Thursday, August 26, 2010

Gov’t aids banks, not homeowners

Gov’t aids banks, not homeowners

Go To Original

On Aug. 20 the U.S. Treasury Department issued a report citing the failure of the federal Home Affordable Modification Program to alleviate foreclosures and keep people in their homes. The HAMP was instituted by the Obama administration with the stated purpose of helping 3 million to 4 million homeowners get loan modifications from their lenders that would allow them to keep their homes.

The foreclosure epidemic ravaging cities and states across the U.S. shows no end in sight, with no real relief available to the vast majority of workers, homeowners and renters. More than 2.3 million households have been forced out of their homes due to foreclosure and repossession by the banks and lenders since the economic crisis officially began in December 2007. A million more will likely be added to those ranks this year, with some economic forecasters predicting 1.5 million additional foreclosures in 2011.

But nearly half of the only 1.3 million homeowners who were accepted into the HAMP have not received permanent loan modifications and face or have gone through foreclosure.

According to the Treasury report, about 48 percent of those who had enrolled in the program since March 2009 — some 630,000 homeowners who tried to get their monthly mortgage payments lowered to 31 percent of their gross income — have been cut loose through the end of July. Only 32 percent of those who started the program have been able to get permanent loan modifications to save their homes. (Associated Press, Aug. 20)

In Michigan, one of the states deeply impacted by the racist subprime mortgage catastrophe and the ensuing record rate of foreclosures and evictions, the “Helping Hardest Hit Homeowners” program started on July 12 with the stated goal of keeping unemployed homeowners out of foreclosure.

New foreclosures in the state are skyrocketing as layoffs, plant closings and unemployment soar. The city of Detroit has been particularly devastated.

The program was supposed to utilize $154.5 million in federal funds from the U.S. departments of Treasury and Housing and Urban Development to pay up to half of a home mortgage, up to $750 per month for one year, for laid-off workers who are drawing unemployment benefits. On Aug. 13 it was announced the state would receive an additional $128 million for the program.

Untold thousands in Michigan, like millions of workers around the country, have exhausted their unemployment benefits and/or are no longer “counted” as unemployed because they have given up searching for jobs during this period of economic contraction for workers. So they don’t even qualify for the “Helping Hardest Hit” program, which was supposed to help only 17,000 unemployed homeowners in the state.

But for those unemployed workers who might qualify, the Michigan program has also proven to be a failure. Why? Because most banks and lenders have refused to participate. Not a single one of the major lenders has signed on to the program. Even Gov. Jennifer Granholm was recently forced to admit this.

Exposing gov’t complicity

in foreclosures

Instead of using her executive authority, however, to place a moratorium or freeze on foreclosures or mandate the banks to participate in the program, Granholm is urging unemployed homeowners to “call their lenders.” It is a long-established fact that homeowners do not obtain mortgage relief by “calling their lenders.”

The Detroit-based Moratorium NOW! Coalition to Stop Foreclosures, Evictions and Utility Shutoffs has been in the forefront of exposing the reasons why the federal HAMP and Michigan’s “Helping Hardest Hit” programs have failed.

Coalition leader and anti-foreclosure attorney Jerry Goldberg first exposed the debacle of the federal government’s program in a Workers World article entitled “Millions more to lose homes: Gov’t continues to bail out bankers, not homeowners.” (Dec. 31, 2009)

Goldberg was heard Aug. 16 on WDET public radio slamming the banks and lenders and the federal government for their complicity in tossing people out of their homes. “There’s no stick involved,” said Goldberg. “Instead of saying we’re not going to allow foreclosures unless the banks participate in the programs, [the government] simply depends on the goodwill of the banks — the same banks that make money off foreclosures ... and the same banks that get subsidized with every foreclosure. ... At the root of this crisis is that there’s a bailout going on with virtually every foreclosure.”

Goldberg explained how a majority of mortgages in the U.S. are now owned or backed up to their inflated, pre-foreclosure value by the federal government entities of Freddie Mac, Fannie Mae and HUD.

“Already $145 billion has been paid out by the taxpayers to the banks through Freddie and Fannie to cover losses on bad loans. The total bill is anticipated to reach $389 billion. This means that every foreclosure in essence constitutes a bailout to the banks, which are paid off for the full value of the inflated loan — a loan foisted on homeowners by the predatory and fraudulent practices of these same banks. The lenders are actually being rewarded for not modifying loans.” Goldberg told Workers World.

“The government, instead of helping homeowners keep their homes, carries out most evictions now, and then the home is sold at a minimum price; in Detroit, for example, homes are sold at about 10 percent of a loan’s value, with the taxpayers making up the difference. The federal and state governments have the authority, however, to put a halt or moratorium on foreclosures, to mandate that banks modify loans and allow people to reclaim their homes at real value and based on payments that they can afford.

“It will take a continued struggle to wrest a moratorium — which doesn’t cost a dime — from the politicians who represent banks instead of people.”

The Failure Of European Austerity Is Going To Be A Huge Story This Fall

The Failure Of European Austerity Is Going To Be A Huge Story This Fall

Go To Original

Back in December of 2009 we predicted that the possibility Euro breakup would be THE big story of 2010, and through the first half of the year it definitely was. The Eurozone didn't breakup, but the seriousness with which people were talking about this possibility would have shocked just about anyone for most of last year.

But the acuteness of that crisis faded thanks to ECB intervention and the drive for austerity among the PIIGS.

Except now it's looking more and more like austerity may be a flop. See, everyone expected that austerity would be an economic drag. What they didn't expect is that austerity would worsen sovereign balance sheets (or at least not improve them).

Of course there were warnings. Ireland was an early austerity adopter and it did squat. Richard Koo has been slamming the austerians, using the Japanese lesson, for some time.

And now we're getting results from the recent wave, and so far they're not that encouraging -- in fact, Moody's is now warning that austerity will make the sovereign credit worse in many situations (though of course they're behind the ball, as bond spreads in Ireland and Greece are now showing).

If these initial results hold, this will definitely pose a policy dilemma. In theory it should cause people to question their previous assumptions, though it's hard to say what will happen. Most likely the pro-austerity camp will simply double down on their calls, claiming governments aren't going far enough.

Add into the mix a likely GOP win, and we'll be seriously debating the same questions in the US, making the European experience all the more relevant.

It should be interesting to see how it plays out, to say the least.

July Home Sales Drop 27% And Its Only Going To Get Worse For The U.S. Housing Industry

Home Sales Drop 27 Percent In July And Things Are Only Going To Get Worse For The U.S. Housing Industry

Go To Original

On Tuesday the National Association of Realtors announced that existing home sales in the United States dropped a whopping 27.2% in the month of July. The consensus among analysts was that we would see a drop of around 13 percent, so when the 27 percent figure was announced it sent a shock through world financial markets. To say that the real estate industry is alarmed by these numbers would be a tremendous understatement. What we are seeing unfold is essentially "Armageddon" for those involved in the housing and real estate industries. The real estate market is grinding to a standstill and a shockingly low number of people are actually in the market to buy a home right now. In the months ahead home sales may pick up a little bit, but only if housing prices start to fall. Why? Because right now there are tons of houses on the market and there are very few qualified buyers available to purchase them and potential buyers are starting to realize this. Buyers are beginning to understand that they have all the leverage now and they are waiting for prices to fall.

Anyone who has taken Economics 101 in college knows that when supply is high and demand is low prices will fall, and that is exactly the situation we have in the U.S. housing market right now.

At the moment, most home sellers in the United States are very hesitant to lower the prices on their homes too much. Many have no intention of selling their homes below what they originally paid for them, and many others truly believe that the housing market will eventually rebound.

