Wall Street's Biggest Heist Yet? How the High Wizards of Finance Gutted Our Schools and Cities

By Pam Martens, AlterNet

http://www.alternet.org/story/156352/wall_street%27s_biggest_heist_yet_how_the_high_wizards_of_finance_gutted_our_schools_and_cities

Wall Street banks have hollowed out our communities with fraudulently sold mortgages and illegal foreclosures and settled the crimes for pennies on the dollar.  They’ve set back property records to the early 1900s, skipping the recording of deeds in county registry offices and using their own front called MERS.  

They lobbied to kill fixed pension plans and then shaved a decade of growth off our 401(K)s with exorbitant fees, rigged research and trading for the house.

When much of Wall Street collapsed in 2008 as a direct result of their corrupt business model, their pals in Washington used the public purse to resuscitate the same corrupt financial model – allowing even greater depositor concentration at JPMorgan and Bank of America through acquisitions of crippled firms.

And now, Wall Street may get away with the biggest heist of the public purse in the history of the world.  

You know it’s an unprecedented crime when the conservative Economist magazine sums up the situation with a one word headline: “Banksters.”

It has been widely reported that Libor, the interest rate benchmark that was rigged by a banking cartel, impacted $10 trillion in consumer loans.  Libor stands for London Interbank Offered Rate and is supposed to be a reliable reflection of the rate at which banks are lending to each other.  Based on the average of that rate, after highs and lows are discarded, the Libor index is used as a  key index for setting loan rates around the world, including adjustable rate mortgages, credit card payments and student loans here in the U.S.

But what’s missing from the debate are the most diabolical parts of the scam: how a rigged Libor rate was used to defraud municipalities across America, inflate bank stock prices, and potentially rig futures markets around the world.  All while the top U.S. bank regulator dealt with the problem by fiddling with a memo to the Bank of England.

Libor is also one of the leading interest rate benchmarks used to create payment terms on interest rate swaps.  Wall Street has convinced Congress that it needs those derivatives to hedge its balance sheet. But look at these statistics. According to the Office of the Comptroller of the Currency, as of March 31, 2012, U.S. banks held $183.7 trillion in interest rate contracts but just four firms represent 93% of total derivative holdings: JPMorgan Chase, Citibank, Bank of America and Goldman Sachs.

As of March 31, 2012, there were 7,307 FDIC insured banks in the U.S. according to the FDIC.   All of those banks, including the four above, have a total of $13.4 trillion in assets. Why would four banks need to hedge to the tune of 13 times all assets held in all 7,307 banks in the U.S.?

The answer is that most swaps are not being used as a hedge.  They are being used as a money-making racket for Wall Street.

The Libor rate was used to manipulate, not just tens of trillions of consumer loans, buthundreds of trillions in interest rate contracts (swaps) with municipalities across America and around the globe.  (Milan prosecutors have charged JPMorgan, Deutsche Bank, UBS and Depfa Bank with derivatives fraud and earning $128 million in hidden fees.)

Rigging Libor also inflated the value of the trash that Wall Street was parking in 2008 and 2009 at the Federal Reserve Bank of New York to extract trillions in cash at near zero interest-rate loans from the public purse. When rates rise, bond prices decline.  When rates decline, bond prices rise.  The Federal Reserve made loans to Wall Street based on a percentage of the face value of their bonds and mortgage backed securities that they presented for collateral. By pushing down interest rates, the banks were getting a lift out of their collateral, allowing them to borrow more.

The banks that cheated on Libor were also perpetrating a public fraud in terms of how the market perceived their risk.  The Libor rate they each reported every morning to compile the index was based on the rate they would pay to borrow from other banks, thus the name London Interbank Offered Rate or Libor.  So, for example, even though Citibank’s credit default swap prices were rising dramatically during the 2008 crisis, suggesting it was in trouble, it was reporting low borrowing costs to the Libor index.

Because interest rates impact the price movement of stocks, the rigged lowering of the Libor rate put a false prop under the stock market as well as inflated individual bank stocks.  There is also a  very strong suggestion that there was insider trading on futures or swaps markets based on the spread between the one month and three month Libor rates. One trader’s email to the Libor submitter reads: “We need a 4.17 fix in 1m (low fix) We need a 4.41 fix in 3m (high fix).” 

In simple terms, Wall Street and its colleagues in the global banking cartel have left us clueless as a nation about the validity of our markets, how much hidden debt liability our local and state governments really have, and where the stock market would actually be if interest rates had not been rigged.

Let’s explore the almost incomprehensible rip off of our now struggling communities. Here’s how the swap deals typically worked, although there were Byzantine variations called constant maturity swaps (CMS), swaptions, and snowballs.  These complex machinations pitted the brains of county treasurers or school boards against the deceptive wizards of Wall Street.

