Archive for the 'Politics' Category

US Anticommunist Extermination Programs 1945-2000

Tuesday, September 1st, 2020

The Jakarta Method, Washington’s Anticommunist Crusade & the Mass Murder Program that Shaped Our World, Vincent Bevins, 2020

Zhou Enlai Nehru Nasser Sukarno Nehru

In 1955 President Sukarno of Indonesia organized a conference of the leaders of the non aligned third world nations (former colonies) held in Bandung Java Indonesia. The conference was attended by representatives of 29 former colonial nations. Notable attendees in addition to Sukarno were Jawaharlal Nehru of India, Gamal Abdel Nasser of Egypt, and Zhou Enlai of China. The core principles of the Bandung Conference were political self-determination, mutual respect for sovereignty, non-aggression, non-interference in internal affairs, and equality. US Secretary of State John Foster Dulles (older brother of Allen Dulles) was strongly opposed to the conference. The Bandung conference represented the high point of the attempt to forge cooperation among non aligned third world nations.

This book features two contrasting Americans, Frank Wisner who worked for Allen Dulles in the WWII OSS and after at the CIA as Dulles’ master of covert (black ops) operations until Wisner killed himself in 1965; and Howard P. Jones, who served as US Ambassador to Indonesia from 1958 to 1964 and as Chancellor of the East West Center University of Hawaii from 1965 to 1968. President Truman wanted the CIA to serve as intelligence gatherers only, so Allen Dulles maneuvered Frank Wisner into position as OPC Chief and by 1952 OPC was operating 47 overseas stations operating out of US embassys and consulates and employed 3000 people. Wisner is the mastermind behind the early 1953 Iran coup (executed by Kermit Roosevelt) and the Guatemala coup of 1954 and every black ops through the 1964 Brazilian coup and the 1965 Indonesian coup.

Unlike Wisner, who was a die hard crusader, Jones had a completely different approach to the rest of the world. Rather than viewing every situation in terms of a black and white global struggle, he sought to engage deeply with the complexities of each situation.

Sukarno with Jones

Jones played an important role in repairing the damaged caused to United States-Indonesian relations by the Eisenhower Administration’s covert support for the failed PRRI/Permesta regional uprisings in Sumatra and the Celebes. Following the capture of an American pilot Allen Lawrence Pope (in 1958) who was participating in a Central Intelligence Agency (CIA) black op in support of the Permesta rebels, Jones portrayed Pope as an American “paid soldier of fortune” and expressed his regret at the involvement of an American.

JFK traveled widely after WWII, visiting Indonesia twice. When JFK became President he told Jones that Jones was solely in charge of relations with Sukarno and Indonesia. Reeling from the Bay of Pigs disaster, JFK no longer trusted the CIA and wanted Jones to have a hand free of interference from CIA black ops. After JFK’s assassination, LBJ, with almost no international experience but listening to JFK’s holdover advisors, stopped all cooperation with Sukarno and recalled Ambassador Jones. The CIA now had a free hand to move forward with overthrowing the Sukarno government and attacking the PKI communist party of Indonesia, at the time the third largest communist political party behind China and the Soviet Union. The coup began on Sept. 30, 1965 and on October 2, an unknown (except to key US policy makers) army general Suharto took over the government. On Oct 5, Ambassador Howard Green cabled the State Department:

Spread the story of PKI’s guilt, treachery and brutality (this priority effort is perhaps most needed immediate assistance we can giver army if we can find way to do it without identifying it as solely or largely US effort). .. The army now has the opportunity to move against Communist Party if it moves quickly…”It’s now or never.”

On Oct 29 Frank Wisner killed himself.

On Nov 22, D.N. Aidit, leader to PKI in Central Java was arrested and executed. The military reported and Newsweek published Aidit’s confession that the PKI planned to take over the country. His confession was impossible and a part of an anticommunist black propaganda operation.

In Jan. 1966, Bobby Kennedy was the only American politician to speak up:

We have spoken out against the inhuman slaughters perpetrated by the Nazis and the Communists. But will we speak out also against the inhuman slaughter in Indonesia, where over 100,000 alleged Communists have not been perpetrators but victims

What followed was a state sponsored massacre and genocide of a million Indonesians, many ethnic Chinese. These events are largely unknown in the US although a 2012 documentary The Act of Killing and a companion 2014 documentary The Look of Silence raised awareness for some Americans and others around the world. Indonesia is the only country that engaged in genocide and never attempted an accounting or reconciliation.

…in the years 1945-1990, a loose network of US-backed anticommunist extermination programs emerged around the world, and they carried out mass murder in at least twenty-two countries. there was no central plan, no master control room where the whole thing was orchestrated, but I think that the extermination programs in Argentina, Bolivia, Brazil, Chile, Columbia, East Timor, El Salvador, Guatemala, Honduras, Indonesia, Iraq, Mexico, Nicaragua, Paraguay, the Philippines, South Korea, Sudan, Taiwan, Thailand, Uruguay, Venezuela, and Vietnam should be seen as interconnected and a crucial part of the US victory in the Cold War… The men carrying out purposeful executions of dissidents and unarmed civilians learned from one another. Sometimes they even named their operations after other programs they sought to emulate. I found evidence indirectly linking the metaphor “jakarta”, taken from the largest and most important of these programs, to at least eleven countries. But even the regimes that were never influenced by that specific language would have been able to see, very clearly, what the Indonesian military had done and the success and prestige it enjoyed in the West afterwards.

Following are the conclusions of Harvard historian Odd Arne Westad:

We can see the Cold War as the global circumstances under which the vast majority of the world’s countries moved from direct colonial rule to something else, to a new place in a new global system. If we view it this way, then there is not a simple winner/loser binary between the United States and the Soviet Union. In the third world, there were many paths each country could take; more importantly, most of them are still on the specific path that was shaped and taken during the Cold War

The primary subject of this book is the CIA led mass murder programs designed to eliminate communist and any left leaning populations, but Bevins does spend some attention on the enormous economic pressures the US is able to exert on any government it is trying to undermine. The combination of trade policy, withholding of capital investment and International Monetary Fund (IMF) Neo-Liberal lending can bring any third world economy to its knees without any resort to CIA inspired mass murder programs. Neo-Liberal policies first found their experimental base in the 1972-3 Chili coup when several Chili native Chicago School graduates took charge of Chili’s economy under Pinochet and invited their professor Milt Friedman to advice them. Since that time, Neo-Liberal Chicago School economics have dominated most of the first world approach to the third world and Southern Europe and Ireland.

This book is very personal to this reader. In June 1965, I arrived as a graduate student grantee at the East West Center to work on a masters degree in International Relations with a goal of becoming a State Department diplomat. Chancellor (Ambassador) Howard Jones arrived at the East-West Center a month later.
Under the grant, students from the US and Asia study at the University of Hawaii for one year and then are granted a one year field trip in Asia or America. I passed the foreign service exam in Hawaii and was scheduled for an oral interview in Karachi Pakistan. There were a number of students from Indonesia at the Center and we all socialized so I was somewhat aware of events in Indonesia as they unfolded.

Hotel Indonesia Kempinski built by Sukarno in 1962

When I left Hawaii, I had heard that as many as a half million Indonesians, many of them of Chinese ancestry had been killed. Sometime in late 1966, I arrived in Jakarta for a couple of week visit. I was met by an American from the Embassy who claimed to be there by chance. I am sure he was sent specifically to escort me. He insisted I was required to stay at the Intercontinental Hotel (five star, now Hotel Indonesia Kempinski) and was required to arrange any travel through the official travel agency located in the hotel’s arcade. The nightly room cost alone put a huge dent in my monthly travel stipend. Then I got lucky. The young Indonesian woman at the travel agency, realizing I knew Indonesian students studying in Hawaii arranged a great itinerary; by bus and train to Bandung, then on to Yogyakarta (the old pre-colonial capital). During the train trip to Yogyakarta, I met a young, Dutch trained military officer who was on his way to his wedding. He invited me meet his beautiful fiancee and to the reception, an Indonesian feast. From there I traveled by bus to the coast where I boarded a WWII landing craft to cross to Bali. All hotels were Dutch colonial era with ceiling fans. In Bali, plans were underway for a massive tourist buildup with an enlarged airport and numerous beachfront hotels. Outrigger canoes were arriving from Hawaii and Hawaiians were busily training Balinese for the expected tourists. There were nightly gamelan tourist performances in Denpasar but if I walked away from town guided by the gongs, I could find natural events in the nearby villages. I met an engineer living in a beachfront cottage who was working on the airport expansion. I then flew back to Jakarta where I explored for a few more days. At no point did anyone mention the killings. Bevins says that one of the Bali tourist hotels is called Ku De Ta, which he thinks may be Indonesian humor. It is possible this hotel and others have been built on mass beach front burial grounds. Bali experienced the highest level of killings per capita anywhere in Indonesia.

I met other US diplomats on my travels and quickly concluded that the State Department was not for me. One of my professors in Hawaii was a Bengal Communist who introduced me to several Indian Communist Labor leaders. I met one in Delhi who told me about a labor demonstration scheduled for that day. I got a bicycle rickshaw and dropped by the demonstration on my way to an evening party at the US Embassy. The demonstration was met by armed police who opened fire and killed a number of demonstrators. That evening I asked a reporter from Time Magazine and several diplomats about the demonstration and the killings and no-one had heard anything. A month later, while I was in Calcutta, a Communist labor leader told me about an upcoming general strike. A few days later, Calcutta was completely shut down by a massive, coordinated labor strike. In the 1967 general election the Communist Party won a majority in the state of Kerala. India somehow was spared the “jakarta” mass extermination experience. I later met diplomats and their wives in Katmandu who were all miserable and disappointed with their career paths. I never showed up for my Karachi interview and have never regretted that decision.

John Maynard Keynes vs laissez-faire: a history

Tuesday, August 11th, 2020

The Price of Peace; Money, Democracy, and the Life of John Maynard Keynes, Kachary D. Carter, 2020

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Three Conscientious Objectors in 1915 Bertrand Russell, John Maynard Keynes, Lytton Stratchey

As a freshman at Cambridge University, Keynes was invited to join a secretive club, the Apostles, a sort of graduate seminar and dinner party where one member would present a paper. Keynes represented a new generation of Edwardians, leading a sexual revolution with Lytton Strachey, contrasting with the older Victorians like Bertrand Russell. Stratchey wrote of Keynes to Leonard Woolf in 1905, “He analyses with amazing persistence and brilliance. I never met so active a brain (I believe it’s more active than either (G.E.) Moore’s or Russell’s)…he perpetually frightens me.” Bertrand Russell wrote: “Keynes’s intellect was the sharpest and clearest that I have ever known. When I argued with him, I felt that I took my life in my hands, and I seldom emerged without feeling something of a fool.” An artistic grouping, Bloomsbury was born around 1905 at the house where Virginia (Woolf) and her sister Vanessa lived. Apostles Keynes, Leonard Woolf, Lytton Stratchey, E.M. Forster, Clive Bell and others moved to London. In 1906 Keynes took a job at the India Office where he worked on Indian currency and monetary policy.

In 1914, as WWI started, an obscure genius known to some in government from his India Office days, John Maynard Keynes, was summoned to London by Treasury and the Bank of England. Witnessing banker’s pursuit of their own narrow concerns during a bank run crisis, where Bankers focused on their own short-term pecuniary profit, abandoning all thought of “the honour of our old traditions or future good name”, Keynes concluded that political oversight of the bankers was needed. Keynes conceived a solution which Treasury and Parliament blessed that foreign bills could be redeemed for gold but domestic needs including those of the banks would be met with a new alternative paper currency. The plan worked and the run was stopped.

Keynes was invited to Paris for the WWI treaty of peace negotiations. Disturbed by the Allied demand for massive reparations that were unrealistic , Keynes proposed that Germany be allowed to issue bonds guaranteed against default by the Allied governments. Keynes was not privy to the negotiations drawing new borders and breaking up the Ottoman Empire so doesn’t appear aware of the division of oil reserves among the Allies. When Wilson rejected Keynes “Grand Scheme”, Keynes resigned from the peace negotiations and penned maybe his most influential work in 1919, “The Economic Consequences of the Peace” which Carter describes as:

…provincial, shortsighted, vicious, and in many respects deeply unfair polemic. It is also a masterpiece and very likely the most influential work Keynes ever put his name to—a furious tirade against the autocracy, war, and weak politicians. It is at once a howl of rage directed against the most powerful men in the world and an ominous prophecy of the violence that would again sweep the continent in the years to come.

Keynes wrote:

The resulting international system created at Versailles was extremely fragile and would only function if workers believed in it, and workers would not believe in it unless it worked. Break the collective faith in a better tomorrow, and workers will walk off the job, riot in protest, or worse.

The principle of accumulation based on inequality was a vital part of the pre-war order of Society and of progress as we then understood it. This principle depended on unstable psychological conditions, which it may be impossible to recreate. It was not natural for a population, of whom so few enjoyed the comforts of life, to accumulate so hugely. The war has disclosed the possibility of consumption to all and the vanity of abstinence to many.

Bolshevism in Russia was already known to all as an alternative to La Belle Epoque. All over Europe, but particularly in Germany conditions were ripe for the rise of a strongman. Without jobs, food, a sense of purpose, and confidence in a better tomorrow, Europe was already on the path to another war.

Keynes formalized his political theory of economics with three lectures in 1926 “The General Theory of Employment, Interest and Money“,”The End of Laissez-Faire“, and “A Short View of Russia“. Overlooked in Britain even though Bloomsbury loved them, they formed the core of a unique, practical political theory that the United States would apply on a vast scale during the great depression and WWII.

In 1930, Keynes published “A Treatise on Money” an assault on the ability of central bank interest rates to affect investment. Keynes suggested that the state spend money on public works since domestic investment was the problem. This direct assault on laissez-faire caused Austrian Friedrich von Hayek to pen two part indictment of the book. Milton Friedman later claimed von Hayek encourage a do nothing policy that did harm by recommending that “you just have to let the bottom drop out of the world.” Keynes himself responded to von Hayek; “one of the most frightful muddles I have ever read.”

