Uncovering the other ALECs

In an exposé first published at Truthout.org, Sarah Blaskey and Steve Horn report on what goes on behind the scenes with "stealth" lobbying groups.

May 23, 2012

Wisconsin state Sen. Lena Taylor (Dave Hoefler)
Taxpayer-subsidized stealth lobbyists: Lobbyists who circumvent normal lobbying regulations and procedures to advance the corporate agenda in statehouses nationwide on the taxpayer dime.
IF WASHINGTON, D.C. is the new Versailles, run by corporate overlords and their lobbyist-hired guns, then the 50 statehouses are its paternal twins. That is, while they look different in form, they share the same genetic function as avenues for the fulfillment of the corporate agenda.
The Center for Media and Democracy (CMD) has made this abundantly clear through its ongoing ALEC Exposed project, bringing sunshine to the tax-deductible, statehouse-level influence-peddling efforts made by corporations through the right-wing American Legislative Exchange Council (ALEC). ALEC has been described by CMD as a "corporate bill mill." (Full disclosure: Steve Horn is a former reporter and researcher at CMD. He was on the team that broke ALEC Exposed in the summer of 2011.)
ALEC, though, is not the only "corporate bill mill" playing this game.
"Taxpayer-subsidized stealth lobbyists" have upped the ante and skillfully advanced their agendas through bipartisan "trade associations" for state government officials--in particular, the Council of State Governments (CSG) whose multimillion-dollar budget is mostly funded by taxpayers. Through CSG and friends, lobbyists exploit a well-tethered network of nonprofits representing state-level officials to advance the agenda of their corporate clientele.
"In a climate of stalled federal initiatives, and what I think is really unprecedented partisan battling and bickering, these state legislatures are really shaping the national policy environment," explained one such stealth lobbyist, Michael Behm, in an interview. "I really think they [states] are the real engines of government. And that's why the private sector is interested, quite frankly."
This, then, is part one of a four-party story about how the "real engines of government" work. First stop on the voyage: the CSG.
"That other bill mill": Council of State Governments (CSG)
ALEC IS far and away the most well known of the consortium of 501(c)(3) organizations that allow corporate influence to seep into every facet of state-level government affairs. CSG, on the other hand, is not so well known.
Upon being sworn into office, all state-level legislators (there are about 7,500 of them total), as well as their respective legislative staffs, automatically become CSG members. The organization's membership also includes representatives from the executive and judicial branches of state governments.
Between 2009 and 2011, CSG's Internal Revenue Service (IRS) 990 forms indicate revenue between $29 and $34 million annually. While most of its sizable budget is covered by taxpayers, some 43 percent--or roughly between $12.5 and 14.6 million, according to its website; another 29 percent--or almost $8.4 to $9.9 million of these funds--come from what it describes as "entrepreneurial efforts" which can be loosely interpreted to mean anything from publication sales to a sizable chunk from corporate patronage.
Some perspective is warranted: 990s filed by ALEC in 2010 placed its entire budget at just under $6 million.
"CSG has long believed private sector involvement in the American governance system is critical in formulating sound solutions to public policy challenges," reads the web page for the organization's private enterprise Associates Program. The page also explains a range of benefits special interest groups will receive for annual dues of $6,000.
Many corporations spend additional money sponsoring leadership trainings and conferences.
The CSG "dating service"
ALEC HAS recently taken the hot seat for many of its model bills and for its lobbyist-politician "dating service" process. Yet the idea behind the ALEC model legislation process was, to be clear, originally conceived by CSG, which was founded in 1933. ALEC was born 40 years later, in 1973.
To date, CSG is responsible for publishing between 30-40 model bills annually, in a process called Suggested State Legislation (SSL). These bills are distributed to the states as templates of bipartisan "best practices" often promoting the agendas of multinational corporations.
Behm, the lobbyist, wrote the following about the SSL process:

Few other state officials meetings or forums capture the attention--and stimulate the heart rates--of government affairs professionals [lobbyists] as does the Council of State Governments' Committee on Suggested State Legislation. We pour through the Committee Dockets the minute they are released searching for those bills, or that one law, that caused us so much heartburn earlier in the session season and hoping that it didn't find its way onto the "Committee List." A flurry of e-mails begins, conference calls are scheduled and a full-court press of lobbying is launched on the Committee members.

One only has to look briefly at the most recent SSL dockets to see that the private sector is often successful in its lobbying endeavors.
Most recently, the 2013 SSL docket includes legislation written by and for the shale gas industry on hydraulic fracturing (fracking), as well as a corporate-backed, union-busting collective bargaining "reform" bill. Both of these policies have been, to date, associated exclusively with ALEC by critical observers.
Some other policy highlights of the past decade include, but are by no means limited to, these SSL templates, as well as policy position papers and what CSG calls its "Innovation Awards," (templates for executive-level initiatives) in the following arenas:

-- Biometric testing
-- Union-busting through acts like the Puerto Rico Public/Private Partnership Act
-- Cracking down on "illegal immigration" in a wide array of legislative packages
-- Carbon sequestration and storage (alias "clean coal")
-- Nuclear energy promotion
-- Teacher tenure "reform"
-- Charter schools/virtual charter schools
-- Anti-terrorism

