Saturday, October 2, 2010

Is The Federal Reserve Out Of Control?

Is The Federal Reserve Out Of Control? Markets Across The Globe Brace For Impact As The Federal Reserve Powers Up The Printing Presses

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What in the world is going on over at the Federal Reserve? Has it gotten to the point where the Federal Reserve is completely and totally out of control? There is increasing speculation in the financial community that the Federal Reserve is on the verge of unleashing another round of quantitative easing. In fact, at their September meeting, Federal Reserve officials hinted very strongly that quantitative easing is very much on their minds when they stated that the Federal Open Market Committee "is prepared to provide additional accommodation if needed to support the economic recovery and to return inflation, over time, to levels consistent with its mandate." You might want to reread that quote a couple of times just to let it sink in. Do you see what the Fed is saying there? The Fed is actually saying that it has a mandate to maintain a certain level of inflation. Not that this is a secret to anyone that has seriously studied the Federal Reserve. Since 1913, inflation has constantly gone up, U.S. government debt has increased exponentially and the U.S. dollar has lost over 96 percent of its value. But for Federal Reserve officials to openly state that a certain amount of inflation is part of their mandate is absolutely stunning.

Even though the U.S. economy is still in pretty decent shape at this point (for the moment at least), the Federal Reserve still seems obsessed with trying to stimulate it.

In the past, the Federal Reserve would just cut interest rates whenever the economy needed a bit of a boost, but at this point the Fed has cut rates to nearly zero. There just isn't any more room to cut rates.

So what else can the Federal Reserve do?

Well, it can create money out of thin air and use it to buy U.S. Treasuries, mortgage-backed securities and other assets. This is known as quantitative easing, and many analysts fear that it is quickly becoming more than just an emergency measure.

Back in March 2009, the Federal Reserve announced that it would purchase $1.7 trillion worth of U.S. Treasuries and mortgage-backed securities over the next 6 to 9 months. That was the first round of quantitative easing and Fed officials believe that it helped the U.S. economy avoid an even worse downturn.

But now Federal Reserve officials are talking about making quantitative easing a regular thing. An article in the Wall Street Journal recently described the current thinking inside the Fed....

Rather than announce massive bond purchases with a finite end, as they did in 2009 to shock the U.S. financial system back to life, Fed officials are weighing a more open-ended, smaller-scale program that they could adjust as the recovery unfolds.

Quantitative easing that is open-ended?

What kind of insanity is this?

Is quantitative easing going to become a permanent part of our financial system?

And what does "smaller-scale" actually mean?

Well, according to James Bullard, the president of the St. Louis Federal Reserve Bank, "small-scale" is actually pretty darn large. According to the Wall Street Journal, a "small-scale" quantitative easing program would be somewhere in the neighborhood of $100 billion a month....

Under a small-scale approach, Mr. Bullard says, the Fed might announce some still-undecided target for bond buying—say $100 billion or less per month. It would then make a judgment at each meeting whether continued action was needed.

If the Fed injected $100 billion a month into the economy through quantitative easing, that would mean that by the end of the year over 1 trillion dollars would have been created.

That does not sound like "small-scale" to me.

In fact, if the Federal Reserve purchased $1 trillion in U.S. Treasuries next year that would be an amount nearly equal to the total amount of new debt that the U.S. government plans to issue during the year.

Can anyone say Ponzi scheme?

When we get to the point where the Federal Reserve is "buying" a large percentage of new U.S. debt with money that is created out of thin air there is simply no denying the fact that the Fed is running a massive Ponzi scheme.

But the truth is that the U.S. government is in so much debt and the U.S. economy is in so much trouble that something must be done. It is really tempting to "inflate away" the debt and to pump up GDP figures with a flood of paper money, and Helicopter Ben Bernanke has certainly shown that he is not shy about pulling the trigger.

Of course more debt, more paper money and more inflation will only make our long-term economic problems even worse.

But right now Federal Reserve officials appear to be absolutely obsessed with the short-term.

And without a doubt world financial markets are certainly expecting a new round of quantitative easing to begin soon.

CNBC recently polled 67 economists, strategists and fund managers about what they think is going to happen. The following is a summary of what CNBC found....

The Federal Reserve will boost its balance sheet by about half a trillion dollars over a six-month period beginning in November and keep it inflated for up to a year, according to a survey of leading markets participants by CNBC.

But many analysts believe that the Fed will take even more substantial action than that. According to the Wall Street Journal, economists at Goldman Sachs are projecting that the Federal Reserve will end up buying at least another $1 trillion in assets during this next round of quantitative easing.

Stephen Stanley of Pierpont Securities in convinced that it will be even worse than that. Stanley believes that the Fed will add another $3 trillion to its balance sheet by next August. The following is what he recently told CNBC....

"If the Fed pulls the trigger, they will go big."

In an interview with the Economic Times of India, Marc Faber painted an even bleaker picture....

"I believe that if the S&P in the US drops 15-20% to around 900-950, the Fed would come out not with this quantitative easing No. 2, but with quantitative easing No. 2, 3, 4, 5, 6, 7, 8, 9, 10 until the asset markets go up again. They are going to print and print and print."

It seems like almost everyone is anticipating that the Federal Reserve is going to fire up the printing presses.

Now, even some of the Federal Reserve's staunchest defenders are now abandoning them.

Ambrose Evans-Pritchard, perhaps the most respected financial columnist in the U.K., recently penned an article entitled "Shut Down the Fed (Part II)" in which he absolutely lambasted Bernanke and other Federal Reserve officials for considering another round of quantitative easing....

I apologise to readers around the world for having defended the emergency stimulus policies of the US Federal Reserve, and for arguing like an imbecile naif that the Fed would not succumb to drug addiction, political abuse, and mad intoxicated debauchery, once it began taking its first shots of quantitative easing.

In fact, Ambrose Evans-Pritchard is now openly accusing the Federal Reserve of being out of control....

So all those hillsmen in Idaho, with their Colt 45s and boxes of krugerrands, who sent furious emails to the Telegraph accusing me of defending a hyperinflating establishment cabal were right all along. The Fed is indeed out of control.

On behalf of those who believe that the Federal Reserve is "a hyperinflating establishment cabal", I accept Ambrose Evans-Pritchard's apology.

The truth is that the Federal Reserve is out of control.

The Federal Reserve system was designed to get the U.S. government into a perpetually expanding spiral of debt. Wealth is slowly but surely transferred from the American people to the U.S. government (when we pay taxes) and ultimately into the hands of those who own U.S. government debt.

As long as the Federal Reserve system exists, U.S. government debt will keep going up, the value of the U.S. dollar will keep going down and wealth will be slowly transferred into the hands of the ultra-wealthy.

And why in the world would the American people allow an unelected, privately-owned central bank to run the U.S. economy, control the money supply, set interest rates and print all U.S. currency?

It simply does not make any sense.

The Federal Reserve has not been shy about declaring that it is "not an agency" of the U.S. government and not directly accountable to the American people.

So why do the American people put up with this kind of nonsense?

The truth is that the Federal Reserve has become far too powerful. U.S. Representative Ron Paul recently told MSNBC that he believes that the Federal Reserve is actually more powerful than Congress.....

"The regulations should be on the Federal Reserve. We should have transparency of the Federal Reserve. They can create trillions of dollars to bail out their friends, and we don’t even have any transparency of this. They’re more powerful than the Congress."

The truth is that the U.S. economy will never be fundamentally "fixed" simply by electing another "Bush" or another "Obama". Something needs to be done about the Federal Reserve system, but right now our politicians in Washington can't even muster enough support to pass a bill to audit the Fed.

