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Saturday, November 14, 2009
$2.5 Trillion - That’s the size of the global oil scam.
It’s a number so large that, to put it in perspective, we will now begin measuring the damage done to the global economy in "Madoff Units" ($50Bn rip-offs). That’s right - $2.5Tn is 50 TIMES the amount of money that Bernie Madoff scammed from investors in his lifetime, yet it is also LESS than the MONTHLY EXCESS price the global population is being manipulated into paying for a barrel of oil.
Where is the outrage? Where are the investigations?
Goldman Sachs (GS), Morgan Stanley (MS), BP (BP), Total (TOT), Shell (RDS.A), Deutsche Bank (DB) and Societe Generale (SCGLY.PK) founded the Intercontinental Exchange (ICE) in 2000. ICE is an online commodities and futures marketplace. It is outside the US and operates free from the constraints of US laws. The exchange was set up to facilitate "dark pool" trading in the commodities markets. Billions of dollars are being placed on oil futures contracts at the ICE and the beauty of this scam is that they NEVER take delivery, per se. They just ratchet up the price with leveraged speculation using your TARP money. This year alone they ratcheted up the global cost of oil from $40 to $80 per barrel.
A Congressional investigation into energy trading in 2003 discovered that ICE was being used to facilitate "round-trip" trades. " Round-trip” trades occur when one firm sells energy to another and then the second firm simultaneously sells the same amount of energy back to the first company at exactly the same price. No commodity ever changes hands. But when done on an exchange, these transactions send a price signal to the market and they artificially boost revenue for the company. This is nothing more than a massive fraud, pure and simple.
"Traders of the the ICE core membership (GS, MS, BP, DB, RDS.A, GLE & TOT) wouldn’t really have to put much money at risk by their standards in order to move or support the global market price via the BFOE market. Indeed the evolution of the Brent market has been a response to declining production and the fact that traders could not resist manipulating the market by buying up contracts and “squeezing” those who had sold oil they did not have. The fewer cargoes produced, the easier the underlying market is to manipulate." - Chris Cook, Former Director of the International Petroleum Exchange, which was bought by ICE.
How widespread are “round-trip’‘ trades? The Congressional Research Service looked at trading patterns in the energy sector and this is what they reported: This pattern of trading suggests a market environment in which a significant volume of fictitious trading could have taken place. Yet since most of the trading is unregulated by the Government, we have only a slim idea of the illusion being perpetrated in the energy sector.
DMS Energy, when investigated by Congress, admitted that 80 percent of its trades in 2001 were “round-trip” trades. That means 80 percent of all of their trades that year were bogus trades where no commodity changed hands, and yet the balance sheets reflect added revenue. Remember, these trades are sham deals where nothing was exchanged. Duke Energy (DUK) disclosed that $1.1 billion worth of trades were “round-trip” since 1999. Roughly two-thirds of these were done on the InterContinental Exchange; that is, the online, nonregulated, nonaudited, nonoversight for manipulation and fraud entity run by banks in this country. That means thousands of subscribers would see false pricing. Under investigation, a lawyer for JPMorgan Chase (JPM) admitted the bank engineered a series of “round-trip” trades with Enron.
You can chart the damage done by Goldman Sachs and their gang of thieves by looking at commodity pricing pre and post ICE. Before ICE, commodities followed a more or less normal growth path that matched global GDP and was always limited in price appreciation by the fact that, ultimately, someone had to take delivery of a physical commodity at a set price.
ICE threw that concept out the window and turned commodity trading into a speculative casino game where pricing was notional and contracts could be sold by people who never produced a thing, to people who didn’t need the things that were not produced. And in just 5 years after commencing operations, Goldman Sachs and their partners managed to TRIPLE the price of commodities.
Goldman Sachs Commodity Index funds accounted for $60Bn out of $100Bn of all formula-managed funds in 2007 and investors in the GSCI lost 15% in 2006 while Goldman had a record year. John Dizard, of the Financial Times, calls this process "date rape" by Goldman Sachs as the funds index rolls cost investors 150 basis points of return annually ($9Bn on the Goldman funds) but GS, under the prospectus, is able to "manage our corresponding position," which means that it has to deliver a price at the end of the roll period. If Goldman can cover that obligation at a better price, they will, and GS pockets the difference. This is why we see such wild moves in the days before rollover, there are Billions riding on GS hitting their target every month…
It is not surprising that a commodity scam would be the cornerstone of Goldman Sachs’s strategy. CEO Lloyd Blankfein rose to the top through Goldman’s commodity trading arm J Aron, starting his career at J Aron before Goldman Sachs bought them over 25 years ago. With his colleague Gary Cohn, Blankfein oversaw the key energy trading portfolio. According to Chris Cook: "It appears clear that BP and Goldman Sachs have been working collaboratively – at least at a strategic level - for maybe 15 years now. Their trading strategy has evolved over time as the global market has developed and become ever more financialised. Moreover, they have been well placed to steer the development of the key global energy market trading platform, and the legal and regulatory framework within which it operates." According to Cook:
It appears to me that what has been occurring in the oil market may have been that – through the intermediation of the likes of J Aron in the Brent complex – long term funds have been lending money to producers – effectively interest-free - and in return the producers have been lending oil to the funds. This works well for as long as funds flow into the market, or do not withdraw in quantity, but once funds withdraw money from the market, there is a sudden collapse in price.
A combination of market hype, the opacity of the Brent Complex and the relatively small scale of trading of the benchmark BFOE crude oil contract enabled the long run up in prices, and several observers believe that the dramatic spike to $147.00 per barrel was the specific outcome of the collapse of SemGroup, which that company’s management subsequently blamed mainly on Goldman Sachs.
Mike Riess issued a study of "Modern Market Manipulation" in which he describes how GS, MS, DB et al have systematically created an environment that rewards those who manipulate the system, robbing the poor to send the money up they company ladder in exchange for record bonus payouts, which (by design) are the majority of their traders’ salaries:
Before the ‘80’s, there were just us traders. "Rogue" traders arrived on the scene with the large institutional participants, both private and public. Today’s companies and government marketing boards are large enough for senior management to distance itself from controversy, including market manipulation.
In a competitive, amoral environment, middle managers in these mega-organizations have the authority to hijack an institution’s reputation and the financial clout to manipulate the market—and they do. As long as they succeed, they enjoy promotions and perks and, sometimes, the fruits of embezzlement. If the manipulation unravels, the company denies any knowledge and hangs the rogue out to dry. We’ve seen this over and over again, most recently with D’Avila and Codelco, Hamanaka and Sumitomo, Leeson and Barings and Tsuda and Daiwa Bank.
The CFTC’s definition of manipulation is:
A planned operation that causes or maintains an artificial price
Unusually large purchases or sales in a short period of time in order to distort prices
Putting out false information in order to distort prices.
In mid-2008 it was estimated that some $260 billion was invested in the Brent energy markets on the ICE while the value of the oil actually coming out of the North Sea each month, at maybe $4 to $5 billion at most. NYMEX trading follows a similar path with 258,000, 1,000-barrel contracts open for December delivery (258M barrels), which were traded 327,000 times yesterday alone yet, at the end of the period, less than 40M barrels of oil will actually be delivered as that is the total capacity at Cushing, Okla. - where NYMEX contract deliveries are settled. Every single one of those traders know it is not even possible for 80% of the contracts they are trading to be fulfilled - it's a joke, but the joke is on YOU!
Over the course of an average month at the NYMEX, 5 BILLION barrels of oil will be traded, with a fee being collected on every single transaction which is ultimately passed down to US consumers, yet less than 40M barrels will actually be delivered. That is just 8 tenths of 1 percent of actual demand for the product that is being traded - 99.2% of the oil transaction fees being paid by the American people do nothing more than create fees for the traders and record profits and bonuses for the trading firms!
Index Speculators have now stockpiled, via the futures market, the equivalent of 1.1 billion barrels of petroleum, effectively adding eight times as much oil to their own stockpile as the United States has added to the Strategic Petroleum Reserve over the last five years. Today, in many commodities futures markets, they are the single largest force. The huge growth in their demand has gone virtually undetected by classically trained economists who almost never analyze demand in futures markets. As money pours into the markets, two things happen concurrently: The markets expand and prices rise. One particularly troubling aspect of Index Speculator demand is that it actually increases the more prices increase. This explains the accelerating rate at which commodity futures prices (and actual commodity prices) are increasing.
Before ICE, the average American family spent 7% of their income on food and fuel. Last year, that number topped 20%. That’s 13% of the incomes of every man, woman and child in the United States of America, over $1Tn EVERY SINGLE YEAR, stolen through market manipulation. On a global scale, that number is over $4Tn per year - 80 Madoffs! Why is there no outrage, why are there no investigations? Well, the answer is the same - $4Tn per year buys you a lot of political clout, it pays to have politicians all over the world look the other way while GS and their merry men rob from the poor and give to the rich on such a vast scale that it’s hard to grasp the damage they have done and continue to do to the global economy.
CIBC Chief Economist Jeff Rubin issued a report last year that blames the current recession on high oil prices, saying defaulting mortgages are only a symptom. According to Rubin, these higher oil prices caused Japan and the Eurozone to enter into a recession even before the most recent financial problems hit. Higher oil prices started four of the last five world recessions; we shouldn’t be too surprised if they started this one also:
Oil shocks create global recessions by transferring billions of dollars of income from economies where consumers spend every cent they have, and then some, to economies that sport the highest savings rates in the world. While those petro-dollars may get recycled back to Wall Street by sovereign wealth fund investments, they don’t all get recycled back into world demand. The leakage, as income is transferred to countries with savings rates as high as 50%, is what makes this income transfer far from demand neutral.
There is NO shortage of oil. OPEC alone has 6-7 Million barrels a day of spare capacity, more than the total disruption of any single country and any two countries other than Saudi Arabia could offset. Additionaly, ICE partners Total and JPM are part of the cartel that is totally skewing the global demand picture by storing 125M barrels of oil in offshore tankers. That’s 15 days of US imports that have been "ordered" but never delivered so they show up as an extra 1Mbd of global demand, even though nobody actually wants them. Land-based storage is also bursting at the seams, with global supplies up to 61 days of total consumption (84Mbd) up from 52 days last year.
That’s 5 BILLION barrels of oil already out of the ground, in barrels and ready to go AND THEY KEEP MAKING 86M MORE EVERY DAY!!! Where is the shortage? Mainly, it is media hype pushed by "analysts" at the very firms that profit the most from high oil prices. Goldman Sachs issues bullish opinions on oil and builds large positions in oil, while it is the cartel’s job to hide oil in offshore tankers, and then sell forward all the oil, with futures contracts, locking in the high price. Of course they have their media hounds as well, most notably the Drudge Report. As noted by Goldmansachsrules:
Type in the word "OIL" inside the "Drudge Report" search engine. It returns 1,965 headlines with the word "OIL." Over the last couple years, The Drudge Report has ran 1,965 headlines with the word "OIL." Most of these articles were hosted by the worthless organizations of Yahoo, Breibart, APNews, and Reuters. The Drudge Report just creates the headline, and links it the article hosted by who ever is doing the "hyping."
Search on the word "credit crisis" and you only get 12 archived headlines. The word "bailout" yields only 268. The word "bank" returns only 568. So you have the Drudge Report hyping the oil market, because they bring it up almost 2,000 times. Unlike the "credit crisis" or "Wall Street Bailout" that actual did happen, the oil market and what did/didn’t happen between Israel/Iran is plugged 10 times more!
Of all the 1,965 articles that the Drudge Report ran with the word "OIL" in the title, most were hyping the oil market. The most notorious cases, a few times a week, were hosted by Yahoo, Breibart, and AP News. Most of these articles were plugged with the same paragraph that stated if "Israel were to attack Iran, Iran would retaliate by taking over the straits of Hormuz, the largest pathway for oil and we all know what that would do to the price of oil.
It truly takes a global village of manipulators and their lackeys to pull off a con on the scale of oil but it’s also the most profitable scam ever perpetrated on the people of this planet, as they take control of a vital resource and then create artificial shortages and drive speculative demand in order to charge you an extra dollar per gallon of gas. You don’t complain because it’s "only" $15-$20 every time you fill up your tank, but that’s what they count on and that’s where you’re wrong - it’s $20 from you and $20 from EVERY SINGLE ONE of your customers once or twice a week and $20 more your employees need just to get to work. It’s money that could be going into your business instead of a new gold bathtub for a Saudi Prince or a Goldman trader.
Global drivers consume 1.7Bn gallons of gas every single day, that $1 is $50Bn a month, a Madoff per month that is being taken away from YOU and YOUR business and the non-energy/financial businesses you invest in. Of course we can give up and invest in those sectors (we do) but that doesn’t do much for the global economy and, even as you sit here now, not doing anything, those oil profits have been plowed into the copper and gold markets and now the same Goldman energy cartel is bidding to take over you clean air (through Carbon Credit trading) and your clean water.
Maybe when they are charging you $80 a gallon for water and ten cents a breath you’ll want to do something about it. I think I’ll start right now and you can too! Here are the Email addresses and Fax numbers for all of your Senators, Congresspeople and Governors. Send this article to them and let them know you’d like to see an investigation. Take a few minutes of your time to save a few bucks on your next gallon of water!
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Related Articles
What Rising Oil Prices Mean for Energy Investors Nov 13, 2009
Has the U.S. Been Playing Loose With Oil Market Data? Nov 13, 2009
Cooper: Turnaround Coming for Natural Gas Nov 13, 2009
Green Energy Investing for Beginners, Part II Nov 13, 2009
Solar Market Declines for First Time Ever Nov 13, 2009
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Related Stocks:
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BOTTOM LINE HERE FOLKS IS BILLIONS ARE BEING MADE AND LOST WHILE HIGH FINANCE CON MEN MANIPULATE THE MARKETS. WE ARE BEING PUMMELED AT THE PUMPS, TAKING OUR SHIT TO THE PAWN SHOPS JUST TO GET ENOUGH PETROL FOR ANOTHER WEEK. THE POLITICIANS DO ABSOLUTELY NOTHING TO ALLEVIATE THE SITUATION!
It’s a number so large that, to put it in perspective, we will now begin measuring the damage done to the global economy in "Madoff Units" ($50Bn rip-offs). That’s right - $2.5Tn is 50 TIMES the amount of money that Bernie Madoff scammed from investors in his lifetime, yet it is also LESS than the MONTHLY EXCESS price the global population is being manipulated into paying for a barrel of oil.
Where is the outrage? Where are the investigations?
Goldman Sachs (GS), Morgan Stanley (MS), BP (BP), Total (TOT), Shell (RDS.A), Deutsche Bank (DB) and Societe Generale (SCGLY.PK) founded the Intercontinental Exchange (ICE) in 2000. ICE is an online commodities and futures marketplace. It is outside the US and operates free from the constraints of US laws. The exchange was set up to facilitate "dark pool" trading in the commodities markets. Billions of dollars are being placed on oil futures contracts at the ICE and the beauty of this scam is that they NEVER take delivery, per se. They just ratchet up the price with leveraged speculation using your TARP money. This year alone they ratcheted up the global cost of oil from $40 to $80 per barrel.
A Congressional investigation into energy trading in 2003 discovered that ICE was being used to facilitate "round-trip" trades. " Round-trip” trades occur when one firm sells energy to another and then the second firm simultaneously sells the same amount of energy back to the first company at exactly the same price. No commodity ever changes hands. But when done on an exchange, these transactions send a price signal to the market and they artificially boost revenue for the company. This is nothing more than a massive fraud, pure and simple.
"Traders of the the ICE core membership (GS, MS, BP, DB, RDS.A, GLE & TOT) wouldn’t really have to put much money at risk by their standards in order to move or support the global market price via the BFOE market. Indeed the evolution of the Brent market has been a response to declining production and the fact that traders could not resist manipulating the market by buying up contracts and “squeezing” those who had sold oil they did not have. The fewer cargoes produced, the easier the underlying market is to manipulate." - Chris Cook, Former Director of the International Petroleum Exchange, which was bought by ICE.
How widespread are “round-trip’‘ trades? The Congressional Research Service looked at trading patterns in the energy sector and this is what they reported: This pattern of trading suggests a market environment in which a significant volume of fictitious trading could have taken place. Yet since most of the trading is unregulated by the Government, we have only a slim idea of the illusion being perpetrated in the energy sector.
DMS Energy, when investigated by Congress, admitted that 80 percent of its trades in 2001 were “round-trip” trades. That means 80 percent of all of their trades that year were bogus trades where no commodity changed hands, and yet the balance sheets reflect added revenue. Remember, these trades are sham deals where nothing was exchanged. Duke Energy (DUK) disclosed that $1.1 billion worth of trades were “round-trip” since 1999. Roughly two-thirds of these were done on the InterContinental Exchange; that is, the online, nonregulated, nonaudited, nonoversight for manipulation and fraud entity run by banks in this country. That means thousands of subscribers would see false pricing. Under investigation, a lawyer for JPMorgan Chase (JPM) admitted the bank engineered a series of “round-trip” trades with Enron.
You can chart the damage done by Goldman Sachs and their gang of thieves by looking at commodity pricing pre and post ICE. Before ICE, commodities followed a more or less normal growth path that matched global GDP and was always limited in price appreciation by the fact that, ultimately, someone had to take delivery of a physical commodity at a set price.
ICE threw that concept out the window and turned commodity trading into a speculative casino game where pricing was notional and contracts could be sold by people who never produced a thing, to people who didn’t need the things that were not produced. And in just 5 years after commencing operations, Goldman Sachs and their partners managed to TRIPLE the price of commodities.
Goldman Sachs Commodity Index funds accounted for $60Bn out of $100Bn of all formula-managed funds in 2007 and investors in the GSCI lost 15% in 2006 while Goldman had a record year. John Dizard, of the Financial Times, calls this process "date rape" by Goldman Sachs as the funds index rolls cost investors 150 basis points of return annually ($9Bn on the Goldman funds) but GS, under the prospectus, is able to "manage our corresponding position," which means that it has to deliver a price at the end of the roll period. If Goldman can cover that obligation at a better price, they will, and GS pockets the difference. This is why we see such wild moves in the days before rollover, there are Billions riding on GS hitting their target every month…
It is not surprising that a commodity scam would be the cornerstone of Goldman Sachs’s strategy. CEO Lloyd Blankfein rose to the top through Goldman’s commodity trading arm J Aron, starting his career at J Aron before Goldman Sachs bought them over 25 years ago. With his colleague Gary Cohn, Blankfein oversaw the key energy trading portfolio. According to Chris Cook: "It appears clear that BP and Goldman Sachs have been working collaboratively – at least at a strategic level - for maybe 15 years now. Their trading strategy has evolved over time as the global market has developed and become ever more financialised. Moreover, they have been well placed to steer the development of the key global energy market trading platform, and the legal and regulatory framework within which it operates." According to Cook:
It appears to me that what has been occurring in the oil market may have been that – through the intermediation of the likes of J Aron in the Brent complex – long term funds have been lending money to producers – effectively interest-free - and in return the producers have been lending oil to the funds. This works well for as long as funds flow into the market, or do not withdraw in quantity, but once funds withdraw money from the market, there is a sudden collapse in price.
A combination of market hype, the opacity of the Brent Complex and the relatively small scale of trading of the benchmark BFOE crude oil contract enabled the long run up in prices, and several observers believe that the dramatic spike to $147.00 per barrel was the specific outcome of the collapse of SemGroup, which that company’s management subsequently blamed mainly on Goldman Sachs.
Mike Riess issued a study of "Modern Market Manipulation" in which he describes how GS, MS, DB et al have systematically created an environment that rewards those who manipulate the system, robbing the poor to send the money up they company ladder in exchange for record bonus payouts, which (by design) are the majority of their traders’ salaries:
Before the ‘80’s, there were just us traders. "Rogue" traders arrived on the scene with the large institutional participants, both private and public. Today’s companies and government marketing boards are large enough for senior management to distance itself from controversy, including market manipulation.
In a competitive, amoral environment, middle managers in these mega-organizations have the authority to hijack an institution’s reputation and the financial clout to manipulate the market—and they do. As long as they succeed, they enjoy promotions and perks and, sometimes, the fruits of embezzlement. If the manipulation unravels, the company denies any knowledge and hangs the rogue out to dry. We’ve seen this over and over again, most recently with D’Avila and Codelco, Hamanaka and Sumitomo, Leeson and Barings and Tsuda and Daiwa Bank.
The CFTC’s definition of manipulation is:
A planned operation that causes or maintains an artificial price
Unusually large purchases or sales in a short period of time in order to distort prices
Putting out false information in order to distort prices.
In mid-2008 it was estimated that some $260 billion was invested in the Brent energy markets on the ICE while the value of the oil actually coming out of the North Sea each month, at maybe $4 to $5 billion at most. NYMEX trading follows a similar path with 258,000, 1,000-barrel contracts open for December delivery (258M barrels), which were traded 327,000 times yesterday alone yet, at the end of the period, less than 40M barrels of oil will actually be delivered as that is the total capacity at Cushing, Okla. - where NYMEX contract deliveries are settled. Every single one of those traders know it is not even possible for 80% of the contracts they are trading to be fulfilled - it's a joke, but the joke is on YOU!
Over the course of an average month at the NYMEX, 5 BILLION barrels of oil will be traded, with a fee being collected on every single transaction which is ultimately passed down to US consumers, yet less than 40M barrels will actually be delivered. That is just 8 tenths of 1 percent of actual demand for the product that is being traded - 99.2% of the oil transaction fees being paid by the American people do nothing more than create fees for the traders and record profits and bonuses for the trading firms!
Index Speculators have now stockpiled, via the futures market, the equivalent of 1.1 billion barrels of petroleum, effectively adding eight times as much oil to their own stockpile as the United States has added to the Strategic Petroleum Reserve over the last five years. Today, in many commodities futures markets, they are the single largest force. The huge growth in their demand has gone virtually undetected by classically trained economists who almost never analyze demand in futures markets. As money pours into the markets, two things happen concurrently: The markets expand and prices rise. One particularly troubling aspect of Index Speculator demand is that it actually increases the more prices increase. This explains the accelerating rate at which commodity futures prices (and actual commodity prices) are increasing.
Before ICE, the average American family spent 7% of their income on food and fuel. Last year, that number topped 20%. That’s 13% of the incomes of every man, woman and child in the United States of America, over $1Tn EVERY SINGLE YEAR, stolen through market manipulation. On a global scale, that number is over $4Tn per year - 80 Madoffs! Why is there no outrage, why are there no investigations? Well, the answer is the same - $4Tn per year buys you a lot of political clout, it pays to have politicians all over the world look the other way while GS and their merry men rob from the poor and give to the rich on such a vast scale that it’s hard to grasp the damage they have done and continue to do to the global economy.
CIBC Chief Economist Jeff Rubin issued a report last year that blames the current recession on high oil prices, saying defaulting mortgages are only a symptom. According to Rubin, these higher oil prices caused Japan and the Eurozone to enter into a recession even before the most recent financial problems hit. Higher oil prices started four of the last five world recessions; we shouldn’t be too surprised if they started this one also:
Oil shocks create global recessions by transferring billions of dollars of income from economies where consumers spend every cent they have, and then some, to economies that sport the highest savings rates in the world. While those petro-dollars may get recycled back to Wall Street by sovereign wealth fund investments, they don’t all get recycled back into world demand. The leakage, as income is transferred to countries with savings rates as high as 50%, is what makes this income transfer far from demand neutral.
