Tuesday, July 7, 2009

The Wall Street White House : How Goldman Sachs and Citi Run the Show


Robert Hormats, Vice Chairman of Goldman Sachs, is to be installed as Under Secretary of Economics, Business, and Agricultural Affairs. This comes as one more, probably unnecessary reminder of the total control exercised by Wall Street over the Obama administration’s economic and financial policy. True, Hormats is “a talker rather than a decider” according to one former White House official, but he will find plenty of old friends used to making decisions, almost all of them uniformly disastrous for the U.S. and global economy.

Among the familiar Wall Street faces that Hormats will encounter in his new post will that of Deputy Secretary of State Jacob Lew, lately Chief Financial Officer of Citigroup Alternative Investments Group which lost $509 million in the first quarter of 2008 alone. On visits to the White House he is sure to bump into Michael Froman, who also tore a swath through the Citi balance sheet at the alternative investments shop (they specialized in “esoteric” investments such as private highways) but is now Obama’s Deputy National Security Adviser for International Economic Affairs. If Froman is otherwise engaged, Hormats can interface with Froman’s deputy, David Lipton, who was until recently running Citi’s global country risk management effort.

Citigroup is also well represented at Treasury, in the form of Lewis Alexander, formerly the bank’s chief economist and now Counselor to Treasury Secretary Timothy Geithner. Given the role played by all of the above in bankrupting us all, Alexander’s 2007 verdict on the onset of the mortgage crash, “I think that’s not going to spill more broadly into the economy and so I think we’re going to have a normal kind of housing cycle though the middle of this year,” can only have been a recommendation in the eyes of his current employer.

Alexander’s function at Citi may have been merely to endorse the financial depredations of colleagues with economic blather, rather than exercise loss-making functions personally. Not so Deputy Treasury Secretary Neal Wolin, who has moved over to the number two job at the department from the Hartford Insurance Company, where he served as president and chief operating officer of the Property and Casualty Group. Hartford was one of the insurance companies that got suckered by the banks into backing their ruinous investments in real estate and other esoterica, but Wolin’s Treasury has just handed Hartford $3.4 billion of our money in the form of TARP funds.

Hormats’ agricultural responsibilities will of necessity bring him into frequent contact with the Chairman of the Commodity Futures Trading Commission, Gary Gensler – a former Goldman partner. As Assistant Secretary of Treasury in the Clinton Adminsitration Gensler played a key role in greasing the skids for the notorious Commodity Futures Modernization Act of 2000, which set the stage for the great credit default swaps scam that underpinned the recent bubble and subsequent collapse. News of the appointment did generate threats of obstruction in the Senate – any one of the senators could have blocked the appointment had they really wished to do so – but such threats proved predictably hollow. Had they been otherwise, Treasury Chief of Staff Mark Patterson could of course have lent the expertise he gained as Goldman’s lobbyist to overcome the obstacle.

For sheer gall it would be hard to equal the appointment of Gensler, one of the engineers of this catastrophe, but the administration has managed it with the selection of Linda Robertson, formerly a key Enron lobbyist and intimately involved in pushing through the commodity futures act as chief flack for the Federal Reserve. Prior to joining the crooked energy-trading firm, Robertson was an important figure in the Clinton Treasury Department, latterly serving her friend Larry Summers and before him Robert Rubin during their terms as Treasury Secretaries.

Such connection to the key enablers of our bankrupt casino helps explain many of the other hires listed above. Michael Froman was Chief of Staff to Robert Rubin at Treasury before following Rubin to his reward at Citigroup. Most significantly, it was Froman who first introduced Rubin to his Harvard classmate Barack Obama. David Lipton also served in the Rubin Treasury, as deputy under secretary for international affairs. Neal Wolin, on the other hand, appears to have more an acolyte of Summers, who cherished him as Treasury General Counsel from ’99 to ’01. Summers and Robertson were similarly close, and certainly he raised no objection to her fatal submissions on behalf of her paymasters at Enron.

Recent reports suggest that financial industry lobbying in Washington, at $104.7 million for the first three months of 2009, is 8% down on last year. But that is to be expected – why should Wall Street continue paying top dollar for a wholly owned subsidiary?

Source: Counter Punch

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Eager to Tap Iraq's Vast Oil Reserves, Industry Execs Suggested Invasion

Two years before the invasion of Iraq, oil executives and foreign policy advisers told the Bush administration that the United States would remain "a prisoner of its energy dilemma" as long as Saddam Hussein was in power.

That April 2001 report, "Strategic Policy Challenges for the 21st Century," was prepared by the James A. Baker Institute for Public Policy and the US Council on Foreign Relations at the request of then-Vice President Dick Cheney.

