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Bill Black: Fiat Justitia Ruat Caelum (Let Justice be Done, Though the Heavens Fall)

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Yves here. This post by Bill Black is important because it presents and dissects an ugly example of failure of morality and common sense within what passes for the elite in the US.

Earlier this week, Matthew Yglesias defended the Administration’s distaste for pursuing fraud investigations against financial players:

….the Obama administration felt it was important to restabilize the global financial system. That meant, at the margin, shying away from anxiety-producing fraud prosecutions. And faced with a logistically difficult task, that kind of pressure at the margin seems to have made a huge difference. There simply was no appetite for the kind of intensive work that would have been necessary.

I’m not as persuaded as, say, Jamie Galbraith is that the failure to do this is a key causal element in our economic problems. Indeed, I’d say that if you look at the situation literally, Tim Geithner’s judgment was probably correct.

This line of thinking is a favorite of authoritarians. Democracy, justice, and capitalism are messy affairs. All sort of repressive measures can be justified in the name of stability and safety. And the irony here is that the firms directly responsible for the most disruptive economic event of the last eighty years are to be shielded from the long arm of the law….in the name of stability, the one output they have clearly failed to provide.

You may or may not agree with the Jamie Galbraith view that fraud was a major driver of the crisis, but it was undeniably a contributing factor. And with millions suffering in very tangible ways, through job losses, foreclosures, and losses of savings, the least we can do to is hold those responsible to account, most importantly by punishing misconduct. Every social animal species with enough brainpower to have cheaters also has individuals go to personal cost to punish them. Those attitudes are deeply ingrained precisely because they are necessary for communities to function well. Yet push come to shove, Yglesias sides with his class rather than with the broad social interests he professes to represent as a “liberal”.

By Bill Black, an Associate Professor of Economics and Law at the University of Missouri-Kansas City. He is a white-collar criminologist, a former senior financial regulator, and the author of The Best Way to Rob a Bank is to Own One.

It is one of the paradoxes of life that the most practical means to ensure that the system does not collapse is to insist on justice for all and to ignore demands for special treatment premised on claims that justice places the system at grave risk of collapse. Nietzsche argued that the ubermensch (generally translated as “Superman”) transcended the normal rules. The elites claim impunity from normal rules on the basis of their purported superiority and because they claim that they are so important that applying the normal rules to them will harm society. Some pigs are more equal than others. What any competent financial regulator learns is that the best way to destroy a financial system is to refuse to hold the elites accountable. Regulators that insist on doing justice prevent the heavens from falling.

Gretchen Morgenson and Louise Story authored a column addressing one of our national scandals – the elite banking frauds who caused the Great Recession through their looting have done so with impunity. Not a single one of them has been convicted. This is the hallmark of crony capitalism.

Gretchen and Louise’s reporting exposed for the first time two underlying scandals that produced the overall scandal. In 2008, the FBI, belatedly, realized that it had improperly targeted relatively trivial mortgage frauds while ignoring the massive lenders that specialized in making fraudulent mortgages. The FBI developed a plan to reorient its resources towards the “accounting control frauds” that always should have been its priority. We now know that the Department of Justice (DoJ) deliberately, and successfully, sabotaged this effort to investigate the major frauds. We need additional investigative reporting to discover why DoJ did so.

The second underlying scandal that their column disclosed is that two key members of what Tom Frank aptly termed Bush’s “Wrecking Crew” – Geithner and Bernanke – who President Obama chose to promote and reappoint and make his anti-regulatory leaders sought to discourage or limit federal and state prosecutions, enforcement actions, and suits. Geithner’s express rationale was that the financial system extreme fragility made vigorous investigations of the elite frauds too dangerous.

Here is how I responded to Kai Ryssdal, Marketplace’s business journalist, who asked about Geithner’s rationale:

Ryssdal: What about the argument, though, that the financial system is so fragile still, and these cases so complicated, that we can’t really tear things apart with substantive investigations and prosecutions because it will all fall apart again?
Black: Yeah, that’s an excellent point. We should leave felons in charge of our largest financial institutions as a means of achieving financial stability.
Ryssdal: See, that’s funny because I was expecting you to come back with — I don’t know, JPMorgan earned $5 billion last quarter. How shaky can they be?

In retrospect, that interchange should have been a warning to me – Ryssdal actually thought Geithner’s position favoring immunity for elite felons was acceptable when financial conditions are “shaky.” Sure enough, Matthew Yglesias wrote a column on April 14, 2011 embracing the Geithner immunity doctrine. He titled it: “The Fraud Free Financial Crisis” – and it proves our family rule that it is impossible to compete with unintentional self-parody.

Here is Yglesias’ position:

[T]he key sentiment underlying the whole thing is that the Obama administration felt it was important to restabilize the global financial system. That meant, at the margin, shying away from anxiety-producing fraud prosecutions. And faced with a logistically difficult task, that kind of pressure at the margin seems to have made a huge difference. There simply was no appetite for the kind of intensive work that would have been necessary.

I’m not as persuaded as, say, Jamie Galbraith is that the failure to do this is a key causal element in our economic problems. Indeed, I’d say that if you look at the situation literally, Tim Geithner’s judgment was probably correct.

Yglesias believes that “Geithner’s judgment was probably correct” because investigating the accounting control frauds that caused the economic crisis would have been “anxiety-producing.” Geithner’s overriding goal was to “restabilize the global financial system,” so he was correct to discourage the fraud investigations of the elite bankers. Yglesias obviously believes that Geithner “restabilize[d] the global financial system.”

I’ve noted the brief answer that I gave on Marketplace. Here’s the expanded answer. This was not a “fraud free financial crisis.” It is a prosecution free financial crisis for the elites whose frauds caused the crisis. Historically, “control frauds” – frauds run by the senior officers who control seemingly legitimate banks and use them as “weapons” to defraud creditors and shareholders – drive serious financial crises. That was true of our two most recent financial scandals. The national commission investigating the causes of the S&L debacle found that at the typical large failure “fraud was invariably present.” The major Enron era frauds were all control frauds. This current crisis was driven by accounting control frauds. We have known, for well over a century, how to make home loans in a manner that limits fraud to negligible levels. We have known for centuries that if bankers do not underwrite the inevitable results are massive losses, endemic fraud, and failure. Honest mortgage lenders do not make liar’s loans. No one ever forced a banker to make liar’s loans. Only fraudulent mortgage lenders make material numbers of liar’s loans. My prior columns have explained that it was the lenders that overwhelmingly put the lies in liar’s loans.

The FBI warned in House testimony in September 2004 that there was an “epidemic” of mortgage fraud and predicted that it would cause a “financial crisis” if it were not stopped. It was not contained. Everyone agrees that the mortgage fraud epidemic expanded massively after the FBI warning. Here’s the four-part “recipe” for a fraudulent lender optimizing fictional accounting income and real losses:

1. Grow massively
2. By making awful loans at a premium yield
3. While employing extreme leverage, and
4. Providing only grossly inadequate loss reserves

Deregulation and desupervision are more extreme in some industries and regions and certain assets provide superior “ammunition” for accounting fraud. If entry is relatively easy (and it was ridiculously easy for mortgage banking and loan brokers), then accounting control frauds will cluster in particular asset categories, industries, and regions. Clustering, extreme growth, and the fact that accounting control frauds rapidly increase their lending even when they know that they are lending into the teeth of a massive bubble are all factors that make accounting control fraud epidemics uniquely dangerous devices for hyper-inflating financial bubbles. All other factors being held constant, the more a bubble hyper-inflates the greater the economic inefficiency and losses and the greater the risk that it will cause a severe recession. The second ingredient in the fraud recipe – lending to borrowers who will often be unable to repay their loans – also plays a major role in causing bubbles to hyper-inflate. There are tens of millions of Americans who cannot afford to purchase homes and therefore are normally unable to obtain loans to purchase homes. When accounting control frauds lend to the uncreditworthy they make it possible for millions of additional Americans to purchase homes – but not to repay their loans. In economics jargon, this shifts the demand curve to the right. Shifting the demand curve for housing to the right will increase the price of housing and hyper-inflate the bubble.

How much of the bubble was driven by the accounting control fraud? We don’t know the precise amount. Data on the frequency of liar’s loans are uncertain. The three major categories of home loans: prime, subprime, and “alt-a” (aka: “stated income” or “liar’s loans) had no formal definition and no standard reporting. The loan categories are not mutually exclusive. The best information we have is that by 2006 one-half of subprime loans were also liar’s loans. The most reliable estimates of the total number of liar’s loans made in 2006 are that they represent between 25 and 49% of home loans. That is a disturbingly wide range of estimates. Even the lower bound estimate represents over a million loans. Independent studies of the incidence of fraud in liar’s loans run from 80 – 100%. That means that the annual number of mortgage frauds arising from liar’s loans alone is likely to be roughly one million. (Extrapolating the likely number of frauds from the number of criminal referrals leads to a similar estimate of the annual number of mortgage frauds.) Expanding the number of home purchasers by loaning to those who would often prove unable to repay their home loans caused a major right shift in the demand curve – providing somewhere between 25 and 50% of the total home purchasers in 2006. Losses do not increase in a linear fashion when a bubble hyper-inflates. A 25% increase in the bubble could produce a 100% increase in the ultimate losses. We do not know how rapid the rise in losses will be when a bubble hyper-inflates, but our experience with the collapse of massive bubbles is generally dire.

We could have far better data if the administration heeded our requests that we sample the Fed’s and Fannie and Freddie’s massive holdings of mortgage instruments to determine the facts. Instead, the FDIC and OTS have created a “data base” of mortgages that is worse than useless. It treats prime, subprime, and alt-a as mutually exclusive categories and defines alt-a not by the lack of underwriting but rather by FICO score. Both of these practices are not only obviously wrong, but indefensibly wrong. These errors will irretrievably cripple meaningful research and fact-based policies if senior FDIC officials fail to intervene.