There is NO shortage of oil. OPEC alone has 6-7 Million barrels a day of spare capacity, more than the total disruption of any single country and any two countries other than Saudi Arabia could offset. Additionaly, ICE partners Total and JPM are part of the cartel that is totally skewing the global demand picture by storing 125M barrels of oil in offshore tankers. That’s 15 days of US imports that have been "ordered" but never delivered so they show up as an extra 1Mbd of global demand, even though nobody actually wants them. Land-based storage is also bursting at the seams, with global supplies up to 61 days of total consumption (84Mbd) up from 52 days last year.
That’s 5 BILLION barrels of oil already out of the ground, in barrels and ready to go AND THEY KEEP MAKING 86M MORE EVERY DAY!!! Where is the shortage? Mainly, it is media hype pushed by "analysts" at the very firms that profit the most from high oil prices. Goldman Sachs issues bullish opinions on oil and builds large positions in oil, while it is the cartel’s job to hide oil in offshore tankers, and then sell forward all the oil, with futures contracts, locking in the high price. Of course they have their media hounds as well, most notably the Drudge Report. As noted by Goldmansachsrules:
Type in the word "OIL" inside the "Drudge Report" search engine. It returns 1,965 headlines with the word "OIL." Over the last couple years, The Drudge Report has ran 1,965 headlines with the word "OIL." Most of these articles were hosted by the worthless organizations of Yahoo, Breibart, APNews, and Reuters. The Drudge Report just creates the headline, and links it the article hosted by who ever is doing the "hyping."
Search on the word "credit crisis" and you only get 12 archived headlines. The word "bailout" yields only 268. The word "bank" returns only 568. So you have the Drudge Report hyping the oil market, because they bring it up almost 2,000 times. Unlike the "credit crisis" or "Wall Street Bailout" that actual did happen, the oil market and what did/didn’t happen between Israel/Iran is plugged 10 times more!
Of all the 1,965 articles that the Drudge Report ran with the word "OIL" in the title, most were hyping the oil market. The most notorious cases, a few times a week, were hosted by Yahoo, Breibart, and AP News. Most of these articles were plugged with the same paragraph that stated if "Israel were to attack Iran, Iran would retaliate by taking over the straits of Hormuz, the largest pathway for oil and we all know what that would do to the price of oil.
It truly takes a global village of manipulators and their lackeys to pull off a con on the scale of oil but it’s also the most profitable scam ever perpetrated on the people of this planet, as they take control of a vital resource and then create artificial shortages and drive speculative demand in order to charge you an extra dollar per gallon of gas. You don’t complain because it’s "only" $15-$20 every time you fill up your tank, but that’s what they count on and that’s where you’re wrong - it’s $20 from you and $20 from EVERY SINGLE ONE of your customers once or twice a week and $20 more your employees need just to get to work. It’s money that could be going into your business instead of a new gold bathtub for a Saudi Prince or a Goldman trader.
Global drivers consume 1.7Bn gallons of gas every single day, that $1 is $50Bn a month, a Madoff per month that is being taken away from YOU and YOUR business and the non-energy/financial businesses you invest in. Of course we can give up and invest in those sectors (we do) but that doesn’t do much for the global economy and, even as you sit here now, not doing anything, those oil profits have been plowed into the copper and gold markets and now the same Goldman energy cartel is bidding to take over you clean air (through Carbon Credit trading) and your clean water.
Maybe when they are charging you $80 a gallon for water and ten cents a breath you’ll want to do something about it. I think I’ll start right now and you can too! Here are the Email addresses and Fax numbers for all of your Senators, Congresspeople and Governors. Send this article to them and let them know you’d like to see an investigation. Take a few minutes of your time to save a few bucks on your next gallon of water!
SeekingAlpha.Initializer.LogAndRun(load_article_toolbar);
Related Articles
What Rising Oil Prices Mean for Energy Investors Nov 13, 2009
Has the U.S. Been Playing Loose With Oil Market Data? Nov 13, 2009
Cooper: Turnaround Coming for Natural Gas Nov 13, 2009
Green Energy Investing for Beginners, Part II Nov 13, 2009
Solar Market Declines for First Time Ever Nov 13, 2009
remove_unneeded_article_from_article_more_box(GetArticleId());
Related Stocks:
BP, DB, GS, ICE, JPM, MS, RDS.A, SCGLY.PK, TOT
BOTTOM LINE HERE FOLKS IS BILLIONS ARE BEING MADE AND LOST WHILE HIGH FINANCE CON MEN MANIPULATE THE MARKETS. WE ARE BEING PUMMELED AT THE PUMPS, TAKING OUR SHIT TO THE PAWN SHOPS JUST TO GET ENOUGH PETROL FOR ANOTHER WEEK. THE POLITICIANS DO ABSOLUTELY NOTHING TO ALLEVIATE THE SITUATION!
The Great American Bubble Machine
From tech stocks to high gas prices, Goldman Sachs has engineered every major market manipulation since the Great Depression - and they're about to do it again
MATT TAIBBI
Posted Jul 13, 2009 1:49 PM
Advertisement
Click to watch Matt Taibbi break down his report in our exclusive video.
For more on Wall Street's march on Washington, read Taibbi's "The Big Takeover."
The first thing you need to know about Goldman Sachs is that it's everywhere. The world's most powerful investment bank is a great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money. In fact, the history of the recent financial crisis, which doubles as a history of the rapid decline and fall of the suddenly swindled dry American empire, reads like a Who's Who of Goldman Sachs graduates.
By now, most of us know the major players. As George Bush's last Treasury secretary, former Goldman CEO Henry Paulson was the architect of the bailout, a suspiciously self-serving plan to funnel trillions of Your Dollars to a handful of his old friends on Wall Street. Robert Rubin, Bill Clinton's former Treasury secretary, spent 26 years at Goldman before becoming chairman of Citigroup — which in turn got a $300 billion taxpayer bailout from Paulson. There's John Thain, the asshole chief of Merrill Lynch who bought an $87,000 area rug for his office as his company was imploding; a former Goldman banker, Thain enjoyed a multibilliondollar handout from Paulson, who used billions in taxpayer funds to help Bank of America rescue Thain's sorry company. And Robert Steel, the former Goldmanite head of Wachovia, scored himself and his fellow executives $225 million in goldenparachute payments as his bank was selfdestructing. There's Joshua Bolten, Bush's chief of staff during the bailout, and Mark Patterson, the current Treasury chief of staff, who was a Goldman lobbyist just a year ago, and Ed Liddy, the former Goldman director whom Paulson put in charge of bailedout insurance giant AIG, which forked over $13 billion to Goldman after Liddy came on board. The heads of the Canadian and Italian national banks are Goldman alums, as is the head of the World Bank, the head of the New York Stock Exchange, the last two heads of the Federal Reserve Bank of New York — which, incidentally, is now in charge of overseeing Goldman — not to mention …
But then, any attempt to construct a narrative around all the former Goldmanites in influential positions quickly becomes an absurd and pointless exercise, like trying to make a list of everything. What you need to know is the big picture: If America is circling the drain, Goldman Sachs has found a way to be that drain — an extremely unfortunate loophole in the system of Western democratic capitalism, which never foresaw that in a society governed passively by free markets and free elections, organized greed always defeats disorganized democracy.
The bank's unprecedented reach and power have enabled it to turn all of America into a giant pumpanddump scam, manipulating whole economic sectors for years at a time, moving the dice game as this or that market collapses, and all the time gorging itself on the unseen costs that are breaking families everywhere — high gas prices, rising consumercredit rates, halfeaten pension funds, mass layoffs, future taxes to pay off bailouts. All that money that you're losing, it's going somewhere, and in both a literal and a figurative sense, Goldman Sachs is where it's going: The bank is a huge, highly sophisticated engine for converting the useful, deployed wealth of society into the least useful, most wasteful and insoluble substance on Earth — pure profit for rich individuals.
They achieve this using the same playbook over and over again. The formula is relatively simple: Goldman positions itself in the middle of a speculative bubble, selling investments they know are crap. Then they hoover up vast sums from the middle and lower floors of society with the aid of a crippled and corrupt state that allows it to rewrite the rules in exchange for the relative pennies the bank throws at political patronage. Finally, when it all goes bust, leaving millions of ordinary citizens broke and starving, they begin the entire process over again, riding in to rescue us all by lending us back our own money at interest, selling themselves as men above greed, just a bunch of really smart guys keeping the wheels greased. They've been pulling this same stunt over and over since the 1920s — and now they're preparing to do it again, creating what may be the biggest and most audacious bubble yet.
If you want to understand how we got into this financial crisis, you have to first understand where all the money went — and in order to understand that, you need to understand what Goldman has already gotten away with. It is a history exactly five bubbles long — including last year's strange and seemingly inexplicable spike in the price of oil. There were a lot of losers in each of those bubbles, and in the bailout that followed. But Goldman wasn't one of them.
NEXT: Bubble #1 — The Great Depression
From issue 1082-1083, the story that inflamed Wall Street — Matt Taibbi on how Goldman Sachs seized Washington. Plus, click to watch Taibbi break down his report in our exclusive video.
BUBBLE #1 The Great Depression
Goldman wasn't always a too-big-to-fail Wall Street behemoth, the ruthless face of kill-or-be-killed capitalism on steroids — just almost always. The bank was actually founded in 1869 by a German immigrant named Marcus Goldman, who built it up with his soninlaw Samuel Sachs. They were pioneers in the use of commercial paper, which is just a fancy way of saying they made money lending out shortterm IOUs to smalltime vendors in downtown Manhattan.
You can probably guess the basic plotline of Goldman's first 100 years in business: plucky, immigrantled investment bank beats the odds, pulls itself up by its bootstraps, makes shitloads of money. In that ancient history there's really only one episode that bears scrutiny now, in light of more recent events: Goldman's disastrous foray into the speculative mania of precrash Wall Street in the late 1920s.
This great Hindenburg of financial history has a few features that might sound familiar. Back then, the main financial tool used to bilk investors was called an "investment trust." Similar to modern mutual funds, the trusts took the cash of investors large and small and (theoretically, at least) invested it in a smorgasbord of Wall Street securities, though the securities and amounts were often kept hidden from the public. So a regular guy could invest $10 or $100 in a trust and feel like he was a big player. Much as in the 1990s, when new vehicles like day trading and etrading attracted reams of new suckers from the sticks who wanted to feel like big shots, investment trusts roped a new generation of regularguy investors into the speculation game.
Beginning a pattern that would repeat itself over and over again, Goldman got into the investmenttrust game late, then jumped in with both feet and went hogwild. The first effort was the Goldman Sachs Trading Corporation; the bank issued a million shares at $100 apiece, bought all those shares with its own money and then sold 90 percent of them to the hungry public at $104. The trading corporation then relentlessly bought shares in itself, bidding the price up further and further. Eventually it dumped part of its holdings and sponsored a new trust, the Shenandoah Corporation, issuing millions more in shares in that fund — which in turn sponsored yet another trust called the Blue Ridge Corporation. In this way, each investment trust served as a front for an endless investment pyramid: Goldman hiding behind Goldman hiding behind Goldman. Of the 7,250,000 initial shares of Blue Ridge, 6,250,000 were actually owned by Shenandoah — which, of course, was in large part owned by Goldman Trading.
The end result (ask yourself if this sounds familiar) was a daisy chain of borrowed money, one exquisitely vulnerable to a decline in performance anywhere along the line. The basic idea isn't hard to follow. You take a dollar and borrow nine against it; then you take that $10 fund and borrow $90; then you take your $100 fund and, so long as the public is still lending, borrow and invest $900. If the last fund in the line starts to lose value, you no longer have the money to pay back your investors, and everyone gets massacred.
In a chapter from The Great Crash, 1929 titled "In Goldman Sachs We Trust," the famed economist John Kenneth Galbraith held up the Blue Ridge and Shenandoah trusts as classic examples of the insanity of leveragebased investment. The trusts, he wrote, were a major cause of the market's historic crash; in today's dollars, the losses the bank suffered totaled $475 billion. "It is difficult not to marvel at the imagination which was implicit in this gargantuan insanity," Galbraith observed, sounding like Keith Olbermann in an ascot. "If there must be madness, something may be said for having it on a heroic scale."
NEXT: Bubble #2 — Tech Stocks
BUBBLE #2 Tech Stocks
Fast-forward about 65 years. Goldman not only survived the crash that wiped out so many of the investors it duped, it went on to become the chief underwriter to the country's wealthiest and most powerful corporations. Thanks to Sidney Weinberg, who rose from the rank of janitor's assistant to head the firm, Goldman became the pioneer of the initial public offering, one of the principal and most lucrative means by which companies raise money. During the 1970s and 1980s, Goldman may not have been the planet-eating Death Star of political influence it is today, but it was a topdrawer firm that had a reputation for attracting the very smartest talent on the Street.
It also, oddly enough, had a reputation for relatively solid ethics and a patient approach to investment that shunned the fast buck; its executives were trained to adopt the firm's mantra, "longterm greedy." One former Goldman banker who left the firm in the early Nineties recalls seeing his superiors give up a very profitable deal on the grounds that it was a longterm loser. "We gave back money to 'grownup' corporate clients who had made bad deals with us," he says. "Everything we did was legal and fair — but 'longterm greedy' said we didn't want to make such a profit at the clients' collective expense that we spoiled the marketplace."
But then, something happened. It's hard to say what it was exactly; it might have been the fact that Goldman's cochairman in the early Nineties, Robert Rubin, followed Bill Clinton to the White House, where he directed the National Economic Council and eventually became Treasury secretary. While the American media fell in love with the story line of a pair of babyboomer, Sixtieschild, Fleetwood Mac yuppies nesting in the White House, it also nursed an undisguised crush on Rubin, who was hyped as without a doubt the smartest person ever to walk the face of the Earth, with Newton, Einstein, Mozart and Kant running far behind.
Rubin was the prototypical Goldman banker. He was probably born in a $4,000 suit, he had a face that seemed permanently frozen just short of an apology for being so much smarter than you, and he exuded a Spock-like, emotion-neutral exterior; the only human feeling you could imagine him experiencing was a nightmare about being forced to fly coach. It became almost a national clichè that whatever Rubin thought was best for the economy — a phenomenon that reached its apex in 1999, when Rubin appeared on the cover of Time with his Treasury deputy, Larry Summers, and Fed chief Alan Greenspan under the headline The Committee To Save The World. And "what Rubin thought," mostly, was that the American economy, and in particular the financial markets, were over-regulated and needed to be set free. During his tenure at Treasury, the Clinton White House made a series of moves that would have drastic consequences for the global economy — beginning with Rubin's complete and total failure to regulate his old firm during its first mad dash for obscene short-term profits.
The basic scam in the Internet Age is pretty easy even for the financially illiterate to grasp. Companies that weren't much more than potfueled ideas scrawled on napkins by uptoolate bongsmokers were taken public via IPOs, hyped in the media and sold to the public for mega-millions. It was as if banks like Goldman were wrapping ribbons around watermelons, tossing them out 50-story windows and opening the phones for bids. In this game you were a winner only if you took your money out before the melon hit the pavement.
It sounds obvious now, but what the average investor didn't know at the time was that the banks had changed the rules of the game, making the deals look better than they actually were. They did this by setting up what was, in reality, a two-tiered investment system — one for the insiders who knew the real numbers, and another for the lay investor who was invited to chase soaring prices the banks themselves knew were irrational. While Goldman's later pattern would be to capitalize on changes in the regulatory environment, its key innovation in the Internet years was to abandon its own industry's standards of quality control.
"Since the Depression, there were strict underwriting guidelines that Wall Street adhered to when taking a company public," says one prominent hedge-fund manager. "The company had to be in business for a minimum of five years, and it had to show profitability for three consecutive years. But Wall Street took these guidelines and threw them in the trash." Goldman completed the snow job by pumping up the sham stocks: "Their analysts were out there saying Bullshit.com is worth $100 a share."
The problem was, nobody told investors that the rules had changed. "Everyone on the inside knew," the manager says. "Bob Rubin sure as hell knew what the underwriting standards were. They'd been intact since the 1930s."
Jay Ritter, a professor of finance at the University of Florida who specializes in IPOs, says banks like Goldman knew full well that many of the public offerings they were touting would never make a dime. "In the early Eighties, the major underwriters insisted on three years of profitability. Then it was one year, then it was a quarter. By the time of the Internet bubble, they were not even requiring profitability in the foreseeable future."
Goldman has denied that it changed its underwriting standards during the Internet years, but its own statistics belie the claim. Just as it did with the investment trust in the 1920s, Goldman started slow and finished crazy in the Internet years. After it took a littleknown company with weak financials called Yahoo! public in 1996, once the tech boom had already begun, Goldman quickly became the IPO king of the Internet era. Of the 24 companies it took public in 1997, a third were losing money at the time of the IPO. In 1999, at the height of the boom, it took 47 companies public, including stillborns like Webvan and eToys, investment offerings that were in many ways the modern equivalents of Blue Ridge and Shenandoah. The following year, it underwrote 18 companies in the first four months, 14 of which were money losers at the time. As a leading underwriter of Internet stocks during the boom, Goldman provided profits far more volatile than those of its competitors: In 1999, the average Goldman IPO leapt 281 percent above its offering price, compared to the Wall Street average of 181 percent.
How did Goldman achieve such extraordinary results? One answer is that they used a practice called "laddering," which is just a fancy way of saying they manipulated the share price of new offerings. Here's how it works: Say you're Goldman Sachs, and Bullshit.com comes to you and asks you to take their company public. You agree on the usual terms: You'll price the stock, determine how many shares should be released and take the Bullshit.com CEO on a "road show" to schmooze investors, all in exchange for a substantial fee (typically six to seven percent of the amount raised). You then promise your best clients the right to buy big chunks of the IPO at the low offering price — let's say Bullshit.com's starting share price is $15 — in exchange for a promise that they will buy more shares later on the open market. That seemingly simple demand gives you inside knowledge of the IPO's future, knowledge that wasn't disclosed to the daytrader schmucks who only had the prospectus to go by: You know that certain of your clients who bought X amount of shares at $15 are also going to buy Y more shares at $20 or $25, virtually guaranteeing that the price is going to go to $25 and beyond. In this way, Goldman could artificially jack up the new company's price, which of course was to the bank's benefit — a six percent fee of a $500 million IPO is serious money.
Goldman was repeatedly sued by shareholders for engaging in laddering in a variety of Internet IPOs, including Webvan and NetZero. The deceptive practices also caught the attention of Nicholas Maier, the syndicate manager of Cramer & Co., the hedge fund run at the time by the now-famous chattering television asshole Jim Cramer, himself a Goldman alum. Maier told the SEC that while working for Cramer between 1996 and 1998, he was repeatedly forced to engage in laddering practices during IPO deals with Goldman.
"Goldman, from what I witnessed, they were the worst perpetrator," Maier said. "They totally fueled the bubble. And it's specifically that kind of behavior that has caused the market crash. They built these stocks upon an illegal foundation — manipulated up — and ultimately, it really was the small person who ended up buying in." In 2005, Goldman agreed to pay $40 million for its laddering violations — a puny penalty relative to the enormous profits it made. (Goldman, which has denied wrongdoing in all of the cases it has settled, refused to respond to questions for this story.)
Another practice Goldman engaged in during the Internet boom was "spinning," better known as bribery. Here the investment bank would offer the executives of the newly public company shares at extra-low prices, in exchange for future underwriting business. Banks that engaged in spinning would then undervalue the initial offering price — ensuring that those "hot" opening-price shares it had handed out to insiders would be more likely to rise quickly, supplying bigger firstday rewards for the chosen few. So instead of Bullshit.com opening at $20, the bank would approach the Bullshit.com CEO and offer him a million shares of his own company at $18 in exchange for future business — effectively robbing all of Bullshit's new shareholders by diverting cash that should have gone to the company's bottom line into the private bank account of the company's CEO.
In one case, Goldman allegedly gave a multimillion-dollar special offering to eBay CEO Meg Whitman, who later joined Goldman's board, in exchange for future i-banking business. According to a report by the House Financial Services Committee in 2002, Goldman gave special stock offerings to executives in 21 companies that it took public, including Yahoo! cofounder Jerry Yang and two of the great slithering villains of the financial-scandal age — Tyco's Dennis Kozlowski and Enron's Ken Lay. Goldman angrily denounced the report as "an egregious distortion of the facts" — shortly before paying $110 million to settle an investigation into spinning and other manipulations launched by New York state regulators. "The spinning of hot IPO shares was not a harmless corporate perk," then-attorney general Eliot Spitzer said at the time. "Instead, it was an integral part of a fraudulent scheme to win new investment-banking business."
Such practices conspired to turn the Internet bubble into one of the greatest financial disasters in world history: Some $5 trillion of wealth was wiped out on the NASDAQ alone. But the real problem wasn't the money that was lost by shareholders, it was the money gained by investment bankers, who received hefty bonuses for tampering with the market. Instead of teaching Wall Street a lesson that bubbles always deflate, the Internet years demonstrated to bankers that in the age of freely flowing capital and publicly owned financial companies, bubbles are incredibly easy to inflate, and individual bonuses are actually bigger when the mania and the irrationality are greater.
Nowhere was this truer than at Goldman. Between 1999 and 2002, the firm paid out $28.5 billion in compensation and benefits — an average of roughly $350,000 a year per employee. Those numbers are important because the key legacy of the Internet boom is that the economy is now driven in large part by the pursuit of the enormous salaries and bonuses that such bubbles make possible. Goldman's mantra of "long-term greedy" vanished into thin air as the game became about getting your check before the melon hit the pavement.
The market was no longer a rationally managed place to grow real, profitable businesses: It was a huge ocean of Someone Else's Money where bankers hauled in vast sums through whatever means necessary and tried to convert that money into bonuses and payouts as quickly as possible. If you laddered and spun 50 Internet IPOs that went bust within a year, so what? By the time the Securities and Exchange Commission got around to fining your firm $110 million, the yacht you bought with your IPO bonuses was already six years old. Besides, you were probably out of Goldman by then, running the U.S. Treasury or maybe the state of New Jersey. (One of the truly comic moments in the history of America's recent financial collapse came when Gov. Jon Corzine of New Jersey, who ran Goldman from 1994 to 1999 and left with $320 million in IPO-fattened stock, insisted in 2002 that "I've never even heard the term 'laddering' before.")
For a bank that paid out $7 billion a year in salaries, $110 million fines issued half a decade late were something far less than a deterrent — they were a joke. Once the Internet bubble burst, Goldman had no incentive to reassess its new, profit-driven strategy; it just searched around for another bubble to inflate. As it turns out, it had one ready, thanks in large part to Rubin.
NEXT: Bubble #3 — The Housing Craze
BUBBLE #3 The Housing Craze
Goldman's role in the sweeping global disaster that was the housing bubble is not hard to trace. Here again, the basic trick was a decline in underwriting standards, although in this case the standards weren't in IPOs but in mortgages. By now almost everyone knows that for decades mortgage dealers insisted that home buyers be able to produce a down payment of 10 percent or more, show a steady income and good credit rating, and possess a real first and last name. Then, at the dawn of the new millennium, they suddenly threw all that shit out the window and started writing mortgages on the backs of napkins to cocktail waitresses and excons carrying five bucks and a Snickers bar.
None of that would have been possible without investment bankers like Goldman, who created vehicles to package those shitty mortgages and sell them en masse to unsuspecting insurance companies and pension funds. This created a mass market for toxic debt that would never have existed before; in the old days, no bank would have wanted to keep some addict ex-con's mortgage on its books, knowing how likely it was to fail. You can't write these mortgages, in other words, unless you can sell them to someone who doesn't know what they are.