In retrospect, it appears that the report helped focus administration thinking on why it made geopolitical sense to oust Hussein, whose country sat on the world's second largest oil reserves.

"Iraq remains a destabilizing influence to the flow of oil to international markets from the Middle East," the report said.

"Saddam Hussein has also demonstrated a willingness to threaten to use the oil weapon and to use his own export program to manipulate oil markets. Therefore the US should conduct an immediate policy review toward Iraq including military, energy, economic and political/diplomatic assessments."

The advisory committee that helped prepare the report included Luis Giusti, a Shell Corp. non-executive director; John Manzoni, regional president of British Petroleum; and David O'Reilly, chief executive of ChevronTexaco.

James Baker, the namesake for the public policy institute, was a prominent oil industry lawyer who also served as secretary of state under President George H.W. Bush, and was counsel to the Bush/Cheney campaign during the Florida recount in 2000.

Ken Lay, then-chairman of the energy trading Enron Corp., also made recommendations that were included in the Baker report.

At the time of the report, Cheney was leading an energy task force made up of powerful industry executives who assisted him in drafting a comprehensive "National Energy Policy" for President George W. Bush.

A Focus on Oil

It was believed then that Cheney's secretive task force was focusing on ways to reduce environmental regulations and fend off the Kyoto protocol on global warming.

But Bush's first treasury secretary, Paul O'Neill, later described a White House interest in invading Iraq and controlling its vast oil reserves, dating back to the first days of the Bush presidency.

In Ron Suskind's 2004 book, "The Price of Loyalty," O'Neill said an invasion of Iraq was on the agenda at the first National Security Council. There was even a map for a post-war occupation, marking out how Iraq's oil fields would be carved up.

Even at that early date, the message from Bush was "find a way to do this," according to O'Neill, a critic of the Iraq invasion who was forced out of his job in December 2002.

The New Yorker's Jane Mayer later made another discovery: a secret NSC document dated February 3, 2001 - only two weeks after Bush took office - instructing NSC officials to cooperate with Cheney's task force, which was "melding" two previously unrelated areas of policy: "the review of operational policies towards rogue states" and "actions regarding the capture of new and existing oil and gas fields." [The New Yorker, February 16, 2004]

By March 2001, Cheney's task force had prepared a set of documents with a map of Iraqi oilfields, pipelines, refineries and terminals, as well as two charts detailing Iraqi oil and gas projects, and a list titled "Foreign Suitors for Iraqi Oilfield Contracts," according to information released in July 2003 under a Freedom of Information Act lawsuit filed by the conservative watchdog group Judicial Watch.

A Commerce Department spokesman issued a brief statement when those documents were released stating that Cheney's energy task force "evaluated regions of the world that are vital to global energy supply."

There has long been speculation that a key reason why Cheney fought so hard to keep his task force documents secret was that they may have included information about the administration's plans toward Iraq.

"Conspiracy Theory"

However, both before and after the invasion, much of the US political press treated the notion that oil was a motive for invading Iraq in March 2003 as a laughable conspiracy theory.

Generally, business news outlets were much more frank about the real-politick importance of Iraq's oil fields.

For instance, Ray Rodon, a former executive at Halliburton, the oil-service giant that Cheney once headed, said he was dispatched to Iraq in October 2002 to assess the country's oil infrastructure and map out plans for operating Iraq's oil industry, according to an April 14, 2003 story in Fortune magazine.

"From behind the obsidian mirrors of his wraparound sunglasses, Ray Rodon surveys the vast desert landscape of southern Iraq's Rumailah oilfield," Fortune's story said. "A project manager with Halliburton's engineering and construction division, Kellogg Brown & Root, Rodon has spent months preparing for the daunting task of repairing Iraq's oil industry."

"Working first at headquarters in Houston and then out of a hotel room in Kuwait City, he has studied the intricacies of the Iraqi national oil company, even reviewing the firm's organizational charts so that Halliburton and the Army can ascertain which Iraqis are reliable technocrats and which are Saddam loyalists."

At about the same time as Rodon's trip to Iraq - October 2002 - Oil and Gas International, an industry publication, reported that the State Department and the Pentagon had put together pre-war planning groups that focused heavily on protecting Iraq's oil infrastructure.

The next month, November 2002, the Department of Defense recommended that the Army Corps of Engineers award a contract to Kellogg, Brown & Root to extinguish Iraqi oil well fires.

