[As a courtesy to our guests, please keep comments to the book and be respectful of dissenting opinions. Please take other conversations to a previous thread. - bev]

The Operators: The Wild and Terrifying Inside Story of America’s War in Afghanistan

General Stanley McChrystal told journalist Michael Hastings that he wanted to be on the cover of Rolling Stone and so he was. The resulting story—describing an alcohol fueled dinner in Paris and the General’s staff mocking the Obama Administration—ended McChrystal’s tour as the commander of US forces in Afghanistan and his military career.

The Operators, by fellow Vermonter Michael Hastings, is a book about the story. It adds detail to what was in the original Rolling Stone article, recounts Hastings experience in writing the article, and describes the establishment media’s harsh reaction to the story. McChrystal and his team included Hastings in classified briefings, staff meetings, dinners, and visits to the troops. They recklessly shared the substance of private exchanges between McChrystal and Obama (and McChrystal’s frustration with a president who approved McChrystal’s strategy but didn’t believe in it) and frat boy jokes at the expense of Vice President Biden (“bite me”), Ambassador Richard Holbrooke, and National Security Advisor Jim Jones, among others. Neither McChrystal nor his media handler established ground rules for what Hastings could or could not use, which is all the more incredible for the fact that McChrystal had served as the Pentagon spokesman during the invasion of Iraq. After the Rolling Stone story was published, Hastings’ colleagues in the mainstream press—and notably those writing for the New York Times—excoriated Hastings for having reported what he heard and saw. Hastings rightly strikes back at the cozy relationship between the mainstream press and the Pentagon that has limited candid writing about the shortcomings of the US strategy in Afghanistan.

This is no small point. In 2011, the US spent $117 billion and committed 100,000 troops to a counter-insurgency strategy in Afghanistan that never had the slightest chance of success. As its architects would be the first to admit, the strategy depends on having a local partner who can take over security and provide good governance once US troops have secured an area. The corrupt, ineffective, and illegitimate Karzai government is not a partner and, as Hastings writes, local warlords, drug runners and power brokers –many supported by the US military—are equally bad. [cont'd.]

Yet, the military claims its strategy is working. Hastings explores the circular nature of this argument. When violence in Afghanistan is up, it reflects the aggressive NATO campaign against the Taliban. If violence were to go down, it would be because the campaign had succeeded in pacifying more of the country. But, the troops on the ground know better and one of the book’s most poignant scenes is where troops fighting Helmand Province tell McChrystal his strategy isn’t working.

I met McChrystal in 2009 when I served as the Deputy UN envoy in Afghanistan and I liked him. He was determined to minimize civilian casualties, articulating a “zero tolerance” policy. He spoke of the strategic consequences of such collateral damage—killing the wrong person in tribal Afghanistan can make hundreds of new enemies—but I also had the sense that he did not like taking lives unnecessarily. And, unusual in the military, he was apparently a Democrat.

I was less impressed with McChrystal’s Spartan lifestyle: he famously ate just one meal a day and slept no more than four hours a night. When I met him to discuss security arrangements for polling centers in the forthcoming Afghan presidential elections, he struggled to stay awake. (1200 polling stations were ostensibly located in places so insecure that no Afghan election official had ever been there and, of course, the polling centers never actually existed. The Karzai-controlled election commission reported more than a million votes for the President from these ghost polling centers. The fraud not only denied Afghans their democratic rights but undercut US strategy by making a weak partner—already burdened by corruption and ineffectiveness—illegitimate. In September 2009, UN Secretary General Ban ki-Moon fired me for urging–privately and internally—that the UN do something about the fraud in elections that the UN had paid for. Hastings covers this episode in two chapters.)

Some of the more intriguing—and least explained—parts of the book are the snippets of insight that Hastings provides into his own life. He is a self-described war junkie who encouraged his girlfriend to join him in Baghdad only to have her die in 2007 in a botched kidnapping. He has had his own alcohol issues, having spent three days in jail following a college binge drinking episode. The reader slightly wonders if the book’s focus on the McChrystal team’s drinking (the front and rear covers shows a faceless four star General with alcohol in hand) doesn’t, in part, reflect the author’s own demons.

Hastings tells a story familiar to those of us who lived through Vietnam. The Pentagon’s counter insurgency strategy is succeeding and, if Afghanistan goes south (as it surely will, it is because irresolute politicians didn’t stay the course. As in Vietnam, the mainstream press has been insufficiently skeptical, perhaps because their access depends on good relations with the generals. While it may to be too much to say that Michael Hastings is the David Halberstam of his generation, The Operators is an important contribution to truth telling.

