Tuesday, September 15, 2009

Five Editorials...Citizens United v. the Federal Election Commission

The Trial of John Roberts

By JEFFREY ROSEN
Published: September 12, 2009
Washington

Related
Times Topics: John G. Roberts Jr.

FOUR years ago, when John Roberts became chief justice of the United States, he said that he hoped to emulate the modesty and unanimity of his greatest predecessor, John Marshall. But if Chief Justice Roberts presides over a broad, ideologically divided ruling in a campaign finance case the court heard last week, he risks being remembered instead as a conservative Earl Warren.

For decades conservatives have attacked Warren, who was chief justice from 1953 to 1969, as the face of liberal judicial activism. They have criticized him for presiding over a court that imposed a contested vision of social justice on an unwilling nation — overturning decades of precedents and scores of federal and state laws in the process.

Moreover, conservatives view Warren as a Machiavellian former politician (he had been governor of California) who used incremental strategies to pursue radical ends — handing down a series of cautious decisions that favored the police, for example, and then tying their hands by requiring officers to read suspects their rights in the 5-to-4 Miranda decision of 1966.

Likewise, if the Roberts court issues a sweeping 5-to-4 decision in the current case, Citizens United v. the Federal Election Commission, striking down longstanding bans on corporate campaign expenditures, it would define John Roberts as indelibly as Miranda defined Earl Warren. And there is no reason for the court to do so: it would be easy for the justices to rule narrowly in the Citizens United case, holding that the corporate-financed political material in question — a documentary called “Hillary: the Movie” — isn’t the kind of campaign ad that federal law was intended to regulate.

But many conservatives, and even some liberal devotees of the First Amendment, are urging the Roberts court to uproot federal and state regulations on corporate campaign spending that date back to 1907, as well as decades of Supreme Court precedents. If Chief Justice Roberts takes that road, his paeans to judicial modesty and unanimity would appear hollow.

In his confirmation hearings in 2005, Judge Roberts talked about the “jolt to the legal system” that occurs whenever the Supreme Court overturns its own precedents. And soon after taking office, he expressed concern that his colleagues were acting more like law professors than members of a collegial court in their willingness to divide along predictable party lines. He said he would try to persuade his colleagues to converge around narrow, unanimous opinions that avoided the most contentious constitutional issues. The result, he said, would help shore up the court’s legitimacy in a polarized age.

During his four terms as chief justice, Mr. Roberts has had mixed success in achieving his vision of narrow, unanimous opinions, although he surely deserves credit for trying. Under his leadership, the percentage of 5-to-4 decisions has fluctuated from a low of 11 percent in his first term to a high of 33 percent in the term that ended in 2007. Chief Justice Roberts has been most successful in achieving unanimity in cases involving business interests, which now represent some 40 percent of the court’s docket. According to the United States Chamber of Commerce, 79 percent of these cases are decided by margins of 7-to-2 or better.

At his best, Chief Justice Roberts has distanced himself from the most ardent conservative culture warriors on the court, Antonin Scalia and Clarence Thomas. In his most impressive act of judicial statesmanship, he persuaded his colleagues to converge around a narrowly written 8-to-1 decision in June that sidestepped the constitutional difficulties raised by a bipartisan amendment to the federal Voting Rights Act. (Only Justice Thomas dissented.) And Justice Roberts pointedly refused to join Justices Scalia, Thomas and Anthony Kennedy when they called in 2007 for gutting campaign finance regulations — endorsing a more modest position that Antonin Scalia attacked as “faux judicial restraint.”

If, however, in the Citizens United case, Justices Roberts and Samuel Alito now join Justices Scalia, Kennedy and Thomas in a 5-to-4 decision that broadly overturns longstanding bans on corporate campaign expenditures, the 2007 Scalia critique will be vindicated. And liberals will conclude that John Roberts is guilty of precisely the kind of strategic temporizing that conservatives have long ascribed to Earl Warren.

There is, of course, a case to be made for Warren Court activism, and it was made in the Citizens United argument last week by Floyd Abrams, a principled liberal who opposes campaign finance regulations on free speech grounds. (Paradoxically, he was arguing on behalf of Senator Mitch McConnell, the very conservative leader of the Senate Republicans.) Mr. Abrams invoked the landmark 1964 decision in New York Times v. Sullivan — which held that public figures could not sue the press for defamation unless there was “actual malice” involved — as one in which the court was right to rule broadly and overturn 150 years of settled jurisprudence.

But the Sullivan decision was 9-to-0: not a single justice believed that The New York Times could be sued for running an ad that the police commissioner in Montgomery, Ala., viewed as critical of his actions against civil rights protesters. Moreover, it was a decision that was acceptable to the country as a whole at a time when all three branches of government agreed about the importance of federal civil rights laws.

In fact, the most successful decisions of the Warren era fit the same model. Despite conservative caricatures of him as an activist who didn’t care about public opinion, Warren was a canny politician who viewed his role as working harmoniously with the governing majority in the White House and Congress to solve the nation’s problems. The unanimous Brown v. Board of Education was popular with 54 percent of the country when it came down in 1954. Baker v. Carr, the landmark 6-to-2 decision (Justice Charles Evans Whittaker did not participate) from 1962 that Warren considered the most important of his tenure, was hailed by voters from both parties for recognizing the principle of “one man, one vote.” Griswold v. Connecticut, the 7-to-2 decision from 1965 striking down an archaic Connecticut law forbidding the use of contraceptives by married couples, was supported by broad national majorities.

HOW, then, by the late 1960s did Warren become a symbol of judicial arrogance? The answer, according to the historian Lucas A. Powe Jr., can be found in its controversial decisions on criminal procedure. These cases tended to be closely divided along ideological lines and intensely opposed by national majorities. Mapp v. Ohio of 1961, for example, was a 6-to-3 decision that imposed the exclusionary rule on the states, changing the law in half of them and freeing guilty defendants across the country. Escobedo v. Illinois of 1964, the 5-to-4 decision that held that suspects have a right to a lawyer during police interrogations, created a political firestorm.

The success of Earl Warren’s bipartisan decisions, and the intense controversy produced by his ideologically divided ones, offers a cautionary tale for Chief Justice Roberts. If he presides over a court that establishes itself as the adversary rather than the partner of the president and Congress — imposing hotly contested visions of free speech and racial equality with a narrow court majority — he will become as polarizing a figure at the beginning of his tenure as Warren became at the end of his own.

John Roberts clearly understands the stakes. During an interview at end of his first term, he told me that the most successful chief justices in American history have been able to persuade their colleagues to speak with one voice. By contrast, he said, 5-to-4 decisions involving the most controversial questions in American politics make it harder for the public to respect the court as an institution that transcends politics.

Now he can support a narrow, restrained campaign finance decision that Republicans and Democrats can embrace, or he can hand down a broad, activist decision that turns our political system upside down. John Marshall or Earl Warren: the choice is his.

Jeffrey Rosen is a law professor at George Washington University and the legal affairs editor of The New Republic.
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September 10, 2009

Justices Are Pressed for a Broad Ruling in Campaign Case

By ADAM LIPTAK
WASHINGTON — There seemed little question after the argument in an important campaign finance case at the Supreme Court on Wednesday that the makers of a slashing political documentary about Hillary Rodham Clinton were poised to win. The open issue was just how broad that victory would be.

The argument was extraordinary in its timing, length and participants. It took place during the court’s summer break, almost a month before the start of the new term in October; lasted more than 90 minutes instead of the usual hour; and featured the Supreme Court debuts of Justice Sonia Sotomayor and the solicitor general, Elena Kagan.

It was, moreover, a rare re-argument. When the case was first heard in March, it centered on whether the restrictions on corporate spending in the 2002 McCain-Feingold campaign finance law applied to the documentary “Hillary: The Movie,” which was produced by a nonprofit advocacy corporation called Citizens United. In the request for re-argument, the court raised the much broader question of whether it should sweep away restrictions on political speech by corporations.

On Wednesday, Ms. Kagan all but said that a loss for the government would be acceptable, so long as it was on narrow grounds.

She suggested to the justices that Citizens United might not be the sort of corporation to which some campaign finance restrictions ought to apply. What the Supreme Court should not do, she said, is overrule two earlier decisions and thereby allow all kinds of corporations to spend money to support or oppose political candidates, principally through television advertisements.

Chief Justice John G. Roberts Jr., on hearing the government’s position, accused it of engaging in strategic behavior.

“So you want to give up this case,” Chief Justice Roberts said to Ms. Kagan, “change your position, and basically say you lose solely because of the questioning we have directed on re-argument?”

Ms. Kagan did not go that far. But she said, “If you are asking me, Mr. Chief Justice, as to whether the government has a position as to the way it loses, if it has to lose, the answer is yes.”

Chief Justice Roberts and several of the court’s more conservative justices seemed frustrated with the complex state of modern campaign finance law and appeared ready to take bold action. Justice Sotomayor, like some of the court’s more liberal members, seemed inclined to take a narrower approach.

“Wouldn’t we be doing some more harm than good,” she asked Floyd Abrams, “by a broad ruling in a case that doesn’t involve more business corporations, and actually doesn’t involve the traditional nonprofit corporation?”

“Your honor,” Mr. Abrams responded, “I don’t think you’d be doing more harm than good in vindicating the First Amendment rights here, which transcend that of Citizen United.” Mr. Abrams represented Senator Mitch McConnell of Kentucky, the Republican leader and a longtime foe of campaign finance regulation.

The order calling for re-argument in the case, Citizens United v. Federal Election Commission, No. 08-205, asked the parties to offer their views on whether the court should overrule a 1990 decision, Austin v. Michigan Chamber of Commerce, which upheld restrictions on corporate spending to support or oppose political candidates, and part of McConnell v. Federal Election Commission, the 2003 decision that upheld the central provisions of the McCain-Feingold campaign finance law.

The McCain-Feingold law bans the broadcast, cable or satellite transmission of “electioneering communications” paid for by corporations in the 30 days before a presidential primary and in the 60 days before the general election. The law requires the government, Justice Anthony M. Kennedy said, to make an array of distinctions — among speakers, what they say and when they say it — that raise serious First Amendment concerns.

The court could rule in favor of Citizens United without making fundamental changes to the political landscape. It could say that the McCain-Feingold law was not meant to address 90-minute documentaries like the one at issue. It could say that the way Citizens United wanted to distribute the documentary, on a cable video-on-demand service, was not covered by the law. Or it could, as Ms. Kagan suggested, carve out some kinds of corporations.

Justice Sotomayor asked Theodore B. Olson, a lawyer for Citizens United, whether his side had abandoned earlier arguments based on the McCain-Feingold law rather than the First Amendment rights of all corporations.

Mr. Olson indicated that he was prepared to accept any sort of victory. But he added that the court would have to confront the larger question in the case soon enough and that whatever interim lines the court drew would chill free speech in the meantime.

Mr. Abrams reminded the court that it could have decided New York Times v. Sullivan, the 1964 decision that revolutionized the law of libel, on quite narrow grounds. When First Amendment rights are in danger, Mr. Abrams said, a broad ruling can be the correct one.

“Hillary: The Movie,” a caustic critique of Mrs. Clinton, was shown in theaters in six cities, and it remains available on DVD and the Internet. A three-judge panel of the Federal District Court said last year that it could not be transmitted on cable because it had only one purpose: “to inform the electorate that Senator Clinton is unfit for office, that the United States would be a dangerous place in a President Hillary Clinton world and that viewers should vote against her.”

Ms. Kagan disavowed a statement that a government lawyer made when the case was first argued in March. The lawyer said the government could ban the distribution of books paid for by corporations before elections.

“The government’s answer has changed,” Ms. Kagan said, adding that the Federal Election Commission had never tried to regulate distribution of books.

Chief Justice Roberts bristled at that statement. “We don’t put our First Amendment rights in the hands of F.E.C. bureaucrats,” he said.

