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AIG CEO Compares Anger at Wall Street Bonuses to the Lynching of Black People in the South

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I’m doing God’s work.
– Goldman Sachs CEO Lloyd Blankfein in a November 2009 interview

It’s war. It’s like when Hitler invaded Poland in 1939.
– Steve Schwarzman, Chairman and co-founder of Blackstone, on potential tax changes in 2010

The uproar over bonuses was intended to stir public anger, to get everybody out there with their pitch forks and their hangman nooses, and all that–sort of like what we did in the Deep South. And I think it was just as bad and just as wrong.
– AIG CEO Robert Benmosche in a Wall Street Journal Interview this past weekend

As if you needed any more evidence of how disconnected, entitled, irrational and sociopathic the heads of financial firms in America are these days, along comes AIG’s CEO Robert Benmosche to dispel any lingering doubts. In a highly disturbing interview with the Wall Street Journal, Mr. Benmosche compares the murder of black people in the deep south based on racial prejudice and hate to the vast majority of Americans expressing disgust with the fact that Wall Street decided to suspend capitalism when it was in their best interests in order to give themselves trillions of dollars.

He actually compares an environment where the rule of law was often completely suspended to allow the murder of a disenfranchised racial group, to widespread public anger about the suspension of the rule of law to benefit the wealthiest, most connected people in the nation.

The craziest part of his statement is that if anything, the bailout of financial oligarchs to the severe detriment of the rule of law, free markets and the best interests of the vast majority of the American public is actually what is most similar to lynchings in the south. In both cases, the rule of law was suspended to benefit the powerful over the weak. This man is a dangerous sociopath, and he is precisely the type of person you get in charge when you bail out institutions that should have died.

More from the Wall Street Journal:

Mr. Benmosche on the government’s campaign against partial “bonuses” to be paid to hundreds of employees in the AIG financial-products unit as they unwound massive, ill-fated bets on mortgage bonds. He said “less than 10” employees were behind the bad trades.

“That was ignorance … of the public at large, the government and other constituencies. I’ll tell you why. [Critics referred] to bonuses as above and beyond [basic compensation]. In financial markets that’s not the case. … It is core compensation.

Core compensation would have been reset in the financial industry down to more reasonable levels had there not been bailouts. That’s capitalism you crony jackass.

“Now you have these bright young people [in the financial-products unit] who had nothing to do with [the bad bets that hurt the company.] … They understand the derivatives very well; they understand the complexity. … They’re all scared. They [had made] good livings. They probably lived beyond their means. …They aren’t going to stay there for nothing.

So let them go. Again, isn’t that capitalism? What about all of the people that lost their jobs and are on food stamps now because of those “10 people” at AIG? Moreover, how many of those 10 are in prison?

The uproar over bonuses “was intended to stir public anger, to get everybody out there with their pitch forks and their hangman nooses, and all that–sort of like what we did in the Deep South [decades ago]. And I think it was just as bad and just as wrong.

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A Deep Look into the Shady World of the Private Prison Industry

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Private prisons are antithetical to a free people. Of all the functions a civilized society should relegate to the public sector, it’s abundantly clear incarceration should be at the very top of the list. Jailing individuals is a public cost that a society takes on in order to ensure there are consequences to breaking certain rules that have been deemed dangerous to the happiness and quality of life within a given population. However, the end goal of any civilized culture must be to try to keep these cost as low possible. This should  be achieved by having as few people as possible incarcerated, which is most optimally achieved by reducing incidents of criminality within the population. Given incarceration is an undesirable (albeit necessary) part of any society, the idea is certainly not to incentivize increased incarceration by making it extremely profitable. This is a perverse incentive, and one that is strongly encouraged by the private prison industry to the detriment of society.

I’ve written many articles highlighting the negative consequences of the private prison industry, and these have focused on the two biggest names in the space. Corrections Corp of America (stock ticker, CXW) and GEO Group. A few of my most popular articles on the topic are:

Texas Teen Faces 8 Years in Jail for an Insensitive Joke on Facebook

Idaho Dumps Private Prison Company Due to “Violence, Understaffing and Over-billing”

America in 2013: Florida Football Stadium Named After a Private Prison Company

In the Public Interest has taken this a step further in its recent excellent report titled: Criminal: How Lockup Quotas and “Low-Crime Taxes” Guarantee Profits for Private Prison Corporations.

In the Public Interest describes itself as:

A comprehensive resource center on privatization and responsible contracting.  It is committed to equipping citizens, public officials, advocacy groups, and researchers with the information, ideas, and other resources they need to ensure that public contracts with private entities are transparent, fair, well-managed, and effectively monitored, and that those contracts meet the long-term needs of communities.