[As a courtesy to our guests, please keep comments to the book and be respectful of dissenting opinions. Please take other conversations to a previous thread. - bev]

A Safeway in Arizona: What the Gabrielle Giffords Shooting Tells Us About the Grand Canyon State and Life in America

It has been a year and a month since the day the shots pierced the heart of Arizona on January 8, 2011. In all, 19 victims were shot. Six lives were taken and Congresswoman Gabrielle Giffords gravely wounded. Friends, families, a state and a nation were torn at their emotional seams.

The news crews came for their live shots, talking heads talked, pundits opined, quick clues to a deeper cause and meaning sought and catharsis stated to have been reached in a stirring memorial led by an eloquent President. Over time, the initial raw wounds seemed to merge into the amazing evolving story of strength, resilience and recovery of Gabby Giffords. And, to be sure, there are few parallels in public life to the resilience and recovery of Gabby, it has been stunning, heartwarming and inspirational..

But there is more, much more, to the shooting that day at Congress On Your Corner, and that is the subject of A Safeway in Arizona: What the Gabrielle Giffords Shooting Tells Us About the Grand Canyon State and Life in America, by today’s guest, author and journalist Tom Zoellner. Tom is not just a chronicler of the events and surroundings, he is a native of Arizona, and Tucson, and speaks not only with factual accuracy and thoroughness, but passion and deep understanding of his subject.

Arizona depends on reinvention. The narrative of a fresh start in a warm place is the root of the economy, and the unsustainable nature of that dream over the long run is the largest part of what ails the state today.

Zoellner opens with the the setup and events at the shooting scene, but then takes the reader on a sprawling ride through Arizona’s history and structure, both as a state and Tucson as his own home. Interwoven into the picture of Arizona and Tucson is also the tale of how and why it is the home of his dear friend Gabby Giffords, and the other souls who came to be part of the story at the Safeway at the intersection of fabled Ina and Oracle roads in Tucson. Much like all the people – from Gabby, to the Chief Judge of Arizona’s Federal Courts, John Roll, to nine year year old Christina Taylor Green, and the others – Ina and Oracle roads do not seem like they ought to intersect where they do. Yet intersect they do, and did in a tragedy that says at once everything about Arizona problems, and nothing to the real ethos of its substantial good and beauty.

At the Safeway In Tucson, all the factors and people intersected with Jared Lee Loughner. Zoellner plumbs the depth of a disturbed and alienated young man who, in hindsight, seems so clearly headed to the result he created. But the story of Loughner, and the environment which molded him, is also the story of the city of Tucson, state of Arizona and, yes, the nation. The story of opportunity wasted and lost, of a social fabric too easily frayed, and human beings too easily lost as the teeming masses swirl around them. It is a tale of us, not just them. [cont'd.]

And that is the real power of A Safeway in Arizona: What the Gabrielle Giffords Shooting Tells Us About the Grand Canyon State and Life in America, it is the tale of all of us. In that regard, it is certainly not always a comfortable and smooth ride through the pages; Zoellner drills into the pathology of the “rugged individualist” movement, stark isolation of disaffected youth, rank bigotry against Hispanics fostered by small but influential right wing zealotry, the out of control gun culture and mental illness in a time when austerity and tax cuts have emaciated the social services that could ameliorate the various ills.

There are more questions asked than necessarily answered by Tom Zoellner’s gritty, but honest book. It is the story of both disassociation, resilience and reinvention. I was going to craft a nice little soundbite like quote to summarize today’s book, but I cannot top the inestimable Charlie Pierce:

One of the great comforting fictions of our time is the notion that acts of public violence are random things. In his exemplary account of the attempted assassination of Rep. Gabrielle Giffords, and the murder of several other people, Tom Zoellner denies us the cheap solace of easy answers and sets Jared Loughner’s rampage in the context of a violent time in a country that seems more fragile by the hour.

Perfectly stated.

