Grow Freedom Not Government

camp that includes ALL of the diverse, minority groups that stand to gain from the protection of the 10th Amendment.

An alliance that puts gun rights people along side of gay marriage groups, abortion activists, supporters of marijuana legalization and constitutional scholars is an alliance showing the kind of diversity that this nation was founded to serve.

Who were the first Americans if not members of a diverse collection of minorities, cultural and philosophical misfits who were tired of central planners deciding their fate?
June 11, 2009
Bryce Shonka

There are many bold statements in this interview, so I took it upon myself to do fact checking.  The following is a transcript of the interview with supporting information embedded in the form of links.

-B

April 3, 2009

BILL MOYERS: Welcome to the Journal.

For months now, revelations of the wholesale greed and blatant transgressions of Wall Street have reminded us that “The Best Way to Rob a Bank Is to Own One.” In fact, the man you’re about to meet wrote a book with just that title. It was based upon his experience as a tough regulator during one of the darkest chapters in our financial history: the savings and loan scandal in the late 1980s.

WILLIAM K. BLACK: These numbers as large as they are, vastly understate the problem of fraud.

BILL MOYERS: Bill Black was in New York this week for a conference at the John Jay College of Criminal Justice where scholars and journalists gathered to ask the question, “How do they get away with it?” Well, no one has asked that question more often than Bill Black.

The former Director of the Institute for Fraud Prevention now teaches Economics and Law at the University of Missouri, Kansas City. During the savings and loan crisis, it was Black who accused then-house speaker Jim Wright and five US Senators, including John Glenn and John McCain, of doing favors for the S&L’s in exchange for contributions and other perks. The senators got off with a slap on the wrist, but so enraged was one of those bankers, Charles Keating — after whom the senate’s so-called “Keating Five” were named — he sent a memo that read, in part, “get Black — kill him dead.” Metaphorically, of course. Of course.

Now Black is focused on an even greater scandal, and he spares no one — not even the President he worked hard to elect, Barack Obama. But his main targets are the Wall Street barons, heirs of an earlier generation whose scandalous rip-offs of wealth back in the 1930s earned them comparison to Al Capone and the mob, and the nickname “banksters.”

Bill Black, welcome to the Journal.

WILLIAM K. BLACK: Thank you.

BILL MOYERS: I was taken with your candor at the conference here in New York to hear you say that this crisis we’re going through, this economic and financial meltdown is driven by fraud. What’s your definition of fraud?

WILLIAM K. BLACK: Fraud is deceit. And the essence of fraud is, “I create trust in you, and then I betray that trust, and get you to give me something of value.” And as a result, there’s no more effective acid against trust than fraud, especially fraud by top elites, and that’s what we have.

BILL MOYERS: In your book, you make it clear that calculated dishonesty by people in charge is at the heart of most large corporate failures and scandals, including, of course, the S&L, but is that true? Is that what you’re saying here, that it was in the boardrooms and the CEO offices where this fraud began?

WILLIAM K. BLACK: Absolutely.

BILL MOYERS: How did they do it? What do you mean?

WILLIAM K. BLACK: Well, the way that you do it is to make really bad loans, because they pay better. Then you grow extremely rapidly, in other words, you’re a Ponzi-like scheme. And the third thing you do is we call it leverage. That just means borrowing a lot of money, and the combination creates a situation where you have guaranteed record profits in the early years. That makes you rich, through the bonuses that modern executive compensation has produced. It also makes it inevitable that there’s going to be a disaster down the road.

BILL MOYERS: So you’re suggesting, saying that CEOs of some of these banks and mortgage firms in order to increase their own personal income, deliberately set out to make bad loans?

WILLIAM K. BLACK: Yes.

BILL MOYERS: How do they get away with it? I mean, what about their own checks and balances in the company? What about their accounting divisions?

WILLIAM K. BLACK: All of those checks and balances report to the CEO, so if the CEO goes bad, all of the checks and balances are easily overcome. And the art form is not simply to defeat those internal controls, but to suborn them, to turn them into your greatest allies. And the bonus programs are exactly how you do that.

BILL MOYERS: If I wanted to go looking for the parties to this, with a good bird dog, where would you send me?

WILLIAM K. BLACK: Well, that’s exactly what hasn’t happened. We haven’t looked, all right? The Bush Administration essentially got rid of regulation, so if nobody was looking, you were able to do this with impunity and that’s exactly what happened. Where would you look? You’d look at the specialty lenders. The lenders that did almost all of their work in the sub-prime and what’s called Alt-A, liars’ loans.

BILL MOYERS: Yeah. Liars’ loans–

WILLIAM K. BLACK: Liars’ loans.

BILL MOYERS: Why did they call them liars’ loans?

WILLIAM K. BLACK: Because they were liars’ loans.

BILL MOYERS: And they knew it?

WILLIAM K. BLACK: They knew it. They knew that they were frauds.

WILLIAM K. BLACK: Liars’ loans mean that we don’t check. You tell us what your income is. You tell us what your job is. You tell us what your assets are, and we agree to believe you. We won’t check on any of those things. And by the way, you get a better deal if you inflate your income and your job history and your assets.

BILL MOYERS: You think they really said that to borrowers?

WILLIAM K. BLACK: We know that they said that to borrowers. In fact, they were also called, in the trade, ninja loans.

BILL MOYERS: Ninja?

WILLIAM K. BLACK: Yeah, because no income verification, no job verification, no asset verification.

BILL MOYERS: You’re talking about significant American companies.

WILLIAM K. BLACK: Huge! One company produced as many losses as the entire Savings and Loan debacle.

BILL MOYERS: Which company?

WILLIAM K. BLACK: IndyMac specialized in making liars’ loans. In 2006 alone, it sold $80 billion dollars of liars’ loans to other companies. $80 billion.

BILL MOYERS: And was this happening exclusively in this sub-prime mortgage business?

WILLIAM K. BLACK: No, and that’s a big part of the story as well. Even prime loans began to have non-verification. Even Ronald Reagan, you know, said, “Trust, but verify.” They just gutted the verification process. We know that will produce enormous fraud, under economic theory, criminology theory, and two thousand years of life experience.

BILL MOYERS: Is it possible that these complex instruments were deliberately created so swindlers could exploit them?

WILLIAM K. BLACK: Oh, absolutely. This stuff, the exotic stuff that you’re talking about was created out of things like liars’ loans, that were known to be extraordinarily bad. And now it was getting triple-A ratings. Now a triple-A rating is supposed to mean there is zero credit risk. So you take something that not only has significant, it has crushing risk. That’s why it’s toxic. And you create this fiction that it has zero risk. That itself, of course, is a fraudulent exercise. And again, there was nobody looking, during the Bush years. So finally, only a year ago, we started to have a Congressional investigation of some of these rating agencies, and it’s scandalous what came out. What we know now is that the rating agencies never looked at a single loan file. When they finally did look, after the markets had completely collapsed, they found, and I’m quoting Fitch, the smallest of the rating agencies, “the results were disconcerting, in that there was the appearance of fraud in nearly every file we examined.”

BILL MOYERS: So if your assumption is correct, your evidence is sound, the bank, the lending company, created a fraud. And the ratings agency that is supposed to test the value of these assets knowingly entered into the fraud. Both parties are committing fraud by intention.

WILLIAM K. BLACK: Right, and the investment banker that — we call it pooling — puts together these bad mortgages, these liars’ loans, and creates the toxic waste of these derivatives. All of them do that. And then they sell it to the world and the world just thinks because it has a triple-A rating it must actually be safe. Well, instead, there are 60 and 80 percent losses on these things, because of course they, in reality, are toxic waste.

