The Return of Liar’s Loans



This is an extract from a blog post (“The Bank Whistleblowers United Plan of Urgent Financial Change”) by Bill Black, author of The Best Way to Rob a Bank Is to Own One and an associate professor of economics and law at the University of Missouri-Kansas City. Many of us a bit long in tooth remember a time that when you wanted to buy a home, you had to genuflect to a banker and put up gallons of blood and your first-born. Changes in bank policy—and levels of greed—ultimately helped lead to the great recession we’re still struggling with. And virtually nobody has been held accountable. Here are some of his thoughts:

Our goal of restoring accountability to Wall Street is not controversial.  Indeed, there is unanimity among the candidates for the presidency that accountability for Wall Street elites has disappeared and urgently needs to be restored.  But that same unanimity among candidates has existed for over a decade.  Beginning with DOJ’s failure to prosecute the elite bankers that aided and abetted Enron’s senior managers’ looting and destruction of Enron in 2000-2001 – the consensus on the need to restore accountability has failed to produce accountability for elite bankers for over 15 years.  Every political leader says they want to help honest bankers succeed.  Nearly every political leader agrees that the “revolving door” corrupts Wall Street’s regulators.  The movie The Big Short has a scene at a pool that is designed to be emblematic of the public perception that the SEC (and, by extension, the other federal financial regulators, the FBI, and the DOJ) is staffed by lawyers whose goal in life is to be hired by Goldman Sachs.  One of our major insights is how law enforcement priorities with regard to financial elites have become sharply perverse as the financial regulatory agencies’ input to the FBI and DOJ have virtually ceased through the destruction of the agencies’ criminal referral process and been replaced by misdirected law enforcement priorities pushed by the elite bankers.  We propose concrete steps to return our priorities to the most damaging financial frauds, which are always led by elites….

We have no constraints on our ability to speak the truth and we have a history of speaking truth to power.  What follows is not the product of press flacks or political spinmeisters.  We have the expertise and personal knowledge to explain five key facts.

  • The most recent U.S. bubble and resultant financial crisis and Great Recession were driven by three epidemics of fraud led by elite bankers. The three epidemics that drove the crisis are appraisal fraud, “liar’s” loans (collectively, these were the loan origination frauds), and the resale of those fraudulently originated mortgages through fraudulent “reps and warranties” to the secondary market and the public.  Banks, like fish, rot from the head – the “C Suite.”   Liar’s loans is an industry term that shouts the industry’s knowledge that it was originating overwhelmingly fraudulent loans.  In a liar’s loan the lender agrees not to verify data that is essential to prudent underwriting.  This would be an insane practice for an honest lender – and it was practice that was always discouraged by the federal regulators – but it optimizes “accounting control fraud.”[1]

Tom Miller, the Nation’s longest serving state attorney general (for Iowa), was also a leader of key combined DOJ and state task forces on mortgage fraud.  Industry spokesmen invariably try to get the public to believe that the banks were the victims of liar’s loans, but as Miller testified before the Fed, investigations prove the opposite.

“[Many originators invent] non-existent occupations or income sources, or simply inflat[e] income totals to support loan applications. Importantly, our investigations have found that most stated income fraud occurs at the suggestion and direction of the loan originator, not the consumer.”

  • Not a single one of those elite bankers who led the fraud epidemics has been prosecuted and only one, a woman who was only moderately senior, has been held personally accountable in any meaningful way through a civil suit (made possible by a whistleblower). This is the greatest strategic failure of the DOJ in recent history.
  • The SEC has also proven ineffective in holding the elite Wall Street bankers who led these fraud epidemics personally accountable. As with DOJ, one of the fundamental problems that has gotten worse is the “revolving door.”  We propose a practical means of reducing that problem.
  • Dodd-Frank has not fixed the gaping problems endemic to finance that will cause future epidemics of elite financial fraud and resultant global crises.
  • We know how to identify developing fraud epidemics before they hyper-inflate financial bubbles, how to prevent or at least greatly reduce such epidemics, and how to prosecute effectively the elite banksters. Our group includes former regulators who demonstrated each of these abilities.  What we need is the political will to make the vital changes in the face of fierce opposition from the elite banksters.  That will is sapped by the revolving door.

And here’s a related piece that appeared on Bloomberg Business last fall.

Humor: The Borowitz Report


DES MOINES (The Borowitz Report)—Senator Ted Cruz’s stunning victory in the Iowa caucuses is serving as a beacon of hope to despised people across the nation, a number of disliked Americans confirmed on Monday.

In interviews from coast to coast, dozens of pariahs said that the Cruz triumph meant that “the sky’s the limit” for widely hated people like them.

Tracy Klugian, a real-estate agent from Jupiter, Florida, said that the fact that she has systematically alienated her co-workers, by bad-mouthing them to management and stealing their listings, no longer seems like an obstacle to advancement.

