Sequoia Fund Manager Campaigns Against Goldman Board Member, Former Fannie CEO Jim Johnson

A telling taboo in elite circles is the issue of corruption. At INET last year, after a panel discussion on the financial crisis, Jamie Galbraith said he was astonished that there was not a single mention of fraud. His observation was met with a resounding silence.

Similarly, I had a colleague tell me today that I shouldn’t use the “c” word, meaning corruption, since it would alienate potential allies. The logic is similar to arguments against being shrill. He claimed that even if a lot of people in positions of authority engage in corrupt looking behavior, that doesn’t mean they understand it to be corrupt, so calling the corrupt will merely get them worked up to no useful end. They could well think they are doing the right thing and just be victims of cognitive capture.

I deeply oppose this line of argument. First, it assumes that decision-makers don’t recognize when they are taking ethically problematic actions. The people I know who have yielded to institutional pressures to do the wrong thing say they knew they were doing so and found a way to rationalize it. And I suspect even sociopaths know where the lines are. They have to do a better job of covering their tracks when their conduct is dubious.

Second, it assumes that it isn’t worth taking a firm position on ethics because it will turn off powerful people who have engaged in questionable behavior. Better to be less accusatory in order to have a dialogue with them. I don’t buy that because being indulging their justifications of their conduct helps preserve a bad status quo.

One aspect of American exceptionalism is many still believe the US is cleaner and more above board than most other advanced economies. But if you go overseas, you will find that a lot of businessmen see the US as not particularly ethical. One British colleague who has worked with major US firms described the US as becoming more and more a scam-based economy (in fairness, he was really talking about the financial services industry). An American who works a great deal with foreign investors said his clients saw the US at best as on a par with other big countries, at worst, with Russia.

One of the big reasons for the erosion in US behavior is the notion that elite crimes shouldn’t be prosecuted because it would harm the system. Glenn Greenwald describes the pardon of Richard Nixon as a critical embodiment of this principle. And while people in influential positions have long been able to get away with all sorts of bad conduct, it’s one thing to have, say, speeding tickets disappear quietly (the hoi polloi are no wiser) and quite another to have a tax cheat oversee the IRS. In the old days, propriety and reputations mattered, and that served to check bad behavior.

So it is important to define norms and not shy away from words like “fraud” and “corruption” when they fit. While it would be nice if more people in power were capable of feeling guilt, shame will do. Thus naming and shaming are legitimate strategies for letting the elites know that the broader public is not fooled.

It’s also important to recognize that some people at the top of the food chain are willing to criticize bad actors. Ruane, Cunniff & Goldfarb, the well respected investment firm that among other things, manages the fund Sequoia, sent out a letter that is blistering by the reserved standards of that industry. It says that former Fannie chief Jim Johnson, who is currently on the board of Goldman and Target, is not fit to serve on any corporate board. Those of you who read the book Reckless Endangerment may recall the detailed discussion of how Johnson aggressively cultivated support in Washington and helped forge a coalition among affordable housing backers, banks, realtors, and homebuilders (I read the book as being far more anti-Jim Johnson than anti the GSEs per se).

The Sequoia letter says it will vote against Johnson continuing as a Goldman board member and urged clients to join them in opposing him. It describes how Johnson has “been at the center of several egregious corporate governance debacles,” not just at Fannie but also as a board member of United Healthcare and KB Homes. Oh, and he also got a Friend of Angelo sweetheart loan, when with his rich pay package, he was hardly in need of a break on his mortgage.

I urge you to read this short, scathing letter in full.

It’s welcome to see an investor wage a campaign against a tainted board member, particularly one seen as particularly connected and influential. Along with the investor rejection of Vikram Pandit’s pay package, this may be the beginning of a long overdue demand for greater accountability from the governing classes. And these calls are harder to ignore when they come from experts and peers.

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    1. K Ackermann

      These people never actually go away, they just go into remission for a while. Look at the neocons – they are flaring up everywhere on Mitt these days.

