Wednesday, July 22, 2009

US bank bailout to cost $23.7 trillion

US bank bailout could cost $23.7 trillion

By Andre Damon

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The federal government’s bailout of Wall Street may cost $23.7 trillion, according to a statement given to Congress Monday by the lead overseer of the Treasury's bailout program. Neil Barofsky, special inspector-general for the Troubled Asset Relief Program (TARP), said that the US Treasury’s bailout program was fraught with “conflicts of interest,” “collusion vulnerabilities” and deliberate obfuscation of what banks are doing with the money they received from the government. He noted that there are 35 major fraud investigations related to the bailout, and that a substantial section of banks did not use their bailout funds to make new loans.

The Treasury immediately denounced Barofsky's findings, claiming the figure of $23 trillion failed to adequately account for repayments on the government loans, which it claimed might actually earn the government money.

Barofsky's report reads more like a police dossier on a money laundering operation than a report on the activities of a government agency. He notes that the Treasury—the branch of government responsible for overseeing a large part of the bailout—has repeatedly opposed calls for more transparency and stricter reporting standards, including those from his office.

The report notes, “TARP has become a program in which taxpayers (i) are not being told what most of the TARP recipients are doing with their money, (ii) have still not been told how much their substantial investments are worth, and (iii) will not be told the full details of how their money is being invested.”

The report notes that in the nine months since the creation of the Troubled Asset Relief Program, “the US Department of the Treasury (“Treasury”) has created 12 separate programs involving Government and private funds of up to almost $3 trillion.” Besides the Treasury's activities, the US government as a whole has created “dozens” of programs, whose “support could reach up to $23.7 trillion.”

While the Treasury has been allocated $700 billion by Congress, the report notes that the Treasury's total potential obligations—arising from the fact that the government has guaranteed banks’ debt in case of losses—totals somewhere between $2.3 and 2.8 trillion. The original Troubled Asset Relief Program has splintered into a dozen programs, including a $218 billion capital injection program known as the Capital Purchase Program (CPP), direct bailouts of individual firms like AIG, and two major asset repurchasing programs, the Term Asset-Backed Securities Loan Facility (TALF) and the Public-Private Investment Program (PPIP), both of which have potential obligations of up to a trillion dollars.

Barofsky noted that one of his initial recommendations was that the “Treasury require all TARP recipients to report on the actual use of TARP funds.... Treasury has declined to adopt this recommendation, calling any such reporting ‘meaningless.’”

The Treasury’s argument, as pointed out by the report, is preposterous. Banks can easily be made to disclose how additional funds affected their decision-making. The Treasury’s obdurance in not insisting that banks disclose what they do with the money is to cover-up the fact that a large number of banks have contracted their lending, raised fees and interest rates on consumer loans, and pursued policies that run dramatically against the needs of society.

In fact, the report found that, of the 300 banks surveyed, 20 percent did not increase their lending after receiving funds, but directed the additional bailout money to other purposes. The report further notes that the Special Investigator’s office is currently investigating 35 cases of fraud and corruption in relation to the TARP program.

Barofsky further noted the Treasury has denied appeals to begin reporting the values of its bailout asset holdings, both in relation to the TARP and PPIP. In the case of the government’s toxic asset buyup program, the report states that this method is explicitly counter to the program’s goals, since “price discovery” for “illiquid secruities” was one of the justifications for pushing through the program.

The report notes that “conflicts of interest and collusion vulnerabilities were inherent in the design of PPIP” from its inception, because the businesses assigned to value illiquid assets would in many cases be the same ones receiving federal subsidies, resulting in an incentive to overvalue securities.

The report repeats allegations that the “Treasury is using TARP to pick winners and losers and that, by granting certain firms the PPIF manager status, it is benefitting a chosen few at the expense of the dozens of firms that were rejected, of the market as a whole, and of the American taxpayer.”

None of this is an accident. It is well documatend that politically connected banks and investment firms, such as Goldman Sachs, have utilized the bailout to drive out their competitors and consolidate their monopoly over the financial system.

Moreover, the government is using the program’s lack of transparency to hide the fact that it is giving banks a free pass now they have returned to profitability. Another oversight body for the TARP, the Congressional Oversight Panel, found this month that the government was receiving only sixty cents on the dollar from banks seeking to repay their obligations to the government.

The report’s estimate of the bailout’s total cost, $23 trillion, is in itself mind-boggling. It amounts to 1.7 times the total Gross Domestic Product of the whole United States. In other words, the product of more than a year’s labor for all American workers is being directly transferred to the banks. To put this figure in perspective, the government’s total outlay for discretionary spending, which includes education, food and nutrition programs and housing and urban development, is less than a trillion a year.

This massive transfer of wealth entails the immiseration and impoverishment of the great majority of society. The bank bailout program is widely reviled, and the bankers who benefited are seen as no better than criminals. All of this has explosive implications. It is in tacit recognition of this fact, and in desire to make the Treasury’s theiving less blatant, that the document warns that the Treasury’s actions “could put in jeopardy the fragile trust the American people have in TARP and, by extension, their Government.”

The bank bailout was designed from the start to enrich the financial elite at the expense of everyone else while being presented as relief for the economic crisis . The program’s favoritism, conflicts of interest, and massive loopholes are not a rough patch in an otherwise sound program, but are essential to its very aim. The whole thing is a crime of historic proportions.

The class issues in the US health care debate

The class issues in the US health care debate

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The Obama administration’s push for health care “reform” has exposed the class realities that dominate American politics and the social interests which Obama defends.

Under Obama, the issue of health care reform has been shifted from providing decent medical care for all to slashing the cost of health care to businesses and the government, primarily by cutting costs for Medicare and fundamentally changing the nature of the Medicare program.

Depending on his audience, Obama at times seeks to conceal the reactionary essence of his proposal by presenting it as a plan to provide health insurance to the uninsured. But even if his plan were enacted in full, it would still leave an estimated 18 million Americans without any form of health coverage.

In a blitz of interviews Monday and Tuesday, Obama refused to endorse a provision of a House version of his health care plan that would impose a small tax surcharge on the rich. Under the House plan, individuals making more than $280,000 a year or families earning more than $350,000—about 1.2 percent of US households—would be required to pay the surtax. For a family making $500,000, the surtax would amount to about $1,500.

The tax surcharge provision was included in a bill passed by a House committee last week, and within days the head of the Congressional Budget Office issued a highly critical report declaring that Obama’s reforms would not slow the rise in health care costs and suggesting a tax on employee health benefits.

This sequence of events was not accidental. The media, speaking for the ruling class, has been overtly hostile to the tax surcharge, complaining that the provision would unduly penalize the rich.

For their part, the Republicans oppose any expansion of government-backed health insurance, and are calling for even more draconian cuts in existing programs.

There was a time when Social Security and Medicare were considered the “third rail” of American politics. “Third rail” refers to the electrified rail on subway train tracks, the implication being that if you proposed cuts in Social Security or Medicare, you were, politically speaking, a dead man.

Now you have a Democratic president and Democratic Congress that are proposing unprecedented cuts and a fundamental restructuring of Medicare, and a proposal to slightly increase taxes on the rich to help pay for the up-front costs of the plan is treated with horror and indignation by the media. Any increase in taxes on the rich is revealed to be the “third rail” of contemporary American politics.

The class priorities are clear in the contrast between Obama’s insistence on reducing health care costs and his policy toward the banks. In testimony Tuesday before the House Oversight and Government Reform Committee, Neil Barofsky, special inspector general for the Trouble Asset Relief Program (TARP), said that the potential cost of the government bailout of the banks could reach $23.7 trillion.

Obama contends that slashing health care costs is the overriding requirement for reducing the budget deficit and restoring the economy. This is universally echoed in the media and the political establishment. No one asks: Why a fundamental social need such as health care? Why not military spending? Or interest payments to the banks on the national debt?

As a result of the administration’s policies—escalating the war in Afghanistan, enlarging the military, doubling the national debt to finance the bailout of the banks—the costs for these budget items are rising at record rates.

There has been an outcry within the political establishment and the media over the estimated $1 trillion price tag over 10 years for the health care plans being debated in Congress. This is approximately equal to the amount allocated annually by the US government in military-related expenditures, which account for about one-third of the entire 2009 fiscal year budget.

