2008 October 14

By Stephen Lendman - RINF | Since 9/11, the notion of an October surprise has been around. The idea going something like this. Another real or manufactured terror attack. The dominant media stokes fear. The public is again traumatized. The Bush administration pledges all effective measures to protect national security. Formerly seizes total power. Suspends the Constitution and declares martial law. Mass detentions follow. Beginning with dissenters and elements of the public considered “dangerous.”

This may be coming with the 3rd Infantry’s 1st Brigade Combat Team back in the US as of October 1. According to the Army Times, as “an on-call federal response force for natural or manmade emergencies and disasters, including terrorist attacks.” Augmented by USNORTHCOM.

According to Wayne Madsen’s recent article titled “FEMA sources confirm coming martial law,” it gets worse. He cites “knowledgeable” FEMA sources saying that “the Bush administration is putting the final touches on a plan (to declare) martial law in the US with various scenarios anticipated as triggers.” Economic collapse. Massive social unrest. Bank closures. Street protests. Violence in response, and another stolen election.

Early in the month, a different October surprise arrived. Not the expected one. Not yet at least. The Wall Street Journal put it this way: “The Dow Jones Industrial Average (DJIA) capped the worst week in its 112-year history with its most volatile day ever, as hopes for a major international bank rescue plan were overwhelmed at day’s end by another wave of selling.”

The DJIA dropped 22% over the past eight trading sessions. Investors were “shell-shocked.” Many spent Friday “trying to protect themselves from further declines. The past week’s (October 6 - 10) 18% decline “and Friday’s 1018.77 point swing from low to high were the biggest since the Dow was created in 1896.” The VIX measure of market fear hit 69.95. By far its highest level ever, and some investors think it may touch 100 in the current climate. Until now, the Dow’s worst week was in 1933. Trading volume also set a record at 11.16 billion shares.

“Market crash shakes world” headlined the Financial Times (FT). Mass trauma, fear and uncertainty sent tremors everywhere, and no one knows if Friday ended it. Maybe just began it. First markets crater. Then world economies, and finally the inevitable human fallout. Affecting many tens of millions everywhere. Innocent people paying dearly.

Morning headlines say it all. And they’re getting grimmer. On October 10, the Wall Street Journal said the “Market’s 7-Day Rout Leaves US Reeling. Stocks in a Slow-Motion Crash….After Year of Declines, Investors Lose $8.4 Trillion of Wealth.” Most scary is what’s ahead and how much more people can or will tolerate.

The Financial Times was just as grim headlining “Global equities plunge….Japan leads Asian market rout…Wall Street in biggest fall since 1987 crash.” Once the nation’s largest company, General Motors may now face bankruptcy. Its October 10 stock fell to its 1950 valuation and now has a market capitalization of just $2.6 billion. Shockingly expressed in one headline saying “Wheels falling off for General Motors.” Add the engine and chassis, too.

Ford Motor’s outlook is little better. Its stock price is the lowest in decades, and one analyst warned that “the accelerating deterioration in industry fundamentals will be a serious challenge to liquidity (for both companies and Chrysler) during 2009.” JD Power and Associates was even grimmer saying that the global auto market may experience an “outright collapse” in 2009. And we’re only talking about autos.

Look at banks and world finance. The source of today’s crisis and reason global economies are reeling. Economists like Nouriel Roubini were once scoffed at. No longer. He warned for months that “the risk of a total systemic meltdown is now as high as ever since the credit crunch is gripping European banks as well” and spreading globally. Affecting good ones as well as bad. Trashing the baby with the bath water. Erasing savings for tens of millions everywhere. And for seniors who may not have time to recoup.

The crisis didn’t emerge like Topsy. It’s been simmering for years, and in July 2006 historian Gabriel Kolko warned about it in an article titled “Bankers Fear World Economic Meltdown.” He noted how:

the “whole nature of the global finance system has changed radically in ways that have nothing whatsoever to do with ‘virtuous’ national economic policies….The investment managers of private equity funds and major banks have displaced national banks….moving well beyond regulatory structures….Traders have taken over from traditional bankers because buying and selling shares, bonds, derivatives and the like now generate the greater profits, and taking more and higher risks is now the rule….They often bet with house money (and) low interest rates….let them do things….that were once deemed foolhardy.”

Compounded by the irrational development of global finance, liberalization and loose regulations. Playing fast and loose and betting on the come. The potential gains are enormous and so are the risks of a major financial crisis. A meltdown. Now we’ve got one that global institutions are “utterly inadequate” to deal with.

Kolko warned then that “the entire global financial structure (was) becoming uncontrollable….financial liberalization produced a monster….contradictions wrack the world’s financial system (that’s) both crisis-prone (and) immoral. (We) may very well be on the verge of serious crises.” Now we’ve got one and in dire straits.

Because “a kleptocratic class (took) over the economy,” according to economist Michael Hudson. A criminal element betting on high returns through computerized gambling “and when bad bets are made, bailouts are the (payoff) for campaign contributions.” For having friends in high places as well.

Today’s crisis isn’t an accident or from happenstance. It was planned, according to economist and critic F. William Engdahl in his recent article titled “Behind the Panic.” To “shape the future of global banking” through creative destruction. Panic incited by a well-designed “long-term strategy.” To change the “face of European banking.” Weaken it with toxic junk. Asset Backed Securities. Force enough of it into liquidation or cheap enough to buy at fire sale valuations. The idea being to “create three colossal global financial giants - Citigroup, JP Morgan Chase, and Goldman Sachs.” Add Bank of America and make it a foursome. Then use their “muscle to ravage European banks.” Even if they wreck the US and world economies. Resuscitate them so they can “advance their global agenda over the coming years.” To dominate world finance and increase US hegemony in the new century.

That’s the scheme, and Engdahl calls it “a fight for the survival of the American Century.” Built on “the twin pillars of American financial (and military) dominance,” but the game is far from over. “Battle lines are drawn.” EU nations have their own ideas. Stabilization and recovery plans as well that differ from Washington’s and look much sounder. It remains to be seen where things are heading and whether competing nations can work together and do it effectively. They haven’t much time.

Washington’s Efforts to Shape the Last Century

Engdahl recounted some of them in his important book on war, geopolitics, oil and finance: “A Century of War.” He explained how Washington designed “the greatest confidence game” ever. A “special hegemony” to:

– print limitless amounts of dollars;

– accumulate huge trade deficits;

– “inflate (the) currency beyond imagination;”

– have the government pay bankers interest on its own money; and

– create an unprecedented public and private debt to enrich the few at the expense of the many.

Up to now it worked. Let America rule the world. Control its energy and finance. Avoid serious challengers and crush potential ones.

From the early years of the last century, US muscle flexing took many forms. From conflicts to geopolitics to controlling world resources to financial warfare. JP Morgan and other Wall Street notables were experts on the latter. Creating panics for greater power. Like today’s with similar aims.