Crony Capitalism: Wall Street's Favorite Politicians

Crony Capitalism: Wall Street’s Favorite Politicians

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A full 90 members of Congress who voted to bailout Wall Street in 2008 failed to support financial reform reining in the banks that drove our economy off a cliff. But when you examine campaign contribution data, it’s really no surprise that these particular lawmakers voted to mortgage our economic future to Big Finance: This election cycle, they’ve raked in over $48.8 million from the financial establishment. Over the course of their Congressional careers, the figure swells to a massive $176.9 million.

The complete list of these Crony Capitalists is below, along with the money they pulled in from Big Finance, according to data compiled by the Center for Responsive Politics (opensecrets.org). The career data goes back to 1989. Of the 69 House members who voted with Wall Street on both the bailout and financial reform, 60 are Republicans, while nine are Democrats. All 21 Senators who voted with Wall Street on both issues are Republicans, and Republicans raked in over 90 percent of the total campaign contributions. Here’s a chart showing Wall Street’s total contributions to this crowd for the 2010 cycle, by political party:

And here’s one showing total Wall Street contributions over the course of their careers:

These aren’t the only politicians carrying water for Wall Street—only the most flagrant. Some of the bank lobby’s savviest servants on Capitol Hill do their dirty work early in the legislative process. They push through technical amendments and deploy complex procedural tricks to defang a bill, but when the final vote comes, they can still create the appearance of taking a stand against Wall Street’s interests. Rep. Melissa Bean, D-Ill., is a master of this technique, and Tea Party favorite Sen. Scott Brown, R-Mass., was able to claim credit for voting in favor of reform after demanding—and receiving—a host of big bank giveaways in return for his vote.

Nor are Republicans the only recipients of Wall Street largesse. Bean, for instance, has pulled in over $773,000 from Wall Street in the 2010 cycle alone, while working overtime to carve loopholes into new consumer protections (she’s scored $2.4 million over the course of her Congressional career). And the Democratic leadership has received millions as well.

When it comes to dealing out economic damage, no special interest group has been able to wreak more havoc that Big Finance. After inflating an $8 trillion housing bubble and sparking a recession that has cost the economy over 8 million jobs, public pressure to crack down on Wall Street was intense. And the public is still clamoring for Wall Street accountability—after two years in office, the Wall Street reform bill remains the most popular legislative effort championed by President Barack Obama, and getting tough on Big Finance has been a reliable re-election strategy for embattled incumbents.

But harnessing the Wall Street beast proved a tortuously long and difficult process, taking nearly two years despite its economic urgency. And while the bill that Congress approved this year has plenty of virtues, many of the most critical reforms were simply not addressed by the legislation. The too-big-to-fail financial behemoths that taxpayers bailed out in 2008 are even bigger today, banks can still gamble with taxpayer money, and the foreclosure crisis continues to ravage neighborhoods across the country. Until these issues are addressed, the U.S. economy will remain beholden to Wall Street’s bonus-crazed whims.

But if you follow the money, it’s obvious why so much work remains to be done on financial reform. This year alone, Wall Street spent a staggering $251 million fighting financial reform. According to a separate analysis of campaign contributions performed by Public Citizen, lawmakers who voted with Wall Street on both the bailout and reform received nearly triple the campaign cash of those who opposed Wall Street (figures in the Public Citizen study don’t correspond to those I’ve compiled, as Public Citizen examined contributions from 2007 through July of 2010).

Despite the popularity of Wall Street reform, 90 members of Congress didn’t even want to publicly pretend to support reining in almost universally reviled banks. When you’re trying to decide which bums to throw out in November, here’s one place to start. These members of Congress are okay with setting up economic calamities, and they don’t mind paying for them with your tax dollars.

Here’s how Wall Street’s contributions break down among Wall Street’s 21 Senate Cronies. For 2010:

For their careers:

And here are all of the Cronies, along with their Wall Street hauls:

Senator2010 Wall Street CashCareer Wall Street Cash
Sen. Lamar Alexander (R-TN)$1,600,000 $4,900,000
Sen. Robert Bennett (R-UT)$1,500,000 $2,600,000
Sen. Kit Bond (R-MO)$333,600 $3,300,000
Sen. Richard Burr (R-NC)$1,500,000 $3,300,000
Sen. Saxby Chambliss (R-GA)$2,500,000 $3,500,000
Sen. Tom Coburn (R-OK)$451,700 $1,200,000
Sen. Bob Corker (R-TN)$3,100,000 $3,300,000
Sen. John Cornyn (R-TX)$3,200,000 $4,700,000
Sen. John Ensign (R-NV)$1,300,000 $2,600,000
Sen. Lindsey Graham (R-SC)$1,100,000 $2,000,000
Sen. Judd Gregg (R-NH)$233,200 $1,100,000
Sen. Orrin Hatch (R-UT)$1,400,000 $2,600,000
Sen. Kay Bailey Hutchison (R-TX)$1,400,000 $4,700,000
Sen. Johnny Isakson (R-GA)$1,500,000 $4,200,000
Sen. John Kyl (R-AZ)$2,800,000 $3,800,000
Sen. Dick Lugar (R-IN)$412,200 $2,500,000
Sen. John McCain (R-AZ)$947,600 $34,000,000
Sen. Mitch McConnell (R-KY)$4,300,000 $5,300,000
Sen. Lisa Murkowski (R-AK)$268,200 $909,700
Sen. John Thune (R-SD)$1,600,000 $3,900,000
Sen. George Voinovich (R-OH)$435,200 $2,800,000
21 Republicans

