The Ruthless Truth blog

by William Blum.

Global Research, June 5, 2009

The Anti-Empire Report

The United States is "facing a nuclear threat in Iran" — article in Chicago Tribune and other major newspapers, May 26

"the growing missile threat from North Korea and Iran" — article in the Washington Post and other major newspapers, May 26

"Iran’s threat transcends religion. Regardless of sectarian bent, Muslim communities need to oppose the attempts by Iran … to extend Shia extremism and influence throughout the world." — op-ed article in Boston Globe, May 27

"A Festering Evil. Doing nothing is not an option in handling the threat from Iran" — headline in Investor’s Business Daily, May 27, 2009

This is a very small sample from American newspapers covering but two days.

"Fifty-one percent of Israelis support an immediate Israeli strike on Iran’s nuclear sites" — BBC, May 24

After taking office, on Holocaust Memorial Day, Israeli Prime Minister Benjamin Netanyahu said: "We will not allow Holocaust-deniers [Iranian president Mahmoud Ahmadinejad] to carry out another holocaust." — Haaretz (Israel), May 14, 2009

Like clinical paranoia, "the threat from Iran" is impervious to correction by rational argument.

Two new novels have just appeared, from major American publishers, thrillers based on Iran having a nuclear weapon and the dangers one can imagine that that portends — "Banquo’s Ghosts" by Rich Lowry & Keith Korman, and "The Increment" by David Ignatius. "Bomb, bomb, bomb. Let’s bomb Iran," declares a CIA official in the latter book. The other book derides the very idea of "dialogue" with Iran while implicitly viewing torture as acceptable.1

On May 12, in New York City, a debate was held on the proposition that "Diplomacy With Iran Is Going Nowhere" (English translation: "Should we bomb Iran?"). Arguing in the affirmative, were Liz Cheney, former State Department official (and daughter of a certain unindicted war criminal) and Dan Senor, formerly the top spokesman for Washington’s Coalition Provisional Authority in Baghdad. Their "opponents" were R. Nicholas Burns, former undersecretary of state, and Kenneth Pollack, former National Security Council official and CIA analyst and author of "The Threatening Storm: The Case for Invading Iraq", a book that, unsurprisingly, did not have too long a shelf life.2

This is what "debate" on US foreign policy looks like in America in the first decade of the 21st century AD — four quintessential establishment figures. If such a "debate" had been held in the Soviet Union during the Cold War ("Detente With The United States Is Going Nowhere"), the American mainstream media would unanimously have had a jolly time making fun of it. The sponsor of the New York debate was the conservative Rosenkranz Foundation, but if a liberal (as opposed to a progressive or radical leftist) organization had been the sponsor, while there probably would have been a bit more of an ideological gap between the chosen pairs of speakers, it’s unlikely that any of the present-day myths concerning Iran would have been seriously challenged by either side. These myths include the following, all of which I’ve dealt with before in this report but inasmuch as they are repeated on a regular basis in the media and by administration representatives, I think that readers need to be reminded of the counter arguments.

• Iran has no right to nuclear weapons: Yet, there is no international law that says that the US, the UK, Russia, China, Israel, France, Pakistan, and India are entitled to nuclear weapons, but Iran is not. Iran has every reason to feel threatened. In any event, the US intelligence community’s National Intelligence Estimate (NIE) of December 2007, "Iran: Nuclear Intentions and Capabilities", makes a point of saying in bold type and italics: “This NIE does not assume that Iran intends to acquire nuclear weapons.” The report goes on to state: "We judge with high confidence that in fall 2003, Tehran halted its nuclear weapons program ."

• Ahmadinejad is a Holocaust denier: I have yet to read of Ahmadinejad saying simply, clearly, unambiguously, and unequivocally that he thinks that what we know as the Holocaust never happened. He has instead commented about the peculiarity and injustice of a Holocaust which took place in Europe resulting in a state for the Jews in the Middle East instead of in Europe. Why are the Palestinians paying a price for a German crime? he asks. And he has questioned the figure of six million Jews killed by Nazi Germany, as have many other people of all political stripes.

