Monthly Archives: April 2015

Jim Hightower on Smearing Environmentalists

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“Dr. Evil” turns out to be “Dr. Silly”

Friday, April 24, 2015   |   Jim Hightower

Imagine a political campaign against environmentalists that’s so negative, so ridiculously slanted and downright dirty, that it actually repulsed executives of some of America’s biggest fracking corporations.

Wow – it’s got to take a big wad of ugly to gag a fracker! But in the gross world of political rancor, few cough up hairballs as foul as those produced by Rick Berman. He specializes in taking secret funding from major corporations to publicly slime environmentalists, low-wage workers, and anyone else perceived by his corporate clients as enemies.

So last year, Berman was in Colorado Springs, at a meeting of Big Oil frackers about his down and dirty plan to smear and ridicule the grassroots enviros who’ve dared to oppose the fracking of Colorado’s land, water, people, and communities. Dubbing the campaign “Big Green Radicals,” the Berman team revealed that their PR firm had dug into the personal lives of Sierra Club board members, looking for tidbits to embarrass them. Gut it up, Berman cried out to the executives, “You can either win ugly or lose pretty.” The Little Generalissimo then urged them to pony up some $3 million for his assault, saying they should “think of this as an endless war,” adding pointedly, “and you have to budget for it.”

Unfortunately for the sleaze peddler, one appalled energy executive recorded his crude pitch and leaked it to the media. “That you have to play dirty to win,” the executive explained, “just left a bad taste in my mouth.” Even Anadarko, an aggressive fracking corporation with 13,000 fracked wells in the Rockies, publicly rejected Berman’s political play, telling the New York Times: “It does not align with our values.”

Berman likes to be called “Dr. Evil,” but he’s so coarse, strident, bombastic, and clownish that he’s become known as “Dr. Silly.”

“Hard-Nosed Advice From Veteran Lobbyist: ‘Win Ugly or Lose Pretty’,” www.nytimes.com, October 30, 2014.

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Naked Capitalism: Deregulation and the Crash

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One Reason Economists Don’t Get Any Love: They Refuse to Take Any Blame for the Great Crash

Posted on April 27, 2015 by

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

The field [economics] is filled with anxious introspection, prompted by economists’ feeling that they are powerful but unloved, and by robust empirical evidence that they are different.

The Superiority of Economists, by Marion Fourcade, Etienne Ollion and Yan Algan.

I feel bad for these lost souls, the unloved economists, so I’ll try to help them understand why people don’t love them. It’s obvious that the principal reason is that economists refuse to take any responsibility for the Great Crash, despite the fact that it was their policy recommendations and justifications that led to the dismantling of the regulatory structure that worked for decades to prevent such massive disasters. They could have confessed that that they didn’t do a proper cost benefit analysis of the risks associated with their policies getting rid of Glass-Steagall, and ending aggressive enforcement of securities and commodities laws, and that they had absolutely no idea what might happen as a result.

But they didn’t. What they did was to define the debate over their failures as a question about their models. Here are some examples: Noah Smith, finance professor at SUNY Stony Brook, David Andolfatto at the St. Louis Fed, and Chris Dillow, economist and writer. Here’s one from December 2010, an interview with the neoliberal Gary Becker.

The gist of the defense is that it’s not fair to ask that their models predict disasters like the Great Crash. Here’s David Andolfatto:

But seriously, the delivery of precise time-dated forecasts of events is a mug’s game. If this is your goal, then you probably can’t beat theory-free statistical forecasting techniques. But this is not what economics is about. The goal, instead, is to develop theories that can be used to organize our thinking about various aspects of the way an economy functions. Most of these theories are “partial” in nature, designed to address a specific set of phenomena (there is no “grand unifying theory” so many theories coexist). These theories can also be used to make conditional forecasts: IF a set of circumstances hold, THEN a number of events are likely to follow. The models based on these theories can be used as laboratories to test and measure the effect, and desirability, of alternative hypothetical policy interventions (something not possible with purely statistical forecasting models).

That’s a pretty good description of the behavior of economists as described by Fourcade et al. They set up models and then tell politicians, central banks, legislators, regulators and all the rest of us how to behave and what policies are best.

But it turns out that not only are their models not going to give “time-dated forecasts of events” like the Great Crash, there are no circumstances under which their models will predict a financial crash until it’s upon us. Consider this paper from the staff of the International Monetary Fund. The abstract tells us “[t]his paper presents the theoretical structure of MAPMOD, a new IMF model designed to study vulnerabilities associated with excessive credit expansions, and to support macroprudential policy analysis.” They explain

As has been emphasized in a number of recent theoretical and empirical studies by the world’s leading policy institutions (see for example Macroeconomic Assessment Group, 2010), the critical macroprudential policy tradeoff is between reducing the risks of very costly financial crises and minimizing the costs of macroprudential policies during normal times.

The obvious implication is that economists never thought of using their models to figure out any of the circumstances under which those models would predict a crash. Worse, they didn’t use their models to estimate the cost generated by crashes until several years after their favored policies wrecked the financial system.

In this paper by Del Negro et al. of the New York Fed, the authors describe tweaks they made to a standard DSGE model and the addition of data as late as Fall 2008. Here’s their conclusion:

We show that as soon as the financial stress jumps in the Fall of 2008, the model successfully predicts a sharp contraction in economic activity along with a modest and more protracted decline in inflation. Price changes are projected to remain in the neighborhood of one percent. This result contrasts with the commonly held belief that such models are bound to fail to capture the broad contours of the Great Recession and the near stability of inflation.

The paper tells us that if you put in the data about a crash, their modes can predict the outcome. Of course, no one thought of doing that in the 20th Century when these guys were busy tearing down the regulatory structure. This model wasn’t even created until after the Great Crash, and it still won’t predict a crash; the authors had to put the crash into the data.

The plain fact is that economists converged on a set of ideas, perhaps because of the way the field is organized, as explained by Fourcade et al. Those ideas furthered the personal and corporate interests of the rich and of Wall Street, and drew their enthusiastic support. To these economists and their self-interested supporters, economic efficiency was so important that it wasn’t useful or reasonable to evaluate the costs of a crash. The US and other countries adopted their favored macroprudential policies, like getting rid of New Deal financial regulation. The result was trillions of dollars of damage. And how much were the gains from purported economic efficiency? And precisely who reaped those gains? And who paid the price? No surprises here: the gains, whatever they were, went to the rich and their friends on Wall Street, and the price was paid by the rest of us.

The problem is not that models created by economists didn’t predict this Great Crash. The problem is that the models are not designed to predict crashes. And even worse, they weren’t set up to evaluate the costs of events like the Great Crash. That means it was in utter ignorance of the costs of failure that economists told policy makers it would be great to get rid of the entire New Deal regulatory structure.

That’s one reason why people don’t love economists.

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Greg Palast on Victory in Iraq

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By Greg Palast for Vice Magazine

If you thought it was “Blood for Oil”–you’re wrong.  It was far, far worse.

Because it was marked “confidential” on each page, the oil industry stooge couldn’t believe the US State Department had given me a complete copy of their secret plans for the oil fields of Iraq. Actually, the State Department had done no such thing. But my line of bullshit had been so well-practiced and the set-up on my mark had so thoroughly established my fake identity, that I almost began to believe my own lies.

I closed in. I said I wanted to make sure she and I were working from the same State Department draft. Could she tell me the official name, date and number of pages? She did.

Bingo! I’d just beaten the Military-Petroleum Complex in a lying contest, so I had a right to be stoked.

After phoning numbers from California to Kazakhstan to trick my mark, my next calls were to the State Department and Pentagon. Now that I had the specs on the scheme for Iraq’s oil – that State and Defense Department swore, in writing, did not exist – I told them I’d appreciate their handing over a copy (no expurgations, please) or there would be a very embarrassing story on BBC Newsnight.

