The actions of those in the Civil Rights Movement were not always supported by the majority of Americans, especially the violence. But the messages presented at the sit-ins and marches did begin to resonate.
However, what probably helped the movement the most, was the response of segregationists like George Wallace. "In the name of the greatest people that have ever trod this earth, I draw the line in the dust and toss the gauntlet before the feet of tyranny, and I say segregation now, segregation tomorrow, segregation forever".
His confrontations with students played out like a Klan lynching, and Americans noticed, overwhelmingly supporting an end to segregation, and discrimination that defined where blacks could live, work and be educated.
As "Occupiers" in the anti-Wall Street movement are being evicted, many citizens are applauding the police crack down. But the message of inequality is sinking in, being helped by the parallel universe of the Republican debates. We know that there are many people hurting, victims of not only the "economic crisis", when the rich got even richer, but of a concerted effort to remove the public from public policy.
The message presented by the GOP hopefuls, is that poor people should be allowed to starve, sick people without medical insurance, allowed to die, and if you're unemployed, you're just lazy. The same message they've been spouting for fifty years.
The right wing noise machine has monopolized the political conversation for too long, and people are beginning to tune out.
In Mississippi, voters rejected a measure that would have defined a fertilized egg as a person, even though pro-life groups poured a lot of money into getting it passed. They were hoping that this would set a precedent, and help a larger bill, the Sanctity of Life Act, sponsored by Georgia Republican Rep. Paul ‘When Will Someone Shoot Obama’ Broun. If they can't get it passed in Mississippi, there's hope.
In Ohio, an anti-union bill that was signed into law earlier this year, was repealed by voters with a 23 point margin.
Regardless of the margin, last night was historic as no Governor of Ohio has ever seen voters repeal any portion of their agenda within the first year in office. First, the ability of anyone to pull off a referendum so early in a new Governor’s term is itself incredibly rare. Second, this is the only time it worked.
A grassroots group called We Are Ohio, need to be commended. They were discredited at every turn, called communists and traitors, but they never quit.
Canadian unions are challenging Tony Clement's budget cuts, and we need to back them up. In Ohio, Democrats and Republicans worked together. This is not a partisan issue but a We are Canada one.
Maine reinstated same day voter registration after the Republicans tried to make it more difficult to vote. Russel Pearce, the architect of Arizona’s racist profiling law, just got voted out of office, in an historic recall and the state of Delaware is suing Wall Street for questionable mortgage practices.
You don't have to live in a park and pee in a porta-potty, to know that what is happening is wrong. The Occupy Wall Street group has struck a nerve and the ridiculous Republican presidential hopefuls, a shot of common sense and common decency, sorely lacking in the GOP. They represent everything that is wrong with the Conservative movement. It is pure evil.
The Occupation of Wall Street protests are growing, and appear to have staying power. Without the corporate funding of the Tea Party, they started with just a small group and an idea.
Taxpayers were forced to bail out Wall Street, and yet Wall Street now sits on a mountain of cash, refusing to bail them out.
What are these so-called "job creators" doing with all that money? They certainly aren't creating jobs.
So this small group took to the streets to deliver their simple message and it's beginning to resonate.
Republican presidential hopeful, Herman Cain, suggests that they are playing the victim card. They are jealous of the wealthy, otherwise known as Republicans and their posse; and if they're out of work it's their own fault.
Can you imagine someone wanting to be president of the United States, openly declaring that he has no interest in representing the working class, who are now the "hardly working" class?
He's now tied for the lead.
Canada's occupation of Bay Street protests will start this week and let's hope they are a success.
The fools gold of neoconservatism has been exposed as worthless. Giving more money to the rich, only helps the rich, who in turn help the conservatives stay in power.
In Ontario, Tim Hudak's campaign was reliably disappointing. "Low taxes", tough on imaginary crime and going after welfare cheats. If he'd thrown in "long-haired hippies", it could have just as easily been Ronald Reagan's 1967 campaign in his first run for Governor of California.
In fact, it probably was. For almost half a century, neocons have stuck to the same script.
In Kingston, our local conservative candidate Rodger James, had more signs than any of his opponents. Not many on lawns, but busy roadways were plastered with them, lined up like blue and white dominoes.
I see those signs as a metaphor for today's conservatism.
Gluttony and excess, with nothing behind them but a big stick.
The Wall Street protests continue, with activists promising to hold out for months. However, another element has been brought in, that has no place in a legitimate rally.
Topless women with signs requesting that gawkers not look at them but listen to them. I can't help but think that Karl Rove has outdone himself. They need to stop off at Wall Street, pick up their pay cheques for discrediting the movement, and then let the grown-ups take over.
Did they really think people would listen to them if they took their clothes off?
The message of the protesters is an important one. They represent the 99% of Americans that are propping up the top 1%, and they are sick of it.
Remember the 2006 leaked Citigroup memo? (Equity Strategy, By: Ajay Kapur, Niall Macleod, Narendra Singh, Citigroup Global Market Research, October 16, 2005)
The World is dividing into two blocs - the Plutonomy and the rest. The U.S., UK, and Canada are the key Plutonomies - economies powered by the wealthy. Continental Europe (ex-Italy) and Japan are in the egalitarian bloc.
... We can see a number of potential challenges to plutonomy. The first, and probably most potent, is through a labor backlash. Outsourcing, offshoring or insourcing of cheap labor is done to undercut current labor costs .... Low-end developed market labor might not have much economic power, but it does have equal voting power with the rich .... the third threat comes from the potential social backlash.
All we have left is "equal voting power", yet people are still refusing to vote, casting their ballots instead for the continuation of our plutocracy.
When does Stephen Harper ever talk about income disparity or poverty? Never. He was handed a Senate report on how to help alleviate poverty, and he stuck his nose in the air and then threw it in the trash.