He then asked about pamphlets. “A pamphlet would be different,” Ms. Kagan said. “A pamphlet is pretty classic electioneering.”

Much of the argument was taken up by discussions of whether the speech of corporations might be treated different from that of individuals. Mr. Olson and Justice Antonin Scalia noted that most corporations were small, had limited assets and often were owned by a single shareholder. Justice Ruth Bader Ginsburg asked about “megacorporations” with foreign investors.

Changes at the court, particularly the replacement of Justice Sandra Day O’Connor by Justice Samuel A. Alito Jr. in 2006, have substantially altered its attitude to campaign finance laws. A five-justice majority of the Roberts court has been hostile to such laws, but Chief Justice Roberts and Justice Alito have so far moved in cautious increments.

Judging by the request for re-argument and the tenor of the questioning on Wednesday, that may be about to change.
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September 8, 2009
EDITORIAL

A Threat to Fair Elections

The Supreme Court may be about to radically change politics by striking down the longstanding rule that says corporations cannot spend directly on federal elections. If the floodgates open, money from big business could overwhelm the electoral process, as well as the making of laws on issues like tax policy and bank regulation.

The court, which is scheduled to hear arguments on this issue on Wednesday, is rushing to decide a monumental question at breakneck speed and seems willing to throw established precedents and judicial modesty out the window.

Corporations and unions have been prohibited from spending their money on federal campaigns since 1947, and corporate contributions have been barred since 1907. States have barred corporate expenditures since the late 1800s. These laws are very much needed today. In the 2008 election cycle, Fortune 100 companies alone had combined revenues of $13.1 trillion and profits of $605 billion. That dwarfs the $1.5 billion that Federal Election Commission-registered political parties spent during the same election period, or the $1.2 billion spent by federal political action committees.

The Supreme Court has repeatedly upheld the limitations on corporate campaign expenditures. In 1990, in Austin v. Michigan Chamber of Commerce, and again in 2003, in McConnell v. Federal Election Commission, it made clear that Congress was acting within its authority and that the restrictions are consistent with the First Amendment.

In late June, the court directed the parties to address whether Austin and McConnell should be overruled. It gave the parties in Citizens United v. Federal Election Commission a month to write legal briefs on a question of extraordinary complexity and importance, and it scheduled arguments during the court’s vacation.

All of this is disturbing on many levels. Normally, the court tries not to decide cases on constitutional grounds if they can be resolved more simply. Here the court is reaching out to decide a constitutional issue that could change the direction of American democracy.

The court usually shows great respect for its own precedents, a point Chief Justice John Roberts made at his confirmation hearings. Now the court appears ready, without any particular need, to overturn important precedents and decades of federal and state law.

The scheduling is enormously troubling. There is no rush to address the constitutionality of the corporate expenditures limit. But the court is racing to do that in a poorly chosen case with no factual record on the critical question, making careful deliberation impossible.

Most disturbing, though, is the substance of what the court seems poised to do. If corporations are allowed to spend from their own treasuries on elections — rather than through political action committees, which take contributions from company employees — it would usher in an unprecedented age of special-interest politics.

Corporations would have an enormous say in who wins federal elections. They would be able to use this influence to obtain subsidies, stimulus money and tax loopholes and to undo protections for investors, workers and consumers. It would take an extraordinarily brave member of Congress to stand up to agents of big business who then could say, quite credibly, that they would spend whatever it takes in the next election to defeat him or her.

The conservative majority on the court likes to present itself as deferential to the elected branches of government and as minimalists about the role of judges. Chief Justice Roberts promised the Senate that if confirmed he would remember that it’s his “job to call balls and strikes and not to pitch or bat.”

If the court races to overturn federal and state laws, and its well-established precedents, to free up corporations to drown elections in money, it will be swinging for the fences. The American public will be the losers.
===================================================================================

September 11, 2009
EDITORIAL

The Court and Campaign Finance

In the Supreme Court this week, Elena Kagan, the new solicitor general, eloquently defended the longstanding ban on corporate spending in political campaigns. But the conservative justices who spoke showed a disdain for both Congress’s laws and for the court’s own prior rulings. If the ban is struck down, as we fear, elections could be swamped by special-interest money.

Conservative jurists talk about judicial modesty and deferring to the elected branches. But in the questioning, Justice Antonin Scalia made clear that he considers Congress to be a self-interested actor when it writes campaign finance laws. Chief Justice John Roberts and Justice Samuel Alito seemed to put little weight on the fact that the court has repeatedly upheld a ban on corporate campaign expenditures.

What the conservatives seemed most concerned about was protecting the interests of corporations. The chief justice and Justice Scalia seemed especially perturbed that what they see as the inviolable right of these legal constructs to speak might be infringed upon.

The conservatives also seemed incredulous that vast amounts of corporate money flooding into campaigns could be seen as corrupting the system. We agree with Senator John McCain, who told reporters after the argument that he was troubled by the “extreme naïveté” some of the justices showed about the role of special-interest money in Congressional lawmaking.

The more liberal justices — including Justice Sonia Sotomayor, who was participating in her first argument — were far more sympathetic to the ban on corporate expenditures, but they have only four votes.

There is still some hope that Chief Justice Roberts may decide his affection for corporations is less important than the reputation of the Roberts court. If he does, there is a chance for a limited, and relatively undamaging, ruling that hews closely to the facts of this case.

The underlying dispute is a narrow First Amendment challenge brought by Citizens United, a nonprofit group that wanted to show an anti-Hillary Clinton movie on a video-on-demand service during the primary season. The court could uphold its right to show the movie without opening the door to a new era of political corruption.
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It Could Be the End of Our Democracy as We Know It

http://www.truthdig.com/report/item/20090906_it_could_be_the_end_of_our_democracy_as_we_know_it/

Posted on Sep 6, 2009

By E.J. Dionne

President Barack Obama’s health care speech on Wednesday will be only the second most consequential political moment of the week.

Judged by the standard of an event’s potential long-term impact on our public life, the most important will be the argument before the Supreme Court (on the same day, as it happens) about a case that, if decided wrongly, could surrender control of our democracy to corporate interests.

This sounds melodramatic. It’s not. The court is considering eviscerating laws that have been on the books since 1907 in one case and 1947 in the other, banning direct contributions and spending by corporations in federal election campaigns. Doing so would obliterate precedents that go back two and three decades.

The full impact of what the court could do in Citizens United v. Federal Election Commission has only begun to receive the attention it deserves. Even the word radical does not capture the extent to which the justices could turn our political system upside down. Will the high court use a case originally brought on a narrow issue to bring our politics back to the corruption of the Gilded Age?

Citizens United, a conservative group, brought suit arguing that it should be exempt from the restrictions of the 2002 McCain-Feingold campaign finance law for a movie it made that was sharply critical of Hillary Clinton. The organization said it should not have to disclose who financed the film.

Instead of deciding the case before it, the court engaged in a remarkable act of overreach. On June 29, it postponed a decision and called for new briefs and a highly unusual new hearing, which is Wednesday’s big event. The court chose to consider an issue only tangentially raised by the case. It threatens to overrule a 1990 decision that upheld the long-standing ban on corporate money in campaigns.

I don’t have the space to cite all the precedents the court would have to set aside, going back to the Buckley campaign finance ruling of 1976, if it threw out the prohibition on corporate money. Suffice it to say that there is one member of the court who has spoken eloquently about the dangers of ignoring precedents.

“I do think that it is a jolt to the legal system when you overrule a precedent,” he said. “Precedent plays an important role in promoting stability and evenhandedness. It is not enough—and the court has emphasized this on several occasions—it is not enough that you may think the prior decision was wrongly decided. That really doesn’t answer the question, it just poses the question.”

This careful jurist continued: “And you do look at these other factors, like settled expectations, like the legitimacy of the court, like whether a particular precedent is workable or not, whether a precedent has been eroded by subsequent developments.”

He learnedly cited Alexander Hamilton, who wrote in Federalist 78: “To avoid an arbitrary discretion in the judges, they need to be bound down by rules and precedents.”

Chief Justice John Roberts, the likely swing vote in this case, was exactly right when he said these things during his 2005 confirmation hearings. If he uses his own standards, it is impossible to see how he can justify the use of “arbitrary discretion” to discard a well-established system whose construction began with the Tillman Act of 1907.

Were the courts that set the earlier precedents “legitimate”? This ban was upheld over many years by justices of a variety of philosophical leanings. We are not talking about overturning a single decision by a bunch of activists in robes seizing a temporary court majority.

Are the precedents “workable”? The answer is clearly yes, which is why there is absolutely no popular demand to let corporate cash loose into our politics. Our system would be less “workable” if the court abruptly changed the law.

Has the precedent been “eroded”? Absolutely not. In case after case, no matter where particular court majorities stood on particular campaign finance provisions, the ban on corporate contributions was taken for granted. As the court stated just six years ago, Congress’ power to prohibit direct corporate and union contributions “has been firmly embedded in our law.” That’s what you call “settled expectations.”

This case is the clearest test Justice Roberts has faced so far as to whether he meant what he said to Congress in 2005. I truly hope he passes it. If he doesn’t, he will unleash havoc in our political system and greatly undermine the legitimacy of the court he leads.

E.J. Dionne’s e-mail address is ejdionne(at)washpost.com.

© 2009, Washington Post Writers Group

Sunday, September 13, 2009

The Wing-Nut Code: What Glenn Beck and Sarah Palin Are Really Saying to Their Followers

By Adele M. Stan, AlterNet
Posted on September 2, 2009, Printed on September 13, 2009
http://www.alternet.org/story/142333/

Editor's note: As members of the Tea Party and patriot movements march and rally in Washington, D.C., on September 12, they will be out in full regalia, and you can expect the speeches to be loaded with code -- signals to various factions of their coalition, some of them armed, to mobilize politically on specific issues (health-care reform, energy reform, net neutrality) and against President Obama himself. Here's a glossary of the symbols and shorthand likely to be employed in this weekend's smoke-and-mirrors display of purported right-wing power.

When Glenn Beck offers an odd-looking icon for his 9-12 Project, or Sarah Palin says something about her native state that sounds a bit to off-kilter to the ears of those in the lower 48, it's tempting to think, well, they're just nuts. Perhaps they are, but that's beside the point. The point is that when Beck throws up a graphic of a segmented snake as his project's mascot, or Palin speaks of her native land as the "sovereign" state of Alaska, they're blowing a kind of dog-whistle for the armed and paranoid who make up the right-wing, neo-militia "Patriot" movement and the broader "Tea Party" coalition. The loose affiliation of right-wing groups under the Tea Party umbrella can make it difficult to discern who's truly dangerous, and who's just an angry blowhard.

For instance, in its report about the resurgence of the militia movement, the Southern Poverty Law Center notes that a Minuteman militia in Southern California uses the Tea Party anthem as its call to arms. Scott Roeder, the militant anti-abortion activist who is charged with the killing of Dr. George Tiller, counts himself among the members of the patriot movement.
But in Pittsburgh earlier this month, I sat among a group of disgruntled senior citizens at a conference sponsored by the astroturf group, Americans for Prosperity, who probably don't spend their weekends training for a war with the government, but nonetheless consider themselves to be part of the Tea Party coalition -- and perhaps even the patriot movement. Nonetheless, when conference speakers made reference to gun rights, they received heartfelt applause.

The Tea Party coalition is mobilizing for what it promises will be a big march on Washington on Sept. 12. As the date approaches, expect to hear more disguised shout-outs to patriots and tea-partiers, as right-wing politicians seek to placate the hordes said to be on their way to the nation's capitol. Members of the far-right Tea Party and patriot movements love the iconography of the American Revolution. They fancy themselves as "patriots" in the mold of Ethan Allen and Charles Gadsden -- men who led militias against the troops of England's despotic King George III. Yet much of their ideology stems from the states' rights philosophy of the Confederacy in the Civil War, and sometimes the ideas and symbols of the two wars are drawn together in a tangle of rage.

