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Totally Corrupt America

OCTOBER 24, 2011

Reckless Endangerment

by PAUL CRAIG ROBERTS

Last March I reviewed Matt Taibbi’s important book Griftopia, an entertaining account of the through-going financial fraud that gave us the financial crisis.  Taibbi shows that the US “superpower” can match any third world backwater in the magnitude of greed and fraud that is endemic in business and government. Taibbi’s Griftopia was published last year. This year Henry Holt publishers have provided us with Gretchen Morgenson and Joshua Rosner’s Reckless Endangerment.

Morgenson and Rosner tell the story again, but with less drama and provocation. Possibly, it might be more acceptable to those gullible Americans who wrap themselves in the flag and refuse to believe that their country could ever knowingly do anything that is wrong.

I am not suggesting that Morgenson and Rosner pull their punches.  To the contrary, the authors deliver enough knockouts to be contenders with Taibbi as world champions in exposing the reckless  fraud that the US financial sector and its regulators now epitomize.

The financial crisis, which is very much still with us, did not result from accident or miscalculation; neither did it result because of a flaw in Alan Greenspan’s theory, as he told Congress when a feeble effort was made to hold him accountable.   It was the intentional result of people motivated by short-term profits who wanted to get theirs and get out.

As Reckless Endangerment shows, fraud characterized every stage of the process from the fraudulent borrower incomes and credit scores that mortgage issuers gave to unqualified buyers, through the securitization of the mortgages and their triple-A investment grade ratings by the rating agencies (Standard & Poor’s especially, but also Moody’s and Fitch) to the investment banks that sold what the banks knew was junk to investors around the world as investment grade securities.  Indeed, Goldman Sachs was simultaneously betting against the mortgage derivatives that it was selling to clients.

Investment banks, such as Goldman Sachs, which once considered it a matter of honor to represent the interests of customers, took advantage of the trust that had been built up in the past to commit fraud against customers in order to advance the banks’ short-term profits and the out-sized multi-million dollar managerial bonuses that these fraudulent profits produced.

Morgenson and Rosner provide a number of unique accounts of how those benefitting from fraud were able to defeat laws that were passed that would have held them to account. For example, the state of Georgia passed perfect legislation that held predatory lending to account. William J. Brennan Jr. and Georgia Governor Roy E. Barnes got the Georgia Fair Lending Act through the state legislature. It was a model for other states.  As the federal regulators had thrown in the towel, the state laws would have prevent the worst part of the financial crisis, it not prevented the crisis altogether.

The Georgia law only lasted a few months, because the rating agencies saw that their enormous profits from issuing fraudulent investment grade ratings were threatened by the law. The corrupt rating agencies mischaracterized the consumer protection act as a jihad by regulators. Standard & Poor’s declared that it would no longer allow Georgia mortgages to be placed in mortgage securities that it rated.

In other words, Georgia mortgages could no longer be securitized.  This announcement banned Georgia  mortgage lenders from securitization. Thus, the law was overturned, and fraud ran wild.

These kind of mafia strong-armed tactics in order to protect at all costs the short-term mega-bonuses that drove the totally fraudulent system have never been held accountable or punished.  Totally innocent people are held indefinitely and tortured by the US government for no other reason than to convince the gullible public that they are endangered by terrorists, but those who wiped out the home ownership and retirement pensions of millions of Americans now hold high and honorable positions on corporate boards and US regulatory agencies.

Federal regulatory agencies totally failed. Brooksley Born tried to use her statutory authority to regulate over-the-counter derivatives, but she was blocked by the Federal Reserve chairman, the US Treasure secretary, and the SEC chairman and forced to resign. As University of Chicago Nobel economist George Stigler predicted, regulatory agencies are captured by those who are intended to be regulated.  This was the case.

Regulators turned a blind eye to obvious criminal fraud, and were rewarded with lucrative positions in the financial community. The same for the US senators and representatives who repealed Glass-Steagal and other financial regulations.

For example, former US senator Phil Gramm who spearheaded the repeal of the Glass-Steagall Act, which separated commercial from investment banking, the repeal of which set up the financial crisis, was rewarded by being made vice chairman of the mega-bank UBS, a Swiss global financial services company.

What Taibbi, Morgenson and Rosner make clear is that while monster criminals continue to collect their multi-million dollar annual incomes, depressed single mothers, deserted by the men who fathered their child, are sent to prison for having small quantities of illegal drugs to boost their depressed spirits, and their children are put out to adoption.

This is “justice” in America where there is “freedom and democracy.”

Paul Craig Roberts was an editor of the Wall Street Journal and an Assistant Secretary of the U.S. Treasury.  His latest book, HOW THE ECONOMY WAS LOST, has just been published by CounterPunch/AK Press. He can be reached at: PaulCraigRoberts@yahoo.com

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NOVEMBER 24, 2011

Standing Up to Tyranny

by PAUL CRAIG ROBERTS

November 23, 2011: The day before the Thanksgiving holiday brought three extraordinary news items.  One was the report on the Republican presidential campaign debate. One was the Russian President’s statement about his country’s response to Washington’s missile bases surrounding his country. And one was the failure of a German government bond auction.