BILL MOYERS: You’re describing what Bernie Madoff did to a limited number of people. But you’re saying it’s systemic, a systemic Ponzi scheme.

WILLIAM K. BLACK: Oh, Bernie was a piker. He doesn’t even get into the front ranks of a Ponzi scheme…

BILL MOYERS: But you’re saying our system became a Ponzi scheme.

WILLIAM K. BLACK: Our system…

BILL MOYERS: Our financial system…

WILLIAM K. BLACK: Became a Ponzi scheme. Everybody was buying a pig in the poke. But they were buying a pig in the poke with a pretty pink ribbon, and the pink ribbon said, “Triple-A.”

BILL MOYERS: Is there a law against liars’ loans?

WILLIAM K. BLACK: Not directly, but there, of course, many laws against fraud, and liars’ loans are fraudulent.

BILL MOYERS: Because…

WILLIAM K. BLACK: Because they’re not going to be repaid and because they had false representations. They involve deceit, which is the essence of fraud.

BILL MOYERS: Why is it so hard to prosecute? Why hasn’t anyone been brought to justice over this?

WILLIAM K. BLACK: Because they didn’t even begin to investigate the major lenders until the market had actually collapsed, which is completely contrary to what we did successfully in the Savings and Loan crisis, right? Even while the institutions were reporting they were the most profitable savings and loan in America, we knew they were frauds. And we were moving to close them down. Here, the Justice Department, even though it very appropriately warned, in 2004, that there was an epidemic…

BILL MOYERS: Who did?

WILLIAM K. BLACK: The FBI publicly warned, in September 2004 that there was an epidemic of mortgage fraud, that if it was allowed to continue it would produce a crisis at least as large as the Savings and Loan debacle. And that they were going to make sure that they didn’t let that happen. So what goes wrong? After 9/11, the attacks, the Justice Department transfers 500 white-collar specialists in the FBI to national terrorism. Well, we can all understand that. But then, the Bush administration refused to replace the missing 500 agents. So even today, again, as you say, this crisis is 1000 times worse, perhaps, certainly 100 times worse, than the Savings and Loan crisis. There are one-fifth as many FBI agents as worked the Savings and Loan crisis.

BILL MOYERS: You talk about the Bush administration. Of course, there’s that famous photograph of some of the regulators in 2003, who come to a press conference with a chainsaw suggesting that they’re going to slash, cut business loose from regulation, right?

WILLIAM K. BLACK: Well, they succeeded. And in that picture, by the way, the other — three of the other guys with pruning shears are the…

BILL MOYERS: That’s right.

WILLIAM K. BLACK: They’re the trade representatives. They’re the lobbyists for the bankers. And everybody’s grinning. The government’s working together with the industry to destroy regulation. Well, we now know what happens when you destroy regulation. You get the biggest financial calamity of anybody under the age of 80.

BILL MOYERS: But I can point you to statements by Larry Summers, who was then Bill Clinton’s Secretary of the Treasury, or the other Clinton Secretary of the Treasury, Rubin. I can point you to suspects in both parties, right?

WILLIAM K. BLACK: There were two really big things, under the Clinton administration. One, they got rid of the law that came out of the real-world disasters of the Great Depression. We learned a lot of things in the Great Depression. And one is we had to separate what’s called commercial banking from investment banking. That’s the Glass-Steagall law. But we thought we were much smarter, supposedly. So we got rid of that law, and that was bipartisan. And the other thing is we passed a law, because there was a very good regulator, Brooksley Born, that everybody should know about and probably doesn’t. She tried to do the right thing to regulate one of these exotic derivatives that you’re talking about. We call them C.D.F.S. And Summers, Rubin, and Phil Gramm came together to say not only will we block this particular regulation. We will pass a law that says you can’t regulate. And it’s this type of derivative that is most involved in the AIG scandal. AIG all by itself, cost the same as the entire Savings and Loan debacle.

BILL MOYERS: What did AIG contribute? What did they do wrong?

WILLIAM K. BLACK: They made bad loans. Their type of loan was to sell a guarantee, right? And they charged a lot of fees up front. So, they booked a lot of income. Paid enormous bonuses. The bonuses we’re thinking about now, they’re much smaller than these bonuses that were also the product of accounting fraud. And they got very, very rich. But, of course, then they had guaranteed this toxic waste. These liars’ loans. Well, we’ve just gone through why those toxic waste, those liars’ loans, are going to have enormous losses. And so, you have to pay the guarantee on those enormous losses. And you go bankrupt. Except that you don’t in the modern world, because you’ve come to the United States, and the taxpayers play the fool. Under Secretary Geithner and under Secretary Paulson before him… we took $5 billion dollars, for example, in U.S. taxpayer money. And sent it to a huge Swiss Bank called UBS. At the same time that that bank was defrauding the taxpayers of America. And we were bringing a criminal case against them. We eventually get them to pay a $780 million fine, but wait, we gave them $5 billion. So, the taxpayers of America paid the fine of a Swiss Bank. And why are we bailing out somebody who that is defrauding us?

BILL MOYERS: And why…

WILLIAM K. BLACK: How mad is this?

BILL MOYERS: What is your explanation for why the bankers who created this mess are still calling the shots?

WILLIAM K. BLACK: Well, that, especially after what’s just happened at G.M., that’s… it’s scandalous.

BILL MOYERS: Why are they firing the president of G.M. and not firing the head of all these banks that are involved?

WILLIAM K. BLACK: There are two reasons. One, they’re much closer to the bankers. These are people from the banking industry. And they have a lot more sympathy. In fact, they’re outright hostile to autoworkers, as you can see. They want to bash all of their contracts. But when they get to banking, they say, ‘contracts, sacred.’ But the other element of your question is we don’t want to change the bankers, because if we do, if we put honest people in, who didn’t cause the problem, their first job would be to find the scope of the problem. And that would destroy the cover up.

BILL MOYERS: The cover up?

WILLIAM K. BLACK: Sure. The cover up.

BILL MOYERS: That’s a serious charge.

WILLIAM K. BLACK: Of course.

BILL MOYERS: Who’s covering up?

WILLIAM K. BLACK: Geithner is charging, is covering up. Just like Paulson did before him. Geithner is publicly saying that it’s going to take $2 trillion — a trillion is a thousand billion — $2 trillion taxpayer dollars to deal with this problem. But they’re allowing all the banks to report that they’re not only solvent, but fully capitalized. Both statements can’t be true. It can’t be that they need $2 trillion, because they have masses losses, and that they’re fine.

These are all people who have failed. Paulson failed, Geithner failed. They were all promoted because they failed, not because…

BILL MOYERS: What do you mean?

WILLIAM K. BLACK: Well, Geithner has, was one of our nation’s top regulators, during the entire subprime scandal, that I just described. He took absolutely no effective action. He gave no warning. He did nothing in response to the FBI warning that there was an epidemic of fraud. All this pig in the poke stuff happened under him. So, in his phrase about legacy assets. Well he’s a failed legacy regulator.

BILL MOYERS: But he denies that he was a regulator. Let me show you some of his testimony before Congress. Take a look at this.

TIMOTHY GEITHNER:I’ve never been a regulator, for better or worse. And I think you’re right to say that we have to be very skeptical that regulation can solve all of these problems. We have parts of our system that are overwhelmed by regulation.

Overwhelmed by regulation! It wasn’t the absence of regulation that was the problem, it was despite the presence of regulation you’ve got huge risks that build up.

WILLIAM K. BLACK: Well, he may be right that he never regulated, but his job was to regulate. That was his mission statement.