The New York Times has been leading the campaign to slash health care costs at the expense of the working class. In a July 20 editorial, it hails Obama’s latest proposal to set up an “independent expert body to propose fair payment rates and other cost-saving reforms for Medicare.” What this will mean in practice is indicated, although in deliberately vague terms, in the remainder of the editorial.

It states: “If the government simply extends subsidized insurance to millions of uninsured people but fails to force fundamental changes in the delivery or financing of health care, then federal health care costs will keep escalating at excessive rates.” The editorial continues: “Medicare ought to be empowered, for example, to reduce its payment rates to the highest-cost hospitals and most inefficient doctors.”

This means, in plain language, that hospitals which spend similar amounts to treat Medicare patients as they do to treat wealthy patients should be penalized and placed at a competitive disadvantage with hospitals that provide cut-rate care to Medicare patients. The “spendthrift” hospitals will be confronted with the alternative of reducing their care for those whose bills are paid by Medicare or going out of business.

And what, precisely, is meant by “inefficient” doctors? This is a code word for those doctors who provide roughly equivalent care—tests, procedures, medications—to Medicare patients as to those able to pay on their own. They too will be faced with the alternative of cutting back on the care for Medicare patients, or being financially penalized.

The Times spells this out when it writes: “That is probably the best way to get them to stop providing needless tests and treatments that don’t improve the health of the patient.”

One should consider the meaning of “needless.” How is this to be determined in advance? The only way to determine with certainty whether a procedure or test is “needed” is if, having been denied a more expensive method of treatment, the patient fails to recover or dies!

The editorial continues, reinforcing the same point: “Medicare should also be allowed to use the results of comparative effectiveness research to set reimbursement policies favoring the best treatments.”

This is nothing other than a demand that Medicare be restructured to become a cut-rate system for providing substandard care to the working class and the poor. In a fundamental sense, this represents the unwinding of Medicare as a system of universal health care for the elderly. When the program was launched in 1965, it was based on the social principle that all elderly people were entitled to the same level of medical care, regardless of their income or socioeconomic status. It is this principle that is under attack by the Times and the Obama administration.

In its place, Medicare is to become a class-based system of reduced care to workers and poor people, while the wealthy will have access to the best treatment.

The Times goes on to make clear its support for proposals to tax employee health benefits, saying, “A tax on employer-provided benefits would probably also encourage workers to choose lower-cost policies, and use health care more sparingly.”

That is, health care is to be rationed to the “rabble” of society, so that the corporations can increase their profits by reducing their health care outlays, while the wealthy continue to enjoy the benefits of a tax system skewed in their interests.

The Times expresses the outlook of contemporary American liberalism and the social layers upon which it is based, i.e., sections of the financial elite and the most privileged layers of the middle class. It articulates the contempt for the working class that the liberal establishment, which supports the Democratic Party and the Obama administration, shares with its Republican counterpart.

GE Promotes Manufacturing Jobs in US, Then Ships 'Em Overseas

GE Promotes Manufacturing Jobs in US, Then Ships 'em Overseas

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Jeffery Immelt, the CEO of General Electric, has led the outsourcing charge in the past. So commentators were shocked last month when, speaking at the Detroit Economic Club, Immelt said that the United States needs to invest in American manufacturing in order to get out of our current economic crisis.

Some companies had gone overboard with outsourcing in the past and now it was time to bring that work back into the United States to create a strong economy, Immelt said at the forum. "This country ought to be, and we can be, not just the world's leading market but a leading exporter as well. GE plans to lead this effort," he said.

Immelt should heed his own advice.

While Immelt was calling for manufacturing to stay in the U.S., his company was at the same time shipping manufacturing jobs overseas by canceling an order with an American-based wind turbine maker, ATI Casting Service in LaPorte, Ind., so that GE could instead buy the parts from a factory in China.

Recently, ATI made $30 million worth of investments to buy, convert, and modernize a shuttered factory in economically ravaged Michigan so the company could provide more parts to GE as the green economy expands with federal stimulus funding. But a Chinese firm underbid ATI, and the factory faced having to lay off 302 union workers and shutter the plant.

In an aggressive bid to keep the factory open, ATI offered to match the price of the Chinese producers. GE once again said they would prefer to buy from China. The ATI plant is now closed, the jobs gone.

After Immelt pledged to create jobs in America, for him to make a U.S. company shed jobs so GE can buy Chinese goods for the same price is beyond hypocritical.

More troubling is the fact that President Obama is receiving his economic advice from people like Jeffrey Immelt. Immelt serves on the president's Economic Recovery Advisory Board, but is doing very little to encourage economic recovery himself. "This is an unacceptable example for the country and the promise that the 'green' economy will lead to a manufacturing revival," said Leo Gerard, president of the United Steel Workers.

Gerard has accused Immelt of being a hypocrite, not just for undermining ATI, but for doing so while raking in millions of dollars in federal stimulus money intended to support a "Buy America" strategy.

It's time that lawmakers put a stop to this madness. Today, the Senate Environment and Public Works Committee is holding a hearing on Capitol Hill with governors and mayors to look at ways the U.S. can adopt a comprehensive manufacturing job policy that makes sure that the green economy keeps jobs here in America. Through a series of measures, including incentives for companies to stay in America, "Buy America" provisions and trade law reform, lawmakers like Ohio Sen. Sherrod Brown are hoping to keep green jobs in America.

The president correctly views the green economy as the pathway to economic recovery. But if the windmills, solar panels and other key building blocks of that economy are made in China, we'll only end up in deeper debt. As Campaign for America's Future fellow David Johnson noted in his blog post "It's the Economic Paradigm, Stupid!" without a new American manufacturing policy there will be no economic recovery. We need to move beyond a bubble economy built on debt and financial speculation and into a real economy that actually makes products.

Honduran Coup Reveals Crisis of Democracy in the United States as Well

Honduran Coup Reveals Crisis of Democracy in the United States as Well

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Three weeks have passed since the military coup d'état in Honduras, yet the United States has failed to join the international community in issuing a clear denunciation of the illegal overthrow of the government of Honduras. Despite a statement by President Obama calling the coup illegal and recognizing Zelaya as the legitimate president, the US State Department refuses to classify what occurred as a coup or to take decisive steps required by law, including cutting off aid to the Micheletti government. The crisis of democracy in Honduras has unmasked a crisis in the United States as well.

In an emergency visit I made to Honduras to accompany social movement leaders, people in Honduras repeatedly told me that if the United States government were truly in favor of democracy, it would send a clear signal of denunciation and the coup would collapse in a day. The failure to do so puts the United States again on the wrong side of history, in a shocking throwback to the era of US-backed military dictatorships and brutal counterinsurgency campaigns of past decades.

Tegucigalpa sat police and military line 4.
(Photo: Lucas / Tom Loudon)

Today's events in Honduras occur in a context of a history of US use of Honduras as a military and intelligence stronghold in the region from which counterinsurgency wars against neighboring Central American countries were launched throughout the 1970's-1980's. During the 1980's, US Ambassador to Honduras John Negroponte masterminded counterinsurgency campaigns in the region and was the virtual commander in chief of the illegal "contra" army operating in Nicaragua.

Many of us working in the region at that time witnessed atrocities carried out on the people of Central America, thanks to massive infusions of US military aid, equipment, direction and training of military leaders at the infamous School of the Americas. In Nicaragua, the contra army waged a relentless campaign of terror on the civilian population from military bases in Honduras under Negroponte's watch. By the end of the decade, US counterinsurgency campaigns in the region had left hundreds of thousands of people missing, tortured, traumatized and dead in the name of "fighting communism."

Bloody man stands over blood.
(Photo: Lucas / Tom Loudon)

It was in this context that the current Constitution of Honduras was written and ratified in 1982. The current Constitution is considered by Honduran social movement leaders to be a document created by the United States. According to them, the Honduran Constitution was written with a twofold intention: to sell all of Honduras and to dismantle the state.