Within days, our chief of investigations, Ms Badpenny, delivered to my shack  in the woods outside New York a 323-page, three-volume program for Iraq’s oil crafted by George Bush’s State Department and petroleum insiders meeting secretly in Houston, Texas.

I cracked open the pile of paper – and I was blown away.

Like most lefty journalists, I assumed that George Bush and Tony Blair invaded Iraq to buy up its oil fields, cheap and at gun-point, and cart off the oil. We thought we knew the neo-cons true casus belli: Blood for oil.

But the truth in the confidential Options for Iraqi Oil Industry was worse than “Blood for Oil”. Much, much worse.

The key was in the flow chart on page 15, Iraq Oil Regime Timeline & Scenario Analysis:

“…A single state-owned company …enhances a government’s relationship with OPEC.”

Let me explain why these words rocked my casbah.

I’d already had in my hands a 101-page document, another State Department secret scheme, first uncovered by Wall Street Journal reporter Neil King, that called for the privatization, the complete sell-off of every single government-owned asset and industry. And in case anyone missed the point, the sales would include every derrick, pipe and barrel of oil, or, as the document put it, “especially the oil”.

That plan was created by a gaggle of corporate lobbyists and neo-cons working for the Heritage Foundation. In 2004, the plan’s authenticity was confirmed by Washington power player Grover Norquist. (It’s hard to erase the ill memory of Grover excitedly waving around his soft little hands as he boasted about turning Iraq into a free-market Disneyland, recreating Chile in Mesopotamia, complete with the Pinochet-style dictatorship necessary to lock up the assets – while behind Norquist, Richard Nixon snarled at me from a gargantuan portrait.)

The neo-con idea was to break up and sell off Iraq’s oil fields, ramp up production, flood the world oil market – and thereby smash OPEC and with it, the political dominance of Saudi Arabia.

General Jay Garner also confirmed the plan to grab the oil. Indeed, Garner told me that Secretary of Defense Donald Rumsfeld fired him, when the General, who had lived in Iraq, complained the neo-con grab would set off a civil war. It did. Nevertheless, Rumsfeld replaced Garner with a new American viceroy, Paul Bremer, a partner in Henry Kissinger’s firm, to complete the corporate takeover of Iraq’s assets – “especially the oil”.

But that was not to be. While Bremer oversaw the wall-to-wall transfer of Iraqi industries to foreign corporations, he was stopped cold at the edge of the oil fields.

How? I knew there was only one man who could swat away the entire neo-con army: James Baker, former Secretary of State, Bush family consiglieri and most important, counsel to Exxon-Mobil Corporation and the House of Saud.

(One unwitting source was industry oil-trading maven Edward Morse of Lehman/Credit Suisse, who threatened to sue Harper’s Magazine for my quoting him. Morse denied I ever spoke with him. But when I played the tape from my hidden recorder, his memory cleared and he scampered away.)

Weirdly, I was uncovering that the US oil industry was using its full political mojo to prevent their being handed ownership of Iraq’s oil fields. That’s right: The oil companies did NOT want to own the oil fields – and they sure as hell did not want the oil. Just the opposite. They wanted to make sure there would be a limit on the amount of oil that would come out of Iraq.

There was no way in hell that Baker’s clients, from Exxon to Abdullah, were going to let a gaggle of neo-con freaks smash up Iraq’s oil industry, break OPEC production quotas, flood the market with six million barrels of Iraqi oil a day and thereby knock its price back down to $13 a barrel where it was in 1998.

Big Oil simply could not allow Iraq’s oil fields to be privatized and taken from state control. That would make it impossible to keep Iraq within OPEC (an avowed goal of the neo-cons) as the state could no longer limit production in accordance with the cartel’s quota system..

The problem with Saddam was not the threat that he’d stop the flow of oil – he was trying to sell more. The price of oil had been boosted 300 percent by sanctions and an embargo cutting Iraq’s sales to two million barrels a day from four. With Saddam gone, the only way to keep the damn oil in the ground was to leave it locked up inside the busted state oil company which would remain under OPEC (i.e. Saudi) quotas.

The James Baker Institute quickly and secretly started in on drafting the 323-page plan for the State Department. In May 2003, w ith authority granted from the top (i.e. Dick Cheney), ex-Shell Oil USA CEO Phil Carroll was rushed to Baghdad to take charge of Iraq’s oil. He told Bremer, “There will be no privatization of oil – END OF STATEMENT.” Carroll then passed off control of Iraq’s oil to Bob McKee of Halliburton, Cheney’s old oil-services company, who implemented the Baker “enhance OPEC” option anchored in state ownership.

Some oil could be released, mainly to China, through limited, but lucrative, “production sharing agreements”.

And that’s how George Bush won the war in Iraq. The invasion was not about “blood for oil”, but something far more sinister: blood for no oil. War to keep supply tight and send prices skyward.

Oil men, whether James Baker or George Bush or Dick Cheney, are not in the business of producing oil. They are in the business of producing profits.

And they’ve succeeded. Iraq, capable of producing six to 12 million barrels of oil a day, still exports well under its old OPEC quota of three million barrels.

As George Bush could proudly say to James Baker: Mission Accomplished!

*  *  *  *  *  *  *

Palast is the author of the New York Times bestsellers Billionaires & Ballot Bandits: How to Steal an Election in 9 Easy Steps, The Best Democracy Money Can Buy, Armed Madhouse and the highly acclaimed Vultures’ Picnic, named Book of the Year 2012 on BBC Newsnight Review.

Common Dreams on the Biggest Bank Fraud

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Big Bank ‘Crime of the Century’ Results in Guess What? No Jail Time for Anyone

Despite severity of offenses, ‘the government concluded that these crimes should be punished only through a financial penalty,’ says Public Citizen

Deutsche Bank headquarters in Frankfurt, Germany. (Photo: orkomedix/flickr/cc)

While corporate watchdogs hailed the record $2.5 billion settlement paid by Deutsche Bank to U.S. and U.K. authorities for its rate-rigging role in the massive LIBOR scandal, some noted that the fine—while large—suggests that some institutions are still considered “too big to jail.”

Authorities announced Thursday that Germany’s biggest bank would pay $2.5 billion in penalties, a record for cases involving interest rate fraud, which have already targeted banking behemoths like Barclays and UBS. Officials said the wrongdoing at Deutsche Bank lasted from 2005 to 2011 and touched employees in London, Frankfurt, New York, and Tokyo.

“Surprisingly, despite the severity of these offenses, the government concluded that these crimes should be punished only through a financial penalty.” —Bartlett Naylor, Public Citizen

The New York Times reports that Deutsche Bank “also agreed to accept a criminal guilty plea for the British subsidiary at the center of the case. It is the most significant banking unit to accept a criminal plea in the long-running investigation into the manipulation of the London interbank offered rate, or LIBOR.”

The LIBOR rate is an average of what banks charge for lending to each other. In addition, it sets a benchmark for interest rates for trillions of dollars’ worth of loans around the world—from mortgages and student loans to credit cards and complex derivatives.

The penalty follows a seven-year investigation into how some of the world’s largest financial institutions secretly conspired to rig benchmark interest rates to their benefit.

But not everyone agrees that the punishment announced Thursday fits what has been called “the crime of the century.”

“Law enforcers found repeated examples of manipulation as they investigated the bank,” said Bartlett Naylor, financial policy advocate in Public Citizen’s Congress Watch Division, on Thursday.

“For example, they discovered pervasive fraudulent practices where traders gave false information about rates at which they borrowed or loaned money with other banks,” he said. “That established false benchmarks on which other rates were based. That harms average Americans when they agree to mortgages. Law enforcers also found that Deutsche Bank withheld and even destroyed information about the investigation. Yet, surprisingly, despite the severity of these offenses, the government concluded that these crimes should be punished only through a financial penalty.”