      1. Ex-Csfb

        Neo-cons are the least of it; more worrisome are the hypocrite democrats. I remember visiting Bermuda in the early 2000s, one of the most exclusive neighborhoods, Tuckerstown, home to Mayor Bloomberg, Ross Perot, and, since the 1990s while he faithfully employed as a diligent public servant, James Johnson. Now, as an employee of CS even then, I knew well that Mr. Johnson better deserved to be in prison than entertaining from his perch in Bermuda. His gains while pumping up the housing markets were anything but well-gotten. And this was far earlier than the significant housing crisis of 2006-present. His activities have been documented by the Wall Street Journal, they are no secret. How can he serve on the boards of Goldman and Target? Both willfully overlooking his moral character and reputation. Both in the pockets of the Democrat party, or both holding him out to Democrats (Barney Frank) in a role that they may look forward to filling when they step down (the recent Treasury fellow for example).

        1. Goin' South

          It is pretty sad. Johnson was Fritz Mondale’s AA when Mondale was in the Senate. He went with him into the White House when Mondale was Carter’s VP. What stellar “liberal” credentials.

          And look what he’s done with the power and influence he gathered.

          Washington, like Wall Street, is a place where only the corrupt succeed. Either they start out that way or must “adapt” to stay there.

  1. vlade

    One thing I really really liked when I still lived in NZ was how even small things killed high placed politicians – no matter what the party – in the years I was there a senior minister got sacked for trying to get police from issuing him a parking ticket, and another (also senior) for being slightly over-limit and driving.

    The sad thing is that I heard it’s changing for the worse in the last five years or so..

    If NY can get tough with small crimes, the same logic should apply to any crimes. That said, I believe the system got corrupted when you could settle/get fined with “but does not admit wrongdoing”. Of course, the short-term costs are lower for that specific company, but the long term cost to the society are higher.

    1. CB

      Settling crimes for cash is a crime, but lazy, corrupt prosecutors regularly hold press conferences to announce piddly squat “settlements.” Of course it pays to play if you can walk on a fine. Cost of doing business. And deductible, don’t you know. I believe the feds started the practice, which quickly devolved to the states. So much easier than prosecuting. And those future job offers!

  2. jake chase

    Sounds to me like Johnson is perfect for the Goldman board, although perhaps his record is a trifle restrained. How many countries did he blow up? How many investors faces did he rip off? This letter sounds to me like corporate PR-bs. Maybe Sequoia fears being forgotten? I know I had forgotten it.

    1. 4D

      Great to see this letter, but I’m with you on this one. I would be far more impressed if they dumped their Goldman and Target holdings too, because by having Johnson on the board immediately brings their ethics into question.

      That would be a real statement of morality.

  3. timotheus

    “It is a lucky society where despicable behavior must be kept hidden.” –Nadhezhda Mandelstam, who survived Stalin (her husband, the poet Osip Mandelstam, did not).

    Apologies for the paraphrase, she said it much better.

  4. Conscience of a Conservative

    Interesting. Fannie Mae lobbies for lower mortgage standards so they can earn more income which primes the market for lower quality mortgages. This is the 1990’s so besides greed me thinks this is Minsky in action as an observer back then would say this is there’s no risk considering the low default rates. It’s also interesting to learn once again that the job of a board of director is to lobby the gov’t.

  5. Middle Seaman

    As one who had to adjust to the US culture after growing up in a “in your face” intellectual culture, this post is a perfect description of the preferred communication style in business and society in the US. In a non contravesal meeting this week I used: “I agree with you but want to come from a different perspective” instead of “you are full of shit, that is what is going on.”

    Since I think that Glen Greenwald is almost always wrong, Nixon’s pardon is not the cause of the problem. (Punishments is not just jail time, dear Glen.) My thinking is that we are heavily influenced by the Anglo Saxon tradition which is less verbal than, for instance, the Arab-Jewish (Middle Eastern) tradition.

    About 25 years ago, the LA Times had a series about the Israeli hi-tech industry. It was summarized by a CEO who worked as such both in the US and Israel. He said: “in the US, you must agree with the CEO; you tow the line. In Israel, if you don’t argue with the CEO, the CEO will conclude that you are indifferent.” As I said above, different verbal and behavioral traditions.

    1. Merchant Mermaid

      “Glen Greenwald is almost always wrong.”
      He’s almost always right – there aren’t many writers who convincingly analyze the loss of civil liberties and the tragedy of criminal justice system in this country. Oh yeah, a CEO of a Defense Contractor will never be honest about anything.