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Franklin D. Roosevelt in his inaugural address in 1933 said

Primarily this is because the rulers of the exchange of mankind’s goods have failed, through their own stubbornness and their own incompetence, have admitted their failure, and abdicated. Practices of the unscrupulous money changers stand indicted in the court of public opinion, rejected by the hearts and minds of men…They know only the rules of a generation of self-seekers. They have no vision, and when there is no vision the people perish…The money changers have fled from their high seats in the temple of our civilization. We may now restore the temple to the ancient truths. The measure of the restoration lies in the extent to which we apply social values more noble than mere monetary profit.

In his first 100 days FDR created the FDIC, the SEC, the TVA, and the Agricultural Adjustment Administration.
Felix Frankfurter, a friend of Keynes and appointee to the US Supreme Court in 1939, delivered a letter from Keynes to FDR and arranged meetings for Keynes in 1934 with key administration players not totally on board with Keynesian ideas. One player Keynes met was John Kenneth Galbraith who was running the office of price administration. Galbraith described the meeting as the Pope visiting the lowly village priest. Keynes largely found himself preaching to the choir.
FDR met Keynes and thought him politically naive about the President’s relationship with Wall Street. FDR believed a banking industry hostile to his reforms was driving up interest rates on government debt by sitting out Treasury bill auctions. “There is a practical limit to what the Government can borrow– especially because the banks are offering passive resistance in most of the large centers,” Keynes did make progress with Fed Chairman Eccles who understood the need to keep interest rates low to help the government spend its way out of the Depression.

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In 1936 Keynes published his most important work “The General Theory of Employment, Interest and Money“, a work that Carter calls the most important work in economics in 160 years, to be compared with the monuments of Aristotle, Thomas Hobbes, Edmund Burke, and Karl Marx.

It is a theory of democracy and power, of psychology and historical change, a love letter to the power of ideas. The book is dangerous because it demonstrates the necessity of power. It is a liberation book because it re-framed the central problem at the heart of modern economics as the alleviation of inequality, pivoting away from the demands of production and the incentives facing the rich and powerful that had occupied economists for centuries. It is a frustrating book because it is written in novel abstractions, argued in convoluted sentences and dense equations. And it it a work of genius because it proves a simple truth that, once offered, seems obvious: Prosperity is not hard-wired into human beings; it must be orchestrated and sustained by political leadership.

Keynes said of the genius of Sir Issac Newton:

Newton could hold a problem in his mind for hours and days and weeks until it surrendered to him its secret. Then being a supreme mathematical technician he could dress it up, how you will, for purposes of exposition, but it was his intuition which was preeminently extraordinary…The proofs, for what they are worth, were, as I have said, dressed up afterwards–they were not the instrument of discovery.

Explaining his own method in The General Theory Keynes says:

The object of our analysis is, not to provide a machine, or method of blind manipulation, which will furnish an infallible answer, but to provide ourselves with an organized and orderly way of thinking out particular problems…Too large a proportion of recent “mathematical” economics are mere concoctions, as imprecise as the initial assumptions they rest on, which allow the author to lose sight of the complexities and inter-dependencies of the real world in a maze of pretensions and unhelpful symbols.

The term macroeconomics hadn’t even been coined. Keynes not only invented modern economics, he invented the modern economist and placed him at the top of the new intellectual power structure. The book is a collaborative work done by the Cambridge “Circus” an almost cult like group with its own private language. The two most important contributors beyond Keynes were Joan Robinson and Richard Kahn. Carter says Robinson is the most important economist never to have won a Nobel prize in economics. Two of her students Amartya Sen and Joseph Stiglitz were honored with the Nobel prize. In fact she was only named full professor at Cambridge in 1965, thirty years after publication of her most significant work for which she is not credited. Carter likens Joan Robinson to Rosalind Franklin who discovered the double helix of DNA and was never recognized. Joan Robinson’s published contributions to economics continued until her death in 1983. Much of the The General Theory is incomprehensible. The book is difficult and obscure because Keynes wanted it to be. Its sheer ugliness created a small industry of interpreters. Two economists won Nobel prizes for interpreting the work.


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Keyesian economics found its first real world application during the FDR years. For Joan Robinson “The economic theory which was developed in America was a return to pre-Keynesian doctrines that smothered everything important in Keynes.” For Richard Kahn, the re-engineering of The General Theory into mathematics was a Faustian bargain–a fatal turn that would ultimately lead to Keynes being discredited.

In June 1942, Keynes was rewarded for his service with a hereditary peerage. On 7 July his title was gazetted as Baron Keynes, of Tilton, in the County of Sussex.

Maynard’s wife Lydia was a principal ballet dancer with Ballets Russes under Diaghilev and partnered with Nijinsky

Lydia partnered by Vaslav Nijinsky
There is a youtube video of Lydia dancing with George Balanchine in 1929.

Bretton Woods agreement 1944-1972 Lydia was 5’0″ Maynard was 6’7″

In 1944 Keynes attended the Bretton Woods conference in New Hampshire to hammer out a new international economic system. The Mount Washington Hotel overlooked the Ammonoosuc River where Keynes’s wife Lydia bathed nude each morning.
Keynes called for a new Supernational Bank to regulate the global money supply, currency, and trade flows. This international central bank would issue “Supernational Bank money (SBM) to national central banks like the Federal Reserve, the Bank of England, and their other counterparts throughout the world. These national central banks would borrow SBM from the Supernational Bank as a matter of course as they conducted their ordinary monetary policy operations.
The Supernational Bank would allow nations to grapple with domestic problems without resorting to deflation. Nations would never have to worry about running out of money in an emergency, because the Supernational Bank would always be there to provide money on reasonable terms. No government would have to intentionally create unemployment to resolve a currency or trade problem. Under the old system, when loans became unavailable for any reason–war, banking instability, bad monetary policy, a stock market bubble, or a simple disinterest in foreign lending–the only way a country running a trade deficit to fix its situation would be to force down the price of its goods in foreign markets. Ultimately it would resort to deflation and mass unemployment to do so. Keynes argued the surplus nations were not injured by countries that ran deficits. While the deficit country ran up large financial debts, the surplus country enjoyed fat export trade that employed its workers and raised the standard of living.
What the world also needed was an international authority that could punish countries for running a persistent trade deficit or a persistent trade surplus. Keynes proposed an International Clearing Union (ICU). Each participating central bank would open an account with the ICU. International trade payments would be made through those accounts, using a new international currency called Bancor that the ICU would create at will. When a country ran a persistent deficit or a persistent surplus, the ICU would require it to revalue its currency to bring the system back toward balance. The revaluations would be up or down to a limit of 5%.

Unfortunately for Keynes’s vision, Harry Dexter White, the US representative of the FDR administration arrived at Bretton Woods with a plan already formulated and the US had the clout to get its way. Keynes’s plan had been rejected before the conference even began. Instead all nations that joined the Bretton Woods project would agree to make their currencies convertible into dollars at a fixed exchange rate. The dollar only would be convertible into gold at a price later fixed at $35 per ounce. An International Monetary Fund (IMF) would be established to provide emergency loans in a crisis. A World Bank would be created to assist with post war reconstruction.

Instead of an international regulatory apparatus, Keynes got a gold standard with a bailout fund. White spend much of his time at the conference trying to secure USSR participation. He failed and the USSR never ratified the Bretton Woods agreement. Britain was broke and Keynes could do nothing about the outcome of the conference. Keynes died on Easter Sunday 1946.

The backlash against FDR’s New Deal and War powers was led by the bankers, wall street, and the corporate American elite. Undermining Keynesian economics combined the McCarthy era Communist scare accusations, the rise of the Ayn Rand inspired libertarian movement emphasizing unfettered individual freedom (freedom from government interference), and the resurgence of laissez-faire (market fundamentalism) economics centered at the Chicago School with von Mises and von Hayek and the London School of Economics.
Chicago School graduate Paul Samuelson wrote the textbook Economics: An Introductory Analysis, first published in 1948 that became the principal introduction to economics for generations of American students including this reader. While incorporating some Keynesian ideas, Samuelson was careful to couch these ideas in the long tradition of market fundamental economics. Some labeled Samuelson a neo-Keynesian .

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In 1958 Galbraith published his sensational The Affluent Society where the economics of scarcity had been replaced by an economy of abundance able to meet the needs of everyone with advertising used to encourage further consumption. Galbraith noted that great inequality still existed in America. The book had an immediate and wide spread impact on economic discussion which Carter calls similar to the impact of Thomas Piketty’s Capital in the Twenty-First Century, a history of inequality of income and wealth in France, Britain, and America. Galbraith was perhaps the best known member of the JFK brain trust. Expecting a cabinet appointment, Galbraith was instead named ambassador to India, then under Nehru and the Congress party. Galbraith was a vocal opponent of US involvement in Vietnam so likely JFK wanted to isolate him to quiet his opposition.

In 1972, Nixon shocked the world announcing the end of the post war Bretton Wood system. The gold standard was abandoned and massive monetary and fiscal stimulus programs were launched with low interest rates and business tax cuts. A 10% import tariff would be imposed and price controls put into place. Carter doesn’t discuss it but the US had moved from a trade creditor nation to a trade deficit nation by the late 1960’s. Strongest of the Creditors were Germany and Japan. Sometime about 1971, a young London School of Economics educated Paul Volcker penned a three page secret memo to his boss Henry Kissinger suggesting that foreign nations should be encouraged to have the United States recycle their surpluses through Wall Street. Yanis Varoufakis claims to have seen this secret memo, but the reality is that approximately 70% of all foreign trade surpluses, including China, are now recycled by the United States. Thus a new industry, financialization, which today dominates the US economy was created.

Volcker was named Fed Chairman by Jimmy Carter in 1979. He promptly raised interest rates to an unprecedented peak of 20%. Volcker had turned the Federal Reserve into the primary instrument of US economic policy to fight inflation. Further creative uses of the Fed would be used in the 2008 banking crisis.

The final nails in the coffin of New Deal economic mechanisms occurred under Bill Clinton taking the advise of Bob Rubin and Larry Summers. The Glass-Steagall act was repealed allowed the merger of banks with wall street to create too big to manage financial monsters. Then Clinton declared that there was no need to regulate Wall Street created derivatives that were at the heart of the 20008 sub prime mortgage crisis. Carter points out that the credit default swap (CDS) was the most explosive of these new derivatives. The CDS was a form of insurance whereby a default of an insured derivative would pay the holder. There was no requirement that the entity taking out the insurance actually owned the derivative insured.

The Obama administration was economically scammed by Tim Geithner and Larry Summers. The big banks were bailed out, Glass-Steagall was not reinstated, no banker was prosecuted for their illegal activities. And, according to Carter, 9.3 million lost their homes with government doing virtually nothing to preserve home ownership. A $75 billion plan designed to save 4 million homes never happened. The money was allocated but never spent. The family loss of homes contributed greatly to the increase in unemployment during this time.
Democratic Representative Dennis Cardoza of California in 2011 exclaimed:

For the life of me, I can’t figure out why a community organizer who says he cares about families, who says he cares about communities, has turned his back on one of the biggest problems in America.

Keynes believed that an enlightened management of the economy to produce widespread prosperity and job security would alleviate the problems of unrest that lead to revolutions either communist or fascist. Today the world has the highest level of inequality ever measured.

In 2008, Joseph Stiglitz calculated that if the $48 trillion global economy were simply divided among every one of its inhabitants, a family of four world receive $28,000, high enough to end poverty in every country. Carter calculated that the 2018 economy of $85.8 trillion economy and 7.5 billion people would yield an income of $45,000 for each family of four. “The economic problem of humanity is no longer a problem of production but of distribution–inequality.

Keynes was a conscientious objector dedicated to the elimination of the causes of war. Yet the history of the US after WWII was one of almost continuous real armed conflict and a continuous succession of virtual wars: the cold war til 1992, the war on drugs, and the war on terror after 9/11, The later two were not wars against state actors but against amorphous largely hidden force scattered globally. State actors found themselves invariably drawn into all these virtual wars often with terrible consequences. In real shooting wars with armies, Korea was fought to a draw; Vietnam was lost at a cost of more than 1 million lives; Afghanistan and Iraq never end; Syria and Libya appear to be without resolution. In foreign policy, the US, starting in 1953 and continuing to this day, assist in the overthrow of governments in country after country. The US today is the world’s greatest threat to stability and peace.

As Piketty documents, we are living in a period of unprecedented inequality of income and wealth. Carter concludes, the US government has remained, with the exception of Bill Clinton, stubbornly Keynesian but Keynesian principals are applied only during ever escalating economic crises. Applying Keynesian solutions in government policy sporadically and blind to people’s suffering serves only to rescue the oligarchs from their own incompetence and crimes. This malignant phenomenon has been named “Corporate Socialism“. The failures of the 2008 banking crisis highlighted the bankruptcy of Market Fundamentalist views of the world. Without extensive, enlightened, humane state management, unfettered capitalism is capable of generating enormous instability and suffering that only the state can correct. As an optimist foresees, the global economy, properly managed by the state, is capable of reducing income and wealth inequality and improve the lives and quality of life of everyone on earth, and eliminate war.

A bit of trivia; Keynes was 6’7″, Galbraith was 6’9″ and Volcker was 6’7″.

Optimist anticipates participatory socialism and social federalism

Tuesday, June 23rd, 2020

Capital and Ideology, Thomas Piketty, 2020
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A continuation of Piketty’s earlier 2014 work extending his previous analysis starting from 1500 to the present and adding France, India, China, Germany, Spain. the Nordic countries, Russia and Eastern Europe, the Petro-Monarchies, etc.
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Today, the postcommunist societies of Russia, China, and to a certain extent Eastern Europe…have become hypercapitalism’s staunchest allies. This is a direct consequence of the disaster of Socialism and Marxism and the consequence of all egalitarian internationalist ambitions. So great was the communist disaster that it overshadowed even the damage done by the ideologies of slavery, colonialism, and racialism and obscured the ties between those ideologies and the ideology of ownership and hypercapitalism–no mean feat.

