Friday, January 23, 2009

Democrats Inch Toward Torture Probe

Democrats Inch Toward Torture Probe

By Jason Leopold

Go To Original

As President Barack Obama reverses some of ex-President George W. Bush’s most controversial “war on terror” policies, a consensus seems to be building among Democratic congressional leaders that further investigations are needed into Bush’s use of torture and other potential crimes.

On Wednesday – the first working day of the Obama administration – Senate Majority Leader Harry Reid said he would support funding and staff for additional fact-finding by the Senate Armed Services Committee, which last month released a report tracing abuse of detainees at Guantanamo Bay and Abu Ghraib to Bush’s Feb. 7, 2002, decision to exclude terror suspects from Geneva Convention protections.

Senate Armed Services Committee Chairman Carl Levin, who issued that report, echoed Reid’s comments, saying “there needs to be an accounting of torture in this country.” Levin, D-Michigan, also said he intends to encourage the Justice Department and incoming Attorney General Eric Holder to investigate torture practices that took place while Bush was in office.

Two other key Democrats joined in this growing chorus of lawmakers saying that serious investigations should be conducted.

Sen. Sheldon Whitehouse, D-Rhode Island, a former federal prosecutor and a member of the Senate Judiciary Committee, said in a floor speech, “As the President looks forward and charts a new course, must someone not also look back, to take an accounting of where we are, what was done, and what must now be repaired.”

Democratic Majority Leader Steny Hoyer of Maryland told reporters: "Looking at what has been done is necessary.”

On Jan. 18, two days before Obama’s inauguration, House Speaker Nancy Pelosi expressed support for House Judiciary Committee Chairman John Conyers’s plan to create a blue-ribbon panel of outside experts to probe the “broad range” of policies pursued by the Bush administration “under claims of unreviewable war powers.”

In an interview with Fox News’ Chris Wallace, Pelosi specifically endorsed a probe into the politicization of the Justice Department, but didn’t spell out a position on Conyers's plan to examine the Bush administration’s torture and rendition policies, which could prove embarrassing to Pelosi and other Democratic leaders who were briefed by the CIA about these tactics.

Still, when Wallace cited Obama’s apparent unwillingness to investigate the Bush administration, Pelosi responded: “I think that we have to learn from the past, and we cannot let the politicizing of the — for example, the Justice Department, to go unreviewed. Past is prologue. We learn from it. And my views on the subject — I don't think that Mr. Obama and Mr. Conyers are that far apart.”

The emerging consensus among top congressional Democrats for some form of investigation into Bush’s controversial policies has surprised some progressives who had written off the leadership long ago for blocking impeachment hearings and other proposals for holding Bush and his subordinates accountable.

In 2006, for instance, Pelosi famously declared that “impeachment is off the table,” and prior to Election 2008, the Democratic leadership largely acquiesced to Bush’s demands for legislation that supported his “war on terror” policies, including a compromise bill granting legal immunity to telecommunications companies that assisted in Bush’s warrantless wiretaps.

A Changed Tone

Since the election – in which the Democrats increased their congressional majorities and won the White House – key Democrats have begun releasing more information about Bush’s abuses of power.

Besides Levin’s findings on mistreatment of detainees, Conyers published a 487-page report entitled "Reining in the Imperial Presidency: Lessons and Recommendations Relating to the Presidency of George W. Bush” that calls for the creation of a blue-ribbon panel and independent criminal probes into the Bush administration’s conduct in the “war on terror.”

Conyers urged the Attorney General to “appoint a Special Counsel or expand the scope of the present investigation into CIA tape destruction to determine whether there were criminal violations committed pursuant to Bush administration policies that were undertaken under unreviewable war powers, including enhanced interrogation, extraordinary rendition, and warrantless domestic surveillance.”

Last year, Bush’s Attorney General Michael Mukasey appointed U.S. Attorney John Durham as special counsel to investigate whether the destruction of CIA videotapes that depicted interrogators waterboarding alleged terrorist detainees violated any laws. Durham was not given the authority to probe whether the interrogation techniques themselves violated anti-torture laws.

“At present, the Attorney General has agreed only to appoint a special U.S. Attorney to determine whether the destruction of videotapes depicting the waterboarding of a detainee constituted violations of federal law,” Conyers’s report said.

“Despite requests from Congress, that prosecutor has not been asked to investigate whether the underlying conduct being depicted – the waterboarding itself or other harsh interrogation techniques used by the military or the CIA – violated the law. … Appointment of a special counsel would be in the public interest (e.g., it would help dispel a cloud of doubt over our law enforcement system).”

Additional evidence about the Bush administration’s actions is expected to become available in the coming weeks as the Obama administration loosens the secrecy that has surrounded Bush’s “war on terror,” a phrase that Obama and his team have effectively dropped from Washington’s lexicon.

Obama’s aides have indicated that there soon may be a “public airing” of secret Justice Department legal opinions and other documents that provided the underpinning for the Bush administration’s brutal interrogation policies.

Levin also indicated that he expects to release the full Armed Services Committee report – covering an 18-month investigation – in about two or three weeks. Levin added that he would ask the Senate Intelligence Committee to conduct its own investigation of torture as implemented by the CIA.

Meanwhile, Republicans have grown increasingly worried that Holder, as Attorney General, will launch a criminal investigation into Bush’s interrogation policies. They delayed a vote on his nomination demanding that he respond to questions about whether he intends to investigate and/or prosecute Bush administration officials.

Sen. John Cornyn, R-Texas, said he wants to ask Holder whether he intends to investigate the Bush administration and intelligence officials for torture

Last week, at his confirmation hearing before the Senate Judiciary Committee, Holder was asked about the practice of waterboarding, a form of simulated drowning that the Bush administration has acknowledged using against three terror suspects. Holder answered that “waterboarding was torture.”

Cornyn said Holder’s view means there is a possibility that investigations might be on the horizon.

"Part of my concern, frankly, relates to some of his statements at the hearing in regard to torture and what his intentions are with regard to intelligence personnel who were operating in good faith based upon their understanding of what the law was," Cornyn said Wednesday.

Gates Predicts U.S. Will be in Iraq and Afghanistan ‘for Years to Come’

Gates Predicts U.S. Will be in Iraq and Afghanistan ‘for Years to Come’

By Pete Winn

Go To Original

Defense Secretary Robert Gates predicts the U.S. will be in Afghanistan for years to come.

In an article in the current issue of Foreign Affairs, Gates laid out the state of the U.S. military -- and how well it is poised to face the future.

Gates, who came to his post under Bush and was asked to stay by Obama, said the ability of the United States to deal with future threats will depend on how it performs in Iraq and Afghanistan.

“To be blunt, to fail -- or to be seen to fail -- in either Iraq or Afghanistan would be a disastrous blow to U.S. credibility, both among friends and allies and among potential adversaries,” Gates wrote.

Gates said the number of U.S. combat units in Iraq will decline over time – “as it was going to do no matter who was elected president in November,” he added.

“Still, there will continue to be some kind of U.S. advisory and counterterrorism effort in Iraq for years to come,” he said.

In Afghanistan, however, troop levels will likely continue to increase in the year ahead.

“Afghanistan in many ways poses an even more complex and difficult long-term challenge than Iraq -- one that, despite a large international effort, will require a significant U.S. military and economic commitment for some time,” the defense secretary and former CIA head wrote.

Retired Lt. Col Bob Maginnis, a strategic adviser to the Pentagon, told that Gates is being pragmatic and objective about the daunting challenges we face.

“First of all, taking down a country, replacing it with a viable government and then securing that country in a hostile arena such as the Persian Gulf, is going to take some time,” he said.

