When Truth Is Suppressed Countries Die

Paul Craig Roberts
March 15, 2013

Over a decade during which the US economy was decimated by jobs offshoring, economists and other PR shills for offshoring corporations said that the US did not need the millions of lost manufacturing jobs and should be glad that the “dirty fingernail” jobs were gone.

America, we were told, was moving upscale. Our new role in the world economy was to innovate and develop the new products that the dirty fingernail economies would produce. The money was in the innovation, they said, not in the simple task of production.

As I consistently warned, the “high-wage service economy based on imagination and ingenuity” that Harvard professor and offshoring advocate Michael Porter promised us as our reward for giving up dirty fingernail jobs was a figment of Porter’s imagination.

Over the decade I repeated myself many times: “Innovation takes place where things are made. Innovation will move abroad with the manufacturing.”

This is not what corporations or their shills such as Porter wanted to hear. Corporations were boosting their profits by getting rid of their American employees and replacing them with lowly paid foreigners. Porter’s job was to reassure the sheeple so that no outcry would materialize against the greed that was hollowing out the US economy.

Now comes a study conducted by 20 MIT professors and their graduate students that concludes on the basis of the facts that “the loss of companies that can make things will end up in the loss of research than can invent them.”

http://www.manufacturingnews.com/news/mit0305131.html

I am pleased to be vindicated by MIT. Of course, the professors are too late. The loss has already occurred. Nevertheless, it will be interesting to see if the MIT professors can be heard through the orchestrated disinformation.

Two years ago in 2011 a Nobel prize-winning economist, Michael Spence, confirmed my decade-old conclusion that the US economy no longer had the capability to create any jobs except low-wage domestic service jobs that do not produce tradable goods and services that can be exported to reduce the massive US trade deficit. Spence validated my argument that the “new economy” was the offshored economy. Spence concluded that the outlook for the US economy and US employment is dire. The US faces “a long-term structural challenge with respect to the quantity and quality of employment opportunities in the United States. A related set of challenges concerns the income distribution; almost all incremental employment has occurred in the non-tradable sector, which has experienced much slower growth in value added per employee. Because that number is highly correlated with income, it goes a long way to explain the stagnation of wages across large segments of the workforce.”

http://www.cfr.org/industrial-policy/evolving-structure-american-economy-employment-challenge/p24366

There has been no more public policy response to Spence’s conclusion than to my identical conclusion.

We have heard all our lives that ideas are the most powerful force and prevail over material interests. Perhaps this was once true, but that would have been in previous times when material interests did not control the media, the universities, and the publishing companies along with the government. Voices such as mine, that of a high US Treasury official, and that of Spence, a Nobel prize winner, cannot compete with the voices paid by Big Money. Today the bulk of the population knows nothing except the propaganda fed to them by the oligarchic interests. They sit in front of Fox News or CNN and ingest it all. Those who fancy themselves more sophisticated get the same dose of lies from the New York Times.

If those who speak truth cannot be bought off or shut up, they are ignored or demonized. Almost everything Americans need to know is off limits in public discussion. Anyone who broaches the truth becomes an “anti-American,” a “terrorist sympathizer,” a “commie-socialist,” a “conspiracy theorist,” an “anti-semite,” a “kook,” or some other name designed to scare Americans away from the message of truth.

The corrupt corporations, the corrupt media, and the corrupt US government have insulated the country from truth. The result will be a massive crash. A country built on lies is like a house built on sand:

“Therefore everyone who hears these words of mine and puts them into practice is like a wise man who built his house on the rock. The rain came down, the streams rose, and the winds blew and beat against that house; yet it did not fall, because it had its foundation on the rock [truth]. But everyone who hears these words of mine and does not put them into practice is like a foolish man who built his house on sand [lies].The rain came down, the streams rose, and the winds blew and beat against that house, and it fell with a great crash.” Matthew 7:24-27 (NIV)

Dr. Paul Craig Roberts is the father of Reaganomics and the former head of policy at the Department of Treasury. He is a columnist and was previously the editor of the Wall Street Journal. His latest book, “How the Economy Was Lost: The War of the Worlds,” details why America is disintegrating.

1% Wall Street sales tax solution

1% Wall Street sales tax solution to stablize US federal budget
Webster G. Tarpley
Tue Dec 4, 2012
http://www.presstv.ir/detail/2012/12/04/276170/wall-street-tax-solution-to-us-budget/

In the midst of the current haggling over the US federal budget, the main fact is being ignored: the fiscal shortfall of the US government over decades is largely due to Wall Street’s rigging of the tax code so that the main money center banks pay little or nothing in the way of taxes.

Like the haughty nobility in France before the Revolution of 1789, the Wall Street banks are practically exempt from taxation, and the burden of paying for the government is shifted to the middle class. Anybody who is serious about reducing the power of Wall Street bankers in US politics must now mobilize to educate public opinion about the situation and its main remedy - the 1% Wall Street Sales Tax.

Wall Street banks are corporations, and US corporations are supposed to pay a federal corporate income tax of 35% on their profits.

Over recent decades, government revenue from the federal corporate income tax has been in sharp decline, as more and more companies learn the secrets of tax loopholes, offshore tax shelters, and other accounting tricks. Some of the most adept in dodging tax payments are the leading Wall Street institutions.

Some statistics on Wall Street’s amazing ability to evade taxation come from Senator Bernie Sanders of Vermont and from Citizens for Tax Justice, a think tank supported by organized labor.

It turns out that Goldman Sachs, the classic zombie bank, paid just 1.1% tax on its total profits in 2008. This scandalous situation did not prevent Lloyd Blankfein, Goldman’s boss, from appearing on CBS television to demand draconian cuts in the meager entitlement payments received by the poor, the sick, and the old.

Goldman paid 1%, Bank of America, Citigroup, Wells Fargo paid nothing.

Citigroup made out even better, paying 0% taxes on $4 billion in profits. In 2011, Bank of America also managed to pay 0% on 4.4 billion of its profits. Another leading bank which managed to avoid the federal corporate income tax altogether is Wells Fargo, which succeeded in paying nothing to the US Treasury in 2008, 2009, and 2010 (See Pat Garofalo, “30 Major Corporations Paid No Income Taxes in the Last Three Years, While Making $160 billion,” Think Progress, November 3, 2011).

Another spectacular example of Wall Street’s tax dodges is General Electric, which long ago ceased being an industrial corporation and became a hedge fund in drag, built around its financial arm, GE Capital.

GE racked up worldwide profits of $14.2 billion in 2010, but managed to avoid the federal corporate income tax completely. Instead, GE accountants were able to secure a $3.2 billion refund from the US Treasury. This happened even though GE was laying off 21,000 US workers and closing 20 US factories over the years 2007-2009.

And these results were typical of GE’s performance over the most recent decade: GE paid a 2.3% tax rate on profits during 2002-2011, and succeeded in paying zero federal corporate income tax in 2002, 2008, 2009, and 2010 (See Citizens for Tax Justice and Jake Tapper, “General Electric Paid No Federal Taxes in 2010,” ABC News, March 25, 2011).

The scandal is made even greater because GE boss Jeffrey Immelt was serving as Obama’s business liaison in his capacity as Chairman of the White House Council on Jobs and Competitiveness. Rapacious predators like Immelt apparently believe that good corporate citizenship starts with evading all taxes.

Wall Street pays no tax on its transactions

But these scandals, though outrageous, barely beginning to scratch the surface of the insane world of US tax law. US states collect sales taxes usually ranging from 6% to 12% on transactions involving merchandise, sometimes including even groceries. But when the Wall Street banks, hedge funds, and brokerage houses sell their stocks, bonds, derivatives, debt instruments, etc., they pay no sales tax whatsoever.

This outdated approach goes back to when the stock and bond markets were considered capital markets. But today, in the era of high frequency trading and flash trading in which one computer can carry out a million trades per second using algorithms, we are obviously dealing with a high-tech gambling casino that poses grave dangers to the public.

In short, the greatest single flow of untaxed money is the stocks, bonds, and derivatives which cross the exchanges in New York and Chicago, as well as the over-the-counter derivatives which are contracted behind the scenes. If sacrifices are required, this is obviously the place to start.

The obvious way to stabilize the US federal budget is to levy a sales tax on these financial market transactions. A sales tax will be paid immediately on every trade, without regard for the yearly profits and losses reported by smart accountants, making it much harder to cheat.

The US federal government collected a financial transaction tax of between 0.04% (0.0004) and 0.1% (0.001) between 1914 and 1966. Even today, the US government still collects the Section 31 fee, a microscopic tax of 0.0034% on stock transactions, which in 1998 produced $1.8 billion and financed the operations of the Securities and Exchange Commission.

The State of New York currently has a small financial transaction tax on the books, but since the late 1970s the proceeds (estimated at about $25 billion per year) have been remitted to the bankers in response to their blackmail threats to move their operations out of state. In any case, there is no serious constitutional challenge to the legality of a Wall Street sales tax.

The AFL-CIO, European Trade Union Confederation, the International Metal Workers Federation (including the UAW), National Nurses United, and other labor organizations all support some version of the Wall Street Sales Tax, but usually at a very low rate, and without a clear demand that the proceeds be used to maintain and expand the in-country social safety net. There is a proposal for a Global Tobin Tax, and for a Robin Hood Tax - not a clever name. The G-20 has discussed a financial transaction tax, and the European Union is slowly implementing a tiny financial transaction tax.

