Nuclear Treason

When one reads Seymour Hersh’s material (The Samson Option, Random House: 1991) on Israel’s pursuit of, manufacture of, and testing of nuclear weapons in a program which began in the late 1950s, and America’s response to it, one has no choice but to consider the word “treason.” That is because for decades, starting with the late days of the Kennedy Administration, and continuing through Lyndon Johnson, Richard Nixon, Jimmy Carter, Ronald Reagan, and beyond, successive American Presidents, intelligence officials and Cabinet members have all had a hand in a clandestine policy to keep the increasingly conclusive proof that Israel had succeeded in producing nuclear weapons a secret. A secret from the American public. A secret from U.S. allies. A secret from the world—even as the United States loudly and overtly banged the drum promoting the Non-Proliferation Treaty it had a major hand in writing, and from its beginnings, enforcing. It has vociferously protested when any nation but the big 5 (the U.S., the Soviet Union, France, England, and China) has made moves to acquire nuclear weapons. It has accused nations such as India and Pakistan of endangering the world, and more recently North Korea and Iran of violating their commitments under the NPT. It has called them everything from liars to frauds to criminals to Hitlerian dictators threatening other nations and worldwide conflagration.
            And yet, when it came to Israel, the American political establishment bent (and still bends) over backwards (or perhaps forwards) to look the other way: see no evil, hear no evil, and definitely speak none. And there has been one overriding reason for this: fear of the protests that would arise from the American Jewish community if the United States revealed Israel’s dirty secret. Fear that the big money coming to American politicians from that same community would be cut off. One of John F. Kennedy’s major contributors, for example, was a hosiery and apparel mogul named Abraham Feinberg. His financial donations had rescued Harry Truman’s presidential campaign in 1948 by financing Truman’s whistle-stop train campaign. Feinberg then managed to collect a huge campaign chest for the Kennedy campaign as well, and thereby secured direct influence in that White House. Having raised many millions of dollars needed to help Israel build its nuclear facility at Dimona, Feinberg’s zeal to protect “his” facility ran into conflict with Kennedy’s commitment to nonproliferation and desire to get IAEA inspections of it. Feinberg “fought the strongest battle of my career to keep them from a full inspection” by getting his message to the President (he met directly with Defense Secretary Robert McNamara): an inspection of Dimona would result in less support in Kennedy’s 1964 presidential campaign. Though unable to fight off an inspection completely, Feinberg was able to cripple it: instead of the IAEA, Washington agreed to send an American inspection team, one that would schedule its inspection visits in advance, with Israeli’s permission. This gave Israel time, as Hersh puts it, to build a “Potemkin Village” to deceive their American visitors (p. 111). In other words, the Israelis built a false control room showing that no chemical reprocessing plant (and hence no conversion of spent nuclear fuel to bomb-grade plutonium) was operating, and the American team dutifully reported that Israel had only a “standard reactor.”            
President Lyndon Johnson continued this charade (American inspections of Dimona took place each year on schedule, always finding nothing, including the time in 1963 when Israel’s reactor “went critical”—meaning it was producing 70 megawatts of power, far more than the alleged 24 megawatts needed for electricity, and enough to start producing plutonium.) As Hersh writes:
            “By the middle 1960s, the game was fixed: President Johnson and his advisers would pretend that the American inspections amounted to proof that Israel was not building the bomb, leaving unblemished America’s newly reaffirmed support for nuclear nonproliferation.” (p. 143).
            The American CIA knew full well what the Israelis were doing: “Everybody knew” about the Israeli missile, one CIA analyst said, “but nobody would talk about it.”  This allowed President Johnson to make statements, after China exploded its first nuclear weapon on October 18, 1964, such as: “Nuclear spread is dangerous to all mankind…We must continue to work against it, and we will.” (p. 149.) After the Israeli victory in the Six-Day War of 1967, the intentional ignorance became even more pronounced, as the White House sided more openly with Israel. Israel was importing yellowcake (uranium ore) from South Africa in great quantities, and it was monitored by IAEA. As one U.S. official monitoring nuclear developments said, “We knew about the yellowcake, but we weren’t allowed to keep a file on it. It simply wasn’t part of the record. Anytime we began to follow it, somebody in the system would say, ‘That’s not relevant.’”
            But the most overt piece of pandering to his American Jewish supporters—and specifically to the same Abe Feinberg mentioned above—by Lyndon Baines Johnson took place just before LBJ left office. As Hersh describes it, the CIA by this time knew for certain that Israel had manufactured at least four nuclear weapons (it had actually made many more). But Israel wanted American F-4 Phantom jets—a high performance airplane that could carry nuclear weapons on a mission to Moscow (which Israel was determined to, and did target to dissuade the Soviets from aiding Egypt and other Arab nations).  Many in the Johnson administration wanted to use this Israeli hunger for the F-4 as a bargaining chip to get Israel to sign the Nuclear Non-Proliferation Treaty (NPT). Paul Warnke, assistant secretary of defense, to that end called Yitzhak Rabin, Israel’s American ambassador, to his office and questioned him about Israel’s nuclear program. Rabin refused to answer, and Warnke leveled him with a long overdue tirade: “Mr. Ambassador, we are shocked at the manner in which you are dealing with us…You, our close ally, are building nuclear bombs in Israel behind our back.” Rabin of course denied it, but was so outraged that he not only lied about the encounter (he said in his memoirs that the whole encounter was about the F-4, and Warnke’s attempt to blackmail Israel by insisting on complete on-site supervision of all Israeli arms manufacturing and research), but also activated all of Israel’s supporters in Congress to oppose the NPT inspections. Most tellingly, Rabin called upon Abe Feinberg. Feinberg recalled Rabin complaining that “Everything you (Feinberg) have done about Phantoms is going down the drain. Clifford (Clark Clifford, Secretary of Defense and Warnke’s boss) is insisting on the NPT.” Now Feinberg had just recently met the President and Walt Rostow, his National Security Adviser, and remembered the President saying there would be “no conditions” to the sale of the planes. Hersh narrates the rest:
            “So I picked up the telephone,” he said, “called the White House, and asked for Rostow.” The national security adviser was having dinner at Clifford’s house, and Feinberg, who was well known to the White House switchboard operators, was patched through. “Walt gets on the telephone,” continued Feinberg, “and I say, ‘Walt, you and I and the President were together and Johnson said ‘no conditions.’ Walt agrees. I say, ‘When you get back to the table, tell that to Clifford.’”
            Clifford apparently got the message. For when Paul Warnke “arrived at a later meeting of his staff, all of whom favored tying the F-4 sale to Israeli acceptance of the NPT, he dramatically drew his hand across his neck. The NPT was out.” Harry Schwartz recalled Warnke’s account of the Clifford-Johnson dialogue: “Clifford called Johnson and LBJ said, ‘Sell them anything they want.’
            “‘Mr. President, I don’t want to live in a world where the Israelis have nuclear weapons.’
            “‘Don’t bother me with this anymore.’ And he hangs up.” (pp. 190ff)
            So there it is. Don’t bother me with this anymore, says the President of the United States.  Nevermind hypocrisy. Nevermind being taken for a fool by another nation whom the United States has supported and continued to support in the face of worldwide opposition, and without which support this nation could not last a day. Nevermind being spied on, lied to, hijacked, and, in at least one instance, being attacked by this same nation that seems immune to criticism (I refer to the now-infamous Liberty incident, wherein Israeli aircraft fired upon an American telecommunications ship in international waters during its 1967 Six-Day War, killing 34 Americans and wounding 171.) LBJ, like Kennedy before him, felt constrained to honor his commitment to a major American Jewish donor, regardless of the fact that nuclear nonproliferation, which the President believed in as sincerely as he believed in anything and on which, arguably, depended the fate of the entire world, was openly mocked and endangered thereby.
            Nor was this the end. This same kind of intentional blindness, this same massive hypocrisy, this same kowtowing to the organized might of American Jewry has continued almost unabated ever since, through every President and every administration, up to and including the administration of Barack Hussein Obama. CIA reports have been buried. Public accounts of Israel’s nuclear activities have been ignored by the world’s media: for example, in April 1976, Time magazine reported that shortly after the 1967 Six-Day War, Israel’s war hero Moshe Dayan had secretly ordered the building of a reprocessing plant. The report came from David Halevy, an Israeli citizen. Nothing happened. Ten years later, this time in 1986, the London Sunday Times ran an explosive story, based on the testimony of Israeli defector Mordecai Vanunu, detailing the inside story, with photos, of the huge Isaeli nuclear operation, including the fact that the Israeli nuclear stockpile now totaled more than 200 warheads, including some of the most sophisticated weapons in the nuclear arsenal such as advanced missile delivery systems targeting the Soviet Union, and “suitcase bombs” capable of infiltrating any country. Again, there was no reaction, other than a widespread Israeli disinformation campaign, much of which was organized by the rival Sunday Mirror of London by its pro-Israeli owner, Robert Maxwell.
            Of course, some might say, ‘No one should worry. Israel is an ally, a sane and rational democracy, whose leaders would never employ such weapons.’ But that would be to forget the zealots who are in charge of this “democracy,” and what they have said, and done already. In the aftermath of the 1956 Suez War, for example, in which the Israeli leader David Ben Gurion considered President Eisenhower’s refusal to back Israel as a dastardly betrayal, one Israeli official is quoted by Hersh as saying: “We got the message. We can still remember the smell of Auschwitz and Treblinka. Next time we’ll take all of you with us.” (p. 42) It was at this point that Israel initiated its secret plan, with French aid, to go nuclear. And by the time of Israel’s 1973 Yom Kippur war with Egypt and Syria, it was not only nuclear, but deadly serious about acting. Most Americans, consumed with their own domestic drama known as Watergate, could never have known how close the world came at this time to Armaggedon, and worse (if anything could be worse than nuclear destruction), how the Israelis used that threat of Armaggedon to blackmail its patron and ally, the United States of America.
            Hersh devotes an entire chapter, and more, to this episode. For the truth is, in the early days of the war, Israel was in a panic. Its famed commander, Moshe Dayan, having been totally surprised by the Arab attack, was virtually conceding defeat to the advancing Egyptian and Syrian armies which had destroyed 500 of Israel’s tanks and 400 planes, including 14 F-4 Phantom jets. An October 8 cabinet meeting resulted in three related decisions:
            “Israel would rally its collapsing forces for a major counterattack; it would arm and target its nuclear arsenal in the event of total collapse and subsequent need for the “Samson Option” [i.e. bringing down “all of you with us”]; and finally, it would inform Washington of its unprecedented nuclear action—and unprecedented peril—and demand that the U.S. begin an emergency airlift of replacement arms and ammunition needed to sustain an extended all-out war effort.” (p. 225).
 