But the truth is that housing prices are simply not going to rebound to 2006 levels. If anything, they are going to continue to fall.

The following are the three basic points that every American needs to understand about the U.S. housing market right now....

1) There Is A Gigantic Mountain Of Unsold Homes On The Market

There are a staggering number of unsold homes on the market right now. As you can see from the chart from the Calculated Risk blog below, there is now over a year's worth of unsold homes flooding the marketplace....

So who is going to buy all of those unsold homes with so few qualified purchasers in the marketplace?

That is a very good question.

Unfortunately, all the signs indicate that the glut of unsold homes is going to get even worse.

As of this March, U.S. banks had an inventory of 1.1 million foreclosed homes, which was a new all-time record and which was up 20 percent from one year ago.

And the tsunami of foreclosures and repossessions just keeps growing....

*One out of every seven mortgages were either delinquent or in foreclosure during the first quarter of 2010.

*According to RealtyTrac, a total of 1.65 million U.S. properties received foreclosure filings during the first half of 2010.

*U.S. Banks repossessed 269,962 U.S. homes during the second quarter of 2010, which was a new all-time record.

The supply of unsold homes is already incredibly massive and it is growing at a staggering rate.

With such a flood of homes on the market, why in the world would anyone in their right mind pay a premium price for a home in 2010?

2) There Are Not Nearly Enough Qualified Buyers Seeking To Buy Homes

The banks and lending institutions that survived the subprime mortgage crisis of 2007 and 2008 learned some very valuable lessons. The days when even the family dog could get approved for a home loan are long gone. Now the pendulum has swung to the other end of the spectrum. Fearful of making more bad loans, banks and lending institutions have really, really tightened up lending standards. So a lot fewer people are getting approved for home loans these days.

That makes a lot of business sense for banks and lending institutions, but it also means that there are a lot fewer qualified buyers out there looking for homes.

Not only that, but millions of Americans who could potentially buy homes are waiting for the market to go down even further.

When you add that all together, you get the kind of home sales numbers discussed at the beginning of the article.

The Mortgage Bankers Association recently announced that demand for loans to purchase U.S. homes has sunk to a 13-year low. Unless the number of Americans getting approved for home loans starts increasing, you simply are not going to see housing numbers recover much.

And the truth is that Americans are not even doing much browsing for homes right now. Even Internet searches for homes are way down. Internet searches on real estate websites are down about 20 percent compared to this same time period in 2009.

So with a massive flood of houses on the market and with very few qualified buyers to purchase them, how in the world are housing prices supposed to go up?

3) The Housing Industry Will Never Fully Recover Without A Jobs Recovery First

In order to get qualified for home loans, Americans have to have good jobs first. But in this economy that is a huge problem.

Robert Dye, a senior economist with PNC Financial Services Group, recently told USA Today what he believes the bottom line problem of this housing crisis is....

"Jobs, jobs, jobs"

Today, 14 million Americans are unemployed and millions more are underemployed. Unfortunately, there are not nearly enough good jobs for all of them.

Today it takes the average unemployed American over 8 months to find a job. The number of Americans receiving long-term unemployment benefits has risen a staggering 60 percent in the past year alone.

Things have gotten so bad that according to one recent survey 28% of all U.S. households have at least one person that is searching for a full-time job.

To get an understanding of how horrific the unemployment situation has become in the United States, take 38 seconds to watch the incredible video posted below....

The truth is that without jobs, Americans simply cannot buy homes.

So is there any hope that we will see a robust jobs recovery any time soon?

Well, as I have written about previously, unfortunately there is every indication that the employment market is going to get even worse.

So the bottom line is that the housing market is going to continue to suffer.

There is going to continue to be a massive glut of unsold homes on the market.

There are going to continue to be very few qualified buyers in the marketplace.

Large numbers of Americans are going to continue to be unemployed.

Yes, that is a lot of bad news, but you aren't reading this column to get the same kind of mindless optimism that you get from the mainstream media news.

Record drop in US home sales

Record drop in US home sales

Go To Original

Sales of existing US homes in July plunged by a record 27.2 percent from the previous month, according to a report released Tuesday by the National Association of Realtors.

The virtual collapse in home sales affected every region of the country and was more than twice as bad as anticipated by economic analysts, who had forecast a drop of 12.1 percent. Sales fell to 3.83 million units, compared to June’s downwardly revised figure of 5.26 million.

On a year-over-year basis, existing home sales in July were down 25.5 percent from an annual rate of 5.14 million units in July 2009.

The July figure was the largest monthly drop since records began in 1968. It brought the rate of US home sales on an annualized basis to the lowest level since 1995.

Home sales fell 29.5 percent in the Northeast, 22.6 percent in the South, 25 percent in the West and 35 percent in the Midwest. The link between the housing collapse and the social distress caused by long-term mass unemployment was underscored by two pieces of data: nearly a third of the homes sold were distressed properties, and sales tumbled particularly sharply for homes in the lower to mid-priced ranges. In the Midwest, sales of homes priced between $100,000 and $250,000 plunged nearly 47 percent.

The July figure marked the third consecutive monthly decline since the April 30 expiration of a federal tax credit for home-buyers. The impact of the termination of the tax credit on the housing market has been compounded by the soaring number of foreclosed homes and the rising rate of mortgage payment delinquency.

Home foreclosures are running about ten times higher than before the housing bust of 2007. A survey released last week by Deutsche Bank showed that the rate of serious mortgage payment delinquency (more than 90 days) in the average US congressional district has nearly tripled from the time of the 2008 election.

The realtors’ report also recorded a sharp rise in the inventory of unsold existing homes in July. At the end of the month, 3.98 million homes were available for sale, which translates into a 12.5-month supply, up from 8.9 months in June and the highest level in over a decade. A six-month supply of available homes is considered a healthy level.

The disastrous home sales report is consistent with dismal reports last week on housing starts and new housing permits and other data, including a nine-month high for initial jobless benefit claims, which reflect a sharp contraction in economic growth and point to a further rise in unemployment, already near Depression levels.

Most economists believe that when the Commerce Department issues its revised estimate for second quarter US economic growth on Friday, it will downgrade the figure from the 2.4 percent it reported last month to 1.3 percent. Even this grim prediction may be overly optimistic. For the past several weeks, virtually every economic indicator has been worse than economists’ forecasts.

Dan Greenhaus, chief economic strategist for Miller Tabak & Co., spoke in a research note Tuesday of a “near, if not outright, collapse in housing.”

Paul Dales of Capital Economics said, “It is becoming abundantly clear that the housing market is undermining the already faltering wider economic recovery. With an increasingly inevitable double-dip in housing prices yet to come, things could get a lot worse.”

In a note analyzing the housing numbers, Nigel Gault, chief US economist for HIS Global Insight, wrote, “A sustained upturn [in the housing market] will depend on an improvement in the jobs market, which at the moment is slowing down rather than gathering pace.” He added, “There is no sign of any underlying recovery despite rock-bottom interest rates.”

The average rate for a 30-year fixed mortgage has sunk to 4.42 percent, the lowest rate in decades. That home sales continue to plummet despite such attractive rates underscores the depth of the economic crisis and absence of any real recovery. Workers who would otherwise be in the market are not buying either because they have lost their job or they fear joining the jobless ranks. Banks have also tightened their requirements and cut back on loans.

Stock markets around the world fell sharply on the latest sign of a slowdown in the US economy. Asian stocks, which fell Tuesday morning, in part in anticipation of the US housing report, resumed their decline on Wednesday. European stocks fell by more than 1 percent Tuesday, as did US stocks. The Dow Jones Industrial Average lost 133 points, a decline of 1.3 percent. The Standard & Poor’s 500 index and the Nasdaq fell even more sharply on a percentage basis. It was the fourth consecutive decline on Wall Street.