The average American, who pays sales tax every day, often demands that Wall Street pay exactly the same sales tax (6% to 12%) on its transactions as the general public pays on purchases. This is an important political fact, which ought to encourage lawmakers to substantially increase the narrow scope and miniscule transaction tax rates contained in their proposals, especially in view of the inevitable resistance by reactionary princes of privilege.

The goal should be a 1% across-the-board Wall Street Sales Tax, paid by the seller, on stocks, bonds, and the notional value of derivatives. It also makes sense for the federal government to share half of the proceeds with the states, in order to support the key role of state and local governments in preserving the essentials of modern civilization.

While flash trading and high frequency trading have driven stock transactions up to unprecedented levels, the real mother lode of transactions is to be found in the area of derivatives. Futures, options, and indices and their various combinations are traded on public exchanges and can be easily tracked.

Over-the-counter derivatives, which take the form of private contracts between counterparties, are still a matter of guesswork because of the failure of the Dodd-Frank law to force the reporting of these trades.

The best remedy might be to specify in legislation that any over-the-counter derivatives contracts which have not paid the 1% Wall Street Sales Tax cannot be enforced in court, meaning that the losing counterparty would always be able to renege if the tax has not been paid.

World derivatives must currently be in excess of two quadrillion dollars in notional value. As these derivatives are bought and sold, some estimates put the resulting turnover in the range of six to seven quadrillion dollars. This suggests that revenues on the order of tens of trillions of dollars would be available from a 1% Wall Street Sales Tax.

At the same time, it should be clear that the presence of such a tax would cause many derivatives transactions and many high frequency trading operations to cease. Even so, we can be confident that a 1% levy can provide several trillion dollars in new tax revenue.

By contrast, competing proposals for a wealth tax may face prolonged constitutional challenges. They will require police state methods to carry out a census of taxable assets. In return for this effort, a 1% wealth tax cannot hope to exceed several hundred billion dollars of yearly revenue -- not the many trillions which the Wall Street sales tax can deliver.

A wealth tax does nothing to discourage speculation nor foster real production. Finally, a wealth tax provides an easy way for reactionary forces to pose as the defenders of the middle class, as seen through the eagerness of Bill O’Reilly of Fox News to invite wealth tax advocates on his show. The justifiable concern about the exorbitant size of certain family fortunes can be met by better enforcement of the Estate Tax.

In order to avoid an excessive burden on families and individuals who are buying and selling stocks to finance college education, retirement, or medical emergencies, it will be wise to establish a $1 million per person exclusion; only if securities trading goes over this threshold will the Wall Street Sales Tax be paid.

A society which taxes the sales of industrial manufacturing and agricultural products, but which establishes a tax exemption for speculation, derivatives, and financial services has tilted the playing field in favor of a parasitical casino economy of the type which has historically led to widespread immiseration and recurring financial panics.

The Wall Street Sales Tax will tend to reduce the social evil of speculation, while ending the tax subsidy to financial gambling at the expense of tangible, physical production. It will enhance the possibilities for rational investment choices. In the current season of debate about tax policy, the 1% Wall Street Sales Tax is the idea whose time has come.

Goldman CEO insists on Social Security cuts

Goldman’s multi-billion dollar bailout queen CEO insists on Social Security, Medicare cuts
11/20/2012 by Chris in Paris
http://americablog.com/2012/11/multi-billion-dollar-bailout-queen-ceo-insists-social-security-cuts-are-necessary.html

Of course, another super rich white guy, who is set for life, wants to gut Social Security and Medicare because “we can’t afford it.”

Why is it that the people howling the most about ripping apart the social system, who complain the loudest about us being unable to afford Social Security and Medicare, are those who profited so heavily from the public’s largesse?

Goldman Sachs CEO Lloyd Blankfein is an extreme example since his own firm (like the rest of Wall Street) required billions of taxpayer money to stay alive, but let’s not forget about the destructive duo, Alan Simpson and Erskine Bowles.

Alan Simpson spent his life working as a politician, followed by going on the speaking circuit or whatever it is that he does when he talks about butchering Social Security and Medicare while promoting tax cuts. It must be nice knowing that he’s set for life with the best health care plan, and a retirement plan unknown to most working Americans. And our friend, fellow “Democrat” Erskine Bowles also did well working in finance followed by the White House, then a large state university followed by his own speaking circuit gigs.

One does wonder how much they intend to give up from their own fat government benefits, as part of our “common sacrifice.”

Many of us have completely had it with rich, white guys like this proudly speaking to the media about how much gutting and shredding they think is necessary to “save the system,” while refusing to budge on their own massive tax cuts. They’ve all lived high on the hog at our expense, and now we’re giving them an easy forum for promoting this rich-guy assault on the system.

When is enough enough for these people? Much like sending a bill to Texas as the cost of seceding, let’s send a bill to these pampered fat cats for everything we’ve given them, and tell them all to shove off. They’ve cost us enough — quite literally trillions — and now they want to cost us more, by ripping apart the social fabric of America.

No thanks.

CBS News:

BLANKFEIN: You’re going to have to undoubtedly do something to lower people’s expectations — the entitlements and what people think that they’re going to get, because it’s not going to — they’re not going to get it.

PELLEY: Social Security, Medicare, Medicaid?

BLANKFEIN: You can look at history of these things, and Social Security wasn’t devised to be a system that supported you for a 30-year retirement after a 25-year career. … So there will be things that, you know, the retirement age has to be changed, maybe some of the benefits have to be affected, maybe some of the inflation adjustments have to be revised. But in general, entitlements have to be slowed down and contained.

PELLEY: Because we can’t afford them going forward?

BLANKFEIN: Because we can’t afford them.


Someone please help me refresh my memory, but how did we afford to give away trillions of dollars to Wall Street, to save their lifestyle, so they could continue giving themselves huge bonuses while the rest of us lost our business and our homes?

I don’t recall any complaints back in 2008 and 2009 about the middle class not being able to afford the bail out of people like Blankfein, do you?  Or any talk during the Bush years of the entire country not being able to afford his massive tax cuts that broke the budget?

Some thanks.

Beast of the Year 2012: Paul Ryan

The votes are in, and The Konformist readers have spoken. Paul Ryan is your choice for the 2012 Beast of the Year - a choice that is well deserved.

Perhaps the biggest news story of the last year - if not of the last four years - is just how scary crazy the entire GOP has gone in the age of Obama.  And no figure has been more important in the Republican Party to the right-wing movement than Paul Ryan, currently their VP nominee in this year's election.  His 2012 federal budget plan would abolish korporate income taxes, estate taxes, taxes on capital gains, dividends and interest, and heavily reduce tax rates on the wealthy while ruthlessly cutting social programs, partially privatizing part of Social Security to Wall Street and fully privatizing Medicare.  Some would call this "Ayn Rand on Crack" (which may be an unfair smear of Ms. Rand, who was at least a gifted writer) yet all but four Republicans in the the HOR and five in the Senate voting for it.

Runner-Up: Brian Moynihan

In the unlikely event that Ryan can no longer fill his duties as Beast of the Year, Brian Moynihan is ready to take over the crown. Rest assured the BOTY trophy is in good hands either way, as Mr. Moynihan has had great Beastly practice as CEO of Bank of America.

In any case, we salute you, Paul Ryan and Brian Moynihan.  Congratulations, and keep up the great work, dudes!!!

What Past Presidents Thought About Big Banks

Stephen D. Foster Jr.
June 3, 2012
http://www.addictinginfo.org/2012/06/03/what-past-presidents-thought-about-big-banks

The Occupy Wall Street protesters have been standing against the big banks for a few months now. They are protesting the greed, irresponsibility, and fraud that banks like Bank of America, Citigroup, and JPMorgan Chase commit on a daily basis. The big banks of Wall Street caused an economic collapse. As a result of that collapse, Americans suffered job losses and money losses while the banks got a bail out on the taxpayer’s dime. Not one banker has been arrested for stealing billions of dollars from the American people.

Throughout American history, big banks have sought to fleece the people and control government. They have a caused economic turmoil, social injustice, war, hunger, and crises too numerous to mention, all because of greed and a lust for absolute power. Many American Presidents have risen to challenge them and hold them accountable for their actions. So which Presidents would cheer on Occupy Wall Street? What did past Presidents think about big banks? I’ll let the quotes speak for themselves.

1. “Banks have done more injury to the religion, morality, tranquility, prosperity, and even wealth of the nation than they can have done or ever will do good.”
~John Adams

2. “The central bank is an institution of the most deadly hostility existing against the Principles and form of our Constitution. I am an Enemy to all banks discounting bills or notes for anything but Coin. If the American People allow private banks to control the issuance of their currency, first by inflation and then by deflation, the banks and corporations that will grow up around them will deprive the People of all their Property until their Children will wake up homeless on the continent their Fathers conquered.”
~Thomas Jefferson to Albert Gallatin, 1803.

