Welcome

Welcome to Sheeple Liberation. The purpose of this blog is to be an extension and companion of a blog I created at MySpace . My specific interest in creating this blog is to provide a forum for the free discussion of current topics and to provide an ongoing resource to folks who are either awake or on the path to it. So many times in my life I have had experiences that shocked me into the awareness that what I thought I knew and what I assumed to be the truth was not so. I know there are many of you out there who have had similar experiences. The description of this kind of experience is that you know something is wrong, but you just can't put your finger on just what it is. I hope this blog can be a place where you can help yourself put together the pieces and also to share what you have learned.

Sunday, July 25, 2010

America's Ruling Class -- And the Perils of Revolution

America's Ruling Class -- And the Perils of Revolution

As over-leveraged investment houses began to fail in September 2008, the leaders of the Republican and Democratic parties, of major corporations, and opinion leaders stretching from the National Review magazine (and the Wall Street Journal) on the right to the Nation magazine on the left, agreed that spending some $700 billion to buy the investors' "toxic assets" was the only alternative to the U.S. economy's "systemic collapse." In this, President George W. Bush and his would-be Republican successor John McCain agreed with the Democratic candidate, Barack Obama. Many, if not most, people around them also agreed upon the eventual commitment of some 10 trillion nonexistent dollars in ways unprecedented in America. They explained neither the difference between the assets' nominal and real values, nor precisely why letting the market find the latter would collapse America. The public objected immediately, by margins of three or four to one.

When this majority discovered that virtually no one in a position of power in either party or with a national voice would take their objections seriously, that decisions about their money were being made in bipartisan backroom deals with interested parties, and that the laws on these matters were being voted by people who had not read them, the term "political class" came into use. Then, after those in power changed their plans from buying toxic assets to buying up equity in banks and major industries but refused to explain why, when they reasserted their right to decide ad hoc on these and so many other matters, supposing them to be beyond the general public's understanding, the American people started referring to those in and around government as the "ruling class." And in fact Republican and Democratic office holders and their retinues show a similar presumption to dominate and fewer differences in tastes, habits, opinions, and sources of income among one another than between both and the rest of the country. They think, look, and act as a class.

Although after the election of 2008 most Republican office holders argued against the Troubled Asset Relief Program, against the subsequent bailouts of the auto industry, against the several "stimulus" bills and further summary expansions of government power to benefit clients of government at the expense of ordinary citizens, the American people had every reason to believe that many Republican politicians were doing so simply by the logic of partisan opposition. After all, Republicans had been happy enough to approve of similar things under Republican administrations. Differences between Bushes, Clintons, and Obamas are of degree, not kind. Moreover, 2009-10 establishment Republicans sought only to modify the government's agenda while showing eagerness to join the Democrats in new grand schemes, if only they were allowed to. Sen. Orrin Hatch continued dreaming of being Ted Kennedy, while Lindsey Graham set aside what is true or false about "global warming" for the sake of getting on the right side of history. No prominent Republican challenged the ruling class's continued claim of superior insight, nor its denigration of the American people as irritable children who must learn their place. The Republican Party did not disparage the ruling class, because most of its officials are or would like to be part of it.

Never has there been so little diversity within America's upper crust. Always, in America as elsewhere, some people have been wealthier and more powerful than others. But until our own time America's upper crust was a mixture of people who had gained prominence in a variety of ways, who drew their money and status from different sources and were not predictably of one mind on any given matter. The Boston Brahmins, the New York financiers, the land barons of California, Texas, and Florida, the industrialists of Pittsburgh, the Southern aristocracy, and the hardscrabble politicians who made it big in Chicago or Memphis had little contact with one another. Few had much contact with government, and "bureaucrat" was a dirty word for all. So was "social engineering." Nor had the schools and universities that formed yesterday's upper crust imposed a single orthodoxy about the origins of man, about American history, and about how America should be governed. All that has changed.

Today's ruling class, from Boston to San Diego, was formed by an educational system that exposed them to the same ideas and gave them remarkably uniform guidance, as well as tastes and habits. These amount to a social canon of judgments about good and evil, complete with secular sacred history, sins (against minorities and the environment), and saints. Using the right words and avoiding the wrong ones when referring to such matters -- speaking the "in" language -- serves as a badge of identity. Regardless of what business or profession they are in, their road up included government channels and government money because, as government has grown, its boundary with the rest of American life has become indistinct. Many began their careers in government and leveraged their way into the private sector. Some, e.g., Secretary of the Treasury Timothy Geithner, never held a non-government job. Hence whether formally in government, out of it, or halfway, America's ruling class speaks the language and has the tastes, habits, and tools of bureaucrats. It rules uneasily over the majority of Americans not oriented to government.

The two classes have less in common culturally, dislike each other more, and embody ways of life more different from one another than did the 19th century's Northerners and Southerners -- nearly all of whom, as Lincoln reminded them, "prayed to the same God." By contrast, while most Americans pray to the God "who created and doth sustain us," our ruling class prays to itself as "saviors of the planet" and improvers of humanity. Our classes' clash is over "whose country" America is, over what way of life will prevail, over who is to defer to whom about what. The gravity of such divisions points us, as it did Lincoln, to Mark's Gospel: "if a house be divided against itself, that house cannot stand."

The Political Divide

Important as they are, our political divisions are the iceberg's tip. When pollsters ask the American people whether they are likely to vote Republican or Democrat in the next presidential election, Republicans win growing pluralities. But whenever pollsters add the preferences "undecided," "none of the above," or "tea party," these win handily, the Democrats come in second, and the Republicans trail far behind. That is because while most of the voters who call themselves Democrats say that Democratic officials represent them well, only a fourth of the voters who identify themselves as Republicans tell pollsters that Republican officeholders represent them well. Hence officeholders, Democrats and Republicans, gladden the hearts of some one-third of the electorate -- most Democratic voters, plus a few Republicans. This means that Democratic politicians are the ruling class's prime legitimate representatives and that because Republican politicians are supported by only a fourth of their voters while the rest vote for them reluctantly, most are aspirants for a junior role in the ruling class. In short, the ruling class has a party, the Democrats. But some two-thirds of Americans -- a few Democratic voters, most Republican voters, and all independents -- lack a vehicle in electoral politics.