“Sometimes, knowing that everyone in the office hates me so much that they won’t even ride in an elevator with me kind of brought me down,” she said. “That’s why this Cruz thing is such a game-changer.”

Chuck Greister, a general contractor who has incurred the wrath of hundreds of clients for his shoddy work and flagrant, who-gives-a-crap attitude, said that Ted Cruz’s victory in Iowa has “been nothing short of inspirational.”

“Showing up four hours late or drinking on the job site—sure, loads of people hated me for that,” Greister said. “But a little hate never stopped a gentleman named Mr. Ted Cruz.”

In the wake of the Iowa caucuses, America’s most unlikeable people were lighting up Facebook with comments in praise of Cruz, bursting with pride that one of their number had a legitimate shot at the White House.

“There are a lot of despised little kids out there who probably think that they’ll never be President,” Klugian said. “Ted Cruz gives them a reason to dream.”

Naked Capitalism on Imperial Capitalism


Capitalism Versus The Social Commons

Yves here. Ed Walker’s piece below makes a big argument in an impressively compact space. I wanted to add a couple of thoughts.

One reason capitalists wind up with profits that they do not adequately reinvest is that they set their return targets too high. This has been documented periodically. A recent example comes from Andrew Haldane of the Bank of England on short-termism and how it leads to underinvestment.

Second is that many projects are best undertaken by government, such as infrastructure that will serve as the foundation for growth, basic research, or other projects where the time frames are too long, the payoffs too ambiguous, or the resource mobilization too great to make sense for the private sector. In keeping with the Ed Walker’s use of writings from long ago to shed light on our supposedly modern problems, Michal Kalecki explained in Political Aspects of Full Employment why businessmen prefer to have lower employment and as a result, growth:

The reasons for the opposition of the ‘industrial leaders’ to full employment achieved by government spending may be subdivided into three categories: (i) dislike of government interference in the problem of employment as such; (ii) dislike of the direction of government spending (public investment and subsidizing consumption); (iii) dislike of the social and political changes resulting from the maintenance of full employment.

When you have finished Walker’s fine piece, please go immediately and read Kalecki’s short, penetrating essay.

By Ed Walker, who wrote as masaccio at Firedoglake and now writes regularly at emptywheel. You can follow him at Twitter at @MasaccioFDL, and here’s his author page at Shadowproof.

For a long time, and particularly since WWII, societies around the world have managed substantial parts of their productive activity in non-capitalist zones. In the UK, for example, health care is provided by the National Health Service. It operates in a market society, but it is not part of the process of capital accumulation. The education system is an example in the US. We can think of these non-capitalist enclaves as a social commons. We all share in them, and we all have a stake in seeing to it that they operate at a high level.

With the turn towards neoliberalism in the past 35 years, the rich have tried to colonize these non-capitalist sectors. Currently UK capitalists and the Tories are intent on privatizing the NHS for their personal gain. They look at the way the US medical/drug system works for the benefit of the rich and they want that for themselves. In the US, we have already turned over big chunks of the prison system to these people, with predictable results. The big push in the US is the effort to take over the education system for personal profit. In a larger perspective, the capitalists and their economists tell us constantly that European welfare states are impossibly expensive and must be privatized. Why? Why is this such a big deal?

It might be easy to put this down to greed, or to the Great Man theory of economic progress, or creative destruction. But perhaps there is something in the nature of capitalism that can explain this better. Two books published in the wake of WWII examine a broad sweep of economic history to try to understand how that war happened. Karl Polanyi’s The Great Transformation sees the war as the end of the experiment with unrestrained free market capitalism, and offers the hope of a more socialist future. Hannah Arendt’s The Origins of Totalitarianism offers a dark view of human nature and of the capitalist system, and is much less hopeful.

It may seem odd to focus on 70 year old books to analyze our current system and the problems we face, but we have to remember how hard it is to understand one’s own time and make sense of it. One reason to read these books is the brilliance of the writers. The works are fascinating works of scholarship, heavily footnoted and discursive in focus, and covering a huge time frame. They seem so different from the books on economics and politics on the best-seller list, with the conspicuous exception of Capital in the Twenty-First Century which plumbs two hundred years of records.

It’s also important to note that neither of these authors had succumbed to what C. Wright Mills called the Capitalist Celebration, the capitulation of the US left to the spell of capitalism. We have to go back that far to find an actual left criticism of capitalism. Arendt has a strong Marxian flavor. Polanyi sees the value of the increase in productivity brought on by the industrial revolution, but believes strongly in the Enlightenment view that humans can control and direct society to prevent the damage that unrestrained capitalism can bring, damage he describes in detail. Far from celebrating capitalism, both Arendt and Polanyi argue that unrestrained capitalism and free market ideology were significant factors in the rise of fascism.

With that background, here’s a look at one aspect of the rise of unrestrained capitalism, Imperialism, largely drawn from Arendt.