Municipalities typically entered into an interest rate swap because Wall Street’s fast talking salesmen showed up with incomprehensible power point slides wearing $3,000 suits and assured municipal officials it would lower their overall borrowing costs on their municipal bond issues.  A typical deal involved the municipality issuing variable rate municipal bonds and simultaneously signing a contract (interest rate swap) with a Wall Street bank that locked it into paying the bank a fixed rate while it received from the bank a floating interest rate tied to one of two indices. One index, Libor, was operated by an international bankers’ trade group, the British Bankers Association.  The other index, SIFMA, was operated by a Wall Street trade association.  

Neither was an independent monitor for the public interest.

When the two sets of cash flows are calculated, the side that generates the larger payments receives the difference between the sums. In many cases, continuing to this day, the municipality ended up receiving a fraction of one percent, while contractually bound to pay Wall Street firms as much as 3 to 6 percent in a fixed rate for twenty years or longer.  If the local or state governments or school boards wanted out of the deal, a multi-million dollar penalty fee could be charged based on the rate structure and notional (face amount) of the swap.

We learned late last month that the Libor rate the municipalities were receiving was manipulated downward from at least 2007 to 2010 by a global banking cartel. The U.S. dollar Libor panel included U.S. banks JPMorgan Chase, Citibank (whose parent is the former ward of the taxpayer, Citigroup), and Bank of America. Canadian prosecutors have implicated JPMorgan and Citibank in a criminal probe, as well as other banks.  A whistleblower has provided the names of traders that are alleged to have taken part in the scheme and turned over emails, according to affidavits filed with the Ontario Superior Court.

At least 12 global banks are being investigated by U.S., British and European authorities. Barclays admitted in June that its employees rigged Libor rates. It paid $453 million in fines to U.S. and British authorities and turned over emails showing its traders and those at other, as yet unnamed, banks gave instructions on how the rates were to be rigged on specific dates.

No one has accused SIFMA, the other interest rate benchmark used to set variable rates of interest on municipal bonds, of overseeing a rigged index but it is certainly not a comfort to understand just what SIFMA is.  On its web site, SIFMA defines itself as follows:  “The Securities Industry and Financial Markets Association (SIFMA) represents the industry which powers the global economy.  Born of the merger between the Securities Industry Association and the Bond Market Association, SIFMA is the single powerful voice for strengthening markets and supporting investors -- the world over.”

Notice that the words “Wall Street” do not appear in this description and yet, that is precisely what SIFMA is: a Wall Street trade association that viciously lobbies for Wall Street. (As for “supporting investors,” it should be sued for false advertising.)  In February of this year, it even sued the top regulator of derivatives, the Commodity Futures Trading Commission in Federal Court to stop it from setting limits on the maximum size of derivative bets that can be taken in the market.

From 2000 through 2011, SIFMA spent $96.4 million lobbying Congress on behalf of Wall Street.  In the 2008 election cycle, according to the Center for Responsive Politics, SIFMA spent $865,000 in political donations, giving to both Republicans and Democrats.

In March 2010, the Service Employees International Union (SEIU) issued a report indicating that from 2006 through early 2008 banks are estimated to have collected as much as $28 billion in termination fees from state and local governments who were desperate to exit the abusive interest rate swaps.  That amount does not include the ongoing outsized interest payments that were and are being paid. Experts believe that billions of abusive swaps may be as yet unacknowledged by embarrassed municipalities.  

In 2009, the Auditor General of Pennsylvania, Jack Wagner, found that 626 swaps were done in Pennsylvania between October 2003 and June 2009, covering $14.9 billion in municipal bonds.  That encompassed 107 of Pennsylvania’s 500 school districts and 86 other local governments.  The swaps were sold to the municipalities by Citibank, Goldman Sachs, JPMorgan and Morgan Stanley.

In one case cited by Wagner, the Bethlehem Area School entered into 13 different swaps, covering $272.9 million in debt for school construction projects.  Two swaps which had concluded at the time of Wagner’s investigation cost taxpayers $10.2 million more than if the district had issued a standard fixed-rate bond or note and $15.5 million more than if the district had simply paid the interest on the variable-rate note without any swaps at all.

And therein lies the rub. Municipalities never needed these nonsensical weapons of mass deception.  Muni bond issuers could have simply done what muni investors have done for a century – laddered their bonds.  

To hedge risk, an issuer simply has bonds maturing along a short, intermediate and long-term yield curve.  If rates rise, they are hedged with the intermediate and long term bonds.  If rates fall, the short munis will mature and can be rolled over into the lower interest rate environment.  Municipal issuers are further protected by being able to establish call dates of typically 5 years, 7 years, or 10 years when they issue long terms bonds. They pay moms and pops and seniors across America, who buy these muni bonds,  a small premium of usually $10 to $20 per thousand face amount and call in the bonds if the interest rate environment becomes more attractive for issuance of new bonds.

