Category Archives: Corruption

Bad Actors

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A continuing source of frustration for many Americans has been the fact that no one on Wall Street has gone to jail for the mortgage fraud that nearly crashed the world financial system in 2008. But in the last three weeks the dam has broken and the indictments are beginning to emerge. It may have taken a long time, but perhaps the departure of Tim Geithner, the boy with his finger in the dyke, will signal a new attitude by the Obama administration towards the Wall Street Miscreants.

The first step was the amazing Frontline episode The Untouchables, which depicted a craven Assistant Attorney General, Lanny Breuer, who went out of his way to protect the bankers, fearing an indictment would crash the financial system. Soon after the program aired, Breuer announced he was returning to private practice, probably to represent the big banks.

Next came the Department of Justice suit against Standard and Poors for their outrageous rating as AAA, securities that they knew were junk. The suit quotes internal S & P emails.

“Rating agencies continue to create an even bigger monster — the C.D.O. market,” one S.& P. employee wrote in an internal e-mail in December 2006. “Let’s hope we are all wealthy and retired by the time this house of card falters.”

Another S.& P. employee wrote in an instant message the next April, reproduced in the complaint: “We rate every deal. It could be structured by cows and we would rate it.”

Finally comes word this morning that Jamie Dimon and his pals at JP Morgan Chase were just as involved in mortgage fraud as any other bank, despite Dimon’s attempt to paint himself as the good guy during the 2008 meltdown.

According to the court documents, an analysis for JPMorgan in September 2006 found that “nearly half of the sample pool” — or 214 loans — were “defective,” meaning they did not meet the underwriting standards. The borrowers’ incomes, the firms found, were dangerously low relative to the size of their mortgages. Another troubling report in 2006 discovered that thousands of borrowers had already fallen behind on their payments.

But JPMorgan at times dismissed the critical assessments or altered them, the documents show. Certain JPMorgan employees, including the bankers who assembled the mortgages and the due diligence managers, had the power to ignore or veto bad reviews.

The real problem with establishment types like Tim Geithner and Lanny Breuer is that they went to Ivy League schools and couldn’t imagine that their establishment peers would possibly commit fraud. And even if they saw evidence of the fraud, then preserving The System became more important then sending their classmates to jail. President Obama bought into that establishment trope in his first term. He surrounded himself with people like Geithner, Larry Summers and Bob Gates. But I sense something has changed. The appointment of Mary Jo White to head the SEC could be a sign that heads are going to role, but the real change will come from more lawsuits filed like the S & P case. Certainly the other ratings services, Moody’s and Fitch, are equally guilty of pay to play services.  One of Obama’s greatest legacies could be a real financial reform agenda.

Aaron Swartz

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I noticed a lot of comments on the suicide of young Aaron Swartz on my last post. It’s a tragedy when anyone takes their own life and I can’t really write about the issues surrounding the legal case he was involved in because I’m tired of dealing with the Mob– the idiots that send me emails saying “Why don’t you shove a nail in your ass” after we released our report on Ad Networks and Piracy. The problem with the copyleft is that they can’t imagine someone actually having to go to jail for stealing intellectual property. That was probably part of Aaron’s problem. It never occurred to him that breaking into a server was the equivalent of breaking into a house. He had a history of depression and wrote romantically about suicide in the comic book movies he loved. He seemed like a very generous soul. But he was clearly not ready to go to jail.

But the fact that I feel constrained to speak my mind about piracy because I am tired of the mob is sad. Last year I wrote about my friend David Fanning having his whole web enterprise destroyed by Lulzsec because his show Frontline reported on the darker side of Julian Assange’s sense of morality. I know for a fact that most musicians are scared to speak out about having their content exploited by criminals like Kim Dotcom, because they are afraid of the cyber mob. I don’t know how the hell we are going to have a civil conversation about IP with those of us who want to defend the artist’s right to get paid for their work, being under the threat of bodily harm (note that most of the most threatening comments have been taken down)?

America’s Paranoia Problem

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A year ago I wrote a post called American Crack-up, in which I argued that a good bit of the country had become completely divorced from Reality. It began with these lines.

When did it start?

When did America’s mass consensual hallucination begin? When did the boundaries between truth and fiction dissolve?

In these Post Newtown days, I am even more convinced that the American Crack up is like a continuing set of mass paranoid delusions. Here is the Mayo Clinic definition of the delusions associated with Paranoid Schizophrenia.