The Industrial Revolution created massive wealth for a few, who for clarity I will refer to as the Capitalists, a group which includes some of the hereditary rich, the aristocrats, as well as wealthy merchants and newly rich manufacturers. The Capitalists quickly found themselves unable to create profitable investments for their capital in their home countries. Arendt calls this superfluous wealth. It had no purpose, no utility in the home country, and little prospect of producing gain for the holder. This led to a decade in Europe in which there was massive financial and real estate fraud in the business sector, and corruption at the nation-state, leading to depressions and massive unemployment. Many of the victims of these frauds were artisans, tradesmen and small merchants, who, Arendt says, believed that they had to invest their small savings in these ventures or risk falling into the out of the middle class.

Each round of new technology, each period of growth, was followed by a crisis, usually a financial collapse. Those crises led massive unemployment, the displacement of people from a role in the productive sector of their society. Arendt calls these superfluous people. They had as little utility to their society as the superfluous wealth. Similarly, Polanyi says that government and leading economic writers referred to two groups, the sick, the old and the weak who were the deserving poor, entitled to some assistance from the nation-state; and the able-bodied who could not find work, who were not deserving of assistance, and for whom hunger would serve as a lash to force them to work for any wage, or just for food and shelter..

Arendt says that some Capitalists sought opportunities in foreign lands, but they experienced losses in those investments, as the foreigners didn’t play by the rules of the Capitalists. Beginning in the 1870s, the Capitalists demanded that the nation-states protect their investments by force. They wanted profits without risks, and the nation-states did as they demanded. Arendt claims that this served the interests of the nation-state in that that it enabled the productive use of superfluous capital, and the employment of superfluous men as soldiers and sailors, and supervisors or workers in the new colonies, or in the transportation of imports and exports.

Arendt says that the driving force of capitalism, the demand for profits, means that capital can never stand still. It must always be in motion.

The decisive point about the depressions of [the 1860s and 70s], which initiated the era of imperialism, was that they forced the bourgeoisie to realize for the first time that the original sin of simple robbery, which centuries ago had made possible the “original accumulation of capital” (Marx) and had started all further accumulation, had eventually to be repeated lest the motor of accumulation suddenly die down. In the face of this danger, which threatened not only the bourgeoisie but the whole nation with a catastrophic breakdown in production, capitalist producers understood that the forms and laws of their production system “from the beginning had been calculated for the whole earth.” P. 148 fn omitted.

The first omitted footnote cites Rudolf Hilferding for the proposition that “… imperialism “suddenly uses again the methods of the original accumulation of capitalistic wealth””. Arendt is asking us to think about how wealth was originally accumulated.

Adam Smith tells a charming story about the accumulation of capital in Book 1 Chapter 6 of The Wealth of Nations. “In that early and rude state of society which precedes both the accumulation of stock and the appropriation of land…” societies rewarded hard work and talent with extra stuff. Then we jump to “As soon as stock has accumulated in the hands of particular persons…”.

Smith doesn’t discuss the fact that during the interim period the rich and vicious seized personal property and land by force. He doesn’t mention the Enclosures, or any of the bloody history of accumulation of the initial stocks of wealth, either in the home countries or in other lands. For that history, take a look at Polanyi.

After this jump, we get Smith’s explanation that given the initial distribution of land and other assets, including cash, profits are the natural result of the work of the owners of those initial capital stocks, who organize production and are entitled to keep the profits as compensation for their skill and effort. Smith doesn’t discuss the use of force and violence against workers and peasants or the assistance of the nation-state with laws and militia and patents and corruption. Smith is the father of modern economists who ignore the role of force, violence, state power, fraud and corruption and substitute mythic cover stories about entrepreneurship and disruption.

It’s true that some capital accumulation takes place as Smith says, from frugality, skill, or luck. But it’s equally true that at the outset of the Industrial Revolution, most capital was held by nobles and aristocrats who took it by force, and the rest was owned by their bankers and a few merchants. It’s also true that much current capital accumulation takes place through monopoly, oligopoly, and fraud and corruption. Look no further than the Great Crash.

Back to the Imperial period. Arendt points to Rosa Luxemburg’s posthumous work, The Accumulation of Capital for its explanation of the roots of imperialism. Luxemburg was a Marxian intellectual and activist, who took part in the German communist uprising in the wake of WWI, and was murdered by the Weimar Freikorps.

Accumulation is impossible in an exclusively capitalist environment. Therefore, we find that capital has been driven since its very inception to expand into non-capitalist strata and nations, ruin artisans and peasantry, proletarianize the intermediate strata, the politics of colonialism, the politics of ‘opening-up’ and the export of capital. The development of capitalism has been possible only through constant expansion into new domains of production and new countries. But the global drive to expand leads to a collision between capital and pre-capitalist forms of society, resulting in violence, war, revolution: in brief, catastrophes from start to finish, the vital element of capitalism.

