Racial Slur Moment of the Weekend

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The ever-racist Pat Buchanan outdid himself last night debating Rachel Maddow on affirmative action, Sonia Sotomayor and why we don't need no brown-skinned people here, thanks. To Maddow pointing out that 108 of 110 Supreme Court judges have been white:

"White men were 100% of the people that wrote the Constitution, 100% of the people that signed the Declaration of Independence, 100% of the people who died at Gettysburg and Vicksburg...This (is) a country built basically by white folks."

- Common Dreams

Where Did Those Traders in Toxic Assets Go?

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(Tomgram) Forward:

I woke up one morning late last week to the news that taxpayers, already $149 billion in the hole in the Treasury Department's TARP bailout program, are set to lose even more. As rescued banks now try to extricate themselves from the government's control, they must buy back stock warrants proffered at the time of the bailout, which, as the New York Times described it, offer "the right to purchase shares in each of the companies at roughly the price of their shares at the time of the deals."

As it happens, thanks largely to that taxpayer-funded bailout, bank stocks have risen since last fall's meltdown. Selling those warrants, then, should mean a tidy profit for taxpayers. But no such luck, it seems. Almost a dozen small banks have already bought back their warrants, and for a considerable discount -- a mere 66% of their value -- costing taxpayers upwards of $10 million. If this were to continue when giant firms like JPMorgan Chase, Goldman Sachs, and Morgan Stanley come up to bat, taxpayers could be out up to $2.1 billion. Think of that as a small potential thank-you note from the banking business to Americans for helping it out of a jam.

Right behind that bit of sprightly news was a report from the Associated Press that the giant insurance firm AIG, almost 80% owned by taxpayers, was now back in consultation with the Obama administration over just how much more it should pay out in further retention bonuses -- this after multi-millions in such bonuses were already paid -- including "about $235 million for employees at AIG's financial products unit." AIG's near collapse, added the AP, "was not due to its traditional insurance operations, but instead risky derivatives contracts written by the financial products division." In addition to those traders, for 40 top execs of the dismally failed company, there is to be a payout of a mere $9 million in further bonuses for 2008. What a comedown!

Of course, who can be surprised by this sort of thing these days? Not, I assume, Barbara Garson, known in the Vietnam era as the author of the satiric play "MacBird," who has since gone on to write books on American work life (All the Livelong Day) and on a single bank deposit as it made its dizzying way around our planet (Money Makes the World Go Around). For TomDispatch, she's written a little mystery story about those financial-products types, what's happened to them, and -- most strikingly -- their possible rebirth. Think of her as this site's equivalent of Miss Marple, set loose on our financially melted-down planet. - TomDispatch

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The Mystery of the Missing Unemployed Man

Barbara Garson
July 12, 2009 - TomDispatch

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For the book I'm writing about unemployed Americans, I had no trouble finding accountants, brokers, cashiers, or die casters. Admittedly, I had to go out of town to interview the die casters. But when I arrived, alphabetically, at unemployed editors, I had only to look in my address book.

Financiers were further from my life experience than either die casters or editors. Yet the "do you know anyone who…?" method still proved an effective way of turning up unemployed hedge-fund analysts and bank loan officers -- and within a week at that. It was only when I refined my search to ferret out unemployed financiers who had actually handled those infamous "toxic assets" that I hit the proverbial brick wall.

Since mortgage-backed securities and the swaps that insure them had been the downfall of Lehman Brothers, Bear Stearns, Merrill Lynch, and the giant insurance company AIG, packs of bankers who worked on them must, I assumed, be roaming free on the streets of Manhattan. Yet I couldn't find a single one.

Finally, I phoned a law firm representing Lehman Brothers employees in a suit for the pay they were owed when the company shut down without notice. I asked the lawyer if he could possibly inquire among his unemployed clients for someone, anyone, who used to work with mortgage-backed securities and might be willing to talk about how he or she was getting by today. "I don't have to use real names," I assured him. Many of the unemployed people I'd already interviewed felt so lost and ashamed that I had decided not to use their real names. Unemployed bankers deserve anonymity, too.

But the lawyer made it clear that that wasn't the problem. "Most of them were snapped up immediately by Barclays," he said. He represents other financial plaintiffs as well, and he seemed to think that the kind of person I was looking for hadn't remained unemployed very long.