Their report explains how private prison companies insist that states embed “occupancy guarantees” into their contracts with the public sector. They estimate that at least 65% of all private prison contracts have such guarantees, and in some states, like Arizona, the guarantee is a shockingly high 100%. This leads to overcrowding in many instances, and sometimes violent offenders are placed in prisons set up for nonviolent offenses just to fill the quotas. In the event that the beds can’t be filled, the taxpayer makes up the difference to the private prison company. They win no matter what. It’s just more crony capitalism. Below are some highlights from this excellent report.

Major Findings

  • 65 percent of the private prison contracts ITPI received and analyzed included occupancy guarantees in the form of quotas or required payments for empty prison cells (a “low-crime tax”). These quotas and low-crime taxes put taxpayers on the hook for guaranteeing profits for private prison corporations.
  • Occupancy guarantee clauses in private prison contracts range between 80% and 100%, with 90% as the most frequent occupancy guarantee requirement.
  • Arizona, Louisiana, Oklahoma and Virginia are locked in contracts with the highest occupancy guarantee requirements, with all quotas requiring between 95% and 100% occupancy.

In 2012, Corrections Corporation of America (CCA), the largest for-profit private prison company in the country, sent a letter to 48 state governors offering to buy their public prisons. CCA offered to buy and operate a state’s prison in exchange for a 20-year contract, which would include a 90 percent occupancy rate guarantee for the entire term. Essentially, the state would have to guarantee that its prison would be 90 percent filled for the next 20 years, or pay the company for unused prison beds if the number of inmates dipped below 90 percent capacity at any point during the contract term (a “low-crime tax” that essentially penalizes taxpayers when prison incarceration rates fall). Fortunately, no state took CCA up on its outrageous offer. But many private prison companies have been successful at inserting occupancy guarantee provisions into prison privatization contracts, requiring states to maintain high occupancy levels in their private prisons.

These contract clauses incentivize keeping prison beds filled, which runs counter to many states’ public policy goals of reducing the prison population and increasing efforts for inmate rehabilitation. When policymakers received the 2012 CCA letter, some worried the terms of CCA’s offer would encourage criminal justice officials to seek harsher sentences to maintain the occupancy rates required by a contract. Policy decisions should be based on creating and maintaining a just criminal justice system that protects the public interest, not ensuring corporate profits.

The private prison industry has promoted policies and practices that increase the number of people who enter and stay in prison. It is no surprise that the two major private prison companies, CCA and GEO Group, have had a hand in shaping and pushing for criminal justice policies such as mandatory minimum sentences that favor increased incarceration.

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American Dependency: A Food Stamp Micro-Doc

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My friend Dan at Future Money Trends has just put together a fantastic micro-documentary on the rise of our food stamp nation and the far reaching consequences to society. From the art of selling excess food stamp dollars at the end of each month, to JP Morgan profiting from the program as a line of … Read more

Zombie Nation: Homeless People Paid to Wait on iPhone Line in California

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There’s nothing quite like the release of a new iGimmick to mobilize the sheeple zombies from their usual slumber. In this case, the latest product is the iPhone5, or as a very clever and amusing video the other day mockingly renamed the iPhoneNsA. Bet you can’t wait for the upcoming videos of Black Friday, the … Read more

Bernie Sanders Passionately Decries the American Oligarchy on the Senate Floor

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Senator Bernie Sanders of Vermont is the longest serving Independent member of Congress in American history. While I certainly don’t agree with him on everything, I have always respected his willingness to call out the Federal Reserve for the fascist cartel that it is. He has often accurately called it “socialism for the rich.” Back in … Read more

A Tale of Two Subprime: Homes and Autos

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It was the best of times, it was the worst of times, it was the age of wisdom, it was the age of foolishness, it was the epoch of belief, it was the epoch of incredulity, it was the season of Light, it was the season of Darkness, it was the spring of hope, it was the winter of despair, we had everything before us, we had nothing before us, we were all going direct to Heaven, we were all going direct the other way – in short, the period was so far like the present period, that some of its noisiest authorities insisted on its being received, for good or for evil, in the superlative degree of comparison only.

– Charles Dickens, A Tale of Two Cities

The above passage is the opening paragraph of Charles Dickens’ classic novel about the French Revolutionary period, A Tale of Two Cities. I read the book back in tenth grade and it has stuck with me ever since. It wasn’t required reading for the class, rather it was the outgrowth of an assignment where each student had to independently choose a book to read. I had no idea what to pick so I went into the local book store and looked around. Charles Dickens was calling out at me from the shelves and I immediately purchased it. I quickly regretted my decision upon calling my best friend and learning that he had chosen his book, The Scarlet Letter based on its brevity. A Tale of Two Cities looked biblical by comparison.