CSG's SSL record makes clear that corporations, above and beyond promoting models beneficial to big business, simultaneously block the passage of models that could harm their bottom line.
Exhibit A: the behavior of the international pharmaceutical company, Metabolife International, Inc.
Frustrated with consumer complaints about the adverse effects of Metabolife 356 (a dietary supplement containing the problematic epinephrine), during an October 8, 2002, Congressional testimony, David W. Brown, CEO of Metabolife, spoke in favor of his company's 1998 CSG model. The SSL was designed to keep products containing epinephrine on the market by introducing a standardized regulation process.
Then, in 2003, Metabolife moved to crush other CSG model legislation that would have otherwise prohibited its dietary supplement from sale. The same docket included a model promoting the "use of epinephrine auto-injectors" to combat allergies and was included in the final volume.
Due to its $25,000, five-year CSG membership through the Twenty-First Century Foundation, Metabolife (like ALEC) was given a "voice and a vote" alongside politicians on the relevant task forces to recommend that the 2003 proposal be rejected from the SSL docket.
The CSG badge of approval
CSG SSL templates are widely distributed, explained Kelley Arnold, CSG's director of membership, marketing and media in an interview. "Electronic copies of every SSL volume are available online at www.csg.org, hard copies are mailed to majority and minority leaders in the legislature and to the governor in each state," she said. "Any state official may call and request a complimentary copy."
But how does a bill get to CSG in the first place? Reached by e-mail, Arnold wrote, "All legislation submitted for consideration MUST have been introduced in at least one state and the CSG Committee on Suggested State Legislation prefers to consider legislation that has been enacted into law by at least one state."
These CSG bills, unlike ALEC bills--which at this point have a negative stigma in the public sphere--are viewed as having a "badge of approval" of sorts granted by politicians on both sides of the aisle.
"These Docket items can carry with them the imprimatur of a widely-respected state officials' group," Behm wrote in a blog post. He also cautioned that, "adverse legislation can get as widely distributed around the country as good legislation."
Wisconsin Democratic Sen. Lena Taylor, famous for her role in the winter 2011 "Fab 14" (often also referred to as The Heroic Wisconsin 14) Democratic Party officials' exodus from the state in protest of the then-proposed and now enacted anti-union legislation, said that the bipartisan nature of SSL makes it more respected than ALEC's model bills, and, therefore, potentially more easily adopted.
"It's known that Republicans and Democrats have worked together to create what you have," Taylor explained. "There are experts that can help you to navigate the process of explaining it to individuals and helping to make sure its implementation happens appropriately, so to say, in your state."
Virtual charter schools
AS A 2007 graduate of CSG Midwest's leadership training program, the Bowhay Institute for Legislative Leadership Development (BILLD), a corporate-financed training, which, amongst other things, promotes the charter school agenda, Taylor introduced a bill to the Wisconsin Senate in 2008 promoting, you guessed it, virtual charter schools. Later, the bill was adopted as a CSG model and has since passed in Indiana, Mississippi, North Carolina and other states.
K12 Inc., the nation's largest supplier of online K-12 educational platforms, has opened a school in Wisconsin as a direct result of the passage of Taylor's bill. CMD has linked a similar ALEC model bill to K12 Inc.
Until now, the virtual charter school agenda has been linked exclusively to ALEC, though this is far from the case. It is common to see corporations and special interests groups use both CSG and ALEC to promote their agenda--a two-pronged attack, if you will.
Guns
THE NATIONAL Rifle Association (NRA), the most powerful lobbying force in the United States, is now notorious for its role in the promotion of ALEC's Castle Doctrine bill, which codified the conditions that helped lead to the murder of Trayvon Martin in February 2012. A little-known fact is that the NRA also played a role in promoting a slightly tamer--and much less controversial--pro-gun model through CSG.
According to a 2010 Associated Press report, the NRA-endorsed CSG model, titled "Preserving Right to Keep and Bear Arms in Motor Vehicles," includes a measure based on a 2008 Florida law that says employers shall not prohibit workers from storing guns in cars parked in company lots. "The law has also been also been enacted in Arizona, Louisiana and Utah, according to the AP.
Tort reform
CSG AND ALEC have also broken bread over the so-called "tort reform" agenda.
A compilation report by Media Matters for America, as a case in point, shows that Crown Holdings, Inc., a Fortune 500 corporation, is using models promoted through both CSG and ALEC to avoid compensating cancer and mesothelioma victims who were exposed to asbestos by a company it purchased.
The company has already spent more than $700 million on asbestos-related claims and expenses. Supporters claim that the passage of the ALEC/CSG model legislation around the country is "essential as a matter of fundamental business fairness" and job creation. Most recently the model was considered in the Michigan House of Representatives.
ALEC published its asbestos model first in 2003, with CSG following its lead in 2008. That said, there are also examples where the order of publication is reversed.
CSG and its corporate patrons obviously wield much influence in statehouses nationwide. But CSG is not the only Other ALEC.
The National Conference of State Legislatures (NCSL) has been the basis of juxtaposition to ALEC for some, and has been written off as being a different breed than ALEC, an organization that dances to a different tune.
But is it really?
National Conference of State Legislatures: Corporate-sponsored "schmoozapalooza"
THE NCSL, considered an "instrumentality of the states" by the IRS, has served a "forum for America's Ideas since 1975." NCSL plays host to a series of educational conferences and task force meetings, and like its cousin, CSG, it boasts a membership that includes every state-level elected official in the United States.
One article comparing NCSL and ALEC reads, "ALEC may appear on the surface to mimic the bipartisan educational archetype of...NCSL, but ALEC's corporate governance structure, near total reliance on corporate funding, and strong ties to legislators from predominantly one political party make it distinctly different."
Yet, the situation is not so cut-and-dry. Yes, NCSL is different from ALEC, but it still a key tool for corporations.
"Schmoozapalooza" in action
THE SEATTLE Times quoted one lobbyist who described the 2005 NCSL National Summit in Seattle as a "schmoozapalooza," reporting that there were over twice as many lobbyists as legislators at the event. Over 600 people signed up for the event, yet only 1,300 of them were politicians, the rest being "lobbyists or people representing businesses, labor unions and other interest groups," according to The Times.
Corporations spent a lump sum of $1.3 million on the 2005 summit, including paying for politicians and lobbyists to attend "a (Seattle) Mariners game (a $142,000 expense, with the wine alone costing $12,000 for the day) and a fully catered Washington Extravaganza at Seattle Center (a $402,800 expense)." Boeing, Microsoft and the Gates Foundation chipped in $100,000 apiece to take part in the fun.
Summit speakers included Bill Gates and 2004 Democratic Party presidential candidate, U.S. Sen. John Kerry (D-Mass.).
The Washington legislature went so far as to eviscerate its state ethics laws in preparation for the "schmoozapalooza."
"To help cover the convention's entertainment costs, the legislature two years ago approved an exemption in the state ethics law allowing lawmakers to solicit unlimited contributions from businesses and special interests," explained The Times.
The most damning evidence of NCSL's shenanigans comes from an October 2010 report from ABC News' Nightline on the July 2010 NCSL Legislative Summit, which took place in Louisville, Kentucky.
NCSL--due to ABC's reporting--was the inspiration for a broader U.S. Department of Justice (DOJ) investigation on corruption in state politics. Nightline went so far as to describe state governments as the new "ground zero of influence peddling" for corporate lobbyists, using NCSL as a case in point.
Some of the investigative highlights of the Nightline report:

Golfing:
One legislator, Alabama Democrat Rep. Artis J. McCampbell, out on the golf links with lobbyists from the gaming industry and, ironically, skipping an NCSL ethics class, threatened to beat the journalist covering the outing with one of his golf clubs.< a href="http://abcnews.go.com/Blotter/top-federal-prosecutor-vows-crackdown-corrupt-state-legislators/story?id=11926099&page=3"> "Look," he told the journalist, "if you don't want me to take this to you, then leave, leave, leave, leave."
Other politicians on the scene included Alabama Democrat Sen. Bobby Singleton, and Alabama Democrat Rep. Oliver Robinson and Republican Rep. Harry Shriver, according to The Huntsville Times.
Groping:
At one of the many parties hosted by the conference, Puerto Rico lawmaker Jorge Navarro Suarez attempted to "grope and kiss" a Nightline journalist on the job.
Dancing, drinking and horse-race extravaganzas:
Nightline describes the scene best: "Corporate sponsors and lobbyists helped foot the bill for an extravagant river-front party featuring Kentucky barbecue, private dancing on the deck of the steamer Belle of Louisville, and live music...all invitation only.
It continued, "Later in the week, lawmakers were invited to Churchill Downs, where they were treated to private thoroughbred races, barrels of free bourbon, platters of tenderloin and prime rib, and the chance to win free access to a 2011 Kentucky Derby box."
"There's one thing you can say about Louisville, Kentucky," said Kentucky House Speaker, Democratic Rep. Gregory D. Stumbo of the scene. "They know how to party."