According to the June 30, 2011 auditor’s report for the City of Oakland, California, the city entered into a swap with Goldman Sachs Mitsui Marine Derivatives Products in connection with $187.5 million of muni bonds for Oakland Joint Powers Financing Authority.  Under the swap terms, the city would pay Goldman a fixed rate of 5.6775 percent through 2021 and receive a variable rate based on the Bond Market Association index (that was the predecessor name to the SIFMA index). In 2003, the variable rate was changed from being indexed to the Bond Market Association index to being indexed at 65 percent of the one-month Libor rate.

The city is still paying the high fixed rate but it’s receiving a miniscule rate of less than one percent.  

According to local officials, the city has paid Goldman roughly $32 million more than it has received and could be out another $20 million if it has to hold the swap until 2021.  A group called the Oakland Coalition to Stop Goldman Sachs succeeded in getting the City Council to vote on July 3 of this year to stop doing business with Goldman Sachs if it doesn’t allow Oakland to terminate the swap without penalty.  It called the vote “a huge victory for both the city of Oakland and for the people throughout the world living under the boot of interest rate swaps.”

The Mayor of Baltimore, the Baltimore City Council, the City of New Britain Firefighters’ and Police Benefit Fund of Connecticut have filed a class action lawsuit in Federal Court in New York over the rigging of Libor. 

The plaintiffs state that the City of Baltimore purchased hundreds of millions of dollars of derivatives tied to Libor while the New Britain Firefighters and Police Benefit Fund purchased tens of millions. They are suing the banks involved in submitting the  Libor rates.

Wall Street’s boot on interest rate swaps dates back at least 17 years.  In February 1995, Smith Barney  (now co-owned by Citigroup and Morgan Stanley) fired Michael Lissack as a managing director in the firm's public finance department after he publicly accused the firm of cheating Dade County, Florida out of millions on an interest rate swap.  Lissack went on to become the scourge of Wall Street by expertly detailing how counties and states were being ripped off by Wall Street.  He even set up this amusing web site to do battle with the firm.  The case became known as the “yield burning case,” an esoteric term that the public could hardly fathom, much like the Libor scandal today.

In 2000, the Securities and Exchange Commission settled the yield burning matter with 21 firms and imposed fines of $172 million, a minor slap on the wrist given the profits of the firms.  Arthur Levitt was Chairman of the SEC at the time and came from the ranks of Wall Street.

Which brings us full circle.  If you’ve ever wondered where all of those revolving doors between Wall Street and Washington would eventually lead us, we’ve just found out.  It leads to the regulators becoming just as jaded and compromised as Wall Street.  While Wall Street banks and their global counterparts were grabbing the loot, their regulator was watching carefully behind the wheel of the getaway car for at least four years.

This past Friday, the Federal Reserve Bank of New York turned over emails and documents showing that Timothy Geithner, the sitting U.S. Treasury Secretary of the United States, knew at least as early as 2008 that Libor was being rigged.  At the time, Geithner was the President and CEO of the Federal Reserve Bank of New York – the top regulator of Wall Street’s largest banks.  As far as we know currently, Geithner did nothing more to stop the practice than send an email with recommendations to Mervyn King, Governor of the Bank of England.  Libor rigging continued through at least 2010.

As the U.S. grapples with intractable wealth disparity and the related ills of unemployment and recession, we need to understand that this was not merely a few rascals rigging some esoteric index in London.  This was an institutionalized wealth transfer system on an almost unimaginable scale.

Pam Martens worked on Wall Street for 21 years. She is the editor of Wall Street On Parade.

Farm Bill budget cuts will mean millions of Americans go hungry

One in seven Americans relies on food stamps, yet lawmakers are plotting to balance the budget on the backs of the neediest

by John Turner, guardian.co.uk

http://www.guardian.co.uk/commentisfree/2012/jul/19/farm-bill-budget-cuts-millions-americans-hungry

“The test of our progress is not whether we add more to the abundance of those who have much; it is whether we provide enough for those who have too little.”

So said President Franklin D Roosevelt, over 75 years ago, in his second inaugural address. This idea could not be any more important than now, when the health of millions of children, their families and older adults are in danger.

Last Wednesday, the agriculture committee of the House of Representatives voted to pass dramatic cuts to the Farm Bill. If passed by Congress, the legislation will remove $16.5bn from food and hunger relief programs that directly benefit children, seniors and families.

Approximately 80% of the Farm Bill budget funds the Supplemental Nutrition Assistance Program (Snap) – commonly known as food stamps. As 45 million people – one in seven Americans – currently rely on Snap to help feed and nourish themselves and their families, the program provides the first line of defense in our country's hunger relief network.

The proposed cuts will affect between 2 and 3 million Americans, and more than 300,000 people in Texas, where I work. These people are our neighbors, classmates, co-workers, relatives and friends. Make no mistake, these cuts will hurt many families already straining to pay their summer electric bills, rent and gas, making it harder to put food on their tables.