Bartlett continued: “This settlement, which involves no jail time for any traders, seems out of sync with the problems identified. To make matters worse, many of the traders responsible for the frauds remain employed at Deutsche Bank. The DOJ claims that it may still prosecute individuals, and we hope it will pursue such work. To date, some traders at other firms such as Rabobank have been convicted, but no senior officers of any of the banks involved in the LIBOR case have faced charges.”

Indeed, as journalist Valentin Schmid points out at Epoch Times, “Insider trading in individual stocks seems minute in comparison, yet many people have been jailed for 10 years or more. Time criminals working for large international banks are given the same treatment.”

Writing for the Daily Mail, finance and economics columnist Alex Brummer wondered if the fines and criminal prosecutions, “coming so long after the event, may look like a case of shutting the door long after the horse has bolted.”

Brummer continued:

There is no doubt wrongdoing is still going on and has probably moved from the now tightly regulated authorised banking sector to hedge funds, shadow banking organisations and the like.

That is no excuse for cosy backdoor deals with bank sinners. Until the public has seen justice being done, in the shape of the bankers and traders carted off to face trials and retribution, the appalling transgressions of the banking sector will remain an open wound.

Not only should the bankers face long jail sentences, but the ill-gotten assets should be reclaimed by the state as would be the case were they common or garden criminals. The bankers are every bit as culpable of stealing from us all as the much more intriguing Hatton Garden gang.

Still, as the Times reports, “The case spotlighted the collusive elements of Wall Street trading desks, where rival banks have occasionally joined forces to manipulate financial benchmarks. It also foreshadows looming actions against banks suspected of teaming up to manipulate the price of foreign currencies, people briefed on the matter said, with the Justice Department planning to announce guilty pleas from at least four banks—Barclays, JPMorgan Chase, Citigroup and the Royal Bank of Scotland—by next month.”

Naked Capitalism on Union Murders

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U.S. Trade Rep Office Helpfully Explains that Only 28 Trade Unionists Were Murdered in Colombia Last Year

Posted on April 23, 2015 by

By David Dayen, a lapsed blogger. Follow him on Twitter @ddayen

I said on the last post on the TPP that there was one more thing I wanted to point out. It was ably covered by Michael McAuliff of The Huffington Post, and it reminds me of one of those famed Monty Python “letters to the editor,” written after a sketch portraying British seamen as cannibals.

Dear Sir, I am glad to hear that your studio audience disapproves of the last skit as strongly as I. As a naval officer I abhor the implication that the Royal Navy is a haven for cannibalism. It is well known that we have the problem relatively under control, and that it is the RAF who now suffer the largest casualties in this area. And what do you think the Argylls ate in Aden. Arabs? Yours etc. Captain B.J. Smethwick in a white wine sauce with shallots, mushrooms and garlic.

Here’s the context. Rich Trumka reacted an open hearing on Tuesday to the “labor standards” in prior trade agreements. “When you say, ‘Oh these are some standards, they’re better than no standards,’ we were told by by the [United States Trade Representative] general counsel that murdering a trade unionist doesn’t violate these standards, that perpetuating violence against a trade unionist doesn’t violate these agreements.” To back this up, Trumka cited a report that came out just this month in Colombia, where 105 trade unionists have been murdered since 2011, after the U.S. signed a free trade pact where improving labor standards was intended to be an important end goal.

Specifically, AFL-CIO deputy chief of staff Thea Lee said that twice, she was in meetings where killings of trade unionists in Guatemala and Honduras were brought up, and USTR said that would not be considered a violation of the labor rights chapter of the trade deal, because it was “a rule of law problem.”

So McAuliff checked with USTR about it. They said those Guatemala and Honduras cases are under CAFTA, a deal negotiated by George W. Bush with weak labor standards. So then USTR spokesman Andrew Bates was asked about Colombia, a free trade agreement Obama pushed for and signed, with a specific piece called the “Labor Action Plan” committing the country to a host of new laws (setting up a Labor Ministry, hiring inspectors, creating metrics and monitoring) to improve practices. Would continued murders of trade unionists count there?

Bates pointed to USTR data that shows killings of union organizers dropped from about 100 a year before the pact to about 28 killings a year now.

“There has been a significant decline in violence against union members and labor activists in Colombia over the time that we have been working with Colombia under the Action Plan,” Bates added. “We will continue to work with the Departments of Labor and State to make further progress in this regard.”

Emphasis mine, and you read that right, the United States is proud that, four years after they implemented a plan to improve human rights in Colombia, a trade unionist is murdered only every other week.

It probably goes without saying that the statistics they’re citing are bullshit, or at the very least free of context. So let me provide that. It’s based on this USTR report that compares two time periods. See if you can figure out the problem.

From 2001 to 2010, Colombian experts reported an average of close to 100 murders per year of union members. From 2011 to 2014, the number dropped to an average of 28.

Here’s some data from US Labor Education in the Americas Project (USLEAP). First of all, the majority of the killings came from armed right-wing paramilitaries (thanks, U.S. counter-insurgency groups!), and as those paramilitaries have demobilized and violence has subsided generally in the country, it stands to reason that violence against unionists would drop. USLEAP points this out, while adding that “most of the violence against trade unionists is a result of the victims’ normal union activities”:

During debates about the U.S.-Colombia Free Trade Agreement, pro-FTA advocates asserted that the decrease in trade-union murders from the 2002 is due to increased efforts to protect union members. A more likely explanation is that in late 2002, the Uribe government offered to negotiate a peace accord with the paramilitaries and the AUC (United Self-Defense Forces of Colombia, the largest paramilitary group). The AUC responded by announcing a unilateral ceasefire and paramilitary murders of trade unionists began to drop significantly for several years until holding relatively steady from 2007 on, with Colombia still leading the world in number of trade unionists murdered and while other forms of violence escalated.

The numbers were falling leading up to 2011:

The number of trade unionists murdered fell from the 2002 high of 192 to 72 in 2005 to 39 in 2007 but increased back to 51 in 2010 before dropping again in 2011 to 29.

2011 was the year the plan was inaugurated. There’s been basically no movement since then; violence actually went up from 2012 to 2013. Moreover, the attacks are directed at leaders, who are a) in short supply and b) likely to discourage other workers from joining up without having to, you know, kill them. And the only reason there looks to be a big drop is that 2002 figure. Basically, USTR reached back as far as they could to cite the highest number of murders in the pre-Labor Action Plan period.

Second, the workforce in Colombia has dropped from 15 percent unionization in 1993 to 4 percent today. So there are simply less unionists left to kill.

And third, 28 murders per year keeps Colombia as the most dangerous place to be a trade unionist on Earth. That’s after four years of work and all these supposedly vaunted efforts, which have done what could only be charitably described as “next to nothing.”

Because murders are not the only labor problem in Colombia. The report from the respected Escuela Nacional Sindical (ENS), or National Union School, is very detailed and describes the misery of organizing workers or wanting to collectively bargain in that country. You can read it yourself in Spanish. There were 1,933 threats and acts of overt violence over those four years, including 1,337 death threats. There were all kinds of other instances of retaliation against workers who try to organize, from illegal firings to non-renewal of contracts to incalculable incidents of daily harassment. Illegal firings appear to be a fact of life in Colombia, and discrimination against workers seeking their rights “has intensified,” per the report. Also there is “no evidence that fines are being collected” by the labor inspectors hired under the Labor Action Plan. ENS assigned a failing grade on virtually every measure.

As a side note, this is why you maybe don’t grant trade preferences to a country that casually murders people trying to organize workers based on a set of “standards,” however robust. Especially when your own State Department acknowledges that the country enforcing those standards maintains a corrupt judiciary and executive branch that “limits its ability to prosecute human rights violators.” Maybe if that country wants the benefits so bad, they can commit to it through outcomes rather than a promise of dubious quality, leading to standards not met, labor inspectors not collecting or imposing fines, and human beings assassinated in the streets. But, you know, a few less than before.