Some self-described "patriots" take part in the resurgent militia movement, but many do not. However, gun enthusiasts are rife in their ranks, and many view their role as one of "resistance" to what they see as government encroachment in their lives. They oppose virtually all forms of taxation and almost anything run by the government. (Hence, the title of the site run by Grassfire.org known as ResistNet.)

Here are some words and images used by right-wing political and media figures as signals to the patriot and Tea Party constituencies, signals used to organize the throngs against health care legislation, environmental reforms and all things identified with President Barack Obama.

1. Snakes! -- Even before the American Revolution, the rattlesnake -- native to North America -- was a potent symbol for the American colonies. The patriot movement has appropriated the use of a number of Revolutionary War militia flags that feature rattlesnakes, often accompanied by the words, "Don't Tread On Me."
The most recognizable of these is the Gadsden flag, a yellow flag emblazoned with the image of a coiled snake, and the "Don't Tread On Me" slogan.
It's the image that graced the sign carried by the New Hampshire man who showed up with a gun strapped to his leg outside the venue where Obama was scheduled to conduct a town-hall meeting on health care reform.
At the Americans for Prosperity Conference that I attended, a group called American Majority offered for sale a poster that featured the same coiled-snake image. Beck, when creating the iconography for his 9-12 Project -- an organizing hub for town-hall disrupters and people preparing to join the Sept. 12 Tea Party march on Washington -- found a slightly more obscure version of the colonial snake that would resonate, nonetheless, with the patriot types.
Beck's snake is segmented into nine parts, to align with his project's "nine principles." The image is a variation on this one, by Benjamin Franklin, which is thought to be the first political cartoon to run in an American newspaper.
Franklin's snake is segmented into eight parts, representing what were then only eight American colonies. His cartoon implores all eight to join together to fight the French in the French and Indian War and is labeled with the slogan, "Join, or Die."
Bottom line: Any time you see the snake used as a graphic element by right-wingers, you can safely assume it's a call to the often-armed and sometimes-violent members of the patriot movement.

2. The tree of liberty -- This reference comes from a famous Thomas Jefferson quote: "The tree of liberty must be refreshed from time to time with the blood of tyrants and patriots." You'll often find it used in bits and pieces as a form of code.
Outside the New Hampshire town hall, the armed man held a sign that not only featured the coiled snake of the Gadsden flag, but a reference to the Jefferson quote: "It is time to water the tree of liberty."
Note the call of secessionists speaking just this week on the steps of the Texas state capitol building. Fringe gubernatorial candidate Debra Medina may have flubbed the Jefferson quote, but her intent is clear: "We are aware that stepping off into secession may be a bloody war," she said at the rally called by the Texas Nationalist Movement. "We are aware that the tree of freedom is occasionally watered with the blood of tyrants and patriots." In an example of how more-establishment types signal the far right in code, Ralph Reed used another piece of the quote while speaking at an Americans for Prosperity-sponsored rally against health care reform in Atlanta on Aug. 15: "Our right to protest has been purchased with the blood of patriots who paid the ultimate price so that we could be free men and women and have the ability to petition our government. We will not be intimidated, we will not be silenced, and we will not go away." That "blood of patriots" bit? Dog whistle to the gun nuts.

3. Patriot -- A patriot is a member of a movement seen by its participants as the resistance -- often armed -- to the perceived conspiracy of socialists, Jews, blacks and other people "not like us," who have taken over the government, the global banking system and the world. Some self-identified patriots are armed to the teeth and seem pathologically violent; others, not so much. As Chip Berlet and Matthew N. Lyons wrote in a 1995 edition of The Progressive about the patriot movement: Attending a patriot meeting is like having your cable-access channel video of a PTA meeting crossed with audio from an old Twilight Zone rerun.
The people seem so sane and regular. They are not clinically deranged, but their discourse is paranoid, and they are awash in the crudest conspiracy theories.
When you hear a right-wing politician or media figure refer to someone as a "patriot," watch out! That patriot may think it his patriotic duty to take you out.

4. Tea Party -- The Tea Party coalition encompasses a broad swath of the right -- including members of the religious right and the patriot movement. (There's even an organization called Tea Party Patriots.) Taking its name from the Boston Tea Party -- a famous incident that foreshadowed the American Revolution -- the Tea Party coalition was initially drawn together under the anti-taxation umbrella by such astroturfing outfits as FreedomWorks, Americans for Prosperity and Grassfire. (The Boston Tea Party was an act of civil disobedience at which revolutionaries threw overboard, as a tax protest, the cargo of three tea-carrying British vessels. King George III had slapped a hefty tax on the tea, in a defiance of the colonial Continental Congress.)

5. Sovereign -- In the right wing, this term has two meanings. The most troubling refers to a notion called "sovereign citizen," a term popularized by the violent Posse Comitatus militia formation in the 1970s to argue that white people have a superior form of citizenship to that of black people. More commonly, the term "sovereign" refers to a states' rights philosophy that is consonant with secessionist ideologies. Before she left office in July, Palin signed a "sovereignty resolution," reasserting Alaska's rights as a "sovereign state" under the U.S. Constitution. Legislators in 36 other states have introduced similar resolutions, according to the right-wing Tenth Amendment Center. Palin, you'll recall, sent a video shout-out last year to the secessionist Alaska Independence Party, of which her husband, Todd, was a member for seven years.

6. Tenth Amendment -- The final amendment to in the Bill of Rights reads simply: "The powers not delegated to the United States by the Constitution, nor prohibited by it to the states, are reserved to the states respectively, or to the people."
Secessionists and states' rights enthusiasts argue that the federal government has already unconstitutionally usurped all sorts of powers from the states. Bear in mind that the argument for states' rights and state sovereignty provided the justification offered by the states of the Confederacy during the Civil War.
The issue at had was not slavery, per se, the argument went -- it was the federal government overstepping into the jurisdiction of the states when it began to regulate slavery. The 10th Amendment movement is tied in with the Tea Party and patriot movements: On the Web site of the Tenth Amendment Center, one finds yet another version of the "Don't Tread On Me" flag, and links to 35 state groups identified as part of the patriot movement -- a number of them state chapters of Glenn Beck's 9-12 Project. State-sovereignty enthusiasts are known as "tenthers".

7. Second Amendment -- The right to bear arms, the patriot movement's cornerstone. Beck devotes a whole channel of his 9-12 Project Web site to this most-precious amendment to the Constitution. Members of the Tea Party and patriot movements read this amendment in absolutist terms, arguing that the Constitution allows the federal government no earthly role in the regulation of firearms. The amendment is simple, and was passed at a time when the young United States was dependent on state-based militias for the nation's self-defense: "A well regulated militia, being necessary to the security of a free state, the right of the people to keep and bear arms, shall not be infringed." Earlier this year, legislators in the states of Montana and Tennessee decided to test the limits of the Second Amendment by passing gun laws designed to conflict with federal regulations, in the hope of calling forth a showdown on not just the Second Amendment, but the Tenth Amendment, as well. At issue is the federal regulation of firearms produced within each state for use within that state's boundaries. In the past, the federal government has justified federal regulation of firearms based on the constitutional power granted for the regulation of interstate commerce. The Bureau of Alcohol, Tobacco, Firearms and Explosives has responded to both states, taking issue with their new laws -- a mere volley in what promises to be a constitutional showdown.

8. Revolution -- When these folks talk about a revolution, they're not talking in merely philosophical terms. No, this is no paradigm shift, no sea-change. This is about guns. Remember, they're all little Ethan Allens and George Washingtons, ready to take on the tyrant's guard. So when Sen. James Inhofe, R-Okla., told a town-hall meeting last week, "We're almost reaching a revolution in this country," he's giving a nod to the patriot movement.

9. The government -- Plain and simple, all things bad and evil. Oklahoma's Republican junior senator, Tom Coburn, gave the patriots a nod last month when he told David Gregory, host of NBC's Meet the Press that members of Congress who face threats of violence over the prospect of health care reform have "earned" that response, because Congress has caused people to "stop having confidence in, in our government." Visit msnbc.com for Breaking News, World News, and News about the Economy Coburn said this after Gregory noted that Timothy McVeigh, who killed more than 160 people when he blew up the Oklahoma federal building, bore the Jefferson "tree of liberty" quote on the T-shirt he wore that day -- the same quote on the sign that armed man in New Hampshire held to greet the president. Timothy McVeigh's T-shirt

Finally, it must be noted the code is not always necessary to send the signal. There are sins of commission, and sins of omission, such as that of Sen. Charles Grassely, R-Iowa, who simply stood by as an audience member at one of his town-hall meetings on health care reform last month called for an armed intervention on the White House. Audience member Tom Eisenhower said that Obama was "acting like a little Hitler," and suggested that others gather up their guns and join him for a visit to Washington. Grassley didn’t condemn the man or his suggestions but went on to rationalize Eisenhower’s anger, calling health care reform "the straw that broke the camel’s back," especially in light of the "General Motors nationalization" and the "nationalization of banks."

Adele M. Stan AlterNet's Washington bureau chief.

© 2009 Independent Media Institute. All rights reserved.
View this story online at: http://www.alternet.org/story/142333/

FoxPAC: Network Again Engaging in Political Advocacy with "9-12 Project" September 11, 2009 12:57 pm ET

September 11, 2009 12:57 pm ET
Comments

FOR IMMEDIATE RELEASE
Friday, September 11, 2009
CONTACT
Jess Levin (202) 772-8162
jlevin@mediamatters.org

Washington, D.C. - Today, on the eighth anniversary of 9-11, one day before Glenn Beck's "9-12 Project" descends on Washington, Media Matters for America calls attention to what has become a familiar, disturbing pattern on the purportedly "fair and balanced" news network.

Fox News now routinely engages in political advocacy against the Obama administration and the Democratic Congress, and Beck's promotion of a September 12 march on Washington is the latest example. Network executives have made little effort to hide Fox News' agenda, with one referring to the network as the "voice of opposition."

"There is little difference between being the 'voice of opposition' and just being the opposition," said Eric Burns, president of Media Matters. "Since the president's election, Fox News has become nothing more than the 24/7 media wing of the Republican Party. No political party in American history has had such an enormous megaphone."

BACKGROUND:

Since President Obama's inauguration, Fox News network executives have made their intentions clear. In clips aired on the March 23 broadcast of NPR's Media Circus, vice president for programming Bill Shine referred to the network as the "voice of opposition." And chief executive officer Roger Ailes reportedly said of the new administration: "I see this as the Alamo," adding, "If I just had somebody who was willing to sit on the other side of the camera until the last shot is fired, we'd be fine."

On air, the network's agenda is even clearer. Fox News personalities and hosts have promoted and encouraged viewers to "join" tea party protests and town hall meetings. They have implored viewers to call Congress and the White House to protest Democratic policies. And they have declared "Victory!" when Democratic legislation has been stalled.

Most recently, Beck and Fox News have repeatedly promoted Beck's "9-12 Project," which, in addition to encouraging local events, is organizing a September 12 march on Washington, which Fox News will broadcast live.

Beck's 9-12 Project "a place" for people looking to take back their country. Beck started the 9-12 Project, which describes itself as "a place for you and other like-minded Americans looking for direction in taking back the control of our country."

Beck's FoxNews.com website, under a section titled, "TAKE ACTION: GET INVOLVED!" states of the 9-12 Project: "Check out Beck's new Web site for updates on the stories and people who prove that your values and principles are still very much alive." 9-12 Project organizes events across country.

The conservative project frequently organizes events around the country. For instance, members of the 9-12 Project have helped organize tea parties, and Beck's 9-12 website is working with others for a "March on Washington," among other local events, on September 12.

Beck will participate in a 9-12 "March on Washington" by broadcasting live from 1 to 3 p.m. ET on Fox News.