For those of you unaware, today’s discussion comes only three days before the centennial celebration of Arizona’s statehood which, as you can surmise, came on February 14, 1912. There are a lot of bad stories relentlessly reported about Arizona on effectively a daily basis, and there is certainly extremely honest reportage of it in Zoellner’s book. But take it from me, like Tom Zoellner I am also a native, Arizona is also a beautiful and fantastic state, with wonderful people and a fascinating history. It is all here. So join us for a discussion of A Safeway in Arizona: What the Gabrielle Giffords Shooting Tells Us About the Grand Canyon State and Life in America.

[Tom Zoellner is the author of five nonfiction books, including Uranium, The Heartless Stone and Train: Smoke, Iron and the Invention of the Modern World, forthcoming from Viking/Penguin in 2013. He was also the co-author of the New York Times bestselling book An Ordinary Man. Tom has worked as a reporter for the San Francisco Chronicle and The Arizona Republic, and as a contributing editor for Men’s Health magazine. He is now an Associate Professor of English at Chapman University and lives in Los Angeles.]

[As a courtesy to our guests, please keep comments to the book and be respectful of dissenting opinions. Please take other conversations to a previous thread. - bev]

Retirement Heist: How Companies Plunder and Profit from the Nest Eggs of American Workers

What Will They Do When the Money Runs Out?

Comment by Dean Baker

Ellen Schultz has given us a fascinating account of the ways in which corporate America has been able to game legal and accounting rules to emasculate the private pension system. It was only a few decades ago that a secure pension was a staple of middle class life. Workers in middle class jobs, whether in offices, construction, or manufacturing expected to have a pension in retirement to supplement their Social Security income. In many cases, the pension would provide the larger portion of their income, with the Social Security benefit being the supplement.

We should be careful not to glorify the pre-1980 period as a golden age of pensions. Many pensions were not especially generous. Women and minorities were far less likely to have a pension than white men. And, many workers walked away from jobs with nothing after just missing a vesting period by a year or even a month.

Nonetheless, in 1980, roughly half of the work force had a defined benefit (DB) pension on their job. Today, the figure in the private sector is less than 20 percent and it is dropping rapidly. This shift reflects a great loss in the level of retirement security that workers can expect. The 401(k) system of defined contribution has not come close to replacing the losses from the old DB system. The percentage of workers who have access to any retirement plan at their jobs, including a 401(k), is roughly the same as the percentage who had a DB plan in 1980.

We know that the vast majority of workers end up accumulating little in their 401(k) accounts. The median holdings at age 60 for those with accounts is less than $150,000. This is enough to provide a retirement income of about $750 a month. And three quarters of retirees will get less. This is not a story of a middle class that will enjoy a middle class life-style in their retirement.

Ellen Schultz’s book is the story of how we got from there to here. From a world where at least a substantial segment of the population could count on a defined benefit pension to give them a substantial degree of retirement security to world in which the majority of the middle class are looking at a retirement where they are not too far above the poverty line.

The book is essentially a menu of ways in which companies have found to scam the pensions of their workers and the code in order to increase corporate profits and fatten executive compensation. I will just note two of the issues raised.

First, under the law, pension funds are supposed to be kept strictly segregated from the rest of the corporate operation. The money in the fund is to be used only to provide retirement benefits for workers. This fact led to great pain for corporate managers in the 90s, as a surging stock market led many pension funds to be seriously overfunded. (Since this was a stock bubble, the overfunding was to a large extent an illusion.)

However, as the book points out, smart managers found ways around this restriction. There were a number of corporate takeovers in which pension funds were used to pay early retirement benefits to workers who were being laid off. In effect, the takeover artists were using the pension funds to provide severance payments, which is clearly in violation of the law. But, no one was looking.

My other favorite in this book is the story of “dead peasant” insurance policies. People may have heard of these in Michael Moore’s movie, Capitalism: A Love Story. The basic idea is that large companies buy insurance policies on their lower level employees, and make themselves the beneficiaries. In general the employees do not even know about the policy.

Moore left this as just a morose tale of corporate greed, with companies making money off the death of their employees. However, this misses the real story.

The real story is why dead peasant policies are profitable; after all, insurance companies are not giving presents to anyone, even other large corporations. Schultz gives us the secret. Dead peasant insurance policies are a way in which companies can put aside money to accumulate tax free to cover the retirement benefits of their top level executives. Since people will die at a relatively predictable rate, companies know how many dead peasant policies they have to take out in 2000 to pay benefits in 2020.

There are many other great tales of creative accounting in this book. People should go through them to see what happened to their parents’ pension or their own.

