Politics

Reagan's Southern Strategy Gave Rise to the Tea Party

Sunday, 27 October 2013 14:08

Freedman writes: "By leveraging race and religion - especially in the South - he set an example for today's bitter politics."

President Reagan at a rally for Texas Republican candidates in Irving, Texas, 10/11/82. (photo: Reagan Library)

Reagan's Southern Strategy Gave Rise to the Tea Party

By Lawrence Freedman, Salon

27 October 13

By leveraging race and religion � especially in the South � he set an example for today's bitter politics.

ate in the 1960s the practice of political campaigning in the United States began to be transformed. New techniques meant that it was increasingly possible to disseminate messages to extraordinary numbers of potential voters, tailored to the interests and views of particular constituencies. At the same time attitudes were in flux, a consequence of the past decade's social upheavals, and the old party machines were declining in influence. All these factors combined to accentuate the established tendency in political strategy to accentuate the negative.

When journalist James Perry wrote about The New Politics in 1968 his focus was on technique and not about how protests, demonstrations, civil disobedience, and community organizations might be shaking up the old elite. He explained how polling and marketing were becoming more sophisticated, and even drew attention to the potential uses of computers. Perry described how the moderate George Romney was taking advantage of these techniques in the race for the 1968 Republican presidential nomination. By the time the book was published, however, Romney's campaign had collapsed, having failed to connect with voters. The new techniques could only take you so far.

The importance of a media image had been underlined in different ways in the previous two elections. John Kennedy had famously gained an advantage over Richard Nixon in the televised presidential debate in 1960, and then the possibilities of negative advertising had been underlined by one used by the Democrats against Barry Goldwater in 1964. This showed a small girl counting daisies as a missile countdown began leading toward a nuclear explosion, with President Johnson in the background urging peace. This became identified as a turning point in technique. It played on an established image of Goldwater's recklessness. The appeal of the ad was emotional. It contained no facts and Goldwater's name was not mentioned.

The limitations of technique when combined with an uncertain message were illustrated by Nixon's 1968 Presidential campaign. Joe McGinnis's "Selling of the President" captured the idea that someone so unprepossessing could be turned into a marketable political product. The aim was to attach a positive, moderate image to Nixon. But this cautious approach was not wholly successful. The margin of victory was surprisingly narrow.

To Kevin Phillips, a young lawyer with an interest in ethnography, who worked for Nixon in 1968, the candidate's failure was in not recognizing the true opportunities created by the turmoil of the 1960s. His The Emerging Republican Majority was long and analytical but the underlying message was straightforward. The country had been dominated by a liberal establishment that was now old and out of touch, "a privileged elite, blind to the needs and interests of the large national majority." Against the New Left's idealism and the old progressive hope that ethnic differences could be transcended, Philips asserted that these identities were strong and enduring. While Jews and blacks might go with the Democrats, the minorities with a more Catholic background-Poles, Germans, Italians-were lining up against the liberals. Though immigrant communities once saw the Democrats as a defense against the Protestant Republican establishment in the North, now their children saw the Democrats as hostile. In 1970, two Democrat pollsters, Richard Scammon and Ben Wattenberg, also warned that the Republican majority was not yet in place but could be if the Democrats did not acknowledge anxiety among their natural constituents about crime and permissiveness. Instead, the Democrats moved to the left, with young activists pushing those issues that alarmed centrist voters, thus marginalizing the party's former establishment.

Ronald Reagan saw how this new conservatism could be turned to his advantage. During the 1980 election he gained support among groups essential to this new Republican majority. This required an appeal to Southern voters, who had to be weaned away from Jimmy Carter-one of their own. While carefully avoiding overt racism, Reagan began his campaign in Philadelphia, Mississippi, a town notorious for the murder of three civil rights workers in the 1960s. Standing beside a known segregationist, Reagan stressed his belief in "states' rights," code for the obstruction of black advances. It also required a pitch to the religious right.

Reagan concluded his acceptance speech in 1980 with a moment that was apparently spontaneous although actually carefully prepared. He had been wondering, he said, whether to include some thoughts as an addition to the distributed version of his speech. "Can we doubt," he then asked, "that only a divine Providence placed this land, this island of freedom, here as a refuge for all those people in the world who yearn to breathe freely." Carefully he turned his presidential campaign into a religious crusade. He asked for a moment of silent prayer and concluded with what became his customary "God bless America." As David Domke and Kevin Coe show in "The God Strategy," a new religious politics was born. This ploy elicited a positive reaction among two-thirds of Americans. Reagan knew before he stood up that if he could send the right message he would get the support of an increasingly powerful evangelical bloc.

The man who came to be credited as ensuring that the new conservative majority survived the 1980s was Lee Atwater. He made his name as a Republican political activist in the South during the 1970s and then was a leading figure in Reagan's 1984 campaign before managing Vice President Bush's successful campaign of 1988. He was struck down suddenly by a brain tumor in 1991, at the age of 40.

Atwater was an intriguing figure. He was charming and charismatic, but also devious and manipulative. With his existentialism and casual lifestyle he appeared to be at one with other student radicals of his generation. He also had a musical affinity with black culture. In his case, being rebellious and anti- establishment led to Republicanism. "The young Democrats were all the guys running around in three-piece suits, smoking cigars and cutting deals," he later observed, "so I said 'Hell, I'm a Republican.'" He added that this was also "a response to what was going on in the early '70s. I resented the way the left wing claimed to have captured the hearts and minds of American youth. They certainly hadn't captured mine." Being a Republican in the South put him in the position of insurgent. Victory could not be based on the issues, so it had to be based on character. "You had to make the case that the other candidate was a bad guy." His biographer, John Brady, describes how Atwater marketed himself as "a Machiavellian political warrior, skilful at using ad hominem strategies and tactics, characterized by personal attacks, dirty tricks, and accentuating the negative."

