Countdown: McCain’s Lobbyist + Pastor Problems + Rove


May 22, 2008

McCain’s Lobbyist Problems

Keith reports on the lastest news on McCain’s lobbyist problems. Chuck Todd weighs in.


Tonight’s: Poison-Gate, Swift Boat-Gate and the Phony War on Terror-Gate.

Rove Gets Served

Keith reports on the House Judiciary Committee issuing a subpoena for Karl Rove to testify. Jonathan Turley weighs in.

McCain’s Pastor Problems

Keith reports on the latest news on McCain’s pastor problems. Richard Wolffe weighs in.

Worst Person

And the winner is….Oliver North. Runners up Comcast and Gen. Petraeus


Countdown: McCain’s Lobbyist Purge + KY & OR + Clarifies ‘Cold Blooded Killers’ Commen

John McCain’s Lobbyists

McCain Lobbyist Scandal Explodes (links)

TPMtv: McCain’s Lobbying Pals: Vol. 57 + More Hagee

Karl Rove Subpoenaed by Congress! AGAIN! (video)

Karl Rove’s pundit problem by Eric Boehlert

McCain’s Ethics by Josh Sidman

Rod Parsley on Hate Crimes Law + McCain’s Straight Talk on John Hagee (videos)

McCain’s Pastor Problem: The Video By David Corn

Karl Rove Subpoenaed by Congress! AGAIN! (video)

Dandelion Salad


May 22, 2008
CNN Wolf Blitzer


Countdown: McCain’s Lobbyist + Pastor Problems + Rove

Karl Rove’s pundit problem by Eric Boehlert

Q&A with Don Siegelman: I think this will make Watergate look like child’s play

Tell Congress: Arrest Karl Rove



Rod Parsley on Hate Crimes Law + McCain’s Straight Talk on John Hagee (videos)

Dandelion Salad


Added: September 14, 2007
Rod Parsley discusses the proposed hate crimes law, claiming falsely that it would ban speech, religious expression, or even thought. “The next person charged with a crime could be me, or your pastor, or your grandmother, or maybe YOU.” Breakthrough, 9/14/07

h/t: a friend

John Hagee “Church Of America” (1 of 3)


Added: November 01, 2007
John Hagee talks about the Church of America…

h/t: a friend


Parts 2 and 3:


McCain’s Straight Talk on John Hagee


May 22, 2008

John McCain on ABC’s This Week, April 20, 2008

McCain: A Respectful Disagreement?


On Ellen Degeneres’ show John McCain said he has a respectful disagreement with her over the issue of gay marriage. But two of his supporters, John Hagee and Rod Parsley (whom McCain has referred to as a “spiritual advisor”), are two of the most outspoken agents of intolerance in America, spouting vicious homophobic rants on a weekly basis. And make no mistake: McCain actively sought their endorsements.

John McCain’s embrace of these men does not indicate a “respectful disagreement.”

Bush seeks international aid to come up with reason to bomb Iran (satire)


by R J Shulman
Dandelion Salad
featured writer

Robert’s blog post
May 22, 2008

WASHINGTON – Not usually one to call on the international community for help, President Bush has asked world leaders to help him solve the problem of finding a plausible reason to attack Iran. “I used up so many war reasons for when I shock and awed Iraq,” Bush said, ‘that I’ll need a whole new set of good ones for shock and awing Iran.”

“The President wants to show he is a uniter and not a divider,” said Presidential Press Secretary Dana Perino, “so he is bringing together a coalition of the willing to bomb Iran.” “We can’t say Saddam Hussein is now in Iran plotting against us,’ said Secretary of State Condoleezza Rice, “because most Americans know he is dead, no matter how much Fox News might repeat over and over again that Hussein has reappeared, this time as an Iranian threat. 9-11 doesn’t pack the fear punch it used to and I fear that Americans don’t really care if democracy invades Iran.”

“Americans love war presidents,” Bush said, “sos I needicate fresh reasons for a new war so they can forget about the last one. Also,” Bush added, “I get to dress up on a big boat and say ‘mission accomplished all over again.'”

Many political analysts speculate that Bush will not be able to come up with a reason to attack Iran before the end of his term next January and may be forced to invade without justification. Chris Matthews of MSNBC asked Vice President Dick Cheney about the problem of the ethics and morals of an unjustified preemptive attack on Iran. Cheney replied, “So?”


Ray McGovern: Admiral Fallon Should Speak Out (video)

Where Are Those Iranian Weapons in Iraq? by Gareth Porter

Bogus Claim, al-Maliki Stall U.S. Plan on Iran Arms by Gareth Porter

Israeli press reports US pledge of war on Iran—is Bush preparing an October Surprise?

Report: U.S. Will Attack Iran

So? … A Note from Michael Moore (+ video)

Obama’s Secret War Profiteering Tax By Greg Palast

Dandelion Salad

By Greg Palast
May 22nd, 2008

I can’t make this up:

In a hotel room in Brussels, the chief executives of the world’s top oil companies unrolled a huge map of the Middle East, drew a fat, red line around Iraq and signed their names to it.

The map, the red line, the secret signatures. It explains this war. It explains this week’s rocketing of the price of oil to $134 a barrel.

It happened on July 31, 1928, but the bill came due now.

Barack Obama knows this. Or, just as important, those crafting his policies seem to know this. Same for Hillary Clinton’s team. There could be no more vital difference between the Republican and Democratic candidacies. And you won’t learn a thing about it on the news from the Fox-holes.