Sooner or later, well or badly, that majority's demand for representation will be filled. Whereas in 1968 Governor George Wallace's taunt "there ain't a dime's worth of difference" between the Republican and Democratic parties resonated with only 13.5 percent of the American people, in 1992 Ross Perot became a serious contender for the presidency (at one point he was favored by 39 percent of Americans vs. 31 percent for G.H.W. Bush and 25 percent for Clinton) simply by speaking ill of the ruling class. Today, few speak well of the ruling class. Not only has it burgeoned in size and pretense, but it also has undertaken wars it has not won, presided over a declining economy and mushrooming debt, made life more expensive, raised taxes, and talked down to the American people. Americans' conviction that the ruling class is as hostile as it is incompetent has solidified. The polls tell us that only about a fifth of Americans trust the government to do the right thing. The rest expect that it will do more harm than good and are no longer afraid to say so.

While Europeans are accustomed to being ruled by presumed betters whom they distrust, the American people's realization of being ruled like Europeans shocked this country into well nigh revolutionary attitudes. But only the realization was new. The ruling class had sunk deep roots in America over decades before 2008. Machiavelli compares serious political diseases to the Aetolian fevers -- easy to treat early on while they are difficult to discern, but virtually untreatable by the time they become obvious.

Far from speculating how the political confrontation might develop between America's regime class -- relatively few people supported by no more than one-third of Americans -- and a country class comprising two-thirds of the country, our task here is to understand the divisions that underlie that confrontation's unpredictable future. More on politics below.

The Ruling Class

Who are these rulers, and by what right do they rule? How did America change from a place where people could expect to live without bowing to privileged classes to one in which, at best, they might have the chance to climb into them? What sets our ruling class apart from the rest of us?

The most widespread answers -- by such as the Times's Thomas Friedman and David Brooks -- are schlock sociology. Supposedly, modern society became so complex and productive, the technical skills to run it so rare, that it called forth a new class of highly educated officials and cooperators in an ever less private sector. Similarly fanciful is Edward Goldberg's notion that America is now ruled by a "newocracy": a "new aristocracy who are the true beneficiaries of globalization -- including the multinational manager, the technologist and the aspirational members of the meritocracy." In fact, our ruling class grew and set itself apart from the rest of us by its connection with ever bigger government, and above all by a certain attitude.

Other explanations are counterintuitive. Wealth? The heads of the class do live in our big cities' priciest enclaves and suburbs, from Montgomery County, Maryland, to Palo Alto, California, to Boston's Beacon Hill as well as in opulent university towns from Princeton to Boulder. But they are no wealthier than many Texas oilmen or California farmers, or than neighbors with whom they do not associate -- just as the social science and humanities class that rules universities seldom associates with physicians and physicists. Rather, regardless of where they live, their social-intellectual circle includes people in the lucrative "nonprofit" and "philanthropic" sectors and public policy. What really distinguishes these privileged people demographically is that, whether in government power directly or as officers in companies, their careers and fortunes depend on government. They vote Democrat more consistently than those who live on any of America's Dr. Martin Luther King Jr. Streets. These socioeconomic opposites draw their money and orientation from the same sources as the millions of teachers, consultants, and government employees in the middle ranks who aspire to be the former and identify morally with what they suppose to be the latter's grievances.

Professional prominence or position will not secure a place in the class any more than mere money. In fact, it is possible to be an official of a major corporation or a member of the U.S. Supreme Court (just ask Justice Clarence Thomas), or even president (Ronald Reagan), and not be taken seriously by the ruling class. Like a fraternity, this class requires above all comity -- being in with the right people, giving the required signs that one is on the right side, and joining in despising the Outs. Once an official or professional shows that he shares the manners, the tastes, the interests of the class, gives lip service to its ideals and shibboleths, and is willing to accommodate the interests of its senior members, he can move profitably among our establishment's parts.

If, for example, you are Laurence Tribe in 1984, Harvard professor of law, leftist pillar of the establishment, you can "write" your magnum opus by using the products of your student assistant, Ron Klain. A decade later, after Klain admits to having written some parts of the book, and the other parts are found to be verbatim or paraphrases of a book published in 1974, you can claim (perhaps correctly) that your plagiarism was "inadvertent," and you can count on the Law School's dean, Elena Kagan, to appoint a committee including former and future Harvard president Derek Bok that issues a secret report that "closes" the incident. Incidentally, Kagan ends up a justice of the Supreme Court. Not one of these people did their jobs: the professor did not write the book himself, the assistant plagiarized instead of researching, the dean and the committee did not hold the professor accountable, and all ended up rewarded. By contrast, for example, learned papers and distinguished careers in climatology at MIT (Richard Lindzen) or UVA (S. Fred Singer) are not enough for their questions about "global warming" to be taken seriously. For our ruling class, identity always trumps.

Much less does membership in the ruling class depend on high academic achievement. To see something closer to an academic meritocracy consider France, where elected officials have little power, a vast bureaucracy explicitly controls details from how babies are raised to how to make cheese, and people get into and advance in that bureaucracy strictly by competitive exams. Hence for good or ill, France's ruling class are bright people -- certifiably. Not ours. But didn't ours go to Harvard and Princeton and Stanford? Didn't most of them get good grades? Yes. But while getting into the Ecole Nationale d'Administration or the Ecole Polytechnique or the dozens of other entry points to France's ruling class requires outperforming others in blindly graded exams, and graduating from such places requires passing exams that many fail, getting into America's "top schools" is less a matter of passing exams than of showing up with acceptable grades and an attractive social profile. American secondary schools are generous with their As. Since the 1970s, it has been virtually impossible to flunk out of American colleges. And it is an open secret that "the best" colleges require the least work and give out the highest grade point averages. No, our ruling class recruits and renews itself not through meritocracy but rather by taking into itself people whose most prominent feature is their commitment to fit in. The most successful neither write books and papers that stand up to criticism nor release their academic records. Thus does our ruling class stunt itself through negative selection. But the more it has dumbed itself down, the more it has defined itself by the presumption of intellectual superiority.