The Clues

How could that be? We've heard ad nauseum about mortgage-backed securities. They're bonds "structured" out of thousands, or tens of thousands, of home or commercial mortgages. The bond's owner was to receive interest out of the mortgage payments from all those property owners. He could earn a low 5% interest if he opted to be paid out of the first money that came in. (Institutional investors often chose that safe "tranche," or slice, of the security.) But back when mortgages seemed so safe, a hedge-fund gambler might have been happy to opt for the last mortgage payments to come in -- in exchange for heftier 7% to 8% interest rates. Of course, that was the gamble. Too many missed mortgage payments meant little or no returns for his fund.

When last I heard, more than half of U.S. mortgages were held this way, so it was a reasonable supposition that a lot of people had been employed structuring, trading, and insuring those bonds. But who in his right mind would touch this stuff now? While that lawyer sounded like an honest, helpful fellow, I still wondered whether he wasn't just brushing me off to protect his embarrassingly unemployed clients.

Soon after, however, I met a bank corporate loan officer who confirmed that his colleagues on the "structured side" were indeed still employed. In fact, he thought he noticed a couple of new chairs at their trading desk in the bank's trading room. "Those damn things" had become so complicated, he speculated, that the people who put them together were now needed in similar numbers to "unwind the bank's positions" -- that is, get them out of the deals.

That must be it, I thought, and recalled a moment soon after AIG got the last of its $182 billion bailout from the government. At that time, the company braved a massive public outcry to award big bonuses to its top employees, including those who had created the "swaps" (short for credit default swaps, or CDSs) that swamped the company. Like so many other companies, AIG claimed that bonuses were necessary to retain the "best brains," especially those who understood the credit-default swaps.

These swaps are a type of derivative that was supposed to represent a way of insuring the very bonds we've been talking about. Here's how it worked -- at least theoretically, at least before the ship went down: On a given bond, say number 123456, an insurance company like AIG would essentially say to a large investor, perhaps a mutual fund, "You pay us $7,000 a month and, if you fail to receive the interest on that bond for, say, two months, then we'll buy the whole bond from you for the $200 million you paid for it." In other words, it was a private, custom-written contract to simply "swap" one of those bonds for money under certain agreed circumstances.

These deals were couched in such terms, rather than as straight insurance policies, because insurance is regulated and the regulations require setting aside relatively small amounts of money in reserve in case the disasters insured against occur. But swaps aren't regulated. Nothing need be set aside.

Here's the remarkable thing: both the Bush and Obama administrations decided that the government would make good on these non-regulated, non-insurance policies. The costs could be humongous.

Now, here's an even more distressing complication. You didn't have to own the original bond to buy the swap that was really an insurance policy. An "investor" could approach AIG and say, "You know that Merrill asset-backed bond -- number 123456? I'll pay you $7,000 a month, too, and if the bond defaults, then you owe me 200 million also."

It's as if any number of people could buy (or, really, bet on) your life insurance policy. Or think of a race track where anyone can go to the window and bet on any horse in any race -- and collect if it comes in. (Or in this case, collect if mortgage payments didn't come in.)

If our government were merely going to cover the original mortgage-backed securities, the maximum payouts, though large, would at least be calculable. If 50% of the mortgages in the U.S. were, as they say, securitized, and if they all were to default, that would be a vast but finite loss. But since any number of people could buy into the swaps on those bonds, the swap payouts could be an unknown amount that would be many times the value of the real buildings. How many multiples of reality might that come to? Two times, 10 times, 100 times? Who knows? Remember, these are unregulated transactions.

And keep in mind that the "investment" being bailed out here has nothing to do with anything in the real world. Neither party to these "me too" swaps owned, built, or financed the original housing, or anything else for that matter. They were simply betting on whether a certain group of people would pay their mortgage bills.

Why our government would underwrite these bets, and why such gambling contracts are legal in the first place, is beyond me, but as we know, they were placed on a vast scale. No wonder, I thought, that my swap men were all still employed. After all, even if there's no work for die-casters or editors, there's still all that "unwinding" to do by the people who did the winding in the first place.