For years, popular movements in Honduras have identified reform of the current Constitution as central to the struggle for social justice and poverty reduction in Honduras. However, this proposition is fiercely opposed by national elites and the United States government which, under the direction of John Negroponte, constructed the Constitution with the intent that it be inalterable.

The "opinion poll" scheduled for June 28, to measure levels of popular support for including a question on the ballot in November to propose a Constitutional Assembly, became the last straw for the oligarchy and the US government. They have for some time felt threatened by Zelaya's anti-poverty initiatives, openness to dialogue with social movements and participation in alternative economic integration efforts such as the ALBA. Despite a supposed change of administration in the United States, the influence of Negroponte and other right-wing extremists seems to be dominating the State Department and US foreign policy, especially in Latin America.

Social Movement Leaders Saw the Coup Coming

In meetings in Honduras, social movement leaders explained that they had seen the coup coming for months. Mr. Zelaya had started his presidency in a fairly normal fashion per Honduran tradition. He is from the Liberal Party, one of the two virtually indistinguishable mainline parties whose candidates always win the Honduran presidency. Robert Micheletti, the current, illegally installed president, is from the same Liberal Party, having lost the primary to Zelaya in the last elections, and was president of the Congress before the coup. Micheletti has wanted to be president for many years, but apparently a coup was the only way for him to achieve his aspiration.

Zelaya, a wealthy rancher and landowner, comes from the political class. After winning the 2005 election, he approached friends in the party to solicit their assistance in using his presidency to improve the situation for the desperately poor Honduras majority. When his ideas did not resonate with those in positions of power, he turned to other sectors of Honduran society who have been working for social justice for decades. Working together with social movements, Zelaya raised the minimum wage and began exploring how to recover state utilities which have been privatized under US-mandated structural adjustment, so called "free trade" and facilitated by the Honduran Constitution.

As Zelaya advocated for changes, he repeatedly found that the Constitution prohibited the measures he was proposing and contained no provision for reforming articles that impede implementation of social justice policies. Looking for a solution to these roadblocks led to the proposal for a non-binding poll of the Honduran people, to test the level of national interest in Constitutional reform, which triggered the coup.

Many believe that the original plan was to attempt the coup on June 25, three days before the poll was to take place. Social movement leaders were concentrated in Tegucigalpa, preparing to assist in the logistics of the voting process. The army had been deployed around the country for days, preparing for a standoff with the president.

Police line at public ministry bulding 7.
(Photo: Lucas / Tom Loudon)

Suddenly, word came from the province of Colon that the UD party candidate for Congress, Fabio Evelio Ochoa, had suffered an assassination attempt. Armed men fired 27 bullets at Ochoa and left him for dead. Five bullets entered his body; however, he survived, thwarting the plan to kill him and divert the social movement leadership away from Tegucigalpa to Tocoa, Colon, to attend his funeral. The coup plotters would have then closed roads, preventing leaders from returning to Tegucigalpa and muting the response to the coup.

President Zelaya responded to the assassination attempt by sending a helicopter to bring Ochoa to the Social Security hospital where he could receive superior medical attention and security. Immediately after the coup, in the early morning hours of June 28, while the coup operation was in full swing, Ochoa was thrown out of the Social Security hospital.

Coup Leaders Mount Internal Crackdown

In a carefully orchestrated campaign to control information, at 5 a.m. on the day of the coup, the military entered nine radio and TV stations in Tegucigalpa to stop transmission. Radio outlets in other parts of the country were forcibly entered and closed as well. There has been a permanent, coordinated attempt to control information inside the country, and prevent news getting out as well. At least one journalist was killed in a drive-by shooting in San Pedro Sula after broadcasting information about the poll and popular resistance to the coup. At least two other journalists were detained by police, dozens have been threatened and some are in hiding. Television crews from Telesur and Venezuelan TV were captured and expelled.

Despite attempts to intimidate and repress popular protest through heavy militarization, curfews, suspension of civil rights, targeted assassinations and over 1,000 detentions, protests have been united, massive and sustained.

On Sunday, July 5, when Zelaya tried to fly back into Honduras; an estimated half a million people held the streets around the airport in what many are calling the largest protest in the history of Honduras. Troops shot and killed two young people who made their way onto the runway. Several others were wounded by bullets. It is reported that 160 high-power shell casings were found at the airport. Crowds defied the 5:30 p.m. curfew imposed as part of the state of siege, staying on the streets all day and all night. At 2 p.m. Monday, the police and military began advancing, firing tear gas and attacking the crowd. The crowd was forcibly dispersed after over 24 hours in the street.

DSCN8550 protesters.
(Photo: Lucas / Tom Loudon)

Last week, two targeted assassinations were reported; social movement leader Ramon Garcia and journalist Gabriel Fino. Arbitrary arrests and targeted assassinations are being used to intimidate social movement leaders, many of whom have suffered detention, torture and violent repression in past decades. Social movement leaders and Zelaya government officials are requesting international accompaniment to protect their personal security.

A campaign of intimidation is also being carried out in rural areas. The army arrives in communities that have staged protests against the coup, surrounding the community and threatening violence against residents. The community of Guadalupe Carney in Trujillo is considered to be in a situation of particularly high risk at this time. Two hundred soldiers have surrounded the community of 600 families named after a Jesuit priest who was disappeared in the 1983 counterinsurgency campaign. This community has mounted ongoing resistance to the coup and fears that community leaders are targeted for assassination.

COFADEH, the Committee of Families of Detained and Disappeared in Honduras, reports that in addition to the militarization of public utilities and agencies, members of the [Battalion] 3-16 death squads responsible for the disappearances of the 1980's are being placed in public positions.

Who Is Really in Charge of US Foreign Policy?

In a flagrant defiance of widespread international condemnation of the coup, including the expulsion of Honduras from the OAS, and United Nations condemnation of the coup, the illegal Micheletti government remains in power, carrying out a campaign of repression and terror directed at journalists, social movements and communities. The government of the United States stands glaringly alone in the international community, refusing to denounce the military coup, campaign of press censorship, widespread violation of human rights and intimidation of the civilian population.

Efforts by the Secretary General of the Organization of American States (OAS) to mediate the conflict have been rejected by the United States in spite of the fact that OAS is the appropriate body to do so. The US has insisted on Oscar Arias of Costa Rica to mediate, confident that he will be more supportive of US positions. Secretary of State Hillary Clinton has apparently indicated that the United States will not support OAS Secretary General José Miguel Insulza for an additional term, sending a message of displeasure with the widespread condemnation of the coup which occurred under his leadership.

As the conflict enters into its third week and negotiations fail to advance, President Zelaya has indicated that he will enter the country secretly and begin governing clandestinely. On Saturday, July 18, Zelaya agreed to accept the seven-point proposal of President Arias to end the crisis. However, the coup government has rejected the first point, calling for the return of Zelaya to the presidency, and saying it needs time to consult on the other points. Faced with yet another breakdown in negotiations, Arias has asked for another 72-hour period to modify his proposal. Without additional external pressures, the coup government will continue to delay, dragging out negotiations in order to run out the clock to the next elections, expand the internal crackdown and wear down internal resistance.

Meanwhile, the social movements of Honduras have announced that they will be back on the streets this week, focusing their mobilizations initially on the National Congress. A national strike has been called for Thursday and Friday. The blackout on media coverage and lack of international observers raise concerns for levels of repression in the next few days.

Police line on Tuesday smudge.
(Photo: Lucas / Tom Loudon)

On Monday, July 20, the European Union announced that it will immediately suspend all aid, the equivalent of US $92 million, to Honduras due to Micheletti's refusal to accept the seven-point plan proposed by President Arias. The EU also stated that it will restrict contact at the political level, suspend member states' bilateral cooperation and consider other targeted measures.

On July 9, US Ambassador Hugo Llorens in Tegucigalpa told an emergency School of the Americas (SOA) Watch delegation that the US had suspended military aid to Honduras as of the moment that Micheletti swore himself in as president. However, three members of the delegation had stopped by the Palmerola military base where over 500 US soldiers are based and "witnessed an apparently normal buzz of activities, including helicopter flights and interchange of Honduran and US soldiers." The delegation spoke with a US official on duty at the base who told them that nothing had changed since the coup.