Beck: "9-12 Projects and rallies happening all over." In recent months, Beck has frequently touted the effectiveness of his 9-12 Project in organizing followers. On August 12, for instance, Beck described the 9-12 Project as giving "ourselves an outlet of voice to connect, because you needed to community organize. ... Well, you have already done it. There are 9-12 Projects and rallies happening all over.

The biggest one seems to be in Washington, D.C., on September 12."
Beck: "We started that. Millions all involved across the country and the 9-12 project and other organizations like it." On August 27, Beck said of the 9-12 Project:

BECK: Now, the second part of this. A few months ago, I told you, you got to know you're not alone. You've got to know. You got to unite. Talk to people. Make sure you know you're not alone, through the 9-12 Project. We started that. Millions all involved across the country and the 9-12 Project and other organizations like it. I knew we needed to connect with one another.

Beck: "On 9-12, I hope to see you in Washington. I will make sure you're seen all over the country." On August 28, Beck described the 9-12 march on Washington as something "worth standing up for" and told viewers, "I hope to see you in Washington. I will make sure you're seen all over the country."

Beck: Will we find people "to stand for our country?" Discussing his participation in the 9-12 march, Beck asked viewers: "Will we find another 50 men or women willing to stand for our country and the republic? On the Fox News Channel, you can find out all of the details at the 912Project.com."

9-12 march website: Beck "really helping our numbers grow!" A post on the 9-12 march website 912dc.org states, "The recent coverage by Glenn Beck is really helping our numbers grow!" The website frequently mentions Beck's promotion of the march and excerpted a September 8 USA Today article which reported that the march has been "[e]ncouraged by conservative commentators such as Fox's Glenn Beck."

For more examples of the network's political advocacy, please see Media Matters' comprehensive report:

"Voice of the opposition": Fox News openly advocates against Democratic Congress, White House

Uncivil Discourse

Bill Moyers: The editors of THE ECONOMIST magazine say America's health care debate has become a touch delirious, with people accusing each other of being evil-mongers, dealers in death, and un-American.

Well, that's charitable.

I would say it's more deranged than delirious, and definitely not un-American.

Those crackpots on the right praying for Obama to die and be sent to hell — they're the warp and woof of home-grown nuttiness. So is the creature from the Second Amendment who showed up at the President's rally armed to the teeth. He's certainly one of us. Red, white, and blue kooks are as American as apple pie and conspiracy theories.

Bill Maher asked me on his show last week if America is still a great nation. I should have said it's the greatest show on earth. Forget what you learned in civics about the Founding Fathers — we're the children of Barnum and Bailey, our founding con men. Their freak show was the forerunner of today's talk radio.

Speaking of which: we've posted on our website an essay by the media scholar Henry Giroux. He describes the growing domination of hate radio as one of the crucial elements in a "culture of cruelty" increasingly marked by overt racism, hostility and disdain for others, coupled with a simmering threat of mob violence toward any political figure who believes health care reform is the most vital of safety nets, especially now that the central issue of life and politics is no longer about working to get ahead, but struggling simply to survive.

So here we are, wallowing in our dysfunction. Governed — if you listen to the rabble rousers — by a black nationalist from Kenya smuggled into the United States to kill Sarah Palin's baby. And yes, I could almost buy their belief that Saddam Hussein had weapons of mass destruction, only I think he shipped them to Washington, where they've been recycled as lobbyists and trained in the alchemy of money laundering, which turns an old-fashioned bribe into a First Amendment right.

Only in a fantasy capital like Washington could Sunday morning talk shows become the high church of conventional wisdom, with partisan shills treated as holy men whose gospel of prosperity always seems to boil down to lower taxes for the rich.

Poor Obama. He came to town preaching the religion of nice. But every time he bows politely, the harder the Republicans kick him.

No one's ever conquered Washington politics by constantly saying "pretty please" to the guys trying to cut your throat.

Let's get on with it, Mr. President. We're up the proverbial creek with spaghetti as our paddle. This health care thing could have been the crossing of the Delaware, the turning point in the next American Revolution — the moment we put the mercenaries to rout, as General Washington did the Hessians at Trenton. We could have stamped our victory "Made in the USA." We could have said to the world, "Look what we did!" And we could have turned to each other and said, "Thank you."

As it is, we're about to get health care reform that measures human beings only in corporate terms of a cost-benefit analysis. I mean this is topsy-turvy — we should be treating health as a condition, not a commodity.

As we speak, Pfizer, the world's largest drug maker, has been fined a record $2.3 billion dollars as a civil and criminal — yes, that's criminal, as in fraud — penalty for promoting prescription drugs with the subtlety of the Russian mafia. It's the fourth time in a decade Pfizer's been called on the carpet. And these are the people into whose tender mercies Congress and the White House would deliver us?

Come on, Mr. President. Show us America is more than a circus or a market. Remind us of our greatness as a democracy. When you speak to Congress next week, just come out and say it. We thought we heard you say during the campaign last year that you want a government run insurance plan alongside private insurance — mostly premium-based, with subsidies for low-and-moderate income people. Open to all individuals and employees who want to join and with everyone free to choose the doctors we want. We thought you said Uncle Sam would sign on as our tough, cost-minded negotiator standing up to the cartel of drug and insurance companies and Wall Street investors whose only interest is a company's share price and profits.

Here's a suggestion, Mr. President: ask Josh Marshall to draft your speech. Josh is the founder of the website talkingpointsmemo.com. He's a journalist and historian, not a politician. He doesn't split things down the middle and call it a victory for the masses. He's offered the simplest and most accurate description yet of a public insurance plan — one that essentially asks people: would you like the option — the voluntary option — of buying into Medicare before you're 65? Check it out, Mr. President.

This health care thing is make or break for your leadership, but for us, it's life and death. No more Mr. Nice Guy, Mr. President. We need a fighter.

That's it for the Journal. I'm Bill Moyers. See you next time.

It Could Be the End of Our Democracy as We Know It

http://www.truthdig.com/report/item/20090906_it_could_be_the_end_of_our_democracy_as_we_know_it/

Posted on Sep 6, 2009

By E.J. Dionne

President Barack Obama’s health care speech on Wednesday will be only the second most consequential political moment of the week.

Judged by the standard of an event’s potential long-term impact on our public life, the most important will be the argument before the Supreme Court (on the same day, as it happens) about a case that, if decided wrongly, could surrender control of our democracy to corporate interests.

This sounds melodramatic. It’s not. The court is considering eviscerating laws that have been on the books since 1907 in one case and 1947 in the other, banning direct contributions and spending by corporations in federal election campaigns. Doing so would obliterate precedents that go back two and three decades.

The full impact of what the court could do in Citizens United v. Federal Election Commission has only begun to receive the attention it deserves. Even the word radical does not capture the extent to which the justices could turn our political system upside down. Will the high court use a case originally brought on a narrow issue to bring our politics back to the corruption of the Gilded Age?

Citizens United, a conservative group, brought suit arguing that it should be exempt from the restrictions of the 2002 McCain-Feingold campaign finance law for a movie it made that was sharply critical of Hillary Clinton. The organization said it should not have to disclose who financed the film.

Instead of deciding the case before it, the court engaged in a remarkable act of overreach. On June 29, it postponed a decision and called for new briefs and a highly unusual new hearing, which is Wednesday’s big event. The court chose to consider an issue only tangentially raised by the case. It threatens to overrule a 1990 decision that upheld the long-standing ban on corporate money in campaigns.

I don’t have the space to cite all the precedents the court would have to set aside, going back to the Buckley campaign finance ruling of 1976, if it threw out the prohibition on corporate money. Suffice it to say that there is one member of the court who has spoken eloquently about the dangers of ignoring precedents.

“I do think that it is a jolt to the legal system when you overrule a precedent,” he said. “Precedent plays an important role in promoting stability and evenhandedness. It is not enough—and the court has emphasized this on several occasions—it is not enough that you may think the prior decision was wrongly decided. That really doesn’t answer the question, it just poses the question.”

This careful jurist continued: “And you do look at these other factors, like settled expectations, like the legitimacy of the court, like whether a particular precedent is workable or not, whether a precedent has been eroded by subsequent developments.”

He learnedly cited Alexander Hamilton, who wrote in Federalist 78: “To avoid an arbitrary discretion in the judges, they need to be bound down by rules and precedents.”

Chief Justice John Roberts, the likely swing vote in this case, was exactly right when he said these things during his 2005 confirmation hearings. If he uses his own standards, it is impossible to see how he can justify the use of “arbitrary discretion” to discard a well-established system whose construction began with the Tillman Act of 1907.

Were the courts that set the earlier precedents “legitimate”? This ban was upheld over many years by justices of a variety of philosophical leanings. We are not talking about overturning a single decision by a bunch of activists in robes seizing a temporary court majority.

Are the precedents “workable”? The answer is clearly yes, which is why there is absolutely no popular demand to let corporate cash loose into our politics. Our system would be less “workable” if the court abruptly changed the law.

Has the precedent been “eroded”? Absolutely not. In case after case, no matter where particular court majorities stood on particular campaign finance provisions, the ban on corporate contributions was taken for granted. As the court stated just six years ago, Congress’ power to prohibit direct corporate and union contributions “has been firmly embedded in our law.” That’s what you call “settled expectations.”

This case is the clearest test Justice Roberts has faced so far as to whether he meant what he said to Congress in 2005. I truly hope he passes it. If he doesn’t, he will unleash havoc in our political system and greatly undermine the legitimacy of the court he leads.

E.J. Dionne’s e-mail address is ejdionne(at)washpost.com.
© 2009, Washington Post Writers Group

Tuesday, August 18, 2009

In America, Crazy Is a Preexisting Condition

Birthers, Town Hall Hecklers and the Return of Right-Wing Rage
By Rick Perlstein
Sunday, August 16, 2009

In Pennsylvania last week, a citizen, burly, crew-cut and trembling with rage, went nose to nose with his baffled senator: "One day God's going to stand before you, and he's going to judge you and the rest of your damned cronies up on the Hill. And then you will get your just deserts." He was accusing Arlen Specter of being too kind to President Obama's proposals to make it easier for people to get health insurance.

In Michigan, meanwhile, the indelible image was of the father who wheeled his handicapped adult son up to Rep. John Dingell and bellowed that "under the Obama health-care plan, which you support, this man would be given no care whatsoever." He pressed his case further on Fox News.

In New Hampshire, outside a building where Obama spoke, cameras trained on the pistol strapped to the leg of libertarian William Kostric. He then explained on CNN why the "tree of liberty must be refreshed from time to time by the blood of tyrants and patriots."

It was interesting to hear a BBC reporter on the radio trying to make sense of it all. He quoted a spokesman for the conservative Americans for Tax Reform: "Either this is a genuine grass-roots response, or there's some secret evil conspirator living in a mountain somewhere orchestrating all this that I've never met." The spokesman was arguing, of course, that it was spontaneous, yet he also proudly owned up to how his group has helped the orchestration, through sample letters to the editor and "a little bit of an ability to put one-pagers together."

The BBC also quoted liberal Illinois Sen. Dick Durbin's explanation: "They want to get a little clip on YouTube of an effort to disrupt a town meeting and to send the congressman running for his car. This is an organized effort . . . you can trace it back to the health insurance industry."

So the birthers, the anti-tax tea-partiers, the town hall hecklers -- these are "either" the genuine grass roots or evil conspirators staging scenes for YouTube? The quiver on the lips of the man pushing the wheelchair, the crazed risk of carrying a pistol around a president -- too heartfelt to be an act. The lockstep strangeness of the mad lies on the protesters' signs -- too uniform to be spontaneous. They are both. If you don't understand that any moment of genuine political change always produces both, you can't understand America, where the crazy tree blooms in every moment of liberal ascendancy, and where elites exploit the crazy for their own narrow interests.