Let me explain.

In 1928, oil company chieftains (from Anglo-Persian Oil, now British Petroleum, from Standard Oil, now Exxon, and their Continental counterparts) were faced with a crisis: falling prices due to rising supplies of oil; the same crisis faced by their successors during the Clinton years, when oil traded at $22 a barrel.

The solution then, as now: stop the flow of oil, squeeze the market, raise the price. The method: put a red line around Iraq and declare that virtually all the oil under its sands would remain there, untapped. Their plan: choke supply, raise prices rise, boost profits. That was the program for 1928. For 2003. For 2008.

Again and again, year after year, the world price of oil has been boosted artificially by keeping a tight limit on Iraq’s oil output. Methods varied. The 1928 “Redline” agreement held, in various forms, for over three decades. It was replaced in 1959 by quotas imposed by President Eisenhower. Then Saudi Arabia and OPEC kept Iraq, capable of producing over 6 million barrels a day, capped at half that, given an export quota equal to Iran’s lower output.

In 1991, output was again limited, this time by a new red line: B-52 bombings by Bush Senior’s air force. Then came the Oil Embargo followed by the “Food for Oil” program. Not much food for them, not much oil for us.


FAIR USE NOTICE: This blog may contain copyrighted material. Such material is made available for educational purposes, to advance understanding of human rights, democracy, scientific, moral, ethical, and social justice issues, etc. This constitutes a ‘fair use’ of any such copyrighted material as provided for in Title 17 U.S.C. section 107 of the US Copyright Law. In accordance with Title 17 U.S.C. Section 107, the material on this site is distributed without profit to those who have expressed a prior interest in receiving the included information for research and educational purposes. If you wish to use copyrighted material from this site for purposes of your own that go beyond ‘fair use’, you must obtain permission from the copyright owner.


“Let My Oil Go” The Palast Report on Air America’s Clout

Ray McGovern: Admiral Fallon Should Speak Out + Can Fallon Prevent WWIII? (videos)

Dandelion Salad


Ronald Reagan’s CIA briefer Ray McGovern encourages the recently dumped CENTCOM Commander Admiral Fallon to not make mistake that Gen. Anthony Zini did and work now to prevent war with Iran.


Can Admiral William Fallon Prevent World War Three?


Excerpts of an urgent letter from former CIA analyst and prominent anti-war activist Ray McGovern, to Admiral William Fallon, former Middle East Commander, who was forced to retire earlier this year as a result of his public opposition to an invasion of Iran.

Read the letter in its entirety here:

An Appeal to Admiral Fallon on Iran By Ray McGovern

Side note: Search You Tube for “McGovern Rumsfeld” for video of Ray’s public dismantling of the former defense secretary’s lies regarding Iraq, at a Rumsfeld speech in 2006…


An Appeal to Admiral Fallon on Iran By Ray McGovern

Where Are Those Iranian Weapons in Iraq? by Gareth Porter

Israeli press reports US pledge of war on Iran—is Bush preparing an October Surprise?

Report: U.S. Will Attack Iran

Turkish Ambassador to U.S. Calls Iran “a threat to Turkey as well as to the U.S.”

Bogus Claim, al-Maliki Stall U.S. Plan on Iran Arms by Gareth Porter

Where Are Those Iranian Weapons in Iraq? by Gareth Porter

Dandelion Salad

Analysis by Gareth Porter
05/22/08 — WASHINGTON, May 21 (IPS)

The U.S. military command in Iraq continues to talk about an alleged pipeline of Iranian weapons to Iraqi Shiites opposing the U.S. occupation, implying that they have become dependent on Iran for indirect-fire weapons and rocket-propelled grenades (RPGs).

But U.S. officials have failed thus far to provide evidence that would support that claim, and a long-delayed U.S. military report on Iranian arms is unlikely to offer any data on what proportion of the weapons in the hands of Shiite fighters are from Iran and what proportion comes from purchases on the open market.

When Maj. Gen. Kevin Bergner was asked that question at a briefing May 8, he did not answer it directly. Instead Bergner reverted to a standard U.S. military line that these groups “could not do what they’re doing without the support of foreign support [sic].” Then he defined “foreign support” to include training and funding as well as weapons, implicitly conceding that he did not have much of a case based on weapons alone.

Bergner’s refusal to address that question reflects a fundamental problem with the U.S. claims about Iranian weapons in Iraq: if there are indeed any Iranian rockets and mortars, and RPGs in the Mahdi Army’s arsenal of stand-off weapons, they represent an insignificant part of it.

Reports by the U.S. command in Iraq over the past 15 months cited only a handful of Iranian weapons out of hundreds counted in caches found in Shiite areas. Nearly 700 mortars and rockets were reported by specific caliber size, along with a handful of RPGs, in nearly two dozen caches. Of that total, only four rockets were reported as being of Iranian origin, and another 15 were listed as possibly being Iranian.

Although those reports do not represent all the Mahdi Army caches found, they provide further evidence of the relative importance of Iranian rockets, mortars and RPGs in the Mahdi Army arsenal. That is because U.S. military officials are so eager to publicise any discovery of an Iranian-made weapon system that they would exploit any opportunity available to do so.

The U.S. command has gone so far as to claim that it had found “four Iranian hand grenades” — but they were in a cache of weapons found in an al Qaeda area.