The US is also still training Honduran military officers at the US Army's School of the Americas in Fort Benning, Georgia, despite the fact that the US Foreign Operations Act requires that US military aid and training be suspended in the event of a coup. Gen. Romeo Vasquez Velasquez, who led the coup against Zelaya, is a two-time SOA graduate and five other generals linked to the coup are SOA grads as well.

A consistent and clear message on the part of the United States, including: an unequivocal denunciation of the coup on the part of all sectors of the US government, recognition of Zelaya as the legitimate president of Honduras, immediate withdrawal of the US ambassador, suspension of military training and cooperation and the restriction of political contact with the illegal government of Micheletti would put an end to events in Honduras, send a message that the era of military takeovers and brute force is over, and put the United States on the side of democracy. The resolute refusal to do so, points to US complicity and tacit support for the coup and the internal crackdown being waged in Honduras and raises questions about who is really in charge of US foreign policy.

Obama Lawyers Shield Cheney on Leak

Obama Lawyers Shield Cheney on Leak

The Obama administration asserted a legal argument that a federal judge called the Jon Stewart “Daily Show exemption,” as the Justice Department continued a court fight to protect ex-Vice President Dick Cheney from disclosures about his role in the leak of a CIA officer’s identity six years ago.

At a federal court hearing Tuesday, Jeffrey Smith, an attorney in the Justice Department’s Civil Division, argued that the transcript of Cheney’s 2004 interview with special prosecutor Patrick Fitzgerald about the CIA leak should remain secret for as long as 10 more years.

Last month, Smith cited the possibility that the transcript’s release might discourage future vice presidents from cooperating with criminal investigations because their words could become “fodder for The Daily Show.”

When Smith revived that argument on Tuesday, U.S. District Court Judge Emmett Sullivan said, “You’re getting back to the Daily Show exemption. You’re not going back there, are you?”

A skeptical Sullivan asked Smith, “How do you distinguish the political fray from the public’s right to know what the government is up to?”

Smith said he was simply arguing that high-level officials like Cheney would be unwilling to speak to criminal investigators if there was a chance that what they said privately would become public. “Presidents don’t really have to cooperate if they really don’t want to,” Smith said.

Last week, Smith argued in court documents that just because Cheney voluntarily agreed to be interviewed by the special prosecutor investigating the leak of Valerie Plame’s covert CIA identity doesn’t mean Cheney “waived any privileges to which he may have been entitled to” since “none of the privileges at issue here was ever his to waive.”

In a footnote contained in a 12-page court filing, Smith wrote, “These privileges belong to the government. The presidential communications privilege belongs to the President; the deliberative process privilege asserted here belongs to the White House; and the law enforcement privilege asserted here belongs to DOJ.

“A government official, even one as senior as the Vice President cannot implicitly waive these governmental privileges by individually submitting to an interview.”

Though Judge Sullivan didn’t issue a ruling in the case, he didn’t appear swayed by the government’s arguments. He said the Justice Department was, in effect, requesting that he “legislate” by issuing some sort of special Freedom of Information Act exemption for vice presidents, which was something “the courts can’t do,” according to a transcript of the hearing.

“What you are asking the court to do is issue a ruling that says every time a special investigator calls a vice president to come down to testify, that information is protected from the public,” Sullivan said.

“No, that’s not it at all,” Smith responded.

Smith said he simply was concerned the transcript would become part of the “political fray” – and that by withholding it for as long as 10 years, its use would be limited to historical purposes.

That argument brought another incredulous response from Sullivan. “Would there be some impediment to putting this information in a time capsule to be examined by future inhabitants of this world?” Sullivan asked. “Where do I draw the line? This happened five years ago.”

The case stems from a FOIA lawsuit filed last year by the public interest group, Citizens for Responsibility and Ethics in Washington (CREW), which is seeking access to Cheney's interview transcript and now has confronted denials from both the Bush and Obama administrations. [For more background on the case, see's "Bush-Cheney Linked to CIA Leak Case."]

Shaking Heads

The resistance from the Obama administration has left some of its supporters shaking their heads. Not only does the obstruction go against President Obama’s pledge of government openness, but it is protecting the reputation of former Vice President Cheney, one of Obama’s most vocal critics.

The administration’s position also seems to equate with cheap partisanship a request for information about a major controversy from George W. Bush's presidency – the leaking of Plame’s covert CIA identity as part of a campaign to discredit her husband, former U.S. Ambassador Joseph Wilson, who was an early Iraq War critic.

In a declaration filed with the court earlier this month, Lanny Breuer, an assistant attorney general for the criminal division, said releasing Cheney’s interview transcript could discourage cooperation from future vice presidents and thus would raise “the specter of the grand jury process” each time there was a demand to investigate “baseless, partisan allegations.”

In last week’s filing, Obama’s Justice Department even took an apparent swipe at the House Oversight Committee, which investigated the Plame leak for the past several years. The filing noted that the Cheney transcript was initially sought by “a congressional subpoena from a committee that appeared to be conducting a contentious investigation of the White House.”

In seeking to block disclosure of the transcript this month, Obama’s Justice Department did reveal some new details about special prosecutor Fitzgerald's interrogation of Cheney. According to one reference in the court filing, Bush and Cheney were in contact about the scandal, including what is described as “a confidential conversation” and “an apparent communication between the Vice President and the President.”

The filing also made clear that Cheney was at the center of White House machinations rebutting criticism from Wilson, who charged in summer 2003 that the Bush administration had “twisted” intelligence to justify invading Iraq in March 2003. While seeking to discredit Wilson, administration officials disclosed to reporters that Wilson’s wife, Valerie Plame, worked for the CIA.

Besides the contacts with Bush, the filing referenced Cheney’s questions to the CIA about its decision to send Wilson to Africa in 2002 to investigate – and ultimately refute – suspicions that Iraq was seeking yellowcake uranium from the African country of Niger.

Cheney was asked, too, about his role in arranging a statement by then-CIA Director George Tenet taking responsibility for including a misleading claim about the African uranium in Bush’s 2003 State of the Union address, and Cheney’s discussions with his chief of staff I. Lewis Libby and other White House officials about how to respond to inquiries regarding the leak of Plame’s identity, the court filing said.

Fitzgerald also questioned Cheney about his participation in the decision to declassify parts of a 2002 National Intelligence Estimate regarding Iraq’s alleged WMD. It ultimately fell to Bush to clear selected parts of the NIE so they could be leaked as part of the White House campaign to disparage Wilson.

Cheney's aide Libby was convicted of perjury and obstruction of justice in the leak case, but his 30-month prison term was commuted by President Bush.

CREW had represented the Wilson’s in a civil lawsuit against Cheney and other Bush administration officials, which Obama’s Justice Department asked the U.S. Supreme Court to reject. The High Court dismissed the case last month.

Judge Sullivan said if he issues a ruling in favor of CREW, he would allow the government to appeal his decision before ordering the release of the transcript.

Towards a Global Currency?

Towards a Global Currency?

Towards the integration of the Dollar and the Euro?

by Michel Chossudovsky

Go To Original

With a view to restoring financial stability, World leaders have called upon the Group of 20 countries (G-20) to instigate a new global currency based on the IMF's Special Drawing Rights (SDRs).

The media has presented the global currency initiative as a consensus building process, in which BRIC countries (Brazil, Russia, India and China) would participate in the revamping of the international monetary system.

Russia and China have put forth "proposals" which have been highlighted as possible alternatives to the dollar. China has proposed the formation of a new global currency based on a reform of SDR system:

"It is a feasible plan to reform the present SDR and make it into a real settlement currency, a universally accepted 'currency basket' that would replace the dollar at the heart of the monetary system," (Li Ruogu, chairman of the Export-Import Bank of China, Reuters, 6 July 2009)

China's proposal does not imply a major shift in global banking arrangements, nor does it open up a window of debate regarding monetary reform.

On the other hand, Russian President Dmitry Medvedev has explicitly questioned the composition of the SDR basket and has called upon the IMF "to expand the currency basket of SDRs to include the Chinese yuan, commodity currencies and gold in order that it matures into a reserve currency."


Global Geopolitics bears a relationship to the international monetary system. Control over money creation is an instrument of economic conquest.