Atwater's timing was significant in another respect, as he entered politics when opportunities were opening up for professional strategists. The structure of American politics, with its numerous elections and constant campaigning, created opportunities for those who combined an understanding of the mechanics of getting out the vote with the possibilities of modern communications and a flair for campaigning. His reputation as one able to manipulate the "wedge" issues connected with race and crime was confirmed by the ruthlessness with which he disposed of the Democratic nominee in 1988, Michael Dukakis. He grasped how a carefully contrived stunt or a hard-hitting advertisement could become a talking point for days and reframe the voters' views of a candidate.

Atwater was an intense student of strategy, a regular reader of Machiavelli who liked to have at hand Clausewitz's "On War." Sun Tzu was his favorite. He claimed to have read it at least twenty times. Quotes from the "Art of War" were included in the program for his memorial service. "There's a whole set of prescriptions for success," he observed in 1988, "that includes such notions as concentration, tactical flexibility, the difference between strategy and tactics, and the idea of command focus."

Craftiness could reap dividends, especially if the opponent was playing a less imaginative game. Atwater insisted on thorough research of the opponent ("know the enemy"), so that he could target weakness. Likewise, awareness of his own candidate's vulnerabilities was important for defensive purposes. In helping Bush gain the Republican nomination, he exploited Senator Robert Dole's known temper and managed to get under his skin ("anger his general and confuse him"), and then confounded Dukakis by attacking him in his home state Massachusetts on one of his preferred issues, the environment. Dukakis was forced to devote resources to an area in which he had felt safe ("move swiftly where he does not expect you").

As the traditional ideological element, and party discipline, waned in American campaigns, more depended on the qualities of individual candidates. Strategy for elections was like that of battles in being geared to one-off, climactic duels. Elections were zero-sum games, so that what one gained the other must lose. This gave the contest its intensity. Given the size of the electorates, personal contact with the voters was impossible and so campaigns had to be conducted through the media. They were competitions of character as much as policy. Everything that happened must be explained in a way that served a larger narrative. Through the art of "spin" innocent candidates could be tarnished with an undeserved label while guilty parties could escape untainted, the fake and the true could be muddled, and the accidental could become deliberate as the planned became happenstance.

For Bush's presidential campaign of 1988, the election had to be about Democrat Michael Dukakis rather than Bush, who was assumed to suffer from his privileged background and his association with some of the less savory moments of the Reagan presidency. Initially the polls went against Bush. Rescue came in the form of Willie Horton, a Massachusetts prison inmate, who committed armed robbery and rape after being let out on a weekend furlough program that Dukakis had supported as governor. While sparring for the Democratic nomination, Al Gore had mentioned that Dukakis had handed out "weekend passes for convicted criminals." Nothing more came of this, but Atwater's team took note, researched the issue, and saw how badly it could damage Dukakis. "Willie Horton has star quality," exclaimed Atwater, "Willie's going to be politically furloughed to terrorize again. It's a wonderful mix of liberalism and a big black rapist." Ronald Reagan had established a similar plan in California, and the one in Massachusetts was set up by Dukakis's Republican predecessor. Although Dukakis did not want to abandon the policy, he had agreed to tighten it when it involved first-degree murderers. Yet this was turned into a story about Dukakis as a weak liberal making a habit of releasing rapists and murders to commit crimes. The main ad introducing Horton was not an official part of the Bush campaign, but Republicans followed it up remorselessly (Illinois Republicans: "All the murderers and rapists and drug pushers and child molesters in Massachusetts vote for Michael Dukakis." Maryland Republicans had a flier showing Dukakis with a fearsome-looking Horton: "Is This Your Pro-Family Team for 1988?"). Horton was used to address issues of crime and race, the latter more subliminally. Dukakis's image of being indifferent to crime was reinforced when he answered a question in a presidential debate about how he would respond to his wife being raped and murdered by restating his opposition to capital punishment. Although by the time the ad appeared, Bush was already ahead of Dukakis, the Democrat later said that the failure to respond was "the biggest mistake of my political career." In some respect the impact of the negative campaigning was overstated because Dukakis had run such a lackluster campaign. The Clinton campaign in 1992 noted well the consequences of failing to respond to negative, personal attacks, as if it would be undignified to offer more than a disdainful silence.

Democrats had made their own contributions to political strategy. One, which pre-dated Atwater, was to recognize that elections were only one moment in a stream of activity. Intensive campaigning might culminate in an election, but that did not mean that the candidate could get on with the business of governing, the ostensible purpose of all this effort. Jimmy Carter's campaign manager, Hamilton Jordan, advised him to start as early as possible to get name recognition and the funding to get involved in the first state primaries. The journalist Arthur Hadley identified the "Invisible Primary" as the period between the end of one election campaign and the formal start of the next. The natural next step was to the "permanent campaign," a concept introduced by Pat Caddell (Carter's pollster) in a memo written in December 1976. "Too many good people", he wrote, "have been defeated because they tried to substitute substance for style; they forgot to give the public the kind of visible signals that it needs to understand what is happening." According to Caddell, "governing with public approval requires a continuing political campaign."