In the early 1950s, Republicans referred to the presidencies of Franklin Roosevelt and Harry Truman as "20 years of treason" and accused the men who led the fight against fascism of deliberately surrendering the free world to communism. Mainline Protestants published a new translation of the Bible in the 1950s that properly rendered the Greek as connoting a more ambiguous theological status for the Virgin Mary; right-wingers attributed that to, yes, the hand of Soviet agents. And Vice President Richard Nixon claimed that the new Republicans arriving in the White House "found in the files a blueprint for socializing America."

When John F. Kennedy entered the White House, his proposals to anchor America's nuclear defense in intercontinental ballistic missiles -- instead of long-range bombers -- and form closer ties with Eastern Bloc outliers such as Yugoslavia were taken as evidence that the young president was secretly disarming the United States. Thousands of delegates from 90 cities packed a National Indignation Convention in Dallas, a 1961 version of today's tea parties; a keynote speaker turned to the master of ceremonies after his introduction and remarked as the audience roared: "Tom Anderson here has turned moderate! All he wants to do is impeach [Supreme Court Chief Justice Earl] Warren. I'm for hanging him!"

Before the "black helicopters" of the 1990s, there were right-wingers claiming access to secret documents from the 1920s proving that the entire concept of a "civil rights movement" had been hatched in the Soviet Union; when the landmark 1964 Civil Rights Act was introduced, one frequently read in the South that it would "enslave" whites. And back before there were Bolsheviks to blame, paranoids didn't lack for subversives -- anti-Catholic conspiracy theorists even had their own powerful political party in the 1840s and '50s.

The instigation is always the familiar litany: expansion of the commonweal to empower new communities, accommodation to internationalism, the heightened influence of cosmopolitans and the persecution complex of conservatives who can't stand losing an argument. My personal favorite? The federal government expanded mental health services in the Kennedy era, and one bill provided for a new facility in Alaska. One of the most widely listened-to right-wing radio programs in the country, hosted by a former FBI agent, had millions of Americans believing it was being built to intern political dissidents, just like in the Soviet Union.

So, crazier then, or crazier now? Actually, the similarities across decades are uncanny. When Adlai Stevenson spoke at a 1963 United Nations Day observance in Dallas, the Indignation forces thronged the hall, sweating and furious, shrieking down the speaker for the television cameras. Then, when Stevenson was walked to his limousine, a grimacing and wild-eyed lady thwacked him with a picket sign. Stevenson was baffled. "What's the matter, madam?" he asked. "What can I do for you?" The woman responded with self-righteous fury: "Well, if you don't know I can't help you."

The various elements -- the liberal earnestly confused when rational dialogue won't hold sway; the anti-liberal rage at a world self-evidently out of joint; and, most of all, their mutual incomprehension -- sound as fresh as yesterday's news. (Internment camps for conservatives? That's the latest theory of tea party favorite Michael Savage.)

The orchestration of incivility happens, too, and it is evil. Liberal power of all sorts induces an organic and crazy-making panic in a considerable number of Americans, while people with no particular susceptibility to existential terror -- powerful elites -- find reason to stoke and exploit that fear. And even the most ideologically fair-minded national media will always be agents of cosmopolitanism: something provincials fear as an outside elite intent on forcing different values down their throats.

That provides an opening for vultures such as Richard Nixon, who, the Watergate investigation discovered, had his aides make sure that seed blossomed for his own purposes. "To the Editor . . . Who in the hell elected these people to stand up and read off their insults to the President of the United States?" read one proposed "grass-roots" letter manufactured by the White House. "When will you people realize that he was elected President and he is entitled to the respect of that office no matter what you people think of him?" went another.

Liberals are right to be vigilant about manufactured outrage, and particularly about how the mainstream media can too easily become that outrage's entry into the political debate. For the tactic represented by those fake Nixon letters was a long-term success. Conservatives have become adept at playing the media for suckers, getting inside the heads of editors and reporters, haunting them with the thought that maybe they are out-of-touch cosmopolitans and that their duty as tribunes of the people's voices means they should treat Obama's creation of "death panels" as just another justiciable political claim. If 1963 were 2009, the woman who assaulted Adlai Stevenson would be getting time on cable news to explain herself. That, not the paranoia itself, makes our present moment uniquely disturbing.

It used to be different. You never heard the late Walter Cronkite taking time on the evening news to "debunk" claims that a proposed mental health clinic in Alaska is actually a dumping ground for right-wing critics of the president's program, or giving the people who made those claims time to explain themselves on the air. The media didn't adjudicate the ever-present underbrush of American paranoia as a set of "conservative claims" to weigh, horse-race-style, against liberal claims. Back then, a more confident media unequivocally labeled the civic outrage represented by such discourse as "extremist" -- out of bounds.

The tree of crazy is an ever-present aspect of America's flora. Only now, it's being watered by misguided he-said-she-said reporting and taking over the forest. Latest word is that the enlightened and mild provision in the draft legislation to help elderly people who want living wills -- the one hysterics turned into the "death panel" canard -- is losing favor, according to the Wall Street Journal, because of "complaints over the provision."

Good thing our leaders weren't so cowardly in 1964, or we would never have passed a civil rights bill -- because of complaints over the provisions in it that would enslave whites.

nixonland@live.com

Rick Perlstein is the author of "Nixonland: The Rise of a President and the Fracturing of America" and "Before the Storm: Barry Goldwater and the Unmaking of the American Consensus." He will be online to chat with readers Tuesday at 11 a.m. Submit your questions and comments before or during the discussion.

Wednesday, March 25, 2009

The Big Takeover

Matt Taibbi puts all this into plain and understandable language!
Frank

The Big Takeover
The global economic crisis isn't about money - it's about power. How Wall Street insiders are using the bailout to stage a revolution
MATT TAIBBI

Posted Mar 19, 2009 12:49 PM

It's over — we're officially, royally fucked. no empire can survive being rendered a permanent laughingstock, which is what happened as of a few weeks ago, when the buffoons who have been running things in this country finally went one step too far. It happened when Treasury Secretary Timothy Geithner was forced to admit that he was once again going to have to stuff billions of taxpayer dollars into a dying insurance giant called AIG, itself a profound symbol of our national decline — a corporation that got rich insuring the concrete and steel of American industry in the country's heyday, only to destroy itself chasing phantom fortunes at the Wall Street card tables, like a dissolute nobleman gambling away the family estate in the waning days of the British Empire.

The latest bailout came as AIG admitted to having just posted the largest quarterly loss in American corporate history — some $61.7 billion. In the final three months of last year, the company lost more than $27 million every hour. That's $465,000 a minute, a yearly income for a median American household every six seconds, roughly $7,750 a second. And all this happened at the end of eight straight years that America devoted to frantically chasing the shadow of a terrorist threat to no avail, eight years spent stopping every citizen at every airport to search every purse, bag, crotch and briefcase for juice boxes and explosive tubes of toothpaste. Yet in the end, our government had no mechanism for searching the balance sheets of companies that held life-or-death power over our society and was unable to spot holes in the national economy the size of Libya (whose entire GDP last year was smaller than AIG's 2008 losses).

So it's time to admit it: We're fools, protagonists in a kind of gruesome comedy about the marriage of greed and stupidity. And the worst part about it is that we're still in denial — we still think this is some kind of unfortunate accident, not something that was created by the group of psychopaths on Wall Street whom we allowed to gang-rape the American Dream. When Geithner announced the new $30 billion bailout, the party line was that poor AIG was just a victim of a lot of shitty luck — bad year for business, you know, what with the financial crisis and all. Edward Liddy, the company's CEO, actually compared it to catching a cold: "The marketplace is a pretty crummy place to be right now," he said. "When the world catches pneumonia, we get it too." In a pathetic attempt at name-dropping, he even whined that AIG was being "consumed by the same issues that are driving house prices down and 401K statements down and Warren Buffet's investment portfolio down."

Liddy made AIG sound like an orphan begging in a soup line, hungry and sick from being left out in someone else's financial weather. He conveniently forgot to mention that AIG had spent more than a decade systematically scheming to evade U.S. and international regulators, or that one of the causes of its "pneumonia" was making colossal, world-sinking $500 billion bets with money it didn't have, in a toxic and completely unregulated derivatives market.

Nor did anyone mention that when AIG finally got up from its seat at the Wall Street casino, broke and busted in the afterdawn light, it owed money all over town — and that a huge chunk of your taxpayer dollars in this particular bailout scam will be going to pay off the other high rollers at its table. Or that this was a casino unique among all casinos, one where middle-class taxpayers cover the bets of billionaires.

People are pissed off about this financial crisis, and about this bailout, but they're not pissed off enough. The reality is that the worldwide economic meltdown and the bailout that followed were together a kind of revolution, a coup d'état. They cemented and formalized a political trend that has been snowballing for decades: the gradual takeover of the government by a small class of connected insiders, who used money to control elections, buy influence and systematically weaken financial regulations.

The crisis was the coup de grâce: Given virtually free rein over the economy, these same insiders first wrecked the financial world, then cunningly granted themselves nearly unlimited emergency powers to clean up their own mess. And so the gambling-addict leaders of companies like AIG end up not penniless and in jail, but with an Alien-style death grip on the Treasury and the Federal Reserve — "our partners in the government," as Liddy put it with a shockingly casual matter-of-factness after the most recent bailout.

The mistake most people make in looking at the financial crisis is thinking of it in terms of money, a habit that might lead you to look at the unfolding mess as a huge bonus-killing downer for the Wall Street class. But if you look at it in purely Machiavellian terms, what you see is a colossal power grab that threatens to turn the federal government into a kind of giant Enron — a huge, impenetrable black box filled with self-dealing insiders whose scheme is the securing of individual profits at the expense of an ocean of unwitting involuntary shareholders, previously known as taxpayers.

I. PATIENT ZERO

The best way to understand the financial crisis is to understand the meltdown at AIG. AIG is what happens when short, bald managers of otherwise boring financial bureaucracies start seeing Brad Pitt in the mirror. This is a company that built a giant fortune across more than a century by betting on safety-conscious policyholders — people who wear seat belts and build houses on high ground — and then blew it all in a year or two by turning their entire balance sheet over to a guy who acted like making huge bets with other people's money would make his dick bigger.

That guy — the Patient Zero of the global economic meltdown — was one Joseph Cassano, the head of a tiny, 400-person unit within the company called AIG Financial Products, or AIGFP. Cassano, a pudgy, balding Brooklyn College grad with beady eyes and way too much forehead, cut his teeth in the Eighties working for Mike Milken, the granddaddy of modern Wall Street debt alchemists. Milken, who pioneered the creative use of junk bonds, relied on messianic genius and a whole array of insider schemes to evade detection while wreaking financial disaster. Cassano, by contrast, was just a greedy little turd with a knack for selective accounting who ran his scam right out in the open, thanks to Washington's deregulation of the Wall Street casino. "It's all about the regulatory environment," says a government source involved with the AIG bailout. "These guys look for holes in the system, for ways they can do trades without government interference. Whatever is unregulated, all the action is going to pile into that."


The mess Cassano created had its roots in an investment boom fueled in part by a relatively new type of financial instrument called a collateralized-debt obligation. A CDO is like a box full of diced-up assets. They can be anything: mortgages, corporate loans, aircraft loans, credit-card loans, even other CDOs. So as X mortgage holder pays his bill, and Y corporate debtor pays his bill, and Z credit-card debtor pays his bill, money flows into the box.

The key idea behind a CDO is that there will always be at least some money in the box, regardless of how dicey the individual assets inside it are. No matter how you look at a single unemployed ex-con trying to pay the note on a six-bedroom house, he looks like a bad investment. But dump his loan in a box with a smorgasbord of auto loans, credit-card debt, corporate bonds and other crap, and you can be reasonably sure that somebody is going to pay up. Say $100 is supposed to come into the box every month. Even in an apocalypse, when $90 in payments might default, you'll still get $10. What the inventors of the CDO did is divide up the box into groups of investors and put that $10 into its own level, or "tranche." They then convinced ratings agencies like Moody's and S&P to give that top tranche the highest AAA rating — meaning it has close to zero credit risk.