Morton Blackwell, the man who helped Preston Manning set up his anti-democracy centre, and trained people like Karl Rove and Rob Anders, is one of the key players in the Neoconservative movement.
He has made their intentions clear. In a forward to Plinio de Correa de Olivier's English language edition of his book: Nobility and Analagous Traditional Elites, that promotes "the restoration of influence of authentic elites over the multitudes", Blackwell writes:
'One does not have to accept Papal infallibility to appreciate a case persuasively made, using theological, moral, and prudential arguments. This book will convince many readers, whatever their faith, that good elites are legitimate, desirable and, yes, necessary'.
Unfortunately these are not good elites. They are just greedy elites and it's time that the "multitudes" started governing themselves again, by taking back their democracy. A little "social backlash"
The Wall Street protests are important and those topless women need to put on some clothes or go home.
I guess having a ranch named "Niggerhead" didn't win him any points. The Tea Partiers would have loved it, but the Republican leader has to be able to win over more than the crazies to get elected.
It really says a lot for the state of the party though, when Mitt Romney is now considered to be a moderate.
I just finished another section of my Canadian Manifesto. It's flowing better now and should progress faster. With two elections down, I'll have a bit more time to work on it.
I mentioned the musician Tom Morello, who had appeared on Bill Maher recently, discussing social issues. I was so impressed with his genuine concern for societal imbalance and dedication to several causes.
Morello spoke of the "occupation of Wall Street" by folks who had just had enough. One member of the panel belittled the protesters, claiming there were only a handful, but clearly there are more than he would have liked us to believe.
In fact, at least 800 were arrested, and the numbers are rising, not only of arrests but of demonstrators.
The group, called Occupy Wall Street, has been protesting against the finance industry and other issues by camping out in Zuccotti park in New York. During the afternoon a long line of protesters numbering several thousand snaked through the streets towards the landmark bridge across the East River with the aim of ending at a Brooklyn park.
However, during the march across the bridge groups of protesters sat down or strayed into the road from the pedestrian pathway. They were then arrested in large numbers, and held for several hours, by officers who were part of a heavy police presence shepherding the march along its path. At one stage 500 protesters were blocked off by police on the bridge. At least one journalist, freelancer Natasha Lennard for the New York Times, was among those arrested.
The protesters then took their march to police headquarters.
Erin Larkins, a Columbia University graduate student who says she and her boyfriend have significant student loan debt, was among the thousands of protesters on the bridge. She said a friend persuaded her to join the march and she's glad she did. "I don't think we're asking for much, just to wake up every morning not worrying whether we can pay the rent, or whether our next meal will be rice and beans again".
400 of America's wealthiest citizens, have more money than the bottom 155 million combined. Yet when Wall Street gambled and lost, they were bailed out, while thousands at the bottom were thrown out.
Thrown out of their jobs, out their homes and out of the government's concern.
Inspired by protesters along Wall Street and in other U.S. cities, hundreds are expected to occupy Toronto's Bay Street in two weeks to air their various grievances against the financial system and its wealthiest companies. The protest near Wall Street in New York is entering its third week, and doesn't appear to be slowing down. In fact, a police crackdown has only emboldened protesters and some are now expecting the "occupation" to continue into the winter.
The organizers of Occupy Toronto plan to descend on King and Bay Streets on the morning of Saturday, Oct. 15 to set a base of operation to prepare for a march on that Monday. Organizers hope the occupation will last into the following week.
It's all we have now.
Michael Moore was also a guest on the program and his discussion with Morello turned toward citizen activism. They agreed that it would just take one person. One "last" person.
The last person to be thrown out of their home. The last person to lose their job to outsourcing or downsizing. The last person to be refused medical treatment because their insurance didn't cover it.
Rosa Parks was the last person, symbolically speaking, to move to the back of the bus, simply because she was black, and she sparked the Civil Rights movement.
In Canada, wonderful little Brigette Depape, stood alone against Stephen Harper and the Senate. She took a beating from the media and a dressing down from Senator David Tkachuk, one of the sorriest excuses for a human being who ever lived.
Yet Tkachuk prevailed. We chose corrupt not courageous.
In July Kai Nagata quit his job as CTV's Quebec City Bureau Chief, over the state of the Canadian media, and their refusal to sound the alarm over the Harper Doctrine, a rehash of the Bush Doctrine.
But the media is still spinning themselves silly, afraid to stop, fearing they might land on a real political news story. There are exceptions, but sadly, too few.
So if you're tired of corporate tax breaks, deregulation that threatens our environment, and the constant pandering to the rich, join the protest on October 15.
For heaven sake, a former Goldman-Sachs employee is now running the Bank of Canada. Jim Flaherty and Stephen Harper have signed us on to new accounting rules that allow corporations to lie and cheat, without penalty, while toughening laws against far weaker, and less damaging, criminal acts.
When are we going to say enough is enough? Who will be our "last"?
This is the next in my series on Jim Flaherty, Goldman Sachs, AIG and Canada's massive bank bailout. Those following the story already knew of the $125 billion from Canadian taxpayers, but for the first time we heard of how our big five banks also received bailout money from the U.S. Treasury, apaprently in the amount of $111 billion.
But unfortunately the story that appeared in the Globe and Mail vanished almost as soon as it was posted. The only other person who had seen this illusive column was Mark McQueen: Fed's Remarkable Disclosure of Funds for Canada’s Five Largest Banks. His link to the story is also broken.
So I decided to do a bit of digging on my own, and it is indeed true. You just have to let your fingers travel the globe and pick up scraps where you can, so bear with me.
To say that Americans weren't thrilled by the original government bailout of American financial institutions is an understatement. But if they were upset with that plan, imagine how furious they’re going to be when they start to understand that the Obama administration has begun bailing out banks from Japan, Canada and Europe.