Maginnis, a counter-insurgency and counter-terrorism expert who has trained troops in Iraq and Afghanistan, agreed that some kind of American presence will be needed in Iraq for years to come.

“Yes, we’re going to downsize out troop levels as we bring up the Iraqi police forces and security forces, but it’s going to require some presence by our trainers and by our professional military for some time, to basically provide an insurance policy for them so that they have an honest chance to get themselves going in the right direction,” Maginnis added.

Afghanistan, he agreed, is an incredibly difficult environment by anyone’s standards.

“It’s locked in the 14th Century, there’s very little infrastructure. It’s a very large country – it’s much larger than Iraq – and it’s surrounded by hostile neighbors,” he said.

“You’ve got Iran on the West; Pakistan, with a 500-mile common border where you have all kinds of insurgents flowing back and forth and the Pakistani government has very little control over the No man’s land -- the Pashtun heartland where al-Qa’ida and the Taliban had refuge for many years. Then there’s China, a small piece to the Northwest and all the ‘-stans’ to the north.”

“If we’re going to do anything meaningful, it’s going to take decades and decades,” Maginnis said. “Whether we are going to have patience for that long is a fair question. I’m not sure we will.

“Especially now that we’re increasing our troop presence, all we’re going to be able to do is bring a modicum of security there for awhile, until that patience runs out,” Maginnis said.

“The money is going to run out long before the patience will. That’s in part why the Soviets departed in the ‘80s. They just couldn’t put up with the kind of environment they were facing – much less they couldn’t afford it.”

The U.S. has had some successes in Afghanistan, Maginnis said, “but the only part of the country that is truly under control is Kabul, the capital. And the current government there is incredibly corrupt.”

Unlikely to Repeat Iraq, Afghanistan

The Secretary of Defense, meanwhile, predicted that direct military force “will continue to play a role in the long-term effort against terrorists and other extremists” – but the U.S. is going to have to turn toward using soft – or indirect -- power.

“(O)ver the long term,” he wrote, “the United States “cannot kill or capture its way to victory,” adding that wherever possible, the U.S. should engage in promoting better governance and economic programs in countries to defeat extremists.

Gates added that the United States is unlikely to repeat another Iraq or Afghanistan -- forced regime change followed by nation building under fire -- anytime soon.

“We’re not going to go in an take over another country, but there are plenty of failed states around the world,” Gates wrote.

“The most likely catastrophic threats to the U.S. homeland -- for example, that of a U.S. city being poisoned or reduced to rubble by a terrorist attack -- are more likely to emanate from failing states than from aggressor states,” he added.
Maginnis, meanwhile, pointed out that many of those “failed states” are in Africa.

“You have pieces of Somalia that are brewing and overflowing with radicals who have our demise in mind,” he said. “You have problems with Ethiopia and Eritrea. Kenya is unstable and of course you have the entire Maghreb region – Tunisia, Morocco, Algeria.”

There are off-shoots of al-Qai’da in the North African desert region.

“They had been a home-grown type of insurgency, but have mushroomed into something much larger and because they are unpoliced for most of the Maghreb, they have been growing in their capabilities and funding from outside.”

Gates, meanwhile, said one of greatest challenges the U.S. faces is in strategic communication – getting the U.S. message out to a hostile world – and the U.S. intelligence community, which languished under the Clinton administration.

“In many ways, the country's national security capabilities are still coping with the consequences of the 1990s, when, with the complicity of both ends of Pennsylvania Avenue, key instruments of U.S. power abroad were reduced or allowed to wither on the bureaucratic vine,” Gates wrote.

Latest US housing, jobless figures far worse than economists anticipated

Latest US housing, jobless figures far worse than economists anticipated

By Patrick O'Connor

Go To Original

The extraordinary speed at which the US economy is contracting continues to confound economists’ forecasts. According to new housing market data released by the Commerce Department yesterday, new home and apartment construction in December plunged 15.5 percent on an annualized basis. Economists surveyed by Dow Jones Newswires had forecast a 4 percent fall.

Regionally, construction of new homes last month declined at the greatest rate in the South (down 22.2 percent) and the Midwest (down 24.5 percent). The December decline marked a record low, confirming 2008 as the worst year for US builders since such records were kept in 1959. Housing starts last year totaled just over 900,000, down from 1.35 million in 2007. Last year’s construction surpassed the previous low recorded in 1991 of 1.01 million starts.

Applications for building permits, an indicator of future home construction, also plummeted last month by 10.7 percent, far worse than economists’ expectation of a 0.8 percent decline.

Home prices are still going down. The Federal Housing Finance Agency yesterday released its index tracking homes bought with mortgages from Fannie Mae or Freddie Mac. The value of these homes dropped by 1.8 percent between October and November 2008, higher than the 1.1 percent fall recorded a month earlier.

The latest data has dashed hopes that the devastated US housing market would recover ground this year. “The market is bloated with excess supply and demand is weak,” Moody’s economist Ryan Sweet told Bloomberg. “The pace of housing starts will remain depressed until 2011.”

“Conditions in the market for new homes have not been this bad since the 1930s, and they continue to worsen,” Patrick Newport, of economic forecaster IHS Global Insight, added.

The meltdown of the housing market has deepened the crisis of the financial sector—with sub-prime mortgage “toxic assets” threatening the entire banking system with insolvency—as well as the economy’s productive base, with the collapse in home values triggering a deflationary spiral of lower consumer spending and business output and investment.

The Labor Department yesterday reported that initial jobless benefit claims rose to a seasonally adjusted 589,000 in the week ending January 17, the largest recorded since 1982. Economists had forecast just 540,000 new claims. The number of those continuing to seek benefits rose by 97,000—50,000 higher than analysts had anticipated—to 4.6 million.

Michigan’s Department of Labor and Economic Growth reported Wednesday that the state’s official unemployment rate for December stood at 10.6 percent. This was up from 9.6 percent in November, and marked the highest jobless rate since December 1984. Most of the state’s December job losses were in the business and professional services sector, with 15,000 layoffs, and the manufacturing sector, with 12,000 jobs cut. A large proportion of the layoffs in each category were made by auto and auto-related companies. Economists expect things to worsen throughout 2009, with Mackinac Center’s David Littmann telling that Michigan’s unemployment would likely reach 12 percent as soon as July.

Layoffs continue to mount across the US and world economy. Chemical manufacturer Huntsman Corp. is cutting its workforce by 9 percent, shedding 1,175 salaried employees and 490 contractors. Many of the lost jobs will be in Britain, where Huntsman is closing one of its titanium dioxide plants.

Computer chip manufacturer Intel is to close five plants, two in the US and three in Asia, and will lay off between 5,000 and 6,000 workers. The announcement follows Intel’s report last week of a 90 percent fall in profits for the final quarter of 2008.

Microsoft announced it will eliminate 5,000 of its 94,000 employees in the next 18 months. This is the first major layoff announcement in the software giant’s history. Another 5,000 contractors may also be dismissed. Falling software sales have seen Microsoft’s net income drop to $4.17 billion in the second quarter, compared to $4.7 billion a year earlier. The company’s shares yesterday fell by nearly 12 percent on Wall Street yesterday.

A number of other companies also announced lower revenue and profit streams, driving down the major stock indexes amid volatile trading. The Dow Jones Industrial Average closed 1.3 percent lower, the Nasdaq lost 2.8 percent, and the Standard & Poor’s 500 index was down 1.5 percent. The S&P’s financial sector fell by 6.7 percent, due to ongoing concerns over the viability of the major banks. Bank of America lost 14.5 percent of its value while Citigroup declined by 15.3 percent.