• Ahmadinejad has called for violence against Israel: His 2005 remark re "wiping Israel off the map", besides being a very questionable translation, has been seriously misinterpreted, as evidenced by the fact that the following year he declared: “The Zionist regime will be wiped out soon, the same way the Soviet Union was, and humanity will achieve freedom.”³ Obviously, he was not calling for any kind of violent attack upon Israel, for the dissolution of the Soviet Union took place peacefully.

• Iran has no right to provide arms to Hamas and Hezbollah: However, the United States, we are assured, has every right to do the same for Israel and Egypt.

• The fact that Obama says he’s willing to "talk" to some of the "enemies" like Iran more than the Bush administration did sounds good: But one doesn’t have to be too cynical to believe that it will not amount to more than a public relations gimmick. It’s only change of policy that counts. Why doesn’t Obama just state that he would not attack Iran unless Iran first attacked the US or Israel or anyone else? Besides, the Bush administration met with Iran on several occasions.

The following should also be kept in mind: The Washington Post, March 5, 2009, reported: "A senior Israeli official in Washington" has asserted that "Iran would be unlikely to use its missiles in an attack [against Israel] because of the certainty of retaliation." This was the very last sentence in the article and, according to an extensive Nexis search, did not appear in any other English-language media in the world.

In 2007, in a closed discussion, Israeli Foreign Minister Tzipi Livni said that in her opinion "Iranian nuclear weapons do not pose an existential threat to Israel." She "also criticized the exaggerated use that [Israeli] Prime Minister Ehud Olmert is making of the issue of the Iranian bomb, claiming that he is attempting to rally the public around him by playing on its most basic fears." This appeared in Haaretz.com, October 25, 2007 (print edition October 26), but not in any US media or in any other English-language world media except the BBC citing the Iranian Mehr English-language news agency, October 27.

Is it a bird? Is it a plane? No, it’s Changeman!

In January 2006 I was invited to attend a book fair in Cuba, where one of my books, newly translated into Spanish, was being presented. All my expenses were to be paid by the Cuban government and I was very much looking forward to the visit. Only one problem — the government of the United States would not give me permission to go. My application to travel to Cuba had also been rejected in 1998 by the Clinton administration. (On that occasion I went anyhow and was extremely lucky to avoid being caught by the American Travel Police on the way back and being fined thousands of dollars.) I mention this because Obama supporters would have us believe — as they themselves believe — that their Changeman has been busy making lots of important changes, Cuba being only one example. But I still don’t have the legal right to travel to Cuba.

The only real change made by the Obama administration in regard to Cuba is that Cuban-Americans with family on the island can travel there and send remittances without restrictions. The April 13 White House announcement listed several other provisions concerning telecommunications companies, but what this will actually mean in practice, if anything, is unknown, particularly as it affects Cuba’s access to the Internet. American anti-Castroites have long blamed Cuban’s deficient Internet access on the proverbial "communist suppression", when the technical availability and prohibitive cost were to a large extent in the hands of American corporations. Microsoft, for example, bars Cuba from using its Messenger instant messaging service.4 And Google has long blocked Cuban access to many of its features.⁵ Venezuela and Cuba have been working on an underwater cable system that they hope will make them less reliant on the gringos.

The multifarious US economic embargo, which causes unending hardship and expense for the Cuban people, remains in place. Here is Changeman in a recent press conference:

Reporter: Thank you, Mr. President. You’ve heard from a lot of Latin America leaders here who want the U.S. to lift the embargo against Cuba. You’ve said that you think it’s an important leverage to not lift it. But in 2004, you did support lifting the embargo. You said, it’s failed to provide the source of raising standards of living, it’s squeezed the innocent, and it’s time for us to acknowledge that this particular policy has failed. I’m wondering, what made you change your mind about the embargo?

The President: Well, 2004, that seems just eons ago. What was I doing in 2004?

Reporter: Running for Senate.

The President: Is it while — I was running for Senate. There you go.6

Yes, there you go; you shouldn’t confuse campaign rhetoric with the real world and the real Changeman.