I’ll just conclude by throwing out two obvious questions for Ellen:

How do you think pension policy should change in the decade ahead?
How do you think pension policy actually will change?

[As a courtesy to our guests, please keep comments to the book and be respectful of dissenting opinions. Please take other conversations to a previous thread. - bev]

Corporations Are Not People: Why They Have More Rights Than You Do and What You Can Do About It

Money’s corrupting influence on our politics is evident behind so many news cycles: Mitt Romney’s recent victory in Florida, for example, was a dramatic turnaround from the South Carolina vote a week earlier, but one that may have had a lot more to do with the advertising carpet bombing by Romney-affiliated SuperPACS than a simple matter of old-fashioned politics. You may not care for Newt Gingrich, but his defeat in a race so badly distorted by outside money is an ominous indicator of things to come.

The Supreme Court’s recent decision in Citizen’s United vs. the Federal Election Commission certainly didn’t create this problem, but it sure made it a lot worse. Consider: a shocking 72 percent of campaign spending in the 2010 midterms came from secretive groups that were prohibited from spending money in the previous midterm elections. In that election, for the first time in 20 years, outside groups spent more to influence the election than did actual political parties. And the percentage of total election spending from groups that don’t disclose donors has risen from 1 percent in 2006 to 47 percent in the most recent elections.

Citizen’s United is responsible for much of this damage, and it reinforced a poisonous line of thinking: that corporations are, for legal purposes, the same as people. That’s why the Court ruled they could spend in unlimited amounts on elections—since it reasoned that individual people could, why not corporations too? This was an argument rejected by a less-conservative Supreme Court only two years earlier, but Roberts and Alito led this new charge into the wild west of campaign finance.

In his book Corporations Are Not People: The Definitive Guide to Overturning Citizen’s United, Jeffrey Clements lays out a detailed and persuasive indictment of this problem, and offers some solutions, including a constitutional amendment to overturn that decision. The book details in stark terms what Citizen’s United is all about:

Citizen’s United is not merely a mistake easily corrected, nor is the case simply about campaign finance or money in politics. Citizen’s United is a corporate power case masquerading as a free speech case. In many ways, the decision was less a break from the recent past than a proclamation about the sad reality of corporate power in America. The Court’s declaration in Citizen’s United that corporations have the same rights as people might strike most Americans as bizarre. To the five justices in the majority and to the corporate legal movement out of which they have come, however, it was more like a victory lap or an end-zone dance for the three-decade-long campaign for corporate power and corporate rights.

Clements is co-founder of Free Speech for People, and did two stints as assistant attorney general in Massachusetts, fighting tobacco companies, enforcing fair trade, and leading many other battles for consumer and environmental protection. He’s here today to answer your questions, so let’s get rolling!

[As a courtesy to our guests, please keep comments to the book and be respectful of dissenting opinions. Please take other conversations to a previous thread. - bev]

The Benefit and The Burden: Tax Reform-Why We Need It and What It Will Take

I’m delighted to welcome Bruce Bartlett to Firedoglake Book Salon.

Bruce’s new book, The Benefit and the Burden is an extended essay on taxes and tax reform. It provides a breezy survey of the central issues of tax policy, with excursions into history and international comparison, and a keen eye on the political angles and how they’ve been played by both parties in recent years.

The Benefit and the Burden begins with a short history of American taxation and a description of the core issues in the definition of income. It follows with some discussion of the principal economic arguments that have flowed around the relationship between taxes, growth and fairness, and then proceeds to examine the issues surrounding preferences in our tax code – for housing, for charitable contributions, for capital gains, and the problem of taxing corporate profits. It ends with a discussion of reform proposals, and Bruce makes his case for a VAT to close the revenue gap and fund the government that we will need, among other things, to support an increasingly elderly population.

The book is not a partisan tract. Bruce has become well-known – and highly respected – for the rare trait of not-singing to any ideological choir. Open-minded readers of all persuasions will learn from this book, whether they are persuaded by the program, or not.

On a personal note, Bruce and I first met in 1981 – possibly the very end of 1980 – when I was the (much too young) newly-installed staff director of the Joint Economic Committee, under Representative Henry Reuss of Wisconsin, and he was the (equally young) deputy director, appointed by Senator Roger Jepsen of Iowa.

Ideologically, we were opposites. I was a committed Keynesian; Bruce was a supply-sider who had helped to draft Jack Kemp’s tax cut plan and was the author of a newly-published book, Reaganomics.