All three of these plans were implemented. Israel did counterattack, and managed to salvage the situation. But it also went on nuclear alert, readying its nuclear weapons not once, but twice in the course of the Yom Kippur war. It did this openly, partly to impress the Americans, but partly also to scare the Soviet Union into persuading their Arab allies not to advance beyond the pre-1967 borders. Apparently this warning to Egypt was given, according to Mohammed Hiekal, editor of Al Ahram, the leading Egyptian newspaper, warning the Egyptians that the “Israelis had three warheads assembled and ready.” 
            Finally, the blackmail was also implemented by the nuclear arming. Israel was already outraged that Henry Kissinger was taking his time in resupplying the Israeli military with the weapons that had been lost. Without the assurance of immediate delivery of such American weapons, Israeli commanders would be hampered in their vital counterattack. According to Hersh, a call on Kissinger by Simcha Dinitz, Israel’s ambassador to Washington, changed Kissinger’s mind. Confirmation of this comes, not from Kissinger’s memoirs, which omit any mention of Israeli nuclear capability (though they do mention the replacement of its war losses by October 9), much less its threat; but from Hermann F. Eilts, the American ambassador to Egypt. Eilts maintained that at the end of Kissinger’s tenure as Secretary of State, he brought up the 1973 war, and casually referred to the nuclear option: “Henry threw in that there was a concern that the Israelis might go nuclear. There had been intimations that if they didn’t get military equipment, and quickly, they might go nuclear”(p. 230). James Schlesinger, Secretary of Defense, concurred that “Kissinger just turned around totally. He got a little hysterical” in urging an immediate and massive resupply of weapons to Israel in October 1973. Schlesinger added that “there was an assumption that Israel had a few nukes and that if there was a collapse, there was a possibility that Israel would use them.” Finally, Anwar Sadat, then leader of Egypt, told Mohammed Heikal that Kissinger had said at the time: “It was serious, more serious than you can imagine.”
            Before the war was over, Russia would threaten military intervention to get Israel to abide by the cease-fire, the United States had put the 82nd Airborne Division, B-52s carrying nuclear weapons, and the aircraft carrier John F. Kennedy on alert, and Israel responded by going on nuclear alert one more time. Hersh cites one more confirmation of the episode—more dangerous by far than the Cuban Missile Crisis about which we’ve heard so much—in a March 10, 1980 addendum to a column by Jack Anderson. Anderson wrote as follows:
            “Locked in secret Pentagon files is startling evidence that Israel maneuvered dangerously near the edge of nuclear war after the 1973 Arab assault. The secret documents claim that Israel came within hours of running out of essential arms. ‘At this crucial moment, the possibility of nuclear arms was discussed with the U.S,’ declares one report. American authorities feared the Israelis might resort to nuclear weapons to assure their survival. This was the most compelling reason, according to the secret papers, that the United States rushed conventional weapons to Israel.” (p. 236)
            If all this doesn’t make your flesh crawl, I don’t know what will. Read The Samson Option and you’ll see that this is only a sketch of a much more detailed and disturbing story. This is so especially in the light of President Obama’s trip, this week, to try to re-invigorate the START Treaty with Russia, to delimit the nuclear stockpiles of the two major nuclear states even further. All of which is admirable. So is the United States’ continuing attempt to end nuclear proliferation. But all the fine words of statesmen and politicians seem like so much horse shit when viewed in the light of the half-century of dissimulation, deception and outright treason when it comes to Israel’s still-unacknowledged nuclear secrets. I mean think of it: Israel rants and raves about the alleged nuclear plans of Iran. It attacks and destroys Iraq’s Osirak reactor, to unanimous applause. It threatens a similar attack on Iran’s nuclear facilities. It bellows and wails about terrorists who are plotting to infiltrate its borders, or those of the United States, with a suitcase bomb. And all along, it has been the lying, guilty party, doing the same thing, and much much worse. Possessed of hundreds of weapons and advanced rocketry to deliver them, it has threatened the world with nuclear conflagration more than once, and made known that it would do it again.
            What is a rational person to make of this? What are we to make of our leaders—who have known of this massive deception, of the spying of Jonathan Pollard who forwarded 500,000 pages of incredibly sensitive U.S. documents to Israel—and who have at the same time carried on with their hypocritical fulminations against nations like Iran and Korea for their “deceptions.”  What are we to make of the political calculations of presidents—not one but several—who are willing, for political purposes, for continued campaign contributions to assure their own re-election, to put the entire world at risk of nuclear armaggedon? Can we call this anything other than despicable? anything other than treason?
 
Lawrence DiStasi
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Self Model & World Model

 
Most of us go through life pretty much assuming that what we “are” is evident (I am that which perceives, acts, feels and makes my own decisions), and that what the world “is” is also evident (the world is that which I perceive “out there”—land, trees, water, sky, mountains, buildings, animals, other people, objects).  Now along comes a book by Thomas Metzinger, The Ego Tunnel, (Basic Books: 2009) which, basing itself on the neuroscientific studies of recent years, turns these “obvious” assumptions upside down. It turns out, according to philosopher Metzinger, that what we “are” and what the world “is” are both based on models conjured up by the brain.  We each have what Metzinger calls a “phenomenal self model” (PSM)—the conscious model of our organism as a whole that is activated by the brain. As for the world “out there,” it is also a model fed to us by our limited sensory equipment (eyes, ears, nose, taste, touch) and processed by our brains into “a low-dimensional projection of the inconceivably richer physical reality surrounding us and sustaining us.”  So consciousness, for Metzinger and neuroscience, takes place in two related and interrelated steps: “First, our brains generate a world-simulation, so perfect that we do not recognize it as an image in our minds.” This specific world-simulation has been refined over evolutionary time to provide us with precisely what we need to survive. Then, “they [i.e. our brains] generate an inner image of ourselves as a whole.” This latter is the phenomenal Ego—the internal image of the person-as-a-whole, as it appears in conscious experience. Neither one of these models puts us “in direct contact with outside reality or with ourselves.”  But since we are essentially blind to the fact that both are models, we have the experience of “seeing” reality and being ourselves fully and completely in that real world. This is what Metzinger means by the Ego Tunnel of his title: far from realizing that we are perceiving models created by our brain cells, we are in a kind of tunnel that totally precludes us from realizing this. It is only scientific experiments done in collaboration (to get beyond the tunnel that keeps each individual blind) that provide us with evidence of this counter-intuitive situation. (We should always remind ourselves that the earth as a globe spinning in inconceivably vast space was also counter-intuitive for most of human history.)

            The first experiment Metzinger describes is one done in 1998 by University of Pittsburgh psychiatrists Matthew Botvinick and Jonathan Cohen. It’s a kind of play on the oft-reported phenomenon of the phantom limb, where patients who have had an arm or leg removed persist in “feeling” sensation in the absent limb. Botvinick and Cohen contrived a kind of obverse experiment:

            “Subjects observed a rubber hand lying on the desk in front of them, with their own corresponding hand concealed from their view by a screen. The visible rubber hand and the subject’s unseen hand were then synchronously stroked with a probe. After a certain time (a mere 60 to 90 seconds when Metzinger tried this himself), the famous rubber-hand illusion emerges. Suddenly, you experience the rubber hand as your own, and you feel the repeated strokes in this rubber hand. Moreover, you feel a full-blown “virtual arm”—that is a connection from your shoulder to the fake hand on the table in front of you.” (p. 3)

The lessons of the rubber-hand experiment, as well as the later out-of-body experiences and experiments Metzinger describes, are profound. For in these situations, the existence and malleability of the PSM or phenomenal self-model, as a model, comes to light.  Our brain, that is, creates a model of our bodies that is usually very accurate and immensely useful. But it can be fooled, as it is in the rubber hand experiment, into thinking that a rubber hand is part of itself.  Therefore, we come to understand that what we consciously think of as “me,” is really only a model conjured by the brain. We also see that it can be manipulated in such a way that a rubber hand (a fake me) becomes a part of “me,” becomes “mine,” with feelings and sensations. Metzinger then poses a startling question: “Could one create a full-body analog of the rubber-hand illusion? Could the entire self be transposed to a location outside of the body?” (Normally, we think of our “self” as residing somewhere inside our heads.)

            His answer is “yes.” In out-of-the-body experiences (OBEs), which Metzinger himself has had (and which Olaf Blanke, a neurologist at the Swiss Federal Institute of Lausanne, has triggered in patients by directly stimulating their brains with an electrode), the conscious subject of experience (what I consider “me”) is located in the double. That is, in an OBE, there are typically two representations: the visual one (you see your body lying on a bed, or on an operating table); and the felt one, where you feel yourself hovering above your “body.” This latter hovering you is the “double,” and it is here that the phenomenal self model (“me,” or my “ego”) seems to be located.  Hence the term, “out of the body:” “I” am out of my body.

            What this means, first and most importantly, is that being conscious means literally creating models—both of what is “out there,” and what is “in here.” We have brain-generated images of what the world “is” and what we “are”, and they work quite well in most cases; but they are not “real” in the sense we think they are—i.e. that “we” are in direct contact with what “is”. They are “virtual,” models that create a center for us, a center we experience as ourselves, as our first person perspective, and which we use to great advantage to do everything needed to survive. And the second and related meaning is that these models can and have been manipulated in scientific experiments, thus revealing their reality as models. That is, if we had a true and enduring picture of ourselves, we would not be fooled by rubber hands, phantom limbs, or OBEs. If we had a true and enduring picture of the world, we would not think that an evening sky is apricot-pink. As Metzinger notes, “there are no colors out there in front of your eyes. The apricot-pink of the setting sun is not a property of the evening sky; it is a property of the internal model of the evening sky, a model created by your brain. The evening sky is colorless. The world is not inhabited by colored objects at all…out there, in front of your eyes, there is just an ocean of electro-magnetic radiation, a wild and raging mixture of different wavelengths….What is really happening is that the visual system in your brain is drilling a tunnel through this inconceivably rich physical environment and in the process is painting the tunnel walls in various shades of color…For your conscious eyes only.”  Neuroscientists have evidence of this because of a type of brain injury called “apperceptive agnosia.”  This injury prevents the brain from forming a coherent visual model of the outside world, even though the patient’s visual apparatus is intact. So though they can “see,” patients with this injury cannot recognize what it is they are looking at. Their modeling equipment is disabled.

            I don’t know about you, but this gives me a kind of vertigo.

            So do statements like: “No such things as selves exist in the world.”

            Now the Buddha said this, over and over. Indian philosophy and religion talk about this and the related idea that what we take to be “real” is a dream, an illusion. But unless one experiences this “selfless” state for long periods of time, or consistently, this is something most people take on faith, if at all. But now, neuroscientists can refer to something like Cotard’s syndrome, a kind of selfless experience caused by brain malfunction. In it, patients stop using the first-person pronoun and, actually claim that they do not really exist. Metzinger mentions one patient who described herself as “Madame Zero.” The idea seems to be that, again, some part of the self-modeling apparatus is disabled. Metzinger follows this with another key idea: in order to have the feeling of “being someone,” you have to feel that you “own” your body, its sensations, and so on. And this too, is malleable: sports figures like skiers, race car drivers, and others often relate the sensation that their consciously sensed “body” at times is extended to include their skis, the cars they drive, and so on.

            What, then, is the essence of selfhood? Again, ownership seems to be the minimal condition (Metzinger demonstrates that neither a “seeing self”, emotions, will or thoughts are necessary—shut your eyes and your sense of self remains.) His theory then becomes something like this:

            Minimal self-consciousness is not control, but what makes control possible. It includes an image of the body in time and space (location) plus the fact that the organism creating this image does not recognize it as an image (because of the ‘tunnel’). But the important part is that “we discover that we can control the focus of attention. That we can actively control what information appears in our mind.” And then, taking off from experiments demonstrating that monkeys can control robots (called “slave” robots) by means of their thoughts, Metzinger hits us with this zinger:

            “The conscious experience of being a subject arises when a single organism learns to enslave itself.” That is, when it feels as if “I” control myself, or my body-slave.