0 Democrats

Senate Total$31,881,700 97,209,700
House Member2010 Wall Street CashCareer Wall Street Cash
Rep. Rodney Alexander, R-La.$106,500 $422,300
Rep. Spencer Bachus, R-Ala.$611,600 $4,400,000
Rep. Gresham Barrett, R-S.C.$20,400 $806,700
Rep. Marion Berry, D-Ark.$24,900 $663,700
Rep. Judy Biggert, R-Ill.$395,000 $1,900,000
Rep. Roy Blunt, R-Mo.$1,200,000 $3,800,000
Rep. John Boehner, R-Ohio$1,300,000 $3,700,000
Rep. Jo Bonner, R-Ala.$90,400 $702,200
Rep. Mary Bono Mack, R-Calif.$190,000 $733,400
Rep. John Boozman, R-Ark.$257,700 $491,000
Rep. Dan Boren, D-Okla.$123,100 $722,200
Rep. Rick Boucher, D-Va.$92,700 $1,400,000
Rep. Charles Boustany Jr, R-La.$226,300 $934,600
Rep. Kevin Brady, R-Texas$157,000 $840,500
Rep. Henry Brown, R-S.C.$35,700 $494,000
Rep. Vernon Buchanan, R-Fla.$336,800 $1,400,000
Rep. Ken Calvert, R-Calif.$180,300 $940,300
Rep. Dave Camp, R-Mich.$588,000 $1,700,000
Rep. John Campbell, R-Calif.$413,400 $1,200,000
Rep. Eric Cantor, R-Va.$2,100,000 $4,400,000
Rep. Mike Castle, R-Del.$749,100 $3,200,000
Rep. Howard Coble, R-N.C.$23,400 $502,500
Rep. Tom Cole, R-Okla.$110,000 $686,000
Rep. Mike Conaway, R-Texas$161,500 $711,800
Rep. Ander Crenshaw, R-Fla.$86,100 $717,000
Rep. Henry Cuellar, D-Texas$90,600 $606,900
Rep. Charlie Dent, R-Pa.$177,900 $881,000
Rep. Chet Edwards, D-Texas$324,200 $1,900,000
Rep.Vernon Ehlers, R-Mich.$8,500 $292,200
Rep. Jo Ann Emerson, R-Mo.$143,900 $904,400
Rep. Mary Fallin, R-Okla($1,000)$340,700
Rep. Rodney Frelinghuysen, R-N.J.$86,200 $840,300
Rep. Jim Gerlach, R-Pa.$251,600 $1,800,000
Rep. Kay Granger, R-Texas$140,000 $1,100,000
Rep. Wally Herger, R-Calif.$171,500 $1,100,000
Rep. Peter Hoekstra, R-Mich.($1,000)$300,600
Rep. Bob Inglis, R-S.C.0$572,800
Rep. Peter King, R-N.Y.$173,900 $1,600,000
Rep. Mark Kirk, R-Ill.$1,900,000 $4,200,000
Rep. John Kline, R-Minn$170,900 $989,100
Rep. Jerry Lewis, R-Calif.$31,800 $748,000
Rep. Daniel E. Lungren, R-Calif.$147,700 $622,500
Rep. Howard McKeon, R-Calif.$132,100 $1,100,000
Rep. Gary Miller, R-Calif.$144,500 $902,000
Rep. Harry Mitchell, D-Ariz.$130,900 $558,000
Rep. Sue Myrick, R-S.C.$93,600 $1,200,000
Rep. Soloman Ortiz, D-Texas$40,200 $381,700
Rep. George Radanovich, R-Calif.$24,900 $462,000
Rep. Mike Rogers, R-Ala.$128,200 $1,000,000
Rep. Hal Rogers, R-Ky.$50,200 $468,000
Rep. Ileana Ros-Lehtinen, R-Fla.$127,000 $986,000
Rep. Paul Ryan, R-Wis.$531,500 $1,900,000
Rep. Jean Schmidt, R-Ohio$121,900 $519,700
Rep. John Shadegg, R-Ariz.$39,700 $1,200,000
Rep. Bill Shuster, R-Pa.$30,700 $403,600
Rep. Mike Simpson, R-Ind.$20,500 $266,900
Rep. Ike Skelton, D-Mo.$112,500 $524,200
Rep. Lamar Smith, R-Texas$258,900 $1,300,000
Rep. Mark Souder, R-Ind.$40,500 $405,800
Rep. Zack Space, D-Ohio$169,300 $476,300
Rep. John Sullivan, R-Okla.$79,200 $494,800
Rep. Lee Terry, R-Neb.$202,600 $1,400,000
Rep. Mac Thornberry, R-Texas$42,500 $603,400
Rep. Patrick Tiberi, R-Ohio$555,500 $2,800,000
Rep. Fred Upton, R-Mich.$81,700 $929,400
Rep. Greg Walden, R-Ore.$180,700 $732,400
Rep. Zach Wamp, R-Tenn.0$715,700
Rep. Joe Wilson, R-S.C.$155,500 $580,200
Rep. Frank Wolf, R-Va.$90,400 $1,100,000
60 Republicans$15,873,400 $72,443,800
9 Democrats$1,108,400 $7,233,000
House Total$16,981,800 $79,676,800

Corporate Mortgage Scams Threaten to Crash an Already Shaky Housing Market

Corporate Mortgage Scams Threaten to Crash an Already Shaky Housing Market

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The Great Recession may have ended in June 2009, according to the National Bureau of Economic Research, but U.S. Treasury Secretary Timothy Geithner isn't buying it. Neither are recently revealed foreclosure and eviction scams at GMAC Mortgage, JP Morgan Chase, Bank of America, Wells Fargo and other too-big-to-fail financial firms swimming in both American taxpayer cash and the Federal Reserve Bank's divine intervention.

“I'm not an economist, and I'm not an academic," Geithner ducked when asked last week during a Financial Services Committee hearing to agree with NBER's suspicious assessment. "I would just say the following: This is still a very tough economy."

That's a colossal understatement; our creaking housing market is being capsized by a foreclosure pandemic riddled by corruption. Last week, predictable news emerged that Jeffrey Stephan, a GMAC Mortgage team leader for affidavit execution, signed off on nearly 10,000 foreclosures each month without even bothering to read them, although he is legally tasked with doing so. That's a rate of one a minute, if he works an eight-hour day, according to the Washington Post. Afraid it would look like it was blithely executing foreclosures on a callous conveyor belt -- which is precisely the case -- GMAC quickly put the brakes on any further evictions in 23 states until it could find a way to massage the problem.

"Do not proceed with evictions, cash for keys transactions, or lockouts,” GMAC's official memo explained. “All files should be placed on hold, regardless of occupant type. Do not proceed with REO sale closings.”

Real estate owned (REO) sales are sales of lender-owned properties that banks failed to unload at foreclosure auctions, and are busily trying to dump by any means necessary. That includes selling them to whatever deal-hunting home buyers still exist in this anemic economy.

But prospective home buyers could be inheriting damaged goods. Because of their dense securitization, each mortgage is divided between so many parties that banks are foreclosing and selling homes that may not even belong to them.

"Wells [Fargo] is sufficiently concerned about the risks of selling properties out of foreclosure that it is springing an addendum on buyers, shortly before closing, which effectively shifts all risk for any title deficiency onto the buyer," Yves Smith explained on Naked Capitalism. [But] if a bank like Wells does not have the right to foreclose, it cannot have clean title to the property. So the bank could conceivably be selling something it does not own."

Worse, titles to REO properties are being compromised and confused by these crafty banks and their lawyers. In one particularly ridiculous case, Bank of America foreclosed on a Countrywide-brokered Florida home and transferred its title to Fannie Mae, even though it had already been paid off in cash for it and no mortgage existed.

This securitized madness is exactly how owners were saddled with predatory adjustable-rate mortgages to begin with. The plan was never to keep them in their hastily constructed properties, built during a post-9/11 housing boom that more or less functioned as a casino for hedge funds and other deregulated power players. The plan was to saddle homeowners with artificially inflated loans that would exist long after their assets' true value was reached, in the best case. Or, in the worst case, long after they were kicked out of their homes, or could have their homes illegally repossessed thanks to obscure legalese and naked grift.

It is no accident that, according to CoreLogic (PDF), as of Q2 2010, nearly a quarter of all residential properties with mortgages are underwater. (Or experiencing negative equity, as bean counters looking for less scary terminology are wont to say.) Nor is it surprising that housing prices have not yet bottomed, even though they've fallen by nearly 30 percent since 2006.

Nor is it illogical to suggest the situation is only going to get worse, given the 12 million properties entering a market already swamped by underwater homeowners, as well as banks not only unwilling to take on any major housing risk but also shiftily masking title defects to those still interested in taking on the burden of their compromised REOs. It's enough to make you lose your mind in legalese. Which is also the plan.

GMAC's recent controversy is nothing new to anyone who has been paying attention to the issue. The one-time financial services arm of General Motors -- which now goes by the less offensive name Ally Financial, after a $17 billion TARP bailout brought a 56 percent government stake courtesy of American taxpayers -- was legally sanctioned in 2006 for the same scam. But they are no worse than their banking counterparts like JP Morgan Chase, which "committed fraud" according to Florida Circuit Court Judge Jean Johnson, who blocked the too-big-to-fail monster in August from foreclosing on a property that actually belonged to Fannie Mae. And of course, the preposterous Bank of America, whose financial shenanigans are simply too numerous to name here.