The case of the Cuban Five is another chance for Changeman to come to the rescue. This outrageous perversion of justice whereby Cubans were sent to the United States to try to learn of further terrorist attacks in Cuba planned by anti-Castroites in Florida and were themselves arrested by the FBI on information partly supplied to the US by the Cuban government as their contribution to the War On Terrorism.⁷

The Cuban Five have been in US prisons for more than 10 years. Around June 15 the Supreme Court is expected to issue a decision on whether or not they will hear the appeal of the Five. The Clinton administration arrested them. The Bush administration continued the awful, mindless, crimeless persecution for eight more years. But now comes the Changeman administration. Hooray! Oh, in late May, the Changeman administration filed a brief urging the Court to deny the Five a hearing, and on June 2, Secretary of State Hillary Clinton told an Organization of American States meeting: "I want to emphasize the United States under President Obama is taking a completely new approach to our policy toward Cuba."8

Another opportunity for Changeman to come to the rescue also involves Cuba — closing the Guantanamo prison. But our hero is once again displaying a woeful lack of political courage and imagination. If there’s good evidence that certain detainees are a danger to anyone, then try them in US civilian courts with full rights, a decent defense team, and excluding secret evidence and coerced confessions. If they’re found guilty — and with an American jury sitting in judgment of "terrorists", this, in almost all cases, would be the verdict — then imprison them in one of America’s maximum security prisons, which already houses about 355 men labeled as "terrorists".9 The new ones will not be any more of a danger in prison than the ones already there.

However, if they’re found innocent, then declare them free men. It would be much easier then to find a country to accept them, including the United States. Until now, the world has been told repeatedly by Washington that these men are "the worst of the worst". Small wonder that no country or community wants them near. But if they’ve been tried and acquitted, this situation should change markedly.

So Mr. Obama, we’re waiting for you to step into a phone booth.

It’s part of America’s ideology to pretend that it doesn’t have any ideology.

Oh, a woman nominated to be a Supreme Court justice. A woman whose parents are from Puerto Rico. A Latina! A Latina Supreme Court justice! Oh, hooray for America!

Who cares? Clarence Thomas is a Supreme Court justice. He’s black. He’s as hopelessly reactionary as they come. No one should give a damn that Sonia Sotomayor is a woman with a Latin American background. All that counts is her politics. Her ideology. Her positions on important social and political issues. Yes, I know, we’re talking about the Law, the Majesty of the Law, judges who are scholars, impartial scholars, who study the fine points and the history of a law, experts on the Constitution of the United States, not swayed by today’s partisan squabbles but take the long view, looking at precedent, considering what precedent may be set for the future.

Don’t believe it. That may be true in the infrequent Supreme Court case where no ideological question at all is raised. Otherwise the judges are all biased human beings, appointed by a biased president, confirmed by biased members of the Senate.

Patrick Martin recently observed on the World Socialist Web Site: "For the past 12 years … under two Democratic presidents and one Republican, the post of US Secretary of State has been occupied by, in succession, a white woman, a black man, a black woman, and a white woman."10 And they all loved the empire. When the empire called for it, they bombed, invaded, and killed; they overthrew, occupied, tortured, and lied; and swore allegiance to Israel and the corporations.

And now we have a black president. Martin Luther King, Malcolm X, or Stokely Carmichael he’s not. His policies and his appointments have all fallen in that area that runs from ever so slightly to the left of center to clear conservative and imperialist on the right. He’s more loath to being identified as, or collaborating with, progressives than with right-wingers. Team Obama sees the left as an eccentric old aunt who keeps showing up at family functions, making everyone uncomfortable and wishing she’d just go away.

America, and the world, have to grow up. Forget color. Forget ethnicity. Forget gender. Forget sexual orientation. Forget even the class the person comes from. Look at the class they serve. And understand that the person wouldn’t be in the position they are, or be nominated for the position, if there was any serious question about their loyalty to the capitalist ethic or American world domination.

It also matters not whether the president is comically inarticulate or whether he speaks in complete grammatical sentences. Keep your eye on the policies.

Obama

To the numerous fans of Barack Obama, on the left, in the middle, on the right, and to the apolitical Obamaniacs, my advice is to read "Being There" by Jerzy Kosinski, or see the film version of the same name starring Peter Sellers.

Also read "The Emperor’s New Clothes" by Hans Christian Andersen.