The first sentence of that quote relates to a problem uncovered by Mars, who wrote about the primitive accumulation of capital through force and violence, but was not able to account for capital accumulation in the capitalist system as he understood it. Of course, Luxemburg was a Marxist, so it’s easy to dismiss both the problem and her insight. It seems to me, though, that we can see it standing alone as an observation of the actual behavior of capitalists and the results of their armed expansion into other countries, in the unrestrained use of their money, assets and power.

Luxemburg says that capitalism only works if it has non-capitalist areas, or non-capitalist parts of its home society to colonize. These might be lands and resources in India, or South America, or the Belgian Congo, as they were in the Imperialist period, the period she was thinking about. Or they might be the National Health Service in England, or the education system or the medical system, or the prison system or any other government service in the US. Or it might be the people of Bangladesh who can be colonized to make cheap tee-shirts for greater profits to manufacturers.

Three thoughts.

1. The imperative of capital to stay in motion is a force that underlies the expansionary motives of every capitalist. There’s a logic to capitalism. We won’t uncover that logic with the economic theories that teach that capitalism is natural and just.

2. The problem for decades has been superfluous capital, not a shortage of capital.

3. The problem with capitalism is that it creates superfluous people, people estranged from the productive life of their society. These people are fertile ground for authoritarian extremism.


Will Rogers



Naked Capitalism: It’s Not Just Exxon Who Knew


Gaius Publius: It Wasn’t Just Exxon — They All Knew

Posted on December 29, 2015 by Yves Smith

By Gaius Publius, a professional writer living on the West Coast of the United States and frequent contributor to DownWithTyranny, digby, Truthout, and Naked Capitalism. Follow him on Twitter @Gaius_Publius, Tumblr and Facebook. Originally published at at Down With Tyranny. GP article archive here.

More excellent reporting by Neela Banerjee at the award-winning site InsideClimate News on the “Exxon Knew” story. Turns out, they all knew, all the big oil companies. Their industry group, the American Petroleum Institute (API), had been running a task force for years in the late 1970s and early 1980s, at which scientists from all of the big oil companies shared their information.

(Side note: Of course that had to be true. Just like any industry, Big Oil is a very small club at the top. What matters to one of the companies, especially one as big as Exxon, matters to all of them. Their execs all know each other, go to each other’s parties, ride each other’s jets to St. Andrews and Val-d’Isère, share names of the best Confirmation and Bar Mitzvah caterers — so of course when one gets a bug in the behind about maybe CO2 is dangerous, they talk about that bug until they’ve decided what to do. This story was just waiting to be dug out. Kudos to Ms. Banerjee for doing the digging.)

InsideClimate News with the details (my emphasis):

Exxon’s Oil Industry Peers Knew About Climate Dangers in the 1970s, Too

Members of an American Petroleum Institute task force on CO2 included scientists from nearly every major oil company, including Exxon, Texaco and Shell.

Beginning in 1979 the American Petroleum Institute, the nation’s most powerful lobbyist, together with the country’s largest oil companies ran a task force to monitor and share climate research.

The American Petroleum Institute [API] together with the nation’s largest oil companies ran a task force to monitor and share climate research between 1979 and 1983, indicating that the oil industry, not just Exxon alone, was aware of its possible impact on the world’s climate far earlier than previously known.

The group’s members included senior scientists and engineers from nearly every major U.S. and multinational oil and gas company, including Exxon, Mobil, Amoco, Phillips, Texaco, Shell, Sunoco, Sohio and Standard Oil of California and Gulf Oil, the predecessors to Chevron, according to internal documents obtained by InsideClimate News and interviews with the task force’s former director.

An InsideClimate News investigative series has shown that Exxon launched its own cutting-edge CO2 sampling program in 1978 in order to understand a phenomenon it suspected could harm its business. About a decade later, Exxon spearheaded campaigns to cast doubt on climate science and stall regulation of greenhouse gases. The previously unpublished papers about the climate task force indicate that API, the industry’s most powerful lobbying group, followed a similar arc to Exxon’s in confronting the threat of climate change.

Just as Exxon began tracking climate science in the late 1970s, when only small groups of scientists in academia and the government were engaged in the research, other oil companies did the same, the documents show. Like Exxon, the companies also expressed a willingness to understand the links between their product, greater CO2 concentrations and the climate, the papers reveal. Some corporations ran their own research units as well, although they were smaller and less ambitious than Exxon’s and focused on climate modeling, said James J. Nelson, the former director of the task force.

“It was a fact-finding task force,” Nelson said in an interview. “We wanted to look at emerging science, the implications of it and where improvements could be made, if possible, to reduce emissions.”

The group was initially called the CO2 and Climate Task Force, but changed its name to the Climate and Energy Task Force in 1980, Nelson said.

A background paper on CO2 informed API members in 1979 that carbon dioxide in the atmosphere was rising steadily, and it predicted when the first clear effects of climate change might be felt, according to a memo by an Exxon task force representative.

In addition, API task force members appeared open to the idea that the oil industry might have to shoulder some responsibility for reducing CO2 emissions by changing refining processes and developing fuels that emitted less carbon dioxide….