As almost three in five Snap recipients are children or seniors, the advancement of this legislation is especially troubling as the majority of those who stand to lose Snap benefits are the most vulnerable in our society. The impact will ripple across our country starting in our retirement communities and schools.

More seniors will be forced to choose between medical care and food, or utilities and food. Many families receiving Snap benefits are also eligible for free and reduced lunch. The proposed cuts could also mean lost lunches for hundreds of thousands of children, exacerbating an already intolerable situation.

Here, at the Capital Area Food Bank of Texas, we believe hunger is unacceptable, and urge our lawmakers to figure out a way to balance the budget that doesn't do it off the backs of hungry children, their families and our older adults. (To see how you can help, visit our advocacy page.) It's not too late to help protect the most vulnerable members of our community.

Any other outcome would surely mean that, as a society, we have failed the test Franklin D Roosevelt posed all those years ago.

Why We Love Sociopaths

http://thenewinquiry.com/features/why-we-love-sociopaths/

By ADAM KOTSKO

My greatest regret is that I’m not a sociopath. I suspect I’m not alone. I have written before that we live in the age of awkwardness, but a strong case could be made that we live in the age of the sociopath. They are dominant figures on television, for example, and within essentially every television genre. Cartoon shows have been fascinated by sociopathic fathers (with varying degrees of sanity) ever since the writers of The Simpsons realized that Homer was a better central character than Bart. Showing that cartoon children are capable of radical evil as well, Eric Cartman of South Park has been spouting racial invective and hatching evil plots for well over a decade at this point. On the other end of the spectrum, the flagships of high-brow cable drama have almost all been sociopaths of varying stripes: the mafioso Tony Soprano of The Sopranos, the gangsters Stringer Bell and Marlo of The Wire, the seductive imposter Don Draper of Mad Men, and even the serial-killer title character of Dexter. In between, one might name the various reality show contestants betraying each other in their attempt to avoid being “voted off the island”; Dr. House, who seeks a diagnosis with complete indifference and even hostility toward his patients’ feelings; the womanizing character played by Charlie Sheen on the sitcom Two and a Half Men; Glenn Close’s evil, plotting lawyer in Damages; the invincible badass Jack Bauer who will stop at nothing in his sociopathic devotion to stopping terrorism in 24—and of course the various sociopathic pursuers of profit, whether in business or in politics, who populate the evening news.

On a certain level, this trend may not seem like anything new. It seems as though most cultures have lionized ruthless individuals who make their own rules, even if they ultimately feel constrained to punish them for their self-assertion as well. Yet there is something new going on in this entertainment trend that goes beyond the understandable desire to fantasize about living without the restrictions of society. The fantasy sociopath is somehow outside social norms—largely bereft of human sympathy, for instance, and generally amoral—and yet is simultaneously a master manipulator, who can instrumentalize social norms to get what he or she wants.

It is this social mastery that sets the contemporary fantasy sociopath apart from both the psychopath and the real-life sociopath. While many of the characters named above are ruthless killers, they are generally not psychopathic or “crazy” in the sense of seeking destruction for its own sake, nor do they generally have some kind of uncontrollable compulsion to struggle with. Indeed, they are usually much more in control of their actions than the normal “sane” person and much more capable of creating long-term plans with clear and achievable goals.

This level of control also sets them apart from a more clinical definition of sociopathy. I do not wish to delve into the DSM or any other authority in the field of psychology, where the usefulness of sociopathy as a diagnostic category is in any case disputed. Yet as I understand it, real-life sociopaths are pitiable creatures indeed. Often victims of severe abuse, they are bereft of all human connection, unable to tell truth from lies, charming and manipulative for a few minutes at most but with no real ability to formulate meaningful goals. The contemporary fantasy of sociopathy picks and chooses from those characteristics, emphasizing the lack of moral intuition, human empathy, and emotional connection. Far from being the obstacles they would be in real life, these characteristics are what enable the fantasy sociopath to be so amazingly successful.

It is curious to think that power would stem so directly from a lack of social connection. After all, we live in a world where we are constantly exhorted to “network,” to live by the maxim that “it’s all about who you know.” Yet the link between power and disconnection is a persistent pattern in recent entertainment, sometimes displayed in the most cartoonish possible way. Take, for instance, Matt Damon’s character in the various Bourne movies (The Bourne Identity,The Bourne Supremacy, and The Bourne Ultimatum— soon to be followed, as Damon has joked, by The Bourne Redundancy). In the first film, Jason Bourne is fished out of the ocean with no idea of who he is. As the story unfolds, he finds that he is unexpectedly the master of everything he tries to do: from hand-to-hand combat, to stunt driving, to speaking apparently every language on earth. His skills apply interpersonally as well, as the very first woman he meets (Franka Potente) becomes his partner in crime and then lover.

