King's "I Have a Dream" speech. He has told his followers to expect a "miracle" on the day of the rally. And tonight, Beck's production company, Mercury Radio Arts, will produce a pre-game event at the (cough) Kennedy Center, modestly titled "Glenn Beck's Divine Destiny" (until it was apparently renamed "America's Divine Destiny" this morning, per the flyers handed ticket-seekers who were turned away).
However tempting it may be to dismiss Beck's faith-based grandiosity as delusional derangement, there's likely more than a bit of strategy involved in the revamped Beck formula, which is ultimately designed to marshal resentful white people to the anti-regulatory agenda of Rupert Murdoch, CEO of the parent company of Beck's employer, Fox News.
When the billionaire backers of the astroturf group, Americans for Prosperity Foundation (whose board is chaired by David Koch), first drew together the disparate pockets of discontent that formed the initial core of the Tea Party movement, they focused on the secular but personal issue of health care reform. This was a deliberate choice, a way of broadening the circle of those comprising the ranks of the right's ground troops, of bringing in those who share with the religious right a disdain for government, if not the evangelicals' intrusive agenda on issues of sexuality.
Now, it's election time. The dons of the Tea Party movement need the ground organizing know-how and data mines of the Religious Right, just as they need to rouse in secular, libertarian-minded types a fervor of religious proportions in order to keep these self-defined rugged individualists engaged to do the foot-work of get-out-the-vote efforts and phone-banking -- traditionally communitarian efforts, which is why church-based organizing was so effective in the 1980s. And so Beck has refashioned America's civic religion of Constitution and Founding Fathers as one with him at the center, taking orders from a Christian-ish God who whispers in his ear.
It's a clever 90-degree pivot. Tea Partiers already esteem Beck; a recent study by Democracy Corps shows Beck with a 75 percent "warm" rating among self-described Tea Partiers, making him the most esteemed figure the study's authors tested among those surveyed. Having already won their hearts, he is poised to win their souls, while also cleaving to his side a greater chunk of Christian evangelicals than had already found their remotes shifting from the Christian Broadcasting Network to Fox News.
The melding of religious predilections the Church of Beck represents may seem, at first glance, an unlikely draw for members of the Religious Right, not least because of Beck's Mormonism, which is deemed a terrible heresy among most Protestant Christians. And, as religion scholar Joanna Brooks has written, Beck's Founder-worship and tearful pleas are emblematic of his adopted faith.
But the Religious Right never was a theologically pure movement. It was, in fact, created by two paleo-Catholics and a Jew-turned-Christian-Reconstructionist (Paul Weyrich, Richard Viguerie and Howard Phillips), at a time when Catholicism was viewed as something quite as exotic and demonic as Mormonism may still seem today to evangelical Christians. It was this triumverate who essentially hired the segregationist Baptist minister, Rev. Jerry Falwell, to front their movement, named the Moral Majority.
Beck's reinvention into a more distinctly religious figure can be traced to a particular moment -- a moment that conferred on him a legitimacy among followers of the Religious Right because of his Mormon faith. It was the moment he took the stage at this year's commencement ceremony at Liberty University, which was founded by the late Jerry Falwell. At the moment that Beck was introduced to Liberty's Class of 2010 by Jerry Falwell, Jr., a new constituency opened unto him.
Though its leaders might be loathe to admit it, the Religious Right needs the Tea Party movement as much the Tea Party movement needs the precinct lists and campaign canvassers of the Religious Right. That's why, at the Family Research Council's Values Voter Summit next month, there will be significant crossover between the Tea Party movement and the Religious Right among such speakers as Sen. Jim DeMint, R-S.C., Rep. Michele Bachmann, R-Minn. and Amy Kremer of Tea Party Express. And hot on the heels of the aging Family Research Council is Ralph Reed's new and shiny Faith and Freedom Coalition, whose express purpose is to meld the two movements into an electoral juggernaut.
So, laugh, if you will, as Glenn Beck promises his followers that today, at the Lincoln Memorial -- as he attempts to subvert the message of Martin Luther King, they will "see the spirit of God unleashed, unlike you have probably ever seen it before, at least at a public function. You are going to see the power of God."