The Crime

Then I read this headline in the Financial Times: "Strange but true -- the credit specs are back." According to the column that followed by John Dizard, "[T]hanks to the Geithner Treasury's policy of reform, rather than dissolution, CDS trading has regained a vampiric strength that the real economy still lacks."

So, now I understood: the man I couldn't find, the man who wasn't unemployed, wasn't just doing that final bit of unwinding or cleaning up old messes. He was busy making new ones!

How could Dizard be certain, though, that the debt trade is really booming again? He cites "one friend of mine in the credit fund trade" who has "made money on both the downside and the upside during the past year."

Of course, who can know for sure? If there was a derivative exchange along the lines of the New York Stock Exchange, we'd have a good idea of the volume of the trade. But derivatives -- I know you've heard this more than once -- are unregulated.

President Obama's recent white paper on financial reform suggests that derivatives should, in fact, be regulated, except for what it refers to as "custom" products. That, unfortunately, sounds like just the right-sized loophole for the financial instruments I've described. And -- I'm sure you won't be surprised by this -- financiers are lobbying furiously to expand that hole.

The Motive

Why is there such an interest in reviving the debt market and why are financiers so determined to keep it unregulated? Aren't they scared of it, too? Let me quote Dizard one last time:

"After all, if the dictates of style and tax auditors say you have to go easy on conspicuous consumption, and if there's no demand for the products of real capital spending, then you might as well take your cash to the track, or the corner credit default swap dealer."

In other words, people are speculating on derivatives and derivatives of derivatives because there's no action in the real world. You can't invest in new real businesses or lend money to old real businesses for expansion unless people can afford to buy the products they'll produce. That brings me back to where I started: our real world. You know, the one where just about everyone's unemployed except those swap guys.

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Barbara Garson is the author of two classic books about work: All the Livelong Day: The Meaning and Demeaning of Routine Work and The Electronic Sweatshop. Her latest book, Money Makes the World Go Around, published in 2000, described the hollowed-out global economy that was heading for a crash. Now, she's embarked on a book about the current Great Recession.

Everything That Happens in Afghanistan Is Based on Lies or Illusions

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Forward -

Writing on the phenomenon of escalation, journalist Norman Solomon begins a recent piece this way: "The president has set a limit on the number of U.S. troops in Afghanistan. For now. That's how escalation works. Ceilings become floors. Gradually." Then he adds: "[N]o amount of spin can change the fact that the U.S. military situation in Afghanistan continues to deteriorate. It would be astonishing if plans for add-on deployments weren't already far along at the Pentagon."

Well, be astonished no longer. Right now, unsurprisingly enough, it's not looking good in that country. Roadside bomb (IED) attacks are spiking (with an "all-time high" of 465 in May alone), and American and NATO deaths have jumped by 40% since 2008, 75% since 2007. And so, despite a major Obama administration expansion of the war and a significant commitment of new troops and money, fast on the heels of Solomon's piece came the first trial balloon -- the first leaks in a Washington Post piece from those unnamed, if ubiquitous, "senior military officials" -- for what may be the next round of escalation.

In an ongoing assessment of the devolving situation in Afghanistan, due to be delivered to the White House next month, the new U.S. commander General Stanley A. McChrystal has supposedly already concluded "that the Afghan security forces will have to be far larger than currently planned if President Obama's strategy for winning the war is to succeed." Here's the catch (and you knew there would be one, didn't you?): the only way to make that force larger is to pour billions more dollars and thousands of new American soldiers into the country as "advisors" and "trainers." As if he had read Solomon, National Security Adviser James Jones was already talking about those ceilings. ("It would not surprise me if the ceiling for the Afghan army request was raised...")

So it goes. Too bad no one's escalating the diplomacy, as the regularly on-target columnist for the British Guardian, Simon Jenkins, pointed out recently: "Diplomacy, your hour has come. There is no way soldiers will find an exit from Afghanistan. They can deliver defeat or they can deliver bloody stalemate. They cannot deliver victory and every observer knows it. This conflict will end only when the courage being daily demanded of soldiers is also shown by politicians."