In 1969, Richard Nixon had his own scheme with the country in recession. Interest rates were cut. Dollars flowed abroad. The money supply was expanded, and in May 1971 America recorded its first monthly trade deficit. It triggered a panic US dollar sell-off. Gold backed the currency then. Reserves were one-quarter of official liabilities, and (on August 15) Nixon unilaterally imposed a 90-day wage and price freeze. A 10% import surcharge. An 8% currency devaluation, and he closed the gold window. Suspended dollar convertibility into the metal and ended compliance with Bretton Woods’ core provision. He pulled the plug on world economies. Shook them and on February 12, 1973 did again. With a further 10% dollar devaluation that created the worst global instability since the 1930s. What lay behind his actions?

To buy time ahead of a bold new monetary “paradigm shift.” To revive a strong dollar and US hegemony. By a “colossal assault” on world industrial growth. Through an engineered oil embargo. A 400% increase in oil prices. A flood of petrodollars to be recycled into US investments and purchases. Big Oil and major banks to profit hugely at the cost of economic crisis. The worst since the 1930s. Causing bankruptcies, unemployment and stagflation.

Under Jimmy Carter in 1979, Fed chairman Paul Volker advanced his own radical monetary policy on the pretext of fighting high inflation. It was another Washington scheme to preserve dollar hegemony. Keep it the world’s reserve currency, and do it by crushing industrial growth to let political and financial power prop up dollar strength.

It worked by raising interest rates from 10% to 16% and then 20% in weeks. The US and world economies plunged into deep recessions, and the dollar began a strong five year ascent.

In the 1980s under Ronald Reagan, Mexican president Jose Lopez Portillo wanted to use his oil revenue to modernize and industrialize the country. To make it stronger and more independent. That prospect was anathema to Washington and it reacted. With a scheme to demand rigid repayment of Mexican debt at exorbitant rates.

In 1981, it began with an orchestrated run on the peso. Stories were circulated about an impending devaluation and capital flight. Portillo instituted an austerity plan, and his government cracked under pressure. The peso was devalued 30%. Mexican industry was devastated. Industrial production cut. Bankruptcies followed. Millions of Mexicans suffered grievously. The nation became effectively insolvent. It had to accept IMF help. Took on large amounts of debt, and major banks profited hugely by working with the government and IMF. Socializing the debt. Spinning it off to tax payers and privatizing gains through structural adjustment looting. Similarly in other countries. Causing mounting debt. Charging onerous interest rates, and earning greater profits from hundreds of billions of dollars in servicing costs.

Reagan-era deregulation caused the S & L crisis. A lesser version of today’s. By letting banks invest in speculative real estate. Engage in massive fraud. And get the right wing Cato Institute to say: “If Congress had set out in 1980 to create an environment that would lure all the crooks and frauds in the country into one industry, few would have been more suitable than” this one. “It was easy (finding) disenchanged S & L owners who were willing to sell out for a reasonable price, and once one had an S & L charter, opportunities abounded.”

It ended up bankrupting hundreds of banks. Shrunk the industry from 4500 in 1979 to about 2200 in 1991 and hundreds more afterward. It also cost taxpayers around $200 billion. Pocket change compared to the trillions needed for the current crisis.

In the 1980s, Japan was the country that could say “no.” At decade’s end, it was the world’s economic and banking leader. Because reckless speculation left American banks in deep crisis. Japan operated more prudently. It prospered, and challenged American dominance. Washington feared former communist countries would adopt its model. This was anathema. It might shut out US companies. Show Japan’s way was superior so it had to be stopped.

The 1985 Plaza accord was the scheme. To get Japan to exercise monetary and fiscal measures to expand domestic demand and reduce the country’s external surplus. At the same time, the Bank of Japan held interest rates at 2.5% from 1987 - 1989. To stimulate US goods purchases. Instead cheap money went into Japanese stocks and real estate. It created two colossal bubbles. A lost decade followed, and the economy is still recovering and under new duress from the current panic.

The 1990s Asian crisis was also manufactured. In summer 1997, it hit. For no apparent reason beyond rumors that the Thai bhat was in trouble, and Thailand had too few dollars to back it. “Asian Contagion” was unleashed. Hot money came in earlier. Then exited electronically. From Thailand, Indonesia, South Korea, the Philippines, and other Asian Tiger countries. Through a Washington-engineered scheme because these nations’ economic model bested America’s and threatened it.

Tiger countries grew by protecting their markets and barring foreign companies from owning land and national firms. They also restricted Western and Japanese imports to grow their own economies and homegrown industries. Again anathema so it had to be stopped.

The countries were hammered. Forced to devalue their currencies and get IMF help. With strings. Accepting debt bondage. Opening their markets. Structural adjustments. Privatizations. Spending cuts. Mass layoffs and constrained wages and benefits. The whole toxic package in return for aid. The regional toll was devastating. An estimated 24 million lost jobs. Its growing middle class destroyed. A black hole of misery for around 20 million people. Forcing them to do anything to survive. Crushing the Asian miracle to let Western brands replace local ones. Bargain hunters get great deals at fire sale prices. The New York Times called it “the world’s biggest going-out-of-business sale.” The region now hammered again from the current crisis. No secret where it was manufactured. No telling how it will end up. No guessing many millions feel pain and are fearful.

No end to other notable examples. Two especially stand out. The 1990s ones affecting post-Soviet Russia and South Africa. In each case, neoliberal “shock therapy” was devastating. It empowered an oligarch class in Russia. Let them strip mine the nation’s wealth and offshore it to tax havens. Impoverished tens of millions of people. Bankrupted 80% of farmers. Caused mass unemployment. Created a permanent underclass. An annual 700,000 a year population decline and much more.

South Africa fared no better. Despite Nelson Mandela’s pledge to support black economic empowerment. As president he surrendered to capital. The consequences were horrific. Far worse than under apartheid. Double the unemployment rate and number of people in desperate poverty. Millions of poor blacks without homes. Another million evicted from farms. One-fourth of the population with no running water or electricity. Around 60% with inadequate sanitation. A 13 year life expectancy decline since 1990. Appalling human wreckage much like what happened in Russia and elsewhere. To empower capital at the expense of people. Heading for America and in one week took a quantum leap.

Spreading everywhere. On October 2, enough for The New York Times to say that Latin American leaders have gone from “schadenfreude to fear(ful).” Hugo Chavez skipped the UN General Assembly opening to visit China and said Beijing is more relevant than New York. Venezuela and Bolivia expelled their US ambassadors, and Brazil’s Lula da Silva railed against an American regional naval presence and said his nation’s warships must be on alert in response. He’s also furious at Wall Street and Washington for the current crisis and said: “We did what we were supposed to do to get our house in order. They spent years telling us what to do and they themselves didn’t do it.”

Argentina’s Christina Fernandez de Kirchner was also bitter in stating: “We are witnessing the First World, which at one point had been painted as a mecca we should strive to reach, popping like a bubble.” And the Chicago Tribune quoted an Inter-American Dialogue expert saying that “whatever credibility the US had in the region, on economic management, that’s clearly gone.”