            There are insights and mind-bending statements like this in every part, almost every page of Metzinger’s book and they are too numerous to recount. I will end this discussion, therefore, with Metzinger’s reflections on the notion of “free will.” To begin with, much prior brain research has already established the fact that subpersonal brain events (those that specify action goals and assemble motor commands) arise and begin actions before you are conscious of having the idea to “do” something. But since they do at some point become “conscious,” and thus become bound into the self-model active in your brain, you “experience them as your own thoughts, decisions, or urges to act—as properties that belong to you, the person as a whole.” Thus, it feels as if we are able to simply think about doing something, and then have our bodies make it happen. “We” control our bodies. Metzinger describes this as “the appearance of an agent”—i.e. someone who makes something happen, someone who is in control of his own actions. And free will depends intimately on this idea of “agency.” We feel we are able to do what we want to do, or rather, that what we do is done because we, our conscious selves, our PSM, want to. Moreover, this freely willing self-model is not a production of our minds alone; it involves the social life we engage in around us. Free will is like that: it is a social institution. Metzinger then discusses the implications of the fact that free will, or agency, is only an appearance in our model of ourselves:

            The assumption that something like free agency exists, and the fact that we treat one another as autonomous agents, are concepts fundamental to our legal system and the rules governing our societies—rules built on the notions of responsibility, accountability, and guilt. These rules are mirrored in the deep structure of our PSM, and this incessant mirroring of rules, this projection of higher-order assumptions about ourselves, created complex social networks. If one day we must tell an entirely different story about what human will is or is not, this will affect our societies in an unprecedented way. For instance, if accountability and responsibility do not exist, it is meaningless to punish people (as opposed to rehabilitating them) for something they ultimately could not have avoided doing. (p. 128)

Think about this. Virtually every religion and ethical/legal system known to humanity depends on the idea that people are responsible for their actions, and therefore must be held responsible.  “You committed murder. You knew what you were doing, you thought it up and wanted to do it, and decided to do it knowing the consequences, and therefore you must pay.” But what brain research seems to be showing us is that, though we cannot really comprehend it ourselves, most of what we do is already decided by our body/brains before our “conscious selves” or models think about it, and “decide” to do it, and rationalize it. Indeed, that these “conscious selves” are models that are useful illusions, but not really free agents in the strict sense of the word. What then?

            This is only one of the mind-bending conundrums raised by this book. For anyone who finds this type of deep contemplation fascinating, I recommend that you search out Metzinger’s book, read it, cogitate on it. I think I can safely say you’ll never be quite the same.

 

Lawrence DiStasi

On Remembering Whence We Came

 
 
Given that it’s Memorial Day, when we’re supposed to remember sacrifice, and given that we have a Black American now presiding in the White House, it struck me as an apt occasion to remember just where this mix of black and white derives from. I know of no better place to start than the recent book by Annette Gordon-Reed, The Hemingses of Monticello, recently awarded the Pulitzer Prize for history. It fully deserves the honor, for what Gordon-Reed has done is to provide us with a look inside the once-secret life of the household run by that quintessential American, Thomas Jefferson. Author of the Declaration of Independence, third President of the United States and founder of the University of Virginia, designer of his Monticello residence, Jefferson was our true Renaissance man, especially in those areas related to freedom and the democratic ideal. And yet, what Gordon-Reed shows us is that that household, Monticello (itself an icon of liberty and freedom), was staffed by over 80 slaves (Jefferson owned 200 for his various estates), and more, was inhabited by Jefferson’s personal concubine and slave, the beautiful Sally Hemings, who bore him several children.
            Notwithstanding such sensational facts, this is not a history that revels in what in Jefferson’s time amounted to a public scandal. Quietly, and in beautifully shaped prose, Gordon-Reed simply takes us through the domestic history of Jefferson’s family, including the family of his first wife Martha Wayles (who was “given” Sally Hemings as a wedding present), and shows us how slavery worked in those days in Virginia. In so doing, she leads us to an appreciation of what it must have been like to have endured the conflicts and agonies of decision that faced not only Jefferson himself, but those of his concubine, her enslaved family who lived at Monticello as well, and the children she bore him. Along the way, we learn amazing, and to most of us, little-known facts about slavery, how it worked, and the diabolical logic that kept it intact for more than half of our history.
            Consider, for example, how convenient it was for Virginia to change its inheritance laws: where English tradition stipulated that you “were what your father was,” Virginia, in 1662,  adopted the Roman rule partus sequitur ventrem, “which says that you were what your mother was.” And why? Because slave owners, realizing that large numbers of African women had been impregnated (raped) by their white owners, would have borne children who, under the English law, would have been free like their white fathers. Under the new law, however, they remained slaves like their black mothers, and hence property owned by the master. The Hemingses of the title were a case in point: Elizaberth Hemings, herself the offspring of a white father, became the concubine of her owner, John Wayles, a white landowner who had earned money in the slave trade. Wayles and Hemings produced six “mulatto” children, among them Sally Hemings, born in 1773 (even with three white grandparents, she remained “black” and a slave.) Adding to the legal plight of slaves was the fact that not only could no word said by a black person be used against a white person in court, but a child born out of wedlock was filius nullius, the child of no one.
            Jefferson’s wife, Martha, was John Wayles’ legal daughter, and hence the beneficiary of much of the Wayles estate. This came, with their marriage in 1772, to Jefferson, along with most of the Hemingses including Martha’s half-sister, Sally Hemings. When Martha Wayles Jefferson died in childbirth in 1782, she left three children by Jefferson, as well as her half-sister, Sally, then nine years old. A year before he was named minister to France in 1785, Jefferson moved to Paris. He brought with him Sally’s older brother James, to be trained as his chef in French cuisine. But while he was away, Jefferson’s daughter, Lucy, then a two- year-old, died of whooping cough. Distraught, Jefferson insisted on having his remaining daughter, Polly, brought to Paris to be with him and her sister Patsy. Polly’s traveling companion would be none other than Sally Hemings, then about 14 years old.
            It was during this Paris interlude, according to most biographers, that the slave-girl Sally Hemings, Jefferson’s half sister-in-law, became his concubine. We know this partly because of reports that when Jefferson and his family returned to Monticello, Sally Hemings was pregnant. The situation, already deliciously complex, was further complicated by the fact that French laws decreed that any New World slave who set foot on French soil could, if he or she petitioned for it, become a free French citizen. Sally Hemings, though a young slave girl, thus had some leverage over her lover/master, knew it, and used it. Here is how Madison Hemings, one of the offspring of the Jefferson-Hemings liaison, described it years later:
            “But during that time my mother became Mr. Jefferson’s concubine, and when he was called back home she was enciente by him. He desired to bring my mother back to Virginia with him, but she demurred. She was just beginning to understand the French language well, and in France she was free, while if she returned to Virginia she would be re-enslaved. So she refused to return with him. To induce her to do so he promised her extraordinary privileges, and made a solemn pledge that her children should be freed at the age of twenty-one years. In consequence of his promises, on which she implicitly relied, she returned with him to Virginia.” (Gordon-Reed, p. 326)
Though this child conceived in Paris died, Sally Hemings subsequently bore Thomas Jefferson several more children. Of course, neither the President nor his early biographers publicly admitted it, but in 1802, the first public disclosure appeared in a paper called the Richmond Recorder, written by one James Callender: “It is well known that the man, whom it delighteth the people to honor, keeps, and for many years has kept, as his concubine, one of his slaves. Her name is SALLY.” (p. 557). Until recently, this and other rumors were the only indication that the writer of the most renowned paean to human freedom, the Declaration of Independence, not only kept slaves, but had a forty-year intimate relationship with one of them.
            Gordon-Reed thus takes us through one of the most richly improbable domestic dramas in our history. By juxtaposing the life of an almost sainted American founding father with the lives of the people he kept with him, working for him (he made carpenters of two of his sons by Sally, Beverly and Madison), sleeping with him, bearing his children, and finally, freeing them on his terms only after his death, she gives us a sense of the true, if hidden history of this nation. The ringing words “conceived in liberty” begin to take on new meaning. So does the title often given to Jefferson, the “apostle of freedom,” for Gordon-Reed ends with the question of why the great man did not see fit to free Sally Hemings, or any of the other Hemingses, while he was still alive, or even formally in his will. Her answer involves the benefits he derived from having Sally Hemings bound to him, and the damnation of public opinion if he freed her publicly (the law said an owner had to detail how he would provide for a freed slave, as well as petition the Virginia legislature to give that ex-slave permission to remain, freed, in the state) :
            “The only way for a man to control a free woman was to marry her, which he could not do. Selfishness and self-absorption seem far too inadequate as reasons for the way Jefferson treated these members of the Hemings family. There is often great power in simplicity, and the simple terrible fact is that the law vested Jefferson, and other slave owners, with the powers of a tyrant, as he said himself. This domestic tyrant tried to mitigate the meaning of that reality by being as benign as he could. That made it easier for him to see himself as a good man as he indulged his impulses and met his needs—economic, social, and affective—through his control of these family members, to whom he was tied by years of intimate acquaintance, experiences, and blood. He created his own version of slavery that he could live in comfortably with the Hemingses. It suited him. There was never any serious chance that he would have given this up. (p. 640)
 
Still, Sally Hemings, because of her “bargain” with Jefferson on returning from France, did better than most enslaved Africans. She, and they, were “given their time,” i.e. freed. In 1826 she went to live in Charlottsville, shortly thereafter moving into his home with her son Madison, and in the 1830 census, was counted, along with her sons, as free white persons. Three of her children would follow her to live in the white world, while one remained in the black world.
            As to the other Hemingses, who lacked the same leverage, when Monticello was sold in 1831, several were sold at auction. Some ran away. The fate of others is unknown. Some sense of the inhuman obstacles facing them, and all slaves, can be gleaned from the fate of Joseph Fossett, one of the Hemings children. Fossett managed, after he was freed, to gain ownership of five of his children and four of his grandchildren. That is, in order to free his children, he had to BUY them. Gordon-Reed explains:
             To avoid application of the 1806 law, he [Fossett] kept them in legal bondage until he decided in 1837 that it was time for a change. In September, he formally emancipated his own family members.
 
This is one of the many benefits of this deeply revealing and troubling book—illustrating how the fiendish legal system created by the slave-owning South proved, in many ways, as binding to African Americans as their chains. A “nation of laws,” indeed.
 