From Kabul, TomDispatch regular Ann Jones reports on a changing situation in her normal vivid fashion, offering in the process a unique movie review from the front lines of filmmaking. - TomDispatch

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A Film That Captures Some Edgy, Fearful Truths

Ann Jones
July 16, 2009 - TomDispatch.com

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[Note: Fixer will first be shown on HBO on Monday night, August 17th. It will be re-aired on August 20th, 23rd, 25th, 29th, and 31st. Check your local listings for the exact times.]

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KABUL, Afghanistan, July 2009 -- I've come back to the Afghan capital again, after an absence of two years, to find it ruined in a new way. Not by bombs this time, but by security.

The heart of the city is now hidden behind piles of Hescos -- giant, grey sandbags produced somewhere in Great Britain. They're stacked against the walls of government buildings, U.N. agencies, embassies, NGO offices, and army camps (of which there are a lot) -- and they only seem to grow and multiply. A friend called just the other day from a U.N. building, distressed that the view from her office window was vanishing behind yet another row of Hescos. Urban life as Kabulis knew it in this once graceful city has been lost to the security needs of strangers.

The creation of Hescostan in the middle of Kabul is both an effect of, and a cause of, war: an effect because it seems to arise in response to devious enemy tactics that are still relatively new to Afghanistan, such as the use of roadside bombs (IEDs) and suicide bombers (though there has actually been no attack in Kabul for six months now); a cause because it is so clearly a projection, an externalization of the fears of men out of their depth. It is a paradox of such "force protection" that the more you have, the more you feel you need. What's called security generates fear. Now comes a documentary that projects that fear onto the screen.

It is 2006, late in the year. A reporter stands on a rocky hillside near the city of Kandahar in southern Afghanistan and points a wobbly camera at dark-clad gunmen ranged at a distance before him. They've wrapped the tails of their turbans to mask their faces. They carry their Kalashnikovs at the ready. The reporter shouts a question: "Does the Taliban receive support from Pakistan?"

As the camera jumps about to find the Talib who is speaking, a translator voices his answer: "Yes, Pakistan stands with us. On the other side of the border, we have our offices there. Some people in Pakistan is supporting us and the government of Pakistan does not say anything to us. They provide us with everything."

The reporter -- Christian Parenti of the Nation magazine -- has his story. For years, Afghan President Hamid Karzai has charged Pakistan with backing the Taliban, while Pakistan's then-President Musharraf denied it, and officials of the Bush administration looked the other way. Now, Parenti has the word of armed Taliban. This is the kind of story a foreign correspondent can't get without a fixer; that is, a local guy who knows the language, the local politics, the protocols of custom -- and how to arrange a meeting like this in the middle of nowhere with men who might kill you.

A Talib warns of an approaching reconnaissance plane. "We should go," the scared reporter says. The camera spins wildly across a vast empty expanse of rock and pale sky. "We should go." Moments later, safely back in a car speeding away, Parenti turns the camera on his own grinning face: "This is the most relieved American reporter in Afghanistan," he says, and describes the man sitting beside him -- Ajmal Nashqbandi, a 24-year-old Pashtun from Kabul -- as "the best fixer in Afghanistan." But we already know what Parenti doesn't (because filmmaker Ian Olds has told us up front before the titles even hit the screen): soon the fixer will be dead, murdered by the Taliban. We will be witnesses.

If this sounds harrowing, it is. Fixer is the best documentary I've seen on Afghanistan -- so good it's hard to imagine a better one. It's all jagged edges, blurs, and disconnects, catching as it does both the forbidding emptiness of the land and the edginess of war-weary Afghans. One long segment, apparently showing the inside of Parenti's shawl as he conceals a camera from potentially hostile villagers, seems the visual correlative of the feeling that unsettles all outsiders from time to time in this country: the sense of being completely in the dark. In 2006-2007, as the Taliban surged back with kidnappings, murders, bombs, and jihadi suicide attacks, this is how Afghanistan felt. It's the feeling that still drives Hesco sales in the capital.

Full disclosure: both Parenti and I have written about Afghanistan for the Nation for several years. I write mostly about women, Parenti mostly about the war, and I admire his work. We met for the first time only a couple of months ago, after both of us were invited to take part in a conference on Afghanistan. He told me about Fixer, then playing at the Tribeca Film Festival. I went to see it, and when it ended I could hardly get out of my seat. Watching it again on DVD in Kabul made me weep.

