Los Zetas Kingpin: We Bought Guns Directly From U.S. Government...

Revelation heightens supicions that Fast and Furious was an Obama administration plot to undermine Second Amendment

Paul Joseph Watson
Infowars.com
Friday, July 8, 2011

One of the kingpins of the infamous Los Zetas drug running gang has told Mexican federal police that the group purchased its weapons directly from U.S. government officials inside America, a revelation that will only serve to heighten suspicions that the Obama administration’s Operation Fast and Furiousprogram was a deliberate attempt to undermine the Second Amendment by stealth.

Under Operation Fast and Furious, the Bureau of Alcohol, Tobacco, Firearms, and Explosives “Sanctioned the purchase of weapons in U.S. gun shops and tracked the smuggling route to the Mexican border. Reportedly, more than 2,500 firearms were sold to straw buyers who then handed off the weapons to gunrunners under the nose of ATF.” Some of the weapons were later used to kill US Border Patrol agents like Brian Terry.

However, according to the testimony of Rejón Aguilar, one of the original seven members of Los Zetas who was recently captured by police, in some cases Mexican drug gangs did not have to wait until the firearms reached the border – they purchased guns directly from the US government itself inside America.

In an interview with Mexican federal police that was later uploaded to You Tube and translated, Aguilar sensationally blows the whistle on how the Zetas’ weapons were obtained straight from U.S. federal authorities.

“They are bought in the U.S. The buyers (on the U.S. side of the border) have said in the past that sometimes they would acquire them from the U.S. Government itself,” Aguilar told police.

“There were buyers for a time – because they weren’t our people, they were buyers on the other side – telling us that even the American government itself were selling them,” added Aguilar.

The video interview can be seen at the bottom of the page.

A Spanish-language newspaper story on the issue that was translated for us by Larry Pratt states, “Last Sunday, members of the Federal Police detained in the state of Mexico Z-7, one of the 14 leaders and founders of the Zetas who in one of his main statements affirmed that there are elements of the United States government who are furnishing arms to the Mexican cartels.”

Some have questioned the legitimacy of efforts on behalf of the US government to catch drug smuggling kingpins in Mexico by way of sting operations involving firearms, the reason offered by the Obama administration as the motivation behind Fast and Furious, given the fact that those same kingpins are in many cases working for US intelligence itself.

As we reported years ago, former DEA agent Cele Castillo has blown the whistle on how the US government controls the Los Zetas drug smuggling gang and uses it as the front group for their narco-empire.

With the gang having first been trained at the infamous School of the Americas in Fort Benning, Georgia, Castillo affirms that Los Zetas are still working for the US government in protecting drug routes to keep the wheels of Wall Street well-oiled. Castillo has gone on the record to state that the commandos are working directly for the US government drug cartel in carrying out hits on rival drug smugglers who aren’t paying their cut.

In addition, it was recently revealed that Jesus Vicente Zambada Niebla, the “logistical coordinator” for another top Mexican drug-trafficking gang, Sinaloa, the organization responsible for purchasing the CIA torture jet that crashed with four tons on cocaine on board back in 2007, also obtained guns from the U.S. that were later used to kill people in Mexico City. Niebla recently told the U.S. District Court for the Northern District of Illinois in Chicago that he has been working for the U.S. government since January 2004.

The Obama administration has repeatedly invoked rhetoric about the flow of guns being smuggled from the U.S. into Mexico as a talking point with which to chill gun rights of American citizens, repeating the demonstrably false myth that 90% of weapons confiscated by Mexican authorities originate in the U.S.

Despite the establishment media attempting to debunk the notion that Fast and Furious was a deliberate effort on behalf of Obama and his Attorney General Eric Holder to demonize gun rights by pointing to the flow of guns from the U.S. to Mexico, a process now revealed to have been largely overseen by the federal government itself, the fallout from the scandal, with no one in the administration willing to admit culpability, is starting to confirm precisely that premise.

Indeed, during a March 30 meeting between Jim and Sarah Brady and White House Press Secretary Jay Carney, at which Obama “dropped in,” the president reportedly told Brady, “I just want you to know that we are working on it (gun control)….We have to go through a few processes, but under the radar.” The quote appeared in an April 11 Washington Post story about Obama’s gun control czar Steve Croley.

Given the fact that arrested Mexican drug runners are now admitting that they both worked directly for and bought weapons from the US government, the notion that Fast and Furious was an Obama administration plot to attack the second amendment by stealth is perfectly plausible.

Watch the video interview in Spanish with Rejón Aguilar below.

Why Water is the New Oil...

We take water for granted. And why not? We turn a tap and out it comes. But that's going to have to change, says author Alex Prud'homme. As he explains in a new book, The Ripple Effect, the basic problem is this: the quantity of water in the world is finite, but demand is everywhere on the rise. As oil was in the 20th century – the key resource, a focus of tension, even conflict – so water will be of the 21st, as states, countries, and industries compete over the ever-more-precious resource. So we need to figure out how to use it more sustainably. But that's not all. In the United States fresh water is under threat from new kinds of barely understood pollutants, from pesticides to pharmaceuticals, and from a last-century infrastructure of pipes, dams, levees, sewage plants that urgently needs upgrading.
All this and (much) more you'll learn from The Ripple Effect, a book that will forever change the way you think about what comes out of your faucet. (A film based on the book, titled Last Call at the Oasis, produced by the same folks who brought us An Inconvenient Truth and Food Inc., is in preparation.) Rolling Stone recently got Prud'homme on the phone to talk about thirst, waste and the fate of fresh water.
Reading the book, I was really struck by how fundamental water is to so many processes.
Right. Water is considered an “access resource,” meaning it’s the resource that underlies all others. So whether you're building a computer chip, or growing crops, or generating power, all these things require lots of water. But there's only a finite amount of water, and now resources are butting up against each other.

America's Water: The Looming Crisis (Book Excerpt: The Ripple Effect)

At the same time, you point out, we waste a lot of water.
We're using our water supplies unsustainably. In America, we can turn the tap on at any time of day and get as much water as we want at any temperature for as long as we want. And, consequently, we take it for granted. Which is unusual: In most places in the world it's very difficult to get water on a regular basis.
Water is virtually free. Is that a big part of why we take it for granted?
Yes. There's not a great economic incentive to use it efficiently. I came to believe after all this research that we need to value water more highly.
Does that mean putting a price on water? Even privatizing it?
That's probably the trickiest question in water today, because it raises a moral dilemma. Is water common, like the air we breathe? If it is, it should be free to everyone. Or is it a commodity, like oil or gas, that process and sell in the marketplace? On the one hand, if you don't price water, people waste it. On the other hand, if we price it too high, then you are playing a game of life and death, predicated on making a profit.
Is there a middle ground?
Yes. We need to provide a certain amount of water to every person, essentially for free. And that figure is about 13 gallons per capita per day. In the U.S., that's not very much water, but in a place like sub-Saharan Africa or China or India, it's a lot. Beyond that, we should institute a tiered price structure. So that the more water you use, the more you will pay for it.
Let’s talk about what’s in our water. I was shocked to learn that our water is more polluted now than it was 30 years ago.
The environmental laws that were instituted in the '70s – the Clean Water Act, the Safe Drinking Water Act, the founding of the EPA – were largely the result of water issues, and we tend to say, "Okay, we've dealt with that, let's move on." But the EPA has been under-funded and weakened even as the stresses on the system have grown and new kinds of pollutants have come on to the marketplace.
What kinds of pollutants?
There's something like 600 new chemicals – they're called “emerging contaminants” – that come on the market every year. Many of which are not tested for their toxicity, because there's just too many of them. And the questions are, what's the impact of all these things, individually, and what is the combined effect? What happens when that cocktail of things – say, lead, plastic, anti-bacterial soap, Chanel No. 5, narcotics and, say, Viagra – is in the water supply? What does it do to us? Again, we don't know the answer, but these are the cutting-edge questions right now.
How much do we know?
To take one example: You spray your lawn with herbicides, which contain a chemical called hatrizine, which, if and when it gets in the waterways, will disrupt the endocrine system of fish. In the Chesapeake Bay, where I spent a lot of time, the U.S. Geological Survey is now looking at male bass that are developing eggs in their testes. And there are other cases where the female fish are developing testes. It turns out the endocrine system of fish is very similar to that of humans. So, again, what is this doing to us?
And these are on top of the old-fashioned pollutants.
Right. You have the "legacy pollutants," like TCP (trichloropropane), that have been in waterways for decades, and traditional pollutants like sewage and storm water runoff.
Talking of sewage, I was shocked to find that the water treatment process is only partially effective.
Me too. I was surprised to learn that the federal law is that sewage must be cleaned to 85 percent of cleanliness, which means that, even on the best of days, 15 percent of the pollutants get through!
Another big theme of your book is that our water infrastructure is in bad shape. How bad?
The state of our dams and levies and pipelines is shocking. They call this the dawn of the "replacement era," meaning water pipes are starting to burst, and it's really difficult – and expensive – to dig them up and replace them. Many levies were not well built, not well maintained, and they're starting to breach. City sewage systems needs to be totally revamped. New York City’s, for instance, was state-of-the-art 150 years ago, but now it gets overwhelmed, and we actually end up dumping raw sewage into New York's harbor when that happens.
Let’s get back to the sustainability issue. We need to change the way we value water. What else?
We need to focus on efficiency and conservation. I talk in the book about Peter Gleick of the Pacific Institute, who is sort of the champion of a new ethos that comes under the name of the "soft path," as opposed to “hard path” engineering. Soft path is technologically driven, it's kind of a smarter, less dramatic way of conserving the water supplies that we have, and using them more efficiently.