The Faith

Its attitude is key to understanding our bipartisan ruling class. Its first tenet is that "we" are the best and brightest while the rest of Americans are retrograde, racist, and dysfunctional unless properly constrained. How did this replace the Founding generation's paradigm that "all men are created equal"?

The notion of human equality was always a hard sell, because experience teaches us that we are so unequal in so many ways, and because making one's self superior is so tempting that Lincoln called it "the old serpent, you work I'll eat." But human equality made sense to our Founding generation because they believed that all men are made in the image and likeness of God, because they were yearning for equal treatment under British law, or because they had read John Locke.

It did not take long for their paradigm to be challenged by interest and by "science." By the 1820s, as J. C. Calhoun was reading in the best London journals that different breeds of animals and plants produce inferior or superior results, slave owners were citing the Negroes' deficiencies to argue that they should remain slaves indefinitely. Lots of others were reading Ludwig Feuerbach's rendition of Hegelian philosophy, according to which biblical injunctions reflect the fantasies of alienated human beings or, in the young Karl Marx's formulation, that ethical thought is "superstructural" to material reality. By 1853, when Sen. John Pettit of Ohio called "all men are created equal" "a self-evident lie," much of America's educated class had already absorbed the "scientific" notion (which Darwin only popularized) that man is the product of chance mutation and natural selection of the fittest. Accordingly, by nature, superior men subdue inferior ones as they subdue lower beings or try to improve them as they please. Hence while it pleased the abolitionists to believe in freeing Negroes and improving them, it also pleased them to believe that Southerners had to be punished and reconstructed by force. As the 19th century ended, the educated class's religious fervor turned to social reform: they were sure that because man is a mere part of evolutionary nature, man could be improved, and that they, the most highly evolved of all, were the improvers.

Thus began the Progressive Era. When Woodrow Wilson in 1914 was asked "can't you let anything alone?" he answered with, "I let everything alone that you can show me is not itself moving in the wrong direction, but I am not going to let those things alone that I see are going down-hill." Wilson spoke for the thousands of well-off Americans who patronized the spas at places like Chautauqua and Lake Mohonk. By such upper-middle-class waters, progressives who imagined themselves the world's examples and the world's reformers dreamt big dreams of establishing order, justice, and peace at home and abroad. Neither were they shy about their desire for power. Wilson was the first American statesman to argue that the Founders had done badly by depriving the U.S. government of the power to reshape American society. Nor was Wilson the last to invade a foreign country (Mexico) to "teach [them] to elect good men."

World War I and the chaos at home and abroad that followed it discredited the Progressives in the American people's eyes. Their international schemes had brought blood and promised more. Their domestic management had not improved Americans' lives, but given them a taste of arbitrary government, including Prohibition. The Progressives, for their part, found it fulfilling to attribute the failure of their schemes to the American people's backwardness, to something deeply wrong with America. The American people had failed them because democracy in its American form perpetuated the worst in humanity. Thus Progressives began to look down on the masses, to look on themselves as the vanguard, and to look abroad for examples to emulate.

The cultural divide between the "educated class" and the rest of the country opened in the interwar years. Some Progressives joined the "vanguard of the proletariat," the Communist Party. Many more were deeply sympathetic to Soviet Russia, as they were to Fascist Italy and Nazi Germany. Not just the Nation, but also the New York Times and National Geographic found much to be imitated in these regimes because they promised energetically to transcend their peoples' ways and to build "the new man." Above all, our educated class was bitter about America. In 1925 the American Civil Liberties Union sponsored a legal challenge to a Tennessee law that required teaching the biblical account of creation. The ensuing trial, radio broadcast nationally, as well as the subsequent hit movie Inherit the Wind, were the occasion for what one might have called the Chautauqua class to drive home the point that Americans who believed in the Bible were willful ignoramuses. As World War II approached, some American Progressives supported the Soviet Union (and its ally, Nazi Germany) and others Great Britain and France. But Progressives agreed on one thing: the approaching war should be blamed on the majority of Americans, because they had refused to lead the League of Nations. Darryl Zanuck produced the critically acclaimed movie [Woodrow] Wilson featuring Cedric Hardwicke as Senator Henry Cabot Lodge, who allegedly brought on the war by appealing to American narrow-mindedness against Wilson's benevolent genius.

Franklin Roosevelt brought the Chautauqua class into his administration and began the process that turned them into rulers. FDR described America's problems in technocratic terms. America's problems would be fixed by a "brain trust" (picked by him). His New Deal's solutions -- the alphabet-soup "independent" agencies that have run America ever since -- turned many Progressives into powerful bureaucrats and then into lobbyists. As the saying goes, they came to Washington to do good, and stayed to do well.

As their number and sense of importance grew, so did their distaste for common Americans. Believing itself "scientific," this Progressive class sought to explain its differences from its neighbors in "scientific" terms. The most elaborate of these attempts was Theodor Adorno's widely acclaimed The Authoritarian Personality (1948). It invented a set of criteria by which to define personality traits, ranked these traits and their intensity in any given person on what it called the "F scale" (F for fascist), interviewed hundreds of Americans, and concluded that most who were not liberal Democrats were latent fascists. This way of thinking about non-Progressives filtered down to college curricula. In 1963-64 for example, I was assigned Herbert McCloskey's Conservatism and Personality (1958) at Rutgers's Eagleton Institute of Politics as a paradigm of methodological correctness. The author had defined conservatism in terms of answers to certain questions, had defined a number of personality disorders in terms of other questions, and run a survey that proved "scientifically" that conservatives were maladjusted ne'er-do-well ignoramuses. (My class project, titled "Liberalism and Personality," following the same methodology, proved just as scientifically that liberals suffered from the very same social diseases, and even more amusing ones.)

The point is this: though not one in a thousand of today's bipartisan ruling class ever heard of Adorno or McCloskey, much less can explain the Feuerbachian-Marxist notion that human judgments are "epiphenomenal" products of spiritual or material alienation, the notion that the common people's words are, like grunts, mere signs of pain, pleasure, and frustration, is now axiomatic among our ruling class. They absorbed it osmotically, second -- or thirdhand, from their education and from companions. Truly, after Barack Obama described his opponents' clinging to "God and guns" as a characteristic of inferior Americans, he justified himself by pointing out he had said "what everybody knows is true." Confident "knowledge" that "some of us, the ones who matter," have grasped truths that the common herd cannot, truths that direct us, truths the grasping of which entitles us to discount what the ruled say and to presume what they mean, made our Progressives into a class long before they took power.