The contract also called for "assessing the condition of oil-related infrastructure; cleaning up oil spills or other environmental damage at oil facilities; engineering design and repair or reconstruction of damaged infrastructure; assisting in making facilities operational; distribution of petroleum products; and assisting the Iraqis in resuming Iraqi oil company operations."

In January 2003, as President Bush was presenting the looming war with Iraq as necessary to protect Americans, the Wall Street Journal reported that oil industry executives met with Cheney's staff to plan the post-war revival of Iraq's oil industry.

"Facing a possible war with Iraq, US oil companies are starting to prepare for the day when they may get a chance to work in one of the world's most oil-rich countries," the Journal reported on January 16, 2003.

"Executives of US oil companies are conferring with officials from the White House, the Department of Defense and the State Department to figure out how best to jump-start Iraq's oil industry following a war, industry officials say.

"The Bush administration is eager to secure Iraq's oil fields and rehabilitate them, industry officials say. They say Mr. Cheney's staff hosted an informational meeting with industry executives in October [2002], with ExxonMobil Corp., ChevronTexaco Corp., ConocoPhillips and Halliburton among the companies represented.

"Both the Bush administration and the companies say such a meeting never took place. Since then, industry officials say, the Bush administration has sought input, formally and informally, from executives and industry experts on how best to overhaul Iraq's oil sector."

Guarding the Oil Ministry

Despite the Bush administration's denials about oil as a motivation for war, the Bush administration's focus on Iraqi oil was firmly set.

On April 5, 2003, Reuters reported that the State Department's "Future of Iraq" project headed by Thomas Warrick, special adviser to the Assistant Secretary of State for Near Eastern Affairs, held its fourth meeting of the oil and energy-working group.

Documents obtained by Reuters showed that "a clear consensus among expert opinion favoring production-sharing agreements to attract the major oil companies."

"That is likely to thrill oil companies harboring hopes of lucrative contracts to develop Iraqi oil reserves," the news agency reported. "Short-term rehabilitation of southern Iraqi oil fields already is under way, with oil well fires being extinguished by US contractor Kellogg Brown and Root ...

"Long-term contracts are expected to see US companies ExxonMobil, ChevronTexaco and ConocoPhillips compete with Anglo-Dutch Shell, Britain's BP, TotalFinaElf of France, Russia's LUKOIL and Chinese state companies."

After US troops captured Baghdad in April 2003, they were ordered to protect the Oil Ministry even as looters ransacked priceless antiquities from Iraq's national museums and stole explosives from unguarded military arsenals.

Unacceptable Options

In April 2001, the report laid out a series of unacceptable options, including helping Iraq under Saddam Hussein extract more oil by easing embargoes that were meant to hem Hussein in.

"The US could consider reducing restrictions on oil investment inside Iraq," the report said. But if Hussein's "access to oil revenues was to be increased by adjustments in oil sanctions, Saddam Hussein could be a greater security threat to U.S. allies in the region if weapons of mass destruction, sanctions, weapons regimes and the coalition against him are not strengthened."

Iraq is a "key swing producer turning its taps on and off when it has felt such action was in its strategic interest," the report said, adding that there was even a "possibility that Saddam Hussein may remove Iraqi oil from the market for an extended period of time" in order to drive up prices.

"Under this scenario, the United States remains a prisoner of its energy dilemma, suffering on a recurring basis from the negative consequences of sporadic energy shortages," the report said. "These consequences can include recession, social dislocation of the poorest Americans, and at the extremes, a need for military intervention."

The report recommended Cheney move swiftly to integrate energy and national security policy as a means to stop "manipulations of markets by any state" and suggested that his task force include "representation from the Department of Defense."

"Unless the United States assumes a leadership role in the formation of new rules of the game," the report said, "US firms, US consumers and the US government [will be left] in a weaker position."

Two years after the Baker report, the United States - along with Great Britain and other allies - invaded Iraq. Now, more than six years later, the US oil industry finally appears to be in a strong position relative to Iraq's oil riches.

However, the price that has been paid by American troops, Iraqi civilians and the US taxpayers has been enormous.

Source: Truthout

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Israel's housing minister calls for segregation

Israel's housing minister called for strict segregation between the country's Jewish and Arab populations last week as he unveiled plans to move large numbers of fundamentalist religious Jews to Israel's north to prevent what he described as an "Arab takeover" of the region.

Ariel Atias said he considered it a "national mission" to bring ultra-Orthodox Jews - or Haredim, distinctive for their formal black and white clothing - into Arab areas, and announced that he would also create the north's first exclusively Haredi town.

The new settlement drive, according to Mr Atias, is intended to revive previous failed efforts by the state to "Judaise", or create a Jewish majority in, the country's heavily Arab north.