3. “History records that the money changers have used every form of abuse, intrigue, deceit, and violent means possible to maintain their control over governments by controlling money and its issuance.” ~James Madison

4. “I have had men watching you for a long time and I am convinced that you have used the funds of the bank to speculate in the breadstuffs of the country. When you won, you divided the profits amongst you, and when you lost, you charged it to the Bank. … You are a den of vipers and thieves.”
~Andrew Jackson, 1834, on closing the Second Bank of the United States

5. “I have two great enemies, the southern army in front of me and the financial institutions, in the rear. Of the two, the one in the rear is the greatest enemy….. I see in the future a crisis approaching that unnerves me and causes me to tremble for the safety of my country. As a result of the war, corporations have been enthroned and an era of corruption in high places will follow, and the money power of the country will endeavor to prolong its reign by working upon the prejudices of the people until wealth is aggregated in a few hands and the Republic is destroyed. I feel at this moment more anxiety for the safety of my country than ever before, even in the midst of the war.”
~Abraham Lincoln

6. “Whosoever controls the volume of money in any country is absolute master of all industry and commerce… And when you realise that the entire system is very easily controlled, one way or another, by a few powerful men at the top, you will not have to be told how periods of inflation and depression originate.”
~James Garfield (assassinated within weeks of release of this statement during first year of his Presidency in 1881)

7. “Behind the ostensible government sits enthroned an invisible government owing no allegiance and acknowledging no responsibility to the people. To destroy this invisible government, to befoul the unholy alliance between corrupt business and corrupt politics is the first task of the statesmanship of the day.”
~Theodore Roosevelt, April 19, 1906

8. “A great industrial nation is controlled by its system of credit. Our system of credit is concentrated in the hands of a few men. We have come to be one of the worst ruled, one of the most completely controlled and dominated governments in the world– no longer a government of free opinion, no longer a government by conviction and vote of the majority, but a government by the opinion and duress of small groups of dominant men.”
~Woodrow Wilson

9. “We had to struggle with the old enemies of peace-business and financial monopoly, speculation, reckless banking, class antagonism, sectionism, war profiteering. They had begun to consider the Government of the United States as a mere appendage to their own affairs. We know that Government by organized money is just as dangerous as Government by organized mob. Never before in history have these forces been so united against one candidate as they stand today. They are unanimous in their hatred for me – and I welcome their hatred. I should like to have it said of my first administration that in it the forces of selfishness and of lust for power met their match. I should like to have it said of my second administration that in it these forces met their master.”
?~Franklin Delano Roosevelt, Speech at Madison Square Garden

10. “All problems, depressions, wars, disasters, assassinations, all of them were planned, caused, instigated, and implemented by the International Bankers and their attempt to establish a central bank in every country in the world, which they have now done, thanks to corrupt politicians who have been bought and paid for. This is all you need to know about the history of the world.”
~John F. Kennedy

For more than a decade now, banks have brought this country to near economic ruin. They have successfully lobbied to repeal key regulations that have prevented them from employing the harmful tactics they use to fleece the American people in the name of profit. The big banks bet against America and then expect taxpayers to bail them out when they fail. They then gamble with that money and pay their executives millions. It’s wrong and should not be tolerated. The above Presidents knew how dangerous and harmful big private banks can be. Presidents like Andrew Jackson and Theodore Roosevelt fought hard against the “den of vipers,” and the “invisible government,” and FDR had finally put the banks in their place during his own Presidency. These Presidents would most certainly stand with the Occupy protesters and would fiercely call for breaking up and regulating the big banks. The banks have grown powerful and corrupt once again and it will take another great President to rein them in. The question is, who will be that great President?

Austerity Coming to America with the Post Office

Engineered Austerity Coming to America Starting with the Post Office
Brandon Turbeville
Activist Post
Saturday, May 19, 2012
http://www.activistpost.com/2012/05/engineered-austerity-coming-to-america.html

Over the past few months, the dismal financial state of the United States Postal Service has been the subject of much derision and contempt in the mainstream media. The massive debt held by the USPS has been the bloody sheet waived by both reactionary Republicans and Wall Street Democrats in order to justify the privatization or even the elimination of such an important service from oversight and administration by the Federal government.

The large debt held by USPS, coupled with exaggerations of wait times and other aspects involved in shipping services, are constantly highlighted as the latest example of how “government is incapable of running anything effectively.” The general public is then subjected to a barrage of “free market” solutions which are, as is almost always the case, nothing more than the fleecing of the taxpayer who will inevitably end up paying more and receiving less while benefiting crony corporations.

The most immediate solutions proposed by the reactionaries are, of course, austerity measures which take the form of closing thousands of rural post office branches, ending Saturday delivery, increasing prices, and downsizing staff.

Initially the plan proposed by the more savvy austerity ghouls, as well as the Postmaster General himself, would have resulted in the closing of more than 3,700 post office locations all across the country, with the vast majority of those offices in rural areas. Thankfully, there was enough community opposition to derail these disastrous plans. That is, at least for the moment.

The new plan, however, now involves the reduction of staff at over 13,000 rural post office locations as well as a reduction in hours of operation down to as little as two hours in some offices. Estimates of potential job losses run over 100,000.

But because the Post Office intends to seek approval for its plans from the public and the relevant regulatory agencies before moving forward on any “cost-cutting” plans, the process may take several months.

Nevertheless, the Post Office is not only facing a battle from without. Many within the administrative and directional wing are lobbying for programs such as the one mentioned above that will result in the closing of offices and an end to Saturday mail delivery. In fact, it has been the Post Office itself that has pushed Congress to pass legislation allowing these cuts to take place.

Yet to lay all the blame, even on the feet of the Postmaster General is not entirely fair. After all, the Post Office has been dealt a bad hand in terms of its financial solvency due to the psychosis of austerity and hatred of public services pushed by reactionary politicians and corporate competitors. It has essentially been given an impossible task in terms of its own continued existence as an institution.

The real financial problems come not from decreased traffic or even mismanagement, but from the reactionaries themselves. Due to the constant barrage of criticism and mockery hurled at USPS from the mainstream media, as well as the gullibility of the average American, little is known about the 2006 mandate which has done more to bankrupt the Post Office than any other factor.

This mandate, a provision of the Postal Accountability and Enhancement Act of 2006, requires the Post Office to fund the health care benefits of future retirees as far out as 75 years into the future – all within a 10-year window. Previously, as in every other business (and the United States Government), the health care of retirees was a pay-as-you-go system. Thanks to the reactionaries and Wall Street tools like Dennis Hastert, this is no longer the case for the Post Office.

Indeed, the ridiculous mandate now costs the Post Office over $5.5 billion per year (about 2 weeks of Afghan war costs), with the federal government actually holding billions of dollars of overpayments made to the pension accounts by USPS. According to FireDogLake, all of the Post Office’s losses over the past four years have come from this mandate.

Even the Washington Post has reported that, without the 2006 mandate, the Post Office would have actually realized a profit, not a loss, since 2007. Joe Davidson writes,
"The last four years’ reported losses can all be attributed to this prefunding and then some,’"Fredric V. Rolando, president of the National Association of Letter Carriers, said in an interview.
He is correct.

According to the USPS white papers, from 2007 to 2010, mail volume declined 20 percent while postage remained capped at the rate of inflation, "resulting in net losses over the period of just over $21 billion, including a loss in FY2010 of $8,5 billion."

During that period, the prefunding of retiree health benefits cost $21 billion. Without that congressional mandate, the USPS would have cleared $611 million.

This is quite interesting considering the fact that the overwhelming majority of the mainstream media never mentions the mandate. We do, however, continually hear the repetition of the debt owed by the Post Office which is almost always used to shore up the claim of incompetence and waste and to promote the cause of privatization.

In addition, the administrators of the Post Office, especially the Postmaster General, have been showing their true colors for some time refusing to acknowledge the root cause of the problem (the mandate). Instead, the agency is claiming that, in the case of rural offices, 80% of its costs are labor-related. It also suggests that the Internet and a decline in first-class mail volume is the reason for its financial straits.

However, this is a misleading and, I would venture, an intentionally misleading position. Labor costs are a factor in any business, particularly in harsh economic times. Yet hiring labor and/or paying them living wages does not outweigh a mandate such as the one discussed above. It is a stated plan by the Post Office administration to begin replacing full-time workers with part-time workers, in an effort to reduce wages and eliminate benefits and this mandate, along with the deleterious effects it is having on the institution as a whole, merely provides the excuse to initiate a downsizing of the workforce.

Indeed, those who have labor contracts are inevitably going to see those contracts attacked in the very near future. Undoubtedly, in another example of the American people’s often misplaced anger, when the time comes for USPS labor to be dismantled, it almost certainly will be done to the cheers of an ignorant public.  That is what the media campaign is for.

It should also be pointed out that, while the Internet may be a factor in reduced first-class mail, the world economic depression is another. Naturally, mail delivery and all other services will decrease as the vast majority of Americans are financially strained and as less and less businesses continue to exist inside the United States.

With all this in mind, it is worth noting that there is rarely, if ever, a comment made by the office of the Postmaster General regarding the 2006 mandate, even though his agency is being crushed by the burden Congress has created.

For all of the heated rhetoric spouted off by politicians and talking heads about the privatization of postal services, it should be pointed out that no other private company bears the burden of having to fund all of its retirees benefits – some of whom do not even work at the Post Office yet, others have not even been born – for a period of 75 years or anything close to that number. Certainly no private company is being forced to do so by the Federal Government.

In all fairness, shouldn’t UPS and FedEx be forced to fund retiree pension funds if there was to be fair competition? The reactionaries would say no, of course, because that is a violation of the “free market.” Only when these theories are applied to government services that actually benefit people are they acceptable.

Even the Federal Government itself, which actually did make a commitment to future generations with the Social Security program, released itself from future liabilities (in terms of trust funds) and converted to pay-as-you-go, a truly unfortunate policy in this instance. Of course, with massive police states to build, giant bureaucracies to maintain, and numerous illegal foreign wars to fight, one can clearly see the logic behind the decision.

Nevertheless, the situation is dire because the Post Office is already $13 billion in debt, largely due to the congressional mandate. Somewhere between August and September, USPS will be required to pay more than $11 billion to the U.S. Treasury yet again for the prefunding of health benefits, potentially (and almost inevitably) causing the agency to reach its $15 billion debt ceiling.

