Tuesday, October 21, 2008

Could the US election be stolen?

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With John McCain and Barack Obama already swapping accusations of widespread voter fraud, experts warn that a bitter and protracted fight could ensue if the race to the White House is decided by a narrow margin.

The legal battle over election rules has already made it all the way to the Supreme Court as Republicans fight to block potentially false registrations from being validated and Democrats struggle to prevent voter disenfranchisement.

Compounding the problem is the decentralized US electoral system, which hands often partisan local officials the power to make rules and maintain the voter registration rolls.

"I'm hoping it's not close," said Richard L. Hasen, a professor who specializes in election law at Loyola Law School in Los Angeles.

"I am certain there will be problems on election day."

An estimated nine million new voters have registered for the hotly contested November 4 election, and the Obama campaign says Democratic registrations are outpacing Republican ones by four to one.

The McCain campaign contends that an untold number of those registration forms are false and warns that illegally cast ballots could alter the results of the election and undermine the public's faith in democracy.

Republicans have launched a slew of lawsuits aimed at preventing false ballots from being cast, the most high-profile an attempt to challenge as many as 200,000 of more than 600,000 new registrations submitted in the battleground state of Ohio that was blocked by a Supreme Court ruling Friday.

They point to investigations into whether liberal-leaning community organization ACORN deliberately submitted false voter registrations as proof of "rampant" and widespread fraud which McCain said could be "destroying the fabric of democracy."

But the Obama campaign said this was just a "smokescreen" to divert attention from Republican "plotting" to suppress legitimate votes and to "sow confusion and harass voters and complicate the process for millions of Americans."

Voters whose registrations have been challenged or those who find their names have been removed from the rolls are often required to cast provisional ballots, which are not immediately counted in some jurisdictions and are often rejected due to technicalities.

Meanwhile, a 2007 study by the New York University School of Law concluded that "it is more likely that an individual will be struck by lightning than that he will impersonate another voter at the polls."

"For these problems to be really decisive they have to be within the margin of litigation, which is typically a few thousand votes," Hasen said in a recent interview.

The 2000 election took weeks to resolve as Democrat Al Gore fought Republican George W. Bush all the way to the Supreme Court after Bush won the state of Florida, and thus the election, with a margin of a few hundred votes.

Four years later, Democrat John Kerry conceded defeat despite allegations of widespread voter suppression in Ohio, which handed Bush his second term with a margin of nearly 119,000 votes.

In the meantime, electoral litigation has become part of the standard play book.

The number of lawsuits filed over elections has more than doubled from an average of 94 in the four years prior to the 2000 election to an average of 230 in the six years following, Hasen found in a study published in the Stanford Law Review.

Misinformation has also been used to discourage voters from showing up on election day.

Students in Virginia, Colorado and South Carolina were wrongfully told by voting officials that they could lose their scholarships and their parents would no longer be able to claim them on their income taxes if they registered to vote in their college towns.

The Michigan Department of Civil Rights launched an advertising campaign this week to combat misleading rumors - some started by local officials in mailings to voters - that people would be denied the right to vote if they lost their home to foreclosure, have a criminal record or do not have photo identification.

Such tactics are not new, said Laughlin McDonald, the director of the American Civil Liberties Union's voting rights project.

Despite strict constitutional and legal protections for the right to vote, "the history of the country has been one of flagrant vote denial," McDonald told AFP.

Many of tactics once used to keep blacks from voting in the south - poll taxes, literacy tests, violence and intimidation - have been eliminated.

But some have been adapted, including the practice of purging voting rolls of people likely to vote for the other party by challenging them en masse.

"There's more (attempts at voter suppression) that's been going on in the lead-up to this election than any I can remember," McDonald told AFP.

"The fact remains the people who have the power to make the rules are all too often willing to do so in ways that serve their partisan interests."