Those prediction weren’t far off. The whole ICN report is worth reading, but this, however, is especially damning:

At [the urging of task force member Henry Shaw, Exxon’s lead climate researcher in the late 1970s], the task force invited Professor John A. Laurmann of Stanford University to brief members about climate science at the February 1980 meeting in New York. Shaw and Laurmann had participated in the same panel at the AAAS climate conference in April 1979.

Like many scientists at the time, Laurmann openly discussed the uncertainties in the evolving climate research, such as the limited long-term sampling data and the difficulty of determining regional effects of climate change, according to a copy of his presentation attached to the meeting minutes [pdf].

Still, Laurmann told his audience several times that the evidence showed that the increase in atmospheric CO2 is likely “caused by anthropogenic release of CO2, mainly from fossil fuel burning.”

In his conclusions section, Laurmann estimated that the amount of CO2 in the atmosphere would double in 2038, which he said would likely lead to a 2.5 degrees Celsius rise in global average temperatures with “major economic consequences.” He then told the task force that models showed a 5 degrees Celsius rise by 2067, with “globally catastrophic effects.”

Here are those conclusions in full, from the next-to-last page of the report linked in the quote:



Even if this estimate is grossly wrong it is still probable that


Page 10 of the pdf is damning as well. This behavior borders on the criminal, wouldn’t you say? Or maybe crosses it, given the consequences we now face, by the distance of a hemisphere or so. About those consequences

Climate translation:

“I know what you’re thinking, Mr. & Ms. American. You’re thinking, ‘Do we have until 2020 to stop making Big Oil richer, or can we wait till 2040 to take them on?’ Now, to tell you the truth, no one really knows. But being this is civilization-ending CO2 emissions we’re talking about, which will blow your grandchildren right back to the stone age while you watch, you’ve got to ask yourselves a question — Do you feel lucky?”

Nope, still not feeling lucky. Perhaps it’s time to act decisively and treat this like the emergency it is. After this gets going, life won’t be fun for anyone, even the wealthy who caused it. After all, if Val-d’Isère is all melted by then, where will they ski?

Naked Capitalism: Austerity, Son of Trickle Down


The Sneaky Way Austerity Got Sold to the Public Like Snake Oil

Originally published at the Institute for New Economic Thinking website

Orsola Costantini, Senior Economist at the Institute for New Economic Thinking, is the author of a new paper, “The Cyclically Adjusted Budget: History and Exegesis of a Fateful Estimate,” which exposes the fascinating — and disturbing — history of how a budget approach cloaked in a scientific and technical aura became a tool to manipulate public opinion and serve the interests of the powerful. In the following conversation, she reveals how austerity has been sold to the public through a process that damages the lives of ordinary people, consolidates knowledge and power at the top, and compromises democracy. As economic inequality reaches new heights and austerity programs are debated around the world (most recently, in Spain and Portugal), understanding how a lie becomes political and economic “truth” has never been more critical.

Lynn Parramore: Your recent work deals with something called the “cyclically adjusted budget.” What is it and what does it mean in the lives of ordinary people?

Orsola Costantini: The Cyclically Adjusted Budget (CAB) is a statistical estimate that aids government officials when they decide what to spend money on and how much they’re going to tax you. It is mostly federal governments that use it, but also international institutions like the International Monetary Fund (IMF).

Economists will tell you this tool is imprecise. Yet national and international institutions still rely on it to justify important decisions about government spending and taxation.

But there’s something the experts aren’t telling you: the cyclically adjusted budget can be easily maneuvered depending on which way the political winds are blowing. And it appears technical and obscure enough so that regular people tend to look at it as objective and undisputable. That’s where the trouble comes in.

Politicians and government officials using the CAB can limit the range of political choices that appear viable to a community. Policymakers can avoid the hassle of taking political responsibility for these choices, too. We had to do it! The budget says so!

Look at what happened all over Europe in 2008: It’s one thing to say to students in the streets that their education and economic wellbeing are not a priority for the government while saving banks is. It’s quite another to say that politics has nothing to do with it and the economy requires taking certain actions, sometimes painful.

LP: You indicate that this approach to budgeting was invented as a way of making the New Deal acceptable to the business community. How did that work? Over time, who has benefitted from it? Who has lost?

OC: Back in the 1940s, workers were fighting for their rights, class struggle was heating up, and soldiers would soon be returning from the fronts. At that point, a new business organization, the Committee for Economic Development (CED), came together. Led by Beardsley Ruml and other influential business figures, the CED played a crucial role in developing a conservative approach to Keynesian economics that helped make policies that would help put all Americans to work acceptable to the business community.
The idea was that more consumers would translate into more profits — which is good for business. After all, the economic experts and budget technicians said so, not just the politicians. And the business leaders were told that economic growth and price stability would go along with this, which they liked.