But, while the members of the general public may envision a utopia of companies competing to deliver their mail, the reality will undoubtedly be much different. For all their rhetoric about competition and lower prices, the amount of price increases for the base level of hard copy correspondence will skyrocket as soon as the Post Office ceases to exist. Just take a look at the private competition in the market now and you will easily see how much your mail delivery costs will rise if the Post Office option is no longer available. With USPS out of the picture, it is just as likely that the private companies will not only continue to gouge customers, but that prices will increase dramatically using fuel costs and anti-union sentiment as justification.

Currently, the United States Postal Service stands as a model for the rest of the world in terms of logistical capabilities, infrastructure, and especially pricing. It is, in fact, the cheapest mail shipping method available amongst Western nations and most of the rest of the world.

It is also one of the only services that reaches virtually every American and does so on a daily basis.  Besides the manufactured debt of the USPS, for all intents and purposes, it accomplishes its goals of getting the mail to you in a timely fashion.

It might be hard for many to comprehend the ramifications of the privatization of mail and shipping services currently administered by the USPS. However, one need only look to Europe to see that, invariably, prices will rise. Indeed, one need not look across the ocean when a glance at the domestic landscape would prove the same point. A glimpse of UPS and FedEx should be self-explanatory.

With this in mind, it is also worth noting that price increases will be especially true (and especially harmful) for rural areas where no competition exists.

Rising prices in shipping have long been a problem for businesses, particularly small ones. The removal of the USPS option might even be the death knell for many of them. As it stands, it is possible to put a business virtually anywhere in the country because of the availability of the USPS. However, removing those services will force a great many to move further into cities. Those unable to do so may be driven into extinction.

This plan for reduction of services to rural areas may also dovetail with the intentional increase in urbanization called for by UN plans such as Agenda 21. Removing Post Office services from rural areas would be just one more step in the designed inaccessibility of rural living.

Yet there might be one more aspect to the 2006 mandate that bears mentioning. The fact is, the USPS has many enemies who would like to see the agency destroyed and privatized whether it is indebted or not. Even if the USPS meets its commitments over the next ten years, the attacks are not likely to cease. Corporate predators and other agents of Wall Street have a vested interest in seeing the USPS dissolved due to their own interests. So, unless there is an unlikely return to reason by Congress, the fate of USPS might very well be sealed.

Thus, the 2006 mandate, seems to be a two-pronged attack: First, it is designed to handicap and precipitate the destruction of the USPS through unreasonable demands, debt and then austerity measures.

Second, it serves as a fattening of the prey for the Wall Street jackals who are now surrounding it. Let there be no doubt that a “pre-fund” stacked to the tune of billions of dollars will not be ignored at feeding time. Simply put, Wall Street agents appear to be loading the institution with debt as well as assets, waiting on the moment when large-scale asset stripping can commence.

Thus, one might assume it to be very likely that the attacks against the Post Office will soon resume and the asset stripping of the agency and its employee healthcare fund will not be far behind once the final blow has been struck.

Americans have become complacent on such a wide variety of issues that Post Office service might seem as of little consequence when faced with a worsening economic depression, foreign wars, and the prevalence of a domestic police state. Yet losing the USPS would be yet another nail in the coffin of what was once the envy of the world.

It has often been said that you never know what you have until you lose it. Austerity is coming to America starting with one of the only services that delivers.  If Americans do not soon wise up to the game, we might once again prove just how true that statement really is.

Brandon Turbeville is an author out of Mullins, South Carolina. He has a Bachelor's Degree from Francis Marion University and is the author of three books, Codex Alimentarius -- The End of Health Freedom, 7 Real Conspiracies, and Five Sense Solutions and Dispatches From a Dissident. Turbeville has published over one hundred articles dealing with a wide variety of subjects including health, economics, government corruption, and civil liberties. Brandon Turbeville is available for podcast, radio, and TV interviews. Please contact us at activistpost@gmail.com.

A Little Treat... from Michael Moore

Friday, May 4th, 2012

Friends,

Here's a free song for you:

http://soundcloud.com/occupy-this-album/01-michael-moore-the-times

It's my contribution to "Occupy This Album", a compilation CD (99 songs!) featuring David Crosby & Graham Nash, Steve Earle, Tom Morello, Willie Nelson, Ani DiFranco, Third Eye Blind, Immortal Technique and Jackson Browne to be released Tuesday, May 15th. All proceeds from this album will go to fund the Occupy Wall Street movement (all the musicians and songwriters have donated their time and music).

They asked me if I'd like to record a poem or maybe make a music video of some of the songs. I said, "I could just sing a song."

When the laughter died down, I recorded this.

I hope you enjoy my first try at this new profession (though I have no intention of giving up my day job).

And thank you, Bob Dylan, for your contribution, and for approving this, my debut.

Enjoy!

Michael Moore
MMFlint@MichaelMoore.com
@MMFlint
MichaelMoore.com

Seven Day Plan to Hold Wall Street Accountable

A Seven Day Plan to Finally Hold Wall Street Accountable
New evidence points to illegal behavior. Prosecution is the only way to keep that behavior from continuing.
Bruce Judson
Monday, 03/19/2012
http://www.newdeal20.org/2012/03/19/a-seven-day-plan-to-finally-hold-wall-street-accountable-74581

It’s now a near certainty that Wall Street executives committed felonies.

The recently released audits of robo-mortgage activities by the Office of the Inspector General of the Department of Housing and Urban Development (HUD) details shocking behavior at the five banks constituting the Federal Housing Administration’s largest mortgage servicers. At Wells Fargo, management quashed a midlevel manager’s study of the foreclosure process as negative results began to emerge, and it gave an individual whose last job had been in a pizza restaurant the title of “vice-president of loan documentation” to facilitate robo-mortgage signing. Bank of America evaluated employees on the volume of foreclosure affidavits produced. JP Morgan Chase gave individuals titles such as “vice-president of Chase Home” where “the titles were given by Chase for the sole purpose of allowing individuals to sign documents and came with no other duties or authority.” Citigroup and Ally similarly engaged in seemingly illegal practices.

Under federal law, the knowing filing of a false affidavit with the court is a felony offense of perjury, punishable by a prison term of up to five years. An individual violates laws against perjury whether he or she personally appears in court and swears to a false statement or provides the court with a false affidavit. Individual states have their own perjury laws, which were undoubtedly violated as well. The HUD report also suggests that individual banks may be guilty of obstruction of justice and the criminal violation of the False Claims Act for filing insurance claims without following HUD requirements.

Since the start of the financial crisis, federal and state officials have been struggling to change Wall Street behavior. To date, every effort has failed miserably, and the weak enforcement provisions of the robo-mortgage settlement are unlikely to meaningfully change this dynamic. Government officials have also relied, with a very few exceptions, entirely on civil enforcement when criminal laws appear to have been egregiously violated.

The greatest moral hazard now confronting the nation is what appears to be increasingly brazen criminal activity by financial industry executives. With each decision not to prosecute, Wall Street executives justifiably conclude that they are immune to the rules. As a result, it appears that Wall Street criminal activity is increasing in frequency and severity, as opposed to the reverse. The activities surrounding the collapse of MF Global are one example.

So what can be done about it? We can change the behavior in the financial service industry for a full generation in just seven days. This plan may seem to be tongue and cheek, but it hearkens back to a similar action in the era of the Great Depression. In the final months of Herbert Hoover’s presidency, the Senate Banking Committee began an investigation into the causes of the Great Crash of 1929, and a young prosecutor named Ferdinand Pecora was appointed as Chief Counsel. Subsequently, the Roosevelt administration conveyed to Pecora that “the prosecution of an outstanding violator of the banking law would be the most salutary action that could be taken at this time. The feeling is that if the people become convinced that the big violators are to be punished, it will be helpful in restoring confidence.” Ultimately, this investigation, which came to be known as the Pecora Commission, led to the indictment of one of America’s most prominent financiers; demonstrated widespread self-dealing in the financial sector; and, as noted by historian Alan Brinkley, generated “broad popular support” for Roosevelt’s reform agenda, including the creation of the SEC and the Glass-Steagall Act.

My seven day plan is based on a simple premise: When criminal laws are egregiously violated, the guilty parties should face appropriate punishment. Here’s the plan:

Day One: Read the HUD Inspector General’s reports and the public records of past mortgage foreclosure cases from across the nation.

Day Two: Meet with the team at the Office of the Inspector General at HUD that prepared the audits. Obtain the names of all the bank officials, lawyers, and notaries whose behavior, as cited in the audit reports or otherwise known to the investigators, represent clear and unquestionable criminal violations. Add to this list other individuals who have similarly demonstrated or testified to behavior unquestionably constituting criminal acts, as indicated by the public records of the mortgage foreclosure cases reviewed in day one.

Day Three: Indict all of the individuals on the list compiled on day two.

Day Four: Indict banks and financial institutions on criminal charges where criminal behavior by employees (as demonstrated by day three indictments) appears to be endemic. The Justice Department guidelines for prosecuting firms include: (1) the pervasiveness of such activity, (2) the compliance procedures in place, (3) attempts by the corporation to end bad behavior, and (4) cooperation with federal investigators. In 2008, the Justice Department adopted a policy of accepting “deferred prosecutions,” involving agreements to change corporate behavior without damaging innocent third parties through prosecution.