Applied to the TPP, where one country, Vietnam, has only one authorized union and it’s part of the Communist Party, and where violence has been depressingly normal, the question is will barely-there improvements be cited as “great progress,” and will murders of union members be considered a violation of the labor chapter? Of course, the agreement is a secret. Bates, the USTR spokesman, came back after HuffPost publication to insist that labor chapters do cover labor-related violence. AFL-CIO noted that if that was the case, why haven’t they done anything about the 105 dead unionists in Colombia over the last four years?

Naked Capitalism and the Death of Detroit

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The Continuing Depopulation of Detroit

Posted on April 20, 2015 by

Yves here. Detroit is getting the same treatment as Latvia and Ireland, and we are already seeing similar results in Greece, with most people who have good foreign job prospects taking a hike. But while Latvia and Ireland stabilized at much lower levels of output and have started to recover from their, Detroit, like Greece, looks like a failed state. And this is perversely seen as acceptable in America.

By Laura Gottesdiener, a freelance journalist based in New York City. The author of A Dream Foreclosed: Black America and the Fight for a Place to Call Home, her writing has appeared in Mother Jones, Al Jazeera, GuernicaPlayboy, RollingStone.comand frequently at TomDispatch. Originally published at TomDispatch

Unlike so many industrial innovations, the revolving door was not developed in Detroit. It took its first spin in Philadelphia in 1888, the brainchild of Theophilus Van Kannel, the soon-to-be founder of the Van Kannel Revolving Door Company. Its purpose was twofold: to better insulate buildings from the cold and to allow greater numbers of people easier entry at any given time.

On March 31st at the Wayne Country Treasurer’s Office, that Victorian-era invention was accomplishing neither objective. Then again, no door in the history of architecture — rotating or otherwise — could have accommodated the latest perversity Detroit officials were inflicting on city residents: the potential eviction of tens of thousands, possibly as many as 100,000 people, all at precisely the same time.

Little wonder that it seemed as if everyone was getting stuck in the rotating doors of that Wayne County office building on the last day residents could pay their past-due property taxes or enter a payment plan to do so. Those who didn’t, the city warned, would lose their homes to tax foreclosure, the process by which a local government repossesses a house because of unpaid property taxes.

“Oh, my lord,” exclaimed one bundled-up woman when she first spotted the river of people, their documents in envelopes and folders of every sort, pouring out of cars, hunched over walkers, driving electric scooters, being pushed in wheelchairs, or simply attempting to jam their way on foot into the building. The afternoon was gray and unseasonably cold. The following day, in the middle of a snowless meadow in the Sierra Nevada Mountains, the governor of California would announce the state’s first-ever water restrictions as a result of an unprecedented, climate-change-influenced drought. Here in Michigan, city residents were facing another type of man-made disaster: possibly the largest single tax foreclosure in American history.

“It’s the last day to pay,” one woman heading toward the rotating glass chamber yelled to a pedestrian who had slowed to watch the commotion. Inside, a Wayne County Sheriff’s Department officer-turned-traffic-controller boomed instructions to a snaking line of people. “When you get to the eighth floor, you will get a number. Keep that number! Then go to the fifth floor.’”

The eighth floor, however, turned out to be little more than another human traffic jam, a holding space for thousands of anxious homeowners who faced hours of waiting before reaching the desk of some overworked city representative down on five. Yet, as a post office delivery worker gaping at the fiasco told me, this was less hectic than it had been a only few days earlier, when the treasurer’s office had rented out the Second Baptist Church across the street. There, people waited for the opportunity to enter the revolving doors to take the elevator to the eighth floor before heading for the fifth floor to… you get the gist.

In fact, the whole week had been a god-awful mess. A day earlier, rumors had it, a woman had passed out in the elevator between the eighth and fifth floors en route to “making arrangements,” the euphemism for getting on a payment plan that might save your home.

“What happens if you can’t pay?” a slender man asked me as we dodged a new wave of people surging through the glass cylinder.

“Then they sell your house at auction,” I replied.

“For real?” he asked, amazed.

He was waiting for his sister to make those “arrangements.” He didn’t have to worry about all this, he explained, because ever since he’d lost his job, which had provided him with housing, he’d been staying in motels. The Victory Inn over in Dearborn and the Viking across from the Motor City casino were both reasonable enough places, he assured me, but the Royal Inn on Eight Mile was the cheapest of all — $35 a night plus a $10 key deposit. That establishment’s single enigmatic Yelp review read: “This is definitely someplace you want to go where totally normal things happen.”

A Blueprint for Civic Hell

Detroit was once famous for creating the largest, most spectacular versions of whatever its residents set their minds to, be they assembly lines, record labels, or revolutionary workers’ associations. The city is often credited with inventing and mass-producing the twentieth century, while its workers simultaneously took the lead in revolting against the injustices of the era. Its factories put the world on wheels and labor laws on the books. Its workers and thinkers sparked and fanned a number of this country’s most influential resistance movements.

Detroit: every article about you should include a love letter, a thank-you note, a history lesson, for without you…

Few care to admit, however, that the city that was the arsenal of the twentieth century may also provide the blueprint for a more precarious era. Which brings us to those massive tax foreclosures of the present moment. Just over 60,000 homes, about half of them occupied, are slated for the auction block. As many as 100,000 of the city’s residents — about a seventh of the total number — are now on track for what many are calling an eviction “conveyor belt.”

Such an image easily springs to mind in this city whose auto factories were famous for their oh-so-efficient shop floors.  These days, sadly enough, it’s all-too-easy to imagine a twenty-first-century version of a classic Detroit assembly line dedicated to processing its own residents, workers, and retirees — all the ones it claims to no longer need, all those too old, too young, too ill-trained, too inefficient for a post-bankruptcy city. These undesirables, it seems, are to be turned into so many economic refugees on a conveyor belt to nowhere. While everyone loves to hear about legendary industrial Detroit, no one wants to hear about its de-industrialized progeny, and especially not about foreclosures — not again.

Mike Shane, a Detroit resident and organizer with the anti-foreclosure group Moratorium Now!, knows this better than anyone.  “We call the press, and they say, give us anything but foreclosures,” he tells me ruefully.

Connecting the Dots

On March 31st, some people did manage to make the necessary “arrangements” to save their homes. That included one woman with a Hillary Clinton-style hairdo who had lived on Winthrop Street since the 1960s, but like so many in the working-class sections of the city had fallen behind on her taxes. “They asked, ‘Why didn’t you pay your property taxes?’” she explained as she rested on one of the first-floor benches. “And I said, ‘Because I had a heart attack.’”

Last year, she recalled, a neighbor’s home fell into tax foreclosure. A man who lived on the same block noticed the familiar address on the auction list. He bought it back for her, she tells me. “He said to the woman, ‘Pay me back when you can, if you can.’”

Detroit is full of similar stories, filled with a stubborn sense of hope. But there are so many more addresses on the foreclosure list than angelic neighbors. By early afternoon that March day, the building still bursting at its seams with thousands of people, the county office conceded its inability to cope and extended the foreclosure deadline another six weeks.

“I don’t know if it’s because they’re so damn overwhelmed,” wondered Mary Crenshaw, a sunken-eyed woman who was relieved by the announcement, as it gave her time to wait for a lump-sum retirement payout from British Airways, her former employer. She had come to save her family home in Highland Park, a small city enclosed by Detroit whose once occupied homes sported oak floors and beveled glass windows. Now, more than half of them are empty, lawns overgrown, windows boarded up, the former homeowners having already ridden earlier foreclosure conveyor belts out of the neighborhood.