"Men go mad in herds, but only come to their senses one by one." — Charles Mackay, 19th century Scottish journalist

NOTES

1. Washington Post, May 26, 2009 book review^↩

2. Washington Post, May 15, 2009^↩

3. Associated Press, December 12, 2006^↩

4. Associated Press, June 2, 2009 ^↩

5. Does Google Censor Cuba? ^↩

6. White House Press Office, April 19, 2009 ^↩

7. Cuban Political Prisoners … in the United States ^↩

8. Washington Post, June 3, 2009. ^↩

9. "There Are Already 355 Terrorists in American Prisons", Slate Magazine, May 29, 2009^↩

10. "The fundamental social division is class, not race or gender", World Socialist Web Site, May 28, 2009^↩

–

William Blum is the author of:

• Killing Hope: US Military and CIA Interventions Since World War 2

• Rogue State: A Guide to the World’s Only Superpower

• West-Bloc Dissident: A Cold War Memoir

• Freeing the World to Death: Essays on the American Empire

Portions of the books can be read, and signed copies purchased, at www.killinghope.org

Previous Anti-Empire Reports can be read at this website.

To add yourself to this mailing list simply send an email to bblum6@aol.com with "add" in the subject line. I’d like your name and city in the message, but that’s optional. I ask for your city only in case I’ll be speaking in your area.

(Or put "remove" in the subject line to do the opposite.)

Any part of this report may be disseminated without permission. I’d appreciate it if the website were mentioned.

William Blum is a frequent contributor to Global Research. Global Research Articles by William Blum

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by Mike Whitney

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Global Research, June 5, 2009

Is it possible to make hundreds of billions of dollars in profits on securities that are backed by nothing more than cyber-entries into a loan book?

It’s not only possible; it’s been done. And now the scoundrels who cashed in on the swindle have lined up outside the Federal Reserve building to trade their garbage paper for billions of dollars of taxpayer-funded loans. Where’s the justice? Meanwhile, the credit bust has left the financial system in a shambles and driven the economy into the ground like a tent stake. The unemployment lines are growing longer and consumers are cutting back on everything from nights-on-the-town to trips to the grocery store. And it’s all due to a Ponzi-finance scam that was concocted on Wall Street and spread through the global system like an aggressive strain of Bird Flu. The isn’t a normal recession; the financial system was blown up by greedy bankers who used "financial innovation" game the system and inflate the biggest speculative bubble of all time. And they did it all legally, using a little-known process called securitization.

Securitization–which is the conversion of pools of loans into securities that are sold in the secondary market–provides a means for massive debt-leveraging. The banks use off-balance sheet operations to create securities so they can avoid normal reserve requirements and bothersome regulatory oversight. Oddly enough, the quality of the loan makes no difference at all, since the banks make their money on loan originations and other related fees. What matters is quantity, quantity, quantity; an industrial-scale assembly line of fetid loans dumped on unsuspecting investors to fatten the bottom line. And, boy, can Wall Street grind out the rotten paper when there’s no cop on the beat and the Fed is cheering from the bleachers. In an analysis written by economist Gary Gorton for the Federal Reserve Bank of Atlanta’s 2009 Financial Markets Conference titled, "Slapped in the Face by the Invisible Hand; Banking and the Panic of 2007", the author shows that mortgage-related securities ballooned from $492.6 billion in 1996 to $3,071.1 in 2003, while asset backed securities (ABS) jumped from $168.4 billion in 1996 to $1,253.1 in 2006. All told, more than $20 trillion in securitized debt was sold between 1997 to 2007. How much of that debt will turn out to be worthless as foreclosures skyrocket and the banks balance sheets come under greater and greater pressure?