Based on weapons caches discovered over the past 15 months, the Mahdi Army has relied overwhelmingly on four types of heavy weapons: 60mm and 120mm mortars, 107mm rocket, and 57mm anti-tank missile.

Those are essentially the same mortars and rockets that have turned up in al Qaeda and Sunni insurgent weapons caches, suggesting that both groups have obtained their heavier weapons from the international arms market. In fact, 60mm and 120mm mortars were used by Sunni guerrillas in the very early months of the war against U.S. occupation troops.

A U.S. explosives expert, Maj. Marty Weber, confirmed in April 2007 that most 107mm rockets found in Iraq were Chinese-made. He claimed that Iran had repainted Chinese 60mm and 107mm rockets them and sold them on the “open market”.

However, Chinese, Yugoslav and Pakistani 107mm rockets have also been the weapon of choice of Taliban guerrillas in Afghanistan, according to U.S. military officers there.

The U.S. military has refrained from making any charges against Iran over the 107mm rockets found in Iraq, perhaps because it would support the conclusion that the Mahdi Army was buying weapons on the international market rather than obtaining them from the Iranian Revolutionary Guard Corps.

U.S. officials tried to capitalise on the increased mortar and rocket attacks on the Green Zone and U.S. military headquarters last year to argue that they were the result of a rising tide of Iranian supply of such stand-off weapons — particularly 240mm rockets — to what the U.S. command calls “special groups” of Shiite militiamen.

One U.S. official, who insisted on being identified only as a “senior official”, told this writer in mid-September 2007 that rockets and mortars provided by Iran since the beginning of that year — and especially 240 mm rockets — were doing much greater damage because of their greater accuracy and power compared with the older Katyusha rockets — mostly from Iraqi stocks — that had been employed in attacking U.S. bases and the Green Zone in previous years.

But evidence from the U.S. command itself contradicts that dramatic narrative of a bold, new Iranian intervention in the war. A Multi-National Force – Iraq press release dated Jun. 1, 2007 reported that a cache of weapons had been found in an area from which Mahdi Army troops had fired rockets at the Green Zone. It did not claim any Iranian rockets or mortars in the cache but only 20 107mm rocket warheads, three fully assembled 107mm rockets and one 60mm mortar.

No 240mm rocket has been reported found in a Mahdi Army weapons cache over the past year, but a single warhead for a 240mm rocket was reported to have been found in Basra Apr. 19. No official claim has been made that it was manufactured in Iran, however.

After a rocket fired at Camp Victory on Sep. 11, 2007 killed one and wounded 11 others, U.S. officials told the news media that the command spokesman, Gen. Bergner, would display fragments of a 240mm rocket — complete with Iranian markings — at his next press briefing in order to “show the link between the Iranian weapons and the damage they are doing”.

But Bergner admitted to the media that there were no discernible Iranian markings on the fragment, and that a number of countries manufacture 240mm rockets. He was able to assert only that ordnance experts “assess it is of [sic] consistent with the rockets of Iranian origin we have seen used in other attacks.”

That was a very weak claim, because Bergner had not provided any evidence to the media that previous attacks had involved Iranian 240mm rockets either.

When the military headquarters at Camp Victory was hit by rocket fire last Oct. 12, officials admitted that it was 107mm rockets, not 240mm rockets that had been used.

Gen. David Petraeus insisted last October that there is “absolutely no question” that Iran is providing RPG-29 rocket-propelled grenade launchers to Iraqi Shiite groups. But RPG-29s are manufactured by Russia, not Iran. Syria was known to have purchased large quantities of the RPG-29 in 1999-2000. Both the Israeli newspaper Haaretz and the Beirut-based defence monthly Defense 21 have confirmed that the RPG-29s used by Hezbollah in 2006 were Russian-made weapons obtained via Syria.

In weapons caches reported from Shiite locations, not a single RPG-29 has been identified. Of the 160 RPG launchers reported in Mahdi Army caches, along with 800 RPG missiles, none were identified as Iranian, although some were identified as being Soviet-made. Only 11 were reported to be RPG-7s — a type of launcher that is made by Russia and China as well as Iran and used by 40 countries around the world.

Gareth Porter is an historian and national security policy analyst. The paperback edition of his latest book, “Perils of Dominance: Imbalance of Power and the Road to War in Vietnam”, was published in 2006.

FAIR USE NOTICE: This blog may contain copyrighted material. Such material is made available for educational purposes, to advance understanding of human rights, democracy, scientific, moral, ethical, and social justice issues, etc. This constitutes a ‘fair use’ of any such copyrighted material as provided for in Title 17 U.S.C. section 107 of the US Copyright Law. In accordance with Title 17 U.S.C. Section 107, the material on this site is distributed without profit to those who have expressed a prior interest in receiving the included information for research and educational purposes. If you wish to use copyrighted material from this site for purposes of your own that go beyond ‘fair use’, you must obtain permission from the copyright owner.


Bogus Claim, al-Maliki Stall U.S. Plan on Iran Arms by Gareth Porter

Israeli press reports US pledge of war on Iran—is Bush preparing an October Surprise?

Report: U.S. Will Attack Iran

Turkish Ambassador to U.S. Calls Iran “a threat to Turkey as well as to the U.S.”

An Appeal to Admiral Fallon on Iran By Ray McGovern

Mosaic News – 5/21/08: World News from the Middle East

Dandelion Salad



This video may contain images depicting the reality and horror of war/violence and should only be viewed by a mature audience.