These facts about the current crisis and prior crises led prominent economists such as George Akerlof (Nobel Prize, 2001), Paul Romer, and James Galbraith to warn that accounting control fraud epidemics posed critical dangers to our economy. Yglesias, who is not writing in an area in which he has any experience or expertise, offers a bare conclusion – he’s “not persuaded” by the economists, criminologists, or regulators who have made a specific study of the causes of the crises. He apparently believes that the FBI’s prescient 2004 warning that the fraud epidemic would cause a financial crisis was fanciful – even though it proved correct. Among the factors that Yglesias fails to consider is the first rule of investigating accounting control fraud – if you don’t look; you don’t find. The people that look have to understand accounting fraud mechanisms and they have to work intensively with serious commitments of expert personnel. Geithner blocked the investigations. It is clear from the FBI’s own numbers that it never provided remotely adequate staff to conduct a serious investigation of any major failed bank. We know that there were no serious investigations by the regulatory agencies. Contrast that with the S&L debacle where our regulatory investigations led the agency to make well over 10,000 criminal referrals. It’s easy to be “not persuaded” when no one is investigating and making public the persuasive facts. We’ve had to rely on a Senate committee and the Financial Crisis Inquiry Commission to do a literal handful of investigations because the banking regulatory agencies (1) had their budgets and staff’s shredded and (2) were led by anti-regulators who ended the entire criminal referral process and institutions that we built up despite their proven success. It is bizarre that Yglesias uses the paucity of publicly available data – caused by the anti-regulators’ refusal to conduct meaningful investigations and make criminal referrals – to justify his skepticism that bankers who wear nice suits could be criminals.

Liar’s loans are not “complicated.” The huge commercial real estate (CRE) loans that were the dominant “ammunition” used for accounting fraud during the S&L debacle were very complicated. We were able to get over one thousand felony convictions in “major” S&L cases (with a conviction rate of over 90%) despite the complexity of CRE deals.

I end on the fundamental problems with Geithner’s immunity doctrine and Yglesias’ support for it. The policy represents the intersection of the curves of injustice and stupidity at their respective maxima. Those curves have intersected to produce Secretary Geithner’s policy of protecting from prosecution the elite C-suite criminals who caused the financial crisis and the Great Recession. It is stupidity of truly epic proportions to leave felons in charge of banks. Doing so cannot stabilize a financial system – it is certain to cause recurrent, intensifying crises. When I was a regulator during a financial crisis our agency’s top priority was to prevent frauds from controlling S&Ls. Our second priority was to support the prosecution of those fraudulent leaders.

The injustice of Geithner’s “elite frauds go free” doctrine is every bit as extreme as the stupidity of believing that giving fraudulent CEOs de facto immunity is the road to financial stability. It is a travesty that I have to defend the importance of integrity and justice. No nation can be great if it allows its elites to loot with impunity and prosecutes its whistleblowers. Geithner is destroying the things that made America great. He did so as part of Bush’s wrecking crew and he is doing so now as part of Obama’s wrecking crew.

Geithner’s “elite frauds go free” plan is not new. Speaker Wright demanded that my colleagues and I go easy on fraudulent Texas S&Ls to save the Texas economy (which the S&L frauds were savaging – but he assumed they were salvaging). The five senators that became known as the “Keating Five” told us that Lincoln Savings was critical to the health of Arizona’s economy. In reality, it was the worst threat to Arizona’s economy. One of my agency’s presidential appointees, Bank Board member Roger Martin, argued that if Keating was a fraud and had made Lincoln Savings insolvent by looting the S&L it was all the more important to keep him in charge so that he could use his exceptional political power to get zoning changes that would reduce losses. He opposed any closures of insolvent, fraudulent Arizona S&Ls on the grounds that the Arizona economy was fragile. Here’s the difference. We, the professional regulators, explained in excruciating detail why leaving frauds in charge of S&Ls would massively increase losses and harm regional economies. Only one of the three Board members (Larry White) listened to us – the other two (Martin and Bank Board Chairman Danny Wall) took the unprecedented action of removing our jurisdiction over Lincoln Savings because we refused to withdraw our recommendation that it be promptly taken over and Keating removed. We told the Keating Five to their faces that they were intervening on behalf of a fraud. Even before Wall and Martin removed our jurisdiction over Lincoln Savings they expressly ordered us to cease our examination of Lincoln Savings, to cancel the upcoming examination (nominally, they ordered us to postpone it indefinitely), and ordered that the formal investigation of Lincoln Savings (which had produced the admissions of fraud) be terminated (nominally, suspended). The result was that Lincoln Savings became the worst S&L failure. Losses increased substantially after our examination, investigation, and supervision of Lincoln Savings were halted. All of this became a national scandal when House banking chairman, Henry B. Gonzalez, over the opposition of the Democratic leadership, conducted a series of intense oversight hearings that exposed the Bank Board’s capitulation to the political extortion of the Keating Five and Speaker Wright. Danny Wall resigned in disgrace as a result of those hearings.

For those readers who doubt that regulators can ever be trusted let me note several facts about the Keating Five meeting (which occurred 24 years and one week ago). Four of the Senators were Democrats, one was a Republican. Speaker Wright was a Democrat. Four of us from the Federal Home Loan Bank of San Francisco met with the Keating Five. To this day, I have no idea what the political affiliations, if any, of my colleagues were. It was irrelevant to us. We detested the frauds and their political allies. Our job was to protect the public. We were constantly abused, sued for hundreds of millions of dollars, investigated, and threatened with being fired. We prioritized the most elite, most destructive frauds for removal from the industry, enforcement actions, civil suits, and prosecutions. We persevered.

In 1990-91, as the nation entered a recession, and the banking agencies were accused of preventing the recovery of the fragile economy through excessively strict regulation, suits, and prosecutions we ignored those accusations and used normal supervisory means to end a developing wave of nonprime lending by California S&Ls. Our supervision prevented any nonprime crisis in that era. Indeed, we were so effective that the fraudulent S&L leaders of that era “voted with their feet” and left the S&L industry to escape our supervision. For example, the most notorious nonprime lender of that period, Roland Arnall, the head of Long Beach Savings, gave up his federal charter and created a mortgage banking firm (Ameriquest) so that he would not be subject to our supervision. One of his primary mortgage banking competitors was controlled by a married couple we removed and prohibited from a California S&L they controlled.

Competent financial regulators understand that good ethics makes for good regulation. As soon as you depart from the justice and integrity and attempt to save elite bankers from “anxiety” you become a grave threat to the public. I have no hopes about Geithner. What distresses me is Yglesias’ casual willingness to give up on justice because Geithner believed it might cause “anxiety” among his cronies. Justice must not occupy a very high position in either man’s values if they are so willing to abandon it. Powerful bankers commonly press regulators to abandon justice as soon as we find that they have violated the law. These pleas are far more common than threats, and they are more insidious because they are far more likely than threats to be effective. A regulator who gives in to the plea can feel great – he saved the entire system. A regulator that gives in to a threat knows that he has violated his duty and exhibited cowardice.

Yglesias substitutes faux violence for integrity in his vision of how to respond to the massive frauds that caused the Great Recession and cost 10 million Americans their jobs. He muses about the desirability of Nancy Pelosi slapping a bank CEO. His every instinct is wrong. He trivializes the crimes and the concepts of justice and accountability. The web has the opposite extreme – jokes about executing the senior bank frauds. This is the not a mindset of effective regulators or white-collar criminologists. My boss, Michael Patriarca, famously directed us to “cut square corners” in all our dealings with Lincoln Savings even though we knew it be a fraudulent operation engaged in the vilest of tactics against us and the public. Justice, not punishment, is the key.

Effective regulators are the cops on the beat who are essential to defeating the Gresham’s dynamic that arises when frauds gain a competitive advantage. As regulators, we know and deal regularly with a large number of honest bankers. When we leave criminals in place as CEOs by discouraging even investigations of their fraud we endanger their honest competitors, our economy, and our democratic system. Geithner’s path is the coward’s retreat from imagined fears. If he really believes that the fraudulent bank CEOs are essential to the “success” of our economy then he must believe that our economy is fatally flawed and he should be leading the charge to radically transform it.

[Please note: my phrase about the intersection of the curves is a variant of Charles Black’s famous denunciation of a dishonest, racist statement in the infamous Supreme Court opinion in Plessy v. Ferguson upholding the constitutionality of racial segregation: “The curves of callousness and stupidity intersect at their respective maxima.” I am surprised that Paul Krugman has not used Charles Black’s classic phrase (or a variant such as “callousness and mendacity”) to describe Representative Ryan’s budget plan.]

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133 comments

  1. ljm

    Maybe Krugman hasn’t used the Charles Black quote for Plessy v Ferguson, because he’s not a lawyer. I suppose if he does use it, he’ll give a hat tip to Bill Black:)

  2. Francois T

    Given the rampant fraud, why is any large international investor still in the USA?

    I understand that US pension funds and mutual funds with mandated exposure to the US markets be invested here, but I’m wondering why anyone who doesn’t have to would still have assets here.

    1. Francois T

      Obama is the luckiest politician I’ve ever seen. Despite:

      1) a truly corrupting Secretary of the Treasury
      2) an economic team that has neglected ordinary people
      3) not having given a shit about job creation
      4) having done everything to prevent fraud investigations and destroy civil liberties

      short of another financial catastrophe, he’s gonna get reelected.

      May God has mercy on us!

      1. tyrannus chex

        You say 1.)-4.) like they might be reasons someone might not get reelected. If you weren’t born yesterday, you would know that it all boils down to
        1.) his stand on gay marriage
        2.) whether you’d have a beer with him
        3.) how scary he can make the Republicans seem
        4.) who gets to stuff the ballot boxes

        1. Jojo

          I like that. I may “borrow” it for the future!

          But not to forget, it also will depend on who the Republicans put up on their ticket. If they run Romney again, they definitely lose. If they run Trump/Palin (or Palin/Trump), then they definitely lose.

          Then there is the possibility that Palin or Trump could decide to run a 3rd party campaign, splitting the conservative vote and guaranteeing an Obama win.

          1. Middle Seaman

            The sad reality is that you are all on point. There is little doubt that Obama is by far the most morally corrupt and also dysfunctional president since … ever.

            His chances of reelection depend on two factors: first is the opposing Republican candidate and second is the Democratic vote. While the current crop of Repubs candidates is fit for the job of circus clowns (thus helping Obama’s reelection chances), Democrats like me may be too offended and disgusted with our push over, sleaze ball, inapt and right wing president (thus cutting into the Democratic vote).

            To paraphrase a French candidate for president way back: we have a choice between Aids and cancer.

        2. nonclassical

          a very old mentor suggests it’s more important who-how COUNTS the votes-check out Wisconsin judges…

      2. Hacksaw

        The only reason he has any chance of getting reelected is that the tea-baggers, Beck’s Mormon mafia, and the rest of the I’m not paying crowd have turned independents against Republicans. The corporate fascist saw the anger created in the middle class by the TARP vote and co-opted it by bank rolling the tea-baggers and targeted that anger against other working Americans. While I, as a conservative independent, would never vote for Obama, I won’t vote for a corporate fascist either. The Democrats have let a perfect chance to crush the Republicans slip away by focusing on their social ideas instead of focusing on investigation, prosecution and punishment of the fraudsters who crashed the American economy.