By refusing to exploit Ajmal's murder for the sake of suspense -- by revealing it at the start -- Olds has chosen to make a film full of the kind of fear that seems to inhabit international centers of power in Afghanistan today. The film's nervous visual style is strikingly different from the clean-cut look of Occupation: Dreamland, his earlier documentary about American soldiers in Iraq. Critics will surely have much more to say about Fixer's importance as a film. It has already won a raft of prizes, including firsts at Documenta Madrid and the Pesaro (Italy) Film Festival, and Olds took home a Tribeca award this year as the best new documentary filmmaker.

How Lies Begat Illusions Begat Lies

What I want to focus on, though, is the way the film resonates with conditions in Afghanistan today. Olds has the good sense to insert a quick history lesson in this film, on the grounds that you can't understand the Taliban without knowing about America's covert operations in the region in the 1980s. Back then, President Ronald Reagan's administration, mainly through the CIA, used the Pakistani Intelligence services to fund, arm, and train Afghan and foreign Islamist jihadis to defeat the Soviet army in Afghanistan. Pakistan subsequently used "channels built with U.S. money" to install in Afghanistan a friendly government -- the Taliban.

Later, after the George W. Bush administration invaded the country and the U.S. ousted the Taliban, it installed Hamid Karzai as president and returned many of the old Islamist jihadis to power in his government. Thus, this peculiar, well-established fact underlies the current war in Afghanistan: the United States sponsored both sides.

Some analysts say the U.S. "invented" all the "enemies" involved; others, that the U.S. (and Saudi Arabia) merely paid the bills, while Pakistan directed the action to its own advantage. Either way, this history -- much of it still secret or repeatedly re-spun -- leaves all parties to the current conflict in an intellectual sweat. They must plan for the future on the basis of a past they can't acknowledge. With national elections set for August 20th, the United States is planning for an Afghan future that still includes the jihadi buddies its officials know they should long ago have left behind.

Only the Afghanistan Independent Human Rights Commission has called, year after year, for a moral accounting. Its surveys of Afghan citizens consistently find that the people want lasting peace, and to attain it, they would prefer some sort of truth and reconciliation procedure, like the one that took place in South Africa, to cleanse the country and set it on an honest intellectual and moral footing.

For obvious reasons, the United States wants no part of the truth that would emerge from such a process. Just this week, the Obama administration first claimed it had no grounds to investigate General Abdul Rashid Dostum's infamous 2001 massacre of Taliban prisoners, even though Dostum seems to have been on the CIA payroll at the time, and his troops were backed by U.S. military operatives. Later, the president reversed course, ordering national security officials to "look into" the matter. In the end, President Obama may prefer to "move on." As does Dostum, who recently rejoined the Karzai administration.

I've elaborated here on Olds's quick history lesson to more fully explain why you may be finding it hard these days to understand how we got into what's already being called "Obama's War" -- and how to get out. Think of it this way: everything that happens in Afghanistan is based on (1) a lie, (2) an illusion, or (3) both. Then throw in mass illusion as well, carefully constructed so that each person tells others only what they want to hear.

Which brings us back to Fixer, a film steeped in stories of duplicity and self-delusion that are the personal and political currency of Afghanistan today. In one telling incident, Parenti pushes to observe the famously corrupt Afghan judiciary in action. He's rewarded with a front row seat at a murder trial, only to learn that it has been staged for his edification.

In fact, a court official admits, the production Parenti witnessed didn't depict the way the court really works, but the way "it should work" according to international standards. The judiciary knows those international standards very well, since NGOs and private contractors supported by the U.S. Agency for International Development and other aid agencies have offered them training, and what's called "capacity building," for years. The trainers report success, which of course is what the aid agencies want to hear; and the trainees may be encouraged (as in this case) to perform for the public. If Parenti had played the part assigned to him in this exercise in mass illusion, he'd have reported a glowing story about the success of Afghanistan's new rule of law. (He didn't.)