Lawrence DiStasi

The Trouble with Genetic Engineering

 
I received an alert this week concerning President Obama’s new Secretary of Agriculture, Tom Vilsack (former Republican governor of Iowa, a big corn state.) It said that “Upon returning from the G8 summit in Italy, Secretary of Agriculture Vilsack pledged to promote Big Biotech abroad as part of President Obama's foreign policy.” The alert went on to explain that “agricultural development” for this administration seems to mean “exporting the United States’ toxic industrial agriculture model, with genetically engineered crops at the forefront.”
            Big Biotech. Genetically engineered crops. To get a sense of what all this portends, read Claire Hope Cummings recent book, Uncertain Peril: Genetic Engineering and the Future of Seeds (Beacon Press: 2008). It’s an eye-opening study, only a few snippets of which I can convey here.
            To begin with, no one should underestimate the problem, for as Cummings reminds us, fully 80% of the processed foods now on our grocery shelves contain GMOs (genetically modified organisms.) From this, and from industry hype, one might imagine that genetic engineering of crops is a successful enterprise. The truth is that it’s one of the biggest money-losing industries of all time. That’s partly because it’s hugely expensive: as Cummings points out, the old way of developing a new plant variety—which farmers and, more recently, botanists have been doing for thousands of years—can cost $52,000. The typical plant-development cost of the transgenic method? Nearly $1.5 million! So the big corporations like Monsanto who develop this stuff have a lot invested, and they will do anything to protect their investment. One early ploy was the invention of the “pseudo-scientific concept” called “substantial equivalence.” This says, without any scientific evidence, that GMO products are the same as their natural counterparts. Therefore, the biotech companies don’t have to investigate reports of the harm their products cause. No tests, no toxicology studies, nothing. As a Monsanto spokesman put it: “Monsanto should not have to vouchsafe the safety of biotech food. Our interest is selling as much of it as possible. Assuring its safety is the FDA’s job.” The FDA passes the buck back as well, saying its policy is not to test or even label GMOs. So in the end, it’s not only that no one is responsible; it’s worse: we humans are being used as guinea pigs. As Cummings puts it, “the feeding trials are taking place at our dinner tables.”
            Trials are also going on in fields worldwide. Hawaii seems to be testing central for big biotech, with corporations like Monsanto, Dow, Syngenta/Garst and DuPont/Pioneer Hi-Bred using all five islands as sites for their GMOs. And it has not been without its cost. In one case in 1998, the University of Hawaii developed transgenic papaya trees to resist the rinspot virus. Through cross-pollination, the new variety began contaminating other, natural papaya varieties such that by 2004 “almost 50% of papayas tested on the Big Island were contaminated.” Evidence of other genetic contamination is widespread: Starlink corn, a transgenic variety meant to be used only for animal feed, was discovered in taco shells, which means it’s almost everywhere; Liberty Link 601 herbicide-resistant rice, supposedly not for human use, was found by a consumer in U.S. long-grain rice. Because of this contamination, rice futures for U.S. rice have plummeted. And what is Big biotech’s response? Why to lobby the United States Department of Agriculture to approve the contaminated rice for humans retroactively! (reminds us of the Bush Administration and its successful tactic of getting retroactive immunity for its spies and torturers.) This same tactic is being used for all other transgenic crops: the world, says Big Biotech, should simply accept the “adventitious presence” of transgenes. In other words, genetic contamination is just a natural accident, as when non-native plants turn up in soil not natural to them. The upshot is that we can expect much more of this in the future, including the spread of genetically modified trees, and the increase of “superweeds, which result when weeds develop resistance to not one, but several different herbicides (such weeds have already been found in Canada and several other countries including our own.)
            In truth, the more one reads about this chemical industry posing as agriculture, the more the horror stories multiply. Cummings gives us a witches brew of potions that have already been engineered into food plants:  “corn that produces the hepatitis B virus, corn with a human contraceptive, corn with rat genes, chicken genes, jellyfish genes that glow in the dark; growth hormones from carp genes in safflowers; human genes in tobacco, sugar cane, and rice; rat genes in soybeans; wheat genes in chickens.” And my favorite, goats “engineered with spider genes so that they produce spider silk in their milk.” Among the fallout from all this tinkering with seeds—the literal source of life—are a serious rise in allergies, stunted growth damage to the immune system in test animals, and a host of other ailments including liver damage and blood cell formation problems. The very first GMO food, the Calgene Flavr Savr tomato, fed to rats, caused stomach lesions, with 7 of the 40 test animals dying. But since there has been an FDA policy against testing, only a few studies have been done, with even fewer done by independent labs. One of the latter showed not only that GMOs affect the immune system, but that “transgenes can transfer out of GMO food and into bacteria in the gut at detectable levels after just one meal.”
            The most sophisticated part of Cummings’ book is the material on the supposed scientific basis for genetic engineering, i.e. that DNA is the secret of life, and now that scientists have that secret, and the precision to manipulate it, they can create whatever they wish. The truth is that GMO seed construction is anything but precise. As Cummings points out, “What the successful genetic transformation of plants depends on is not design but random luck.”  For though what is called a “cassette” of genes can be inserted into a plant’s cells, no one can really predict where it will end up. The key is to make multiple insertions, thousands of insertions in thousands of trials, discarding all the “monsters” that are created, and saving the few happy accidents. There is lots more in the book about the methods used to insert the desired set of genes—including, early on, using a 22-caliber rifle to shoot the DNA into the cells, and using bacteria to infect wounded plants cells so as to transfer the new DNA. And even when “successful,” the target plants are subject to unexpected mutations and modifications: Monsanto’s Roundup Ready soybean, for example, has been found to contain some mysterious DNA, which Monsanto, of course, said was “natural,” but was later found to have resulted from the transformation process. In short, no one knows what the results of all this diddling with the basic unit of life will be. And we’re the experimental animals.
            The point of all this experimentation, for the biotech companies, is to patent, i.e. have exclusive ownership rights to each new plant product. Then farmers worldwide can be made to pay dearly for new seeds each year, rather than, as farmers have traditionally done, save their own seeds from one year to the next. The Indian physicist/activist Vandana Shiva has raised the cry about this biopiracy worldwide, about the ruination of traditional farmers who are being driven into debt and robbed of their inheritance—their generations of work developing seeds perfectly suited to a specific environment. Now, moreover, they are being inundated with so-called super seeds, and then, if they try to use the seeds on their own, sued by the huge corporations that produce them. Since this is all a bit messy for the biotech giants, their main method of patent enforcement has become “terminator technologies.” Using their DNA-insertion skills, they have now engineered seeds that will not germinate after the first crop; or produced other seeds that are kept from germinating until they are “awakened” by a specific (costly) chemical; or, most bizarre of all, created terminator seeds that are laced with antibiotics designed to turn traits off or on—guaranteeing that farmers can’t re-use them. These “suicide” seeds are labeled “technology protection systems” by their promoters, protecting, they say, plants from being contaminated by transgenes, thus helping farmers.
            The conclusion by Cummings, and by anyone else not polluted by the propaganda pouring from the huge agribusiness sector, is chilling: “Seeds, instead of being a source of life, are now becoming a source of death.” And her crusade, via this book, is to wake all of us to the dangers we face, not simply from the fact of contamination of our entire botanic heritage, but from the overturning of the very genetic, moral basis of our world. Here is how she puts it: “I believe that the use of genetic technologies to re-create the world is the defining moral issue of our time. This technology, more than any that came before it, redefines who we are, what makes us human, and how we see ourselves in relation to the rest of the natural world…Now we are faced with a choice. Do we accept the triumph of the techno-elites, meaning do we let them decide what’s best for us, or do we use our common sense and moral compass to restore the public role of humanity in evaluating and governing technology?”
            When we hear the Secretary of Agriculture promising to promote this technology, not only in the United States, but throughout the world, we can only hope that Cummings’ message will somehow get through, somehow attract a large enough counterforce to compel a rethinking of what we’re here for. Because if it doesn’t, we will leave ourselves at the mercy of corporations which seem driven by the idea that inserting a technology of death into that which is meant to sustain us is as good a raison d’etre as any, and certainly more profitable than most. 
 
Lawrence DiStasi

Where Have You Gone, Dom DiMaggio

        
 
I only met him once, but when I heard the news of his death on Friday night, it felt as if a friend had died. That might stand as one measure of the man. Though he was small for a major league ballplayer, especially compared to his more famous brother, Joe, he was large in that indefinable something called “class” in its noblest sense. In Italian he would’ve been called un’ galantuomo—a man of integrity.
            Dominic Paul DiMaggio was born February 12, 1917 in San Francisco, the ninth child of a North Beach fisherman. Though at first his father had contempt for baseball as a frivolous sport for boys, the elder DiMaggio fathered not one nor two but three major league centerfielders: Vince, the oldest, who played for the Boston Braves and several other teams; Joe, the “Yankee Clipper,” and perhaps the greatest of all time; and Dom, who played 10 seasons in center field for the Boston Red Sox. Playing in the shadow of that great Yankee icon might have discouraged most younger brothers. It didn’t hinder Dom, but rather drove him to work harder to compensate for his short stature (he was 5’9” and weighed 140 when he started) and his nearsightedness (he was one of the rare major leaguers of his time to wear eyeglasses). One of the ways the “little professor” did it was by playing “smart.” His knowledge of the game, and of all the little details of batting and especially fielding, were legendary. He studied hitters and where they hit and always seemed to be one step ahead of the ball, always knowing where to throw to cut off a run or an extra base. Oddly, the most famous play in this regard was one he couldn’t take part in—the throw to second base in the 7th game of the 1946 World Series by his replacement for the ninth inning, Leon Culberson. The throw, which allowed the St. Louis Cardinal’s Enos Slaughter to score from first and defeat the Red Sox in the series, happened because DiMaggio had injured his hamstring in trying to stretch a hit the inning before, and had to be replaced. Enos Slaughter himself said that if Dom had been playing centerfield, he would never have scored (“Baseball’s Little Professor, Dom DiMaggio, Dies,” by Tom Fitzgerald, SF Chronicle, May 9, 2009). Ted Williams, Dom’s teammate and close friend, rated Dom at the very top: “He was as good a centerfielder as I ever saw,” said Williams, this from a man who not only saw Dom’s brother Joe, but Mickey Mantle, and Willie Mays as well. “Dom saved more runs as a centerfielder than anybody else. He should be in the Hall of Fame.” (quoted in “Dom Dimaggio” by Michael Bamberger, Sports Illustrated, July 2, 2001.)
            Sadly, and despite Ted Williams’ constant efforts to promote him, Dom DiMaggio died without being nominated to the Hall. This is reportedly the result of his short career (10 seasons with the Red Sox), and his batting average remaining just below .300 (.298 lifetime). But as the Ted Williams Museum advertises with its Dom DiMaggio display, he scored 1,046 runs in 10 seasons, second only to Williams himself, and had more hits, 1,679 than anyone else. He also holds the American League record of 2.99 chances per game by an outfielder, and the Boston Red Sox record for his 34-game hitting streak—a streak which, ironically, was ended by a diving catch of a sure base hit by his older brother, Joe. Of course, a key reason for the shortness of his career is that he volunteered to serve for three years in the U.S. Navy during World War II, a time when he could have been most productive. Also left out is the fact that when he was benched for the first time in his life in 1953, he retired, deciding that rather than hang on as a pinch hitter or fielder, or be traded as his physical stamina and reputation waned (as most stars do), he would rather walk away on his own terms to pursue other options. Thus began the “little professor’s” second career, as a textile manufacturer. Though his Delaware Valley Corporation, in Lawrence, MA has no connection to baseball, DiMaggio’s intelligence and business acumen made it thrive, and made him very comfortable indeed. In his later years, he spent much of his time either watching the Red Sox or investing in the stock market, which became another passion of his.
            It was in these later years that I met him. Having idolized his older brother, and having grown up as a Yankee fan hating “our” arch-rivals, the Red Sox, I remembered Dom all too vividly. He played for the Red Sox teams of the 40s and early 50s that boasted a “murderer’s row” of hitters, with Dom as the leadoff batter who always seemed to be on base, to be driven home by probably the greatest hitter of all time, Ted Williams. What I never knew about him was his persona, expecting him to be, perhaps, aloof and distant like his brother Joe. Instead, what I encountered was a warm, engaging man who knew who he was and felt no need to advertise it. Our first meeting was by phone: I had been asked to call him to see if I could persuade him to come to Washington in October of 1999 to testify on behalf of the legislation we had introduced—the Wartime Violation of Italian American Civil Liberties Act. It was a bill that had grown out of the exhibit I directed, Una Storia Segreta, detailing the little-known story of the internment and evacuation of Italian enemy aliens during World War II. Dom’s father, as a San Francisco fisherman, had been one of the so-called enemy aliens severely restricted during the war, and we had a photo of him on Fisherman’s Wharf in San Francisco just before he was banned from fishing. Dom’s presence would not only add specificity to that story, but would no doubt impress both the press and the members of the Judiciary Committee holding the hearings.
            When I called, he was at first wary, saying he was quite busy. But as I reminded him of those wartime days, he warmed up, and began reminiscing a little about the prejudice he grew up with, and which, he admitted, sometimes dogged him even as an adult: he had applied for membership to an exclusive club, the Everglades, near his summer home in Palm Beach, he said, and been rejected. He wasn’t sure what the reason was, but opined it could have been his Italian name. His response, he told me, was to say “the hell with them; I’ve got more to offer them than they have for me.” Telling me that story seemed to loosen something, and with a few more questions and a few more laughs, he agreed to come and testify if I thought it would help.
            A man in his 80s by then, Dominic DiMaggio appeared at the hearings smartly dressed, with an easy grin, a surprisingly firm handshake, and a mind as crackling as one of his signature line-drives. Despite his major league fame—and everyone, from the other witnesses, to Congressmen Engel and Lazio testifying for the bill they’d sponsored, to the Chair of the Judiciary Committee, Henry Hyde, wanted to talk to him about his career—he was as down-to-earth as, well, as a fisherman’s son. He chatted easily, he signed booklets and baseballs, he talked knowledgably about the stock market, and charmed everyone, including Doris Pinza, the rather reserved wife of the late opera-and-Broadway star Ezio Pinza (an enemy alien who had been arrested on suspicion during the war) who was testifying before the committee as well. And while DiMaggio’s testimony presented no new revelations, it was evident that his very presence added an extra measure of dignity and weight to the proceedings. When it was over, and we had lunched in the Congressional dining room, everyone sensed that something significant had happened. And it had. Within weeks, Henry Hyde had presented the legislation to the House, had it passed by voice vote, and sent it on to the Senate. The bill would take another few months to be reconciled, but on November 7, 2001, it was signed into Public Law #106-451. 
            Not long after that, I read David Halberstam’s masterful portrait of a quartet of Boston Red  Sox friends from a bygone era—Dom DiMaggio, Bobby Doerr, Johnny Pesky and Ted Williams—and the deep affection they still retained for each other. Titled The Teammates, the book turns on the trip two of them, DiMaggio and Pesky, took to see the ailing Ted William (a sportswriter named Dick Flavin filled out the trio driving from Boston to Florida, Bobby Doerr being unable to make the trip due to his wife’s illness), and the loving way they tried to buoy the spirits of their dying friend. Along the way, it fills in the biographies of all four players, as well as some of the highlights of their Red Sox careers, including that devastating score by Enos Slaughter to defeat the Red Sox in the 1946 Series. It recounts how they had always stayed in touch, how Doerr had always been the only one who could criticize or calm Williams in any way, and how DiMaggio eased into that role in later years. One of the elements that remains with me, especially now, is the nickname Williams—always known as a tempestuous, critical, near-misanthrope of a player—applied to DiMaggio: he called him “Dommy.” The name seems so unlikely, and yet so sweetly affectionate, especially coming from a man like Williams who knows he is dying, that it almost brings tears to one’s eyes.  So does Halberstam’s account of the great slugger’s last days, when he is finally joined by DiMaggio, Pesky and Flavin, and at which visit Dominic sang him an Italian song he called “I Love Her, But I Don’t Know How to Tell Her,” and finished with the classic “Me and My Shadow.” When he was done, Williams was overjoyed, enthusing, “Dommy, Dommy, you did really well.”  
            Williams lasted through the winter and spring after that, at which point DiMaggio “called him every morning with the latest Red Sox scores and an update of how they were playing. If he called a little late, Ted’s attendants would tell him that Ted had been asking about him and whether he had called in yet.” In Julycame the final call, when there was mostly silence at the other end, and DiMaggio was told that his friend had fallen asleep. “Well please tell him I called,” Dominic said; the next day Ted Williams died. (Halberstam, pp 197-98).
            I have not been able to determine if Dominic DiMaggio had his own crew of friends tending to him when he died. It would not have included his brother Joe, who died in 1999, and for whom Dom gave the eulogy at St. Peter and Paul’s church in San Francisco’s North Beach. But it surely would have included his wife of 61 years, Emily, and their three children, Paul, Emily and Peter. It would also have included the prayers and good will of anyone who knew him, who felt his loyalty and affection and heart, and who will miss him. For though he never married America’s movie icon, or appeared in an iconic song (the title of this piece is a play on a line from Simon and Garfunkel’s “Mrs. Robinson”), perhaps he should have, for he was not just a great baseball player; he was a true galantuomo.
 