        1. Rex

          “The Democrats have let a perfect chance to crush the Republicans slip away by focusing on their social ideas instead of focusing on investigation, prosecution and punishment of the fraudsters who crashed the American economy.”

          The highest priority probably should have been cutting the thieving economic bastards off at the knees, but where did you get the notion that PrezO and company had any real focus on social ideas. Maybe you have been believing Fox and the right’s cries of socialism. The greatest achievement was the health care bill that did very little and made the insurance industry “scream” about it while they were secretly overjoyed at the wonders their money had bought.

          People out of work, Guantanamo continues, the wars roll on, tax cuts extended, etc., etc. Yep, a real era of socialist change we can believe in. O & Co. never had any intention of delivering on the platitudes and promises, or making any kind of principled stand.

          And I am really getting annoyed at his habit of thumping the podium, making an audio mic bump, after every single lying phrase he utters.

        2. ZA

          For all his many screwups, I really am kinda digging the way this admin has subtly allowed Team Red to refuse psych meds and hold its debate in the padded room.

          1. alex

            Don’t ascribe to cleverness what can be explained by mere luck. The fact that the opposition is turning ever more nuts is not due to any clever strategy or tactics on Obama’s part.

        3. DownSouth

          Hacksaw said: “While I, as a conservative independent, would never vote for Obama, I won’t vote for a corporate fascist either.”

          Have you seen any evidence that Obama is not a corporate fascist? I certainly haven’t.

          1. mcgee

            Excellent analysis of the American political system in action. Nicely done.
            Now the trick is getting the other 99.99% of voters to see through the facade.

          2. Hacksaw

            I would think that Obama would tend to fall in the bribed government stooge classification and not corporate fascists.

        4. kevin de bruxelles

          Obama will get re-elected quite simply because the first rule of two-party politics is that there are certain things that only Democrats can do and other things only Republicans can do. And this is not because these politicians would refuse to follow orders that this is true. The reason is that it could cause confusion for one party to go too far away from the myths they spin. One example of this is that only the Republicans could have championed the Bush tax cuts for the rich just because for the Democrats to do so would have created too much incoherence and would have further stretched the already paper-thin myth of the Democrats being for the little guy. The same was true of Republicans supporting the bailouts in 2008, it was pretty embarrassing for a guy like Kudlow to have to openly support socialism albeit for the rich (he of course privately has no problem with it).

          But there is an even deeper second rule that says that there are certain policies that only Democrats can get away with pushing through while there are other policies that only Republicans can get away with. In a hyper-partisan situation, politicians who give the appearance of supporting a certain policy may build up enough political capital with potential opponents of these policies to neutralizing them, in the name of party harmony or electoral gain, and in the end actually push the policy objectives through that they are outwardly against. The classic example is the anti-Communist Nixon opening to China. The current example is Obama destroying Medicare.

          Otto von Bismarck always held that parties should take the helm to carry out policies which they opposed. “If reactionary measures are to be carried, the Liberal party takes the rudder, from the correct assumption that it will not overstep the necessary limits; if liberal measures are to be carried, the Conservative party takes office in its turn from the same consideration.”

          Of course in an America dominated by the wealthy, it is mostly reactionary policies that are needed. So for eight years the Republicans, following the first rule above, take the class warfare baton as far to the right as they can. They eventually meet a culminating point where further advance is stymied. This is the time to hand the baton to the do-gooder Democrats like Obama, and eight years later, following the second rule, lo and behold the baton is that much further to the right.

          The wealthy realized that if McCain were leading the charge gutting Medicare and Social Security it would create nothing but stalemate. It is so much better to have a Democrat doing the job. Even better someone from a racial minority background so that opponents can be shamed into silence by claims of racism. First, faced with demands for universal health care, Obama instead of expanding (and reforming) Medicare, he chose to create a private alternative, ObamaCare, closely based on RomneyCare. Along the way he sweetened this privatized pot with a few government subsidies to keep the retards on the left from fleeing the plantation. Of course ObamaCare and Medicare are now contradictory, why should some people have a sweet government program and others a shitty privatized one? And so now the Republicans are suggesting expanding ObamaCare by turning people away from Medicare, but of course without those chimerical government subsidies that were never going to happen anyway.

          But the process of cutting entitlements (including Social Security) will take time. So expect for the next five years outrageous demands from Republicans combined with heroic efforts by Obama to only meet them seven eights of the way (and in the process saving some token program like Planned Parenthood in order to keep the liberal retards on his side).

          All the while, the real problem, the flow of jobs to China, will be ignored.

          1. Anonymous Jones

            I’m confused.

            Clinton actually raised the top marginal rate for high income earners, right?

            The Republican Party has by and large signed onto a plan to eviscerate Medicare, right?

            What exactly am I missing here? How do these facts fit into your paradigm?

            Maybe the second is just a “pushing the debate to center-right v. far-right” thing, so that the Ds can sell out. But there are other explanations right, you see that, no? One is that the R ideologues are actually sociopaths and their followers are monumentally gullible and outright delusional and misguided and that the Ds have to live in the “world of reality” (in which the idiots rule) and can’t actually live in the “world of should” (which doesn’t exist. I mean, I’m not trying to defend those weeny Ds, but seriously…

            And the first? Seriously? I mean, that happened, right?

          2. kevin de bruxelles

            AJ,

            The story of top marginal tax rates perfectly illustrates the point I am trying to make. To understand the Clinton moves within his eight years to raise the top marginal tax rate you have to look at the context of the previous twelve years of Republican rule. In 1980 the top marginal tax rate was 70 %. When Bush I left office they were 31%. That’s a reduction of 39%. In response, Clinton raised the rate to almost 40%. That’s a total of 9%. You can use any analogy you want but you can see the class war is being lost when you lose 30% in any exchange. To finish the story Bush II then reduced them to 35% and Obama has kept them there. Only a loss of 4%!

            So in the Reagan Bush I / Clinton exchange the Republicans pushed the baton even beyond what was stable for the system at the time. In fact at one point the rate was 28% and it was Bush I who raised it back up to 31%. This coincided with the first real third party threat in 1992 (one can debate how serious it was) and outrage about the deficit. One can imagine at the time wealthy people were worried about US economic health. So Clinton on the one hand got to keep the Democratic myth going by raising the rate back up a bit, but on the other hand he handed the right a huge strategic victory by basically agreeing to a 30% loss.

            On Medicare, Obama had the opportunity in 2009 to expand and reform it and to make it universal. Instead he opted for a privatized alternative, which basically was like saying that Medicare was dead. Now the Republicans are basically calling for Medicare to become ObamaCare. The Democrats will pretend to be shocked, and in the end will maybe be like Clinton was with top marginal rates and push back the Republican overreach demands (these percentages are just for example) for a 39% reduction of Medicare and agree to just a 30% and they can then call it a victory.

          3. nonclassical

            Nixon “opening” China has its’ subtleties: read “Red Star Rogue”..understand Kissinger roles in this, and Vietnam War,
            Nixon’s false promise to end Vietnam, which caused his election…

            “Red Star Rogue”=Hawaii was to have been nuclear attacked by Russian sub disguised as Chinese, to play China off against U.S., who was outspending Russian “cold war” efforts.

          4. kevin de bruxelles

            AJ,

            And just to tie the Clinton years back to the two rules of my previous comment; the tax changes were clearly a straight forward application of the first rule. In fact Bush I’s raising of taxes created a quite similar reaction among the partisan peasants on the right as Bush II’s bailouts did. At that point it was clear that a Democrat had to come in to stop the ideological mask from being stripped away.

            Examples of the second rule would be Clinton’s welfare reforms, and his pushing through of NAFTA, and arguably his granting of permanents normal trade relations with China.

            One could argue that it was his success in these three areas that convinced the wealthy to go ahead with the move to a 35% rate under Bush.

            And so if Obama is successful in, shall we say for reasons of political correctness, heroically holding back the Republican hords and only cuts Social Security and Medicare by half as much as they are demanding, then the next Republican President may indeed have a mandate to get that marginal tax rate back down to 28%.

    2. curmudgeonly troll

      nail, meet head.

      how is it destabilizing to prosecute those who implemented and approved Lehman’s ‘Repo 105′ shenanigans to artificially boost capital ratios?

      if shenanigans like that remain unpunished, why would anyone believe the financial statements of BoA and other US institutions? and who wants to be the last investor out the door when the next fraud comes to light? how destabilizing is that?

      (while we’re asking rhetorical questions, on the topics of finance and economics, when has Yglesias written anything but gibberish?)

      1. alex

        “on the topics of finance and economics, when has Yglesias written anything but gibberish?”

        Never, and I’m glad someone else is also saying it. I have no idea why he has such a following. He’s portrayed as some great mind, but I’ve never seen any great originality, insight or discernment from him. He epitomizes the “modern sensible liberal” stereotype, following the flow and throwing in just enough unimportant contrarianism to make it seem like he’s thinking.

    3. tyrannus chex

      “Given the rampant fraud[...]”

      I think you just answered your own question. There’s money in these here hills of rampant fraud…

    4. nonclassical

      why are “they” still here?…they havn’t gotten ahold of “Social Security” and medicare-medicaid, nor government
      auspices-taxpayer provided infrastructure still remaining-
      There’s SO much more yet to pillage, and THEN for taxpayers
      to buy back at ridiculous “privatized” profit-expense..

  3. Dan

    Utter frustration at this whole thing. In no doubt, the goal is to run the clock out.

    Black does nail the dynamic duo in this article though. If I had to name two – it would be Bernanke and Geithner.

    I really just don’t understand why there is no organization to effectively protest this situation. Some groups, such as “Showdown in America” are so mis-directed that they are bound to fail. I really wonder if they are just scams setup by TPTB just to keep people focused on the true vulnerabilities of this corrupt system, such as those Black talks about.

    1. CaitlinO

      Besides the dynamic duo, Dr. Black also named the serial criminal Roland Arnall. I hadn’t known that Black et al were the ones who kicked his cheating a$$ out of the S&L business.

      I do wish, though, that Black had mentioned the third act of Arnall’s career – he was punished for years of larceny and predation by being named Ambassador to the Netherlands by the illustrious George W.

      There really is no end to the scams.

    1. tyrannus chex

      To the degree that quotation is true, then you have rule by men and not by laws. Abrogating the so-called rule of law always leads to bad outcomes, which leads politicians to at least pay lip service.