Major corporate losses and layoffs are now hitting economies throughout the world. Swedish telecommunications equipment maker Ericsson announced this week it was cutting 5,000 jobs in anticipation of a deeper global recession. About 1,000 of the affected workers will be in Sweden. The company is yet to announce where the rest of the layoffs will take effect.

In Japan, Sony said it expected to post a record annual operating loss of nearly $3 billion. The electronics company last month revealed plans to cut 8,000 positions and close up to six manufacturing plants; it is now to cut an additional 1,000 contract workers and close two more plants in Japan. “The massive economic upheaval being experienced across the world is sparing no one in the consumer electronics world,” Sony CEO Howard Stringer declared. He added that “consumer credit has been stifled” and “some of our biggest retailers have been liquidated.”

The collapse of consumer spending in the US and other major economies is badly affecting many export-dependent economies in Asia. Japan’s exports plunged by 35 percent in December on an annualized basis, the largest fall on record. Particularly sharp declines were recorded for exports of cars to the US and Europe and chemicals and electronic components to China. Japan’s trade surplus last year was 80 percent lower than in 2007, and was the smallest recorded since 1982.

In South Korea, fourth quarter 2008 gross domestic product (GDP) contracted by 5.6 percent, the most severe downturn since the 1997-98 Asian economic crisis. The recession is being driven by lower exports—for the fourth quarter, Korea’s goods exports declined by 11.9 percent from the previous three-month period. This was the largest fall since 1979. Fitch Ratings has said it expects the South Korean economy to contract by 2.4 percent this year.

Chinese GDP growth stalled in the last three months of 2008. According to official data released by the National Bureau of Statistics yesterday, the economy grew by 6.8 percent on an annualized basis, down from 9 percent in the third quarter and 10.6 percent in the second. Fourth quarter growth was the weakest recorded since Beijing first released quarterly figures in 1992.

China’s 6.8 percent GDP growth, while higher than most other economies in the region, falls short of the 8 percent level understood to be the minimum required to absorb the continual influx of workers moving to the cities from the countryside. “The situation is really very serious,” Chang Xiuze, of the Macro-Economics Institute of the National Development and Reform Commission in Beijing, told the Washington Post. He predicted an increase in labor disputes. “If economic growth is too low, the government cannot solve unemployment. If the growth rate is less than 7 percent, the country cannot operate normally.”

Obama's orders leave framework of torture, indefinite detention intact

Obama's orders leave framework of torture, indefinite detention intact

By Tom Eley

Go To Original

On Thursday, President Barack Obama issued executive orders mandating the closure of the Guantánamo Bay prison camp in a year’s time, requiring that Central Intelligence Agency (CIA) and military personnel follow the Army Field Manual’s prohibitions on torture, and closing secret CIA prisons overseas.

While the media is portraying these orders as a repudiation of the detention and interrogation policies of the Bush administration, they actually change little. They essentially represent a public relations effort to refurbish the image of the United States abroad after years of torture and extralegal detentions and shield high-ranking American officials from potential criminal prosecution.

In cowardly fashion, Obama staged his signing of the orders in a manner aimed at placating the political right and defenders of Guantánamo and torture and underscoring his intention to continue the Bush administration’s “war on terror.” He was flanked by 16 retired generals and admirals who have pushed for the closure of the prison camp in Cuba on the grounds that it impedes the prosecution of the global “war” and reiterated in his own remarks his determination to continue the basic political framework of the Bush administration’s foreign policy.

The continuation of the ideological pretext for wars of aggression and attacks on democratic rights ensures that the police state infrastructure erected under the Bush administration will remain intact. This is further reinforced by Obama’s assurances that his administration will not investigate or prosecute those officials—including Bush, Cheney, Rumsfeld, Alberto Gonzales and others—who were responsible for the policies of torture and illegal detention.

The orders signed by Obama do not undo the Bush administration’s attacks on constitutional and international law. They do not challenge the supposed right of the president to unilaterally imprison any individual, without trial and without charges, by declaring him to be an “enemy combatant.” Nor do they end the procedure known as “extraordinary rendition,” by which the United States during the Bush years kidnapped alleged terrorists and shipped them to foreign countries or secret CIA prisons outside the US, where they were subjected to torture.

They do not affect the hundreds of prisoners—600 at the Bagram prison camp in Afghanistan alone—incarcerated beyond the barbed wire of Guantánamo. If and when Guantánamo is closed, the US government will simply ship alleged terrorists caught up its international dragnet to other American-run prison camps.

On the question of so-called “harsh interrogation techniques,” i.e., torture, Obama’s orders leave room for their continuation. White House Counsel Gregory Craig told reporters the administration was prepared to take into account demands from the CIA that such methods be allowed. Obama announced the creation of a task force that will consider new interrogation methods beyond those sanctioned by the Army Field Manual, which now accepts 19 forms of interrogation, as well as the practice of extraordinary rendition.

Retired Admiral Dennis Blair, Obama’s nominee for director of national intelligence, told a Senate confirmation hearing that the Army Field Manual would itself be changed, potentially allowing new forms of harsh interrogation, but that such changes would be kept secret.

Obama also announced a second task force that is to consider the fate of the 245 detainees remaining at Guantánamo. Earlier this week he suspended the military commission procedures at the prison camp, but has not abolished the military commissions themselves.

The new administration has ruled out the only constitutional remedy for those who have been held under barbaric conditions, without due process, for years—either releasing them or giving them a speedy trial in a civilian court, with all of the accompanying legal protections and guarantees. There has been a great deal of speculation that the administration may support the establishment of a special National Security Court within the civilian court system to try Guantánamo prisoners and other alleged terrorists. This would represent yet another attack on civil liberties, setting up a drumhead court system to railroad those charged with terrorism—something that could in future be used to repress political opposition.

According to NBC Nightly News on Thursday, the administration is considering keeping some 20 Guantánamo detainees, including the five alleged 9/11 conspirators currently facing military commission trials, imprisoned indefinitely without charges in a military brig within the US.

Commentators have noted that the Obama administration wants to prevent noncitizens detained as terrorists from being able to exercise habeas corpus rights.

Two separate measures taken Tuesday and Thursday by Obama point to a further major consideration behind his moves to close Guantánamo and finesse the issue of torture. On Thursday the administration requested a stay in the habeas corpus appeal to the Supreme Court by the only alleged enemy combatant now held on US soil—Ali al-Marri, of Qatar, whom Obama has called “dangerous.” Al-Marri’s lawyers are challenging the right of the president to arrest and jail individuals by declaring them enemy combatants, and it was expected that the Supreme Court’s hearing of the appeal would force Obama to reveal his position on the issue.

This followed Tuesday’s request for a stay from the Federal District Court in Washington in similar appeals that could affect the cases of more than 200 Guantánamo prisoners.

Thus, the immediate effect of the new administration’s moves is to halt civilian trials that could prove immensely damaging to the government by revealing systematic torture of the detainees and could potentially entangle high government officials.

Obama’s libel against the American people

Obama’s libel against the American people

Go To Original

The phrases in Barack Obama’s inauguration speech that have evoked the greatest enthusiasm across the political spectrum of the US establishment, from the Republican right to liberal Democrats, were those suggesting that the American people are responsible for the present economic catastrophe. “Our economy is badly weakened,” he declared, “a consequence of greed and irresponsibility on the part of some, but also our collective failure to make hard choices and prepare the nation for a new age.”

Precisely what those “hard choices” are Obama did not specify, but he made clear they in no way involve a challenge to the capitalist market system, declaring that “its power to generate wealth and expand freedom is unmatched.”