Corporations receive the benefits of “legal persons,” as demonstrated by Citizens United. But they must also bear the responsibilities of these privileges. A reading of the HUD reports, and other public records, suggests several banks should clearly be prosecuted.

Day 5: Discuss plea bargains with indicted lower-level officials in return for cooperating in investigations of higher-level officials.

Day 6: Consider plea bargains with indicted banks, which require the removal of all remaining officers and directors who were serving when egregious criminal activity occurred, as well as senior officials who were in a position to exercise appropriate supervisory responsibility but chose to look the other way.

Day 7: Indict any senior Wall Street officials implicated by new cooperative testimony resulting from activities on day five. Adopt and announce a policy that future criminal violations will be prosecuted in a similar fashion.

What is particularly disturbing is that a look at the evidence already in the public domain (much less what investigators already know) shows that none of the actions discussed above are entirely absurd. The purpose of prosecution not simply punishment. It acts to deter further illegal activity and to restore public confidence in our system of governance. The nation desperately needs both of these benefits today.

Moreover, these ongoing, almost certainly criminal activities are ultimately dangerous threats to our economy, the success of capitalism, and our democracy. In his column on MF Global, Joe Nocera noted that “customers need to be able to trust” the laws protecting their money. “Otherwise, the markets can’t function.”

Today, as in the era of FDR, we must send a message to the financial community that illegal behavior will not be tolerated. By prosecuting blatant felonies now, we will deter future misbehavior and begin the process of recreating a fair society where equal justice prevails.

Bruce Judson is Entrepreneur-in-Residence at the Yale Entrepreneurial Institute and a former Senior Faculty Fellow at the Yale School of Management.

Wall Street’s Broken Windows

William K. Black
March 4, 2012
http://neweconomicperspectives.org/2012/03/wall-streets-broken-windows.html

James Q. Wilson was a political scientist who often studied the government response to blue collar crime. The public knows him best for his theory called “broken windows.” The metaphor was what happens to a vacant building when broken windows are not promptly repaired. Soon, most of the windows in the abandoned building are broken. The criminals feel little compunction against petty destruction because the building’s owners evince no concern for the integrity of their building. Wilson took social norms, community, and ethics seriously. He argued that as community broke down fewer honest citizens were active in monitoring and policing behavior. The breakdown in community was criminogenic – it led to widespread serious blue collar crime. He urged us to take even minor blue collar crimes and breaches of civility seriously and to demand that they be contained through social pressure and policing.

New York City’s police strategy embraced “broken windows.” The police increased the priority with which they responded to even minor offenses that upset the community – “squeegee men,” graffiti, and street prostitution. Reported blue collar crime fell in New York City. It also fell sharply in most other cities, which did not implement “broken windows” programs, but Wilson and the NYPD got the credit and popular fame for the sharp fall in reported blue collar crime in New York City. Wilson became one of the most famous blue collar criminologists in the world.

Wilson’s broken window theory remains controversial among many blue collar criminologists. As a celebration of his life and research I offer this discussion of applying “broken windows” theory and policies to elite white-collar crime.

Wilson was strongly conservative. His research focus in criminology was almost exclusively blue collar crime. That was a shame because “broken windows” theory is most compelling in the context of elite white-collar crime and because the application would reveal interesting twists in the theory’s potential. Such an application, however, would have been outside Wilson’s comfort zone. Wilson tended to use the word “crime” to refer exclusively to blue collar crime and his emphasis was on very low status criminals. In a book entitled, Thinking About Crime, Wilson argued that criminology should focus overwhelmingly on low-status blue collar criminals.

This book [does not deal] with “white collar crimes”…. Partly this reflects the limits of my own knowledge, but it also reflects my conviction, which I believe is the conviction of most citizens, that predatory street crime is a far more serious matter than consumer fraud [or] antitrust violations … because predatory crime … makes difficult or impossible maintenance of meaningful human communities (1975: xx).

I am rather tolerant of some forms of civic corruption (if a good mayor can stay in office and govern effectively only by making a few deals with highway contractors and insurance agents, I do not get overly alarmed)…. (1975: xix).

Notice that Wilson’s explanation is antithetical to his “broken windows” reasoning. There are, of course, relatively minor white-collar crimes. Wilson emphasized that it was the willingness of society to tolerate relatively minor blue collar crimes that led to social disintegration and epidemics of severe blue collar crimes, but he engaged in the same willingness to tolerate and excuse less severe white collar crimes. He predicted in his work on “broken windows” that tolerating widespread smaller crimes would lead to epidemic levels of larger crimes because it undermined community and social restraints. The epidemics of elite white collar crime that have driven our recurrent, intensifying financial crises have proven this point. Similarly, corruption that is excused and tolerated by elites is unlikely to remain at the level of “a few deals.” Corruption is likely to spread in incidence and severity precisely because it undermines community and the rule of law and it is likely to grow more pervasive and harmful the more we “tolera[te]” it.

“Broken windows” theory, in the white collar crime context, would lead us to make the prevention and deterrence of consumer frauds and anti-trust violations through prosecutions a high priority because of their tendency to produce a “Gresham’s” dynamic in which businesses or CEOs that cheat gain a competitive advantage and bad ethics drives good ethics out of the markets. These offenses degrade ethics and erode peer restraints on misconduct.

The ongoing crisis demonstrates that anti-consumer frauds are a direct assault on community. Mortgage fraud – and it was overwhelmingly the lenders and their agents who put the lies in millions of liar’s loans – physically and socially destroy community by producing mass defaults, homelessness, and vacant homes.

Taking Wilson’s “broken windows” reasoning seriously in the elite white collar crime context would require us to take a series of prophylactic measures to restore integrity and strengthen peer pressures against misconduct. Indeed, we have implicitly tested the applicability of “broken windows” reasoning in that context by adopting policies that acted directly contrary to Wilson’s reasoning. We have adopted executive and professional compensation systems that are exceptionally criminogenic. We have excused and ignored the endemic “earnings management” that is the inherent result of these compensation policies and the inherent degradation of professionalism that results from allowing CEOs to create a Gresham’s dynamic among appraisers, auditors, credit rating agencies, and stock analysts. The intellectual father of modern executive compensation, Michael Jensen, now warns about his Frankenstein creation. He argues that one of our problems is dishonesty about the results. Surveys indicate that the great bulk of CFOs claim that it is essential to manipulate earnings. Jensen explains that the manipulation inherently reduces shareholder value and insists that it be called “lying.” I have seen Mary Jo White, the former U.S. Attorney for the Southern District of New York, who now defends senior managers, lecture that there is “good” “earnings management.”

Fiduciary duties are critical means of preventing broken windows from occurring and making it likely that any broken windows in corporate governance will soon be remedied, yet we have steadily weakened fiduciary duties. For example, Delaware now allows the elimination of the fiduciary duty of care as long as the shareholders approve. Court decisions have increasingly weakened the fiduciary duties of loyalty and care. The Chamber of Commerce’s most recent priorities have been to weaken Sarbanes-Oxley and the Foreign Corrupt Practices Act. We have made it exceptionally difficult for shareholders who are victims of securities fraud to bring civil suits against the officers and entities that led or aided and abetted the securities fraud. The Private Securities Litigation Reform Act of 1995 (PSLRA) has achieved its true intended purpose – making it exceptionally difficult for shareholders who are the victims of securities fraud to bring even the most meritorious securities fraud action.

The Supreme Court has held that banks and other entities that aid and abet securities fraud are immune from suit by the victims of securities fraud. Only the federal government may sue those that aid and abet fraud. The federal government has cut the number of financial fraud prosecutions by over one-half over the last twenty years even as financial fraud has grown massively. No elite CEO leading a control fraud that helped drive the current crisis has even been indicted. Elite CEOs can defraud with near impunity and become wealthy. Elite white collar fraud is a “sure thing” – the only strategy likely to make a mediocre CEO wealthy and famous.

Because Wilson did not research elite white collar crimes he did not direct his formidable intellectual energies and expertise to the study of who could prevent the breaking of corporate windows and repair those that were broken. This was a great loss because his studies of varieties of police behavior in response to blue collar crime are justly famous among criminologists. The central truth he would have quickly recognized had he thought of seeking to reduce elite white collar crimes is that only the financial regulators can serve as the “regulatory cops on the beat.” The police do not deal with elite white collar crimes. A small cadre of FBI special agents works on elite white collar crimes. There are roughly three special agents assigned to white collar crime investigations per industry in the U.S., so they never “patrol a beat.” They investigate only when someone brings a possible white collar crime to their attention. That means whistleblowers, but it overwhelmingly means criminal referrals from the federal financial regulators. Financial institutions may make criminal referrals against their customers, but they will virtually never make them against their CEOs. Only the regulators can make the thousands of criminal referrals against elite white collar criminals essential to a successful prosecutorial effort against the epidemics of accounting control fraud that drive our worst financial crises. In the lead up to the ongoing crisis we gutted the federal regulators, preempted the state regulators, and appointed anti-regulators to head the agencies. A majority of the U.S. House of Representatives is trying to further gut the Commodities Futures Trading Commission (CFTC). If we want to stop the criminals who are destroying our economy and our communities by breaking windows on an epic scale the first step is to rebuild a regulatory force committed to serving as the essential “cops on the beat.”

I listened in stunned amazement to the presentations of law professors who specialize in white collar crime and securities law at the two annual meetings that followed the ongoing financial crisis. Virtually every speaker in these sections presented arguments calling for reducing white collar criminal liability and liability for securities fraud. At the time they were speaking, the Justice Department had already ceased prosecuting major firms and the SEC brought a pathetically high percentage of its small number of enforcement actions against tiny firms with fewer than 10 employees.