BILL MOYERS: As?

WILLIAM K. BLACK: As president of the Federal Reserve Bank of New York, which is responsible for regulating most of the largest bank holding companies in America. And he’s completely wrong that we had too much regulation in some of these areas. I mean, he gives no details, obviously. But that’s just plain wrong.

BILL MOYERS: How is this happening? I mean why is it happening?

WILLIAM K. BLACK: Until you get the facts, it’s harder to blow all this up. And, of course, the entire strategy is to keep people from getting the facts.

BILL MOYERS: What facts?

WILLIAM K. BLACK: The facts about how bad the condition of the banks is. So, as long as I keep the old CEO who caused the problems, is he going to go vigorously around finding the problems? Finding the frauds?

BILL MOYERS: You–

WILLIAM K. BLACK: Taking away people’s bonuses?

BILL MOYERS: To hear you say this is unusual because you supported Barack Obama, during the campaign. But you’re seeming disillusioned now.

WILLIAM K. BLACK: Well, certainly in the financial sphere, I am. I think, first, the policies are substantively bad. Second, I think they completely lack integrity. Third, they violate the rule of law. This is being done just like Secretary Paulson did it. In violation of the law. We adopted a law after the Savings and Loan crisis, called the Prompt Corrective Action Law. And it requires them to close these institutions. And they’re refusing to obey the law.

BILL MOYERS: In other words, they could have closed these banks without nationalizing them?

WILLIAM K. BLACK: Well, you do a receivership. No one — Ronald Reagan did receiverships. Nobody called it nationalization.

BILL MOYERS: And that’s a law?

WILLIAM K. BLACK: That’s the law.

BILL MOYERS: So, Paulson could have done this? Geithner could do this?

WILLIAM K. BLACK: Not could. Was mandated–

BILL MOYERS: By the law.

WILLIAM K. BLACK: By the law.

BILL MOYERS: This law, you’re talking about.

WILLIAM K. BLACK: Yes.

BILL MOYERS: What the reason they give for not doing it?

WILLIAM K. BLACK: They ignore it. And nobody calls them on it.

BILL MOYERS: Well, where’s Congress? Where’s the press? Where–

WILLIAM K. BLACK: Well, where’s the Pecora investigation?

BILL MOYERS: The what?

WILLIAM K. BLACK: The Pecora investigation. The Great Depression, we said, “Hey, we have to learn the facts. What caused this disaster, so that we can take steps, like pass the Glass-Steagall law, that will prevent future disasters?” Where’s our investigation?

What would happen if after a plane crashes, we said, “Oh, we don’t want to look in the past. We want to be forward looking. Many people might have been, you know, we don’t want to pass blame. No. We have a nonpartisan, skilled inquiry. We spend lots of money on, get really bright people. And we find out, to the best of our ability, what caused every single major plane crash in America. And because of that, aviation has an extraordinarily good safety record. We ought to follow the same policies in the financial sphere. We have to find out what caused the disasters, or we will keep reliving them. And here, we’ve got a double tragedy. It isn’t just that we are failing to learn from the mistakes of the past. We’re failing to learn from the successes of the past.

BILL MOYERS: What do you mean?

WILLIAM K. BLACK: In the Savings and Loan debacle, we developed excellent ways for dealing with the frauds, and for dealing with the failed institutions. And for 15 years after the Savings and Loan crisis, didn’t matter which party was in power, the U.S. Treasury Secretary would fly over to Tokyo and tell the Japanese, “You ought to do things the way we did in the Savings and Loan crisis, because it worked really well. Instead you’re covering up the bank losses, because you know, you say you need confidence. And so, we have to lie to the people to create confidence. And it doesn’t work. You will cause your recession to continue and continue.” And the Japanese call it the lost decade. That was the result. So, now we get in trouble, and what do we do? We adopt the Japanese approach of lying about the assets. And you know what? It’s working just as well as it did in Japan.

BILL MOYERS: Yeah. Are you saying that Timothy Geithner, the Secretary of the Treasury, and others in the administration, with the banks, are engaged in a cover up to keep us from knowing what went wrong?

WILLIAM K. BLACK: Absolutely.

BILL MOYERS: You are.

WILLIAM K. BLACK: Absolutely, because they are scared to death. All right? They’re scared to death of a collapse. They’re afraid that if they admit the truth, that many of the large banks are insolvent. They think Americans are a bunch of cowards, and that we’ll run screaming to the exits. And we won’t rely on deposit insurance. And, by the way, you can rely on deposit insurance. And it’s foolishness. All right? Now, it may be worse than that. You can impute more cynical motives. But I think they are sincerely just panicked about, “We just can’t let the big banks fail.” That’s wrong.

BILL MOYERS: But what might happen, at this point, if in fact they keep from us the true health of the banks?

WILLIAM K. BLACK: Well, then the banks will, as they did in Japan, either stay enormously weak, or Treasury will be forced to increasingly absurd giveaways of taxpayer money. We’ve seen how horrific AIG — and remember, they kept secrets from everyone.

BILL MOYERS: A.I.G. did?

WILLIAM K. BLACK: What we’re doing with — no, Treasury and both administrations. The Bush administration and now the Obama administration kept secret from us what was being done with AIG. AIG was being used secretly to bail out favored banks like UBS and like Goldman Sachs. Secretary Paulson’s firm, that he had come from being CEO. It got the largest amount of money. $12.9 billion. And they didn’t want us to know that. And it was only Congressional pressure, and not Congressional pressure, by the way, on Geithner, but Congressional pressure on AIG.

Where Congress said, “We will not give you a single penny more unless we know who received the money.” And, you know, when he was Treasury Secretary, Paulson created a recommendation group to tell Treasury what they ought to do with AIG. And he put Goldman Sachs on it.

BILL MOYERS: Even though Goldman Sachs had a big vested stake.

WILLIAM K. BLACK: Massive stake. And even though he had just been CEO of Goldman Sachs before becoming Treasury Secretary. Now, in most stages in American history, that would be a scandal of such proportions that he wouldn’t be allowed in civilized society.

BILL MOYERS: Yeah, like a conflict of interest, it seems.

WILLIAM K. BLACK: Massive conflict of interests.

BILL MOYERS: So, how did he get away with it?

WILLIAM K. BLACK: I don’t know whether we’ve lost our capability of outrage. Or whether the cover up has been so successful that people just don’t have the facts to react to it.

BILL MOYERS: Who’s going to get the facts?

WILLIAM K. BLACK: We need some chairmen or chairwomen–

BILL MOYERS: In Congress.

WILLIAM K. BLACK: –in Congress, to hold the necessary hearings. And we can blast this out. But if you leave the failed CEOs in place, it isn’t just that they’re terrible business people, though they are. It isn’t just that they lack integrity, though they do. Because they were engaged in these frauds. But they’re not going to disclose the truth about the assets.

BILL MOYERS: And we have to know that, in order to know what?

WILLIAM K. BLACK: To know everything. To know who committed the frauds. Whose bonuses we should recover. How much the assets are worth. How much they should be sold for. Is the bank insolvent, such that we should resolve it in this way? It’s the predicate, right? You need to know the facts to make intelligent decisions. And they’re deliberately leaving in place the people that caused the problem, because they don’t want the facts. And this is not new. The Reagan Administration’s central priority, at all times, during the Savings and Loan crisis, was covering up the losses.

BILL MOYERS: So, you’re saying that people in power, political power, and financial power, act in concert when their own behinds are in the ringer, right?