Other global indicators pointed to an erosion of confidence and mounting fear of a “double-dip” recession. Crude oil prices fell below $72 a barrel, their lowest level in eleven weeks. Gold for December delivery closed $4.90 higher at $1,233.40 an ounce at the Comex division of the New York Mercantile Exchange. The yield on ten-year US Treasuries fell to 2.499 percent, reflecting a “flight to safety” by big investors.

Neither the Obama administration nor its Republican opponents are proposing any serious measures to create jobs or provide relief for the more than 20 million workers who are either unemployed or underemployed. The Democrats and Republicans differ only on the most effective tactics for imposing the full burden of the capitalist crisis on the working class.

On Tuesday, John Boehner, the leader of the Republicans in the House of Representatives, made a demagogic speech in which he attempted to present himself as the advocate for unemployed and economically threatened working people. He denounced Obama for failing to stem the jobs crisis and called for the resignation of Obama’s top economic advisers, Treasury Secretary Timothy Geithner and Lawrence Summers, the director of the White House National Economic Council.

However, his only concrete proposal was to extend the Bush tax cuts for the wealthy—the 2 percent of households making more than $250,000 a year. He also criticized the extension of federal emergency jobless benefits and the $26 billion in federal aid to the states recently passed by Congress.

In response, the Democrats, speaking out of both sides of their mouths, sought to foist the blame for mass unemployment and growing poverty on the Bush administration, while touting the supposed “success” of Obama’s economic policies. Vice President Joseph Biden said that Obama’s 2009 stimulus package was “working to rescue the economy from eight years of failed economic policy and rebuild it even stronger than before.”

Speaking from the exclusive Massachusetts resort island of Martha’s Vineyard, where Obama is vacationing, White House deputy press secretary Bill Burton said Boehner “would fire the very people who helped to make the tough decisions, who helped to do the hard work to get our economy moving in the right direction again.”

Those “tough decisions” include the multi-trillion-dollar bailout of the banks, the forced bankruptcy of General Motors and Chrysler, liquidation of tens of thousands of auto jobs, and imposition of a 50 percent cut in newly-hired auto workers’ wages, as well as the rejection of any further stimulus measures and focus instead on deeper cuts in social programs.

Biden cited Obama’s auto policy as an example of successful “innovation.” The essence of this policy is to keep unemployment painfully high and use it as a bludgeon to permanently reduce the wages and living standards of the American working class, narrowing the differential between US workers and super-exploited workers in China, India and other “emerging economies.” On this basis, the Obama administration is seeking to revive US manufacturing as a cheap-labor platform for export to global markets.

US to spend $1.3 billion on Afghanistan bases

US to spend $1.3 billion on Afghanistan bases

Go To Original

The Pentagon is embarking on a major base construction effort in Afghanistan even as Obama administration and military officials are making it clear that the US “surge” will last well past the July 11 deadline for beginning a drawdown of US troops.

The Washington Post reported Monday that the US Congress is preparing to pass legislation providing “$1.3 billion in additional fiscal 2011 funds for multiyear construction of military facilities in Afghanistan”. These funds would cover, in part, $100 million expansions for each of three major US air bases in different parts of the country.

These projects, the Post stated, are indicative of plans “to support increased US military operations well into the future.”

A notice seeking contractor bids placed on a US government web site last week maps out plans for the expansion of one of these US bases in Shindand, an airfield in western Afghanistan that had been used by the Soviet Army during its occupation of Afghanistan more than two decades ago.

The project is to include new runways, hangars, barracks, storage areas, a “weapons arming area” and other facilities. They are being built to accommodate the Special Operations troops used by Washington to carry out “targeted killings,” i.e., assassinations, which have become a key component of the US war. They will also house a unit operating pilotless drone aircraft for purposes of “Intelligence, Surveillance & Reconnaissance” as well as missile attacks.

The request for bids states that the contract will not be issued until January of next year and that the job itself will not be completed until at least a full year after that, i.e., January 2012, six months after the deadline set by President Barack Obama for the beginning of the drawdown of US troops from Afghanistan.

The House of Representatives and the Senate Appropriations Committee have already approved the $1.3 billion base construction package, which is awaiting only a vote by the full Senate.

This money does not include another $5.3 billion in allocations for the construction of new facilities for the Afghan security forces, the Post reports, citing a Pentagon news release stating that most of these “enduring facilities [are] scheduled for construction over the next three to four years.”

Also to be expanded with the $1.3 billion appropriation is Camp Dwyer, a Marine base and air field in Helmand province. A Pentagon document justifying the expenditure to Congress describes the facility as “a key hub” for special forces operations in southern Afghanistan, the scene of ongoing US offensives in both Helmand and Kandahar provinces. The base is to be expanded to accommodate more helicopter and fixed-wing aircraft for expanded attacks on Afghan villages.

The third facility set for a $100 million expansion is at Mazar-e Sharif, Afghanistan’s fourth-largest city and the capital of Balkh province in the north. The project, the Pentagon told Congress, was needed “in order to expand major logistical and combat support operations into the region.”

Meanwhile, other major US military facilities continue to expand exponentially. Among them is the Kandahar air base just outside the city of Kandahar, which is being targeted for a major military offensive.

Last month, Time magazine published a profile of the Kandahar facility, describing it as “a small Western city in the Taliban heartland” housing some 25,000 troops and contractors. With an average of “5,000-plus military and commercial takeoffs and landings a week,” Kandahar has become “the busiest military base in the world today,” according to the report. The base’s 10-mile security perimeter requires substantial forces to patrol. Armed opposition groups have staged repeated attacks, wounding scores of military and civilian personnel over the past year.

While President Obama insisted when announcing his plans for an Afghanistan “surge” that the US had no intentions of permanently occupying the country, the base construction proposals suggest the opposite. Plans are being implemented based on the assumption that US military forces will be fighting there for years if not decades to come. This protracted war is being waged not to defeat “terrorism” or promote democracy in Afghanistan, but to secure US hegemony in the energy-rich and geo-strategically vital region of Central Asia.

Even as the latest polls indicate that at least 60 percent of the US population opposes the Afghanistan war and seven out of ten do not believe it can be won, top administration and military officials made a series of statements Monday all driving home the same message: do not expect any rapid withdrawal to begin with Obama’s supposed deadline in July 2011.

Speaking to the Veterans of Foreign Wars convention in Indianapolis Monday, Vice President Joseph Biden stressed that the US war in Afghanistan is “only beginning with the right general and the right force.”

“We are not leaving in 2011,” Biden insisted. “We are beginning the transition.”

The top US commander in charge of training Afghan security forces spoke at a Pentagon briefing Monday, stressing that this “transition” is still a long way off. Lt. Gen. William Caldwell told reporters that it would take at least another year to recruit a sufficient number of Afghan soldiers and police.

The Associated Press commented: “Caldwell’s assessment is likely to help dim hopes among Democrats that the planned US withdrawal next year will be significant in size.”

The American general spelled out the immense difficulties confronting the US occupation as it attempts to set up a viable puppet Afghan force. The military newspaper Stars and Stripes quoted him as saying that the illiteracy rate among Afghan recruits is over 85 percent and the attrition rate among some units is well over 50 percent.

“We really don’t know where they go to, to be completely honest. It’s difficult to track over here,” said Caldwell. Many of these Afghan soldiers disappear shortly after completing 17 weeks of training.

Caldwell said that to bring the Afghan security forces up to a proposed head-count of 305,000, another 56,000 recruits were needed. But, because the desertion rate is so great, it would be necessary to put another 141,000 through training. He said that the target date for meeting this goal was October 2011.