The Agenda: Power

Our ruling class's agenda is power for itself. While it stakes its claim through intellectual-moral pretense, it holds power by one of the oldest and most prosaic of means: patronage and promises thereof. Like left-wing parties always and everywhere, it is a "machine," that is, based on providing tangible rewards to its members. Such parties often provide rank-and-file activists with modest livelihoods and enhance mightily the upper levels' wealth. Because this is so, whatever else such parties might accomplish, they must feed the machine by transferring money or jobs or privileges -- civic as well as economic -- to the party's clients, directly or indirectly. This, incidentally, is close to Aristotle's view of democracy. Hence our ruling class's standard approach to any and all matters, its solution to any and all problems, is to increase the power of the government -- meaning of those who run it, meaning themselves, to profit those who pay with political support for privileged jobs, contracts, etc. Hence more power for the ruling class has been our ruling class's solution not just for economic downturns and social ills but also for hurricanes and tornadoes, global cooling and global warming. A priori, one might wonder whether enriching and empowering individuals of a certain kind can make Americans kinder and gentler, much less control the weather. But there can be no doubt that such power and money makes Americans ever more dependent on those who wield it. Let us now look at what this means in our time.

Dependence Economics

By taxing and parceling out more than a third of what Americans produce, through regulations that reach deep into American life, our ruling class is making itself the arbiter of wealth and poverty. While the economic value of anything depends on sellers and buyers agreeing on that value as civil equals in the absence of force, modern government is about nothing if not tampering with civil equality. By endowing some in society with power to force others to sell cheaper than they would, and forcing others yet to buy at higher prices -- even to buy in the first place -- modern government makes valuable some things that are not, and devalues others that are. Thus if you are not among the favored guests at the table where officials make detailed lists of who is to receive what at whose expense, you are on the menu. Eventually, pretending forcibly that valueless things have value dilutes the currency's value for all.

Laws and regulations nowadays are longer than ever because length is needed to specify how people will be treated unequally. For example, the health care bill of 2010 takes more than 2,700 pages to make sure not just that some states will be treated differently from others because their senators offered key political support, but more importantly to codify bargains between the government and various parts of the health care industry, state governments, and large employers about who would receive what benefits (e.g., public employee unions and auto workers) and who would pass what indirect taxes onto the general public. The financial regulation bill of 2010, far from setting univocal rules for the entire financial industry in few words, spends some 3,000 pages (at this writing) tilting the field exquisitely toward some and away from others. Even more significantly, these and other products of Democratic and Republican administrations and Congresses empower countless boards and commissions arbitrarily to protect some persons and companies, while ruining others. Thus in 2008 the Republican administration first bailed out Bear Stearns, then let Lehman Brothers sink in the ensuing panic, but then rescued Goldman Sachs by infusing cash into its principal debtor, AIG. Then, its Democratic successor used similarly naked discretionary power (and money appropriated for another purpose) to give major stakes in the auto industry to labor unions that support it. Nowadays, the members of our ruling class admit that they do not read the laws. They don't have to. Because modern laws are primarily grants of discretion, all anybody has to know about them is whom they empower.

By making economic rules dependent on discretion, our bipartisan ruling class teaches that prosperity is to be bought with the coin of political support. Thus in the 1990s and 2000s, as Democrats and Republicans forced banks to make loans for houses to people and at rates they would not otherwise have considered, builders and investors had every reason to make as much money as they could from the ensuing inflation of housing prices. When the bubble burst, only those connected with the ruling class at the bottom and at the top were bailed out. Similarly, by taxing the use of carbon fuels and subsidizing "alternative energy," our ruling class created arguably the world's biggest opportunity for making money out of things that few if any would buy absent its intervention. The ethanol industry and its ensuing diversions of wealth exist exclusively because of subsidies. The prospect of legislation that would put a price on carbon emissions and allot certain amounts to certain companies set off a feeding frenzy among large companies to show support for a "green agenda," because such allotments would be worth tens of billions of dollars. That is why companies hired some 2,500 lobbyists in 2009 to deepen their involvement in "climate change." At the very least, such involvement profits them by making them into privileged collectors of carbon taxes. Any "green jobs" thus created are by definition creatures of subsidies -- that is, of privilege. What effect creating such privileges may have on "global warming" is debatable. But it surely increases the number of people dependent on the ruling class, and teaches Americans that satisfying that class is a surer way of making a living than producing goods and services that people want to buy.

Beyond patronage, picking economic winners and losers redirects the American people's energies to tasks that the political class deems more worthy than what Americans choose for themselves. John Kenneth Galbraith's characterization of America as "private wealth amidst public squalor" (The Affluent Society, 1958) has ever encapsulated our best and brightest's complaint: left to themselves, Americans use land inefficiently in suburbs and exurbs, making it necessary to use energy to transport them to jobs and shopping. Americans drive big cars, eat lots of meat as well as other unhealthy things, and go to the doctor whenever they feel like it. Americans think it justice to spend the money they earn to satisfy their private desires even though the ruling class knows that justice lies in improving the community and the planet. The ruling class knows that Americans must learn to live more densely and close to work, that they must drive smaller cars and change their lives to use less energy, that their dietary habits must improve, that they must accept limits in how much medical care they get, that they must divert more of their money to support people, cultural enterprises, and plans for the planet that the ruling class deems worthier. So, ever-greater taxes and intrusive regulations are the main wrenches by which the American people can be improved (and, yes, by which the ruling class feeds and grows).