The invasion and occupation of Iraq was to exclude rival Russian and Chinese interests from the Middle-East and Central Asian oil fields.

The reform of the international monetary system is a project of the dominant financial elites, which is discussed behind closed doors. It is unlikely that Russia and China, which in large part remain subordinate to Western banking interests, will perform a significant role in central banking functions at a global level.

Moreover, this initiative occurs at a time of East West confrontation, amidst veiled US-NATO threats directed against Russia as well China. The establishment of a new global currency and central banking system is an instrument of global economic domination which is intimately related to the broader US-NATO military agenda.

While the SDR basket composition could be modified or revised, it is unlikely that the Yuan and the Ruble would be allowed to perform a role as major reserve currencies. What is more likely to occur is the formation of a global proxy currency predicated largely on the Euro and the US dollar. In response to the Dollar-Euro hegemony, Russia, China and the member states of the Shanghai Cooperation Organization (SCO) may decide to develop bilateral trading arrangements in Rubles or Yuan (renminbi).

Special Drawing Rights

SDRs are a composite accounting unit used by the IMF and the World Bank in loan agreements with member countries. The SDR is a basket of essentially four major currencies: the US dollar, the Euro, the British pound and the Japanese Yen.

Composition of basket (value of 1 XDR)
Period Flag of the United StatesUSD Flag of GermanyDEM Flag of FranceFRF Flag of JapanJPY Flag of the United KingdomGBP
1981–1985 0.540 (42%) 0.460 (19%) 0.740 (13%) 34.0 (13%) 0.0710 (13%)
1986–1990 0.452 (42%) 0.527 (19%) 1.020 (12%) 33.4 (15%) 0.0893 (12%)
1991–1995 0.572 (40%) 0.453 (21%) 0.800 (11%) 31.8 (17%) 0.0812 (11%)
1996–1998 0.582 (39%) 0.446 (21%) 0.813 (11%) 27.2 (18%) 0.1050 (11%)
Period Flag of the United StatesUSD Flag of EuropeEUR Flag of JapanJPY Flag of the United KingdomGBP
1999–2000 0.5820 (39%) 0.3519 (32%) 27.2 (18%) 0.1050 (11%)
2001–2005 0.5770 (45%) 0.4260 (29%) 21.0 (15%) 0.0984 (11%)
2006–2010 0.6320 (44%) 0.4100 (34%) 18.4 (11%) 0.0903 (11%)

Source Wikipedia

The IMF has recently presented a plan for issuing debt denominated in SDRs rather than US dollars. The media has heralded this decision as a major innovation, when in fact the Bretton Woods institutions have, for many years, been issuing debt denominated in SDRs.

"Today, the SDR has only limited use as a reserve asset, and its main function is to serve as the unit of account of the IMF and some other international organizations. The SDR is neither a currency, nor a claim on the IMF. Rather, it is a potential claim on the freely usable currencies of IMF members." (IMF Fact Sheet on SDRs)

What would happen if a new global currency were to be devised using the existing SDR framework?

SDRs would no longer be an accounting unit but a unit of currency in a basket. Actual central banking functions, however, would not necessarily be transferred to the IMF, they would remain in the hands of four constituent central banks: The US Federal Reserve, the European Central Bank based in Frankfurt, the Bank of England and the Bank of Japan. I

The IMF is a bureaucracy which serves the interests of major private financial institutions.

While the IMF would formally be responsible for overseeing a global currency, the IMF would not actually be responsible for monetary policy. Under the existing SDR composition, the central banking functions would be divided between four central banks. These central banks are in turn controlled by a handful of private banking interests.

A global currency based on the existing SDR arrangement would not fundamentally change the global monetary order.

The SDR would be a proxy currency. Under the present composition of the SDR, what we would be dealing with is an alliance between US, British, European and Japanese banking institutions, ultimately with the US dollar and the Euro predominating.

Euro-Dollar Rivalry

From the outset in 1999, there has been a clash between the Euro and the dollar. In Eastern Europe, the former Soviet Union, the Balkans extending into Central Asia, the dollar and the Euro are competing with one another. Ultimately, control over national currency systems is the basis upon which countries are colonized. While the U.S. dollar prevails throughout the Western Hemisphere, the Euro and the U.S. dollar are clashing in the former Soviet Union, Central Asia, Sub-Saharan Africa and the Middle East.

Prior to the invasion of Iraq in March 2003, there was a political confrontation between the Franco-German alliance and the dominant Anglo-American military axis.

With the election of pro-US governments in both France and Germany, a political consensus seems to have emerged with regard to the Middle East war. In turn, this consensus regarding the US-NATO military agenda favors greater cooperation and integration between the US and the EU in global financial and monetary affairs.

Would this potential "alliance" between powerful overlapping American, British, European and Japanese banking interests lead to the integration of the Euro and the dollar into a single global currency?

This integration would lead to reinforcing the hegemonic control of a small number of global banking and financial institutions over the process of money creation. This, in turn, would overshadow the functions of national central banks, encroach on the sovereignty of the Nation State and eventually lead to a new phase of the global debt crisis.

Wall Street's Private Judicial System Exposed as a Fraud

Judicial Apartheid


Go To Original

For the past 18 years, a motley mix of corporate law firms, Wall Street powerhouses and private justice providers have been serving up false testimony to the highest court of our land that mandatory arbitration is “inexpensive, fast and fair” and a proper substitute for the public court system. And for 18 years a majority of the U.S. Supreme Court has been cozying up to these brazenly preposterous statements while gutting our Constitution’s Seventh Amendment guarantee to a jury trial. In doing so, wittingly or unwittingly, the Supreme Court had aided and abetted the key linchpin of a wealth transfer system that has brought the nation to its knees.

Today, everything from Wall Street brokerage accounts, employment contracts, credit cards, mortgages, even cell phone contracts have routinely removed the individual’s constitutional right to file a claim in court to seek redress of a grievance or fraudulent action. Instead, the individual’s claim is forced into one of the privately run arbitration organizations where conflicts are rampant, discovery is limited, and the right to appeal is typically impossible because the arbitrators are not required to explain the rationale for their decisions in writing.

In a saner era, these mandatory arbitration contracts would be thrown out by courts as contracts of adhesion because they were offered on a take it or leave it basis. Under any rational interpretation of contract law, contracts must be a meeting of the minds, freely entered into, between parties of equal bargaining power.

But just as profits have been privatized on Wall Street and losses socialized, the right to a jury trial in a court system paid for by individual taxpayers is now increasingly reserved for corporations, not people. It’s a form of judicial apartheid not dissimilar to the way the Supreme Court rationalized the segregation of blacks in its Plessy v. Ferguson decision in 1896, promising “equal” facilities, just separate.

Last week, a lone female state attorney general put the lie to mandatory arbitration. And when she pulled back its dark curtain, what we saw was a grand theft of both justice and wealth perpetuated by the U.S. Supreme Court against the American people.

Lori Swanson, Attorney General of Minnesota, charged the National Arbitration Forum with consumer fraud, deceptive trade practices and false advertising. The National Arbitration Forum is a private justice provider that adjudicates upwards of 200,000 consumer claims a year and acknowledges that it has been appointed as the arbitrator in “hundreds of millions of contracts.”

Swanson’s lawsuit charges that the National Arbitration Forum, which masquerades as functioning like an independent judge and jury, is in fact financially shackled to debt collection law firms representing major credit card companies. The lawsuit states that:

“Beginning in 2006 and through 2007, Accretive LLC…engineered two transactions. In the first transaction, Accretive formed several private equity funds under the name ‘Agora’ (meaning ‘Forum’ in Greek), which in turn invested $42 million in the National Arbitration Forum and obtained governance rights in it. In the second transaction, three of the country’s largest debt collection law firms (Mann Bracken of Georgia, Wolpoff & Abramson of the District of Columbia, and Eskanos & Adler of California) merged into one large national law firm called Mann Bracken, LLP. Accretive then formed and funded (partly using federal money from the U.S. Small Business Administration) a debt collection agency called Axiant, LLC, which acquired the assets and collections operations of Mann Bracken. Through these transactions, the Accretive hedge fund group simultaneously took control of one of the country’s largest debt collectors and became affiliated with the Forum, the country’s largest debt collection arbitration company.”