Suddenly, thanks to this financial seal of approval, banks had a way to turn their shittiest mortgages and other financial waste into investment-grade paper and sell them to institutional investors like pensions and insurance companies, which were forced by regulators to keep their portfolios as safe as possible. Because CDOs offered higher rates of return than truly safe products like Treasury bills, it was a win-win: Banks made a fortune selling CDOs, and big investors made much more holding them.

The problem was, none of this was based on reality. "The banks knew they were selling crap," says a London-based trader from one of the bailed-out companies. To get AAA ratings, the CDOs relied not on their actual underlying assets but on crazy mathematical formulas that the banks cooked up to make the investments look safer than they really were. "They had some back room somewhere where a bunch of Indian guys who'd been doing nothing but math for God knows how many years would come up with some kind of model saying that this or that combination of debtors would only default once every 10,000 years," says one young trader who sold CDOs for a major investment bank. "It was nuts."

Now that even the crappiest mortgages could be sold to conservative investors, the CDOs spurred a massive explosion of irresponsible and predatory lending. In fact, there was such a crush to underwrite CDOs that it became hard to find enough subprime mortgages — read: enough unemployed meth dealers willing to buy million-dollar homes for no money down — to fill them all. As banks and investors of all kinds took on more and more in CDOs and similar instruments, they needed some way to hedge their massive bets — some kind of insurance policy, in case the housing bubble burst and all that debt went south at the same time. This was particularly true for investment banks, many of which got stuck holding or "warehousing" CDOs when they wrote more than they could sell. And that's were Joe Cassano came in.

Known for his boldness and arrogance, Cassano took over as chief of AIGFP in 2001. He was the favorite of Maurice "Hank" Greenberg, the head of AIG, who admired the younger man's hard-driving ways, even if neither he nor his successors fully understood exactly what it was that Cassano did. According to a source familiar with AIG's internal operations, Cassano basically told senior management, "You know insurance, I know investments, so you do what you do, and I'll do what I do — leave me alone." Given a free hand within the company, Cassano set out from his offices in London to sell a lucrative form of "insurance" to all those investors holding lots of CDOs. His tool of choice was another new financial instrument known as a credit-default swap, or CDS.

The CDS was popularized by J.P. Morgan, in particular by a group of young, creative bankers who would later become known as the "Morgan Mafia," as many of them would go on to assume influential positions in the finance world. In 1994, in between booze and games of tennis at a resort in Boca Raton, Florida, the Morgan gang plotted a way to help boost the bank's returns. One of their goals was to find a way to lend more money, while working around regulations that required them to keep a set amount of cash in reserve to back those loans. What they came up with was an early version of the credit-default swap.

In its simplest form, a CDS is just a bet on an outcome. Say Bank A writes a million-dollar mortgage to the Pope for a town house in the West Village. Bank A wants to hedge its mortgage risk in case the Pope can't make his monthly payments, so it buys CDS protection from Bank B, wherein it agrees to pay Bank B a premium of $1,000 a month for five years. In return, Bank B agrees to pay Bank A the full million-dollar value of the Pope's mortgage if he defaults. In theory, Bank A is covered if the Pope goes on a meth binge and loses his job.

When Morgan presented their plans for credit swaps to regulators in the late Nineties, they argued that if they bought CDS protection for enough of the investments in their portfolio, they had effectively moved the risk off their books. Therefore, they argued, they should be allowed to lend more, without keeping more cash in reserve. A whole host of regulators — from the Federal Reserve to the Office of the Comptroller of the Currency — accepted the argument, and Morgan was allowed to put more money on the street.

What Cassano did was to transform the credit swaps that Morgan popularized into the world's largest bet on the housing boom. In theory, at least, there's nothing wrong with buying a CDS to insure your investments. Investors paid a premium to AIGFP, and in return the company promised to pick up the tab if the mortgage-backed CDOs went bust. But as Cassano went on a selling spree, the deals he made differed from traditional insurance in several significant ways. First, the party selling CDS protection didn't have to post any money upfront. When a $100 corporate bond is sold, for example, someone has to show 100 actual dollars. But when you sell a $100 CDS guarantee, you don't have to show a dime. So Cassano could sell investment banks billions in guarantees without having any single asset to back it up.

Secondly, Cassano was selling so-called "naked" CDS deals. In a "naked" CDS, neither party actually holds the underlying loan. In other words, Bank B not only sells CDS protection to Bank A for its mortgage on the Pope — it turns around and sells protection to Bank C for the very same mortgage. This could go on ad nauseam: You could have Banks D through Z also betting on Bank A's mortgage. Unlike traditional insurance, Cassano was offering investors an opportunity to bet that someone else's house would burn down, or take out a term life policy on the guy with AIDS down the street. It was no different from gambling, the Wall Street version of a bunch of frat brothers betting on Jay Feely to make a field goal. Cassano was taking book for every bank that bet short on the housing market, but he didn't have the cash to pay off if the kick went wide.

In a span of only seven years, Cassano sold some $500 billion worth of CDS protection, with at least $64 billion of that tied to the subprime mortgage market. AIG didn't have even a fraction of that amount of cash on hand to cover its bets, but neither did it expect it would ever need any reserves. So long as defaults on the underlying securities remained a highly unlikely proposition, AIG was essentially collecting huge and steadily climbing premiums by selling insurance for the disaster it thought would never come.

Initially, at least, the revenues were enormous: AIGFP's returns went from $737 million in 1999 to $3.2 billion in 2005. Over the past seven years, the subsidiary's 400 employees were paid a total of $3.5 billion; Cassano himself pocketed at least $280 million in compensation. Everyone made their money — and then it all went to shit.

II. THE REGULATORS

Cassano's outrageous gamble wouldn't have been possible had he not had the good fortune to take over AIGFP just as Sen. Phil Gramm — a grinning, laissez-faire ideologue from Texas — had finished engineering the most dramatic deregulation of the financial industry since Emperor Hien Tsung invented paper money in 806 A.D. For years, Washington had kept a watchful eye on the nation's banks. Ever since the Great Depression, commercial banks — those that kept money on deposit for individuals and businesses — had not been allowed to double as investment banks, which raise money by issuing and selling securities. The Glass-Steagall Act, passed during the Depression, also prevented banks of any kind from getting into the insurance business.

But in the late Nineties, a few years before Cassano took over AIGFP, all that changed. The Democrats, tired of getting slaughtered in the fundraising arena by Republicans, decided to throw off their old reliance on unions and interest groups and become more "business-friendly." Wall Street responded by flooding Washington with money, buying allies in both parties. In the 10-year period beginning in 1998, financial companies spent $1.7 billion on federal campaign contributions and another $3.4 billion on lobbyists. They quickly got what they paid for. In 1999, Gramm co-sponsored a bill that repealed key aspects of the Glass-Steagall Act, smoothing the way for the creation of financial megafirms like Citigroup. The move did away with the built-in protections afforded by smaller banks. In the old days, a local banker knew the people whose loans were on his balance sheet: He wasn't going to give a million-dollar mortgage to a homeless meth addict, since he would have to keep that loan on his books. But a giant merged bank might write that loan and then sell it off to some fool in China, and who cared?

The very next year, Gramm compounded the problem by writing a sweeping new law called the Commodity Futures Modernization Act that made it impossible to regulate credit swaps as either gambling or securities. Commercial banks — which, thanks to Gramm, were now competing directly with investment banks for customers — were driven to buy credit swaps to loosen capital in search of higher yields. "By ruling that credit-default swaps were not gaming and not a security, the way was cleared for the growth of the market," said Eric Dinallo, head of the New York State Insurance Department.

The blanket exemption meant that Joe Cassano could now sell as many CDS contracts as he wanted, building up as huge a position as he wanted, without anyone in government saying a word. "You have to remember, investment banks aren't in the business of making huge directional bets," says the government source involved in the AIG bailout. When investment banks write CDS deals, they hedge them. But insurance companies don't have to hedge. And that's what AIG did. "They just bet massively long on the housing market," says the source. "Billions and billions."

In the biggest joke of all, Cassano's wheeling and dealing was regulated by the Office of Thrift Supervision, an agency that would prove to be defiantly uninterested in keeping watch over his operations. How a behemoth like AIG came to be regulated by the little-known and relatively small OTS is yet another triumph of the deregulatory instinct. Under another law passed in 1999, certain kinds of holding companies could choose the OTS as their regulator, provided they owned one or more thrifts (better known as savings-and-loans). Because the OTS was viewed as more compliant than the Fed or the Securities and Exchange Commission, companies rushed to reclassify themselves as thrifts. In 1999, AIG purchased a thrift in Delaware and managed to get approval for OTS regulation of its entire operation.

Making matters even more hilarious, AIGFP — a London-based subsidiary of an American insurance company — ought to have been regulated by one of Europe's more stringent regulators, like Britain's Financial Services Authority. But the OTS managed to convince the Europeans that it had the muscle to regulate these giant companies. By 2007, the EU had conferred legitimacy to OTS supervision of three mammoth firms — GE, AIG and Ameriprise.

That same year, as the subprime crisis was exploding, the Government Accountability Office criticized the OTS, noting a "disparity between the size of the agency and the diverse firms it oversees." Among other things, the GAO report noted that the entire OTS had only one insurance specialist on staff — and this despite the fact that it was the primary regulator for the world's largest insurer!

"There's this notion that the regulators couldn't do anything to stop AIG," says a government official who was present during the bailout. "That's bullshit. What you have to understand is that these regulators have ultimate power. They can send you a letter and say, 'You don't exist anymore,' and that's basically that. They don't even really need due process. The OTS could have said, 'We're going to pull your charter; we're going to pull your license; we're going to sue you.' And getting sued by your primary regulator is the kiss of death."

When AIG finally blew up, the OTS regulator ostensibly in charge of overseeing the insurance giant — a guy named C.K. Lee — basically admitted that he had blown it. His mistake, Lee said, was that he believed all those credit swaps in Cassano's portfolio were "fairly benign products." Why? Because the company told him so. "The judgment the company was making was that there was no big credit risk," he explained. (Lee now works as Midwest region director of the OTS; the agency declined to make him available for an interview.)

In early March, after the latest bailout of AIG, Treasury Secretary Timothy Geithner took what seemed to be a thinly veiled shot at the OTS, calling AIG a "huge, complex global insurance company attached to a very complicated investment bank/hedge fund that was allowed to build up without any adult supervision." But even without that "adult supervision," AIG might have been OK had it not been for a complete lack of internal controls. For six months before its meltdown, according to insiders, the company had been searching for a full-time chief financial officer and a chief risk-assessment officer, but never got around to hiring either. That meant that the 18th-largest company in the world had no one checking to make sure its balance sheet was safe and no one keeping track of how much cash and assets the firm had on hand. The situation was so bad that when outside consultants were called in a few weeks before the bailout, senior executives were unable to answer even the most basic questions about their company — like, for instance, how much exposure the firm had to the residential-mortgage market.

III. THE CRASH

Ironically, when reality finally caught up to Cassano, it wasn't because the housing market crapped but because of AIG itself. Before 2005, the company's debt was rated triple-A, meaning he didn't need to post much cash to sell CDS protection: The solid creditworthiness of AIG's name was guarantee enough. But the company's crummy accounting practices eventually caused its credit rating to be downgraded, triggering clauses in the CDS contracts that forced Cassano to post substantially more collateral to back his deals.