.... With the exception of $30 billion to Canadian banks, the Federal Reserve won't reveal how much of these subsidized loans they are giving to foreign banks. And why we would want to subsidize Canadian banks is a mystery in the first place. Compared to the U.S. economy, the Canadian economy has done fairly well during the global economic crisis.
In September of 2008, the U.S. government was already contemplating bailing out foreign banks who had dealing in the U.S., lifting many requirements, and this was being handled by Henry Paulson.
Treasury Secretary Henry Paulson confirmed the change on ABC's "This Week," telling George Stephanopoulos that coverage of foreign-based banks is "a distinction without a difference to the American people."
And who is Henry Paulson? The former Chairman and Chief Executive Officer of Goldman Sachs. He loosened the criteria for bailouts to include anyone who had dealings with AIG. And as we know, that included Canadian banks courtesy of Steve and Jimbo.
Bank of Montreal has emerged as one of the key beneficiaries of the costly decision by the U.S. government to rescue American International Group. Canada’s fourth-largest bank is among the top 10 recipients of federal bailout money paid to financial counterparties by the stricken insurer, according to documents published by AIG.
The payments were revealed after pressure from Capitol Hill for an account of how taxpayer money had been spent by the company amid a rising populist backlash. The documents show a least US$1.1-billion of bailout money was funneled to BMO alongside payouts of up to US$13-billion each to U.S. and European banks.
So while they were given $125 billion tax dollars so that we could buy back their toxic paper, they also put out their other hand and took from American taxpayers. And while they were losing their homes and their livelihoods, our so-called "good banks" were feeding from the public trough on both sides of the border.
CNN were also reporting on our "good banks" and the difficulty in getting information South of the border. BMO appears on the list. And with some of the money they bought up AIG in Canada. As a result they were investigated by the NY Attorney general's office.
Bank of Montreal is being caught up in a widening probe into the use of bailout funds by American International Group, the distressed U.S. insurer. Payments made by AIG to Canada’s fourth-largest bank are due to be examined by the New York Attorney-General Andrew Cuomo as part of an inquiry into billions in taxpayer money funnelled to financial institutions.
The investigation comes as the attention of U.S. lawmakers turns to the payouts to banks following a political firestorm over bonuses handed by the insurer to staff at a controversial unit that sold credit protection to sophisticated financial clients. "Our investigation into corporate bonuses has led us to an investigation of the credit default swap contracts at AIG," the Attorney-General’s office said. BMO declined to comment.
Reports name AIG's derivative counterparties, including BMO NEW YORK _ The U.S. government bailout of insurance giant American International Group Inc. has benefited at least two-dozen U.S. and foreign financial institutions _ including the Bank of Montreal _ who together collected some $50 billion, news reports said Saturday.
BMO was also a partner in their derivatives game, that brought on the global economic crisis.
So Goldman Sach's Henry Paulson was in charge of distributing funds to banks and is trying to keep quiet how much went to foreign interests, including Canada's big five. Goldman Sach's Mark Carney is now the Governor of the Bank of Canada. Goldman Sach's Timothy Hodgson is his assistant in charge of derivatives, and Flaherty is allowing our CPP funds to be invested in this high-risk gamble.
Our Pig in the Poke
Matt Taibbi in his piece Wall Street's Bailout Hustle, refers to one aspect of the entire scam as a "Pig in the Poke".
The scam's name comes from the Middle Ages, when some fool would be sold a bound and gagged pig that he would see being put into a bag; he'd miss the switch, then get home and find a tied-up cat in there instead. Hence the expression "Don't let the cat out of the bag."The "Pig in the Poke" scam is another key to the entire bailout era. After the crash of the housing bubble — the largest asset bubble in history — the economy was suddenly flooded with securities backed by failing or near-failing home loans. In the cleanup phase after that bubble burst, the whole game was to get taxpayers, clients and shareholders to buy these worthless cats, but at pig prices.
One of the first times we saw the scam appear was in September 2008, right around the time that AIG was imploding. That was when the Fed changed some of its collateral rules, meaning banks that could once borrow only against sound collateral, like Treasury bills or AAA-rated corporate bonds, could now borrow against pretty much anything — including some of the mortgage-backed sewage that got us into this mess in the first place. In other words, banks that once had to show a real pig to borrow from the Fed could now show up with a cat and get pig money. "All of a sudden, banks were allowed to post absolute shit to the Fed's balance sheet," says the manager of the prominent hedge fund.
At about this time, we were in the middle of an election campaign in Canada, and when Stephane Dione sounded the alarm, both Jim Flaherty and Mark Carney laughed and referred to him as "Chicken Little". And yet not long after Flaherty announced his first 25 billion bank bailout, when he started buying their toxic assets on behalf of the Canadian taxpayer.
He tried to say it was not a bailout, but what did the Canadian tax payer get for this investment? The cat in the bag. Our "good banks" played fast and loose with the requirements for loans and mortgages, absorbing none of the risks.
When it all came tumbling down, what did they do? They used their bailout money to buy up defunct U.S. banks, and deregulated our industry to meet the lower U.S. standards, meaning that if there is another meltdown, Canada will not do so well.
Yet the Conservatives are using our money to convince us that they are the best to handle the "economy". Our "pig in the poke". We think that somewhere we have money and sound investments, but in fact we have nothing but a boatload of debt and no regulations to protect us from unscrupulous Wall Street. Instead they've been moved in.
When the Conservatives won the election in 2006 and Jim Flaherty was named the minister of finance, his choice for deputy minister raised a few eyebrows. Mark Carney was a high ranking executive from Goldman Sachs who was making millions of dollars a year. Why would he accept a position that paid a fraction of what he was used to making?