The force unleashed may not be that of God, but it will be a force, and one with a purpose. Resentment is powerful. It's the thing that Tea Partiers and followers of the Religious Right have in common: resentment of elites, resentment of the poor, resentment of any reminder that they enjoy any privilege at the expense of others by accident of birth. Through Beck, we are about to see resentment made holy.
What Rotten Eggs Reveal About the State of Our Democracy
The massive recall of salmonella-infected eggs opens a window on the power of large corporations over not only our health, but over our government.
By Amy Goodman, King Features Syndicate
Posted on August 27, 2010
What do a half-billion eggs have to do with democracy? The massive recall of salmonella-infected eggs, the largest egg recall in U.S. history, opens a window on the power of large corporations over not only our health, but over our government.
While scores of brands have been recalled, they all can be traced back to just two egg farms. Our food supply is increasingly in the hands of larger and larger companies, which wield enormous power in our political process. As with the food industry, so, too, is it with oil and with banks: Giant corporations, some with budgets larger than most nations, are controlling our health, our environment, our economy and increasingly, our elections.
The salmonella outbreak is just the most recent episode of many that point to a food industry run amok. Patty Lovera is the assistant director of the food-safety group Food & Water Watch. She told me: “Historically, there’s always been industry resistance to any food-safety regulation, whether it’s in Congress or through the agencies. There are large trade associations for every sector of our food supply, starting from the large agribusiness-type producers all the way through to the grocery stores.”
The salmonella-tainted eggs came from just two factory farms, Hillandale Farms and Wright County Egg, both in Iowa. Behind this outbreak is the egg empire of Austin “Jack” DeCoster. DeCoster owns Wright County Egg and also owns Quality Egg, which provides chicks and feed to both of the Iowa farms. Lovera describes DeCoster as “a poster child for what happens when we see this type of consolidation and this scale of production.”
The Associated Press offered a summary of DeCoster’s multistate egg and hog operation’s health, safety and employment violations. In 1997, DeCoster Egg Farms agreed to pay a $2 million fine after then-Labor Secretary Robert Reich described his farm “as dangerous and oppressive as any sweatshop.” In 2002, DeCoster’s company paid $1.5 million to settle a lawsuit filed by the federal Equal Employment Opportunity Commission on behalf of Mexican women who reported they were subjected to sexual harassment, including rape, abuse and retaliation by supervisors. Earlier this summer, another company linked to DeCoster paid out $125,000 to the state of Maine over animal-cruelty allegations.
Despite all this, DeCoster has thrived in the egg and hog business, which puts him in league with other large corporations, like BP and the major banks. The BP oil spill, the largest in the history of this country, was preceded by a criminally long list of serious violations going back years, most notably the massive Texas City refinery explosion in 2005 that killed 15 people. If BP were a person, he would have been imprisoned long ago.
The banking industry is another chronic offender. In the wake of the largest global financial disaster since the Great Depression, banks like Goldman Sachs, flush with cash after a massive public bailout, subverted the legislative process aimed at reining them in.
The result: a largely toothless new consumer-protection agency, and relentless opposition to the appointment of consumer advocate Elizabeth Warren to head it. She would give the banks as much oversight as the new agency would allow, which is why the bankers, including President Barack Obama’s appointees like Treasury Secretary Timothy Geithner and economic adviser Larry Summers, are believed to be opposing her.
The fox, you could say, is watching the henhouse (and the rotten eggs within). Multinational corporations are allowed to operate with virtually no oversight or regulation. Corporate cash is allowed to influence elections, and thus, the behavior of our elected representatives. After the Supreme Court’s Citizens United decision, which will allow unlimited corporate donations to campaigns, the problem is only going to get worse. To get elected, and to stay in power, politicians will have to cater more and more to their corporate donors.
There is hope. There is a growing movement to amend the U.S. Constitution, to strip corporations of the legal status of “personhood,” the concept that corporations have the same rights as regular people.