As the presstitute media will not inform us of what any of this means, let me try.

With the exception of Ron Paul, the only candidate in either party qualified to be the president of the US, the rest of the Republican candidates are even worst than Obama, a president who had the country behind him but sold out the American people to the special interests.

No newly elected president in memory, neither John F. Kennedy nor Ronald Reagan, had the extraordinary response to his election as Barak Obama. A record-breaking number of people braved the cold to witness his swearing in ceremony. The mall was filled with Americans who could not see the ceremony except as televised on giant screens.

Obama had convinced the electorate that he would end the wars, stop the violation of law by the US government, end the regime of illegal torture, close the torture prison of Guantanamo, and attend to the real needs of the American people rather than stuff the pockets of the military/security complex with taxpayers’ money.

Once in office, Obama renewed and extended the Bush/Cheney/neoconservative wars.

He validated the Bush regime’s assaults on the US Constitution. He left Wall Street in charge of US economic policy, he absolved the Bush regime of its crimes, and he assigned to the American people the financial cost necessary to preserve the economic welfare of the mega-rich.

One would think such a totally failed president would be easy to defeat.  Given an historic opportunity, the Republican Party has put before the electorate the most amazingly stupid and vile collection of prospects, with the exception of Ron Paul who does not have the party’s support, that Americans have ever seen.

In the November 22 presidential “debate,” the candidates, with the exception of Ron Paul, revealed themselves as a collection of ignorant warmongers who support the police state. Gingrich and Cain said that Muslims “want to kill us all” and that “all of us will be in danger for the rest of out lives.”

Bachmann said that the American puppet state, Pakistan, is “more than an existential threat.”  The moron Bachmann has no idea what is “more than an existential threat.”

However, it sounded heavy, like an intellectual thing to say for the candidate who previously declared the long-defunct Soviet Union to be today’s threat to the US.

Any sentient American who watched or read about the Republican presidential debate must wonder what there is to be thankful for as the national holiday approaches.

The Russian government, which prefers to use its resources for the economy rather than for the military, has decided that it has been taking too many risks in the name of peace. The day before Thanksgiving, Russian President Dmitry Medvedev said, in a televised address to the Russian people, that if Washington goes ahead with its planned missile bases surrounding Russia, Russia will respond with new nuclear missiles of its own, which will target the American bases and European capital cities.

The President of Russia said that the Russian government has asked Washington for legally binding guarantees that the American missile bases are not intended as a threat to Russia, but that Washington has refused to give such guarantees.

Medvedev’s statement is perplexing. What does he mean “ifWashington goes ahead?”  The American missile and radar bases are already in place. Russia is already surrounded.  Is Medvedev just now aware of what is already in place?

Russia’s and China’s slow response to Washington’s aggression can only be understood in the context of the two countries’ experience with communism. The sufferings of Russians and Chinese under communism was extreme, and the thinking part of those populations saw America as the ideal of political life. This delusion still controls the mentality of progressive thinkers in Russia and China.  It might prove to be a disaster for Russia and China that the countries have citizens who are aligned with the US.

Belief in Washington’s trustworthiness even pervades the Russian government, which apparently, according to Medvedev’s statement, would be reassured by a “legally binding guarantee” from Washington.  After the massive lies told by Washington in the 21st century–”weapons of mass destruction,” “al Qaeda connections,” “Iranian nukes”–why would anyone put any credence in “a legally binding guarantee” from Washington? The guarantee would mean nothing. How could it be enforced?  Such a guarantee would simply be another deceit in Washington’s pursuit of world hegemony.

The day prior to Thanksgiving also brought another extraordinary development–the failure of a German government bond auction, an unparalleled event.

Why would Germany, the only member of the EU with financial rectitude, not be able to sell 35 per cent of its offerings of 10-year bonds?  Germany has no debt problems, and its economy is expected by EU and US authorities to bear the lion’s share of the bailout of the EU member countries that do lack financial rectitude.

I suspect that the answer to this question is that the failure of the German government’s bond auction was orchestrated by the US, by EU authorities, especially the European Central Bank, and private banks in order to punish Germany for obstructing the purchase of EU member countries’ sovereign debt by the European Central Bank.

The German government has been trying to defend the terms on which Germany gave up control over its own currency and joined the EU. By insisting on the legality of the agreements, Germany has been standing in the way of the ECB behaving like the US Federal Reserve and monetizing the debt of member governments.

From the beginning the EU was a conspiracy against Germany. If Germany remains in the EU, Germany will be destroyed. It will lose its political and economic sovereignty, and its economy will be bled in behalf of the fiscally irresponsible members of the EU.

If Greeks will not submit to the tyranny, why should Germans?

Paul Craig Roberts was an editor of the Wall Street Journal and an Assistant Secretary of the U.S. Treasury.  His latest book, HOW THE ECONOMY WAS LOST, has just been published by CounterPunch/AK Press. He can be reached at: PaulCraigRoberts@yahoo.com 

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