How the Banksters Made a Complete Killing off the Bailout

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By Pam Martens

In 1897, when 8-year old Virginia O’Hanlon posed her Santa Claus query to the New York Sun, she received a heart-warming editorial response reassuring her that "He exists as certainly as love and generosity and devotion exist."


Today, we hand our 8 year olds a $13 trillion national debt while our Congress hands Wall Street banksters the national purse without so much as a hearing to determine the cause of the debt collapse. Worse still, the money is doled out to the very same individuals who leveraged their institutions to casino status.


Americans are correctly outraged at the spectacle of U.S. crony capitalism crashing stock and bond markets around the globe while simultaneously watching the poster boys of crony capitalism on Monday, October 13, 2008 march up the granite steps of the United States Treasury building in their Armani shoes and heist a fresh $125 Billion of taxpayer dough in broad daylight.


The U.S. Treasury Secretary, Henry Paulson’s, $700 billion bailout plan to buy up distressed mortgage assets has spun off its own $250 billion subsidiary plan (skipping that pesky detail called taxation with representation) to inject $125 billion in equity capital into 9 of the biggest commercial and investment banks in the country. Another $125 billion may possibly go to smaller regional banks and thrifts, assuming they will sign on to the deal.


And what will taxpayers get for their investment in these financial firms whose stock prices are getting hammered as the public recoils in revulsion at what they have done to our financial system? The taxpayers, who were not invited to send their own legal representative to the negotiating table, will receive a paltry 5% dividend, exactly half of what Warren Buffett received for his recent investment in General Electric, a company that actually makes something real, like jet engines and light bulbs.


Now we learn from the U.S. Treasury web site that it has hired the law firm of Simpson, Thacher & Bartlett to represent our taxpayer interests going forward at a cost to us of $300,000 for six months work. But we’re not allowed to know their hourly wages; that information has been blacked out on the Treasury’s contract. Curiously, the Treasury has named in its contract the specific lawyers it wants to work for us. Two of those are Lee A. Meyerson and David Eisenberg. Mr. Meyerson has been a central player in facilitating the bank consolidations that have led to the present train wreck, including building JPMorgan Chase from the body parts of Chemical Bank, Chase Manhattan and Bank One.


Mr. Eisenberg has played a central role in the proliferation of the credit derivatives blowing up on the books of the Frankenbanks created by Mr. Meyerson. Here’s what the Simpson, Thacher & Bartlett web site says about its relationships and Mr. Eisenberg’s work:



"The Firm’s practice benefits from established relationships with all of the major investment banks. Mr. Eisenberg is responsible for creating the asset-backed practice at the firm and has represented clients involved in the structuring of the first asset-backed commercial paper program, the first public offering of credit card-backed securities by a bank and the first offering of asset-backed securities supported by dealer floor plan loansMr. Eisenberg represents JPMorgan Chase Bank, as issuer, in its ongoing program of public offerings of its credit card receivables backed notes. In addition Mr. Eisenberg represented JPMorgan Chase Bank in connection with the issuance of notes backed by commercial loans and in connection with its offerings of Leveraged Notes for Credit Exposure, a credit derivative product. Mr. Eisenberg has also represented underwriters, issuers and sponsors of modeled index catastrophe bonds. Mr. Eisenberg has represented sellers and buyers of credit protection in connection with synthetic securitizations of consumer loans, commercial loans and high yield bonds."


This is an unconscionable conflict of interest given that JPMorgan Chase is receiving $25 billion of taxpayer funds under this bailout and that the program is very likely to be buying the very toxic waste for which Mr. Eisenberg wrote legal opinions and assisted in proliferating.


What most Americans do not understand, because mainstream media rarely explains it, is the incestuous relationship between the U.S. Treasury and this small band of financial marauders who busted the entire financial system with insane levels of leveraged derivative bets.