This would subject corporations to the same oversight that existed for the first 100 years of U.S. history. To restrict political participation just to people will take a genuine, grass-roots movement, though, since Congress and the Obama administration can’t seem to get even the most basic changes implemented. As the saying goes, if you want to make an omelet, you have to break a few eggs.
By Amy Goodman, King Features Syndicate
Posted on August 27, 2010
What do a half-billion eggs have to do with democracy? The massive recall of salmonella-infected eggs, the largest egg recall in U.S. history, opens a window on the power of large corporations over not only our health, but over our government.
While scores of brands have been recalled, they all can be traced back to just two egg farms. Our food supply is increasingly in the hands of larger and larger companies, which wield enormous power in our political process. As with the food industry, so, too, is it with oil and with banks: Giant corporations, some with budgets larger than most nations, are controlling our health, our environment, our economy and increasingly, our elections.
The salmonella outbreak is just the most recent episode of many that point to a food industry run amok. Patty Lovera is the assistant director of the food-safety group Food & Water Watch. She told me: “Historically, there’s always been industry resistance to any food-safety regulation, whether it’s in Congress or through the agencies. There are large trade associations for every sector of our food supply, starting from the large agribusiness-type producers all the way through to the grocery stores.”
The salmonella-tainted eggs came from just two factory farms, Hillandale Farms and Wright County Egg, both in Iowa. Behind this outbreak is the egg empire of Austin “Jack” DeCoster. DeCoster owns Wright County Egg and also owns Quality Egg, which provides chicks and feed to both of the Iowa farms. Lovera describes DeCoster as “a poster child for what happens when we see this type of consolidation and this scale of production.”
The Associated Press offered a summary of DeCoster’s multistate egg and hog operation’s health, safety and employment violations. In 1997, DeCoster Egg Farms agreed to pay a $2 million fine after then-Labor Secretary Robert Reich described his farm “as dangerous and oppressive as any sweatshop.” In 2002, DeCoster’s company paid $1.5 million to settle a lawsuit filed by the federal Equal Employment Opportunity Commission on behalf of Mexican women who reported they were subjected to sexual harassment, including rape, abuse and retaliation by supervisors. Earlier this summer, another company linked to DeCoster paid out $125,000 to the state of Maine over animal-cruelty allegations.
Despite all this, DeCoster has thrived in the egg and hog business, which puts him in league with other large corporations, like BP and the major banks. The BP oil spill, the largest in the history of this country, was preceded by a criminally long list of serious violations going back years, most notably the massive Texas City refinery explosion in 2005 that killed 15 people. If BP were a person, he would have been imprisoned long ago.
The banking industry is another chronic offender. In the wake of the largest global financial disaster since the Great Depression, banks like Goldman Sachs, flush with cash after a massive public bailout, subverted the legislative process aimed at reining them in.
The result: a largely toothless new consumer-protection agency, and relentless opposition to the appointment of consumer advocate Elizabeth Warren to head it. She would give the banks as much oversight as the new agency would allow, which is why the bankers, including President Barack Obama’s appointees like Treasury Secretary Timothy Geithner and economic adviser Larry Summers, are believed to be opposing her.
The fox, you could say, is watching the henhouse (and the rotten eggs within). Multinational corporations are allowed to operate with virtually no oversight or regulation. Corporate cash is allowed to influence elections, and thus, the behavior of our elected representatives. After the Supreme Court’s Citizens United decision, which will allow unlimited corporate donations to campaigns, the problem is only going to get worse. To get elected, and to stay in power, politicians will have to cater more and more to their corporate donors.
There is hope. There is a growing movement to amend the U.S. Constitution, to strip corporations of the legal status of “personhood,” the concept that corporations have the same rights as regular people.
This would subject corporations to the same oversight that existed for the first 100 years of U.S. history. To restrict political participation just to people will take a genuine, grass-roots movement, though, since Congress and the Obama administration can’t seem to get even the most basic changes implemented. As the saying goes, if you want to make an omelet, you have to break a few eggs.
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