Asked how this October 2011 goal squared with the July 2011 deadline set by Obama, Caldwell stressed that the Afghan forces would not be able to operate independently any time soon. “We have not even finished building the Afghan National Army or the police force or the air force, at this point,” he said. He added that for Afghan troops to operate on their own, “key enablers,” including logistics, maintenance, transportation, and intelligence units would have to be in place. “None of those organizations have been built and brought online,” he said.

The top US commander in Afghanistan, Gen. David Petraeus, gave an interview in Kabul to the BBC Monday stressing that the July 2011 deadline would not be a fundamental turning point. “That’s a date when a process begins—nothing more, nothing less,” said Petraeus. “It is not the date when the American forces begin an exodus and look for the exit and the light to turn off on the way out of the room.”

The general continued: “It’s a date when the process of transition of some tasks to some Afghanistan forces—in those areas where conditions allow it, and at a pace allowed by the conditions—that’s what begins then.”

Petraeus’ comments were the latest in a series of media appearances in which he emphasized that any US troop drawdown would depend on military “conditions on the ground.”

The general has coupled the clear warning that the Afghanistan “surge” will continue well after next July with claims of progress in the US war against the Afghan resistance. He told the BBC that “the momentum that the Taliban have established over the course of recent years has been reversed in many areas of the country.”

In the face of continuing high casualties, he added, “It gets harder before it gets easier.” Four US soldiers were killed in Afghanistan on Sunday and another four NATO troops, one of them reportedly American, were killed on Monday.

Petraeus’ feigned optimism notwithstanding, the crisis and contradictions confronting the US occupation appear to be deepening.

Over the weekend, Afghan President Hamid Karzai reiterated his order banning the operation of private security contractors inside the country, giving them four months to leave.

In an interview on ABC Television’s “This Week” program, Karzai charged that the contractors were destabilizing the country by “running a parallel security structure to the Afghan government.” He accused the contractors of “looting and stealing from the Afghan people” and “causing a lot of harassment to our civilians.”

The “surge” of private security contractors into the country has paralleled that of the US military. Contractors now outnumber US troops in Afghanistan.

Directed by US mercenaries, the security contractors employ as many 50,000 Afghans. They have been accused of killing Afghans with impunity as well as making payoffs to the Taliban and other armed anti-government groups to protect convoys bringing supplies to US forces from attack.

The Defense Department employs some 17,000 private security contractors in the country, a five-fold increase in their number since the beginning of 2009. The State Department employs thousands more.

Karzai said that he would exempt from his order those security contractors “providing protection to embassies and to aid organizations within their compounds and who escort diplomats or representatives of foreign governments in Afghanistan from place to place.” He himself is guarded by private mercenaries.

Last June, the State Department signed a $120 million contract with the notorious Blackwater group, now rebranded as Xe Services, to provide protection for its regional offices in Afghanistan, while the CIA signed a $100 million deal with the company to provide security at its Kabul station.

The firm earned international infamy after its mercenaries massacred 17 Iraqi civilians in 2007 in Baghdad’s Nisour Square.

The State Department announced Monday that it had reached an administrative settlement with Blackwater under which the company will pay a $42 million penalty for violating hundreds of export rules over the past seven years, including making illegal arms shipments to Afghanistan. Two former Blackwater mercenaries still face federal murder charges for killing two Afghans civilians. Several former company executives have been indicted on criminal charges.

“War on Terrorism” Propaganda Ratcheted up Ahead of War Escalation

Masterminds, Mosques and Mass Insanity: “War on Terrorism” Propaganda Ratcheted up Ahead of War Escalation

Go To Original

Exemplified by the furor over the so-called “Ground Zero mosque” in New York, and rumors of a new Al-Qaeda “mastermind”, 9/11 “war on terrorism” propaganda has been ramped up to deafening levels by various political factions.

Nearly a decade since Bush/Cheney’s 9/11 false flag deception, a fearful, self-destructive American mass public remains fully brainwashed by “war on terrorism” deception--- ignorant of history, and militantly oblivious to facts.

“Ground Zero mosque”: the art of missing the point

The ludicrous uproar over plans to build a Muslim community center in New York, the so-called “Ground Zero mosque” has dominated mainstream corporate news headlines. Political players from all sides, including President Barack Obama have joined the fray, attempting to prove themselves the superior “anti-terrorist”, or the better “commemorator of 9/11, when 3,000 people were killed by Muslim terrorists”. The right-wing is going berserk, gleefully.

Heated arguments have exploded around religion, tolerance, democracy, etc.---everything except the only fact that matters: 9/11 was a false flag operation, courtesy of the Bush-Cheney administration, carried out by an elite consensus, in order to justify the “war on terrorism”, and everything that came with it. Mass murder. Unending resource conquest. A police state within US borders. Open criminality.

The perpetual threat posed by a fabricated outside enemy, and a militarized, fearful populace, remain the centerpieces of elite policy, and they have been consistently maintained by both Bush/Cheney and Obama administrations. The demonization of Muslims continues to facilitate pillage.

While violent hatred continues to be directed at Muslims (and all “foreigners”), the criminals who truly massacred 3,000 people in the World Trade Center continue to enjoy power, wealth, and high positions of world “leadership” and remain in control of virtually every aspect of society. Those who perpetuate the cover-up (including the Obama administration) still “run the world”, to mass public enthusiasm.

As the “Ground Zero mosque” mushrooms into a full-blown election year battle cry by one faction or another, not whisper of truth appears in any corporate media coverage. Meanwhile, the exhaustive and available information thoroughly exposing and destroying the official “war on terrorism” narrative is unknown to a minority of people whose critical faculties remain intact.

Mike Ruppert’s Crossing the Rubicon exposed why and how 9/11 was likely carried out by Bush/Cheney. Michel Chossudovsky’s America’s “War on Terrorism” thoroughly exposed the 9/11 deception, as well as the fact that 1) the “war on terrorism” is a fabrication that serves as the eternal pretext for global war, and that 2) “Al-Qaeda” and other “Islamic jihad” front are military-intelligence assets that have been continuously supported, managed and “run” by the CIA and affiliates such as Pakistan’s ISI on behalf of Anglo-American geostrategic interests (notably oil) going back to the Cold War. A vast number of researchers (all derided as “9/11 truthers”) such David Ray Griffin continue to detail various aspects of the case including physical evidence.

Oblivious to the availability of this mountain of “conspiracy fact”, the vast majority of the population chooses to embrace the Big Lie.

New “Al-Qaeda” mastermind named

In recent weeks, mainstream corporate news headlines have exploded with the “revelation” that “Al-Qaeda” has a new leader of global operations “in charge of planning future attacks”: Adnan Shukrijumah

According to Miami-based FBI counterterrorism agent Greg LeBlanc, whose Associated Press interview in early August is the single source for the new spate of repeated headlines, Shukrijumah is alleged to be a 15-year resident of the US “intimately familiar with American society”, and is the son of a Muslim cleric trained in Saudi Arabia. He have lived in Miramar, Florida before joining terror training camps in Afghanistan in the 1990s, in order to fight the persecution of Muslims in Bosnia, Chechnya and elsewhere.

Tagged by LeBlanc as the successor to his former boss Khalid Sheikh Mohammed (KSM), and taking orders directly from Osama bin Laden. A clip of Shukrijumah posted by the FBI is gibberish.

There is nothing new about the Shukrijumah narrative. It is an intelligence “legend” years in the making.

Chaim Kupferberg, whose classic analysis of post-9/11 “terror” propaganda (Part 1 and Part Two) are definitive, offered the following thoughts on Shukrijumah in 2004 in a piece titled The "Official" Operative Clique for the Next 9/11.