The bulk of the $125 billion will be dispersed among Uncle Sam’s own brokers, or in street parlance, Primary Dealers. Primary dealers are those financial firms anointed by the Federal Reserve to participate in the Fed’s open market activities and are required to participate to a significant degree in buying up Treasury securities at every Treasury auction. In other words, without these firms, the U.S. Government would have no means of financing its own funding needs.


Treasury, therefore, has an obvious conflict of interest in keeping these firms alive, even when they are the walking dead. Here’s how much of the $125 Billion the Fed’s Primary Dealers will collect: Citigroup, $25 Billion; JPMorgan Chase & Co., $25 Billion; Bank of America and its soon to be acquired brokerage, Merrill Lynch, $25 Billion; Goldman Sachs, $10 Billion; Morgan Stanley, $10 Billion. In other words, of the first $125 billion outlay from the emergency bailout fund, 76% is going to shore up Uncle Sam’s brokers and $300,000 is going to retain one of Wall Street’s favorite law firms.


In 1988 there were 46 primary dealers. That number had shrunk to 30 by 1999. In June 2008 there were 20, in no small part as a result of the mergers facilitated by Simpson, Thacher & Bartlett. In rapid succession since July, three more have disappeared from bad bets: Countrywide Securities (shotgun marriage with Bank of America); Lehman Brothers, bankrupt; Bear, Stearns (shotgun marriage with J.P. Morgan Securities). That currently leaves 17 and that number will drop to 16 when Merrill Lynch is folded into Bank of America. (The rest of the 16 primary dealers that are not getting part of the $125 billion are foreign banks.)


In addition to the repeal of the depression era, investor protection legislation known as the Glass Steagall Act, the removal of credit default swaps from regulation by the Commodity Futures Modernization Act of 2000, various U.S. Supreme Court decisions upholding Wall Street’s ability to run its own private justice system shrouded in darkness, there was one more key regulatory change that greased the tracks of this train wreck. On January 22, 1992 the Federal Reserve announced that its New York region would "discontinue the ’dealer surveillance’ now exercised over Primary Dealers through the monitoring of specific Federal Reserve standards and through regular on-site inspection visits by Federal Reserve dealer surveillance staff."


In other words, as bank consolidation left the country with fewer and fewer Primary Dealers and more and more "too big to fail candidates," instead of beefing up surveillance, the Federal Reserve amazingly dropped inspections. Who was at the helm of the Federal Reserve when this nutty decision was made: the same man who lobbied for the repeal of the Glass Steagall Act that ushered in the merger of depositor banks with casino investment banks and brokerages; the same man who lobbied for the passage of the Commodity Futures Modernization Act of 2000 to allow for unregulated derivatives markets. The man, of course, is Alan Greenspan who served a breathtaking 19 years as Chairman of the Federal Reserve. That, by the way, is the approximate number I would assign to how many years it will take to repair the collapse of confidence engendered by his crony wealth transfer system created under the guise of free market capitalism.

Iceland's Economic Meltdown Is a Big Flashing Warning Sign

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By Toby Sanger

Iceland -- better known for its geothermal hot springs, abundant fish, all-night raves and eclectic musicians such as Björk and Sigur Rós -- has now become renowned for something else: It is the first catastrophic, and perhaps most unlikely, casualty of the 2008 economic and financial meltdown.


Iceland is now essentially bankrupt after the government took over its three major banks to prevent them from failing. It owes more than $60 billion overseas, about six times the value of its annual economic output. As a professor at London School of Economics said, "No Western country in peacetime has crashed so quickly and so badly."


What on earth happened to get Iceland and its banking sector into such a state?


It turns out that Iceland, despite its coalition governments and Nordic social values, became a poster child for neoconservative economic policies inspired by Milton Friedman during the past decade. Friedman himself visited Iceland in 1984 and participated in what was described as a "lively television debate" with leading Socialists. This inspired a generation of young conservatives who came to power through the Independence Party in 1991 and have run its government through different coalitions since then.