The 2010 medical law is a template for the ruling class's economic modus operandi: the government taxes citizens to pay for medical care and requires citizens to purchase health insurance. The money thus taken and directed is money that the citizens themselves might have used to pay for medical care. In exchange for the money, the government promises to provide care through its "system." But then all the boards, commissions, guidelines, procedures, and "best practices" that constitute "the system" become the arbiters of what any citizen ends up getting. The citizen might end up dissatisfied with what "the system" offers. But when he gave up his money, he gave up the power to choose, and became dependent on all the boards and commissions that his money also pays for and that raise the cost ofcare. Similarly, in 2008 the House Ways and Means Committee began considering a plan to force citizens who own Individual Retirement Accounts (IRAs) to transfer those funds into government-run "guaranteed retirement accounts." If the government may force citizens to buy health insurance, by what logic can it not force them to trade private ownership and control of retirement money for a guarantee as sound as the government itself? Is it not clear that the government knows more about managing retirement income than individuals?

Who Depends on Whom?

In Congressional Government (1885) Woodrow Wilson left no doubt: the U.S. Constitution prevents the government from meeting the country's needs by enumerating rights that the government may not infringe. ("Congress shall make no law..." says the First Amendment, typically.) Our electoral system, based on single member districts, empowers individual voters at the expense of "responsible parties." Hence the ruling class's perpetual agenda has been to diminish the role of the citizenry's elected representatives, enhancing that of party leaders as well as of groups willing to partner in the government's plans, and to craft a "living" Constitution in which restrictions on government give way to "positive rights" -- meaning charters of government power.

Consider representation. Following Wilson, American Progressives have always wanted to turn the U.S. Congress from the role defined by James Madison's Federalist #10, "refine and enlarge the public's view," to something like the British Parliament, which ratifies government actions. Although Britain's electoral system -- like ours, single members elected in historic districts by plurality vote -- had made members of Parliament responsive to their constituents in ancient times, by Wilson's time the growing importance of parties made MPs beholden to party leaders. Hence whoever controls the majority party controls both Parliament and the government.

In America, the process by which party has become (almost) as important began with the Supreme Court's 1962 decision in Baker v. Carr which, by setting the single standard "one man, one vote" for congressional districts, ended up legalizing the practice of "gerrymandering," concentrating the opposition party's voters into as few districts as possible while placing one's own voters into as many as possible likely to yield victories. Republican and Democratic state legislatures have gerrymandered for a half century. That is why today's Congress consists more and more of persons who represent their respective party establishments -- not nearly as much as in Britain, but heading in that direction. Once districts are gerrymandered "safe" for one party or another, the voters therein count less because party leaders can count more on elected legislators to toe the party line.

To the extent party leaders do not have to worry about voters, they can choose privileged interlocutors, representing those in society whom they find most amenable. In America ever more since the 1930s -- elsewhere in the world this practice is ubiquitous and long-standing -- government has designated certain individuals, companies, and organizations within each of society's sectors as (junior) partners in elaborating laws and administrative rules for those sectors. The government empowers the persons it has chosen over those not chosen, deems them the sector's true representatives, and rewards them. They become part of the ruling class.

Thus in 2009-10 the American Medical Association (AMA) strongly supported the new medical care law, which the administration touted as having the support of "the doctors" even though the vast majority of America's 975,000 physicians opposed it. Those who run the AMA, however, have a government contract as exclusive providers of the codes by which physicians and hospitals bill the government for their services. The millions of dollars that flow thereby to the AMA's officers keep them in line, while the impracticality of doing without the billing codes tamps down rebellion in the doctor ranks. When the administration wanted to bolster its case that the state of Arizona's enforcement of federal immigration laws was offensive to Hispanics, the National Association of Chiefs of Police -- whose officials depend on the administration for their salaries -- issued a statement that the laws would endanger all Americans by raising Hispanics' animosity. This reflected conversations with the administration rather than a vote of the nation's police chiefs.

Similarly, modern labor unions are ever less bunches of workers banding together and ever more bundled under the aegis of an organization chosen jointly by employers and government. Prototypical is the Service Employees International Union, which grew spectacularly by persuading managers of government agencies as well as of publicly funded private entities that placing their employees in the SEIU would relieve them of responsibility. Not by being elected by workers' secret ballots did the SEIU conquer workplace after workplace, but rather by such deals, or by the union presenting what it claims are cards from workers approving of representation. The union gets 2 percent of the workers' pay, which it recycles as contributions to the Democratic Party, which it recycles in greater power over public employees. The union's leadership is part of the ruling class's beating heart.

The point is that a doctor, a building contractor, a janitor, or a schoolteacher counts in today's America insofar as he is part of the hierarchy of a sector organization affiliated with the ruling class. Less and less do such persons count as voters.

Ordinary people have also gone a long way toward losing equal treatment under law. The America described in civics books, in which no one could be convicted or fined except by a jury of his peers for having violated laws passed by elected representatives, started disappearing when the New Deal inaugurated today's administrative state -- in which bureaucrats make, enforce, and adjudicate nearly all the rules. Today's legal -- administrative texts are incomprehensibly detailed and freighted with provisions crafted exquisitely to affect equal individuals unequally. The bureaucrats do not enforce the rules themselves so much as whatever "agency policy" they choose to draw from them in any given case. If you protest any "agency policy" you will be informed that it was formulated with input from "the public." But not from the likes of you.

Disregard for the text of laws -- for the dictionary meaning of words and the intentions of those who wrote them -- in favor of the decider's discretion has permeated our ruling class from the Supreme Court to the lowest local agency. Ever since Oliver Wendell Holmes argued in 1920 (Missouri v. Holland) that presidents, Congresses, and judges could not be bound by the U.S. Constitution regarding matters that the people who wrote and ratified it could not have foreseen, it has become conventional wisdom among our ruling class that they may transcend the Constitution while pretending allegiance to it. They began by stretching such constitutional terms as "interstate commerce" and "due process," then transmuting others, e.g., "search and seizure," into "privacy." Thus in 1973 the Supreme Court endowed its invention of "privacy" with a "penumbra" that it deemed "broad enough to encompass a woman's decision whether or not to terminate her pregnancy." The court gave no other constitutional reasoning, period. Perfunctory to the point of mockery, this constitutional talk was to reassure the American people that the ruling class was acting within the Constitution's limitations. By the 1990s federal courts were invalidating amendments to state constitutions passed by referenda to secure the "positive rights" they invent, because these expressions of popular will were inconsistent with the constitution they themselves were construing.