Goldman used two methods to hide the mess they were selling. First, they bundled hundreds of different mortgages into instruments called Collateralized Debt Obligations. Then they sold investors on the idea that, because a bunch of those mortgages would turn out to be OK, there was no reason to worry so much about the shitty ones: The CDO, as a whole, was sound. Thus, junkrated mortgages were turned into AAArated investments. Second, to hedge its own bets, Goldman got companies like AIG to provide insurance — known as creditdefault swaps — on the CDOs. The swaps were essentially a racetrack bet between AIG and Goldman: Goldman is betting the excons will default, AIG is betting they won't.
There was only one problem with the deals: All of the wheeling and dealing represented exactly the kind of dangerous speculation that federal regulators are supposed to rein in. Derivatives like CDOs and credit swaps had already caused a series of serious financial calamities: Procter & Gamble and Gibson Greetings both lost fortunes, and Orange County, California, was forced to default in 1994. A report that year by the Government Accountability Office recommended that such financial instruments be tightly regulated — and in 1998, the head of the Commodity Futures Trading Commission, a woman named Brooksley Born, agreed. That May, she circulated a letter to business leaders and the Clinton administration suggesting that banks be required to provide greater disclosure in derivatives trades, and maintain reserves to cushion against losses.
More regulation wasn't exactly what Goldman had in mind. "The banks go crazy — they want it stopped," says Michael Greenberger, who worked for Born as director of trading and markets at the CFTC and is now a law professor at the University of Maryland. "Greenspan, Summers, Rubin and [SEC chief Arthur] Levitt want it stopped."
Clinton's reigning economic foursome — "especially Rubin," according to Greenberger — called Born in for a meeting and pleaded their case. She refused to back down, however, and continued to push for more regulation of the derivatives. Then, in June 1998, Rubin went public to denounce her move, eventually recommending that Congress strip the CFTC of its regulatory authority. In 2000, on its last day in session, Congress passed the now-notorious Commodity Futures Modernization Act, which had been inserted into an 11,000-page spending bill at the last minute, with almost no debate on the floor of the Senate. Banks were now free to trade default swaps with impunity.
But the story didn't end there. AIG, a major purveyor of default swaps, approached the New York State Insurance Department in 2000 and asked whether default swaps would be regulated as insurance. At the time, the office was run by one Neil Levin, a former Goldman vice president, who decided against regulating the swaps. Now freed to underwrite as many housingbased securities and buy as much credit-default protection as it wanted, Goldman went berserk with lending lust. By the peak of the housing boom in 2006, Goldman was underwriting $76.5 billion worth of mortgagebacked securities — a third of which were subprime — much of it to institutional investors like pensions and insurance companies. And in these massive issues of real estate were vast swamps of crap.
Take one $494 million issue that year, GSAMP Trust 2006S3. Many of the mortgages belonged to secondmortgage borrowers, and the average equity they had in their homes was 0.71 percent. Moreover, 58 percent of the loans included little or no documentation — no names of the borrowers, no addresses of the homes, just zip codes. Yet both of the major ratings agencies, Moody's and Standard & Poor's, rated 93 percent of the issue as investment grade. Moody's projected that less than 10 percent of the loans would default. In reality, 18 percent of the mortgages were in default within 18 months.
Not that Goldman was personally at any risk. The bank might be taking all these hideous, completely irresponsible mortgages from beneath-gangster-status firms like Countrywide and selling them off to municipalities and pensioners — old people, for God's sake — pretending the whole time that it wasn't gradeD horseshit. But even as it was doing so, it was taking short positions in the same market, in essence betting against the same crap it was selling. Even worse, Goldman bragged about it in public. "The mortgage sector continues to be challenged," David Viniar, the bank's chief financial officer, boasted in 2007. "As a result, we took significant markdowns on our long inventory positions … However, our risk bias in that market was to be short, and that net short position was profitable." In other words, the mortgages it was selling were for chumps. The real money was in betting against those same mortgages.
"That's how audacious these assholes are," says one hedgefund manager. "At least with other banks, you could say that they were just dumb — they believed what they were selling, and it blew them up. Goldman knew what it was doing."
I ask the manager how it could be that selling something to customers that you're actually betting against — particularly when you know more about the weaknesses of those products than the customer — doesn't amount to securities fraud.
"It's exactly securities fraud," he says. "It's the heart of securities fraud."
Eventually, lots of aggrieved investors agreed. In a virtual repeat of the Internet IPO craze, Goldman was hit with a wave of lawsuits after the collapse of the housing bubble, many of which accused the bank of withholding pertinent information about the quality of the mortgages it issued. New York state regulators are suing Goldman and 25 other underwriters for selling bundles of crappy Countrywide mortgages to city and state pension funds, which lost as much as $100 million in the investments. Massachusetts also investigated Goldman for similar misdeeds, acting on behalf of 714 mortgage holders who got stuck holding predatory loans. But once again, Goldman got off virtually scot-free, staving off prosecution by agreeing to pay a paltry $60 million — about what the bank's CDO division made in a day and a half during the real estate boom.
The effects of the housing bubble are well known — it led more or less directly to the collapse of Bear Stearns, Lehman Brothers and AIG, whose toxic portfolio of credit swaps was in significant part composed of the insurance that banks like Goldman bought against their own housing portfolios. In fact, at least $13 billion of the taxpayer money given to AIG in the bailout ultimately went to Goldman, meaning that the bank made out on the housing bubble twice: It fucked the investors who bought their horseshit CDOs by betting against its own crappy product, then it turned around and fucked the taxpayer by making him pay off those same bets.
And once again, while the world was crashing down all around the bank, Goldman made sure it was doing just fine in the compensation department. In 2006, the firm's payroll jumped to $16.5 billion — an average of $622,000 per employee. As a Goldman spokesman explained, "We work very hard here."
But the best was yet to come. While the collapse of the housing bubble sent most of the financial world fleeing for the exits, or to jail, Goldman boldly doubled down — and almost single-handedly created yet another bubble, one the world still barely knows the firm had anything to do with.
NEXT: Bubble #4 — $4 a Gallon
BUBBLE #4 $4 a Gallon
By the beginning of 2008, the financial world was in turmoil. Wall Street had spent the past two and a half decades producing one scandal after another, which didn't leave much to sell that wasn't tainted. The terms junk bond, IPO, subprime mortgage and other once-hot financial fare were now firmly associated in the public's mind with scams; the terms credit swaps and CDOs were about to join them. The credit markets were in crisis, and the mantra that had sustained the fantasy economy throughout the Bush years — the notion that housing prices never go down — was now a fully exploded myth, leaving the Street clamoring for a new bullshit paradigm to sling.
Where to go? With the public reluctant to put money in anything that felt like a paper investment, the Street quietly moved the casino to the physical-commodities market — stuff you could touch: corn, coffee, cocoa, wheat and, above all, energy commodities, especially oil. In conjunction with a decline in the dollar, the credit crunch and the housing crash caused a "flight to commodities." Oil futures in particular skyrocketed, as the price of a single barrel went from around $60 in the middle of 2007 to a high of $147 in the summer of 2008.
That summer, as the presidential campaign heated up, the accepted explanation for why gasoline had hit $4.11 a gallon was that there was a problem with the world oil supply. In a classic example of how Republicans and Democrats respond to crises by engaging in fierce exchanges of moronic irrelevancies, John McCain insisted that ending the moratorium on offshore drilling would be "very helpful in the short term," while Barack Obama in typical liberal-arts yuppie style argued that federal investment in hybrid cars was the way out.
But it was all a lie. While the global supply of oil will eventually dry up, the shortterm flow has actually been increasing. In the six months before prices spiked, according to the U.S. Energy Information Administration, the world oil supply rose from 85.24 million barrels a day to 85.72 million. Over the same period, world oil demand dropped from 86.82 million barrels a day to 86.07 million. Not only was the shortterm supply of oil rising, the demand for it was falling — which, in classic economic terms, should have brought prices at the pump down.
So what caused the huge spike in oil prices? Take a wild guess. Obviously Goldman had help — there were other players in the physicalcommodities market — but the root cause had almost everything to do with the behavior of a few powerful actors determined to turn the oncesolid market into a speculative casino. Goldman did it by persuading pension funds and other large institutional investors to invest in oil futures — agreeing to buy oil at a certain price on a fixed date. The push transformed oil from a physical commodity, rigidly subject to supply and demand, into something to bet on, like a stock. Between 2003 and 2008, the amount of speculative money in commodities grew from $13 billion to $317 billion, an increase of 2,300 percent. By 2008, a barrel of oil was traded 27 times, on average, before it was actually delivered and consumed.
As is so often the case, there had been a Depression-era law in place designed specifically to prevent this sort of thing. The commodities market was designed in large part to help farmers: A grower concerned about future price drops could enter into a contract to sell his corn at a certain price for delivery later on, which made him worry less about building up stores of his crop. When no one was buying corn, the farmer could sell to a middleman known as a "traditional speculator," who would store the grain and sell it later, when demand returned. That way, someone was always there to buy from the farmer, even when the market temporarily had no need for his crops.
In 1936, however, Congress recognized that there should never be more speculators in the market than real producers and consumers. If that happened, prices would be affected by something other than supply and demand, and price manipulations would ensue. A new law empowered the Commodity Futures Trading Commission — the very same body that would later try and fail to regulate credit swaps — to place limits on speculative trades in commodities. As a result of the CFTC's oversight, peace and harmony reigned in the commodities markets for more than 50 years.
All that changed in 1991 when, unbeknownst to almost everyone in the world, a Goldmanowned commoditiestrading subsidiary called J. Aron wrote to the CFTC and made an unusual argument. Farmers with big stores of corn, Goldman argued, weren't the only ones who needed to hedge their risk against future price drops — Wall Street dealers who made big bets on oil prices also needed to hedge their risk, because, well, they stood to lose a lot too.
This was complete and utter crap — the 1936 law, remember, was specifically designed to maintain distinctions between people who were buying and selling real tangible stuff and people who were trading in paper alone. But the CFTC, amazingly, bought Goldman's argument. It issued the bank a free pass, called the "Bona Fide Hedging" exemption, allowing Goldman's subsidiary to call itself a physical hedger and escape virtually all limits placed on speculators. In the years that followed, the commission would quietly issue 14 similar exemptions to other companies.
Now Goldman and other banks were free to drive more investors into the commodities markets, enabling speculators to place increasingly big bets. That 1991 letter from Goldman more or less directly led to the oil bubble in 2008, when the number of speculators in the market — driven there by fear of the falling dollar and the housing crash — finally overwhelmed the real physical suppliers and consumers. By 2008, at least three quarters of the activity on the commodity exchanges was speculative, according to a congressional staffer who studied the numbers — and that's likely a conservative estimate. By the middle of last summer, despite rising supply and a drop in demand, we were paying $4 a gallon every time we pulled up to the pump.
What is even more amazing is that the letter to Goldman, along with most of the other trading exemptions, was handed out more or less in secret. "I was the head of the division of trading and markets, and Brooksley Born was the chair of the CFTC," says Greenberger, "and neither of us knew this letter was out there." In fact, the letters only came to light by accident. Last year, a staffer for the House Energy and Commerce Committee just happened to be at a briefing when officials from the CFTC made an offhand reference to the exemptions.
"I had been invited to a briefing the commission was holding on energy," the staffer recounts. "And suddenly in the middle of it, they start saying, 'Yeah, we've been issuing these letters for years now.' I raised my hand and said, 'Really? You issued a letter? Can I see it?' And they were like, 'Duh, duh.' So we went back and forth, and finally they said, 'We have to clear it with Goldman Sachs.' I'm like, 'What do you mean, you have to clear it with Goldman Sachs?'"
The CFTC cited a rule that prohibited it from releasing any information about a company's current position in the market. But the staffer's request was about a letter that had been issued 17 years earlier. It no longer had anything to do with Goldman's current position. What's more, Section 7 of the 1936 commodities law gives Congress the right to any information it wants from the commission. Still, in a classic example of how complete Goldman's capture of government is, the CFTC waited until it got clearance from the bank before it turned the letter over.
Armed with the semi-secret government exemption, Goldman had become the chief designer of a giant commodities betting parlor. Its Goldman Sachs Commodities Index — which tracks the prices of 24 major commodities but is overwhelmingly weighted toward oil — became the place where pension funds and insurance companies and other institutional investors could make massive longterm bets on commodity prices. Which was all well and good, except for a couple of things. One was that index speculators are mostly "long only" bettors, who seldom if ever take short positions — meaning they only bet on prices to rise. While this kind of behavior is good for a stock market, it's terrible for commodities, because it continually forces prices upward. "If index speculators took short positions as well as long ones, you'd see them pushing prices both up and down," says Michael Masters, a hedgefund manager who has helped expose the role of investment banks in the manipulation of oil prices. "But they only push prices in one direction: up."
Complicating matters even further was the fact that Goldman itself was cheerleading with all its might for an increase in oil prices. In the beginning of 2008, Arjun Murti, a Goldman analyst, hailed as an "oracle of oil" by The New York Times, predicted a "super spike" in oil prices, forecasting a rise to $200 a barrel. At the time Goldman was heavily invested in oil through its commoditiestrading subsidiary, J. Aron; it also owned a stake in a major oil refinery in Kansas, where it warehoused the crude it bought and sold. Even though the supply of oil was keeping pace with demand, Murti continually warned of disruptions to the world oil supply, going so far as to broadcast the fact that he owned two hybrid cars. High prices, the bank insisted, were somehow the fault of the piggish American consumer; in 2005, Goldman analysts insisted that we wouldn't know when oil prices would fall until we knew "when American consumers will stop buying gas-guzzling sport utility vehicles and instead seek fuel-efficient alternatives."
But it wasn't the consumption of real oil that was driving up prices — it was the trade in paper oil. By the summer of 2008, in fact, commodities speculators had bought and stockpiled enough oil futures to fill 1.1 billion barrels of crude, which meant that speculators owned more future oil on paper than there was real, physical oil stored in all of the country's commercial storage tanks and the Strategic Petroleum Reserve combined. It was a repeat of both the Internet craze and the housing bubble, when Wall Street jacked up presentday profits by selling suckers shares of a fictional fantasy future of endlessly rising prices.
In what was by now a painfully familiar pattern, the oil-commodities melon hit the pavement hard in the summer of 2008, causing a massive loss of wealth; crude prices plunged from $147 to $33. Once again the big losers were ordinary people. The pensioners whose funds invested in this crap got massacred: CalPERS, the California Public Employees' Retirement System, had $1.1 billion in commodities when the crash came. And the damage didn't just come from oil. Soaring food prices driven by the commodities bubble led to catastrophes across the planet, forcing an estimated 100 million people into hunger and sparking food riots throughout the Third World.
Now oil prices are rising again: They shot up 20 percent in the month of May and have nearly doubled so far this year. Once again, the problem is not supply or demand. "The highest supply of oil in the last 20 years is now," says Rep. Bart Stupak, a Democrat from Michigan who serves on the House energy committee. "Demand is at a 10-year low. And yet prices are up."
Asked why politicians continue to harp on things like drilling or hybrid cars, when supply and demand have nothing to do with the high prices, Stupak shakes his head. "I think they just don't understand the problem very well," he says. "You can't explain it in 30 seconds, so politicians ignore it."
NEXT: Bubble #5 — Rigging the Bailout
BUBBLE #5 Rigging the Bailout
After the oil bubble collapsed last fall, there was no new bubble to keep things humming — this time, the money seems to be really gone, like worldwide-depression gone. So the financial safari has moved elsewhere, and the big game in the hunt has become the only remaining pool of dumb, unguarded capital left to feed upon: taxpayer money. Here, in the biggest bailout in history, is where Goldman Sachs really started to flex its muscle.
It began in September of last year, when then-Treasury secretary Paulson made a momentous series of decisions. Although he had already engineered a rescue of Bear Stearns a few months before and helped bail out quasi-private lenders Fannie Mae and Freddie Mac, Paulson elected to let Lehman Brothers — one of Goldman's last real competitors — collapse without intervention. ("Goldman's superhero status was left intact," says market analyst Eric Salzman, "and an investmentbanking competitor, Lehman, goes away.") The very next day, Paulson greenlighted a massive, $85 billion bailout of AIG, which promptly turned around and repaid $13 billion it owed to Goldman. Thanks to the rescue effort, the bank ended up getting paid in full for its bad bets: By contrast, retired auto workers awaiting the Chrysler bailout will be lucky to receive 50 cents for every dollar they are owed.
Immediately after the AIG bailout, Paulson announced his federal bailout for the financial industry, a $700 billion plan called the Troubled Asset Relief Program, and put a heretofore unknown 35yearold Goldman banker named Neel Kashkari in charge of administering the funds. In order to qualify for bailout monies, Goldman announced that it would convert from an investment bank to a bankholding company, a move that allows it access not only to $10 billion in TARP funds, but to a whole galaxy of less conspicuous, publicly backed funding — most notably, lending from the discount window of the Federal Reserve. By the end of March, the Fed will have lent or guaranteed at least $8.7 trillion under a series of new bailout programs — and thanks to an obscure law allowing the Fed to block most congressional audits, both the amounts and the recipients of the monies remain almost entirely secret.
Converting to a bank-holding company has other benefits as well: Goldman's primary supervisor is now the New York Fed, whose chairman at the time of its announcement was Stephen Friedman, a former co-chairman of Goldman Sachs. Friedman was technically in violation of Federal Reserve policy by remaining on the board of Goldman even as he was supposedly regulating the bank; in order to rectify the problem, he applied for, and got, a conflictofinterest waiver from the government. Friedman was also supposed to divest himself of his Goldman stock after Goldman became a bankholding company, but thanks to the waiver, he was allowed to go out and buy 52,000 additional shares in his old bank, leaving him $3 million richer. Friedman stepped down in May, but the man now in charge of supervising Goldman — New York Fed president William Dudley — is yet another former Goldmanite.
The collective message of all this — the AIG bailout, the swift approval for its bankholding conversion, the TARP funds — is that when it comes to Goldman Sachs, there isn't a free market at all. The government might let other players on the market die, but it simply will not allow Goldman to fail under any circumstances. Its edge in the market has suddenly become an open declaration of supreme privilege. "In the past it was an implicit advantage," says Simon Johnson, an economics professor at MIT and former official at the International Monetary Fund, who compares the bailout to the crony capitalism he has seen in Third World countries. "Now it's more of an explicit advantage."
Once the bailouts were in place, Goldman went right back to business as usual, dreaming up impossibly convoluted schemes to pick the American carcass clean of its loose capital. One of its first moves in the postbailout era was to quietly push forward the calendar it uses to report its earnings, essentially wiping December 2008 — with its $1.3 billion in pretax losses — off the books. At the same time, the bank announced a highly suspicious $1.8 billion profit for the first quarter of 2009 — which apparently included a large chunk of money funneled to it by taxpayers via the AIG bailout. "They cooked those firstquarter results six ways from Sunday," says one hedgefund manager. "They hid the losses in the orphan month and called the bailout money profit."
Two more numbers stand out from that stunning first-quarter turnaround. The bank paid out an astonishing $4.7 billion in bonuses and compensation in the first three months of this year, an 18 percent increase over the first quarter of 2008. It also raised $5 billion by issuing new shares almost immediately after releasing its firstquarter results. Taken together, the numbers show that Goldman essentially borrowed a $5 billion salary payout for its executives in the middle of the global economic crisis it helped cause, using halfbaked accounting to reel in investors, just months after receiving billions in a taxpayer bailout.
Even more amazing, Goldman did it all right before the government announced the results of its new "stress test" for banks seeking to repay TARP money — suggesting that Goldman knew exactly what was coming. The government was trying to carefully orchestrate the repayments in an effort to prevent further trouble at banks that couldn't pay back the money right away. But Goldman blew off those concerns, brazenly flaunting its insider status. "They seemed to know everything that they needed to do before the stress test came out, unlike everyone else, who had to wait until after," says Michael Hecht, a managing director of JMP Securities. "The government came out and said, 'To pay back TARP, you have to issue debt of at least five years that is not insured by FDIC — which Goldman Sachs had already done, a week or two before."
And here's the real punch line. After playing an intimate role in four historic bubble catastrophes, after helping $5 trillion in wealth disappear from the NASDAQ, after pawning off thousands of toxic mortgages on pensioners and cities, after helping to drive the price of gas up to $4 a gallon and to push 100 million people around the world into hunger, after securing tens of billions of taxpayer dollars through a series of bailouts overseen by its former CEO, what did Goldman Sachs give back to the people of the United States in 2008?
Fourteen million dollars.
That is what the firm paid in taxes in 2008, an effective tax rate of exactly one, read it, one percent. The bank paid out $10 billion in compensation and benefits that same year and made a profit of more than $2 billion — yet it paid the Treasury less than a third of what it forked over to CEO Lloyd Blankfein, who made $42.9 million last year.
How is this possible? According to Goldman's annual report, the low taxes are due in large part to changes in the bank's "geographic earnings mix." In other words, the bank moved its money around so that most of its earnings took place in foreign countries with low tax rates. Thanks to our completely fucked corporate tax system, companies like Goldman can ship their revenues offshore and defer taxes on those revenues indefinitely, even while they claim deductions upfront on that same untaxed income. This is why any corporation with an at least occasionally sober accountant can usually find a way to zero out its taxes. A GAO report, in fact, found that between 1998 and 2005, roughly twothirds of all corporations operating in the U.S. paid no taxes at all.
This should be a pitchforklevel outrage — but somehow, when Goldman released its post-bailout tax profile, hardly anyone said a word. One of the few to remark on the obscenity was Rep. Lloyd Doggett, a Democrat from Texas who serves on the House Ways and Means Committee. "With the right hand out begging for bailout money," he said, "the left is hiding it offshore."
NEXT: Bubble #6 — Global Warming
BUBBLE #6 Global Warming
Fast-forward to today. It's early June in Washington, D.C. Barack Obama, a popular young politician whose leading private campaign donor was an investment bank called Goldman Sachs — its employees paid some $981,000 to his campaign — sits in the White House. Having seamlessly navigated the political minefield of the bailout era, Goldman is once again back to its old business, scouting out loopholes in a new government-created market with the aid of a new set of alumni occupying key government jobs.
Gone are Hank Paulson and Neel Kashkari; in their place are Treasury chief of staff Mark Patterson and CFTC chief Gary Gensler, both former Goldmanites. (Gensler was the firm's cohead of finance.) And instead of credit derivatives or oil futures or mortgage-backed CDOs, the new game in town, the next bubble, is in carbon credits — a booming trillion dollar market that barely even exists yet, but will if the Democratic Party that it gave $4,452,585 to in the last election manages to push into existence a groundbreaking new commodities bubble, disguised as an "environmental plan," called cap-and-trade.
The new carboncredit market is a virtual repeat of the commodities-market casino that's been kind to Goldman, except it has one delicious new wrinkle: If the plan goes forward as expected, the rise in prices will be government-mandated. Goldman won't even have to rig the game. It will be rigged in advance.
Here's how it works: If the bill passes, there will be limits for coal plants, utilities, natural-gas distributors and numerous other industries on the amount of carbon emissions (a.k.a. greenhouse gases) they can produce per year. If the companies go over their allotment, they will be able to buy "allocations" or credits from other companies that have managed to produce fewer emissions. President Obama conservatively estimates that about $646 billion worth of carbon credits will be auctioned in the first seven years; one of his top economic aides speculates that the real number might be twice or even three times that amount.
The feature of this plan that has special appeal to speculators is that the "cap" on carbon will be continually lowered by the government, which means that carbon credits will become more and more scarce with each passing year. Which means that this is a brand new commodities market where the main commodity to be traded is guaranteed to rise in price over time. The volume of this new market will be upwards of a trillion dollars annually; for comparison's sake, the annual combined revenues of all electricity suppliers in the U.S. total $320 billion.