There was a certain amount of mutual suspicion at first. And yet, for two years we worked together, in a spirit of fair play and open debate. We helped the Joint Economic Committee to achieve a remarkable moment in its history, not through fatuous bipartisanship, but through spirited combat, carried out in hearings, studies and reports. It was great fun, and Bruce and I have been friends ever since.

Bruce left the JEC to work in the White House under President Reagan, and served in the Treasury under President George H.W. Bush. In the mid 2000s, he managed to get himself fired from the conservative National Center for Policy Analysis for writing Impostor, a magnificent tract on the non-conservatism of George W. Bush. In writing that book, he exhibited the true bravery of an independent spirit.

Recently Bruce has achieved a wide readership through regular postings at The New York Times and at The Fiscal Times, where he writes most frequently on taxes and tax reform. In that capacity, he has honed the skills on display in this fine small book.

I am therefore very pleased to note that Bruce and I have known each other for 31 years, and that – on this my 60th birthday, it’s my privilege to celebrate by hosting the Firedoglake Book Salon on his new book.

Bruce, welcome.

[As a courtesy to our guests, please keep comments to the book and be respectful of dissenting opinions. Please take other conversations to a previous thread. - bev]

Uncompromised: The Rise, Fall, and Redemption of an Arab American Patriot in the CIA

In her memoir, Uncompromised: The Rise, Fall, and Redemption of an Arab American Patriot in the CIA, Nada Prouty cites this passage from Malcom X’s Autobiography to describe her excitement as she felt herself adopting her new nationality:

Yes, one only truly becomes an American through a kind of conversion, and that conversion arises out of a desire to join in a common hunger for the rule of law, for equality for all, and for the benefits of cultural heterogeneity.

I found it a striking choice for an American immigrant to describe what it means to be American. Malcom X had such troubles achieving this American dream. But as it turned out, Prouty has had to fight to get America’s promised rule of law and equality, too.

The book describes how she escaped the Lebanese civil war by enrolling in college in the US. To gain the ability to work her way through school, she entered into a “Green Card marriage.” A number of years, several accounting degrees, and a “real” marriage later, she joined the FBI as one of its rare recruits with native Arab fluency and the sangfroid acquired from surviving a civil war. While at the FBI—and, later, at the CIA—she investigated a range of al Qaeda and Hezbollah attacks, including the Cole bombing and 9/11.

Yet none of her efforts in the war on terror put her, an Arab-American (though not a Muslim), beyond the suspicions of Detroit-based FBI agents investigating her Lebanese-American brother-in-law. When they failed to make a tax evasion investigation against him into a terrorism charge, they turned to trumping up a case against Prouty, ultimately using her “Green Card marriage”—which she had disclosed to the FBI—to get her to plea to a charge of unauthorized computer access and immigration fraud, which DOJ then spun publicly as a terrorism charge.

This book is Prouty’s attempt to tell what really happened—partly in hopes to regain her American citizenship.

At one level, Prouty’s life story—before the FBI targeted a woman who had done so much for the Agency—reads like a classic, exceptional, immigrant success story. But so much of what the government used against her has been used on Muslims and other Arab-Americans without the means to fight back:  [cont'd.]

Secret evidence
National Security Letters
Threats of deportation (which in her case would have been lethal) and to family members
Border exception searches
Badly managed informants (in this case, Prouty’s own brother)
Trial in the public sphere

And that’s why the book—a national security expert exposing the problem with such techniques—serves an important lesson for Malcom X’s vision of America.

Prouty ends her book with this warning.

Suspicion and fear mingled with threats of punishment are not hallmarks of a healthy civil society.

[snip]

My prosecution brought into stark relief the possibility that the politicizing of the war on terror would create similar “internal enemies” [as existed in Lebanon during its civil war] here in America. Such enemies are, more often than not, patriotic Americans who happen to have what some, in their ignorance, see as “different” names and faces.

Let’s hope this lesson, coming from someone who worked so hard to defeat those who had attacked the US, will be heard.