    2. alex

      “… we are heavily influenced by the Anglo Saxon tradition …”

      So how do you account for the _change_ in American tolerance of corruption? Are we now more influenced by the “Anglo Saxon” tradition? If anything it’s the other way around.

      “… which is less verbal than, for instance, the Arab-Jewish (Middle Eastern) tradition …”

      So is it your contention that, as a rule, Arab countries are less tolerant of corruption (e.g baksheesh)? The recent Arab Spring nothwithstanding, I think that might be hard to justify based on historical arguments.

    3. Lambert Strether

      Anglo-Saxon culture can be plenty adversarial; two sides in parliament, defense vs. prosecution, etc. I used to be a forensics debater, back in the day, and being intellectually adversarial was what that was all about; totally “smash mouth,” just with the mind.

      But… “kids these days” don’t do that. Somewhere in the last twenty or thirty years we lost that. I think it’s a culture of deference inculcated by the our betters, the dominant neo-liberals, on their way to creating the aristocracy that always forms from kleptocracy.

      1. Binky Bear

        I’ll have you know that this is going to go down on your permanent record, Mr. Strether. Your unwillingness to go along to get along or be a team player will be forwarded to any future potential employer who may inquire about your work habits. A note regarding this matter will be appended to your social networking pages directing people in your sphere of social relations to information demonstrating that you are a bad egg, harping on about corruption and ethical conflicts.

        A digital, red letter A. The greater barrier to action is always the imagined one as Kafka wrote in “The Law.”

  6. DP

    Speaking of corrupt scumbags who shouldn’t be anywhere near a public company, I’d think the latest Aubrey McClendon scandal at Chesapeake Energy is worth a piece on Naked Capitalism. He is CEO with a crony Board of Directors. In the fall of 2008 all of his Chesapeake shares, which peaked at about $2 billion in market value, were liquidated by banks to satisfy margin loans. The sales crushed the stock price, which peaked at $80 and dropped to $10 or so on the forced margin related selling.

    The Chesapeake Board, rather than firing a CEO that could be that reckless and oblivious to risk management, handed him a new pile of restricted stock. The latest scandal is that McClendon is leveraged up again, owing Chesapeake $1.1 billion in loans that Chesapeake’s legal counsel says weren’t material enough to disclose. Also, he has been getting a 2.5% carried interest in wells Chesapeake drills and has the ability to buy wells from the company at prices he effectively sets.

    I have no intention of owning common stocks when we don’t have a functioning SEC and CEO’s and Boards of Directors are free to brazenly rape and plunder shareholders without any fear of prosecution.

  7. Skeptical

    Why no mention of the fact that Sequoia sells investments in private label mortgage securities?

    To a large extent, the Sequoia letter is an amplification of a right wing meme called by Joe Nocera, Barry Ritholtz and others as The Big Lie. Most specifically,

    “Rather than act conservatively to protect taxpayers, during Johnson’s tenure Fannie ramped up its growth by buying lower-quality mortgages. This bloated Fannie’s balance sheet, increased its profit and magnified the risk to taxpayers.”

    Remember, Johnson left his employment at Fannie at the end of 1998. During his 8 years as CEO (1991-1998), Fannie’s credit losses, as a percentage of its mortgage book, ranged between 3 and 6 basis points. During the 8 years that followed, (1999-2007) credit losses ranged between 1 and 5 basis points. After the housing crash, annual credit losses spiked up to 77 bps in 2010.–508_file.pdf See page 124.

    Nocera and Bethany McLean debunk the meme about Johnson in their book, The Devils Are All Here. They are unsparing of their criticism of Johnson, but they also note that, contrary to myth and his lip service to affordable housing, he remained vigilant about protecting credit quality under his watch:

    “Here’s the great irony of the mortgage market in the 1990s: to the extent that lower- and moderate-income Americans were being swept along in the rising tide of home ownership in the 1990s, it was happening not because of Fannie and Freddie, but despite them… Fannie and Freddie may have been given a federal mandate to help lower- and moderate-income Americans buy homes, but that GSEs were cautious about the credit risk they took…Repeated studies by HUD showed that GSEs purchases of loans made to lower income borrowers lagged the market.
    “Fannie Mae made no apologies for its stance. “I used to say that the goal at Fanny was to have a seamless yes to anyone who wants to do anything for housing,” Johnson later said. “But we didn’t say yes to crap, to fraud. We were probing the boundaries, but it was carefully circumscribed.”
    “[A former Fannie executive] adds, “Johnson’s attitude was, ‘I am not going to let the government define what affordable housing is to this company.'”