WILLIAM K. BLACK: That’s right. And it’s particularly a crisis that brings this out, because then the class of the banker says, “You’ve got to keep the information away from the public or everything will collapse. If they understand how bad it is, they’ll run for the exits.”

BILL MOYERS: Yeah, and this week in New York, at this conference, you described this as more than a financial crisis. You called it a moral crisis.

WILLIAM K. BLACK: Yes.

BILL MOYERS: Why?

WILLIAM K. BLACK: Because it is a fundamental lack of integrity. But also because, if you look back at crises, an economist who is also a presidential appointee, as a regulator in the Savings and Loan industry, right here in New York, Larry White, wrote a book about the Savings and Loan crisis. And he said, you know, one of the most interesting questions is why so few people engaged in fraud? Because objectively, you could have gotten away with it. But only about ten percent of the CEOs, engaged in fraud. So, 90 percent of them were restrained by ethics and integrity. So, far more than law or by F.B.I. agents, it’s our integrity that often prevents the greatest abuses. And what we had in this crisis, instead of the Savings and Loan, is the most elite institutions in America engaging or facilitating fraud.

BILL MOYERS: This wound that you say has been inflicted on American life. The loss of worker’s income. And security and pensions and future happened, because of the misconduct of a relatively few, very well-heeled people, in very well-decorated corporate suites, right?

WILLIAM K. BLACK: Right.

BILL MOYERS: It was relatively a handful of people.

WILLIAM K. BLACK: And their ideologies, which swept away regulation. So, in the example, regulation means that cheaters don’t prosper. So, instead of being bad for capitalism, it’s what saves capitalism. “Honest purveyors prosper” is what we want. And you need regulation and law enforcement to be able to do this. The tragedy of this crisis is it didn’t need to happen at all.

BILL MOYERS: When you wake in the middle of the night, thinking about your work, what do you make of that? What do you tell yourself?

WILLIAM K. BLACK: There’s a saying that we took great comfort in. It’s actually by the Dutch, who were fighting this impossible war for independence against what was then the most powerful nation in the world, Spain. And their motto was, “It is not necessary to hope in order to persevere.”

Now, going forward, get rid of the people that have caused the problems. That’s a pretty straightforward thing, as well. Why would we keep CEOs and CFOs and other senior officers, that caused the problems? That’s facially nuts. That’s our current system.

So stop that current system. We’re hiding the losses, instead of trying to find out the real losses. Stop that, because you need good information to make good decisions, right? Follow what works instead of what’s failed. Start appointing people who have records of success, instead of records of failure. That would be another nice place to start. There are lots of things we can do. Even today, as late as it is. Even though they’ve had a terrible start to the administration. They could change, and they could change within weeks. And by the way, the folks who are the better regulators, they paid their taxes. So, you can get them through the vetting process a lot quicker.

BILL MOYERS: William Black, thank you very much for being with me on the Journal.

WILLIAM K. BLACK: Thank you so much.

It seems that the first article that Google indexed on the $3.6 billion in (TARP funded) bonuses paid out to Merrill Lynch employees was published by none other than the Agence France-Presse. Merrill Lynch paid out nearly 22 times as much as AIG did and yet until now avoided almost any of the damning feedback AIG has experienced recently.  My hat is off to AFP for bringing this news of American taxpayer abuse before even a mention in the illustrious New York Times.  Has American reporting really slipped this much since Woodward & Bernstein took down Nixon?

The Internet is not the reason US newspaper readership is down- newspapers have ceased to be relevant and so Americans have stopped buying them.  The failure of the press in not making a big news item out of the Merrill Lynch story before a foreign news agency (and again, hats off to AFP!) demonstrates this perfectly.

Here’s the journalistic failure timeline:

AFP: US officials seek BofA, Merrill Lynch bonus details – Mar 9, 2009

The French news agency AFP is the first major media outlet to report the $3.6 billion in bonuses, as indexed by Google.

Andrew Little’s Speech to the National Press Club – Mar 10, 2009

Next, Andrew Little, the national secretary of New Zealand’s largest trade union, brings up bonus abuse in a speech to the New Zealand National Press Club:

“Failing their way to success:
senior executive pay for performance – but performance of what?”

“There has never been a better time to closely examine the culture of high salaries and performance bonuses endemic in many large corporations and merchant banks around the world…and the examination should be not just of the economic justification for these rewards but of the moral case for them and the social implications.”

“As a mark of gratitude for this spectacular performance, the heads of Merrill Lynch awarded bonuses throughout the organisation of $US3.6 billion.”

Economic Outlook: The ripple effect – United Press International, March 16, 2009

UPI describes “…the furor over $3.6 billion in bonuses pay given to Merrill Lynch executives in spite of huge losses…”.  Furor?  Really?  Wouldn’t that warrant a major US reporting effort?

Phillip Martin: Why The Obama Administration Underestimated Public Outrage Over AIG? – March 18, 2009

In his blog for the Huffington Post, Martin contradicts the furor assessment:

“Take for example the 3.6 billion in questionable bonuses to Merrill Lynch executives a few months ago as the bailed out financial management firm was being taken over by Bank of America. That payout makes the AIG reward for failure look like a tip at McDonalds. Seven Merrill Lynch executives each received a bonus of more than $10m for 2008. But compared to the current AIG debacle the public response at the time amounted to slight irritation, not fury.”

(Right on Phillip, but nobody’s going to get all furored if they don’t even know about the $3.6b…)

SIDEBAR: AIG’s not the only company to pay bail-out bonuses – Mar 18, 2009

Monsters & Critics cited yet another foreign news agency, Deutsche Presse-Agenteur of Germany in this post:

“In another bail-out bonus situation, Merrill Lynch, acquired by Bank of America in a government-backed rescue measure last year, reportedly had a 3.6 billion-dollar bonus pool in December, the New York Times reported, citing a court transcript.”

“What NY Times report???” I shrugged and asked Google The Almighty:

search: Merrill Lynch Bonus December site:nytimes.com

And there it was.

Cuomo Says Merrill Deceived Congress on Bonuses – NYTimes.com – March 11, 2009

After reading it, I quickly saw why I had missed this article.  NYT reporter Louise Story failed to even mention the amount of the Merrill Lynch bonus pool, and so adding ’3.6′ to my search string missed it.  Either way, AFP beats NYT to the punch by two days.  Story wrote:

“Andrew M. Cuomo, the attorney general of New York, claimed on Wednesday that Merrill Lynch misled Congress over the timing of its plans to award billions of dollars in bonuses last December.”

1600 Pennsylvania Avenue – NBC – March 18th 2009

Senator Byron Dorgan was a guest on NBC’s ’1600 Pennsylvannia Ave and had this to say during the discussion:

“You know what, the American people need to know this information. We need this transparency. The president is angry about this. This isn‘t his fault. He wasn‘t—this wasn‘t on his watch. And listen, the other thing is, these are relatively small compared to the Merrill Lynch bonuses made in December. That was a company that lost 27 billion dollars and gave 3.6 billion dollars in bonuses. They paid 694 people, each of them more than one million dollars in bonuses for a company that lost 27 billion.”

“And then Bank of America took them over and got 20 billion dollars in Tarp Funds. I‘m just telling you, this is a culture of corruption. I‘m glad the thing has boiled over. People are furious and so am I. We need to put a stop to all of this.”

In Defense of (Some) Bonus Babies – The Opinionator Blog – NYTimes.com – March 20th, 2009

Now here’s where it gets even more absurd to me.  If the NYT was supposed to have broken this story, then why was NYT blogger Eric Etheridge referring to yet another blog as the source here, rather than his parent company?