Lawrence DiStasi

Ponzi and Pecora: the Yin and Yang of Banking in Crisis

Though it might at first seem highly unlikely, the roots of the present financial crisis can be found in the “work” of two Italian immigrants: Charles (Carlo) Ponzi and Ferdinand Pecora. They are the Yin and Yang, the Alpha and Omega of American finance. As such, their stories are highly emblematic of our current predicament.

            Take Ponzi first. So iconic was his meteoric career that his name now identifies the scheme he made famous: the Ponzi scheme, wherein early investors are paid off with the money paid by later investors in a kind of pyramid fraud. It’s the scheme that was used to even greater advantage by Bernard Madoff (in fact, according to William K. Black, the whole fraudulent loan system was a “Ponzi-like scheme”). But Ponzi made it a true American game.

            He was an Italian immigrant who claimed Parma as home, but was actually from a tiny Italian village called Lugo. He arrived in New York in 1903 with only $2.50 in his pocket (having gambled away almost $200 he had originally). After several menial jobs like dishwashing, he learned English well enough to become the manager of an immigrant bank in Montreal owned by one Luigi Zarossi, himself a swindler who claimed he paid 6% interest on bank deposits (apparently using a kind of Ponzi scheme himself). When Banco Zarossi failed, Ponzi resorted to forging the check of a former customer, was caught, and sent to prison for two years. Released in 1911, he got involved in a smuggling scheme, spent two more years in prison in Atlanta, and eventually ended up in Boston where he married the former Rose Guecco in 1918 and started a business trying to sell advertising. Though the business failed, Ponzi picked up an idea for his greatest scam: redeeming postal stamps (International Reply Coupons) sent from one country, in the currency of another. Ponzi figured that IRCs could be bought cheaply in Italy and exchanged for U.S. stamps to a higher value. Then the U.S. stamps could be sold at what Ponzi claimed was a 400% profit.

            Though his stamp scheme quickly aborted on red tape and volume problems, Ponzi promoted it so skillfully among friends (he promised to double their investment in 90 days) that he was able to start his own Securities Exchange Company and pay off his initial investors as promised. This was in early 1920. Word of the fantastic profits spread, and investors began besieging his Boston office with cash. Ponzi had to hire agents to handle the volume, paying them lavishly for business they were now bringing in from all over New England. By May of 1920 Ponzi had made almost half a million dollars, and deposited so much in the Hanover Trust Bank (in Boston’s Little Italy) that he was soon able to buy a controlling interest in that bank. By July of 1920, he was being called Boston’s “Wizard of Finance,” had purchased a mansion in Lexington, MA, and was able to bring his mother from Italy to join him. He would arrive at work in a cream-colored limousine driven by a Japanese chauffeur, whence crowds would cheer him like a movie star. After one little speech he gave, one fan called him the greatest Italian of all.

            “But what about Columbus,” Ponzi asked. “He discovered America.”

            “But you discovered money!” was the reply.

            Several times, suspicions were raised and there were runs on Ponzi’s company, but each time he paid off his investors and restored confidence. But it was not to last. The financial analyst Clarence Barron made calculations regarding the supposed source of the investment returns, and found that 160 million postal reply coupons would have to be circulating, while in truth, only 27,000 were. Another panic resulted, but Ponzi again managed to dodge the bullet. He hired a publicity agent, William McMasters, who quickly found the secret to Ponzi’s scheme. McMasters, a former newspaperman, took his information to the Boston Post’s editor, got $5000 for his exposé, and on August 2, 1920, the front-page headline blared: “Declares Ponzi is Now Hopelessly Insolvent.” McMasters pointed out that Ponzi was millions in debt, and was paying off early investors with new incoming deposits. To make things worse, on August 11, the Montreal Police identified Ponzi as the Zarossi clerk once jailed for forgery. Federal agents seized Ponzi and his holdings, while swarms of investors screamed for Ponzi’s head.

            The new Columbus served a combined seven years on both a federal and a state count, and when he was released, he was deported to Italy for an immigrant violation (having never become an American citizen.) After several more jobs, one for Mussolini’s Latin Airlines in Rio di Janeiro, Ponzi remained in Brazil trying to eke out a living teaching English, but in the end died in a charity ward there, in January 1949, broke and alone at the age of 66.

 

            Ferdinand Pecora, at first glance, seems the opposite of Ponzi. Ponzi hailed from a small town near Italy’s east coast between Ravenna and Bologna, while Pecora was born in the deep south, in Nicosia, Sicily, from whence he emigrated to the United States with his shoemaker father. Where Ponzi was all flash and showmanship, Pecora is described as dogged and implacable, a lawyer and prosecutor who mastered details and never forgot a fact. Where Ponzi presented himself as a mandarin of finance, outfitted like the banker he pretended to be, Pecora is described as an “earthy populist” who liked to play pinochle and smoke inexpensive cigars (his salary with the Senate committee was $255 a month). But in another sense, the two were brethren: like Ponzi, Pecora had a flair for the dramatic and an eye for the limelight, which shone brightly upon him when he was featured on the cover of Time Magazine’s June 12, 1933 issue. And like Ponzi, Pecora made his name in connection with wrongdoing—only on the opposite side of the law. The irony, of course, is that the fierce upholder law, Pecora, was largely forgotten until recently, while the felonious Ponzi became a household word and the subject of countless stories and reports.

            Still, of the two, Ferdinand Pecora is, or should be, the more relevant to our time. This is due to his hero’s stint as chief counsel to the Senate Banking and Currency Committee and its 1933  hearings on the causes of the Great Depression.  It was a signal moment in American economic history: since the crash of 1929, 40% of all American banks had closed, with 9 million individuals and families losing their savings. The Stock Exchange had sunk to a fifth of its 1929 value, and 17 million Americans were unemployed. Refugee camps called “Hoovervilles” dotted the landscape, with desperate souls emerging from them to beg for food and work. As for Pecora himself, he had worked his way through New York Law School, become an assistant district attorney in New York, and helped to prosecute more than 100 “bucket shops”—fly-by-night brokerage houses that preyed on gullible investors. This became his on-the-job-training in the seamy side of Wall Street, and the background which led to his selection as the counsel for the Banking Committee.

            Beginning in February of 1933, the hearings, which were soon known as the Pecora Hearings, called Wall Street’s most powerful figures—Richard Whitney, president of the NY Stock Exchange,  Albert Wiggin of Chase National Bank, Charles E. Mitchell of National City Bank (today’s Citibank) and J. P. Morgan Jr.—before it to testify.  Pecora himself interrogated many of them, driving them into corners, forcing them to reveal astonishing bits of chicanery that had helped fuel the 1929 Crash. Where Wiggin of Chase and Mitchell of National City had been praised for their supposedly Herculean efforts to halt the Depression, Pecora showed that Wiggin had actually profited from his bank’s falling prices by selling shares short. Mitchell and his cronies at National City had not only given themselves millions in interest-free loans to get them through the crash, but had also passed off bad loans to Latin America by concealing them in securities sold to investors (sounds a lot like the legendary “mortgage-backed securities” that have poisoned our own global financial system.) Pecora’s greatest moment probably came when he grilled J. P. Morgan Jr., the “Lion of Wall Street,” about his taxes. Pecora asked Morgan if he had paid income tax in 1930. After a silence, Morgan replied, “I cannot remember.” It was a lightning bolt, but Pecora was not finished. He asked Morgan about his taxes for 1931, and again for 1932. Each time Morgan answered in the same way: he couldn’t remember. Bulldogging even deeper, Pecora asked about the Morgan banking partners. The Lion of Wall Street knew nothing about taxes paid by them either. Pecora did know, and stated for the record that the sum of the taxes paid by J.P. Morgan and its partners for 1931 was $5,000. The resultant furor led Time Magazine, in its cover article, to coin a name for the bankers that Pecora had now made infamous: “banksters.”