How?

Fairly simple steps – low-flow showerheads, low-flush toilets, crib irrigation, side-mounting washing machines, storing water underground instead of above ground, where it evaporates. These are not super hi-tech, they're existing technologies, we just haven't used them intentionally enough yet. And Gleick will tell you that if everyone in California got low-flush toilets and low-flow shower heads, that even there, in the fastest-growing state in the union, they wouldn't have to build new dams.

Did working on the book change the way you use water?

It did.  Once I got into this, I discovered to my horror that I was wasting water in many small ways. So now I recycle water much more. I'm very careful about what I put down the drain; I used to put pharmaceuticals down the drain, because that's what we were told to do, but I realize now that many of those survive the treatment process and end up in the water supply. We now have a more efficient, low-flush toilet. I have fixed leaks in my house. The stat that I remember is that a dripping faucet can drip ten gallons a day of water – water that's been carefully collected and cleaned and piped to you. That’s just a crazy waste of resources.

Courtesy of rollingstone.com

America's Water: The Looming Crisis...

The following is an excerpt from The Ripple Effect: The Fate of Fresh Water in the Twenty-First Century by Alex Prud'homme (Simon & Schuster)

Chapter One: The Defining Resource

Thousands have lived without love—not one without water. —W. H. Auden

It is scarcity and plenty that makes the vulgar take things to be precious or worthless; they call a diamond very beautiful because it is like pure water, and then would not exchange one for ten barrels of water. —Galileo Galilei, 1632

The received wisdom is that America has some of the best water in the world – meaning that we have the cleanest and most plentiful supply of H2O anywhere, available in an endless stream, at whatever temperature or volume we wish, whenever we want it, at hardly any cost. In America, clean water seems limitless. This assumption is so ingrained that most of us never stop to think about it when we brush our teeth, power up our computers, irrigate our crops, build a new house, or gulp down a clean, clear drink on a hot summer day.

Why Water is the New Oil: Q&A with Alex Prud'homme

It’s easy to see why. For most of its history, the United States has shown a remarkable ability to find, treat, and deliver potable water to citizens in widely different circumstances across the country. Since the seventies, America has relied on the Environmental Protection Agency and robust laws – most notably the Clean Water Act and the Safe Drinking Water Act, which have been further enhanced by state and local regulations – to protect water supplies. Even our sewer systems are among the best in the world, reliably limiting the spread of disease and ensuring a healthy environment. At least, that is what the water industry says.

To put the state of American water in perspective, consider that by 2000 some 1.2 billion people around the world lacked safe drinking water, and that by 2025 as many as 3.4 billion people will face water scarcity, according to the UN. What’s more, as the global population rises from 6.8 billion in 2010 to nearly 9 billion by 2050, and climate change disrupts familiar weather patterns, reliable supplies of freshwater will become increasingly threatened. In Australia and Spain, record droughts have led to critical water shortages; in China rampant pollution has led to health problems and environmental degradation; in Africa tensions over water supplies have led to conflict; and in Central America the privatization of water has led to suffering and violence.

At a glance, then, America seems to be hydrologically blessed. But if you look a little closer, you will discover that the apparent success of our water management and consumption masks a broad spectrum of underlying problems – from new kinds of water pollution to aging infrastructure, intensifying disputes over water rights, obsolete regulations, and shiting weather patterns, among many other things.

These problems are expensive to fix, difficult to adapt to, and politically unpopular. Not surprisingly, people have tended to ignore them, pretending they don’t exist in the secret hope that they will cure themselves. Instead, America’s water problems have steadily grown worse. In recent years, the quality and quantity of American water has undergone staggering changes, largely out of the public eye.

Between 2004 and 2009, the Clean Water Act (CWA) was violated at least 506,000 times by more than twenty-three thousand companies and other facilities, according to EPA data assessed by the New York Times. The EPA’s comprehensive data covers only that five-year span, but it shows that the number of facilities violating the CWA increased more than 16 percent from 2004 to 2007. (Some polluters illegally withheld information about their discharges, so the actual contamination was worse.) The culprits ranged from small gas stations and dry-cleaning stores, to new housing developments, farms, mines, factories, and vast city sewer systems. During that time, less than 3 percent of polluters were punished or fined by EPA regulators, who were politically and financially hamstrung.

During the same period, the quality of tap water deteriorated, as the Safe Drinking Water Act (SDWA) was violated in every state. Between 2004 and 2009, a study by the Environmental Working Group (EWG), a nonprofit watchdog organization, found, tap water in forty-five states and the District of Columbia was contaminated by 316 different pollutants. More than half of those chemicals—including the gasoline additive MTBE, the rocket-fuel component perchlorate, and industrial plasticizers called phthalates—were unregulated by the EPA and thus not sub- ject to environmental safety standards. Federal agencies have set limits for ninety-one chemicals in water supplies; the EWG study found forty-nine of these pollutants in water at excessive levels. Translated, this means that the drinking water of 53.6 million Americans was contaminated.

Many people have turned to bottled water as a convenient, supposedly healthier alternative to tap, but a 2008 test by EWG found that bottled water (purchased from stores in nine states and the District of Columbia) contained traces of thirty-eight pollutants, including fertilizers, bacteria, industrial chemicals, Tylenol, and excessive levels of potential carcinogens. The International Bottled Water Association, a trade group, dismissed the EWG report as exaggerated and unrepresentative of the industry, demanding that EWG “cease and desist.” EWG stuck to its conclusions and objected to the industry’s “intimidation tactics.”

The health consequences of water pollution are difficult to gauge and likely won’t be known for years. But medical researchers have noticed a rise in the incidence of certain diseases, especially breast and prostate cancer, since the 1970s, and doctors surmise that contaminated drinking water could be one explanation. Similarly, the effect of long-term multifaceted pollution on the ecosystem is not well understood. What, for instance, is the cumulative effect of a “cocktail” of old and new contaminants—sewage, plastics, ibuprofen, Chanel No. 5, estrogen, cocaine, and Viagra, say—on aquatic grasses, water bugs, bass, ducks, beavers, and on us? Hydrologists are only just beginning to study this question.

In the meantime, human thirst began to outstrip the ecosystem’s ability to supply clean water in a sustainable way. By 2008, the world’s consumption of water was doubling every twenty years, which is more than twice the rate of population growth. By 2000, people had used or altered virtually every accessible supply of freshwater. Some of the world’s mightiest rivers—including the Rio Grande and the Colorado—had grown so depleted that they reached the sea only in exceptionally wet years. Springs have been pumped dry. Half the world’s wetlands (the “kidneys” of the environment, which absorb rainfall, filter pollutants, and dampen the effects of storm surges) were drained or damaged, which harmed ecosystems and allowed salt water to pollute freshwater aquifers. In arid, rapidly growing Western states, such as Colorado, Texas, and California, droughts were causing havoc.

A report by the US General Accounting Office predicts that thirty-six states will face water shortages by 2013, while McKinsey & Co. forecasts that global demand for water will outstrip supply by 40 percent in 2030.

The experts—hydrologists, engineers, environmentalists, diplomats— have been watching these trends with concern, noting that the growing human population and warming climate will only intensify the pressure on water supplies. Some call freshwater “the defining resource of the twenty-first century,” and the UN has warned of “a looming water crisis.”

“We used to think that energy and water would be the critical issues. Now we think water will be the critical issue,” Mostafa Tolba, former head of the UN Environment Programme, has declared. Ismail Serageldin, the World Bank’s leading environmental expert, put it even more bluntly: “The wars of the twenty-first century will be fought over water.”

How did this happen? How did the United States, the world’s most powerful, wealthy, and technically savvy country, find its water supplies becoming more, not less, polluted in the nearly forty years since the Clean Water Act of 1972? How did the nation find itself running dry in some historically wet regions, while suffering devastating floods in historically dry regions? How is water being turned into an expensive commodity, such as oil or gas, and why is it a flash point for conflict? What kind of solutions can we—as individuals, and collectively—build? These were some of the questions that intrigued me, and that this book seeks to answer.

Courtesy of rollingstone.com

“ET life inevitably exists due to universal laws, and we’ll soon discover it”...

“ET life inevitably exists due to universal laws, and we’ll soon discover it”...