Goldman wants this bill. The plan is (1) to get in on the ground floor of paradigmshifting legislation, (2) make sure that they're the profitmaking slice of that paradigm and (3) make sure the slice is a big slice. Goldman started pushing hard for capandtrade long ago, but things really ramped up last year when the firm spent $3.5 million to lobby climate issues. (One of their lobbyists at the time was none other than Patterson, now Treasury chief of staff.) Back in 2005, when Hank Paulson was chief of Goldman, he personally helped author the bank's environmental policy, a document that contains some surprising elements for a firm that in all other areas has been consistently opposed to any sort of government regulation. Paulson's report argued that "voluntary action alone cannot solve the climatechange problem." A few years later, the bank's carbon chief, Ken Newcombe, insisted that capandtrade alone won't be enough to fix the climate problem and called for further public investments in research and development. Which is convenient, considering that Goldman made early investments in wind power (it bought a subsidiary called Horizon Wind Energy), renewable diesel (it is an investor in a firm called Changing World Technologies) and solar power (it partnered with BP Solar), exactly the kind of deals that will prosper if the government forces energy producers to use cleaner energy. As Paulson said at the time, "We're not making those investments to lose money."
The bank owns a 10 percent stake in the Chicago Climate Exchange, where the carbon credits will be traded. Moreover, Goldman owns a minority stake in Blue Source LLC, a Utahbased firm that sells carbon credits of the type that will be in great demand if the bill passes. Nobel Prize winner Al Gore, who is intimately involved with the planning of cap-and-trade, started up a company called Generation Investment Management with three former bigwigs from Goldman Sachs Asset Management, David Blood, Mark Ferguson and Peter Harris. Their business? Investing in carbon offsets. There's also a $500 million Green Growth Fund set up by a Goldmanite to invest in greentech … the list goes on and on. Goldman is ahead of the headlines again, just waiting for someone to make it rain in the right spot. Will this market be bigger than the energyfutures market?
"Oh, it'll dwarf it," says a former staffer on the House energy committee.
Well, you might say, who cares? If cap-and-trade succeeds, won't we all be saved from the catastrophe of global warming? Maybe — but capandtrade, as envisioned by Goldman, is really just a carbon tax structured so that private interests collect the revenues. Instead of simply imposing a fixed government levy on carbon pollution and forcing unclean energy producers to pay for the mess they make, cap-and-trade will allow a small tribe of greedy-as-hell Wall Street swine to turn yet another commodities market into a private taxcollection scheme. This is worse than the bailout: It allows the bank to seize taxpayer money before it's even collected.
"If it's going to be a tax, I would prefer that Washington set the tax and collect it," says Michael Masters, the hedgefund director who spoke out against oilfutures speculation. "But we're saying that Wall Street can set the tax, and Wall Street can collect the tax. That's the last thing in the world I want. It's just asinine."
Cap-and-trade is going to happen. Or, if it doesn't, something like it will. The moral is the same as for all the other bubbles that Goldman helped create, from 1929 to 2009. In almost every case, the very same bank that behaved recklessly for years, weighing down the system with toxic loans and predatory debt, and accomplishing nothing but massive bonuses for a few bosses, has been rewarded with mountains of virtually free money and government guarantees — while the actual victims in this mess, ordinary taxpayers, are the ones paying for it.
It's not always easy to accept the reality of what we now routinely allow these people to get away with; there's a kind of collective denial that kicks in when a country goes through what America has gone through lately, when a people lose as much prestige and status as we have in the past few years. You can't really register the fact that you're no longer a citizen of a thriving first-world democracy, that you're no longer above getting robbed in broad daylight, because like an amputee, you can still sort of feel things that are no longer there.
But this is it. This is the world we live in now. And in this world, some of us have to play by the rules, while others get a note from the principal excusing them from homework till the end of time, plus 10 billion free dollars in a paper bag to buy lunch. It's a gangster state, running on gangster economics, and even prices can't be trusted anymore; there are hidden taxes in every buck you pay. And maybe we can't stop it, but we should at least know where it's all going.
Watch Matt Taibbi break down the Great American Bubble Machine in our exclusive video, and for more on how Wall Street is taking over Washington, read his "The Big Takeover."
From tech stocks to high gas prices, Goldman Sachs has engineered every major market manipulation since the Great Depression - and they're about to do it again
MATT TAIBBI
Posted Jul 13, 2009 1:49 PM
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Click to watch Matt Taibbi break down his report in our exclusive video.
For more on Wall Street's march on Washington, read Taibbi's "The Big Takeover."
The first thing you need to know about Goldman Sachs is that it's everywhere. The world's most powerful investment bank is a great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money. In fact, the history of the recent financial crisis, which doubles as a history of the rapid decline and fall of the suddenly swindled dry American empire, reads like a Who's Who of Goldman Sachs graduates.
By now, most of us know the major players. As George Bush's last Treasury secretary, former Goldman CEO Henry Paulson was the architect of the bailout, a suspiciously self-serving plan to funnel trillions of Your Dollars to a handful of his old friends on Wall Street. Robert Rubin, Bill Clinton's former Treasury secretary, spent 26 years at Goldman before becoming chairman of Citigroup — which in turn got a $300 billion taxpayer bailout from Paulson. There's John Thain, the asshole chief of Merrill Lynch who bought an $87,000 area rug for his office as his company was imploding; a former Goldman banker, Thain enjoyed a multibilliondollar handout from Paulson, who used billions in taxpayer funds to help Bank of America rescue Thain's sorry company. And Robert Steel, the former Goldmanite head of Wachovia, scored himself and his fellow executives $225 million in goldenparachute payments as his bank was selfdestructing. There's Joshua Bolten, Bush's chief of staff during the bailout, and Mark Patterson, the current Treasury chief of staff, who was a Goldman lobbyist just a year ago, and Ed Liddy, the former Goldman director whom Paulson put in charge of bailedout insurance giant AIG, which forked over $13 billion to Goldman after Liddy came on board. The heads of the Canadian and Italian national banks are Goldman alums, as is the head of the World Bank, the head of the New York Stock Exchange, the last two heads of the Federal Reserve Bank of New York — which, incidentally, is now in charge of overseeing Goldman — not to mention …
But then, any attempt to construct a narrative around all the former Goldmanites in influential positions quickly becomes an absurd and pointless exercise, like trying to make a list of everything. What you need to know is the big picture: If America is circling the drain, Goldman Sachs has found a way to be that drain — an extremely unfortunate loophole in the system of Western democratic capitalism, which never foresaw that in a society governed passively by free markets and free elections, organized greed always defeats disorganized democracy.
The bank's unprecedented reach and power have enabled it to turn all of America into a giant pumpanddump scam, manipulating whole economic sectors for years at a time, moving the dice game as this or that market collapses, and all the time gorging itself on the unseen costs that are breaking families everywhere — high gas prices, rising consumercredit rates, halfeaten pension funds, mass layoffs, future taxes to pay off bailouts. All that money that you're losing, it's going somewhere, and in both a literal and a figurative sense, Goldman Sachs is where it's going: The bank is a huge, highly sophisticated engine for converting the useful, deployed wealth of society into the least useful, most wasteful and insoluble substance on Earth — pure profit for rich individuals.
They achieve this using the same playbook over and over again. The formula is relatively simple: Goldman positions itself in the middle of a speculative bubble, selling investments they know are crap. Then they hoover up vast sums from the middle and lower floors of society with the aid of a crippled and corrupt state that allows it to rewrite the rules in exchange for the relative pennies the bank throws at political patronage. Finally, when it all goes bust, leaving millions of ordinary citizens broke and starving, they begin the entire process over again, riding in to rescue us all by lending us back our own money at interest, selling themselves as men above greed, just a bunch of really smart guys keeping the wheels greased. They've been pulling this same stunt over and over since the 1920s — and now they're preparing to do it again, creating what may be the biggest and most audacious bubble yet.
If you want to understand how we got into this financial crisis, you have to first understand where all the money went — and in order to understand that, you need to understand what Goldman has already gotten away with. It is a history exactly five bubbles long — including last year's strange and seemingly inexplicable spike in the price of oil. There were a lot of losers in each of those bubbles, and in the bailout that followed. But Goldman wasn't one of them.
NEXT: Bubble #1 — The Great Depression
From issue 1082-1083, the story that inflamed Wall Street — Matt Taibbi on how Goldman Sachs seized Washington. Plus, click to watch Taibbi break down his report in our exclusive video.
BUBBLE #1 The Great Depression
Goldman wasn't always a too-big-to-fail Wall Street behemoth, the ruthless face of kill-or-be-killed capitalism on steroids — just almost always. The bank was actually founded in 1869 by a German immigrant named Marcus Goldman, who built it up with his soninlaw Samuel Sachs. They were pioneers in the use of commercial paper, which is just a fancy way of saying they made money lending out shortterm IOUs to smalltime vendors in downtown Manhattan.
You can probably guess the basic plotline of Goldman's first 100 years in business: plucky, immigrantled investment bank beats the odds, pulls itself up by its bootstraps, makes shitloads of money. In that ancient history there's really only one episode that bears scrutiny now, in light of more recent events: Goldman's disastrous foray into the speculative mania of precrash Wall Street in the late 1920s.
This great Hindenburg of financial history has a few features that might sound familiar. Back then, the main financial tool used to bilk investors was called an "investment trust." Similar to modern mutual funds, the trusts took the cash of investors large and small and (theoretically, at least) invested it in a smorgasbord of Wall Street securities, though the securities and amounts were often kept hidden from the public. So a regular guy could invest $10 or $100 in a trust and feel like he was a big player. Much as in the 1990s, when new vehicles like day trading and etrading attracted reams of new suckers from the sticks who wanted to feel like big shots, investment trusts roped a new generation of regularguy investors into the speculation game.
Beginning a pattern that would repeat itself over and over again, Goldman got into the investmenttrust game late, then jumped in with both feet and went hogwild. The first effort was the Goldman Sachs Trading Corporation; the bank issued a million shares at $100 apiece, bought all those shares with its own money and then sold 90 percent of them to the hungry public at $104. The trading corporation then relentlessly bought shares in itself, bidding the price up further and further. Eventually it dumped part of its holdings and sponsored a new trust, the Shenandoah Corporation, issuing millions more in shares in that fund — which in turn sponsored yet another trust called the Blue Ridge Corporation. In this way, each investment trust served as a front for an endless investment pyramid: Goldman hiding behind Goldman hiding behind Goldman. Of the 7,250,000 initial shares of Blue Ridge, 6,250,000 were actually owned by Shenandoah — which, of course, was in large part owned by Goldman Trading.
The end result (ask yourself if this sounds familiar) was a daisy chain of borrowed money, one exquisitely vulnerable to a decline in performance anywhere along the line. The basic idea isn't hard to follow. You take a dollar and borrow nine against it; then you take that $10 fund and borrow $90; then you take your $100 fund and, so long as the public is still lending, borrow and invest $900. If the last fund in the line starts to lose value, you no longer have the money to pay back your investors, and everyone gets massacred.
In a chapter from The Great Crash, 1929 titled "In Goldman Sachs We Trust," the famed economist John Kenneth Galbraith held up the Blue Ridge and Shenandoah trusts as classic examples of the insanity of leveragebased investment. The trusts, he wrote, were a major cause of the market's historic crash; in today's dollars, the losses the bank suffered totaled $475 billion. "It is difficult not to marvel at the imagination which was implicit in this gargantuan insanity," Galbraith observed, sounding like Keith Olbermann in an ascot. "If there must be madness, something may be said for having it on a heroic scale."
NEXT: Bubble #2 — Tech Stocks
BUBBLE #2 Tech Stocks
Fast-forward about 65 years. Goldman not only survived the crash that wiped out so many of the investors it duped, it went on to become the chief underwriter to the country's wealthiest and most powerful corporations. Thanks to Sidney Weinberg, who rose from the rank of janitor's assistant to head the firm, Goldman became the pioneer of the initial public offering, one of the principal and most lucrative means by which companies raise money. During the 1970s and 1980s, Goldman may not have been the planet-eating Death Star of political influence it is today, but it was a topdrawer firm that had a reputation for attracting the very smartest talent on the Street.
It also, oddly enough, had a reputation for relatively solid ethics and a patient approach to investment that shunned the fast buck; its executives were trained to adopt the firm's mantra, "longterm greedy." One former Goldman banker who left the firm in the early Nineties recalls seeing his superiors give up a very profitable deal on the grounds that it was a longterm loser. "We gave back money to 'grownup' corporate clients who had made bad deals with us," he says. "Everything we did was legal and fair — but 'longterm greedy' said we didn't want to make such a profit at the clients' collective expense that we spoiled the marketplace."
But then, something happened. It's hard to say what it was exactly; it might have been the fact that Goldman's cochairman in the early Nineties, Robert Rubin, followed Bill Clinton to the White House, where he directed the National Economic Council and eventually became Treasury secretary. While the American media fell in love with the story line of a pair of babyboomer, Sixtieschild, Fleetwood Mac yuppies nesting in the White House, it also nursed an undisguised crush on Rubin, who was hyped as without a doubt the smartest person ever to walk the face of the Earth, with Newton, Einstein, Mozart and Kant running far behind.
Rubin was the prototypical Goldman banker. He was probably born in a $4,000 suit, he had a face that seemed permanently frozen just short of an apology for being so much smarter than you, and he exuded a Spock-like, emotion-neutral exterior; the only human feeling you could imagine him experiencing was a nightmare about being forced to fly coach. It became almost a national clichè that whatever Rubin thought was best for the economy — a phenomenon that reached its apex in 1999, when Rubin appeared on the cover of Time with his Treasury deputy, Larry Summers, and Fed chief Alan Greenspan under the headline The Committee To Save The World. And "what Rubin thought," mostly, was that the American economy, and in particular the financial markets, were over-regulated and needed to be set free. During his tenure at Treasury, the Clinton White House made a series of moves that would have drastic consequences for the global economy — beginning with Rubin's complete and total failure to regulate his old firm during its first mad dash for obscene short-term profits.
The basic scam in the Internet Age is pretty easy even for the financially illiterate to grasp. Companies that weren't much more than potfueled ideas scrawled on napkins by uptoolate bongsmokers were taken public via IPOs, hyped in the media and sold to the public for mega-millions. It was as if banks like Goldman were wrapping ribbons around watermelons, tossing them out 50-story windows and opening the phones for bids. In this game you were a winner only if you took your money out before the melon hit the pavement.
It sounds obvious now, but what the average investor didn't know at the time was that the banks had changed the rules of the game, making the deals look better than they actually were. They did this by setting up what was, in reality, a two-tiered investment system — one for the insiders who knew the real numbers, and another for the lay investor who was invited to chase soaring prices the banks themselves knew were irrational. While Goldman's later pattern would be to capitalize on changes in the regulatory environment, its key innovation in the Internet years was to abandon its own industry's standards of quality control.
"Since the Depression, there were strict underwriting guidelines that Wall Street adhered to when taking a company public," says one prominent hedge-fund manager. "The company had to be in business for a minimum of five years, and it had to show profitability for three consecutive years. But Wall Street took these guidelines and threw them in the trash." Goldman completed the snow job by pumping up the sham stocks: "Their analysts were out there saying Bullshit.com is worth $100 a share."
The problem was, nobody told investors that the rules had changed. "Everyone on the inside knew," the manager says. "Bob Rubin sure as hell knew what the underwriting standards were. They'd been intact since the 1930s."
Jay Ritter, a professor of finance at the University of Florida who specializes in IPOs, says banks like Goldman knew full well that many of the public offerings they were touting would never make a dime. "In the early Eighties, the major underwriters insisted on three years of profitability. Then it was one year, then it was a quarter. By the time of the Internet bubble, they were not even requiring profitability in the foreseeable future."
Goldman has denied that it changed its underwriting standards during the Internet years, but its own statistics belie the claim. Just as it did with the investment trust in the 1920s, Goldman started slow and finished crazy in the Internet years. After it took a littleknown company with weak financials called Yahoo! public in 1996, once the tech boom had already begun, Goldman quickly became the IPO king of the Internet era. Of the 24 companies it took public in 1997, a third were losing money at the time of the IPO. In 1999, at the height of the boom, it took 47 companies public, including stillborns like Webvan and eToys, investment offerings that were in many ways the modern equivalents of Blue Ridge and Shenandoah. The following year, it underwrote 18 companies in the first four months, 14 of which were money losers at the time. As a leading underwriter of Internet stocks during the boom, Goldman provided profits far more volatile than those of its competitors: In 1999, the average Goldman IPO leapt 281 percent above its offering price, compared to the Wall Street average of 181 percent.
How did Goldman achieve such extraordinary results? One answer is that they used a practice called "laddering," which is just a fancy way of saying they manipulated the share price of new offerings. Here's how it works: Say you're Goldman Sachs, and Bullshit.com comes to you and asks you to take their company public. You agree on the usual terms: You'll price the stock, determine how many shares should be released and take the Bullshit.com CEO on a "road show" to schmooze investors, all in exchange for a substantial fee (typically six to seven percent of the amount raised). You then promise your best clients the right to buy big chunks of the IPO at the low offering price — let's say Bullshit.com's starting share price is $15 — in exchange for a promise that they will buy more shares later on the open market. That seemingly simple demand gives you inside knowledge of the IPO's future, knowledge that wasn't disclosed to the daytrader schmucks who only had the prospectus to go by: You know that certain of your clients who bought X amount of shares at $15 are also going to buy Y more shares at $20 or $25, virtually guaranteeing that the price is going to go to $25 and beyond. In this way, Goldman could artificially jack up the new company's price, which of course was to the bank's benefit — a six percent fee of a $500 million IPO is serious money.
Goldman was repeatedly sued by shareholders for engaging in laddering in a variety of Internet IPOs, including Webvan and NetZero. The deceptive practices also caught the attention of Nicholas Maier, the syndicate manager of Cramer & Co., the hedge fund run at the time by the now-famous chattering television asshole Jim Cramer, himself a Goldman alum. Maier told the SEC that while working for Cramer between 1996 and 1998, he was repeatedly forced to engage in laddering practices during IPO deals with Goldman.
"Goldman, from what I witnessed, they were the worst perpetrator," Maier said. "They totally fueled the bubble. And it's specifically that kind of behavior that has caused the market crash. They built these stocks upon an illegal foundation — manipulated up — and ultimately, it really was the small person who ended up buying in." In 2005, Goldman agreed to pay $40 million for its laddering violations — a puny penalty relative to the enormous profits it made. (Goldman, which has denied wrongdoing in all of the cases it has settled, refused to respond to questions for this story.)
Another practice Goldman engaged in during the Internet boom was "spinning," better known as bribery. Here the investment bank would offer the executives of the newly public company shares at extra-low prices, in exchange for future underwriting business. Banks that engaged in spinning would then undervalue the initial offering price — ensuring that those "hot" opening-price shares it had handed out to insiders would be more likely to rise quickly, supplying bigger firstday rewards for the chosen few. So instead of Bullshit.com opening at $20, the bank would approach the Bullshit.com CEO and offer him a million shares of his own company at $18 in exchange for future business — effectively robbing all of Bullshit's new shareholders by diverting cash that should have gone to the company's bottom line into the private bank account of the company's CEO.
In one case, Goldman allegedly gave a multimillion-dollar special offering to eBay CEO Meg Whitman, who later joined Goldman's board, in exchange for future i-banking business. According to a report by the House Financial Services Committee in 2002, Goldman gave special stock offerings to executives in 21 companies that it took public, including Yahoo! cofounder Jerry Yang and two of the great slithering villains of the financial-scandal age — Tyco's Dennis Kozlowski and Enron's Ken Lay. Goldman angrily denounced the report as "an egregious distortion of the facts" — shortly before paying $110 million to settle an investigation into spinning and other manipulations launched by New York state regulators. "The spinning of hot IPO shares was not a harmless corporate perk," then-attorney general Eliot Spitzer said at the time. "Instead, it was an integral part of a fraudulent scheme to win new investment-banking business."
Such practices conspired to turn the Internet bubble into one of the greatest financial disasters in world history: Some $5 trillion of wealth was wiped out on the NASDAQ alone. But the real problem wasn't the money that was lost by shareholders, it was the money gained by investment bankers, who received hefty bonuses for tampering with the market. Instead of teaching Wall Street a lesson that bubbles always deflate, the Internet years demonstrated to bankers that in the age of freely flowing capital and publicly owned financial companies, bubbles are incredibly easy to inflate, and individual bonuses are actually bigger when the mania and the irrationality are greater.
Nowhere was this truer than at Goldman. Between 1999 and 2002, the firm paid out $28.5 billion in compensation and benefits — an average of roughly $350,000 a year per employee. Those numbers are important because the key legacy of the Internet boom is that the economy is now driven in large part by the pursuit of the enormous salaries and bonuses that such bubbles make possible. Goldman's mantra of "long-term greedy" vanished into thin air as the game became about getting your check before the melon hit the pavement.
The market was no longer a rationally managed place to grow real, profitable businesses: It was a huge ocean of Someone Else's Money where bankers hauled in vast sums through whatever means necessary and tried to convert that money into bonuses and payouts as quickly as possible. If you laddered and spun 50 Internet IPOs that went bust within a year, so what? By the time the Securities and Exchange Commission got around to fining your firm $110 million, the yacht you bought with your IPO bonuses was already six years old. Besides, you were probably out of Goldman by then, running the U.S. Treasury or maybe the state of New Jersey. (One of the truly comic moments in the history of America's recent financial collapse came when Gov. Jon Corzine of New Jersey, who ran Goldman from 1994 to 1999 and left with $320 million in IPO-fattened stock, insisted in 2002 that "I've never even heard the term 'laddering' before.")
For a bank that paid out $7 billion a year in salaries, $110 million fines issued half a decade late were something far less than a deterrent — they were a joke. Once the Internet bubble burst, Goldman had no incentive to reassess its new, profit-driven strategy; it just searched around for another bubble to inflate. As it turns out, it had one ready, thanks in large part to Rubin.
NEXT: Bubble #3 — The Housing Craze
BUBBLE #3 The Housing Craze
Goldman's role in the sweeping global disaster that was the housing bubble is not hard to trace. Here again, the basic trick was a decline in underwriting standards, although in this case the standards weren't in IPOs but in mortgages. By now almost everyone knows that for decades mortgage dealers insisted that home buyers be able to produce a down payment of 10 percent or more, show a steady income and good credit rating, and possess a real first and last name. Then, at the dawn of the new millennium, they suddenly threw all that shit out the window and started writing mortgages on the backs of napkins to cocktail waitresses and excons carrying five bucks and a Snickers bar.
None of that would have been possible without investment bankers like Goldman, who created vehicles to package those shitty mortgages and sell them en masse to unsuspecting insurance companies and pension funds. This created a mass market for toxic debt that would never have existed before; in the old days, no bank would have wanted to keep some addict ex-con's mortgage on its books, knowing how likely it was to fail. You can't write these mortgages, in other words, unless you can sell them to someone who doesn't know what they are.
Goldman used two methods to hide the mess they were selling. First, they bundled hundreds of different mortgages into instruments called Collateralized Debt Obligations. Then they sold investors on the idea that, because a bunch of those mortgages would turn out to be OK, there was no reason to worry so much about the shitty ones: The CDO, as a whole, was sound. Thus, junkrated mortgages were turned into AAArated investments. Second, to hedge its own bets, Goldman got companies like AIG to provide insurance — known as creditdefault swaps — on the CDOs. The swaps were essentially a racetrack bet between AIG and Goldman: Goldman is betting the excons will default, AIG is betting they won't.