The narrative explanation for Bourne’s near superhero status is an elite CIA training program. Yet that training is directly tied to Bourne’s amnesia, as the program’s goal is to create the ultimate “sleeper” agents. The program culminates with a thorough brainwashing, after which the agents don’t remember they’re agents until their programming is triggered by some signal. The life the CIA sets up for the agent is, in true sociopathic style, only an act that can be left behind at any time. What’s more, a later film reveals that Bourne’s trainers only regarded him as truly ready to work once they had induced him to kill in cold blood someone he believed to be an innocent man. Lack of social ties and ruthless amorality thus fit together seamlessly with virtual superpowers in this movie.

The pattern isn’t limited to superheroes. For instance, Don Draper of Mad Men, arguably the most iconic and exemplary contemporary TV sociopath, becomes a powerful ad executive who appears to do little but drink all day and wait for random flashes of inspiration. And as if securing a wife who looks like Grace Kelly isn’t enough, he repeatedly seduces interesting, substantial women, because for most of the series’ run, the standard route of seducing naïve young secretaries is simply beneath him. What enabled this miraculous rise? Stealing the identity of a man who has literally just died in front of him and then abandoning his family!

Many of these sociopathic characters are, of course, “psychologically complex,” particularly in shows with high-brow ambitions. Don Draper is never sure what he wants, though he nearly always gets it, and Tony Soprano famously seeks out therapy to help him deal with the stress of being a mob boss. Dexter gets a voiceover where he muses about what it must be like to feel sympathy or happiness or sadness, while House is subjected to endless amateur psychoanalysis by his friends and co-workers, distraught about how he can be so rude and cynical.

It is hard to believe, however, that the exploration of the dark side of the human psyche for its own sake is behind the appeal of these sociopathic characters. What, then, is going on in this trend? My hypothesis is that the sociopaths we watch on TV allow us to indulge in a kind of thought experiment, based on the question: “What if I really and truly did not give a fuck about anyone?” And the answer they provide? “Then I would be powerful and free.”

In order to get at why this thought experiment would be appealing, and even more why this somewhat counter-intuitive answer would be compelling, I believe it will be helpful to take a detour through awkwardness.

At first glance, the TV sociopath appears to be nearly the opposite of the awkward character. I’ve previously defined awkwardness as the feeling of anxiety that accompanies the violation or absence of a clear social norm. It could happen when someone commits a social faux pas, such as telling a racist joke (what I’ve called “everyday awkwardness”), or it could occur in situations where there are no real social expectations to speak of—for instance, in cross-cultural encounters where one cannot appeal to a third “meta-culture” to mediate the interaction (what I’ve called “radical awkwardness”). In both cases, we are thrown into a situation in which we don’t know what to do. At the same time, however, this violation or lack of social norms doesn’t simply dissolve the social bond. Instead, awkwardness is a particularly powerful social experience, in which we feel the presence of others much more acutely—and more than that, awkwardness spreads, making even innocent bystanders feel somehow caught up in the awkward feeling. This “raw” feeling of social connection can be so anxiety-producing, in fact, that I have even hypothesized that awkwardness comes first and social norms are an attempt to cope with it.

In contrast to the sociopath, then, whose lack of social connection makes him or her a master manipulator of social norms, people caught up in awkwardness are rendered powerless by the intensity of their social connection. Thus we might say that at second glance, the TV sociopath is the exact opposite of the awkward character—the correspondence is too perfect to ignore.

To understand why this connection might exist, I’d like to look more closely at my distinction between the violation and the lack of a social norm. The distinction between these two situations is not hard and fast, because in many cases, it’s not clear how to react to the violation of a social norm. Many social norms function as straightforward commandments—for example, “thou shalt not take cuts in line”—but fail to prescribe a punishment or designate an agent who is qualified to administer it. As a result, when someone does take cuts, there seems to be nothing anyone can do.

In fact, the person who does decide to confront the offender may well come out looking like the asshole in the situation, because in many cultural settings there is a strong bias against unnecessary confrontation. The awkward person sits and fumes, or else confronts the cutter and quickly retreats. If we could define something like the everyday sociopath, it would be the person who is not only callous enough to take cuts in the first place, but is able to manipulate social expectations to shame the person who calls out the violation.

The transition to the fantasy of TV sociopathy comes when the awkward person shifts from “I hate that guy” to “I wish I were that guy.” In everyday settings, this shift is unlikely. Even if the line is unbearably long, most well-adjusted people would prefer not to disobey their ingrained social instincts and, if confronted with a queue-jumper, would console themselves with the thought that at least they are not such inconsiderate people, etc. Similar patterns repeat themselves in other areas of life—a man may wish, for instance, that he were a suave seducer, but at bottom he feels that the seducer is really a douche bag. Even though envy is probably inevitable, a feeling of moral superiority is normally enough to stave off outright admiration of the everyday sociopath.