Furthermore, social democrats never really reconsidered the issue of just ownership after the collapse of communism. The postwar social-democratic compromise was built in haste, and issues such as progressive taxation, temporary ownership, circulation of ownership (for example, by means of a universal capital grant financed by a progressive tax on property and inheritances), power sharing in firms (via co-management or self management), democratic budgeting and public ownership were never explored as fully or systematically as they might have been.

It (modern property law) originated…with Christian doctrine, which sought over many centuries to secure the property rights of the Church as both a religious and a property-owning organization.

…the concentration of private property, which was already extremely high in 1800-1810, only slightly lower than on the eve of the (French) Revolution, steadily increased throughout the nineteenth century and up to the eve of World War I…The case of Paris is especially noteworthy; there, the wealthiest 1 percent owned nearly 50 percent of all property in 1800-1810 and more than 65 percent on the eve of World War I.

As for achieving real equality, however, the great promise of the (French) Revolution went unfulfilled…And when a progressive income tax was finally adoption on July 15, 1914, it was not to finance schools or public services but to pay for war with Germany.

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When slavery was abolished in the 19th Century, the discussion in slave owning nations concerned compensation for the owner’s of slaves, never about compensation for the slaves.

It is easy to see that in a society where slaves represented virtually the entire work force, their market value could reach astronomical levels, potentially as high as seven or eight years of annual production…Recall that France saddled Haiti with a debt equivalent to three years of Haitian nation income in 1825 yet remained convinced that it was making sacrifices compared to what slaves in Saint-Dominique actually yielded in profit.

In 1860, the market value of (US) slaves (4 million in number) exceeded 250 percent of the annual income of the southern states and came close to 100 percent of the annual income of all the states. If compensation had been paid, it would have been saddled with interest and principal payments for decades.

The secession of the southern states and the resulting Civil War ended these discussions and US slave owners were never compensated for their loss of property as a result of the war and the emancipation proclamation.

Piketty follows the transformation, starting around 1500, of society from Ternary (Clergy, Nobility, Third estate–the workers) to Ownership societies with a centralized state. This transformation was accompanied by the rapid development of arms, warships, and navigation, needed to support the endless wars among the new nation states. This technological development of war tools enabled the co development of slavery and colonialism. Even the Ottoman and Chinese Empires were no match for the modern war machine. Gunboat diplomacy reigned supreme into the twentieth century. An extreme example are the two opium wars of Britain against China in the mid nineteenth century. Not only did China have to allow the sale of opium in China, but China was saddled with massive reparations for the costs of the wars.

Japanese Depiction of Perry’s black ships
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Japan reacted to the American (Admiral Perry), French and British visit by warship in the mid nineteenth century with the Meiji reformation, whereby Japan acquired and built its own advanced arms and warships and became a colonial power in its own right.

In the period 1880-1914, the United Kingdom and France earned so much from their investments in the rest of the world (roughly 5 percent additional national income for France and more than 8 percent for the United Kingdom) that they could allow themselves to run persistent structural trade deficits (an average of 1-2 percent of national income for both countries) while continuing to accumulate claims on the rest of the world at an accelerated pace. In other words, the rest of the world labored to increase consumption and standard of living of the colonial powers, even as it became increasingly indebted to those powers.

On Colonial state tax revenues in the eighteenth century:

…both countries (England and France) were taking in 600-900 tons of silver in 1700, 800-1100 tons in the 1750’s, and 1600-1900 tons in the 1780’s, leaving all other European powers far behind. Importantly, Ottoman tax receipts remained virtually unchanged from 1500 to 1780; barely 150-200 tons. After 1750, it was not only France and England that had a far greater tax capacity than the Ottoman Empire; so did Austria, Prussia, Spain, and Holland.

…the development of the modern state involved two great leaps forward. The first unfolded between 1500 and 1800 in the leading states of Europe, which were able to increase their tax revenues from barely 1-2 percent of national income to about 6-8 percent. This process was accompanied by the development of ownership societies at home and colonial empires abroad. The second leap forward came in the period 1930-1980, when the rich countries as a group went from tax revenues of 8-10 percent of national income on the eve of World War I to revenues of 30-50 percent of national income in the 1980s. This transformation was accompanied by a broad process of economic development and historic improvement in living conditions and gave rise to various forms of social-democratic society…It proved difficult to extend the second leap forward to poorer countries in the late twentieth and early twenty-first centuries…

If we include all military conflicts across the continent in each period, we find that European countries were at war 95 percent in the sixteenth centry, 94 percent in the seventeenth century, and still 78 percent in the eighteenth century (compared to 40 percent in the nineteenth century and 54 percent in the twentieth century). The period 1500-1800 was one of incessant rivalry among Europe’s military powers, and this is what fueled the development of unprecedented fiscal capacity as well as numerous technological innovations, particularly in the areas of artillery and warships.

By the end of the American Revolutionary and Napoleonic Wars (1792-1815), British public debt had soared to more than 200 percent of national income, the debt was so high that one-third of the taxes paid by British taxpayers between 1815 and 1914 (mainly by people of middle and low income) was devoted to repayment of the debt and interest (profiting the wealthy who had lent the government money to pay for the wars)…It also might have been preferable to tax the wealthy rather than allow them to become still wealthier by buying government bonds…with political power in the hands of the wealthy, the choice was made to spend money on the military and to finance it with public debt, and this helped to secure European domination over the rest of the world.

…these protectionist and mercantilist measures, imposed on the the rest of the world at gunpoint, played a significant role in achieving British and European industrial domination. According to available estimates, the Chinese and Indian share of global manufacturing output, which was still 53 percent in 1800, had fallen to 5 percent by 1900.

The colonial ideology that seeks to liberate and civilize nations in spite of themselves generally leads to disaster, no matter what the color of the colonizer’s skin (Japan).

The success of Japan’s proprietarian and industrial transition shows that the mechanisms at work have nothing whatsoever to do with Christian culture or Eueopean civilization…the Japanese experiences shows that proactive policies, especially regarding public infrastructure and investments in education, can overcome very strong and longstanding status inequalities in a matter of decades…we will see that the reduction of social inequality in Japan was further assisted by an ambitious program of agrarian reform in the period 1945-1950 as well as by highly progressive taxation of top incomes and large estates.

The fall of ownership society in the period 1914-1945 can be analyzed as a consequence of three challenges; the challenge of inequality with European ownership societies, which led to the emergence first of counterdiscourses and then of communist and social-democratic counter-regimes in the late nineteenth and first half of the twentieth centuries; the challenge of inequality among countries, which led to critiques of the colonial order and the rise of increasingly powerful independence movements in the same period; and finally a nationalist and identitarian challenge, which heightened competition among the European powers and eventually led to their self-destruction through war and genocide in the period 1914-1945.

The period from 1726-1914 saw low inflation and complete stability in the value of the pound sterling and the French gold franc. World War I put an end to monetary stability and the suspension of convertibility of their currencies into silver or gold.

…from 1914 to 1950 inflation averaged 13 percent a year in France (equivalent to a hundred fold increase in the price level) and 17 percent in Germany (a three hundredfold price increase).

…ownership societies that seemed so prosperous and solid on the eve of World War I collapsed between 1914-and 1945. The collapse was so complete that nominally capitalist countries actually turned into social democracies between 1950 and 1980 through a mixture of policies including nationalizations, public education, health and pension reforms, and progressive taxation of the highest incomes and largest fortunes. Despite undeniable success, however, these social-democratic societies began to run into trouble in the 1980’s. Specifically, they proved unable to cope with rampant inequality that began to develop more of less everywhere around that time.

Why did social democratic societies fail after 1980?

Ronald Reagan (R) and Margaret Thatcher wave after their arrival in Camp David, 22 december 1984, before their meeting. (Photo credit should read ARCHIVES UPI/AFP/Getty Images)

In the first place, attempts to institute new forms of power sharing and social ownership of firms remained confined to a small number of countries (especially German and Sweden). This avenue of reform was never explored fully as it might have been, even though it offered one of the most promising responses to the challenge of transcending private property and capitalism. Second, social democracy did not have a good answer to one pressing question; how to provide equal access to education and knowledge, particularly higher education. Finally, we will look at social-democratic thinking about taxation, especially progressive taxation of wealth. Social democracy did not succeed in building new transnational federal forms of shared sovereignty or social and fiscal justice. Today’s globalized economy is one in which regulation in all its forms has been undermined by free trade and free circulation of capital, instituted by agreements to which social democrats consented or even instigated. In any case, they had no alternative to offer. The resulting heightened international competition has gravely endangered the social contract (and consent to taxation) on which the social-democratic states of the twentieth century were built.

The French and British never embraced corporate power sharing and social ownership preferring nationalization of private companies:

Then in 1986-1988 the Gaullist and liberal parties returned to power in a new context of privatization and deregulation under Thatcher and Reagan, while at the the same time the Communist bloc was slowly crumbling. This led to the privatization of most of the companies that had been nationalized between 1945-1982.

…from 1917 to 1991, new thinking about private property was blocked by the bipolar opposition of Soviet Communism and American capitalism. One was either for unlimited state ownership or for full private shareholder ownership….The fall of the Soviet Union inaugurated a new period of unlimited faith in private property from which we have not yet completely emerged but which is beginning to show serious signs of exhaustion.

On the massive inequality that developed in the United States from about 1980:

The bottom 50 percent of the income distribution claimed about 20 percent of national income from 1960 to 1980, but that share has been divided in half, falling to just 12 percent in 2010-2015. The top centile’s share has moved in the opposite direction, from barely 11 percent to more than 20 percent…the share of total income going to the bottom 50 percent in Europe remains significantly larger than the share going to the top centile.

To sum up: in the light of the history of the past two centuries, educational equality played a more important sole in economic development than the sacrilization of inequality, property, and stability. More generally, history demonstrated the recurrent risk of an “inequality trap” which many societies have faced throughout the ages. Elite discourse tends to overvalue stability, and especially the perpetuation of existing property rights, whereas development often requires a redefinition of property relations and opening up of opportunities to new groups.

On the failures of progressive taxation:

First, parties of the left failed to foster the kind of international cooperation needed to protect and extend progressive taxation; indeed at times they contributed to the fiscal competition that has proved devastating to the very idea of fiscal justice. Second, thinking about just taxation too often neglected the idea of a progressive wealth tax, despite its importance for any ambitious attempt to transcend private capitalism, particularly if used to finance a universal capital endowment and promote greater circulation of wealth.

…we now know that the top centile’s share of total wealth can fall from 70 percent to 20 percent without impeding growth (quite the contrary, as Western European experience in the twentieth century shows). We know from experience with Germanic and Nordic versions of co-management that employee and shareholder representatives can each control half the voting rights in a firm and that such power sharing can improve overall economic performance.

On tax havens:

…this minimum estimate implies that the financial assets tucked away in tax havens are roughly equal to the total amount of all financial assets legal owned by Russian households inside Russia (roughly one year of national income). In other words, off shore property has become at least as important in macroeconomic terms as legal financial property…In a sense, illegality has become the norm.

…by exploiting data made public by the Bank for International Settlements (BIS) and the Swiss National Bank (SNB) on countries where assets are held, one can estimate each country’s approximate share of offshore assets held in tax havens relative to the total (lawful and unlawful) assets held by residents of each country. The results are as follows; “only” 4 percent for the United States, 10 percent for Europe, 22 percent for Latin America, 30 percent for Africa, 50 percent for Russia, and 57 percent for the petroleum monarchies.

On China:

China thus appears to have settled on a mixed-economy property structure: the country is no longer communist since nearly 70 percent of all property is now private, but it is not completely capitalist either because public property still accounts for a little more than 30 percent of the total–a minority share but still substantial. Because the Chinese government, led by the CCP, owns a third of all there is to own in the country, its scope for economic intervention is large: it can decide where to invest, create jobs, and launch regional development programs.

If we compare China to the other Asian giant, India, it is clear that since the early 1980s China has been both more efficient in terms of growth and more egualitarian in terms of income distribution (or, rather, less inegalitarian, in the sense that concentration of income has increased less dramatically than in India)…one reason for this difference is that China has been able to invest more in public infrastructure, education, and health care. China achieved a much higher level of tax revenue than India, where basic health-care and educational services remain notoriously underfinanced. China has nearly matched Western levels of taxation, taking in roughly 30 percent of national income in taxes (and roughly 40 percent if one includes profits from public firms and sale of public lands).

On the dangers posed by the central banks:

After the bankruptcy of Lehman Brothers in September 2008 and the ensuing financial panic, things changed completely…The world’s major central banks devised increasingly complex money-creation schemes collectively described by the enigmatic term “quantitative easing” (QE). In concrete terms, QE involves lending to the banking sectors for longer and longer periods (three months, six months, or even a year rather than a few days or weeks) and buying bonds issued by private firms and governments with even longer duration (of several years) and in much greater quantities than before. The Federal Reserve was the first to react In September 2008 its balance sheet increased from the equivalent of 5 percent of GDP to 15 percent; in other words the Fed created money equivalent to 10 percent of US GDP in a few weeks time. This proactive stance would continue in subsequent years; the Fed’s balance sheet had risen to 25 percent of GDP by the end of 2014…In Europe the reaction was slower. The ECB and other European authorities took longer to understand that massive intervention by the central bank was the only way to stabilize financial markets and reduce the “spread” between the interest rates of the various European countries. Since then, the ECB purchases of public and private bonds have accelerated, however, and the ECB’s balance sheet stood at 40 percent of Eurozone GDP at the end of 2018…By avoiding cascading bank failures and acting as “lender of last resort”, the Fed and ECB did not repeat the errors that the central banks committed in the interwar years, when orthodox “liquidationist” thinking (based on the idea that bad banks must be allowed to fail so that the economy can restart) helped push the world over the edge of the the abyss…What makes central banks so powerful is their ability to act extremely rapidly.