The insulting fiasco is another slap in the face to the Obama administration's Home Affordable Modification Program (HAMP), which was supposed to be a collaborative loan-modification effort between government and industry to lower homeowner payments and stave off foreclosures. But like government and industry's previously disastrous collaborations -- deregulation, bailouts, should I go on? -- the people foot the exorbitant bill and interminably suffer while industry players suck dry everything worth value, whether they own it or not. As of August, HAMP helped about 450,000 of a promised 3-4 million homeowners modify their loans, while foreclosures hit a monthly record of 95,000 homes, the highest monthly total ever recorded by housing industry analysts RealtyTrac. Those failures will only increase repossessions and evictions, which will spark off a persistent unemployment crisis featuring 15 million out-of-work Americans.

Meanwhile, more than half of the $400 billion government has recently spent to promote home ownership has benefited not the people-at-large but the wealthiest 5 percent of taxpayers, according to a new study funded by the nonprofit Annie E. Casey Foundation and the Corporation for Enterprise Development (CFED). Now we can add shocking -- shocking! -- revelations of corporate boilers courtesy of GMAC, the nation's fourth-largest lender, getting caught illegally mass-producing foreclosures using robo-signing slaves. Great.

The hard lesson, and truth, in this mayhem is that the so-called Great Recession is only over for corporations, whose profits have returned to pre-crisis levels and whose balance sheets haven't been this solvent since 1956, according to the Commerce Department. You're welcome.

For the rest of us, there are too few jobs or fair-minded loans on the horizon. Real unemployment is closer to 20 percent than it is to 10 percent. Like ourselves, our houses are increasingly underwater, submerged by disingenuous banks looking to callously capitalize on properties and securities they may not even own, all while willingly committing fraud on the nation.

But there are some shining lights willing to put it on the line for the American people.

"I'm pushing to establish an Office of the Homeowner Advocate at the Department of Treasury that would assist borrowers in the HAMP program who believe their mortgage servicer is breaking the rules," Senator Al Franken told the Huffington Post. "Right now, these families have nowhere to turn when wrongly denied from the assistance program or when they encounter difficulties in navigating an incredibly complicated system of avoiding foreclosure."

Let's hope Franken succeeds. Without that complexity, the banking and housing industry as we know it would disappear. Without the ability to splice mortgages into sci-fi nanostrands deliberately engineered to avoid simplicity (and liability), banks would suddenly have to increase their capital requirements, increase transparency and lend directly to homeowners without the benefit of a servicing industry whose very purpose is to distance risk as far away from lenders as possible. So far, it's working like a well-funded machine, even in spite of the GMAC controversy, which is years-old news, to say nothing of the overall recession. If banks can lock homeowners into dense legalese and massive interest payments, they can lock out those same homeowners and make hay in the foreclosure aftermarket.

Meanwhile, all the homes industry just couldn't wait to build in the housing bubble are rotting away, toxic footballs punted between players paranoid of getting stuck in money pits. Which, in turn, is creating multiple monsters, from increasing family homelessness, an unsustainable housing glut, depressed property values, rising public fury and worse. And it's time the American people withdrew from the war, like the United Auto Workers, who are so fed up with JP Morgan Chase's refusal to implement a two-year freeze on foreclosures they are planning mass bank withdrawals in the hundreds of millions. More taxpayer revolt against the banks, as well as a double-dip recession, are practically guaranteed unless the government gets serious about protecting its people, not just corporations, from systemic financial failure.

"Popular anger against taxpayer dollars going to the largest banks, especially when the economy continues to struggle, remains high," explained the Congressional Oversight Panel -- whose chairwoman Elizabeth Warren was named by the Obama administration to head a new consumer watchdog -- explained in its September report. "The program's unpopularity may mean that unless it can be convincingly demonstrated that the TARP was effective, the government will not authorize similar policy responses in the future. Thus, the greatest consequence of the TARP may be that the government has lost some of its ability to respond to financial crises in the future."

So NBER may think the Great Recession is over, but it's really just beginning for the majority of Americans, who are running out of hope, change and time. If economic history, which is littered with recessions and depressions, is any guide, Americans have years to wait before this Titanic turns around, if it ever does.

"If you allow a financial market to spin wildly until it breaks down, it really does seem that you run the risk of years of economic malaise," explained Yale economist Robert Shiller. "That is a historical pattern."

White House Under Fire for Grossly Underestimating Oil Spill

Barack Obama under fire for grossly underestimating Gulf oil spill

White House commission finds that administration lost public trust and may have sabotaged clean-up operations

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The Obama administration lost the public trust and may have sabotaged clean-up operations in the Gulf of Mexico by grossly underestimating the amount of oil gushing from BP's broken Macondo well, according to a White House commission appointed to investigate the spill.

In a scathing critique of the administration's handling of the disaster, the two co-chairs of the commission yesterday said government officials made a serious blunder by releasing early estimates of the spill that were about 60 times too low.

"It's a little bit like Custer underestimating the number of Indians on the other side of the hill and paying a price for that," Bob Graham, a former Democratic senator from Florida, told reporters.

Government agencies have come under sustained assault from independent scientists for initial estimates that put the size of the spill as low as 1,000 barrels a day – even as footage from the ocean floor showed a huge cloud of oil and gas billowing out of the BP well. A team of scientific experts assembled by the government eventually raised the estimate to more than 60,000 barrels a day.

In testimony yesterday, the coast guard commander Admiral Thad Allen insisted the underestimates had had no effect on the response. "The answer is no," Allen said. "We assumed at the outset this would be a catastrophic event."

But Allen's assertion made little headway with the other co-chair of the commission. "I would assume that it's common sense that a flow rate will determine how many skimmers you think you need, how many thousand feet of boom you bring into the area, what you are going to do with respect to dispersants," said William Reilly, who served as chairman of the Environmental Protection Agency under the first President Bush. "How do you deploy your resources if you don't know how serious the threat is?"

The low estimate may also have encouraged BP to take the ultimately unsuccessful step of attempting to cap the well with a giant dome. "I think it did have an impact … on the issue of the containment technology," Graham said.

The charges that government officials badly misjudged or misrepresented the gravity of the spill are extremely sensitive for the Obama administration, which claims repeatedly that its environmental policies are rooted in sound science.

Graham and Reilly said the disconnect between official assertions and the footage from the sea bed badly undermined public confidence in the oil spill response.

"I think it set a context for public scepticism about future information," said Graham.That scepticism rose again last month when government agencies produced a report saying about 75% of the oil had been captured, burned, dissolved or dispersed.

Bill Lehr, a senior scientist for the National Oceanic and Atmospheric Administration, stood by the report yesterday.

The authority of that report was also challenged when a leading oceanographer told the commission that more than half of the oil that spilled into the Gulf was now buried along the coast or on the sea floor.

"Over 50% of the total discharge is a highly durable material that resists further dissipation," Ian MacDonald, a scientist at Florida State University told the commission.

"Much of it is now buried in marine and coastal sediments. There is scant evidence for bacterial degradation of this material prior to burial."

FBI Raids Activists' Homes in Sinister COINTELPRO Replay

FBI Raids Activists' Homes in Sinister COINTELPRO Replay

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In a replay of the Federal Bureau of Investigation's infamous COINTELPRO operations targeting the left during the 1960s and '70s, America's political police launched raids on the homes of antiwar and solidarity activists.

Heavily-armed SWAT teams smashed down doors and agents armed with search warrants carried out simultaneous raids in Minneapolis and Chicago early morning on September 24.