In order to get from the everyday sociopath to the fantasy sociopath, we need to think in terms of my third class of awkwardness, which I’ve called cultural awkwardness, but perhaps should have called culture-wide awkwardness. Falling in between the types of awkwardness stemming from a violation and a lack of a social norm, cultural awkwardness arises in a situation where social norms are in the process of breaking down. Just as it’s easier to criticize than to create, a social order in a state of cultural awkwardness is perfectly capable of telling us what we’re doing wrong—but it has no convincing account of what it would look like to do things right. My favorite encapsulation of this Kafkaesque logic remains a quote from Gene Hackman’s character in Royal Tenenbaums: “It’s certainly frowned upon, but then what isn’t these days?”

In Awkwardness, I argued that the proper response to our culture-wide awkwardness is simply to embrace rather than try to avoid awkwardness. After all, if the social bond of awkwardness is more intense than our norm-governed social interactions, it also has the potential to be more meaningful and enjoyable. Such a strategy sacrifices comfort and predictability, but it’s not clear that comfort and predictability in our interactions are always desirable anyway.

What our cultural fascination with the fantasy sociopath points toward, however, is the fact that the social order doesn’t exist simply to provide comfort and predictability in interpersonal interactions. One would hope that it might also deliver some form of justice or fairness. The failure to deliver on that front is much more serious and consequential than the failure to allay our social anxieties, though the pattern is similar in both cases. In a society that is breaking down, the no-win situation of someone flagrantly cutting in line repeats itself over and over, on an ever grander scale, until the people who destroyed the world economy walk away with hundreds of millions of dollars in “bonuses” and we’re all reduced to the pathetic stance of fuming about how much we hate that asshole—and the asshole also has the help of a worldwide media empire (not to mention an increasingly militarized police force) to shout us down if we gather up the courage to complain.

At that point, the compensation of moral superiority no longer suffices. We recognize our weakness and patheticness and project its opposite onto our conquerors. If we feel very acutely the force of social pressure, they feel nothing. If we are bound by guilt and obligation, they are completely amoral. And if we don’t have any idea what to do about the situation, they always know exactly what to do. If only I didn’t give a fuck about anyone or anything, we think—then I would be powerful and free. Then I would be the one with millions of dollars, with the powerful and prestigious job, with more sexual opportunities than I know what to do with. In short order, it even comes to seem that only such people can get ahead.

This interpretation has much to recommend it. The people who run our world do a lot of terrible things, and the highest level of contrition they display is seldom more than a token gesture—in fact, officials regularly “take full responsibility” for things without suffering any apparent consequences at all. It takes a special kind of person to order the invasion of a country with no provocation, to cut social programs that millions rely on in order to meet the demands of bondholders, or to deprive people of their livelihood because a set of numbers isn’t adding up in the right way. One can easily argue that the various managers and administrators who control our lives are overpaid, but the callousness they routinely display really does represent a rare skill set. I know that I couldn’t cope with the guilt if I behaved like them—right?

Yet perhaps I could. Perhaps the problem isn’t that we’re being ruled by sociopathic monsters, but rather by people who are just as susceptible to social forces as the rest of us. One might think here of the frequently observed phenomenon of people being perfectly nice one-on-one, but obnoxious and unbearable when part of a group—something often associated with gender-segregated adolescent groups.

Individual members of a fraternity or sports team, for example, might be uncomfortable with the way they are expected to behave toward women—they might have a less constrained view of who counts as “attractive” or be uncomfortable with hook-up culture—but they conform in order to avoid getting made fun of by the other guys. And why will those other guys make fun of them? Because they will be made fun of if they take the non-conformist’s side. The dynamic whereby these young men have to continually prove that they’re “real men” or else face ostracization doesn’t require any individual young man to be a bad person going in. 

And though the addition of a genuinely malicious person might exacerbate the problem, the dynamic is basically self-sustaining without the need for any external “evil” inputs.

Similar dynamics obviously happen in the corporate and political worlds as well, particularly in light of how insular those social circles can be. A politician must be willing to make “tough choices”—and somehow that tough choice is always somehow related to piling further burdens on the already disadvantaged. Of course no one wants to be a bleeding heart, or an idealist, or a wimp, and so no one seriously pushes back. Yet all these spineless conformists style themselves, à la John McCain, as straight-shooting mavericks who aren’t afraid to tell it like it is.

For every average Joe saying to himself, “I wish I was like Tony Soprano,” then, there’s a member of the ruling class saying to himself, “You know, I am kind of like Tony Soprano—it’s not always pretty, but I do what needs to be done.” What both fail to recognize is that Tony Soprano’s actions are no more admirable or necessary than the decision to exclude some poor schlub from the in-group on the playground. More fundamentally, both fail to recognize that what is going on is a social phenomenon, a dynamic that exceeds and largely determines the actions of the individuals involved—not a matter of some people simply being more callous or amoral (though some people certainly are) or being more clear-eyed and realistic (as few of us really are in any serious way).