To quote Kupferberg at length [my emphasis in bold]:

“I'm sure many of you out there are noticing a unified narrative taking shape in advance of the next expected attack. In calibrated drips and dollops, the mainstream media, in partnership with the 9/11 panel, are laying the evidentiary trail pointing to the next "Atta" and his insular cell, which apparently already seems to be "in place" stateside.

“Having no access at all to any insider reports, one can almost foretell the Official Legend that will follow in the wake of this clique's first big explosion into the public consciousness - just by reading the mainstream news.

Certainly, three of these major operatives - Adnan Shukrijumah, Abderrouf Jdey, and Aafia Siddiqui - are already being linked together. But Shukrijumah and Jdey are the ones to watch, for they are being intimately seeded into the Padilla/dirty bomb and Ahmed Ressam/Canadian clique/West Coast threads of 9/11.

“Recently, Shukrijumah was mentioned as the guy likely doing surveillance of the New York buildings in the latest terror alert. But that was supposed to be old information. Yet Shukrijumah has been showing up all over the radar in the past year alongside Jdey and Siddiqui.

“When Abu Musab Zarqawi was publicly unveiled by Colin Powell before the UN in February 2003, he had yet to make his very public splash as the next Khalid Shaikh Mohammed. But in the opening months of 2004 - as I surmised back in October 2003 - Zarqawi would lay his own foundation in the public mind (particularly by way of the Daniel Pearl-like Berg killing) as the guy tagged to head up the next ‘big one’.

“If the Ressam-connected Canadian clique is involved, the likely target is the U.S. West Coast. I suspect this is the case due to three items: the bulletin last May that alerted the public to Shukrijumah, Jdey, Siddiqui, Gahdan, el-Maati, and others; a reported sighting the next day of Shukrijumah and Jdey at a Denny's in Colorado (they stated that they were "from Iran" and were en route to the West Coast from New York); the release, two weeks later, of the official 9/11 staff report that now placed Jdey (in cahoots with Moussaoui) as an original member of an aborted 9/11 "second wave" attack on the West Coast; and a reported sighting of Shukrijumah at a nuclear research facility in Ontario (while el-Maati had previously been reported casing nuclear facilities near Ottawa).

“…Shukrijumah (aka "the next Atta") apparently seems to be threaded into the 1993 bomb plots by way of his father's connection to Clement Hampton-El. But more strangely, it seems that Shukrijumah will make his way into the Oklahoma City Bomb thread by way of his Florida connection with "dirty bomb" guy Jose Padilla. To shore up the Oklahoma thread, we also have the Zarqawi/Moussaoui/ Nick Berg connection.

“But let's step back and take a stab at guessing at what is happening here. The new legends will be used to strengthen the foundations of the old ones. In parallel to the official account, however, the existing counter-legends will also be beefed up. In short, the narratives are getting all too muddled with the growing interlinking chains. The growing complexity of these new interlinking legends will operate to turn off a good portion of those who might be seriously interested in examining the truth behind 9/11.

“And what of the rest of us? Will we be locked in a never-ending cycle of polarized argument - with each of us picking his favorite conspiracy thread? How many of us will look at Shukrijumah and see the fingerprints of Iran? How many of us will look at the Canadian clique and sense the hand of Syria behind it all? And if they find that the next operation was pulled off with forged New Zealand passports, how many of us will dig up the newspaper account of the Mossad/ New Zealand passport scandal and go ‘Aha! Once again the Israelis!’

And what about the anthrax thread? In recent months, a writer by the name of Ross Getman has been posting accounts that read like excerpts from a future Official 9/11 Sequel Report. Going by Getman's writings, it would appear that a possible Boston connection would involve anthrax by way of Aafia Siddiqui's connection to Brandeis University and its anthrax facility. Also note that a first sighting of Shukrijumah and Jdey a year ago occurred in Maine, where they were spotted driving with a Massachusetts license plate.

So, to sum up: Shukrijumah seems to be part of a "dirty bomb" or radiological thread, while Siddiqui seems to be part of an anthrax thread. Perhaps the Shukrijumah/Jdey/Siddiqui clique is planning a bi-coastal attack involving radiological materials (or perhaps an attack on a nuclear facility) and a simultaneous attack involving anthrax. Shukrijumah has been marketed as an "Atta-level" pilot.

Whatever the case, a definite evidentiary trail seems to be clearly laid so as to give the impression of the dots connecting up. Shukrijumah was also spotted recently in the Honduras, but I wouldn't give that one much credence. The Denny's item seems the most likely to be resurrected post-facto as an example of institutional incompetence and blindess. Perhaps the Honduras item was meant to give the impression that Shukrijumah was not yet in the U.S.

“…In the aftermath of this next one, there will be those who will point to new instances of incompetence and blindness - who will say that the dots couldn't be connected. Hopefully, perhaps none of the above will ever come to pass. Perhaps Shukrijumah, Jdey, and Siddiqui will never make their "historical" mark - and we've all been treated to nothing more than a cunningly orchestrated campaign of fear-mongering by the government.

“Whatever the case, it seems that a very clear narrative - with accompanying threads - is being built up for potential use. In the event this particular chapter of the narrative ever goes "operational" ... well, at least you'll all know that the mainstream media had put the dots in place beforehand.”

In the years since Kupferberg’s dead-on prediction, Shukrijumah has indeed “emerged” gradually. Attorney General John Ashcroft labeled Shukrijumah a “clear and present danger” in 2004. In 2009, authorities named Shukrijumah as a co-conspirator in the highly questionable New York subway bomb plot.

Shukrijumah has over the years been picked up as a cause célèbre by right-wing hacks such as Michelle Malkin, and the infamous Gerald Posner, who has built an entire malodorous career helping cover-up government crimes as a favored “anti-conspiracy” media shill.

There are many reasons for Shukrijumah to explode to official prominence now. President Barack Obama has declared an end to “combat operations in Iraq”, while maintaining the permanent US military presence in the country and a continuous “anti-terror” operation against “Al-Qaeda” in Iraq. The administration shift forces to Afghanistan, and continue to ramping up its long-promised goal of escalating the “war on terrorism” throughout Afghanistan, Pakistan, etc., With this in the works, along with congressional mid-term elections looming in the fall, all of Washington, from the White House and the FBI to the congressional nominees are refreshing the “terrorism” pretext.

It should be noted that no analysis was done by the various media organs to corroborate the details of LeBlanc’s story before it was repeated verbatim across the media. LeBlanc has also not been vetted as a credible, unbiased source.

Whether Shukrijumah is a intelligence “legend”, a low-level intelligence asset, or the “mastermind” that FBI agent LeBlanc claims, the discussion still collapses when viewed against the backdrop of known historical and post-9/11 fact. “Terrorism” is still a red herring.

As amply documented over the years by Michel Chossudovsky and others, “Islamic terrorism”, including “Al-Qaeda”, the Taliban, etc. are assets of the CIA a myth designed to obscure a vast covert operation and war plan. The “Militant Islamic Network” was created by the CIA, and has continued to operate on behalf of Anglo-American military-intelligence interests. “Terrorists” were key Washington CIA assets during the wars in Kosovo, Chechnya, etc.. Shukrijumah’s boss, Osama bin Laden is a product of the CIA, is a military-intelligence asset who may be dead, or a myth.