All of my immature trepidation quickly dissipated as I started reading the novel and discovered that I simply couldn’t put it down. I was mentally and emotionally infected by the characters, the history, and the hard lessons learned. It created an indelible impression upon me that has never gone away.

Whether we want to admit it or not, we find ourselves in pre-revolutionary times at the moment. This doesn’t mean I predict violent upheavals everywhere followed by chaos and bloodshed, it means that the current paradigm is no longer sustainable because it is not longer working. More and more people now recognize this.

In case you needed anymore insight into the complete and total insanity of the “elite” Central Planners driving the U.S. economy off a cliff, I have decided to highlight a couple of articles explaining the rapid reflation of two important subprime markets: Homes and Autos. Clearly the only lesson learned from the 2008 crisis was that connected oligarchs can steal all they want with total impunity. There’s only one way this ends. With a complete and total collapse and then a massive paradigm shift. I’m quite hopeful our next system can be far better than this one. I predict it will be centered on decentralization, peer to peer interaction, the rule of law and competing free market currencies, but only time will tell. It’s really up to us.

First, here are some excerpts from a recent Bloomberg article on the resurgence of subprime auto loans (a topic I covered before regarding 97 month loans):

Subprime auto lenders are enabling buyers to borrow more relative to the cost of a car in a sign that underwriting standards are deteriorating amid increased competition, according to Standard & Poor’s.

The average loan-to-value ratio, or LTV, on vehicle sales to consumers with spotty credit has risen to 114.5 percent this year from about 112 percent in 2010, S&P said in a report yesterday. That compares with a peak of 121 percent in 2008, according to the New York-based rating company.

“We’re expecting continued weakening in credit standards as more players vie for a piece of the subprime auto loan market and others try to hold on to market share,” wrote the analysts led by Amy Martin.

The segment has boomed since 2010 as high margins and low funding costs attract private-equity firms such as Blackstone Group LP. After drying up during the credit crisis, originations of car loans to borrowers with bad credit have almost doubled since the fourth quarter of 2009 to reach $18.4 billion during the same period in 2012, Citigroup Inc. analysts led by Mary Kane in New York said in a Sept. 6 report.

I suppose becoming a real estate slumlord wasn’t good enough for the boys at Blackstone.

The increase in subprime originations is fueling growth in the asset-backed bond market, with sales of securities linked to the debt surging 24.4 percent to $14.7 billion through August compared with the same period in 2012, according to Deutsche Bank AG data.

Now let’s turn our attention over to Neil Weinberg, Editor in Chief at American Banker for some excerpts from his article: Who’s Pushing Subprime Mortgages? Uncle Sam. Here are some excerpts:

Complying with a mass of new regulation to make sure every loan is sound and defect-free is only part of what the government expects of mortgage lenders. It also wants them to chuck these standards of care out the window to lend to what it deems as disadvantaged borrowers. 

Specifically, the government is enforcing with great vigor a range of so-called fair lending provisions. The gist is that lenders are to ignore all the talk about fat down payments, ensuring borrowers’ ability to repay and the like when it comes to fair lending applicants.

The Federal Housing Administration recently went so far as to cut to one year from three how long borrowers must wait after losing a home to foreclosure or a short sale before qualifying for a new mortgage.

One Phoenix conference speaker expressed shock that Shaun Donovan, the secretary of Housing and Urban Development, which runs the FHA, has referred to these low down-payment mortgages to recently failed borrowers as “plain vanilla” loans that can be made safely.

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Why Obama Allowed Bailouts Without Indictments by Janet Tavakoli

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The government’s bailout plan destroyed capitalism. In a capitalist system, those who stood to gain–and already made off with large gains—would have to bear the risk. The bailouts represented a corruption of capitalism. Crony capitalism violates the spirit of democracy established by the Founding Fathers of the republic known as the United States. I expressed these sentiments in a letter to the Financial Times on September 29, 2008.

– Janet Tavakoli

The following article by Janet Tavakoli is an excellent reminder of the extraordinarily destructive coup pulled off by financial oligarchs in fall of 2008, when the rule of law was suspended and total theft institutionalized. I have written many times about my experience on Wall Street when the bailouts happened. How I ranted and raved on the trading desk about how TARP marked the end of any semblance of free markets and that there was no turning back. How I was told to “take a walk around the block” to cool off.