            Pecora’s hearings rocked the nation and are considered key to the passage of the New Deal regulations that followed, regulations like the Securities Exchange Act of 1934 that created the SEC and reined in Wall Street’s worst excesses for more than 50 years. It was not until the 1990s that laws like the Glass-Steagall Banking Act were jettisoned to pave the way for the Wall Street piracy we have witnessed recently. As for Pecora himself, after his investigations closed in July 1934, President Roosevelt made him a commissioner on the SEC his hearings had helped establish. After that, Pecora was appointed to the New York State Supreme Court in 1935, where he held forth until 1950 when he resigned for an unsuccessful try at the Mayor’s job in New York. When he died in 1971, he left his own account of his hearings in the book he wrote in 1939, Wall Street Under Oath: The Story of Our Modern Money Changers. Too bad some of our own Wall Street “banksters” and alleged regulators didn’t read it before the roof fell in. Now they may get the chance, for increasingly we are hearing calls for a new Pecora and new congressional hearings to investigate the “banksterism” that led to our recent financial collapse. As Michael Winship said in his article on Pecora that appeared recently on Truthout:

            “Ferdinand Pecora, a nation turns its lonely eyes to you.”

 

Lawrence DiStasi

Torture: Crime versus Punishment

We have our ways
On the ship of State
To win your praise
While pushing fate
For the detainee
That is so unlucky
To be positioned
For Inquisition
And then to drown
While we clown



I can no longer remain silent on the false debate on torture. I have tolerated countless right wing extremists defending the US practice of torture, and now otherwise prudent and moderate people argue that torture can be legitimate under two conditions: If it is legal and if it works. The logic is bizarre more than faulty and we will explore the arguments that are essentially extensions of the logic proffered by the Spanish Inquisition. We have rule of law or we do not. That fact is independent of patriotism.

Let us first consider the issue of the law. The US signed the Geneva Accords and we proclaim that we accepted the international law on torture. Precedent from WW II and even the war in Vietnam also supports the prosecution of torture. Conviction of Japanese soldiers who tortured by using the techniques defended by Yoo and Bybee led to sentences of 15 years hard labor. Those techniques included beating, wall-banging, waterboarding (or the water cure), prolonged exposure to cold, etc. It has not always been a military issue. According to Progress Politics: “In 1983, Texas Sheriff James Parker was charged, along with three of his deputies, for handcuffing prisoners to chairs, placing towels over their faces, and pouring water on the cloth until they gave what the officers considered to be confessions. The sheriff and his deputies were all convicted and sentenced to four years in prison.”

Torture, including waterboarding, is illegal. There is no room for debate on that fact. As for what constitutes torture, beyond waterboarding, the examples abound, but precedent mentions stress positions, nakedness, prolonged interrogation and waking periods, denial of food or water, infliction of pain including emotional pain. Those all sound familiar if you have kept up with the Bybee and Yoo legal advice or the Gitmo reporting. Mostly, it is common sense administration for controlling the treatment of captives who have no other protection from abuse than the laws themselves. Merely naming a practice “enhanced interrogation” that, in fact, uses the already defined techniques of torture does not alter the practice or the offense. Requesting and receiving an attorney’s opinion that attempts to create a loophole in the laws on torture is meaningless if the techniques actually applied are already defined as torture. The crime is in the application of illegal methods, not in the advice whether the advice was sincere or an artifact of a conspiracy to commit torture.

Recently, former Vice President Cheney has offered: 1) that the techniques worked, and 2) that only 3 detainees were waterboarded. Let’s take a look at those claims. If the techniques worked, why was one detainee waterboarded 183 times in one month? It would seem that besides being irrelevant, it is hardly an efficient approach to get accurate and usable information. The techniques were “reverse engineered” from the Communist Chinese methods used during the Korean conflict. We actually set up the SERE Program to orient our own military to the Chinese Communist methods that extracted FALSE confessions from our fighting men and women. The underlying premise was that if we trained our military, that they would be less likely to provide false confessions. The method used by the Chinese Communists worked and false confessions were extracted so that our military were exploited for propaganda by the Chinese Communists. Our complaint then and even now is that the confessions were FALSE, not that they were true. Now Cheney has proclaimed a minor miracle that methods made famous for extracting false information now bring forth the TRUTH. Amazing!

If I waterboard only three detainees or otherwise only torture only three detainees, guess what? I tortured three people with multiple counts of torture on those three? That is parallel to extorting or assaulting or robbing or killing only three people. If torture is applied to only one person and only one time, then the offense has been committed. In terms of committing a crime, it takes only one offense. You don’t need to be a serial killer to be tried for murder. And the issue of patriotism as a motive for depriving a person of his rights under the laws of torture simply fails muster. If I rob a bank and assault a teller because I wanted to pay for an operation for my mother or to give money to the poor, the “motivation” is meaningless except in mitigation after conviction for the crime. If an intent is to be examined for a violation of the law, it is the intent to deprive a person of his or her rights under the applicable laws, not the intent to be patriotic. That may come after the trial and conviction for the violation of the law.

My personal interpretation of the myriad pronouncements by Cheney and others is that the truth is coming into daylight and that Cheney knows that he could serve jail time if he were tried and convicted of promoting methods otherwise defined as torture. He may or may not be evil, but surely, he is not stupid and does not look forward to being called out by our courts or by the international courts to defend his actions regarding torture. This is a basic case of conflict of interest. We have a right of free speech and Cheney is exercising that right, but please consider the source when evaluating the content. Others, including Bybee and Yoo and Rumsfeld and Gonzales have been less garrulous, but they must also be hoping all this will blow away or that people will accept their framing of the arguments and lose sight of the real offenses committed. The nation of Spain may again be in the limelight, but this time on the side of the law and against the Inquisition. The irony is worth noting.

In summary, the techniques of torture are illegal and while I seriously doubt that they work, that issue is irrelevant for all the reasons already cited. If US perpetrators (high and low) are not, in fact, tried by US courts, they may well be tried by foreign courts and, if so, we will have lost the initiative to control our own fate and reputation as a nation of law. Torture at Guantanamo and at Abu Ghraib and other sites has been credited as the greatest recruiting tool for the Taliban and Al Qaeda. We need to demonstrate that we have the courage to do the right thing and to practice what we preach…even if it hurts. Let the Taliban and Al Qaeda recruit on their own and without our help. Otherwise we face the ever increasing numbers of enemy at a time when we should be making it more difficult and less attractive for them to sign on. If these officials were criminals and were also patriotic, may they receive reduced sentences. First, we need to try them in courts of law as happens in other civilized countries.

Peace,
George Giacoppe
10 May 2009

The Case Against Ahmedinejad

 
The propaganda war against Iran, mostly advanced through continuing attacks against Mahmoud Amedinejad, continued this week as the Iranian president delivered the first speech at the UN Durban Review Conference on Racism. The reason he delivered the first speech, of course, is that he was the only national president who agreed to come to the conference. Most other nations sent representatives. The United States and Israel, as expected, refused to send anyone. So the Iranian President gave his speech, and with his first remarks about Israel, some forty outraged representatives of mostly European nations, stormed out in protest. The U.S. media predictably focused on this walkout, barely giving any attention to what Ahmedinejad had said, characterizing it as “anti-semitic,” and leaving the impression that the remarks were both humanly and historically false, racist, and deeply insulting to anyone who knows the facts. This is the same treatment Ahmedinejad has received in the past, to wit, when he made his remarks about Israel that are endlessly quoted as having vowed to “wipe Israel off the map”, and hence constituting a prima facie case for Iranian aggression. But as University of Michigan professor Juan Cole and Farsi language analysts long ago pointed out, Ahmadinejad was quoting Ayatollah Khomeini, who had said the “regime occupying Jerusalem must vanish from the page of time.” Cole explained that this “does not imply military action or killing anyone at all.” Journalist Diana Johnstone further pointed out that the quote was not aimed at the Israeli people, but at the Zionist “regime” occupying Jerusalem.
            In the same way, it one takes a look at what Ahmedinejad said at this conference in the light of real rather than imagined history, one gets a different picture. First, according to CNN.com’s account, Ahmadinejad accused the West of making “an entire nation homeless under the pretext of Jewish suffering ... in order to establish a totally racist government in occupied Palestine.” Well let’s see. Did not the Israeli war of 1948 force some three-quarters of a million Palestinians from their homes and make them refugees? Is that not making Palestinians homeless? And did not subsequent wars in 1967 and thereafter turn the Palestinian people who remained into an occupied people, living in refugee camps called the West Bank and the Gaza Strip? And was not the United Nations plan to give a majority of historic Palestine to the Jewish people driven in part by the moral cowardice of the Europeans and Americans, who again and again refused to admit Jewish refugees trying to escape the Holocaust, and sought to compensate for this cowardice and their historic pogroms against Jews by giving their approval and hypocritical sanction to a Palestinian homeland for European Jews in a land already occupied since time immemorial? Which is what Ahmedinejad also said:
“In fact, in compensation for the dire consequences of racism in Europe, they helped bring to power the most cruel and repressive racist regime in Palestine.”
            But you would never know that from the media’s account. For CNN.com felt compelled to add its own version of the 1948 founding of Israel: “Israel was established in 1948 as a homeland for the Jewish people after the Holocaust, on land also claimed by Palestinians.” ALSO CLAIMED BY PALESTINIANS? Palestinians didn’t have to claim it: Palestine was their land. It is their land, Palestine. And it was seized by Zionist force of arms in 1948 and subsequently, as any look at maps from different historical periods or fair accounts of what happened will show. And that seizure is still going on in the form of the apartheid wall and so-called “settlements.” And that war is still going on, most recently in the invasion of Gaza by Israeli forces, sanctioned and approved by the United States, including the slaughter of 1400 Gazans, most of them defenseless women and children.
            But that bad Ahmedinejad had the nerve to call this “racism.” He put it very nicely in fact, when he said, “In fact, in compensation for the dire consequences of racism in Europe, they helped bring to power the most cruel and repressive racist regime in Palestine.” Well isn’t that true? Is not the history of Jews in Europe, and America for that matter, a history of racist oppression against a minority? And does not the status of Palestinians in Israel and the occupied territories now mirror that historic racism in the manner and methods the Zionist regime (European in origin) has consistently used to attack, oppress, disenfranchise and ethnically cleanse the original Semitic people of Palestine? But Ahmedinejad went further. He added that the Jewish national movement “personifies racism” (because what, pray, can a “Jewish state” mean other than the privileging of one people over another—as in the fact that any person of Jewish heritage even today arrives in Israel from Europe with more inherent rights than a Palestinian who has lived there for generations?) and in CNN’s words “accused Zionists of wielding economic and political resources to silence opponents.” Good lord. Does the man have no shame? Zionists use money and politics to try to silence opponents? Who ever heard of such a thing?
            Finally, this man who has been compared to Hitler by the American press had the nerve to tar the United States of America’s invasion of Iraq with the same brush:
“Wasn’t the military action against Iraq planned by the Zionists and their allies in the then-U.S. administration?”
Well, wasn’t it? To whom did Iraq present a threat? Were we to believe that the fabled Iraqi “weapons of mass destruction” threatened the continental United States? No, the real threat Iraq posed was to absolute Israeli hegemony in the Middle East. Just as now, the real threat Iran poses is a constantly hyped threat to that same absolute hegemony. And so, though they may not have been primary in promoting the attack on Iraq—for Bush and his Vice President and his Secretary of Defense seemed determined from the very outset to find an excuse to take out Iraq and Saddam Hussein—there was a cluster of Bush administration hawks, the so-called neocons, who surely played a role in promoting the Iraqi invasion: people like Paul Wolfowitz, Irving “Scooter” Libby, Eliot Abrams, Richard Perle, Douglas Feith, and many more in Congress, many with a history of strong connections with Israel, its right-wing Likud party, and the wing-nut who now rules the nation, Binyamin Netanyahu. Ah, but to call attention to that fact is dastardly, un-diplomatic, anti-semitic. And so the great moral beacons of world democracy—the representatives of white, historically racist Europe—walk out in a huff. Heaving diatribes against this upstart crow from the Middle East: as: from that bastion of equality and fairness regarding the globe’s darker peoples, Great Britain, came “offensive,” “inflammatory,” “outrageous and anti-semitic;” from France came “unacceptable,” and “heinous;” while from Canada erupted the observation that the major problems with Iran are continued threats against Israel and against the Israeli people, along with persistent nuclear ambitions. “Nuclear ambitions!” mind you. For its part, the U.S. through its State Department, ignoring the comment of Navi Pillay, the UN high commissioner for human rights that she regrets and is “shocked” by the United States’ decision to boycott, said that its decision to not attend was based in its objection to a conference document that “singles out” Israel for criticism, and conflicts with the U.S. “commitment to unfettered free speech.”
            Presumably, that right to free speech extends only to the U.S. and its allies, but not to the likes of Mahmoud Ahmedinejad, or Iran, or those “other” races in the Middle East possessed of this disturbing tendency to want to rule, and even inhabit their own part of the world.