“John Hempton at Bronte Capital wonders why no one is mad about the bonuses at Merrill:

‘The bonuses paid at Merrill Lynch were 3.6 billion — 22 times the AIG bonuses.

They were paid by a firm that would not have survived without a bailout by the US Government through Bank of America. Moreover they were sometimes large – the 30 million variety – not the 1.5 million variety.

We should be at least 20 times as outraged over the Merrill Lynch bonuses than the AIG bonuses. But as a society we are not. . .’”

Again John…the people have to know about these things before the outrage/torch/pitchfork stuff gets going.

WTF are the American press covering instead of the real news we need to function as a democracy?  If you want to know who’s stealing from you this week, look to the foreign press or sharpen those search string skills.

Impart as much useful knowledge as you can to a resident of the 14th century, in one minute — GO!

The Kasper Hauser Comedy Podcast

The Lew Rockwell Show – 104. Peter Schiff: Why Was Anyone Surprised By the Crash?.

“Sergio’s White Hot Top 5″ is more about entertainment than music videos, though you do get exposed to a few bands in the process.  SWHT5 is a recurring segment on InfoMania and can be seen via podcast or on Current_TV (you prbably get this new and amazing channel and don’t even know it).  While you are at it, be sure to look at Ben Hoffman’s “Tech Report” for additional lol-age.

Thank you Al Gore, for helping to create the most groundbreaking new TV network since the inception of MTV.

DEA to end medical marijuana raids
Holder confirms states to have final say on use of drug for pain control
By Alex Johnson
Reporter
msnbc.com
updated 2:42 p.m. PT, Fri., Feb. 27, 2009

Blackwater Agent Carries Out DEA Raid

Supporters of programs to provide legal marijuana to patients with painful medical conditions are celebrating Attorney General Eric Holder’s statement this week that the Drug Enforcement Administration would end its raids on state-approved marijuana dispensaries.

Federal raids on medical marijuana distributors continued at least into the second week of Barack Obama’s presidency, when federal agents shut down at least two dispensaries in California on Feb. 3.

Holder was asked about those raids Wednesday in Santa Ana, Calif., at a news conference that was called to announce the arrests of 755 people in a nationwide crackdown on the U.S. operations of Mexican drug cartels. He said such operations would no longer be conducted.

“What the president said during the campaign … will be consistent with what we will be doing here in law enforcement,” he said. “What (Obama) said during the campaign … is now American policy.”

Obama indicated during the presidential campaign that he supported the controlled use of marijuana for medical purposes, saying he saw no difference between medical marijuana and other pain-control drugs.

“My attitude is if the science and the doctors suggest that the best palliative care and the way to relieve pain and suffering is medical marijuana, then that’s something I’m open to,” Obama said in November 2007 at a campaign stop in Audubon, Iowa. “There’s no difference between that and morphine when it comes to just giving people relief from pain.”

White House spokesman Nick Shapiro hinted at the policy shift shortly after the California raids, telling The Washington Times that the dispensaries were legal in California and that the Obama administration’s stance was that “federal resources should not be used to circumvent state laws.”

Major shift in federal policy
The new policy represents a significant turnabout for the federal government. During the Bush administration, DEA agents shut down 30 to 40 marijuana dispensaries, the agency said.

The Web site of the White House Office of National Drug Control Policy had yet to catch up to the policy shift as of Friday afternoon, and was still prominently featuring a “ Medical Marijuana Reality Check” declaring that “marijuana is not considered modern medicine” and arguing that “no animal or human data support the safety or efficacy of smoked marijuana for general medical use.”

Holder’s comments received little notice Wednesday, overshadowed by the news of the drug arrests. But supporters of legalized marijuana seized on them as an important sign of progress in their campaign.

“Holder’s statement marks a dramatic shift in U.S. drug policy and is a major victory for the 72 million Americans who reside in states where the use of medical cannabis is legal,” said Paul Armentano, deputy director of the National Organization for the Reform of Marijuana Laws, said in a statement.

Thirteen states allow the cultivation, sale and use of medical marijuana.

Armentano said the shift would add momentum to campaigns in states that are considering their own medical marijuana laws. The New Jersey Senate approved such a bill Monday, and Gov. Jon Corzine said he would sign it if it cleared the state Assembly.

Charles Lynch, who operated a state-approved dispensary in Morro Bay, Calif., before it was raided in 2007, also welcomed the new policy.

“It’s a good thing for California. It’s a good thing for the other 12 states that have medical marijuana laws,” said Lynch, who was convicted in August of federal drug charges.

Lynch could face five years in prison when he is sentenced late next month, but in light of the new federal policy, he said he would appeal his conviction and seek a presidential pardon.

Lynch contended that dispensaries like his were vital for patients in the last stages of a painful illness.

“Having one in your community, wherever that may be, is a good thing because it helps these people that need relief,” he said.

The following NBC stations contributed to this report: KNSD of San Diego; KSBY of San Luis Obispo, Calif.; and WNBC of New York.

URL: http://www.msnbc.msn.com/id/29433708/

MSN Privacy . Legal
© 2009 MSNBC.com

originally posted at Ron Paul’s Campaign for Liberty

Tooth Fairy Economics
By Tom Woods

Printer-friendly version

So the “stimulus” package, a dagger through the heart of the economy, has passed. The geniuses who govern us, who insist that seizing the produce of the voluntary economy and devoting it to arbitrary projects will make us wealthy, have had their victory.

Much of the debate turned, unfortunately, on how much “pork” was in the bill. This or that spending program was silly or an obvious waste of money, critics said. All too true, of course, but unless we’re looking to be hired by the Titanic’s Department of Deck Chair Rearrangement, we’re missing the point with arguments like this.

The primary fallacy of the tooth-fairy economics at the heart of the stimulus is the very idea that economic health is the product of government spending, which is financed either by borrowing (which leaves private businesses with a smaller share of the pool of savings for them to borrow from), printing money out of thin air, or direct seizure from the population. Whatever government spends the money on is necessarily arbitrary — government lacks the profit-and-loss feedback mechanism that keeps the private sector from squandering resources and employing factors of production in ways that do not cater to consumer wants. It can seize its resources from the people without their consent, and it makes no difference to government whether or not people actually want or wind up using the things it produces. Meanwhile, the economy loses the goods that would have been produced by the voluntary sector had the government not seized these resources for its own use.

The more sophisticated Keynesians, if that isn’t an oxymoron, will come back with the argument that while they really do agree with you in cases when the economy is experiencing “full employment,” your point doesn’t apply when there are “idle resources.” In that case, we can “stimulate” those idle resources into action without drawing resources out of alternative employments. These resources currently have no alternative employments.

Nice try. But whatever projects our wise planners come up with to put these “idle resources” to work will inevitably draw complementary resources away from alternative employments that are more urgently desired than what the government intends to use them for. Resources will unavoidably be drawn from current employments in the attempt to kick-start “idle resources.” So the “idle resources” argument doesn’t really manage to evade the opportunity-cost problem.

Beyond that, pro-stimulus thinkers show remarkably little curiosity about why the so-called idle resources are idle in the first place. They are idle because of some previous entrepreneurial miscalculation. What might have caused systemic miscalculation of this kind? Could it be the Federal Reserve’s manipulation of interest rates, which leads investors to make incorrect assessments of profitability and provokes false economic booms, as F.A. Hayek won the Nobel Prize for showing in 1974?