He broadly hinted that the “hard choices” he would make involve sweeping cuts in social programs, including ending programs that don’t’ “work.” This policy of austerity, which, as he had previously indicated, would include cuts in bedrock programs such as Social Security and Medicare, was summed up in his call for “a new era of responsibility.”

The implicit demand for greater sacrifice from the American people was hailed by liberal commentators such as the Washington Post’s David Ignatius, who praised Obama for telling the people that the crisis was “partly our fault.” He continued, “We all know the Pogo line about how ‘we have met the enemy, and he is us.’ Obama implicitly seemed to embrace it.”

Right-wing columnist George Will in his Washington Post op-ed piece enthused over the same lines, writing that one of Obama’s themes “was that Americans do not just have a problem, they are a problem.”

These approving comments accurately sum up the deeply reactionary and deceitful thrust of Obama’s speech, behind its “I feel your pain” rhetoric. Obama’s attempt to foist the blame for the failure of American capitalism on the American people is nothing short of a libel, the purpose of which is to obscure those social interests that are really responsible for the unfolding catastrophe and justify even deeper attacks on the working class.

The working class bears no responsibility for the collapse of the financial system and the resulting recession that is developing into a full-scale depression. Working people have no control over the policies and actions of the multimillionaires and billionaires who bestride Wall Street. They had no say in concocting the Ponzi schemes that generated multimillion-dollar compensation packages and colossal personal fortunes for the financial aristocracy until they collapsed, as they were bound to.

Working people are the victims of the maniacal greed of the corporate-financial elite, which itself is an expression of fundamental contradictions within the irrational economic system over which they preside. One would think from Obama’s remarks that the broad masses of people in the US have been living the good life. In reality, for three solid decades they have seen their social position decline and their living standards deteriorate as an ever-greater share of the national wealth was funneled into the bank accounts of the ruling elite.

The single most significant feature of American life—the staggering growth of social inequality—went without mention in Obama’s speech. He could not allude to it and at the same time accuse the people of bearing “collective” guilt.

Obama’s single fleeting reference to corporate criminality—“greed and irresponsibility on the part of some”—was itself a cover-up. On the part of “some”? The virtual collapse of the US and global economy is not the result of a few bad apples or mere aberrational behavior. Fraud, incompetence, recklessness were—and remain—pervasive and systemic in American capitalism.

This is a system that for decades has starved and dismantled basic industry, allowed the social infrastructure to rot and driven down the living standards of the majority of the population in order to generate higher profits for the elite from financial manipulation and speculation. The American ruling class stands exposed and disgraced before the world as a semi-criminal social layer.

Obama’s “new era of responsibility” signifies, in reality, a general amnesty for the system, the class and those in government who are truly responsible for the crisis. None of the bankers and speculators who created a mountain of paper values on the basis of predatory home loans that were bound to fail are to be held accountable. Nor are the government regulators who ran interference and served as their accomplices. Likewise, the congressmen of both parties who dismantled regulations and slashed corporate taxes in exchange for campaign funds and other bribes.

To name a few names:

• New York Senator Charles Schumer, Democratic chairman of the Joint Economic Committee, who raised $12, 928,000 in the 2003-2008 election cycle, according to the Center for Responsive Politics (CPR). His top five industries for campaign cash were securities and investment, lawyers and law firms, real estate, miscellaneous finance and commercial banks, from which he netted a total of $3,937,000. His top five contributing firms were Citigroup, UBS, Weiss et al, Kosowitz, Benson et al and Metlife, which funneled a total of $271,000 to his campaigns.

As head of the Democratic Senatorial Campaign Committee for the last four years, Schumer has increased donations from Wall Street by 50 percent. Has raked in over $120 million from Wall Street in recent years.

• Barney Frank, Democratic chairman of the House Financial Services Committee. He raised $2,282,000 in 2007-2008, according to CPR, with his top five contributing industries consisting of securities and investment, real estate, insurance, lawyers and law firms and commercial banks.

• Rahm Emanuel, Obama’s White House chief of staff. After leaving the Clinton administration, he netted $18 million in the three years he was employed by the global investment banking firm of Dresdner Kleinwort Wasserstein in Chicago, where he worked from 1999 to 2002.

Then there is Obama himself. A product of the Illinois Democratic Party machine, tied in with financial moguls such as Robert Wolf, CEO of UBS America, and Warren Buffett, the wealthiest individual in the US, the recipient of hundreds of millions of dollars in corporate campaign funds and himself a multimillionaire, he personifies the social corruption of the ruling elite in general and the rightward movement of the Democratic Party in particular. His ascendance is the outcome of the turn to identity politics and racial preferences as a means of integrating the black upper-middle-class into the political establishment and suppressing the fundamental class issues in American society.

The prerequisite for establishing genuine “responsibility” is for the working class to demand a full and public accounting for the plundering of the economy and the social misery it has produced. This must include serious investigations of the role of bankers, hedge fund managers, speculators and their accomplices in government and facilitators in the corporate media.

The entire economic and political system must be put on trial, and criminal prosecutions pursued against the main offenders. The fortunes amassed from fraud and swindling must be seized and the wealth stolen from the American people recovered. Such a public accounting is essential to developing a rational and progressive solution to the crisis.

Senate passes wage discrimination bill

Senate passes wage discrimination bill


Go To Original

A wage discrimination bill that heralds the pro-labor policies of the Democratic-controlled Congress and White House cleared the Senate Thursday and could be on President Barack Obama's desk within days.

The legislation reverses a 2007 Supreme Court ruling that narrowly defines the time period during which a worker can file a claim of wage discrimination, even if the worker is unaware for months or years that he or she is getting less than colleagues doing the same job. It has been a priority for women's groups seeking to narrow the wage gap between men and women.

The House is expected to act quickly to again approve the measure, sending it to Obama for his signature. The House passed a nearly identical version two weeks ago but then combined it with another bill that the Senate didn't consider.

Senate Majority Leader Harry Reid predicted that "the first bill that President Obama will sign will be this piece of legislation." He said the bill would send an important message because "this administration stands for equality and fairness."

Obama strongly backs the measure and invited Lilly Ledbetter, the retired Alabama tire company worker whose lawsuit inspired the legislation, to accompany him on the train trip bringing him to Washington for the inauguration.

Former President George W. Bush threatened to veto the bill when it came up in the past, and last year it died in the Senate.

The vote was 61-36. Republicans demanded that the bill hit a 60-vote threshold for passage as a condition for moving on the legislation.

The House approved the legislation during the first week of the new session of Congress, signaling that labor rights bills that made little headway during the Bush administration will be at the top of the agenda this year.

"We feel free at last," said Sen. Barbara Mikulski, D-Md., the chief sponsor of the legislation. She said the strong vote, which included all 16 female senators — including four Republicans — was "a sign of what Democratic leadership means."

The bill paves the way for considering more controversial labor measures, including one that would take away a company's right to demand a secret ballot when workers are seeking to organize. Reid said that could come up this summer.

The Ledbetter bill would clarify that every paycheck resulting from discrimination would constitute a new violation, extending the 180-day statute of limitations for filing a claim. The Supreme Court, in a 5-4 decision denying Ledbetter's complaint, ruled that a worker must file a claim within 180 days of the initial decision to pay a worker less, even if the worker did not discover the pay disparity until years later.

Ledbetter, 70, who was in the Capitol to watch the debate, said it was only at the end of her 19-year career at a Goodyear Tire & Rubber Co. plant in Gadsden, Ala. — when someone left an anonymous note in her mailbox — that she became aware that she was getting paid less than her male counterparts. "It turns out that I was earning 70 to 85 percent of what my male colleagues were getting. I started out at a lower salary, and they gave me lower raises, over and over again."