[As a courtesy to our guests, please keep comments to the book and be respectful of dissenting opinions. Please take other conversations to a previous thread. - bev]

Vultures’ Picnic: In Pursuit of Petroleum Pigs, Power Pirates, and High-Finance Carnivores

To be frank with you, I was rather surprised when Bev at FireDogLake asked me to be the host for Greg Palast’s latest book, Vultures Picnic; In Pursuit of Petroleum Pigs, Power Pirates, and High-Finance Carnivores. There were lots of reasons why. First, I am not that savvy on the computer and my son had to put in a new hard drive to just get it working; then second, although I had heard of Greg Palast and knew he was one of the good guys, I hadn’t read any of his books. So why was I picked to host? I could think of at least a hundred other writer/activists a lot better than me. Then I read his book.

Oh ho, I read his book. Let me tell you, I am not a newbie in this corporate malfeasance business by a long shot. I’ve been jailed for civil disobedience fifty times, sunk my own shrimp boat on top of an illegal toxic discharge into the Gulf of Mexico, scaled chemical towers, and barged into two Senate hearings on the Deepwater Horizon to: 1) do a citizens arrest of Tony Hayward, CEO of BP, and 2) pour a half gallon of oil on myself. So I thought I had heard and seen it all—up close and personal. Nothing could surprise me. Wrong wrong. I was just seeing my little snapshot of heartache (particular to shrimpers from the Gulf Coast) but Greg Palast’s book gave me the front row seat in the motion picture version of “The 1%” featuring yours truly, BP.

The Vulture’s Picnic is a hefty book, almost 400 pages and I read it start to finish in two days. It was like nothing I had ever read. I have an injured workers group consisting of tossed out, sick, disposable workers from the oil and chemical industry on the Texas Gulf Coast and often they show up at my front door carrying documents and a gun. It’s a scary business telling tales. But Greg Palast’s book is like the president of the corporation settling into my couch and spilling his guts. And sitting next to his shiny boot is a briefcase of confidential documents.

Palast takes us on a fast paced, kick ass narrative that globe trots from the 2010 Deepwater Horizon oil blowout in the Gulf of Mexico, to the coast of Alaska, to New Orleans, to Liberia, to Azerbaijan, to Fukushima, Japan. It’s the real-deal investigative reporting of corporate irresponsibility. As Greg Palast said himself in an interview,” This book is a story of the 1%. It’s why we occupy.”

If you have ever despaired that justice can always be perverted by those with the fortunes to buy whatever they want, even governments, then read this book. Palast may not deliver justice (unless you believe that recording truth serves justice and in this book, there is that) but at the least this book will fill your belly with fire for the long fight into the night.

Cartel: The Coming Invasion of Mexico’s Drug Wars

Hello FDL readers

My name is Sam Quinones. I’m a reporter with the LA Times, author of two books of nonfiction stories about Mexico. I’ll be moderating today’s chat.

Today, we’ll be talking with Sylvia Longmire about Mexico’s drug war, now in its 7^th year, as I believe it’s actually been going on since at least 2005 — and not 2006 when Felipe Calderon came to office.

I welcome your comments, questions and observations. Please don’t be shy – I’m sure you won’t be, as the topic is fundamental, engrossing, and controversial.

Having followed Mexico’s cartels for years, border security expert Sylvia Longmire takes us deep into the heart of their world to witness a dangerous underground that will do whatever it takes to deliver drugs to a willing audience of American consumers. The cartels have grown increasingly bold in recent years, building submarines to move up the coast of Central America and digging elaborate tunnels that both move drugs north and carry cash and U.S. high-powered assault weapons back to fuel the drug war. Channeling her long experience working on border issues, Longmire brings to life the very real threat of Mexican cartels operating not just along the southwest border, but deep inside every corner of the United States. She also offers real solutions to the critical problems facing Mexico and the United States, including programs to deter youth in Mexico from joining the cartels and changing drug laws on both sides of the border.

Sylvia Longmire is a retired Air Force Captain and former Special Agent in the Air Force Office of Special Investigations.

She has worked as an intelligence analyst for the state’s Emergency Management Agency, focusing on drug trafficking and border violence.

She has a Master’s degree in Latin American studies and is the author of the new book, her first, “Cartel: The Coming Invasion of Mexico’s Drug Wars“.

Please welcome Sylvia Longmire.

[As a courtesy to our guests, please keep comments to the book and be respectful of dissenting opinions. Please take other conversations to a previous thread. - bev]

Greedy Bastards: How We Can Stop Corporate Communists, Banksters, and Other Vampires from Sucking America Dry

Dylan Ratigan is well positioned to author a book, designed to be an enjoyable and informative read by normal humans, on the ongoing financial crisis. He is the wunderkind who became Global Managing Editor for Corporate Finance of Bloomberg, the premier news service that specializes in finance, at an exceptionally young age. He was at CNBC while that network was hyping the housing bubble as a non-bubble offering fantastic investment opportunities.