One imperative behind the permanent campaign was the intensity of the daily news cycle and evidence of the costs of failure to deal with negative material as soon as it first appeared. The sense that the daily narrative mattered at least as much as and possibly more than the business of policy formation and government pushed short-termism to its limits. In 1992, the lesson the Clinton campaign drew from the Willie Horton episode and the general ease with which Democratic nominees had been blown aside in the previous two elections was that there must be an immediate and aggressive riposte to any negative campaigning from the opposition. As soon as stories of Clinton's infidelity surfaced during the primaries, the team was able to swing into action and deflect attention away from them.

Clinton's campaign manager James Carville recalled that while he began by trying to "look at things in an analytical, calculating way and not let my own emotions get in there," in practice "it never works. I end up hating the opposition, I hate the media, and I hate everybody who is not completely swept up in getting my candidate elected." His preference was to be on the offensive. It was much more "psychically rewarding" to "slash the opposition than to cobble together another round of gushy, flag-waving, isn't-our-guy-great ads."

In a book written with Paul Bagala, another veteran of the 1992 campaign, Carville explained his philosophy by linking it to the demands of the media, which were only interested in scandals, gaffes, polls, and attacks. The only hope of controlling the agenda was going on the attack. Attacks could be prepared over time, waiting for the right moment to pounce, but timing was still essential, linked to both the progressive contraction of the news cycle, which created a media appetite for a new story even before the last one had fully worked its way through, and to the small chunks of time allowed by broadcasters for any story. In 1968, each candidate could be heard without interruption on network news for 42.3 seconds; by 2000, the length of a sound bite was 7.8 seconds.

This put a premium on accuracy, agility, and flexibility. There was no time for the "paralysis of analysis" and no "second chance to make a first impression." The original media take was the one that would last, so it was important to be the first in the news cycle and not the follow-up. Once a judgment was made and acted upon, there could be no second thoughts; hesitation would be fatal. To frame the debate, the core message must be simple and repeated relentlessly. Communication required memorable stories: "Facts tell, but stories sell." Carville's team worked the media continually, making sure that the right messages were received after the debates and that nothing negative about the Bush campaign was missed. Having noted Dukakis's fate, a rapid-response team was set up to respond to any challenge to the candidate. Even as Bush was delivering his acceptance speech in 1992, point-by-point rebuttals were being sent out. By the time of the candidates' debates, knowledge of Bush's stances and his record in office was leading to "prebuttals," countering his claims before he actually made them.

The steady domination of negative campaigning at all levels of American politics reflected the conviction of candidates and campaign strategists that it worked, especially when races were tight and money was not a major constraint. Negativity would work less well, however, if the messages were too shrill, crude "mud-slinging", or irrelevant to current concerns, such as a riotous youth or past infidelities. The experience of the past two decades, and especially President Obama's two victories, demonstrates the techniques of the modern campaign strategist, from sophisticated polling to targeted adverts and careful narratives, can only make a decisive deference when attention is also paid to shifts in popular moods and attitudes. What worked for Atwater in the 1980s could not work for his successors because their messages appealed to a shrinking segment of the American population.

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FOCUS | Our Clumsy Foolish NSA

Sunday, 27 October 2013 12:29

Davidson writes: "The Agency moves broadly and clumsily; it's greedy in a way that is unhealthy; it tells itself that rules can mean what it wants them to mean."

German Chancellor Angela Merkel. (photo: unknown)

Our Clumsy Foolish NSA

By Amy Davidson, The New Yorker

27 October 13

t has become painfully clear that what the National Security Agency lacks, above all, is discretion. That probably occurred to President Obama on Wednesday, when he got on the line with Angela Merkel, the Chancellor of Germany, who was calling with what was apparently unmitigated anger to ask why the N.S.A. was monitoring her cell phone. Obama told her that it isn't, or won't-a "wasn't" seems to have been missing - but Merkel's government had seen enough, in N.S.A. documents obtained by the German news magazine Der Spiegel, to know what it thought. (According to Reuters, one listed her mobile phone number.) Obama had a similar call with France's Fran�ois Hollande, and may have about thirty-three more, based on the latest Guardian report on the number of heads of state whose phones it tracked. But the N.S.A.'s wildly indiscreet character had already come well into the light in the first documents leaked, this summer, by Edward Snowden, about its mass, often indiscriminate collection of American telephone and Web communications. The Agency moves broadly and clumsily; it's greedy in a way that is unhealthy; it tells itself that rules can mean what it wants them to mean; it is a poor judge of people; it has no real discernment - and that, for a spy agency, may be the worst part of all.

Our current and recent intelligence leaders seem determined to reinforce this judgment. On Thursday, Michael Hayden, the former director of the N.S.A., talking on his cell phone on Amtrak's Acela, gave anonymous quotes to various reporters loudly enough for a fellow passenger named Tom Matzzie to hear and live-tweet it. The same day, the Pentagon posted a video interview with Hayden's successor, General Keith Alexander, in which he awkwardly tried to explain that the operations Snowden revealed "are not spying programs" and dismissed privacy concerns this way:

It's like when you were younger-well, this is for boys - you know, when you're younger you say, "I don't want to take a bath." You say, "No, I'll never to take a bath." Why would you want to take a bath, well, you have to take a bath, clean, da da, da. You say, "But isn't there a better way?" So we had to take baths, right. Or showers.

READ MORE: Our Clumsy Foolish NSA

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FOCUS | A Revolution Led by Russell Brand?