All of the suffering and hardships the majority of Americans are experiencing today are directly related to the coup pulled off by the crony financial oligarchs in the fall of 2008, and all of the media and political minions that helped them do it. People realize we have become a Banana Republic and they have now lost all hope. That said, there should always be hope and we can certainly restore society to better days, but not until we remove our domestic cancers from their positions in the highest offices of government, finance and corporate America. That is what we must peacefully achieve.  Now here’s Janet Tavakoli:

In November 2008, President Obama was elected, and he was sworn in January 2009. The country was promised change and reform. Recently two democrats close to the top of President Obama’s administration made excuses to me for the lack of financial reform in the United States. Their separately related versions were remarkably similar, so similar they seemed scripted:

The administration made a bargain, and I’m not sure it was the right decision. The world was teetering on the edge of collapse. There was a crisis of confidence. There would have been unimaginable consequences. So bad even your imagination can’t handle the truth?

It was the lesser of two evils to let a lot of people get away scot free than to risk a collapse in confidence.  There were only two choices according to this narrative.

It was better to let a lot of people get away scot free than to have the first African American president take on the establishment while the country was deeply divided and he needed agreement on big things like ending wars, health care, Supreme Court nominees (and LGBT rights). There were lots of battles without taking on the financial establishment.  It seems to me that reforming our financial system is a big thing. As for at least two of the narrative’s big issues: health care costs are zooming up, and it looks as if we’re rattling our swords for another military conflict.

The president was elected in part on his promise to effect change on the really tough issues, and there was no better time than when the crisis was fresh, and he had a groundswell of popular support.

The most amusing thing about all of this is that people wanted President elect Obama to stick it to the financial oligarchs. Instead, he gave them trillions and offered immunity. More from Janet:

Instead of TARP, handing out money to cover banks’ losses, we could have forced creditors to accept a restructuring plan. This is what was done during the Great Depression. Creditors, i.e., debt holders including credit default swap counterparties, would have been compelled to accept a restructuring plan. That required partial forgiveness of debt in many cases and/or a debt for equity swap.

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Video of the Day: The iPhone 5NsA

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Nothing like rolling out a smartphone with biometric screening a couple of months after massive NSA leaks made everyone paranoid about government surveillance and the corporate partners that help make it possible. In case you are in the need for a little laugh at one of the most poorly timed product launches in history, here … Read more

Texas High School Rewrites the Second Amendment in its History Books

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This is straight up ridiculous. The Daily Paul has brought to my attention that Guyer High School in Denton, Texas is currently using a textbook that describes the 2nd Amendment as such:

Screen Shot 2013-09-17 at 4.58.13 PM

Now this is what the 2nd Amendment actually says:

A well regulated Militia, being necessary to the security of a free State, the right of the people to keep and bear Arms, shall not be infringed.

The Daily Paul correctly points out:

Did you catch the sleight of hand?

A militia is a body of citizens enrolled for military service, and called out periodically for drill but serving full time only in emergencies. It’s a common man army of citizens, NOT soldiers. The citizens are called up in emergencies to protect the free State.

The 2nd Amendment says that a militia is necessary to protect a free State, so in order to be able to have a militia, the citizens have a natural right to keep and bear arms and the government cannot infringe on that right.

The textbook version implies that we’re only allowed to keep and bear arms if we’re in a State militia, a clear misrepresentation of the 2nd Amendment.

Anyone that has actually read the Bill of Rights, understands that they are very brief in text. There is absolutely no reason to ever abbreviate any of these Amendments considering how crucial they are to our civil liberties.

To demonstrate just how brief they are, I have listed them below:

Amendment I

Congress shall make no law respecting an establishment of religion, or prohibiting the free exercise thereof; or abridging the freedom of speech, or of the press; or the right of the people peaceably to assemble, and to petition the Government for a redress of grievances.

Amendment II

A well regulated Militia, being necessary to the security of a free State, the right of the people to keep and bear Arms, shall not be infringed.

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Obama Waives Ban on Arming Terrorists to Aid Syrian Rebels

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When I first highlighted the fact that the rebels in Syria had large al-Qaeda elements to it back in December of last year, most people thought it was too incredible to believe. Fast forward to today, and not only is this admitted fact, but we have only solidified our alliance with the rebels over the past nine months. We are now allied with forces that are our purported number one enemy, the threat of which has been used to justify the destruction of civil liberties in this country. Mind-boggling.

Our corrupt, crony leaders are now in such a desperate panic to establish regime change in Syria that we are waiving bans on arming terrorist groups, so that we can arm terrorist groups. The Washington Examiner reports that:

President Obama waived a provision of federal law designed to prevent the supply of arms to terrorist groups to clear the way for the U.S. to provide military assistance to “vetted” opposition groups fighting Syrian dictator Bashar Assad.

The president, citing his authority under the Arms Export Control Act, announced today that he would “waive the prohibitions in sections 40 and 40A of the AECA related to such a transaction.”

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