Consider a circus that comes to town for a few weeks. A restaurant owner may expand his seating capacity in the false expectation that the circus and the related demand for his food that it brings in its wake will last forever. But when the circus leaves town, he’ll find he has “idle resources” on his hands. We should not want to put these idle resources to work. Doing so would only draw labor and other resources away from other sectors of the economy, where they are employed in the satisfaction of real consumer demand. The expansion of the restaurant should not have occurred in the first place. We should want this bubble activity to shrink back down to size, in order that other, non-bubble activities in the economy can be correspondingly strengthened.

In the wake of a previous, unsustainable boom brought about by the central bank’s credit expansion, the market economy and its price system, left to their own devices, will adopt another arrangement of resources that employs available factors in the service of producing goods and services that correspond to real consumer demand. During the bust, free individuals interacting within the market nexus sort out which projects and business ventures are healthy and sustainable, and which are bubble activities that cannot survive without a constant artificial increase in the money supply, and cannot (and should not) survive now that reality has reasserted itself.

That’s what the market was allowed to do in the long-forgotten depression of 1920-21. Instead of a “fiscal stimulus” package, the government cut its budget. The Fed, for its part, did little. Meanwhile, the economy was allowed to clean out the malinvestments of the false boom of previous years, thereby making a robust recovery possible.

The artificial housing boom made Americans feel wealthier than they really were. As a result, they consumed more than they would have if the Fed-created housing bubble had not distorted their assessments of their net worth. What the economy needs now, therefore, is not “spending” per se. Too much spending and debt caused the initial problem. People bought more house than they could afford, and on the basis of its seemingly incessant appreciation they went out and purchased more consumer goods than they now realize they should have. Americans are in more debt than they can pay back — credit-card defaults will provoke calls for the next round of bailouts. How can “spending” solve this problem?

Meanwhile, part of the reason the American savings rate has been so low is that for many Americans, saving seemed superfluous: after all, they possessed an asset that (they falsely believed) was guaranteed to appreciate over time. That, after all, is what the experts told them. The dramatic rise in housing prices isn’t an unsustainable bubble that has to burst, Fed economists said. It is a sustainable increase based on real factors.

Oops.

We should not want to “stimulate” an economy based on debt and overconsumption back into existence. We should want to restructure it along sustainable lines.

For instance, we’re now learning that Starbucks, at least in its one-store-every-ten-feet business model, was a bubble activity. With the housing bubble having burst, people now have a more accurate estimate of their real level of wealth. They’re now less likely to buy a $5 cup of coffee — or, in the case of the ailing Cold Stone Creamery, spend $6 for an ice cream cone. These are resources that need to be freed up so business firms carrying out genuine, non-bubble activities can be strengthened and the recovery accelerated.

In his recent press conference, President Obama cited the case of Japan as if it were evidence for his side of the argument. Exactly the opposite is true. Japan has done everything to itself that our government has done and is threatening to do to us, and with no results. From partial nationalization of its banking system to “stimulus” packages amounting to trillions of yen, from propping up zombie companies and dropping interest rates to zero, they’ve tried it all.

Naturally, the Keynesian response is that Japan simply didn’t spend enough. Oh? Thanks to the misnamed “stimulus” packages that the Japanese government imposed on its hapless people, Japan is the most indebted country in the developed world. So becoming the most indebted country in the developed world — and that’s saying something — still isn’t enough spending for Keynesians?

What would be enough, then? A quadrillion dollars? A googol dollars? Infinity minus one dollars? It’d be interesting to know what “stimulus” figure might make a Keynesian declare, “Now that’s too much!”

If there’s one silver lining to the crisis, it’s that more and more people are figuring out that so-called respectable opinion has been dead wrong, and for a long time. The economics profession, by and large, has embarrassed itself with a Keynesianism so crude it would not satisfy a bright sixth-grader. People trotted out as experts, who failed to see the crisis coming and have no idea how it occurred — “excessive risk-taking!” they say, in a non-explanation that merely begs the question — have no idea how to solve it.

This, incidentally, is why I wrote my new book Meltdown, which gives a free-market overview of what caused the problem, where we are now, and how we get out. People are ready to listen to reasonable, previously neglected ideas, especially if the people who hold them managed to predict the current crisis — as indeed the economists of the Austrian School did. It’s up to us to bring them these ideas.

Thomas E. Woods, Jr., is the New York Times bestselling author of nine books, including The Politically Incorrect Guide to American History and, most recently, Meltdown: A Free Market Look at Why the Stock Market Collapsed, the Economy Tanked, and Government Bailouts Will Make Things Worse (with a foreword by Ron Paul). Visit his website, and watch his Rally for the Republic speech (part 1, part 2).

Recently I had a conversation with a Jewish friend who told me that she was tired of the assumption that all Jews support Israeli foreign policy, particularly the recent massacre in the Gaza Strip.  It had never occurred to me, even after several of my own altercations with pro-Zionist internet bullies, that a special brand of contempt awaits Jewish Americans who speak out against Israel.  I’m sure this interview will be of some comfort to all those who have crossed paths with the rabid Zionist apologists, Jewish or otherwise.  What a breath of fresh air Mr. Burg is…

Avraham Burg is a former Speaker of the Israeli Parliament and former Chairman of the Jewish Agency and the World Zionist Organization. His new book is called The Holocaust Is Over: We Must Rise from its Ashes.  This is a transscript from his compelling interview on the excellent daily news broadcast, ‘Democracy Now!‘.

To watch the interview click here.  As a critic of Israeli foreign policy I’m no stranger to accusations of anti-semitism.  I’d love to see that tried with Mr. Burg…

JUAN GONZALEZ: We’re moving to Israel, where political leaders there continue negotiations over forming a new coalition government. The general election ended in a near draw, with Foreign Minister Tzipi Livni’s Kadima Party in first place with twenty-eight seats and former Prime Minister Benjamin Netanyahu a close second with twenty-seven seats. But Netanyahu will have an easier chance at assembling a coalition government, following a strong showing by minor parties that are even more right-wing.

The differences between the two leading candidates are slight. Both support attacking and blockading Gaza and the continued takeover of Palestinian land in the occupied West Bank.

On Wednesday, Palestinian Prime Minister Salam Fayyad said any Israeli government must end the occupation.

PRIME MINISTER SALAM FAYYAD: These expectations can be summarized in one sentence: steps have to be taken—tangible steps have to be taken to end the occupation that began 1967, namely, again, ending the occupation that began in 1967 and establishment of an independent Palestinian state on the territories occupied in 1967, with East Jerusalem as its capital. That’s been the goal since the start of this peace process. It has not materialized. And what has materialized are adverse facts on the ground inconsistent with the viability of the solution, with the need to attain that goal. These are our expectations of the next Israeli government, whichever—however it might be formed, and I hope that will be also the expectation of the international community of the next government in Israel.

JUAN GONZALEZ: Some Israeli dissidents have suggested that a Netanyahu government might be preferable in the long term. Writing in the Israeli newspaper Haaretz, Israeli journalist Gideon Levy says, “Netanyahu’s election is likely to bring the curtain down on the great fraud…the lie of ‘negotiations’ and the injustice of the ‘peace process.’ Israel consistently claimed these acts proved the nation was focused on peace and the end of the occupation. All the while, it did everything it could to further entrench the occupation and distance any chance of a potential agreement.”

AMY GOODMAN: As Israeli leaders continue talks on assembling a coalition, we’re joined now by a former Israeli politician who has emerged as one of his government’s biggest critics. Avraham Burg is a former speaker of the Israeli parliament, the Knesset. He’s former chair of the Jewish Agency and the World Zionist Organization. His new book, though, is called The Holocaust Is Over: We Must Rise from its Ashes.

We welcome you to Democracy Now!

AVRAHAM BURG: Good morning.