Bankrolled by corporate largesse
THOUGH NCSL is primarily supported by public dollars through state dues payments--over $10 million in taxpayer money went toward NCSL in fiscal year 2011--it also maintains a corporate-funded foundation, with sponsorship levels ranging from $7,500-$25,000.
NCSL Foundation had enjoyed a budget of $1.7 to $1.9 million for the past three years, according to its IRS 990 forms. A quick glance at the sponsorship list shows many of the largest multinational corporations in the world. By way of this tax-deductible route, corporate sponsors gain access to the conferences and task forces while funneling money into select NCSL programs, as well.
In 2011, upon his fifth re-election to the NCSL Foundation's board of directors, corporate stealth lobbyist Behm was recognized for actively promoting "public-private interaction and discussion of major state issues" and bolstering private sector "fundraising efforts."
"[The Foundation is] more important than ever during this day and age of cutbacks because, I'm just telling you, when the states have to cut back on their budgets, NCSL feels definitely feels the pain," Behm said in an interview.
The private sector has a vested interest in NCSL, which adopts policy position papers used to lobby the federal government on behalf of the states. In general, these policies promote states' "flexibility" (translated: cuts and privatization) in spending in areas like public higher education, as well as other spheres.
The NCSL higher education privatization agenda
A PRIME example of the push for so-called flexibility ensued in June 2011, when NCSL promoted the privatization efforts of public universities. "There is an important new conversation brewing," wrote NCSL in an article titled, "Taking the 'State' Out of State Universities."
"Can states continue to afford higher education? How important is it to maintain a public system? Why can't higher education be run more like a private business?"
NCSL has received over $1 million since 2007 from the Lumina Foundation to push the higher education privatization effort in the states. By contrast, ALEC has received $595,000 since 2008 from Lumina, all according to Lumina's web site's section on grants.
The funding stream behind Lumina's existence speaks volumes about the higher education agenda it is pushing. "Lumina Foundation is a conversion foundation created in mid-2000 as USA Group, Inc., the nation's largest private guarantor and administrator of education loans, sold most of its operating assets to Sallie Mae," explains Lumina on its web site.
Sallie Mae, lo and behold, gave nearly $21 billion dollars in student loans in fiscal year 2009, feasting on skyrocketing student tuition fees, which are directly linked to the "flexibility" efforts the foundation Sallie Mae bankrolls is pushing through NCSL (and ALEC).
In the meantime, scores of students are defaulting on these student loans.
Corporate-funded tutelage academy: State Legislative Leaders Foundation
THOUGH NOT directly responsible for any policy positions, per se, the State Legislative Leaders Foundation (SLLF), with an annual budget in the $2.5 to $3 million range, can best be described as a corporate-funded tutelage academy for majority and minority state-level legislative leaders nationwide. The organization bipartisan board of directors consists of 32 legislators: 16 Democrats and 16 Republicans.
SLLF's frequently-asked-questions section says that it is a "nonprofit, nonpartisan organization established in 1972 for the express purpose of providing our nation's state legislative leaders with information on critical public policy issues and aspects of leadership."
Further, it emphasizes that it does not accept public funding or members dues, and that all of its funding, without exception, comes from "contributions from the private sector, registration fees, and grants and contracts with governmental agencies and philanthropic foundations."
The SLLF Advisory Council consists of scores of multinational corporations.
Tutelage academy in action
ON AN annual basis, SLLF hosts the Emerging Leaders Program (ELP), sponsored by companies like Altria, Comcast, GlaxoSmithKline and Walmart, among others.
ELP is described by SLLF as "designed for those men and women who are judged by their peers to be likely future leaders in their state. For three days, more than 50 of these potential leaders convene for a series of intense interactive and often provocative discussions led by a distinguished University of Virginia, Darden (Business) School faculty member."
SLLF also hosts several other leadership forums on an annual basis. Like all of the Other ALECs highlighted in this article, the corporate-funded tutelage academy aspect is an often overlooked but vital part of these organizations' missions.
The big picture
ALEC AND its Republican Party-allied base are responsible for a plentitude of legislation that has passed in the 50 statehouses.
At this juncture, however, and contrary to the public narrative offered so far, ALEC's hyperconservative agenda actually is beginning to diverge in some key ways from the corporate agenda. It has become, to use the words of the Washington Post, a "liability" for big business.
ALEC's changing position was proven by the over a dozen corporations that withdrew their support from the group in recent weeks, citing its extreme agenda. "Our involvement with ALEC was focused on efforts to oppose discriminatory food and beverage taxes, not on issues that have no direct bearing on our business," read Coca-Cola's statement on the issue.
Other notables divesting from ALEC thus far include Kraft, Reed Elsevier, Intuit, McDonald's and the Bill and Melinda Gates Foundation. Many of touted these corporate dumpings as a victory, yet the corporations that bankroll ALEC continue to engage in stealth lobbying through CSG, NCSL and SLLF (and ALEC in most cases, for that matter).
The citizen's lobbying group Common Cause filed a lawsuit challenging ALEC's tax-exempt status, saying that it is an organization that lobbies in direct violation of its 501(c)(3) legal status. Not mentioned in the suit are 501(c)(3)'s like CSG, NCSL and SLLF, which engage in many identical lobbying practices under the auspices of bipartisan neutrality.
The glue that binds "the other ALECs" together
THE NEXT installment of "The Other ALECs" will reveal the glue connecting all of them, namely, stealth lobbyists working at Washington DC-based firms. These firms wed corporate clients to state-level legislators nationwide.
Also highlighted will be a revolving door arrangement between dozens of politicians and lobbyists who also have leadership positions in a number of the Other ALECs.
The fun, as they say, has only just begun.
First published at Truthout.org.

Québec students defy government threats

Roger Annis, an editor of Canada's Socialist Voice, reports on the ongoing strike of Québec students--and the steps the government is taking to stop it.