Bankers, Bailouts, Credit Cards and Suckers

 
 An item on the news yesterday about the progress, or lack of it, of the “Credit Cardholders’ Bill of Rights Act of 2009” (to try to keep credit card companies, i.e. banks, from arbitrarily increasing interest rates on existing credit card balances) got me thinking about debt, credit, bankruptcy and how the laws all favor the banks until it comes time for the suckers (us) to bail them out. Especially in recent years, we suckers have all been taken for a real ride. In 2005, for example, the Bush Administration passed a law—“The Bankruptcy Abuse Prevention and Consumer Protection Act”—signed with great fanfare by President Decider, that “reformed” the bankruptcy laws, particularly governing credit card debt.  The reform was promoted as a benefit to consumers (suckers) by making it harder for the average person with consumer debt to file for Chapter 7 bankruptcy (the law now forced such persons to file a “means test,” as well as undertake “credit counseling” and education in personal financial management), thus reducing losses to lenders. Presumably, we’d all benefit because lenders wouldn’t tighten up on the credit cards all the rest of us depend on. Though the new hurdles definitely caused a sharp decline in personal bankruptcy filings—thus benefiting the banks—they also failed to stop the rise of interest rates and fees these same banks charged suckers. A Harvard Law School fellow, Mike Simkovic, did a study and put it this way:
            “The fact that after bankruptcy reform, interest rates and fees continued to rise, and grace periods continued to fall, even though credit card companies reaped tremendous gains from declining bankruptcy losses demonstrates that the credit card market is not price-competitive. This lack of price competition explains why the benefits of bankruptcy reform accrued exclusively to credit card lenders and…why bankruptcy reform was a failure.” (from “New Bankruptcy Laws Hurt Consumers,” at http://www.consumeraffairs.com/news04/2008/07/bankruptcy_changes.html )
 
The same article cites another effect of the 2005 “reforms”:  the increase in home foreclosures and defaults—something clearly related to our current crisis. According to a study by David Bernstein, “The more stringent bankruptcy code” that limited financial relief and made it more difficult and expensive to file for bankruptcy, “appears to have increased the number of individuals walking away from their homes, their mortgages, and the other financial obligations without seeking the protection of the bankruptcy court.”
            To grant the devils their due, such restrictive measures are not, historically, as bad as the practice in ancient Greece, where bankruptcy didn’t even exist. The families of adult fathers who couldn’t pay their debts were legally liable for those debts, and so entire families could be forced into “debt slavery” until their labor discharged the debt. Many if not most of the first immigrants to the United States were debtors as well, coming to the New World as indentured servants committed to working off their debts in a few years. Thomas Jefferson, among other notables, ended his life so deeply in debt that his entire property (including about 200 slaves) went on the auction block to pay his creditors, leaving his white family penniless (his “black” family by his enslaved concubine Sally Hemings, of course, would have inherited nothing in any case). Still, according to an article in the current New Yorker Magazine, the debtor policy in the United States improved on the bankruptcy situation that had prevailed in Europe, where only traders and merchants were allowed to claim bankruptcy—European logic being that such “risk-takers” had to be protected in order for their crucial trade to continue. All others went to debtors’ prisons—for sums as small as a few shillings. In the United States, by contrast, democracy in essence demanded that all were entitled to the same protection, and so the protection of bankruptcy, usually Chapter 7, became available to anyone unable to pay his bills. This meant that though major property items could be seized, at least some “exempt” property—clothing, household goods, an older car—could be retained as the rest of the debt was discharged (except for spousal and child support, student loans and most taxes).  This was the situation that prevailed until the 2005 “reform” made bankruptcy for suckers less available.
            Since then, however, a few things have changed. Most notably, the current financial crisis has meant that now it is not those irresponsible consumers (suckers) who are going bankrupt, but the banks (mortgage brokers, investment bankers, insurance companies etc.) themselves. And, reverting to the traditional attitude that wealthy traders and merchants deserve more consideration than the workers who actually make products, our financial wizards have decreed that we taxpayers (suckers) should all agree to bail out the financiers because, after all, what they do is crucial for the rest of us. And so, in the biggest bailout in U.S. history, we’ve propped them up with trillions ($12 trillion so far?) in taxpayer dollars.
            Now that wouldn’t be quite so bad if the bastards displayed a little contrition, a little consideration for the little guy. But do they? Not on your life. First of all, these hucksters continued to pay themselves—the guys at the top—obscene bonuses. And more recently, an AFL-CIO sponsored study found that more CEOs of American companies got pay hikes than pay cuts in the year 2008. That’s right. Of 946 companies surveyed, 480 had CEOS who got pay raises, while 463 cut their CEOs pay. Moreover, median CEO salary rose 7% in 2008 (the year the economy collapsed), with their perks going up 13% to an average value of $336,246., and their average yearly compensation  reaching $5.4 million.
            Secondly, and this is the real outrage, the banks we’ve bailed out with trillions that our children will be paying for god knows how long, have chosen to stick it to us suckers in yet another way—by gouging us with credit card interest. That’s right, the same swine who have begged for  billions to keep their companies “solvent” (after they drove them and us into the ditch with their complex securitized mortgage packaging and credit default swaps all designed to make billions while the getting was good), these same hot shots have now come up with yet another swindle—sticking it to credit card debtors. It’s a foolproof game, especially now that getting bankruptcy relief for credit card debt has been made much harder (thanks to the 2005 reform cited above): just raise the rates on credit card debt arbitrarily, take it or leave it. Listen to the experience of some recent complainants to CNN.money.com. A small business owner from Southhaven, Miss wrote:
            “I have a very small business and most of our debt is on credit cards. We had a 0% annual percentage rate until January 2009 that would go up to 7.99% thereafter. A few months ago my check got there a day late. The credit card company, Advanta, increased my APR to 7.99%. I just received my current statement and the APR jumped to 25.39%. When I called, a supervisor said it was done for economic reasons. How can they do that? Is it illegal? Can I report them?”
The answer came from Kathleen Ryan O’Connor:
            “Faced with the same economic pressures as other companies affected by the ongoing recession and credit crunch, credit card companies are racing to protect themselves from the costs of more defaults by hiking interest rates and slashing credit limits, even for cardholders with excellent credit histories.”
Another small business owner had the same experience, noting that her expanding company was not only issued a lower credit card limit, but also an interest rate hike that went from 3% to 27%! The credit card company, Advanta, referred her to the terms and conditions it issues, including this one: “We may change any of your account terms, including rates and fees, at any time, for any reason.” No questions asked. Take it or leave it.
            So that’s the money game. First make a pile of money on fraudulent practices in mortgage lending and bundling the bad loans in impenetrable securitized mortgage packages to be sold to suckers the world over. Then get government bailouts (i.e. taxpayer money) to get rid of the “toxic assets” that are holding back credit and threatening to bring down the whole system. Then stick it to the taxpayers who bailed you out by raising their credit card interest so as to maintain your “profitability”—which is precisely what my credit card company, Chase, used as justification for bumping my APR over 4 percentage points. No reason needed. Take it or leave it, suckers.
            So don’t be shy about calling your Congressional reps and senators. Tell them you back the idea proposed by Vermont’s Senator Bernie Sanders: calling the practice of credit card companies “nothing less than loan sharking,” Sanders has proposed a 15% limit on all credit card interest. Period. Now that’s a proposal. So is Senator Christopher Dodd’s idea to “bar credit card companies from raising interest rates at any time for any reason.” I wouldn’t hold my breath that either proposal will pass, but some outraged calls and letters threatening a debtors’ revolt might help.
 
Lawrence DiStasi
 

You can Bank on it

Rivers have banks
Remember the Ganges
With ashes and hankies
And Boston has the Charles
With coeds and ivies
But while rivers have banks
Our nation has bankers
Who are bred with the Brahmins
And they give us tankers and cankers
While they hide in the Caymans


We seem to be focused on the scandalous behavior of today’s bankers with regard to being dismal stewards of wealth both at home and abroad. We have marveled at their seeming limitless incompetence and greed as though it were some historical anomaly. It is not. I observed banking close up in the late seventies and early eighties while working for one. That is when bankers chaffed under the rules that limited their grasp to banking while they pleaded for license to offer other stuff like investment products and services that were then largely limited to Trust Banking. Trust Banking was a wonderful excuse for slick bank operators in the northeast to squeeze vulnerable old widows by entertaining them in Florida and selling them questionable securities and planning advice in the winter. Of course, that was a minor scam compared to today’s derivative product schemes, but the roots were well watered and established. As for incompetence, the most salient example for me was the insatiable appetite Colonial Bank of Connecticut demonstrated for international lending. The bank had a well disciplined practice of presenting domestic loans to a loan committee that was responsible for seeing that loans were balanced by geography and by industry or business concentration. Lending to too many dry cleaners or department stores or car dealers could concentrate losses due to the vagaries of the economy or weather or fire, etc. In setting up 29 international bankers in London, however, those lessons were lost and the lending risk was concentrated not only on shipping, but on Greek Oil Tankers. Geography and industry related risks were essentially doubled up and no domestic loan committee reviewed the loans. When the recession came, the tanker “owners” simply anchored their ships in Athens harbor and walked away without a care about the debt. Colonial Bank was then taken over by Bank of Boston which itself was bought out by another bank and the fiasco rolled on. I once asked one of these senior professional bankers why they would spend hundreds of dollars in overtime labor to track down the explanation for a two dollar difference at close of business to balance the books when it would be so much cheaper to simply write off the two bucks or add it as found money. His response was that banking was “precise.” When I then asked how banking could be considered precise if the bank was out of balance in the first place, I did not get an answer.