By 2010 some in the ruling class felt confident enough to dispense with the charade. Asked what in the Constitution allows Congress and the president to force every American to purchase health insurance, House Speaker Nancy Pelosi replied: "Are you kidding? Are you kidding?" No surprise then that lower court judges and bureaucrats take liberties with laws, regulations, and contracts. That is why legal words that say you are in the right avail you less in today's America than being on the right side of the persons who decide what they want those words to mean.

As the discretionary powers of officeholders and of their informal entourages have grown, the importance of policy and of law itself is declining, citizenship is becoming vestigial, and the American people become ever more dependent.

Disaggregating and Dispiriting

The ruling class is keener to reform the American people's family and spiritual lives than their economic and civic ones. In no other areas is the ruling class's self-definition so definite, its contempt for opposition so patent, its Kulturkampf so open. It believes that the Christian family (and the Orthodox Jewish one too) is rooted in and perpetuates the ignorance commonly called religion, divisive social prejudices, and repressive gender roles, that it is the greatest barrier to human progress because it looks to its very particular interest -- often defined as mere coherence against outsiders who most often know better. Thus the family prevents its members from playing their proper roles in social reform. Worst of all, it reproduces itself.

Since marriage is the family's fertile seed, government at all levels, along with "mainstream" academics and media, have waged war on it. They legislate, regulate, and exhort in support not of "the family" -- meaning married parents raising children -- but rather of "families," meaning mostly households based on something other than marriage. The institution of no-fault divorce diminished the distinction between cohabitation and marriage -- except that husbands are held financially responsible for the children they father, while out-of-wedlock fathers are not. The tax code penalizes marriage and forces those married couples who raise their own children to subsidize "child care" for those who do not. Top Republicans and Democrats have also led society away from the very notion of marital fidelity by precept as well as by parading their affairs. For example, in 1997 the Democratic administration's secretary of defense and the Republican Senate's majority leader (joined by the New York Times et al.) condemned the military's practice of punishing officers who had extramarital affairs. While the military had assumed that honoring marital vows is as fundamental to the integrity of its units as it is to that of society, consensus at the top declared that insistence on fidelity is "contrary to societal norms." Not surprisingly, rates of marriage in America have decreased as out-of-wedlock births have increased. The biggest demographic consequence has been that about one in five of all households are women alone or with children, in which case they have about a four in 10 chance of living in poverty. Since unmarried mothers often are or expect to be clients of government services, it is not surprising that they are among the Democratic Party's most faithful voters.

While our ruling class teaches that relationships among men, women, and children are contingent, it also insists that the relationship between each of them and the state is fundamental. That is why such as Hillary Clinton have written law review articles and books advocating a direct relationship between the government and children, effectively abolishing the presumption of parental authority. Hence whereas within living memory school nurses could not administer an aspirin to a child without the parents' consent, the people who run America's schools nowadays administer pregnancy tests and ship girls off to abortion clinics without the parents' knowledge. Parents are not allowed to object to what their children are taught. But the government may and often does object to how parents raise children. The ruling class's assumption is that what it mandates for children is correct ipso facto, while what parents do is potentially abusive. It only takes an anonymous accusation of abuse for parents to be taken away in handcuffs until they prove their innocence. Only sheer political weight (and in California, just barely) has preserved parents' right to homeschool their children against the ruling class's desire to accomplish what Woodrow Wilson so yearned: "to make young gentlemen as unlike their fathers as possible."

At stake are the most important questions: What is the right way for human beings to live? By what standard is anything true or good? Who gets to decide what? Implicit in Wilson's words and explicit in our ruling class's actions is the dismissal, as the ways of outdated "fathers," of the answers that most Americans would give to these questions. This dismissal of the American people's intellectual, spiritual, and moral substance is the very heart of what our ruling class is about. Its principal article of faith, its claim to the right to decide for others, is precisely that it knows things and operates by standards beyond others' comprehension.

While the unenlightened ones believe that man is created in the image and likeness of God and that we are subject to His and to His nature's laws, the enlightened ones know that we are products of evolution, driven by chance, the environment, and the will to primacy. While the un-enlightened are stuck with the antiquated notion that ordinary human minds can reach objective judgments about good and evil, better and worse through reason, the enlightened ones know that all such judgments are subjective and that ordinary people can no more be trusted with reason than they can with guns. Because ordinary people will pervert reason with ideology, religion, or interest, science is "science" only in the "right" hands. Consensus among the right people is the only standard of truth. Facts and logic matter only insofar as proper authority acknowledges them.

That is why the ruling class is united and adamant about nothing so much as its right to pronounce definitive, "scientific" judgment on whatever it chooses. When the government declares, and its associated press echoes that "scientists say" this or that, ordinary people -- or for that matter scientists who "don't say," or are not part of the ruling class -- lose any right to see the information that went into what "scientists say." Thus when Virginia's attorney general subpoenaed the data by which Professor Michael Mann had concluded, while paid by the state of Virginia, that the earth's temperatures are rising "like a hockey stick" from millennial stability -- a conclusion on which billions of dollars' worth of decisions were made -- to investigate the possibility of fraud, the University of Virginia's faculty senate condemned any inquiry into "scientific endeavor that has satisfied peer review standards" claiming that demands for data "send a chilling message to scientists...and indeed scholars in any discipline." The Washington Post editorialized that the attorney general's demands for data amounted to "an assault on reason." The fact that the "hockey stick" conclusion stands discredited and Mann and associates are on record manipulating peer review, the fact that science-by-secret-data is an oxymoron, the very distinction between truth and error, all matter far less to the ruling class than the distinction between itself and those they rule.

By identifying science and reason with themselves, our rulers delegitimize opposition. Though they cannot prevent Americans from worshiping God, they can make it as socially disabling as smoking -- to be done furtively and with a bad social conscience. Though they cannot make Americans wish they were Europeans, they continue to press upon this nation of refugees from the rest of the world the notion that Americans ought to live by "world standards." Each day, the ruling class produces new "studies" that show that one or another of Americans' habits is in need of reform, and that those Americans most resistant to reform are pitiably, perhaps criminally, wrong. Thus does it go about disaggregating and dispiriting the ruled.