But at the time our attention was drawn to the undemocratic floor crossing of David Emerson and the subsequent drama on the hill.
As a result, the media barely gave it a passing glance. But this should have made headlines, and if not then, then at least now, in light of the mess that Goldman Sachs has made of the global economy. What was their interest in Canada?
Progressive journalists and bloggers have been sounding the alarm on Jim Flaherty's sub-prime mortgage fiasco, but no one in government or the MSM are touching it. I mentioned reading Matt Taibi's two articles in the Rolling Stone on Saturday, and it really put Canada's situation into perspective. I sat up half the night with open books scattered everywhere, and came to the conclusion that this is not simply about the gamble of high-risk mortgages. This is much deeper.
This is about Wall Street taking over this country's finances and setting us on a dangerous course. And as Linda McQuaig and Neil Brooks reveal in their book: The Trouble With Billionaires, once they move in you never get them out.
... by the early 1990s, prodigies of Wall Street had effectively taken over government by being appointed to its top economic management positions. A virtual revolving door now connects the power corridors of Wall Street and Washington, with Goldman Sachs practically serving as a training school for those running the U.S. Treasury. Robert Rubin spent twenty-six years at Goldman Sachs, rising to co-chairman of the firm before becoming Treasury secretary under Bill Clinton; Henry Paulson, a one-time Goldman CEO, became George W. Bush's Treasury Secretary. (1)
And the result has been massive deregulation, allowing Wall Street to become the Las Vegas strip. And any attempt to reverse this has proven to be impossible.
This extraordinary political clout has enabled the wealthy few to effectively disable government when it comes to regulating financial markets. So when Brooksley Born, head of the U.S. Commodity Futures Trading Commission, tried in the late 1990s to bring greater oversight to the wildly gyrating derivatives market, she was stopped in her tracks. It was almost a foregone conclusion that her efforts would be defeated, since she was opposed by the three most powerful government officials in the financial domain: Treasury Secretary Robert E. Rubin, Securities and Exchange Commission Chairman Arthur Levitt Jr., and Federal Reserve Chairman Alan Greenspan. Significantly, these men had all earned their wealth via Wall Street and all were dedicated to the Wall Street creed of deregulation. (1)
Jim Flaherty and Stephen Harper appear to have a very unhealthy infatuation with banks. I wonder if as part of role playing, they make their wives dress up as banks or bankers. But then I try not to wonder about things like that and turn my attention to pleasanter thoughts. Like a multi-car pile up.
But you can't escape this "good banks" phenomenon. It's everywhere. Canadian banks didn't fail because they were sound and regulated. But turns out this was only smoke and mirrors, because what Mark Carney has been doing, is deregulating Canada's financial sector.
We know that this new security perimeter deal is only for the benefit of multinational corporations, as globalization seeks to create a flat earth, with nothing in it's path. But Canada was a stumbling block because we had one of the safest banking systems in the world.
That's about to change. With a Wall Street guru now head of the Bank of Canada, our safeguards are being incrementally removed, that were once a barrier to foreign interests getting rich off the Canadian taxpayer.
Mark Carney started with taxing income trusts, that destroyed the life savings of many Canadian seniors, but netted $35 billion for Goldman Sachs' clients. He also removed the 15% tax on foreign investors, clearing the way for more takeover of Canadian assets. (2) In the 2010 budget, more tariffs were removed, costing taxpayers another $300 million a year, that will have to be absorbed by the working class.
The tariff elimination was by far the biggest move for corporate Canada ... [and] Despite the fiscal crunch, in which more than $160-billion will be added to the national debt by mid-decade, the federal government committed to follow through on cuts to corporate tax rates, to 15% by 2012. It would also establish a panel of MPs and businesspeople to look at repealing layers of red tape that might be adding unnecessary costs for companies. (3)
Translation for "repealing layers of red tape" - the removal of environmental protections.
The taxpayer funded ads about our economy are only creating a facade. Because behind the scenes, the boys are busy creating the perfect storm. A deregulated banking industry and an enormous amount of high-risk mortgages, now owned by us.
None of this was by accident, nor was it just a fleeting and dangerous whim. And I can prove it.
This is one in a series of articles on Jim Flaherty, his relationship with Goldman Sachs and why it might be too late to change the course they have put us on.
Sources:
1. The Trouble With Billionaires, By Linda McQuaig and Neil Brooks, Viking Canada, 2010, ISBN: 978-670-06419-9, Pg. 65-66
2. Ottawa moves to eliminate tariffs, By Paul Vieira , Financial Post, March 4, 2010
3. Taxes and Avoiding Them on Everyone's Tongue, Toronto Sun, November 11, 2007
"The test of serious moral commitment to the family is a willingness to spend public money. Effective child protection, universal access to health care, affordable child care, first-rate primary and secondary education - these are the building blocks of the protective arch that society must raise over its families. This institutional arch doesn't come cheap, but those exponents of family values who won't stump up for it are just engaging in cheap talk." - Michael Ignatieff (1)
In Michael Ignatieff's year end interview, he claimed that his Party would be focusing their attention on the middle class. Some in the media are suggesting that Rob Ford, Toronto's new neoconservative mayor, is representing the middle class, which is pure nonsense.
Because to me the middle class were never mean, at least not collectively. Rob Ford represents millionaires who want all services privatized so they can make more money, by destroying the unions there to protect public servants. People who have been able to make their way to the middle because of fair wages and benefits.
The problem with Canada since Brian Mulroney, and the United States since Ronald Reagan, is that the middle is now being ignored, while all focus is on improving the lot of the wealthy, with some ridiculous notion that those wealthy will look after the poor.