Rummaging through personal belongings, agents carted off boxes of files, documents, books, letters, photographs, computers and cell phones from Minneapolis antiwar activists Mick Kelly, Jessica Sundin, Meredith Aby, two others, as well as the office of that city's Anti-War Committee.

Meanwhile, as federal snoops seized personal property in Minneapolis, FBI agents raided the Chicago homes of activists Stephanie Weiner and Joseph Iosbaker. According to the Chicago Tribune, "neighbors saw FBI agents carrying boxes from the apartment of community activist Hatem Abudayyeh, executive director of the Arab American Action Network."

"In addition," the Tribune reported, "Chicago activist Thomas Burke said he was served a grand jury subpoena that requested records of any payments to Abudayyeh or his group."

Amongst those targeted by the FBI were individuals who organized peaceful protests against the imperialist invasion and occupation of Iraq and 2008 protests at the far-right Republican National Convention in St. Paul, Minnesota.

As Antifascist Calling reported in 2008 and 2009, citing documents published by the whistleblowing web site WikiLeaks, state and local police, the FBI and agencies such as the Department of Homeland Security, the Pentagon's Northern Command (NORTHCOM), the United States Secret Service, the National Security Agency and the National Geospatial-Intelligence Agency implemented an action plan designed to monitor and squelch dissent during the convention.

As part of that plan's execution, activists and journalists were preemptively arrested, and cameras, recording equipment, computers and reporters' confidential notes were seized. Demonstrations were broken up by riot cops who wielded batons, pepper spray and tasers and attacked peaceful protesters who had gathered to denounce the war criminals' conclave in St. Paul.

With Friday's raids, the federal government under "change" huckster Barack Obama, has taken their repressive program to a whole new level, threatening activists with the specter of being charged with providing "material support of terrorism." A felony conviction under this draconian federal law (Title 18, Part I, Chapter 113B, § 2339B) carries a 15 year prison term.

State-Corporate Nexus

The trend by federal, state and corporate securocrats to situate antiwar and international solidarity activism along a bogus "terrorism continuum," is an alarming sign that plans for building an American police state are well underway as I pointed out in my 2008 analysis of the FBI's "Counterterrorism Analytical Lexicon."

Recently, the secrecy-spilling web site Public Intelligence posted 137 bulletins produced by the Institute of Terrorism Research and Response (ITRR), an American-Israeli company, under terms of a $125,000 contract to the Pennsylvania Office of Homeland Security.

Billing itself as "the preeminent Israeli/American security firm providing training, intelligence and education to clients across the globe," ITRR is part of a large, but little understood nexus of "public-private partnerships" fusing state and corporate surveillance against leftists and environmentalists.

Amongst the targets of ITRR's alarmist screeds were anti-drilling and environmental activists, permanent quarry for corporate spies and provocateurs, as the web site Green Is The New Red (GNR) amply documents.

Earlier this month, GNR reported that while ITRR and their political paymasters have been monitoring non-violent activists, "including a film screening of Gasland," Pennsylvania's heimat security boss James Powers wrote in an email that his office intended to "continue providing this support to the Marcellus Shale Formation natural gas stakeholders while not feeding those groups fomenting dissent against those same companies."

In the bizarre parallel universe inhabited by Powers and his Israeli cohorts, anti-drilling activists are "ecoterrorists," while the mass-murdering neo-Nazi mastermind of the 1995 Oklahoma City bombing that killed 168 people including 19 children, Timothy McVeigh, was "just a person very angry with the U.S. government."

While corporate polluters and criminals get a free pass from the federal government and an anti-Muslim and anti-Arab crusade is in full-swing, stoked by right-wing goons and their media shills, it is little wonder then, that Friday's raids targeted supporters of the Palestinian solidarity movement.

Neo-McCarthyite Witchhunt

With a pretext that the raids were seeking "evidence related to an ongoing Joint Terrorism Task Force investigation," FBI spokesperson Steve Warfield told The New York Times that repressors are "looking at activities connected to the material support of terrorism."

Attorney Ted Dooley who represents Mick Kelly, a union- and socialist activist targeted by the Bureau told the Times that the SWAT team broke down Kelly's door at 7 a.m. on Friday and served a search warrant on his companion.

According to Dooley, the warrant claimed the secret state was searching for "evidence" that activist groups had provided "material support" to "Hezbollah, the Popular Front for Liberation of Palestine and the Revolutionary Armed Forces of Colombia."

Dooley told the Minneapolis Star-Tribune that the raids are nothing less than "a probe into the political beliefs of American citizens and any organization anywhere that opposes the American imperial design."

The political nature of the raids was blatantly transparent. A copy of the search warrant on Kelly's home obtained by Twin Cities Independent Media Center (TC-IMC) revealed that the order, signed by U.S. Magistrate Judge Susan Nelson specified that Kelly's membership in the Freedom Road Socialist Organization (FRSO) was a primary motive behind the Bureau's home invasion.

The warrant allowed the FBI to take "documents, files, books, photographs, videos, souvenirs, war relics, notebooks, address books, diaries, journals, maps, or other evidence, including evidence in electronic form relating to Kelly's travels to and from and presence and activities in Minnesota and other foreign countries, to which Kelly has traveled as part of his work for FRSO."

Reprising the red-hunting frenzy of the McCarthy period at the height of the Cold War, the warrant specifies that the Bureau was authorized by Obama's Justice Department to seize material relating to "the recruitment, indoctrination, and facilitation of other individuals in the United States to join FRSO, including materials related to the identity and location of recruiters, facilitators, and recruits, the means by which the recruits were recruited to join FRSO, the means by which the recruitment was financed and arranged."

In other words, with a bogus "terrorism investigation" as a pretext, the Obama regime is targeting socialist political groups for destruction in order for Democrats to whip-up "War on Terror" and anticommunist hysteria prior to November general elections that may see Congress pass into the hands of the troglodytic Republican faction of war criminals and corporatists.

Grand Jury Intimidation

In addition to turning over the homes of antiwar and solidarity activists in Illinois, Michigan and Minnesota, the FBI handed out subpoenas ordering individuals to appear before a federal grand jury that will convene next month in Chicago.

While the Bureau cannot compel citizens to answer their questions, administrative means can be used by the secret state to coerce testimony against fellow activists: the federal grand jury system.

As civil liberties scholar Frank Donner wrote in his groundbreaking book, The Age of Surveillance: "Federal grand juries, judicial bodies limited under our legal system to an accusatory role, were in the same way [as red-hunting congressional committees] taken over by the executive branch in the Nixon years and converted into intelligence instruments."

Historically, federal grand juries have targeted dissident groups and individuals as an harassment and intimidation tactic, particularly when activists and organizations challenged the government's imperial adventures abroad and capitalist depredations at home.

Individuals subpoenaed by the state who refuse to answer questions posed by Star Chamber inquisitors can be receive an indeterminate jail sentence for failing to do so.

During the Nixon administration according to Donner, some one hundred grand juries subpoenaed more than one hundred thousand witnesses in a blatant attempt to silence New Left and antiwar groups; as well, members of the Catholic left and supporters of the African-American, Native American, Puerto Rican independence and women's liberation movements were similarly targeted.

While corporate media insist that the COINTELPRO-era disappeared with Nixon, FBI snoops throughout the 1980s, '90s down to the present moment have marked the left for destruction.

Recently, Bay Area Indymedia journalist Josh Wolf was jailed for 226 days in 2006-2007 by the U.S. District Court in San Francisco after refusing to turn over his raw, unedited video footage to the FBI in connection with the Bureau's alleged "arson investigation" against anti-G8 anarchist protests in 2005.