Meddling and Apologies

America's best and brightest believe themselves qualified and duty bound to direct the lives not only of Americans but of foreigners as well. George W. Bush's 2005 inaugural statement that America cannot be free until the whole world is free and hence that America must push and prod mankind to freedom was but an extrapolation of the sentiments of America's Progressive class, first articulated by such as Princeton's Woodrow Wilson and Columbia's Nicholas Murray Butler. But while the early Progressives expected the rest of the world to follow peacefully, today's ruling class makes decisions about war and peace at least as much forcibly to tinker with the innards of foreign bodies politic as to protect America. Indeed, they conflate the two purposes in the face of the American people's insistence to draw a bright line between war against our enemies and peace with non-enemies in whose affairs we do not interfere. That is why, from Wilson to Kissinger, the ruling class has complained that the American people oscillate between bellicosity and "isolationism."

Because our ruling class deems unsophisticated the American people's perennial preference for decisive military action or none, its default solution to international threats has been to commit blood and treasure to long-term, twilight efforts to reform the world's Vietnams, Somalias, Iraqs, and Afghanistans, believing that changing hearts and minds is the prerequisite of peace and that it knows how to change them. The apparently endless series of wars in which our ruling class has embroiled America, wars that have achieved nothing worthwhile at great cost in lives and treasure, has contributed to defining it, and to discrediting it -- but not in its own eyes.

Rather, even as our ruling class has lectured, cajoled, and sometimes intruded violently to reform foreign countries in its own image, it has apologized to them for America not having matched that image -- their private image. Woodrow Wilson began this double game in 1919, when he assured Europe's peoples that America had mandated him to demand their agreement to Article X of the peace treaty (the League of Nations) and then swore to the American people that Article X was the Europeans' non-negotiable demand. The fact that the U.S. government had seized control of transatlantic cable communications helped hide (for a while) that the League scheme was merely the American Progressives' private dream. In our time, this double game is quotidian on the evening news. Notably, President Obama apologized to Europe because "the United States has fallen short of meeting its responsibilities" to reduce carbon emissions by taxation. But the American people never assumed such responsibility, and oppose doing so. Hence President Obama was not apologizing for anything that he or anyone he respected had done, but rather blaming his fellow Americans for not doing what he thinks they should do while glossing over the fact that the Europeans had done the taxing but not the reducing. Wilson redux.

Similarly, Obama "apologized" to Europeans because some Americans -- not him and his friends -- had shown "arrogance and been dismissive" toward them, and to the world because President Truman had used the atom bomb to end World War II. So President Clinton apologized to Africans because some Americans held African slaves until 1865 and others were mean to Negroes thereafter -- not himself and his friends, of course. So assistant secretary of state Michael Posner apologized to Chinese diplomats for Arizona's law that directs police to check immigration status. Republicans engage in that sort of thing as well: former Soviet dictator Mikhail Gorbachev tells us that in 1987 then vice president George H. W. Bush distanced himself from his own administration by telling him, "Reagan is a conservative, an extreme conservative. All the dummies and blockheads are with him..." This is all about a class of Americans distinguishing itself from its inferiors. It recalls the Pharisee in the Temple: "Lord, I thank thee that I am not like other men..."

In sum, our ruling class does not like the rest of America. Most of all does it dislike that so many Americans think America is substantially different from the rest of the world and like it that way. For our ruling class, however, America is a work in progress, just like the rest the world, and they are the engineers.

The Country Class

Describing America's country class is problematic because it is so heterogeneous. It has no privileged podiums, and speaks with many voices, often inharmonious. It shares above all the desire to be rid of rulers it regards inept and haughty. It defines itself practically in terms of reflexive reaction against the rulers' defining ideas and proclivities -- e.g., ever higher taxes and expanding government, subsidizing political favorites, social engineering, approval of abortion, etc. Many want to restore a way of life largely superseded. Demographically, the country class is the other side of the ruling class's coin: its most distinguishing characteristics are marriage, children, and religious practice. While the country class, like the ruling class, includes the professionally accomplished and the mediocre, geniuses and dolts, it is different because of its non-orientation to government and its members' yearning to rule themselves rather than be ruled by others.

Even when members of the country class happen to be government officials or officers of major corporations, their concerns are essentially private; in their view, government owes to its people equal treatment rather than action to correct what anyone perceives as imbalance or grievance. Hence they tend to oppose special treatment, whether for corporations or for social categories. Rather than gaming government regulations, they try to stay as far from them as possible. Thus the Supreme Court's 2005 decision in Kelo, which allows the private property of some to be taken by others with better connections to government, reminded the country class that government is not its friend.

Negative orientation to privilege distinguishes the corporate officer who tries to keep his company from joining the Business Council of large corporations who have close ties with government from the fellow in the next office. The first wants the company to grow by producing. The second wants it to grow by moving to the trough. It sets apart the schoolteacher who resents the union to which he is forced to belong for putting the union's interests above those of parents who want to choose their children's schools. In general, the country class includes all those in stations high and low who are aghast at how relatively little honest work yields, by comparison with what just a little connection with the right bureaucracy can get you. It includes those who take the side of outsiders against insiders, of small institutions against large ones, of local government against the state or federal. The country class is convinced that big business, big government, and big finance are linked as never before and that ordinary people are more unequal than ever.

Members of the country class who want to rise in their profession through sheer competence try at once to avoid the ruling class's rituals while guarding against infringing its prejudices. Averse to wheedling, they tend to think that exams should play a major role in getting or advancing in jobs, that records of performance -- including academic ones -- should be matters of public record, and that professional disputes should be settled by open argument. For such people, the Supreme Court's 2009 decision in Ricci, upholding the right of firefighters to be promoted according to the results of a professional exam, revived the hope that competence may sometimes still trump political connections.