Courtesy of rollingstone.com

RT spoke with Andrey Finkelstein, Director of the Institute of Applied Astronomy about the scientific reasoning behind his controversial statement that in 20 years humanity will discover aliens and they are likely to look much like humans.
RT: Mr. Finkelstein, thank you for being with us tonight. You have promised that in twenty years’ time you will have discovered life on other planets. Are we actually talking about aliens, or merely some bacteria?
Andrey Finkelstein: We are talking life forms, of course. What particular form such life could be is a separate question. Where there is life, intelligence and civilization are a possibility. But discovering life is of primary importance.
RT: In what form?
AF: What I‘m going to tell you is a paradox. The form will definitely be well-known to us. In my opinion, and I believe experts generally agree on this, life and intelligence, should they exist elsewhere at all, should be highly human-like.
You see, essentially, the origins of life follow the same pattern, just as it is with atoms, molecules or macromolecules. There are fundamental laws of physics that apply invariably in each case. These laws have been thoroughly researched and explained. Now all you need is the right environment that would enable a process like that to start.
For example, an atom of hydrogen that originates in a galaxy located millions of parsecs away from us – that is hundreds of millions of light years away – is absolutely identical to a hydrogen atom that originates in our Solar System. Because fundamental laws are universal.
And it’s the same with the fundamental laws that govern the origins of life, including the fundamental laws of evolution. These are universal, so all living things should have the same composition, and living organisms should look like the ones we encounter on Earth.
RT: Could these life forms you’re talking about develop into a civilization?
AF: Primarily, they can develop intelligence. I think it is possible, because, apparently, there is some regular pattern that life inevitably develops intelligence, if only there is enough time, and intelligence leads to civilization.
However, this is a very long process. Mind you, the Earth formed 4.5 billion years ago. Four billion years ago, it was already suitable for life forms, and in fact, that is how long ago initial indications of life date back to.
But evolution takes a long time. Homo sapiens originated 200,000 years ago, but it was only 40,000 years ago that modern humans came about, the culture-bearing humans that you and I belong to.
By the way, their genesis was a paradox, too, as they emerged on Earth very quietly, and then they immediately spread all over the vast area from the Cape of Good Hope to China. Apparently, there are some laws that we still don’t know in detail.
RT: As a scientist, would you guarantee one hundred per cent that we will discover life?
AF: Yes. And I will explain why. You see, there is this rational, if not purely scientific, outlook on the universe: a process can either be unique, or, if there is at least one similar occurrence, then it is a regular phenomenon.
For some time, scientists believed that the Solar System is something unique, but nowadays we find that most stars have planets. Furthermore, the formation of planets is an inevitable process which occurs when a giant molecular cloud forms into a star. About a thousand planets located around different stars have been discovered to this date. Over 500 stars are known to have planets. A million planets are projected to be discovered within the next ten years.
Moreover, some of the recently discovered planets not only resemble the Earth by composition, but also seem to have oxygen. And oxygen necessarily indicates the presence of life. So, planets are a regular phenomenon.
Meanwhile, the universe consists of about a hundred billion galaxies, and each of them has roughly a hundred billion stars. These are immense multitudes. Almost all stars might have their planets – we’ve already discovered a thousand of them – and some of those planets, be it 10 per cent or even one per cent, might be suitable for the origin of life.
RT: By the time the Earth runs out of its resources – and they definitely will be depleted some day, perhaps in a few billion years – do you think there is a chance that humankind will be able to inhabit other planets?
AF: I see what you are talking about. I’m not an expert on this, although I do have a feeling that life is generally organized in such a way that any species exists for a certain limited period of time. It is highly possible that humans are no exception.
Environmental conditions on Earth changed at least five times in the 250 million years that we are able to trace back, with up to 90 per cent of all living organisms becoming extinct, and earthly flora and fauna changing completely. Some hypotheses maintain that it was caused by an asteroid or a comet hitting the Earth. But I’m more inclined to think that the Earth and the Solar System, or even the universe in general is something of a chemistry lab, a giant factory with its own workings, and certain species may only be designed to exist for a limited period of time. And that may also be the case with humans.
I find it rather difficult to envisage that humans will be travelling to other stars and migrating to other planets on a massive scale. In terms of our immediate prospects, the primary destination for human colonization will be the Moon. I might not live long enough to see this, but you definitely will, as it will happen within the next 20 to 25 years.
Three global powers – the United States, the European Union and China – are already competing to set up the first lunar observatory and hence the first colony on the Moon. Later on, people might colonize Mars. China’s ideas of populating Mars with millions of people and giving them land seem naïve to me, although the Chinese are capable of a lot. In any case, I doubt we will be travelling to other stars.
RT: How will locating conscious life forms on other planets help us?
AF: I do not know. For some time I stuck with the idea that we were alone in the universe, that we were unique. It seemed like the desire to discover extraterrestrial life forms was essentially a desire to answer some of the questions that troubled us all: questions related to health, technology and survival.
If we do indeed discover a civilization outside of Earth, a highly advanced civilization, we may gain some technology from them. This technology would be fantastic. Look at how the world has changed over the past 40 to 50 years. The changes were radical. People who remember the first airplanes taking off and the first televisions are still alive, and on the other hand, we have the internet. It has only been 50 years.
Now imagine meeting a civilization that is ahead of us by 100 or 200 years. The discoveries they must have made are unimaginable. This is especially relevant considering that technologies can be transmitted to us via signals.
RT: What sort of signals would those be?
AF: The area of science that searches for extra-terrestrial civilizations is divided into three parts. We have the SETI – the search for extra-terrestrial intelligence, the CETI – communication with extra-terrestrials, and METI – the message for extra-terrestrial intelligence. The best way to do it, I think, is by radio waves. It is the most powerful transmitter we have. Moreover, it has been tested. Astronomers are looking into this; they are looking for signals from extraterrestrials and using capacities we have here on Earth to send signals to outer space.
RT: Do you believe in aliens?
AF: In what sense? Do I believe they have visited us?
RT: That, and their existence.
AF: If there is intelligence and a civilization outside Earth, then we would call that civilization extra-terrestrial. But the term is used quite differently by the public, to refer to phenomena that we supposedly observed here on Earth. That, I do not believe in. I know for a fact that it didn’t happen.
The thing is – and the public might find this interesting – the USSR was the only country in its day to host a grand experiment. The General Staff had issued an order to various units under the Defence Ministry’s command to report any unidentified flying objects, they were called unidentified atmosphere phenomena back then.
The program was called “the net”. It was divided into two parts, the Defence Ministry’s net looked for what might be traces of new types of weaponry, the other net, the so-called “AN Net” looked for phenomena previously unknown to humankind. For more than 20 years, people across one sixth of the Earth’s territory – even more than that because we had military units stationed outside the USSR at certain points – all those people monitored the skies for UFOs every single day.
They detected approximately 1,000 unusual phenomena, only two of which remain unexplained to this day. The rest were either man-made or natural. Some of them were amazing. You would not believe me if I told you about some of the things that were found. People didn’t know such things could happen. Airplanes, abandoned by pilots, flew on for days, a missile was once detected that bypassed a passenger jet by a mere two meters. We saw something of the sort later on, in Ukraine.
I believe it has been proven quite convincingly that extraterrestrials never visited us. It makes sense, too. The way the public is thinking… I am sure that if we were using horses to get around rather than planes, they would think aliens were visiting us on horseback. Certain phenomena are interpreted into a myth this way.
RT: We recently spoke to Jill Tarter who works with SETI. She told us that if aliens do indeed exist, their civilization should be much older and more advanced than ours. She said aliens would not contact us.
AF: There is a joke we have: the fact that extra-terrestrials are not contacting us proves that they exist and they are smart. But seriously, we know that there is no speed faster than the speed of light. It takes light from the star closest to Earth four years to reach us. It would take us centuries to devise a means of transportation that would allow us to travel this distance.
We know for a fact now that the star closest to us is devoid of life. The next star, the Gliese, is 20 light years away. It would take us millennia to think of a way to get there. Physical star travel is impossible. That is my belief. We would have to revise the whole science of physics. Miracles do not happen in science. They do happen, but are a different sort of miracle to what we are used to.
RT: An asteroid passed very close to Earth several days ago – it was only 12,000 kilometers away. Today everyone is talking about the risk of the Earth colliding with another asteroid, the Apophis. Do you think this is a real threat?
AF: It is risky. First of all, I want to tell you that asteroids and comets played a very important role in the birth of life. Remember, the solar system is essentially a giant chemistry lab. Comets and asteroids transport matter across this lab, including, some suspect, organic matter. They have often collided with Earth. The Earth is dotted with asteroid craters. We call them “space wounds”.
Some scientists believe that the disappearance of entire species of plants and animals has to do with asteroids. It happened 250 million, 50 million and 25 million years ago.
Now, the Apophis asteroid is not anything out of the ordinary. What’s more, you and I may have seen something of the sort happen twice: we saw Jupiter collide with an asteroid. Jupiter is Earth’s lucky star. It is our defender: if it were not for Jupiter, all those asteroids would hit us. The moon has a lot of asteroid imprints and a comet recently flew into the sun, so there are some examples for you.
The science that studies asteroids on a collision trajectory with Earth, which is approximately 10% of all asteroids, states that they do represent a threat. But back to the Apophis: I think we do not have to worry about it. It will come as close to Earth as a geostationary satellite does in 2029. It will be the brightest object in our sky.
Then, in 2032, it will return but it will not pass as close. It is quite a large asteroid, about 0.5 kilometers in diameter. There is a chance of it striking Earth, that is, if it hits the so-called “keyhole”. The Earth has two of these “keyholes” in its gravitational field, each one approximately the size of the asteroid. But I do not think the Apophis will hit one. We will be able to affect its trajectory after all.
RT: How? Can we destroy it?
AF: Experiments conducted on Earth have demonstrated that asteroids are destructible. We will need a stronger force than what we used in the experiment to destroy it, however. Then again, we have been warned in advance which is very important.
We could affect its trajectory gradually, pushing it into the gravity field of another planet. Then, after making several revolutions, it will no longer be on a collision trajectory. These ideas have never been implemented but I think they are plausible. We shouldn’t have a problem doing it, even at our technological level.