    2. Name (required)

      Bill Black is right to say that ubermensch is generally translated as ‘Superman’. It is, though, a poor translation which illustrates a very significant point.

      Nietzsche’s ubermensch is a species as distinct from the ordinary men as a racehorse is from equus in general – it has enhanced traits in specific areas of horsiness (ie speed)yet is otherwise ‘horse’. Specifically, ubermensch demonstrated enhanced ‘human’ traits such as morality, courage, fidelity etc. which given a basic spark or comprehension could be pursued and ‘purified’ just like speed in a horse, through training and breeding – and not like any horse though undertaken quests such as those so beloved by Wagner, and Tolkien.

      Many horses will never run on a racecourse as they simply don’t have the breeding, but many of those with the breeding will never do so either as they never respond even to the training sufficiently to achieve ‘racehorsehood’.

      So to Nietzsche even breeding wasn’t enough for admission to the ubermensch. It required conscious refinement, pursuit, application and even sacrifice in the rigorous Holy Grail-type self-realisation.

      The Superman of Jerry Siegel and Joe Shuster, though, is very much an American creation. Superman, Batman, Spiderman and others of the genre are born with their ‘super’ powers, or gain them by accident. Moreover the powers are unique to themselves rather than a potentiality available even to a subset of humanity. Unlike Nietzsche’s ubermensch, Superman has no choice about what he is, merely what he does with what he is.

      A Nietzschian elite of ubermensch would be a Council or Order (or Conspiracy?) of ordinary people with perhaps a defining initial racial or cultural characteristic but who had consciously worked towards and achieved a “Masterhood” of generally recognised traits – just as it takes more that just being a white stallion to get into the Spanish Riding School. And the underlying assumption is that it is the initial self-awareness of potential and the supreme effort, discipline and sacrifice which goes into realising it that earns and justifies the rewards of respect, esteem and even power which the attained “Masterhood” demands.

      In the US version – Superman – that quest for Masterhood, and the expense of effort, discipline and sacrifice which underpins it and endows the titles with the rewards, is missing. It is too difficult. You are ubermensch by birth or accident, demanding the rewards of being elite without achieving eliteness.

      A subtle but damming misunderstanding.

      1. Name (required)

        (Sorry – omitted point)

        Black writes – “The elites claim impunity from normal rules on the basis of their purported superiority and because they claim that they are so important that applying the normal rules to them will harm society.”

        This is true, but under the Nietzschian ideal of Ubermensch that ‘superiority’ and the immunity claimed for it, is claimed to be justified by the ‘earned’ nature of the eliteness – the sacrifices made and disciplines demonstrated in achieving the claimed ‘superiority’ are themselves evidence that the normal rules need not be applied just as dentists are an elite who have earned the right to be exempted from the normal rule that no-one goes anywhere near your teeth with a diamond-tipped drill.

        America’s Superman, however, can only prove he can be trusted not to abuse his powers by breaking the normal rules only for ‘good’, so proving he can be trusted.

        America’s elite have neither earned the right to be trusted, nor proved they can be. Quite the opposite.

        1. Jessica

          Thank you for both these posts. I never heard this explained this way.
          It is like the difference between a scout or early adopter leading the way for the sake of everyone versus an overlord whose advance is everyone else’s limit.

        2. DownSouth

          Name (required) said: “America’s Superman, however, can only prove he can be trusted not to abuse his powers by breaking the normal rules only for ‘good’, so proving he can be trusted.”

          That doesn’t sound like any “America’s Superman” I’ve ever heard of. In fact, that “America’s Superman” flies in the face of everything America has traditionally stood for, idealistically speaking at least. Here’s what Martin Luther King had to say on the topic:

          [T]he first principle in the movement is the idea that means must be as pure as the end. This movement is based on the philosophy that ends and means must cohere. Now this has been one of the long struggles in history, the whole idea of means and ends. Great philosophers have grappled with it, and sometimes they have emerged with the idea, from Machiavelli on down, that the end justifies the means. There is a great system of thought in our world today, known as communism. And I think that with all of the weakness and tragedies of communism, we find its greatest tragedy right here, that it goes under the philosophy that the end justifies the means that are used in the process. So we can read or we can hear the Lenins say that lying, deceit, or violence, that many of these things justify the ends of the classless society.

          My ideal Superman doesn’t “abuse his powers by breaking the normal rules” for any reason. And the reason for this is really quite simple, explained here by Hannah Arendt in The Promise of Politics:

          [B]y applying the absolute—-justice, for example, or the “ideal” in general (as in Nietzsche)—-to an end, one first makes unjust, bestial actions possible, because the “ideal,” justice itself, no longer exists as a yardstick, but has become an achievable, producible end within the world.

      2. DownSouth

        I think what gets lost in all this is that Ayn Rand and Alan Greenspan, along with the National Socialists, took Nietzsche and turned him on his head. Whereas the hallmarks of Nietzsche’s superman are, as you say, “morality, courage, fidelity, etc.” the hallmarks of Rand’s, Greenspan’s and the Nazis’ superman are immorality, cowardice, treachery, etc., but most of all greed. This is hardly Nietzsche’s superman. Here’s Nietzsche:

        The great man is an end; the great age, for example the Renaissance, is an end. The genius—-in work, in deed—-is necessarily a prodigal: that he spends himself is his greatness….The instinct of self-preservation is unhinged as it were…. They call it “sacrifice”; they extol…his indifference to personal welfare, his devotion to an idea… He gushes forth, he gushes over, he uses himself up, he does not spare himself—-with fatality, disastrously, involuntarily as a river’s overflowing its banks is involuntary.

        Black indiscriminately parrots the libertarian-Nazi rendition of Nietzsche’s superman without ever delving into what Nietzsche actually wrote. What Rand, Greenspan and the Nazis call “superman”—-a definition Black accepts uncritically—-Nietzsche without a doubt would consider to be the scum of the earth.

        Nietzsche, along with another prominent writer and thinker of his time, Leo Tolstoy, were elitists who placed a great deal of emphasis on what, for lack of a better word, might be called noblesse oblige. They felt it was the only corrective to creeping nihilism. The difference between the two is that Tolstoy’s beliefs where religious based, and Nietzsche’s were secular based.

        And regardless of how the “US version” or Hollywood version of superman was created or came about, he has absolutely nothing in common with the superman of the Nazis and libertarians.

      3. stephanie

        “The Superman of Jerry Siegel and Joe Shuster, though, is very much an American creation. Superman, Batman, Spiderman and others of the genre are born with their ’super’ powers, or gain them by accident. Moreover the powers are unique to themselves rather than a potentiality available even to a subset of humanity. Unlike Nietzsche’s ubermensch, Superman has no choice about what he is, merely what he does with what he is.

        In the US version – Superman – that quest for Masterhood, and the expense of effort, discipline and sacrifice which underpins it and endows the titles with the rewards, is missing. It is too difficult. You are ubermensch by birth or accident, demanding the rewards of being elite without achieving eliteness.”

        At the risk of nit-picking: Batman does not have superpowers. He has expensive toys and an attitude problem — and, at least in his Golden Age and NolanVerse incarnations, spends a lot of time in training in order to become ultimate crime-fighter. I’d say if you want a character to illustrate your American version of the ubermensch, Batman might very well be your guy.

        1. CS

          As a kid, Batman was my guy…when it wasn’t Turok, Son of Stone. For the very reason cited above – they used their resources. Kind of like Ulysses, the everyman of the Illiad and Odyssey.

    3. John Merryman

      Power does determine law, but it is nature which holds the upper hand in regards to power and human law is foundational to cooperative behavior and leveraging greater power out of the social mass. When it breaks down, we collectively loose power. Those at the top of the pyramid may remain there, but it becomes a much smaller pyramid.

    4. nonclassical

      “In the name of stability” only applies up to the point of
      “In the name of ORDER”-destabilized necessity of…

    5. DownSouth

      Externality,

      I read Posner’s article and all I can say is “Wow, I could write a book on that subject.”

      Posner stands on one side of a divide that splits the world right down the center. In my way of thinking, he touts a 19th-century politics that is now all but obsolete, rendered so by events that include 1) the methods of nonviolence, 2) the threat of mutual nuclear and environmental self-destruction, 3) people’s war and 4) modern global communications that are capable of defying the role of elite gatekeepers.

      For Posner, it’s as if the 20th century never happened. He and his fellow neocons are like the Catholic priesthood that swore by the Ptolemaic System well into the 18th century for no other reason than it served as a cosmic model for the political status quo.

      Here’s how Jonathan Schell, writing in The Unconquerable World, describes the choice now facing Americans:

      For Americans, the choice is at once between two Americas, and between two futures for the international order. In an imperial America, power would be concentrated in the hands of the president, and checks and balances would be at an end; civil liberties would be weakened or lost; military spending would crowd out social spending; the gap between rich and poor would be likely to increase; electoral politics, to the extent that they still mattered, would be increasingly dominated by money, above all by corporate money, whose influence would trump the people’s interests; the social, economic, and ecological agenda of the country and the world would be increasingly neglected. On the other hand, in a republican America dedicated to the creation of a cooperative world, the immense concentration of power in the executive would be broken up; power would be divided again among the three branches, which would resume their responsibility of checking and balancing one another as the Constitution provides; civil liberties would remain intact or be strengthened; money would be driven out of politics, and the will of the people would be heard again; politics, and with it the power of the people, would revive; the social, economic, and ecological agendas of the country and the world would become the chief concern of the government.

      Which path the United States will choose is likely to be decided in a protracted, arduous political struggle in the years ahead.

      Posner is about as far over in the “imperial America” column as one can get.

  4. Paul Tioxon

    The geo political nation state system has co evolved with the non government organizations of the world wide capitalist system. The sovereignty of the nation state ends at the border and commercial NGOs move freely amidst and among all of the nations. The Real Politik being articulated may be wrong on many levels. Goldman may be prosecutable legally, doable politically and ethically valid. But what is announced by Real Politik with the nation state vis a vis the world capitalist system? Let us assume that Eric Holder is stupid and corrupt, or, let us assume he is smart and incorruptible. If Goldman Sachs is guilty of doing as much damage as outlined by the Senate investigation, during the normal course of business, what could they do if weaponized as a primarily destructive organization committed to not accumulating capital, but instead, destroying its enemies?

