Organized Crime and Government

I’ve been thinking a lot about the economic crisis. It has damaged the security of our Country and has hurt so many innocent people. The people on Wall St. and their conspirators in government have caused this country more damage than Al Qaeda. I agree with President Obama that we have to focus on solving the crisis. But solving the crisis means identifying what criminals did what to cause the damage. People are outraged that the same people at AIG that caused the problem got bonuses. What about the outrage that the same people in government who conspired with them are now in charge of solving the problem?

The worst economic crisis since the “Great Depression” was primarily the result of three government actions. First, repeal of the Glass-Steagall Act and hundreds of post Depression regulations that then allowed Wall St. investment firms to compete with Banks. Second, the derivatives market was exempted from regulatory control. This allowed Wall St. to create derivatives and then criminally over-leveraged them to cause the whole house of cards to collapse. Third, Wall St. was allowed to carry off-balance sheet accounting and to use “self-policing” to regulate that market. This allowed Wall St. to hide overleveraged phony derivatives from regulators, if they ever decided to look.

It is certain that the present economic crisis is due primarily to the deregulation of Wall St. and the failure to regulate derivatives. It is just as certain that some people on Wall St. are making a lot of money with the tax-payer bailouts. So if we follow the old adage “follow the money”, what do we get? Why did some Wall St. firms get bailed out and not others? Why was AIG allowed to keep bonuses and launder money to Goldman-Sachs, Citigroup and UBS? The map of key players reads like an old Mafia organization map, tracing connections between Wall St. and Government. This is the organization that stole our savings and is stealing our tax dollars now:

Robert Rubin (AKA “The Accountant”): Former executive with Goldman-Sachs and 70th Secretary of the Treasury. He spearheaded the Clinton Administration effort to repeal the Glass-Steagall Act and exempt derivatives. He now works for Citigroup.

Larry Summers (AKA “The Apprentice”): Currently the Chief Economic Advisor to the President, former 71st Secretary of the Treasury and former assistant to Robert Rubin. He assured that derivatives would be exempted from regulations and was a big proponent of allowing Wall St. to “self-regulate”.

Henry Paulson (AKA “The Don”): the power behind the organization. He was the former CEO of Goldman-Sachs and 74th Secretary of Treasury. He organized and coordinated the government response to the Wall St. bailouts with Goldman-Sachs. He made the decisions on who got money and who didn’t. For example, when Lehman Brothers and AIG requested bailouts, Paulson had a “sit down” with current Sachs CEO, Lloyd Blankfein in late Sept. 2008 and decided to let Sachs competitor Lehman Brothers fail, but bail out AIG. Who was AIG’s biggest trading partner? Goldman-Sachs. Too bad you Lehman Brothers, Bear-Stearns investors backed the wrong horse. Maybe you should pay more attention to who is in government than your portfolio. Paulson runs the organization now through his positions on the Boards of TARP and FSOB.

Tim Geithner (AKA “Babyface”): Former assistant to Robert Rubin and Larry Summers and now the 75th Secretary of Treasury. He helped Rubin and Summers destroy the regulation of Wall St. and exemption of derivatives. Recommended by “the Don” Paulson, he is now in charge of making sure the organization takes care of it’s own. Just to be sure, his Chief of Staff is Mark Patterson, formerly of Goldman-Sachs. Patterson strong armed Sen. Dodd into taking out the restrictions on bonuses to AIG and allowed AIG to pay-off lenders at full price such as Goldman-Sachs

Ben Bernanke (AKA “The Banker”): Chair of the Federal Reserve. He withdrew the money and put it into TARP to pay off, sorry, “bail out” Wall St. firms such as Sachs and Citigroup at the recommendation of Paulson. He appointed Neel Kahkari, formerly V.P. of (you guessed it) Goldman-Sachs to head TARP. He negotiated the deal to save AIG and allowed all initial TARP money to be given to Wall St. without conditions.

Sen. Phil Gramm (AKA “The Assassin”): Along with Robert Rubin and Larry Summers, he spearheaded the Senate legislation to kill Glass-Steagall, regulations on trade and accounting and exempt derivatives. While Chairman of the Senate Banking Committee he exacted over 3 billion dollars of contributions to allies in the Government from Wall St. He was in a position to take over as “Don” but failed in the 2008 election. He has since become a lobbyist for… UBS, one of the firms AIG laundered TARP money to pay off.