The Supreme Court decision, said Sen. Patty Murray, D-Wash., "set us back 40 years in our fight for equal opportunity in the workplace."

Earlier in the day, the Senate voted 55-40 to reject an alternative by Sen. Kay Bailey Hutchison, R-Texas. She and other Republicans contended that the legislation would effectively neutralize the statute of limitations, subject companies to more lawsuits and be a bonanza for trial lawyers.

"This bill is about effectively eliminating the statute of limitations on pay discrimination," said Senate Minority Leader Mitch McConnell, R-Ky. "Job creators have enough to worry about these days. We shouldn't add the threat of never-ending lawsuits."

Hutchison's approach would have codified existing discovery rules by stating that the statute of limitations would be triggered when a person has, or should be expected to have, enough information to support a reasonable suspicion that discrimination was occurring.

Hutchison said her alternative would give employees the opportunity to seek redress for discrimination while protecting businesses from employees who might wait months or years to file claims in order to drive up damage awards.

But opponents contended Hutchison's proposal could weaken employee rights. It "would impose additional burdens on the victims of pay discrimination to prove a negative: that they had no reason to have known about the discrimination," said Marcia Greenberger, co-president of the National Women's Law Center.

Mikulski said it could lead to more lawsuits because people would go to court out of fear they would miss the legal deadline. It "could create a very hostile and nasty work environment."

Mikulski said her bill would "restore a bright line for determining the timeliness of pay discrimination claims."

Workplace discrimination such as wage disparity was banned under the Civil Rights Act of 1964; but more than four decades later, women still receive only about 78 cents for every dollar earned by men for doing the same work. The Ledbetter bill would apply to other forms of discrimination such as that based on race, ethnicity or national origin as well as gender.


The bill is S. 181.

On the Net:


Despite billions, banks still teeter on the brink

Despite billions, banks still teeter on the brink

Wall Street waits on Obama, but no clear solution to the crisis exists

Go To Original

Wall Street is losing faith in Washington's efforts to fix the financial crisis. As bank losses pile up and bank stocks plunge, investors have an urgent question for the new Obama administration: What's the plan?

Timothy Geithner, Obama's pick for treasury secretary, had few answers as he began confirmation hearings Wednesday. He told lawmakers that two goals were to "get credit flowing again" and overhaul the $700 billion bailout, but he offered few details.

There's a lot riding on the new administration. Several of the largest U.S. banks, saddled with soured mortgage-backed assets, are edging toward the danger zone despite injections of billions of dollars from the government last year.

At the same time, the recession is gathering force, chewing up jobs by the hundreds of thousands and ruining many consumer and business loans that were once thought to carry little risk.

The first half of the federal bailout came with no requirement that the banks lend more. But even keeping the cash as a cushion hasn't stopped banks from sliding toward the precipice.

"The size of the problem is growing faster than the banks' ability to handle it," said Joe Battipaglia, market strategist at Stifel Nicolaus. "We're halfway through the bailout money, and the banks are in worse shape than they were six months ago."

Investors expect Obama's team to consider a range of options, including pumping more money into banks and creating a government entity to buy up bad bank assets so they'll start lending again.

But those prospects all raise troubling questions: Would stockholders be wiped out? How much taxpayer money would ultimately be needed? What could happen if the government takes an even bigger role in the banking system? And perhaps the biggest unknown: Would a bigger bailout get banks to start lending again and help pull the country out of recession?

For now, the focus is simply on keeping the banks alive.

Experts say household names like Citigroup and Bank of America, which have already received two government cash infusions apiece — will need even more to offset future losses and stay afloat.

The fear is that both banks are so big, so blended into the global financial system, that their collapse could trigger a catastrophe.

The most troubled banks are "going to definitely go down" without more government help, said Jonathan Macey, a law professor at Yale University who wrote a book about a bailout of Sweden's banking system during the 1990s.

"And they may go down with it," he added. "The pace of these bank losses is outrunning the infusions by the government."

Sheila Bair, chairman of the Federal Deposit Insurance Corp., sought to allay those worries Wednesday in an interview with The Associated Press. Still, she acknowledged investors' concerns.

"There's a lot of fear out there," Bair said. "We're going to work through this. It's going to be hard. It's going to take time. But we will work through it."

In the meantime, investors are agonizing. Citigroup's stock fell 20 percent to below $3 a share Tuesday. Bank of America shares tumbled 29 percent. Both banks rebounded some Wednesday, but experts say their troubles are far from over.

So why hasn't the bailout worked?

Experts say one big problem is it hasn't addressed the root cause of the trouble: the mortgages and other bad assets sitting on the banks' books.

When the government announced the bailout three months ago, the plan was to buy those bad assets so banks could start lending again. But that approach was quickly scrapped, partly over concerns it would take too long to work.

Plan B, injecting banks with cash, hasn't worked as Wall Street had hoped.

The government has so far provided $192.3 billion to 257 large and small financial institutions in 42 states and Puerto Rico. But banks are mainly sitting on the money, not ramping up lending.

"The capital injections haven't worked," said Edward Yardeni, an independent market analyst. "It's been like giving blood thinner to a patient who needs to have their wounds clotted. The bleeding hasn't stopped."

Some lawmakers want to force banks to boost lending if they accept taxpayer money, but none of the leading plans being debated on Capitol Hill include such requirements.

If Washington decides to give banks more money, the question is how much.

Bert Ely, an independent banking analyst in Alexandria, Virginia, has estimated the price could swell to as much as $1.5 trillion. "There's no reason why it couldn't go that high," Ely said.

But many on Wall Street are uncomfortable with the government's giving banks more money, believing it would amount to a federal takeover of the U.S. banking system that could wipe out shareholders.

"What we're heading for is the dirty word of de facto nationalization of U.S. banks if we continue on the current path," Chuck Gabriel, managing director of Capital Alpha Partners in Washington. "How are you going to attract private capital to the banking system? That's the question they haven't come close to answering."

One alternative to giving banks more cash is setting up a government-run bank to buy banks' bad assets. The idea is that by removing the assets weighing down the banks, they'll stop hoarding cash and start lending again.

Gabriel said that could assure nervous investors that Obama's team is pursuing a new course of action.

"They need to come out and do something that's a departure" from only capital infusions, he said. "You could spend another $700 billion and some folks might think that's not enough."

Experts say there's no option guaranteed to spur more lending.

For one thing, banks have tightened lending standards, shrinking the pool of qualified borrowers. That makes it much harder for the government to "force-feed credit into the economy," Ely said.

So what if the government decides not to give the banks more money? Experts say the consequences could be dire.

In a report last week, Goldman Sachs estimated that financial institutions and investors worldwide will ultimately absorb $2 trillion in losses on U.S. loans — but have recognized only half those losses so far.

Unless the banking sector has a way to offset those losses, troubled banks could fall — possibly triggering a panic.

"You could see a total erosion of confidence among the government's ability to stave off another crisis," said Richard Sparks, senior equities analyst at Schaeffer's Investment Research in Cincinnati. "I can't conceive of the government not doing anything."

The Bailout: TARP Failing, Next Step Unclear

The Bailout: TARP Failing, Next Step Unclear

Go To Original

The TARP hasn't saved [1] the nation's major banks, and the Obama administration doesn't know what to do [2] to save them.

That is the unusually sober takeaway in the morning's major papers, following yesterday's sharp decline for banks in the stock markets. Bank stocks have been sliding all month: "The common stock of the major banks tracked by the Dow Jones Wilshire U.S. Banks Index has fallen roughly $287 billion in value since Jan. 2, a 43% decline in just over two weeks," reports the Wall Street Journal [3].