Written by <a href="index.php?option=com_comprofiler&task=userProfile&user=20877"><span class="small">William Boardman, Reader Supported News</span></a>

Sunday, 27 October 2013 10:43

Boardman writes: "When the over-dressed, neatly bearded Paxman challenges the under-dressed, shaggy Brand about his 'credentials,' Paxman is both quietly bullying and committing a basic logical fallacy: basing his argument on authority, rather than facts."

Russell Brand. (photo: unknown)

A Revolution Led by Russell Brand?

By William Boardman, Reader Supported News

27 October 13

�

Taking no chances, the empire strikes back with the BBC.

ussell Brand, who are you to edit a political magazine?" asks BBC interviewer Jeremy Paxman with all the arrogant irrelevance required of an establishment shill at the beginning of an eleven-minute interview on the BBC's October 23 edition of Newsnight. Posted on the BBC Newsnight channel on YouTube, the interview had almost six million views in its first three days.

Disappointingly, Brand does not immediately respond to the insult with something like, "Well who are you to decide who does or doesn't get to edit anything in a country that more or less claims to have a free press?"

This segment of Newsnight isn't exactly for serious news. It's also a promotional appearance by Brand, whose primary work is as a comedian and actor, currently on a world tour of his stand-up show, Messiah Complex. It opened in June, but doesn't get even a mention in the interview. Brand is on the program now because one of Britain's more successful political magazines, New Statesman, has just published its October 24 issue, for which Brand served as guest editor, organizing the content around the present need for global revolution. He explained his appearance in New Statesman in a 4,500-word editorial that began:

"When I was asked to edit an issue of the New Statesman I said yes because it was a beautiful woman asking me. I chose the subject of revolution because the New Statesman is a political magazine and imagining the overthrow of the current political system is the only way I can be enthused about politics."

So when the over-dressed, neatly bearded Paxman challenges the under-dressed, shaggy Brand about his "credentials," Paxman is both quietly bullying and committing a basic logical fallacy: basing his argument on authority, rather than facts. Instead of pointing this out, Brand answers with a variation on the opening paragraph of his editorial, with an added joke about being "a person of crazy hair, quite a good sense of humor, don't know much about politics - I'm ideal!"

"But is it true you don't even vote?" Paxman immediately asks next, already knowing the answer. Brand confirms this: he's never voted. Then, not even thirty seconds into the interview, Paxman seems to go gently for the jugular: "Well, how do you have any authority to talk about politics then?"

Can we then assume that, if you don't vote, you don't really exist?

Brand takes the bait without missing a beat. He doesn't challenge the presumptuous premise of the question - that you have to participate in a system in order to earn the right to criticize that system (a standard by which there was no authority for the Cold War). But Brand takes the question at face value and offers a perfectly coherent, brief answer about deriving his authority from looking for alternatives "that might be of service to humanity - alternate means, alternate political systems."

Still on the attack, the BBC interviewer presses the comic for a blueprint of his alternate systems, but this time Brand ridicules the ridiculous question. He points out some of the worst abuses by the current system, noting that the world would be improved merely by stopping these abuses (such as destroying the planet, creating massive economic disparity, or ignoring the needs of the people) - "the burden of proof is on the people with the power."

Paxman pounces on the mention of power and tries to argue that people "get power by being voted in.... in a democracy, that's how it works." This is just another paraphrase of the traditional establishment defense, that you have to be part of the system if you want to change the system. It's so patently false, it's hard to imagine Paxman actually believes it. But it's an argument he's tacitly expected to make as part of his job.

But Paxman has a reputation for being good at his job. Business Insider calls him "Britain's toughest journalist," adding that he's "a journalist known for his incredibly combative style of interviewing (he once asked a government minister the same question 12 times in succession)."

So Paxman presses on with the same rutted irrelevance, in an ad hominem form: "If you can't be asked to vote, why should we be asked to listen to your political point of view." When Brand bats that away with more sharp criticism of the system, Paxman tries a guilt inflection, asking Brand, "Well why don't you change it then?"

Challenging the powerless to change things is what the powerful do

When Paxman learns that Brand has never voted, he tries to make the issue completely personal, saying to Brand: "so you struck an attitude, what, before the age of eighteen?" This is tantamount to calling Brand's politics nothing more than an adolescent pose, rhetoric without substance. Just over two minutes into the exchange, Paxman seems to be on top, when Brand says:

"Well, I'd really been a drug addict at that point, because I come from the kind of social conditions that are exacerbated by an indifferent system that really just administrates for large corporations and ignores the population that-"

Paxman interrupts with a desperate ploy: "You're blaming the political class for the fact that you had a drug problem?" But Brand keeps on with an articulate critique of the present moment that reduces Paxman to accusing Brand of not believing in democracy and wanting a revolution. Something is happening here, and he doesn't seem to know what it is.

Now, in response to Brand's articulate litany, Paxman goes in a completely different direction: "All of those things may be true ..." "They are true!" says Brand. "I wouldn't argue with you about many of them," Paxman responds, at which point the interview appears to be edited and what follows is some nonsense about Paxman's beard.

Paxman shifts back to the inquiry mode, asking Brand for details again about what he means by revolution and what are the specifics of the new system he wants, but his tone now is less confrontational. Even so, when Brand says voting makes no difference, Paxman responds, "It does make a difference," without offering any evidence that it does. And he's already agreed with Brand that in many important ways, voting hasn't made a difference.

After six minutes, Paxman seems more hesitant, and the exchange becomes more of a conversation. Having conceded most of the problems facing the world, Paxman tries yet another tack in defense of the powerful: "It's possible that human beings are just overwhelmed by the scale of the problem."