    It would not matter who or what Eric Holder was or was not, or our system of justice or our national sovereignty, but rather what would be the consequences of prosecuting them to the fullest extent of the law. We are seeing the full extent of the power of Goldman, but what we have not seen is the full measure of the legal system to operate as we understand that it should and can, but some how, so far, it won’t. What are the real reasons for it not operating as it should? If the CIA can assassinate foreign leaders, and domestic ones as well, with total impunity as they have done, what is going on with Goldman? Just what do we have to lose by prosecuting them? Really good golf buddies, campaign donors? There is a lot more money where that came from if they are put out of business and others pick up the slack. When will we see the trial start or if not, when will know for sure the reasons, precisely, that they are untouchable? Apparently, there is a slow but steady investigation at the highest reach of power in the country. It has been going on behind the scene, amidst a lot of other distractions that are substantive political events of real not PR generated gravity. Goldman and Wall St has not gone unnoticed, except by those obsessed with birth certificates, abortions and the fascist nightmare of mandatory health insurance premiums.

    1. tyrannus chex

      You seem to be under the misimpression that the U.S. Government is somehow more powerful than Goldman. Goldman is the apotheosis of capitalism itself.

      1. alex

        “You seem to be under the misimpression that the U.S. Government is somehow more powerful than Goldman.”

        More to the point, he thinks they’re distinct entities.

        1. Paul Tioxon

          How many armored divisions does Goldman have? How many countries have capital import barriers but also have US Military troops and/bases on their soil? In addition to the embassies, there are over 660 military bases in other countries. Does Goldman even have that many EAVPs? The next time the USA is under attack and about to be vaporized, get back to me on yr smartphones and tell me how the powerful Goldman Empire rebuilds our country. The USA saved not only Goldman, but capitalism twice. The creator is always greater than the creation, they use the money printed by the government, their contracts are protected by the government courts, and their lives, their fortunes and their precious honor all under the aegis of the government. Goldman is little more than a paperless shuffling bureaucracy.

          1. alex

            “How many armored divisions does Goldman have?”

            How many armored divisions can the president operate by himself? Heck, I doubt he ever even learned to drive a tank (at least he didn’t repeat Dukakis’ mistake). What matters is who controls these things, and when it comes to finance that’s Government-Sachs and their ilk. Sure the US government _can_ change this, but the question is whether they _will_.

  5. psychohistorian

    I used to be amazed when you wrote such clear and moving appeals for the return to equitable application of RULE OF LAW.

    I continue to be thankful for your efforts and wish your message had a wider audience and acceptance.

    I hope our world gets a chance to rule itself without the class structured mentality in effect currently, as evidenced by the bifurcated application of rule of law.

  6. Tyrannus Chex

    One minor point. The much misunderstood ubermensch didn’t have to obey the normal rules since he obeyed the real rules. In this situation the ubermenchen are the honest bankers who don’t succumb to the temptation to commit fraud even though everyone who does gets away with it. The banksters represent the “last men”–those morally weak blinking idiots that tend to stay on top.

  7. Hacksaw

    I have no means to determine what percentage of the fault for the crash of the American economy fraud was responsible for, but I do contend that the investigation, prosecution and punishment of those who committed that fraud would go a long way toward repairing the American economy. In fact I believe that the economy, the main street economy, will not be repaired completely until that fraud is addressed. Working Americans, small businesses and American companies aren’t going to trust the corporate fascists, the too big to fail financiers or their bribed stooges in the government again until a strong message is sent by the government that defrauding the American people and destroying the economy will not be tolerated.

    1. nonclassical

      “no means to determine”..do read Yves’, “ECONned”…and
      Naomi Klein’s, “The SHock Doctrine-Rise of DIsaster Capitalism”, Kevin Phillips’, “American Dynasty” and “American Theocracy”, “Wall STreet-A History”; William Blum’s “Killing HOpe”, Perkins’ “Confessions of An Economic Hit Man”-information is good…

  8. Jojo

    Financial meltdown – Why hasn’t anyone in the financial industry gone to jail yet?
    http://www.youtube.com/watch?v=JEK4T1Cs8c8

    Also see:
    http://www.cjr.org/the_audit/skimpy_coverage_of_levin-cobur.php

    Our government is so corrupted (both Dems & Repubs) that no one is even pretending that there is rule of law anymore! Now the government just openly ignores the will of the people (the majority of which want to see some Wall Street exec’s behind bars) and go on about their primary business of collecting campaign contributions.

    It seems all we can do is post rants on blogs (which if you remember form the beginning of the Obama admin, they said that they NEVER read).

    We should be taking to the street like the people in the Middle East are doing!

    1. R Foreman

      All the investigations were blocked to give Bernanke and Geitner time to test their Keynesian theories about avoiding deflation by having the capitalists not suffer any losses. If they succeed in restarting the ponzi bubble then the electorate becomes very happy, but on failure then the outcome is so severe that nobody will remember what caused it when there is no food and the elite hole up in a bunker for 40 years and turn into Morlocks.

      1. alex

        “All the investigations were blocked to give Bernanke and Geitner time to test their Keynesian theories about avoiding deflation by having the capitalists not suffer any losses.”

        There’s nothing even vaguely Keynesian about the Bernanke/Geithner approach to not prosecuting crimes. You may not like Keynesianism, and you may not like the Bernanke/Geithner approach, but don’t conflate the two.

  9. attempter

    1. There’s no trade-off between democracy and justice on the one hand and stability on the other. On the contrary, we know for a fact that capitalism itself, even where not fully ramified into kleptocracy, is radically destabilizing and chronically brings economic and social crisis. This is hardwired into its nature.

    Kleptocratic financialization is the most virulent and violent manifestation of this destabilizing crime spree. By aggressively destroying democracy and subverting justice, it necessarily assaults all forms of stability at every level.

    So, far from being a trade-off, in fact democracy*, justice, and social stability comprise an identity. Let one go, and you necessarily let the others go. Truly and aggressively seek one, and you necessarily seek the others.

    * By democracy we now know that we must mean true, direct participatory democracy. We now know that “representative democracy” was always a sham which was intended to be hijacked against justice and stability.

    2. Vermin like Yglesias are correctly called authoritarians, but it’s incorrect to contrast that with “liberalism”. On the contrary, liberals are and always have been authoritarians. Their historic job has always been to lie to the productive people, convincing them that they can and should make some sort of deal with authoritarian parasites. Sometimes this deal did temporarily seem to work (i.e., during the time of the oil surplus).

    But in the end it was always going to be broken at the first convenient moment for the elites. So after all we know that liberals were always idiots at best, and more often conscious traitors.

    Scum like Yglesias, today’s corporate liberals, are just the late version of the model. It’s true that by now they express open hatred for working people and no longer bother trying to lie to them (considering them permanently defeated), but they still tell the same treacherous lies to the middle class, to help with the final liquidation of that class.

    We can at least take comfort from the fact that no matter what happens, revolution or fascism, the corporate liberals will soon be wiped out themselves. Certainly the corporate elites won’t keep them around one day longer than they have to.

  10. Parvaneh Ferhadi

    I guess the rather obvious reason why no prosecutions – and not even investigations – occur, is that they are all in it together.
    There is no difference between the interest of the fraudulent bankers and the (fraudulent) politicians, it’s one class with the same basic interest: reaching and preserving power and wealth for themselves.

  11. K Ackermann

    Look, folks, this is the pinnicle of capitalism! Marx carefully explained about this very event.

    Does anyone really think the great concentrations of wealth are going to be used for the common good? Please!

    Now we have to live through a period where the snake eats itself.

    The capture is complete.

  12. Xavier Onassis

    If only I could, I’d PAY every person on Earth to watch a series of short videos called Renaissance 2.0 made by an industry insider whistle-blower named Damon Vrabel. I know people on the web put up a lot of mediocre, actually uninformative links of little worth and say they’re must-see, so everybody will doubt these videos are different, but if people will take just one more leap of faith and look at Mr. Vrabel’s work – it will speak for itself.

    Damon has offered the world an absolutely astounding education like nothing you have seen before. He exposes, in clear and simple language anybody can understand, what even longtime, serious hunters for the biggest financial/economic/political picture are still unaware of.

    The link I’m giving here is to lesson 6 part 2, as I think it might be the best to convince you the whole series is truly crucial viewing. It’s 9 minutes long. Please, please – go take a look – I really strongly think you’ll agree this is extraordinarily vital for all to see and know:

    http://www.csper.org/lesson-62.html

    Has anyone else here seen this series? Please say what you think of it if you have already viewed this?

    1. Xavier Onassis

      ps: Think of the people in your life who haven’t the first clue about how the system works as you watch. Imagine THEM getting ahold of this as you watch. Because the heretofore uninformed – unaware they’re unaware – are the ones we need to get clued in if we’re ever to win a majority for real, positive change. This is the biggest, fastest clue-in ever, imo.

      My deepest thanks to anyone who passes this along – and no, I don’t know Damon Vrabel. But he has done the entire world a very, very great favor and I can never thank him enough.

  13. craazyman

    great stuff. sitting here eating my pancakes and thinking this is waaay better than a church sermon.

    don’t want to sit on some wooden bench in a sport coat and khakis listening to some dude in a black frock tell me about the next world and the love of God. fcuk that. I’ll think about that stuff by myself when I ride the bus.

    I like this world and am glad folks like Bill Black do too. Seems like there’s no hope with Obama’s crew in charge. But I don’t think you’d necessarily have to put anyone in jail to have a salutary effect. wonder if they could just indict the firms, like Arthur Andersen. (That would make individual prosecutions easier where the facts merit).

    Right now these firms and their execs are at the epicenter of our social/tribal-collective-energy-structure and that’s where they get their power, like some sort of utterly corrupted shamanic voodoo priesthood. Take away that legitimacy with a criminal indictment — which would be an instant pole reversal of the social energy — and they are all toast in one quantum jump of public shaming.

  14. ella

    What continues to puzzle me is that everyone has begun to can the fraud and corruption. That is everyone except our regulators and politicians. Either they are ignorant or deliberately failing to take action.

    How long will the public continue to bail out the fraudsters? Why are we responsible for bailing out the system that they destroyed with their greed? Globally, the taxpayers are guaranteeing and paying the debts of the banks. By what law and when did we decide to be liable for their debts while they retain their profits?

    Questions that may never be answered.

    1. jacke

      Fraud and corruption have now become legal. At least one court(in Chicago)has issued a ruling in the case of a now-defunct bank, that the bank had the “right” to act without cause and in bad faith, determined solely by the phrase “at will” in a lending contract, to the exclusion all other evidence. Our legal system has now been co-opted by the elite money interests, with absolute power to destroy financially any business or individual from whom their client wants to steal.
      In Mr. Black’s own state, a big regional bank’s insiders seem to have been using exactly that legal power game to perpetrate the thefts of commercial properties securing notes at that bank. Without the legal power to sue, and due to the “protection” of such banks by the federal government, such predatory lending practices are rampant.
      Of course, the snow job is to focus on the foreclosures in home mortgages, not in understanding that people are losing their homes because such predators destroyed their jobs and the businesses that employed them.