Analysts say the announcement is a disturbing indication that the Haredim, who have traditionally been hostile to Zionism because of their strict reading of the Bible, are rapidly being recruited to the Judaisation project in both Israel and the occupied territories.

Mr Atias, of the ultra-Orthodox party Shas, is drawing on a model already successfully developed over the past decade in the West Bank, where the Haredim, the group with the highest birth rate in Israel, have been encouraged to move into separate settlements that have rapidly eaten into large chunks of Palestinian territory.

Several mayors of large northern cities in Israel have appealed to Mr Atias to help them "save" the Jewishness of their communities in a similar manner by recruiting Haredim to swell the numbers of Jews in the north.

Mr Atias revealed his new drive on Thursday as he spoke at an Israeli Bar Association conference in Tel Aviv to discuss land reform plans. He told the delegates: "We can all be bleeding hearts, but I think it is unsuitable [for Jews and Arabs] to live together."

His priority, he said, was to prevent the "spread" of Arab citizens, who comprise one-fifth of the country's population and are mostly restricted to their own overcrowded communities in two northern regions, the Galilee and Wadi Ara.

Referring to the Galilee, where Arab citizens are a small majority of the population, he said: "If we go on like we have until now, we will lose the Galilee. Populations that should not mix are spreading there."

Mr Atias also revealed that mayors of several large northern cities where Arab citizens had started to move into Jewish neighbourhoods had asked him how they could "salvage" their cities.

One, Shimon Lankry, the mayor of Acre, where there were intercommunal clashes last year, met with the minister only last week. "He told me 'Bring a bunch of Haredim and we'll save the city'," Mr Atias said.

"He told me that Arabs are living in Jewish buildings and running them [Jews] out."

The Haredim have a birth rate - estimated at eight children per woman - that is twice that of the Muslim population and are increasingly seen as a useful demographic weapon to stop the erosion of Israel's Jewish majority.

Mr Atias's comments brought swift condemnation from Israel's Arab lawmakers. Mohammad Barakeh, the head of the Communist Party, told the popular Israeli website Ynet: "Racism is spreading throughout the government and Minister Atias is the latest to express it."

The key initiative proposed by Mr Atias is the development of a large Haredi town of 20,000 homes based on an existing small community at Harish in the Wadi Ara, a region close to the West Bank.

Harish was established in the early 1990s by the housing minister of the time, Ariel Sharon, as part of a huge settlement drive inside both Israel and the occupied territories.

Harish and a dozen communities known as "star points" were built on the Green Line - the pre-1967 border between Israel and the West Bank - as a way to erode its political significance.

Most of the communities, however, were located in densely populated Arab areas and failed to attract Israelis.

Until recently the settler population had spurned settling in Israel and has been drawn instead either to Palestinian areas close to Jerusalem or to frontier communities deep in the West Bank.

Cesar Yehudkin of Bimkom, a group of Israeli town planners critical of government planning policy, said the goal of Harish was to occupy a large swathe of land in Wadi Ara to prevent the "natural growth" of Arab localities. "Harish is an attractive option for rapid development because the infrastructure for a large town is already in place," he said.

Mr Atias told Israel's Bar Association that Harish was a vital way to stop "illegal Arab expansion" and that the Haredim "are the only ones willing to live there".

The Israeli media revealed two weeks ago similar plans by Shimon Gapso, the mayor of Upper Nazareth, a Jewish town established 50 years ago in the Galilee region to restrict the growth of the neighbouring Arab city of Nazareth.

He announced that 3,000 homes are to be built next year for the Haredim to increase Jewish dominance of the city, which has seen a steady migration of Arabs from Nazareth and its surrounding villages desperate for a place to live.

Tight planning restrictions on Arab communities mean that there are few places for Arab citizens to build legally and they are excluded from hundreds of Jewish rural communities through vetting committees, Mr Yehudkin said.

Mr Gapso, who is identified with the Yisrael Beiteinu Party of the foreign minister, Avigdor Lieberman, has complained about the "demographic threat" posed by Arabs moving into Upper Nazareth.

He recently told the Israeli media: "As a man of Greater Israel, I think it more important to settle the Galilee than Judea and Samaria [the West Bank]...I urge the settlers to come here."

Some 600 ultra-Orthodox families have already signed up to live in the new Upper Nazareth neighbourhood, which has the backing of Eli Yishai, the interior minister and leader of Shas.

In a related Judaisation drive, Nefesh B'Nefesh, one of the main organisations bringing Jewish immigrants to Israel, announced in December a programme to offer financial incentives to new immigrants to settle in northern Israel.

Source: Institute For Mid East Understanding
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