Forty world specialists from 20 countries attended the International Conference of Political Economy in Caracas, Venezuela from October 8 - 11. To analyze and propose South-based, alternative solutions to the financial crisis. Venezuela’s Minister for Planning and Development, Haiman El Troudi, highlighted his country’s relative strength. Its impressive economic growth (at 6% in first half 2008), and recommended that Venezuelans repatriate their US investments given the current climate. To protect them from unsafe American banks.

He and President Chavez also criticized the IMF and called for it to “dissolve….kill itself.” They were harsh on the World Bank as well. Chavez added that “We are decoupling from the wagon of death.” El Troudi said we are witnessing the end of neoliberal hegemony. Others agreed that a new model is needed. The old one clearly failed.

The Current Panic and Meltdown

Credit today is frozen. From a debt crisis, not a liquidity one. Markets are reeling as a result. Crashing in free fall from severe financial stress. From the largest ever leveraged asset and credit bubbles. Multiple ones. Imploding. Starting with housing. Causing widespread mortgage defaults and huge financial institution losses. Multi-trillions more asset dollars at risk. Compounded by banks reluctant to lend. Fearing they won’t be repaid. Prices are falling. Trust is eroded. Losses mounting from destructive deleveraging. Mortgages, stocks, bonds, commodities, credit, private equity, hedge funds imploding more intensively than since the Great Depression.

Forcing troubled companies to the wall. Each one exposing others. Some too big to fail but they did. Getting investors to run for the exits. Selling good assets to cover bad ones. Freezing up money markets. Making short-term Treasuries the only safe bet. Getting world governments scrambling for solutions. Already in recession and getting worse. Fearing an intensified financial crisis. A systemic collapse.Turning a deepening recession into a global depression. A disaster only urgent, well-designed, and coordinated actions may prevent. But no assurance anything will work this late.

Here’s what Nouriel Roubini and others recommend. Mirror opposite of EESA that will do more harm than good:

– additional rapid rate cuts globally; at least to 1% in America; much lower in the EU, Asia and elsewhere;

– guarantee all deposits until stability is restored at least;

– partially nationalize troubled banks; recapitalize them with public funds; in some form that now seems the plan according to The New York Times in its October 11 article headlined: “White House Overhauling Rescue Plan;” capital to be injected into banks by buying non-voting shares; what’s known is Henry Paulson’s October 10 statement that “We can use the taxpayer’s money more effectively….if we develop a standardized program to buy equity in financial institutions;” it remains to be seen what, in fact, happens; Paulson represents Wall Street; not the public, national or world interests;

– he’s not for reestablishing responsible regulation to curb market excesses; what economists like Roubini recommend;

– freeze all home foreclosures; establish a 1930s type Home Owners’ Loan Corporation (HOLC) to refinance homes and prevent foreclosures; let foreclosed homeowners retain their properties and pay affordable rent;

– ease the debt burden of distressed households; cap credit card and other high consumer loan interest rates at much lower levels; put cash in peoples’ hands; lots of it; at least several hundred billion dollars for starters; more if needed; as much as it takes;

– provide solvent financial institutions with as much liquidity as they need; corporate sector companies as well, including small businesses;

– save solvent companies; liquidate troubled ones too far gone;

– fund massive stimulus to revive the economy; for public works, infrastructure, education, alternative energy, unemployment benefits, job training, tax rebates to the needy, and state and local governments strapped for cash; money for what’s needed most and that can do the most good;

– get stronger, more solvent countries to help weaker, more indebted ones; and

– move on these policies fast; world governments have little time left to save themselves; there’s no assurance they can; and these measure don’t address our destructive military Keynsianism; permanent war economy and need to redirect those funds for constructive homeland needs; mirror opposite of a reported a new Pentagon document requesting an additional $450 billion over the next five years.

Reeling from One Policy Response to Another

First came EESA. The Emergency Economic Stabilization Act. To reward fraudsters and not address the root of the crisis. Nor help millions of troubled households. Homeowners in foreclosure. Others threatened. The public traumatized by the most calamitous economic events since the 1930s.

Europeans formed their own plans. Different from Washington’s. On October 10, G-7 finance ministers met to discuss policy. In early evening, they presented an action plan. Long on promises. Short on specifics. The New York Times reported that: “Many investors had hoped the ministers would (propose) more concrete steps” and quoted Peterson Institute of International Economics deputy director, Adam Posen, saying: “This fell short.” But he wasn’t giving up entirely or saying what they have in mind or will later decide can’t work.

They agreed to:

– act decisively with all available tools to support financial institutions and prevent their failure;

– unfreeze credit and money markets; assure banks and other financial institutions “have broad access to liquidity and funding;”

– ensure banks and financial intermediaries “can raise (sufficient) capital from public (and) private sources;” to rebuild confidence and get them again lending to households and businesses;

– ensure national deposit insurance protection is sound so people have confidence in the safety of their deposits; and

– take appropriate action “to restart the secondary markets for mortgages and other securitized assets;” assure accurate valuations and transparency according to “high quality accounting standards.”

Besides the US Treasury planning to “buy equity in financial institutions,” AP reported on October 12 that the 15 euro-zone countries will “temporarily guarantee future bank debt to encourage lending….for an interim period and on appropriate terms” for up to five years. Recapitalizing banks is part of the plan. The hope is to unfreeze credit and get markets operating normally again.

According to The New York Times on October 12, “each country will announce concrete figures for the measures they expect to take individually.” Belgian finance minister Didier Reynders said “There is no question of setting up a European fund.” A final proposal will be presented to the full 27-member EU summit later in the week, and individual parliaments will have to vote on it.

Key to understand about whatever emerges in final details or any that follow - world governments will loot their treasuries to save powerful capital interests. Despite bold pronouncements we can expect more of ahead, practically nothing will be done for many tens of millions of people globally in greatest need. At best for them….crumbs.

In the coming days and weeks, we’ll see statements become policies and how world markets react. Given the immensity of the crisis, no one’s sure if anything can work. Nor is it reassuring to hear George Bush say remain calm. We’ve got things under control. On October 10, the Dow dropped 300 points while he spoke.

In an October 13 Barron’s interview, noted money manager Jeremy Grantham (now age 70) was asked if he thought we’d learn anything from the current crisis. His response: “an enormous amount in a very short time, quite a bit in the medium-term, and absolutely nothing in the long-term.”

He’s been bearish since last year but added that “the fundamentals are turning out worse than” he expected. “The terrible thing - after all this pain - is that the US equity market is not even cheap.” It was so high in 2000 that it hasn’t come down to trend, but it’s getting close. However, “the really bad news is that great bubbles in history always overcorrect.” He believes S & P 500 fair value is around 1025 compared to its 899.22 October 10 close. But “typically bubbles overcorrect by quite a bit, possibly by 20%. This is very discouraging,” so he’s not rushing to buy but he fears he’ll act too soon. He predicts a market low in 2010.