The Economy and the 2012 Election: How Obama Could Win (or Lose)...

Fifteen months out from the 2012 presidential election, how are things looking for Obama? Not great. "It's going to be a very close, competitive election … a street fight for the presidency," White House aide and 2008 campaign manager David Plouffe told reporters yesterday. No kidding. Obama's approval rating is below 50 percent. Unemployment, currently at 9.1 percent, might be down to 8 a year from now; no incumbent since FDR has been reelected with the jobless number above 7.2 percent. GDP grew by a pathetic 1.9 percent last quarter. Granted, Obama could argue the economy would be in even worse shape absent his stimulus program – but good luck running on that argument.

Even so, reports Doyle McManus in the LA Times, Plouffe still says the election is Obama's to lose.  His reasons: he thinks the president has a good shot with independent voters, who'll reward his bipartisan, bend-over-backwards approach the debt talks; he's a seasoned campaigner with a huge war chest; he's moved to the center without losing the base (the oft-noted "enthusiasm gap" seems to have closed); demographics are on his side (he won big with minorities in 08, and they'll make up a larger share of the electorate next year); and, of course, the GOP field is weak: Frontrunner Mitt Romney is the most formidable of the bunch, but he's nobody's idea of a standard bearer.

But does any of this matter, given the economic picture? Well, yes – and partly because the economic picture, and its likely effect on the election, is less cut-and-dried than it looks. As political scientist Larry Sabato explains here, unemployment isn't a perfect predictor Sure, no president since FDR has been reelected with joblessness above 7.2 percent, but FDR was reelected, twice, with unemployment at 17 and 15 percent, respectively! These are old numbers, for sure, but they at least suggest it's "the trend of unemployment that makes the difference," writes Sabato. (In both cases, the number was coming down.) More evidence for that: Reagan was reelected with unemployment at 7.2 percent, down from 10 and change; George H.W. Bush was booted with unemployment around 7, up from around 5 when he was elected.

As for economic growth, there's no iron rule here, either. The key time period to watch is the third quarter of the election year, from July 1 to September 30. As with unemployment, the big question is: what's the trend?  Bill Clinton had a lower economic growth rate for his 1996 reelection (4.8 percent) than Bush did when he lost in '92 (6.1). The difference: people felt the economy was was on the up in one case but not in the other. (Oh, and GDP growth can't trump other factors. Guess what the figure was when Jimmy Carter ran for reelection in 1980? A whopping 8.6 percent! He lost, of course.)
All of which goes to show, you can't write off Obama just because the economy sucks right now. On the other hand, if unemployment isn't coming down perceptibly by mid-2012, and the economy isn't growing fast enough, then Obama is pretty much toast, whatever his other advantages. But it's a long road from here to there.

Courtesy of rollingstone.com

Frank Rich Blasts Obama For Letting Wall Street Off the Hook...

A lot of people are talking about Frank Rich’s explosive new article in New York magazine. I think it is a remarkable thing, the latest and maybe the most comprehensive in an increasingly lengthy series of articles and investigations into the Obama administration’s failure to properly investigate the causes of the financial crisis.

By now this is not quite a mainstream media drumbeat, but it’s coming close: between the reporting of Louise Story and Gretchen Morgenson at the New York Times to the recent not-terribly-laudatory piece on New York Southern District U.S. Attorney Preet Bharara by the New Yorker’s George Packer, to Eliot Spitzer’s bitter commentary on the subject on CNN, to my own bleatings, and now this Rich broadside, it seems quite clear that the Obama administration’s failure to clean up Wall Street is becoming a matter of some fascination with the few investigative journalists who are not covering the Casey Anthony case.

Rich’s thesis is that this issue is becoming important not just to reporters, but to voters, and that Obama may soon pay for his failures at the polls:

Obama can win reelection without carrying 10021 or Greenwich in any case. The bigger political problem is that a far larger share of the American electorate views him as a tool of the very fat-cat elite that despises him.

In making this point, Rich uses language that seems unusually savage for him:

For all the lurid fantasies of the birthers, the dirty secret of Obama’s background is that the values of Harvard, not of Kenya or Indonesia or Bill Ayers, have most colored his governing style. He falls hard for the best and the brightest white guys.

Yikes! That last line is truly brutal and I imagine will not be forgotten inside the White House, which once must have viewed Rich as one of Obama’s great supporters in the punditry world. A lot of journalists, myself included, were once enthralled by Obama, and saw his election as a rare uplifting moment in our electoral history, with the candidate himself performing with tremendous grace and class as he helped slay the country’s racial demons. Some of us even thought that Obama might be that rare, once-in-a-generation-type political talent who could help the country rise above itself, an MLK or a Roosevelt.

I say might. Because throughout 2008, it was hard to shake the feeling that this was a politician whose legacy could still go either way. There were an awful lot of troubling signs on the horizon in Obama’s campaign, not the least of which being the enthusiastic support he was receiving from Wall Street.

Obama in part ran a very slightly economically populist campaign, but the tens of millions pouring into his campaign coffers from the very rich (and specifically from hedge funds) told all of us that we probably shouldn’t expect those promises to come off. For a piece I wrote that summer, I asked people in Washington why Wall Street would be throwing money at a guy who was out there on the stump pledging to reach into their pockets:

Sadly, the answer to that question increasingly appears to be that Obama is, well, full of shit. He has made no bones about his plans to raise income by soaking the rich, promising to roll back the Bush tax cuts for people making over $250,000, increase the top tax rate on capital gains to 25 percent and raise the top rate on qualified dividends. He has also pledged to deliver a real stomach punch to hedge-fund managers, raising the tax rate on most of their income from 15 percent to 35 percent.

These populist pledges sound good, but many business moguls appear to be betting that the tax policies, like Obama himself, are only that: something that sounds good. "I think we don't want to make too much of his promises on taxes," says Robert Pollin, professor of economics at the University of Massachusetts. "Not all of these things will happen." Noting the overwhelming amount of Wall Street money pouring into Obama's campaign, even elitist fuckwad David Brooks was recently moved to write, "Once the Republicans are vanquished, I wouldn't hold your breath waiting for that capital-gains tax hike."

Disgustingly, Brooks turned out to be right, and the narrative of the Obama presidency did end up turning sour, on that front anyway. All of these articles are now chronicling how and why that happened.
The gist of this blistering Rich piece is that Obama came to office at a time of unprecedented hardship and public discontent, and made a mistake in deciding not to ride that anger and take an axe to those guilty of destroying the economy. Rich isn’t saying that Obama needed to put a guillotine on Maiden Lane; he’s saying that Obama’s big problem was that his failure to clean up Wall Street coincided with a similarly inexplicable failure to address the unemployment problem:

Howard Dean rage has never been Obama’s style—hope-and-change was an elegant oratorical substitute—and had he given full voice to the public mood, he would have been pilloried as an “angry black man.” But Obama didn’t have to play Huey Long. He could have pursued a sober but determined execution of justice and an explicit, major jobs initiative—of which there have been exactly none, the too-small stimulus included, to the present day.

Rich goes on to argue, very convincingly, that Obama decided to pass on the unemployment issue because he accepted the advice of Bob Rubin acolytes like Tim Geithner, who urged the president to move instead toward the Tea Party and take up the “austerity” mantle:

A once-hoped-for WPA-style public-works program, unloved by Geithner, had been downsized in the original stimulus, and now a tardy, halfhearted stab at a $50 billion transportation-infrastructure jobs bill produced a dandy Obama speech but nothing else.

Obama soon retreated into the tea-party mantra of fiscal austerity… It’s his fault, no one else’s, that he seems diffident about the unemployed. Each time there’s a jolt in the jobless numbers, he and his surrogates compound that profile by farcically reshuffling the same clichés, from “stuck in a ditch” to “headwinds” (first used by Geithner in March 2009—retire it already!) to “bumps in the road.” It’s true the administration has caught few breaks and the headwinds have been strong, but voters have long since tuned out this monotonous apologia. The White House’s repeated argument that the stimulus saved as many as 3 million jobs, accurate though it may be, is another nonstarter when 14 million Americans are looking for work.

Rich in this way describes the central failure of the Obama presidency. Obama entered the White House in the middle of a great economic crisis, and his Geithner/Rubin solution was to spend mind-boggling amounts bailing out Wall Street, while extracting no conditions or reforms in exchange, and punishing no one. Then, by abandoning jobs programs and taking up the Tea Party’s “austerity” model, he essentially asked ordinary Americans to foot the bill for this no-strings-attached rescue program.