By the fall of 2007, it was evident that AIGFP's portfolio had turned poisonous, but like every good Wall Street huckster, Cassano schemed to keep his insane, Earth-swallowing gamble hidden from public view. That August, balls bulging, he announced to investors on a conference call that "it is hard for us, without being flippant, to even see a scenario within any kind of realm of reason that would see us losing $1 in any of those transactions." As he spoke, his CDS portfolio was racking up $352 million in losses. When the growing credit crunch prompted senior AIG executives to re-examine its liabilities, a company accountant named Joseph St. Denis became "gravely concerned" about the CDS deals and their potential for mass destruction. Cassano responded by personally forcing the poor sap out of the firm, telling him he was "deliberately excluded" from the financial review for fear that he might "pollute the process."

The following February, when AIG posted $11.5 billion in annual losses, it announced the resignation of Cassano as head of AIGFP, saying an auditor had found a "material weakness" in the CDS portfolio. But amazingly, the company not only allowed Cassano to keep $34 million in bonuses, it kept him on as a consultant for $1 million a month. In fact, Cassano remained on the payroll and kept collecting his monthly million through the end of September 2008, even after taxpayers had been forced to hand AIG $85 billion to patch up his fuck-ups. When asked in October why the company still retained Cassano at his $1 million-a-month rate despite his role in the probable downfall of Western civilization, CEO Martin Sullivan told Congress with a straight face that AIG wanted to "retain the 20-year knowledge that Mr. Cassano had." (Cassano, who is apparently hiding out in his lavish town house near Harrods in London, could not be reached for comment.)

What sank AIG in the end was another credit downgrade. Cassano had written so many CDS deals that when the company was facing another downgrade to its credit rating last September, from AA to A, it needed to post billions in collateral — not only more cash than it had on its balance sheet but more cash than it could raise even if it sold off every single one of its liquid assets. Even so, management dithered for days, not believing the company was in serious trouble. AIG was a dried-up prune, sapped of any real value, and its top executives didn't even know it.

On the weekend of September 13th, AIG's senior leaders were summoned to the offices of the New York Federal Reserve. Regulators from Dinallo's insurance office were there, as was Geithner, then chief of the New York Fed. Treasury Secretary Hank Paulson, who spent most of the weekend preoccupied with the collapse of Lehman Brothers, came in and out. Also present, for reasons that would emerge later, was Lloyd Blankfein, CEO of Goldman Sachs. The only relevant government office that wasn't represented was the regulator that should have been there all along: the OTS.

"We sat down with Paulson, Geithner and Dinallo," says a person present at the negotiations. "I didn't see the OTS even once."

On September 14th, according to another person present, Treasury officials presented Blankfein and other bankers in attendance with an absurd proposal: "They basically asked them to spend a day and check to see if they could raise the money privately." The laughably short time span to complete the mammoth task made the answer a foregone conclusion. At the end of the day, the bankers came back and told the government officials, gee, we checked, but we can't raise that much. And the bailout was on.

A short time later, it came out that AIG was planning to pay some $90 million in deferred compensation to former executives, and to accelerate the payout of $277 million in bonuses to others — a move the company insisted was necessary to "retain key employees." When Congress balked, AIG canceled the $90 million in payments.

Then, in January 2009, the company did it again. After all those years letting Cassano run wild, and after already getting caught paying out insane bonuses while on the public till, AIG decided to pay out another $450 million in bonuses. And to whom? To the 400 or so employees in Cassano's old unit, AIGFP, which is due to go out of business shortly! Yes, that's right, an average of $1.1 million in taxpayer-backed money apiece, to the very people who spent the past decade or so punching a hole in the fabric of the universe!

"We, uh, needed to keep these highly expert people in their seats," AIG spokeswoman Christina Pretto says to me in early February.

"But didn't these 'highly expert people' basically destroy your company?" I ask.

Pretto protests, says this isn't fair. The employees at AIGFP have already taken pay cuts, she says. Not retaining them would dilute the value of the company even further, make it harder to wrap up the unit's operations in an orderly fashion.

The bonuses are a nice comic touch highlighting one of the more outrageous tangents of the bailout age, namely the fact that, even with the planet in flames, some members of the Wall Street class can't even get used to the tragedy of having to fly coach. "These people need their trips to Baja, their spa treatments, their hand jobs," says an official involved in the AIG bailout, a serious look on his face, apparently not even half-kidding. "They don't function well without them."

IV. THE POWER GRAB

So that's the first step in wall street's power grab: making up things like credit-default swaps and collateralized-debt obligations, financial products so complex and inscrutable that ordinary American dumb people — to say nothing of federal regulators and even the CEOs of major corporations like AIG — are too intimidated to even try to understand them. That, combined with wise political investments, enabled the nation's top bankers to effectively scrap any meaningful oversight of the financial industry. In 1997 and 1998, the years leading up to the passage of Phil Gramm's fateful act that gutted Glass-Steagall, the banking, brokerage and insurance industries spent $350 million on political contributions and lobbying. Gramm alone — then the chairman of the Senate Banking Committee — collected $2.6 million in only five years. The law passed 90-8 in the Senate, with the support of 38 Democrats, including some names that might surprise you: Joe Biden, John Kerry, Tom Daschle, Dick Durbin, even John Edwards.

The act helped create the too-big-to-fail financial behemoths like Citigroup, AIG and Bank of America — and in turn helped those companies slowly crush their smaller competitors, leaving the major Wall Street firms with even more money and power to lobby for further deregulatory measures. "We're moving to an oligopolistic situation," Kenneth Guenther, a top executive with the Independent Community Bankers of America, lamented after the Gramm measure was passed.

The situation worsened in 2004, in an extraordinary move toward deregulation that never even got to a vote. At the time, the European Union was threatening to more strictly regulate the foreign operations of America's big investment banks if the U.S. didn't strengthen its own oversight. So the top five investment banks got together on April 28th of that year and — with the helpful assistance of then-Goldman Sachs chief and future Treasury Secretary Hank Paulson — made a pitch to George Bush's SEC chief at the time, William Donaldson, himself a former investment banker. The banks generously volunteered to submit to new rules restricting them from engaging in excessively risky activity. In exchange, they asked to be released from any lending restrictions. The discussion about the new rules lasted just 55 minutes, and there was not a single representative of a major media outlet there to record the fateful decision.

Donaldson OK'd the proposal, and the new rules were enough to get the EU to drop its threat to regulate the five firms. The only catch was, neither Donaldson nor his successor, Christopher Cox, actually did any regulating of the banks. They named a commission of seven people to oversee the five companies, whose combined assets came to total more than $4 trillion. But in the last year and a half of Cox's tenure, the group had no director and did not complete a single inspection. Great deal for the banks, which originally complained about being regulated by both Europe and the SEC, and ended up being regulated by no one.

Once the capital requirements were gone, those top five banks went hog-wild, jumping ass-first into the then-raging housing bubble. One of those was Bear Stearns, which used its freedom to drown itself in bad mortgage loans. In the short period between the 2004 change and Bear's collapse, the firm's debt-to-equity ratio soared from 12-1 to an insane 33-1. Another culprit was Goldman Sachs, which also had the good fortune, around then, to see its CEO, a bald-headed Frankensteinian goon named Hank Paulson (who received an estimated $200 million tax deferral by joining the government), ascend to Treasury secretary.

Freed from all capital restraints, sitting pretty with its man running the Treasury, Goldman jumped into the housing craze just like everyone else on Wall Street. Although it famously scored an $11 billion coup in 2007 when one of its trading units smartly shorted the housing market, the move didn't tell the whole story. In truth, Goldman still had a huge exposure come that fateful summer of 2008 — to none other than Joe Cassano.

Goldman Sachs, it turns out, was Cassano's biggest customer, with $20 billion of exposure in Cassano's CDS book. Which might explain why Goldman chief Lloyd Blankfein was in the room with ex-Goldmanite Hank Paulson that weekend of September 13th, when the federal government was supposedly bailing out AIG.

When asked why Blankfein was there, one of the government officials who was in the meeting shrugs. "One might say that it's because Goldman had so much exposure to AIGFP's portfolio," he says. "You'll never prove that, but one might suppose."

Market analyst Eric Salzman is more blunt. "If AIG went down," he says, "there was a good chance Goldman would not be able to collect." The AIG bailout, in effect, was Goldman bailing out Goldman.

Eventually, Paulson went a step further, elevating another ex-Goldmanite named Edward Liddy to run AIG — a company whose bailout money would be coming, in part, from the newly created TARP program, administered by another Goldman banker named Neel Kashkari.

V. REPO MEN

There are plenty of people who have noticed, in recent years, that when they lost their homes to foreclosure or were forced into bankruptcy because of crippling credit-card debt, no one in the government was there to rescue them. But when Goldman Sachs — a company whose average employee still made more than $350,000 last year, even in the midst of a depression — was suddenly faced with the possibility of losing money on the unregulated insurance deals it bought for its insane housing bets, the government was there in an instant to patch the hole. That's the essence of the bailout: rich bankers bailing out rich bankers, using the taxpayers' credit card.

The people who have spent their lives cloistered in this Wall Street community aren't much for sharing information with the great unwashed. Because all of this shit is complicated, because most of us mortals don't know what the hell LIBOR is or how a REIT works or how to use the word "zero coupon bond" in a sentence without sounding stupid — well, then, the people who do speak this idiotic language cannot under any circumstances be bothered to explain it to us and instead spend a lot of time rolling their eyes and asking us to trust them.

That roll of the eyes is a key part of the psychology of Paulsonism. The state is now being asked not just to call off its regulators or give tax breaks or funnel a few contracts to connected companies; it is intervening directly in the economy, for the sole purpose of preserving the influence of the megafirms. In essence, Paulson used the bailout to transform the government into a giant bureaucracy of entitled assholedom, one that would socialize "toxic" risks but keep both the profits and the management of the bailed-out firms in private hands. Moreover, this whole process would be done in secret, away from the prying eyes of NASCAR dads, broke-ass liberals who read translations of French novels, subprime mortgage holders and other such financial losers.

Some aspects of the bailout were secretive to the point of absurdity. In fact, if you look closely at just a few lines in the Federal Reserve's weekly public disclosures, you can literally see the moment where a big chunk of your money disappeared for good. The H4 report (called "Factors Affecting Reserve Balances") summarizes the activities of the Fed each week. You can find it online, and it's pretty much the only thing the Fed ever tells the world about what it does. For the week ending February 18th, the number under the heading "Repurchase Agreements" on the table is zero. It's a significant number.

Why? In the pre-crisis days, the Fed used to manage the money supply by periodically buying and selling securities on the open market through so-called Repurchase Agreements, or Repos. The Fed would typically dump $25 billion or so in cash onto the market every week, buying up Treasury bills, U.S. securities and even mortgage-backed securities from institutions like Goldman Sachs and J.P. Morgan, who would then "repurchase" them in a short period of time, usually one to seven days. This was the Fed's primary mechanism for controlling interest rates: Buying up securities gives banks more money to lend, which makes interest rates go down. Selling the securities back to the banks reduces the money available for lending, which makes interest rates go up.

If you look at the weekly H4 reports going back to the summer of 2007, you start to notice something alarming. At the start of the credit crunch, around August of that year, you see the Fed buying a few more Repos than usual — $33 billion or so. By November, as private-bank reserves were dwindling to alarmingly low levels, the Fed started injecting even more cash than usual into the economy: $48 billion. By late December, the number was up to $58 billion; by the following March, around the time of the Bear Stearns rescue, the Repo number had jumped to $77 billion. In the week of May 1st, 2008, the number was $115 billion — "out of control now," according to one congressional aide. For the rest of 2008, the numbers remained similarly in the stratosphere, the Fed pumping as much as $125 billion of these short-term loans into the economy — until suddenly, at the start of this year, the number drops to nothing. Zero.