For more:
“Lebanese Rivals Reach Agreement in Doha,” Al Jazeera TV, Qatar
“Israel and Syria Reveal Peace Talks in Turkey ,” IBA TV, Israel
“Opposition Removes Sit-in Tents from Beirut,” Al Arabiya TV, UAE
“Syria’s Influence in Lebanon Increases,” ANB TV, England
“Kuwaiti Women Looking for Representation in Parliament,” Dubai TV, UAE
“Former Iraqi Deputy Prime Minister on Trial,” Al-Iraqiya TV, Iraq
“Sudan Launches Campaign to Protect Children,” Sudan TV, Sudan
“Tehran Protests US-Based Anti Iranian Group,” IRIB2 TV, Iran
Produced for Link TV by Jamal Dajani.

For His Treatment of Children in the ‘War on Terror,’ Bush Is a War Criminal

Dandelion Salad

By Dave Lindorff
05/22/08 “Commondreams

Surely nothing that President Bush has done in his two wretched terms of office — not the invasion and destruction of Iraq, not the overturning of the five-centuries-old tradition of habeas corpus, not his authorization and encouragement of torture, not his campaign of domestic spying — nothing, can compare in its ugliness as his approval, as commander in chief, of the imprisoning of over 2500 children.

According to the US government’s own figures, that is how many kids 17 years and younger have been held since 2001 as “enemy combatants” — often for over a year, and sometimes for over five years. At least eight of those children, some reportedly as young as 10, were held at Guantanamo. They even had a special camp for them there: Camp Iguana. One of those kids committed suicide at the age of 21, after spending five years in confinement at Guantanamo. (Ironically and tragically, that particular victim of the president’s criminal policy, had been determined by the Pentagon to have been innocent only two weeks before he took his own life, but nobody bothered to tell him he was slated for release and a return home to Afghanistan.)

I say Bush’s behavior is criminal because since 1949, under the Geneva Conventions signed and adopted by the US, and incorporated into US law under the Constitution’s supremacy clause, children under the age of 15 are classed as “protected persons,” and even if captured while fighting against US forces are to be considered victims, not POWs. In 2002, the Bush administration signed an updated version of that treaty, raising the “protected person” age to all those “under 18.”

Treaties don’t mean much to this president, to the vice president, or to the rest of the administration, but they should mean something to the rest of us.

But capturing and imprisoning children isn’t even the worst of this president’s war crimes when it comes to the abuse of the young. Under Bush’s leadership as commander in chief, the US military in Iraq and Afghanistan has been considering any male child in Iraq of age 14 or older to be a potential combatant. They have been treated accordingly — shot by US troops, imprisoned as “enemy combatants,” and subjected to torture.

In the 2004 assault by US Marines on the city of Fallujah, things were even worse. Dexter Filkins, a reporter for the New York Times, reported that before that invasion, some 20,000 Marines encircled the doomed city, which the White House had decided to level because it harbored a bunch of insurgents and had angered the American public by capturing, killing and mutilating the bodies of four mercenaries working for US forces. The residents of the 300,000-population city were warned of the coming all-out attack. Women and children and old people were allowed to flee the city and pass through the cordon of troops. But Filkins reported that males determined to be “of combat age,” which in this case was established as 12 and up, were barred from leaving, and sent back into the city to await their fate. Young boys were ripped from their screaming mothers and sent trudging back to the city to face death.

In the ensuing slaughter, as the US dumped bombs, napalm, phosphorus, anti-personnel fragmentation weapons and an unimaginable quantity of machine gun and small arms fire on the city, it is clear that many of those young boys died.

This was a triple war crime. First of all, it was a case of collective punishment — a practice popular with the Nazis in World War II, and barred by the Geneva Conventions. The international laws of war also guarantees the right of surrender, so those men and boys who tried to leave, even if suspected of being enemy fighters, should have been allowed to surrender and be held as captives until their loyalties could be established. The boys, meanwhile, were “protected persons” who were by law to be treated as victims of war, and protected from harm.

Instead they were treated as the enemy, to be destroyed.

For these crimes, the president should today be impeached by the Congress and then tried as a war criminal.

After watching this Congress cower from its responsibility to defend the Constitution, I have little hope of that happening. But I do harbor the hope that once Bush has left office, some prosecutor in another country — perhaps Spain, or Canada or Germany — will use the doctrine of universal jurisdiction to indict him for war crimes, and, should he leave the country for some lucrative speaking engagement, arrest him, the way former dictator Augusto Pinochet was arrested by a Spanish prosecutor on a visit to the UK.

For his abuse, imprisonment and killing of children, this president should stand trial for war crimes.

Dave Lindorff’s most recent book is “The Case for Impeachment” (St. Martin’s Press, 2006). His work is available at

FAIR USE NOTICE: This blog may contain copyrighted material. Such material is made available for educational purposes, to advance understanding of human rights, democracy, scientific, moral, ethical, and social justice issues, etc. This constitutes a ‘fair use’ of any such copyrighted material as provided for in Title 17 U.S.C. section 107 of the US Copyright Law. In accordance with Title 17 U.S.C. Section 107, the material on this site is distributed without profit to those who have expressed a prior interest in receiving the included information for research and educational purposes. If you wish to use copyrighted material from this site for purposes of your own that go beyond ‘fair use’, you must obtain permission from the copyright owner.