Rich thinks that this is going to hurt him with voters next fall, and he may be right. It could also be that Americans don’t particularly care about Obama’s failure to deal with Wall Street (or, more specifically, to clean up his completely broken and corrupted regulatory apparatus), and the administration’s political calculus is that that apathy and unfamiliarity with the root causes of the crisis will be such that there’s no real downside to continuing to take mountains of financial-sector cash while slow-rolling the cleanup.
If that’s what the Obama administration is thinking, I can certainly see the logic there. They may well be right that to solve the problem of getting re-elected in 2012, the president’s best bet is to take care of the Citigroups and JP Morgans on his Pioneer list, blow Romney or Bachmann away on the spending front, and then non-act and non-police his way straight into a second term.
But the problem is that doing that leaves the whole running-the-country matter unresolved. He might win re-election, but by taking this course of non-action, he’s risking another 2008-style crash, which Rich correctly points out would render the results of next year’s election irrelevant:

The alternative is a failure of historic proportions. Those who gamed the economy to near devastation—so much so that the nation turned to an untried young leader in desperation and in hope—would once again inherit the Earth. Unless and until there’s a purging of the crimes that brought our president to his unlikely Inauguration Day, much more in America than the second term of his administration will be at stake.

More and more, I hear that Obama’s hands-off-Wall-Street policy is a matter of concern within what used to be his own circle – Beltway professionals, intellectuals, lobbyists, academics, etc. Pretty clearly, that concern is bleeding into the mainstream press now. It’ll be interesting to see if Rich is right about it bleeding into the voter pool next.

Courtesy of rollingstone.com

The People vs. Goldman Sachs

The People vs. Goldman Sachs
Matt Taibbi: A Senate committee has laid out the evidence. Now the Justice Department should bring criminal charges.
By Matt Taibbi
Courtesy of rollingstone.com

They weren't murderers or anything; they had merely stolen more money than most people can rationally conceive of, from their own customers, in a few blinks of an eye. But then they went one step further. They came to Washington, took an oath before Congress, and lied about it.
Thanks to an extraordinary investigative effort by a Senate subcommittee that unilaterally decided to take up the burden the criminal justice system has repeatedly refused to shoulder, we now know exactly what Goldman Sachs executives like Lloyd Blankfein and Daniel Sparks lied about. We know exactly how they and other top Goldman executives, including David Viniar and Thomas Montag, defrauded their clients. America has been waiting for a case to bring against Wall Street. Here it is, and the evidence has been gift-wrapped and left at the doorstep of federal prosecutors, evidence that doesn't leave much doubt: Goldman Sachs should stand trial.
The great and powerful Oz of Wall Street was not the only target of Wall Street and the Financial Crisis: Anatomy of a Financial Collapse, the 650-page report just released by the Senate Subcommittee on Investigations, chaired by Democrat Carl Levin of Michigan, alongside Republican Tom Coburn of Oklahoma. Their unusually scathing bipartisan report also includes case studies of Washington Mutual and Deutsche Bank, providing a panoramic portrait of a bubble era that produced the most destructive crime spree in our history — "a million fraud cases a year" is how one former regulator puts it. But the mountain of evidence collected against Goldman by Levin's small, 15-desk office of investigators — details of gross, baldfaced fraud delivered up in such quantities as to almost serve as a kind of sarcastic challenge to the curiously impassive Justice Department — stands as the most important symbol of Wall Street's aristocratic impunity and prosecutorial immunity produced since the crash of 2008.
To date, there has been only one successful prosecution of a financial big fish from the mortgage bubble, and that was Lee Farkas, a Florida lender who was just convicted on a smorgasbord of fraud charges and now faces life in prison. But Farkas, sadly, is just an exception proving the rule: Like Bernie Madoff, his comically excessive crime spree (which involved such lunacies as kiting checks to his own bank and selling loans that didn't exist) was almost completely unconnected to the systematic corruption that led to the crisis. What's more, many of the earlier criminals in the chain of corruption — from subprime lenders like Countrywide, who herded old ladies and ghetto families into bad loans, to rapacious banks like Washington Mutual, who pawned off fraudulent mortgages on investors — wound up going belly up, sunk by their own greed.
But Goldman, as the Levin report makes clear, remains an ascendant company precisely because it used its canny perception of an upcoming disaster (one which it helped create, incidentally) as an opportunity to enrich itself, not only at the expense of clients but ultimately, through the bailouts and the collateral damage of the wrecked economy, at the expense of society. The bank seemed to count on the unwillingness or inability of federal regulators to stop them — and when called to Washington last year to explain their behavior, Goldman executives brazenly misled Congress, apparently confident that their perjury would carry no serious consequences. Thus, while much of the Levin report describes past history, the Goldman section describes an ongoing? crime — a powerful, well-connected firm, with the ear of the president and the Treasury, that appears to have conquered the entire regulatory structure and stands now on the precipice of officially getting away with one of the biggest financial crimes in history.
Defenders of Goldman have been quick to insist that while the bank may have had a few ethical slips here and there, its only real offense was being too good at making money. We now know, unequivocally, that this is bullshit. Goldman isn't a pudgy housewife who broke her diet with a few Nilla Wafers between meals — it's an advanced-stage, 1,100-pound medical emergency who hasn't left his apartment in six years, and is found by paramedics buried up to his eyes in cupcake wrappers and pizza boxes. If the evidence in the Levin report is ignored, then Goldman will have achieved a kind of corrupt-enterprise nirvana. Caught, but still free: above the law.
To fully grasp the case against Goldman, one first needs to understand that the financial crime wave described in the Levin report came on the heels of a decades-long lobbying campaign by Goldman and other titans of Wall Street, who pleaded over and over for the right to regulate themselves.
Before that campaign, banks were closely monitored by a host of federal regulators, including the Office of the Comptroller of the Currency, the FDIC and the Office of Thrift Supervision. These agencies had examiners poring over loans and other transactions, probing for behavior that might put depositors or the system at risk. When the examiners found illegal or suspicious behavior, they built cases and referred them to criminal authorities like the Justice Department.
This system of referrals was the backbone of financial law enforcement through the early Nineties. William Black was senior deputy chief counsel at the Office of Thrift Supervision in 1991 and 1992, the last years of the S&L crisis, a disaster whose pansystemic nature was comparable to the mortgage fiasco, albeit vastly smaller. Black describes the regulatory MO back then. "Every year," he says, "you had thousands of criminal referrals, maybe 500 enforcement actions, 150 civil suits and hundreds of convictions."

But beginning in the mid-Nineties, when former Goldman co-chairman Bob Rubin served as Bill Clinton's senior economic-policy adviser, the government began moving toward a regulatory system that relied almost exclusively on voluntary compliance by the banks. Old-school criminal referrals disappeared down the chute of history along with floppy disks and scripted television entertainment. In 1995, according to an independent study, banking regulators filed 1,837 referrals. During the height of the financial crisis, between 2007 and 2010, they averaged just 72 a year.