So can we trust the same men in government who caused the economic crisis (by enabling Wall St.’s thefts of our future) to make sure our money now goes to solve the problem? Or can we expect that they will enrich the same people who stole our money with our tax dollars? Is it any wonder why Goldman-Sachs is now “whole” and has fewer competitors? Is it any wonder why we can’t account for hundreds of billions of tax dollars already given to Goldman-Sachs, Citigroup and AIG?

Is it time to realize that we are being robbed by a conspiracy that reaches from Goldman-Sachs to the Obama Administration to AIG and back again when the next round of pay-offs, I mean bail-outs occur.

Bad Cops in Connecticut, on Video

It never ceases to amaze me how the cops keep beating the crap out of people while the video recorders in their police cruisers capture the beatings on tape. This time it happened in Connecticut. Here’s the video if you want to watch:

I like how practically the whole thing is “bleeped” out because the cops are cussing up a shit storm as they are pounding on this poor guy Alexis Hernandez (of course he is Latino). And of course, the police department refused to turn over the video until after they were sued under the Freedom of Information Act.

I watch videos like this all the time because I often work on police beating cases. You’d think I’d get used to seeing this stuff by now, but I don’t. I still get angry and outraged by every one of these tapes. And these maniacs are carrying guns. Scary! The cowboy cop, Brian Lawlor, in the video was fired and later charged with third degree assault for which he received nothing a one year suspended sentence.

Amusingly, after the video was released this week, the cowboy cop’s lawyer said that the video justified the beating because he thought the guy was reaching for a gun. Yeah right. They always say they thought the guy was reaching for a gun. Hm, when I watch this video I’m trying to figure out at what point cowboy thought the guy was reaching for a gun? Maybe it was when there were THREE cops bending the guy over his car and beating the shit out of him. Yeah, that must be when the cowboys thought he was reaching for a gun. Right, I must have missed that. Keep the cameras rolling!

A Lesson in Double Jeopardy

The Fifth Amendment to our Constitution provides that “nor shall any person be subject for the same offence to be twice put in jeopardy of life or limb” This language is commonly referred to as the Double Jeopardy Clause. Most people understand this language to mean that the government cannot try to “get you twice” for the same crime. That is a pretty good summary of the broad concept, but there are some finer points to how it works.

Let’s pretend that the government charges you with a crime. You get a lawyer and go to trial during which the prosecutors present evidence to the jury. After the government concludes its case, the defense counsel usually files a motion for a directed verdict. This motion basically asks the court to throw out the charges and enter an acquittal because the prosecutors failed to present sufficient evidence of a crime. This is a very important motion that acts as a check and balance system on the executive branch (i.e., police, prosecutors, district attorneys).

You see, the government has the power to charge a person with a crime, but if they fail to present any evidence of the crime, the judge is supposed to “check” the executive branch by throwing out the case. Without this check and balance system, prosecutors would be allowed to charge you with a crime knowing they didn’t have any evidence and convince a jury to convict you because they didn’t like your hair. That is not the way it is supposed to work. The motion for directed verdict is a powerful check on the prosecutor to prevent him from convicting a person of a crime without any evidence.

In practice, defense lawyers almost always file motions for directed verdict but they are rarely granted. Well yesterday a judge in Arizona granted a defendant’s motion for directed verdict and it seems to have caused quite a stir.

Apparently, Arizona Attorney General Terry Goddard tried to charge local gun dealers who he accused of arming Mexican drug cartels. It seems that the gun dealers made legitimate sales of weapons to individuals who later shipped the weapons to Mexican drug cartels. Because the gun dealer’s sales were legitimate under state law, the Attorney General basically had no case, but it didn’t stop him from charging the crime. This is a text book example of when a judge should grant a directed verdict, and that is exactly what Judge Robert Gottsfield of Maricopa County Superior Court did. Judge Gottsfield threw out the case, as he should have, because the prosecutors didn’t have enough evidence to convict but instead wanted to bend and twist the law to make up a different crime.

By no means am I suggesting that gun dealers should be arming drug cartels, but prosecutors should not be allowed to overreach and “make up the law” to promote their own self righteous agendas. If they want the laws changed to make it easier for them to charge crimes, they need to go to their state legislature to do it. But they should not expect the judges to give them a hand in their endeavors.

Of course the Attorney General is mad as hell because the judge actually enforced the constitution and threw out the case. In an interview reported in the New York Times, Goddard said “It’s not over by any means” and went on to say “We are trying to make sense of it.”