That seems desperate and improbable, since he's defending people who, rather than appearing overwhelmed, are actively making the problems worse. When Brand lucidly says as much, Paxman, without looking Brand in the eye, says, "You don't really believe that." But he's quiet almost to the point of inarticulateness at this point and offers no rebuttal. Brand by now is energized and needs no questions to continue his hyperactive analysis, which ends with, "Why pretend, why be complicit in this ridiculous illusion?"

Lacking a relevant response, he tries irrelevance, and then silence

Paxman, defender of the status quo, answers only: "Because by the time somebody comes along that you might think it worth voting for, it may be too late." In other words, Paxman is suggesting, your analysis of the crisis is essentially correct, but the only way to fix it is to work within the system. At this point, after almost nine minutes, Paxman looks even as hopeless as he sounds, and Brands spins on.

After another minute of saying nothing, Paxman asks quietly, "Do you see any hope?"

"Yes, totally, there's going to be revolution, it's totally going to happen," Brand snaps back. And then he gets personal with Paxman in a startling way. Brand says:

"I remember seeing you on that program where you look at your ancestors and you saw that your grandmother had to brass herself or else get f**ked over by the aristocrats that ran her gaff and you cried - because you knew that it was unfair, and unjust. And that, what was that, a century ago?

"That's happening to people now. I've just come from a woman who's being treated like that, I've just been talking to a woman, today, who's being treated like that. So if we can engage that feeling, instead of some lachrymose sentimentality trotted out on TV for people to pore over, emotional porn - if we can engage that feeling and change things, why wouldn't we? Why is that naive? Why is that not my right because I'm an 'actor?' I've taken the right. I don't need the right from you. I don't need the right from anybody. I'm taking it."

The segment ends and Paxman hasn't said another word.

William M. Boardman has over 40 years experience in theatre, radio, TV, print journalism, and non-fiction, including 20 years in the Vermont judiciary. He has received honors from Writers Guild of America, Corporation for Public Broadcasting, Vermont Life magazine, and an Emmy Award nomination from the Academy of Television Arts and Sciences.

Reader Supported News is the Publication of Origin for this work. Permission to republish is freely granted with credit and a link back to Reader Supported News.

Excellant Audio Commentary: http://www.radio4all.net/index.php/program/72062

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The Lies That Will Kill America

Written by <a href="index.php?option=com_comprofiler&task=userProfile&user=14990"><span class="small">Bill Moyers and Michael Winship, Moyers & Company</span></a>

Saturday, 26 October 2013 14:30

Moyers and Winship write: "If anybody's been robbed it's not JPMorgan Chase, which can absorb the loss and probably take a tax write-off for at least part of it. No, it's the American public. In addition to financial heartache we still have been denied the satisfaction of seeing jail time for any of the banksters who put our feet in cement and pushed us off the cliff."

News Corp. headquarters in New York. (photo: Mary Altaffer/AP)

The Lies That Will Kill America

By Bill Moyers and Michael Winship, Moyers & Company

26 October 13

�

ere in Manhattan the other day, you couldn't miss it - the big bold headline across the front page of the tabloid New York Post, screaming one of those sick, slick lies that are a trademark of Rupert Murdoch's right-wing media empire. There was Uncle Sam, brandishing a revolver and wearing a burglar's mask. "UNCLE SCAM," the headline shouted. "US robs bank of $13 billion."

Say what? Pure whitewash, and Murdoch's minions know it. That $13 billion dollars is the settlement JPMorgan Chase, the country's biggest bank, is negotiating with the government to settle its own rip-off of American homeowners and investors - those shady practices that five years ago helped trigger the financial meltdown, including manipulating mortgages and sending millions of Americans into bankruptcy or foreclosure. If anybody's been robbed it's not JPMorgan Chase, which can absorb the loss and probably take a tax write-off for at least part of it. No, it's the American public. In addition to financial heartache we still have been denied the satisfaction of seeing jail time for any of the banksters who put our feet in cement and pushed us off the cliff.

This isn't the only scandal JPMorgan Chase is juggling. A $6 billion settlement with institutional investors is in the works and criminal charges may still be filed in California. The bank is under investigation on so many fronts it's hard to keep them sorted out � everything from deceptive sales in its credit card unit to Bernie Madoff's Ponzi scheme to the criminal manipulation of energy markets and bribing Chinese officials by offering jobs to their kids.

Nor is JPMorgan Chase the only culprit under scrutiny. Bank of America was found guilty just this week of civil fraud, and a gaggle of other banks is being investigated by the government for mortgage fraud. No wonder the camp followers at Fox News, The Wall Street Journal, CNBC and other cheerleaders have ganged up to whitewash the banks. If justice is somehow served, this could be the biggest egg yet across the smug face of unfettered, unchecked, unaccountable capitalism.

One face in particular: Jamie Dimon, the chairman and CEO of JPMorgan Chase. One of Murdoch's Fox Business News hosts, Charlie Gasparino, claims the Feds are on a witch hunt against Dimon for criticizing President Obama, whose administration, we are told, "is brutally determined and efficient when it comes to squashing those who oppose their policies." But hold on: Dimon is a Democrat, said to be Obama's favorite banker, with so much entree he's been doing his own negotiating with the attorney general of the United States.

But that's crony capitalism for you, bipartisan to a fault. Rupert Murdoch has been defending Dimon in his media for a long time. Last spring, when it looked like there might be a stockholders revolt against Dimon, Murdoch was one of many bigwigs who rushed to his defense. He tweeted that JPMorgan would be "up a creek" without Dimon. "One of the smartest, toughest guys around," Murdoch insisted. Whether Murdoch's exaltation had an effect or not, Dimon was handily reelected.