    The FCIC, Nocera, the SEC complaint, and others point out that Fannie reduced its credit standards in 2005, long past the point when Johnson was gone. The only vintages that, as of 2012 incurred net losses were 2005-2008.

    Let’s not forget that, since the housing crash, which took place almost a decade after Johnson left the firm, the large majority of credit losses and serlously delinquent loans were held by non-GSEs, even though the GSEs hold most of the mortgage loans in the US. The losses on synthetic assets in CDOs, which financed nothing, exceeded the credit losses at Fannie.

    1. Yves Smith Post author

      I suspect you have not read Reckless Endangerment. Its big problem is that is is a journalistic account that has been read as an argument book (ie the authors never set forth a clear thesis statement, which means lower level arguments are quoted in isolation as tantamount to that). Nowhere does it say Fannie and Freddie caused the crisis.

      You can fault Morgenson and Rosner for not saying that when Fox News et al pumped book sales by using the book’s criticism of Johnson for creating a political alliance in favor of “affordable housing” which led to a lack of skepticism as to whether putting people into mortgages with little/no equity made sense. The book is very clear on how Johnson created a massive lobbying operation using Fannie’s cash flow and went after critics in DC and bought pretty much every formerly independent housing analyst.

      And did you read the Sequoia letter? It contends that the controls that were in place were built during Johnson’s tenure. Having worked for lots of large corporations, that rings as true, as does this:

      As chairman of the board and chief executive officer of the mortgage giant Fannie Mae from 1991 through 1998, Johnson lobbied Congress relentlessly to relax Fannie’s underwriting standards and lower the capital requirements put in place to protect taxpayers from losses in the event of a downturn in the housing market.

      In other words, you are using my mention of Reckless Endangerment to straw man the Sequoia letter. You aren’t dealing with the letter, you are attacking Reckless Endangerment, not the charges set forth by Sequoia.

      And what does the fact that Sequoia invested in subprime have to do with anything? This letter is directed to investors in their EQUITY funds. Pretty astonishing stretch to accuse them of nefarious motives. Sequoia, in case you missed it, is a blue chip activist manager. This is completely consistent with their general stance.

      Oh, and Blackrock and Pimco, even mortgage securitization expert Bill Frey of Greenwich Capital (he advised Russia on its securitization market, which has performed better than that of the US) invested in subprime. There is lots of company in that space.

      1. Skeptical

        There’s a lot to unpack, but I’ll give it a try.

        First, I was not referring to your mention of Reckless Endangerment, which I missed. I regret if you or anyone else got that impression. The meme about 1990s Fannie being an out-of-control company that brought on the mortgage crisis had been around for a couple of years before the Morgenson/Rosner book came out. I have read the book, but first let me clarify/amplify my original points.

        Yes, as Nocera/McLean also report, Johnson was a smooth but ruthless political operator, willing to steamroller critics and regulators who got in his way. Bt these authors draw keen distinctions between words, actions, and results. Sequoia contends that, “during Johnson’s tenure Fannie ramped up its growth by buying lower-quality mortgages..and magnified the risk to taxpayers.” Except the evidence simply isn’t there, based on Fannie’s loan performance during the 1990s, when home price appreciation was moderate, and for years afterward. True, F&F had small pilot programs that represented under 1% of their balance sheets, but that didn’t drive the rest of the housing market.

        As for weak controls, a closer look indicates that there is less than meets the eye. Sequoia’s reference that, “OFHEO found that in 1998, Fannie Mae’s “incorrect accounting spared it approximately $500 million in impairment losses,” correctly quotes the OFHEO report, which gives no backup for the claim. The SEC complaint, released the same day as the report, makes no such mention of such impairment. The only material allegation to FY 1998 pertains to Fannie’s apparent failure to adequately reflect an adjustment to the rate of fee amortization, because mortgages were repaying at a slower rate than originally projected. (They smoothed out a one-year adjustment to two years.) Virtually everything else refers to accounting standards–FAS 133, FAS 149–that became effective several years after Johnson left the company.