In paranoid schizophrenia, a common delusion is that you’re being singled out for harm. For instance, you may believe that the government is monitoring every move you make or that a co-worker is poisoning your lunch. You may also have delusions of grandeur — the belief that you can fly, that you’re famous or that you have a relationship with a famous person, for example. You hold on to these false beliefs despite evidence to the contrary. Delusions can result in aggression or violence if you believe you must act in self-defense against those who want to harm you.

Sound familiar?

Now it’s fairly clear that many of the Mass Gun Murderers were suffering from Paranoid Schizophrenia and even Adam Lanza’s mother seemed to be somewhat paranoid. But what concerns me equally is the number of seriously delusional people who are in positions of power or influence. Take for instance Larry Pratt, President of Gun Owners of America.

During the interview on Hardball, Pratt argued that guns are necessary to “control the government.” When Matthews asked for an example, Pratt pointed to 1946, in Athens, Tenn., when townsmen took up arms against corrupt government officials.

Why is this guy walking into the TV studios of Washington rather than being treated for his paranoid delusions that he needs assault rifles to defend himself from the government? The problem is that since the FCC banned the Fairness Doctrine, paranoid loons like Glenn Beck can fill our airwaves with delusional crap that is accepted by imbeciles like Larry Pratt. People can live their whole lives with an alternative set of facts as if they were in a Twilight Zone episode. Climate Change is a Hoax, the Government has already been taken over by Communists who will enslave God Fearing, Gun Toting Americans, Women’s bodies reject the sperm of a rape.

I really feel like 30% of Americans are living in an alternative universe where they slowly get dumber every day. It is truly scary.

Globalization Fail

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A few weeks ago I wrote about the anomie that enveloped me when I attended the Aspen Ideas Festival. The sense that what was taking place in our economy and society was the effect of forces outside our control. The term used for this notion is globalization. So yesterday the New York Times put out a long piece about how through a combination of carrots and sticks we had gotten the Japanese auto manufacturers to put plants in America and hire American workers. The article asked this question.

For years, high-tech executives have argued that the United States cannot compete in making the most popular electronic devices. Companies like Apple, Dell and Hewlett-Packard, which rely on huge Asian factories, assert that many types of manufacturing would be too costly and inefficient in America. Only overseas, they have said, can they find an abundance of educated midlevel engineers, low-wage workers and at-the-ready suppliers.

But the migration of Japanese auto manufacturing to the United States over the last 30 years offers a case study in how the unlikeliest of transformations can unfold. Despite the decline of American car companies, the United States today remains one of the top auto manufacturers and employers in the world. Japanese and other foreign companies account for more than 40 percent of cars built in the United States, employing about 95,000 people directly and hundreds of thousands more among parts suppliers.

I posted the article on my Facebook page and got this rant back from John Papola.

Why should the corrupt crony thugs in DC prevent Americans from trading with other people just because of some stupid line on a map. The “globalization gospel” is called “freedom” and “free exchange” and its the roots of western civilization. Are you seriously proposing mercantilism? The 17th century called. It wants it’s defunct doctrines back.

But my response to John is that his vision of freedom in America is a mirage. In the U.S. those with power use it to insulate themselves from competitive forces by winning favorable tax treatment and other forms of what economists call “rent seeking.” I reject the notion that all of these changes that make it so hard to find jobs for people without college educations, are just the inevitable forces of technological change. Globalization was a choice on the part of capital to weaken the bargaining power of workers by using outsourcing. As the auto “insourcing” model proves, there is no inherent reason why U.S. workers can’t be just as productive as Asian workers. Because the Reagan administration (and every one to follow) made it easy for companies to close down factories and move jobs offshore, the rent seekers triumphed.

The irony of course is that I know John Papola hates rent seeking crony capitalism as much as I do. For a liberal like myself, it is anguishing that both Clinton and Obama have been just as obsequious to the wishes of Wall Street as Reagan, Bush 1 and 2. What we need is a new reform politics that will combine elements of market choice (such as our discussion on school vouchers) with a simple set of regulations that bring the extraordinary power of capital to heel. We will still need a smart government to build the roads, run the police and fire departments and provide a social safety net. My guess is that the Democrats are less in the bag to the 1% than the Republicans and so they are better positioned to be the messengers of reform. As I have said before, cashiering Tim Geithner and hiring Joe Stiglitz would be a good start for Obama’s second term.