Snakes and Superdelegates By Lori Price

Immoral Hazard: Financial Instability, “Free Markets” & the Fed

Dandelion Salad

by Stephen Lendman
Global Research, May 22, 2008

A review of Jeremy Grantham’s book

So says Jeremy Grantham, co-founder of Boston-based investment firm Grantham, Mayo and Van Otterloo, now known as GMO. Some call him the philosopher king of Wall Street because of his highly insightful views on markets and the economy, usually with a longer-term perspective. In a profession of touts, fast-buck and scam artists, Grantham’s commentaries are notably refreshing. They’re detailed, scholarly, sober, clear and especially important at a time of unparalleled excesses, great economic uncertainty, voices ranging from gloom and doom to blue skies and all clear ahead, so who knows what to believe. Few people sort things out better than he, and whether right or wrong, he makes consummate sense and should be taken seriously.

He calls his latest commentary “Immoral Hazard” and takes straight aim at the perpetrators. It’s not the first time, and with good reason. Bad policy yields bad results with former Fed Chairman Greenspan Exhibit A.

Grantham notes: “It’s not that the former Fed boss…was incompetent that is remarkable. (It’s that even now) so many people (still) don’t seem to get it.” Do they “just believe high-quality, self-justifying blarney?” Or do they think top jobs ipso facto “attract great talent by divine right?” Often, the most important jobs get “mediocrities” like Greenspan and the current White House occupant. Even worse, Washington is infested with them.

Grantham first learned of Greenspan in the late 1960s when he headed economic consulting firm Townsend-Greenspan & Co. Even then, his assessment was unsparing: “To be brutally honest, he was considered run of the mill by anyone I knew then or have met later who knew” of his work. Consider his “famous” January 1973 call that “it is rare that you can be as unqualifiedly bullish as you now can.” It was right at the start of a punishing recession and 60% two-year market decline in real terms, second only at the time to the 1929 crash.

Never one to equivocate, Grantham cuts to the chase and draws blood: Greenspan’s call “was one of the first of a long line of terrible prognostications for which he has remarkably ‘not’ been remembered,” except by a few historians and analysts like Grantham. He seemed to pop out of nowhere to become Fed Chairman in 1987, not for his professional skills but for plenty of political ones. The Greenspan years and what’s so far followed haven’t been “our finest hour in the US.”

A smattering of skilled leaders handled things way back compared to the “rudderless” kind under Greenspan and today. Moments (far too few) showed “vision, leadership and backbone.” They then gave way to political opportunism and “easy paths taken” for short-term gains – most notably since the Reagan era. Referring to when Greenspan became Fed Chairman, Grantham continued saying we’re “get(ting) ready to celebrate the 20th anniversary of the Great Moral Hazard.” Asset bubbles are tolerated because of who wins and loses. If managed well, speculators and Wall Street profit hugely, bail out at tops (the old pump and dump scheme), then let the public take the pain. No problem though if they miscalculate. Fed Chairmen like Greenspan and the current maestro step in with bailouts.

It’s called “moral hazard,” and the term goes way back – to the 1600s. English insurance companies then used it in the late 17th century. In the modern era, it got more study in the 1960s, but at the time didn’t imply fraud, immoral behavior or outsized excess. Economists used the term to describe market inefficiencies when risks are displaced. It was before what became known as the “Greenspan put,” or the idea that Fed Chairmen provide insurance – to bail out investors who take imprudent risks, so take even greater ones since winning is always guaranteed. But only for high-rollers.

Moral Hazard 101 – A Brief Case Study

Take Long Term Capital Management (LTCM), for example, and its dream team management:

— a former highly respected Salomon Brothers fixed income chief who became tainted by the firm’s auction-rigging scandal; no matter, he remained highly regarded by Wall Street;

— a former Fed Vice-Chairman; and

— two economics Nobel laureates.

They played high-stakes poker with little regulatory oversight and used their good names to do very risky things – like putting on interest rate swaps at market rates for no initial margin; borrowing 100% of value of top-grade collateral held; using that cash to buy more securities, then using them as collateral for more borrowing. In other words, it was a scheme to theoretically leverage to infinity, LTCM practically did it, and for a while it worked.

Things began unravelling in 1998. It started in July when Salomon Smith Barney announced it was liquidating its dollar interest arbitrage positions. LTCM took a hit, then things got worse when in August Russia declared a moratorium on its rouble and domestic dollar debt. Panic ensued, it spread to other markets, risky investments fled to high quality ones, then they were sold to raise cash.

LTCM was one of many large investors affected. By September, it dropped 52% in value and needed new capital to avoid a dilemma that could impact all of Wall Street if not addressed. LTCM’s balance sheet assets were leverage thirtyfold to $125 billion, then tenfold more by off-balance sheet transactions for a total valuation of around $1 trillion – or too big to fail. If they folded, a financial panic could ensue, so the situation was critical. Enter the Fed after some initial high-stakes maneuvering failed. It engineered a multi-billion dollar bailout to avoid a greater financial market collapse.

It worked, but it’s no way to run an economy. Bad examples keep getting repeated and each time show up worse. That’s precisely today’s dilemma. The stakes are enormous. No one for sure knows to what degree, and there’s even less assurance how things will play out.

Minsky on Markets

He’s passed but surely smiling and saying I warned you. His economic writings were mostly ignored in the prosperous 1980s and 1990s, but current market turbulence proved him right. He constructed a “financial instability hypothesis” building on the work of John Maynard Keynes. It showed how speculative bubbles grow out of outsized greed. Finally, asset values collapse in the end-game part of a seven-stage up-then-reverse journey downward. It’s a “Minsky Moment” when euphoria turns to panic, investors bail out, and meltdown ensues.