  15. DownSouth

    It’s always great to hear from an honest liberal like Bill Black. It’s a breath of fresh air in a suffocating world populated mostly by dishonest liberals.

    That said, the argument Black articulates just goes to highlight how, in times like this, liberalism of any variety—-be it the honest liberalism of Black or the dishonest liberalism of Iglesias or Obama—–is as useless as the teats on a boar hog.

    Black reminisces of a bygone era. This was a time when regulators could, and did, stand up to crooked politicians, such as in “the Keating Five meeting (which occurred 24 years and one week ago).” Black then laments the current situation in which “the firms directly responsible for the most disruptive economic event of the last eighty years are to be shielded from the long arm of the law.”

    But there’s something missing in Black’s narrative. For in the last 24 years the firms directly responsible for this “most disruptive event” have transmogrified. Somewhere along the way they went from being merely above the law to the point now where they are the law. So Black’s talk about “enforcing the law” and “the rule of law” no longer offers meaningful guidance. Instead, there now exists a situation not unlike what Martin Luther King faced: it was the law that Rosa Parks be forced to give up her seat to a white man, and she broke the law and was arrested when she didn’t. By 2000, as Kevin Phillips writes in Wealth and Democracy, Washington had been transformed into a world “in which liberals found themselves muttering about ‘corruption’ that was largely legal behavior.” Or as King put it so succinctly in his essay “Love, Law, and Civil Disobedience”:

    We must never forget that everything that Hitler did in Germany was “legal.”

    When a government, such as the current government of the United States, is rapidly losing legitimacy, it substitutes tyranny for that lost legitimacy. That is why, while the Goldman Sachs and the BPs of the world, along with their puppet law enforcement agencies, are given immunity, the little people are terrorized. Thus we get prosecutions like this one where a rogue Justice Department sends a homeowner to jail for taking out a liar loan, while at the very same time allows the very people who invented liar loans and profited the most from them to operate with impunity. All this is missing from Black’s narrative, a narrative which is entirely too sanguine.

    The situation is now much worse than it was 24 years ago. It has deteriorated way beyond the point where some dedicated law enforcement official with a strong moral compass will be allowed to affect some modicum of justice. An honest cop can no longer work for justice within the existing legal system, because the entire system has been so thoroughly vitiated.

    And it’s not like we have to reinvent the wheel. Gandhi and then Martin Luther King have blazed this trail before. And if we are serious about justice, the first step—-a step without which no further progress is even remotely possible—-is to jettison liberalism in favor of the methods of nonviolence. As King wrote in “Pilgrimage to Nonviolence”:

    I also came to see that liberalism’s superficial optimism concerning human nature caused it to overlook the fact that reason is darkened by sin. The more I thought about human nature the more I saw how our tragic inclination for sin causes us to use our minds to rationalize our actions. Liberalism failed to see that reason by itself is little more than an instrument to justify man’s defensive ways of thinking.

    Or in the words of Gandhi:

    In my humble opinion the ordinary methods of agitation by way of petitions, deputations, and the like is no longer a remedy for moving to repentance a government so hopelessly indifferent to the welfare of its charge as the Government of India has proved to be.

    1. K Ackermann

      It is funny, though, how Liberal has gone from a dirty word to to something that only a select few of the best can claim to be.

      People can throw all the darts they want at me for saying that, but those are the ones that are part of the problem to begin with.

      We were a great country with a marginal tax rate of 80%. We had very few problems, and we got things done. We all felt powerful. Economists understood the power of Velocity back then, and how it empowered everyone.

      Now its tax breaks for the rich that are supposed to save us, and taking any and all power away from the poorest among us is somehow going to lead us to greatness once again.

      How pathetically stupid we’ve become.

    2. Siggy

      The event before is the pandemic of fraud that has occurred and continues to occur.

      Discussions that delve into the philosophy of motivations entirely evade the reality that requires correction. Blatant fraud has been perpetrated and it continues and yet we have no prosecutions.

      We once had a decent middle class and a Federal Republic. Today we have a enfeebled middle class and a suborned banana republic.

      We should not be quibbling about philosophies of motivation, we need to be discussing what can be done to cause the needed prosecutions.

      Without prosecutions, there will be no cure and the dwindling middle class will be lost in its entirety. Upon that loss there will then follow the final demise of what was once the United States of America.

      I see no reason to be hopeful!

    3. alex

      DownSouth: “It’s always great to hear from an honest liberal like Bill Black.”

      What Black is espousing has nothing to do with liberalism vs. conservatism – it’s about honesty vs. corruption. That’s a point that Black himself emphasizes, for good reason. To say otherwise is to degenerate into the endless liberal vs. conservative debate, but how many people (real people – not politicians or bankers) are enthusiastic supporters of corruption?

      1. DownSouth

        alex,

        The choice is not between liberalism and conservatism.

        The choice is between liberalism and something much more radical. It’s called nonviolence.

        Nonviolence expresses itself in the refusal to participate in the ordinary processes of society. It may mean the refusal to pay taxes (civil disobedience), to trade with the social group which is to be coerced (boycott), to render customary services (strike) or to engage in demonstrations that disrupt the ordinary processes of society.

        Please re-read the quotes by Martin Luther King and Gandhi that I cited. No one is advocating conservatism. And in fact no one even mentioned conservatism, except you.

        1. alex

          “no one even mentioned conservatism, except you”

          While I explicitly referred to conservatism (though only to point out its irrelevance), by calling Bill Black an “honest liberal” you implicitly referred to the liberal vs. conservative question as though it’s relevant to the issue.

          “Somewhere along the way they went from being merely above the law to the point now where they are the law.”

          They are the law in the sense that they’ve bribed every important cop on the beat, but that’s no different from being above the law. This situation is quite different, and far more mundane, than the epic struggles that Gandhi and King fought. Gandhi and King advocated disobeying unjust laws, but the laws that Black wants enforced are both just and still on the books. Indeed both statute and case law have been strengthened in the wake of the S&L scandals.

          This is not an epic struggle to change society and its longstanding laws as Gandhi and King faced, but a mundane (though not necessarily tractable) matter of crooked cops looking the other way because they’re on the take. We do seem to have reached the point, as in various other organized crime problems, where the cops are barely distinguishable from the crooks, but its still about corruption rather than unjust laws.

      2. Tao Jonesing

        It was perfectly legitimate to point out the fact that Bill Black is a liberal when the point you’re trying to make is that modern liberals are all talk and no action. A lot of talking. A lot of hand wringing. A lot of heavy sighs.

        But, uh, where’s the action?

        All we get is the liberal version of what I’m calling the “Exceptional Victim Syndrome” (EVS) of American politics. All Americans are exceptional, and we’re all victims, too. Liberal EVS is marked by displaying how smart and insightful you are while complaining that everybody ignores you, which they do. After all, wouldn’t you ignore people who are all talk and no action?

        1. alex

          “modern liberals are all talk and no action”

          As opposed to modern conservatives? Because if you believe they take action, then you’re implying that conservatives favor corrupt law enforcement.

          1. Tao Jonesing

            Once again, you seem to assume that criticizing the modern liberal equals siding with the modern conservative.

            There is a big difference between modern liberals and modern conservatives, though, and that is the fact that there is a broad-based modern conservative movement whereas there is no countervailing modern liberal movement. Liberals will continue to be marginalized so long as they remain unbound by a common cause that appeals well beyond the individual fetishes of true believers.

            But, hey, you can stick with what you’re doing and see if it yields you any more success than it has in the last thirty years.

          2. alex

            “you seem to assume that criticizing the modern liberal equals siding with the modern conservative”

            On the contrary, my point was that your criticism of “modern liberalism” applies equally to “modern conservatism” unless you believe that conservatives (real people – not politicians) are in favor of corruption. More generally, Black’s points about the evils of not enforcing the law have nothing to do with liberal vs. conservative. A point which he himself makes.

          3. Tao Jonesing

            Look, DownSouth made a legitimate point. You seem intent on ignornig that point because you seem to believe that it is most important to find a post-partisan common ground between conservatives and liberals.

            Let me spell it out for you. First, I agree with you that enforcing the law is something that any right-thinking person ought to want, whether conservative or liberal (there are actually more than two choices, but you seem stuck on those two). Second, I agree with DownSouth that the modern liberal is all talk and no action, that the modern liberal seems incapable of creating a counter-movement to the conservative movement that has taken us back to the 1890s in almost every regard.

            Feel free to ignore the second point and continue yapping to your heart’s content. Unless and until liberals can pull together a real political movement to counter a conservative movement that has brought this country to the brink of ruin in the short span of thirty years, I will just ignore you like everybody else does.

    4. nonclassical

      J. Krishnamurti, his taoist predecessors, have all questioned such over 3500 years..the answers exist. People
      don’t LIVE them…

  16. Dan Duncan

    A good post, but your argument would be better served through the prism of Godel, as opposed to Nietzsche.

    The problem of corruption is NOT a situation where the Elites claim transcendence above normal rules. The problem of corruption is the reverse. The problem of corruption is where interested parties want to “pull down” and nullify the transcendence of normal rules.

    The distinction is not trivial, either.

    The Problem of the Elite class…this is easy to isolate. “It’s them. It’s the Elite. The Rulers. Replace our Rulers with new rulers and things will get better.”

    No they won’t. As Obama has shown it does not matter.

    Godel’s work is spot on to our current plight.

    Godel specifically postulates about The System. That system can be a math system or a legal system. It does not matter.

    The following comes from http://www.myrkul.org/recent/godel.htm :

    “Godel then points out that the following statement is a part of the system: a statement P which states “there is no proof of P”. If P is true, there is no proof of it. If P is false, there is a proof that P is true, which is a contradiction. Therefore it cannot be determined within the system whether P is true.

    As I see it, this is essentially the “Liar’s Paradox” generalized for all symbolic systems. For those of you unfamiliar with that phrase, I mean the standard “riddle” of a man walking up to you and saying “I am lying”. The same paradox emerges. This is exactly what we should expect, since language itself is a symbolic system.