After all, this current tax foreclosure crisis comes right on the heels of the city’s last great displacement: the 2008 housing crash, which descended on Detroit like a tidal wave, sweeping nearly a quarter of a million people out of the city and leaving in its wake tens of thousands of vacant properties.

The fact that the city is now threatening to evict a seventh of its remaining inhabitants in a single year, all because of unpaid property taxes, seems like an absurd proposition until you begin to connect the dots: the mass water shutoffs, the shuttering of dozens of public schools, the neglect of fire hydrants in particular neighborhoods, and now this deluge of foreclosures.

Looking at the pattern that emerges, you can see that Detroit is not only a city in the midst of a “revival,” as enterprising investors and the national media often claim. It’s true that redevelopment is taking place in some neighborhoods, and city officials do claim that big changes are coming, often illustrating them with colorful documents that look like they were formatted by a team of graphic design wizards from the back of San Francisco’s Google Bus.

But that’s just one part of the Detroit story. For the city’s low-income, black, and elderly residents, Detroit isn’t a city on the rise, but one under siege.

An Emergency That Never Ends

On a blustery Saturday afternoon just two weeks before the day of the foreclosure deadline, an Emergency People’s Assembly Against Tax Foreclosures was held at Old Christ Church to address this siege. It was one of a set of “people’s assemblies” called to deal with the latest crisis in a city where, in recent years, crises have never been lacking.  Before the tax foreclosure assemblies there had been the Emergency People’s Assemblies Against Bank Foreclosures, the Emergency Pack-The-Court Actions to Defend Homeowners from Eviction, the Emergency Town Halls to Defend City Pensions & Services, the Emergency Meetings Against the Emergency Financial Manager, and so on.

“Emergency” had, in other words, been the word of the moment for years and years. That invasive sense of never-ending urgency could similarly be seen in the literature of such groups — in the words always screamingly in capital letters, in the typographical equivalents of exclamation points. When I’d first heard about the most recent event, I was in a meeting with Mike Shane and I said to him, “Over the three years I’ve been visiting Detroit, I’ve never arrived at a time you weren’t holding an Emergency People’s Assembly the following Saturday.”

Shane laughed on cue. “Well, yes, that’s right,” he replied. “We’ve been at this since about 2007.”

The Old Christ Church that day was shiveringly cold. From the pew behind me came the sound of rustling coats as two children squirmed. Beside them sat their grandmother and grandfather, Lula and Daryl Burke, who had come to describe how their home had been sold at a tax foreclosure auction last year. With the help of the grassroots community group Detroit Eviction Defense, Lula explained, the Burkes had convinced the home’s buyer to sell it back to the family.

A little bit of gumption on her part helped, too.  As she recalled explaining to the investor who had bought her home at auction, he could try to sell the house to someone else. But before he did that, she planned to strip every last thing out of it. “It won’t have a furnace, a toilet, doors, windows, all the way down to the light switch,” she warned him.

On the wall behind the altar three white-robed angels were suspended in mid-frolic, oblivious to the current condition of their once regal city. In front of them stood anti-foreclosure lawyer Jerry Goldberg.  “Are we going to allow 62,000 more foreclosures this year?” he thundered, his face growing redder. I later learned that, years ago, Goldberg had sold peanuts down at the old Tigers stadium (now a bulldozed parking lot) and his unrelenting voice had apparently made him very good at it.

“No!” he responded emphatically to his own question. “Are we going to allow them to make our neighborhoods into a bunch of ponds?”

Perhaps I should have led with this information: in some of the city’s latest flashy Adobe InDesign-ed planning documents, certain of Detroit’s more down-and-out neighborhoods have been transformed into ponds. Or, to be more precise, they have been turned into “water retention basins” that planners believe will offer the Detroit of the future superior management of storm water runoff.

Minutes earlier, Alice Jennings, one of the most celebrated social justice lawyers in the city, had explained that, according to Detroit’s planning documents, those retention basins are slated to be built on top of now populated neighborhoods. In other words, ponds are also what we’re talking about when we talk about Detroit’s tax foreclosures.

“No!” Goldberg shouted yet again. “We need to stop these foreclosures with a moratorium, a halt! The idea that this can’t be done is hogwash! The Supreme Court held in 1934 that, during a period of emergency, the people’s need to survive supersedes any financial contract! The governor has a responsibility to declare a state of emergency!”

His sentences all ended in exclamation points, as his torrent of words resounded off the church’s high ceilings. In an upside-down universe, Goldberg would have made a skilled auctioneer rather than a man desperate to save all those homes and their inhabitants.

To be clear, Goldberg isn’t suggesting another of the emergency proclamations that Michigan’s governors have used to impose unelected emergency managers on school districts and municipalities from Detroit to Muskegon Heights. Rather, he’s calling for the governor to declare a state of emergency under Michigan law 10.31, which would allow him to “promulgate reasonable orders, rules, and regulations as he or she considers necessary to protect life and property” — including, of course, halting the tax foreclosures. In 1933, similar actions allowed Michigan’s legislature to pass the Mortgage Moratorium Act, later upheld by the Supreme Court, mandating a five-year halt on property foreclosures.

Winning that moratorium took, among other things, a well-organized national Communist Party, hundreds of worker councils, thousands of eviction blockades, and — I’d be willing to bet, although I don’t have the archival evidence — an incredible number of “emergency meetings.”

Woe to Those Who Plan Iniquities

By late afternoon, Goldberg was resting his vocal chords and about a dozen people from the audience were lining up to take the microphone, including Cheryl West, a tiny, gray-haired woman clutching a thick Bible to her stomach. When it was her turn to speak, she began: “I lost my home of 60 years.” There was no trace of bitterness in her voice, just a touch of awe and disbelief. “It’s been quite a journey. Quite a journey.”

“Let me give you a little background,” she continued. “My entire family is now deceased. My father was the first African American to teach music in Detroit, possibly in the entire state of Michigan. He worked for the school system. He lived in that very house. He lived there through the 1967 riots and we were right at the hub of where the riots started. My sister was a journalist, and during the riots she was one of the people getting the story out to the media, because she was working for UPI at the time. My sister was on the front page of the London Times, that’s how far her news traveled of the city burning down around us.”

Then, after a few more background comments on her life, she opened up her bible. “Since we’re in a church,” she said by way of explanation and began to read from the Book of Micah. She skipped its beginning.

“Woe to those who plan iniquity,
to those who plot evil on their beds!
At morning’s light they carry it out
because it is in their power to do it.
They covet fields and seize them,
and houses, and take them.
They defraud people of their homes,
they rob them of their inheritance…”

Undoubtedly, she assumed that everyone in the church was already familiar with such “iniquities” and the biblical lines that went with them. After all, in the previous few years, they had lived through the 2008 foreclosure crisis, the imposition of an emergency manager on their city, mass water shutoffs, and significant pension cuts for retired city workers, not to speak of all the evils that had come before.

Instead, she read the verses she liked best, the ones that, as she said, God led her to just about the time she lost her home.

“You strip off the rich robe
from those who pass by without a care,
like men returning from battle.
You drive the women of my people
from their pleasant homes.
You take away my blessing
from their children forever.”

She paused, then suddenly, in a surprisingly powerful voice, yelled the next line: “Get up! Go away!”

The church reverberated with her admonishment. And then, with a smile at her own audacity, she added, “The end.”

Shortly afterwards, we filed out of the church. And yet it was not the end. It never is.

There is now, for instance, that new deadline — May 12th — for residents to get on a payment plan to avoid losing their homes to tax foreclosure. That offers more time for people to navigate the revolving doors of the Wayne County Treasurer’s Office, head up to the eighth floor, then down to the fifth, all in an effort to fight their way off of the city’s conveyor belt to nowhere. And, of course, it gives residents more time to host emergency people’s assemblies aimed at throwing a monkey wrench  — once and for all — into this assembly line of eviction and displacement.