Afghans have an expression -- "pesh pa been" -- referring to people who move relentlessly ahead by watching their own feet. Parenti, at least, could see when he was being tripped up. But the incident leaves you wondering: if officials of the Karzai government go this far for a single American reporter, what extravagant performances have they mounted all along for junketing Senators and cabinet members, and the likes of Donald Rumsfeld and Laura Bush, not to mention the recent rounds of Obama era visitors?

Even Ajmal the fixer repeatedly misjudges situations and his own people; and in the end, he proves to have been more of an innocent than Parenti. In an eerie moment captured on screen, Parenti predicts that one day the Taliban will kidnap a Western journalist. No way, says Ajmal, assuming that he and his clients are protected by Pashtunwali, his (and the Taliban's) tribal code of honor. Later, working for the Italian journalist Daniele Mastrogiacomo, Ajmal fixes a fatal appointment with Taliban commander Mullah Dadullah. Taken hostage, Ajmal reassures his family in a Taliban video: "These are Muslims. We are in the hands of Islam."

Behind the Hescos Where History Is Being Re-Spun

Illusion and duplicity entrap the fixer, too, and spin his personal story into a political event. The Italians, who notoriously negotiate with hostage takers, persuade Karzai to exchange five Taliban prisoners for Mastrogiacomo and Ajmal. In the excitement of being freed, however, Mastrogiacomo fails to keep track of his fixer. The Taliban see an opportunity to recapture Ajmal and demand the release of two more prisoners. Karzai and his foreign minister, having freed the foreigner, then scramble to the moral high ground, refusing to negotiate with terrorists. Orders come down from Pakistan to kill Ajmal -- on April 8, 2007 -- to make Karzai look bad in the eyes of his own people. Mullah Dadullah sends a video of the beheading.

Ajmal's stricken father asks, "What kind of government doesn't protect its own citizens?" The answer is: a government that's bought, paid for, and answerable to outsiders, a government that has neither the need nor the inclination to care for its citizens. As Karzai explains the matter, "The Italians built us a road."

That's the government the international community is now spending more than $500 million to reelect. (Most of that money comes from the U.S.) International election officials, of course, are neutral -- so neutral that they look the other way as Karzai makes deals with rival warlords to ensure his reelection. One by one they come over to his side, and word leaks out about which ministries they've been promised.

International agencies responsible for mounting the election have already abandoned the goal of a "free and fair" vote. They're aiming for "credible," which is to say, an election that looks pretty good, even if it's not. In the context of accumulated illusions, this goal is called "realistic," and perhaps it is. As the fixer's grieving father says, "Our government is a puppet of foreigners. That is why we expect nothing from it."

As I write, 4,000 newly arrived U.S. Marines are trudging through the blistering heat of Helmand Province to push back the Taliban so local Pashtuns can turn out to vote next month for Karzai, their fellow Pashtun. What's wrong with this new Obama strategy? For one thing, in some areas the local Pashtun population has instead turned out to fight against the foreign invaders, side by side with the Taliban (who, it should be remembered, are mostly local Pashtuns). They're as fed up as anybody with the puppet Karzai. Like millions of other Afghans, they say Karzai has done nothing for the people. But saddled with history, Karzai remains the horse the U.S. rode in on.

Let me make it clear that Olds and Parenti don't draw these comparisons to current affairs in Afghanistan. Fixer is simply and appropriately subtitled The Taking of Ajmal Nashqbandi. It's a tribute to a trusted colleague. But watch the film yourself and you'll be immersed in duplicity: officials manipulate the truth, citizens fear to tell it, Americans can't bear to look it in the face. Watch the film and maybe you'll understand how hard it has become, here behind the Hescos where history is being re-spun, to size anything up, pin anything down, recognize an enemy, or help a friend.

[Note: Fixer will first be shown on HBO on Monday night, August 17th. It will be re-aired on August 20th, 23rd, 25th, 29th, and 31st. Check your local listings for the exact times.]

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Ann Jones wrote at length about the failure of American aid in Kabul in Winter a book about American meddling in Afghanistan as well as her experience as a humanitarian aid worker there from 2002 to 2006. For a concise report on many of the defects in international aid mentioned here, check out Real Aid (pdf file below), a report issued in 2005 by the South African NGO Action Aid.

http://www.actionaid.org.uk/doc_lib/69_1_real_aid.pdf