May 23, 2012

Students on the march through Montreal (Tina Mailhot-Roberge)
THE STRIKE of post-secondary students in Québec has taken a dramatic turn with the provincial government rushing adoption of a special law on May 18 to suspend the school year at strike-bound institutions until August and to outlaw protest activity deemed disruptive of institutions not participating in the strike.
Details of Bill 78 were unveiled the day before and debated in a special, overnight session of Québec's National Assembly. They include a ban on demonstrations within 50 meters of a post-secondary institution and severe financial penalties on students or teachers and their organizations if they picket or otherwise protest in a manner declared "illegal." Demonstrations of 10 or more people must submit their intended march route to police eight hours in advance.
The elected representative and co-leader of the Québec Solidaire party, Amir Khadir, told the Assembly that the law aims to "criminalize and destroy" student organizations. Thousands of students marched angrily in the streets of Montreal, Québec City and Sherbrooke on the evening of May 17 as the law was being debated in the National Assembly.
Courts are beginning to process the hundreds of students who have been arrested over the past three-and-a-half months of the strike and issuing severe restrictions on movement and activity pending rulings.
The 24,000-member Bar Association of Québec has spoken against Bill 78. Among its concerns is the provision that the education minister may rule by decree on education matters, bypassing the National Assembly, including ordering education institutions to withhold the transfer of membership dues to student organizations.
Leaders of the unions of university and CEGEP (junior college) professors (the FQPPU and FNEEQ, respectively) as well as the large, trade union centrals have also condemned the measure.
Gabriel Nadeau-Dubois of the CLASSÉ student federation called the law "repressive and authoritarian. It restricts students' right to strike, which has been recognized for years by educational institutions." His colleague, Jeanne Reynolds, says the law is a "losing proposition" coming from a "haughty and arrogant" Premier Jean Charest. Both leaders reaffirmed the mass protest on May 22, saying, "No law will stop us from demonstrating."
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Government was failing to intimidate students and supporters
The Québec government provoked the student strike with its proposal last year, confirmed in its March 2012 budget, to increase tuition fees by 60 percent over the next five years. That was then modified to a 75 percent increase over seven years.
The deeply unpopular government has been battered and bruised by the strike, including on May 14, when Minister of Education Line Beauchamp submitted a surprise resignation. She buckled under the pressure of her responsibilities in carrying the government's hard line.
In the lead-up to Bill 78, politicians and editorialists were calling for greater use of police violence and court injunctions to break up student picket lines and support action by teachers and professors that have closed many colleges and university departments. But education administrators complained that the injunctions were "unenforceable" due to mass picketing. They were also nervous about the consequences of even more blatant exercises of police violence against students. Now they hope that the punitive measures in the new law will dissuade militant action.
The law targets another area of concern--teaching staff. Many professors have joined the picket lines of their students. They have said they would not be forced to teach under the threat of injunctions and riot police.
Following a police attack on students at CEGEP Lionel-Groulx north of Montreal on May 15, for example, Jean Trudelle, president of the FNEEQ said, "The scenes we witnessed here this morning have shocked everyone, beginning with the students and professors directly concerned. It is inhuman to ask people to teach after such events."
Pressure on all the parties involved in the strike is intense because the school year is at stake. Both available options--cancellation of the school year or an unlikely concession by the government to temporarily suspend the tuition freeze permitting CLASSÉs to resume--involve heavy financial sacrifices by students, making their tenacity all the more remarkable. Adding to the pressure on students is uncertainty over summer employment and the need to earn course credits during the summer months.
Bill 78 will complicate life for those in strike-bound CEGEPS because it projects that the current school year would resume in August and be completed in October. That means graduates intending to enter university would have to wait until September 2013.
The government, the business elite and editorialists in the mainstream media are counting on these pressures to push through the tuition increase. But they have underestimated student determination until now and, according to students, are still making the same mistake.
Some 160,000 students are on strike, approximately 35 percent of the post-secondary student population in the province. Of those, 65,000 are CEGEP students, all in Montreal and surrounding regions. Only small numbers of students at the three English-language universities are on strike, while the three English CEGEPs (located in Montreal) are fully functional.
One additional feature of the strike has been the participation of high school students. They have staged one-day walkouts from school and will likely have a strong presence at the May 22 action.
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Calls for inquiry into police violence against students
Televisions, radio and print news reports are full of discussion of the police violence that erupted in Victoriaville on May 4 in front of a hotel conference center where the governing Liberal party was holding a meeting of its executive council. The riot squad of the Québec provincial police (Sûreté du Québec) unleashed unprecedented violence against protesters that shocked many in the province.
According to estimates published in the daily newspapers, police fired 30 plastic bullets, more than 100 concussion grenades and countless canisters of CS gas and pepper gas. Two students were gravely injured when struck by police projectiles--Maxence Valade lost an eye and Alexandre Allard suffered a life-threatening concussion. Others suffered broken bones and teeth or other traumatic injuries from police truncheons.
Witnesses say that projectiles were fired point blank by police at the height of heads and upper bodies, in violation of police protocol (and elementary human rights). Photo and video news reports confirm the accusations. One video image captured the injury suffered by Allard.
Police blocked bridges leading out of Victoriaville when the protest was over that evening in order to intercept and arrest protesters returning to Montreal or other points of origin. They turned back three entire buses of students and supporters, turning the buses into overnight prison cells. Passengers were selected for arrest as the night wore on and were otherwise instructed not to speak to each other or use communication devices.
The Montreal daily Gazette reports 110 arrests by police, and counting. There are widespread calls for a formal inquiry into police action. Among those voices are Québec Solidaire, the Parti Québécois and the League of Rights and Freedoms.
The use of plastic bullets against civic protests was harshly criticized (article in French) by a panel of five members of a legal observer team created by the Québec government to observe protests during the Summit of the Americas in Québec City in 2001.
A member of that team says today she doesn't know what became of their report. She says that in light of events in Victoriaville, it looks like it was simply "filed away."
The student strike has also occasioned other attacks on democratic rights. The federal government is moving on a new law that would criminalize the wearing of a mask at public assemblies declared to be "illegal." Montreal mayor Gilles Tremblay has quickly rushed a similar municipal law into place. (The mayor has his own troubles at hand. Three of his recent top aides were arrested on May 17 as part of a massive corruption probe of the construction industry in Québec that has rocked the province from top to bottom.)
Four young people may face prosecution under "anti-terrorist" legislation for releasing several smoke bombs in Montreal's underground subway system on May 10. The stunt closed the system for several hours during the morning rush hour. The accused surrendered to police the following day. Student leaders criticized the action and how it is being used to deter attention from the issues of their strike.
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Background on student strikers
Members of the three student associations waging the strike voted by massive margins during the week of May 7 to reject a shabby government offer to end the strike. The offer issued from 22 hours of overnight talks on May 4 and 5, between the government and the three large student associations--CLASSÉ, the FECQ and the FEUQ.
The revolt is fueled by deep opposition to what students consider to be the commercialization of education and degradation of social rights across the whole of society. Some view the strike as part of a broader, anti-capitalist struggle for a society of social justice. The association that expresses this most forcefully is CLASSÉ (Broad Coalition of the Association for Trade Union-Student Solidarity).
One of the goals of CLASSÉ is to spearhead a broader social movement in Québec society that could challenge capitalist dominance and fight for a new society based on principles of social justice. It proposes the tactics of broad, "social strikes" to forge a fighting alliance with workers and others victims of class society. Specifically for education planning and policy, it wants to convoke États généraux (civic assemblies) to discuss and decide education policy. The assemblies would be composed of the elected representative of the main protagonists in Québec education.
This resembles the "red university" strategy of the mass, student rebellion of the 1960s and 1970s in which students sought to use their capacities and the resources of the universities to spark broad, anti-capitalist struggle.
CLASSÉ represents just over half of the 160,000 striking students. The association's numbers have grown by 10,000 since the beginning of the strike from students switching membership from the other student groups. CLASSÉ's appeal is due to its principled stand for free, public education and its democratic internal functioning.
The association held a two-part meeting of its national council on May 10 and 13 in Montreal and Québec City, respectively, which discussed and approved strategy in the ongoing fight. It approved continuing mobilizations as well as support for campaigns of other movements such as women's rights, refugee rights and trade union-led opposition to privatizations and other attacks by governments on social services. There were some 200 delegates at the meetings.
Delegates voted to demand that representatives of employer associations be excluded from future talks on education with the government. The association considers that public education is being treated as a commercial entity in the capitalist market instead of the precious human and social right that it should be. "The elite already have enough outlets to express their views to government," said one delegate in the discussion of the resolution.
Another resolution proclaimed that CLASSÉ will not participate in permanent councils to oversee the management of education institutions. One aspect of the failed government proposal of May 4, 5 was the proposed formation of a multi-partite council to study education spending and recommend cuts to government. Student representatives and their allies (teachers, education workers) would be a minority on such a cost-cutting body or on more permanent versions.
Several delegates argued that "co-management" is a trap that places student representatives in unequal and disadvantageous positions. They said that the power of students stems from mobilizing actions in the streets and in the institutions. The goal of CLASSÉ, they reminded the Montreal conference, is radical social change, including free and universal access to education.
The conference session in Montreal spent considerable time discussing the relationship of CLASSÉ and the student struggle to the trade unions in Québec. There is dissatisfaction over the role that leaders of the large, trade union centrals played in the talks on May 4, 5. They were invited to participate by the government.
The union leaders came out of the talks saying that the government proposal could be a "road map" toward mitigating the government's tuition hike. They treated the proposal as a fait accompli, whereas student leaders insisted it would go to vote of their members.
Many student activists also consider that the non-education union federations and their affiliates have been long on statements of support and short on action.
Delegate after delegate in Montreal spoke of the importance of relations with the unions, saying that workers' rights and the social wage are under attack by the same government that is attacking students and education services. In the end, the meeting resolved to continue seeking points of agreement and common action with workers and their unions.
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A powerful movement in need of more allies
One need only ride public transit or stroll through downtown Montreal to appreciate the scope and power of this student strike. Montreal has the highest, per capita post-secondary student population of any city in North America. In the city core, there are four universities with an enrollment of 175,000.
Students recognize that they need allies in order to win demands for free, accessible education. The CLASSÉ association explains on its website that it is not asking simply for statements of support:

We wish, on the contrary, for a convergence of the entire Québec population against the politics of cuts and merchandising of social services and our collective rights. Only a generalization of the student strike to workplaces will make such a convergence effective. Our call, therefore, is a call to the entire population for a social strike!