Deregulation opened Pandora’s box, unleashing a weird mix of shady off-book operations (SPVs, SIVs) and dodgy, odd-sounding derivatives that were used to amplify leverage and stack debt on tinier and tinier scraps of capital. It’s easy to make money, when one has no skin in the game. That’s how hedge fund managers and private equity sharpies get rich. Securitization gave the banks the opportunity to take substandard loans from applicants who had no way of paying them back, and magically transform them into Triple A securities. "Abra-kadabra". The Wall Street public relations throng boasted that securitization "democratized" credit because more people could borrow at better rates since funding came from investors rather than banks. But it was all a hoax. The real objective was to turbo-charge profits by skimming hefty salaries and bonuses on the front end, before people found out they’d been hosed. The former head of the FDIC, William Seidman, figured it all out back in 1993 when he was cleaning up after the S&L fiasco. Here’s what he said in his memoirs:

“Instruct regulators to look for the newest fad in the industry and examine it with great care. The next mistake will be a new way to make a loan that will not be repaid.” (Bloomberg)

That’s it in a nutshell. The banks never expected the loans would be paid back, which is why they issued them to ninjas; applicants with no income, no collateral, no job, and a bad credit history. It made no sense at all, especially to anyone who’s ever sat through a nerve-wracking credit check with a sneering banker. Trust me, bankers know how to get their money back, if that’s their real intention. In this case, it didn’t matter. They just wanted to keep their counterfeiting racket zooming ahead at full-throttle for as long as possible. Meanwhile, Maestro Greenspan waved pom-poms from the sidelines, extolling the virtues of the "new economy" and the permanent high plateau of prosperity that had been achieved through laissez faire capitalism.

Now that the securitization bubble has burst, 40% of the credit which had been coursing into the economy has been cut off triggering a 1930′s-type meltdown. Fed chief Bernanke has stepped into the breach and provided a $13 trillion dollar backstop to keep the financial system from collapsing, but the broader economy has continued its historic nosedive. Bernanke is trying to fill the chasm that opened up when securitization ground to a halt and gas started exiting the credit bubble in one mighty whooosh. The deleveraging is ongoing, despite the Fed’s many programs to rev up securitization and restore speculative bubblenomics. Bernanke’s latest brainstorm, the Term Asset-backed securities Lending Facility (TALF), provides 94 percent public funding for investors willing to buy loans backed by credit card debt, student loans, auto loans or commercial real estate loans. It’s a "no lose" situation for big investors who think that securitized debt will stage a comeback. But that’s the problem; no one does. Attractive, non recourse (nearly) risk free loans have failed to entice the big brokerage houses and hedge fund managers. Bernanke has peddled less than $30 billion in a program that’s designed to lend up to $1 trillion. It’s been a complete bust.

To understand securitization, one must think like a banker. Bankers believe that profits are constrained by reserve requirements. So, what they really want is to expand credit with no reserves; the equivalent of spinning flax into gold. Securitization and derivatives contracts achieve that objective. They create a confusing netherworld of odd-sounding instruments and bizarre processes which obscure the simple fact that they are creating money out of thin air. That’s what securitization really is; undercapitalized junk masquerading as precious jewels. Here’s how economist Henry CK Liu sums it up in his article "Mark-to-Market vs. Mark-to-Model":

"The shadow banking system has deviously evaded the reserve requirements of the traditional regulated banking regime and institutions and has promoted a chain-letter-like inverted pyramid scheme of escalating leverage, based in many cases on nonexistent reserve cushion. This was revealed by the AIG collapse in 2008 caused by its insurance on financial derivatives known as credit default swaps (CDS)…..

The Office of the Comptroller of the Currency and the Federal Reserve jointly allowed banks with credit default swaps (CDS) insurance to keep super-senior risk assets on their books without adding capital because the risk was insured. Normally, if the banks held the super-senior risk on their books, they would need to post capital at 8% of the liability. But capital could be reduced to one-fifth the normal amount (20% of 8%, meaning $160 for every $10,000 of risk on the books) if banks could prove to the regulators that the risk of default on the super-senior portion of the deals was truly negligible, and if the securities being issued via a collateral debt obligation (CDO) structure carried a Triple-A credit rating from a “nationally recognized credit rating agency”, such as Standard and Poor’s rating on AIG.