But spiking almost all criminal referrals wasn't enough for Wall Street. In 2004, in an extraordinary sequence of regulatory rollbacks that helped pave the way for the financial crisis, the top five investment banks — Goldman, Merrill Lynch, Morgan Stanley, Lehman Brothers and Bear Stearns — persuaded the government to create a new, voluntary approach to regulation called Consolidated Supervised Entities. CSE was the soft touch to end all soft touches. Here is how the SEC's inspector general described the program's regulatory army: "The Office of CSE Inspections has only two staff in Washington and five staff in the New York regional office."
Among the bankers who helped convince the SEC to go for this ludicrous program was Hank Paulson, Goldman's CEO at the time. And in exchange for "submitting" to this new, voluntary regime of law enforcement, Goldman and other banks won the right to lend in virtually unlimited amounts, regardless of their cash reserves — a move that fueled the catastrophe of 2008, when banks like Bear and Merrill were lending out 35 dollars for every one in their vaults.
Goldman's chief financial officer then and now, a fellow named David Viniar, wrote a letter in February 2004, commending the SEC for its efforts to develop "a regulatory framework that will contribute to the safety and soundness of financial institutions and markets by aligning regulatory capital requirements more closely with well-developed internal risk-management practices." Translation: Thanks for letting us ignore all those pesky regulations while we turn the staid underwriting business into a Charlie Sheen house party.
Goldman and the other banks argued that they didn't need government supervision for a very simple reason: Rooting out corruption and fraud was in their own self-interest. In the event of financial wrongdoing, they insisted, they would do their civic duty and protect the markets. But in late 2006, well before many of the other players on Wall Street realized what was going on, the top dogs at Goldman — including the aforementioned Viniar — started to fear they were sitting on a time bomb of billions in toxic assets. Yet instead of sounding the alarm, the very first thing Goldman did was tell no one. And the second thing it did was figure out a way to make money on the knowledge by screwing its own clients. So not only did Goldman throw a full-blown "bite me" on its own self-righteous horseshit about "internal risk management," it more or less instantly sped way beyond inaction straight into craven manipulation.
"This is the dog that didn't bark," says Eliot Spitzer, who tangled with Goldman during his years as New York's attorney general. "Their whole political argument for a decade was 'Leave us alone, trust us to regulate ourselves.' They not only abdicated that responsibility, they affirmatively traded against the entire market."
By the end of 2006, Goldman was sitting atop a $6 billion bet on American home loans. The bet was a byproduct of Goldman having helped create a new trading index called the ABX, through which it accumulated huge holdings in mortgage-related securities. But in December 2006, a series of top Goldman executives — including Viniar, mortgage chief Daniel Sparks and senior executive Thomas Montag — came to the conclusion that Goldman was overexposed to mortgages and should get out from under its huge bet as quickly as possible. Internal memos indicate that the executives soon became aware of the host of scams that would crater the global economy: home loans awarded with no documentation, loans with little or no equity in them. On December 14th, Viniar met with Sparks and other executives, and stressed the need to get "closer to home" — i.e., to reduce the bank's giant bet on mortgages.
Sparks followed up that meeting with a seven-point memo laying out how to unload the bank's mortgages. Entry No. 2 is particularly noteworthy. "Distribute as much as possible on bonds created from new loan securitizations," Sparks wrote, "and clean previous positions." In other words, the bank needed to find suckers to buy as much of its risky inventory as possible. Goldman was like a car dealership that realized it had a whole lot full of cars with faulty brakes. Instead of announcing a recall, it surged ahead with a two-fold plan to make a fortune: first, by dumping the dangerous products on other people, and second, by taking out life insurance against the fools who bought the deadly cars.
The day he received the Sparks memo, Viniar seconded the plan in a gleeful cheerleading e-mail. "Let's be aggressive distributing things," he wrote, "because there will be very good opportunities as the markets [go] into what is likely to be even greater distress, and we want to be in a position to take advantage of them." Translation: Let's find as many suckers as we can as fast as we can, because we'll only make more money as more and more shit hits the fan.
By February 2007, two months after the Sparks memo, Goldman had gone from betting $6 billion on mortgages to betting $10 billion against them — a shift of $16 billion. Even CEO Lloyd "I'm doing God's work" Blankfein wondered aloud about the bank's progress in "cleaning" its crap. "Could/should we have cleaned up these books before," Blankfein wrote in one e-mail, "and are we doing enough right now to sell off cats and dogs in other books throughout the division?"
How did Goldman sell off its "cats and dogs"? Easy: It assembled new batches of risky mortgage bonds and dumped them on their clients, who took Goldman's word that they were buying a product the bank believed in. The names of the deals Goldman used to "clean" its books — chief among them Hudson and Timberwolf — are now notorious on Wall Street. Each of the deals appears to represent a different and innovative brand of shamelessness and deceit.
In the marketing materials for the Hudson deal, Goldman claimed that its interests were "aligned" with its clients because it bought a tiny, $6 million slice of the riskiest portion of the offering. But what it left out is that it had shorted the entire deal, to the tune of a $2 billion bet against its own clients. The bank, in fact, had specifically designed Hudson to reduce its exposure to the very types of mortgages it was selling — one of its creators, trading chief Michael Swenson, later bragged about the "extraordinary profits" he made shorting the housing market. All told, Goldman dumped $1.2 billion of its own crappy "cats and dogs" into the deal — and then told clients that the assets in Hudson had come not from its own inventory, but had been "sourced from the Street."
Hilariously, when Senate investigators asked Goldman to explain how it could claim it had bought the Hudson assets from "the Street" when in fact it had taken them from its own inventory, the bank's head of CDO trading, David Lehman, claimed it was accurate to say the assets came from "the Street" because Goldman was part of the Street. "They were like, 'We are the Street,'" laughs one investigator.
Hudson lost massive amounts of money almost immediately after the sale was completed. Goldman's biggest client, Morgan Stanley, begged it to liquidate the investment and get out while they could still salvage some value. But Goldman refused, stalling for months as its clients roasted to death in a raging conflagration of losses. At one point, John Pearce, the Morgan Stanley rep dealing with Goldman, lost his temper at the bank's refusal to sell, breaking his phone in frustration. "One day I hope I get the real reason why you are doing this to me," he told a Goldman broker.
Goldman insists it was only required to liquidate the assets "in an orderly fashion." But the bank had an incentive to drag its feet: Goldman's huge bet against the deal meant that the worse Hudson performed, the more money Goldman made. After all, the entire point of the transaction was to screw its own clients so Goldman could "clean its books." The crime was far from victimless: Morgan Stanley alone lost nearly $960 million on the Hudson deal, which admittedly doesn't do much to tug the heartstrings. Except that quickly after Goldman dumped this near-billion-dollar loss on Morgan Stanley, Morgan Stanley turned around and dumped it on taxpayers, who within a year were spending $10 billion bailing out the sucker bank through the TARP program.
It is worth pointing out here that Goldman's behavior in the Hudson scam makes a mockery of standards in the underwriting business. Courts have held that "the relationship between the underwriter and its customer implicitly involves a favorable recommendation of the issued security." The SEC, meanwhile, requires that broker-dealers like Goldman disclose "material adverse facts," which among other things includes "adverse interests." Former prosecutors and regulators I interviewed point to these areas as potential avenues for prosecution; you can judge for yourself if a $2 billion bet against clients qualifies as an "adverse interest" that should have been disclosed.
But these "adverse interests" weren't even the worst part of Hudson. Goldman also used a complex pricing method to turn the deal into an impressive triple screwing. Essentially, Goldman bought some of the mortgage assets in the Hudson deal at a discount, resold them to clients at a higher price and pocketed the difference. This is a little like getting an invoice from an interior decorator who, in addition to his fee for services, charges you $170 a roll for brand-name wallpaper he's actually buying off the back of a truck for $63.
To recap: Goldman, to get $1.2 billion in crap off its books, dumps a huge lot of deadly mortgages on its clients, lies about where that crap came from and claims it believes in the product even as it's betting $2 billion against it. When its victims try to run out of the burning house, Goldman stands in the doorway, blasts them all with gasoline before they can escape, and then has the balls to send a bill overcharging its victims for the pleasure of getting fried.
Timberwolf, the most notorious of Goldman's scams, was another car whose engine exploded right out of the lot. As with Hudson, Goldman clients who bought into the deal had no idea they were being sold the "cats and dogs" that the bank was desperately trying to get off its books. An Australian hedge fund called Basis Capital sank $100 million into the deal on June 18th, 2007, and almost immediately found itself in a full-blown death spiral. "We bought it, and Goldman made their first margin call 16 days later," says Eric Lewis, a lawyer for Basis, explaining how Goldman suddenly required his client to put up cash to cover expected losses. "They said, 'We need $5 million.' We're like, what the fuck, what's going on?" Within a month, Basis lost $37.5 million, and was forced to file for bankruptcy.
In many ways, Timberwolf was a perfect symbol of the insane faith-based mathematics and blackly corrupt marketing that defined the mortgage bubble. The deal was built on a satanic derivative structure called the CDO-squared. A normal CDO is a giant pool of loans that are chopped up and layered into different "tranches": the prime or AAA level, the BBB or "mezzanine" level, and finally the equity or "toxic waste" level. Banks had no trouble finding investors for the AAA pieces, which involve betting on the safest borrowers in the pool. And there were usually investors willing to make higher-odds bets on the crack addicts and no-documentation immigrants at the potentially lucrative bottom of the pool. But the unsexy BBB parts of the pool were hard to sell, and the banks didn't want to be stuck holding all of these risky pieces. So what did they do? They took all the extra unsold pieces, threw them in a big box, and repeated the original "tranching" process all over again. What originally were all BBB pieces were diced up and divided anew — and, presto, you suddenly had new AAA securities and new toxic-waste securities.
A CDO, to begin with, is already a highly dubious tool for magically converting risky subprime mortgages into AAA investments. A CDO-squared doubles down on that lunacy, taking the waste products of the original process and converting them into AAA investments. This is kind of like taking all the kids who were picked last to play volleyball in every gym class of every public school in the state, throwing them in a new gym, and pretending that the first 10 kids picked are varsity-level players. Then you take all the unpicked kids left over from that process, throw them in a gym with similar kids from all 50 states, and call the first 10 kids picked All-Americans.
Those "All-Americans" were the assets in the Timberwolf deal. These were the recycled nightmare dregs of the mortgage craze — to quote Beavis and Butt-Head, "the ass of the ass."
Goldman knew the deal sucked long before it dinged the Aussies in Basis Capital for $100 million. In February 2007, Goldman mortgage chief Daniel Sparks and senior executive Thomas Montag exchanged e-mails about the risk of holding all the crap in the Timberwolf deal.
MONTAG: "CDO-squared — how big and how dangerous?"
SPARKS: "Roughly $2 billion, and they are the deals to worry about."
Goldman executives were so "worried" about holding this stuff, in fact, that they quickly sent directives to all of their salespeople, offering "ginormous" credits to anyone who could manage to find a dupe to take the Timberwolf All-Americans off their hands. On Wall Street, directives issued from above are called "axes," and Goldman's upper management spent a great deal of the spring of 2007 "axing" Timberwolf. In a crucial conference call on May 20th that included Viniar, Sparks oversaw a PowerPoint presentation spelling out, in writing, that Goldman's mortgage desk was "most concerned" about Timberwolf and another CDO-squared deal. In a later e-mail, he offered an even more dire assessment of such deals: "There is real market-meltdown potential."
On May 22nd, two days after the conference call, Goldman sales rep George Maltezos urged the Australians at Basis to hurry up and buy what the bank knew was a deadly investment, suggesting that the "return on invested capital for Basis is over 60 percent." Maltezos was so stoked when he first identified the Aussies as a target in the scam that he subject-lined his e-mail "Utopia."
"I think," Maltezos wrote, "I found white elephant, flying pig and unicorn all at once."
The whole transaction can be summed up by the now-notorious e-mail that Montag wrote to Sparks only four days after they sold $100 million of Timberwolf to Basis. "Boy," Montag wrote, "that timeberwof [sic] was one shitty deal."