Where he sees things going from here was also posed. He’s highly respected as an expert, and yet he emphasized “how little (he) understand(s about) all of the intricate workings of the global financial system. (He) hopes that someone else gets it, because (he) doesn’t. And (he) has no idea, really, how this will work out….(It’s) so intricate that all (he) can conclude, by instinct (and from history), is that it will be longer, harder and more complicated than we expect.” Quite an assessment from a man called “the philosopher king of Wall Street.”

The Human Cost of Manufactured Crisis

Ordinary people are hit hardest. Millions will suffer grievously for years as a result of this totally avoidable crisis. Fraudsters who caused it are rewarded. Innocent homeowners, households, and workers are punished. Mercilessly. The result:

– trillions of dollars lost; likely trillions more ahead;

– millions of lost homes, homeowners behind in their payments, or threatened with foreclosure in the worst housing crisis since the Great Depression; ultimately may exceed it given current estimates of up to 10 million foreclosures before stability and recovery;

– likely well over a million 2008 personal bankruptcies and much higher numbers in 2009 compared to 800,000 in 2007 and 573,000 in 2006; figures below the 2000 - 2005 1.5 million average before passage of the 2005 Bankruptcy Abuse Prevention and Consumer Protection Act; according to Samuel Gerdano, American Bankruptcy Institute director, consumer over-indebtedness “made worse by the home mortgage crisis” is the problem; it won’t likely recede in the near or intermediate-term;

– rising unemployment; not the spurious 6.1%; including discouraged workers and people working part-time who want (but can’t find) full-time jobs, economist John Williams puts the real figure above 12% and rising;

– consumer over-indebtedness; maxed out on credit but needing more of it to survive; and charged usurious rates to get it;

– declining wages and benefits in the face of soaring expenses; making it all the harder to cope;

– food banks and homeless shelters facing increasing demands but forced to turn away people for lack of resources; and

– things overall are worsening; to the edge of the abyss according to some; even the most optimistic fear what’s coming; who can know; no one dares be complacent.

Whatever final policies emerge. In whatever form they take. Unless they address the human dimension, they’ll do nothing for people in most need. Growing millions. Desperate and in trouble. Their issue is economic and ethical. The G-7 statement addressed neither. It dealt only with saving Wall Street. Industrial capitalism. A better idea is let them die and replace them with a new order. A workable one. Respecting people, not capital.

Pilger’s law: ‘If it’s been officially denied, then it’s probably true’

John Pilger, scourge of injustice, is still battling after half a century of campaigns. He’s even gunning for Tony Blair.

Cross the threshold of John Pilger’s south London home and the deep pile carpet gently gives way beneath the feet. Soothing strains of classical guitar waft through the air and, over mugs of tea, the great polemicist examines the impact of his career, his sentences punctuated by the mewling of a ginger cat.

This scene of domestic calm is not one Pilger’s many political opponents, or the millions who follow his work, would associate with the cage-rattling campaigner who has set himself against authority figures from Washington DC to the killing fields of Cambodia.

It is half a century since Pilger started out as a copy boy on the Sydney Sun and he turned 69 last Thursday. But he remains agitated by injustices which he sees at every turn in Britain and abroad. Forty years after he began working for Granada’s World in Action, he has been commissioned to make a new film examining the media’s portrayal of Britain at war. And in the New Statesman he calls the political establishment to account, most recently railing at the failure of the main parties to debate the Iraq and Afghanistan conflicts at their conferences.

Yet he has also set himself a fresh challenge, one that appears to have filled him with a sense of self-doubt. “I’ve started…,” he announces with a splutter of disbelief, “to write what I hope is my first fiction.” The author of a dozen books of journalism, he has yet to offer a sample of this “collection of short stories” to his publisher. “The wonderful thing about writing fiction is that you are released from the tyranny of facts, of having to get everything right, of sourcing everything that matters. Your imagination is released. But you know,” he adds, starting to laugh, “there is a bit of clash going on here and I’m not sure that it’s a good idea.”

After five decades as a crusader for truth, making stuff up doesn’t come easily, despite what some of his right-wing critics might claim. “It’s a real struggle. I’m constantly drawn back to non fiction because it is so much more interesting and vivid,” he says.

If the book does get finished, don’t expect to find Pilger wrestling with his emotions – “I’m not interested in navel gazing” – but developing characters he has observed on a journey that has taken him to war zones in Vietnam, East Timor, Palestine and beyond, always examining the roles of western governments in the conflicts.

More than anything now, he wants to conduct a sit-down televised interview with Tony Blair, if only he can persuade the former prime minister to go on camera. “ITV would take that – Blair is somebody I don’t believe has ever been interviewed properly,” he says. “I’ve approached the people you are meant to approach and the silence is ear-splitting. No surprise there.”

Later this month sees the release of a 16-disc DVD box-set of Pilger’s work, spanning 37 years of film-making and 52 documentaries. Though the documentary films were made for ITV, it is a series made for Channel 4 in 1983 he draws attention to. The Outsiders was a series of conversations between Pilger and maverick individuals he admired, many of them journalistic heroes such as Wilfred Burchett of the Daily Express, whom he reveres for having landed “the scoop of the century” in exposing the effects of the atomic attack on Hiroshima.

“I have his wonderful front page,” he says, leading the way up to his office via a staircase decorated with framed photographs of his journalistic adventures, family and friends. And there it is, Wilfred Burchett’s scoop from 5 September 1945 with the headline “The Atomic Plague”, the intro, “I write this as a warning to the world…” and the byline “by Peter Burchett”. “The sub got his name wrong. Wilfred forgave him,” observes Pilger. “The entire press corps of Japan were embedded and on the day he set out on this perilous journey to Hiroshima, Japan had just been defeated and foreign journalists were being shepherded to see General MacArthur receive a ritualistic sword of defeat. Burchett said, ‘To hell with that, that’s not the real story,’ and headed the other way.”

Burchett was demonised for his revelation that deaths at Hiroshima were caused by more than a bomb blast. The New York Times ran a “No Radioactivity in Hiroshima” piece and Burchett was branded a crazy leftie. The treatment echoes that meted out to Pilger following his 1970 film The Quiet Mutiny, which revealed rebellion in US military ranks during the Vietnam War.

That documentary, stemming from articles Pilger had produced for Hugh Cudlipp’s Daily Mirror, was denounced by the American government, which complained to the broadcasting authorities. “I had no experience of anything like this, everything seemed to fall down around my shoulders and it was disturbing. But the story that film told became the received wisdom all over the world within a year.”

To some in the modern media, Pilger is a figure from a bygone age, his name eliciting the sort of sighs of exasperation that until recently accompanied the notion of nationalisation. But he is convinced that there remains an appetite for left-wing journalism. “The influence of The Independent and Guardian are much greater than you would think. I don’t believe the majority of people in Britain have the so-called values of The Daily Telegraph and the Daily Mail and certainly not The Sun.”