We have systematically reduced effective peer restraints in our most important controls against financial fraud. Law firms, audit firms, and investment banks used to be professional partnerships. Each partner was potentially liable for any firm misconduct, which maximized the incentive to insist on higher levels of integrity. These firms are now virtually all corporations or limited liability partnerships. The incentive of partners to monitor other partners’ actions to ensure their integrity has largely been lost.

In the elite white collar crime context we have been following the opposite strategy of that recommended under “broken windows” theory. We have been breaking windows. We have excused those who break the windows. Indeed, we have praised them and their misconduct. The problem with allowing broken windows is far greater in the elite white collar crime context than the blue collar crime context. The squeegee guys make tiny amounts of money and are hated and politically powerless. The mediocre financial CEO who engages in accounting control fraud because it is a “sure thing” causes the bank to report record (albeit fictional) profits and becomes wealthy and politically powerful. He uses his wealth to make charitable and political contributions that make him far harder to sanction. He claims that any crackdown on him is “class warfare” by “neo-Bolsheviks.” Incredibly, the Wall Street Journal continues to serve as the cheerleader and apologist for those who become wealthy by breaking windows, communities, and economies.

Wilson warned of blue collar “super predators.” He called them “feral” – wild animals. These criminals are in fact dangerous, but they are odd candidates for the title of “super predators.” Wilson noted that they were disproportionately black and that they were confined almost entirely to the poorest neighborhoods in America where their pickings are poor. Accounting control frauds occupy Wall Street and other financial centers – the richest neighborhoods in the world. Their “take” from fraud is extraordinary. The blue collar criminals that occupied Wilson’s attention late in his career were politically and socially powerless. The fraudulent CEOs that drive our recurrent, intensifying financial crises are wealthy and socially and politically dominant.

Wilson had a fabulous career and added greatly to the policy debate about how to respond to blue collar crime. Our most fitting tribute to him and contribution to his legacy would be to apply his “broken window” theory to the elite white collar crimes and criminals that drive our financial crises. The troubling paradox is that the strongest proponents of “broken windows” theory and policies in the blue collar crime context are the strongest opponents of applying analogous policies in the elite white collar crime context. The Wall Street Journal is the most prominent example of this class-based incoherence.


Bill Black is the author of The Best Way to Rob a Bank is to Own One and an associate professor of economics and law at the University of Missouri-Kansas City. He spent years working on regulatory policy and fraud prevention as Executive Director of the Institute for Fraud Prevention, Litigation Director of the Federal Home Loan Bank Board and Deputy Director of the National Commission on Financial Institution Reform, Recovery and Enforcement, among other positions.

Bill writes a column for Benzinga every Monday. His other academic articles, congressional testimony, and musings about the financial crisis can be found at his Social Science Research Network author page and at the blog New Economic Perspectives.

Follow him on Twitter: @WilliamKBlack

Are Bankers Capitalists?

Thursday, 03/1/2012Bruce Judson
http://www.newdeal20.org/2012/03/01/are-bankers-capitalists-73236

Jamie Dimon says banks are more successful than media companies, but which industry is actually following capitalist principles?

The phrase “Wall Street” is evocative in American culture. For generations, it has referred to the showcase of American capitalism: our financial services system that ensured the efficient use of funds by channeling capital to its most productive use. Indeed, the governing ethos in America is that Wall Street is the heart and soul of our capitalist economy.

As I have written before, capitalism involves four basic principles: absolute responsibility for anything and everything that happens to your company (i.e. total accountability), equal justice under the law, compensation based on the real value created for society, and competition, which involves failure and what is often called creative destruction.

The CEO of JPMorgan Chase, Jamie Dimon, has repeatedly touted the success of his efforts and disparaged critics. Earlier this week he compared compensation in the banking industry to the struggling media world, suggesting that the banking industry was far more successful. In speaking to journalists, according to Bloomberg, he noted, “Worse than that, you don’t even make any money… [while] we make a lot of money.”

Mr. Dimon is right. He and his colleagues are successful. But the real question is this: What are they successful at? By almost any criteria, the banks operate under rules that are so far from capitalism as to be unrecognizable. Let’s take Mr. Dimon’s comparison of the media industry and the banking industry further.

Both industries have been affected by unforeseen events. The Internet has undermined the viability of innumerable media businesses, leading to bankruptcies, changing business models, and intense competition for advertiser and subscriber dollars. In the face of these changes, industry participants have been forced to adapt or die. The forces of creative destruction, which are central to capitalism, have operated with an unforgiving ferocity. Formerly dominant entities have been forced to declare bankruptcy, while new media competitors and business models emerge on a seemingly daily basis.

In contrast, the banks argued that TARP was warranted because the economic tsunami of 2008 was unforeseeable. One of the essential functions of a financial institution is to manage risk. The majority of our large institutions failed entirely in this central responsibility as the economic crisis struck. In effect, many of our leading financial services firms were (and often continue to be) led by such poor businesspeople that if the principles of capitalism were enforced they would be out of business. My friends who are media entrepreneurs in Silicon Valley actually laugh when they hear the “we should not be responsible because this was not foreseeable” claims from the bankers. Every entrepreneur knows that they must make payroll each week or they are bankrupt.

At the same time, no one in Washington seriously believes the too big to fail legislation in Dodd-Frank will ever work. Inevitably, as in the case of AIG, counter-parties will declare that they will suffer irreparable harm if one of our leading banks is allowed to fail. I have come to call this “the Washington wink.” You ask a federal official if too big to fail legislation will work, they dutifully say of course it will. However, the “of course” is inevitably accompanied by a knowing wink.

In another divergence, the government has not subsidized media businesses. The banks may be showing profits, but they are on government life support. These so-called zombie banks can borrow from the Federal Reserve at almost no cost, and a long list of government initiatives have served as additional “stealth” bailouts of the banks. In the absence of this government support, would the banking industry still be successful? If media companies could borrow funds at almost no costs, I suspect their balance sheets and profits would be dramatically enhanced.

Capitalism is built on the idea that compensation and profits reflect the relative contribution an individual or firm makes to the total wealth of a society. Real societal wealth is anything that can be consumed or experienced. Profits are an accounting proxy meant to measure wealth. As I have written before, this proxy has failed miserably with regard to the banking industry. Given the loss of real societal wealth that accompanied the economic crisis as a result of poor bank management, the employment crisis, and the ongoing support the industry needs from the government, there is only one possible conclusion: at this moment the financial services industry is far more of a destroyer of real wealth than a wealth creator.

Meanwhile, media companies don’t profit by repeatedly breaking the law. The lack of enforcement against Wall Street undermines our democracy and capitalism, and is effectively another form of stealth government support for the industry. As noted here, JP Morgan Chase (like several of the large banks) is in the middle of a host of potential scandals. In a true capitalist economy, the government would enforce the law to prevent repetitive malfeasance. The executives leading a firm that repeatedly violated the law would be held accountable by the firm’s board for failure to exercise this basic responsibility to society.

Since the start of the economic crisis, the financial services industry has grown even more concentrated. It’s hard not to regard our largest financial services institutions as effective monopolies. Yet, to my knowledge, no investigation of antitrust issues related to the industry is underway. This is yet another stealth government subsidy. By contrast, in an earlier article I wrote about the misguided Justice Department investigation of e-book pricing, another area that is already suffering badly.

Yes, Mr. Dimon, you are a success. However, I would suggest that the success you so proudly proclaim reflects the loss of two of our nation’s most important values. The first is the failure of individuals and leaders to simply take responsibility for their actions and the actions of their companies. The second is that Wall Street, which should be the heart of American capitalism, has instead become the heart of a dysfunctional system that is destroying the nation’s wealth.

No, bankers are not capitalists. At every turn, they demonstrate that the last thing they want is the return of real capitalism to America.

Bruce Judson is Entrepreneur-in-Residence at the Yale Entrepreneurial Institute and a former Senior Faculty Fellow at the Yale School of Management.

Romney's Auto Bail-out Billionaires

Top funders made billions from US Treasury Greg Palast for Nation of Change
Thursday, February 23, 2012

Republican Presidential candidate Mitt Romney called the federal government's 2009 bail-out of the auto industry, "nothing more than crony capitalism, Obama style... a reward for his big donors to his campaign." In fact, the biggest rewards - a windfall of more than two billion dollars care of US taxpayers -- went to Romney's two top contributors.

John Paulson of Paulson & Co and Paul Singer of Elliott International, known on Wall Street as "vulture" investors, have each written checks for one million dollars to Restore Our Future, the Super PAC supporting Romney's candidacy.

Gov. Romney last week asserted that the Obama Administration's support for General Motors was a, "payoff for the auto workers union." However, union workers in GM's former auto parts division, Delphi, the unit taken over by Romney's funders, did not fare so well. The speculators eliminated every single union job from the parts factories once manned by 25,200 UAW members.

The two hedge fund operators turned a breathtaking three-thousand percent profit on a relatively negligible investment by using hardball tactics against the US Treasury and their own employees.

Under the control of the speculators, Delphi, which had 45 plants in the US and Canada, is now reduced to just four factories with only 1,500 hourly workers, none of them UAW members, despite the union agreeing to cut contract wages by two thirds.

It wasn't supposed to be quite so bad. The Obama Administration and GM had arranged for a private equity investor to provide half a billion dollars in new capital for Delphi, but that would have cut the pay-out to Singer and Paulson. The speculators blocked the Obama-GM plan, taking the entire government bail-out hostage. Even the Wall Street Journal's Dealmaker column was outraged, accusing Paul Singer of treating the auto company, "like a third world country."