Now an anchor for MSNBC, Ratigan is a fierce critic of prominent politicians in both parties for what he views as their destructive policies and slavish efforts to aid the wealthiest and most politically powerful at the expense of the best interests of America and its people. He is passionate about these subjects and far less predictable than many of his peers because he is not a political partisan.

In finance, the most important question is why we suffer recurrent, intensifying financial crises. That question is really two questions. Answering it requires that we determine what causes our crises and why we fail to learn from these crises, but instead make the incentive structure ever more perverse after each crisis. Anyone from a finance background is likely to conclude that perverse incentives cause financial crises, so I was surprised by Ratigan’s choice of book title (“Greedy Bastards”). I think that greed is unlikely to have changed greatly over the last quarter century in which the U.S. has suffered three recurrent, intensifying financial crises.

I don’t call people bastards, even the self-made ones, because my mother reacted poorly to Speaker Wright referring to me as the “red-headed SOB.” Ratigan’s view on these points turns out to be similar to mine. He argues that the issue is not greed, but perverse incentives. When CEOs have incentives adverse to the public and their customers they tend to act on those incentives and harm the public and their customers. This observation is one of those essential points so often overlooked by writers about this crisis. A CEOs’ principal function is creating, monitoring, and adjusting the corporation’s incentive structures. There is a massive business literature on this function and CEOs uniformly believe that incentive structures for officers and employees are critical in shaping their behavior.  [cont'd.]

There is only one (disingenuous) exception to this rule – when officers and employees act criminally because the CEO has created perverse incentive structures. Suddenly, the CEO is shocked that his officers and employees acted criminally in response to the CEO’s incentive structures that encourage criminal conduct. Ratigan focuses on precisely this exception. Anyone that has had the misfortune to listen to compulsory business ethics training by his or her employer will have learned that the key is the “tone at the top” set by the CEO. True, but that always ends the discussion. No employee is going to be trained by his employer as to what to do when the tone at the top set by the CEO is pro-fraud.

As Ratigan demonstrates, our most elite financial CEOs typically created and maintained grotesquely perverse incentive structures that encouraged their officers and employees as well as “independent” professionals to act criminally in a manner that harmed customers, the public, and shareholders – but made the controlling officers wealthy. Is there any CEO of a lender incapable of understanding that when the loan officers and brokers’ compensation depends on volume and yield – not quality – the result will be catastrophic? Is there any CEO of a lender incapable of understanding that if the loan brokers’ fees depend as well on the reported debt-to-income and loan-to-value ratios and the broker is permitted to make liar’s loans the result will be that the brokers will engage in endemic, severe inflation of the borrowers’ incomes and their homes’ appraised values? Is there any reader that doubts that the CEOs intended to produce precisely what their perverse incentives were certain to produce? A CEO cannot send a memo to 50,000 loan brokers instructing them to inflate appraisals and use liar’s loans to inflate the borrowers incomes’ but he can, and does, send the same message through his compensation system. Each of these perverse incentives produces precisely the result that the CEOs expected and desired.

Ratigan gets right two of the essentials to understanding why we suffer recurrent, intensifying financial crises. First, cheating has become the dominant strategy in finance. Second, cheating is dominant because finance CEOs create such intensely perverse incentives that fraud becomes endemic. The Business Roundtable (the largest 100 U.S. corporations), had to react to the Enron era frauds. It chose as its spokesperson a CEO who embodied the best of American big business. This was the response he gave to Business Week when their reporter asked why so many top corporations engaged in accounting control fraud:

“Don’t just say: “If you hit this revenue number, your bonus is going to be this.” It sets up an incentive that’s overwhelming. You wave enough money in front of people, and good people will do bad things.”

How did the CEO know about the “overwhelming” effect of creating incentives so perverse that they would routinely cause “good people [to] do bad things”? He knew because he directed and administered such a perverse compensation system. An SEC complaint would soon identify that compensation system as driving accounting control fraud at his firm. His name was Franklin Raines, CEO of Fannie Mae.

What Ratigan does in this book that differs so importantly, and accurately, from nearly every other account of the crisis by a prominent writer is to say in plain English that our most elite financial institutions caused the crisis, that they did so because their controlling officers caused them to cheat, and that the senior officers cheated their own shareholders for the purpose of becoming wealthy.