There was only one problem with the deals: All of the wheeling and dealing represented exactly the kind of dangerous speculation that federal regulators are supposed to rein in. Derivatives like CDOs and credit swaps had already caused a series of serious financial calamities: Procter & Gamble and Gibson Greetings both lost fortunes, and Orange County, California, was forced to default in 1994. A report that year by the Government Accountability Office recommended that such financial instruments be tightly regulated — and in 1998, the head of the Commodity Futures Trading Commission, a woman named Brooksley Born, agreed. That May, she circulated a letter to business leaders and the Clinton administration suggesting that banks be required to provide greater disclosure in derivatives trades, and maintain reserves to cushion against losses.
More regulation wasn't exactly what Goldman had in mind. "The banks go crazy — they want it stopped," says Michael Greenberger, who worked for Born as director of trading and markets at the CFTC and is now a law professor at the University of Maryland. "Greenspan, Summers, Rubin and [SEC chief Arthur] Levitt want it stopped."
Clinton's reigning economic foursome — "especially Rubin," according to Greenberger — called Born in for a meeting and pleaded their case. She refused to back down, however, and continued to push for more regulation of the derivatives. Then, in June 1998, Rubin went public to denounce her move, eventually recommending that Congress strip the CFTC of its regulatory authority. In 2000, on its last day in session, Congress passed the now-notorious Commodity Futures Modernization Act, which had been inserted into an 11,000-page spending bill at the last minute, with almost no debate on the floor of the Senate. Banks were now free to trade default swaps with impunity.
But the story didn't end there. AIG, a major purveyor of default swaps, approached the New York State Insurance Department in 2000 and asked whether default swaps would be regulated as insurance. At the time, the office was run by one Neil Levin, a former Goldman vice president, who decided against regulating the swaps. Now freed to underwrite as many housingbased securities and buy as much credit-default protection as it wanted, Goldman went berserk with lending lust. By the peak of the housing boom in 2006, Goldman was underwriting $76.5 billion worth of mortgagebacked securities — a third of which were subprime — much of it to institutional investors like pensions and insurance companies. And in these massive issues of real estate were vast swamps of crap.
Take one $494 million issue that year, GSAMP Trust 2006S3. Many of the mortgages belonged to secondmortgage borrowers, and the average equity they had in their homes was 0.71 percent. Moreover, 58 percent of the loans included little or no documentation — no names of the borrowers, no addresses of the homes, just zip codes. Yet both of the major ratings agencies, Moody's and Standard & Poor's, rated 93 percent of the issue as investment grade. Moody's projected that less than 10 percent of the loans would default. In reality, 18 percent of the mortgages were in default within 18 months.
Not that Goldman was personally at any risk. The bank might be taking all these hideous, completely irresponsible mortgages from beneath-gangster-status firms like Countrywide and selling them off to municipalities and pensioners — old people, for God's sake — pretending the whole time that it wasn't gradeD horseshit. But even as it was doing so, it was taking short positions in the same market, in essence betting against the same crap it was selling. Even worse, Goldman bragged about it in public. "The mortgage sector continues to be challenged," David Viniar, the bank's chief financial officer, boasted in 2007. "As a result, we took significant markdowns on our long inventory positions … However, our risk bias in that market was to be short, and that net short position was profitable." In other words, the mortgages it was selling were for chumps. The real money was in betting against those same mortgages.
"That's how audacious these assholes are," says one hedgefund manager. "At least with other banks, you could say that they were just dumb — they believed what they were selling, and it blew them up. Goldman knew what it was doing."
I ask the manager how it could be that selling something to customers that you're actually betting against — particularly when you know more about the weaknesses of those products than the customer — doesn't amount to securities fraud.
"It's exactly securities fraud," he says. "It's the heart of securities fraud."
Eventually, lots of aggrieved investors agreed. In a virtual repeat of the Internet IPO craze, Goldman was hit with a wave of lawsuits after the collapse of the housing bubble, many of which accused the bank of withholding pertinent information about the quality of the mortgages it issued. New York state regulators are suing Goldman and 25 other underwriters for selling bundles of crappy Countrywide mortgages to city and state pension funds, which lost as much as $100 million in the investments. Massachusetts also investigated Goldman for similar misdeeds, acting on behalf of 714 mortgage holders who got stuck holding predatory loans. But once again, Goldman got off virtually scot-free, staving off prosecution by agreeing to pay a paltry $60 million — about what the bank's CDO division made in a day and a half during the real estate boom.
The effects of the housing bubble are well known — it led more or less directly to the collapse of Bear Stearns, Lehman Brothers and AIG, whose toxic portfolio of credit swaps was in significant part composed of the insurance that banks like Goldman bought against their own housing portfolios. In fact, at least $13 billion of the taxpayer money given to AIG in the bailout ultimately went to Goldman, meaning that the bank made out on the housing bubble twice: It fucked the investors who bought their horseshit CDOs by betting against its own crappy product, then it turned around and fucked the taxpayer by making him pay off those same bets.
And once again, while the world was crashing down all around the bank, Goldman made sure it was doing just fine in the compensation department. In 2006, the firm's payroll jumped to $16.5 billion — an average of $622,000 per employee. As a Goldman spokesman explained, "We work very hard here."
But the best was yet to come. While the collapse of the housing bubble sent most of the financial world fleeing for the exits, or to jail, Goldman boldly doubled down — and almost single-handedly created yet another bubble, one the world still barely knows the firm had anything to do with.
NEXT: Bubble #4 — $4 a Gallon
BUBBLE #4 $4 a Gallon
By the beginning of 2008, the financial world was in turmoil. Wall Street had spent the past two and a half decades producing one scandal after another, which didn't leave much to sell that wasn't tainted. The terms junk bond, IPO, subprime mortgage and other once-hot financial fare were now firmly associated in the public's mind with scams; the terms credit swaps and CDOs were about to join them. The credit markets were in crisis, and the mantra that had sustained the fantasy economy throughout the Bush years — the notion that housing prices never go down — was now a fully exploded myth, leaving the Street clamoring for a new bullshit paradigm to sling.
Where to go? With the public reluctant to put money in anything that felt like a paper investment, the Street quietly moved the casino to the physical-commodities market — stuff you could touch: corn, coffee, cocoa, wheat and, above all, energy commodities, especially oil. In conjunction with a decline in the dollar, the credit crunch and the housing crash caused a "flight to commodities." Oil futures in particular skyrocketed, as the price of a single barrel went from around $60 in the middle of 2007 to a high of $147 in the summer of 2008.
That summer, as the presidential campaign heated up, the accepted explanation for why gasoline had hit $4.11 a gallon was that there was a problem with the world oil supply. In a classic example of how Republicans and Democrats respond to crises by engaging in fierce exchanges of moronic irrelevancies, John McCain insisted that ending the moratorium on offshore drilling would be "very helpful in the short term," while Barack Obama in typical liberal-arts yuppie style argued that federal investment in hybrid cars was the way out.
But it was all a lie. While the global supply of oil will eventually dry up, the shortterm flow has actually been increasing. In the six months before prices spiked, according to the U.S. Energy Information Administration, the world oil supply rose from 85.24 million barrels a day to 85.72 million. Over the same period, world oil demand dropped from 86.82 million barrels a day to 86.07 million. Not only was the shortterm supply of oil rising, the demand for it was falling — which, in classic economic terms, should have brought prices at the pump down.
So what caused the huge spike in oil prices? Take a wild guess. Obviously Goldman had help — there were other players in the physicalcommodities market — but the root cause had almost everything to do with the behavior of a few powerful actors determined to turn the oncesolid market into a speculative casino. Goldman did it by persuading pension funds and other large institutional investors to invest in oil futures — agreeing to buy oil at a certain price on a fixed date. The push transformed oil from a physical commodity, rigidly subject to supply and demand, into something to bet on, like a stock. Between 2003 and 2008, the amount of speculative money in commodities grew from $13 billion to $317 billion, an increase of 2,300 percent. By 2008, a barrel of oil was traded 27 times, on average, before it was actually delivered and consumed.
As is so often the case, there had been a Depression-era law in place designed specifically to prevent this sort of thing. The commodities market was designed in large part to help farmers: A grower concerned about future price drops could enter into a contract to sell his corn at a certain price for delivery later on, which made him worry less about building up stores of his crop. When no one was buying corn, the farmer could sell to a middleman known as a "traditional speculator," who would store the grain and sell it later, when demand returned. That way, someone was always there to buy from the farmer, even when the market temporarily had no need for his crops.
In 1936, however, Congress recognized that there should never be more speculators in the market than real producers and consumers. If that happened, prices would be affected by something other than supply and demand, and price manipulations would ensue. A new law empowered the Commodity Futures Trading Commission — the very same body that would later try and fail to regulate credit swaps — to place limits on speculative trades in commodities. As a result of the CFTC's oversight, peace and harmony reigned in the commodities markets for more than 50 years.
All that changed in 1991 when, unbeknownst to almost everyone in the world, a Goldmanowned commoditiestrading subsidiary called J. Aron wrote to the CFTC and made an unusual argument. Farmers with big stores of corn, Goldman argued, weren't the only ones who needed to hedge their risk against future price drops — Wall Street dealers who made big bets on oil prices also needed to hedge their risk, because, well, they stood to lose a lot too.
This was complete and utter crap — the 1936 law, remember, was specifically designed to maintain distinctions between people who were buying and selling real tangible stuff and people who were trading in paper alone. But the CFTC, amazingly, bought Goldman's argument. It issued the bank a free pass, called the "Bona Fide Hedging" exemption, allowing Goldman's subsidiary to call itself a physical hedger and escape virtually all limits placed on speculators. In the years that followed, the commission would quietly issue 14 similar exemptions to other companies.
Now Goldman and other banks were free to drive more investors into the commodities markets, enabling speculators to place increasingly big bets. That 1991 letter from Goldman more or less directly led to the oil bubble in 2008, when the number of speculators in the market — driven there by fear of the falling dollar and the housing crash — finally overwhelmed the real physical suppliers and consumers. By 2008, at least three quarters of the activity on the commodity exchanges was speculative, according to a congressional staffer who studied the numbers — and that's likely a conservative estimate. By the middle of last summer, despite rising supply and a drop in demand, we were paying $4 a gallon every time we pulled up to the pump.
What is even more amazing is that the letter to Goldman, along with most of the other trading exemptions, was handed out more or less in secret. "I was the head of the division of trading and markets, and Brooksley Born was the chair of the CFTC," says Greenberger, "and neither of us knew this letter was out there." In fact, the letters only came to light by accident. Last year, a staffer for the House Energy and Commerce Committee just happened to be at a briefing when officials from the CFTC made an offhand reference to the exemptions.
"I had been invited to a briefing the commission was holding on energy," the staffer recounts. "And suddenly in the middle of it, they start saying, 'Yeah, we've been issuing these letters for years now.' I raised my hand and said, 'Really? You issued a letter? Can I see it?' And they were like, 'Duh, duh.' So we went back and forth, and finally they said, 'We have to clear it with Goldman Sachs.' I'm like, 'What do you mean, you have to clear it with Goldman Sachs?'"
The CFTC cited a rule that prohibited it from releasing any information about a company's current position in the market. But the staffer's request was about a letter that had been issued 17 years earlier. It no longer had anything to do with Goldman's current position. What's more, Section 7 of the 1936 commodities law gives Congress the right to any information it wants from the commission. Still, in a classic example of how complete Goldman's capture of government is, the CFTC waited until it got clearance from the bank before it turned the letter over.
Armed with the semi-secret government exemption, Goldman had become the chief designer of a giant commodities betting parlor. Its Goldman Sachs Commodities Index — which tracks the prices of 24 major commodities but is overwhelmingly weighted toward oil — became the place where pension funds and insurance companies and other institutional investors could make massive longterm bets on commodity prices. Which was all well and good, except for a couple of things. One was that index speculators are mostly "long only" bettors, who seldom if ever take short positions — meaning they only bet on prices to rise. While this kind of behavior is good for a stock market, it's terrible for commodities, because it continually forces prices upward. "If index speculators took short positions as well as long ones, you'd see them pushing prices both up and down," says Michael Masters, a hedgefund manager who has helped expose the role of investment banks in the manipulation of oil prices. "But they only push prices in one direction: up."
Complicating matters even further was the fact that Goldman itself was cheerleading with all its might for an increase in oil prices. In the beginning of 2008, Arjun Murti, a Goldman analyst, hailed as an "oracle of oil" by The New York Times, predicted a "super spike" in oil prices, forecasting a rise to $200 a barrel. At the time Goldman was heavily invested in oil through its commoditiestrading subsidiary, J. Aron; it also owned a stake in a major oil refinery in Kansas, where it warehoused the crude it bought and sold. Even though the supply of oil was keeping pace with demand, Murti continually warned of disruptions to the world oil supply, going so far as to broadcast the fact that he owned two hybrid cars. High prices, the bank insisted, were somehow the fault of the piggish American consumer; in 2005, Goldman analysts insisted that we wouldn't know when oil prices would fall until we knew "when American consumers will stop buying gas-guzzling sport utility vehicles and instead seek fuel-efficient alternatives."
But it wasn't the consumption of real oil that was driving up prices — it was the trade in paper oil. By the summer of 2008, in fact, commodities speculators had bought and stockpiled enough oil futures to fill 1.1 billion barrels of crude, which meant that speculators owned more future oil on paper than there was real, physical oil stored in all of the country's commercial storage tanks and the Strategic Petroleum Reserve combined. It was a repeat of both the Internet craze and the housing bubble, when Wall Street jacked up presentday profits by selling suckers shares of a fictional fantasy future of endlessly rising prices.
In what was by now a painfully familiar pattern, the oil-commodities melon hit the pavement hard in the summer of 2008, causing a massive loss of wealth; crude prices plunged from $147 to $33. Once again the big losers were ordinary people. The pensioners whose funds invested in this crap got massacred: CalPERS, the California Public Employees' Retirement System, had $1.1 billion in commodities when the crash came. And the damage didn't just come from oil. Soaring food prices driven by the commodities bubble led to catastrophes across the planet, forcing an estimated 100 million people into hunger and sparking food riots throughout the Third World.
Now oil prices are rising again: They shot up 20 percent in the month of May and have nearly doubled so far this year. Once again, the problem is not supply or demand. "The highest supply of oil in the last 20 years is now," says Rep. Bart Stupak, a Democrat from Michigan who serves on the House energy committee. "Demand is at a 10-year low. And yet prices are up."
Asked why politicians continue to harp on things like drilling or hybrid cars, when supply and demand have nothing to do with the high prices, Stupak shakes his head. "I think they just don't understand the problem very well," he says. "You can't explain it in 30 seconds, so politicians ignore it."
NEXT: Bubble #5 — Rigging the Bailout
BUBBLE #5 Rigging the Bailout
After the oil bubble collapsed last fall, there was no new bubble to keep things humming — this time, the money seems to be really gone, like worldwide-depression gone. So the financial safari has moved elsewhere, and the big game in the hunt has become the only remaining pool of dumb, unguarded capital left to feed upon: taxpayer money. Here, in the biggest bailout in history, is where Goldman Sachs really started to flex its muscle.
It began in September of last year, when then-Treasury secretary Paulson made a momentous series of decisions. Although he had already engineered a rescue of Bear Stearns a few months before and helped bail out quasi-private lenders Fannie Mae and Freddie Mac, Paulson elected to let Lehman Brothers — one of Goldman's last real competitors — collapse without intervention. ("Goldman's superhero status was left intact," says market analyst Eric Salzman, "and an investmentbanking competitor, Lehman, goes away.") The very next day, Paulson greenlighted a massive, $85 billion bailout of AIG, which promptly turned around and repaid $13 billion it owed to Goldman. Thanks to the rescue effort, the bank ended up getting paid in full for its bad bets: By contrast, retired auto workers awaiting the Chrysler bailout will be lucky to receive 50 cents for every dollar they are owed.
Immediately after the AIG bailout, Paulson announced his federal bailout for the financial industry, a $700 billion plan called the Troubled Asset Relief Program, and put a heretofore unknown 35yearold Goldman banker named Neel Kashkari in charge of administering the funds. In order to qualify for bailout monies, Goldman announced that it would convert from an investment bank to a bankholding company, a move that allows it access not only to $10 billion in TARP funds, but to a whole galaxy of less conspicuous, publicly backed funding — most notably, lending from the discount window of the Federal Reserve. By the end of March, the Fed will have lent or guaranteed at least $8.7 trillion under a series of new bailout programs — and thanks to an obscure law allowing the Fed to block most congressional audits, both the amounts and the recipients of the monies remain almost entirely secret.
Converting to a bank-holding company has other benefits as well: Goldman's primary supervisor is now the New York Fed, whose chairman at the time of its announcement was Stephen Friedman, a former co-chairman of Goldman Sachs. Friedman was technically in violation of Federal Reserve policy by remaining on the board of Goldman even as he was supposedly regulating the bank; in order to rectify the problem, he applied for, and got, a conflictofinterest waiver from the government. Friedman was also supposed to divest himself of his Goldman stock after Goldman became a bankholding company, but thanks to the waiver, he was allowed to go out and buy 52,000 additional shares in his old bank, leaving him $3 million richer. Friedman stepped down in May, but the man now in charge of supervising Goldman — New York Fed president William Dudley — is yet another former Goldmanite.
The collective message of all this — the AIG bailout, the swift approval for its bankholding conversion, the TARP funds — is that when it comes to Goldman Sachs, there isn't a free market at all. The government might let other players on the market die, but it simply will not allow Goldman to fail under any circumstances. Its edge in the market has suddenly become an open declaration of supreme privilege. "In the past it was an implicit advantage," says Simon Johnson, an economics professor at MIT and former official at the International Monetary Fund, who compares the bailout to the crony capitalism he has seen in Third World countries. "Now it's more of an explicit advantage."
Once the bailouts were in place, Goldman went right back to business as usual, dreaming up impossibly convoluted schemes to pick the American carcass clean of its loose capital. One of its first moves in the postbailout era was to quietly push forward the calendar it uses to report its earnings, essentially wiping December 2008 — with its $1.3 billion in pretax losses — off the books. At the same time, the bank announced a highly suspicious $1.8 billion profit for the first quarter of 2009 — which apparently included a large chunk of money funneled to it by taxpayers via the AIG bailout. "They cooked those firstquarter results six ways from Sunday," says one hedgefund manager. "They hid the losses in the orphan month and called the bailout money profit."
Two more numbers stand out from that stunning first-quarter turnaround. The bank paid out an astonishing $4.7 billion in bonuses and compensation in the first three months of this year, an 18 percent increase over the first quarter of 2008. It also raised $5 billion by issuing new shares almost immediately after releasing its firstquarter results. Taken together, the numbers show that Goldman essentially borrowed a $5 billion salary payout for its executives in the middle of the global economic crisis it helped cause, using halfbaked accounting to reel in investors, just months after receiving billions in a taxpayer bailout.
Even more amazing, Goldman did it all right before the government announced the results of its new "stress test" for banks seeking to repay TARP money — suggesting that Goldman knew exactly what was coming. The government was trying to carefully orchestrate the repayments in an effort to prevent further trouble at banks that couldn't pay back the money right away. But Goldman blew off those concerns, brazenly flaunting its insider status. "They seemed to know everything that they needed to do before the stress test came out, unlike everyone else, who had to wait until after," says Michael Hecht, a managing director of JMP Securities. "The government came out and said, 'To pay back TARP, you have to issue debt of at least five years that is not insured by FDIC — which Goldman Sachs had already done, a week or two before."
And here's the real punch line. After playing an intimate role in four historic bubble catastrophes, after helping $5 trillion in wealth disappear from the NASDAQ, after pawning off thousands of toxic mortgages on pensioners and cities, after helping to drive the price of gas up to $4 a gallon and to push 100 million people around the world into hunger, after securing tens of billions of taxpayer dollars through a series of bailouts overseen by its former CEO, what did Goldman Sachs give back to the people of the United States in 2008?
Fourteen million dollars.
That is what the firm paid in taxes in 2008, an effective tax rate of exactly one, read it, one percent. The bank paid out $10 billion in compensation and benefits that same year and made a profit of more than $2 billion — yet it paid the Treasury less than a third of what it forked over to CEO Lloyd Blankfein, who made $42.9 million last year.
How is this possible? According to Goldman's annual report, the low taxes are due in large part to changes in the bank's "geographic earnings mix." In other words, the bank moved its money around so that most of its earnings took place in foreign countries with low tax rates. Thanks to our completely fucked corporate tax system, companies like Goldman can ship their revenues offshore and defer taxes on those revenues indefinitely, even while they claim deductions upfront on that same untaxed income. This is why any corporation with an at least occasionally sober accountant can usually find a way to zero out its taxes. A GAO report, in fact, found that between 1998 and 2005, roughly twothirds of all corporations operating in the U.S. paid no taxes at all.
This should be a pitchforklevel outrage — but somehow, when Goldman released its post-bailout tax profile, hardly anyone said a word. One of the few to remark on the obscenity was Rep. Lloyd Doggett, a Democrat from Texas who serves on the House Ways and Means Committee. "With the right hand out begging for bailout money," he said, "the left is hiding it offshore."
NEXT: Bubble #6 — Global Warming
BUBBLE #6 Global Warming
Fast-forward to today. It's early June in Washington, D.C. Barack Obama, a popular young politician whose leading private campaign donor was an investment bank called Goldman Sachs — its employees paid some $981,000 to his campaign — sits in the White House. Having seamlessly navigated the political minefield of the bailout era, Goldman is once again back to its old business, scouting out loopholes in a new government-created market with the aid of a new set of alumni occupying key government jobs.
Gone are Hank Paulson and Neel Kashkari; in their place are Treasury chief of staff Mark Patterson and CFTC chief Gary Gensler, both former Goldmanites. (Gensler was the firm's cohead of finance.) And instead of credit derivatives or oil futures or mortgage-backed CDOs, the new game in town, the next bubble, is in carbon credits — a booming trillion dollar market that barely even exists yet, but will if the Democratic Party that it gave $4,452,585 to in the last election manages to push into existence a groundbreaking new commodities bubble, disguised as an "environmental plan," called cap-and-trade.
The new carboncredit market is a virtual repeat of the commodities-market casino that's been kind to Goldman, except it has one delicious new wrinkle: If the plan goes forward as expected, the rise in prices will be government-mandated. Goldman won't even have to rig the game. It will be rigged in advance.
Here's how it works: If the bill passes, there will be limits for coal plants, utilities, natural-gas distributors and numerous other industries on the amount of carbon emissions (a.k.a. greenhouse gases) they can produce per year. If the companies go over their allotment, they will be able to buy "allocations" or credits from other companies that have managed to produce fewer emissions. President Obama conservatively estimates that about $646 billion worth of carbon credits will be auctioned in the first seven years; one of his top economic aides speculates that the real number might be twice or even three times that amount.
The feature of this plan that has special appeal to speculators is that the "cap" on carbon will be continually lowered by the government, which means that carbon credits will become more and more scarce with each passing year. Which means that this is a brand new commodities market where the main commodity to be traded is guaranteed to rise in price over time. The volume of this new market will be upwards of a trillion dollars annually; for comparison's sake, the annual combined revenues of all electricity suppliers in the U.S. total $320 billion.