Piketty does not discuss the New Deal US Federal Deposit Insurance Corporation FDIC program which allows the federal government to instantly take over failing banks, reorganize them with new management, and reopen them after a single weekend, assuring depositors that their savings are insured and immediately available. Obama and his treasury secretary Tim Geithner refused to allow the Shiela Bair led FDIC to break up and reorganize the failing banks during the 2008 crisis. This would have been the available and desired solution to the failures.

…the danger is that these monetary policies, by avoiding the worst gave the impression that no broader structural change in social, fiscal, or economic policy was necessary. Nevertheless, the fact is that central banks are not equipped to solve all the world’s problems or to serve as the ultimate regulator of the capitalist system…To combat excessive financial deregulation, rising inequality, and climate change, other public institutions are necessary; laws, taxes, and treaties drafted by parliaments relying on collective deliberation and democratic procedures.

In the abstract, there is nothing to stop central banks from enlarging their balance sheets by a factor of ten or even more…From a strickly technical standpoint, the Fed or ECB could create dollars or euros worth 600 percent of GDP and attempt to buy all the private wealth of the United States or Western Europe…central banks and their boards of governors are no better equipped to administer all of a country’s property than were the Soviet Union’s central planners.

…the Bank of Japan and Swiss National Bank both have balance sheets in excess of 100 percent of GDP…It is nevertheless impossible to rule out that similar things will someday happen to the Eurozone or the United States. Financial globalization has assumed such proportions that it may lead those responsible for setting monetary policy step by step toward decisions that would have been unthinkable only a few years before.

Many citizens have quite understandably begun to ask why such sums were created to bail out financial institutions, with little apparent effect in jump-starting the European economy, and why it shouldn’t be possible to mobilize similar resource to help struggling workers, develop public infrastructure, or finance large investments in renewable sources of energy. Indeed it would be by no means absurd for European governments to borrow at current low interest rates to finance useful investments, on two conditions; first, such investments should be decided democratically, in parliament with open debate, and not by a Governing Council meeting behind closed doors; and second, it would be dangerous to lend credence to the notion that every problem can be resolved by printing money and taking on debt. The principal instrument for mobilizing resources to undertake common political projects was and remains taxation, democratically decided and levied on the base of each taxpayer’s economic resources and ability to pay, in total transparency.

And yet the Democratic presidents who followed Reagan, Bill Clinton (1992-2000) and Barack Obama (2008-2016) never made any real attempt to revise the narrative or reverse the policies of the 1980s. In particular, in regard to the reduction of the progressive income tax (whose top marginal rate fell to an average of 39 percent from 1980 to 2018, half its level in the period 1932-1980) and the de-indexing of the federal minimum wage (which led to a clear loss of purchasing power since 1980), the Clinton and Obama administrations basically validated and perpetuated the basic thrust of policy under Reagan…But it may also be that acceptance of the new fiscal and social agenda was partly due to the transformation of the Democratic electorate and to a political and strategic choice to rely more heavily on the party’s new and highly educated supporters, who may have found the turn toward less redistributive policies personally advantageous.

In particular, higher-income voters voted more heavily for Tony Blair’s New Labour in the period 1997-2005 than they had voted for Labour previously. That may seem logical given that New Labour also attracted more and more votes among college-educated people and its fiscal policies were relatively favorable to high earners. Just as the Clinton (1992-2000) and Obama (2008-2016) administrations had validated and perpetuated the Reagan reforms of the 1980s, New Labour governments in the period 1997-2010 largely validated and perpetuated the fiscal reforms of the Thatcher era.

I have tried to highlight the significant dangers posed by the rise of socioeconomic inequality since 1980. In a period marked by internationalization of trade and rapid expansion of higher education, social-democratic parties failed to adapt quickly enough, and the left-right cleavage that had made possible the mid-twentieth-century reduction of inequality gradually fell apart. The conservative revolution of the 1980s, the collapse of Soviet communism, and the development of neo-proprietarian ideology vastly increased the concentration of income and wealth in the first two decades of the twenty first century. For want of a constructive egalitarian and universal political outlet, these tensions have fostered the kinds of nationalist identity cleavages that we see today in practically every part of the world…When people are told that there is no credible alternative to the socioeconomic organization and class inequality that exists today, it is not surprising that they invest their hopes in defending their borders and identities instead.

In the broadest terms, the tax system of the just society would rest on three principal progressive taxes: a progressive annual tax on property, a progressive tax on inheritances, and a progressive tax on income. As indicated here, the annual property tax and the inheritance tax would together yield about 5 percent of national income, all of which would be used to finance capital endowments. The progressive income tax, would yield about 45 percent of national income, which would be used to finance all other public expenditures, including the basic income and, above all, the welfare state (which would cover health, education, pensions, and so on).

The model of participatory socialism proposed here rests on two key pillars; first, social ownership and shared voting rights in firms, and second, temporary ownership and circulation of capital. These are the essential tools for transcending the current system of private ownership. By combining them, we can achieve a system of ownership that has little in common with today’s private capitalism; indeed it amounts to a a genuine transcendence of capitalism.

If every individual is to have a chance of finding decently remunerated employment, we must put an end to the hypocritical practice of investing more in elitist educational programs and institutions than in institutions that cater to the disadvantaged. The labor code and, more generally the entire legal system need to be overhauled. New systems of wage bargaining, a higher minimum wage, a fairer wage scale, and sharing of voting rights within firms between workers and shareholders can all contribute to the establishment of a just wage, a more equal distribution of economic power, and a deeper involvement of workers in shaping the strategy of their employers.

The central goal of democratic equality vouchers is to promote participatory and egalitarian democracy. Currently, the prevalence of private (political) financing significantly biases the political process. This is particularly true of the United States where campaign finance laws (always inadequate) have been set aside by recent decisions of the Supreme Court. But it is also true in emerging democracies such as India and Brazil as well as in Europe, where current laws are equally inadequate and in some cases totally scandalous.

The redefinition of the global legal framework will require abandonment of some existing treaties, most notably those concerning the free circulation of capital that came into effect in the 1980s-1990s because these stand in the way of meeting the above mentioned goals. These treaties will need to be replaced by new rules based on the principles of financial transparency, fiscal cooperation, and transnational democracy.

Finally it should be noted that this book was written before the start of the global covid19 pandemic and the global recession/depression. Undoubtedly much is about to change socially and politically in response.

Securitized Mortgage Meltdown; the Homeowner Victim’s Perspective

Friday, June 5th, 2020

Chain of Title; How Three Ordinary Americans Uncovered Wall Street’s Great Foreclosure Fraud, David Dayen, 2016

Amid the suffering of the 1930’s, communities banded together to fight foreclosures…Sustained action led to several foreclosure moratorium throughout the Midwest…To stop foreclosures, the Home Owner’s Loan Corporation (HOLC) bought defaulted mortgages from financial institutions at a discount and sold them back to homeowners. Beginning in 1933, HOLC acquire one million mortgages–one out of five in the country at that time. Eighty percent of HOLC clients saved their homes when they might have lost them…HOLC gave borrowers a twenty year mortgage with a fixed interest rate allowing them to gradually pay off the principal over the life of the loan…

Thus the New Deal gave birth to the modern mortgage industry.

No such governmental efforts were made during the subprime mortgage crisis of 2008. While campaigning, Obama favored cramdowns, where judges in bankruptcy can modify the terms of the mortgage, but Obama’s economic team opposed cramdowns and 10 senate Democrats voted against its use. HAMP, Obama’s loan modification program appealed to the banks primarily for the additional fees HAMP might generate. In this book, banks usually accepted HAMP applications at the same time they moved forward with foreclosure. Treasury claims (with no evidence) that 5 million loans were modified by HAMP (and other programs). This book estimates that 6 million homes were lost to foreclosure. A later book, Homewreckers puts the number of homes lost to foreclosure at 10 million. Homewreckers presents the macro view as millions of homes were sold by the banks with Obama government assistance to vulture funds. Most of these home remain off the market, empty, without repairs.

Lisa and Michael Researching fraudulent documents

This book features three Floridian victims of the great foreclosure banking fraud; Lisa Epstein, a nurse, Michael Redman, selling cars on the internet, and Lynn Szymoniak, a lawyer. They each discovered that their foreclosure cases were filled with fraudulent documents showing the wrong dates, the wrong plaintiffs, wrong amounts owed, wrong fees. They quickly uncovered a whole industry created to support mortgage securitization and its array of derivatives moving so fast that producing legally required documents would only be done after the fact, such as a need to foreclose on a single mortgage. Original documentation was usually destroyed by the originators. The Mortgage Electronic Registration System (MERS) was substituted for keeping track of securitized loans and they were never up to the task. County Recorders around the country are the keepers of the official legal filings for all mortgage documents and the mortgage industry went into overdrive to try to file postdated assignments, etc. regarding particular mortgages. The resulting chaos of documents creates broken chain of titles for millions of properties, meaning that no title company can insure the title and the property cannot be sold or transferred. There is no way to guarantee that a title or note claimant will not emerge in the future.

The three victims discovered the widespread practice of robo-signing, where unqualified people were signing massive numbers of documents (thousands a day) without examination and these signatures were often notarized at different times and locations and sometimes with expired on not yet valid notary licenses. A single person might sign as VP for many different banks and institutions. Some signers were dead or in prison at the time of signing.

One service company DocX created after the fact documents for banks. Lynn uncovered a document filed in Florida with BOGUS ASSIGNEE whose address is xxxxxxx. Whether intended as a joke or someone failed to replace the name is unknown but BOGUS ASSIGNEE documents started showing up in other states in official public records.

Michael received an anonymous document:

DocX printed a catalog for foreclosure mills and mortgage servicers , with an online order form called GetNet for missing documents. Curing a defective mortgage would cost you $12.95. Lost note affidavits and allonges were also $12.95. Creating a “missing intervening assignment?” $35.00. “Re-creating the entire collateral file”–that means the note, mortgage, securitization agreement, everything? It’s yours for the low,low price of $95.00.

The documents needed were often produced in foreign countries, some even in Panama.

Lynn Szymoniak

From 2009-2011 documenting the massive bank fraud, creating a grass roots movement with blogs, and chat rooms, in addition to fighting their own foreclosure cases became a full time occupation for all three featured activists. The robo-signing for a time got some national attention. In 2011, CBS’s 60 minutes came to Lynn’s house to film a segment. On April 3,2011 60 minutes aired two segments; one the interview with Lynn and a second on children of foreclosed homes living in Orlando vans and motels. 60 minutes received a award for the story. For a brief time some banks called a moratorium on foreclosure activity. The three believed that criminal indictments were imminent. In the Obama administration with Eric Holder as AG, none of this would happen on a national level.

Michael searched Illinois public records and found the Obama satisfactions of mortgage on their condo signed in 2005 by Chase robo-signer Marshe Caine. Michael posted this on his blog and hits soured after a Dutch blog linked to it. The next day Michael found a second robo-signed Obama document. Michael wrote on his blog; “Feel free to call or email me to discuss this further, Mr. President.” Three weeks later Bank of America resumed foreclosures.

On Feb 9, 2012, state and federal regulators announced the National Mortgage Settlement with the five largest mortgage servicers: Bank of America, JP Morgan Chase, Citigroup, Wells Fargo, and GMAC. Victims of the fraud would receive $2,000. Noone at the bank’s personnel would be fired or go to jail. The only silver lining; Lynn was awarded $18 million for her whistle blower case. After expenses and legal fees, she netted $5.5 million. Foreclosures would move forward at even more accelerated rates with Florida’s “rocket-docket” executing summary decisions in just 20 seconds per case. Public records may never be free of all the fraudulent Recorded documents.

Crooked banks rely on isolation and shame. The Isolation renders the prospect of individual homeowners fighting big banks impossible; the shame makes no level of misconduct from Wall Street as critical as missing a mortgage payment. The foreclosure fighters created community spaces to disarm isolation and shame, giving struggling homeowners a voice and a chance. Without the foreclosure fraud movement there is no Occupy Wall Street; there is no Elizabeth Warren wind of the Democratic Party; this is no student debt movement, or low-wage worker movement, or movement to transfer money to credit unions and community banks. Lisa and Michael and Lynn, and all the bloggers and lawyers and activists who put their heart into this issue, raised public consciousness so that mega-banks have lost just a hint of their aura of invincibility.

For more on Obama’s administration see Scamming the President.

Where Did all the Houses Go After the Financial Crisis of 2007-2008?

Tuesday, November 19th, 2019

Homewreckers; How a Gang of Wall Street Kingpins, Hedge Fund Magnates, Crooked Banks, and Vulture Capitalists Suckered Millions Out of Their Homes and Demolished the American Dream, Aaron Glantz, 2019

Steve Mnuchin, Poster Child of the Homewreckers

10 million Americans lost their homes as a result of the Financial Crisis of 2007-2008. By 2010 more than 10% of Americans were unemployed. The Financial Crisis left 45 more million Americans below the poverty line. This book focuses on a handful of predators whose actions would not have been possible without the full cooperation and assistance of the Federal government and the Obama administration. Most of those houses became rentals owned by a handful of huge LLC limited partnerships. The new owners of all these houses are holding them waiting for real estate prices to recover sufficiently to satisfy their greedy requirements to profit from a disaster. These houses are not available to individual home buyers which is artificially driving the prices of homes higher. Charts (not shown in this book) illustrate the changes.