In the morning, he logs on to the Information Clearing House, a US-based website that provides a digest of left-of-centre journalism, highlighting the work of Noam Chomsky, Robert Fisk and Pilger himself. Such sites ensure a large readership. “The internet has changed so much. In America alone, my New Statesman column reaches millions on the web.”

He returned briefly to the Mirror after the September 11 terrorist attacks, when Piers Morgan (who he appears to respect) was editing the paper. “It was a very rewarding 18 months,” he says. “I was happy to keep on writing for the Mirror, but Piers was under pressure from the management and American shareholders who objected to the kind of journalism that he was publishing, often written by me. It was a myth that the readers didn’t want a serious approach to journalism in a popular newspaper.”

When he speaks to journalism students, he is convinced “many start with the same passion I started with” and implores them to “keep your principles as you navigate the system”. His watchword remains, ‘Never believe anything until it’s officially denied,’ a favourite expression of reporter Claud Cockburn, father of Independent journalist Patrick Cockburn.

Pilger hopes that his last documentary, The War on Democracy, and his forthcoming one, will encourage colleagues to take a more critical view. “If journalists can look behind the press-release version of events, or push back the screen of what is often propaganda but rarely recognised as such,” he says, “then we will produce true journalism, not a form of PR. We ought to be the agents of people, not power.”

Riot police use violence to break up student demonstration

Harare - Riot police broke up a student demonstration in Harare, injuring at least four people and arresting three Tuesday, in the first such incident of police violence since the signing of a power-sharing agreement by Zimbabwe’s political protagonists a month ago.

The attack on the peaceful demonstration took place just as former South African president Thabo Mbeki began mediating to try and rescue the agreement from collapse after President Robert Mugabe at the

weekend unilaterally allocated to his ZANU(PF) party the most important posts in the proposed power-sharing government.

Privilege Mutanga, a member of the national executive of the Zimbabwe National Students Union, said about 200 students had marched to Zimbabwe’s parliament to present a petition protesting over the failure since August of nearly all the country’s universities to open for the new academic year.

About 30 riot police, with batons, dogs and firearms, stopped them and told them to send two representatives with the petition to the parliament doors.

‘As soon as we did, they arrested them,’ she said. ‘Then they charged us, and we scattered. I tried to hide inside a shop doorway, but they saw that I was wearing a ZINASU T-shirt, so they pulled me out and beat me with baton sticks and kicked me.’

She was treated for bruising and swelling about her body and face. She said another student had suffered a fractured skull. Clever Bere, the president of ZINASU, was in police custody.

Police appeared to have suspended their outright ban on all public demonstrations following the signing of the agreement on September 15, and allowed several peaceful demonstrations to proceed without interruption.

Until then, any demonstrations, except by President Robert Mugabe’s ZANU(PF) party, have been met with force, with sometimes hundreds being savagely beaten - including, last year, Morgan Tsvangirai, who is prime minister-designate under the power-sharing deal - and people being detained in filthy police cells for weeks on end.

Observers say the attack on the demonstration is an indication that Mugabe’s regime is resuming its hard-line strategy against the octogenarian dictator’s regime as hopes for change falter.

Pilots ready to seek legal action over ID cards

The British Airline Pilots Association union has warned it may seek a judicial review of the government’s ID cards scheme to prevent pilots being forced to carry identity cards.

By Natasha Lomas | As part of a phased introduction of ID cards, the government has stipulated that people working in certain ’sensitive areas’ such as airports will be required to hold an identity card from mid-2009. Foreign nationals will also have to carry the cards, with theirs set to be issued from next month.

A spokesman for the British Airline Pilots Association (Balpa), which represents more than 10,000 airline pilots — some 90 percent of the UK workforce — said: “The possibility of [seeking] a judicial review is very high on the agenda.”

“[The review] would be on the basis that we are told repeatedly by ministers that the ID card scheme is voluntary but how can it be voluntary if we stand the prospect of losing our jobs?” he said.

The Balpa spokesman said pilots are of the view that security at airports can be tightened by implementing a national airport pass scheme, rather than by forcing them to carry ID cards. “We’ve been on at the government for a long time to standardise and have a national airport pass which in fact would do the trick but the government’s refusing to go down that line,” he said. “They say it’s up to individual airport owners.

“[But] you don’t have to go through the ID card route… It’s a false premise. Security can be tightened in other ways.”

Balpa’s national executive has already had several meetings with the government to voice its objections to ID cards, and further talks have been offered, according to the spokesman, which the union intends to take up.

However, he added: “Ministers tell us, ‘well, it’s going to happen anyway’.”

Additional primary legislation would be required for ID cards to become compulsory for every UK citizen or resident and, according to the government, there is no timetable for its introduction.

Counterterrorist Data Mining Needs Privacy Protection

Secret Papers Reveal Tony Blair Sold Out to Big Tobacco

Secret documents recently obtained by British reporters under the United Kingdom’s Freedom of Information Act that show former UK Prime Minister Tony Blair ordered tobacco sponsorship exempted from a new law banning tobacco advertising at sporting events. Blair’s action came immediately after his political party, the Labour Party, received a secret donation of one million British pounds from Bernie Ecclestone, the president and CEO of Formula One Motorsports. After winning the general election in 1997, the Labour Party had pledged to ban tobacco advertising, and in June 1998, the European Union formally adopted a directive prohibiting all tobacco advertising and sponsorship in the EU. The secret papers show, though, that within hours of his October 16, 1997 meeting with Ecclestone, Blair demanded the U.K. policy be changed to allow tobacco companies to sponsor Formula One car races, and that his aides went on to help him hide the truth behind the change. Philip Morris was the largest tobacco sponsor of Formula One racing.

New documents reveal No 10’s role in the first scandal to hit Labour in office in 1997

Tony Blair personally ordered an exemption for motor racing from a tobacco sponsorship ban after Labour received a secret £1m donation from Bernie Ecclestone, the Formula One boss.

New documents released under the Freedom of Information Act show he demanded a change of policy within hours of a meeting with Ecclestone on October 16, 1997, and his aides went on to blur the truth.

The affair was the first sleaze scandal of the new Labour era. At its height, Blair feared the episode would end his premiership and went on television to defend his reputation, saying he was a “pretty straight kind of guy”.

The new documents expose the extent to which he was the driving force behind plans to exempt F1 from Labour’s manifesto pledge to end tobacco sponsorship of sport, pushing a reluctant Department of Health into agreeing. Before Ecclestone’s £1m donation, Labour had planned a universal ban.

Tessa Jowell, a health minister at the time, emerges as having had serious reservations about the move. But a Whitehall memo written on October 31, 1997, states: “The prime minister has made clear his wish to see a permanent exclusion for Formula One from the scope of the tobacco advertising ban.”

The documents show how mandarins warned Blair that he could be misleading MPs over the sequence of events.

At the height of the scandal, the Tory MP John Maples put down a written parliamentary question asking when Blair told Frank Dobson, the health secretary, of his plans to exempt F1.