Covert Action Quarterly featured the following summation box in many of its post-9/11 issues:

9/11 cover-up continues:

*Carter administration=CIA-Islamists of Afghanistan

*Carter administration=CIA=Islamists of Iran

*al-Qaeda=Saudi=CIA-=Reagan administration collaborations in Afghanistan and Sudan

*al-Qaeda=CIA=Clinton administration collaborations in Albania, Algeria, Bosnia, Chechnya, Iraq, Libya, Sudan

We can now add to this:

*Bush/Cheney and Obama administrations=CIA=Afghanistan, Iraq, Pakistan

Put succinctly by Mike Ruppert in Crossing the Rubicon:

“Given the degree of documented intelligence penetration of al Qaeda; the fact that Osama bin Laden had been a CIA asset during the first Afghan conflict against the Soviets; the fact that a number of the so-called hijackers and/or al Qaeda members had been trained in CIA training camps in Chechnya; had fought in CIA/US-sponsored guerrilla conflicts (e.g. in Kosovo with the KLA in 2000), or had received military training at US installations; given all that, it is reasonable to assume that one or more top al Qaeda officials were in fact double or triple agents. They worked to further an agenda originating out of Washington, strongly influenced by Tel Aviv, rather than out of some ill-defined Muslim hatred of the US. In this class I would include people like Khalid Sheikh Muhammad (KSM), Ramzi bin al-Shibh, and Mohammad Atta.”

“…In covert operations, the best kind of an asset is one that has no idea who is really “running” him. That is not to say that I don’t believe there are terrorists out there who would do any kind of damage they possibly could to the United States. Even if there weren’t any before 9/11 (and there were), the US has gone out of its way to create animosity against this country that is in full flower all over the globe. What is clear is that the government’s assertions that 19 hijackers, funded from caves in Afghanistan, were able to excecute what happened on September 11th is beyond ludicrous. It is also that case that the government has never proven to anybody by any standard other than that used by Randolph Hearst.”

What about Shukrijumah’s link to the New York subway bomb plot? That incident has been linked to Jaish-e-Muhammad, a CIA front. Therefore, any Shukrijumah connection to this event also points to way to the CIA.

It is amusing that a USA Today article about Shukrijumah notes how the hunt for “Al-Qaeda” always comes back to Florida. If the writer of this piece had truly dug into Florida’s long history of covert operations, dirty politics (the Bushes), narcotrafficking, etc. the writer would not have to ask why.

Investigative journalist Dan Hopsicker exposed the Florida links to the so-called 9/11 hijackers, including their military training, and connections to Floridians with military-intelligence and the Bush family, in a series of articles, and in the video Mohammad Atta and the Venice Flying Circus. From a propaganda perspective, placing Shukrijumah into this same framework simply makes sense, as Kupferberg notes.

According to Shukrijumah's mother, her son is “not a mastermind, but a nice boy” who last contacted her right after 9/11, allegedly from Afghanistan. If Shukrijumah’s radicalization was triggered by 9/11 itself, one could argue that (assuming that he is a real terrorist) he is yet another by-product of Bush/Cheney’s violence.

The Big Lie redux

Both the “Ground Zero mosque” and Shukrijumah stories have gone “viral”. The noise surrounding both is certain to be even more deafening, even more outrageous, as election season intensifies, and Obama ramps up its war. Another anniversary of 9/11 approaches, complete with tear-soaked howling over the official lies.

The “terror” threat---perpetual fear of a fabricated outside enemy--- is central to Anglo-American geostrategy. It is being strenuously nurtured. Insanity continues to prevail.

“Al-Qaeda” the eternal covert operation and propaganda apparatus, is being given yet another new boogeyman’s face. All issues surrounding the 9/11 still set off paroxysms of fear, rage, hatred, and violence, nearly a decade later.

The militant public embrace of “war on terrorism” lies underscores how that the 9/11 false flag operation has succeeded beyond the wildest dreams of the Anglo-American war criminals who orchestrated it.

The American populace supports the most pernicious 9/11 myths. It is being played like a fiddle. It is being “run” as effectively as any military-intelligence asset.

American Propaganda

American Propaganda

Go To Original

When will the people of this nation understand that those they trust to guide them and protect them have nothing but contempt for them? Everyday there are people who have no work and have used up their 99 weeks of unemployment insurance, they are called the 99%’rs. Every day the people of this nation look into their television sets and hear the propaganda of a nation that is hell-bent on empire because they fear their own imminent collapse. This won’t affect the trans-national corporate hierarchy; they will just move to another country, it’s all the same to them. There is no patriotism and no loyalty to the United States among those that sit on the mantle of power.

The majority of Americans are decent, hard-working people, but they are none the less… stooges. They have been indoctrinated from birth to believe in a set of core values that are designed to keep them subservient and docile. They are the victims of propaganda that emanates from the government and the corporate media, designed to lead them to believe that we are “defending democracy” even though we have no real democracy of our own.

We exist under an oligarchy and have existed under it from the time of our nation’s inception. The Constitution was designed not for the common man, but for those that had the wealth to exercise power. In everything that we see and hear, the powers that be (and have always been), tell us that we under threat. What are these threats? The answer is that a threat is anything that will allow those wealthy people that run this nation to make a profit. The profit motive is what drives this nation. It has destroyed the lives of ordinary citizens, workers and our military and shows no sign of abating.

The current war in Afghanistan was orchestrated so that our military expenditures could be justified, so that military armaments could be produced by the Military Industrial Complex while the American public learns about the war from the corporate media from bloodless, sanitized, government approved footage that makes the war seem more like a football game than human carnage. Meanwhile, as this nation sinks into irrecoverable debt, the military spending goes on and on. The American people know that something is wrong, but they can’t come to grips with the fact that those elected to see to our general welfare, really don’t give a damn what happens to the common man. The corporate world has become global, what happens to America does not concern them, the bottom line; profit…is really their only bottom line.

The fact that 80% of us only own 7% of the wealth of this nation is not talked about. The fact that corporations and the rich pay less percentage of income than the middle class is not talked about. The fact that the middle-class is almost gone is not talked about. While our industry has been outsourced to other countries, Wall Street makes money by moving financial inventions such as derivatives around like a classic shell game.
Capitalism is looked upon as something sacred. The mantra of “Free Enterprise” has been hammered into our heads by corporate propaganda since birth. Rarely does one read about the government’s shooting of men, women and children by the military and corporate goons when this country tried to implement trade unions. Our “revised” history books make scant mention of the imprisonment of the “Wobbly’s’” during the Wilson Administration. Every major attempt to improve the lot of the workers in America has met with resistance from not only from the Capitalist bosses, but from the government that was charged to look out for its people.

The so-called “Tea-Partiers” are deluded and indoctrinated. They oppose taxation in its entirety. They are brainwashed to believe that taxation of the rich will result in job losses and an erosion of the middle-class. They can’t help it; they are hammered everyday and have no idea that they are being manipulated by the oligarchs of this nation to do their bidding. Look at the professional politicians that are supported by the tea party, they are almost to a man (or woman) rich. Who is fooling who?

It is time to hold those in power responsible. This has nothing to do with a political party or even politics itself. The time for politics has come and gone. Working “inside the system” has come and gone. The “system” is their “system”. We need to mobilize and take action against those that would make us serfs. We need to take to the streets, and by our numbers convince this corrupted government that we are becoming ungovernable. Control is their only sacrament, only when they feel that they will lose this control will they be supplicant to the people.

When King Louis the 14th asked his Prime Minister if this was another protest, he replied “No Sir, It’s a Revolution”.