Friedman may be dead now, but the economic and financial collapse of 2008 is becoming a real-life battleground of his theories against those of the other giant of 20th century economics, John Maynard Keynes, and their respective followers. Will financial market bailouts put the economy back on track, or are more extensive reform and a more active role for the government needed?


Keynes’ analysis was complicated and nuanced. The work for which he’s best known, The General Theory of Employment, Interest, and Money, provided a theoretical basis for the economic reforms of the New Deal era -- investments in public works and deficit spending that helped countries recover from the Great Depression.


While Keynes did not dismiss the role of monetary policy in countering an economic downturn, some of his followers, notably recent 2008 Nobel economics prize winner Paul Krugman, in relation to Japan, have focused on the possibility of a "liquidity trap" that makes traditional monetary policies, such as cutting interest rates, ineffective.


Keynes’ theories, though often misapplied, provided the basis for most macroeconomic policies in the capitalist world from the 1930s until the 1970s when the oil-price shock and stagflation hit.


Friedman, in his Monetary History of the United States, argued that the Great Depression was primarily caused by negligence by monetary authorities, such as the U.S. Federal Reserve, who didn’t do enough to respond to an ordinary financial shock by expanding the money supply.


Friedman and his Chicago school of economics then very successfully spearheaded a reaction against Keynesianism, largely defining economic policy since the 1980s. The main policy prescriptions -- restricting the role of government, deregulation, privatization, cutting taxes, low inflation and the benefits of free markets -- were encapsulated in the "Washington consensus" and imposed with missionary zeal by IMF economists around the world.


While Friedman’s narrow form of money supply monetarism was quickly abandoned in the early 1980s, most governments have relied primarily on monetary instead of fiscal policy for stabilization of their economies over the past few decades. This turned Alan Greenspan, former head of the U.S. Federal Reserve and an advocate of Friedman’s policies, into the most important economic policy maker in the world. Although Greenspan was never elected, had no particular expertise in economics and was a disciple of the fringe ideology of libertarian Ayn Rand, he was able to use his considerable power to endorse tax cuts and deregulation. He is now widely considered to share the blame for creating the conditions that resulted in the current economic collapse.


Greenspan’s successor as chair of the Federal Reserve, Ben Bernanke, is also a follower of Friedman, but he is an accomplished economist. Coincidentally enough, one of his areas of expertise was in the economics of the Great Depression; he once boldly stated that the Federal Reserve was responsible for causing the Great Depression and making banking panics during it "much more severe and widespread."


Bernanke is now one of the people in charge of what is probably the most expensive experiment in human history: trying to avert another Depression, using economic policies inspired by Friedman. The cost of this to the U.S. Treasury so far has already reached well over $1 trillion and continues to rise.


So how did the much smaller but perhaps more ambitious experiment with Friedmanite economic policies fare in tiny Iceland, one of the most physically isolated countries in the world with a population of only 320,000?


Under the leadership of Prime Minister David Oddsson and explicitly inspired by Friedman, Iceland’s neoconservative young Turks implemented a radical (but now familiar) program of privatization, tax cuts, reductions in spending and deficits, inflation targeting, central bank independence, free trade and exchange rate flexibility. Corporate taxes were cut from 50 percent down to 18 percent. Privatization and deregulation were driven directly through the prime minister’s office, and the major banks were privatized.


Economic missions and reports on Iceland issued by the influential International Monetary Fund (IMF) and the Organization for Economic Co-operation and Development (OECD) largely praised and encouraged these reforms, often disregarding the rising risks for its financial sector until recently.


It wasn’t as if everyone was unaware of the growing dangers of these policies. In 2001, Joseph Stiglitz, recipient of the Nobel prize in economics and one of the leading lights of the "New Keynesian" school of economics, wrote a remarkably prescient paper for the Central Bank of Iceland. In the paper, he raised alarm about a vulnerable, small, open economy such as Iceland suffering from a severe financial and economic crisis from such policies. In the absence of reforms in the "global financial architecture," Stiglitz outlined a set of regulatory and tax measures that Iceland should implement "both to reduce the likelihood of a crisis and to help manage the economy through a crisis."