Goldman wants this bill. The plan is (1) to get in on the ground floor of paradigmshifting legislation, (2) make sure that they're the profitmaking slice of that paradigm and (3) make sure the slice is a big slice. Goldman started pushing hard for capandtrade long ago, but things really ramped up last year when the firm spent $3.5 million to lobby climate issues. (One of their lobbyists at the time was none other than Patterson, now Treasury chief of staff.) Back in 2005, when Hank Paulson was chief of Goldman, he personally helped author the bank's environmental policy, a document that contains some surprising elements for a firm that in all other areas has been consistently opposed to any sort of government regulation. Paulson's report argued that "voluntary action alone cannot solve the climatechange problem." A few years later, the bank's carbon chief, Ken Newcombe, insisted that capandtrade alone won't be enough to fix the climate problem and called for further public investments in research and development. Which is convenient, considering that Goldman made early investments in wind power (it bought a subsidiary called Horizon Wind Energy), renewable diesel (it is an investor in a firm called Changing World Technologies) and solar power (it partnered with BP Solar), exactly the kind of deals that will prosper if the government forces energy producers to use cleaner energy. As Paulson said at the time, "We're not making those investments to lose money."
The bank owns a 10 percent stake in the Chicago Climate Exchange, where the carbon credits will be traded. Moreover, Goldman owns a minority stake in Blue Source LLC, a Utahbased firm that sells carbon credits of the type that will be in great demand if the bill passes. Nobel Prize winner Al Gore, who is intimately involved with the planning of cap-and-trade, started up a company called Generation Investment Management with three former bigwigs from Goldman Sachs Asset Management, David Blood, Mark Ferguson and Peter Harris. Their business? Investing in carbon offsets. There's also a $500 million Green Growth Fund set up by a Goldmanite to invest in greentech … the list goes on and on. Goldman is ahead of the headlines again, just waiting for someone to make it rain in the right spot. Will this market be bigger than the energyfutures market?
"Oh, it'll dwarf it," says a former staffer on the House energy committee.
Well, you might say, who cares? If cap-and-trade succeeds, won't we all be saved from the catastrophe of global warming? Maybe — but capandtrade, as envisioned by Goldman, is really just a carbon tax structured so that private interests collect the revenues. Instead of simply imposing a fixed government levy on carbon pollution and forcing unclean energy producers to pay for the mess they make, cap-and-trade will allow a small tribe of greedy-as-hell Wall Street swine to turn yet another commodities market into a private taxcollection scheme. This is worse than the bailout: It allows the bank to seize taxpayer money before it's even collected.
"If it's going to be a tax, I would prefer that Washington set the tax and collect it," says Michael Masters, the hedgefund director who spoke out against oilfutures speculation. "But we're saying that Wall Street can set the tax, and Wall Street can collect the tax. That's the last thing in the world I want. It's just asinine."
Cap-and-trade is going to happen. Or, if it doesn't, something like it will. The moral is the same as for all the other bubbles that Goldman helped create, from 1929 to 2009. In almost every case, the very same bank that behaved recklessly for years, weighing down the system with toxic loans and predatory debt, and accomplishing nothing but massive bonuses for a few bosses, has been rewarded with mountains of virtually free money and government guarantees — while the actual victims in this mess, ordinary taxpayers, are the ones paying for it.
It's not always easy to accept the reality of what we now routinely allow these people to get away with; there's a kind of collective denial that kicks in when a country goes through what America has gone through lately, when a people lose as much prestige and status as we have in the past few years. You can't really register the fact that you're no longer a citizen of a thriving first-world democracy, that you're no longer above getting robbed in broad daylight, because like an amputee, you can still sort of feel things that are no longer there.
But this is it. This is the world we live in now. And in this world, some of us have to play by the rules, while others get a note from the principal excusing them from homework till the end of time, plus 10 billion free dollars in a paper bag to buy lunch. It's a gangster state, running on gangster economics, and even prices can't be trusted anymore; there are hidden taxes in every buck you pay. And maybe we can't stop it, but we should at least know where it's all going.
Watch Matt Taibbi break down the Great American Bubble Machine in our exclusive video, and for more on how Wall Street is taking over Washington, read his "The Big Takeover."
Malik Zulu Shabazz, national chairman of the radical New Black Panther Party visits Whitehouse! WTF?
0 comments at 5:02 PM
Earlier in 2006 the New Black Panther Party regained the media spotlight by interpolating itself into the 2006 Duke University lacrosse team scandal, organizing marches outside of Duke University and made numerous media appearances where they demanded that the jury organized by District Attorney Nifong convict the accused lacrosse players.[21] Malik Zulu Shabazz met with the DA and asserted repeatedly that the DA's answers meant he was supporting the claims made by the NBPP, a point that was widely disputed. On April 12, 2007, after District Attorney Nifong's case collapsed and the Duke Lacrosse players were exonerated, Malik Zulu Shabazz appeared on The O'Reilly Factor and declared that he would not apologize for his actions in the leadup to the Duke University lacrosse rape scandal, stating that he did not know whether or not anything happened to the young accuser. He stated his beliefs that the rich, white families of Duke had placed political pressure on the investigation and forced the charges to be dropped. When questioned by guest host Michelle Malkin, he labeled her a "political prostitute" and "mouthpiece for that racist Bill O'Reilly." In response, Malkin stated that "the only whore present is you." Malik Zulu Shabazz replied, "You should be ashamed of yourself for defending and being a spokesman for Bill O'Reilly."
Khalid Abdul Muhammad
From Wikipedia, the free encyclopedia
Khallid Abdul Muhammad (born Harold Moore Jr.; January 12, 1948–February 17, 2001) was a black nationalist and supremacist. Muhammad came to prominence as the National Assistant to Minister Louis Farrakhan of the Nation of Islam (NOI), a position he held until 1993. He served as the National Chairman of the New Black Panther Party from 1993 until his death in 2001.
Contents[hide]
1 Early life
2 Nation of Islam
3 New Black Panther Party
4 References
5 See also
6 External links
//
[edit] Early life
Muhammad was raised by his aunt, Carrie Moore Vann in Houston, Texas, where he attended Bruce Elementary School, E.O. Smith Junior High School, and all-black Phyllis Wheatley High School. He was an Eagle Scout.[1] After graduating high school, Muhammad went to Dillard University in Louisiana, where he was known as Harold Vann, to pursue a degree in theological studies. At this time he ministered at Sloan Memorial Methodist Church. In 1967, he was initiated into the Theta Sigma Chapter of Omega Psi Phi Fraternity, Inc.
[edit] Nation of Islam
In 1970, while attending Dillard, Muhammad joined the Nation of Islam (a 20th century American movement distinct from traditional Islam[2]), which was then under the leadership of Elijah Muhammad. He changed his name to Harold Smith, became Minister Louis Farrakhan's protégé, and was active as a recruiter within the organization. In 1978 Muhammad was appointed Western Regional Minister of the Nation of Islam and leader of Mosque #27. In 1983, Minister Farrakhan named him Khalid after the Islamic general Khalid ibn al-Walid, a follower of Muhammad, calling him "the Sword of Allah".
By 1985, Muhammad had become one of Louis Farrakhan's most trusted advisors in the Nation of Islam. He traveled to Libya on a fund-raising trip, where he became well acquainted with leader Muammar al-Gaddafi. Muhammad's dedication to Farrakhan and to the message of the NOI eventually secured him the title of national spokesman and he was named one of Louis Farrakhan's friends in 1981. He served at Nation of Islam mosques in New York and Atlanta throughout the 1980s. Muhammad was convicted of fraud in 1988.[3] In 1991 he became Farrakhan's personal assistant.
Muhammad was notably featured by the hip-hop group Public Enemy on the introduction to its 1988 track "Night of the Living Baseheads", from the album It Takes a Nation of Millions to Hold Us Back:
“
Have you forgotten that once we were brought here, we were robbed of our name, robbed of our language. We lost our religion, our culture, our god...and many of us, by the way we act, we even lost our minds.
”
He also appeared in rapper Ice Cube's albums Death Certificate (1991) and Lethal Injection (1993) as a guest. In Death Certificate, Muhammad appeared in the tracks "Death" and "The Birth". In Lethal Injection, he appeared in the song "Cave Bitch", a song rediculing white women. His appearance in this song caused controversy. Ice Cube was affilated with the Nation of Islam at this time.
Muhammad's new position involved public speaking engagements, where he became known for his inflammatory anti-white, antisemitic and anti-homosexual speeches along with notions of black self-empowerment and black separation. Muhammad's condemnation of whites and Jews extended to conservative blacks, whom he criticized for what he perceived as their self-subjugation:
“
When white folks can't defeat you they'll always find some Negro, some boot-licking, butt-licking, bamboozled, half-baked, half-fried, sissified, punkified, pasteurized, homogenized Nigger that they can trot out in front of you.[4]
”
In 1993, following a speech at Kean College in Union Township, New Jersey, in which Muhammad referred to Jews as "bloodsuckers"; labeled the Pope a "no-good cracker"; and advocated the murder of any and all white South Africans who would not leave the nation subsequent to a warning period of 24 hours, the United States Senate voted 97-0 to censure Muhammad, and the United States House of Representatives in a special session passed a House Resolution. When he was also reprimanded by the NOI he left the organization. There is some question as to whether Muhammad was removed from the organization by Louis Farrakhan or if his departure was voluntary. In 1994, Muhammad appeared on The Phil Donahue Show in an appearance that featured Muhammad in heated arguments with Jewish audience members amid an explanation of his racist remarks.
Muhammad was shot by James Bess, a former NOI member, after he spoke at the University of California at Riverside on May 29, 1994. Muhammad believed the shooting was a part of a conspiracy against him.
[edit] New Black Panther Party
After being stripped of his position as NOI spokesman, Muhammad became the national chairman of the New Black Panther Party. On May 21, 1997, he delivered a heated speech at San Francisco State University in which he criticized Jews, whites, Catholics and homosexuals and said they should be killed. He endorsed a Holocaust denial position, asserted Jewish control over U.S. policy, and alleged Jewish involvement in various conspiracies.[5]
In 1998 Muhammad organized the Million Youth March in New York City. The march was controversial from its inception as New York mayor Rudolph Giuliani denied organizers a permit, calling it a "hate march". A court ruled that the event could go on, but scaled back its duration and size. At the conclusion of the rally, just as Muhammad appeared on the stage to speak, the demonstration was interrupted by a low-flying police helicopter that acted as a signal for more than 3,000 police in riot gear, including some mounted on horseback, to come in and disperse the crowd. In response, Muhammad exhorted the rally participants to attack the oncoming police and to attack and beat them with rails and to shoot them with their own guns. Dozens were arrested and 30 officers and five civilians were injured.[6] [7] Mayor Giuliani said the march turned out to be precisely what he predicted, one "filled with hatred, horrible, awful, vicious, anti-Semitic and other anti-white rhetoric, as well as exhortations to kill people, murder people. ... The speeches given today should not occur anyplace."[6] In subsequent activism, Muhammad convened a second march in 1999 that drew roughly 90 participants and no incidents with the police, even though beforehand he made threats that his speech would include all his beliefs including the assertion that all whites should be murdered.
In 2000, Muhammad's beliefs were introduced to a completely new demographic when it was revealed that one of the contestants on the American version of the Dutch television show Big Brother, William Collins (Hiram Ashantee), was a follower of his. He also appeared in an episode of Louis Theroux's Weird Weekends.
In 2001, Muhammad died suddenly of a brain aneurysm in Atlanta, Georgia, at the age of 53.
Since Muhammad's death, the organization has been headed by Malik Zulu Shabazz. Members of the original Black Panther Party—particularly founder Bobby Seale—have insisted that this party is illegitimate and have vociferously objected that there "is no new Black Panther Party."[8]
[edit] References
^ "Dr. Khallid Abdul Muhammad". New Black Panther Party. http://www.newblackpanther.com/drkhallid.html. Retrieved 2008-12-31.
^ "Chart: Nation of Islam and Traditional Islam". Beliefnet. http://www.beliefnet.com/Faiths/2002/10/Chart-Nation-of-Islam-and-Traditional-Islam.aspx. Retrieved 2008-12-31.
^ Smith, Vern E.; Sarah Van Boven (September 14, 1998). "The Itinerant Incendiary". Newsweek. http://www.newsweek.com/id/113381. Retrieved July 25, 2009.
^ The Journal of Blacks in Higher Education, No. 3 (Spring, 1994), pp. 84-85
^ ADL Alerts Nation's Academic Leadership About Virus of Bigotry Being Spread by Khalid Abdul Muhammad
^ a b Million Youth March Ends in Clash
^ village voice > news > The Hunt for Khallid Abdul Muhammad by Peter Noel
^ "There is No New Black Panther Party: An Open Letter from the Dr. Huey P. Newton Foundation" [1]
[edit] See also
Nation of Islam and antisemitism
Black separatism
[edit] External links
Khallid Abdul Muhammad: In His Own Words
The Hunt for Khalid Abdul Muhammed
Wikiquote has a collection of quotations related to: Khalid Abdul Muhammad
Retrieved from "http://en.wikipedia.org/wiki/Khalid_Abdul_Muhammad"
From Wikipedia, the free encyclopedia
Khallid Abdul Muhammad (born Harold Moore Jr.; January 12, 1948–February 17, 2001) was a black nationalist and supremacist. Muhammad came to prominence as the National Assistant to Minister Louis Farrakhan of the Nation of Islam (NOI), a position he held until 1993. He served as the National Chairman of the New Black Panther Party from 1993 until his death in 2001.
Contents[hide]
1 Early life
2 Nation of Islam
3 New Black Panther Party
4 References
5 See also
6 External links
//
[edit] Early life
Muhammad was raised by his aunt, Carrie Moore Vann in Houston, Texas, where he attended Bruce Elementary School, E.O. Smith Junior High School, and all-black Phyllis Wheatley High School. He was an Eagle Scout.[1] After graduating high school, Muhammad went to Dillard University in Louisiana, where he was known as Harold Vann, to pursue a degree in theological studies. At this time he ministered at Sloan Memorial Methodist Church. In 1967, he was initiated into the Theta Sigma Chapter of Omega Psi Phi Fraternity, Inc.
[edit] Nation of Islam
In 1970, while attending Dillard, Muhammad joined the Nation of Islam (a 20th century American movement distinct from traditional Islam[2]), which was then under the leadership of Elijah Muhammad. He changed his name to Harold Smith, became Minister Louis Farrakhan's protégé, and was active as a recruiter within the organization. In 1978 Muhammad was appointed Western Regional Minister of the Nation of Islam and leader of Mosque #27. In 1983, Minister Farrakhan named him Khalid after the Islamic general Khalid ibn al-Walid, a follower of Muhammad, calling him "the Sword of Allah".
By 1985, Muhammad had become one of Louis Farrakhan's most trusted advisors in the Nation of Islam. He traveled to Libya on a fund-raising trip, where he became well acquainted with leader Muammar al-Gaddafi. Muhammad's dedication to Farrakhan and to the message of the NOI eventually secured him the title of national spokesman and he was named one of Louis Farrakhan's friends in 1981. He served at Nation of Islam mosques in New York and Atlanta throughout the 1980s. Muhammad was convicted of fraud in 1988.[3] In 1991 he became Farrakhan's personal assistant.
Muhammad was notably featured by the hip-hop group Public Enemy on the introduction to its 1988 track "Night of the Living Baseheads", from the album It Takes a Nation of Millions to Hold Us Back:
“
Have you forgotten that once we were brought here, we were robbed of our name, robbed of our language. We lost our religion, our culture, our god...and many of us, by the way we act, we even lost our minds.
”
He also appeared in rapper Ice Cube's albums Death Certificate (1991) and Lethal Injection (1993) as a guest. In Death Certificate, Muhammad appeared in the tracks "Death" and "The Birth". In Lethal Injection, he appeared in the song "Cave Bitch", a song rediculing white women. His appearance in this song caused controversy. Ice Cube was affilated with the Nation of Islam at this time.
Muhammad's new position involved public speaking engagements, where he became known for his inflammatory anti-white, antisemitic and anti-homosexual speeches along with notions of black self-empowerment and black separation. Muhammad's condemnation of whites and Jews extended to conservative blacks, whom he criticized for what he perceived as their self-subjugation:
“
When white folks can't defeat you they'll always find some Negro, some boot-licking, butt-licking, bamboozled, half-baked, half-fried, sissified, punkified, pasteurized, homogenized Nigger that they can trot out in front of you.[4]
”
In 1993, following a speech at Kean College in Union Township, New Jersey, in which Muhammad referred to Jews as "bloodsuckers"; labeled the Pope a "no-good cracker"; and advocated the murder of any and all white South Africans who would not leave the nation subsequent to a warning period of 24 hours, the United States Senate voted 97-0 to censure Muhammad, and the United States House of Representatives in a special session passed a House Resolution. When he was also reprimanded by the NOI he left the organization. There is some question as to whether Muhammad was removed from the organization by Louis Farrakhan or if his departure was voluntary. In 1994, Muhammad appeared on The Phil Donahue Show in an appearance that featured Muhammad in heated arguments with Jewish audience members amid an explanation of his racist remarks.
Muhammad was shot by James Bess, a former NOI member, after he spoke at the University of California at Riverside on May 29, 1994. Muhammad believed the shooting was a part of a conspiracy against him.
[edit] New Black Panther Party
After being stripped of his position as NOI spokesman, Muhammad became the national chairman of the New Black Panther Party. On May 21, 1997, he delivered a heated speech at San Francisco State University in which he criticized Jews, whites, Catholics and homosexuals and said they should be killed. He endorsed a Holocaust denial position, asserted Jewish control over U.S. policy, and alleged Jewish involvement in various conspiracies.[5]
In 1998 Muhammad organized the Million Youth March in New York City. The march was controversial from its inception as New York mayor Rudolph Giuliani denied organizers a permit, calling it a "hate march". A court ruled that the event could go on, but scaled back its duration and size. At the conclusion of the rally, just as Muhammad appeared on the stage to speak, the demonstration was interrupted by a low-flying police helicopter that acted as a signal for more than 3,000 police in riot gear, including some mounted on horseback, to come in and disperse the crowd. In response, Muhammad exhorted the rally participants to attack the oncoming police and to attack and beat them with rails and to shoot them with their own guns. Dozens were arrested and 30 officers and five civilians were injured.[6] [7] Mayor Giuliani said the march turned out to be precisely what he predicted, one "filled with hatred, horrible, awful, vicious, anti-Semitic and other anti-white rhetoric, as well as exhortations to kill people, murder people. ... The speeches given today should not occur anyplace."[6] In subsequent activism, Muhammad convened a second march in 1999 that drew roughly 90 participants and no incidents with the police, even though beforehand he made threats that his speech would include all his beliefs including the assertion that all whites should be murdered.
In 2000, Muhammad's beliefs were introduced to a completely new demographic when it was revealed that one of the contestants on the American version of the Dutch television show Big Brother, William Collins (Hiram Ashantee), was a follower of his. He also appeared in an episode of Louis Theroux's Weird Weekends.
In 2001, Muhammad died suddenly of a brain aneurysm in Atlanta, Georgia, at the age of 53.
Since Muhammad's death, the organization has been headed by Malik Zulu Shabazz. Members of the original Black Panther Party—particularly founder Bobby Seale—have insisted that this party is illegitimate and have vociferously objected that there "is no new Black Panther Party."[8]
[edit] References
^ "Dr. Khallid Abdul Muhammad". New Black Panther Party. http://www.newblackpanther.com/drkhallid.html. Retrieved 2008-12-31.
^ "Chart: Nation of Islam and Traditional Islam". Beliefnet. http://www.beliefnet.com/Faiths/2002/10/Chart-Nation-of-Islam-and-Traditional-Islam.aspx. Retrieved 2008-12-31.
^ Smith, Vern E.; Sarah Van Boven (September 14, 1998). "The Itinerant Incendiary". Newsweek. http://www.newsweek.com/id/113381. Retrieved July 25, 2009.
^ The Journal of Blacks in Higher Education, No. 3 (Spring, 1994), pp. 84-85
^ ADL Alerts Nation's Academic Leadership About Virus of Bigotry Being Spread by Khalid Abdul Muhammad
^ a b Million Youth March Ends in Clash
^ village voice > news > The Hunt for Khallid Abdul Muhammad by Peter Noel
^ "There is No New Black Panther Party: An Open Letter from the Dr. Huey P. Newton Foundation" [1]
[edit] See also
Nation of Islam and antisemitism
Black separatism
[edit] External links
Khallid Abdul Muhammad: In His Own Words
The Hunt for Khalid Abdul Muhammed
Wikiquote has a collection of quotations related to: Khalid Abdul Muhammad
Retrieved from "http://en.wikipedia.org/wiki/Khalid_Abdul_Muhammad"
videos-
THE EARLY YEARS
Minister Khallid Abdul Muhammad, born Harold Moore, Jr. by his parents, blessed this earth on January 12th, 1948 in Houston, Texas. He was the second? of six children to the late Harold Moore, Sr. and Lottie B. Moore. His Aunt Momma Carrie Moore Vann in Houston, Texas reared him. Minister Khallid Muhammad, affectionately known as "butch" by the family attended Bruce Elementary School, E.O.Smith Junior High School and all Black Phyllis Wheatley High School in Texas. At Phyllis Wheatley, Brother Khallid was an esteemed member of Stagecrafters, a group of exceptional students where he developed debate and drama skills under direction of Ms. Vernell Lillie. Minister Khallid as a young man would preach to cars from his porch as they passed by on the highway and was president of Houston Methodist Youth Fellowship. Khallid was a star quarterback, team captain of his high school football team, an eagle scout, a class officer and a star debater.
THE CONVERSION
Upon graduating high school, our bold and shining Black prince won a scholarship to Dillard University in Louisiana to pursue his degree in theological studies. At this time he ministered at Sloan Memorial Methodist Church. While at Dillard University young Khallid first heard Minister Louis Farrahkan, the National Representative of the Honorable Elijah Muhammad. He had a big Afro and a huge medallion of Malcolm X around his neck. After hearing Minister Farrakhan speak Khallid Abdul Muhammad joined the Nation of Islam under the leadership of the Honorable Elijah Muhammad. Immediately Brother Harold X, as he was known at that time became renown as a top recruiter in the south for the Black Muslims. Dr. Khallid continued his studies and graduated from Pepperdine University in Los Angeles California. He then was the recipient of an academic fellowship, and matriculated to do "Intensive Studies" at Harvard, Yale, and Columbia Universities. The skills of higher education as well as his fighting spirit made Minister Khallid a valuable weapon to the Nation of Islam and the Black Nation in general.
THE EVOLUTION
When the Messenger of Allah, the Honorable Elijah Muhammad departed from amongst us in 1975, Minister Khallid Abdul Muhammad kept on fighting. At this time he was known as Dr. Malik Rushaddin. He traveled throughout Africa and trained in revolutionary movements with a focus on freeing apartheid ridden South Africa (Azania) from white oppression. When Minister Farrakhan decided to rebuild the Nation of Islam in 1978. Minister Khallid was right there with him when there were just a few. Minister Khallid Muhammad served as western regional minister of the Nation of Islam and leader of Mosque #27, which made lightning progress under his leadership. In 1983 Minister Louis Farrakhan named him Khallid, which has the historical interpretation of "great warrior" after the great follower of Prophet Muhammad (pbuh) Khallid ibn Walid. Like this great Islamic general Khallid Muhammad was called the "sword of Allah".
Minister Khallid Abdul Muhammad was soon appointed as Supreme Captain over the military in the Nation of Islam. In 1985 Minister Khallid Abdul Muhammad was appointed National Spokesman and Representative of Minister Louis Farrakhan, following in the footsteps of Minister Farrakhan and Malcolm X. At other points he also served the posts of Southern Regional Minister, Minister of Mosque #7 in Harlem, New York City, and National Assistant.