    Godel’s proof is designed to emphasize that the statement P is *necessarily* a part of the system, not something arbitrary that someone dreamed up. Godel actually numbers all possible proofs and statements in the system by listing them lexigraphically. After showing the existence of that first “Godel” statement, Godel goes on to prove that there are an infinite number of Godel statements in the system, and that even if these were enumerated very carefully and added to the postulates of the system, more Godel statements would arise. This goes on infinitely, showing that there is no way to get around Godel-format statements: all symbolic systems will contain them.”

    And that is what is happening to our Rule of Law. There is a concerted attempt to pull the rules down and into the system. Once The Rules become part of The System, they cease to be rules which can effectively govern the system.

    1. Godel's Ghost

      Wow. I am stunned. This is a misinterpretation of a misinterpretation of my theory. I would be rolling in my grave if not for the fact that I am now a ghost.

      However, the distinction between the meta level and the object level and the principle of non-contradiction, which I didn’t invent could be useful for you.

      1. K Ackermann

        How could you forget to eat?

        I’m really surprised to hear you’re dead. Your perfect solution to Einstein’s field equations, for me, said that the mere possibility of closed timelike curves MUST be included in the quantum state, if even just a tiny bit.

        But that’s all that would be needed, wouldn’t it?

        Godel lives!

    2. Susan Truxes

      If I have a choice between Bill Black and Kurt (?) Godel, I think I’ll take Bill Black. Godel was a genius of philosophy who was tormented by inadequate logic. Black is a genius of common sense who can actually get something done. Godel died a long paranoid death, having lived most of his life in a mental fetal position. Yes he was smart but so what? I don’t think this is the time for us all to curl up and suck our thumbs.

      1. alex

        “Godel was a genius of philosophy …”

        No, Godel was a genius of mathematics and a cut-rate philosopher. More infuriating is that people take his incompleteness theorems, which only address very specific technical mathematical issues, as being generally applicable to philosophy. That’s called reasoning by metaphor, and it’s bogus.

    3. nonclassical

      jonathan swift-Gulliver, 3rd book, conversation with “whinnies”=

      “Is not the purpose of speech to tell one that which IS?
      If you tell one that which is NOT, you leave them in a worse condition than if you tell them nothing at all-thereby proving humans are irrational…”

    4. F. Beard

      I mean the standard “riddle” of a man walking up to you and saying “I am lying”. Dan Duncan

      But if a man says “I am a liar” then you can believe him because if true then true and if false then true.

  17. frances snoot

    As long as the multilateral banking/governing institutions retain diplomatic immunity/above any law status for their constituents the idealism purported by Bill Black is meaningless.

  18. doom

    The crooked Bush administration signed the Convention Against Corruption before the GOP got purged by popular disgust, and stuck Dems with commitments and obligations including

    Article 18, Trading in Influence. Dems haven’t criminalized Trading in Influence, they’ve institutionalized it, as Ferguson showed, with fundraising requirements for committee chairs and congressional leadership positions;

    Article 19, Abuse of Function. Dems haven’t criminalized that either. This administration campaigned on it in a decisive parallel election by corporate donors. That was the only pledge they kept. Abuse of function for AIG. For Goldman Sachs. For BP. For Bank of America. For the RIAA.

    Control of corruption is another obligation this state cannot meet. That compact Bush signed to lift up and improve dirty third-world countries? Turns out we’re the dirty third-world country. Central Asian strongmen laugh at us. This is terminal degeneration of a state. Instead of following this fake election I’ll read Tacitus’ Annals again.

  19. Max424

    I find it a little surprising that people like Bill Black — and Glenn Greenwald! — are still under the impression that Matty Y. is an independent blogger. Nothing could be further from the truth. Yglesias is paid propagandist, period. His marching orders come directly from the White House.

    Only two people have been kicked Matt’s blog; myself, and a guy named Alan P. (aka State of Division). The reason? During the opening months of the crisis in the Gulf of Mexico (a taboo subject if ever there was one at the Yglesias Blog), Alan and I had the temerity to openly discussed the crisis (imagine that!), and we courageously (giggle) provided dozens of links to relevant oil spill material (Florida Oil Spill, SkyTruth, Ricky Ott, Dahr Jamail, Rense, George Washington, Naked Capitalism ..wink.. etc.).

    There is NO DOUBT in my mind, what Alan and I were doing — making a lock tight case for impeachment, it turns out — was touching nerves, WAY ABOVE Matt’s pay grade, and predictably (and as I predicted, two days before it happened), we got booted.

    Note: I knew we were going to get censored, because Matt was getting censored. In all those months of deep, deep crisis — when the oil was blasting out the ocean floor and the Obama administration was up against it — Matt never posted on the Gulf. Not once. Imagine a self-styled “political blogger” who can’t be bothered (yawwwwnnn) to blog about, if not the most important, then certainly the most complex, and intriguing, political event of his young lifetime. Too funny.

    1. Erin

      Yglesias and the Center for American Progress clearly are not as “progressive” as they claim. What true progressive would advocate for war AND advocate not prosecuting control fraud? Anybody that believes there is a meaningful difference between Republicans and Democrats is an idiot. Wake up.

      1. Max424

        The Republicans and the Democrats are the same. The Republicans and the Democrats are the same.

        The Republicans … and the Democrats … are the same. Ok – got it.

        Thanks for the info.

        1. Erin

          Jeremy Scahill said in 2009:

          “Reading the Center for American Progress‘ new report supporting President Obama’s escalation of the US war against Afghanistan is a very powerful reminder of how much neoliberals and neocons are alike. This, of course, is not some genius observation, particularly since CAP and the neocons are making it hard to miss, what with their love triangle with the war. Indeed, CAP’s launch event for its report, “Sustainable Security in Afghanistan: Crafting an Effective and Responsible Strategy for the Forgotten Front,” included a leading neocon, Frederick Kagan and was promoted by William Kristol’s new version of the Project for a New American Century, the Foreign Policy Initiative. So, here is part of what we are seeing unfold: Running parallel to the bi-partisan war machine within the official government is a coordinated campaign in the shadow government — the think tanks. Or, as Naomi Klein describes them, the people paid to think by the makers of tanks. CAPs particular role in this campaign appears to be attempting to sell Obama’s war.”

          And sell a hands-off approach to Wall St as well…and prosecuting torture…the list goes on…

          http://original.antiwar.com/scahill/2009/04/03/obamas-neoliberals-selling-his-afghan-war-one-report-at-a-time/

          1. nonclassical

            Scahill is becoming more polished-but he misses FACT that
            “intelligence gathering” industry is now around 60% outsourced to private contractors…

        2. Tao Jonesing

          Erin didn’t say that Republicans and Democrats are the same. Erin said that there is no meaningful difference between Republicans and Democrats, and that is clearly the case when it comes to how the parties govern the country.

          Seriously, Obama is governing exactly the same way Dubya did. Sure, Obama is a lot more articulate and comes across as a total pushover in a negotiation, but he is delivering exactly the same results as Dubya did with just as much intention of doing so.

          1. Max424

            I actually have Obama to the right of George W. Bush. I also think he has committed more crimes than George W. Bush.

            And LIKE I SAID, I think Obama should be impeached, found wanting, and tossed out of office.

  20. F. Beard

    1. Grow massively
    2. By making awful loans at a premium yield
    3. While employing extreme leverage, and
    4. Providing only grossly inadequate loss reserves
    William K Black

    Those are all matters of judgment, Bill. How big is too big? What is an “awful loan” when asset prices are booming? What is extreme leverage? What are grossly inadequate loss reserves?

    You liberals gave away the store when you accepted the basic premise of fractional reserve lending in a government enforced monopoly money supply – that theft of purchasing power from all money holders INCLUDING the poor you claim to care about is ACCEPTABLE if done “moderately.”

    1. F. Beard

      Hey snoot,

      They miss you at Max Keiser and I miss Cleetus, Stella and Harry Dog.

      Yall come back now, ya hear?

      1. frances snoot

        Heh, Frank. I’m afraid Harry ate the KJBible. But he’s been regurgitating ever since. Feeling like, well, I got me a holy dog.

  21. F. Beard

    Our money system:

    “Hear you go bankers – a license to counterfeit. You be good now, ya hear? Don’t steal too much.”

  22. don

    Yesterday as I drove through the coastal town of Crescent City, in far northern California on my way home, just across the border in Oregon. As I passed the city part to saw around 40 demonstrators carrying signs, one of which said: “No More Socialism”. I could barely contain my laughter.

    These were working class people who believed that the government was against them because it is running up higher and higher deficits. Does it ever occur to these people who these deficits support transnational corporations at their expense?

    For the sake of stability, real politik is considered a necessary “evil”. No where is this more evident than in the foreign policy arena. Obama was elected on some sort of idealism that contrasted with the realism of the immoral Bush admin. He promised change and a better life. Sound familiar? Reagan promised the same, in a manner of speaking.

    So Obama moves from idealism in presentation to realism in practice. At the Treasury is an individual who is complicit in the fraud and surely deserves a prison sentence. But it would be naive to think this would ever happen, just as it is to think that Bush would be imprisoned for his actions that frankly makes Geithner’s pale in comparison.

    Someday it may dawn on the people of this country that the government exists to serve the interests of the people of this nation, not a class of wealthy who make millions while the multitude find themselves struggling. Is it any surprise that today, still, the ruling ideas are the ideas of the ruling class?

    1. DownSouth

      When speaking of foreign policy, the terms “realism” and “idealism” invoke very specific meanings.

      Under Casey, idealism temporarily gained prominence, but other than that realism has pretty much reigned supreme for the last several decades. That is until 9/11, after which idealism became dominant, where it remains today. When you think of realism, think Kissinger. When you think idealism, think Cheney, Rumsfeld, Wolfowitz and Perle.

      In 2008 the American people voted for a return to realism. That’s what Obama promised. They had grown tired of tilting windmills in so many far-flung places around the globe, and spending untold blood and treasure in the process. However, Obama pulled a bait and switch. He promised a return to realism, but what he delivered was more idealism.

      Idealism serves the interests of the security-industrial complex (war, oil, police, surveillance and prison industries) as well as the financial-industrial complex (imposing “democracy” and “free markets,” at the point of a gun, as is always necessary).

      1. JTFaraday

        I don’t know about that though. Humanitarian interventionist Samantha Power was always Obama’s girl, despite her temporary layoff for calling Hillary Clinton “a monster”:

        http://en.wikipedia.org/wiki/Samantha_Power

        Meanwhile, his nicey nice acceptance speech contained this jarring note:

        “When John McCain said we could just “muddle through” in Afghanistan, I argued for more resources and more troops to finish the fight against the terrorists who actually attacked us on 9/11 and made clear that we must take out Osama bin Laden and his lieutenants if we have them in our sights. John McCain likes to say that he’ll follow bin Laden to the gates of hell—but he won’t even go to the cave where he lives.”