Stiglitz’s paper (PDF) has invaluable advice that should have been considered by any nation -- and especially Iceland -- but it appears these recommendations were ignored. The right-wing reformers certainly didn’t change their course. Why would they? Life was good and getting better in the small island state, with showrooms full of fancy cars and booming real estate, business and financial industries.


At first, the policies appeared to be very successful. The economy grew at a strong pace, rising until Iceland achieved one of the highest per capita GDPs in the world. In 2007 it also topped the score for the United Nation’s Human Development Index.


Iceland rocketed to the top 10 in the indexes of economic freedom designed by the Fraser Institute and the Heritage Foundation. It was lauded by the conservative Cato Institute for its flat taxes, privatization and economic freedoms. The institute also criticized Naomi Klein for not mentioning Iceland (along with Ireland, Estonia and Australia) as an example of success in her book about the rise of disaster capitalism, The Shock Doctrine.


Icelandic banks and businesses, with the support of their government, expanded aggressively overseas, particularly into the U.K. and the Netherlands. The banking industry and private businesses flourished and created a number of new billionaires on the island.


Then it all came crashing down.


Inflation and short-term interest rates escalated to 14 percent, and Iceland’s currency lost half its value. Now Iceland has an external debt equivalent to about $200,000 per person with virtually no prospect of repaying it.


Iceland’s economic collapse wasn’t caused by the subprime crisis or by the Wall Street shenanigans in the biggest economic powerhouse in the world. Instead, it was caused by the same Friedman-inspired economic policies being independently applied in one of the smallest countries in the world.


Back in the United States, it appears that Washington’s experiments with Friedman-inspired economic policies are not meeting with much success. Each action taken by the U.S. Treasury and the Federal Reserve until mid-October was met with a further decline in stock prices.


Stock markets didn’t start to recover until European nations moved to effectively nationalize their major banks. This move was quickly followed by Washington, although it is far outside of what Friedman advocated. It is also diametrically opposed to a number of the 10 economic policy commandments of the old "Washington Consensus." While stock markets may recover, or continue more along their roller-coaster ride, we have yet to see how far down these Friedmanite free market policies will take the real economy of people’s jobs, incomes and living standards.


What is somewhat incredible is the apparent lack of remorse or self-reflection and doubt being expressed by the ideologues who put these policies in place. Amazingly, many neocons continue to argue that the financial collapse was caused by regulations that were too strong, or by a confluence of unlikely events, including a rise in "leftist attitudes."


There seems to be a belief among many that a financial market bailout will soon relieve the credit crunch caused by the subprime fiasco and then we can go back to business as usual. We don’t need to look too far back in time or too far abroad to see how misguided these views are. Clearly it is time to broaden our horizons, learn from Keynes and successful New Deal economic policies, and consider other imaginative solutions to our economic crisis.

Housing crisis accelerates blight in Detroit neighborhoods

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By Debra Watson and Anne Moore

Dire conditions in a once prosperous East Side Detroit neighborhood underscore the impact the wave of home foreclosures is having on working people across the United States. While the effect of the mortgage crisis on the Wall Street banks is headline news, the media rarely inquires into the social consequences of the foreclosure epidemic.


Some three-quarters of a million people have lost their homes across the US so far this year and foreclosure filings are up 82.6 percent from a year ago, according to the web site ForeclosureS.com. The same report notes that 107,500 homes were lost in September alone.


The city of Detroit has the highest repossession rate for a major city in the US, with real-estate owned (REO) homes—that is, homes repossessed by banks or mortgage holders—at 3.7 percent in 2007. Cleveland, Ohio came in a close second with a 3 percent REO rate.