But things changed progressively over the 1970s and early 1980s. Firms went global. They became financialized. The balance of power between workers and owners started to shift more towards the owners, the capitalists. People were told they needed to sacrifice, to accept cuts to social spending and fewer rights and benefits on the job — all in the name of economic science and capitalism. The CAB was turned into a tool for preventing excessive spending — or justifying selected cuts.

Middle class folks were afraid that inflation would erode their savings, so they were more keen to approve draconian measures to cut wages and reduce public budgets. People on the lower rungs of the economic ladder felt the pain first. But eventually the middle class fell on the wrong side of the fence, too. Most of them became relatively poorer.

I suppose this shows the limits of democracy when information, knowledge, and ultimately power are unequally distributed.

LP: You’re really talking about birth of austerity and the way lies about public spending and budgets have been sold to the public. Why is austerity such a powerful idea and why do politicians still win elections promoting it?

OC: Austerity is so powerful today because it feeds off of itself. It makes people uncertain about their lives, their debts, and their jobs. They become afraid. It’s a strong disciplinary mechanism. People stop joining forces and the political status quo gets locked down.

Even the
name of this tool, the “cyclically adjusted budget,” carries an aura of respect. It diverts our attention. We don’t question it. It creates a barrier between the individual and the political realm: it undermines democratic participation itself. This obscure theory validates, with its authority, a big economic mistake that sounds like common sense but is actually snake oil — the notion that the federal government budget is like a household budget. Actually, it isn’t. Your household doesn’t collect taxes. It doesn’t print money. It works very differently, yet the nonsense that it should behave exactly like a household budget gets repeated by politicians and policymakers who really just want to squeeze ordinary people.

LP: How does all this play out in the U.S. and in Europe?

OC: The European Union requires its members to comply with something called a cyclically adjusted budget constraint. Each country has to review its economic and fiscal plans with the European Commission and prove that those are compatible with the Pact. It’s a ceiling on a country’s deficit, but it’s also much more than that.

Thanks to the estimate, the governments of Italy or Spain, for example, are supposed to force the economy toward some ideal economic condition, the definition of which is obviously quite controversial and has so far rewarded those countries that have implemented labor market deregulation, cut pensions, and even changed the way elections happen. Again, it’s a control mechanism.

In the U.S. this scenario plays out, too, although less strictly. Talk about the budget often relies on the same shifty and politically-shaded statistical tools to support one argument or the other. Usually we hear arguments that suggest we have to cut social programs and workers’ rights and benefits or face economic doom. Tune in to the presidential debates and you’ll hear this played out — and it isn’t strictly limited to one party.

LP: How do we stop powerful players from co-opting economics and budgets for their own purposes?

OC: Our education system is increasingly unequal and deprived of public resources. This is true in the U.S. but also in Europe, where the crisis accelerated a process that was already underway. When children don’t get good educations, the production of knowledge falls into private control. Power gets consolidated. The official theoretical frameworks that benefit the most powerful get locked in.

In the economic field, we need to engage different points of view and keep challenging dominant narratives and frameworks. One day, human curiosity will save us from intellectual prostitution.



Juanita Jean on George P. Bush

Bush Crap: George Pee Privilege Edition

December 07, 2015 By: Juanita Jean Category: Uncategorized

Young son-of-a-Jeb, George Pee Bush, got himself elected Land Commissioner in Texas.  There have been problems from the get-go, like hiring his buddies to high paying jobs within his office.

georgepbush_320x245The big news in Texas right now is that George P Bush, son of a JebBush, got elected Land Commissioner in Texas and is violating the law, hiring his friends and family, not posting jobs, and has turned the Texas General Land office to a frat house / political payoff machine that even has his retired Republican predecessor aghast.

That has been the good news of his tenure in office.

He’s been spending more time on the campaign trail with his daddy than running his office in Texas.

Come to think of it, maybe that’s good news.

George Pee had a conference call with his closest supporters and even they were dumbfounded when he explained that he had run for “dogcatcher” in Texas

“There’s no better experience than getting involved in a presidential race because you truly do absorb so much more information than say, running for dog catcher like I did in Texas,” he said, according to the Houston Chronicle’s Brian Rosenthal.

But he didn’t stop there.  When asked if he was going to help with the presidential campaign, he explained —

When he began to talk about where his father and brother would be campaigning, he said he was “stuck here in Texas this week, but will be out on the trail.”

So, here we have a young man with a $167,070 a year job that oversees the Texas School Fund and all the damn land in Texas. Land commissioner is the oldest, continuous elected position in Texas history.  But, George Pee considers that dogcatcher.

I wonder if he knows he’s not “stuck in Texas.”  He can leave at any time.  In my mind, the sooner, the better.

Damn Bushes.

Naked Capitalism on the French Ghetto


Is France Building an Apartheid State?

Yves here. Be sure to watch the documentary at the end of this post.