That isn't happening and as one Conservative Christian said recently "we cannot foodbank our way out of poverty." We need government intervention to protect all citizens, because it's the right thing to do.
I've come down hard on Jack Layton and the NDP recently, after learning that they will be propping up the Harper government in January, and supporting future corporate tax cuts. Canada will not survive if they move to the right. We need a good strong party governing the centre, with good strong voices from the left making sure that the needs of citizens are being met. The NDP need to get back to the values of people like Tommy Douglas, Ed Broadbent and David Lewis, who took on corporations, not bowed down to them.
And the Liberals need to get back to the values of Pierre Trudeau and Lester Pearson, and even John Diefenbaker, now that his party has been wiped out.
Because when these guys were around, Canada worked. We were envied and admired. I never even heard the word "homeless" until neoconservative Mike Harris ran Ontario. There were vagabonds and tramps, but their lives were romanticized, because many chose that free lifestyle.
But no one chooses to be homeless. And families should not be living in their cars.
Today's Billionaires Do NOT Earn Their keep
The neoconservative principle of everyone being free to make as much money as possible, and then everyone will be taken care of through the trickling down; may be the biggest fraud since the pyramid scheme.
Canadian and American society has had it's classes, and most of the wealthy got that way through hard work, or inheritance from someone else, who worked hard to get rich. There were exceptions, but for the most part you could trace names back to an invention or the improvement of an invention.
I read the story of Henry Ford, a few years back, and when he was working on his ideas, his wife was there tinkering with him (literally, not a euphemism). She told of how she would have to remove engines from the kitchen sink before she could use it, and wipe motor oil off the counters. And eventually through hard work and innovation, they gave us the modern automobile. And the auto industry provided good union jobs and swelled the ranks of the middle class. The Fords got rich and everyone benefited.
Gerber baby foods also started with an idea. The Gerber family was struggling with the canning industry, almost bankrupt, when Mrs. Gerber first suggested that they try making baby food. Initially, her husband rejected the notion, so she left him to feed their baby, attempting to mash the food fine enough for consumption. He relented and turned a small portion of the plant into canning for infants. It went so well that within a short time, a prosperous baby food company and industry was born. The Gerbers got rich and everyone prospered.
Howard Johnson first made flavoured icecream when a boy, peddling it in his wagon. The radio, the television, movies. All started with someones idea and hard work to sell that idea.
But how are many of today's millionaires and billionaires making their fortunes? Some like Bill Gates, with an idea, but too many others with a scam.
And one of the biggest scams of late is the sub-prime mortgage industry.
In their new book: The Trouble With Billionaires, Linda McQuaig and Neil Brooks, tell the story of John Paulson and Goldman-Sachs, who cashed in big on the misery of others.
Paulson didn't invent sub-prime mortgages, only took them to unheard levels, after reading a newsletter by an aging, little-known economic consultant named Gary Shilling. While everyone else was painting a rosy picture of continued growth and prosperity, Shilling predicted a crash.
It was now up to Paulson to find a way to exploit this.
Paulson had been looking for an opportunity to bet that the housing bubble would burst. There was enough information around about the shoddy nature of many of the subprime mortgage deals—with clients who had little in the way of assets, income, or employment—that a number of close observers realized a lot of "homeowners" would soon be in dire straits, unable to meet their monthly payments. In the betting parlours of Wall Street, this represented a chance to make some serious money.
The best vehicle for betting against the housing market, as Paulson and a few other Wall Streeters had figured out, was to take out "insurance" on packages of mortgages that had been bundled together and sold as a stock. This was an odd concept that twisted the conventional notion of insurance .... What was unusual here was that the Wall Street types were taking out insurance on something they had no personal stake in, on something that involved other people's assets. It was like buying insurance on a car owned by a stranger, in the hopes of collecting money if the stranger's car crashed. (2)
It was gambling on the misfortune of others. But the problem was that the needed risks were not there. Still too much caution, and you can't make money with this scheme if people are too cautious.
So Paulson decided to take a more pro-active approach. What if he worked through a lending institution, to convince the most vulnerable to buy houses they couldn't afford? That way when they lost those homes, as they almost always did, his insurance policy "against" those foreclosures, would kick in.
This "insurance"—known as a credit default swap (CDS)—was simply a bet. One frustration for Paulson was that there just weren't enough of these stocks, known as collateral debt obligations (CDO), to bet against. So he decided to become proactive. He approached a number of investment banks with the request that they create more CDOs to sell to clients, so that he could then take out insurance betting these would fail. The arrangement Paulson had in mind was rife with potential conflicts of interest. He clearly wanted to help pick the mortgages that would make up the new CDOs. And he would obviously favour particularly risky subprime mortgages, thereby increasing the likelihood that the CDOs would become worthless and he would be able to collect on the "insurance" he had taken out.
Bear Stearns, the giant investment bank where Paulson had once served as managing director, said no to his scheme. But Goldman Sachs agreed to the arrangement, providing Paulson with his dream opportunity: a chance to bet on toxic CDOs worth about $5 billion.(2)
And when the bubble burst and $5 billion dollars worth of mortgages were deemed worthless, Paulson pocketed $1 billion in "insurance." And as his gambling continued to pay off, his net gain was $3.7 billion.
He did not earn this money, he stole it, and yet he was heralded as a hero on Wall Street. The triumph of an underdog. The Greatest Trade Ever, became the name of a book of his exploits, written by Wall Street Journal reporter, Gregory Zuckerman. How can this be?
Certainly, the Paulson—Goldman scheme set off a series of events with extremely negative repercussions. Investors purchasing the toxic CDOs lost billions of dollars, unaware that they were buying faulty merchandise. Furthermore, the scheme exacerbated the impact of the housing collapse and the near-bankruptcy of insurance giant AIG, which had sold some $64 billion of CDS "insurance" on CDOs related to subprime mortgages. AIG was unable to pay out the money it owed to those, like Paulson, who had bought insurance on now-worthless mortgage-related CDOs.