The fantasy of the sociopath, then, represents an attempt to escape from the inescapably social nature of human experience. The sociopath is an individual who transcends the social, who is not bound by it in any gut-level way and who can therefore use it purely as a tool. The two elements of the fantasy sociopath may not make for a psychologically plausible human being, but they are related in a rigorously consistent way.

Indulging in the fantasy of the sociopath is thus the precise opposite of the strategy of indulging in the primordial social experience of awkwardness. Both approaches, however, respond to the same underlying reality, which is a social order that is breaking down, making impossible demands while failing to deliver on its promises.

Easy intro to Fredric Jameson…

http://www.cla.purdue.edu/english/theory/marxism/modules/jamesonideology.html

FREDRIC JAMESON builds on the work of previous theorists in his understanding of ideology. He is particularly influenced by Jacques Lacan and those post-Marxist theorists who have made use of Lacan's distinction between reality and "the Real" in order to understand ideology (Louis Althusser, Chantalle Mouffe, and Ernesto Laclau). (See the Lacan module on the structure of the psyche.) At one point, Jameson quotes Althusser's Lacanian definition of ideology: "the representation of the subject's Imaginary relationship to his or her Real conditions of existence" (Postmodernism 51). Those "Real conditions of existence" remain, by definition, outside of language. History therefore functions for Jameson as an "absent cause," insofar as, in its totality, it remains inexpressible; however, it nonetheless does exist as that which drives real antagonisms in the present (for example, between social classes). We may not be able to get out of ideological contradiction altogether; however, Jameson asserts the importance of attempting, nonetheless, to acknowledge the real antagonisms that are, in fact, driving our fantasy constructions.

Jameson also makes it clear that there is not one ideological dominant in any period. In this, Jameson follows Raymond Williams' useful distinctions among "residual" ideological formations (ideologies that have been mostly superceded but still circulate in various ways); "emergent" ideological formations (new ideologies that are in the process of establishing their influence); and "dominant" ideological formations (those ideologies supported by what Louis Althusser terms "ideological state apparatuses"; e.g. schools, government, the police, and the military). Jameson insists on the value of such a model because "If we do not achieve some general sense of a cultural dominant, then we fall back into a view of present history as sheer heterogeneity, random difference, a coexistence of a host of distinct forces whose effectivity is undecidable" (Postmodernism 6).

By determining the dominant of our age in his book, Postmodernism, Jameson hopes to provide his reader with a "cognitive map" of the present, which then can make possible effective and beneficial political change. The problem with our current postmodern age, according to Jameson, is that "the prodigious new expansion of multinational capital ends up penetrating and colonizing those very precapitalist enclaves (Nature and the Unconscious) which offered extraterritorial and Archimedean footholds for critical effectivity" (Postmodernism 49). Any effort to contest dominant ideology threatens to be reabsorbed by capital, so that "even overtly political interventions like those of The Clash are all somehow secretly disarmed and reabsorbed by a system of which they themselves might well be considered a part, since they can achieve no distance from it" (Postmodernism 49). Given such a situation, Jameson argues that what is needed is a "cognitive map" of the present, one that reinjects an understanding of the present's real historicity. Jameson compares the situation of the individual in postmodern late capitalist society to the experience of being in a postmodern urban landscape: "In a classic work, The Image of the City, Kevin Lynch taught us that the alienated city is above all a space in which people are unable to map (in their minds) either their own positions or the urban totality in which they find themselves: grids such as those of Jersey City, in which none of the traditional markers (monuments, nodes, natural boundaries, built perspectives) obtain, are the most obvious examples" (Postmodernism 49). The notion of a "cognitive map" enables "a situational representation on the part of the individual subject to that vaster and properly unrepresentable totality which is the ensemble of society's structures as a whole" (Postmodernism 51). Jameson expands this concept of cognitive mapping to ideological critique, suggesting that his task is to make sense of our place in the global system: "The political form of postmodernism, if there ever is any, will have as its vocation the invention and projection of a global cognitive mapping, on a social as well as a spatial scale" (Postmodernism 54).

One "cognitive map" Jameson for example turns to is Algirdas Greimas' semiotic square, which he calls "a virtual map of conceptual closure, or better still, of the closure of ideology itself, that is, as a mechanism, which, while seeming to generate a rich variety of possible concepts and positions, remains in fact locked into some initial aporia or double bind that it cannot transform from the inside by its own means" ("Foreword" xv). Using Greimas' semiotic square, Jameson seeks to find the dominant ideological contradictions of a given text or cultural work. (For more on the semiotic square, see the Greimas module on the semiotic square.)

[...]

USA continues move toward Authoritarian State-Run Capitalism

U.S. Admits Surveillance Violated Constitution At Least Once

http://www.wired.com/dangerroom/2012/07/surveillance-spirit-law/

by Spencer Ackerman

The head of the U.S. government’s vast spying apparatus has conceded that recent surveillance efforts on at least one occasion violated the Constitutional prohibitions on unlawful search and seizure.