That’s how markets reacted to the Greenspan-caused tech bubble. They sold off hugely, then reinflated from outsized monetary and fiscal stimulus. Last summer, they peaked, dropped sharply, stabilized in April after a lesser Minsky reversal, but there’s no way to know if it’s over. Grantham doesn’t think so. Neither do others. More on that below.

Economist Michael Hudson Cuts Through the Clutter

Hudson is an economist and President of The Institute for the Study of Long-Term Economic Trends (ISLET). He’s also a Distinguished Research Professor of Economics, a former Wall Street financial analyst, and a no-nonsense critic of the current economic environment. He notes how recent events show that “economic royalists” and “money changers” run things and have “mismanage(d) our economy into dire straights of unprecendented risk – (a combination of reckless) debt creation, euphemized as ‘leveraging’ and ‘wealth creation.’ “

Few regulatory checks remain, and anything goes “under the guise of ‘saving the system.’ ” If money manipulators hadn’t endangered it, no fix would be needed. Now with systemic trouble of undetermined proportions, trillions of dollars are being misdirected. They’re going for wars and bailouts instead of helping beleaguered homeowners who were manipulated for profit, face possible foreclosure, job loss, and likely hard times ahead.

Hudson says what’s going on is “an economy-wide Ponzi scheme (for) creditors to lend debtors enough money (for their) interest costs so as to keep current on their loans.” The idea was for various asset prices (stocks, bonds, real estate) to be inflated enough so debtors could pledge them as collateral at higher market valuations for more loans.

It worked as long as valuations rose. When they fell, all bets were off, and here’s how trouble started and spread:

— cracks in the multi-trillion dollar US securitization markets showed up last summer; they created liquidity crises for two Bear Stearns hedge funds; they were heavily into sub-prime mortgages; Bear Stearns was a Wall Street outlier; it was much unloved on the street, notorious for taking outsized risks, and that made it very vulnerable for a run on its assets when the opportunity came; it happened in March and forced the firm to sell out for pennies on the dollar after 85 years in business;

— the initial damage spread to a little-known German bank, IKB; it forced the European Central Bank (ECB) to provide large amounts of liquidity to stem the damage;

— it became apparent that trouble was systemic; it could touch down anywhere and likely hardest where greatest risks were taken – in America; and

— intervention wasn’t working; panic didn’t stop; reserve hoarding took hold instead; and a run on commercial paper began – the kinds international banks issued in Structured Investment Vehicles (SIVs).

The bottom began to fall out, and the problem was how to stop a growing debacle from becoming catastrophic. The solution, of course, was “immoral hazard” by bailing out transgressors, and the bigger they are, the greater the bailout amounts. Hudson calls it a “trillion-dollar bailout of bad mortgage debt” while homeowners go begging.

It began in March with heaps of hyperbole selling it. Multi-billions poured out. Money supply growth exploded. It now averages a near-monthly 18%. Deficits are mounting, and fiscal spending is just as outsized, but not much of it reaches households even with the so-called “rebate.” In the meantime, real wages keep falling. Oil and food prices are skyrocketing. Real unemployment tops 12%. Consumer inflation is nearly as high, and real GDP (not the phony official number) hovers around -2%. Most other economic numbers are just as worrisome, so manipulating magic fixes them.

We’re in uncharted territory, problems are huge, they’re systemic and structural, and Hudson says “the Fed and Treasury officials seem to be making up new rules on a daily basis – that receive only….perfunctory” congressional oversight. Speculation is being rewarded, anything goes, and bailing out Wall Street and big banks takes top priority.

It gets worse. It costs trillions. No one knows where it will end or if it will work, and there’s nothing left over for Social Security, Medicare, Medicaid, and all other essential social and national infrastructure needs.

Hudson puts it this way: “The historic road to serfdom is that of debt peonage to a financial oligarchy concentrating wealth in its own hands….The problem for society….is that finance finds its major gains to lie not in raising living standards, but in promoting a free lunch for its customers — while turning corporate profits, monopoly rent-seeking and real estate price gains into a flow of interest to itself, by advancing the credit to finance the purchase of these assets and privileges.”

The only way out is to “scale back existing mortgages (especially ones with negative equity) to reflect the plunge in property values today.” Once principal is “reduced to realistic levels,” fixed rate mortgages would replace ARMs.

Financial institutions won’t accept this or whatever other ways it costs them, and therein lies the problem. Blaming victims is much simpler along with bailing out culprits – when they’re too big to fail. Hudson calls for some high-octane populism to change things. Unfortunately, not a hint of it is in sight, and debt levels are so high they “cannot be paid….given the nation’s heavy military and trade deficits.” It’s hammered the dollar and “rais(ed) dollarized prices for oil and other raw materials.”

It gets worse. Foreign central banks and investors keep funding our excesses, and US spending, of course, depends on them. The more they lend us, the more we need in a never-ending dependency cycle. It bankrupted Medici bankers in the Renaissance era and got Adam Smith to conclude that governments don’t repay outsized debts. They either default, declare a moratorium, or repudiate them. Not fit subjects for discussion, but you can bet foreign debt holders weigh them as they debate whether to keep the daisy chain going.