Not surprisingly, "fear" and "nationalization [4]" are the words that crop up the most -- as in investors' fear of being wiped out by a government takeover. As the Journal puts it, "The fact that nationalization is considered by some to be possible and is roiling markets reflects the failures of repeated government interventions to stem a widening crisis of confidence in the banking system."

So far, the Treasury Department has spent roughly $230 billion pumping money into the nation's banks [5] (billions more have gone to the auto companies and AIG). But as the Washington Post puts it [1], that money "did not succeed in stabilizing the industry," and according to unnamed Obama administration officials, it's "increasingly likely" that the remainder of the $700 billion in bailout money won't do the trick either.

So what next? The New York Times [2], Post and Journal all juggle a variety of alternative solutions: They range from the apparently leading contender of creating a "bad bank" to house the banks' toxic assets to nationalization.

The underlying choice there is whether to protect shareholders or taxpayers. The "bad bank" model would involve the government buying and holding the banks bad assets -- but there are worries the government would overpay. In another case of unusual bluntness, the Times reports:

If policy makers were even remotely honest, [financial industry] analysts said, they would force banks to take huge write-downs and insist on a high price in return for taking bailout money. For practical purposes, that could mean nationalization or partial nationalization for many banks.

But as the chorus of calls for nationalization [4] grows, the Journal notes a reluctance among U.S. officials to take "the most extreme step -- nationalizing banks altogether -- worried about the government's ability to run them. The challenges of running Fannie Mae and Freddie Mac, the two large mortgage-finance firms the government took over last fall, are seen as evidence of that."

House Rejects Obama's Request For Rest Of TARP

House Rejects Obama's Request For Rest Of TARP

Go To Original

The House expressed its bipartisan anger over a massive financial bailout package Thursday as the Obama administration undertook to assure lawmakers that it would spend the remaining money prudently and with greater oversight than the Bush administration.

In a symbolic vote, the House voted to reject President Barack Obama's request for the unspent $350 billion in a bailout fund for the financial sector. The 270-155 tally was a moot point because the Senate had refused to block the release of the money last week. That effectively made it available to the new administration.

The vote let Obama know that in seeking to shore up a shaky financial sector, he, like Bush before him, is operating on shaky political ground, even as the weakened banking industry continues to roil the stock markets.

Eager to signal a change, the Obama administration promised to force bankers to report their lending activity on a quarterly basis and to meet tougher executive pay requirements. From the podium of the White House briefing room and in written responses to senators, Obama officials pledged to ensure that the money is used to extend credit to small businesses and consumers.

"Those principles include ensuring that executive compensation is limited so that the American taxpayer can feel confident that any money that's used as a part of a financial stability package doesn't go to line the pockets of a CEO," White House spokesman Robert Gibbs said.

Timothy Geithner, whose nomination to be treasury secretary cleared the Senate Finance Committee on Thursday, told the committee in written response to questions that "oversight and transparency requirements in the original proposal were inadequate." He said banks would have to provide "detailed and timely information on their lending patterns broken down by category."

In addition, a new special inspector general assigned to oversee the funds said Thursday that he will ask all institutions that have already received money from the Troubled Asset Relief Program to account for their use of the money and to detail any steps they have taken to meet existing executive pay caps.

"If the American taxpayer is to be expected to fund this extraordinary effort to stabilize the financial system, it is not unreasonable that the public and its representatives in Congress have some understanding as to how those funds have been used by the recipients," the inspector general, Neil Barofsky, wrote to Sen. Charles Grassley.

Thursday's vote illustrated how the House, where members face election every two years, is much more sensitive to public opinion than the Senate, with its six-year terms of office.

Ninety-nine Democrats joined 171 Republicans in voting to reject the money in a vote that put conservatives and liberals on the same prevailing side. Republicans had grudgingly voted for the $700 billion Troubled Asset Relief Program last fall and were still smarting over Bush administration decisions to use some of the money to help the auto industry and to give money to banks with few conditions. Democrats, freed by the Senate from the pressure to support Obama, fled from the program as well.

"My goodness, I can't stand here as a member of Congress and vote to release the second half of this money without knowing what happened to the first half of it," said House Minority Leader John Boehner, R-Ohio.

Democratic opponents of the fund described the bailout as a misplaced priority.

"There's a massive transfer of wealth going on, taking money out of the pockets of the American people and putting it into these banks," said Rep. Dennis Kucinich, D-Ohio. "This has to stop. We have to stop."

The vote came a day after the House voted 260-166 to set greater reporting requirements on banks that receive bailout funds. House Financial Services Chairman Barney Frank, D-Mass., who supported releasing the funds, conceded Thursday's vote was moot.

"Why are we still voting on it?" he asked. "Because there is a degree of anger in the American public at what they think is a very unfair system that gives benefits unduly and disproportionately to some of those who caused the problem, while denying health care and unemployment compensation and a decent higher education for working-class people."....

Foreclosure Fightback

Foreclosure Fightback

Go To Original

"This is a crowd that won't scatter," James Steele wrote in the pages of The Nation some seventy-five years ago. Early one morning in July 1933, the police had evicted John Sparanga and his family from a home on Cleveland's east side. Sparanga had lost his job and fallen behind on mortgage payments. The bank had foreclosed. A grassroots "home defense" organization, which had managed to forestall the eviction on three occasions, put out the call, and 10,000 people--mainly working-class immigrants from Southern and Central Europe--soon gathered, withstanding wave after wave of police tear gas, clubbings and bullets, "vowing not to leave until John Sparanga [was] back in his home."

"The small home-owners of the United States are organizing," Steele concluded, "tardily perhaps, but none the less surely." It wasn't just homeowners--three months earlier the governor of Iowa had called out the National Guard after farmers stormed a courthouse and threatened to hang the judge if he didn't stop issuing foreclosures. They left him in a ditch, bruised but alive. By the end of the 1930s, farmers' and home-owners' struggles had pushed the legislatures of no fewer than twenty-seven states to pass moratoriums on foreclosures.

The crowds appear to be gathering again--far more quietly this time but hardly tentatively. Community-based movements to halt the flood of foreclosures have been building across the country. They turned out in Cleveland once again in October, when a coalition of grassroots housing groups rallied outside the Cuyahoga County courthouse, calling for a foreclosure freeze and constructing a mock graveyard of Styrofoam headstones bearing the names of local communities decimated by the housing crisis. (They did not, unfortunately, stop the more than 1,000 foreclosure filings in the county the following month.) In Boston the Neighborhood Assistance Corporation of America began protesting in front of Countrywide Financial offices in October 2007. Within weeks, Countrywide had agreed to work with the group to renegotiate loans. In Philadelphia ACORN and other community organizations helped to pressure the city council to order the county sheriff to halt foreclosure auctions this past March. Philadelphia has since implemented a program mandating "conciliation conferences" between defaulting homeowners and lenders. ACORN organizers say the program has a 78 percent success rate at keeping people in their homes. One activist group in Miami has taken a more direct approach to the crisis, housing homeless families in abandoned bank-owned homes without waiting for government permission.

It's unlikely, though, that any of these activists will be able to relax soon. Other than calling for a ninety-day freeze on foreclosures--which, given that loan negotiations can take many months to work out, would almost certainly be inadequate--President Obama has been consistently vague about his plans to address the foreclosure crisis. He has indicated his support for a $24 billion program proposed in November by FDIC chair Sheila Bair, which would offer banks incentives to renegotiate loans, aiming to reduce mortgage payments to 31 percent of homeowners' monthly income. Obama's economic team has since worked with House Financial Services Committee chair Barney Frank on a bill that would require that between $40 billion and $100 billion of what's left in the bailout package be spent on an unspecified foreclosure mitigation program. It would be left to Obama's Treasury Department to design that program. But Frank's and Bair's proposed plans are voluntary. Banks that choose not to accept federal assistance won't have to renegotiate a single loan.