A briefing note to the Cabinet Office outlining possible responses to the question reveals that the date was October 16. It also reveals Blair ordered Jonathan Powell, his senior aide, to ring Jowell to discuss the issue that evening, shortly after meeting Ecclestone.

However, the note suggests Blair wanted to name October 29 as the date, to be consistent with his previous public claims that the decision was not taken until two to three weeks after the crucial meeting with Ecclestone.

Civil servants warned: “The draft reply is strictly true in terms of the final decision . . . but critics could argue that the answer was disingenuous in that the prime minister’s views had been clearly conveyed by the telephone call on October 16.”

The papers also suggest No 10 set out to mislead the public, via the media, about the prime minister’s role in the affair. A briefing note for Alastair Campbell, then Blair’s press secretary, offers guidance “to dispel the notion that the F1 approach was dictated by the PM alone, after meeting Ecclestone”.

Blair defended the plan for a dispensation on the grounds that the ban could lead to big job losses in Britain’s motor racing industry. However, it has emerged that the then Department for Trade and Industry (DTI) cast doubt on this claim. A memo from the DTI to the health department, sent in November 1997 when the government was still trying to decide how to implement the ban, says: “We believe it is unlikely that if F1 should leave the UK there would be an immediate effect on the industry as a whole.”

The episode took place before political donations had to be publicly declared. For days, Labour refused to reveal whether Ecclestone had given money to the party. As the controversy raged about whether government policy had been influenced by a donation, Gordon Brown, who knew of the gift, found himself denying all knowledge in a radio interview. He was later reported to have returned to the Treasury in anguish, claiming his credibility would be “in shreds” if anyone discovered he had lied.

November 5: government announces proposals to exempt F1 from tobacco sponsorship ban

Democracy Now Follows Up on NSA’s Illegal Spying and War Crimes

Democracy Now! today not only admitted that I had broken the story but followed up on the story of illegal NSA spying, including the evidence of war crimes.

James Bamford: “The Shadow Factory: The Ultra-Secret NSA from 9/11 to the Eavesdropping on America.”

The Bush administration’s wiretapping program has come under new scrutiny this week. Two influential congressional committees have opened probes into allegations US intelligence spied on the phone calls of American military personnel, journalists and aid workers in Iraq. We speak to James Bamford about the NSA’s spying on Americans, the agency’s failings pre-9/11 and the ties between NSA and the nation’s telecommunications companies. [includes rush transcript–partial]

James Bamford, investigative reporter who has been covering the National Security Agency for the last three decades. He came close to standing trial after revealing the NSA’s operations in his explosive 1982 book The Puzzle Palace. His latest book, which comes out today, is the third in his trilogy on the NSA. It’s called The Shadow Factory: The Ultra-Secret NSA from 9/11 to the Eavesdropping on America.

This transcript is available free of charge. However, donations help us provide closed captioning for the deaf and hard of hearing on our TV broadcast. Thank you for your generous contribution.
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* DEMOCRACY NOW! EXCLUSIVE: Fmr. Military Intelligence Sgt. Reveals US Listed Palestine Hotel in Baghdad as Target Prior to Killing of Two Journalists in 2003 (5/13/2008)

AMY GOODMAN: The Bush administration’s wiretapping program has come under new scrutiny this week. Two influential congressional committees have opened probes into allegations US intelligence spied on the phone calls of American military personnel, journalists and aid workers in Iraq. Senator Patrick Leahy and Senator Arlen Specter of the Senate Judiciary Committee and Senator Jay Rockefeller, chair of the Senate Intelligence Committee, say they want Congress to look into allegations from two former military intelligence officials.

The two whistleblowers—Adrienne Kinne, an Army reservist, and David Murfee Faulk, a Navy linguist—spoke last Thursday to ABC News. While the network claimed that marked the first time the two whistleblowers had come forward, they had both spoken out well before last week.

Blogger David Swanson wrote about them as early as July 2007, and in her first broadcast interview five months ago, former Military Intelligence Sergeant Adrienne Kinne, detailed the spying on Democracy Now! back in May.

ADRIENNE KINNE: I was stationed at Fort Gordon, Georgia, and I was actually mobilized shortly after 9/11 with a group of reservists who were eventually sent to Fort Gordon to work a mission, that it was actually a brand new mission. It was something not like anything I had done in military intelligence previously. And this new mission involved the intercept of satellite phone communications in Iraq and Afghanistan and basically a huge swath of the region around those two countries. It was really brand new, and basically there were about twenty of us who were put in charge of this new mission, to stand it up.

In the very beginning, basically what we did was that we would have a front end, which intercepted satellite phone communications in that region, and then it would transmit the satellite phone conversations back to the United States, where it would just fill up this queue in our computer, and we would just go through. And all the numbers were unidentified. So, at the beginning, it was just a matter of sifting through thousands upon thousands of unidentified satellite phone communications, as we kind of tried to sort out what phone number belonged to who and kind of go through the process of identifying phone numbers in the search for intelligence that might be related to operations in Afghanistan and, later on, Iraq.

ADRIENNE KINNE: We started listening to the entire region pretty much immediately. I think this was December of 2001. And I was mobilized from October 2001 through August of 2003. So I was working that mission pretty much from December through August of 2003.

And over the course of my time, as we slowly began to identify phone numbers and who belonged to what, one thing that gave me grave concern was that as we identified phone numbers, we started to find more and more and more numbers that belonged not to any organizations affiliated with terrorism or with military—with militaries of Iraq or Afghanistan or elsewhere, but with humanitarian aid organizations, non-governmental organizations, who include the International Red Cross, Red Crescent, Doctors Without Borders, a whole host of humanitarian aid organizations. And it also included journalists.

AMY GOODMAN: Former Military Intelligence Sergeant Adrienne Kinne, speaking on Democracy Now! in May. She and Navy linguist, David Murfee Faulk, were also interviewed for a new book on the National Security Agency by James Bamford, an investigative journalist and author of two earlier books on the agency. Bamford is among the plaintiffs in a suit filed by the American Civil Liberties Union on behalf of journalists, academics, aid workers and lawyers who feared they were targeted by government spying. A federal appeals court dismissed the case last year after ruling the plaintiffs can’t prove they were monitored. The ACLU might reopen the suit to include the new revelations by Kinne and Faulk.

James Bamford has been covering the National Security Agency for the last three decades. He came close to standing trial after revealing the NSA’s operations in his explosive 1982 book The Puzzle Palace. His latest book, which comes out today, is the third in his trilogy on the NSA. It’s called The Shadow Factory: The Ultra-Secret NSA from 9/11 to the Eavesdropping on America. Today, we spend the hour with James Bamford. He joins us from Washington, D.C.

AMY GOODMAN: It’s good to have you with us. Well, let’s talk about Adrienne Kinne’s allegations, spying on Americans and international aid workers in Iraq. What’s wrong with this?