In announcing the suit, Swanson was joined at the press conference by Richard Neely, retired Chief Justice of the West Virginia Supreme Court of Appeals. One suspects that Mr. Neely, who worked for a brief stint as an arbitrator for the National Arbitration Forum, may have assisted in providing research for the lawsuit. Here are the choice words Mr. Neely had to say about the organization in the September/October 2006 issue of The West Virginia Lawyer:

“A few years ago I answered a request from the National Arbitration Forum to join their panel of arbitrators. I thought I was invited because I was a former state supreme court judge. Stupid me! I was just another piece of raw meat…Thus I learned how Godless bloodsucking banks have converted apparently neutral arbitration forums into collection agencies to exact the last drop of blood from desperate debtors…Banks and other bloodsuckers make campaign contributions and single moms don’t. That accounts for the current Federal system…”

Another insider glimpse at the National Arbitration Forum came on April 2, 2009 when Deanna Richert, a former employee, filed a lawsuit for employment discrimination, deceptive trade practices and consumer fraud in the U.S. District Court for the District of Minnesota. Ms. Richert’s lawsuit alleges:

“During the course of plaintiff’s employment at defendants, she witnessed fraudulent and corrupt practices in the administration of arbitration cases by defendants which draw into question the neutrality of any arbitrator associated in any way with defendants and which practices make any alleged requirement of arbitration fraudulent and unconscionable, and thereby null, void and unenforceable. The NAF and Forthright had regular business users of their arbitration system who were referred to in-house as the ‘Famous Parties.’ These ‘Famous Parties’ were repeat filers for arbitration who did not pay for defendants’ services as they filed like sporadic filers, but used the arbitration service so commonly that they paid on account to defendants. Among the fraudulent and corrupt practices witnessed by plaintiff with respect to these ‘Famous Parties,’ were the following:

Management meetings in which personnel were instructed to call arbitrators and tell them, prior to the release of the decision to the parties to the arbitration, to change decisions they had issued that found against the Famous Parties;

Management meetings in which personnel were instructed to make sure that certain arbitrators who had decided cases against a Famous Party did not get any more cases;

Defendants drafting the claim forms and fictitious affidavits of service for the Famous Parties, including the placement of stored electronic signatures for the Famous Parties on these documents…

Arbitrators calling defendants to ask its attorneys how they should rule on a particular matter…

The disallowance by defendants of responses by consumers to claims filed against them simply because the consumer did not carbon copy the filer of the claim on their correspondence, thereby putting the consumer into default on an arbitration claim they had attempted to answer.”

According to Ms. Richert’s attorney, Daniel E. Warner, a motion to compel the lawsuit “into arbitration is pending in the federal district court, which we are actively resisting.”

Who are these so-called “Famous Parties?” According to Attorney General Swanson’s lawsuit, the National Arbitration Forum has among its clients, MBNA/Bank of America, JPMorgan Chase and Citigroup; those same “infamous” parties deemed too big to fail by the Federal government, thus entitling them to the public purse as a lifeline.

Nine years ago, on March 1, 2000, Caroline E. Mayer, writing in the Washington Post, put the deception of this so-called neutral forum right under the nose of the Supreme Court justices, Congress and the Department of Justice. Ms. Mayer had obtained documents filed in a class action lawsuit against First USA. The documents showed that the bank prevailed in “99.6 percent of the cases that went all the way to an arbitrator” at the National Arbitration Forum. “Since First USA implemented its arbitration clause in early 1998, it has filed 51,622 claims against consumers with the forum. The forum has made 19,705 awards: First USA prevailed in 19,618, card members in 87.”

That did not stop the U.S. Supreme Court from continuing to embrace the virtues of mandatory arbitration. Justice Ruth Ginsburg even gave the National Arbitration Forum a plug in a partial dissenting opinion when she said: Other national arbitration organizations have developed similar models for fair cost and fee allocation. Adding in a footnote: “They include National Arbitration Forum provisions that limit small-claim consumer costs to between $49 and $175 and a National Consumer Disputes Advisory Committee protocol recommending that consumer costs be limited to a reasonable amount. National Arbitration Forum, Code of Procedure, App. C, Fee Schedule (July 1, 2000).”

Ginsburg made her remarks in a case called Green Tree Financial Corp. v. Larketta Randolph where the mandatory arbitration clause left open ended the amount of fees the consumer might have to pay for the arbitration.

Former Chief Justice William Rehnquist wrote the opinion for the court, stating:

“…we have recognized that federal statutory claims can be appropriately resolved through arbitration, and we have enforced agreements to arbitrate that involve such claims…We have likewise rejected generalized attacks on arbitration that rest on ‘suspicion of arbitration as a method of weakening the protections afforded in the substantive law to would-be complainants...’ These cases demonstrate that even claims arising under a statute designed to further important social policies may be arbitrated because `so long as the prospective litigant effectively may vindicate [his or her] statutory cause of action in the arbitral forum,' the statute serves its functions.”

The above twisted logic together with the phrase "liberal federal policy favoring arbitration agreements" has become the mindless mantra of a high court that has evinced willful blindness toward their role of enablers to a creeping corporate fascism.

Particularly egregious in Green Tree was the mountain of evidence the Supreme Court majority ignored. Amici for the respondent, Larketta Randolph, submitted the following facts supporting the charge that

“many individuals asserting statutory claims against corporations have confronted arbitration fees that amounted to thousands of dollars in settings where these fees would discourage the individuals from pursuing those claims: In Brower v. Gateway 2000…an arbitration clause required individuals to pay an advance fee of $4000 (which the court noted exceeded the cost of most of the defendant’s products)…In Patterson v. ITT Consumer Financial Corp….the court found that a borrower would have to pay at least $850 to get a participatory hearing over debts as small as $2,000 and that these fees (along with other procedures) ‘become oppressive when applied to unsophisticated borrowers of limited means…In Cole v. Burns Int’l Sec. Servs…the court noted that arbitrators’ fees range from $500 to $1,000 per day. In Jones v. Fujitsu Network Communications…the Arbitration Policy require[d] Plaintiff to pay one-half of the arbitrator’s fee, the court reporter’s fee, the fee for the arbitrator’s copy of the transcript, and facility costs….In the Matter of Arbitration Between Teleserve Sys., Inc. and MCI Telecomm. Corp…the court noted that the arbitration filing fee alone for the claimant in an antitrust dispute would amount to more than $200,000.”

In September 2007, Public Citizen published a comprehensive 74-page study of mandatory arbitration with a sharp focus on the National Arbitration Forum. The report is titled “The Arbitration Trap.” Among its many startling findings related to the National Arbitration Forum, Public Citizen found that in California between January 1, 2003 and March 31, 2007 “…a small cadre of arbitrators handled most of the cases that went to a decision. In total, 28 arbitrators handled 17,265 cases – accounting for a whopping 89.5 percent of cases in which an arbitrator was appointed – and ruled for the company nearly 95 percent of the time…Topping the list of the busiest arbitrators was Joseph Nardulli, who handled 1,332 arbitrations and ruled for the corporate claimant an overwhelming 97 percent of the time.”

This is known as the “repeat player” defect in arbitration and is one of the darkest secrets among private arbitral forums. Corporate antagonism to a trial by a jury of our peers is the randomness of jury selection. Juries are typically culled from massive voter or motor vehicle registrations. They are not highly paid, repeat players hearing claims involving the same corporation.

And the National Arbitration Forum is not an aberration. On July 20, 2000 the Public Investors Arbitration Bar Association (PIABA) issued a press release accusing the National Association of Securities Dealers (NASD) of rigging its computerized system of selecting arbitrators. The opening text reads as follows: “In direct and flagrant violation of federal law, the NASD systematically evaded the Securities and Exchange Commission approved ‘Neutral List Selection System’ arbitration rule requiring arbitrators to be selected on a rotating basis. Instead, the NASD secretly programmed its computers to select some arbitrators on a seniority basis – just what the rule was designed to prevent.”