I’m sorry to tell you Mr. Goddard, but it is indeed over. Let me break this down for you. The Double Jeopardy Clause doesn’t allow you to continue your crusade once the Judge granted the motion for directed verdict. The grant of a motion for directed verdict is the same as an acquittal. Once there is an acquittal, your case is over. You get no appeal, even if the Judge’s reasoning underlying his ruling is wrong so says the United States Supreme Court.

You may want to take a look at the Supreme Court’s decision in Smalis v. Pennsylvania, 476 U.S. 140 (1986) in which the highest court of our land ruled that if the trial judge grants a motion for directed verdict for lack of evidence, there can be no further proceedings or appeal by the government. To be more specific, the Supreme Court held that:

The Double Jeopardy Clause bars a postacquittal appeal by the prosecution not only when it might result in a second trial, but also if reversal would translate into “further proceedings of some sort”

In State of Arizona v. Millanes, 180 Ariz. 418 (1994), the Arizona Court of Appeals has already followed the Supreme Court’s decision in Smalis.

So what does this all mean? In short, its over. Thank God for our constitutional system of checks and balances, and even more so for judges like Robert Gottsfield who are willing to “check” prosecutors for trying to skirt our constitutional rights.

Obama’s First Judicial Nominee to the Federal Appeals Court

Like many other court watchers and lawyers, I’ve been waiting to see who Obama would nominate to the federal bench. Well the waiting is now over. This week Obama made his first judicial nomination to the federal court of appeals for the Seventh Circuit (which covers federal appeals from Indiana, Wisconsin, and Illinois).

Obama picked a federal trial court judge named David Hamilton, a 15 year trial judge appointed to the federal bench in Indiana by President Clinton. Both the Democrat and Republican Senators from Indiana support Hamilton’s appointment to the Seventh Circuit, but some conservative groups have already expressed their dislike for Hamilton because he believes in the constitution formerly represented the ACLU.

It is interesting how certain Republicans and conservative groups are already whining about Obama’s first appointment and calling for more “bipartisanship” in judicial appointments. You know, the kind of bipartisanship that Bush completely ignored when he stacked the federal courts full of conservative idealogues (please don’t ask me for a list of their names– although many of us who practice in federal court know them well).

It is unfortunate that most people do not know what happens in the federal courts. They hear only about big-ticket issues like abortion, gun control, and gay rights. But what about the thousands of civil rights lawsuits against corrupt police officers and other corrupt law enforcement personnel? Many of those cases go unnoticed. In those cases is where the idealogues control the federal courts.

Washington Post Staff Writer Jeffrey Smith recently wrote an expose about Bush’s picks to the federal courts and how his judges have locked up (pun intended) the federal courts of appeals to follow their philosophies. Smith is correct when he writes that:

Although the impact of Bush’s judicial appointments is most often noticed at the Supreme Court, it has played out much more frequently and more importantly here and in the nation’s 12 other appellate courts, where his appointees and their liberal counterparts are waging often-bitter ideological battles. After Bush’s eight years in office, Republican-appointed majorities firmly control the outcomes in 10 of these courts, compared with seven after President Bill Clinton’s tenure. They also now share equal representation with Democratic appointees on two additional courts.

Although exceptions exist, of course, independent legal scholars say Bush’s picks in particular have been more likely than Democratic appointees to uphold the positions of police and prosecutors, and less likely to alter verdicts because of procedural and legal mistakes in handling defendants.

So now that Bush has stacked the federal courts with his judicial picks naturally conservative groups and GOP Senators want Obama to play partisan with his judicial nominees. In any event, Obama’s first nominee, David Hamilton, seems to enjoy bipartisan support from his home state senators and should be confirmed.

Leverage

Don’t let them fool you. There is a way to stop the economic terrorism of AIG and their latest act of outrage: giving multi-million dollar bonuses to the same people who ran the division of AIG that caused the economic crisis in the first place. AIG FORCED us to bail them out with over $170 billion dollars of tax money (our money) in order to save the financial markets. The same people who made a decision to put not only their own company at risk but hundreds of other financial institutions, are now going to get over $165 million dollars in bonuses for making the worst economic decisions in corporate history. It is outrageous, but it is certainly NOT unstoppable.