By James Kleinfeld (@kleinfeldja) and Max Blumenthal )@MaxBlumenthal), the award-winning author of Goliath and Republican Gomorrah. His most recent book is The 51 Day War: Ruin and Resistance in Gaza. Originally published at Alternet

In our documentary released earlier this year, Je Ne Suis Pas Charlie, Max Blumenthal and I surveyed the landscape of French society in the wake of the Charlie Hebdo attacks, interviewing representatives of French Muslim and Jewish communities, political activists, academics and average French citizens. The accounts we recorded told of long-exacerbating pressures on inter-communal relations that are rapidly approaching a state of low-level civil conflict. The minority citizens we spoke with were seething under a system that has given rise to daily encounters with discrimination and systematic exclusion from the public space.

In turn, French reality has been punctuated by seemingly random, spectacularly gruesome acts of violence carried out by individuals who come from the most excluded sections of French society. They are at once native-born citizens of France and the country’s ultimate outsiders. The main perpetrators of the Charlie Hebdo attacks and the atrocities this November were not a foreign presence which has disturbed a peaceful status quo in French society, but the unwanted, outcasted byproducts of the French Republic and its imperial legacy in the Middle East.

Whether or not we are willing to describe the situation in impoverished French banlieues (suburbs) as outright apartheid, as Prime Minister Manuel Valls did this year, the toxic combination of militaristic government policies abroad and draconian, discriminatory policies at home have unleashed an authoritarian mood among the general public. For French Muslims and other minorities, the situation increasingly resembles the plight blacks faced in apartheid South Africa and even that of the Palestinians living under Israeli military occupation. Though French minorities confront only a shadow of the disproportionate violence that Israel has visited upon Palestinians, they have found themselves in a permanent state of exclusion enforced by a regime of increasingly brutal repression.

The racism that has always simmered just above the surface of mainstream French society has reached historic highs. In the month following the attacks on Charlie Hebdo, the Collective Against Islamophobia measured a 70% rise in Islamophobic incidents, 80% of which were directed against Muslim women usually targeted because they wore hijab. This includes Islamophobic language, verbal and physical assaults and property damage. Since the terrorist attacks of November 13, mosques, halal butchers, kebab restaurants and town halls have been attacked.

The scale of this racist tidal wave on Muslims can be gleaned from a statement made by a Parisian policeman, who said he is “overwhelmed with false accusations” made by civilians toward people perceived as Muslim. This goes hand in hand with the systemic use of racial profiling by France’s security forces. This populist assault on France’s Muslim community has been incited by high-level Islamophobia from the country’s leadership, whose excesses include laws banning the Islamic veil, shuttering mosques, imposing state-friendly, puppet-like religious leadership, removing non-halal options for Muslim school children, and the anti-immigrant bile spewed by members of the far-right National Front and former President Nicholas Sarkozy’s center-right “Republican” Party.

How does this situation mirror apartheid, or the Israeli regime of ethnic separation known as hafrada, and whose benefit does this state of affairs serve? Undoubtedly, France’s political class has been careful to avoid canonizing an overt ideology of ethno-supremacy, and yet the effects of state actions have clearly led to the same result. In our documentary, Houria Bouteldja, a founder of the leftist minority party known as the Indigenous Peoples of the Republic, claimed it was “the figure of the Christian, white, European person” who the state privileges with power and wealth in the society, who is legally positioned above “the black, the Arab, the Muslim and the Roma” person. It isn’t a visible form of apartheid, but a regime of separation which is enacted through systemic, naturalized forms of domination and violence. As her fellow party leader Youssouf Boussouma described to us how the French authorities banned demonstrations against Israel’s 2014 assault on Gaza, then meted out harsh punishments to young Arab males who took to the streets, “this government behaves toward certain sections of its populations as if they really were citizens of an occupied country.”

The reality Bouteldja and Boussouma painted for us reflected the consequences of a long-term, generational process of exclusion and inequality that stemmed directly from the history of French colonialism in Africa and the Middle East, the treatment of French colonialists to the indigenous populations which it ruled over, and the actions of the French army in those colonies.

Ethnic separation is also maintained through the urban environment, where large numbers of Arab and African communities languish in a spiral of poverty, relegated to second-class citizenship and physically separated through deliberate planning. Ethnic divisions are most notable in Paris, where successive waves of immigration from France’s African and Middle Eastern colonies were settled in underfunded, distant suburbs. Meanwhile, gentrification is pushing the remaining minority communities out of the socially engineered Parisian city center, relegating them to the immiseration and despair of thebanlieues. The périphérique, the ring road encircling the 20 districts of Paris and elegantly buried underground in the genteel neighbourhoods of the West and South, functions as a concrete roadblock cutting off access to and from the lower-class neighbourhoods of Saint-Ouen, Saint-Denis, Aubervilliers and Montreuil to the North and East. What this leads to is a growing cultural and ethnic homogenization of the center, through turfing out the different Others to the periphery. As Boussouma, the minority rights activist, remarked, “We have the feeling that… this isn’t the same country, that these aren’t the same norms, not the same references, that [we] live in a sort of sub-humanity.”