Lex Gill, president of the student union at the English-language Concordia University, wrote in the May 12 Montreal daily The Gazette that the students, not the government, speak for Québec society on education matters:

A ballot in a box every few years should never trump the will of an entire generation...When the electoral process fails an entire generation, when public consultation isn't meaningful, when petitions, letters and phone calls to elected representatives go unheard, there is often no other option than to express (social) convictions in the streets.

Gabriel Nadeau-Dubois of CLASSÉ explained to journalists on May 13, "After 13 weeks of strike, an exceptional solidarity has been formed. Students are prepared to go much further in the struggle than was imagined at the outset."
This is the great fear that the capitalists in Québec and in Canada have for this movement. As a columnist in the national Globe and Mail daily lamented on May 14, "In Québec, students are confronting the Liberal Charest government ostensibly over tuition fees, but in reality over who governs."
First published at The Bullet.

A new stage of the resistance in Greece

May 23, 2012

New elections have been set for June 17 in Greece, and the far-left SYRIZA alliance is currently favored in opinion polls to take first place. If that happens, it would be a stunning blow to the austerity agenda that the bankers, bosses and political elite of Europe have imposed on Greece, in the form of the so-called “Memorandum.”
A first set of elections on May 6 dealt a devastating blow to the country’s two main parties, the conservative New Democracy and the center-left PASOK—which together ended up with fewer than half the number of votes they won in the previous election. SYRIZA, which stands for the Coalition of the Radical Left, catapulted from small-party status to second place. None of the three top finishers could form a government, so new elections have been called.
SYRIZA endured intense pressure to capitulate on its platform of repudiating the Memorandum and rolling back the austerity measures that were a condition of a financial bailout by the European bankers. With that stance gaining in popularity, SYRIZA is calling on left-wing party, including the Communist Party and the smaller anti-capitalist alliance ANTARSYA to work in alliance with the aim of forming a government of the left.
Antonis Davanellos is a leading member of the Internationalist Workers Left, a revolutionary socialist organization that was a cofounder of SYRIZA in 2004. He spoke to Ahmed Shawki and Alan Maass about the outcome of the May 6 vote and what will come next in Greece.

Greek workers march during a general strike last year

CAN YOU summarize the reasons behind the stunning result for SYRIZA in the May 6 election?

THE MAIN factor was the resistance of the workers and the people in Greece. In the three years that followed the signing of the Memorandum with the troika--with the European Union, the European Central Bank and the IMF--we saw huge resistance from the workers, from the youth and from the popular masses. This was not just inside Athens, but everywhere in the country. This is the most important factor.
SYRIZA was, from the beginning, very clearly identified as the part of the left that said a clear "no" to the Memorandum and that, at the same time, stood side by side with the people who were fighting. That was very important. And it was easier for us because of our policy of the united front--of the unity of the left and the unity of the movement--is a main characteristic of SYRIZA.
So in their day-by-day experience, people came to the understanding that SYRIZA was a good way to escalate the resistance. That was a major achievement by SYRIZA in the years before the election.
But also, some months before the election, SYRIZA made a point of saying that we can win. That was important because the Communist Party, which is bigger than SYRIZA, was saying that we can't do anything. As we wrote in DEA's newspaper: "They chose to proclaim to the people that any effort they make to change their lives today, rather than in some sort of 'people's power' regime of the distant future, is a dangerous illusion."
So before the elections, SYRIZA was the only part of the left that was saying that we can win--that we can overthrow the current government and propose a new government of the left. We said that we must take this possibility to put an end to the Memorandum and all of the austerity measures, and permit the people to turn around the cuts in salaries, in pensions, in public schools, in the public hospitals, and in measures of support for the unemployed people.
We faced a very big question on this: Where will you find the money? And on that question, SYRIZA was also very clear.
We said that, first, we will stop the payments to the international and local banks--to the IMF, the European Central Bank and so on. We will stop paying the debt. Second, we said that we will tax the rich in Greece--the corporations and the wealthy. Third, we said that we must take public control of the banks--put the banks under democratic and workers' control.
These answers of where we will find the money are very near to the feelings of huge numbers of people. So that's why there was a popular tide of support to SYRIZA. Before the election, I think that I felt very optimistic in expecting that we would win between 12 percent or 15 percent. At the end of the day, we found ourselves with 17 percent.
This was a political earthquake. Around 3.4 million voters moved away from PASOK and New Democracy, compared to the last election--mainly to the left, though there was also growth for the Nazis. But it's clear that SYRIZA was the main recipient of many of these votes.

TELL US more about SYRIZA. What is its presence like in struggles and in neighborhoods?

SYRIZA IS a coalition of parties and organizations, and but there are also unorganized people of the left who participate. There is no unified political line within SYRIZA, but we have a strong agreement on the main points of the current period.
SYRIZA is organized into local committees. Its connection to local struggles has been very important over the years. And SYRIZA is also supporting a coalition of rank-and-file union workers of the left inside the factories and inside the public sector. At this rank-and-file level, we have very strong relations with the comrades of ANTARSYA. On many levels, we are acting together--in the unions, at the demonstrations, in the big struggles.
So people have seen members of SYRIZA on the front line of everyday struggles. But it was also very important to have a presence at the national political level. People know from what SYRIZA was saying at the parliament, and in the newspapers and the media, that it was supporting the different struggles.
We have faced real pressure, as well. If you remember some years ago, in December 2008, there was a rebellion of the youth in Athens after the police killed a 15-year-old student. For a month and a half, Athens was burning every night. And SYRIZA was the only party that was saying, "Continue to demonstrate, don't go back." This was at a time when SYRIZA suffered a big loss of votes.
But now we are winning the votes of all these people around very important demands of a change from the austerity measures. People have come to understand they can trust SYRIZA.
In this last parliament beginning in 2009, we had only 13 members, but they did good work. The president of our parliamentary group, Alexis Tsipras, was a sharp and explicit critic of the government, in a way that expressed the anger of the people. There are also members like Panagiotis Lafazanis, who raised in parliament all kinds of questions critical in workers' struggles--the cuts in salaries and pensions, the changes in laws that have made strikes more difficult.
And so people understood the general political message of SYRIZA to be that we must resist and that we can win. Both parts of this message were important to our victory--not only resistance, but the slogan of a government of the left that can scrap the Memorandum.

WHAT HAS taken place since the election?

AFTER THE election, the bankers and the industrialists in Greece insisted that there must be a government, and so the two main parties, New Democracy and PASOK, pushed very hard to create a government of national unity or national salvation. They were promising almost anything to SYRIZA if we joined a government of national salvation.
In reality, the pressure was to push SYRIZA inside a government that would continue the policies of the Memorandum, which capitalism needs, not only in Greece, but which the European Union is demanding as well.
It was very important that SYRIZA resisted this, and it was a huge battle every day to do so. All the parties were demanding that SYRIZA take part in the government. And we were saying no--we will not participate in a national unity government. We said that we have declared before the people that the only government we will take part in or form is a government of the left, a government that will change the Memorandum and all the laws that of the last three years, during the period of the crisis.
Now, the efforts to form a national unity government have collapsed, and we are facing new elections in a month. Many polls are saying that SYRIZA will be in first place in the next election--with 20 or 25 percent of the vote, and the expectation is that this number will only grow.
We have an incredible situation. This is not revolutionary, not pre-revolutionary, but we are confronting the fact that in a month's time, SYRIZA will be the leading party in the country.
So we will be called on at that point to form a government that can transform things for the people of Greece. But we also know the reality of our organized forces and what we have inside the banks, inside the army, inside the police. So we understand the challenges.