The Big Lie

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Kim Dotcom is the alias of a modern day digital mafioso, who made more than half a billion dollars in the last few years by selling advertising on a site filled with stolen movies and music. Like any mafia lord, Kim hangs out with various low talent artists hoping that a little blow might be left on the coffee table. So today Kim and his lame ass disco music friends have released a song that is on a par with Triumph of The Will for those who study propaganda. The master of the field was Joe Goebbels who wrote “It would not be impossible to prove with sufficient repetition and a psychological understanding of the people concerned that a square is in fact a circle. They are mere words, and words can be molded until they clothe ideas and disguise.”

In his brilliant attempt to square the circle of his fortune built on stealing from artists, Kim equates his struggle with that of Martin Luther King. He attempts to hijack the whole Occupy movement to aid in his redemption. But in deciding that he could make $ million by selling advertising on Megaupload–with an inventory of quantities of stolen digital content–it’s easy to think that Kim Dotcom believed he was above the law. And the sad thing is that huge corporations like Google and Yahoo—some of Kim Dotcom’s early advertising partners–support this kind of conduct by enabling an underground advertising market that funds both piracy and pornography (usually on the same site) in the huge “remnant ad business” on the web. Continue reading →

Money, Power and Wall Street

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You owe it to yourself to watch the new Frontline two part special, Money, Power and Wall Street. It is as fine an understanding of where we are and how we got here as anything in our media system today. Part Two comes on next week, but already the major themes are becoming clear.

  • Complexity-No one except the “Quants” (the mathematical geniuses in the Big Investment Banks) who designed the Credit Default Swaps that grew to a $50 Trillion market in 8 years, knew how the securities operated or how risky they really were.
  • Transparency-The only reason the spreads were so big on the CDS market was that it was a totally Dark Market. There was no transparency. No one could tell the real values of the securities.
  • The Committee to Save the World-Rubin, Summers, Paulson, Blankfein, Dimon and Geithner were all part of a club that was going to make sure that none of their members would have to take a haircut on all the crap they owned. The Democrats are just as guilty as the Republicans that this happened.

If Obama’s second term looks like Teddy Roosevelt’s second term and he turns into the trust buster populist President, then eventually this wrong doing will be punished. Until then, watch this show and get really pissed off.

The Hunger Games

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We had our Annenberg Innovation Summit yesterday and it was a smashing success. So today for the first time in two weeks I went to the movies. I saw Hunger Games, because I am going to give a lecture on Monday on technology, politics and the future. The movie is the latest in a long line of dystopian science fiction films from Metropolis to Bladerunner. I long since came to the conclusion that science fiction is our way of writing about our fears about the present. Metropolis (1927) was about the exploitation of the masses in a machine age. Bladerunner (1982) takes the metaphor farther by imagining machine made humans, called Replicants. Both invoke world’s of such radical change, that we don’t recognize our self in the protagonists.

But Hunger Games is radically different, because it essentially is about the 1% vs. the 99%. It is about what could happen in the world we are experiencing today. The Hunger Games is in essence a story about Bread and Circuses. As the Poet Juvenal wrote of the period in 140 BC Rome when the politicians were for sale and the people didn’t care as along as the bloody entertainments kept coming.

… Already long ago, from when we sold our vote to no man, the People have abdicated our duties; for the People who once upon a time handed out military command, high civil office, legions — everything, now restrains itself and anxiously hopes for just two things:bread and circuses

We start the movie in an Appalachia not too far distant from the haunting Walker Evans photos of the Great Depression. Dirt poor coal miners living under constant police presence. All power and money resides in the Capitol–a New York on Steroids. The Capitol is filed with a society of the very rich that are every bit as decadent as Rome in Calligulas’ time or New York in Andy Warhol’s prime. The Hunger Games are a combination Reality Show and Gladiator match. The contest creates a kind of  Lord of the Flies world with knives, spears and (most importantly) a bow and arrow that our heroine wields beautifully.

But finally it is a story of teen empowerment and rebellion. It is a vision of a future of the total failure of democracy because security of the rich was more important. That’s a very dark belief that obviously millions of young readers of the novels have bought in to. That the movie made $150 million in its first weekend is testimony that some profound mental shift has happened in the society. 1%-99% metaphor has sunk in to the collective consciousness.