Wolf refused to comply with the subpoena, and National Lawyers Guild attorneys argued that to do so would have a "chilling effect" on journalists who covered future protests, effectively transforming reporters into an arm of the government. Their arguments failed to sway the Ninth Circuit Court of Appeals and Wolf was imprisoned.

When Wolf was released from the Federal Corrections Institution in Dublin, California in 2007, he had been jailed longer than any other journalist for refusing to divulge sources or source materials.

Cover-Ups, Terror, Repression

Today, as the capitalist economic crisis deepens and the "War on Terror" morphs into a multiyear, multibillion dollar boondoggle engorging defense and security corporations with taxpayer-funded boodle, labor, environmental and socialist opponents are in the cross-hairs of the Obama administration, just as they were during the years of the criminal Bush regime.

Activists with diverse groups such as the Palestine Solidarity Group, Students for a Democratic Society, the Twin-Cities Anti-War Committee, the Colombia Action Network, the Freedom Road Socialist Organization, and the National Committee to Free Ricardo Palmera, a Colombian political prisoner, have now been targeted for "special handling" by Obama's Justice Department.

As the imperialist occupation project flies off the rails in Afghanistan, and as governments in Central and South America reject the capitalist "free trade" paradigm of militarism, hyperexploitation and resource extraction that benefit grifting North American multinationals and drug-money laundering banks, the repressive state is moving to shore-up its crumbling edifice here at home.

Friday's raids are all the more ironic, given the fact that just last week the Justice Department's own Office of the Inspector General (OIG) revealed that the Bureau had used false claims to launch "counterterror" investigations to justify covert spying and infiltration operations by provocateurs against activist groups across the country.

That report was a whitewash and largely exonerated the Bureau, clearing secret state agents of deliberate violations of their targets' civil rights and claimed that FBI snoops were motivated by a concern over "potential violence," not the leftist views expressed by U.S. policy opponents.

Although a cover-up, the OIG report disclosed new details of illegal FBI spying on an array of antiwar, Muslim, environmental and animal rights groups. Filled with mendacious characterizations designed as an alibi for "overzealous" agents, Inspector General Glenn A. Fine asserted that people were placed on terrorist watch lists because of "factually weak" evidence and that investigations were opened and continued "without adequate basis," not their opposition to imperialism or destruction of the environment.

The conduct by secret state repressors however, goes far beyond overzealousness. In the wake of the provocative 9/11 attacks, materially aided by the FBI's own informant, the al-Qaeda triple agent Ali Mohamed, "terrorism" continues to serve as a pretext--and justification--for a domestic clampdown against organizations engaged in legal political activity guaranteed by the U.S. Constitution and is a key feature of Washington's "War on Terror" policies.

Parenthetically, Fox News reported Sunday that the Pentagon "has burned 9,500 copies of Army Reserve Lt. Col. Anthony Shaffer's memoir 'Operation Dark Heart,' his book about going undercover in Afghanistan."

"The Defense Intelligence Agency," the right-wing news outlet reports, "attempted to block key portions of the book that claim 'Able Danger' successfully identified hijacker Mohammed Atta as a threat to the United States before the Sept. 11, 2001, terror attacks."

According to Fox, "the DIA wanted references to a meeting between Lt. Col. Tony Shaffer, the book's author, and the executive director of the 9/11 Commission, Philip Zelikow, removed. In that meeting, which took place in Afghanistan, Shaffer alleges the commission was told about 'Able Danger' and the identification of Atta before the attacks. No mention of this was made in the final 9/11 report."

Undercover at the time, Shaffer recounted that there was "stunned silence" at the meeting after he told the executive director of the commission and others that Atta was identified as early as 2000 by 'Able Danger'."

While far-right terrorists are given entrée to the United States by secret state agencies to murder its own citizens, organizations targeted by the Bureau's blanket spying according to the Inspector General included Greenpeace, People for the Ethical Treatment of Animals, Catholic Worker and the Thomas Merton Center, a pacifist group dedicated to nonviolence. In one telling passage, Fine wrote, "in some cases, the FBI classified some investigations relating to nonviolent civil disobedience under its 'acts of terrorism' classification."

Given imperial assertions by the Bush and now, Obama regimes, that the Executive Branch, and it alone, has the authority to arrest and indefinitely detain anyone it so chooses without trial, on suspicion of "terrorism," categorizing nonviolent protesters as "terrorists" could lead to the seizure of individuals so designated and send them on a one-way trip to a military gulag such as Guantánamo Bay or even a CIA "black site."

In a statement commenting on the release of the OIG's report, Michael German, the American Civil Liberties Union Senior Policy Counsel, and a former FBI whistleblower said:

"The FBI has a long history of abusing its national security surveillance powers, reaching back to the smear campaign waged by the American government against Dr. Martin Luther King. Americans peacefully exercising their First Amendment rights were able to become targets of FBI surveillance because spying guidelines that were established after the shameful abuses of the 60s and 70s were loosened in 2002. Unfortunately, they were loosened again in 2008, even after this abuse was uncovered.

"Unless the rules regulating the FBI are strengthened to safeguard the privacy of innocent Americans, we are all in danger of being spied on and added to terrorist watch lists for doing nothing more than attending a rally or holding up a sign."

With the recent raids on activist homes, the Bureau has issued its unambiguous reply to the Inspector General and the American people.

In response, over 150 people attended a community meeting in Minneapolis Friday night "on less than six hours notice, to begin to respond to Friday morning's FBI raids and subpoenas to local antiwar and international solidarity organizers," the Twin Cities Independent Media Center reported.

"Organizers," according to TC-IMC, "also announced two upcoming events: a protest outside the Minneapolis FBI office, 111 Washington Ave. S., at 4:30pm on Monday; and a solidarity committee meeting on Thursday at 7pm, location to be determined. The subpoenas ask activists to appear before a grand jury in Chicago, where a solidarity vigil was held last night as a raid was still ongoing in that city, on or around October 19, reported a Chicago Indymedia post."

Minnesota civil rights attorney Bruce Nestor told the St. Paul Pioneer Press that he was "profoundly troubled" by the raids. "Overwhelmingly they're people who are doing public political organizing, so I think it's shocking to have heavily armed federal agents show up at their homes. ... It's all people involved in anti-war activity, and it appears to be focused largely on opposition to the U.S. policy in Colombia and Palestine."

Nestor added. "This is a direct attack on people who are strong, dedicated advocates of freedom, of the right of people to be free from US domination. It is an attack upon anybody who organizes against US imperialism and US militarism abroad."

Census finds record gap between rich and poor

Census finds record gap between rich and poor

Recession's impact: Census shows growing income gap as young adults, children take big hits.

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The income gap between the richest and poorest Americans grew last year to its widest amount on record as young adults and children in particular struggled to stay afloat in the recession.

The top-earning 20 percent of Americans — those making more than $100,000 each year — received 49.4 percent of all income generated in the U.S., compared with the 3.4 percent earned by those below the poverty line, according to newly released census figures. That ratio of 14.5-to-1 was an increase from 13.6 in 2008 and nearly double a low of 7.69 in 1968.

A different measure, the international Gini index, found U.S. income inequality at its highest level since the Census Bureau began tracking household income in 1967. The U.S. also has the greatest disparity among Western industrialized nations.

At the top, the wealthiest 5 percent of Americans, who earn more than $180,000, added slightly to their annual incomes last year, census data show. Families at the $50,000 median level slipped lower.