SO WHAT will it mean to prepare for this next election?

THAT'S A very difficult question because we have a huge responsibility to the people who are supporting SYRIZA. We must ask all the real questions--what is it we want to change and what is it we can change.
We also have a responsibility to transform the situation of the left. We will call again on the Communist Party to have a relationship of unity with us. And we will also call on ANTARSYA to recognize that it would be silly to operate separately in this election--that it's very important to work with us and confront all these very serious challenges together.
At the same time, we must state clearly and honestly inside the people's movements that the only way that we can achieve real changes is when people are organizing and protesting in the streets and in the workplaces--when people get organized and struggle around many different issues, as well as the larger questions about society.
In the week after the election, when the pressure on us was huge, with groups of capitalists and officials of other European governments demanding that SYRIZA go back and accept the national salvation government, SYRIZA called open general assemblies of people in Athens--65 in all--to discuss the issues.
The participation was greater than anything we've seen before now. For example, in one poor neighborhood between Athens and Piraeus, where a meeting called by SYRIZA might have drawn 30 or 40 people, there were 1,000 people at the general assembly.

IS THERE anything that the left internationally should do to support the efforts of SYRIZA?

ABSOLUTELY. ONE big difference between SYRIZA and the Communist Party, as well as some "national" currents of the revolutionary left, is that we have always insisted that the solution to the crisis must be a European solution. When we say that, we aren't talking about currencies--the euro or a return to the drachma. We mean the solution lies in the relationship between the working class movements in Greece, Italy, Spain, Portugal, Britain, Ireland and so on.
This is what has historically changed the history of Europe. So we strongly support the building of relationships between the left in Greece and left organizations and parties throughout Europe. If Greece can set an example, then we can change the direction of things in Europe. But we need strong support in this, because alone, we can't do much.
We are keeping our eyes on the huge forces of the working class movement in Europe, which has traditionally been in Italy, France, Spain and so on. We need the help of all these forces.
It's not a fantasy to look to this kind of solidarity. I remember last year, during one of the worst nights of police violence we had here in Greece, that after many hours of facing tear gas in Syntagma Square in Athens, I got back home and I saw on television some pictures of a demonstration in Spain, with the slogan, "Our brothers in Greece, hold on, we are coming."
That sense of solidarity from below, between the workers of Greece, Italy, France, Spain, Portugal and so on, is what we need to change the situation.
I think it's very possible that we'll face some major provocations in the coming weeks. The rulers of Greece are very frightened right now. Until last week, they were hoping that the bourgeois parties would find a solution and create a government. Now they know that hope is finished, and they are very afraid about what comes next. If the elections happen and SYRIZA comes in first place, it will be more difficult for them to stop us--I don't mean it's impossible, but it will be more difficult.
So there are many possibilities of what they could do in a crisis--like close down the banks or stop paying pensions or things like that. And at that moment, we will desperately need the support of the European movement. If Angela Merkel of Germany or any other political leader tries to strangle the government in Greece, we will need the intervention of our sisters and brothers there on the left.
Transcription by Karen Domínguez Burke

Europe is driving full-tilt, foot on the pedal, into a brick wall

It’s unbelievable that we should be urging our neighbours to adopt a tighter fiscal union, argues Boris Johnson.

Message understood: graffiti depicting the euro symbol as a grenade about to be thrown, on a wall in Athens 

By Boris Johnson

6:22AM BST 21 May 2012

I see the G8 has a brilliant solution to the problems of the eurozone. President Obama says it’s time for “growth and jobs”. Jolly good. That’s the stuff. Let me show you how to create employment – the Brussels way.

Come with me through the streets of Athens, not far from Syntagma Square, and your mind will reel with the horrified realisation that history is not a one-way ratchet, that human progress is not guaranteed, and that a proud country can be reduced – by years of torture and bullying – to a state verging on total political, economic and moral collapse.

You will see businesses boarded up and windows smashed because no one has the money or the energy to fix them, and on almost every wall a riot of graffiti full of poisonous hatred for politicians. You will see people sitting on cardboard, heads down, hands out, or pushing trolleys full of scrap metal.

Not far from the town hall, I saw a man using the pavement as an operating theatre to eviscerate a mattress for its springs. In the eyes of every politician there is a glassy humiliation, a sense that the fate of the nation is no longer in their hands. Even worse than the humiliation is the dread that things will deteriorate further still. Thousands are now being fed by soup kitchens.

Unemployment is rising by the day, and among young people it now stands at a shameful 54 per cent. Yup, folks – those are the results of an EU plan to produce “growth and jobs”. It was called the euro, and it has been a catastrophe for Greece and pretty bad (with one notable exception) for the rest of the continent.

Via: the Telegraph

As far as I can understand the “strategy” of the EU, it is now to prepare for Greece to leave the single currency. Not that the Greeks themselves are anything like psychologically ready to quit: the politicians are punch-drunk, exhausted, and appalled at the loss of face and loss of security that would go with a sundering from “Europe”. Most voters choose pro-euro parties. But money is being withdrawn from banks; events are gathering momentum; and it is clear from their remarks that other EU leaders are getting ready for an outcome which until recently was held to be impolite to mention: the Grexit.
And then what? And then the strategy would appear to be to cauterise the amputation; to circle the wagons; to issue the most ringing and convincing proclamation to the markets that no more depredations will be tolerated; and to get the Germans to stump up, big time, to protect Spain and Portugal. We are told that the only solution now is a Fiscal Union (or FU). We must have “more Europe”, say our leaders, not less Europe – even though more Europe means more suffering, and a refusal to recognise what has gone wrong in Greece.
The euro has turned out to be a doomsday machine, a destroyer of jobs, a killer of growth, because it entrenches and exacerbates the fundamental and historic inability of some countries to compete with Germany in making high-quality goods with low-unit labour costs. Unable to devalue their way back into the game, these countries are forced to watch industry wilt under German imports, as the euro serves as a giant trebuchet to fire swish German saloon cars and machine tools across the rest of Europe.
Germany is almost alone in recording economic growth in the first part of 2012; Germany is doing well from the euro; and so the theory is that Germany should pay to keep the whole racket going by bailing out the improvident and the uncompetitive, just as London and the South East subsidise the rest of the UK.
Alas, it is not a strategy that is likely to work. As Angela Merkel has made clear, there is little political support – let alone popular support – in Germany. EU leaders may want a fiscal union, but it is deeply anti-democratic. We accept large fiscal transfers in this country because Britain has a single language and a single political consciousness in a way that Europe never will. Rather than creating an “economic government of Europe”, the project will lead to endless bitterness between the resentful donors and the humiliated recipients, as these diminished satrapies will be instructed to accept cuts and “reforms” – designed in Berlin and announced in Brussels – as the price of their dosh.
And it is not as if the markets will believe in these “firewalls”, or not for very long. If they can prise away Greece, they will know they can prise away others. As long as the euro can break up, there is always a risk that it will break up. So it is frankly unbelievable that we should now be urging our neighbours to go for fiscal union. It is like seeing a driver heading full-tilt for a brick wall, and then telling them to hit the accelerator rather than the brake.
Europe now has the lowest growth of any region in the world. We have already wasted years in trying to control this sickness in the euro, and we are saving the cancer and killing the patient. We have blighted countless lives and lost countless jobs by kidding ourselves that the answer to the crisis might be “more Europe”. And all for what? To salvage the prestige of the European Project, and to spare the egos of those who were wrong and muddle-headed enough to campaign for the euro.
Surely it is now time to accept that the short-term pain of a managed euro rupture – a wholesale realignment, possibly a north/south bisection – would be better than continuing to immiserate so many people around the continent.
At the end of a day in Athens, I was so sad at what I had seen that I went to a kafeneion and ordered a metaxa. And then another. At length, I fished into my wallet and found a rather handsome banknote, with an image of Apollo from Olympia. “Not today,” said the owner, politely declining my drachmas. “In a month, yes.” It will be awful for Greece, and turbulent for Britain, but at present I can think of no better solution.