The reason the number has dropped to nothing is that the Fed had simply stopped using relatively transparent devices like repurchase agreements to pump its money into the hands of private companies. By early 2009, a whole series of new government operations had been invented to inject cash into the economy, most all of them completely secretive and with names you've never heard of. There is the Term Auction Facility, the Term Securities Lending Facility, the Primary Dealer Credit Facility, the Commercial Paper Funding Facility and a monster called the Asset-Backed Commercial Paper Money Market Mutual Fund Liquidity Facility (boasting the chat-room horror-show acronym ABCPMMMFLF). For good measure, there's also something called a Money Market Investor Funding Facility, plus three facilities called Maiden Lane I, II and III to aid bailout recipients like Bear Stearns and AIG.

While the rest of America, and most of Congress, have been bugging out about the $700 billion bailout program called TARP, all of these newly created organisms in the Federal Reserve zoo have quietly been pumping not billions but trillions of dollars into the hands of private companies (at least $3 trillion so far in loans, with as much as $5.7 trillion more in guarantees of private investments). Although this technically isn't taxpayer money, it still affects taxpayers directly, because the activities of the Fed impact the economy as a whole. And this new, secretive activity by the Fed completely eclipses the TARP program in terms of its influence on the economy.

No one knows who's getting that money or exactly how much of it is disappearing through these new holes in the hull of America's credit rating. Moreover, no one can really be sure if these new institutions are even temporary at all — or whether they are being set up as permanent, state-aided crutches to Wall Street, designed to systematically suck bad investments off the ledgers of irresponsible lenders.

"They're supposed to be temporary," says Paul-Martin Foss, an aide to Rep. Ron Paul. "But we keep getting notices every six months or so that they're being renewed. They just sort of quietly announce it."

None other than disgraced senator Ted Stevens was the poor sap who made the unpleasant discovery that if Congress didn't like the Fed handing trillions of dollars to banks without any oversight, Congress could apparently go fuck itself — or so said the law. When Stevens asked the GAO about what authority Congress has to monitor the Fed, he got back a letter citing an obscure statute that nobody had ever heard of before: the Accounting and Auditing Act of 1950. The relevant section, 31 USC 714(b), dictated that congressional audits of the Federal Reserve may not include "deliberations, decisions and actions on monetary policy matters." The exemption, as Foss notes, "basically includes everything." According to the law, in other words, the Fed simply cannot be audited by Congress. Or by anyone else, for that matter.

VI. WINNERS AND LOSERS

Stevens isn't the only person in Congress to be given the finger by the Fed. In January, when Rep. Alan Grayson of Florida asked Federal Reserve vice chairman Donald Kohn where all the money went — only $1.2 trillion had vanished by then — Kohn gave Grayson a classic eye roll, saying he would be "very hesitant" to name names because it might discourage banks from taking the money.

"Has that ever happened?" Grayson asked. "Have people ever said, 'We will not take your $100 billion because people will find out about it?'"

"Well, we said we would not publish the names of the borrowers, so we have no test of that," Kohn answered, visibly annoyed with Grayson's meddling.

Grayson pressed on, demanding to know on what terms the Fed was lending the money. Presumably it was buying assets and making loans, but no one knew how it was pricing those assets — in other words, no one knew what kind of deal it was striking on behalf of taxpayers. So when Grayson asked if the purchased assets were "marked to market" — a methodology that assigns a concrete value to assets, based on the market rate on the day they are traded — Kohn answered, mysteriously, "The ones that have market values are marked to market." The implication was that the Fed was purchasing derivatives like credit swaps or other instruments that were basically impossible to value objectively — paying real money for God knows what.

"Well, how much of them don't have market values?" asked Grayson. "How much of them are worthless?"

"None are worthless," Kohn snapped.

"Then why don't you mark them to market?" Grayson demanded.

"Well," Kohn sighed, "we are marking the ones to market that have market values."

In essence, the Fed was telling Congress to lay off and let the experts handle things. "It's like buying a car in a used-car lot without opening the hood, and saying, 'I think it's fine,'" says Dan Fuss, an analyst with the investment firm Loomis Sayles. "The salesman says, 'Don't worry about it. Trust me.' It'll probably get us out of the lot, but how much farther? None of us knows."

When one considers the comparatively extensive system of congressional checks and balances that goes into the spending of every dollar in the budget via the normal appropriations process, what's happening in the Fed amounts to something truly revolutionary — a kind of shadow government with a budget many times the size of the normal federal outlay, administered dictatorially by one man, Fed chairman Ben Bernanke. "We spend hours and hours and hours arguing over $10 million amendments on the floor of the Senate, but there has been no discussion about who has been receiving this $3 trillion," says Sen. Bernie Sanders. "It is beyond comprehension."

Count Sanders among those who don't buy the argument that Wall Street firms shouldn't have to face being outed as recipients of public funds, that making this information public might cause investors to panic and dump their holdings in these firms. "I guess if we made that public, they'd go on strike or something," he muses.

And the Fed isn't the only arm of the bailout that has closed ranks. The Treasury, too, has maintained incredible secrecy surrounding its implementation even of the TARP program, which was mandated by Congress. To this date, no one knows exactly what criteria the Treasury Department used to determine which banks received bailout funds and which didn't — particularly the first $350 billion given out under Bush appointee Hank Paulson.

The situation with the first TARP payments grew so absurd that when the Congressional Oversight Panel, charged with monitoring the bailout money, sent a query to Paulson asking how he decided whom to give money to, Treasury responded — and this isn't a joke — by directing the panel to a copy of the TARP application form on its website. Elizabeth Warren, the chair of the Congressional Oversight Panel, was struck nearly speechless by the response.

"Do you believe that?" she says incredulously. "That's not what we had in mind."

Another member of Congress, who asked not to be named, offers his own theory about the TARP process. "I think basically if you knew Hank Paulson, you got the money," he says.

This cozy arrangement created yet another opportunity for big banks to devour market share at the expense of smaller regional lenders. While all the bigwigs at Citi and Goldman and Bank of America who had Paulson on speed-dial got bailed out right away — remember that TARP was originally passed because money had to be lent right now, that day, that minute, to stave off emergency — many small banks are still waiting for help. Five months into the TARP program, some not only haven't received any funds, they haven't even gotten a call back about their applications.

"There's definitely a feeling among community bankers that no one up there cares much if they make it or not," says Tanya Wheeless, president of the Arizona Bankers Association.

Which, of course, is exactly the opposite of what should be happening, since small, regional banks are far less guilty of the kinds of predatory lending that sank the economy. "They're not giving out subprime loans or easy credit," says Wheeless. "At the community level, it's much more bread-and-butter banking."

Nonetheless, the lion's share of the bailout money has gone to the larger, so-called "systemically important" banks. "It's like Treasury is picking winners and losers," says one state banking official who asked not to be identified.

This itself is a hugely important political development. In essence, the bailout accelerated the decline of regional community lenders by boosting the political power of their giant national competitors.

Which, when you think about it, is insane: What had brought us to the brink of collapse in the first place was this relentless instinct for building ever-larger megacompanies, passing deregulatory measures to gradually feed all the little fish in the sea to an ever-shrinking pool of Bigger Fish. To fix this problem, the government should have slowly liquidated these monster, too-big-to-fail firms and broken them down to smaller, more manageable companies. Instead, federal regulators closed ranks and used an almost completely secret bailout process to double down on the same faulty, merger-happy thinking that got us here in the first place, creating a constellation of megafirms under government control that are even bigger, more unwieldy and more crammed to the gills with systemic risk.

In essence, Paulson and his cronies turned the federal government into one gigantic, half-opaque holding company, one whose balance sheet includes the world's most appallingly large and risky hedge fund, a controlling stake in a dying insurance giant, huge investments in a group of teetering megabanks, and shares here and there in various auto-finance companies, student loans, and other failing businesses. Like AIG, this new federal holding company is a firm that has no mechanism for auditing itself and is run by leaders who have very little grasp of the daily operations of its disparate subsidiary operations.

In other words, it's AIG's rip-roaringly shitty business model writ almost inconceivably massive — to echo Geithner, a huge, complex global company attached to a very complicated investment bank/hedge fund that's been allowed to build up without adult supervision. How much of what kinds of crap is actually on our balance sheet, and what did we pay for it? When exactly will the rent come due, when will the money run out? Does anyone know what the hell is going on? And on the linear spectrum of capitalism to socialism, where exactly are we now? Is there a dictionary word that even describes what we are now? It would be funny, if it weren't such a nightmare.

VII. YOU DON'T GET IT

The real question from here is whether the Obama administration is going to move to bring the financial system back to a place where sanity is restored and the general public can have a say in things or whether the new financial bureaucracy will remain obscure, secretive and hopelessly complex. It might not bode well that Geithner, Obama's Treasury secretary, is one of the architects of the Paulson bailouts; as chief of the New York Fed, he helped orchestrate the Goldman-friendly AIG bailout and the secretive Maiden Lane facilities used to funnel funds to the dying company. Neither did it look good when Geithner — himself a protégé of notorious Goldman alum John Thain, the Merrill Lynch chief who paid out billions in bonuses after the state spent billions bailing out his firm — picked a former Goldman lobbyist named Mark Patterson to be his top aide.

In fact, most of Geithner's early moves reek strongly of Paulsonism. He has continually talked about partnering with private investors to create a so-called "bad bank" that would systemically relieve private lenders of bad assets — the kind of massive, opaque, quasi-private bureaucratic nightmare that Paulson specialized in. Geithner even refloated a Paulson proposal to use TALF, one of the Fed's new facilities, to essentially lend cheap money to hedge funds to invest in troubled banks while practically guaranteeing them enormous profits.

God knows exactly what this does for the taxpayer, but hedge-fund managers sure love the idea. "This is exactly what the financial system needs," said Andrew Feldstein, CEO of Blue Mountain Capital and one of the Morgan Mafia. Strangely, there aren't many people who don't run hedge funds who have expressed anything like that kind of enthusiasm for Geithner's ideas.

As complex as all the finances are, the politics aren't hard to follow. By creating an urgent crisis that can only be solved by those fluent in a language too complex for ordinary people to understand, the Wall Street crowd has turned the vast majority of Americans into non-participants in their own political future. There is a reason it used to be a crime in the Confederate states to teach a slave to read: Literacy is power. In the age of the CDS and CDO, most of us are financial illiterates. By making an already too-complex economy even more complex, Wall Street has used the crisis to effect a historic, revolutionary change in our political system — transforming a democracy into a two-tiered state, one with plugged-in financial bureaucrats above and clueless customers below.

The most galling thing about this financial crisis is that so many Wall Street types think they actually deserve not only their huge bonuses and lavish lifestyles but the awesome political power their own mistakes have left them in possession of. When challenged, they talk about how hard they work, the 90-hour weeks, the stress, the failed marriages, the hemorrhoids and gallstones they all get before they hit 40.

"But wait a minute," you say to them. "No one ever asked you to stay up all night eight days a week trying to get filthy rich shorting what's left of the American auto industry or selling $600 billion in toxic, irredeemable mortgages to ex-strippers on work release and Taco Bell clerks. Actually, come to think of it, why are we even giving taxpayer money to you people? Why are we not throwing your ass in jail instead?"

But before you even finish saying that, they're rolling their eyes, because You Don't Get It. These people were never about anything except turning money into money, in order to get more money; valueswise they're on par with crack addicts, or obsessive sexual deviants who burgle homes to steal panties. Yet these are the people in whose hands our entire political future now rests.

Good luck with that, America. And enjoy tax season.

[From Issue 1075 — April 2, 2009]

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Native of the Philadelphia "Kensington and Alleganey" northeast area. I spent 4 years in the Air Force (Titan-II missles in Tuscon Arizona). I Am currently retired, and among other adventures I spent 28 years working for AT&T in Telecommunications. I've lived in Florida for 33 years....20 years in Hollywood Fla., and 13 years North Florida. I've been married 42 years, and am a proud father of three adult offspring. All of them contributing to society in a very useful and creative manner.