Even if that happened, however, these gatherings, called for in all capital letters and exclamation points, undoubtedly wouldn’t end. They’ve become as much a fixture of this city as the women and men who organize them, the churches that host them, and the neighborhoods whose survival may depend on them. After all, the worst injustice would not be whatever provokes the next emergency people’s assembly, but the possibility of a future Detroit without such gatherings, one in which all these meetings and people are gone, all the stories have been suppressed. Imagine, then, the worst iniquity of all, the one so many are fighting against: a Detroit where once inhabited streets have been submerged in the silence of water retention ponds, where longtime residents have been scattered and displaced by the foreclosure conveyor belt and no one left in the city knows the history of what’s been drowned.

Naked Capitalism: Elizabeth Warren on the Attack

Elizabeth Warren Throws Down Gauntlet, Calls for Genuine Financial Reform

Posted on April 17, 2015 by

At the Levy Conference, Elizabeth Warren launched a new campaign for tough-minded, effective financial regulation. This ought to be a straightforward call for restoring banking to its traditional role of facilitating real economy activity. Instead, in this era of “cream for the banks, crumbs for everyone else,” common-sense reforms to make banks deal fairly with customers and remove their outsized subsidies will no doubt be depicted by pampered financiers as an unfair plot to target a successful industry. But as we’ve stressed, Big Finance gets more government support than any line of business, even military contractors. They are utilities and should be regulated as such. Thus even Warren’s bold call to action falls short of the degree to which the financial service industry need to be curbed.

Below is the video of her speech; I’ve also embedded the text at the end of the post.

From Adam Levitin at Credit Slips:

This speech is a bigger deal than Senator Warren’s Antonio Weiss speech or her famous Citibank speech. This speech is a blueprint for Dodd-Frank 2.0.  It lays out a detailed vision of the challenges for reform work going forward:

  • break up the big banks;
  • a 21st Century Glass-Steagal Act that promotes narrow banking;
  • a targeted financial transactions tax to reduce unnecessary volatility from excessive arbitrage;
  • elimination of the tax system’s preference for debt over equity financing, a limit on the Fed’s emergency lending authority;
  • a simplification of the financial regulatory system (does this as presaging a reduction in the number of bank regulators? The SEC should certainly feel the heat from this speech…);
  • reforms aimed at the various types of short-term debt that are the hallmark of the shadow banking sector (money market mutual funds, repo).

There are three remarkable things about this speech.  First, what is truly groundbreaking is that Senator Warren recognizes that the problems in the financial regulatory space are not just technocratic ones but political, and that technocratic fixes will never work until and unless the political structure of financial regulation is reformed.  Senator Warren’s speech says exactly what needs to be said:  the power of large financial institutions not only threatens our economy, it threatens our democracy. Senator Warren has picked up the mantle of Teddy Roosevelt.

Second, as a political matter this speech announces a reform offensive. Since the high-water mark of Dodd-Frank’s passage in 2010 we have seen a steady push for deregulation. For Senator Warren to take the offensive here, particularly when her party is in the minority in both houses of Congress shows real moxie. That this speech is credible in such political circumstances is also a testiment to its substantive strength.

Third, this speech presents the only vision for financial reform in the policy space. (OK, I guess the “deregulate ‘em all” approach is a vision of sorts, but come on…) There isn’t a competing right or left alternative out there.  No one else has a cohesive reform platform.  I think that makes Senator Warren’s speech all the more important because this is the speech that will shape the policy field going forward into 2016.  This is the yardstick against which all presidential candidates, Democratic and Republican will be measured. It will be interesting to see which ones endorse what parts of Warren’s vision and how enthusiastically. Silence will be particularly telling, as it is a vote for the dysfunctional status quo that leaves the Too-Big-To-Fail banks intact and growing.

And from Simon Johnson:

Senator Warren puts forward two main sets of proposals. The first is to more strongly discourage the deception of customers…

The second proposal is to end the greatest cheat of all – the implicit subsidies received by the largest financial institutions, structured so as to encourage excessive and irresponsible risk-taking. These consequences of these subsidies have already caused massive macroeconomic damage – this is why our crisis in 2008-09 was so severe and the recovery so slow. Yet we have made painfully little progress towards really ending the problems associated with some very large financial firms – and their debts – being viewed by markets and policymakers as being too big to fail.

Warren also hits important targets forcefully in her speech. She attacks the Department of Justice for its failure to take cases against big financial institutions to trial or to pursue their executives and managers who engage in fraud. She singles out the SEC as an even worse actor. She criticizes both agencies for entering into “cost of doing business” settlements as opposed to calling for (at a minimum) full disgorgement of their ill-gotten gains (the problem here, of course, is that both agencies tend to pursue only isolated examples of bad conduct, such as the SEC’s settlement with Goldman on only “Abacus” CDO out of a program of 25).

I hope readers will support Warren’s efforts. Her campaign will put a spotlight on the fealty of both parties, but particularly Hillary Clinton, to major financial players, and will expose inconsistencies between their messaging and their actual loyalties. It also serves to undermine the banking industry’s pretense that the crisis is over and nothing more needs to be done, when the Fed remains backed in a negative real interest rate corner that is a large, ongoing subsidy to trading and speculation, the very sort of activities that have been identified as negative from the perspective of economic growth.

But while I endorse Warren’s initiative, I feel compelled to highlight why it falls short. The notion that removing subsidies will end the “too big to fail” problem is misguided. Notice how Warren and her backers maintain that they are trying to make markets work better. Yet one big problem with our current system is that so much financial services activity has been moved off bank balance sheets into financial markets. During the crisis, the authorities didn’t bail out firms because they were too big to fail; they bailed them out because they were critical players in markets deemed too big to fail. Virtually no one would have deemed Bear Stearns to be systemically important prior to its rescue. So why was it salvaged? It was a big player in credit default swaps, and also a prime broker, meaning a large lender to hedge funds. Similarly, why did Federal and state banking regulators paper over the mess of mortgage chain of title, refuse to fix servicing (none of those firms remotely approached TBTF size), punt on securitization reform, and enter into an appalling “get out of liability almost free” Federal/49 state mortgage settlement? Because the officialdom deemed the mortgage backed securities market to be too big to fail.

The underlying problem is that in the US and far too many economies around the world, growth in private debt, particularly household debt, served to shore up stagnant worker incomes. But high household debt levels are actually a dampener over the longer term to growth. Yet the officialdom sees consumer relevering as positive and resisted the sort of widespread debt reduction and restructuring that could have set the financial services industry and consumers on a sounder footing.

As long as we have a market-based credit system, those markets, and the critical actors in those markets, will continue to be too big too fail. Recall that the comparatively modestly sized Bank of New York Mellon is also a “too big to fail” player by virtue of its role in clearing and tri-party repo. And rather than fix mortgage securitization, that market has instead been put on government life support via the fact that over 90% of residential mortgage issuance is now guaranteed by the Federal government.

So don’t kid yourself that removal of subsidies will do the trick. The officialdom will ride into the rescue if markets or institutions deemed to be essential start looking wobbly. Removal and reduction of subsidies needs to be accompanied by prohibition, particularly of low societal value/high risk activities like many over-the-counter derivatives. Regulators need to reject complexity and opacity. If they don’t understand a product and its risks thoroughly, they should not allow it to be offered. And that prohibition has to extend to lending or even taking anything more than trivial counterparty risk to firms that create or trade those products.

But this is a case where having Warren put serious financial reform back on the agenda opens up the topic of what is wrong with our current financial system up again for badly needed scrutiny. And instilling more spine in regulators would be a big step forward. So I hope you’ll press your Senators and Representative to join Warren’s campaign. It’s time to start taking ground back from an oversized, papered, and too often predatory industry.