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"Income inequality is rising, and if we took into account tax data, it would be even more," said Timothy Smeeding, a University of Wisconsin-Madison professor who specializes in poverty. "More than other countries, we have a very unequal income distribution where compensation goes to the top in a winner-takes-all economy."

Lower-skilled adults ages 18 to 34 had the largest jumps in poverty last year as employers kept or hired older workers for the dwindling jobs available, Smeeding said. The declining economic fortunes have caused many unemployed young Americans to double-up in housing with parents, friends and loved ones, with potential problems for the labor market if they don't get needed training for future jobs, he said.

Rea Hederman Jr., a senior policy analyst at The Heritage Foundation, a conservative think tank, agreed that census data show families of all income levels had tepid earnings in 2009, with poorer Americans taking a larger hit. "It's certainly going to take a while for people to recover," he said.

The findings are part of a broad array of U.S. census data being released this month that highlight the far-reaching impact of the recent economic meltdown. The effects have ranged from near-historic declines in U.S. mobility and birth rates to delayed marriage and the first drop in the number of illegal immigrants in two decades.

The census figures also come amid heated political debate in the run-up to the Nov. 2 elections over whether Congress should extend expiring Bush-era tax cuts. President Barack Obama wants to extend the tax cuts for individuals making less than $200,000 and joint filers making less than $250,000; Republicans are pushing for tax cuts for everyone, including wealthy Americans.

The 2009 census tabulations, which are based on pre-tax income and exclude capital gains, are adjusted for household size where data are available. Prior analyses of after-tax income made by the wealthiest 1 percent compared to middle- and low-income Americans have also pointed to a widening inequality gap, but only reflect U.S. data as of 2007.

Among the 2009 findings:

_The poorest poor are at record highs. The share of Americans below half the poverty line — $10,977 for a family of four — rose from 5.7 percent in 2008 to 6.3 percent. It was the highest level since the government began tracking that group in 1975.

_The poverty gap between young and old has doubled since 2000, due partly to the strength of Social Security in helping buoy Americans 65 and over. Child poverty is now 21 percent compared with 9 percent for older Americans. In 2000, when child poverty was at 16 percent, elderly poverty stood at 10 percent.

_Safety nets are helping fill health gaps. The percentage of children covered by government-sponsored health insurance such as Medicaid and the Children's Health Insurance Program jumped to 37 percent, or 27.6 million, from 24 percent in 2000. That helped offset steady losses in employer-sponsored insurance.

The 2009 poverty level was set at $21,954 for a family of four, based on an official government calculation that includes only cash income. It excludes noncash aid such as food stamps.

Arloc Sherman, a senior researcher at the left-leaning Center on Budget and Policy Priorities, noted the effects of expanded government programs in cushioning the impact of skyrocketing unemployment. For example, the Census Bureau estimates that 3.6 million people would have been lifted above the poverty line if food stamps were counted — a number that would have reduced the 2009 poverty rate from the official 14.3 percent to 13.2 percent.

Sheldon Danziger, a University of Michigan public policy professor, said while the U.S. has developed policies to combat poverty, it has trouble addressing ever-widening income inequality — even with a growing federal deficit and previous warnings by former Federal Reserve Chairman Alan Greenspan about soaring executive pay.

An Associated Press-GfK Poll this month found that by 54 percent to 44 percent, most Americans support raising taxes on the highest U.S. earners. Still, many congressional Democrats have expressed wariness about provoking the 44 percent minority so close to Election Day.

"We're pretty good about not talking about income inequality," Danziger said.

US to spy on Internet messaging: Regulations to target Skype, Facebook, Blackberry

Big Brother Obama: US to spy on Internet messaging

Regulations to target Skype, Facebook, Blackberry

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The Obama White House is backing new regulations that would compel popular Internet messaging services like Facebook, Skype and Blackberry to open up their systems to FBI surveillance, the New York Times reported Monday, citing federal law enforcement and national security officials.

The threat to democratic rights goes far beyond anything envisioned by the Bush administration. The goal is to make all forms of electronic communication that use the Internet subject to wiretapping and interception by federal police agencies.

In the past few years there has been a large-scale shift from conventional telephone communication to Internet-based messaging, which is both cheaper and more secure.

“Investigators have been concerned for years that changing communications technology could damage their ability to conduct surveillance,” the Times reported. “In recent months, officials from the FBI, the Justice Department, the National Security Agency, the White House and other agencies have been meeting to develop a proposed solution.”

This would include drafting new statutory language to bring providers like Research in Motion, the Canadian-based company that makes Blackberry devices, under legal controls similar to those established by the 1994 Communications Assistance to Law Enforcement Act.

That legislation required telecommunications companies to make their call-processing systems accessible to federal government spying, whether the calls pass through conventional phone lines or cell phone relay towers.

One of the biggest issues will be a government demand that communications service providers change the structure of their hardware and software, providing a “back door” for the use of intelligence agencies and ensuring that government agents can break any encryption applied to messages either by the service provider or the customer.

The Times article did not raise any alarm over the prospect of government snooping on the private communications of hundreds of millions of people, whether in the United States or in other countries. Nor did it quote any objection to the proposal from civil liberties groups, although the American Civil Liberties Union quickly issued a statement calling the plan “a huge privacy invasion” that was “one more step toward conducting easy dragnet collection of Americans’ most private communications.”

The only downside suggested by the Times account was the existence of technical problems that might prove expensive and cumbersome for the corporations that would have to comply with the new rules, and that the new security procedures might create new opportunities for hackers.

FBI General Counsel Valerie Caproni, who discussed the issue with the newspaper, said that there was a consensus among police and intelligence agencies that companies which provide encrypted communications would have to retain the key to any encryption, rather than allowing their customers to devise and hold their own.

“No one should be promising their customers that they will thumb their nose at a US court order,” she told the Times. “They can promise strong encryption. They just need to figure out how they can provide us plain text.” In other words, encryption would protect the privacy of communications, except when the government says otherwise.

This is the same stance taken by dictatorial governments from China to the Middle East. The governments of Saudi Arabia and the United Arab Emirates only last month threatened to bar Blackberry services in their countries because Research in Motion refused to allow the local intelligence services to monitor and intercept messaging.

The Times article gave two examples of government efforts to intercept encrypted or peer-to-peer communications that ran into technical obstacles, one involving a drug cartel, the other related to the failed Times Square bombing earlier this year. These examples were chosen to support the claim by the Obama administration that the buildup of surveillance is part of a struggle against crime and “terrorism.”

However, the Obama administration has defined “terrorism” so widely that the term now covers a vast array of constitutionally protected forms of political opposition to the policies of the US government, including speaking, writing, political demonstrations, even the filing of legal briefs.

The Times report comes only three days after FBI raids on antiwar political activists in Minneapolis and Chicago, who could face charges of providing “material support” for terrorist organizations because they have spoken and written in opposition to US foreign policy in the Middle East and in Colombia.

According to an attorney for one of those targeted, the dragnet was so all-encompassing that FBI agents seized “any documents containing the word Palestine.”

By the same logic, any data packet passing through the Internet with the word “Palestine” could be subject to interception, decryption, and storage in a federal database where both the person sending the message and the person receiving it would be permanently recorded as under suspicion of links to terrorism. Other words suggest themselves as likely targets: socialism, class struggle, imperialism, revolution, Marxism, Trotskyism.

The US national security apparatus seeks the power not only to spy on the Internet, but to seize or shut it down entirely when that might seem advantageous. Former CIA director Michael Hayden, interviewed by Reuters at a cyber-security conference in San Antonio, Texas on Sunday, called for giving President Obama, or any president, the power to shut down the Internet. “It is probably wise to legislate some authority to the president to take emergency measures for limited periods of time, with clear reporting to Congress, when he feels as if he has to,” he said.