The Public Investors Arbitration Bar Association discovered the manipulation when a team of its attorneys demanded a test of the selection system at an NASD/PIABA meeting in Chicago on June 27, 2000. PIABA predicted that “this rule violation tainted hundreds or even thousands of compulsory securities arbitration – many still ongoing. In every such instance, the substantive rights of public investors to a neutral panel have been cynically violated. Many public investors were thus twice cheated: first, by an NASD member firm that fraudulently conned them out of their life’s savings, and second by the NASD Arbitration Department’s rigged panels.”

The industry bias of arbitrators hearing claims against Wall Street firms is legendary. On June 9, 1994, Margaret Jacobs exposed the systemic bias in a feature article in the Wall Street Journal on the case of Helen L. Walters:

“Helen L. Walters says her boss called her a ‘hooker,’ a ‘bitch’ and a ‘streetwalker.’ Sometimes he brandished a riding crop in front of her and once he left condoms on her desk.

Ms. Walters, then a trading-room secretary at a California brokerage firm, filed a complaint against him alleging sexual harassment. In a formal hearing, he readily admitted to the whip and the condoms, and to using all of those epithets. Her case, legal scholars agree, seems a textbook example of illegal harassment as defined by the Supreme Court: a situation in which a ‘reasonable person’ would find the work environment ‘hostile or abusive.’

So why did Ms. Walters lose?

Ms. Walters slammed into a little-known, but extraordinarily daunting, roadblock facing many women in the securities industry: Bias complaints, like any other employee dispute, must go through the industry’s mandatory-arbitration system. That means victims’ complaints can’t be heard in court by judge or jury, no matter how strong their merit.”

Ms. Walters’ case is indicative of the final dark secret that seems to have escaped the U.S. Supreme Court, whose occupants make their deliberations in a taxpayer funded building inscribed with the words “Equal Justice Under Law.” Arbitration cannot be a fair substitute to court because arbitrators are not bound to follow the law or legal precedent. The big lie in Plessy of separate but equal is the big lie in Supreme Court rulings on mandatory arbitration.

In the case of Delfina Montes v. Shearson Lehman Brothers, involving a claim for overtime pay under the Fair Labor Standards Act (FLSA), the lawyer for this Wall Street brokerage firm argued as follows during the arbitration:

“I know, as I have served many times as an arbitrator, that you as an arbitrator are not guided strictly to follow case law precedent… I know it’s hard to have to say this and it’s probably even harder to hear it but in this case this law is not right. Know that there is a difference between law and equity and I think, in my opinion, that difference is crystallized in this case. The law says one thing. What equity demands and requires and is saying is another….You know as arbitrators you have the ability, you’re not strictly bound by case law and precedent. …as I said in my Answer, as I said before in my Opening, and I now ask you in my Closing, not to follow the FLSA if you determine she’s not an exempt employee.”

From defective consumer products, to denial of overtime pay, to gutting the civil rights laws, to unconscionable mortgages, derivatives, obscene rates and bogus fees on credit cards, the corporations have had quite a run over the past decade with their judicial apartheid and anointed blessing of a majority of the U.S. Supreme Court. And just where did it get them? Those with the most egregious mandatory arbitration contracts are either bankrupt or zombie firms struggling for survival on the taxpayer’s dime.

Popular Vision and Vanguardism

Popular Vision and Vanguardism

By Mark Evans

Go To Original

The current economic crisis has dealt a powerful blow to Milton Friedman's socio-economic vision and the dogma, propounded by followers of the Chicago School movement - there is no alternative - that has helped maintain it. [1] As a result people everywhere are more open to consider alternative social systems. This has created a great opportunity for the Left to regain popular support amongst the general public. However, the Left have not been able to take full advantage of the situation due to an inability to address weaknesses in old Left theory and practice. Below I offer some suggestions on how we might transcend these problems and move towards developing a comprehensive program for radical progressive social transformation.

The Masses and the Conscious Minority:

Nowadays the notion of a vanguard is usually associated with Marxism - or more precisely with what are seen as the negative, authoritarian and elitist aspects of Marxism-Leninism. History however reveals that the theory of vanguardism has actually been put into practice right across the revolutionary left spectrum. The anarchist historian Daniel Guerin, for example, writes that "Although he had become an anarchist, Bakunin remained convinced of the need for a conscious vanguard" quoting Bakunin as saying "For revolution to triumph over reaction the unity of revolutionary thought and action must have an organ in the midst of the popular anarchy which will be the very life and the source of all the energy of the revolution." [2]

Both Marxists and anarchists understand that the revolutionary potential resides within the masses. However, they both also recognise that there is an unevenness in the level of class consciousness amongst the masses due to the fact that the dominant ideas in any society are those of the dominant classes. [3] It is the recognition of this reality by Marxists and anarchists that makes them both understand the need for a vanguard of organisers if the revolution is to move in the right direction and be sustained to the point of completion. According to Guerin however, for the anarchists the role of the vanguard is to "enlighten rather than to direct" and it is this strategic distinction, perhaps more than any other issue, that has torn the revolutionary left apart.

Marxist-Leninists argue that a successful revolution requires the conscious minority to organise into a vanguard party which functions along democratic centralist lines. This is necessary, they say, "because the ruling class is highly centralised" and "If you are not symmetrical to your enemy you can never win". [4] They also point out that "History has shown, time and again, that workers rise up spontaneously and, in the process of making a revolution, become conscious as a class", however "History also shows us that workers need a coherent theory and organisation in order to chart their way from their initial uprising to being able to run their own workers' state ..." "The task of a revolutionary party" they conclude "is to provide that theory and organisation." [5]

This strategy is of course highly controversial. For one thing we may not be all that surprised to see that the outcome of a revolution that models itself "symmetrically" on its "enemy" turns out to duplicate many of the horrible social features that were in place during the pre-revolutionary period. This, of course, is what we saw with the Russian Revolution.

Apologists for Bolshevik tyranny may argue that the Russian Revolution degenerated because of external factors - like the resulting civil war and the isolation due to the failure of the revolution to spread to Europe. [6] However, a simple institutional analysis reveals inherent dangers in the strategy of organising the vanguard into a democratic centralist party.

Organising the vanguard into a "highly centralised" party mean institutionalising a hierarchical division of labour. In turn this means that those elected to the centre get to monopolise empowering tasks within the party / movement. As a result of this arrangement any discussions that occur within the party will most likely be dominated by those at the centre. Over time this arrangement will most likely foster an anti-participatory culture as the democratic process becomes ever more meaningless. What we tend to see as an outcome of this strategy is the elevation of a professional-managerial class who come to dominate the revolutionary process whilst the working class continue in their traditional role of carrying-out orders sent down from above.

This is not to say that the external conditions the Bolsheviks were up-against during the Russian Revolution had no negative impact on the outcome of the revolution. Rather, the point is that regardless of external circumstances, the internal dynamic of a vanguard party organised along democratic centralist lines actually reinforce and accentuate the divide between the conscious minority and the masses which invariably lead to new forms of class dominance.

Such an understanding first requires a class consciousness not only of the working and capitalists classes but also that of the professional-managerial class. However, as one commentator has pointed out -
Unfortunately, for all its emphasis on class analysis, Marxism blinded many fighting against the economics of competition and greed to important antagonisms between the working class and the new, professional managerial, or coordinator class. [7]

Another controversial claim made by advocates of the democratic centralist vanguard party is that of the supposedly "spontaneous" nature of the uprisings by the workers. As we have seen this is a crucial part of the argument that justifies the need to organise the vanguard into a party. Presumably this is because organising into a party gives the vanguard much more power over the masses allowing them greater opportunities to overcome inconsistencies within the movement and guidance over the revolutionary process. However, as it turns out, the claim that these worker uprisings are spontaneous is something of a myth - The rural "soviets" that later formed the spearhead for the revolution and land reform in Russia were not creations of Mensheviks or Bolsheviks - who were virtually unknown in the Russian countryside prior to 1917 - but the fruits of decades of organising by different groups of rural Russian libertarian socialists. Nor did the rural soviets spontaneously appear from the untutored consciousness of the exploited peasant "masses" without organisational precedent. Rural soviets only appeared suddenly and acted decisively because the idea of radical land reform had been nurtured for decades in most Russian villages by Narodniki, anarchists, and cadre from the Left Social Revolutionary Party, and because villages with battle-tested leadership already existed to form the backbone of the rural soviets." [8]

Perhaps not surprisingly, and for rather obvious ideological reasons, advocates of Bolshevik style strategy play down or entirely ignore these historical findings. Clearly the fact that the vanguard can so effectively organise without forming itself into a party greatly damages the Marxist argument. As we shall see however, the Marxist argument is to some extent reprieved by the failings of the anarchist proposals.