Over the last few days, The Wall Street Journal, both Bible and supplicant of high finance as well as one of Murdoch's more reputable publications - at least in its reporting - echoed the "UNCLE SCAM" indignation of the more lowbrow Post. The government just wants "to appease their left-wing populist allies," its editorial writers raged, with a "political shakedown and wealth-redistribution scheme." Perhaps, the paper suggested, the White House will distribute some of the JPMorgan Chase penalty to consumers and advocacy groups and "have the checks arrive in swing congressional districts right before the 2014 election." We can hear the closet Bolsheviks panting for their handouts now and getting ready to use their phony ID's to stuff the box on Election Day with multiple illegal ballots.

Such fantasies are all part of the Murdoch News Corp. pattern, an unending flow of falsehood and phony populism that in reality serves only the wealthy elite. Fox News is its ministry of misinformation, the fake jewel of the News Corp. crown, a 24/7 purveyor of flimflam and the occasional selective truth. Look at the pounding they've given Obama's healthcare reform right from the very start, whether the non-existent death panels or claims that it would cause the highest tax increase in history.

While it's true that the startup of Obamacare has been plagued by its website nightmare and other problems, Fox News consistently has failed to mention Republican roadblocks that prevented the program from getting proper funding or the fact that so many states ruled by Republican governors and legislatures - more than 30 - have deliberately failed to set up the insurance marketplaces critical to making the new system work. Just the other day, Eric Stern at Salon.com fact-checked a segment on Sean Hannity's show. "Average Americans are feeling the pain of Obamacare and the healthcare overhaul train wreck," Hannity declared, "and six of them are here tonight to tell us their stories."

Eric Stern tracked down each of the Hannity Six and found that while their questions about health reform may have been valid, the answers they received from Hannity or had decided for themselves were not. "I don't doubt that these six individuals believe that Obamacare is a disaster," Stern reported. "But none of them had even visited the insurance exchange."

And there you have the problem: ideology and self-interest trump the facts or even caring about the facts, whether it's banking, Obamacare or global warming. Ninety-seven percent of climate scientists say that climate change is happening and that humans have made it so, but only four in ten Americans realize it's true. According to a new study in the journal Public Understanding of Science, written by a team that includes Yale University's Anthony Leiserowitz, the more that people listen to conservative media like Fox News or Limbaugh, the less sure they are that global warming is real. And even worse, the less they trust science.

Such ignorance will kill democracy as surely as the big money that funds and encourages the media outlets, parties and individuals who spew the lies and hate. The ground is all too fertile for those who will only believe whatever best fits their resentment or particular brand of paranoia. It is, as an old song lyric goes, "the self-deception that believes the lie." The truth will set us free; the lie will make prisoners of us all.

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Nobody Should Shed a Tear for JP Morgan Chase

Saturday, 26 October 2013 08:04

Taibbi writes: "So again, $13 billion sounds like a lot of money. But Bernie Madoff is doing 150 years, and nobody in this cast of characters will personally pay a dollar in fines. Nobody will do one day in jail. That's a huge, huge discrepancy."

Matt Taibbi. (photo: Rolling Stone)

Nobody Should Shed a Tear for JP Morgan Chase

By Matt Taibbi, Rolling Stone

26 October 13

lot of people all over the world are having opinions now about the ostensibly gigantic $13 billion settlement Jamie Dimon and JP Morgan Chase have entered into with the government.

The general consensus from most observers in the finance sector is that this superficially high-dollar settlement - worth about half a year's profits for Chase - is an unconscionable Marxist appropriation. It's been called a "robbery" and a "shakedown," in which red Obama and his evil henchman Eric Holder confiscated cash from a successful bank, as The Wall Street Journal wrote, "for no other reason than because they can and because they want to appease their left-wing populist allies."

Look, there's no denying that this is a lot of money. It's the biggest settlement in the history of government settlements, and it's just one company to boot. But this has been in the works for a long time, and it's been in the works for a reason. This whole thing, lest anyone forget, has its genesis in a couple of state Attorneys General (including New York's Eric Schneiderman and Delaware's Beau Biden) not wanting to sign off on any deal with the banks that didn't also address the root causes of the crisis, in particular the mass fraud surrounding the sale and production of subprime mortgage securities.

Those holdouts essentially forced the federal government's hand, leading Barack Obama to create a federal working group on residential mortgage-backed securities (widely seen as the AGs' price for okaying the $25 billion robosigning deal), headed up by Schneiderman, whose investigation of Chase and its affiliates led to the deal that's about to be struck. Minus all of that, minus those state holdouts in those foreclosure negotiations, this settlement probably would never even take place: The federal government seemed more than willing previously to settle with the banks without even addressing the root-cause issues that are at the heart of this new Chase deal.

So let's not forget that - that even this $13 billion settlement, which is actually a $9 billion settlement (see below), came very close to never happening. But now it is happening, and the business press is going nuts about how unfair it all is.

In fact, this deal is actually quite a gift to Chase. It sounds like a lot of money, but there are myriad deceptions behind the sensational headline.

First of all, the settlement, as the folks at Better Markets have pointed out, may wipe out between $100 billion and $200 billion in potential liability - meaning that the bank might just have settled "for ten cents or so on the dollar." The Federal Housing Finance Agency alone was suing Chase and its affiliates for $33 billion. The trustee in the ongoing Bernie Madoff Ponzi scandal was suing Chase for upwards of $19 billion.