... But it gets worse. Insisting that AIG's bankruptcy would devastate credit markets, the U.S. government stepped in to prop up the giant insurance conglomerate. In a deal overseen by then Treasury Secretary Henry Paulson [no relation],' Washington bailed out AIG with $170 billion. Out of that huge pool of taxpayer money, AIG paid Goldman $14 billion to make good on the insurance Goldman had bought on its CDOs.' Similarly, it paid Paulson $1 billion.
This means that a billion dollars of taxpayer money went to ensure that Paulson was able to collect his gambling jackpot. ... So Paulson not only helped spark the financial collapse—with its ruinous repercussions for millions around the world—but he made off with $1 billion of the public's money for his role in what appears to be a crooked gambling scheme. (2)
These are the new heroes. Antiheroes who are able to garner admiration for destroying countless lives. And who we are being told we must give more of our money to, if we hope to survive. Pull out that public trough and gather the wealthy. Slurp, slurp, slurp.
It reminds me of the Irish genocide, dubbed the "potato famine". While people were starving, eight shiploads of produce a day, was leaving the island in export. The hungry masses would gather while the ships were being loaded, hoping to grab a few carrots or ears of corn that fell from the overloaded carts. But if they were caught, they were beaten or sometimes imprisoned.
That is exactly where our society is headed if we don't smarten up.
But What Does John Paulson Have to do With Us?
In 2006, while Paulson was cooking up his scheme, peddling subprime mortgages to unsophisticated would-be homeowners, on a notion that every American had the "right" to own a home, Jim Flaherty was also rubbing his hands together and frothing at the mouth, over his scheme that he said would “result in greater choice and innovation in the market for mortgage insurance, benefiting consumers and promoting home ownership...”
But an investigation by the Globe and Mail revealed:
... as the subprime mortgage crisis was exploding in the United States, a contagion of U.S.-style lending practices quietly crossed the border and infected Canada's previously prudent mortgage regime. New mortgage borrowers signed up for an estimated $56-billion of risky 40-year mortgages, more than half of the total new mortgages approved by banks, trust companies and other lenders during that time, according to banking and insurance sources. Those sources estimated that 10 per cent of the mortgages, worth about $10-billion, were taken out with no money down.
The mushrooming of a Canadian version of subprime mortgages has gone largely unnoticed. The Conservative government finally banned the practice last summer, after repeated warnings from frustrated senior officials and bankers that the country's financial system was being exposed to far too much risk as the housing market weakened. Just yesterday, Finance Minister Jim Flaherty repeated the mantra that the government acted early to get rid of risky mortgages. What he and Prime Minister Stephen Harper do not explain, however, is that the expansion of zero-down, 40-year mortgages began with measures contained in the first Conservative budget in May of 2006. (3)
And like Paulson and his ilk in the United States, there were legions of the unscrupulous, targeting the vulnerable in this country.
"The subprime lenders trashed the market. They were doing loans that no one else would do and people were shaking their heads saying, 'What are these guys doing?' " The data also revealed that scores of wealthy individuals dabbled in subprime lending at a time when many believed the real estate market was on a never-ending ride. Doctors, lawyers, stockbrokers and former bankers offered high-interest-rate mortgages to debt-laden homeowners, many of whom are now facing foreclosure proceedings." (4)
And it could very well hit us in the same way, as the Globe again revealed in 2009:
Since the subprime mortgage meltdown in the United States, Canadian leaders have assured the public that a similar tidal wave of foreclosures can't hit here. They have cited the prudence and market dominance of Canada's five most prominent banks, the conservatism of Canadian consumers and the tiny, 7-per-cent market share of subprime lenders, which is much lower than their 22-per-cent market share in the United States. Just four days ago in a speech, Prime Minister Harper said: "We have avoided the extreme of the unregulated, or barely regulated, financial and mortgage industries that has caused such grief around the world."
However, The Globe's investigation shows that while Canada's real estate sector hasn't suffered as much as its counterpart in the United States, the Prime Minister and others have grossly underestimated the impact of that small portion of subprime lenders.
... The number of subprime lenders who have initiated foreclosure proceedings isn't a surprise to anyone in the business, said Kap Hiroti, the owner of Foreclosurelist.ca, one of the companies that tracks foreclosures and supplied data for this story. "It was almost as if the lenders didn't see the big picture".... (4)
Or were they like Paulson, and did see the big picture? Flaherty allowed AIG (3) to insure our mortgages. Is there a Canadian John Paulson out there, now stuffing their pockets with our money, seeing as how the Canadian taxpayer was forced to bail out the banks when the crisis first hit?
Of course there are. In fact, many I would imagine. These people are not earning their money. They are con-artists and Canadians are being robbed at both ends.
We need to get back to our middle. During the post-war years the middle class began to thrive, often due to good paying union jobs. The rich still got richer, but we were OK with that, unless they got rich by stealing or trickery, and then they went to jail.
People bought homes and raised families, and governments could focus on issues that improved society. Public schools, healthcare, women's rights, equal rights ... All of the things that moved us toward a Just Society.
By suggesting that people like Rob Ford represent the middle class, suggests that the middle class don't care about the environment or poverty, only making a buck. How out of touch the media are.
Many lost good paying union jobs, and are now forced to work two or three part-time jobs, at minimum wage just to make ends meet. This keeps them from their families longer, and for young couples, they put off starting a family until they can afford it, which may be never.
Neoconservatives want to abolish unions altogether, instead allowing corporations to determine wages and employee standards. Many will boast that they are the children of factory workers and labourers who have made it on their own, forgetting that those factory workers were unionized, and their wages and benefits helped to keep them off the streets. And public healthcare and public education gave them the hand up they needed.