Ratigan shows that the self-described “productive class” is actually a group dominated by “greedy bastards” who win by cheating. As George Akerlof and Paul Romer said in their famous 1993 article (“Looting: the Economic Underworld of Bankruptcy for Profit”), accounting fraud is a “sure thing.” Ratigan shows that while looting begins with accounting fraud it ends with tax fraud, political domination and scandal by the wealthy frauds, and crony capitalism. Indeed, Ratigan shows how far we have fallen since 1993. Fraudulent CEOs who control systemically dangerous institutions (SDIs) can now become wealthy by looting, cause the SDI to become insolvent, get bailed out by their political lackeys, resume looting, pay virtually no federal income tax, and do so with nearly complete immunity from prosecution. He shows that rather than being “productive”, the greedy bastards are destroying America’s middle and working classes, hollowing out our economy, and destroying wealth and employment.

[As a courtesy to our guests, please keep comments to the book and be respectful of dissenting opinions. Please take other conversations to a previous thread. - bev]

The United States of Fear

Everything changed on September 11, 2001. It’s become an American truism. And for many, it’s also absolutely true. It certainly was the case for Tom Engelhardt. He was roughly seven miles north of the World Trade Center that morning and that’s about the furthest he’s been from it since.

Don’t get me wrong, I don’t mean to say Engelhardt’s a hermit. He travels. But while that morning sent some very prominent Americans running headlong into futility in Afghanistan, ruin in Iraq, and toward utter economic collapse, it sent Tom Engelhardt off to his computer and an unlikely second career. He had been known to insiders in the publishing world as a genius editor – first at Pantheon and then Metropolitan Books – but back then he was barely on email. More than a decade later, he’s an on-line institution. You can’t visit a left-leaning website, or even a number of prominent conservative and libertarian ones, for very long without running into a piece by Andy Bacevich or Rebecca Solnit or Barbara Ehrenreich or Mike Klare or Bill McKibben, or a couple dozen other writers that he regularly edits. Even likelier, since he also pens an article a week, you’ll see a piece bylined to him.

His website, the Nation Institute’s TomDispatch.com has not only produced some of the most trenchant articles on our post-9/11 world, but also several books on the subject. The latest of these is Engelhardt’s The United States of Fear, a slim but meaty volume that takes the story up to our present crash-and-burn moment.

Engelhardt argues, quite persuasively, that the sole superpower left standing after the USSR crumbled in the early 1990s took its peace dividend and doubled down on war, following what he calls the “Soviet path” to such an absurd degree that it even invaded Afghanistan, the very country that helped cripple that other empire. [cont'd.]

It was fear, super-charged by 9/11, that allowed what he calls the “national security complex” to expand far beyond the already excessive levels reached when the United States faced off against the Soviets and their potentially world-ending nuclear arsenal. Today, the so-called “intelligence community” puts its Cold War variant to shame, the Pentagon budget is far larger and an all-new “defense” department, the Department of Homeland Security, has joined the bloated budget scrum. And all of it was unleashed by a few guys with box cutters and has been sustained by hyping up handfuls of men running around the backlands of the planet in what U.S. troops call “man-jamas” (the pajama-like clothes worn by Afghan men) as super-villains.

In The United States of Fear, Engelhardt takes on subjects of critical importance to Americans that somehow remain ill-covered, or sometimes uncovered, by the mainstream media. Among them, why our wonder weapons — most recently, pilotless drones — never actually win wars; why, in a dangerous world, the national security state is concerned with only one thing: terrorism (even though, since 9/11, terrorism has ranked above shark attacks and little else in terms of actual danger to Americans); or why the ongoing damage we inflict on civilians in other countries — including, for example, blowing away at least six wedding parties in Iraq and Afghanistan over the years — seldom gets paid much attention in the United States.

Engelhardt has never been to Iraq or Afghanistan, but he’s been analyzing those wars more astutely, and has been right about them more often than most experts who have made America’s warzones a second home. This alone would be remarkable, but in The United States of Fear he does something more impressive and, it turns out, important. In a way few Americans are capable of, he views the country through the eyes of an outsider while retaining all the insights of someone born and raised here. In the end, this allows him to offer a clear, more truthful picture of the United States than many are used to seeing – one that’s troubling to behold, but difficult to ignore.