Obviously, those plaintiffs may never have gotten that kind of money out of Chase. But just settling the mere potential of so much liability has huge value for the bank. It's part of the reason the company's share price hasn't exactly cratered since the settlement was announced.

Moreover, the settlement is only $9 billion in cash, with $4 billion earmarked for "mortgage relief." Again, as Better Markets noted, we've seen settlements with orders of mortgage relief before, and banks seem to have many canny ways of getting out of the spirit of these requirements.

In the foreclosure settlement, most of the ordered "relief" eventually came in the form of short sales, with banks letting people sell their underwater houses and move out without paying for the loss in home value. That's better than nothing, but it's something very different than a bank working to help families stay in their homes.

There's also the matter of the remaining $9 billion in fines being tax deductible (meaning we're subsidizing the settlement), and the fact that Chase is reportedly trying to get the FDIC to assume some of Washington Mutual's liability.

But overall, the key to this whole thing is that the punishment is just money, and not a crippling amount, and not from any individual's pocket, either. In fact, the deal that has just been completed between Chase and the state represents the end, or near the end, of a long process by which people who committed essentially the same crimes as Bernie Madoff will walk away without paying any individual penalty.

What Washington Mutual and Bear Stearns (Chase's guilty acquisitions) were doing in the mortgage markets was little more than an elaborate take on a Madoff-style Ponzi scheme. Actually, most of the industry was guilty of the same thing, but in the cases of these two banks in particular the concrete evidence of fraud is extensive, and the comparison to a Madoff-style caper isn't a fanciful metaphor but more like evidentiary fact.

Madoff's operational fiction was his own personality. He used his charm and his lifestyle and his social status to con rich individuals into ponying up money into an essentially nonexistent investment scheme.

In the cases of both WaMu and especially Bear, the operating fictions were broad, carefully-crafted infrastructures of bogus guarantees, flatlined due diligence mechanisms, corrupted ratings agencies and other types of legal chicanery. These fake guarantees and assurances misled investors about they were buying. Most thought they were investing in home mortgages. What they were actually investing in was a flow of cash from new investors that banks like Bear and WaMu were pushing into a rapidly-overheating speculative bubble.

These banks created huge masses of mortgage securities they knew to be highly risky and/or fraudulent. At Bear, one deal manager jokingly nicknamed one pool of mortgages, SACO-2006-08, the "SACK OF SHIT" deal. In another case, Bear's securitization company, EMC, obtained a pool of mortgages from a sketchy mortgage originator called AHM, and found out that as much as 60 percent of the batch was delinquent.

Yet they continued to buy these mortgages and throw them into the great hamburger-machine, turning them into securities that would in turn be bought by everyone from pension funds to Fannie and Freddie. And then they pushed sales even harder, relying upon the influx of new buyers of these securities to keep the value of the old securities stable.

This is exactly what Bernie Madoff did, it's what Charles Ponzi did, and it's what Allen Stanford did - using cash from new investors to pay off the old investors. The supermarket-bank version of this game was just more elaborate, involved more moving parts and threatened indescribably greater damage.

Bernie Madoff ultimately caused about $18 billion in losses. When he got caught, the state threw the book at him, giving him a 150-year jail sentence.

Meanwhile, just the subset of Bear Stearns defendants, according to a complaint against Chase filed last year by Eric Schneiderman, caused $22.5 billion in losses in just two years, 2006 and 2007.

And while it is true that the federal government in this latest $13 billion settlement is ostensibly reserving the right to continue to pursue criminal charges, don't hold your breath. The arc of this story suggests that the whole purpose of this agreement has been to find the highest price Chase is willing to pay to a) stay in business b) keep employees out of jail.

So again, $13 billion sounds like a lot of money. But Bernie Madoff is doing 150 years, and nobody in this cast of characters will personally pay a dollar in fines. Nobody will do one day in jail. That's a huge, huge discrepancy.

Of course, Bernie Madoff today is reviled on Wall Street, even by papers like the Wall Street Journal. This is mainly because he ripped off other finance-sector hotshots, but also because he gave Wall Street a bad name.

Post-2009 coverage of Madoff from the financial press has focused intently on the failure of the government (and in particular the SEC) to aggressively investigate the scandal in a timely fashion. This has followed a rhetorical line that frequently emanates from the finance sector, in which white-collar crime is somehow less the fault of criminals than of the police who failed to stop it.

These "Where were the regulators?" cries generally never show up in financial-press coverage of Wall Street scandals until those same pundits have first exhausted all attempts to argue that no crime was ever committed by the bank/broker/hedge fund in question.

Remember, for instance, that there was a time when papers like the Journal thought Bernie Madoff was one of their own, didn't want to make trouble for him, and bluntly refused to investigate him. The Journal was infamously given the whole seedy Madoff story by investigator Harry Markopolos in 2005 (see p. 16 of this devastating testimony), and though reporter John Wilke wanted to follow up on the piece, it appeared his superiors at the paper never gave him the go-ahead.

But after Madoff came forward weeping and confessing in late 2008, and there was no longer any possibility of denying his monstrous guilt, suddenly the Journal turned into an ardent critic of soft government enforcement, ragefully denouncing everyone from Eliot Spitzer to the SEC for failing to catch Madoff. In its December 17th, 2009 editorial, To Catch a Thief, for instance, the paper blasted the financial cops of the world for failing to protect Madoff's investors and the good name of honest Wall Street business:

The real lesson is that financial enforcement nearly always fails to protect investors, and this Ponzi scheme is merely typical . . . In 1999, trader Harry Markopolos wrote that "Madoff Securities is the world's largest Ponzi Scheme," in a letter to the SEC. More recently, multiple SEC inquiries and exams in 2005 and 2007 found only minor infractions... Neither current AG Andrew Cuomo nor Mr. Spitzer appears to have had a clue about Mr. Madoff's conduct.