JAMES BAMFORD: Well, there’s a lot of things wrong with it. First of all, they’re wasting their time, when they should be spying on or trying to intercept communications to and from terrorists. That was one of the complaints that Adrienne had and also Murfee Faulk had, that they didn’t join the military to listen to Americans doing pillow talk, because a lot of this was intimate conversations between Americans and their spouses back in the United States. They’ve been separated a long time, and you can imagine what a lot of those conversations dealt with. They were very personal matters dealing with finance, affection, and so forth. So they felt that they were morally wrong by eavesdropping on these people and then just wasting government money and wasting their time by listening to things that had nothing to do with the war on terrorism.

AMY GOODMAN: You know, it’s interesting. One of the things Adrienne Kinne told us was that she was spying on journalists at the Palestine Hotel. She knew they were journalists. She heard what they were saying over time. Here she was in Georgia, but spying on those people, those journalists, in Iraq. And she said she saw a document, she saw an email that put the Palestine Hotel on a—as a bombing target, and she immediately went to her superiors, because she was spying on them, she knew that they were journalists. She said, “But there are journalists in that hotel.” She learned a lot in this spying. Is this illegal?

JAMES BAMFORD: Well, you know, it would have been illegal under the old original Foreign Intelligence Surveillance Act. The way they’ve sort of contorted the new amendments to the act, it’s hard to tell what’s legal and what isn’t, because they’ve taken the Foreign Intelligence Surveillance Court largely out of the mix. And so, much of what is being done is governed by secret rules known as USSID 18, United States Signals Intelligence Directive 18, which is above top-secret. It’s top-secret code words. So what is legal, what isn’t legal, it’s very hard to tell.

And I think that’s why you really need a congressional committee to really take a look at this. What really needs to happen is a very in-depth examination of NSA post/11—actually, pre-9/11 and post-9/11, the kind that was done in the mid-1970s by Senator Frank Church, the Church Committee. I think that’s really the only way to get to the bottom of whether NSA messed up before the attacks on 9/11 and whether they’re doing things that are illegal or improper after 9/11.

AMY GOODMAN: What other allegations did the Navy linguist David Murfee Faulk make about what he was listening to in Iraq?

JAMES BAMFORD: Well, he confirmed a lot of what Adrienne was saying. And it’s interesting, because they cover such different times there. Adrienne was there from 2001 to August of 2003. David Faulk was there from November of 2003 until November of 2007. So you have this time period covered from 2001 to 2007. And they were both doing similar things. They had never met each other. So these are very independent views of what was going on over there. And so, you have this continuum from 2001 to 2007 of eavesdropping on Americans.

One of the things that David Murfee Faulk brought up was the fact that not only were they eavesdropping on a lot of these conversations, some of which were very intimate, but they would have sort of locker room chats about what they were hearing, and they would post—or they would notify their co-workers that you should listen to this, what they call “cut,” their conversations. You should listen to this conversation or that conversation. They’d laugh about it. And, you know, I don’t really think that’s what the soldiers over there that are fighting really appreciate, the fact that you have Americans back in the state of Georgia laughing over their intimate conversations.

So, the other thing that David Murfee Faulk brought up that I thought was very important and really gave a good insight into what—how some of this activity that’s taking place in Iraq comes about, you know, when they’re dropping bombs on houses and neighborhoods and busting down doors and putting people into Abu Ghraib and so forth, how does that come about? Why do they bust down this door or drop a bomb on that house? And the insight he gave, I thought was very interesting. He was saying how it’s these people here that are sitting in this windowless room in the state of Georgia, near Augusta, Georgia, that are listening to these conversations in Iraq, in Baghdad, and they’re making instantaneous decisions on whether somebody is telling the truth or not. So they’re writing out these—they’re doing these transcripts, and then they’re writing these little comments saying this person here, Ali, is saying he’s going to deliver a load of melons to his cousin Mohammed tomorrow. And then you have somebody making a decision: is he telling the truth, or isn’t he? Are these melons, or possibly could they be IEDs? And if a person says, “You know, I don’t think he’s telling the truth,” there’s a good chance that that house could be blown up or that person could be put in Abu Ghraib, or whatever.

And the point that David Mufee Faulk was making was that the people that are making these decisions, these sometimes life-and-death decisions, don’t have the proper training. They’re trained for sixty-three weeks in Monterey, California in standard Arabic. And what they’re listening to a lot of times is dialects that they don’t really understand, and they’re listening for nuances that they don’t really get, and idioms and so forth. And I think it’s very dangerous, and what the point he was making was it was very dangerous for—you know, sometimes these are just people right out of high school to—that have never been out of the country, and certainly never been over to the Middle East, to make these sort of life-and-death decisions based on just hearing one conversation out of context.

AMY GOODMAN: And they’re doing this from Fort Gordon, Georgia. Are they working for the NSA, the National Security Agency?

JAMES BAMFORD: Yes. The way this works—a lot of people don’t really understand how this whole system works—the NSA is sort of two organizations in one; the director of NSA wears two hats. If you ever get a letter from NSA or whatever, it says—the letterhead says, “National Security Agency/Central Security Service.” And the director always signs his name “Director NSA/Chief CSS.”

The National Security Agency is largely civilians, and they’re mostly the analysts and the people who design the sophisticated satellites and do a lot of the technical development work and break a lot of the codes and so forth. And the people on the front lines, the intercept operators, are almost all military, and some civilians who transition from the military into a private contractor, for example. So, most of those are the military, but they all come under the same organization. The military is technically the Central Security Service, which reports to the director of NSA, and the civilians are largely NSA analysts and so forth. So it’s the same organization. Adrienne Kinne, for example, she showed me her certificate that she received when she was there. In a big print at the top, it said “National Security Agency,” and it was an award of achievement for the good work she did while she was there on this NSA mission called Operation Highlander.

AMY GOODMAN: We’re talking to James Bamford, investigative journalist, author of three books now on the National Security Agency, his last out today, The Shadow Factory: The Ultra-Secret NSA from 9/11 to the Eavesdropping on America. We’re spending the hour with him. When we come back from break, just what is the NSA? And then we’ll talk about what happened in the lead-up to 9/11 and beyond. Stay with us.

Banks dictate conditions of US financial bailout

By Alex Lantier | The 936 point rise on the US stock market yesterday was the American ruling elite’s initial verdict on the extraordinarily favorable terms the government is granting to financial firms in the $700 billion bailout passed by Congress on October 3. Far from heralding improving economic conditions for working people, the Wall Street surge reflects the financial establishment’s success in extorting massive sums of money from taxpayers.

Several factors played important roles in the market’s rise. A technical correction was likely after the massive falls of last week, when the Dow Jones Industrial Average fell 2,236 points, or 21.33 percent, to 8451.19. The announcement of bank bailouts in Europe totaling trillions of dollars—under conditions where national governments are competing to rescue their respective banks—contributed to expectations that Washington would continue to bail out its own banks. Another major factor was undoubtedly a series of announcements by US officials underscoring that US banks would essentially dictate the terms of the bailout.