The financial crisis of 2007-2008 was the direct result of a Federal government failure of regulation of the banking industry and the confusion of FDIC banking with Wall Street style speculation. Three critical changes were required to assure it didn’t happen again: 1) Reestablish the Glass-Steagall Act to again separate FDIC regulated banking from Wall Street Speculation. This act was passed in 1933 and repealed in 1999 under Clinton. 2) Severely Regulate or outlaw financial derivatives, created by the Commodity Futures Modernization Act of 2000 signed into law by Clinton. 3) Break up the big banks and separate their FDIC insured portions from their Wall Street operations. Since all banks were insolvent by 2008, the FDIC had full authority to take over all banks, remove all management, and do whatever was necessary to restore sound banking practice. See also Sheila Bair’s book. The Obama administration did none of these things. These three changes were necessary and possible but re regulation would have required even more changes before banking could return to its rightful boring self. The blame for what happened to those 10 million American families who lost their homes couldn’t be clearer. Clinton broke banking and Obama didn’t fix it even though he could have. Now this book;

Through all of this, the administration of Barack Obama, like George W. Bush’s before him, did very little to stem the tide of foreclosures. …Congress passed a massive bank bailout that did little to help individual borrowers. The terms of the deals the federal government brokered afterward, like the sale of IndyMac to Steve Mnuchin’s group of hedge fund managers, encouraged foreclosures.
Then, as foreclosures spiraled out of control and the number of vacant and foreclosed homes mounted, the federal government did almost nothing to prevent communities from collapsing entirely…The Neighborhood Stabilization Program, extended grants to hard-hit communities to provide “emergency assistance to stabilize communities with high rates of abandoned and foreclosed homes.” …A typical NSP grant went to Riverside, California, where fourteen thousand homes were lost to foreclosure… The city…received just $6.5 million–barely enough to buy fifty homes (not even 1 percent of Riverside’s foreclosures).

The Barracks

The Depression era HOLC, by contrast, acquired nearly two hundred thousand properties through foreclosure. 90 percent of those home were sold to families. The Obama Federal Housing Finance Agency, which oversees Fannie Mae and Freddie Mac, simply bundled foreclosed houses into blocks sized between 500 and 10,000 homes at a time to be sold to the Federally subsidized (bailed out) banks and eventually to vulture LLCs. The banks had no intention of finding individual buyers and issuing mortgages so all these homes so they unloaded then in bulk to the vulture LLCs. No attempt was made to determine if the buyers were qualified to manage these properties. There were no promises by buyers to maintain the properties, keep rents affordable, or engage with the community. The home were simply dumped by the government and the banks. And house prices kept dropping through 2012. Las Vegas, Phoenix, Spokane, Riverside and San Bernadino County saw prices drop more than 50 percent. By late 2011 the fire sale was on. The book features Tom Barrack whose source of money to make the home purchases is murky but involves the Cayman Islands and strong suspicions of money laundering and tax evasion. It all ends with Delaware (Biden) LLCs and ultimately to Barrack’s parent company, Colony Capital LLC. Colony eventually amassed an empire of 31,000 houses, rivaling the size of Blackstone’s house empire. Chase lent Colony $1.1 Billion for 7,563 homes. This giant bundle created a derivative that was carved up into tranches and sold on the bond market. But the two LLC predatory vulture groups featured in this book taken together total about 60,000 houses which represent about .6 percent of the 10 million houses lost. Where are the rest of those 10 million houses?

The book outlines the takeover of two failed banks, BankUnited of Florida, and IndyMac of California. Both deals were very costly for the government and resulted in private equity LLC ownership by wealth seeking individuals without a shred of empathy for who was hurt by their actions. The preditors see themselves as simply taking advantage of market opportunities presented by the federal government.

Attention is also given to the unloading of OneWest bank to a who’s who of investors for $1.6 billion. The deal left the government on the hook for any losses incurred in dumping the bank’s mortgages. When the new owners stripped and sold the bank, their return was $5 billion tripling their investment in less than 5 years. The investors included George Soros, John Thain, John Paulson, J.C. Flowers, and others.

Sandy Jolley Reverse Mortgage Whistle blower

Drawing special attention here is the reverse mortgage for the elderly, pioneered during the Reagan years but kept small by government rules. By 2006, the cap was raised to 275,000. Even the government was selling them and packaging its own fully guaranteed reverse mortgages into mortgage backed securities, sold and sliced by the same speculators that brought down the whole system. Most troubling, subprime specialists like IndyMac started selling reverse mortgages using “boiler room” sales tactics and preying on seniors lacking the mental capacity to understand the contracts they signed. Glantz features one deal involving an elderley wife with Alzheimer’s and a dying husband unable to understand the reverse mortgage he was agreeing to. When the husband died, the daughter Sandy Jolley moved back home to care for her mother and fight off foreclosure. In any system with a functioning justice system, the reverse mortgage contracts would have been vacated, the home restored, and damages assessed. None of this happened but Jolley kept fighting, assembling a large group of similarly displaced homeowners and becoming a federal whistle blower. Twelve years after her parent’s reverse mortgage was signed, the case was settled in 2017 with a typical slap on the wrist award and no admission of wrongdoing. Sandy Jolley’s whistle blower’s reward was $978,000.

Too big to fail ($50 billion plus in assets enshrined under Dodd-Frank now raised to $250 billion) Chase bank acquired Bear Sterns and Washington Mutual Bank in 2008. Wells Fargo acquired Wachovia Bank in 2008. Bank of America acquired Merrill Lynch in 2008. All banks accelerated their foreclosure and bundled them for sale to vulture capital LLCs as the easiest way to get the houses off their books, and the Obama government was guaranteeing any losses incurred. All banks greatly decreased their mortgage business and offered mortgages only to customers with high income and impeccable credit. From 2014 to 2016 Chase issued six thousand mortgages under the FHA program (usually used by first time buyers). During this same period Chase loaned Tom Barrack’s Colony $3.3 billion as it created six mortgage backed securities covering 23,000 homes. For first time home buyers an entire generation has had no reasonably priced starter homes and no way to buy the few that were out there. Yet the Federal Reserve held interest rates at near zero throughout the period. Practically, this has meant FDIC deposits are practically free for banks and cheap money was available for speculation and vulture purposes.
The Vulture LLCs that acquired all these houses, bundled them into large groups and securitized them using the same vehicles journalists were calling weapons of mass destruction in 2008. The bundles were diced into trenches to receive different ratings by the same agencies like Moodies who contributed to the 2008 collapse. Typically 80 percent of the bundles received AAA ratings. Glantz researched a tiny Los Angeles Home which listed a mysterious LLC as owner and a lien for $500 million (later refinanced for $900 million).

When housing prices reach a suitably high level, no doubt the LLCs will start selling their huge collections of houses but for the time being they can continue to collect ever increasing rents while spending a minimum on maintenance. Expect these houses to be in awful shape when they eventually reenter the housing market as single family homes.

An article in RCLCO real estate advisors in 2016 found that the seven largest LLCs owned and rented out a total of 170,000 single family houses. A chart in this article shows that single family rental units now comprise 35 percent of total rentals. If there are 43 million renters, then 15 million would be renting single family units. The 10 million foreclosed homes must represent a very sizable portion of these rentals. The article puts the increase in occupied single family rentals during the period 2005-2014 at 3.8 million (probably under estimated) while the increase in single family ownership increased by just a tiny 482,000. It appears the government does little to actually track statistically what happened to foreclosed houses or to track what the deals assuring that banks or LLCs wouldn’t lose money from foreclosures actually cost the government. Mother Jones in 2009 put the financial crisis federal bailout cost at a staggering $14.4 trillion. At present, we seem to have no accurate way to determine what happened to the bulk of those 10 million foreclosed houses. The $14 trillion figure also appears in Ron Suskind’s 2011 Book.

Many of the vultures moved to the Trump administration and the administration’s big tax reduction giveaway showered particular largess on corporations and LLCs.

Ed Snowden In His Own Words

Thursday, November 14th, 2019

Permanent Record, Edward Snowden, 2009


Ed and Lindsay out in Moscow

Ed Snowden was only 29 years of age when he blew the whistle on NSA’s mass surveillance of all Americans (in fact on everyone in the world). Here is the story of his own arc of growing up, engaging in a highly successful technical career, and then deciding to throw it all away to tell journalists and the world what their government was secretly doing.

Ed was born in 1983, the year that ARPA (Advanced Research Projects Agency, later DARPA adding Defense to the title) made the ARPAnet (using the TCP/IP protocol) publicly available for the first time. In 1983 the Mosaic pioneer browser existed at the University of Illinois. The world wide web (WWW) was invented at CERN in 1989 by Tim Berners-Lee. IBM introduced the PC in 1981, and Ed’s first computer, a Commodore 64 was introduced in 1982. In other words, Ed grew up at precisely the time that PC’s and the Internet were new. Ed became a very young, natural self described Geek and is mostly self educated since computers and the Internet were far more interesting than school and Ed was very talented in this new world.

Ed claims to be able to trace his ancestry on his mother’s side from the Mayflower itself and his fathers side to fighting in the Revolutionary War and every war thereafter. Early on his family moved from North Carolina to Maryland where his father worked on technology for the Coast Guard, and his mother worked at the NSA in human resources. Both parents held security clearances. Government service was the natural career path for his family. Unfortunately, modern government service requires a college degree and Ed finished high school with a GED. When the 9/11 attacks happened, Snowden signed up for army special forces and at 5’9″” and 124 pounds he went off to Fort Benning for basic training. He stress fractured a leg and the army, to avoid liability, granted Ed release from service with no black marks. While recovering from his injury, Ed came up with plan B. He would apply for a high level security clearance (requiring one year of vetting). The security clearance was granted and the CIA, much reduced after its failures in the 9/11 attack, hired Ed to babysit its headquarters computer systems. Thus started Ed’s meteoric but short career of government service which saw Ed stationed at the US embassy in Geneva Switzerland, and then, with the NSA, a stint at the Yokota Air Force Base on Honshu in Japan, and finally assignment to the NSA facilities near Waipahu Hawaii.

In 2009, while Ed was in Japan, a single document was flagged by the NSA’s repository as not belonging there. He noticed the document was classified TOP SECRET//STLW//HCS/COMINT//ORCON/NOFORN. STLW stands for STELLARWIND. Ed says only a few dozen people would have access to this document (plus system administrator Ed Snowden). This document was the authorization for mass surveillance of all American’s communications. Neither anyone in Congress nor the White House would have access to this document. The NSA continued to deny it was mass surveilling Americans. Daniel Ellsberg, in his Doomsday Machine book about our nuclear program describes the security classification system and security clearances that are understood by almost noone in politics nor the public.

Meanwhile the age of surveillance capitalism was fast arriving with Google, Facebook, Amazon, Microsoft, Apple, etc. gathering and exploiting users data for profit. Worse, they were freely sharing this private data with the government. Ed says he (his right to privacy) was first betrayed by his government, then by his beloved Internet, and finally, by his own body. He was diagnosed with epilepsy (not the grand mal seizure variety) and took the job in Hawaii to reduce his level of stress. In Hawaii, he had the leisure to start collective data to prove the NSA was spying on everyone and to further understand the different programs and tools available to the NSA and its contractors. His final exploration was of the program XKEYSCORE which allowed the government and its contractors to find anything about a persons digital history.

Bill Binney

Ed here honors his whistleblower predecessors from Daniel Ellsberg and Anthony Russo to Thomas Tamm who reported extensively on warrantless wiretapping in the mid 2000’s. Included are Perry Fellwock, who in 1971 revealed the existence of the NSA for the first time. He also lists Bill Binney, The Good American, Drake, Wiebe, and Loomis. Finally special mention of Chelsea Manning for leaking war crimes documents via Wikileaks. He gives special thanks to Sarah Harrison, journalist and editor for Wikileaks, who arrived in Hong Kong to assist Ed in his search for asylum and who accompanied Ed to Moscow.

Poitras Greenwald Lindsay Citizenfour Oscar

Ed does a good job of describing the ever increasing use of contractors by the government. He attributes this trend to budget issues and seems unaware of the worldwide neo liberal political movement to attempt to privatize all previously public functions of government from education to defense to incarceration to water. This privatization is highly profitable, leads to corrupt revolving door policies where government officials are able to grant contracts and special privileges to private for profit corporations with the understanding that they will be rewarded when they leave government to join the very companies they enriched.

For more on the surveillance state, see this work that includes Snowden’s disclosure.

Ed believes that the only current way to control surveillance is through the extensive use of encryption which the government cannot break. He also advocates the use of TOR or “onion routing” which uses a worldwide network of TOR servers to break the connection between the originating IP address and the destination IP address making it impossible to track communications using IP addresses. TOR was developed by a mathematician and a computer scientist at the Naval Research Laboratories and was designed to protect military and government communications using the public Internet. Ed was teaching classes in these subjects in Hawaii when he blew the whistle. Ed was also handing out printed copies of the US Constitution to his coworkers. This at the same time a supposedly constitutional law professor, Barrack Obama, was in the White House busily ignoring the very Constitution he was supposedly so expert at.

Ed decries the rise of cloud computing as a return the bad old days of centralized mainframe computing and points out your cloud computing authorization contract passes ownership of all your data to the cloud’s owners. If your data including photos are in a cloud they are no longer yours.

The Kochs – Hypocritical Libertarians

Saturday, October 5th, 2019

Kochland; The Secret History of Koch Industries and Corporate Power in America, Christopher Leonard, 2019

The Fred C. Koch Family
Fred C. Koch died Nov 17, 1967 Mary R. Koch died December 21, 1990 Charles Koch died Aug 23,2019.

Charles Koch

In a 1974 speech (Charles) Koch attacked the entire narrative behind the New Deal (based on Keynesian Economics), claiming that Roosevelt’s legislation was not, in fact, in response to a lack of federal-level regulation. Koch said that when the New Deal was passed, the economy was already “polluted by massive governmental manipulations of the money supply.”…The business community needed to wage a long-term campaign that would change the way Americans thought about the markets and the role of government (Hayek, Mises, Friedman). Koch said that the campaign should have four elements; 1) Education; 2) Media outreach; 3) Litigation; and 4) Political Influence.