Evidence of Israel’s ethnic cleansing kept under lock and key

The secrets in Israel’s archives Evidence of ethnic cleansing kept under lock and key

Go To Original

History may be written by the victors, as Winston Churchill is said to have observed, but the opening up of archives can threaten a nation every bit as much as the unearthing of mass graves.
That danger explains a decision quietly taken last month by Benjamin Netanyahu, the Israeli prime minister, to extend by an additional 20 years the country’s 50-year rule for the release of sensitive documents.
The new 70-year disclosure rule is the government’s response to Israeli journalists who have been seeking through Israel’s courts to gain access to documents that should already be declassified, especially those concerning the 1948 war, which established Israel, and the 1956 Suez crisis.
The state’s chief archivist says many of the documents “are not fit for public viewing” and raise doubts about Israel’s “adherence to international law”, while the government warns that greater transparency will “damage foreign relations”.
Quite what such phrases mean was illustrated by the findings of a recent investigation by an Israeli newspaper. Haaretz revisited the Six Day War of 1967, in which Israel seized not only the Palestinian territories of the West Bank and Gaza, but also a significant corner of Syria known as the Golan Heights, which Israel still refuses to relinquish.
The consensus in Israel is that the country’s right to hold on to the Golan is even stronger than its right to the West Bank. According to polls, an overwhelming majority of Israelis refuse to concede their little bit of annexed Syria, even if doing so would secure peace with Damascus.
This intransigence is not surprising. For decades, Israelis have been taught a grand narrative in which, having repelled an attack by Syrian forces, Israel then magnanimously allowed the civilian population of the Golan to live under its rule. That, say Israelis, is why the inhabitants of four Druze villages are still present there. The rest chose to leave on the instructions of Damascus.
One influential journalist writing at the time even insinuated anti-Semitism on the part of the civilians who departed: “Everyone fled, to the last man, before the IDF [Israel Defence Forces] arrived, out of fear of the ‘savage conqueror’ … Fools, why did they have to flee?”
However, a very different picture emerges from Haaretz’s interviews with the participants. These insiders say that all but 6,000 of the Golan’s 130,000 civilians were either terrorised or physically forced out, some of them long after the fighting finished. An army document reveals a plan to clear the area of the Syrian population, with only the exception of the Golan Druze, so as not to upset relations with the loyal Druze community inside Israel.
The army’s post-war tasks included flushing out thousands of farmers hiding in caves and woods to send them over the new border. Homes were looted before the army set about destroying all traces of 200 villages so that there would be nowhere left for the former inhabitants to return to. The first Jewish settlers sent to till the fields recalled seeing the dispossessed owners watching from afar.
The Haaretz investigation offers an account of methodical and wholesale ethnic cleansing that sits uncomfortably not only with the traditional Israeli story of 1967 but with the Israeli public’s idea that their army is the “most moral in the world”. That may explain why several prominent, though unnamed, Israeli historians admitted to Haaretz that they had learnt of this “alternative narrative” but did nothing to investigate or publicise it.
What is so intriguing about the newspaper’s version of the Golan’s capture is the degree to which it echoes the revised accounts of the 1948 war that have been written by later generations of Israeli historians. Three decades ago -- in a more complacent era -- Israel made available less sensitive documents from that period.
The new material was explosive enough. It undermined Israel’s traditional narrative of 1948, in which the Palestinians were said to have left voluntarily on the orders of the Arab leaders and in the expectation that the combined Arab armies would snuff out the fledging Jewish state in a bloodbath.
Instead, the documents suggested that heavily armed Jewish forces had expelled and dispossessed hundreds of thousands of Palestinians before the Jewish state had even been declared and a single Arab soldier had entered Palestine.
One document in particular, Plan Dalet, demonstrated the army’s intention to expel the Palestinians from their homeland. Its existence explains the ethnic cleansing of more than 80 per cent of Palestinians in the war, followed by a military campaign to destroy hundreds of villages to ensure the refugees never returned.
Ethnic cleansing is the common theme of both these Israeli conquests. A deeper probe of the archives will almost certainly reveal in greater detail how and why these “cleansing” campaigns were carried out -- which is precisely why Mr Netanyahu and others want the archives to remain locked.
But full disclosure of these myth-shattering documents may be the precondition for peace. Certainly, more of these revelations offer the best hope of shocking Israeli public opinion out of its self-righteous opposition to meaningful concessions, either to Syria or the Palestinians.
It is also a necessary first step in challenging Israel’s continuing attempts to ethnically cleanse Palestinians, as has occurred in the last few weeks against the Bedouin in both the Jordan Valley and the Negev, where villages are being razed and families forced to leave again.
Genuine peacemakers should be demanding that the doors to the archives be thrown open immediately. The motives of those who wish to keep them locked should be clear to all.

Credit card rates hit highest level in 9 years

Credit card rates hit highest level in 9 years

Go To Original

Interest rates continue to tumble for the U.S. Treasury, companies and home buyers alike. But for a large portion of 381 million U.S. credit-card accounts, borrowing rates have been moving only one way: up.

And average rates are likely to climb further soon. New credit-card rules that took effect Sunday limit banks’ ability to charge penalty fees. They come on top of rule changes earlier this year restricting issuers’ ability to adjust rates on the fly. Issuers responded by pushing card rates to their highest level in nine years.

In the second quarter, the average interest rate on existing cards reached 14.7 percent, up from 13.1 percent a year earlier, according to research firm Synovate, a unit of Aegis Group PLC. That was the highest level since 2001.

Those figures look especially stark when measuring the gap between the prime rate — the benchmark against which card rates are set — and average credit-card rates. The current difference of 11.45 percentage points is the largest in at least 22 years, Synovate estimates.

By comparison, the spread between 10-year Treasurys and a standard 30-year fixed-rate mortgage is just 1.93 percentage points, near historical averages, according to mortgage-data provider HSH Associates.

The moves are driven by a combination of forces. The Credit Card Accountability Responsibility and Disclosure Act of 2009 has given card issuers less flexibility to raise interest rates as they wish. At the same time, issuers are still dealing with credit-card delinquencies that remain above historical levels. “The rules have changed and the goalposts of risk have changed,” says Paul Galant, chief executive of Citigroup Inc.’s Citi Cards unit.

Banks used to boost rates in a hurry on borrowers who fell behind on payments or otherwise turned out to be surprisingly risky. However, under the Card Act, financial institutions must warn customers at least 45 days before making substantial changes to rates or fees. People can avoid future rate increases and pay off existing balances over time. As a result, most changes affect only new credit-card purchases. Rules that took effect Sunday limit what banks can collect in penalty fees, too.

Now bank executives say they need to be smarter when setting the initial interest rates on cards. In many cases, that means starting off with a higher rate. “We can’t come up with penalty pricing or if we can, quite frankly, it’s too late to do much good,” says Stephanie Keire, head of consumer credit-card risk management at Wells Fargo & Co.

The sponsor of the Card Act, Rep. Carolyn Maloney (D-NY), said that despite the rising rates, the law benefits consumers because it eliminates unwelcome surprises and provides them with a clear picture of the costs they will face. “Better that consumers should know up-front what the interest rate is, even if it’s higher, than to be soaked on the back-end by tricks and hidden fees.”

At Discover Financial Services, a diminished ability to boost rates is causing the Riverwoods company to offer fewer interest-free balance transfers for new customers, says Discover President Roger Hochschild. Balance transfers have declined 60% from last year. A typical offer might include 0% interest on the transferred amount for a year, with customers paying a balance transfer fee.

More increases are looming as card issuers respond to the new penalty-fee limits, says Ken Paterson, vice president of research at Mercator Advisory Group.

Many banks rushed to boost rates before limits on increases for existing customers took hold in February. Some lenders have recently raised rates for new borrowers. For example, Capital One Financial Corp. in June increased the rate on its Classic Platinum for Young Adults card by 2.9 percentage points from the previous 16.9%, and increased the rate on its No-Hassle Cash Rewards card by 1.9 percentage points.

In May, Wells Fargo increased the interest rate on new Cash Back Home Rebate, Platinum and College cards by one percentage point. Citigroup boosted the minimum rate on its Platinum elect card by two percentage points in July. The higher rates apply to new accounts.