        I think this is another case of people wanting from Obama that which Obama was not going to deliver.

    2. kevin de bruxelles

      “These were working class people who believed that the government was against them because it is running up higher and higher deficits. Does it ever occur to these people who these deficits support transnational corporations at their expense?”

      Granting your premises did it ever occur to you that it therefore makes sense for them to protest against “socialism”?

  23. John Merryman

    There are little earthquakes. There are big earthquakes. Just because all you have ever experienced are little earthquakes, doesn’t mean big earthquakes are not going to happen. Especially when the pressure is building and any attempt to release it is stifled.
    We don’t know what straw will break this camels back because if it was at all obvious, there would be concerted efforts to stifle it.
    One day though, some fruit peddler is gong to light himself on fire and it will all start to come unglued.

  24. Bruce Wilder

    “Overleveraged” is a euphemism for fraud, based on one of the most fundamental results in financial economics: Miller-Modigliani. To the extent that one sees the financial crisis attributed to excessive leverage, one is justified in presuming that financial fraud is co-extensively at fault.

    I’m surprised that few economists seem to make the logical connection between Miller-Modigliani and Minksy, regarding leverage.

    If the economic value of the project is its expected cash flow, then changing the capital structure cannot change the project’s value. Increasing leverage on a promise of increasing the project’s market value ought to be, presumptively, a fraudulent venture, only possible to the extent that salesmanship overcomes truth.

    Whereever you see the phrase “overleveraged”, I think an economist could justify a presumptive substitution of the word, “fraudulent finance”, without fear of being often contradicted by detailed facts.

    1. Tao Jonesing

      “Economics” is another euphemism for fraud. The entire discipline exists to distract society while financial elites pick its pockets.

      And “fraudulent finance” is redundant . . .

      1. Bruce Wilder

        If you figure that a functional financial system might be around 2% of GDP and our financial system is 8+%, then, yes, approximately 3/4s of our financial system is, by implication, dysfunctional and predatory.

        Yglesias, representing the neo-liberal complacency which pervades elite “thinking”, suggesting that “stabilizing” a system, which is 3/4s dysfunctional and predatory, is actually pretty mind-boggling.

        But, I think lots of people don’t recognize that phrases like “overleveraged” are euphemisms for fraud. The misunderstanding is a source of misapplied complacency.

  25. Eureka Springs

    The system is completely corrupted, criminals are still in charge/own both parties.

    Do something!

    Get out of either party… if you are still there… shame on you. If you are a member of or even kind to other members for remaining members of the D or R party you are part of the problem.
    Demand everyone from Obama to Boehner step down today. Dismantle both of those criminal party organizations.
    Resist! … be that through tax revolt, or stop paying on liars loans/ inevitable fraudclosure, high credit card rates…. there are countless ways to at the very least limit your participation in the big ponzi.
    Get out of big banks… even if you have little money.

    It is way past time for us to refuse the ponzi instead of just gasping at it.

    And never ever give the Yglesias pearl-clutchers of the world a click.

  26. Cathy

    I warned for 10+ years that Wall St. was going to crash because of FRAUD. I said it would happen in about a decade. Everyone said I was Bleeping crazy to say it nicely.
    My teenage son in the spring of 2008 hit the nail on the head, as he told me “you know how you keep saying Wall St. will crash because of fraud & about the housing being a bubble, well we studied a chapter on the Great Depression & I believe on Sept. 15th this year, it will have started.”

    How’s that for predicting? I have said that the economy won’t recover until the criminal banksters are brought to justice.
    I tried hard with others to keep the bailout from passing because what I read & understood there wasn’t anything in it with teeth, nothing in it to make sure the money wouldn’t go into their own pockets, there was no oversight or even any rules.

    Unless they are held accountable I believe the economy can’t recover. It ISN’T recovering now unless it’s Wall Street.

  27. FatCat

    FatCat here. I honestly don’t understand why all the bitching here, because I had a great year. Just got my tax refund (all 100 million of it), plus a nice 2 billion tax credit for all my good environmental work (I am THE major shareholder in British Petroleum). plus 700 million in subsidies for all my biofuel investments (using top notch Monsanto genetically engineered corn). I also got my fair share (2 billion dollars, to be exact) of America’s.”foreign aid” for all my sales of cluster bombs to Israel and Libya. Plus, I made a handsome 1.5 billion dollars in tax-free bonuses for all my good work on the boards of Goldman Sachs, JP Morgan Chase, Citibank, and Bank of America, as well as United Healthcase, Blue Cross Blue Shield, and, last but not least, AIG. I had a great year, as did all my friends. So why all the bitching?! Please explain yourselves…
    FatCat

  28. Indeed.

    Well-put Mr. Black. Thank you for sharing so much more of your personal experience with S&L crisis, and the extent that Gresham’s law cannot be ignored. It seems that all the ‘powers that be’ learned, was how to avoid the consequences to themselves this time.

    I especially concur with your final statement:

    “….our economy is fatally flawed and he [Geitner] should be leading the charge to radically transform it. ”

    Indeed.

  29. sleeper

    Waht a fun elucidating discussion. It is wonderful to read about Nietzsche, the rule of law, and equal justice for all.

    Sorry folks, Nietzshe is long dead. The rule of law is dead, Equal justice for all is dead.

    Belief in any of these requires hopeless naivete,certifiable behavior, or permently attached rose colored glasses.

    Here’s what we will hear from DOJ – “We never comment on our investigations” – which in realspeak means = We might have some notes in a file somewhere but don’t expect anything in the next few yearS.

    MSM will do no better – ” We know Rome is burning but really we don’t want to upset anyone.”

  30. Pitchman

    Yves: Right on! The piece by Bill Black piece was telling.
    I posted excerpts form the Bill Black piece with links back to your site. – http://notionalvalue.blogspot.com/2011/04/william-black-why-arent-honest-bankers.html

    You Bill and others have cried from the bell towers for all to hear. The people, I suppose, are a little preoccupied trying to keep their heads above water to fully engage. All the while our ‘representative’ leadership is consumed in a frenzy of greed, selling the rest of us and the last vestige of an ‘American Ideal’ down the road. When the next down draft occurs there may be little left to defend. As our decent progress those who can must point to the root cause and personalize it. We must continue to yell from the roof tops, the power to bring about real change lies in the hands of the people; always has!

    THE CREATOR PRODUCES: THE PARASITE LOOTS. – http://notionalvalue.blogspot.com/2011/04/creator-produces-parasite-loots.html

    “The creator’s concern is the conquest of nature. The parasites concern is the congest of men… The parasite seeks power. He wants to bind all men together in common action and common slavery… Look at history… Every great achievement has come from the independent work of some independent mind. Every horror and destruction came from attempts to force men into a heard of brainless soulless robots… Without will, hope or dignity. It is an ancient conflict. It has another name. The individual against the collective… We are approaching a world in which I can not permit myself to live… I came here to say that I do not recognize anyone’s right to one minute of my life… My terms are; a mans right to exist for his own sake!”

    KUCINICH: OBAMA PRESIDES OVER A MORAL DEFICIT – Must See Video – http://notionalvalue.blogspot.com/2011/04/kucinich-obama-presides-over-moral.html

    “The deficit underscores the transfer of wealth that’s occurring in this country from the Great mass of people into the hands of the few. And the Obama administration is actually presiding over that. That’s like their job. Why doesn’t the President lead? Why doesn’t the President challenge these corporations…” It’s official, Kucinich and Paul; our only non-neutered ‘representatives’.

    When Government Is Complicit In Crime It’s Our Duty To Amend, Dismember, Or Overthrow It – http://notionalvalue.blogspot.com/2011/04/when-government-is-complicit-in-crime.html

    Those ideals we hold most dear are being down-trod by the very forces charged with their care. So, all thinking Americans must ask themselves. Is this the Country the great Americans of Antiquity wished for us? Secondly, and much more important, each of us must honestly ask ourselves if these Charlatans represent the America We Want and Deserve? If your conclusion is NO, then it is time to take action.

    All Americans – conservatives and liberals alike – can agree that it is not capitalism, and it is not American. – Washington’s Blog

    This country, with its institutions, belongs to the people who inhabit it. Whenever they shall grow weary of the existing government, they can exercise their constitutional right of amending it, or their revolutionary right to dismember or overthrow it. – Abraham Lincoln

    Patriotism means to stand by the country. It does not mean to stand by the president or any other public official save exactly to the degree in which he himself stands by the country. It is patriotic to support him insofar as he efficiently serves the country. It is unpatriotic not to oppose him to the exact extent that by inefficiency or otherwise he fails in his duty to stand by the country. – Teddy Roosevelt

    I have two great enemies, the Southern army in front of me and the bankers in the rear. Of the two, the one on my rear is my greatest foe. – Abraham Lincoln

    You must pay the price if you wish to secure the blessing. – Andrew Jackson

    Leave no authority existing not responsible to the people. – Thomas Jefferson

    *

    “This game is rigged man. We like them little bitches on a chess board.” – The Wire

  31. steelhead23

    I suspect that being the 130th commenter on this thread that few will hear what I have to say, least of whom being Dr. Black. He makes the perfectly logical claim that those on the blogosphere posting bits about executing banksters are “not thinking like white-collar criminologis”. Isn’t that the point? That is, if the king and his princes aren’t going to punish the people’s tormentors, isn’t it the right of the people to unseat the king? Didn’t a document some rubes signed back in 1776 say just that? To be perfectly clear, this unwillingness of current leadership to “shake up the tree” while the fruit of that tree is poisoning us, gives us the right to defy that leadership.

    We the People accept that Justice is not divine and have thus acquiesced that justice must be guided by process to minimize error and the persecution of the innocent. However, the king’s abandoning the pursuit of justice is not a legitimate use of process, it is an unjust act favoring one group of citizens beyond all others, to which the People have every right to respond, including decorating lamposts with tyrants and banksters.

  32. Steven Rowlandson

    If the tendency among democracies, republics and communist countries is that people are ruled by a sellect elite clique of satan worshippers who think themselves to be equal to or superior to god and do not fear god then what do the people expect?
    It is merely a case of garbage in, garbage out!
    A government composed of luciferians will tend to behave like the the spiritual entity they admire the most.
    It will behave like satan and a cursory check of history and the public record will confirm this.
    You people will not have good government untill you stop being governed by satan worshippers.

    Steven

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