David and Charles Koch

Based on his long term vision, Koch founded the Cato Institute, contributed to the Heritage Foundation and other right wing think tanks; rebuilt the law and economics departments of George Mason University near Washington in the image of the Chicago school, and created the Mercatus Center another free market think tank. This center offered free seminars to more than 4,000 federal judges from all 50 states. Koch was central to the creation of ALEC, the American Legislative Exchange Council, which writes right wing laws and pressures state legislatures to pass them. Koch is behind the Americans for Prosperity lobby that was central to defeat of the Obama era cap and trade legislation in 2010, the only serious effort by congress to limit carbon emissions. In the 2010 midterm election, the Republicans gained control of the house and senate, in large part due to the emergence of tea party candidates and Koch’s Americans for Prosperity efforts.

David and Charles Koch

Koch Industries was to benefit enormously from Federal Action, particularly from the Clean Air Act of 1970. Refineries already operating in 1970 (Koch had two) were “grandfathered” in to the era of clean air regulation. The unintended consequence of this legislation was to halt the construction of new refineries, assuring that no new competition would enter the business. Existing refinery owners immediately started gaming the act; for example companies could be exempted if curbing pollution would be unreasonably expensive. This assured that new technologies would never be implemented in the existing refineries. The EPA was to enforce the New Source Review program which prohibited new refineries from entering the game. The last refinery built in the US was completed in 1977. The EPA needed to rely on state regulators to enforce the New Source Review and these state regulators were simply outgunned and overwhelmed by the giant refinery corporations. Koch’s two refineries were able to increase their capacity more than ten fold and were able to introduce new outputs and products at will. Much of this expansion was achieved without first obtaining permits that would have limited pollution from the plants. Koch refused to invest in suggested new pollution control measures.


Pine Bend Refinery Rosemount, Minnesota

In mid 1996 a sour water stripper that limits the amount of ammonia that was pumped into the wastewater treatment plant ceased operating properly. Repairing the stripper would require shutting down the refiner which Koch refused to do. Instead Koch flushed the ammonia rich waste into large detention pools on the far end of the refinery. When these filled they began spraying the contaminated water onto the surrounding wetlands and fields. In January 1997, Heather Faragher, The only employee trained in waste water management at Koch’s refinery but without the authority make changes at the refinery, told the Minnesota Pollution Control Agency, which was responsible for enforcing federal EPA standards, everything that Koch had been doing at the refinery. in 1998 the MPCA fined Koch $6.9 million for pollution. Federal criminal charges in 1999 resulted in a criminal fine of $6 million, $2 million to the County Park system. Koch also agreed to pay the EPA a $3.5 million fine. Similar events happened at Koch’s Texas refinery, causing Charles Koch to initiate a new program to assure that Koch was in compliance with all state and federal regulations (100% compliance, 100% of the time). He hired a group of regulatory compliance attorneys locating them at company headquarters in Wichita Kansas with the authority to force all company divisions to comply with regulations and with the authority to shut facilities down if necessary. He was driven to this measure to avoid future big fines, to protect Koch’s now tarnished reputation, and to prevent state and federal officials from inspecting and investigating his operations. Privacy and secrecy are Charles Koch’s highest priorities.

A big disappointment in this 600 page book is the failure to address the extent to which Koch benefits financially from direct government subsidies. The topic receives one short mention with no figures of the scale of corporate welfare or crony capitalism enjoyed by Koch. Charles Koch often speaks about his opposition to government subsidies but there is no evidence in this book that Koch has ever turned down a single subsidy. The book does mention that fracking was developed largely due to government subsidies and Koch indirectly benefited as fracking increased the production of oil and natural gas so that the US is now energy independent. One would dearly love to know the extent to which Koch’s remarkable success was due to direct government subsidies.

The fossil fuel industry has always depended on trading, the buying of crude oil, natural gas, etc. and on selling refined or manufactured products. Historically this trade has not been done using established commodity markets. Koch established a separate trading division located in Houston. Charles Koch insisted that his traders have the best available information including the best weather forecasts. Koch invested heavily in computers and developed elaborate models of the relevant markets. Central to the success of Koch trading was the availability of inside industry information which can be used freely and legally in Koch’s markets. Market volatility is what drives profits in trading and Koch’s traders became expert in exploiting volatility. In the cold winter of 2000, one trader placed large bets on the volatility of natural gas prices and earned Koch $75 million. The trader’s base salary was $60,000 and he earned $4 million in a bonus. Koch keeps a close leash on its traders and knows on a day to day basis company exposure to its trader’s bets. Unlike banks, wall street firms and insurance companies, Koch has never experienced unexpected losses from a rogue trader. In 2000, as Clinton was leaving office, his administration passed the Commodity Futures Modernization Act, leaving the market for derivatives unregulated and in the dark. Thus Clinton set the stage for the 2008 subprime mortgage crisis. This book explores how fossil fuel industry traders quickly learned and adapted to this new age of unregulated financialization. We think of Wall Street, the banks, and the insurance companies, but the fossil fuel industry reaped enormous profits from exotic and dark trades.

How Koch Became an Oil Speculator Powerhouse

Companies like Enron and Koch all engaged in illegal trading activity, best exemplified by California’s electric utility deregulation fiasco that started in 2000. ALEC was instrumental in getting the disastrous neoliberal bill passed in 1998. The New Deal Era public utilities system for electrical power was replaced by a radical new system. The existing utilities retained their geographic monopolies with set maximum electric rates, but they were stripped of their generators. Power generation was privatized and the utilities were required to buy power on a daily basis. An emergency state agency was created to buy electricity when the markets failed. A massive daily trading system emerged. The new system was quickly overrun by unusually hot weather. The scale of Koch’s illegal trading activities in California electric power were dwarfed by the scale of Enron and other huge energy companies and largely escaped being tarnished further by its illegal trading. Charles Koch’s 100% compliance order somehow did not include the trading division. Enron’s fraud and illegal activities forced it out of business in 2007.

California Electricity Crisis of 2000-2001

Charles Koch was a keen student of the latest management theories. Early in his career, he adopted the teaching of Edward Deming who revolutionized Japanese manufacturing practices after WWII. His typical management hire was a young graduate of a midwestern university often with an engineering degree and often someone raised on a farm with midwestern work habits. Charles Koch believed he could educate the young graduates to his philosophy and new hires spent hours in seminars and training. The new hire would then be assigned a job and his performance closely watched. If he was successful, he would then be reassigned to another position that might be totally alien to the experience and training of the employee. They might find themselves moved from a refinery to a trading desk where a whole new set of skills is required. If successful there, the employee might be moved to another position, maybe in fertilizer or pipelines or most anything. If the employee does not succeed in their new assignment they are terminated from Koch. Its a bit like the father that throws his child in the deep water to see if they sink or swim. In spite of this style of management, employees at Koch, if they succeed, seem extremely loyal to Charles Koch and enjoy long careers. In 1969, two years after Charles Koch became CEO, Laurence J. Peter published a book describing what became known as the Peter Principal. Organizations continue to promote their workers until they reach a point where they are no longer able to successfully perform the functions required by their position. This book makes no mention of the Peter Principal but Charles Koch, whether he knew the principal or not, seemed to embrace it and used advancement within Koch to test and challenge his employees until they break at which point they are removed.

In 1987, an investigative report published in the Arizona Republic charged that the oil companies were stealing oil from native American reservation oil fields. Several US Senators got interested and the largest oil companies told them to look at Koch. The Senators got an FBI agent assigned to investigate and he started observing Koch trucks and gaugers as they pumped oil from the field tanks to their trucks, measuring the amount of oil taken using gauge sticks inserted into the field tanks before and after the pumping. The drivers would record the amount of oil taken and leave a ticket at the site. This ticket determined what Koch owed for the oil taken. When the truck was emptied at its destination an accurate measure of the oil taken could be obtained. The work of the guagers is only approximate and Koch trained the drivers never to be short, i.e. never to have the oil actually delivered be less then the ticket left at the site. To be short meant an immediate termination. The drivers were never instructed to steal oil, they were instructed never to deliver less oil than Koch was obligated to pay for. The obvious and only was to assure that they were not short was to always be long. The Senate passed the investigation to the Justice Department which made Koch hand over its records for three years. In each of these years Koch received an average of 400,000 Barrels of oil per year worth about $10 million that they didn’t pay for. The Justice Dept. didn’t want to charge individual drivers but thought it would be difficult to charge the top executives for the theft. The case did go to trial and was settled for an undisclosed amount. There was bad publicity for Koch but no lasting consequence. This is just another example of Koch pushing beyond the limits of legal and normally understood ethical behavior.

Additional Details on Oil Theft from Christopher Leonard

Two sections of the book deal with Koch treatment of unions, first the union at the Minnesota refinery, and second the Georgia Pacific division unions. The stories are different but similar. Koch refuses to negotiate, changes the work rules, slowly squeezes wages, moves union pensions to 401K s and interferes with health care programs. It is pretty miserable to work a union job at Koch but the alternatives are worse. Charles Koch’s toughness is illustrated by his reaction to a union strike at the Pine Bend refinery in Minnesota, which in 1970 was still a strong union state. Charles Koch hired a Texas oilman whose hero was George Patton to run the refinery. When the workers voted to go on strike, he hired enough non union workers to keep the refinery running and flew them on site by helicopter. The skeletal crew lived on site with their boss. When the teamsters refused to cross the picket line, Koch negotiated a deal whereby Koch drivers would replace the teamsters for the drive through the picket line, load the truck, and return it to the teamster driver. When the strike extended, Koch built a separate road entrance bypassing the picket line and convinced the teamsters to drive their trucks through the new entrance. For specialized maintenance requiring workers from other unions, Koch eventually convinced them to make repairs in spite of the strike. In this way the refinery union was slowly isolated and weakened. They eventually settled on Koch’s original terms, but after losing more than a year of wages.

Georgia Pacific’s plants and warehouses were subjected to modern software systems designed to increase worker productivity. This increased productivity was accompanied by a corresponding increase in injuries, some of them fatal. These injuries would result in OSHA investigations and modest fines, but any government interventions were anathema in Koch’s culture. While trying their best to prevent injuries, the numbers stayed stubbornly high. Stressed employees will make mistakes and the only solution is to decrease the pressure. On the contrary Koch would fire employees that were considered too cautious and careful because that meant they worked slower. Had the OSHA fines been in the millions, I have no doubt Koch would have figured things out to reduce or eliminate injuries.

Koch created a Value Creation Group but this got subdivided and one of the subdivisions was Koch Agriculture. Koch had virtually no experience in agribusiness volatility. In 1997 Koch saw an opportunity to buy century old Purina Mills headquartered in nearby St. Louis. The problem with private equity acquisitions is that is drew Koch into businesses where it had no expertise. They agreed to pay $670 million for a company worth $109 million. Koch borrowed $570 million and put up $100 million of its own money for the purchase. Koch tried to impose the Koch culture on a company with its own very different and well established culture with the result that key employees left the company in droves. Due diligence failed to uncover massive contracts between Purina and hog feedlots which required Purina to produce piglets that the feedlots were under contract to buy and grow using Purina food. When the hog market imploded, the feedlots defaulted on their contracts (that Koch didn’t know existed) and Purina was forced into bankruptcy. Purina and the creditors lawyers believed the Koch corporate veil that was supposed to protect the holding company, was flawed, and Koch was forced to settle by putting up another $60 million in cash to get rid of Purina. Charles Koch fired everyone associated with this disaster and closed the entire acquisitions division.

Koch began a complete reorganization of the business in 1999. Over the years Koch had acquired a wide hodgepodge of unrelated businesses. Koch unloaded many of its pipelines, sold a small chemical company and other odds and ends. At the core of the new structure, Koch Petroleum was rename Flint Hills Resources. Others were simplified and reorganized into Koch Minerals, Koch Supply & Trading, and Koch Chemical Technology Group. New leaders were appointed to run these consolidated businesses. Koch Industries became little more than a holding company protected by a legally impenetrable veil to protect it from problems in its divisions. Charles Koch also finally put to rest the 20 year long legal feud with brother Bill and could totally focus on growing Koch. Koch’s spectacular growth after 2000 was the result of operating one of the largest private equity operations in the country. Private equity finds distressed public companies that can be purchased cheap, converted from publicly traded or coop into privately held companies. Charles Koch from the beginning wanted his company to remain private, to operate in secret, and to forego dividends in favor of reinvesting profits to grow the business. He was proving that he could learn fast from past mistakes, correct them mercilessly and move on. He initiated his “10,000 percent compliance” program discussed earlier at this time to keep the government and regulators off his back. Clinton ushered in the age of financialization in 2000 and George W Bush from Texas and Dick Cheney entered the White House. Koch was set for a decade of spectacular growth.

In 2003, Farmland a depression era coop headquartered in Kansas City wanted to sell a group of liquid nitrogen fertilizer plants all located close to their midwest farm customers. The most expensive component, at 80% in the production of liquid nitrogen is natural gas and domestic natural gas was very expensive. Lower cost imported fertilizer had undermined Farmland’s market. Koch had inside information that fracking was about create a vast increase in the supply of natural gas and prices would plummet. This purchase would mean a significant reentry into agribusiness and the acquisition team didn’t know if Charles Koch was ready to forget the Purina experience but he fully backed acquisition. Natural gas prices plunged and the fertilizer plants became immediately profitable.