        Most importantly, the OFHEO/SEC claims that Fannie understated losses proved to be untrue. When the company released its restated financials, it turned out that by every standard metric, Net earnings, S/H equity, net cash flows, Fannie performed materially better than what it originally reported.

        Also, it is definitely true that Johnson lobbied to keep F&F’s regulatory capital requirements low, back in the day when nonprime securitizations were a blip on the radar screen. He can be faulted for that, and the Bush Administration and GOP House can be faulted for not attempting to raise that level in subsequent years.

        I am no great fan of Johnson, but I believe that the Fannie-under-the-Clinton-Administration-caused-the-crisis meme is baseless and is used to distract away from the real abuses that took place in the 2000s, and as part of a greater effort by discredited right wing think tanks to paper over their own failures.

        Now, as for Reckless Endangerment. The authors write:

        “Under Johnson, Fannie Mae led the way in encouraging loose lending practices among the banks whose loans the company bought. A Pied Piper of the financial sector, Johnson led both the private and public sectors down a path that led directly to the financial crisis of 2008.”

        So i guess that after 1998 Johnson led those sectors in abstentia, and the path was set by him before the CDOs holding securitizations and CDS for mortgage bonds had even been invented.

        As for their claims that Johnson lobbied to relax underwriting standards, that doesn’t seem to be backed up with any hard evidence. The authors’ one quoted source, Edward Pinto, who claims he was fired by Fannie before Johnson came on board, happens, according to Nocera, Ritholtz and others, to be the chief proponent of The Big Lie. The FCIC demolished his “research.” The one defining characteristic of all the Fannie-did-it proponents is that they refuse to compare the GSEs’ loan performance to that of the rest of the market, the way the FCIC and David Min and people in the industry do.

        I would refer you to the takedown of the book in The Ne York Review of Books, which, so far as I can tell, has never received a response from the authors.

        1. Yves Smith Post author

          Let me repeat myself: what about straw man don’t you understand?

          Neither Reckless Endangerment (despite the NY Review of Books efforts to pin that tail on the donkey) nor Ruane, Cunniff & Goldfarb argue that Fannie was an out of control company that caused the mortgage crisis. RE does argue that Jim Johnson saw how various housing interests (banks, realtors, homebuilders, affordable housing types) could be united under a much more concerted and aggressive effort to push from much bigger subsidies and soft support for the housing sector. The book depicts Johnson’s significance much more as a political force (for instance, knecapping opponents of more goodies for the housing lobby) than as a direct actor (eg, a buyer of subprime).

          Ruane, Cunniff & Goldfarb argue that Johnson presided over several significant corporate governance failures, of which Fannie was one. You concede one of their arguments on Fannie, pushing for unduly low equity levels. Your argument does not necessarily disprove the OFHEO comment re impairment losses. The SEC may have chosen to include it in its suit. And given how much latitude there is in how the books of financial firms are marked, it is not at all impossible that Fannie was able to find other income (managing loss reserves is one of many goodies, valuation of derivatives is another, and the GSEs run massive interest rate hedging operations) to offset the impact of more accurate accounting of impaired loans.

          Oh, and CDOs were a significant factor in the first subprime bubble, that of the late 1990s.

  8. martin

    On the one hand, I take this as a breath of fresh air wafting into the crony capitalist board system that has seized control of the US financial system. On the other, I am saddened that its only manifestation appears to have required malfeasance to this extent. Mere incompetents should rest easy.

  9. ella

    The rule of law is vanishing to be replaced by the rule of man. This was contrary to American law, that is until corruption became rampant and unpunished. Moral hazard? Nonsense, there is nothing moral about corruption and bailouts it is crony capitalism. Moral guidance is toothless without enforceable punitive law to eliminate corruption, fraud and crony capitalism.

  10. diptherio

    “Similarly, I had a colleague tell me today that I shouldn’t use the “c” word, meaning corruption, since it would alienate potential allies.”

    Oh yeah,’corruption’…right…not what I was thinking.