A true Pan Afrikanist, Minister Khallid Muhammad has traveled on research and fact-finding missions to Kemet (Egypt) Jerusalem, South Afrika and throughout the African sub continent. He made his sacred pilgrimage to the Holy City, Mecca, numerous times. He has earned the title El Hajj Khallid Abdul Muhammad. Minister Khallid Abdul Muhammad was the creator and founder of The New African Cultural Holiday alternative to Thanksgiving called "GYE NYAME (G-NY-MAY). Black youth and "gang" members loved Dr. Khallid. You have heard this dynamic soldier on rap albums from Tupac Shakur, Ice Cube, Sista Souljah, X-Clan, Public Enemy, Scar-Face, Shaquille O'Neill, Erica Badu, Lauren Hill, Dead Prez, Capone N' Noriega and the Black Lyrical Terrorist. Dr. Khallid was known as dynamic fiery, explosive, electrifying, spellbinding! He has fired up and inspired audiences at over 100 universities in the United States, Africa, Europe and the world. He spoke at many churches and served as a minister at the 1st Afrocentric Temple in Atlanta, Georgia before his transition to the ancestors.
Minister Khallid Abdul Muhammad, born Harold Moore, Jr. by his parents, blessed this earth on January 12th, 1948 in Houston, Texas. He was the second? of six children to the late Harold Moore, Sr. and Lottie B. Moore. His Aunt Momma Carrie Moore Vann in Houston, Texas reared him. Minister Khallid Muhammad, affectionately known as "butch" by the family attended Bruce Elementary School, E.O.Smith Junior High School and all Black Phyllis Wheatley High School in Texas. At Phyllis Wheatley, Brother Khallid was an esteemed member of Stagecrafters, a group of exceptional students where he developed debate and drama skills under direction of Ms. Vernell Lillie. Minister Khallid as a young man would preach to cars from his porch as they passed by on the highway and was president of Houston Methodist Youth Fellowship. Khallid was a star quarterback, team captain of his high school football team, an eagle scout, a class officer and a star debater.
THE CONVERSION
Upon graduating high school, our bold and shining Black prince won a scholarship to Dillard University in Louisiana to pursue his degree in theological studies. At this time he ministered at Sloan Memorial Methodist Church. While at Dillard University young Khallid first heard Minister Louis Farrahkan, the National Representative of the Honorable Elijah Muhammad. He had a big Afro and a huge medallion of Malcolm X around his neck. After hearing Minister Farrakhan speak Khallid Abdul Muhammad joined the Nation of Islam under the leadership of the Honorable Elijah Muhammad. Immediately Brother Harold X, as he was known at that time became renown as a top recruiter in the south for the Black Muslims. Dr. Khallid continued his studies and graduated from Pepperdine University in Los Angeles California. He then was the recipient of an academic fellowship, and matriculated to do "Intensive Studies" at Harvard, Yale, and Columbia Universities. The skills of higher education as well as his fighting spirit made Minister Khallid a valuable weapon to the Nation of Islam and the Black Nation in general.
THE EVOLUTION
When the Messenger of Allah, the Honorable Elijah Muhammad departed from amongst us in 1975, Minister Khallid Abdul Muhammad kept on fighting. At this time he was known as Dr. Malik Rushaddin. He traveled throughout Africa and trained in revolutionary movements with a focus on freeing apartheid ridden South Africa (Azania) from white oppression. When Minister Farrakhan decided to rebuild the Nation of Islam in 1978. Minister Khallid was right there with him when there were just a few. Minister Khallid Muhammad served as western regional minister of the Nation of Islam and leader of Mosque #27, which made lightning progress under his leadership. In 1983 Minister Louis Farrakhan named him Khallid, which has the historical interpretation of "great warrior" after the great follower of Prophet Muhammad (pbuh) Khallid ibn Walid. Like this great Islamic general Khallid Muhammad was called the "sword of Allah".
Minister Khallid Abdul Muhammad was soon appointed as Supreme Captain over the military in the Nation of Islam. In 1985 Minister Khallid Abdul Muhammad was appointed National Spokesman and Representative of Minister Louis Farrakhan, following in the footsteps of Minister Farrakhan and Malcolm X. At other points he also served the posts of Southern Regional Minister, Minister of Mosque #7 in Harlem, New York City, and National Assistant.
A true Pan Afrikanist, Minister Khallid Muhammad has traveled on research and fact-finding missions to Kemet (Egypt) Jerusalem, South Afrika and throughout the African sub continent. He made his sacred pilgrimage to the Holy City, Mecca, numerous times. He has earned the title El Hajj Khallid Abdul Muhammad. Minister Khallid Abdul Muhammad was the creator and founder of The New African Cultural Holiday alternative to Thanksgiving called "GYE NYAME (G-NY-MAY). Black youth and "gang" members loved Dr. Khallid. You have heard this dynamic soldier on rap albums from Tupac Shakur, Ice Cube, Sista Souljah, X-Clan, Public Enemy, Scar-Face, Shaquille O'Neill, Erica Badu, Lauren Hill, Dead Prez, Capone N' Noriega and the Black Lyrical Terrorist. Dr. Khallid was known as dynamic fiery, explosive, electrifying, spellbinding! He has fired up and inspired audiences at over 100 universities in the United States, Africa, Europe and the world. He spoke at many churches and served as a minister at the 1st Afrocentric Temple in Atlanta, Georgia before his transition to the ancestors.
National Chairman - New Black Panther Party (NBPP)Founder/Spokesman - Black Lawyers for Justice (BLFJ)
Dr. Malik Zulu Shabazz, Esq. is a national figure and key representative of the new leadership that has emerged from the Black Liberation and Islamic movements. Shabazz has guided the New Black Panther Party since 2001 and Black Lawyers for Justice since 1996. What makes Dr. Malik Zulu Shabazz unique and effective today is the depth of his knowledge, professional organizing skills, potent legal advocacy, and dynamic speaking skills. Malik Zulu Shabazz continues to draw comparisons between himself and his revolutionary prototype- Minister Malcolm X. Malcom X (Al Hajj Malik Shabazz) wanted to be a lawyer as a child but was cut short by racist forces.
Dr. Malik Zulu Shabazz is freedom fighter, activist, attorney operating on the world stage today. The New Black Panther Party has 27 Chapters operating across the United States, United Kingdom, Caribbean and Africa. Shabazz has been involved in a plethora of major political and legal causes and struggles that pertain to Black peoples in America, African peoples worldwide, and the causes of the Muslim world. Shabazz can be seen and heard periodically on Fox News, CNN, MSNBC, C-SPAN and OTHER major national and international media outlets. He is a credible articulator and debater on major political and legal newsworthy matters.
Malik Zulu Shabazz graduated from Howard University and Howard University School of Law. While in Law School he founded and led the Progressive Student Movement/Unity Nation, a Black Nationalist student organization closely affiliated with the Nation of Islam leadership. While at Howard University, Shabazz came under the influence of Minister Louis Farrakhan and Dr. Khallid Abdul Muhammad. During these period seminal scholars such as Dr. Leonard Jeffries, Dr. Yosef Ben Jochannon, Professor Ron Walters, Dr. Ashra Quesi, Dr. Tony Martin, and other African- Centered scholars of the movement would also touch and influence Shabazz.
Minister Louis Farrakhan and Dr. Khallid Muhammad had a heavy influence on the young Shabazz while an undergraduate and law student. As an activist, Malik Zulu Shabazz organized students and stirred up the campus of Howard University as never before- making the campus a beacon light of Black Consciousness and student revolution. He was called “one of the greatest student leaders of all time,” by Dr. Khallid Abdul Muhammad.
Upon graduation from law school in 1995, Shabazz immediately passed his bar exam and founded Black Lawyers for Justice (BLFJ), a legal-political advocacy organization where conscious attorneys can pool their talents and resources to advocate in and out of the courtroom in order to counter the many attacks on the human and civil rights of our peoples. Black Lawyers For Justice believes that because Black professionals and lawyers hold unique places of respect in the community, they must exert strong and effective leadership within the profession and in the political and social order. Attorney Shabazz practices in the area of civil litigation with a focus on wrongful death, personal injury and victims rights and also handles criminal matters and entertainment law. Shabazz has also been a part of some key international legal causes.
Some of Malik Zulu Shabazz’ organizing/legal highlights include:
Organizing for the 1995 Million Man March and the pre Million Man March Black Holocaust Conference
Served as National Youth Director over the controversial 1998 Million Youth March in New York
Co Counsel for the Million Youth March vs. the City of New York, who sued, and won, in Federal Court over Constitutional battles relating to the Million Youth Marchers legal right to march in 1998 and 1999
Voted ‘Young Lawyer of the Year’ in 1998 by the National Bar Association, America’s largest Black legal organization
Won several high profile settlements for D.C. School Children victimized on D.C. Jail tours
Won high-profile settlements for victims of consumer racism.
Has organized countless boycotts, efforts and actions to achieve justice for victims of wrongful conduct
Became Leader of the New Black Panther Party in 2001 after serving as National Spokesman and National Minister of Justice, succeeding the Hon. Minister Khallid Muhammad- his revolutionary mentor and ally for 13 years.
Organized the infamous “War on Terrorism” Islamic Conference in Washington D.C. on 10/31/2001 which shook the nation and the government after the events of September 11, 2001
Spearheaded an emergency search and rescue team that rescued hundreds of trapped New Orleans’ victims of Hurricane Katrina.
Served as National Co-convener and National Executive Committee Member of the Hon. Louis Farrakhan’s 2005 Millions More Movement
In 2008, Shabazzinitiated the Black Power Movement, a broad based movement for Black People who believe in Black Power.
As guide and leader of the New Black Panther Party for Self Defense, Dr. Malik Zulu Shabazz, Esq. has spread the size, influence and respect of the NBPP since being appointed as National Chairman in 2001. Throughout the nation and the world the New Black Panther Party is rapidly gaining respect. Shabazz is a principled helper in the cause of the rise of Black people and a solid ally in the world wide complete constructive change (revolution) that is taking place across the globe. The New Black Party is filled with young, new leaders and is very active in the community. Liberation schools, free food programs, anti-violence efforts, self-defense training, police accountability, mass rallies, advocacy for the homeless, advocacy for political prisoners, Black male mentoring, political education, fighting racism, and bringing in a new political, economic, and spiritual world order are all on the New Black Panther Party national agenda. Dr. Malik Zulu Shabazz as the revolutionary and visionary leader of the New Black Panther Party has defied critics and is making the New Black Panther Party a great witness to the validity of the works of the Original Black Panther Party for Self Defense, which was founded October 15, 1966 in Oakland California. Dr. Malik Shabazz regularly speaks on college campuses throughout America, as well as addressed audiences in Churches, Mosques, and other Community and Academic venues. Shabazz possesses a grip on a wide range of subjects not limited to: Law, Islam, Politics, Black History in America, African/ World History, International Affairs, Real Estate and Land investments, Black Nationalism, Pan-Africanism, Community Organizing and Religion in general.To contact Mr. Shabazz email Shabazzlaw@aol.com
Dr. Malik Zulu Shabazz, Esq. is a national figure and key representative of the new leadership that has emerged from the Black Liberation and Islamic movements. Shabazz has guided the New Black Panther Party since 2001 and Black Lawyers for Justice since 1996. What makes Dr. Malik Zulu Shabazz unique and effective today is the depth of his knowledge, professional organizing skills, potent legal advocacy, and dynamic speaking skills. Malik Zulu Shabazz continues to draw comparisons between himself and his revolutionary prototype- Minister Malcolm X. Malcom X (Al Hajj Malik Shabazz) wanted to be a lawyer as a child but was cut short by racist forces.
Dr. Malik Zulu Shabazz is freedom fighter, activist, attorney operating on the world stage today. The New Black Panther Party has 27 Chapters operating across the United States, United Kingdom, Caribbean and Africa. Shabazz has been involved in a plethora of major political and legal causes and struggles that pertain to Black peoples in America, African peoples worldwide, and the causes of the Muslim world. Shabazz can be seen and heard periodically on Fox News, CNN, MSNBC, C-SPAN and OTHER major national and international media outlets. He is a credible articulator and debater on major political and legal newsworthy matters.
Malik Zulu Shabazz graduated from Howard University and Howard University School of Law. While in Law School he founded and led the Progressive Student Movement/Unity Nation, a Black Nationalist student organization closely affiliated with the Nation of Islam leadership. While at Howard University, Shabazz came under the influence of Minister Louis Farrakhan and Dr. Khallid Abdul Muhammad. During these period seminal scholars such as Dr. Leonard Jeffries, Dr. Yosef Ben Jochannon, Professor Ron Walters, Dr. Ashra Quesi, Dr. Tony Martin, and other African- Centered scholars of the movement would also touch and influence Shabazz.
Minister Louis Farrakhan and Dr. Khallid Muhammad had a heavy influence on the young Shabazz while an undergraduate and law student. As an activist, Malik Zulu Shabazz organized students and stirred up the campus of Howard University as never before- making the campus a beacon light of Black Consciousness and student revolution. He was called “one of the greatest student leaders of all time,” by Dr. Khallid Abdul Muhammad.
Upon graduation from law school in 1995, Shabazz immediately passed his bar exam and founded Black Lawyers for Justice (BLFJ), a legal-political advocacy organization where conscious attorneys can pool their talents and resources to advocate in and out of the courtroom in order to counter the many attacks on the human and civil rights of our peoples. Black Lawyers For Justice believes that because Black professionals and lawyers hold unique places of respect in the community, they must exert strong and effective leadership within the profession and in the political and social order. Attorney Shabazz practices in the area of civil litigation with a focus on wrongful death, personal injury and victims rights and also handles criminal matters and entertainment law. Shabazz has also been a part of some key international legal causes.
Some of Malik Zulu Shabazz’ organizing/legal highlights include:
Organizing for the 1995 Million Man March and the pre Million Man March Black Holocaust Conference
Served as National Youth Director over the controversial 1998 Million Youth March in New York
Co Counsel for the Million Youth March vs. the City of New York, who sued, and won, in Federal Court over Constitutional battles relating to the Million Youth Marchers legal right to march in 1998 and 1999
Voted ‘Young Lawyer of the Year’ in 1998 by the National Bar Association, America’s largest Black legal organization
Won several high profile settlements for D.C. School Children victimized on D.C. Jail tours
Won high-profile settlements for victims of consumer racism.
Has organized countless boycotts, efforts and actions to achieve justice for victims of wrongful conduct
Became Leader of the New Black Panther Party in 2001 after serving as National Spokesman and National Minister of Justice, succeeding the Hon. Minister Khallid Muhammad- his revolutionary mentor and ally for 13 years.
Organized the infamous “War on Terrorism” Islamic Conference in Washington D.C. on 10/31/2001 which shook the nation and the government after the events of September 11, 2001
Spearheaded an emergency search and rescue team that rescued hundreds of trapped New Orleans’ victims of Hurricane Katrina.
Served as National Co-convener and National Executive Committee Member of the Hon. Louis Farrakhan’s 2005 Millions More Movement
In 2008, Shabazzinitiated the Black Power Movement, a broad based movement for Black People who believe in Black Power.
As guide and leader of the New Black Panther Party for Self Defense, Dr. Malik Zulu Shabazz, Esq. has spread the size, influence and respect of the NBPP since being appointed as National Chairman in 2001. Throughout the nation and the world the New Black Panther Party is rapidly gaining respect. Shabazz is a principled helper in the cause of the rise of Black people and a solid ally in the world wide complete constructive change (revolution) that is taking place across the globe. The New Black Party is filled with young, new leaders and is very active in the community. Liberation schools, free food programs, anti-violence efforts, self-defense training, police accountability, mass rallies, advocacy for the homeless, advocacy for political prisoners, Black male mentoring, political education, fighting racism, and bringing in a new political, economic, and spiritual world order are all on the New Black Panther Party national agenda. Dr. Malik Zulu Shabazz as the revolutionary and visionary leader of the New Black Panther Party has defied critics and is making the New Black Panther Party a great witness to the validity of the works of the Original Black Panther Party for Self Defense, which was founded October 15, 1966 in Oakland California. Dr. Malik Shabazz regularly speaks on college campuses throughout America, as well as addressed audiences in Churches, Mosques, and other Community and Academic venues. Shabazz possesses a grip on a wide range of subjects not limited to: Law, Islam, Politics, Black History in America, African/ World History, International Affairs, Real Estate and Land investments, Black Nationalism, Pan-Africanism, Community Organizing and Religion in general.To contact Mr. Shabazz email Shabazzlaw@aol.com
Malik Zulu Shabazz, national chairman of the radical New Black Panther
Party, refused to confirm or deny to WND whether he visited the White House
since President Obama took office, despite his name appearing on a recent administration disclosure.
Shabazz's namesake was among the 110 names and 481 visits released by the White House on Friday as part of the Obama administration's so-called volunteer disclosure policy. The names were just a fraction of the hundreds of thousands of visitors who have gone through the White House's doors since January.
Among the famous names that stood out on the brief list were Shabazz, Jeremiah Wright and William Ayers.
The White House blog claimed all three names were "false positives" – names that make you think of a well-known person, but are actually someone else.
Added the official blog: "In September, requests were submitted for the names of some famous or controversial figures (for example Michael Jordan, William Ayers, Michael Moore, Jeremiah Wright, Robert Kelly, and Malik Shabazz). The well-known individuals with those names never actually came to the White House. Nevertheless, we were asked for those names, and so we have included records for those individuals who were here and share the same names."
Other famous names confirmed to have visited the White House include Oprah Winfrey and George Soros.
Asked by WND to confirm or deny he had visited the White House, Shabazz replied by e-mail "no comment on that one."
There is no known record of Shabazz visiting the White House.
since President Obama took office, despite his name appearing on a recent administration disclosure.
Shabazz's namesake was among the 110 names and 481 visits released by the White House on Friday as part of the Obama administration's so-called volunteer disclosure policy. The names were just a fraction of the hundreds of thousands of visitors who have gone through the White House's doors since January.
Among the famous names that stood out on the brief list were Shabazz, Jeremiah Wright and William Ayers.
The White House blog claimed all three names were "false positives" – names that make you think of a well-known person, but are actually someone else.
Added the official blog: "In September, requests were submitted for the names of some famous or controversial figures (for example Michael Jordan, William Ayers, Michael Moore, Jeremiah Wright, Robert Kelly, and Malik Shabazz). The well-known individuals with those names never actually came to the White House. Nevertheless, we were asked for those names, and so we have included records for those individuals who were here and share the same names."
Other famous names confirmed to have visited the White House include Oprah Winfrey and George Soros.
Asked by WND to confirm or deny he had visited the White House, Shabazz replied by e-mail "no comment on that one."
There is no known record of Shabazz visiting the White House.
WND previously broke the story that Shabazz's New Black Panther Party, or NBPP, endorsed Obama on its own page of the presidential candidate's official site, which allowed registered users to post their own blogs.
The NBPP labeled itself on Obama's site as representing "freedom, justice and peace for all of mankind." It linked to the official NBPP website, which contains what can be arguably regarded as hate material.
Shabazz's NBPP is a controversial black extremist party whose leaders are notorious for their racist statements and for leading anti-white activism. Shabazz has given scores of speeches condemning "white men" and Jews.
His NBPP's official platform stated, "White man has kept us deaf, dumb and blind," referred to the "white racist government of America," demanded black people be exempt from military service and used the word Jew repeatedly in quotation marks.
Shabazz has led racially divisive protests and conferences, such as the 1998 Million Youth March, in which a few thousand Harlem youths reportedly were called upon to scuffle with police officers and speakers demanded the extermination of whites in South Africa.
The NBPP chairman was quoted at a May 2007 protest against the 400-year celebration of the settlement of Jamestown, Va., stating, "When the white man came here, you should have left him to die."
He claimed Jews engaged in an "African holocaust," and he has promoted the anti-Semitic urban legend that 4,000 Israelis fled the World Trade Center just prior to the Sept. 11, 2001, terrorist attacks.
When Shabazz was denied entry to Canada last May while trying to speak at a black action event, he blamed Jewish groups and claimed Canada "is run from Israel."
Canadian officials justified the action, stating he has an "anti-Semitic" and "anti-police" record, but some reports blamed what was termed a minor criminal history for the decision to deny him entry.
He similarly blamed Jews for then–New York Mayor Rudy Giuliani's initial decision, later rescinded, against granting a permit for the Million Youth March.
In a 1993 speech condemned by the U.S. Congress and Senate, late NBPP chairman Khallid Abdul Muhammad, lionized on the NBPP site, referred to Jews as "bloodsuckers," labeled the pope a "no-good cracker" and advocated the murder of white South Africans who would not leave the nation subsequent to a 24-hour warning.
All NBPP members must memorize the group's rules, such as that no party member "can have a weapon in his possession while drunk or loaded off narcotics or weed," and no member "will commit any crimes against other party members or black people at all."
The deceased chairman of the NBPP, Khallid Abdul Muhammad, is a former Nation of Islam leader who was once considered Louis Farrakhan's most trusted adviser. Muhammad gave speeches referring to the "white man" as the devil and claiming that "there is a little bit of Hitler in all white people."
The NBPP labeled itself on Obama's site as representing "freedom, justice and peace for all of mankind." It linked to the official NBPP website, which contains what can be arguably regarded as hate material.
Shabazz's NBPP is a controversial black extremist party whose leaders are notorious for their racist statements and for leading anti-white activism. Shabazz has given scores of speeches condemning "white men" and Jews.
His NBPP's official platform stated, "White man has kept us deaf, dumb and blind," referred to the "white racist government of America," demanded black people be exempt from military service and used the word Jew repeatedly in quotation marks.
Shabazz has led racially divisive protests and conferences, such as the 1998 Million Youth March, in which a few thousand Harlem youths reportedly were called upon to scuffle with police officers and speakers demanded the extermination of whites in South Africa.
The NBPP chairman was quoted at a May 2007 protest against the 400-year celebration of the settlement of Jamestown, Va., stating, "When the white man came here, you should have left him to die."
He claimed Jews engaged in an "African holocaust," and he has promoted the anti-Semitic urban legend that 4,000 Israelis fled the World Trade Center just prior to the Sept. 11, 2001, terrorist attacks.
When Shabazz was denied entry to Canada last May while trying to speak at a black action event, he blamed Jewish groups and claimed Canada "is run from Israel."
Canadian officials justified the action, stating he has an "anti-Semitic" and "anti-police" record, but some reports blamed what was termed a minor criminal history for the decision to deny him entry.
He similarly blamed Jews for then–New York Mayor Rudy Giuliani's initial decision, later rescinded, against granting a permit for the Million Youth March.
In a 1993 speech condemned by the U.S. Congress and Senate, late NBPP chairman Khallid Abdul Muhammad, lionized on the NBPP site, referred to Jews as "bloodsuckers," labeled the pope a "no-good cracker" and advocated the murder of white South Africans who would not leave the nation subsequent to a 24-hour warning.
All NBPP members must memorize the group's rules, such as that no party member "can have a weapon in his possession while drunk or loaded off narcotics or weed," and no member "will commit any crimes against other party members or black people at all."
The deceased chairman of the NBPP, Khallid Abdul Muhammad, is a former Nation of Islam leader who was once considered Louis Farrakhan's most trusted adviser. Muhammad gave speeches referring to the "white man" as the devil and claiming that "there is a little bit of Hitler in all white people."
Who could have imagined the 2008 presidential campaign?