Examples beyond my personal observation exist and I want to insert some thoughts that demonstrate one item in our national history through a well researched past that has been prelude to power and control anachronistic in our representative democracy. I commend the history Rising Tide by John M. Barry as a documented description of how bankers influenced the events surrounding the catastrophic Mississippi flood of 1927. Barry documents the engineering, politics and financing that controlled the Mississippi river. His book is consistently fascinating and occasionally alarming.
That 1927 flood cost the lives of several hundred Americans and was characterized with politics and scheming from every level of our republic. It was also an interesting stew of engineering and special interests as well as bad luck in weather. Banking, however was the item that will most remind us of today’s situation where bankers have chosen high risk over common sense or commonwealth in any sense of the words.

New Orleans lies near the exit of the Mississippi into the Gulf of Mexico, but there are parishes (counties) between the Big Easy and the sea. As the flood waters moved south along the general path of the big river, it wreaked destruction all along its path and the path itself was tortuous with excursions along the way that in one breech alone exceeded 90 miles east-west by 60 miles deep. The powers of New Orleans sought to remove even the slightest doubt that the river would overtop the levees of New Orleans Parish and they sought to dynamite the levees protecting Plaquemines and St. Bernard Parishes. They went to the Governor of Louisiana and to the President of the United States asking for authority to destroy the levees south of New Orleans and were met largely with indifference and light resistance at every level. They also went to the Secretary of Commerce who was put in charge of recovery activities by President Calvin Coolidge. You may remember Herbert Hoover who later became associated with laiszez faire control of banking. Hoover was Secretary of Commerce and Coolidge could not be bothered to visit the devastation despite repeated requests from most governors and the Congress. At that time, Hoover was known as a publicity hound; skilled at spin before it became a professional art form. He would ride that barge to the White House where it sunk a few years later.

If you are at all curious as to where the power of New Orleans centered, it was not with the democratically elected officials. It was the 27 or so major bankers of the city who, even then, had also been the social elite (Boston Club) of New Orleans who sponsored and supported the major krewes of Mardi Gras. Once they decided to dynamite the levees south of the city, it was only a matter of when and how much they had to pay in reparations. That is power. Most often, these bankers chose to remain anonymous as long as they were able to present their sons and daughters as king or queen of Mardi Gras. That was an honor bestowed on few and cherished by all. It required unmentionable wealth to execute the duties of Mardi Gras, especially for the secret krewe of Comus. It was the social and economically privileged that controlled the major krewes, the banks, the politics and the levee. He who controls the levee controls the world of New Orleans including the life and death of every citizen. It is parades and parties that precede Lent each year for the masses, but it is a perennial party for the bankers of New Orleans. Barry points out that a ball gown for the queen of Comus or perhaps Rex would typically far exceed the annual salary for the governor of Louisiana.

I know that some readers may feel that the impact of privilege is overvalued, but as we fast-forward to current events in banking and finance, the parallel of our banking system to the social structure of New Orleans is curious as a minimum. Banking has little basis in performance. It has a strong basis in power; social power as well as personal wealth and it is unrelated to democratically elected positions. The “Fed” prints and controls our money and yet it is not a government function. How did we get here? Can we change the structure?

When I lived in New Orleans with my wife and kids, I felt that the city was a warm and friendly town and, indeed, that is one level of the city. Peel back the layers and it is far more interesting and perhaps even sinister because nothing is as it appears there or in our national banking system. It is a costume party and you are not invited except to stand on the street at public parades shouting, “Throw me something, Mister.” Please read Barry’s book and the recent banking essay by Larry DiStasi. Catch a trinket.


Peace,
George Giacoppe
10 April 2009

Money Ex Nihilo

 
Since our little economic crisis took center stage, I have been trying, vainly, to understand it, along the way trying to understand money and a little concept called “debt-based currency.” Recently, I think I’ve got it—not thoroughly, to be sure, but enough to be able to perceive a monstrous scam when I see one, thanks to an amazing little article I suggest everyone read: “Dollar Deception: How Banks Secretly Create Money,” by Ellen Brown, J.D. on http://www.webofdebt.com/articles/dollar-deception.php . It doesn’t have to do with AIG or with credit default swaps or securitized mortgages. It has to do with the basic idea of money creation, who creates it, and how.
            Begin with some common misconceptions. 1) The Federal Reserve is the nation’s bank, a public, government entity. Wrong. The Federal Reserve is actually a consortium of private banks, which creates money and lends it to the government, to us, at a nice rate of interest. 2) The Federal Reserve, by creating its Federal Reserve notes, i.e. printing all that money we all lust after, makes most of the money supply. Also wrong. Forget paper money: most of the money that’s created is actually created by plain old banks when they make loans. 3) The money that banks create is actually backed by something substantial, like gold or silver. Wrong. The United States went off the gold standard in 1933, when Franklin Delano Roosevelt made this move to keep what money was left in the United States from fleeing to foreign banks. Since then, the legendary stash of gold in Fort Knox supposedly backing our paper dollars no longer exists. Your dollars are backed by literally nothing except the U.S. government’s pledge to honor them in some way that is not clear. It’s a bit of a magic trick, kept afloat by the faith of people and businesses (and countries like China and Saudi Arabia which hold so much U.S. debt that if they ever decided to call it in, we’d all be in the sewer).
            But let’s get back to basics. Banks create money out of thin air. Ellen Brown cites an astonishing lawsuit that illustrates this in an amazing way. In 1969, a man named Daly was about to lose his home to a bank that held a $14,000 mortgage on it. Daly, a lawyer, decided to sue the bank for not having “consideration,” or something of value, backing its loan to him. In court, the bank’s president admitted this was true, saying that the bank routinely created money “out of thin air” for its loans, which he said was standard practice in the industry. The judge, a Justice of the Peace named Mahoney, reiterated what he had heard: “Plaintiff admitted that it, in combination with the Federal Reserve Bank of Minneapolis…did create the entire $14,000 in money and credit upon its own books by bookkeeping entry. That this was the consideration used to support the note…[and that] the money and credit first came into existence when they created it. Mr. Morgan [the bank president] admitted that no United States Law or Statute existed which gave him the right to do this…” Given these facts—that the bank was actually extending credit without backing its loans with anything it actually had in its vaults—the court ruled against the bank’s foreclosure claim, and Daly kept his house.
            Now elementary banking theory seems to partially admit this. It grants that since at least the 17th century, in a practice started by goldsmiths, bankers have engaged in what is known as “fractional reserve banking.” That is, when people deposited their gold with goldsmiths, and received paper notes testifying to the amount and allowing them to redeem the gold when they needed it, the goldsmiths holding the gold noticed something. People never came all at once to redeem their gold. In fact, at any one time, only about 10 or 20% of the gold was needed to redeem the notes people presented. This meant that the goldsmith could actually lend from 5 to 10 times as much money (in notes) as they had backed with gold. This became the basis for “fractional reserve banking” and most currency: except in situations like the Depression, where everyone suddenly wants to redeem paper bank notes for gold or silver in what is known as a “run” on banks, banks could lend out—literally create—far more money than they actually had in reserves. Ellen Brown quotes some notable bankers on this. Sir Josiah Stamp, president of the Bank of England in the 1920s:
            “The modern banking system manufactures money out of nothing. The process is perhaps the most astounding piece of sleight of hand that was ever invented.”
            Or Graham Towers, Governor of the Bank of Canada from 1935 to 1955:
“Banks create money. That is what they are for. . . The manufacturing process to make money consists of making an entry in a book. That is all. . . .Each and every time a Bank makes a loan . . . new Bank credit is created -- brand new money.”
Or Robert B. Anderson, Treasury Secretary under President Eisenhower:
            “[W]hen a bank makes a loan, it simply adds to the borrower's deposit account in the bank by the amount of the loan. The money is not taken from anyone else's deposit; it was not previously paid in to the bank by anyone. It's new money, created by the bank for the use of the borrower.”
            To get some idea of the amount of money that gets created this way, and its inflationary effect (creating money means more dollars (demand) chasing the same amount of goods (supply), hence prices tend to rise) Brown cites the Fed’s own money supply (M3) statistics. First of all, new money has to be created all the time, i.e. borrowed, “just to pay the interest owed to bankers. A dollar lent at 5 percent interest becomes 2 dollars in 14 years. That means the money supply has to double every 14 years just to cover the interest owed on the money existing at the beginning of this 14-year cycle. The Federal Reserve’s own figures confirm that M3 has doubled or more every 14 years since 1959. That means that every 14 years, banks siphon off as much money in interest as there was in the entire economy 14 years earlier. This tribute is paid for lending something the banks never actually had to lend, making it perhaps the greatest scam ever perpetrated…”
            Now think about it. Bankers, and especially those in the big banks like Citibank and Morgan and Chase and Wells Fargo and Bank of America, have been getting rich on this “greatest scam ever perpetrated” for years, a scam that at one time was called usury. But not content with making billions on interest, especially from the difference between the rate they pay to borrow the money from the Federal Reserve and the outrageous rate they have been allowed, since 1981, to charge their credit card customers (one of my bank credit cards just informed me that my interest rate was being raised about 4%, the difference between the essentially 1% they get it for and the 13% they now charge me being their profit, not to mention the profit they make from poorer folks whom they charge 25 and 30% for the same credit), they had to get into “subprime” mortgages and complicated securitized debt instruments as well, so they could make even more obscene profits. All of which came a cropper when the housing bubble burst and all that debt going bad (I gather that that debt or money owed them is what banks tend to use as “consideration”) threatened to take the whole financial system down with them. And which they then had the nerve to beg the Federal Government via taxpayers to rescue them from. And which the government, using taxpayer dollars, convinced the sucker public to agree to because otherwise we’d all be doomed.
            Now, with a new president to hopefully instill some root sense into the whole system, we find that his top advisers, the Summers and Geithners and Emanuels and Goolsbees, are not only “centrist” and rooted in the financial system themselves, as are all our so-called representatives who derive the bulk of their contributions from this same financial sector, but in practice determined to revive and maintain the same bankers and the same system that brought us all to the brink of financial Armageddon in the first place.
            So consider. Bankers create money out of nothing. And then charge us and the government (also us) interest on it. Not a bad way to make a living, one you’d think would be enough for these charlatans (who, by the way, pay their working-class tellers about $11 an hour to start). But no. Greed, by definition, knows no moderation, never says ‘this is enough.’ No, greed is infinite.  Until, that is, the people finally wake up and get fed up and cry “foul.” Some of that has been happening already regarding the bonuses to the AIG scoundrels. Now what one hopes is that the outrage will continue until all banks and bankers and their whole system are truly brought to heel, along with insurance companies and the rest of the Wall Street bunco artists. How this might happen is not something I’m competent to predict (Ellen Brown suggests establishing a true government bank that prints its own money but doesn’t charge itself interest; think of the savings!) But perhaps we can all find out before it’s too late. Meantime, next time you see your banker, you might let him know that you know: Money ex nihilo might sound godlike, but it’s more like what Freud said it symbolized—the doings of the other end.
 
Lawrence DiStasi
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