Also in 2003 Georgia Pacific approached Koch to see if they were interested in purchasing several struggling pulp mills in Georgia and Washington – Oregon. The mills came with several unionized warehouses for the mill’s products. When the Koch team visited Georgia Pacific’s Atlanta headquarters (51 stories tall) they saw a bloated, hyper luxurious operation. At the same time DuPont came on the market. Overall, Koch was looking at corporate takeovers worth more than $25 billion. Koch acquired both DuPont’s Invista for $4.4 billion and Georgia Pacific for $21 billion. Charles Koch had always disliked borrowing, but borrowing is the foundation of the private equity business. Find an under performing company with lots of cash flow and buy it with borrowed money. Make sure the holding company is protected from the creditors, turn the companies around and use the resulting cash flows to repay the loans. Koch was now willing to borrow seemingly unlimited money to fuel its acquisition appetites. Both DuPont and Georgia Pacific were heavily dependent on the building of new housing which was a hot market right up to the sub prime mortgage crash of 2008. Charles Koch did not panic but scaled back operations at all affected acquisitions and waited to weather the downturn storm.

June 29, 2012 (Reuters) – DuPont Co has settled a $745 million lawsuit brought by Koch Industries Inc’s Invista unit over safety and environmental problems at plants once owned by the large chemical company.

How The Kochs Are Fracking America

The crash of 2008 made fracking economically viable and the supply of natural gas exploded. Then drillers in North Dakota applied fracking to crude oil successfully for the first time. There was an area called the Eagle Ford Shale region near Corpus Christi where Koch’s second light crude refinery was located. Koch’s planners decided on a plan to build pipelines between Eagle Ford and Corpus Christi and to buy and build a ship slip to export any excess crude oil. Charles Koch embraced the plan immediately and only wanted to assure the plans were big enough. Oil from fracking start to flow in 2010 when by the end of the year 139,000 barrels a day were being produced. By 2014 production hit 1.68 million barrels a day roughly 20% of all crude oil produced in the US that year. Because the 1970 Clean Air Act effectively prevented the building of new refineries, Koch’s Corpus Christi refinery enjoyed enormous profits from the newly available light crude.

Koch Brothers War on Renewable Energy

Through this same period the Kochs focused their political attention on fighting renewal energy initiatives at the state level (ALEC), fighting any carbon restrictions at the state and federal level, and rolling back CAFE auto efficiency standards. Charles Koch and his company became much more visible as a result of these massive anti environmental efforts and he started experiencing demonstrations at his gatherings and now requires constant security protection. Gone were the days when Charles could drive his modest old station wagon from the family home to Koch headquarters.

FDA Fails to Assure Safe Generic Drug Supply

Monday, July 15th, 2019

Bottle of Lies; The Inside Story of the Generic Drug Boom, Katherine Eban, 2019
Katherine Eban
The US government is prevented from negotiating drug prices through Medicare, Medicaid, and the ACA because of industry lobbies. The exclusive way the government has chosen to attempt to control runaway drug prices is through generic drugs. Generic drugs must be proven to be bioequivalent to brand-name drugs. Healthy volunteers are given the drug and their blood measured to determine the maximum concentration (Tmax) and peak concentration (Cmax) of drug in the blood. The blood can not fall below 80% or rise above 125% of the brand-names concentration. Companies are required to impose a 90% confidence interval on their testing to assure that less then 20% of samples fall outside the range. Drug companies are required to run these tests themselves. What happens if a foreign or domestic drug company sets out to systematically generate false test results in order to deceive and defraud the FDA? This is the story of one such company Ranbaxy Laboratory of India.
To increase companies incentives to produce generic drugs, the FDA offered a six month exclusive to whichever company first filed an application to produce a generic dug. On Aug 19, 2002, Ranbaxy submitted a 7,500 page application to produce Pfizer’s Lipitor then a blockbuster drug at $2.5 Billion annually. The Lipitor patent was set to expire in 2011.
Ranbaxy hired two Indians working for Bristol-Meyers Squibb. Rashmi Barbihaiya had been developing drugs for BMS for 21 years. Dinesh Thakur specialized in the application of robotics to eliminate human error from the manufacturing process. Thakur had helped Barbihaiya transfer and reconcile data from a BMS purchase. Barbihaiya decided to join Ranbaxy, set to acheive sales of $1 billion in 2002, and suggested Thakur join him. Thakur arrived in India on Aug 17,2002, two days before the Lipitor application was filed. Thakur had just become a US citizen.
Barbihaiya mysteriously quit Ranbaxy in 2004 receiving a sizable severance package (Hush money?). Thakur’s new boss in 2004 was London trained Arun Kumar who immediately started finding troubling discrepancies in testing and data. In mid 2004 he assigned Thakur to thouroughly research the records and data. On October 14,2004 Kumar met with members of the scientific committee of the Ranbaxy board of directors. Kumar showed a PowerPoint of 24 slides prepared by Thakur entitled “Risk Management for ANDA Portfolio”. The presentation showed that Ranbaxy had lied to regulators, falsified data, and endangered patient safety in almost every country where it sold drugs. More than 200 products in more than 40 countries had data that were fabricated to support business needs. The board asked Kumar if he could bury the data. Realizing the problems were systemic coming from the top, Kumar resigned. Ranbaxy did not know Thakur had prepared the presentation.
Dinesh Thakur
Thakur’s grandmother read him tails from the Ramayana and the Mahabharata and he credits his moral and ethical grounding in these stories. He resigned Ranbaxy after 32 months and with no plans for what to do next. On Aug 15, 2005, after wrestling with his conscience for four months following his resignation, Thakur posted, in broken English, an email using a newly created Yahoo account. Thakur did not consult his wife about his action, because whistle-blowing in India can be fatal with no legal protection. Finally on Nov 2, 2005, Thakur sent the incriminating Power Point Presentation to FDA’s Rivera-Martinez. Andrew Beato’s whistleblower law firm agreed to represent Thakur. Thakur was now protected and his identity would remain secret.
On Nov 30, 2011 the FDA notified Ranbaxy that it was approved to start producing generic Lipitor. Ranbaxy promised they would purchase the active ingredient from Pfizer and produce the drug in an FDA approved facility. They did neither, using their own non approved active ingredient and producing in a non approved facility. The FDA did nothing about this deception believing Ranbaxy would need the revenue from generic Lipitor to pay the settlement. Ranbaxy shipped $600 million in their 6 month exclusive period.
The case was settled May 13, 2013 for $500 million. Thakur received $48 million for his role as whistleblower. No individual was held to account. It had taken the FDA and Justice Dept. almost 8 years to settle the case. Japanese drug maker Daiichi Sankyo had purchased Ranbaxy during this period relying on false information so they sought redress from the International Court of Arbitration in Singapore. In Apr 2016 the court ordered to Singh brothers to pay Daiichi Sankyo $550 million in legal damages.
Former Ranbaxy employees, all highly trained in fraudulent data manipulation and generation are today scattered throughout the industry, even in the US.

The Ranbaxy case defied the imagination of US regulators and investigators so long because the fraud was so all-encompassing. The company’s intricate system for faking data involved hundreds of people. And the US government all but volunteered to be fooled by announcing its inspections in advance.

Rajiv Malik $25 million per year
Another company featured here is Mylan Pharmaceuticals, a Pennsylvania based company registered in the Netherlands. In June 2003, Rajiv Malik resigned from Ranbaxy. In Jan 2007, Mylan acquired Matrix Laboratories, an Indian publicly traded drug manufacture. Along with Matrix, Mylan acquired Malik who became executive VP in charge of global technical operations. Malik brought his team of specialists from Ranbaxy with him to Mylan. He quickly rose to become Mylan COO. Heather Bresch, daughter of West Virginia senator Joe Manchin, became CEO of Mylan in 2012. She advocated for and got passed in Jan 2012 the Generic Drug User Fee Amendment (GDUFA) which called for drug producers to pay fees into a fund at the FDA in increase inspections. The fees were also intended to speed up applications for new drugs which had a huge backlog.
Bresch did not understand that her own corporate culture, thanks in large park to Malik, was in need of massive reform.
Mylan agreed to purchase for $1.6 billion, Agila Specialists in India. In June 2013 the FDA scheduled an inspection at a sterile injectable plant in India as part of the Agila purchase. FDA inspector extraordinaire Peter Baker was part of the inspection team. The problems uncovered were massive. Inspection Problems at two more Agila plants followed. All three plants had to be shut down. These plants also supplied Pfizer and GSK creating a worldwide panic.
Deb Autor FDA’s Revolving Door
Mylan hired Deb Autor, one of FDA’s top officials as its senior vp of strategic global quality and regulatory policy. Malik had suceeded in corrupting almost every Mylan owned plant in India. A Mylan whistleblower came to FDA headquarters with detailed accusations about Malik’s data fraud in India. His detailed information could have guided further inspections of specific plants. The FDA did nothing for a full Year. Remember that Deb Autor was formerly at the FDA and Bresch was a Senator’s daughter. The whistleblower in July 2016 jolted the FDA in an email, holding the FDA accountable for what happened to US patients and suggesting that the FDA revolving door (Autor) was responsible for their inaction. Two inspections at Nashik (India) and Morgantown followed.
Tom Cosgrove Covington Food, Drug and Device Practice Group 2017
In May 2017 FDA’s director Tom Cosgrove downgraded the FDA findings from Official Action Indicated to Voluntary Action Indicated. Cosgrove then left the FDA.
Another whistleblower from within the Morgantown plant came forward in early 2018 saying that Mylan had developed an embedded culture that permitted fraud. The Ranbaxy fraud virus had spread to the US.

From 2012 to 2018, the agency (FDA) downgraded 112 inspections in India to make the final classification less severe. For company after company — Mylan, Cipla, Aurobindo, Dr. Reddy’s, Sun Pharma, Glenmark — findings of Official Action Indicated (OAI) became Voluntary Action Indicated (VAI). These downgraded essentially nullified the judgments made by its investigators in the field and replaced them with judgements made by bureaucrats in Maryland. Cosgrove and other officials waived import restriction. They chose to communicate confidentially with some firms through so-called untitled letters instead of issuing public reprimands. Politics seemed to guide the agency’s enforcement actions.

Peter Baker FDA Inspector

After Baker’s inspection at the Pfizer-affiliated Zhejiang Hisun plant, the FDA restricted the import of thirty of the plant’s drug products. But fifteen of the drug ingredients were in short supply in the United States, so the agency lifted the restriction on about half of the drugs, including a crucial chemotherapy drug for treating Leukemia and breast and ovarian cancers.
To Baker, the decision made no sense. According to regulations, the drugs had no place in the US supply. They weren’t good or safe enough. Shortages didn’t change that fact.

In July 2018 a widely used active ingredient for Valsartin a blood pressure medication was found to contain a cancer causing toxin known as NDMA. The ingredient was made by Chinese Zhejiang Huahai Pharmaceuticals who had changed its production process in 2012. In the US more than a dozen manufactures had to recall their product as did dozens more worldwide. Some patients had been consuming the toxins for 6 years. Just a year earlier the FDA had downgraded an investigators report of impurities at another Valsartin ingredient plant to VAI. The company was let off the hook only to end up in the middle of a worldwide scandal a year later.

In 2013 Harry Lever, cardiologist at the Cleveland Clinic, sent a detailed letter to the FDA concerning Wockhardt’s generic metropolol succinate which he found could not control patient’s chest pain, heart rate, or blood pressure. NPR’s The People’s Pharmacy radio program with the Graedons had been flooded with complaints about this generic. The FDA sent Peter Baker to inspect the plant in India. Baker on July 24, 2013 joined two Indian FDA inspectors already on site. Baker had previosly inspected this plant in March. On this inspection they got a partial confession from an employee and amassed further damaging information. One of the inspectors became ill and their hotel room was bugged. Both Wockhardt and Dr. Reddy’s recalled their metoprolol succinate from the market with admission that the drugs were not bioequivalent at all. Lever had been right after all.
In 2008, again reacting to the People’s Pharmacy and Harry Lever’s patient’s generic Toprol XL experience, The Graedons began to focus on extended release (ER) drugs. In 2006 Teva began marketing a generic antidepresent for Wellbutrin XL sold by GSK. The FDA didn’t respond to the deluge of complaints. The FDA had 85 independent reports in 2007 which they ignored. Consumerlabs joined the fight and tested the Teva generic against the GSK. The result was that the generic dumped four times as much active ingredient in the first two hours as the brand name did. So a new, largely unidentified cause, dose dumping, came to the forefront of Doctor’s attention but not that of the FDA. The FDA’s bioequivalence tests were set in 1992. New drugs often feature extended release (ER). They release their doses evenly over a twelve hour period. If a generic dumps its dose quickly, the patient can be potentially harmed, sometimes in dramatic ways. The FDA 1992 bioequivalence definition is out of date and unable to account for the time pattern of dosage for an ER drug. The FDA ignored the results and one official even suggested the difference in dosage might be an advantage. On Apr 16, 2008 the FDA asserted that they had been right to approve the generic. Reading the report, it was clear the FDA had tested the 150 mg and not the 300 mg dose where all the complaints were centered. When asked, the FDA said they were afraid to test the 300 mg because it “might lead to seizures”. When Graedon looked at the 150 test results, the dosage dumping of the generic was still clear and unmistakable. It took five years for the FDA to agree to revisit the tests. They finally agreed that Teva’s drug was not bioequivalent. In 2010, the FDA official obstructing the Teva investigation, Gary Buehler, left the FDA to become vp of global regulatory intelligence and policy at Teva, another classic example of regulatory capture and the FDA revolving door.
Gary Buehler FDA To Teva
In June 2018 a woman arrived at Cleveland Clinic suffering from chest pain and shortness of breath. The 35 year old woman had had a successful heart transplant three years previously and had been taking the immunosuppressant Prograf daily to prevent organ rejection. But six months earlier, a CVS pharmacy refilled her prescription with generic tacrolimus, made by Dr. Reddy’s. Over the six months she felt progressively worse. Lever and his colleague Randall Starling sent her blood tests and tacrolimus capsules to a Massachusetts laboratory. The patient died of a heart attack in Sept. 2018. Preliminary test results from Massachusetts showed that tacrolimus released its active ingredient very rapidly compared with the brand.
Revising bioequivalence to address ER and dose dumping has not been done by the FDA. Peter Baker was no longer sent to do inspections and has left the FDA.