Community organizers, however, aren't sitting around waiting for banks to come to the table. Nowhere have they had more cause to keep busy than in California, home to a quarter of the 3.2 million foreclosures filed in the country last year. The collapse of the state's hyperinflated real estate market has left as many as 27 percent of mortgage holders owing more on their homes than the properties are worth; California's foreclosure rate is more than twice the national average. From San Diego to Stockton, in churches, union halls and community centers, angry homeowners have been organizing to freeze foreclosures and impose a systematic modification of home loans.

The crisis has produced some unlikely activists. Faith Bautista didn't start out as a rabble-rouser. A small, energetic and stubbornly cheerful woman, she has run a tiny nonprofit called the Mabuhay Alliance since 2004. Until recently, it functioned as an all-purpose minority small-business association. With a staff of six working out of a mini-mall office behind an auto parts store in an industrial section of San Diego, the Mabuhay Alliance served a largely Filipino community (mabuhayviva!) offering, among other services, free income-tax preparation, microloans and counseling for first-time homeowners. translates roughly from Tagalog as

It was through the latter program that Bautista heard the first rumblings of the mortgage meltdown, which would ultimately bring down Wall Street's most powerful financial firms. Southern California's development boom hadn't yet begun to ebb in late 2006, but, Bautista says, "people were already calling us and asking what was going to happen. They were clearly going to default."

The community Mabuhay serves--about 40 percent Filipino, the remainder Latino, African-American and other Asians--was hit particularly hard. Throughout the housing boom, immigrant and minority borrowers were disproportionately issued high-priced subprime loans, even when they qualified for less expensive, fixed-rate mortgages. One study by the California Reinvestment Coalition found that African-American and Latino borrowers were nearly four times as likely as whites to receive high-cost mortgages. Bautista had an adjustable-rate mortgage on the home she bought in 2004. Her monthly payments soon leapt to $6,000. It took her nine months, she says, and a personal meeting with the CEO of the bank that held her mortgage, to renegotiate the loan. It quickly became obvious to her that fighting the banks on an individual basis would be inadequate to the scale of the crisis--only an organized battle for systematic changes would help keep people in their homes.

In the early months of 2007, as the first of the subprime lenders began to declare bankruptcy, Bautista started contacting major lenders, asking them to stop foreclosures and take part in a "massive loan-modification program"--dropping interest rates, writing down principals and donating executive bonuses to a fund for borrowers at risk of default. If lenders shared responsibility for the crisis, she calculated, homeowners shouldn't bear the full brunt of the suffering. Not surprisingly, she laughs, "they didn't want to talk to us."

That summer, with the help of the Greenlining Institute, a Berkeley-based research and advocacy group that works on racial equality issues, she was able to arrange a meeting with Countrywide co-founder and CEO Angelo Mozilo. At the time, almost one-fourth of Countrywide's subprime loans were delinquent. The meeting, Bautista says, was fruitless: "Eyes are closed, ears are closed." Over the next few months, she met three more times with Countrywide management, getting nowhere. "They didn't want to admit they were doing anything wrong."

Elected officials appeared equally blind to the extent of the problem. Countrywide's stock had plummeted, but the influence of the nation's largest mortgage lender still ran deep. Mozilo's so-called Friends of Angelo program had cut favorable deals on loans to his highly placed acquaintances, including Christopher Dodd and Kent Conrad, chairs of the Senate banking and budget committees, respectively. And Countrywide, along with other top mortgage lenders and industry associations, spent tens of millions of dollars lobbying Congress and gave millions more in campaign contributions. By mid-October 2007, the government's only response to the foreclosure crisis had been the creation of the Hope Now alliance, a voluntary mortgage-industry coalition that established a telephone hot line to aid homeowners in altering the terms of their mortgages. But, critics say, the program has done little more than design repayment plans that in many cases actually increased borrowers' monthly payments. "I call it Hope Not," quips Bautista.

At the state level, things weren't much better. Governor Arnold Schwarzenegger brokered a nonbinding agreement in which Countrywide and other lenders volunteered to extend the introductory low interest rates on some adjustable-rate mortgages. It only deferred disaster and did nothing for those who were already in default. Meanwhile, new foreclosure records were being broken every month.

The day before Thanksgiving, the Mabuhay Alliance, joined by the Mexican-American Political Alliance, staged a protest in front of Countrywide's San Diego office. They attempted to hand-deliver a turkey to Mozilo, who, not counting stock options, would be paid $22 million in 2007, down from $42 million in 2006. Once again, the doors were locked. Only about fifty people showed up that day, but the protest got enough press to have a powerful symbolic effect. "No one was willing to take on Mozilo in California," says Greenlining's Robert Gnaizda. "He held enormous power. And [Bautista] took him on. She forced the financial industry to pay attention."

The next week, Bautista and Gnaizda went to Washington and met with Federal Reserve chief Ben Bernanke and FDIC chair Sheila Bair, asking for a freeze on foreclosures and wholesale relief for mortgage holders. Bair was receptive, Bautista says. Bernanke was not. Eight months later, when the FDIC took over IndyMac, Bair immediately suspended foreclosures. "Now they're willing to do it," Bautista shrugs. If they'd acted earlier, she says, "all those people who were foreclosed wouldn't have been foreclosed."

In December, a few weeks after the Countrywide protest, she and Gnaizda wangled a meeting with California Attorney General Jerry Brown, asking him to sue Countrywide for defrauding borrowers. He wasn't interested, Bautista says. The following June, a few days before Bank of America bought out the crippled lender, Brown finally filed suit against Mozilo and Countrywide. Gnaizda explains the delay: "Countrywide was not weak in December."

In the meantime, all the major loan providers in the country have agreed to work with Mabuhay to modify individual loans. This means, Bautista says, that Mabuhay can help about twenty people a week. She is far from satisfied. Despite the hundreds of billions of dollars given to the financial industry, no federal or state government has provided any substantive relief to the people hit the hardest by the mortgage crisis--the ones who are losing their homes. "You gotta start from the bottom and go up," Bautista says. "If you start at the top, then at the bottom you get crumbs. You get nothing."

In December Mabuhay sponsored a "foreclosure clinic" at a community college in the San Francisco Bay Area city of Vallejo, which despite its small size--its population is about 112,000--boasted the tenth-highest foreclosure rate in the country at the time. About 150 anxious homeowners showed up, clutching thick folders of financial documents, waiting to speak with mortgage counselors. Their stories were painfully similar: one couple was struggling to pay an interest rate of 16 percent; another was unable to make $4,300 monthly payments and owed $630,000 on a home worth $370,000; another, in their mid-60s, had resigned themselves to losing the home in which they'd lived for twenty-three years and spending their retirement in a motor home.

Standing beside Bautista at the front of the auditorium, Gnaizda did his best to channel the crowd's frustration into action. "Ten million families are facing foreclosure right now," he said. "Change is not going to come about because President Obama wants it to. He is not going to act unless you hold his feet to the fire."

Gnaizda was not alone in that conclusion: other grassroots efforts to stop foreclosures have been sprouting up all over California. In metropolitan Los Angeles and Oakland, groups like ACORN had already established an effective infrastructure to organize low-income homeowners. A list of community demands that came out of a December 2007 ACORN-sponsored meeting at an Oakland senior center became the basis for a July state law requiring banks to warn homeowners thirty days before filing a notice of default. The law is credited with dramatically lowering foreclosure rates in California for two months after it took effect. (Predictably, foreclosure rates resumed their northward climb after that.)