The problem with the Obama administration is that the people he has solving the economic crisis on Wall St. are FROM Wall St. – they are part of the club. Geinthner, Summers, Bernanke, Romer, Rubin – they all say they are “outraged”, but a contract is a contract and there is nothing we can do. First of all, they are all current or former members of the same club. They all had their time of doing deals, having lunch and playing golf with the same AIG people. I don’t trust any of them in terms of holding their buddies accountable. Sure, the Obama economic team wants to solve the problem, but they don’t seem interested at all in holding the people who nearly destroyed our economy accountable. What they did to our economy with their greed has done far more damage to the security of our Country than anything Al Qaeda has done.

A contract is a contract, but contracts can be re-negotiated, especially when there is a strong incentive. The GOP has no problems at all forcing the hard working auto workers to renegotiate their contract under a threat of mass layoffs. Why is such a threat made to the UAW but not thieving AIG executives? After all, a contract is just a contract, isn’t it?

Here’s incentive for the Wall St. terrorists: criminal prosecutions. What the people at AIG did was deliberately hidden from regulators and stockholders. Even if derivatives were exempted from trade regulations (by an amendment pushed by the almost Treasury Secretary Phil Gramm), they were not exempted from tax laws and other legal statutes that could apply if some lawyer with half a brain at the DOJ researched it. That’s the leverage we have as the people. We need to force the Justice Department to start criminal investigations of these white-collar criminals and if they want to re-negotiate tax funded bonuses for shorter prison terms then they can have their lawyers call our lawyers.

Lets’ see how much laughing the Wall St. terrorists do when they start being held accountable for their crimes instead of being paid for them – crimes which are long overdue to be prosecuted.

Banksters and Broke-sters

Throughout history there have been certain occupations and ethnic groups that seem to be ready-made as scapegoats. Sometimes status and ethnicity are combined, for example, ”Jewish Bankers” or “welfare cheats” (i.e. African-Americans). As our economy continues to deteriorate we can expect that old scapegoats will be dusted off and used again. Never mind that the real welfare cheats are the banksters and broke-sters who took our money, are taking our money and will be taking our money. Doesn’t it make you just a little bit angry to know that your tax dollars are going to bail out the same bankers who have been refusing to lower your mortgage interest rate so you can save your home? Now we are forced to save their businesses.

Scapegoats are meant to take the attention away from the real culprits. It would be easy to lump all banksters and broke-sters together because the abuse in the financial industries seems to be widespread. I am sure there are “good guys” out there, but I am not about to take up a lantern and wander the streets at night looking for them. What those people have done may not be illegal, but it sure is immoral. Bankers and brokers justify their immorality by saying there was no illegality. They blame the victims – homeowners, especially “poor people” (another popular scapegoat) who took the money offered to them to realize the American dream.

Bankers and brokers are no different from me or you insofar as we are all guilty of greed sometimes. We all want more than we need sometimes. The difference between us and them is that they have power. We would be put in jail immediately if we robbed a liquor store of a few hundred dollars. But men like Madoff can rob people of billions and stay comfortable in their $7 million Manhattan penthouse (making fur with filthy lucre).

Bankers are fighting tooth and nail to prevent bankruptcy judges from being able to reduce mortgage principle when they could have reduced the rates voluntarily and helped people avoid bankruptcy. They just don’t want to reduce rates because it might cost them a few dollars. They wouldn’t help a family keep their home even if foreclosure costs the banks far more than lowering the interest rate. That kind of power should not be in the hands of people who care for nothing more than their own treasure and feel that they are beyond accountability.

You should e-mail or write your representatives in the Congress and tell them that we want the power to negotiate mortgages foreclures out of the hands of the banksters we are bailing out.

Over the Cliff?

In the world of investors, Warren Buffet is called the “Oracle of Omaha” because he is the most successful investor over the last 30 years. He has seen markets come and go, recessions come and go, bubbles come and go. He was Mr. “Steady as you go”. He also had credibility in my mind because he was an advisor to President Obama and a constant critic of the Bush economic policy. So when Warren Buffet said this weekend that the economy has fallen over a cliff it caught my attention.

Up to now, I believed that the economic problems we have could be worse. But when the voice of reason in the market says we are over the cliff then it can’t be any worse. Before I heard Buffet, I have to confess, I couldn’t separate the politics from the economics. I thought we had the luxury of being able to take the time to remind everyone that it was the unrestrained supply-side economics of Reagan-Bushx2 that got us here and it was time to hold the GOP accountable. I thought we had the luxury of thinking that Krugman was engaging in hyperbole when he said the stimulus spending was too little, too late and we could pull back from disaster. Who has time for politics or denial anymore? OK – Congress.