But it worked. Singer and Paulson got what they demanded. Using US Treasury funds:

GM agreed to pay off $1.1 billion of Delphi's debts, forgave $2.15 billion owed GM by Delphi (which had been spun off as an independent company) pumped $1.75 billion into Delphi operations, and took over four money-losing plants that the speculators didn't want.

If those plants had been closed, GM factories would have shut down cold for lack of parts.

Then there was the big one: The US government agreed to take over $6.2 billion in pension benefits due Delphi workers under US labor law.

Governor Romney, while opposing the bail-out of GM, accused Obama of eliminating the pensions of 21,000 non-union employees at Delphi. In fact, it was Romney's funders who wiped out 100% of the pensions and health care accounts of Delphi salaried retirees.

Paulson and Singer paid an average of about 67 cents a share for Delphi. In November, 2011, Paulson sold a chunk of his holdings for $22 a share. Paulson's gain totals a billion and a half dollars ($1,499,499,000), and Singer gained nearly a billion ($899,751,000) -- thirty-two times their investment.

One-hundred percent of this gain for the Paulson and Singer hedge funds is accounted for by taxpayer bail-out support.

But, unlike the government loans and worker concessions given to GM, the US Treasury and workers get nothing in return from Delphi.

From GM, the US Treasury got warrants for common stock (similar to options) that have already produced billions in profit.

And Delphi? It's doing well for Paulson and Singer. GM and Chrysler, still in business by the grace of the US Treasury, remain Delphi's main customers, buying parts now made almost entirely in China and other cheap-labor nations.

And exactly who are Paulson and Singer?

Billionaire John Paulson became the first man in history to earn over $3 billion in a single year -- not for his hedge fund, but for himself, personally. At the core of this huge payday was a 2007 scheme by which, via Goldman Sachs, he sold "insurance" on subprime mortgage loans. According to a lawsuit filed by the Securities Exchange Commission, Goldman defrauded European banks by pretending that Paulson was investing in the insurance. In fact, Paulson was, secretly, the beneficiary of the insurance, reaping billions when the mortgage market collapsed.

Goldman paid half a billion dollars in civil fines for the fraud. While the SEC states that Paulson knowingly participated in the scheme, he was not fined and denies he defrauded the banks.

Multi-billionaire Singer is known as Wall Street's toughest "vulture" speculator. Vulture fund financial attacks on the world's poorest nations have been effectively outlawed in much of Europe and excoriated by human rights groups, conduct Britain's former Prime Minister Gordon Brown described as, "morally outrageous."

This is one report from our new investigative series: Billionaires & Ballots. We need your support to dig into the sources of the big money bending the campaign using our team's internationally heralded investigative skills. You've seen our reports on BBC Television Newsnight, on Democracy Now, in The Nation, in Rolling Stone, on Truthout and elsewhere. Our stories require digging deep into hidden files and for witnesses spread over five continents. Without your tax-deductible donation this would be impossible. [We just returned from the Congo tracing the twisted path of Romney's top funders. We go where the evidence takes us, without partisan favor. Please donate now and receive a gift signed by Greg Palast: his brand new, highly acclaimed book Vultures' Picnic, films and more.

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3 doomsaying experts who foresee economic devastation ahead

Adam Shell, USA TODAY2-26-12
http://www.usatoday.com/money/perfi/stocks/story/2012-02-26/stock-market-bears-doomsayers/53259742/1

NEW YORK – Behind the mainstream Wall Street happy talk about more stable financial markets and an improving economy are grim warnings of tough times ahead from a small cadre of doomsayers who warn that the worst of the financial crisis is still to come.

Harry Dent, author of the new book The Great Crash Ahead, says another stock market crash is coming due to a bad ending to the global debt bubble. He has pulled back on his earlier prediction of a crash in 2012, as central banks around the world have been flooding markets with money, giving stocks an artificial short-term boost. But a crash is coming in 2013 or 2014, he warns. "This will be a repeat of 2008-09, only bigger, when it finally hits," Dent told USA TODAY.

Gerald Celente, a trend forecaster at the Trends Research Institute, says Americans should brace themselves for an "economic 9/11" due to policymakers' inability to solve the world's financial and economic woes. The coming meltdown, he predicts, will lead to growing social unrest and anti-government sentiment, a U.S. dollar with far less purchasing power and more people out of work.

Celente won't rule out another financial panic that could spark enough fear to cause a run on the nation's banks by depositors. That risk could cause the government to invoke "economic martial law" and call a "bank holiday" and close banks as it did during the Great Depression.

"We see some kind of threat of that magnitude," Celente, publisher of The Trends Journal newsletter, warned in an interview.

Robert Prechter, author of Conquer the Crash, first published in 2002 and updated in 2009, is still bearish. He says today's economy has similarities to the Great Depression and warns that 1930s-style deflation is still poised to cause financial havoc. Prechter predicts that the major U.S. stock indexes, such as the Dow Jones industrials and Standard & Poor's 500, will plunge below their bear market lows hit in March 2009 during the last financial crisis. The brief recovery will fail as it did in the 1930s, he says.

2 very different viewpoints

If he's right, stocks would lose more than half of their value. "The economic recovery has been weak, so the next downturn should generate bad news in a big way," Prechter said in an e-mail interview. "For the third time in a dozen years, the stock market is in a very bearish position."

These dire forecasts differ sharply with the brighter outlooks being espoused by the bulls, or optimists, on Wall Street. Recent stock performance and fresh readings on the economy also suggest a future that is less gloomy than the doomsayers predict.

The Dow, for instance, is in rebound mode and has climbed back to levels not seen since the early days of the financial crisis in May 2008. Tech stocks in the Nasdaq composite are trading at levels last seen in 2000. Data on auto sales, manufacturing and consumer confidence have been firming. Job creation is also on the rise. The unemployment rate dipped to 8.3% in January, its lowest level in three years.

As a result, stock market strategists such as Rod Smyth of RiverFront Investment have been raising their outlooks for 2012. Smyth raised his target range for the S&P 500 to 1250-1500. If the market hits the top of the range, stocks would have risen 10%. Similarly, Brian Belski, strategist at Oppenheimer, recently said he remains comfortable with his year-end 2012 target of 1400. That's up 2.5% from here. Bespoke Investment Group published research that shows the market, which is closing in on a new bull market high, has done well in the past once it breaks through old highs.

Bulls are betting that Europe's banking system will be stabilized, minimizing the risk of a severe credit crisis. Bulls are also encouraged by recent data from around the world that show modest growth and a pickup in economic momentum.

The causes of economic calamity

So what has the super-bears so worried?

Dent says the combination of aging Baby Boomers exiting their big spending years and a shift toward debt reduction and austerity around the world will cause the economy to suffer another severe leg down, making it more difficult for the government and Federal Reserve to avert a new meltdown. He has not always been bearish. In 1993 he wrote The Great Boom Ahead.

Celente, who as far back as 2008 has been warning of economic calamity, argues that the ballooning debt and the growing divide between the haves and have-nots has put the U.S. in a weakened state.

As a result, he says, the nation is more vulnerable to potential shocks. He worries about potential chaos caused by people all trying to yank their money out of financial markets at the same time. He also sees risk in the event there is a loss of confidence in elected leaders.

Societal unrest in the form of street protests and increased crime are possible, too, he adds. Markets could also be spooked by an oil price shock due to a military conflict between Israel and Iran, or a bad outcome to Europe's debt crisis.

"2012 is when many of the long-simmering socioeconomic and political trends that we have been forecasting and tracking will climax," Celente noted in his Top 12 Trends 2012 newsletter. In an interview he added: "When money stops flowing to the man on the street, blood starts flowing in the street."

While bulls are urging investors to get back into stocks, the doomsayers are advising a far different strategy. Dent's investment advice is simple: "Get out of the way." He recommends buying short-term U.S. Treasury bills and the U.S. dollar, which will benefit from safe-haven cash flows. He says stocks will fall sharply in value.

Celente's advice centers on survival. He says buy gold so you don't lose purchasing power when the value of the dollar plummets. He says buy a gun to protect your family against desperate people in search of food and money. He says plan a getaway to places with more stable finances and governments.

Prechter says to keep your powder dry and buy when things get really bad: "When things get really scary, as in early 2009, I get bullish."

One Out Of Every Ten Wall Street Employees Is A Psychopath

One Out Of Every Ten Wall Street Employees Is A Psychopath, Say Researchers Alexander Eichler
02/28/12
http://www.huffingtonpost.com/2012/02/28/wall-street-psychopaths_n_1307168.html

Maybe Patrick Bateman wasn't such an outlier.

One out of every 10 Wall Street employees is likely a clinical psychopath, writes journalist Sherree DeCovny in an upcoming issue of the trade publication CFA Magazine (subscription required). In the general population the rate is closer to one percent.

"A financial psychopath can present as a perfect well-rounded job candidate, CEO, manager, co-worker, and team member because their destructive characteristics are practically invisible," writes DeCovny, who pulls together research from several psychologists for her story, which helpfully suggests that financial firms carefully screen out extreme psychopaths in hiring.

To be sure, typical psychopathic behavior runs the gamut. At the extreme end is Bateman, portrayed by Christian Bale, in the 2000 movie "American Psycho," as an investment banker who actually kills people and exhibits no remorse. When health professionals talk about "psychopaths," they have a broader range of behavior in mind.