Now that it is obvious that Mitt Romney will be the Republican nominee, this same metaphor will dominate the political debate. Mitt is the candidate of and for the 1%. Look at his tax policy, which will enrich them and his hawkish military policy which will continue the 65 year Military Industrial Complex boondoggle, further enriching them. Finally his oil and environmental policies are made for the Koch Brothers and their friends in the oil and gas business.

The trick for Obama is to make the connection to the 18-24 year olds who didn’t get a chance to vote last time. These are the kids lining up for Hunger Games. I sense they are ready for Obama’s message. But he has to take on the Inequality Issue head on.

How do you like your democracy now, Mr. Scalia?

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Only one year ago, the Supreme Court handed down it’s decision in Citizens United v. Federal Election Commission. But I wonder how Mr. Justice Scalia, whose concurrence outlined the most radical defense of Corporate speech, must be feeling as he surveys the wreckage of American Democracy in the wake of his decision?

Justice Stevens, in his eloquent dissent had stated that the court’s decision would be a disaster for our democracy.

At bottom, the Court’s opinion is thus a rejection of the common sense of the American people, who have recognized a need to prevent corporations from undermining self government since the founding, and who have fought against the distinctive corrupting potential of corporate electioneering since the days of Theodore Roosevelt. It is a strange time to repudiate that common sense. While American democracy is imperfect, few outside the majority of this Court would have thought its flaws included a dearth of corporate money in politics.

But Scalia pushed back hard against Justice Stevens, writing, “to exclude or impede corporate speech is to muzzle the principal agents of the modern free economy. We should celebrate rather than condemn the addition of this speech to the public debate.” Defenders of corporate speech like Scalia say that full disclosure will solve any objections to the possibly corrupting influence of the Supreme Court decision. They note that on Friday the donors to Super Pacs will have to disclose. But don’t hold your breath.

Some donors will never be known because some super PACs have established not-for-profit arms that can shield contributors’ identities. Those arms can spend more than roughly half of their money on so-called advocacy, although campaign-finance reformers have urged the Internal Revenue Service to reduce that share.

Ironically, Chief Justice Roberts, writing for the majority justified overturning precedent (stare decisis) in the Citizens United case. He wrote, “Stare decisis is a doctrine of preservation, not transformation. It counsels deference to past mistakes, but provides no justification for making new ones.” He should heed his own words and make up for the egregious mistake of the January 2010 decision.

New Liberalism

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I had dinner last night with one of the most important conservative media voices in America and some of his friends. I had gone to the dinner expecting some fireworks, but was totally caught off guard by his charm and what he had to say.

First, he was disgusted by “the pygmies” in the Republican Presidential Race. As much as he dislikes Obama, there was not a one of the current Republican candidates that he could be enthusiastic about.

Second, we found ourselves in agreement that the issue of Crony Capitalism is perhaps the most pernicious threat to our Republic. Crony Capitalism distorts everything from Crop subsidies flowing to agribusiness to our inability to cancel useless Pentagon weapon systems. And the disease effects both political parties.

As the evening progressed I kept trying to move us beyond the Left-Right dialectic we are trapped in and to suggest that we might find some common ground in the liberal principles that are the basis for our Republic:

We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness.

Now the word “liberal” is seen as poisonous to conservatives, but it’s origins in John Locke’s Natural Rights theory were the basis for our revolution. Continue reading →

Delicious Irony

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Two years ago Citizens United financed a documentary by Newt & Callista Gingrich called America at Risk. It was the typical Gingrich over the top Global War on Islam screed and par for the course for the production company most famous for the Supreme Court decision that unleashed unlimited corporate funds into the 2012 election cycle.

So what a delicious irony that Newt’s campaign has been brought to earth by the very force of Citizens United and the Super Pacs it spawned which are dumping endless negative ads on Gingrich.

The involvement of such groups can be especially damaging for candidates like Mr. Gingrich who have not raised enough money to be able to counter negative attacks with an advertising blitz of their own. Nor does Mr. Gingrich have a well-financed super PAC working on his behalf.

“The problem is the super PACs come in and spend $1 million a week blasting a candidate,” said Tim Albrecht, a senior aide to Gov. Terry E. Branstad of Iowa, a Republican. “And Newt has not been able to put an apparatus like that together.”

Live by the sword, die by the sword.