With CDS insurance, banks then could cut the normal $800 million capital for every $10 billion of corporate loans on their books to just $160 million, meaning banks with CDS insurance can loan up to five times more on the same capital. The CDS-insured CDO deals could then bypass international banking rules on capital. (Henry CK Liu, "Mark-to-Market vs. Mark-to-Model" http://www.henryckliu.com/page191.html )

The same rule applies to derivatives (CDS) as securitized instruments; neither is sufficiently capitalized because setting aside reserves impairs one’s ability to maximize profits. It’s all about the bottom line. The reason credit default swaps are so cheap, compared to conventional insurance, is that there’s no way of knowing whether the dealer has the ability to pay claims. It’s fraud, on a gigantic scale, which is why the financial system went into full-blown paralysis when Lehman Bros defaulted. No one knew whether trillions of dollars in counterparty contracts would be paid out or not. There are simply more claims on wealth than there is money in the system. Bogus mortgages and phony counterparty promises mean nothing. "Show me the money". The system is underwater, and it cannot be fixed by more of the Fed’s presto liquidity. Here’s what Gary Gorton says later in the same article:

"A banking panic means that the banking system is insolvent. The banking system cannot honor contractual demands; there are no private agents who can buy the amount of assets necessary to recapitalize the banking system, even if they knew the value of the assets, because of the sheer size of the banking system. When the banking system is insolvent, many markets stop functioning and this leads to very significant effects on the real economy…."

Indeed. The shadow banking system has collapsed, not because the market is "frozen" or because investors are in a state of panic after Lehman, but because derivatives and securitization have been exposed as a fraud propped up on insufficient capital. It’s snake oil sold by charlatans. That’s why European policymakers are resisting the Fed’s requests to create a facility similar to the TALF to start up securitization again. Here’s a revealing clip from the Wall Street Journal which explains what’s going on behind the scenes:

"Bankers are pushing European policy makers to consider a U.S.-style program to aid the region’s economy by reviving the moribund market for bundled consumer loans. Officials at the European Securitisation Forum, a trade group representing banks and other market participants, said Tuesday that central bankers should consider stepping in with a program similar to the U.S. Federal Reserve’s Term Asset-Backed Securities Loan Facility, or TALF, which provides loans to private investors who buy new securities tied to consumer loans…

After suffering heavy losses on securities stuffed with poorly made loans, investors are reluctant to wade back in, and Europe lacks big players like the Pacific Investment Management Co. in the U.S., whose buying can mobilize other investors….The market also faces uncertainty over how European regulators will change the rules of the game, in part by imposing tougher capital requirements on banks, the main buyers of securitized assets in Europe.

One European Commission proposal would dramatically hike the capital required of banks holding a securitized asset if the originator allowed its share of that asset to fall below a 5% threshold….

Paul Sharma of Britain’s Financial Services Authority said regulatory action is likely to shrink the investor base for ABS, in part by increasing the capital cushions banks will have to hold against ABS holdings in their trading books. He also argued that ABS were inappropriate for banks to hold as liquid assets, because they have proven difficult to sell in a market crisis.

"There is very much a query in the minds of regulators as to whether there is a significant future for securitization," said Mr. Sharma, though he added his own view was that the market did have a future role." ("In Europe, a U.S. Way To Fix ABS Market?" Neil Shah and Stephen Fidler, Wall Street Journal)

See? In Europe regulators still do their jobs and make sure that financial institutions have money before they create trillions of dollars in credit. They don’t stick with their heads in the sand while crooked bankers fleece the public. Bernanke’s job is to step in and put an end to the hanky-panky, not add to the problems by restoring a credit-generating regime that transferred hundreds of billions of dollars from hard-working people to fatcat banksters and Wall Street flim-flammers.

Mike Whitney is a frequent contributor to Global Research. Global Research Articles by Mike Whitney

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Hydrogen Cars: Fad or the Future?

Robert F. Service

Last month, Energy Secretary Steven Chu announced that the Department of Energy (DOE) was putting the brakes on research into automotive hydrogen fuel cells because it would take decades to convert to a hydrogen-car economy. But many scientists and energy experts believe Chu made the wrong call. No alternative-vehicle technology will make a major impact on carbon emissions, petroleum use, or anything else within the next 20 years, they say, because it takes longer than that for a new technology to displace what is already on the road. In the long run, they say only two technologies—hydrogen fuel cells and electric vehicles—are capable of getting the job done, and only one variation, plug-in hybrids, will be on the market anytime soon. But the uncertainties with both technologies make it shortsighted to abandon one.

Hydrogen Cars: Fad or the Future? — Service 324 (5932): 1257 — Science

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