No one is really "self-made". We all had a hand in it.
The "Revolt of the Rich" is over. It's time for a revolt of the middle. But even when we vote out the neocons, we can't stop fighting.
And we have to remember that no political party and no politician has all the answers. What we need is a government that never stops questioning, and an informed public that does the same.
THINK!
Sources:
1. The Rights Revolution: CBC Massey Lectures, By Michael Ignatieff, Anansi, 2000, ISBN: 978-0-88784-762-2, pg. 111
2. The Trouble With Billionaires, By Linda McQuaig and Neil Brooks, Viking Canada, 2010, ISBN: 978-670-06419-9, Pg. 93-99
When the World Economic Forum convened at Davos in January of 2009, the mood was somber. Or at least it should have been. After all, these movers and shakers had been responsible for the worst economic crisis since the Great Depression. And many in attendance had been the recipients of the largest taxpayer bailouts in history. People who would normally scream against government interference, had not only welcomed it, but demanded it.
And despite this helping hand from taxpayers, Wall Street bankers still saw fit to pay themselves a record $140 billion in bonuses in 2009, even beating their 2007 record. Seems perverse, and yet there appeared to be little objection.
And many of the elite were determined to shake off any responsibility for the 2008 financial meltdown. Not just those on Wall Street, who directly engineered it, but also those in government, who dismantled the regulatory walls, or simply encouraged the culture of greed that brought it about. (1)
... few people here will admit to have done anything personally wrong. The boss of JP Morgan Chase, James Dimon, is an exception: "I take full blame, yes. God knows some very stupid things were done." But he can say that with the confidence of a survivor.
... There is no real sense of collective guilt, or serious consideration of what to do next, other than rebuild the world that has just been lost. Davos has the air of a crash inquiry into an airline that intends to keep on flying. One hero, alone among thousands, suggested that the bankers should simply be jailed until they give the money back. The problem with that is that most of them have no money to return. The ocean on which the global boom floated has evaporated.
Yes, pay the money back. What a novel idea, but not something that's likely to happen. In fact they continue to demand more and more tax dollars, so they can continue their reckless behaviour.
Canada was represented at Davos in 2009, by Stockwell Day and Jim Flaherty, who were chest thumping over our strong banking sector. But what they didn't mention was that Jim Flaherty had bailed out our banks to the tune of 150 billion dollars, by buying up on behalf of Canadian taxpayers, all the rotten paper.
And Canada's bankers were not immune to the disease of greed, because they took 8 billion dollars of that taxpayer handout, and gave it as bonuses to their executives. And with additional tax cuts, they handed out another 10 billion this year.
And while we may now own a bit of those banks, we are still being hit with enormous bank fees. No breaks for the unemployed. No job creation. Nothing. Just 150 billion dollars of our money, and more to come.
The 'Free Market' theory is failing us, especially when those who want to be left alone to regulate themselves, come to us with their hands out, whenever they get into trouble.
Enough is enough.
Sources:
1. The Trouble With Billionaires, By Linda McQuaig and Neil Brooks, Viking Canada, 2010, ISBN: 978-670-06419-9, Pg. 2
Random House Unabridged Dictionary defines a villain as "a cruelly malicious person who is involved in or devoted to wickedness or crime; a scoundrel ....
In the aftermath of the 2008 financial crisis, we were introduced to many new villains we didn't know existed. These were Wall Street folks, who created the crisis, and then cashed in on their misdeeds, by taking money from taxpayers.
But there were others who went above and beyond to feed off the misfortunes of others. One of those was John Paulson. According to The Trouble With Billionaires:
Of the world's 1,011 billionaires, it seems fitting to begin with John Paulson, who made a fortune betting against the subprime mortgage market....
Paulson always knew he wanted a large fortune, and he systematically went about laying the groundwork for acquiring one, applying himself sufficiently at New York University to graduate first in his finance class and then winning top honours in the Harvard MBA program. From there he soon gravitated, as water down an incline, to the money-making palaces of Wall Street, opening his own hedge fund in 1994 in order to best make use of his unusual talent for spotting the biggest money-making opportunity going.
The ultimate one came his way in April 2005, when he developed a hunch that the ultra-hot subprime mortgage market was headed for spectacular collapse. Keeping that particular insight to himself, he turned his research staff loose on the problem and figured out how to make money betting that the millions of people signing up for mortgages they could only dream of actually affording would soon start defaulting. When they did, Paulson was there, watching money flood into his hedge fund with the torrential force of a great deal of water travelling down a very steep incline. In 2007 he personally pocketed $3.7 billion, giving him the record—perhaps of all time—for financially profiting from the misery of others. (1)
This would certainly be bad enough, betting on people losing their homes, but what was really happening was that these sub-prime mortgages were actively being sold to unsuspecting and vulnerable clients, who were used as pawns to make a great deal of money for a handful of people. And yet these fraudsters believe that they did nothing wrong.
A scapegoat is emerging for the U.S. housing market meltdown -- and as a reason for more Wall Street regulation -- and his name is John Paulson. As the very smart manager of a hedge fund bearing his name, Paulson and Co., he created a controversial investment vehicle called the Abacus Fund for Goldman Sachs. The Abacus Fund bought risky mortgage loans and literally bet that they (and the homeowners who held them) would default to the detriment of investors and consumers ... ... As it gets easier for the general public to wrap their heads around this picture of Paulson and Co. (and others) creating designed-to-fail mortgages for unwitting consumers, those who partook are going to be painted as pariahs, whether they acted legally, unethically or otherwise . (2)
What these players did, may not have been illegal, though it should be, and the attitude of the financial industry, is that Paulson was simply a smart man, who is being ostracized because he made a bit of money.