How Power Hungry Car Lover Single Highhandedly Destroyed New York

Wednesday, June 5th, 2019

The Power Broker; Robert Moses and the Fall of New York, Robert A. Caro, 1975
This classic Pulitzer Prize work at 1162 pages details the 44 year career from 1924 to 1968 of Robert Moses, the most powerful builder in New York history. Born in 1888, Moses grew up at the birth of the automobile, was educated at Yale and Oxford and earned a PhD degree from Columbia. Starting his career as a reformer helping Governor Al Smith reorganize the government of the state of New York, he asked Smith to be named Commissioner of Parks and Parkways for Long Island and Moses drafted the legislation creating the position from which he could not be removed and in which he had absolute power of property condemnation, which he called “appropriation”. He built a reputation for incorruptibility and non partisanship; a man who got things done. Politicians including FDR in 1932, while disliking Moses and his methods, relied on his accomplishments in their campaigns. Moses took over New York City’s parks consolidating the system into a single commission under his total control. He next took over the stalled Triborough Bridge effort drafting his own Triborough Authority legislation to allow his absolute control including bond issuance. His legislation allowed him to hold simultaneously state and city positions, previously not allowed.

Robert Moses Building Randalls Island in 1936
He completed the Triborough system and the West Side Highway including the Henry Hudson Bridge. When traffic levels assured that the bonds could be repaid in eight years or less Moses redrafted the legislation to extend the Authority to cover any bridge or highway in the New York Area and to allow the bonds to be refinanced which allowed the Authority to live forever. The surpluses from tolls were to give Moses a funding power independent of city, state, or federal influence.

The entrance and exit ramps would have required demolition of historic Castle Clinton and much of Battery Park.

Ole Singstad Rendering of the Battery Park Bridge

Just before WWII, Moses proposed a huge bridge connecting Battery Park in Manhattan to Brooklyn. A tunnel, designed by Ole Singstad who finished the Holland tunnel and designed the midtown and Lincoln tunnels, was already planned for the same route. Conservationists were unable to stop Moses proposed destruction of the historic park and contacted Eleanor Roosevelt who told FDR of the plans. The bridge required War Department approval which was denied. Moses was never able to prove FDR was behind the War department decision. For revenge, Moses moved the hugely popular at 2.5 million visits per year, free, Aquarium out of the CLinton Castle and threatened to destroy the Castle itself. He didn’t and Battery Park was later given to the Federal Government for preservation.
Moses added the East River New York Tunnels to his bridge and highway authority and Singstad, who played a significant role in defeating the bridge never designed or built a tunnel in New York again. His existing tunnel plans were implemented exactly as he had drawn them up.
In the mid 1950’s Moses joined with the separate Port Authority, which operated the George Washington Bridge and the Hudson river tunnels to New Jersey, to take advantage of the new Interstate Highway Federal program. Moses was nominal head because of his long relations with Washington. Under the agreement, the Port Authority would add a second level to the George Washington bridge and build interstate highways in New Jersey and connect Staten Island to New Jersey to handle traffic from Moses Verrazano Narrows bridge which he would build between Long Island and Staten Island as well as connecting highways. Tolls were not allowed under the Interstate Highway program.
The Port Authority had opened, in 1950, a multi level commuter bus station on 8th Ave one block from the Lincoln Tunnel entrance. The buses had their own road connecting the station to the tunnel and dedicated lanes through the tunnel assuring that bus commuters would never be stuck in traffic. Under the station was a subway station. When the Port Authority planned the World Trade Center they made provision for subway stations directly under the Center with high capacity escalators to the mall and offices. They also planned a direct PATH link from Hoboken NJ to the Center. Hoboken NJ was the location of the commuter train and bus station connecting to PATH. Imagine if Moses had this foresight into mass transit when he was building Idlewild and the Expressways.
As if this were not enough power for one man, Moses became head of New York electric power where he built huge hydroelectric dams on the St. Lawrence near Niagara. After WWII he extended his power to include nuclear power generation.
At his peak, Moses held 14 independent power positions simultaneously.
During Moses’ entire 44 year career the city and state of New York never spent a single dime on mass transit development and the city and state even failed to maintain the existing plant. In 1924, when Moses came to government, New York Subways were the envy of the world. By 1968 these subways were perhaps the worst in the world. When building his expressway to Idlewild (now Kennedy) airport Moses refused to consider adding a center median rail system. He did the same for the Long Island Expressway denying requests to add a center rail for mass transit. The long Island railroad was allowed to deteriorate even though large numbers of city commuters were dependent on it. It was around this time that planners discovered that Moses had built his many parkways with bridges and overpasses so low buses were precluded from using them. Moses, who never had a driver’s license and had never experienced a traffic jam doomed the entire New York metropolitan area to perpetual traffic jams. His vision was for scenic drives along the water so he built the West Side Highway right on the Hudson River denying Riverside park users access to the River except for exclusive yachting clubs.

His thinking had been shaped in an era in which a highway was an unqualified boon to the public, in which roads were, like automobiles, sources of relaxation and pleasure. Changing realities could have changed his thinking but he was utterly insulated from reality by the sycophancy of his yes men; by his power, which, independent as it was of official or public opinion – of, in fact, any opinion but his own — made it unnecessary for him to take any opinion but his own into account; by, most of all, his personality, the personality that made it not only unnecessary but impossible for him to conceive that he might have been wrong; the personality that needed applause, thereby reinforcing the tendency to repeat the simplistic formula that had won him applause before; the personality that made it possible for him to relate to the class of people that owned automobiles and were repelled by the dirt and noise, such as the dirt and noise he associated with trains; the personality that made him not only want but need monuments and that saw in highways- and the adjunct suspension bridges (“the most permanent structures built by man”) – the structures that would leave a clean, clear ineradicable mark on history; the personality that, driven by the lust for power, made him anxious to build more revenue- (and power-) producing bridges and parking lots (and highways to encourage their use) and that made him indifferent or antagonistic to subways and railroads which would compete with his toll facilities not only for users but for city construction funds. He was insulated from experience. Most of the millions who used his roads were now using them primarily not for weekend pleasure trips but back and forth to work twice a day, five days a week, and driving was therefore no longer a pleasure but a chore; but for Moses, comfortable in the richly upholstered, air conditioned, soundproofed rear seat of his big limousine, driving was still as pleasurable as it had always been. Robert Moses, who had never had to drive in a single traffic jam, really believed that his transportation policies would work.

This blogger experienced the result of his work in 1977 when a group of us traveled by van from Tarrytown NY, home of Washington Irving, to Kennedy Airport on a Friday afternoon following a week of training. Our driver didn’t use a single highway during the entire trip. When we asked him about the route, he explained that side streets were the only to get us to our flights on time. We traversed the entire city from the north and couldn’t use even one of Moses’ creations.

The press treated Moses uncritically with the New York Times leading the cheers until a couple of young, unintimidated investigative reporters with smaller papers started, in 1959, digging into his Title I Federally subsidized housing and slum clearance programs. Soon the reporters were inundated with tips and material on the corruption and suffering. Targets for slum clearance were often not slums at all but stable well maintained neighborhoods. “Slum” clearance was destroying of lives of tens of thousands if not hundreds of thousands of New Yorkers including hard working respectable families. The resulting deluge of stories of horror and corruption forced even the NYT to assign investigative journalists to the stories.

The Incorruptible, Uncorrupting, Apolitical, Utterly Selfless Public Servant Moses had been a synthetic character, largely puffed up by the press. That character had endured for thirty-five years. But in 1959 the process of deflation by the press-a process that had been going on intermittently for several years-had begun in earnest. In that process there had been a large amount of unfairness. But that process had in the end arrived at the truth. At the beginning of 1959, the Moses image had stood in most of its glory, intact except for a few small chips. At the end of 1959, it lay in unsalvageable ruins. Popularity, Al Smith had warned him, was a slender reed. Now the reed was broken.

Moses resigned his position as head of Title I but his reputation was forever tarnished.

Moses with Nelson
Moses had survived many attempts by governors and mayors to reduce his power and all, including FDR had failed.
Then, in 1959 Nelson Rockefeller became governor of New York. Nelson was 50 and Moses was in his 70’s. Nelson was a Rockefeller, with access to power never before seen by Moses in a mayor or governor. Nelson was tougher than Moses. Rockefeller pressured Moses to give up all his parks posts so Nelson could give them to Nelson’s brother Laurance, a man with impeccable credentials in New York’s conservation movements serving for 27 years on the Palisades Interstate Park Commission. The well conceived and run Palisades Interstate Park had been funded heavily by the Rockefellers. Moses made a huge mistake, accusing Nelson of nepotism in the press. All Moses’ park positions were stripped but in compensation Nelson offered Moses Presidency of the 1964 Worlds Fair to be held in Flushing Meadows.

Moses at Flushing Meadows Park
The position came with very attractive compensation which could help Moses pay for care for his ill wife. Moses took the job thinking he could turn Flushing Meadows into a huge Park after the fair ended. The Fair, as the earlier one in 1930 was a financial disaster complete with Moses lavish contracts to friends. In the end Moses had less than $8 million to pay off $24 million in loans. He used the $8 million to create a small park on the site and the creditors were given nothing. Nelson stripped Moses of his remaining highways position and Moses was down to one title, the one that counted, head of the Triborough Authority.
Nelson moved slowly in his efforts to create the Metropolitan Transit Authority (MTA) to encompass mass transit and bridges and highways. Nelson ambiguously offered Moses a significant role in the new setup which Moses interpreted as head of Triborough and a position on the board of the MTA. Moses believed he held a trump card that the bondholders would have to approve any change to their bond contract which they would never do without Moses’ approval. The bondholders had agreed that any dispute which arose would be handled in litigation by Chase Bank’s lawyer Thomas Dewey. Moses prepared the Triborough Authority to bring suit. Chase was at that time a private bank owned by the Rockefellers and controlled by David Rockefeller who Moses had worked with for decades. The Rockefeller brothers met at Nelson’s apartment and agreed to a plan. Moses held fire believing Nelson would keep him on at Triborough but on March 1 1968 Triborough went out of business merging into the MTA. Moses was stripped of control of Triborough and offered a consultant’s position at $25,000 per year plus his limousine and driver and secretaries. He was never consulted or given meaningful work again. Moses, at age 79, took the job. Moses lived to the age of 92 dying in 1981 on Long Island.

Facebook, Tool for the Despots

Monday, October 29th, 2018

Anti-Social Media; How Facebook Disconnects Us and Undermines Democracy, Siva Vaidhyanathan, 2018

Even when we post and share demonstrably false stories and claims we do so to declare our affiliation, to assert that our social bonds mean more to us than the question of truth…How do we train billions of people to value truth over their cultural membership when the question of truth holds little at stake for them and the question of social membership holds so much?

The social aspect of social media trumps any effort to build or spread civic responsibility into the system. Facebook is a pleasure machine. The pleasure is light and fleeting. That’s what keeps us coming back. But Facebook is also an anxiety machine, an anger machine, and a resentment machine…but the resentment is deep and durable.

Facebook attracts us, hooks us, encourages us to declare our affiliations, divides us, and tracks every single interaction along the way. Facebook’s surveillance system is part of its pleasure system. They cannot be severed.

The influence of Facebook on the violent attacks in Charlottesville is difficult to trace but important to address. I live in a nation that no longer seems able to filter out of its public sphere the most odious calls for an ethnically pure state, that has a major political party that can no longer resist fringe elements, and has a media ecosystem that rewards the most alarming and spectacular claims and is now willing to take seriously the claims of white supremacists. One man sympathetic to white supremacists even assumed the presidency in 2017 because the established filters all failed. Facebook did not generate these problems. It did amplify and normalize them by scrambling our senses of truth and justice and fracturing a sense of collective national fate. Mostly Facebook makes it hard to think.

Between Google and Facebook, we have witnessed a global concentration of wealth and power not seen since the British and Dutch East India Companies ruled vast territories, millions of people, and the most valuable trade routes. Remarkably, and unlike the East India Companies, Google and Facebook have achieved this feat nonviolently and with only tangential state support…They did all this by inviting us in, tricking us into allowing them to make us their means to wealth and power, distilling our activities and identities into data, and launching a major ideological movement – what Neil Postman described yet only predicted in 1992: technopoly.

Postman: “It (technopoly) consists of the deification of technology, which means that the culture seeks it authorization in technology, finds its satisfaction in technology, and takes its orders from technology.” This ideological domination demands a sacrifice of all previously stable belief systems. So trust in institutions, ancient or modern, erodes. Local identities and traditions are rendered valueless except as raw material for remixes, parody, tourism, tapestries, and games rather than expressions of deep human narratives and connections.

Postman: “Technopoly eliminates alternatives to itself in precisely the way Aldous Huxley outlined in Brave New World. It does not make them illegal. It does not make them immoral. It does not even make them unpopular. It makes them invisible and therefore irrelevant.” If it didn’t happen on Facebook, it didn’t happen.

The problem is, Facebook by 2013 already was so dominant that for may people absence from Facebook meant invisibility

The most fruitful response to the problems that Facebook creates, reveals, or amplifies would be to reinvest and strengthen institutions that generate deep, meaningful knowledge. We must support scientific communities, universities, libraries, and museums around the world. We must foster deliberation through publically funded better journalism, forums for debate, and commissions that could harness expertise to address our most pressing challenges.

Modi Duterte Trump

The book is very good on the exploitation of Facebook by despots such as Rodrigo Duterte in the Philippines, and Narendra Modi in India. He talks about the efforts of the Trump campaign to target potential Hillary voters with negative information, such as highlighting the Bill Clinton record of criminalizing crack cocaine, black incarcerations, and Hilary comments on blacks. These efforts probably further suppressed Hillary’s votes in key states like Wisconsin, Michigan, and Pennsylvania.

In the meantime, Vaidhyanathan continues to use Facebook.