The admission comes in a letter from the Office of the Director of National Intelligence declassifying statements that a top U.S. Senator wished to make public in order to call attention to the government’s 2008 expansion of its key surveillance law.

“On at least one occasion,” the intelligence shop has approved Sen. Ron Wyden (D-Ore.) to say, the Foreign Intelligence Surveillance Court found that “minimization procedures” used by the government while it was collecting intelligence were “unreasonable under the Fourth Amendment.” Minimization refers to how long the government may retain the surveillance data it collects.  The Fourth Amendment to the Constitution is supposed to guarantee our rights against unreasonable searches.

Wyden does not specify how extensive this “unreasonable” surveillance was; when it occurred; or how many Americans were affected by it.

In the letter, acquired by Danger Room (.pdf), Wyden asserts a serious federal sidestep of a major section of the Foreign Intelligence Surveillance Act.

That section — known as Section 702 and passed in 2008 — sought to legalize the Bush administration’s warrantless surveillance efforts. The 2008 law permitted intelligence officials to conduct surveillance on the communications of “non-U.S. persons,” when at least one party on a call, text or email is “reasonably believed” to be outside of the United States. Government officials conducting such surveillance no longer have to acquire a warrant from the so-called FISA Court specifying the name of an individual under surveillance. And only a “significant purpose” of the surveillance has to be the acquisition of “foreign intelligence,” a weaker standard than before 2008.

Wyden says that the government’s use of the expanded surveillance authorities “has sometimes circumvented the spirit of the law” — a conclusion that the Office of the Director of National Intelligence does not endorse. 

The office does not challenge the statement about the FISA Court on at least one occasion finding the surveillance to conflict with the Fourth Amendment. Danger Room initially misunderstood the letter to mean that its author, top intelligence official Kathleen Turner, made the statements she was merely informing Wyden he could to issue publicly without revealing classified information.

But this is a far cry from how Director of National Intelligence James Clapper typically describes the new FISA law. When the law was up for reauthorization this spring, Clapper wrote to congressional leaders to say its renewal was his “top priority in Congress,” (.pdf) as the law “allows the Intelligence Community to collect vital information about international terrorists and other important targets overseas while providing robust protection for the civil liberties and privacy of Americans.”

Suspicions about abuse of the government’s new surveillance powers are almost as old as the 2008 expansion of the law. In 2009, citing anonymous sources, the New York Times reported that “the N.S.A. had been engaged in ‘overcollection’ of domestic communications of Americans. They described the practice as significant and systemic,” if unintentional. The Justice Department told the Times that it had already resolved the problem.

But as the American Civil Liberties Union noted in a May letter to lawmakers, “There is little in the public record about how the government implements” the expanded law. An ACLU Freedom of Information Act request discovered that the Justice Department and intelligence bureaucracy refer to “compliance incidents” (.pdf) in their internal accounting of the new surveillance — which seemed to suggest difficulty staying within the broadened boundaries of the law. (Full disclosure: My wife works for the ACLU.)

Wyden has been a lonely congressional voice against renewing the government’s broadened surveillance powers. Last month, he quietly used a parliamentary maneuver to stall the renewal after it passed a key Senate committee.

Wyden’s argument was that the government had not fully disclosed the extent of its new surveillance powers. 

It argued to Wyden that it is “not reasonably possible to identify the number of people located in the United States whose communications may have been reviewed under the authority of the [FISA Amendments Act].” Separately, the National Security Agency insisted that it would violate Americans’ privacy even to tally up how many Americans it had spied upon under the new law.

[...]

Democracy is the Enemy: here's one reason

Sheldon Adelson gave half of June donations to pro-Romney super PAC

http://news.yahoo.com/blogs/ticket/casino-magnate-sheldon-adelson-gave-half-june-donations-210441246.html

by Chris Moody

Restore Our Future, a super PAC supporting Mitt Romney's campaign for president, raised about $20 million in June, more than three times the amount pulled in by the main super PAC behind President Barack Obama's re-election bid.

Just under half of the donations came from Las Vegas casino magnate Sheldon Adelson and his wife, who each donated $5 million apiece to the effort.

The group also received gifts of $1 million or more from a handful of sources, including Boston-based private equity leader John W. Childs, Texas-based real estate investor Harlan Crow and businessman Bill Koch. 

Foster Friess, who supported former Pennsylvania Sen. Rick Santorum's Republican primary bid, gave $200,000.

So far this calendar year, Restore Our Future has raised $52 million and has $23 million left in cash on hand, according to financial disclosures filed with the Federal Election Commission Friday. The June haul is a significant boost from May, when the group raised $4.9 million.

Priorities USA Action, which supports Obama, took in $6.1 million in the same month.

Welcome to the Anthropocene

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