…And Liberty for All

Liberty

 

This post from Media Matters on the right-wing group behind the “religious freedom” laws leads off like this:

The current push for expanded state “religious freedom” laws is thanks in large part to the work of the Alliance Defending Freedom (ADF), an extreme right-wing legal group that’s worked to criminalize gay sex across the globe.

A $39 million non-profit Christian legal group, ADF bills itself as an organization that works for the “right of people to freely live out their faith.” The group has laid the groundwork for “religious freedom” laws across the country, using their legal work to peddle the myth that Christians are under attack by the “homosexual agenda.” But behind this religious freedom rhetoric, the group promotes an extreme anti-LGBT agenda, namely working internationally to criminalize gay sex.

As the piece notes, the group’s agenda extends far beyond these “freedom” laws:

As the “800-pound gorilla of the Christian right,” the group has become a fixture on Fox News in stories about “Christian persecution,” where the group is perhaps best known for defending anti-gay business owners who refuse to serve gay customers. But ADF’s agenda is far more extreme than defending discriminatory florists and bakers in court.

While the group prefers to talk about its “religious liberty” work when in the media spotlight, ADF also actively works internationally to promote and defend laws that criminalize gay sex. ADF’s formal support for anti-sodomy legislation dates to at least 2003, before the Supreme Court made its landmark decision in Lawrence v. Texas. ADF, which was at the time still known as the Alliance Defense Fund, filed an amicus brief in the case, defending state laws criminalizing gay sex. In its brief, ADF spent nearly 30 pages arguing that gay sex is unhealthy, harmful, and a public health risk.

Jim Hightower on Looting the Middle Class

cartoon_200403_0

The fountain-pen economy

Jim Hightower

Even the word “greed” is not negative enough to characterize the all-out assault on workers by today’s corporate elite.

From offshoring jobs to busting unions, from slashing wages to looting pensions, corporate take-aways from America’s used-to-be middle-class workforce certainly are driven by the avarice of top executives and wealthy investors. Plainly put, the more they can take from workers, the more they can put in their own pockets (or, most likely, in their offshore bank accounts). It adds up to a massive redistribution of wealth from the many to the few.

In addition to greedy, though, these people are rank thieves. As Woody Guthrie succinctly put it: “Some’ll rob you with a six-gun, some with a fountain pen.” We’re now in a rapacious fountain-pen economy. Since the Wall Street crash of 2008 (itself a product of grand theft by financial elites), the productivity and creativity of all Americans have regenerated every bit of the wealth that was frittered away by bankers, and we created trillions of dollars in new income. What a phenomenal national achievement that is, produced in an astonishingly short time by the shared effort of our people!

But strenuous effort is all we shared. The richest one-percent of Americans have grabbed 91 percent of the gains in income, and the even-richer one-tenth-of-one-percent sucked up 22 percent of the new wealth. Thus, the vast majority of us have still not recovered the wealth we lost (homes, cars, savings, etc.) and 99 percent of us are getting less income today than we were before Wall Street crashed our economy seven years ago.

It’s time we robees started talking plainly about what’s going on. The rich are not getting richer because they’re more enterprising than everyone else, harder-working, or of strong moral character. They’re thieves. They’re getting richer by stealing from you.

“US wealth inequality – top 0.1% worth as much as the bottom 90%,” www.theguardian.com, November 13, 2014.

“Top 1 percent capture most of wealth gains,” www.timesfreepress.com, January 27, 2015.

“The 1 Percent Have Gotten All The Income Gains From The Recovery, www.thinkprogress.org, January 28, 2015.

*  *  *  *

Scurrilous corporate thieves are stealing workers’ comp

They say there’s honor among thieves, but I say: That depends on the thieves.

Your common street thief, yes – but not those princely CEOs of corporate larceny. The elites in the top suites are pickpockets, swindlers, thugs and scoundrels, routinely committing mass economic violence against America’s working families to further enrich and empower themselves.

But now comes a cabal of about two-dozen corporate chieftains pushing a vicious new campaign of physical violence against workers. The anti-labor bully, Walmart, is among the leaders, but so are such prestigious chains as Macy’s and Nordstrom, along with Lowe’s, Kohl’s, and Safeway. Their goal is to gut our nation’s workers compensation program, freeing corporate giants to injure or even kill employees in the workplace without having to pay for the lost wages, medical care, or burial of those harmed.

Workers comp insurance is a social contract between injured employees, who give up the right to sue their companies for negligence, and employers, who pay for insurance to cover a basic level of medical benefits and wages for those harmed. Administered by state governments, benefits vary, and they usually fall far short of meeting the full needs of the injured people, but the program has at least provided a measure of help to assuage the suffering of millions.

But even that’s too much for these avaricious, multibillion-dollar corporations. Why pay for insuring employees when it’s much cheaper just to buy state legislators who’re willing to privatize workers’ comp? This lets corporations write their own rules of compensation to slash benefits, cut safety costs – and earn thieving CEOs bigger bonuses.

Yes, this shifty move is a scurrilous crime, but it’s a crime that pays richly. And the money can fill the hole in their souls where their honor used to be.

“Walmart, Lowe’s, Safeway, and Nordstrom Are Bankrolling a Nationwide Campaign to Gut Workers’ Comp,” www.motherjones.com, March 26, 2015.

A Brief History of Workers’ Compensation,” www.ncbi.nih.gov, 1999.

Naked Capitalism: Drugs and FDA Corruption

FDA_Approved_600

“God Damn the Pusher Man” – Especially when Enabled by the FDA Revolving Door

Posted on April 14, 2015 by

Lambert here: Here, as generally, “the revolving door” seems a barely adequate metaphor for the pervasiveness of corruption involved; after all, the doors constantly revolve in a house of ill-fame, and it’s the nature of the house itself, not the wear and tear on the hinges of its doors, that is at issue.

By Roy Poses, MD, Clinical Associate Professor of Medicine at Brown University, and the President of FIRM – the Foundation for Integrity and Responsibility in Medicine. Cross posted from the Health Care Renewal website

Who is watching the watchers?  A story this week involving “speed”-like drugs added to “dietary supplements” suggests how far the once respected US Food and Drug Administration has fallen.

An Amphetamine-Like Drug Spiking “Nutritional Supplements”

The story began with a paper by Cohen and colleagues published a relatively obscure medical journal, and then picked up by the news media.(1)  The main points of the article were:

BMPEA (beta-methylphenylethylamine) is a compound first synthesized in the 1930s as a “potential replacement” for amphetamines.  Animal tests revealed amphetamine-like properties.  The compound was never tested on humans, and never marketed.

But,

BMPEA remained known only as a research chemical until early 2013 when the FDA identified BMPEA in multiple supplements labelled as containing ‘Acacia rigidula’, even though the stimulant has never been identified or extracted from Acacia rigidula, a shrub native to Texas.

However,

More than two years after the FDA’s discovery, the FDA has yet to warn consumers about the presence of the amphetamine isomer in supplements.

So Cohen et al undertook to identify “nutritional supplements” said to contain acacia rigidula and test them for BMPEA.  They found 21 such supplements, all of which tested positive. The authors then recommended,

that supplement manufacturers immediately recall all supplements containing BMPEA, and that the FDA use all its enforcement powers to eliminate BMPEA as an ingredient in dietary supplements. Consumers should be advised to avoid all supplements labelled as containing Acacia rigidula. Physicians should remain alert to the possibility that patients may be inadvertently exposed to synthetic stimulants when consuming weight loss and sports supplements.

Note that while the power of the FDA to regulate “nutritional supplements” is limited by a 1994 law, Cohen and colleagues wrote that it

is tasked with identifying and removing mislabelled, adulterated, and dangerous dietary supplements from the marketplace.

Since BMPEA is apparently not found in nature, and was not sold prior to 1994, putting BMPEA in a “dietary supplement” appears to be adulteration.