A clinical psychopath is bright, gregarious and charming, writes DeCovny. He lies easily and often, and may have trouble feeling empathy for other people. He's probably also more willing to take dangerous risks -- either because he doesn't understand the consequences, or because he simply doesn't care.

An appetite for risk can seem like a positive business trait on Wall Street, where big gambles sometimes lead to big rewards. But for the people DeCovny is talking about, the outcomes matter less than the gambles themselves -- and the chemical rush of serotonin and endorphins that accompanies them.

This is hardly the first time that mental illness has been equated with a certain capacity for professional success -- especially in the financial sector, where some stock traders have actually scored higher than diagnosed psychopaths on tests that measure competitiveness and attraction to risk.

Some psychologists have long claimed that the qualities that make for a high-achieving politician or stockbroker are also the same traits that psychopaths have in abundance.

Other researchers generalize it to bosses as a species, saying that about 4 percent of all executives are psychopaths -- and that their relative lack of scruples is what helps them excel in business.

At the same time, the fast-moving, high-pressure environment of Wall Street probably compromises the mental health of some of its employees. A recent study found that many young bankers develop alcoholism, insomnia, eating disorders and other stress-related ailments within just a few years on the job.

Stockbrokers have also been shown to experience clinical depression at a rate more than three times as high as the general population.

DeCovny writes that for someone with a "latent" compulsive gambling problem, a job trading stocks can trigger pathological responses that send the person into an escalating pattern of lies, debts and even embezzlement and fraud.

A person with this problem would feel gratified by an enormous loss, because of the way their brain's reward system works -- which DeCovny says may explain the activities of such notorious rogue traders as Kweku Adoboli, Jerome Kerviel and Nick Leeson, three men who gambled and lost the combined equivalent of $10.3 billion for their respective institutions over the past 17 years.

The Top Twelve Reasons Why You Should Hate the Mortgage Settlement

Yves SmithThursday, February 9, 2012
http://www.nakedcapitalism.com/2012/02/the-top-twelve-reasons-why-you-should-hate-the-mortgage-settlement.html
As readers may know by now, 49 of 50 states have agreed to join the so-called mortgage settlement, with Oklahoma the lone refusenik. Although the fine points are still being hammered out, various news outlets (New York Times, Financial Times, Wall Street Journal) have details, with Dave Dayen’s overview at Firedoglake the best thus far.

The Wall Street Journal is also reporting that the SEC is about to launch some securities litigation against major banks. Since the statue of limitations has already run out on securities filings more than five years old, this means they’ll clip the banks for some of the very last (and dreckiest) deals they shoved out the door before the subprime market gave up the ghost.

The various news services are touting this pact at the biggest multi-state settlement since the tobacco deal in 1998. While narrowly accurate, this deal is bush league by comparison even though the underlying abuses in both cases have had devastating consequences.

The tobacco agreement was pegged as being worth nearly $250 billion over the first 25 years. Adjust that for inflation, and the disparity is even bigger. That shows you the difference in outcomes between a case where the prosecutors have solid evidence backing their charges, versus one where everyone know a lot of bad stuff happened, but no one has come close to marshaling the evidence.

The mortgage settlement terms have not been released, but more of the details have been leaked:

1. The total for the top five servicers is now touted as $26 billion (annoyingly, the FT is calling it “nearly $40 billion”), but of that, roughly $17 billion is credits for principal modifications, which as we pointed out earlier, can and almost assuredly will come largely from mortgages owned by investors. $3 billion is for refis, and only $5 billion will be in the form of hard cash payments, including $1500 to $2000 per borrower foreclosed on between September 2008 and December 2011.

Banks will be required to modify second liens that sit behind firsts “at least” pari passu, which in practice will mean at most pari passu. So this guarantees banks will also focus on borrowers where they do not have second lien exposure, and this also makes the settlement less helpful to struggling homeowners, since borrowers with both second and first liens default at much higher rates than those without second mortgages. Per the Journal:

“It’s not new money. It’s all soft dollars to the banks,” said Paul Miller, a bank analyst at FBR Capital Markets.

The Times is also subdued:

Despite the billions earmarked in the accord, the aid will help a relatively small portion of the millions of borrowers who are delinquent and facing foreclosure. The success could depend in part on how effectively the program is carried out because earlier efforts by Washington aimed at troubled borrowers helped far fewer than had been expected.

2. Schneiderman’s MERS suit survives, and he can add more banks as defendants. It isn’t clear what became of the Biden and Coakley MERS suits, but Biden sounded pretty adamant in past media presentations on preserving that.

3. Nevada’s and Arizona’s suits against Countrywide for violating its past consent decree on mortgage servicing has, in a new Orwellianism, been “folded into” the settlement.

4. The five big players in the settlement have already set aside reserves sufficient for this deal.

Here are the top twelve reasons why this deal stinks:

1. We’ve now set a price for forgeries and fabricating documents. It’s $2000 per loan. This is a rounding error compared to the chain of title problem these systematic practices were designed to circumvent. The cost is also trivial in comparison to the average loan, which is roughly $180k, so the settlement represents about 1% of loan balances. It is less than the price of the title insurance that banks failed to get when they transferred the loans to the trust. It is a fraction of the cost of the legal expenses when foreclosures are challenged. It’s a great deal for the banks because no one is at any of the servicers going to jail for forgery and the banks have set the upper bound of the cost of riding roughshod over 300 years of real estate law.

2. That $26 billion is actually $5 billion of bank money and the rest is your money. The mortgage principal writedowns are guaranteed to come almost entirely from securitized loans, which means from investors, which in turn means taxpayers via Fannie and Freddie, pension funds, insurers, and 401 (k)s. Refis of performing loans also reduce income to those very same investors.

3. That $5 billion divided among the big banks wouldn’t even represent a significant quarterly hit. Freddie and Fannie putbacks to the major banks have been running at that level each quarter.

4. That $20 billion actually makes bank second liens sounder, so this deal is a stealth bailout that strengthens bank balance sheets at the expense of the broader public.

5. The enforcement is a joke. The first layer of supervision is the banks reporting on themselves. The framework is similar to that of the OCC consent decrees implemented last year, which Adam Levitin and yours truly, among others, decried as regulatory theater.

6. The past history of servicer consent decrees shows the servicers all fail to comply. Why? Servicer records and systems are terrible in the best of times, and their systems and fee structures aren’t set up to handle much in the way of delinquencies. As Tom Adams has pointed out in earlier posts, servicer behavior is predictable when their portfolios are hit with a high level of delinquencies and defaults: they cheat in all sorts of ways to reduce their losses.

7. The cave-in Nevada and Arizona on the Countrywide settlement suit is a special gift for Bank of America, who is by far the worst offender in the chain of title disaster (since, according to sworn testimony of its own employee in Kemp v. Countrywide, Countrywide failed to comply with trust delivery requirements). This move proves that failing to comply with a consent degree has no consequences but will merely be rolled into a new consent degree which will also fail to be enforced. These cases also alleged HAMP violations as consumer fraud violations and could have gotten costly and emboldened other states to file similar suits not just against Countrywide but other servicers, so it was useful to the other banks as well.

8. If the new Federal task force were intended to be serious, this deal would have not have been settled. You never settle before investigating. It’s a bad idea to settle obvious, widespread wrongdoing on the cheap. You use the stuff that is easy to prove to gather information and secure cooperation on the stuff that is harder to prove. In Missouri and Nevada, the robosigning investigation led to criminal charges against agents of the servicers. But even though these companies were acting at the express direction and approval of the services, no individuals or entities higher up the food chain will face any sort of meaningful charges.

9. There is plenty of evidence of widespread abuses that appear not to be on the attorney generals’ or media’s radar, such as servicer driven foreclosures and looting of investors’ funds via impermissible and inflated charges. While no serious probe was undertaken, even the limited or peripheral investigations show massive failures (60% of documents had errors in AGs/Fed’s pathetically small sample). Similarly, the US Trustee’s office found widespread evidence of significant servicer errors in bankruptcy-related filings, such as inflated and bogus fees, and even substantial, completely made up charges. Yet the services and banks will suffer no real consequences for these abuses.

10. A deal on robosiginging serves to cover up the much deeper chain of title problem. And don’t get too excited about the New York, Massachusetts, and Delaware MERS suits. They put pressure on banks to clean up this monstrous mess only if the AGs go through to trial and get tough penalties. The banks will want to settle their way out of that too. And even if these cases do go to trial and produce significant victories for the AGs, they still do not address the problem of failures to transfer notes correctly.

11. Don’t bet on a deus ex machina in terms of the new Federal foreclosure task force to improve this picture much. If you think Schneiderman, as a co-chairman who already has a full time day job in New York, is going to outfox a bunch of DC insiders who are part of the problem, I have a bridge I’d like to sell to you.

12. We’ll now have to listen to banks and their sycophant defenders declaring victory despite being wrong on the law and the facts. They will proceed to marginalize and write off criticisms of the servicing practices that hurt homeowners and investors and are devastating communities. But the problems will fester and the housing market will continue to suffer. Investors in mortgage-backed securities, who know that services have been screwing them for years, will be hung out to dry and will likely never return to a private MBS market, since the problems won’t ever be fixed. This settlement has not only revealed the residential mortgage market to be too big to fail, but puts it on long term, perhaps permanent, government life support.

As we’ve said before, this settlement is yet another raw demonstration of who wields power in America, and it isn’t you and me. It’s bad enough to see these negotiations come to their predictable, sorry outcome. It adds insult to injury to see some try to depict it as a win for long suffering, still abused homeowners.