“There was a kind of inflection point during the five-year period between 1997 and 2003 — the late Clinton and/or early Bush administration — when all the rules just went away. You went from a period, a regime, where people did have at least some concern about going to jail, to a point where everything is legal, and derivatives couldn’t be regulated at all and nobody went to jail for anything. And looking back I would say that this period definitely started under Clinton. You absolutely cannot blame this on George W. Bush.” – Charles Ferguson of Inside Job
“I never had any money until I got out of the White House, you know, but I’ve done reasonably well since then.” Bill Clinton

On December 21, 2000, as President, Bill Clinton signed a bill known as the Commodities Futures Modernization Act. This law ensured that derivatives could not be regulated, setting the stage for the financial crisis.  Just two months later, on February 5, 2001, Clinton received  $125,000 from Morgan Stanley, in the form of a payment for a speech Clinton gave for the company in New York City.  A few weeks later, Credit Suisse also hired Clinton for a speech, at a $125,000 speaking fee, also in New York.  It turns out, Bill Clinton could make a lot of money, for not very much work.
Today, Clinton is worth something on the order of $80 million (probably much more, but we don’t really know), and these speeches have become a lucrative and consistent revenue stream for his family. Clinton spends his time offering policy advice, writing books, stumping for political candidates, and running a global foundation.  He’s now a vegan. He makes money from books. But the speaking fee money stream keeps coming in, year after year, in larger and larger amounts.
Most activists and political operatives are under a delusion about American politics, which goes as follows.  Politicians will do *anything* to get reelected, and they will pander, beg, borrow, lie, cheat and steal, just to stay in office.  It’s all about their job.
This is 100% wrong.  The dirty secret of American politics is that, for most politicians, getting elected is just not that important.  What matters is post-election employment.  It’s all about staying in the elite political class, which means being respected in a dense network of corporate-funded think tanks, high-powered law firms, banks, defense contractors, prestigious universities, and corporations.  If you run a campaign based on populist themes, that’s a threat to your post-election employment prospects.  This is why rising Democratic star and Newark Mayor Corey Booker reacted so strongly against criticism of private equity – he’s looking out for a potential client after his political career is over, or perhaps, during interludes between offices.   Running as a vague populist is manageable, as long as you’re lying to voters.  If you actually go after powerful interests while in office, then you better win, because if you don’t, you’ll have basically nowhere to go.  And if you lose, but you were a team player, then you’ll have plenty of money and opportunity.  The most lucrative scenario is to win and be a team player, which is what Bill and Hillary Clinton did.  The Clinton’s are the best at the political game – it’s not a coincidence that deregulation accelerated in the late 1990s, as Clinton and his whole team began thinking about their post-Presidential prospects.
Corruption used to be more overt.  Lyndon Johnson made money while in office, by illicitly garnering lucrative FCC licenses.  It was the first neoliberal President, Jimmy Carter, who began the post-career payoff trend in the Democratic Party.  In 1978, Archer Daniels Midland CEO Dwayne Andreas convinced Carter to back ethanol subsidies.  After Carter lost to Reagan, he faced financial problems, as his peanut warehouse had been mismanaged and was going bankrupt.  AMD stepped in, overpaying for the property.  But Carter wasn’t nearly as skilled as Clinton, because he didn’t stay in the club.
Over the course of the next ten years after his Presidency, Clinton brought in roughly $8-10 million a year in speaking fees.  In 2004, Clinton got $250,000 from Citigroup and $150,000 from Deutsche Bank.  Goldman paid him $300,000 for two speeches, one in Paris.  As the bubble peaked, in 2006, Clinton got $150,000 paydays each from Citigroup (twice), Lehman Brothers, the Mortgage Bankers Association, and the National Association of Realtors.  In 2007, it was Goldman again, twice, Lehman, Citigroup, and Merrill Lynch.  He didn’t just reap speaking fee cash from the financial services sector – corporate titans like Oracle and outsourcing specialist Cisco paid up, as did many Israel-focused groups, Middle Eastern interests, and universities.  Does this explain the finance-friendly, oil-friendly and Israel First-friendly policies pursued by the State Department under Hillary Clinton?  Who knows?  But if you could legally deliver millions in cash to the husband of a high-level political official, it wouldn’t hurt your policy goals.
Speaking fee money isn’t just money, it is easy money.  In one appearance, for one hour, Clinton can make $125,000 to $500,000.  At an hourly rate, that’s between $250 million to $1 billion annually.  It isn’t the case that Clinton is a billionaire, but it is the case that Clinton can, whenever he wants, make money as quickly and as easily as a billionaire.  He is awash in cash, and cash is useful.  Cash finances his lifestyle.  Cash helped backstop his wife’s Presidential campaign when it was on the ropes.
And these speaking fees aren’t the only money Clinton got, it’s just the easiest cash to find because of disclosure laws.  Apparently, Clinton’s firm apparently had a paid $100k+ a month consulting relationship with MF Global, and Clinton and Tony Blair have teamed up to help hedge funds raise money.  His daughter worked for a giant hedge fund and political ally (Avenue Capital).  And Clinton has unusual relationships with billionaires and Dubai-based investors.
Bill and Hillary Clinton are the best at what they do, but they aren’t the only ones who do it.  In fact, this is what politics is increasingly about, not elections, but staying in the club.  Erskine Bowles, former White House Chief of Staff, lost two Senate elections.  But he’s on the board of Facebook and Morgan Stanley, as well as authoring the highly influential Simpson-Bowles plan to gut Social Security and Medicare.  Tom Daschle, who lost a Senate race in 2004, is a millionaire who in large part crafted Obama’s health care plan.  Former Senator Judd Gregg is now at Goldman Sachs.  Current Chicago Mayor Rahm Emanuel made $12 million in between his stint at the Clinton White House which ended in 2000 and his election to Congress in 2002.  Former Congressman Harold Ford, now at Morgan Stanley, is routinely on TV making political claims.  Larry Summers is on the board of the high-flying start-up Square.  Meanwhile, Russ Feingold, a Senator who did go after Wall Street, is a professor in the Midwest.  Eliot Spitzer is a struggling TV host and writer.
In other words, Barack Obama and his franchise are emulating the Clinton’s, and are speaking not to voters, but to potential post-election patrons.  That’s what their policy goals are organized around.  So when you hear someone talking about how politicians just want to be reelected, roll your eyes.  When you hear an argument about the best message or policy framework to use for reelection, stop listening.  That’s not what politicians really care about.  Elections in many ways are just like regular season games in basketball – they are worth winning, but it’s not worth risking an injury.  The reason Obama won’t prosecute bankers, or run anything but a very mild sort of populism, is because he’s not really talking to voters.  He just wants to be slightly more appealing than Romney.  He’s really talking to the people who made Bill and Hillary Clinton a very wealthy couple, his future prospective clients.  We don’t call it bribery, but that’s what it is.  Bill Clinton made a lot of money when he signed the bill deregulating derivatives and repealed Glass-Steagall.  The payout just came later, in the form of speaking fees from elite banks and their allies.
Ironically, Clinton has come to express regret about deregulating derivatives.  He has not given the money back.