Last year, in the one significant regulatory action the government has won against the big banks, the SEC sued Goldman over a scam called Abacus, in which the bank "rented" its name to a billionaire hedge-fund viper to fleece investors out of more than $1 billion. Goldman agreed to pay $550 million to settle the suit, though no criminal charges were brought against the bank or its executives. But in light of the Levin report, that SEC action now looks woefully inadequate. Yes, it was a record fine — but it pales in comparison to the money Goldman has taken from the government since the crash. As Spitzer notes, Goldman's reaction was basically, "OK, we'll pay you $550 million to settle the Abacus case — that's a small price to pay for the $12.9 billion we got for the AIG bailout." Now, adds Spitzer, "everybody can just go home and pretend it was only $12.4 billion — and Goldman can smile all the way to the bank. The question is, now that we've seen this report, there are a bunch of story lines that seem to be at least as egregious as Abacus. Are they going to bring cases?"
Here is where the supporters of Goldman and other big banks will stand up and start wanding the air full of confusing terms like "scienter" and "loss causation" — legalese mumbo jumbo that attempts to convince the ignorantly enraged onlooker that, according to American law, these grotesque tales of grand theft and fraud you've just heard are actually more innocent than you think. Yes, they will say, it may very well be a prosecutable crime for a corner-store Arab to take $2 from a customer selling tap water as Perrier. But that does not mean it's a crime for Goldman Sachs to take $100 million from a foreign hedge fund doing the same thing! No, sir, not at all! Then you'll be told that the Supreme Court has been limiting corporate liability for fraud for decades, that in order to gain a conviction one must prove a conscious intent to deceive, that the 1976 ruling in Ernst and Ernst clearly states....
Leave all that aside for a moment. Though many legal experts agree there is a powerful argument that the Levin report supports a criminal charge of fraud, this stuff can keep the lawyers tied up for years. So let's move on to something much simpler. In the spring of 2010, about a year into his investigation, Sen. Levin hauled all of the principals from these rotten Goldman deals to Washington, made them put their hands on the Bible and take oaths just like normal people, and demanded that they explain themselves. The legal definition of financial fraud may be murky and complex, but everybody knows you can't lie to Congress.
"Article 18 of the United States Code, Section 1001," says Loyola University law professor Michael Kaufman. "There are statutes that prohibit perjury and obstruction of justice, but this is the federal statute that explicitly prohibits lying to Congress."
The law is simple: You're guilty if you "knowingly and willfully" make a "materially false, fictitious or fraudulent statement or representation." The punishment is up to five years in federal prison.
When Roger Clemens went to Washington and denied taking a shot of steroids in his ass, the feds indicted him — relying not on a year's worth of graphically self-incriminating e-mails, but chiefly on the testimony of a single individual who had been given a deal by the government. Yet the Justice Department has shown no such prosecutorial zeal since April 27th of last year, when the Goldman executives who oversaw the Timberwolf, Hudson and Abacus deals arrived on the Hill and one by one — each seemingly wearing the same mask of faint boredom and irritated condescension — sat before Levin's committee and dodged volleys of questions.
Before the hearing, even some of Levin's allies worried privately about his taking on Goldman and other powerful interests. The job, they said, was best left to professional prosecutors, people with experience building cases. "A senator's office is not an enormous repository of expertise," one former regulator told me. But in the case of this particular senator, that concern turned out to be misplaced. A Harvard-educated lawyer, Levin has a long record of using his subcommittee to spend a year or more carefully building cases that lead to criminal prosecutions. His 2003 investigation into abusive tax shelters led to 19 indictments of individuals at KPMG, while a 2006 probe fueled insider-trading charges against the notorious Wyly brothers, a pair of billionaire Texans who manipulated offshore investment trusts. The investigation of Goldman was an attempt to find out what went wrong in the years leading up to the financial crash, and the questioning of the bank's executives was not one of those for-the-cameras-only events where congressmen wing ad-libbed questions in search of sound bites. In the weeks leading up to the hearing, Levin's team carefully rehearsed the moment with committee members. They knew the possible answers that Goldman might give, and they were ready with specific counterquestions. What ensued looked more like a good old-fashioned courtroom grilling than a photo-op for grinning congressmen.
Sparks, who stepped down as Goldman's mortgage chief in 2008, cut a striking figure in his testimony. With his severe crew cut, deep-set eyes and jockish intransigence, he looked like a cross between H.R. Haldeman and John Rocker. He repeatedly dodged questions from Levin about whether or not the bank had a responsibility to tell its clients that it was betting against the same stuff it was selling them. When asked directly if he had that responsibility, Sparks answered, "The clients who did not want to participate in that deal did not." When Levin pressed him again, asking if he had a duty to disclose that Goldman had an "adverse interest" to the deals being sold to clients, Sparks fidgeted and pretended not to comprehend the question. "Mr. Chairman," he said, "I'm just trying to understand."
OK, fine — non-answer answers. "My guess is they were all pretty well coached up," says Kaufman, the law professor. But then Sparks had a revealing exchange with Sen. Jon Tester of Montana. Tester calls the Goldman deals "a wreck waiting to happen," noting that the CDOs "were all downgraded to junk in very short order."
At which point, Sparks replies, "Well, senator, at the time we did those deals, we expected those deals to perform."
Tester then cannily asks if by "perform," Sparks means go to shit — which would have been an honest answer. "Perform in what way?" Tester asks. "Perform to go to junk so that the shorts made out?"
Unable to resist the taunt, Sparks makes a fateful decision to defend his honor. "To not be downgraded to junk in that short a time frame," he says. Then he pauses and decides to dispense with the hedging phrase "in that short a time frame."
"In fact," Sparks says, "to not be downgraded to junk."
So Sparks goes before Congress and, under oath, tells a U.S. senator that at the time he was selling Timberwolf, he expected it to "perform." But an internal document he approved in May 2007 predicted exactly the opposite, warning that Goldman's mortgage desk expected such deals to "underperform." Here are some other terms that Sparks used in e-mails about the subprime market affecting deals like Timberwolf around that same time: "bad and getting worse," "get out of everything," "game over," "bad news everywhere" and "the business is totally dead."
And we indicted Roger Clemens?
Another extraordinary example of Goldman's penchant for truth avoidance came when Joshua Birnbaum, former head of structured-products trading for the bank, gave a deposition to Levin's committee. Asked point-blank if Goldman's huge "short" on mortgages was an intentional bet against the market or simply a "hedge" against potential losses, Birnbaum played dumb. "I do not know whether the shorts were a hedge," he said. But the committee, it turned out, already knew that Birnbaum had written a memo in which he had spelled out the truth: "The shorts were not a hedge." When Birnbaum's lawyers learned that their client's own words had been used against him, they hilariously sent an outraged letter complaining that Birnbaum didn't know the committee had his memo when he decided to dodge the question. They also submitted a "supplemental" answer. Birnbaum now said, "Having reviewed the document the staff did not previously provide me" — his own words! — "I can now recall that ... I believed ... these short positions were not a hedge." (Goldman, for its part, dismisses Birnbaum as a single trader who "neither saw nor knew the firm's overall risk positions.")
When it came time for Goldman CEO Lloyd Blankfein to testify, the banker hedged and stammered like a brain-addled boxer who couldn't quite follow the questions. When Levin asked how Blankfein felt about the fact that Goldman collected $13 billion from U.S. taxpayers through the AIG bailout, the CEO deflected over and over, insisting that Goldman would somehow have made that money anyway through its private insurance policies on AIG. When Levin pressed Blankfein, pointing out that he hadn't answered the question, Blankfein simply peered at Levin like he didn't understand.
But Blankfein also testified unequivocally to the following:
"Much has been said about the supposedly massive short Goldman Sachs had on the U.S. housing market. The fact is, we were not consistently or significantly net-short the market in residential mortgage-related products in 2007 and 2008. We didn't have a massive short against the housing market, and we certainly did not bet against our clients."
Levin couldn't believe what he was hearing. "Heck, yes, I was offended," he says. "Goldman's CEO claimed the firm 'didn't have a massive short,' when the opposite was true." First of all, in Goldman's own internal memoranda, the bank calls its giant, $13 billion bet against mortgages "the big short." Second, by the time Sparks and Co. were unloading the Timberwolves of the world on their "unicorns" and "flying pigs" in the summer of 2007, Goldman's mortgage department accounted for 54 percent of the bank's risk. That means more than half of all the bank's risk was wrapped up in its bet against the mortgage market — a "massive short" by any definition. Indeed, the bank was betting so much money on mortgages that its executives had become comically blasé about giant swings on a daily basis. When Goldman lost more than $100 million on August 8th, 2007, Montag circulated this e-mail: "So who lost the hundy?"
This month, after releasing his report, Levin sent all of this material to the Justice Department. His conclusion was simple. "In my judgment," he declared, "Goldman clearly misled their clients, and they misled the Congress." Goldman, unsurprisingly, disagreed: "Our testimony was truthful and accurate, and that applies to all of our testimony," said spokesman Michael DuVally. In a statement to Rolling Stone, Goldman insists that its behavior throughout the period covered in the Levin report was consistent with responsible business practice, and that its machinations in the mortgage market were simply an attempt to manage risk.
It wouldn't be hard for federal or state prosecutors to use the Levin report to make a criminal case against Goldman. I ask Eliot Spitzer what he would do if he were still attorney general and he saw the Levin report. "Once the steam stopped coming out of my ears, I'd be dropping so many subpoenas," he says. "And I would parse every potential inconsistency between the testimony they gave to Congress and the facts as we now understand them."
I ask what inconsistencies jump out at him. "They keep claiming they were only marginally short, that it was more just servicing their clients," he says. "But it sure doesn't look like that." He pauses. "They were $13 billion short. That's big — 50 percent of their risk. It was so completely disproportionate."
Lloyd Blankfein went to Washington and testified under oath that Goldman Sachs didn't make a massive short bet and didn't bet against its clients. The Levin report proves that Goldman spent the whole summer of 2007 riding a "big short" and took a multibillion-dollar bet against its clients, a bet that incidentally made them enormous profits. Are we all missing something? Is there some different and higher standard of triple- and quadruple-lying that applies to bank CEOs but not to baseball players?
This issue is bigger than what Goldman executives did or did not say under oath. The Levin report catalogs dozens of instances of business practices that are objectively shocking, no matter how any high-priced lawyer chooses to interpret them: gambling billions on the misfortune of your own clients, gouging customers on prices millions of dollars at a time, keeping customers trapped in bad investments even as they begged the bank to sell, plus myriad deceptions of the "failure to disclose" variety, in which customers were pitched investment deals without ever being told they were designed to help Goldman "clean" its bad inventory. For years, the soundness of America's financial system has been based on the proposition that it's a crime to lie in a prospectus or a sales brochure. But the Levin report reveals a bank gone way beyond such pathetic little boundaries; the collective picture resembles a financial version of The Jungle, a portrait of corporate sociopathy that makes you never want to go near a sausage again.
Upton Sinclair's narrative shocked the nation into a painful realization about the pervasive filth and corruption behind America's veneer of smart, robust efficiency. But Carl Levin's very similar tale probably will not. The fact that this evidence comes from a U.S. senator's office, and not the FBI or the SEC, is itself an element in the worsening tale of lawlessness and despotism that sparked a global economic meltdown. "Why should Carl Levin be the one who needs to do this?" asks Spitzer. "Where's the SEC? Where are any of the regulatory bodies?"
This isn't just a matter of a few seedy guys stealing a few bucks. This is America: Corporate stealing is practically the national pastime, and Goldman Sachs is far from the only company to get away with doing it. But the prominence of this bank and the high-profile nature of its confrontation with a powerful Senate committee makes this a political story as well. If the Justice Department fails to give the American people a chance to judge this case — if Goldman skates without so much as a trial — it will confirm once and for all the embarrassing truth: that the law in America is subjective, and crime is defined not by what you did, but by who you are.