The Risks of BMPEA in Nutritional Supplements

The study was then picked up by the media.  In the Los Angeles Times, Pieter Cohen, the lead author of the journal article,

said that while the effects of BMPEA are unknown, the compound is potentially dangerous. He said the FDA’s failure to act is ‘completely inexcusable.’

Furthermore, in a CBS report,

BMPEA has not been tested in humans, but led to increased blood pressure in cats and dogs.

‘These are things that are signals that in humans will later turn into heart attacks, strokes and maybe even sudden death,’ Cohen said.

The point is that while it has never been tested fully on humans, there is every reason to suspect that BMPEA acts very similarly to amphetamine, colloquially called “speed.”  Amphetamines, as we discussed here, have dangerous side effects, including severe blood pressure elevations, and increased risks of stroke, myocardial infarction (heart attack), and other cardiac events.  The drugs also have a high potential for abuse.

Why Did the FDA Do Nothing? 

Despite the likely riskiness of BMPEA, the FDA did nothing when it found it in numerous dietary supplements in 2013, and has not indicated that it will do anything now.  According to the LA Times,

FDA spokeswoman Juli Putnam acknowledged that the agency published research on the occurrence of BMPEA in Acacia rigidula supplements in 2013.

‘While our review of the available information on products containing BMPEA does not identify a specific safety concern at this time, the FDA will consider taking regulatory action, as appropriate, to protect consumers,’ she said.

In a Consumers Report item, Dr Cohen responded to that,

‘It’s mind boggling,’ said Pieter Cohen, M.D., the Harvard physician who is the lead author of the new study, published online in the journal Drug Testing and Analysis. ‘The companies think they have complete impunity. They assume the FDA will do nothing about it. And they’re right.’

A post in the NY Times Well blog reiterated,

Under federal law, dietary supplements — with some exceptions — can contain only ingredients that are part of the food supply or that were already on the market before 1994. Dr. Cohen said that BMPEA has never been sold as a food or supplement, and as a result any product that contains it is considered adulterated, which would give the F.D.A. the authority to send warning letters to companies that add it to their supplements.

Yet while the FDA had authority to do something, it did nothing.

Was the Revolving Door the Reason?

Back in 2014, we posted about two transitions through the revolving door by the FDA official in charge of the regulation of nutritional supplements.  We reproduce the relevant section of the post below:

This round trip through the door was noted rather obliquely in a New York Times article in late April, 2014, focused on how slowly the FDA has reacted to apparently dangerous “dietary supplements,”

Before joining the F.D.A. in 2011, Dr. [Daniel] Fabricant was a top executive at an industry trade group, the Natural Products Association.

The article had previously identified Dr Fabricant as

the director of the division of dietary supplement programs in the agency’s Center for Food Safety and Applied Nutrition.

But,

The F.D.A. recently announced that Dr. Fabricant is leaving the agency this month to return to the trade group as its chief executive.

While the NY Times article thus mentioned as an aside that a government official with major responsibility for regulating dietary supplements had these relationships with the dietary supplement industry, it did not then question whether that relationship had anything to do with slow responses by the FDA to reports of toxic dietary supplements.

In 2014, the Times drew no conclusions about Mr Fabricant’s career trajectory.  However, this time

But public health experts contend that the F.D.A.’s reluctance to act in this case is symptomatic of a broader problem. The agency is not effectively policing the $33 billion-a-year supplements industry in part because top agency regulators themselves come from the industry and have conflicts of interest, they say. In recent years, two of the agency’s top officials overseeing supplements — including one currently on the job — were former leaders of the largest supplement industry trade and lobbying group.

Daniel Fabricant, who ran the agency’s division of dietary supplement programs from 2011 to 2014, had been a senior executive at that trade group, the Natural Products Association, which has spent millions of dollars lobbying to block new laws that would hold supplement makers to stricter standards. He left the F.D.A. last year and returned to the association as its chief executive. His current replacement at the F.D.A.’s supplement division also comes from the trade group.

‘To have former officials in the supplement industry become the chief regulators of that industry at the F.D.A. is like the fox guarding the hen house,’ said Michael F. Jacobson, the executive director of the Center for Science in the Public Interest, a consumer advocacy group.

Also, the new Well blog post noted

Shortly before Dr. Fabricant left the F.D.A. in 2014 to return to the association, the F.D.A. hired another official from the group, Cara Welch. She is now the acting director of the agency’s supplement division. Dr. Cohen, who is also an internist at the Cambridge Health Alliance, said he repeatedly wrote to Dr. Welch asking what the agency was going to do about BMPEA, and that she did not respond.

Dr. Welch declined repeated requests for interviews. In a statement, Juli Putnam, an F.D.A. spokeswoman, said that the agency ‘has found that hiring experienced leaders with diverse backgrounds in public health, industry, academia, and science enriches the professional environment and leads to the best health policy outcomes for the American public.’

Before joining the F.D.A., Dr. Welch was the vice president of scientific and regulatory affairs at the Natural Products Association, where she was a staunch defender of the supplement industry. When JAMA, a leading medical journal, raised concerns in a 2011 editorial that the federal law allowed the supplements industry to police itself, Dr. Welch responded that the industry had ‘an excellent safety record.’

‘The industry itself supports and has implemented strong self-regulatory mechanisms,’ she said in an industry news release at the time.

Summary

To summarize, from 2011 to now, the leadership of the part of the FDA that is supposed to regulate dietary supplements was dominated by former top executives of the Natural Products Association, the trade organization for dietary supplement manufacturers.  In 2013, FDA scientists found that multiple dietary supplements contained BMPEA, a compound closely related to amphetamines, and hence potentially dangerous and addictive, although it had never been tested on or previously used by humans.  Although the FDA had authority to do something about this apparent adulteration of these products, it so far had done nothing.  Thus it appears that the currently legal revolving door that allows government regulation to be run by people who come directly from the industries that government is supposed to regulate could be responsible for exposing people to dangerous, addictive drugs.

Remember, BMPEA is a first cousin of amphetamine, amphetamine is “speed,” and as the drug epidemics of the 1960s and 1970s showed us, “speed kills.”  So a plausible argument is that the revolving door, as relevant to FDA, has enabled manufacturers of nutritional supplements to become the “pusher man,” a la the Steppenwolf sound track of Easy Rider,

As we noted here, some experts consider the revolving door per se to be corruption, not merely conflict of interest.  The current case plausibly suggests not only that the revolving door is corrupt, but that when applied to health care can pose dangers to patients, not merely danger to government finances, government ethics, and the integrity of representative democracy.  Nonetheless, up to now, a few people have decried the revolving door (and very occasionally in health care), but nothing has been done about it.

So it is surprising that today (13 April, 2015), the New York Times published an editorial inspired by the BMPEA case, which concluded

consumer advocates are surely right that putting the industry in charge of supplement regulation is like appointing the fox to guard the henhouse. Clearly, the F.D.A. should not allow industry insiders to fill key positions. A permanent solution is for Congress to enact conflict-of-interest laws forcing employees above a certain grade level at any agency to recuse themselves from official actions that affect a former employer or client, including trade associations and their members.

As a minimum, that would be a good start.  Unfortunately, even a NY Times editorial hardly guarantees action.  At least, however, the problem of the revolving door as a danger to patients has gotten a little less anechoic.

As we last wrote, the continuing egregiousness of the revolving door in health care shows how health care leadership can play mutually beneficial games, regardless of the their effects on patients’ and the public’s health.  Once again, true health care reform would cut the ties between government and corporate leaders that have lead to government of, for and by corporate executives rather than the people at large

Reference

1.  Cohen PA, Bloszies C, Yee C, Gerona R. An amphetamins isomer whose efficacy and safety in humans has never been studied, beta-methylphenylethylamine (BMPEA), is found in multiple dietary supplements.  Drug Testing Analysis 2015; DOI: 10.1002/dta.1793  Link here.