It’s got plenty of US investors concerned as well, and a notable one is bond guru Bill Gross. In an April commentary he wrote: In his judgment, “the private credit markets have forfeited their privileged right to operate relatively autonomously because of incompetence, excessive greed, and (at times) fraudulent activities.”

In an earlier Financial Times interview he also criticized government quick fix schemes. He further blasted hedge funds as “unregulated bank(s)” and a “con” and said complicated financial instruments “exacerbated” credit problems, and over-leveraging “lead(s) to an implosion at the edges….of this new financial marketplace.”

He’s also very worried about declining home prices that many on Wall Street publicly pooh-pooh. He calls a 20% valuation decline “much more” of an economic shock than falling equities “because the amount of homeowner leverage is so much greater. A 20% negative adjustment not only wipes out all ownership equity for millions of Americans, it turns their homes ‘upside down’ – incentivizing them to let their gardens grow weeds instead of lettuce.” He believes systemic crisis is possible if the decline isn’t stopped. He’s not alone in that judgment, but few agreeing get heard.

Consider damage already done. The current Case-Schiller Index shows home prices declining at a 32% annual rate. A year ago, it was 8%. The risk is a huge 4.6 million home inventory or nearly double the 2.6 million past 20 year average. Even more worrisome is that 2.27 million homes sit empty and that’s besides all the others banks own from foreclosures. It’s double the year ago number.

If these properties keep deflating and hit the dangerous 20% level Gross mentions, millions will lose their equity, consumption and credit will be hit, and banks will keep writing-off greater amounts no one wants to contemplate. Robert Shiller believes home prices may equal or exceed the 30% drop of the 1930s. That’s $6 trillion in today’s dollars, or $80,000 for every US homeowner. The Fed can keep injecting liquidity but only for so long, and it may not work. If bank losses are great enough, they’ll need all they can get to stay afloat, but for some it may not be enough. Not a pretty picture and no way to know how bad things may get.

Placing Blame Where It’s Due According to Grantham

Grantham looks back at 2007 and awarded three prizes for “odd prognostications.” They’re named in Greenspan’s honor. First prize went to Citicorp’s CEO Chuck Prince for enthusiastically taking on more credit at a time markets were over-extended and peaking. He subsequently wrote off billions of worthless assets, $17 billion in first quarter 2008 alone, risked the bank’s solvency, and got himself replaced by a new CEO.

Current Fed Chairman Ben Bernanke took second prize for “incomprehensible misreading of obvious data by an apparently well-informed source.” In late 2006, he said what he now regrets (or should) – that “US housing prices merely reflect a strong US economy.” His cohort at Treasury, Hank Paulson, got third prize for his spring 2007 comment that subprime problems were “contained.”

Not if you own one or too many of those junk assets written down to a fraction of their original value. Grantham calls the crisis the most important one since World War II. It’s more global than others. Its tentacles are everywhere. Speculative greed and broad asset overpricing caused it. Loose regulatory and irresponsible Fed policies allowed it. Perpetrators point fingers elsewhere, and no one’s got backbone enough to fess up to their to their own mistakes and transgressions.

Before this ends, according to Grantham, it’s “likely to make the S & L crisis look contained.” As a per cent of GDP, write-downs this time are on the order of two to three times greater now than then. But there’s no precise way to know their full impact or to what degree monetary and fiscal stimulus will contain the damage or delay its final resolution. They won’t be papered over, and writer/economist William Engdahl puts it this way:

Greenspan was a tool of the monied interests who gave him his job. He “knew who buttered his bread” and returned their favors manyfold. He engineered many crises and used them all to “advance and consolidate the influence of US-centered finance over the global economy, almost always to the severe detriment of the economy and broad general welfare of the population.” His 18 year tenure was undistinguished to say the least. “It can be described as rolling the financial markets from successive crises into ever larger ones…”

It remains to be seen if his “securitization revolution was a ‘bridge too far,’ ” spelling the beginning of the end of US dominance as an economic power. The “true significance” of today’s crisis (nowhere near resolved) lies right in his lap. Engdahl lists his menu of malpractice in serving the “Money Trust,” meaning Wall Street and big banks. In each case, it yielded big short-term gains, greater long-term losses, and successively greater crises. A new Fed Chairmen has to solve them. Bailout is his strategy. It may help in the short-term. The jury is still out. The policy is flawed. It assures greater crises ahead, and at some point the music stops.

Bernanke may end up being too smart by half. We’re awash in problems that one analyst calls three simultaneous imploding bubbles:

— a property, mainly housing, price one;

— a mortgage finance one; and

— an alphabet soup of CDOs, SIVs, SPVs, and a whole menu of levered-up, high-risk securitized assets amounting to financial alchemy.

Grantham also takes aim at them and sees lots more write-downs and defaults ahead before it ends. He cites a longer-term problem as well – “that all debt standards fell so that losses will accumulate right across the entire credit system.” Even worse, it came at a time equities were overpriced, still are, and particularly higher-risk ones. Further, “profit margins are spectacularly above average” in some sectors, margins are being squeezed, and markets finally caught on that “all risk is dangerous.”

Grantham’s research shows that all markets eventually revert to their means and for months have been “well into a massive repricing of both risk and asset prices” to get there. Before it started last July, we reached “the lowest risk premium, by far, ever recorded.” It needs lots of heaving lifting to return it to more normal levels. And, of course, it’s a painful process, a drag on the economy, and will likely take years to fix. In Grantham’s judgment, through 2010 “to clean house completely,” and when it ends “the amount of write-downs (may likely) start with a ‘T.’ “

Blame it on a Fed Chairman whose name starts with “G,” and Grantham has been unsparing on him before. Referring to the 1990s and tech excess, he blamed him for engineering the largest ever stock market bubble and bust in history through incompetence, timidity, dereliction of duty or a combination of all three. It didn’t matter because Wall Street types made fortunes, then got plenty of early warning to exit to let small investors take the pain.