These people have no sense of common decency. They believe they are above everyone else and owe nothing to society. This was a con. A fraud, and someone should be in prison as a result. But instead they are being high-fived and continue to almost print money.
Another example of enormous greed, involved Larry Ellison, CEO of Oracle, who has a net worth of $27 billion.
Assuming a 10 percent rate of return, Ellison could spend $51 million a week—or $303,000 an hour, every hour of the day, seven days a week—and still not dig into his principal at all. Moreover, at that same 10 percent return, the taxes on Ellison's sprawling twenty-three-acre California estate could be entirely paid from his interest payments in just six hours, during one night's sleep. Nevertheless, in 2008, Ellison contested the tax bill for the estate and won a $3 million refund, which had to be repaid by local school boards and municipalities. The Portola Valley School District in northern California was ordered to repay the billionaire some $250,000, roughly the cost of hiring several new teachers. For Ellison, the tax refund was yet more pocket money—enough, for instance, to increase that week's hourly spending from $303,000 to $321,000. (2)
$250,000.00 was pocket change to Ellison, and yet he took the money knowing that the community would suffer as a result.
How did we get to this point?
Sources:
1. The Trouble With Billionaires, By Linda McQuaig and Neil Brooks, Viking Canada, 2010, ISBN: 978-670-06419-9, Pg. 4-5
On July 9, 2002, George Bush went to Wall Street to lay the smack down, after a rash of corporate scandals was leading to a crisis of confidence.
His Wall Street speech was long on exhortatory generalities but short on substance and specifics. Delivered at the Regent Wall Street Hotel to a crowd of about a thousand corporate CEOs and Wall Street leaders against a backdrop on which the words "Corporate Responsibility" were printed over and over in bold letters, Bush's wooden speech satisfied few except, perhaps, the CEOs against whom he allegedly railed. According to (New York) Newsday, executives emerged from the Regent Hotel "grinning like they'd just been handed fat new stock-option deals.... The executives Bush came to pillory, they swore they loved the speech. And why not? Savvy Wall Streeters realized what any half-intelligent person would. This was for the cameras." Once again, instead of exposing a broken system that needed fixing, he blamed a degradation of moral fiber among a few corporate executives. (1)
The Harper government has taken the same approach to addressing white collar crime. A lot of posturing but little substance. The first bill they brought forward, went up in smoke when Stephen Harper prorogued Parliament, for the second time, to save his job.
From the last throne speech:
- Recognizing the critical importance of sound securities regulation – both to attract investment and crack down on white-collar crime – our Government will act, within the ambit of the Constitution, to create a Canadian securities regulator.
- Our Government will now focus on the further protection of children, women and victims of white-collar crime.
- Hard-working Canadians who entrust their retirement savings to others have a right to see that trust honoured. Our Government will also introduce legislation to crack down on white-collar crime and secure justice for victims through tougher sentences.
The new bill C-21, while thought to be an important first step, was also deemed by others to be a mere baby step. Because it only spoke of punishment for fraudsters, while not addressing measures to prevent these crimes from happening.
According to Lincoln Caylor and Joseph Groiar in the Globe and Mail:
Recently introduced legislation, Standing Up for Victims of White-Collar Crime Act (Bill C-21), seeks to address this problem by imposing tougher sentences on convicted fraudsters. Where the proceeds of the crime exceed $1-million, individuals who are convicted will be subject to mandatory minimum sentences of two years. Also, sentencing judges will be required to consider making a restitution order to compensate victims of the crime. These are well-intentioned measures meant to strengthen the justice system’s ability to combat large-scale frauds. But without a commitment to a more comprehensive approach, these changes will only impose additional obligations on the current enforcement structure, which is already overburdened and under-resourced.
Ironically, the introduction of Bill C-21 may lead to fewer cases going forward. Experience in the United States has taught us that the effect of mandatory minimum sentences is an increase in the number of trials and a reduction in the number of guilty pleas. Second, the Crown will be required to quantify the proceeds of a fraud due to the million-dollar threshold, something it’s not well-equipped to do.
Finally, the current system doesn’t have the ability to deal with the distribution of assets of a fraud among a large number of victims with varying claims. ... The proposed legislation also leaves victims of fraud with the impression that they will get their money back through the criminal sentencing process. But such a belief is misguided. While the draft legislation requires a sentencing judge to consider issuing a restitution order, it does nothing to change the fact that, by the time law enforcement is involved, the money has often long disappeared.
Like Bush, Harper made a lot of promises to get tough on white collar criminals, but the fact is that the bill lacks teeth.
The president did propose "tough new criminal penalties for corporate fraud," adding that such "legislation would double the maximum prison terms for those convicted of financial fraud from five to ten years. Defrauding investors is a serious offense, and the punishment must be as serious as the crime." Unfortunately, all prosecutors will tell you how hard it is to actually convict individual executives of criminal fraud, hidden as they are behind the collective corporate form, without the extraordinary devotion of government resources.
...The creation of the new Corporate Fraud Task Force within the Justice Department was announced by the president in his Wall Street speech as "a corporate crimes SWAT team." But as CorpWatch, a progressive watchdog group devoted to corporate responsibility, reports ... Bush actually reduced the number of FBI agents on the corporate crime beat by fifty-nine,redeploying them for the anti-terrorism effort. So it looks like the Fraud TaskForce is itself a fraud."
And given that the Harper government has signed on to new accounting rules that make it legal to misrepresent your company's financial situation, I would say that their recent changes are just another fraud.
Source:
1. The Book on Bush: How George W. (mis) Leads America, By Eric Alterman and Mark Green, Penguin Books, 2004, ISBN: 0-670-03273-5, Pg. 68-69