Besides raising rates, increasingly stingy lenders are revamping some of their underwriting techniques. Banks are relying more heavily on what is known as trend analysis to determine which borrowers are showing signs of improvement or weakness in their financial condition, says Steven Wagner, president of Experian PLC’s Consumer Information Services unit.

A credit-card applicant might be considered too risky if he used much of his existing credit in recent months. That could increase the chances that the borrower might be denied a new card or charged a higher rate.

Some issuers want to better use their data on existing customers. Bank of America Corp. says its move in March to merge its deposit-gathering and credit-card units was aimed partly at weighing existing relationships with the Charlotte, N.C., company more heavily in credit decisions.

Bank of America now is more likely to offer customers with large deposits at the bank a lower rate, higher credit limit or better rewards than similar borrowers it knows less about.

Meanwhile, lenders are quicker to reduce credit lines at the first signs of financial stress, including late payments on other bills, a pay cut and unemployment. Several large U.S. banks have begun parsing employment and income data for changes that could affect the riskiness of existing customers, says John Cullerton, vice president at Equifax Inc. He declined to name the lenders.

Card issuers are handing out less credit, too. The credit limit on new bank cards averaged $3,923 in May, the latest month for which data are available, according to Equifax. That is down 11% from an average of $4,422 a year earlier.

Rising interest rates on many credit cards won’t necessarily lead to more profits for issuers. “The interest-rate increases are designed to improve and protect profitability,” says John Grund, a partner with First Annapolis Consulting Inc., but stubbornly high delinquencies and Card Act curbs will eat into those gains, at least in the short term.

Most cards now carry variable rates, meaning any increase in the prime rate is likely to be quickly passed along to borrowers. Still, some bank executives say the interest-rate trend is likely to reverse as the U.S. economy recovers.

Fiddling While the US Economy Burns

Fiddling While the US Economy Burns

The stock market may be over for now as fear and panic drives small investors out. Big corporations hoard stashes of cash rather then hire workers. The D-Word (depression) is back in play.

Foreclosures are up, and the Administration’s programs to stop them are down, well below their stated goals, only helping one-sixth of those promised assistance.

And here’s a statistic for you: 300,000. That’s the number of foreclosure filings every month for the past 17 months.

This year, 1.9 million homes will be lost, down from 2 million last year. Is that progress? In July alone, 92, 858 homes were repossessed.

At the same time, the number of cancelled mortgage modifications exceeded the number of successful ones. According to, last month, “the number of trial modification cancellations surged to 616,839, greatly outnumbering the 421,804 active permanent modifications."

And don’t think this is only a problem that affects the homeowners about to go homeless. The New York Times quotes Michael Feder, the chief executive of the real estate data firm Radar Logic, to the effect that we are all at risk.

“My concern is that if we have another protracted housing dip, it’s going to bring the economy down,” Mr. Feder said. “If consumers don’t think their houses are worth what they were six months ago, they’re not going to go out and spend money. I’m concerned this problem isn’t being addressed.”

The larger point is that even if you believe the economy is already down, it can go lower. No one knows how to “fix it” either just as BP couldn’t plug the “leak” that, truth be told, is still oozing oil.

So what are we doing about it? Are we demanding debt relief or a moratorium on foreclosures? Are we shutting down the foreclosure factories?


Progressives are spending time and wasting passion this August debating on an Islamic Cultural Center near Ground Zero, invariably responding to the provocations and agenda of adversaries. They are always on the defense, never taking the offense.

Who is beating the drum for job creation and a new economic policy? Maybe the unions, but their voice is muted and ignored in the electronic noise machine.

Marches are planned by the UAW and Rev. Jesse Jackson on Aug. 28 in Detroit and in Washington on Oct. 2.

But the expected war of the words between Rev. Al Sharpton and Glenn Beck over the legacy of the March on Washington is expected to generate more heat.

Meanwhile, even as the Administration seems to be finding signs of a “recovery,” a parade of failures march on from the discovery that there is an oil slick the size of Manhattan in the Gulf, to the persistence of frauds in finance from state pension funds in New Jersey, to the case against the head of the Bank of America.

Even worse, ShoreBank, one of the banks that community activists considered a national model of social responsibility has gone down in Chicago, the 104th bank to fail this year with 15 branches including some in Detroit and Cleveland.

The bank was also active in 40 countries. In June, it reported over $2 billion in deposits. By August, it was gone. In all, 349 U.S. banks have disappeared since 2007.

ShoreBank promoted itself as a community development and environmental bank. It was based in Michelle Obama’s old neighborhood with the slogan “Lets Change The World.”

Now the world of Wall Street has changed the bank with a partnership of investors including American Express, Bank of America and Goldman Sachs taking over under the name “United Partnership.”

Hundreds of other banks are on the FDIC hit parade and may be next.

There were many worse casualties in banking in the past according to Barry James Dyke’s informative book, Pirates of Manhattan. He notes that 10,000 banks failed during the Depression and 2,900 bit the dust in the S&L crisis.

The current number may have been higher had Congress not bailed out the Banksters who used some of our money to play PacMan, gobbling up smaller institutions.

AP reported, “ShoreBank lost $39.5 million in the second quarter amid soured real estate loans. The bank had been under a so-called cease and desist order from the FDIC for more than a year, requiring it to boost its capital reserves.

“ShoreBank was able to raise more than $146 million in capital this spring from several big Wall Street institutions. It was unable, however, to secure federal bailout funds it sought from the Treasury Department's Troubled Asset Relief Program.”

Republicans are “investigating” alleged Administration support for the bank.

AP explained, “Rep. Darrell Issa of California, the senior Republican on the House Oversight and Government Reform Committee, sent a letter to a White House legal adviser asking specific questions on possible contacts between administration officials and executives of ShoreBank or potential investors.

“The White House has said no administration officials met with ShoreBank concerning its rescue or requested help from financial institutions on its behalf.”

Questions raised by Republicans, of course, seek to politicize the issue when it is the FDIC ‘s deal with the big banks that needs to be probed, as Zero Hedge explains:

“As it stands, Goldman and 11 other banks are receiving a multimillion dollar gift to conduct a portfolio liquidation run-off of ShoreBank's assets, while merely making sure existing deposits are serviced.”

(Note: the FDIC is led by a Republican. Hmm.)

Blogger Mike, “Mish” Shedlock concludes: “The FDIC's handling of Shore Bank smells as bad as a pile of dead alewives on a Chicago beach in mid-July.”

My question is: Why didn’t the Administration help shore up ShoreBank (if it could be shored up) as they did so many of the "too big to fail" banks?

Their hands-off attitude, perhaps in fear of being criticized, as they were anyway, helped doom the bank and, by extension, the idea that we could have socially responsible lending institutions.

So much for the priorities and power of Obama’s “Chicago Mafia.”

If they don’t have the guts to save a bank in their own hometown that they know has meant so much to so many, is it any wonder they won’t take on the crimes on Wall Street?

Last week, Treasury Secretary Tim Geithner was complaining that he is being falsely identified as a “Goldman Guy,” insisting he never worked for the financial institution that was branded by Rolling Stone’s Matt Taibbi as “a great vampire squid wrapped around the face of humanity.”

Geithner doesn’t seem to realize that the speculation is not based on the details of his resume but on an assessment of his track record as a toady for the pals he worked with when he ran the Federal Reserve Bank in New York.

And by the way, Tim, why the hold–up on the appointment of Elizabeth Warren to run the new Consumer Financial Protection Bureauin your old institution? Is she too smart and popular for you?

Why the fiddling while our modern Rome burns?