AMY GOODMAN: You’re headed back to Israel today, but we’d like to talk about another journey: how you went from where you were, as head of the Israeli parliament in the Labor Party, to where you are today. Talk about your trajectory.

AVRAHAM BURG: Next question, please.

It’s not easy, but at the time, I felt that political walls are closing on me. I had a feeling that Israel became a very, very efficient kingdom, but no prophecy. Deeds are being done. Decisions are being executed. But the ocean liner got no captain, no vision, no direction. Where is it going?

So I started digging into it and looking into it. And the way I know—the way I think for myself is by writing. So I wrote the first book, which was God Is Back. It’s about the religious dimension of world conflicts and the Israeli conflictual reality. And then when I finished the book, I read it, and I realized that I didn’t write about the other items which supports our identity, and this is the only presence of the trauma in our life, which is the Holocaust, which prevents us to trust anybody—to trust ourselves, to trust our neighbors, to trust the world—and therefore creates this kind of a reality. And the minute I realized that this is my inner truth, just published it.

JUAN GONZALEZ: And you talk in the book about how the Holocaust continues to hold so much power and influence over the thinking of Israelis. Could you talk about that some more?

AVRAHAM BURG: Holocaust was such a trauma that it takes, for individuals, years, if not more than years, to overcome. And not everybody who was abused as an individual at a young age can overcome and come out of this inner limbo. And for a while, I was not at all sure that Israel, Israel and the Jewish people, can go out of it. I mean, it happens. And then, the long—

AMY GOODMAN: Your parents were [inaudible]—

AVRAHAM BURG: My father escaped from Berlin in September ’39, which is the very, very last moment. And my mother, who’s a seventh—was a seventh generation Israeli, was born in Hebron and is a survivor of the—by an Arab family, by the way—of the massacre there. So we were born into a kind of a traumatic reality, but we were a trauma-free family.

And the more I think about it, the more I thought about it, I understand that it is not about “yesterday we remembered, and tomorrow we are different people.” Oh, no. It’s a process. And the process, the importance of it is that the generation of my children will be the first generation without any living witness. That will be the generation in which the personal experience becomes a memory. What will be the shape of the memory? A cloning of the trauma or a beginning of the road from trauma to trust? I offer the beginning of the beginning in my book.

AMY GOODMAN: But I’d like you to go back further. I mean, you were the speaker of the Israeli Knesset. You were the head of the World Zionist Organization. Explain that, how you rose to power within the Labor Party and as head of the World Zionist Organization—what it is.

AVRAHAM BURG: I was for many years a kind of a strange bird, OK? I was born to a father who was the leader of the National Religious Party. And he was, for many, many years, a member of each and every cabinet of Israel, from ’48 to ’88—that’s the year I was elected to the Knesset and he retired. And actually, I knew something about Israeli politics, but my position was different than my father’s. It was always more humanistic and less introverted. It was always more universalistic and less nationalistic, etc., etc. I was the founder—one of the founders of the protest movement against the war on Lebanon in ’82, and then I walked into public arena and became whatever I became, a young promising promise.

AMY GOODMAN: What happened to you in that protest movement?

AVRAHAM BURG: First, I protested. And then, during this protest, among other things that happened to me, I was wounded in a hand grenade thrown on our rally in Jerusalem, which killed Emil Grunzweig at the time.

AMY GOODMAN: Explain what happened.

AVRAHAM BURG: There was a demonstration against the war on Lebanon and for calling for the impeachment of the foreign minister, Ariel Sharon. And there was a hand grenade thrown from the political right side of the map into our rally, killed one of my colleagues, Emil Grunzweig, at the time. I was wounded then.

And then, slowly, I walked into the political arena, became an active member of the Labor Party and rose up the political ladder. And at the time, I had a feeling that I’m doing the right thing. I’m fighting for peace. Oslo arrived, and I was part of the Israeli euphoria. I was part of those who made it possible, but supported it, and then Oslo evaporated. Then I was one of the signatories and initiators of the Geneva Accord, and again, it was a civil society effort to push the stone up the hill, and again it fell down on our heads.

And then I said, “Why isn’t it working? So many efforts, and it’s not working, doesn’t bear fruits.” And the reason for me is the—a primary reason, before the ’67 reason, and this is the grip of the Holocaust over our life. And if we will not get a little bit more relaxed about it and understanding, as difficult and as painful as it is, it cannot be the only sole prism through which we see the world.

And then I came to the inner realization that never again for me, it’s not never again for Jews only and therefore we should have the thickest walls around us and the deepest shelter on top of us, but never again is never again for whomever needs my protection. Never again—whomever is the victim today needs the help of the yesterday’s victim to prevent his or her own victimization, be it a battered woman, be it Darfuri, be it somebody in the inner city of Detroit, be it whoever it is. Victims are all over the place. And the Holocaust is not mine only to say, “I have a monopoly over suffering, and that’s it.” Oh, no.

JUAN GONZALEZ: I’d like to ask you, you were still a leader of the Labor Party in 2000, the last major peace negotiations. The myth that has come down from those days is that the Palestinians walked away from the best possible deal that they could get with Ehud Barak. Could you talk about that time and that period and the assessment that is still so widespread, especially here in the United States?

AVRAHAM BURG: It will be very, very difficult to undo the past. And yes, I understand that this is how people remember this period. I’m not at all sure it is right. When you read the memoirs of Bill Clinton and the memoirs of all the people who were involved in the process, you know that it, Camp David, the second Camp David, was an ill-prepared summit, and the sides were not ready for it. And it was Yasser Arafat who said, “I cannot. I cannot. It’s not yet ready.” And to say Israel offered everything and then a couple of weeks or a couple of months later went to Taba and offered even more, so how can you offer everything and then offer some more?

And I’m not into this. I’m not into the game of “You were first, and I was second. You started it. You are to blame.” I’m not into the blame game. I say the past is finding out who is first, I am not into the blame game. I say the past is painful. Let’s draw a sand in the line [sic.]. Let’s move forward. Let’s create a better tomorrow. And then one day we shall revisit the past. I don’t want to argue about the past so much, because I become hostage of the yesterday’s genies, rather than becoming a liberated person or liberated nation or liberated region. And that’s what I’m looking for.

AMY GOODMAN: Do you think that the Israeli government should speak with Hamas?

AVRAHAM BURG: No doubt. I have no doubt about it.

AMY GOODMAN: Have you spoken with them?

AVRAHAM BURG: I’m speaking with everybody who’s available, both in the region—both in the region and around the world. I cannot go to Gaza, because it’s impossible now, but I see them in the West Bank, I see them in Israel, I see them in London.

And I have one thing—I have two things in mind. The first is, I don’t remember even one funeral who came out of a dialogue. I remember many funerals coming out of no dialogue, and shootings. The second is, look at Middle East history. Every time we rejected somebody, we were missing him or her a couple of eras later. Today’s extremist is tomorrow’s moderate. And I ask myself, when will—

AMY GOODMAN: Explain that.

AVRAHAM BURG: When will be the time in which we’ll look back and say, “Ah! We missed the opportunity to talk to Hamas?”

Here is ’67. We conquered and we occupied the West Bank. The first thing we did, we kicked out of the Occupation Territories all the king’s—King Hussein—Jordanian supporters. Then the PLO walked in, and we said, “Where are the supporters of the king when we need them?” But they were not there, because we were the ones expelled them. Then we said, “We shall never talk to the PLO, never talk to them.” So we didn’t talk to them and didn’t talk to them and didn’t talk to them. Now Hamas is there; we say, “Where is the moderate PLO we missed so many years ago?”