Whilst the anarchist conception of the vanguard may be seen by some as less controversial than that of the Marxists it has to be said that it has been no more successful in bringing about a social revolution. Inspired by the ideas of Bakunin, the anarcho-syndicalists during the Spanish Civil War, for example, organised themselves into the Iberian Anarchist Federation (FAI) which operated as an ideologically conscious minority inside the National Confederation of Labour (CNT). According to Guerin, however, this anarchist vanguard did not "perform its part of guide very well, being clumsy and hesitant about its tutelage over the trade unions, irresolute in its strategy, and more richly endowed with activists and demagogues than with revolutionaries as clear-thinking on the level of theory as on that of practice." Guerin concludes from all of this - Relations between the masses and the conscious minority constitutes a problem to which no full solution has been found by the Marxists or even by the anarchists, and one on which it seems that the last word has not yet been said. [9]

What is to be (re)Done?

Here I would like to suggest that the main reason for the misguided organising by the Marxists and dysfunctional organising by the anarchists throughout the twentieth century was, to a large extent, due to a lack of any clearly defined long-term objectives. We may speculate further and consider the possibility that if the Marxist and anarchist vanguard had focused their energies more on developing shared vision then the initial split within the revolutionary left may never have occurred.

The split within the revolutionary left was (and still is) essentially over strategy. Marxist and anarchist develop strategy from their understanding of what is wrong with society and therefore focus on what they are against - anti-capitalist, anti-government etc. But if they had also focused their attention on developing shared vision the strategy the vanguard developed would have been informed not only by the reality on the ground but also by their long term vision. We may therefore conclude that the strategy the vanguard developed would have been different.

Take for example the idea of the vanguard party. We have already seen how dangerous this strategy can be when organised along democratic centralist lines. However, we might find that a vanguard party with an internal structure informed by our long-term vision could prove a very effective form of organisation. [10] We may also consider the potential of a network of trade union activists empowered with a shared vision organising inside the labour movement. A network of trade union actives organising inside the workplace along side a political party organising inside the community, both advocating the same long-term objectives, could prove a very powerful force for radical-progressive social transformation.

The addition of shared vision as part of a comprehensive program for social transformation address the weaknesses we identified earlier in revolutionary left strategy. But, perhaps more importantly, a strategy informed by our shared vision will also minimise the dangers of the gap between the conscious minority and the masses increasing and becoming a permanent fixture.

Both political parties and trade union networks could be used, along side others, as vehicles to popularise the vision. As the vision becomes more widely known and understood the gap between the active minority and the passive majority is reduced. Therefore the dynamic of this strategy would be for the vanguard to expand into an ever more popular movement.

Unfortunately such proposals are typically rejected by the revolutionary left. The development of shared vision tends to be dismissed by Marxists on the grounds that it is unscientific and utopian whereas the anarchists tend to avoid such tactics because they see it as inherently elitist and authoritarian. Most people today understand that the dismissal, by Marxists, of developing shared vision is based on the false claim that Marxism is itself scientific. This claim has, for decades, acted as an intellectual barrier to the development of popular vision. But now that Marxism's claim of being scientific has been exposed as mere ideology we can get on with the important task of developing a set of shared long term objectives. Also, as we shall see, developing shared vision does not need to be elitist and authoritarian but instead can be a participatory process based on common sense.

A Common Sense Approach to Developing Shared Vision:

It is fashionable amongst global justice activists to respond to Margaret Thatcher's TINA doctrine - there is no alternative - by asserting, "one no, many yeses" or, "there are thousands of alternatives". However, any serious enquiry into our actual options is likely to reveal that they are a lot more limited than these slogans suggest. [11]

Society is a complicated system. To try and make sense of it we must first break it down into its component parts. For example we can identify a number of "spheres" that go to make-up society - the political, economic, kinship and community spheres. These spheres are present in all human societies and of course exist within the greater ecosystem. We can also identify two fundamental networks that go to make up each sphere. The first is human beings with all our wants and needs, our skills and levels of consciousness. The second are institutions with all of their structures and rules.

Now that we have broken society down into more manageable component parts we need to specify the basic function of each sphere. Take for example the economic sphere. Its primary functions are - production, consumption and allocation. Different economic systems will perform these primary functions in different ways. What determines any diversity of economic systems is the values that underlie the different modes of production, consumption and allocation.

So, we have three primary functions that all economic systems have to perform. We can now ask: What are our options for production consumption and allocation? The following are more specific questions regarding these primary economic functions -

•One obvious arrangement that greatly impacts on the type of economy we end up with is that of ownership. What are our options for ownership?
•Another important issue that determines different economic systems is that of decision-making authority. What are our options for decision-making?
•The question of workplace structure also impacts on the type of economy we have. What are our options for workplace structure?
•We also need to consider differing criteria for remuneration. What are our options for rewarding people for their economic activity?
•One other very important aspect of any economic model is its chosen means of allocating product. What are our options for allocating goods and services?

We can come-up with a number of answers to these questions but the number will be limited. Take for example the question of ownership. There are only three basic options - Private, State or Collective ownership for us to choose from. Or consider our options for decision-making authority. Here, yet again, we can identify three basic options - Autocracy, democratic centralism or self-management. Of course, we have to be open to other new options being proposed in the future, but for now these are our options.

So we can see that our actual options are in fact quite limited. However, they become even more limited when we realise that for our economic model to function each of our answers needs to be compatible with each other. Consider for example our options so far - Ownership - Private or State or Collective?

Decision-making - Autocratic or Democratic centralism or Self-management?

If we choose private ownership we can not then choose self-management as our option for decision-making for the simple reason that they are incompatible - they undermine each other. So whatever answers we give to the above questions they also need to be compatible with each other which reduces our actual options for possible economic systems even further.

At the end of this process we should end-up with a small number of economic models to choose from. Which model we choose will be determined by our values which are commonly held amongst radical-progressives and mostly uncontroversial.

The same process can be employed to develop vision for the other social spheres. However we can not develop vision for each sphere in isolation without consideration of how that sphere impacts on other spheres as well as the ecosystem. Just as each component part of the economy needs to be compatible with each other so too must the different social spheres complement each other as well as be sustainable.

In the first part of this essay I highlighted the point that historically the need for a vanguard was understood right across the revolutionary Left spectrum. I also highlighted the continuing problem faced by the revolutionary Left - whether libertarian or authoritarian - of the role of the vanguard, its form and function, and how it interacts with the general public. I then went on to suggest that a possible reason for this ongoing problem is due to a failure, by the revolutionary Left, to develop shared vision. I argue that the rejection, by Marxists and anarchists, to focus on long term objectives has only helped maintain the original split within the revolutionary Left movement. Finally I sketched out an approach to developing shared vision that could help overcome this historic split. If such an approach did work this could open-up new possibilities for organising a popular movement with a real sense of direction that could become an effective challenge to hegemony.


[1] For a good account of this movement see Naomi Klein's The Shock Doctrine.
[2] Daniel Guerin - Anarchism.
[3] For an account of how this is achieved in contemporary democratic societies see Herman and Chomsky's propaganda model presented in Manufacturing Consent.
[4] Tony Cliff - Marxism at the Millennium.
[5] Lindsey German - Why We Need A Revolutionary Party.
[6] For an example see John Rees's - In Defence of October.
[7] Robin Hahnel - Economic Justice and Democracy.
[8] Robin Hahnel - Economic Justice and Democracy.
[9] Daniel Guerin - Anarchism.
[10] For an example of what this new vanguard party might look like visit
[11] For a more thorough exploration onto developing societal vision see Michael Albert's Thinking Forward available on-line at