Earth to Dimon: Banks Don’t Have a Right to Profit

Posted: 22 May 2012 04:34 AM PDT

This is by Yves Smith, cross-posted from the New York Times Room for Debate…
Preventing blow-ups like the JPMorgan “hedge” that bears no resemblance to any known hedge isn’t difficult. What makes preventing it difficult is that banks that exist only by virtue of state-granted charters — and more recently, huge transfers from the public — have persuaded public officials and regulators that they have a God-granted right not just to high levels of profit but also high levels of employee and executive compensation.
Banks enjoy state support because they provide essential services, like a payments system and a repository for deposits. One proposal to limit them to these vital services is “narrow banking,” or requiring that deposits be invested in only safe and liquid instruments. This idea was put forward by Irving Fisher and Henry Simons in the 1930s, and has been championed by the right (Milton Friedman), the left (James Tobin) and banking experts (Lowell Bryan of McKinsey).
A less radical idea would be to eliminate credit default swaps over time (they are too embedded in current practice to ban them; banks need to be weaned off them). There are no socially valuable uses for the product. Contrary to defenders’ claims, they aren’t a good way to short bonds (not only does it deal with only one attribute of bond risk, it does so badly: payouts in actual credit events on credit default swaps vary considerably, and are generally less than payouts to holders of real bonds). These swaps were the driver of the crisis. They were the mechanism that allowed real economy exposures to risky subprime bonds to be multiplied well beyond the number of actual borrowers and thus cause vastly more damage.
Another route would be to implement the Volcker Rule as Paul Volcker envisaged, meaning without the portfolio hedging exemption that JPMorgan relied on. Or officials could enforce Sarbanes Oxley, which has the chief executive officer certify the adequacy of internal controls, which for a major financial firm includes risk controls. Had any chief executives been targeted for Sarbanes Oxley violations for the massive risk management failures during the financial crisis, it’s pretty likely thatJamie Dimon, head of JPMorgan, would have thought twice before giving the chief investment officer both the mandate and the rope to enter into risky trades.
Maybe it’s time to recognize that these firms are too big and in too many complex businesses to be managed. Jamie Dimon was touted as a star who could supervise a sprawling firm running huge risks, and he fell short because no one can do the job adequately. A less disaster-prone financial system requires more simplicity and redundancy. Re-instituting Glass-Steagall or other variants on the narrow banking theme isn’t a full solution, but it would make for a good start.
Update by Yves: I’m not happy with the headline the Times put on this piece. The article did not say implementing Glass Steagall would have stopped Dimon’s losses but was an example of the sort of step that could help make the financial system less crash prone.

Over 99% of Federal Reserve Bank Enforcement Actions Are Resolved Without Admission of Guilt

Posted: 22 May 2012 09:56 PM PDT

Matt Stoller is a fellow at the Roosevelt Institute.  You can follow him on twitter at http://www.twitter.com/matthewstoller
In a hearing last week titled “Examining the Settlement Practices of U.S. Financial Regulators”, various regulators tried to justify their practice of settling with financial firms and not requiring them to admit wrongdoing. In that hearing, Federal Reserve General Counsel Scott Alvarez, stated that only seven of the roughly one thousand enforcement actions taken in the last decade were resolved without consent.

The vast majority of the Federa Reserve’s formal enforcement actions are resolved upon consent, which is fully consistent with the goal of resolving supervisory concerns with bank management quickly and firmly. In crafting enforcement actions that are entered by consent, the Federal Reserve typically sets out summary recitations of the relevant facts in “Whereas” clause provisions; however, like our fellow banking regulators, it has not been our practice to require formal admissions to the misconduct addressed in our enforcement orders given the remedial nature of our enforcement program. Requiring admission of fact and legal conclusions as a condition of entering into a consent action is likely to have a deleterious effect on our supervisory efforts by causing more institutions and individuals to challenge the requested relief in contested administrative proceedings, which typically takes years to reach final resolution, and which could delay implemenattion of necessary corrective action.

In other words, the Federal Reserve will only punish banks who break the rules if those banks consent to punishment.  This attitude is pervasive among all regulators.  Here’s the Office of the Comptroller of the Currency, which regulates among other banks JP Morgan Chase.

Obtaining an institution’s consent to an immediately effective order helps ensure that its problems are addressed at a stage when rehabilitation is still possible, thus helping the bank avoid failure…
The longstanding practice of permitting the bank or individual to neither admit nor deny wrongdoing allows the OCC to get an enforceable order in place at an early stage of the proceeding, and encourages compliance with the enforcement action and immediate correction of any deficiencies that need to be addressed. Because consent orders are made available to the public, requiring an admission of wrongdoing would prolong settlement negotiations and increase the number of respondents who choose to litigate the merits of the action.

Of all the regulators testifying, the Securities and Exchange Commission’s enforcement chief, Robert Khuzami, was the most embarrassing, announcing the SEC would be making a change to its practice of not forcing corporate actors to admit wrongdoing.

In light in the special situation where an SEC civil action may also involve a parallel criminal action, senior officials in the Division of Enforcement recently undertook a review of the “neither-admit-nor-deny” settlement policy. While reaffirming the policy more generally, as a result of this review, the Division, after consulting with the Commission, modified its policy to eliminate “neither-admit-nor-deny” language that could be construed as inconsistent with admissions or findings made in a parallel criminal proceeding.  In other words, it seemed unwarranted for there to be a “neither-admit-nor-deny” provision in those cases where a defendant had already admitted to, or been criminally convicted of, conduct that formed the basis of a parallel civil enforcement proceeding.

In other words, if the company has already admitted guilt in a criminal proceeding, where the evidence required is usually much heavier, then the SEC will ask the company to admit guilt in a civil proceeding.  Khuzami spent most of the hearing talking about how the SEC was getting most of what it wanted out of these settlements, anyway, without an admission of guilt.  This is, of course, nonsense.  I pinged Bill Black about why it’s important to make companies admit wrongdoing, and here’s what he said.

(1)  It demonstrates that what has occurred was a fraud (otherwise they deny it after the fact and insist they were simply being extorted), (2) the plea of guilty (as opposed to nolo contender) can be used by civil plaintiffs (and in administrative enforcement actions) to invoke “collateral estoppel.””  The defendant is estopped from denying their guilt in the civil action.  This makes it immensely easier for victims to recover, (3) offenders, particularly multiple offenders, are treated differently under the laws and rules.  The pleas can be used under RICO to establish a pattern of racketeering, under the sentencing guidelines to secure a tougher prison sentence, and to argue in favor of punitive damages and asset freeze orders.

The hearing was about District Court Judge Jed Rakoff’s refusal to sustain the Citigroup settlement with the SEC.  What was interesting about it, from a political standpoint, is that all three witnesses, including the witness brought in by the Democrats, opposed Rakoff’s move and supported the SEC’s position.  And one of the top Democrats on the committee, Carolyn Maloney, gave a long-winded opening statement in which she basically took the position that forcing an admission of wrongdoing was just too hard.  In other words, many high-level Democratic politicians, for all their gnashing of teeth about the need for regulation, aren’t being truthful.  They don’t want regulation, they want to be seen as wanting regulation.  And the Republicans, while they want to be seen as the party against regulation, are actually quite happy having regulators they can work with, regulators who protect the banks from state or local level action.
The argument over regulation or deregulation, in some sense, misses the point.  We need regulation, obviously.  But we also need strongly principled regulators.  And neither Barack Obama nor Mitt Romney has any appetite for that.