Hayden was echoing a view that is increasingly widespread in official Washington. In June, a Senate subcommittee approved a bill, introduced by Joseph Lieberman, the right-wing Democrat from Connecticut, declaring the entire World Wide Web a “national asset” of the United States and giving the president the power to seize control of the Internet or order its complete shutdown “for national security reasons.”

The 197-page bill is entitled “Protecting Cyberspace as a National Asset Act,” or PCNAA. It has the backing of another top Senate Democrat, Jay Rockefeller of West Virginia. Big software companies and Internet Service Providers (ISPs) are supporting the bill because it grants them immunity against civil lawsuits for any damage caused by a shutdown or government takeover.

Also on Monday, the US Treasury Department issued proposed new regulations that would require American banks to report all electronic money transfers into and out of the United States, regardless of the amount. Up to now, transfers of $10,000 or more had to be reported.

The new regulations were issued under the Intelligence Reform and Terrorism Prevention Act, passed in 2004, which gave the treasury secretary authority to require such reports to “combat terrorist financing.” The new rules would require banks to pump information on 750 million transfers a year into a huge new database that could be mined by police, intelligence and regulatory agencies.

The information accompanying a wire transfer usually includes the name, address and account number of sender and recipient, as well as identification such as a driver’s license or passport number if required by the money service. Banks would have to provide Social Security numbers for senders and recipients on an annual basis.

These actions demonstrate that a turning point has been reached in the erosion of democratic rights in the United States. A full decade ago, at the time of the stolen presidential election of 2000 and the Supreme Court’s anti-democratic decision in Bush v. Gore, the Socialist Equality Party and the World Socialist Web Site warned that there was no longer any constituency for the defense of democratic rights within the American ruling class.

For a decade since the 9/11 terrorist attacks, first under Bush, now under Obama, the American ruling class has erected the framework for a police state. At no stage in this process has there been any significant opposition from any section of the political establishment.

Now the United States stands on the brink of major social struggles, with tens of millions of working people seeking the means to fight to defend jobs, living standards and public services. The American ruling class has long understood that the real threat to its vast wealth and privilege comes not from foreign “terrorists,” but from below, from the working people who constitute the vast majority of the population.

Working people must be equally clear-eyed: millions will now come into conflict with the vast military/intelligence apparatus of the federal government. What is posed now is a turn to political struggle, to the independent political mobilization of the working class against the two official parties of big business, the Democrats and Republicans, and against the capitalist state itself.

IMF-ILO conference warns of political upheavals

IMF-ILO conference warns of political upheavals

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The fear of social and political upheaval haunting ruling circles around the world was graphically expressed at a recent joint conference of the International Monetary Fund (IMF) and the International Labour Organisation (ILO) that reviewed the worsening global levels of unemployment and poverty.

Laszlo Andor, the European commissioner for employment and social affairs, told the conference in Norway that 2010 had been an “annus horribilis” for unemployment. “But if we fail to act,” he warned, “2011 may still turn out to be the annus horribilis for social cohesion”. In other words, Andor’s fear was that mass joblessness could bring a mass upsurge of class struggles and political crises—next year.

The figures presented to the conference speak for themselves. There are now over 210 million workers jobless globally—the highest level in recorded history—a 34 million rise in the past three years. Around 80 percent of the world’s population has no social welfare of any kind. Approximately 1.2 billion people, or 40 percent of the world’s labour force, do not earn enough to keep themselves or their families above the $2-a-day poverty level.

What particularly concerned Andor and other top officials was that much of the increased joblessness has been in the advanced economies of Europe and the US. In the US, the official number of unemployed has risen from 7.5 million to more than 15 million (half of these are long-term unemployed)—a level not seen since the Great Depression. Across Europe, there are now more than 23 million unemployed—a 36 percent increase since 2007.

IMF chief Dominique Strauss-Kahn told the gathering that the global financial crisis had left a “wasteland of unemployment”. He said that having a job was “often a matter of life and death” and warned that rising unemployment could lead to violent conflict.

Featured speakers included Spanish Prime Minister José Luis Rodríguez Zapatero and Greek Prime Minister George Papandreou, whose governments have already confronted strikes and mass protests against their IMF-dictated austerity measures. Zapatero warned the audience that long periods of high unemployment could set off “a crisis of pessimism” and “lack of confidence” in governments across Europe.

The ruling classes in Europe and internationally are acutely conscious of the extreme social and political tensions being generated by sharply declining living standards. Hostility to established political parties has been expressed in recent elections in Britain, Australia and Sweden that resulted in hung parliaments. In the US, the Democratic Party is facing major losses in mid-term congressional elections in November. Protests and strikes have not only erupted in Europe but have also emerged among the super-exploited in Asia—garment workers in Bangladesh and Cambodia, and car workers in China.

The conference document highlighted the potential for political radicalisation among young people who have been especially hard hit by job-shedding. In 2009 alone, the number of young people out of work globally rose by 6.6 million. Youth unemployment in Spain is officially 40 percent. In Italy, Sweden and France, it is currently around 25 percent and about 20 percent in the US and the UK.

The document warned: “Personal joblessness experience translates into negative opinions about the effectiveness of democracy and increases the desire for a rogue leader ... [This] extends to individuals who do not experience unemployment themselves, but live in a country and period with high unemployment. High and long-lasting unemployment therefore represents risks to the stability of existing democracies.”

Millions of young people—whether jobless or not—are starting to see for themselves that parliamentary democracy and the established parties are nothing but a screen for the interests of the wealthy corporate and financial elites. That disaffection can be exploited by parties of the extreme right that rail against the banks. However, in speaking of “rogue leaders”, what the ruling elites really fear is the rise of revolutionary sentiments among workers and youth, and genuine socialist parties committed to the abolition of the profit system.

The inability of capitalism or its political representatives to offer any solutions to working people was reflected in the poverty of the conference discussion. Of course, the delegates had to feign concern for the unemployed. But these are the very IMF officials, government leaders, corporate CEOs and trade union bureaucrats who are responsible for creating the jobless “wasteland” over the past two years.

As for proposals, the final conference statement promised to work on “employment-creating growth” and “a minimum social protection floor for people living in poverty”—right at the point where major corporations continue to downsize and governments are slashing budgets. It also called for more “social dialogue” and better “tripartite solutions”—that is, the even closer collaboration of the trade unions with governments and big business in imposing the agenda of austerity.

Two decades ago, amid the triumphalism in bourgeois circles that surrounded the collapse of the Stalinist regimes in Eastern Europe, commentators described 1989 as an “annus mirabilis”—a year of miracles that marked the death of socialism. The International Committee of the Fourth International (ICFI), the world Trotskyist movement, was alone in declaring that the collapse of Stalinism represented the end of all nationally-based programs and foreshadowed a profound crisis of world capitalism.

European Commissioner Andor’s declaration that next year could be an “annus horribilis for social cohesion” is a call to arms to the capitalist classes. For all the talk at the ILO-IMF conference about the political dangers facing “democracy”, the ruling elites will not hesitate to resort to their own methods of extra-parliamentary rule to impose pro-market policies and retain their grip on power.

The bourgeoisie and its representatives are extremely conscious of the political dangers posed to their interests by the worsening global economic crisis. The working class must begin to develop its own political counteroffensive on the basis of the perspective of the ICFI to abolish the profit system and establish a world planned socialist economy.