Commentators, media people, and especially politicians fell all over themselves proclaiming that the 2008 election had, “nothing at all to do with race.” And yet every event, every speech and comment, every debate and appearance had race written all over it. Stephen Colbert, the brilliant satirist, hit it on the head when he asked a Republican operative, “How many euphemisms have you come up with so far so that you won’t have to use the word ‘Black?’” Everyone laughed good-naturedly.
It turns out that they and everyone else had plenty. When Senator Hillary Clinton spoke of “hard-working American workers,” everyone knew who she meant, but just in case anyone missed it, she added, “white workers.” The invisible race talk was about “blue collar” or “working class” or “mainstream” or “small town” or “hockey mom” or “Joe the plumber,” but we were meant to think “white.” All the talk of Senator Barack Obama’s exotic background, all the references to him as “unknown,” “untested,” a “stranger,” or a “symbolic candidate,” or “alien,” a “wildcard,” or an “elitist,” which one Georgia congressman admitted meant “uppity,” all the creepiness packed into the ominous “what do we really know about this man?,” and all the questioning of his patriotism, the obsession with what went on in his church (but no other candidate’s place of worship)—all of it fed a specific narrative: he’s not a real American, he’s not reliable, he’s the quintessential mystery man. The discourse was all about race, us and them, understood by everyone in the United States even when the words African American, black, or white are not spoken. Anyone who dared to point to these proxies and to call them euphemisms for race was promptly accused of being a racist, and, of course, of playing the ever-useful race card.
In this carnival atmosphere throbbed the omnipresent and not so clandestine campaign drumbeats that the senator from Illinois is a secret Muslim, that because his father was a Muslim, the son is forever a Muslim—assuming, of course, that faith in Islam is disqualifying. In a year of loopy ironies, it took a conservative Republican, retired general, and disgraced Bush secretary of state Colin Powell, to vigorously call the question, movingly insisting that it should be perfectly fine to be an American Muslim, and a president. In a perfect storm, Powell was immediately accused by white commentators of siding with his race.
Then there was the lethal mix of gender, race, ethnicity, and class. In the wake of Obama’s primary win in the “heartland” (white) state of Iowa, the Clinton campaign escalated. Gloria Steinem’s Op Ed in the New York Times on primary eve in New Hampshire, “Women are Never Front-Runners,” laid down the gauntlet, asserting a hierarchy of oppression, claiming that it was women who were the most despised, vilified, and unfairly treated by the media and by history—compared to the (supposed) deference to black men. “Why,” she wrote, “is the sex barrier not taken as seriously as the racial one?” Steinem’s intervention made a dichotomy of race and gender, and instead of a complex analysis of the breakthroughs of discriminatory barriers, here was an assertion of superior victim status on the part of white, powerful women. It obliterated the half of African Americans who are women, and the half of women in the United States who are women of color. Intending to highlight the real river of misogynist venom unleashed against Clinton, it posed and perpetuated racial division rather than intersection and unity—the popularly recognized hallmarks of the Obama campaign.
Hillary and Bill Clinton seized on this framing of feminism as a white women’s concern with escalated race talk. Hillary proclaimed on Fox News, “I don’t think any of us want to inject race or gender in this campaign.” But the Clintons promptly resorted to the well-worn “Southern strategy” in South Carolina and the border states. They dismissively referred to Reverend Jesse Jackson’s historic campaigns of 1984 and 1988 as purely race-based, rather than recognizing the unique “rainbow” coalition that included white workers, farmers, and professionals and was to be a harbinger of the Obama campaign. Clinton flagrantly appealed to white voters’ identity as “workers” or “women”—offering white people any reason to vote against Obama without saying he’s black—and followed the ancient and dismal road of racial discourse that appeals to white supremacy, fear, and anxiety. In fact, the prolonged Democratic primary served to chart the Rovian path the Republicans would later hone and utilize in the general election against Obama. Combined with their brazen strategies of voter suppression, demagoguery, and hate, the defense of the color line would become the core of the McCain/Palin convention and subsequent attack machine. dfsFabricated issues of “character,” values, and patriotism dominated the discourse, appeals were floated to white voters’ racial resentments and fears, and the deliberate marketing of the Republican Party—our kids used to call them “Repulsicans”—as the bastion of white peoples’ interests saturated targeted states across the land.
On March 18, 2008, Barack Obama delivered an epic, masterful speech in Philadelphia, Pennsylvania on race and identity. Senator Obama’s talk was called, “A More Perfect Union,” and it tapped a deep longing to be free from the racialized straightjacket of anxiety, fear, and separation. The comedian Jon Stewart got it right when he said, “He treated the American public as if we were adults!” Obama managed to frame the discussion of racial justice in terms of broad American unity.
The speech was designed to redeem his campaign momentum in the wake of relentless, replaying videos of a line delivered by Reverend Jeremiah Wright, Obama’s pastor, after September 11. In it Wright challenges Americans to question the nation’s sense of exceptional goodness, and the refrain “God bless America” in light of our history. It was an edgy sermon to be sure, and apparently most dangerous of all, it was delivered by an angry black man. Using a technique honed by the far right over thirty years, the media seized upon and de-contextualized a sentence from Wright’s lifetime work, characterizing him as “ranting,” “raving,” and “divisive.” Liberals joined the discrediting party, referring to him as that “loony preacher,” spewing “bigoted and paranoid rantings.” In reality Reverend Wright’s sermons were no more incendiary than everyday conversations when white people aren’t looking or listening, or than Dr. Martin Luther King’s sermons a generation before.
In contrast Senator McCain’s active association with the Reverends Hagee, Parsley, and Robertson and the remarks by Governor Sarah Palin’s Pentacostal “spiritual warfare” and “prayer warriors” ministry remained unmemorable and apparently unremarkable. Hagee’s political preaching remained in the realm of the acceptable, including his assertions that AIDs is an incurable plague, God’s curse against a disobedient nation, until an audio clip surfaced in which he preached that what Hitler did in the Holocaust was God’s plan to drive Europe’s Jews back to the land of Israel. Only then, did McCain disassociate himself from his insidious religious flock.
Nothing stopped the McCain and Palin campaign from agitating, encouraging, or at the very least tolerating shouts of “Kill him!” when Obama was verbally attacked by the candidates from the stump. The candidates’ failure to aggressively disassociate themselves from such threats appeared to have lost them a significant part of the independent electorate, and all moral credibility—an encouraging development. The right-wing attack on Congressman John Lewis’s mild rebuke, however, comparing these white crowds to segregationist supporters of Governor Wallace forty years previously, again illuminated the incendiary role of race.
As soon as Barack Obama began winning primary battles, Michelle Obama, the senator’s brilliant, accomplished wife, became a target for the far right-wing haters. Brazen commentators mixed up a bitter brew of misogyny and racism, and sloshed it generously throughout the blogosphere: she’s anti-American; she’s a disgruntled and hectoring black nationalist seething with unresolved racial rage; she’s Reverend Wright but with estrogen and even more testosterone; she’s a ball-breaker who wears the pants in the family. Maureen Dowd referred to the attacks as “Round Two of the sulfurous national game of ‘Kill the witch.’”
Demonizing Michelle Obama began in earnest when, in February 2008, she said that because of her husband’s campaign, hope was sweeping the nation, and that, “For the first time in my adult life, I am really proud of my country.” Those fifteen words were played over and over in a stuttering loop of outrage on right-wing cable, and stood as absolute proof that she (and he) came up fatally short in the “real American” department. In this narrative, uncritical pride-in-country is assumed to be a given, the default of all the good people; anyone who can separate affection for people, a land, an ideal from the actions of a state or a government is a de facto traitor. There’s absolutely no room here for refusal or resistance, for criticism, skepticism, doubt, complexity, nuance, or even thought. Citizenship equals obedience. Right-wing “commentator” Bill O’Reilly’s first reaction to Michelle Obama’s proud-of-my-country comment was to say, “I don’t want to go on a lynching party against Michelle Obama unless there’s evidence, hard facts, that say this is how the woman really feels.” Interestingly, almost no one remembers her joy in the expanding and participatory electorate she was seeing, in contrast to her relatively mild critique, because the “first time” never stopped repeating. And almost no one recalls O’Reilly’s racialized threat of personal violence because it conveniently disappeared from the media’s discourse without a trace.
Fox News called her “Obama’s baby mama,” derogatory slang for an unwed mother. (Fox later apologized.) The National Review featured her on its cover as a scowling “Mrs. Grievance,” and referred to Trinity United Church of Christ as a “new-segregationist ghetto of Afrocentric liberation theology.” It is always black people who have to clarify an unstated assumption (as if John and Cindy McCain’s church, like George Bush’s and Ronald Reagan’s, are models of “post-racial,” integrated America). Take a look. It’s like the famous question: “Why are all the black kids sitting together in the cafeteria?” The white kids never explain why they sit together.
On the night Barack Obama claimed the nomination, he walked on stage with Michelle and she turned and gave him a pound or a dap, a playful and affectionate little fist bump. It flew around the Internet like topsy—reviewed, debated, photo-shopped, commented upon—until E. D. Hill called it a “terrorist fist jab” on Fox News and that proved to be one step too far—Hill was ridiculed and scorned and eventually apologized. Simultaneously, of course, it was seized upon and imitated by new waves of young admirers.
But Michelle Obama had become an established, larger-than-life target for racial and gender animus on conservative blogs. Where were the (white) feminists to defend her and decry the rot? And the liberals seemingly can’t help themselves either—the New York Times ran a positive puff piece on her in which they noted that compared to her husband, “Michelle Obama’s image is less mutable. She is a black American, a descendent of slaves and a product of Chicago’s historically black South Side. She tends to burn hot where he banks cool, and that too can make her an inviting proxy for attack.” So much racialized and racist craziness packed into three short sentences.
In the aftermath it’s time to remember that President Lyndon Johnson, the most effective politician of his generation, was never involved in the Black Freedom Movement, although he did pass far-reaching legislation in response to a robust and in many ways revolutionary movement in the streets. Franklin Delano Roosevelt was not a labor leader, and yet he presided over critical social and pro-labor legislation in a time of radical labor mobilization in shops and factories across the land. And Abraham Lincoln was not a member of an abolitionist political party, but reality forced upon him the freeing of an enslaved people. Each of these three responded to grassroots movements for social justice on the ground.
And it’s to movements on the ground that we must turn as we think beyond this election or the next, and consider—in the midst of massive economic calamity—the problems and possibilities of building a future of peace and love and justice. We may not be able to will a movement into being, but neither can we sit idly waiting for a social movement to spring full grown, as from the head of Zeus. We have to agitate for democracy and egalitarianism, press harder for human rights, link the demands that animate us, and learn to build a new society through our collective self-transformations and our limited everyday struggles. We must seek ways to live sustainably; to stop the addiction to consumption and development and military power; to become real actors and authentic subjects in our own history.
It is surely a unique, awe-inspiring moment. The Obama campaign offered up a new paradigm, activated young people under thirty who have not heretofore exercised the franchise, and illustrated that substantial numbers of white people and Latino people and Asian-American people would indeed vote for a black man. A new generation has learned the tools of campaigning, community organizing, and political discourse and debate. Now their experience can be put to use mobilizing those same people to insist on the changes they imagined. Within the context of cultivating the tacit myth of being a post-racial society, the Obama campaign inspired and mined a deeper longing for humanizing racial unity—even racial unity based on justice. There is change in the air—evidence that the population has travelled some distance—as well as the familiar stench of a racist history.
Our favorite moment came in the heat of the primary battle when now President Obama was asked who he thought Martin Luther King Jr. would support, Clinton or himself. Without hesitation, he responded that Reverend King would be unlikely to support or endorse either of them, because he’d be in the streets building a movement for justice. That seems exactly right.
Commentators, media people, and especially politicians fell all over themselves proclaiming that the 2008 election had, “nothing at all to do with race.” And yet every event, every speech and comment, every debate and appearance had race written all over it. Stephen Colbert, the brilliant satirist, hit it on the head when he asked a Republican operative, “How many euphemisms have you come up with so far so that you won’t have to use the word ‘Black?’” Everyone laughed good-naturedly.
It turns out that they and everyone else had plenty. When Senator Hillary Clinton spoke of “hard-working American workers,” everyone knew who she meant, but just in case anyone missed it, she added, “white workers.” The invisible race talk was about “blue collar” or “working class” or “mainstream” or “small town” or “hockey mom” or “Joe the plumber,” but we were meant to think “white.” All the talk of Senator Barack Obama’s exotic background, all the references to him as “unknown,” “untested,” a “stranger,” or a “symbolic candidate,” or “alien,” a “wildcard,” or an “elitist,” which one Georgia congressman admitted meant “uppity,” all the creepiness packed into the ominous “what do we really know about this man?,” and all the questioning of his patriotism, the obsession with what went on in his church (but no other candidate’s place of worship)—all of it fed a specific narrative: he’s not a real American, he’s not reliable, he’s the quintessential mystery man. The discourse was all about race, us and them, understood by everyone in the United States even when the words African American, black, or white are not spoken. Anyone who dared to point to these proxies and to call them euphemisms for race was promptly accused of being a racist, and, of course, of playing the ever-useful race card.
In this carnival atmosphere throbbed the omnipresent and not so clandestine campaign drumbeats that the senator from Illinois is a secret Muslim, that because his father was a Muslim, the son is forever a Muslim—assuming, of course, that faith in Islam is disqualifying. In a year of loopy ironies, it took a conservative Republican, retired general, and disgraced Bush secretary of state Colin Powell, to vigorously call the question, movingly insisting that it should be perfectly fine to be an American Muslim, and a president. In a perfect storm, Powell was immediately accused by white commentators of siding with his race.
Then there was the lethal mix of gender, race, ethnicity, and class. In the wake of Obama’s primary win in the “heartland” (white) state of Iowa, the Clinton campaign escalated. Gloria Steinem’s Op Ed in the New York Times on primary eve in New Hampshire, “Women are Never Front-Runners,” laid down the gauntlet, asserting a hierarchy of oppression, claiming that it was women who were the most despised, vilified, and unfairly treated by the media and by history—compared to the (supposed) deference to black men. “Why,” she wrote, “is the sex barrier not taken as seriously as the racial one?” Steinem’s intervention made a dichotomy of race and gender, and instead of a complex analysis of the breakthroughs of discriminatory barriers, here was an assertion of superior victim status on the part of white, powerful women. It obliterated the half of African Americans who are women, and the half of women in the United States who are women of color. Intending to highlight the real river of misogynist venom unleashed against Clinton, it posed and perpetuated racial division rather than intersection and unity—the popularly recognized hallmarks of the Obama campaign.
Hillary and Bill Clinton seized on this framing of feminism as a white women’s concern with escalated race talk. Hillary proclaimed on Fox News, “I don’t think any of us want to inject race or gender in this campaign.” But the Clintons promptly resorted to the well-worn “Southern strategy” in South Carolina and the border states. They dismissively referred to Reverend Jesse Jackson’s historic campaigns of 1984 and 1988 as purely race-based, rather than recognizing the unique “rainbow” coalition that included white workers, farmers, and professionals and was to be a harbinger of the Obama campaign. Clinton flagrantly appealed to white voters’ identity as “workers” or “women”—offering white people any reason to vote against Obama without saying he’s black—and followed the ancient and dismal road of racial discourse that appeals to white supremacy, fear, and anxiety. In fact, the prolonged Democratic primary served to chart the Rovian path the Republicans would later hone and utilize in the general election against Obama. Combined with their brazen strategies of voter suppression, demagoguery, and hate, the defense of the color line would become the core of the McCain/Palin convention and subsequent attack machine. dfsFabricated issues of “character,” values, and patriotism dominated the discourse, appeals were floated to white voters’ racial resentments and fears, and the deliberate marketing of the Republican Party—our kids used to call them “Repulsicans”—as the bastion of white peoples’ interests saturated targeted states across the land.
On March 18, 2008, Barack Obama delivered an epic, masterful speech in Philadelphia, Pennsylvania on race and identity. Senator Obama’s talk was called, “A More Perfect Union,” and it tapped a deep longing to be free from the racialized straightjacket of anxiety, fear, and separation. The comedian Jon Stewart got it right when he said, “He treated the American public as if we were adults!” Obama managed to frame the discussion of racial justice in terms of broad American unity.
The speech was designed to redeem his campaign momentum in the wake of relentless, replaying videos of a line delivered by Reverend Jeremiah Wright, Obama’s pastor, after September 11. In it Wright challenges Americans to question the nation’s sense of exceptional goodness, and the refrain “God bless America” in light of our history. It was an edgy sermon to be sure, and apparently most dangerous of all, it was delivered by an angry black man. Using a technique honed by the far right over thirty years, the media seized upon and de-contextualized a sentence from Wright’s lifetime work, characterizing him as “ranting,” “raving,” and “divisive.” Liberals joined the discrediting party, referring to him as that “loony preacher,” spewing “bigoted and paranoid rantings.” In reality Reverend Wright’s sermons were no more incendiary than everyday conversations when white people aren’t looking or listening, or than Dr. Martin Luther King’s sermons a generation before.
In contrast Senator McCain’s active association with the Reverends Hagee, Parsley, and Robertson and the remarks by Governor Sarah Palin’s Pentacostal “spiritual warfare” and “prayer warriors” ministry remained unmemorable and apparently unremarkable. Hagee’s political preaching remained in the realm of the acceptable, including his assertions that AIDs is an incurable plague, God’s curse against a disobedient nation, until an audio clip surfaced in which he preached that what Hitler did in the Holocaust was God’s plan to drive Europe’s Jews back to the land of Israel. Only then, did McCain disassociate himself from his insidious religious flock.
Nothing stopped the McCain and Palin campaign from agitating, encouraging, or at the very least tolerating shouts of “Kill him!” when Obama was verbally attacked by the candidates from the stump. The candidates’ failure to aggressively disassociate themselves from such threats appeared to have lost them a significant part of the independent electorate, and all moral credibility—an encouraging development. The right-wing attack on Congressman John Lewis’s mild rebuke, however, comparing these white crowds to segregationist supporters of Governor Wallace forty years previously, again illuminated the incendiary role of race.
As soon as Barack Obama began winning primary battles, Michelle Obama, the senator’s brilliant, accomplished wife, became a target for the far right-wing haters. Brazen commentators mixed up a bitter brew of misogyny and racism, and sloshed it generously throughout the blogosphere: she’s anti-American; she’s a disgruntled and hectoring black nationalist seething with unresolved racial rage; she’s Reverend Wright but with estrogen and even more testosterone; she’s a ball-breaker who wears the pants in the family. Maureen Dowd referred to the attacks as “Round Two of the sulfurous national game of ‘Kill the witch.’”
Demonizing Michelle Obama began in earnest when, in February 2008, she said that because of her husband’s campaign, hope was sweeping the nation, and that, “For the first time in my adult life, I am really proud of my country.” Those fifteen words were played over and over in a stuttering loop of outrage on right-wing cable, and stood as absolute proof that she (and he) came up fatally short in the “real American” department. In this narrative, uncritical pride-in-country is assumed to be a given, the default of all the good people; anyone who can separate affection for people, a land, an ideal from the actions of a state or a government is a de facto traitor. There’s absolutely no room here for refusal or resistance, for criticism, skepticism, doubt, complexity, nuance, or even thought. Citizenship equals obedience. Right-wing “commentator” Bill O’Reilly’s first reaction to Michelle Obama’s proud-of-my-country comment was to say, “I don’t want to go on a lynching party against Michelle Obama unless there’s evidence, hard facts, that say this is how the woman really feels.” Interestingly, almost no one remembers her joy in the expanding and participatory electorate she was seeing, in contrast to her relatively mild critique, because the “first time” never stopped repeating. And almost no one recalls O’Reilly’s racialized threat of personal violence because it conveniently disappeared from the media’s discourse without a trace.
Fox News called her “Obama’s baby mama,” derogatory slang for an unwed mother. (Fox later apologized.) The National Review featured her on its cover as a scowling “Mrs. Grievance,” and referred to Trinity United Church of Christ as a “new-segregationist ghetto of Afrocentric liberation theology.” It is always black people who have to clarify an unstated assumption (as if John and Cindy McCain’s church, like George Bush’s and Ronald Reagan’s, are models of “post-racial,” integrated America). Take a look. It’s like the famous question: “Why are all the black kids sitting together in the cafeteria?” The white kids never explain why they sit together.
On the night Barack Obama claimed the nomination, he walked on stage with Michelle and she turned and gave him a pound or a dap, a playful and affectionate little fist bump. It flew around the Internet like topsy—reviewed, debated, photo-shopped, commented upon—until E. D. Hill called it a “terrorist fist jab” on Fox News and that proved to be one step too far—Hill was ridiculed and scorned and eventually apologized. Simultaneously, of course, it was seized upon and imitated by new waves of young admirers.
But Michelle Obama had become an established, larger-than-life target for racial and gender animus on conservative blogs. Where were the (white) feminists to defend her and decry the rot? And the liberals seemingly can’t help themselves either—the New York Times ran a positive puff piece on her in which they noted that compared to her husband, “Michelle Obama’s image is less mutable. She is a black American, a descendent of slaves and a product of Chicago’s historically black South Side. She tends to burn hot where he banks cool, and that too can make her an inviting proxy for attack.” So much racialized and racist craziness packed into three short sentences.
In the aftermath it’s time to remember that President Lyndon Johnson, the most effective politician of his generation, was never involved in the Black Freedom Movement, although he did pass far-reaching legislation in response to a robust and in many ways revolutionary movement in the streets. Franklin Delano Roosevelt was not a labor leader, and yet he presided over critical social and pro-labor legislation in a time of radical labor mobilization in shops and factories across the land. And Abraham Lincoln was not a member of an abolitionist political party, but reality forced upon him the freeing of an enslaved people. Each of these three responded to grassroots movements for social justice on the ground.
And it’s to movements on the ground that we must turn as we think beyond this election or the next, and consider—in the midst of massive economic calamity—the problems and possibilities of building a future of peace and love and justice. We may not be able to will a movement into being, but neither can we sit idly waiting for a social movement to spring full grown, as from the head of Zeus. We have to agitate for democracy and egalitarianism, press harder for human rights, link the demands that animate us, and learn to build a new society through our collective self-transformations and our limited everyday struggles. We must seek ways to live sustainably; to stop the addiction to consumption and development and military power; to become real actors and authentic subjects in our own history.
It is surely a unique, awe-inspiring moment. The Obama campaign offered up a new paradigm, activated young people under thirty who have not heretofore exercised the franchise, and illustrated that substantial numbers of white people and Latino people and Asian-American people would indeed vote for a black man. A new generation has learned the tools of campaigning, community organizing, and political discourse and debate. Now their experience can be put to use mobilizing those same people to insist on the changes they imagined. Within the context of cultivating the tacit myth of being a post-racial society, the Obama campaign inspired and mined a deeper longing for humanizing racial unity—even racial unity based on justice. There is change in the air—evidence that the population has travelled some distance—as well as the familiar stench of a racist history.
Our favorite moment came in the heat of the primary battle when now President Obama was asked who he thought Martin Luther King Jr. would support, Clinton or himself. Without hesitation, he responded that Reverend King would be unlikely to support or endorse either of them, because he’d be in the streets building a movement for justice. That seems exactly right.
What Race Has to Do With It - by:Bill Ayers and Bernardine Dohrn
OBAMA ENTERTAINS AND GIVES CREDIBILITY TO THE MOST EXTREME ELEMENTS IN OUR SOCIETY YET THESE EXTREMISTS ARE HELL BENT ON DESTROYING THE VERY SOCIETY THAT SPAWNED THEM.
THE US IS IN UNCHARTED WATERS AND MUST PROCEED WITH EXTREME CAUTION.
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