Following the atrocities of November 13, President François Hollande launched a state of emergency across France, which has since been extended for the next three months. The emergency regulations represent a legal no-man’s land between peacetime common law and wartime state of siege that has allowed the French state to deploy a war without needing to call it one. This is a war of low intensity, whose main tools are legal and judicial rather than through physical offensives. The state of emergency allows local officials to impose curfews, limit the freedom of movement and enter residences in certain areas, forbid individuals from entering certain zones and place them under house arrest in arbitrary fashion. French citizens who remember the Vichy regime have made the connection between the expanded policy of house arrests, and the creation of concentration camps by the Vichy regime, who used the same expression of ‘house arrest’ to justify their draconian clampdowns. The state of emergency was also used during the Algerian war to imprison thousands of suspected nationalist sympathisers.

What sort of result can we expect when the widespread ethnic profiling by French security forces is armed with a state of emergency? At the very moment when the French army is beefing up its military presence in Syria, it is impossible to demonstrate against these military operations, just as it was illegal to gather in large crowds for the COP 21 climate change talks recently held in Paris. Indeed, 26 environmental activists have been placed under house arrest, preventing them from protesting against the climate talks.

The new rules have been applied most firmly against the minority banlieue dwellers who bear the figure of the “terrorist.” The day after the November 13 attacks, police stormed through the impoverished St. Denis neighborhood where two of the assailants lived, stopping and frisking young Arab men in droves, and raiding homes indiscriminately. By early December, the authorities had closed at least three mosques, and arrested hundreds after more than 2,200 raids carried out under the premise of anti-terrorism. Laurent Wauqiuez, the number-three figure in Nicolas Sarkozy’s Republican Party, has even suggested placing French citizens under terror investigations in internment camps.

While dynamics in French society have come to resemble those in Israel-Palestine, with deep fractures along ethnic lines, suppression of civil liberties and racist incitement, the Israel-Palestine crisis has been simultaneously imported back into French society. The French government entertains an obsequious relationship toward the State of Israel, having invited Israeli Prime Minister Bibi Netanyahu to Paris following the attacks in January while slavishly supporting his successive assaults on Gaza. France’s security and intelligence forces cooperate closely with their Israeli counterparts; the municipality of Paris even stoked controversy earlier this year by hosting the city of Tel Aviv for a one day event at the Paris Plage artificial beach, whitewashing the murder of children on the beaches of Gaza one year earlier. At the recent COP 21 climate summit, Parisian authorities deployed a surveillance balloon made by Israel and first tested on occupied Palestinians by the Israeli army.

France can also be considered as contiguous territory on the war on Palestine. The French government is assisting Israel’s strategic imperatives by acting as the only country in the world that has criminalized the boycott of the State of Israel. A memorandum issued in 2010 by then-Justice Minister Michèle Alliot-Marie demanded legal actions against BDS activists on the specious grounds that their political activities represented a form of anti-Semitic hate speech. In recent weeks dozens of activists of the BDS (boycott, divestment, sanctions) movement have been taken to court under the so-called Lellouche law. This month, four more activists will stand trial in Toulouse for distributing pro-boycott material.

Omar Slaouti, a BDS activist who was summoned to trial under the Alliot-Marie directive, hears disturbing echoes of Israeli rhetoric in French political discourse. “The political language used to justify Western wars of foreign intervention is the same used by Israel to justify its occupation of Palestine,” Slaouti said, “and the same discourse wielded by the French political and security class towards the French underclasses.”

During a demonstration last year in protest of Israel’s war on the besieged Gaza Strip, the extremist Jewish Defense League instigated a scuffle with anti-war protesters, throwing projectiles at the demonstrators before fleeing for safety behind line of riot police. The French government reflexively took the side of JDL and its supporters, criminalizing all further demonstrations in support of Palestine. This suppression of Palestinian solidarity has been supplemented by attacks on anti-Zionist Jewish organisations, such as the the Union of French Jews for Peace (UJFP) and Juives et juifs révolutionnaires (Revolutionary Jews) by the JDL.

A French-Israeli hacker named Ulcan (real name Gregory Chelli) has taken refuge in Israeli-controlled territory, where he terrorizes activists from the leftist UJFP. A typical Ulcan prank caused riot police to rush to the home of UJFP president Jean Guy Greilsamer to respond to a false claim that Greilsamer had killed his entire family and would open fire on any police who approached his home. Ulcan is a former member of the JDL, which has appealed to French police for direct security coordinations, particularly in heavily Jewish areas like Sarcelles that also contain large Muslim and immigrant populations. A Jewish community leader from Sarcelles, David Haik, told us that this collaboration is already taking place below the radar.

“When the army is called in to protect some French citizens against others,” Haik remarked, “it’s the beginning of a civil war.”

Kahina Rabahi assisted in the reporting of this article.