The social reality behind these figures is illustrated by a recent sale of a foreclosed home in Detroit. In September, a modest two-story single-family home on Detroit’s east side near the Detroit City Airport sold for one dollar. Less than two years ago, in November 2006, the same home sold for $65,000.


While abandoned homes are hardly a new phenomenon in Detroit, the story of this one house is a testament to the speed, scope, and depth of the foreclosure crisis. The one-dollar sale of the Detroit house even made the Sunday Times of London, which recently ran a piece titled “America’s Darkest Fear: to end up like Detroit.”


The WSWS interviewed Constance and her stepdaughter Toshiana, who live near Detroit City Airport. As Toshiana explained: “I actually am surprised that you came and talked to us at all. When the news came they all were taking pictures of the place up the street that sold for a dollar.



“We finally came out to see what it was about, why the news trucks were here. It took three days before they finally came to us and asked the people on the block what they thought. I don’t think they really care about people like us and what we think.”


Prior to the collapse of auto manufacturing in Detroit, the neighborhood had been relatively prosperous and home to thousands of autoworkers. Now, foreclosed properties are lowering home values and causing urban blight throughout the area. Constance rents a house on the same street as the foreclosed home and grew up nearby.


“I heard about the house up the street selling for one dollar,” Constance told the WSWS. “They had just fixed it up real nice a year and half ago, new siding, things like that. It looked beautiful. Now it’s a mess.”


Last summer the bank foreclosed on the home after the owners fell behind on their mortgage. “They had some renters come in and then it was empty. It didn’t take long for them to come and strip the place clean,” Toshiana said.


“When I was a baby my father was at an auto plant,” Toshiana added. “He had a brother working at the plant also. I had another uncle who worked at Dodge Main in Hamtramck. They all came up from the South in the early 1970s. There are not many people around here at the plants anymore. My mother says she is leaving Michigan and moving back to Louisiana as soon as she retires.


The term “toxic mortgage” only begins to describe the effect of the housing crisis on working class communities across the US. The family that falls behind on mortgage payments or rent is out on the street. Neighborhoods become distressed. Abandoned houses catch fire and burn—a common phenomenon in Detroit—producing a noxious odor that permeates whole neighborhoods for months.


Toshiana noted the absence of the most basic services in the city of Detroit. “We don’t even have a grocery store anymore.”


She continued, “You actually have to go back to the early ’90s to see when all this started to happen. I could tell you a couple blocks I lived on in Detroit that I watched gradually torn down. They were really nice when I was there, but what happened? One place, I came back five years after I had moved, just to visit. I could not believe what had happened. The place was a mess; the houses were in terrible shape.


“Look around here. All you see are empty lots. Realtors may call these an investment opportunity, but who wants to live next to an empty lot? Scrappers make money off tearing the houses up. I really don’t understand why they even give out junking licenses, when they know this is going on in the neighborhoods. The decline is very ugly.”


According to a report in the August 13 Detroit News, there are now several properties listed for one dollar in Detroit, including a single family home and a duplex. In some cases subprime lenders, “find themselves the owners of whole neighborhoods of vacant, deteriorating homes.”



“My 14-year-old son could buy a block of Detroit property,” said a representative of the realty management firm that sold the one-dollar house.


Foreclosures are rising in several metropolitan areas across the state of Michigan. According to figures released by RealtyTrac, the state as a whole ranked fourth nationwide in the total number of foreclosure filings in August, with 13,605. Foreclosure filings rose 17 percent over July levels. Michigan ranked fifth nationwide in foreclosure filings, with one for every 332 households. That compares with a national rate of one filing for every 416 households.


A 2006 Association of Community Organizations for Reform Now (ACORN) report, “The Impending Rate Shock,” singled out Detroit as one of the cities likely to experience a housing disaster. In 2005 more than half the home purchase loans made in Detroit were high-cost loans, “making the city particularly vulnerable to rate shock,” the report noted. There were 23 metropolitan areas in the US where high-cost loans represent at least one of every three loans made to homebuyers.