As noted by multiple media outlets at the time, the paper conveniently left out of these thundering denunciations the damning fact that the Journal itself had been contacted by Markopolous years before, and had blown him off even more completely than the SEC.

So now we, and they, are talking about the Chase scandal. This is Madoff all over again, only on a much huger scale. Ten years from now, bet on it, the Wall Street Journal will be denouncing everyone from Eric Holder to Lanny Breuer to the SEC and DOJ officials in the Bush administration for failing to protect investors from predatory companies like Bear Stearns, Washington Mutual and their parent, JP Morgan Chase.

Right now, however, these papers are still stuck in the denial phase, which is to be expected, I suppose. But it doesn't mean we have to take these ridiculous editorials about Chase's victimhood seriously.

A few more notes on the deal. This latest settlement reportedly came about when CEO Jamie Dimon picked up the phone and called a high-ranking lieutenant of Attorney General Holder, who was about to hold a press conference announcing civil charges against the bank. The Justice Department meekly took the call, canceled the presser, and worked out this hideous deal, instead of doing the right thing and blowing off the self-important Wall Street hotshot long used to resolving meddlesome issues with the gift of his personal attention.

Only on Wall Street does the target of a massive federal investigation pick up the telephone and call up the prosecutor expecting to make the thing go away - and only in recent American history would such a tactic actually work.

Considering the scale of the offenses involved (one could make the argument that Bear Stearns and Washington Mutual by themselves did enough damage and cranked out enough toxic loans to cause the 2008 crash) the state could have taken the hardest of hard lines. Instead, they once again took a big fat check to walk away.

Papers like the Journal have particularly complained that Chase should not be held responsible for the offenses committed by companies long before Chase acquired them. What they forget is that Chase has made a fortune off its acquisitions of Bear and Washington Mutual, two purchases which were massively subsidized by the state. Nobody complained about potential liability back when all those two deals were doing for Chase was helping its executives buy overpriced art and summer homes.

And remember, this sort of liability was basically the only risk Chase took in these deals. The government took on most of the rest, in order to make the acquisitions happen.

Chase got to buy Bear Stearns with $29 billion in Fed guarantees, with the state setting up a special bailout facility, Maiden Lane, to unwind all of the phony-baloney loans created through Bear's Ponzi-mortgage-mechanism described above. So Chase got to acquire one of the world's biggest investment banks for pennies on the dollar, and then got the Fed to buy up all the toxic parts of the bank's portfolio, essentially making the public the involuntary customer of Bear's criminal inventory.

Later on, Chase took $25 billion in TARP money, bought Washington Mutual and its $33 billion in assets for the fire-sale price of $1.9 billion, and then repeated the Bear scenario, getting another Maiden Lane facility to take on the deadliest parts of Washington Mutual's portfolio (including, for instance, a pool of mortgages in which 94 percent of the loans had limited documentation).

Incidentally, the notion that Chase was somehow dragged kicking and screaming by the government and forced to buy these two massive companies essentially for free is almost as laughable and ridiculous as the oft-cited explanation for the financial crisis, that the government forced banks to lend to the poor.

Chase, as has been reported by multiple outlets, had already tried on its own to buy both companies before the state arranged its infamous shotgun weddings. Only after both firms collapsed, the economy was in crisis, and Chase was able to get the Fed to eat the toxic portfolios of both companies did these already-longed-for acquisitions take place.

Chase was too big to fail before the crash, but it's even Too-Bigger-To-Failier now, thanks to the expanded market share afforded by these two Fed-sterilized acquisitions. Bloomberg reported that Bear's book value has soared by $36 billion since it swallowed up those two firms with the public's help. Its retail banking earnings have soared nearly 1000 percent. It has more than doubled the size of its banking deposits. Chase didn't have a single branch in Florida or California before this deal: It's now a top-5 banking presence in both states.

So nobody should be crying for poor Chase now, just because it's no longer able to simply sit back and collect gobs and gobs of essentially free cash from the ill-gotten market share "won" by its two crooked acquisitions.

Incidentally, I don't remember hearing anything from Jamie Dimon at the time Chase was acquiring these banks about any reluctance to buy up two firms that had just spent years helping to blow up the world economic system with phony loans. As one friend of mine on Wall Street noted earlier this week, if there was a single document anywhere with Dimon's name on it expressing reluctance about these new bedfellows, it would have been produced ages ago and "that dickhead Sorkin would have put it in his movie."

These guys at Chase knew exactly what they were buying when they took on these companies. They just thought they were getting the deal of the century, by taking on the still-functioning businesses of two finance giants for a song, giving Chase a state-subsidized push into the pole position of American banking. And they figured, very nearly correctly, that they would never have to pay any serious freight for all the offenses committed by their new acquisitions.

Now they'll have to write a big check, which sucks for them, but what about the victims? To those critics crying about a "shakedown": Would you prefer that Chase merely be required to pay back every dollar to those investors wiped out by these schemes? Because that would be a hell of a lot more than $13 billion.

It would be great if everyone covering Wall Street could sign a pact, and agree: No more crying, please, about no-jail, no-individual-penalty settlements in which companies use shareholder money to pay fines at huge discounts relative to the actual damage they caused. And again, wake me up when even one of these guys goes to jail. There are only about a million Americans doing time for less.

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