Sooner or later the pain on Main Street is going to transcend politics and we will have to pull together and figure this out. This is not about fear (although we should be afraid) but more about saving the Country –and it is time to start talking like that. Any student of history knows what can happen in times like this (see “World, 1929-1939”).

What Does It Mean for Obama to Fail?

When Rush Limbaugh says he wants President Obama to fail, what does it mean? If the President fails to accomplish his goals then it means:

1. The collapse of the US economy and full scale depression with unemployment exceeding 25%, and millions of Americans losing their life savings and their homes.
2. The social safety net for Americans will disappear: no unemployment insurance, no Medicare and the end of guaranteed Social Security benefits.
3. The end of the US auto industry and what is left of our manufacturing capacity, the end of unions. The end of living wages – most American workers will be paid third world wages.
4. Increasing dependence on foreign oil with higher fuel prices for every American.
5. Less access to or no medical treatment at all for most Americans who will have no insurance.
6. Most Americans will not be able to afford a college education and the Public School System will be underfunded and even less effective. Most Americans will get their High School diploma from a private school or not at all.
7. Taxes will be increased on most Americans to expand the welfare system for multi-national corporations.
8. 99% of all wealth will be redistributed to less than 1% of the richest Americans.
9. The government’s control over our lives will increase: they will have the right to spy on every American without a warrant, arrest and detain any American without a court hearing, and any access to the Courts to sue a corporation for damages will end.

That is what Limbaugh Conservatives mean when they say they want President Obama to fail. That is the Conservative agenda for America. Conservatives hate what America stands for.

CPAC

The Conservative Political Action Committee held its conference over the weekend and it was interesting to listen to some of the speeches which included Rush Limbaugh and a teenager who authored a book explaining the principles of Conservatism. I think that Limbaugh Conservatism is markedly different from the Conservatism of Buckley era. The Limbaugh Conservatism is decidedly NOT libertarian and advocates for restricting individual liberties based on religious, not political, principles. Thus in terms of social policy, the Limbaugh Conservatives are a marked disconnect from the libertarian, or at least tolerant, tradition of the Buckley era. The same disconnect appears with regard to foreign policy. American Conservatism historically tended to be isolationist in contrast to the activism of the neo-cons. Now that the neo-cons have been so thoroughly repudiated by reality, it will be interesting to see what direction their foreign policy will take. Speaking of reality, what do we make of their economic policies now that their cornerstone policy of an unregulated free market has precipitated a second depression? Limbaugh Conservatism produces interesting sound bites, but it lacks coherence and the reality of how miserably they have failed over the last 8 years makes it obvious why the intellectual backbone of their movement are novel writing teenagers (or Bobby Jindal).

History (Revisited)

Oh, to be a high school history teacher today… with the endless GOP philippic about “taxes and income redistribution and socialism” ratcheting up it would be fun to send home children to educate their parents. The fiscal “geniuses” of the right wing claim that raising taxes to increase Federal spending will kill any chance of economic recovery. Okay class, what does history teach us about the association of taxes with the economic crisis?

In early 1920s, the highest tax rate was 77%. In 1924, Treasury Secretary Mellon advocated that tax rates should be reduced to encourage investment and job growth. The tax rate was gradually lowered to 25% in 1928. What happened in 1928? The Great Depression started. Reducing the tax rate caused wealth to become consolidated to an increasingly smaller percentage of the population and job growth rate remained stagnant.

President Roosevelt greatly increased Federal spending and raised the tax rates on the richest Americans. The highest tax rate during the Roosevelt Administration? 99%. The result? Job growth every year (except one year when he decided to cut back on Federal stimulus spending), the end of the Depression and the start of the greatest economic boom in the world’s history. We not only rebuilt the Country, we rebuilt Europe.

In 1993 President Clinton inherited the Reagan-Bush (H.W.) recession. The Clinton tax increase in 1993 raised the tax rate on the upper 10% of incomes from 31% to 39.6%. What happened? The longest period of economic growth since WWII and the first budget surplus in nearly 100 years.

In 2003, the Bush tax cut was followed by flat rates of job growth, record budget deficits and the current financial crisis. Reducing the tax rate caused wealth to become consolidated in an increasingly smaller percentage of the population, and job growth rate remained level (see 1928).

So, what is the historic association of raising taxes on the wealthiest Americans and the economy? Job growth and prosperity. What is the historic association of lowering tax rates on the wealthiest Americans and the economy? Reducing the tax rate caused wealth to become consolidated to an increasingly smaller percentage of the population and job growth to remain level (see 1928 and 2008).