Late yesterday morning, news broke that the CEOs of the largest US banks would meet with US Treasury Secretary Henry Paulson, the former CEO of Goldman Sachs, to discuss the terms of the bailout. The Wall Street Journal wrote, “Expected to attend were banking executives including Ken Lewis, CEO of Bank of America; Jamie Dimon, CEO of JPMorgan Chase; Lloyd Blankfein, CEO of Goldman Sachs Group; John Mack, CEO of Morgan Stanley; and Robert P. Kelly, CEO of Bank of New York Mellon.”

A Treasury spokeswoman said, “Treasury and [the Federal Reserve] are meeting today with leading financial market participants to finalize details on a financial market stabilization initiative.” The Journal wrote, “One person familiar with the matter said Mr. Paulson is expected to discuss details of his new plan to take equity stakes in financial firms, among other points.”

The meeting’s roster underscores the social character of the bailout. A handful of current and former top banking executives gathered for a meeting, publicly announced a few hours before it took place and closed to the public, to discuss the conditions under which they will receive hundreds of billions of dollars in public funds. The fact that, in a healthier political climate, these executives would face investigation and prosecution for overseeing the predatory lending practices that led to the housing and credit crises was simply ignored.

In this meeting of the godfathers of American finance, no one was present who represented the overwhelming majority of the American population. Indeed, the participants live in a world of wealth and power that has no resemblance to the existence of ordinary working people.

One could start with Paulson himself, whose former bank stands to benefit handsomely from the bailout which he has authored. While at Goldman Sachs, Paulson amassed a personal fortune of $700 million.

According to Forbes magazine, Ken Lewis last year brought in a salary of $20.13 million, and his holdings of Bank of America stock are worth an estimated $112 million.

Jamie Dimon received a 2007 Christmas bonus of $14.5 million and holds $190 million in JPMorgan stock.

Lloyd Blankfein received a Christmas bonus of $68 million and his holdings of Goldman Sachs stock were worth $414.5 million last year.

Vikram Pandit received a $165 million signing bonus from Citigroup last year, together with a $2.7 million salary for a few months of work and $48 million in stock options.

John Mack received $41.8 million in compensation last year, and his 2007 holdings in Morgan Stanley stock were worth $220 million.

These firms’ stock, and particularly that of Goldman Sachs and Morgan Stanley, rose rapidly on news of the meeting with Paulson. Goldman stock rose 25 percent to $111 a share, and Morgan Stanley stock rose 87 percent to $18.10 per share.

Other financial stocks also rose significantly. Citigroup rose 13.25 percent to $15.98, Bank of New York Mellon rose 15.77 percent to $30.68, and Bank of America rose 9.2 percent to $22.79. JPMorgan stock fell in initial trading on fears of further write-downs, but after the meeting announcement it rose from just over $40 per share to close at $41.64.

Neel Kashkari, the assistant secretary of the treasury and ex-Goldman Sachs executive who is overseeing the $700 billion bailout, confirmed in a speech yesterday that his goal—in purchasing both equity (shares of stock) and assets of financial corporations—is to concentrate money in the hands of the biggest banks.

Kashkari told a Washington DC meeting of the Institute of International Bankers: “We are designing a standardized program to purchase equity in a broad array of financial institutions. As with the other programs [in the bailout], the equity purchase program will be voluntary and designed with attractive terms to encourage participation from healthy institutions.”

This emphasis on bailing out supposedly “healthy” banks reflects the increasingly shaky position of many of the major banks. They are jockeying for influence over the government handouts that will determine which banks profit, which suffer, and which close.

Writing 125 years ago in the third volume of his masterwork, Capital, Marx noted, “So long as things go well, competition affects an operating fraternity of the capitalist class… But as soon as it is no longer a question of sharing profits, but of sharing losses, everyone tries to reduce his own share to a minimum and to shove it off upon another. The class, as such, must inevitably lose. How much the individual capitalist must bear of the loss, i.e., to what extent he must share it at all, is decided by strength and cunning, and competition then becomes a fight among hostile brothers. The antagonism between each individual capitalist’s interests and those of the capitalist class as a whole then comes to the surface…”

This anti-social struggle between the various factions of the bourgeoisie is expressed in the secretive and exclusive character of the planning of the bailout.

The Treasury has set up the bailout’s asset purchases—which are to be carried out by private firms—so that only the largest companies will be able to participate and rake in the lucrative fees the government will pay out. Kashkari said: “Our initial procurements set high capability standards: for example, securities asset managers had to have at least $100 billion of dollar-denominated fixed-income assets under management. This is critical given the magnitude of the program—up to $700 billion. Treasury believes it would not be fiscally prudent to ask a firm that only had experience managing only a few billion to manage $100 billion.”

The Treasury is reserving the other roles in the bailout for an elite group of financial and legal firms. Kashkari stated that the Treasury Department had considered only three candidates for the role of “master custodian firm,” whose function, according to Kashkari, would be to “hold and track the assets we purchase as well as run and report on the auctions we use to buy the assets.” The Treasury also contacted six law firms as potential consultants on the bailout’s stock-purchase program. Kashkari added, “We received two proposals, and selected [top New York law firm] Simpson Thatcher [& Bartlett] on Friday.”

The result of this bailout—a major consolidation and restructuring of the US banking industry—will be quite harmful to the interests of the population. The smaller number of surviving banks will have even more market power to set interest rates and control access to credit for working people, students and small businesses.

While the best-connected firms will profit immensely from the bailout, the bourgeoisie and its political representatives insist there is no money for elementary social needs of the working class, such as foreclosure relief, universal health care and the right to a secure retirement. The major presidential and vice presidential candidates have uniformly called for cuts in existing, already inadequate, programs such as Social Security and Medicare.

The stock market’s rise today is not the advent of a new era of prosperity for the American people. Rather, the bourgeoisie is celebrating the Great Heist of 2008.

BRITISH STUDY SAYS POT LESS RISKY THAN ALCOHOL, SHOULD BE LEGALIZED

NORML - The potential health risks associated with cannabis are less than those associated with alcohol and do not justify the continued criminalization of the plant or its users, according to a report published by The Beckley Foundation - an independent British think-tank that analyzes drug use and drug policy. “There is no justification for incarcerating an individual for a cannabis possession or use offense, nor for creating a criminal conviction,” concludes the report, entitled “Cannabis Policy: Moving Beyond Stalemate.”

Authors of the report recommend that governments consider enacting legislation to tax and regulate the sale of cannabis, or - at a minimum - to institute administrative ‘fine-only’ penalties regarding its use.

“The rationale for severe penalties for possession offenses is weak on both normative and practical grounds,” authors state. “In many developed countries a majority of adults born in the past half-century have used cannabis. Control regimes that criminalize users are intrusive on privacy, socially divisive and expensive. . . They clearly do harm to the many individuals who are arrested, they abridge individual autonomy and they are often applied unjustly.