Undeterred, Greenspan was at it again in the current cycle that’s now being unwound. But this time, multiple bubbles were created, with housing and mortgage ones most affecting households. Grantham (like Gross) calls them “much rarer and more dangerous than stock bubbles” because they affect so many people. Even worse, with over half of all housing wealth borrowed and “on much less credit-worthy terms,” it’s very much “more dangerous than normal.”

It’s the Fed’s job to watch over:

— mortgage quality;

— the soundness of repackaging mortgages; and

— off balance sheet commercial banking that should have been stopped or curtailed.

“And what did Alan Greenspan do this time? Absolutely nothing” except whine about a little excess in housing when it was already out of hand. Even then he implied not to worry because “the housing boom will soon simmer down.” And Bernanke is even more feckless with comments like “The housing market merely reflects a strong US economy.” Grantham portrays him as a Greenspan clone, just as incompetent, and someone having “extraordinary faith in efficiency to the point of denial.” Above all, like Greenspan, he’s there to serve the “Money Trust” that appointed him.

And he’s done it since taking over. First, by “stimulat(ing) at all costs” and repeating the same mistakes as his predecessor. Grantham calls 2008 “the year of Santayana: we ignored history and (are) condemned to repeat it.” Housing price deflation is its most notable feature. It’s what affects households most, and that, in turn, reverberates through the economy. Greenspan and Bernanke paid it no heed. Each now accepts no blame, and Grantham calls it “shameful.” It’s far worse than that at a time people are suffering, and the current Fed Chairman gets accolades for bailing out bankers while paying only lip service to homeowners.

By creating asset bubbles, Fed policy caused their dilemma, and Grantham believes their deflating may be the greatest of all threats to financial and economic stability. It stands to reason that efforts must be made to avoid the worst possible outcome. That means curbing speculation is key. Minsky was right that short of that financial crises are inevitable and excess is always the cause.

Grantham sums it up saying: it’s important or even vital “to our financial well-being that the Fed recognizes a responsibility to move against” this behavior that comes with a huge price. Greenspan’s response: “I have no regrets on any of the Federal Reserve’s policies that we initiated….” Grantham calls that “chutzpah that even Paul Bremer would have to admire.”

Engdahl calls it a “financial tsunami.” It triggered a “crisis of confidence.” High-risk securities were most affected. So were sub-prime mortgages. Then the whole “edifice of securitized debt” began unravelling, triggered by its weakest link collapse. Its effect is global and “a crisis not even comparable to the 1930s Great Depression.”

High-quality municipal debt got hit. Interest rates on them “rose to the highest ever relative to Treasuries.” It makes financing unaffordable and caused states and local agencies to “pull out of the $330 billion floating (auction-rate) market where costs have doubled since January.” New York and London bond fund managers say it’s the worst they ever saw. High interest rates aggravate fiscal crises even with the Fed cutting fed funds and discount rates. Some call it pushing on a string. Time will tell if it’ll work. Engdahl is dubious. He sees depression spreading. It creates “a self-reinforcing downward spiral. The process is in its early stages….”

With market turbulence somewhat quieted after a sharp April rebound after months of declines, unanswered questions remain. Is it a lull, a turnaround, or the eye of the storm before its harshest side hits? Grantham and Engdahl see trouble. Bernanke’s fingers are crossed. European central bankers as well, while Americans fear losing their homes and jobs the longer the crisis goes on and deeper it gets.

Direst forecasts have it in its early innings with the worst of things ahead. Only in the fullness of time will we know, but some things are clear. None of this happened by chance. Nor should it have in the first place. A combination of financial malpractice, outright fraud, and greed are to blame. The same mistakes keep getting repeated. The costs keep going higher. Sooner or later they matter, and some day it’ll be too late to fix them. Some day may be closer than smart money folks think. Stay tuned, be cautious, and ignore Fed Chairmen and politicians promising miracles. If things were sound and improving, they wouldn’t have to keep reminding us.

Global Research Associate Stephen Lendman lives in Chicago and can be reached at

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The battle for Sadr City

Dandelion Salad

by Eric Ruder
May 21, 2008

Out of view of the U.S. media, American forces have been continuing an escalation in violence in Iraq that is claiming more lives.

Fighting that broke out first in Basra in southern Iraq in April, between the Mahdi Army of Shia cleric Moktada al-Sadr and the Iraqi government backed up by U.S. forces, has spread elsewhere around the country–in particular, to the massive Sadr City neighborhood on the outskirts of Baghdad.

Michael Schwartz is the author of a forthcoming book War Without End: The Iraq Debacle in Context, to be published later this year by Haymarket Books. He talked to Eric Ruder about how to make sense of the current situation in Iraq.

ACCORDING TO the Pentagon, last year’s surge produced a period of relative calm in Iraq that has now come to an end. What’s the reason for the recent escalation of U.S. operations?

THE SURGE ended last summer, and the U.S. then began a new strategy of making alliances and tacit or explicit ceasefires with the Sunni insurgents on one side and the Mahdi Army on the other.


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