More recently, ACORN has been pushing the adoption of the program the group helped pioneer in Philadelphia, a mandatory mediation process that forces lenders to negotiate with homeowners before filing a judgment of default. "If they can't figure this out in Sacramento," says ACORN's Austin King, "they're not trying."

Much of the local organizing on the issue, though, has not come from the usual activist suspects. Circumstances have forced groups that usually practice more staid forms of engagement into the fray, particularly in the former industrial towns just beyond the urban fringe, which have been among those hit hardest by the economic collapse. The antiforeclosure movement in Antioch, about thirty-five miles east of Vallejo, began with ten people forming an organizing committee at a local Catholic church. "We just heard dozens and dozens of stories of people struggling to keep their homes, of people losing their homes. They couldn't get any of the banks to respond or even speak to them," says Adam Kruggel, executive director of Contra Costa Interfaith Supporting Community Organization (CCISCO). Two hundred and fifty people showed up at the group's first meeting on the issue. "We sort of deputized ourselves," Kruggel says. "The government wasn't regulating the banks, so we were going to embarrass them in public."

The strategy worked. CCISCO protested in front of several Antioch bank branches in May. Lenders soon began returning the group's phone calls and agreeing to renegotiate their members' loans. But the Bush administration's bailout plan generated enough anger that, Kruggel says, "we realized we needed to work on a local and national level. For less than what [the Treasury] gave Wells Fargo, they could create a loan-modification program that could save a million and a half families their homes." CCISCO began coordinating with similar efforts one county over in Stockton and halfway across the country in Kansas City, and the group sent a lobbying delegation to Washington. It's asking for a six-month freeze on foreclosures and a cap on mortgage payments at 34 percent of family income. "Any bank that got any bailout money needs to do systematic loan modifications," Kruggel says. "We're not going to wait for the Obama administration."

Craig Robbins, who directs ACORN's foreclosure campaign, echoes Kruggel's sentiment: "We're excited about some of the things Obama has been saying, but there's got to be tremendous pressure for a real, comprehensive federal solution." Taking cues from Depression-era antiforeclosure movements, ACORN activists began disrupting foreclosure sales at courthouses across the country in Januaary. "We're looking to throw a wrench in the foreclosure machinery," says Robbins, adding that ACORN is planning to organize "rapid defense teams" ready to turn out crowds on short notice to prevent evictions. Until that happens, it might help to remember that the crowd of thousands that came to the Sparanga family's defense in Cleveland didn't gather until four years into the Depression. This one has just begun...

Another Real Estate Crisis is About to Hit

Another Real Estate Crisis is About to Hit


Go To Original

For a picture of the US real estate crisis, imagine New Orleans wrecked by Hurricane Katrina, and before the waters even begin to recede, a second Katrina hits.

The 1,120,000 lost US retail jobs in 2008 are a signal that the second stage of the real estate bust is about to hit the economy. This time it will be commercial real estate--shopping malls, strip malls, warehouses, and office buildings. As businesses close and rents decline, the ability to service the mortgages on the over-built commercial real estate disappears.

The over-building was helped along by the irresponsibly low interest rates, but the main impetus came from the slide of the US saving rate to zero and the rise in household indebtedness. The shrinkage of savings and the increase in debt raised consumer spending to 72% of GDP. The proliferation of malls and the warehouses that service them reflect the rise in consumer spending as a share of GDP.

Like the federal government, consumers spent more than they earned and borrowed to cover the difference. Obviously, this could not go on forever, and consumer debt has reached its limit.

Shopping malls are losing anchor stores, and large chains are closing stores and even going out of business altogether. Developers who borrowed to finance commercial ventures are in trouble as are the holders of the mortgages, derivatives and other financial junk associated with the loans.

The main source of the economic crisis is the infantile belief of US policymakers that an economy could be based on debt expansion. As offshoring moved jobs, incomes, and GDP out of the country, debt expanded to take the place of the missing income. When the offshored goods and services were brought back to be sold to Americans, the trade deficit rose, adding another level of financing for an economy that consumes more than it produces.

The growth of debt has outpaced the growth of real output. Yet, the solution offered by Obama’s economic team is to expand debt further. This is not surprising as Obama’s economic team consists of the very people who brought on the debt crisis. Now they are going to make it worse.

The unexamined question is: Who is going to finance the next wave of debt?

The US budget deficit for fiscal year 2009 already appears to be on a path to $2 trillion, and that is before Obama’s stimulus program. What we are looking at is a $3 trillion budget deficit if Obama’s program is enacted in time to impact the economy this year.

Foreign countries can finance a $500 billion US budget deficit out of their trade surpluses with the US. But foreigners do not have the funds to finance a US budget deficit in the trillions of dollars, and they would not finance such a deficit even if they had the funds. Foreigners are over-weighted in dollar holdings and prefer to lighten their holding than to add to them. America’s economic prospects are dim as are the dollar’s prospects as reserve currency. An annual budget deficit in the trillions of dollars makes the dollar’s prospects appear even dimmer.

The federal government’s likely solution to the debt problem will be to monetize the debt, that is, the government will finance its deficit by printing money. Debt will be inflated away. But for those Americans without jobs or whose incomes do not rise with inflation, life will be cruel.

Life is already cruel for Americans living on retirement savings. Not only has the stock market bust reduced their wealth by half, but also their remaining assets are producing no income. Interest rates are so low that debt instruments produce no income, and there are scant capital gains in the stock market. Retirees are living by consuming their capital.

America’s economic policy of low interest rates and debt expansion bodes ill for everyone living off their savings. Their future prospects are even worse as high inflation will destroy the value of their savings, especially if held in cash or debt instruments, including “safe” US Treasuries.

There are more intelligent ways to try to escape from the current crisis. However, the financial gangsters and their shills that Obama has put in charge of economic policy are thinking only of their own interest. What happens to the American people is not a concern.

A compassionate government would handle the crisis in this way:

The trillions of dollars in credit default swaps (CDS) should be declared null and void. These “swaps” are simply bets that financial instruments and companies will fail, and the bulk of the bets are made by people and institutions that do not hold the financial instruments or shares in the companies. The ideology that financial markets were self-regulating allowed illegal gambling free rein. There is no reason under the sun for taxpayers to bail out gamblers.

The bailout money, instead of being given to favored financial institutions to finance their acquisition of other institutions, should be used to refinance the defaulting mortgages. This would slow, if not stop, the growing inventory of foreclosed properties that is driving down home prices.

The mark-to-market rule should be suspended until the real values of the troubled properties and instruments can be determined. Suspension of the rule would prevent the failure of sound institutions and lessen the need for a bailout.

Interest rates have to be raised in order to encourage saving and to provide incomes to retirees.

To preserve the dollar’s status as reserve currency, a credible policy of reducing both budget and trade deficits must be announced. In the near term the budget deficit can be reduced by $500 billion by withdrawing from Iraq and Afghanistan and by cutting a bloated defense budget that represents the now unattainable goal of US world hegemony.

The trade deficit can be significantly reduced by bringing offshored jobs back to America. One way to do this is to tax corporations according to the value added to their output that occurs in the US. Corporations that produce their products for US markets abroad would have high tax rates; those that produce domestically would have low tax rates.

This approach to the economic crisis stands in marked contrast with the approach of the gangsters running US economic policy. The gangsters are using the crisis as an opportunity to steal from taxpayers and to finance their misdeeds and exorbitant salaries with Federal Reserve loans. Their shills among economists and the financial press tell the people that the solution is to fatten up the banks with funds so they will resume lending to an over-indebted public that will then return to the shopping malls.

This unrealistic approach to a serious crisis indicates a leadership crisis on top of an economic crisis.