Now, a day will come, I don’t know when, al-Qaeda will be there in Gaza. It will be the global Islam front, and some of the Palestinians will be disconnected from their national political reality and become part of something else. Then I’ll say, “Where is Hamas?” And I say, as difficult as it is, it is there. What will happen? You build a higher wall? You go for more unilateral, arrogant, but still escapism policy? It’s not right. You’re here, Amy. I want to talk to you.

JUAN GONZALEZ: The question of the role of the Jewish community in the United States—there are those who say that it’s even less nuanced in its approach and more emphatic in its opposition to the Palestinians than in Israel. Could you talk about the dynamic there?

AVRAHAM BURG: American Jewry is an unbelievable Jewry. In the last 150-some years, the Jewish people actually created two political entities: the sovereign state of Israel and the semi-autonomous American Jewry. It is less of sovereignty, but very influential. Never did we have such an influential diaspora in our entire history. And I love it, because I, as an Israeli, express the national dimension of myself, and world Jewry, especially American Jewry, expressing the universalist interface between us and the rest of the world, inside-out and outside-in.

But when I see so many of my colleagues and friends making and trying to portray and to lead American Jewry into a single-issue Jewry—Israel and that’s it, no domestic coalitions, no minorities, no responsibility for other social and universalistic affairs—I’m concerned about it, very much so. And when I look at some of the AIPAC’s, OK, activities, I have a feeling that sometimes we’re having three political entities: the United States of America, the sovereign state of Israel, and the independent state of AIPAC, which has its own policy, whatever it is, not working for the best interests of Israel, according to the way I understand it and Yitzhak Rabin understood it, and not according to the best interests of the United States of America. This is a kind of a filter which filters only darkness through it, rather than light through it. And I would like to see the alternative American Jewry, which is expressed through the liberalism and humanism and civil rights and a total commitment toward peace, as the one which expresses me.

AMY GOODMAN: As you speak right now, Avraham Burg, just down the road outside the World Zionist Organization here in New York and the Jewish Agency, the organizations you used to head, there is a twenty-four-hour protest that is being led by Jews against these organizations.

AVRAHAM BURG: This is the answer; what is the question? OK? What do you think about it, right?

First, I love people to express themselves. I mean, politically or democratically, when people go out of their homes and they’re not passive and not just watch the TV, zap to the next station, and that’s it, but if they do something, I’m happy about it. But it takes more than a protest movement. It should go into a much deeper conversation between us and us.

And I’ll give you an example, OK? We look at the outcome of the last elections in Israel. Everybody is horrored by Avigdor Lieberman, who bases his—the foundation of his movement on two very infamous American Jews who made it all possible, Rabbi Kahane and Baruch Goldstein . So there is something wrong with some quarters and some neighborhoods of the Jewish philosophies and Jewish thinking that we have to address internally and not just politically.

AMY GOODMAN: He beat Ehud Barak, right?

AVRAHAM BURG: Yeah, yeah.

AMY GOODMAN: Came in third.

AVRAHAM BURG: Oh, yes. Oh, yes.

AMY GOODMAN: And will make the coalition. What does he represent? What about the asking Israeli Arabs to sign loyalty oaths?

AVRAHAM BURG: Lieberman—Lieberman expresses for me—actually, he’s iconizing for me two kind of phenomena. The first is what happens all around the world, which is very xenophobic. I heard it in the elections here just a couple of months ago. I hear it in Europe with Haider and Blocher and Jean-Marie Le Pen and other. And this is one thing which troubles me a lot, because it is about racism, it’s about xenophobia, it’s about hatred – this time, Jewish hatred and Jewish xenophobia. And I have to fight it. I have to face it personally and collectively.

AMY GOODMAN: What about the US government and what’s happening now? The US House and Senate passed resolutions in support of the Israeli attack on Gaza.

AVRAHAM BURG: A mistake.

AMY GOODMAN: What is your thought on that?

AVRAHAM BURG: A mistake.

AMY GOODMAN: Why?

AVRAHAM BURG: Because this is still the energy of the ocean liner of George W. Bush, that “Never mind what Israel is doing. Never mind what my beloved child is doing. I’ll never say no.” Now, it is wrong for the world, it is wrong for American interests, and it’s wrong for Israel, that Israel will do 200 meters from our window what America permits itself—wrongly so, but permits itself to do in Tora Bora, because by the end of the process, America will withdraw from these places, but I have to live with the impacts of all of these unrestrained and unconstricted aggressions. And therefore, what I’m expecting from the White House, what I’m expecting from the new president, what I’m expecting from the new Senate and the Congress is to reintroduce dialogism rather than violence, to reintroduce conversation rather than continue with the cowboy policy.

JUAN GONZALEZ: In the past few weeks on Democracy Now!, we’ve had both former President Carter and also one of his top aides at the Carter Center talking about the potential for a road for peace between Israel and Palestinians. I’m sure you’re probably familiar with President Carter’s proposal. What do you think of it as a realistic possibility?

AVRAHAM BURG: Politics and realistic possibilities are kind of oxymorons, OK, even here and especially over there. But it must be peace. Will it be peace out of hope, or will it be peace out of despair—it’s just a departure point. But eventually, it will be there.

Now, since the archenemy of the region is the Shiite revolution regime in Iran—revolutionary regime in Iran, and all the others are ready to have a different kind of conversation, so all of the sudden the Saudi king—Prince Fahd formula, which is the Arab League policy, saying let’s talk about a comprehensive coalition between Israel and Egypt and Jordan and Syria and Lebanon and the PLO and the Occupied Territories, and all of us together, more rationalistic, more Western, rather than the Shiite devil—that’s the way they see it—that’s an opportunity. There is an opening there.

JUAN GONZALEZ: And the proposal of President Carter, specifically to trade land connecting Gaza and the West Bank for some of the land on which current settlements are on?

AVRAHAM BURG: These are details. These are details, because by the end of the day, everybody knows what will be the bottom line. The bottom line will be ’67 lines, and whatever cannot be resolved according to the exact geographic line will be land swap.

AMY GOODMAN: Should Israel pull out entirely from the West Bank and Gaza?

AVRAHAM BURG: Tomorrow morning. No, actually, yesterday, yesterday evening. No doubt about it.

AMY GOODMAN: Pull out all the settlements.

AVRAHAM BURG: Yeah, it pollutes our morality, and it contaminates our policy. And we became hostages of the messianic and eschatological policy of the settlers, which actually leads Israel into a de facto one-state solution, which discriminates one people over the other people. At the same time, the Palestinian society was kidnapped and held hostage by the hands of the eschatological fundamental—Hamas fundamentalists. And both societies must get rid of their prisoners, get rid of these kidnappers and get over this Stockholm syndrome that I’m in love with my kidnapper. And only then we will be able to talk to each other.

AMY GOODMAN: And finally, do you support the divestment movement here? You just heard—

AVRAHAM BURG: The what? I’m sorry.

AMY GOODMAN: The divestment movement. You just heard in our headlines that Hampshire College in Massachusetts has become the first college to divest from companies that are doing business with the Israeli military.

AVRAHAM BURG: It stands against my values system to boycott. OK? If I said earlier in this program and earlier in my life, I’m totally committed to conversation, even with my worst enemy. So boycott is not a tool for me. Boycott is an expression of violence.

AMY GOODMAN: Avraham Burg, I want to thank you very much for being with us. He is the former speaker of the Israeli Knesset, former chair of the Jewish Agency, former head of the World Zionist Organization. His new book is called The Holocaust Is Over: We Must Rise from its Ashes.