  11. maggot disco

    When TIRI split off from Transparency International, their rationale was that commercial assessments aren’t enough to curtail corruption, you need civil society because the public has no stake in corruption. TIRI is very touchy-feely to stay inclusive but in a terminal kleptocracy like this one, where complexity’s a crook’s best friend, crowdsourced transparency work takes a lot of specialized skills. That makes it hard to evoke enough public outrage to strip the criminal enterprises of legitimacy. DoJ might once have bridged the gap but DoJ’s a cesspool too – purging Welch will accomplish nothing with mafiya kingpins Holder and Breuer in there. In terms of commercial and governmental integrity, we’re well into the zone where COMECON was when elite panic pushed Gorbachev to the top. We’re not going to get a Gorbachev, though, we’re going to get ten more Andropovs. This is a failing state.

    1. Lambert Strether

      maggot disco, +1000. “Crowdsourced transparency work takes a lot of specialized skills.” It does. Lots of us are trying, and NC does make a difference, but it’s not clear what will be enough (though one must try).

      NOTE Love the handle.

  12. Synopticist

    “Glenn Greenwald describes the pardon of Richard Nixon as a critical embodiment of this principle.”
    Glenn the Koch sucker. Do you need anymore proof the guys a libertarian coprporate shill? Of all the blatant corruption going on amongst the 1% in the last half decade, he talks about Richard F*cking Nixon!!
    He’s a false flag progressive, a clever rightwing plot aimed at reducing voter turnout on the left, and alienating independents in the centre from supporting liberal causes.

    1. Yves Smith Post author

      You lost all credibility with the Koch remark. Greenwald did a single piece of commissioned research for Cato on drug decriminalization. You have a problem with him supporting decriminalization of drugs (a view it’s not hard to imagine he held independent of the Cato gig)?

      1. Synopticist

        You fu*king WTF what?
        Greenwald the false flag had a year long gig at the Cato institute. It was probably the best paid year of his life.
        I thought you read the Exiled. He’s a Cato shill.

        1. Yves Smith Post author

          I like Ames (I just had dinner with him tonight) but he’s wrong on this. He is pathological on the subject of anything dimly relating to the Kochs. While much of his work here is really good, I’ve also seen him go off half baked, and this is one of those occasions.

          Greenwald did one gig and it looks like he got paid for advocating a position he already believed in. Being against the war against drugs is completely consistent with his general views. And Soros is ALSO anti the war on drugs (although not to my knowledge funding research here). So if Greenwald had gotten a gig from Soros. would you call him a Soros tool?

          And you are wrong re the $ too. He would have made more as a lawyer in private practice (which he did in the past) than on a single Cato gig. Look, former Fed board member Frederick Mishkin only got $124K for providing a report saying nice things about Iceland, and that endorsement was a hell of a lot more valuable than Greenwald doing research on drugs. Think tank paper production is nice but not great money.

    2. Sanctuary

      No, that would be robots like you. Nothing dissuades left wing voters more than sycophantic enablers of the Corporate Democratic Party who try to concern troll about someone of principle because of their “associations” and other ad hominems but always can excuse the Corporate Democratic politicians who say “the right things” while destroying liberal achievements.

      Caring about the way something is said and not ever the substance…That’s Today’s Democratic Party!

      1. Synopticist

        I’m not a democrat, and I’m not American.
        I’m a socialist. I’m from the UK.

        We have a safety net here, and free health care. Our rightwing politicians are evil scumbags, but yours make them look like intelligent, mild, kindly gentlemen with a strong social conscience. Your lot are fascists,now, basically. I don’t like your president, but I realise that the other option is a f*ck of a lot worse.

        1. Nathanael

          Yep. I’m glad you see it clearly over there.

          Our “Democrats” are your Tories, and our “Republicans” are out-and-out fascists, Mussolini-style. They haven’t quite made it to Hitler-style yet, but they’re trying.

    3. chitown2020

      The real reason why Nixon was impeached. He was trying to correct problems. I read he was trying to get rid of evidence that tied his name to the J.F.K. assassination. That was no doubt the threat they used to keep him following orders. I met with an attorney a while back about the mortgage fraud. We got to talking about the conspiracy and i told him rumor has it this is another Hitler plan. He told me you will know that is true if Barney Frank’s plane goes down. My observation is if they try to correct problems they get destroyed. The establishment has a ton of dirt on these politicians. That is why there have been no criminal prosecutions and our robbery continues. We need a referendum in the 2012 election to RESTORE THE U.S. CONSTITUTION and to ABOLISH THE FED. That way no politician gets the blame.