America’s Bloodlust Leads to Financial Woes...

America’s Bloodlust Leads to Financial Woes...

Courtesy of rt.com

Could America’s bloodlust be leading us to bankruptcy? The US is one of the last Western democracies which still practices the death penalty, and the policy is coming at a very high financial cost.
But is housing and then executing the worst criminals really worth it?
Convicted killer Jonathan Fajardo is one of the latest additions to California’s death row. For the family of Fajardo’s victim, his death sentence gives them a sense of justice.
“We can finally move forward and Fajardo got what he deserved,” says Marlene Townes, the grandmother of Cheryl Green, who was killed by Fajardo.
But there is a high price for society’s desire for retribution:$300 million per executed prisoner.
Since 1978, 13 inmates have been put to death and some $4 billion have been spent on California’s death row according to a newly released study. With more than 700 inmates still waiting to be executed, that cost is expected to jump to $9 billion by 2030.
Throughout the years, voters have consistently shown their approval for the death penalty. Now the argument over whether to keep pouring money and people into death row comes at a time when California is facing a major budget shortfall of $25 billion.
Leading many to argue the death penalty is a luxury the cash strapped state can no longer afford.
“There are so many different things you can put that budget towards instead of killing people,“ says Derrell Crawford, a South Los Angeles resident.“You can put that budget for programs to improve our streets, for the youth, housing programs for the homeless,” Crawford adds.
Though in one of Riverside’s middle class neighborhoods, school construction is complete but there is no money to operate it so it remains empty.
“It costs more to keep someone in prison in the state of California than it does to send a student to a private school like USC,” says teacher Ron Gochez.“What it says is that our state is more than willing to spend money to imprison our communities,” Gochez adds.
A short sighted policy according to Gochez, who as a community organizer sees the human costs of the economic crisis up close.
“If you have a higher unemployment rate, spend more money on incarceration and at the same time spending less money on education, that’s a perfect recipe for disaster,” says Gochez.
While capital punishment is meant to deter the most heinous of crimes, in one of Los Angeles' poorest and most crime ridden neighborhoods, the debate is still not settled over whether it’s even working.
Nevertheless a bill to abolish the death penalty has been introduced in the state legislature.
While the issue remains a moral one for many, the final verdict may be one based on overwhelming financial evidence.
“What’s happening in California is the same that’s happening in Greece,” says Collapse Network CEO Michael Ruppert. With the state in financial disarray, Ruppert says it is only a matter of time before they open up the gates to jails on the west coast and let the prisoners on the street for the sake of the state’s economy.
With Jerry Brown back in office nearly 30 years after he walked away from two terms as governor, Ruppert says that he might be the state’s only hope.
“Jerry Brown might be the guy in California to remove the death penalty here which I would be in favor of,” says Ruppert.

Congress Prepares Repressive Internet Legislation...

Courtesy of rt.com

­While some lawmakers are leaning towards a legislation that would cripple the internet and give the government the power to wipe websites offline, a group of professors have penned a letter to Congress protesting the proposed Protect IP Act.
The letter comes from three “law professors who teach about write about intellectual property law” and urges Congress to reject the Act, which is currently on hold in the Senate after Sen. Ron Wyden (D-OR) put a freeze on it back in May.
The Protect IP Act, if approved, would give the government the power take websites offline and censor search engines after copyright infringement claims are made by the content in question’s actual owner. Last month screenwriters stood up for the bill, speaking in front of Congress about what the passing would mean to them.
"There's a popular misconception that when you steal content, you’re only stealing from rich corporations who don’t need the money," said Gina Gionfriddo, a television writer and member of the Writers Guild of America. "But Internet piracy really takes income out of my pocket, out of the pockets of actors, writers, directors and technicians who create these programs."
The attorneys that wrote a letter last week object, however, and say that, “although the problems the Act attempts to address . . . are serious ones presenting new and difficult enforcement challenges, the approach taken . . . has grave constitutional infirmities, potentially dangerous consequences for the stability and security of the Internet’s addressing system and will undermine Unites States foreign policy and strong support of free expression on the Internet around the world.”
"At a time when many foreign governments have dramatically stepped up their efforts to censor Internet communications, the [Protect IP Act] would incorporate into U.S. law – for the first time – a principle more closely associated with those repressive regimes: a right to insist on the removal of content from the global Internet, regardless of where it may have originated or be located, in service of the exigencies of domestic law."
The lawyers add that the Act would threaten the security of the Internet at large and would damage web sites worldwide, not to mention challenge the already-existing Internet freedom in America but also the First Amendment.

Stimulus Cost $278,000 Per Job...

Stimulus Cost $278,000 Per Job...

Courtesy of rt.com

If you got a job through Obama’s stimulus bill, maybe you should have asked the president for a personal check instead.
 A study released by the Weekly Standard says that the American Recovery and Reinvestment Act of 2009 has cost $666 billion so far to keep or create 2.38 million jobs.
The Weekly Standard got out their calculators after the White House’s Council of Economic Advisers released that figure on Friday, however, and came to the conclusion that the costly legislation was perhaps not the best idea.
"That's a cost to taxpayers of $278,000 per job," reads the latest issue of the DC-based magazine. "In other words, the government could simply have cut a $100,000 check to everyone whose employment was allegedly made possible by the 'stimulus,' and taxpayers would have come out $427 billion ahead."
The White House isn’t contesting the math, but says it’s a silly way of looking at the aftermath of the Act.
Liz Ozhorn, the spokesperson behind the stimulus, says that there was more to the Recovery Act than just job creation. In a statement to Fox News, Ozhorn says the bill was “also an investment in American infrastructure, education and industries that are critical to America's long-term success and investment in the economic future of America's working families."
In addition to funding salaries, it also went towards construction materials and new factories.
Even still, the $666 billion did indeed come from taxpayer pockets, and if the Recovery Act wasn’t enacted only to create jobs, that was certainly a big part of it. Not only are there 2.38 million jobs created, however, but the unemployment rate itself has gone up since the Act began. The rate was at only 7.1 when the Act was started and is now at over 9 percent.
"If you look at unemployment, unemployment has gone up by 1.9 million Americans,” said Sen. Jon Kyl (R-AZ) last week. "So this is not like a situation where you said, 'I inherited a bad economy, but I'm gradually making it better.' He's making it worse."
The White House says, though, they the Recovery Act could have helped keep or make as many as 3.6 million jobs by the end of this past March and that the 2.38 million statistic is at the bottom end of their estimate.
Since Obama entered the White House the national debt has increased by almost $5 trillion.