    4. Susan of Texas

      Obviously you do not know what real Koch sycophancy is like. Megan McArdle:

      “I don’t see any evidence offered that Koch money funds FreedomWorks, or any astroturfing organization. They may–a lot of groups do it, including groups on the left–but there’s precious little evidence of it in this article. Koch is pretty open about their connection with institutions like IHS, but from what I know of them, astroturfing doesn’t really seem like their style. I’ve seen Koch in action at private events, and though I’ll respect the privacy, I’ll say that even in the company of other like-minded rich people, he displayed rather a mania for honest dealing.”

      Now that’s how it’s done!

      The first question we should ask is if Greenwald is telling the truth. It’s interesting that you believe Greenwald’s exposure of policies that echo or even worsen conservative policies is the problem, and not the policies themselves.

  13. Syncophant

    Oh dear, looks like your post went through, William Buckley and all. Launching the failed drug war- yeah let’s forget about that and how the Kochs make their money. Getting down with stupid!

    1. K Ackermann

      That’s your beef with Greenwald? You think he was influenced?

      Just what kind of Syncophant are you, anyway?

      1. Synopticist

        Whats my problem with Greenwald?
        Firstly, he represents everything thats the worst and most disfunctional about the American quasi left- he completelly ignores real political problems about inequality and the domination of your ugly society by the super rich. He never talks about poverty, or trades unions for example.
        “Rights based advocacy” is no substitute for real leftism.

        Secondly, I think he’s actually fake. I personally think he’s a double agent for the right, a clever hoax, a false flag, a lawyer who’s being paid to say things he doesn’t really mean. He’s been set up as someone who will spread the ” theres no difference between democrats and republican” meme, in order to depress voter turnout on the left, and in order to repulse centrists to stop them voting democrat.

        1. Yves Smith Post author

          I suggest you stick to commenting on the politics of countries you understand.

          Greenwald does not claim to be leftist. If you had bothered to understand his background, he’s a Constitutional lawyer who writes about LEGAL issues and civil liberties. Economics is not his beat.

          You asking him to weigh in on that is like asking a sports writer to publish jazz reviews.

  14. chitown2020

    As long as there are no criminal prosecutions and none of these crooks are held accountable, they will never stop their criminal activity. They committed a quadrillion dollars in fraud and they got way with it. Why? Because everytime law enforcement comes calling they blame the Government and cry and say the Government approved this toxic crap. Therefore the FED and the U.S. GOVERNMENT should eat the crap they created and approved because they all got filthy stinking rich off of our backs. They all need to leave their greedy hands off of our wealth and property.

  15. Hugh

    Cronyism and fraud are fundamental aspects of looting and kleptocracy. Our elites, even the liberal ones, either won’t discuss criminality at all or refuse to address its systemic nature. The reason for this is simple. They are elites and receive their privileges for supporting or at least distracting attention away from the kleptocratic enterprise.

    1. chitown2020

      All true. It is their fix for a quadrillion dollars in fraud that is what we need to worry about. They are out for our National Sovereignty and global serfdom. We have to reject a World Tax or a Vatican/Rothschild gold standard. I feel strongly that we need a referendum on the 2012 ballot to restore the U.S CONSTITUTION and abolish the FED. We must then issue our own currency backed by our own Natural Resource revenues issued via State Banks. The establishment have hijacked America and our wealth under many guises.

  16. Nathanael

    “One aspect of American exceptionalism is many still believe the US is cleaner and more above board than most other advanced economies. But if you go overseas, you will find that a lot of businessmen see the US as not particularly ethical. One British colleague who has worked with major US firms described the US as becoming more and more a scam-based economy (in fairness, he was really talking about the financial services industry). An American who works a great deal with foreign investors said his clients saw the US at best as on a par with other big countries, at worst, with Russia. ”

    Because of US corporate “governance”, I invest mainly in Canadian and European firms. The US, in investing terms, is about as “clean” as Brazil. Slightly better than Russia and China, a lot worse than “developed” countries.

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