Nothing has set the country class apart, defined it, made it conscious of itself, given it whatever coherence it has, so much as the ruling class's insistence that people other than themselves are intellectually and hence otherwise humanly inferior. Persons who were brought up to believe themselves as worthy as anyone, who manage their own lives to their own satisfaction, naturally resent politicians of both parties who say that the issues of modern life are too complex for any but themselves. Most are insulted by the ruling class's dismissal of opposition as mere "anger and frustration" -- an imputation of stupidity -- while others just scoff at the claim that the ruling class's bureaucratic language demonstrates superior intelligence. A few ask the fundamental question: Since when and by what right does intelligence trump human equality? Moreover, if the politicians are so smart, why have they made life worse?

The country class actually believes that America's ways are superior to the rest of the world's, and regards most of mankind as less free, less prosperous, and less virtuous. Thus while it delights in croissants and thinks Toyota's factory methods are worth imitating, it dislikes the idea of adhering to "world standards." This class also takes part in the U.S. armed forces body and soul: nearly all the enlisted, non-commissioned officers and officers under flag rank belong to this class in every measurable way. Few vote for the Democratic Party. You do not doubt that you are amidst the country class rather than with the ruling class when the American flag passes by or "God Bless America" is sung after seven innings of baseball, and most people show reverence. The same people wince at the National Football League's plaintive renditions of the "Star Spangled Banner."

Unlike the ruling class, the country class does not share a single intellectual orthodoxy, set of tastes, or ideal lifestyle. Its different sectors draw their notions of human equality from different sources: Christians and Jews believe it is God's law. Libertarians assert it from Hobbesian and Darwinist bases. Many consider equality the foundation of Americanism. Others just hate snobs. Some parts of the country class now follow the stars and the music out of Nashville, Tennessee, and Branson, Missouri -- entertainment complexes larger than Hollywood's -- because since the 1970s most of Hollywood's products have appealed more to the mores of the ruling class and its underclass clients than to those of large percentages of Americans. The same goes for "popular music" and television. For some in the country class Christian radio and TV are the lodestone of sociopolitical taste, while the very secular Fox News serves the same purpose for others. While symphonies and opera houses around the country, as well as the stations that broadcast them, are firmly in the ruling class's hands, a considerable part of the country class appreciates these things for their own sake. By that very token, the country class's characteristic cultural venture -- the homeschool movement -- stresses the classics across the board in science, literature, music, and history even as the ruling class abandons them.

Congruent Agendas?

Each of the country class's diverse parts has its own agenda, which flows from the peculiar ways in which the ruling class impacts its concerns. Independent businesspeople are naturally more sensitive to the growth of privileged relations between government and their competitors. Persons who would like to lead their community rue the advantages that Democratic and Republican party establishments are accruing. Parents of young children and young women anxious about marriage worry that cultural directives from on high are dispelling their dreams. The faithful to God sense persecution. All resent higher taxes and loss of freedom. More and more realize that their own agenda's advancement requires concerting resistance to the ruling class across the board.

Not being at the table when government makes the rules about how you must run your business, knowing that you will be required to pay more, work harder, and show deference for the privilege of making less money, is the independent businessman's nightmare. But what to do about it? In our time the interpenetration of government and business -- the network of subsidies, preferences, and regulations -- is so thick and deep, the people "at the table" receive and recycle into politics so much money, that independent businesspeople cannot hope to undo any given regulation or grant of privilege. Just as no manufacturer can hope to reduce the subsidies that raise his fuel costs, no set of doctors can shield themselves from the increased costs and bureaucracy resulting from government mandates. Hence independent business's agenda has been to resist the expansion of government in general, and of course to reduce taxes. Pursuit of this agenda with arguments about economic efficiency and job creation -- and through support of the Republican Party -- usually results in enough relief to discourage more vigorous remonstrance. Sometimes, however, the economic argument is framed in moral terms: "The sum of good government," said Thomas Jefferson, is not taking "from the mouth of labor the bread it has earned." For government to advantage some at others' expense, said he, "is to violate arbitrarily the first principle of association." In our time, more and more independent businesspeople have come to think of their economic problems in moral terms. But few realize how revolutionary that is.

As bureaucrats and teachers' unions disempowered neighborhood school boards, while the governments of towns, counties, and states were becoming conduits for federal mandates, as the ruling class reduced the number and importance of things that American communities could decide for themselves, America's thirst for self-governance reawakened. The fact that public employees are almost always paid more and have more generous benefits than the private sector people whose taxes support them only sharpened the sense among many in the country class that they now work for public employees rather than the other way around. But how to reverse the roles? How can voters regain control of government? Restoring localities' traditional powers over schools, including standards, curriculum, and prayer, would take repudiating two generations of Supreme Court rulings. So would the restoration of traditional "police" powers over behavior in public places. Bringing public employee unions to heel is only incidentally a matter of cutting pay and benefits. As self-governance is crimped primarily by the powers of government personified in its employees, restoring it involves primarily deciding that any number of functions now performed and the professional specialties who perform them, e.g., social workers, are superfluous or worse. Explaining to one's self and neighbors why such functions and personnel do more harm than good, while the ruling class brings its powers to bear to discredit you, is a very revolutionary thing to do.

America's pro-family movement is a reaction to the ruling class's challenges: emptying marriage of legal sanction, promoting abortion, and progressively excluding parents from their children's education. Americans reacted to these challenges primarily by sorting themselves out. Close friendships and above all marriages became rarer between persons who think well of divorce, abortion, and government authority over children and those who do not. The homeschool movement, for which the Internet became the great facilitator, involves not only each family educating its own children, but also extensive and growing social, intellectual, and spiritual contact among like-minded persons. In short, the part of the country class that is most concerned with family matters has taken on something of a biological identity. Few in this part of the country class have any illusion, however, that simply retreating into private associations will long save their families from societal influences made to order to discredit their ways. But stopping the ruling class's intrusions would require discrediting its entire conception of man, of right and wrong, as well as of the role of courts in popular government. That revolutionary task would involve far more than legislation.

The ruling class's manifold efforts to discredit and drive worship of God out of public life -- not even the Soviet Union arrested students for wearing crosses or praying, or reading the Bible on school property, as some U.S. localities have done in response to Supreme Court rulings -- convinced many among the vast majority of Americans who believe and pray that today's regime is hostile to the most important things of all. Every December, they are reminded that the ruling class deems the very word "Christmas" to be offensive. Every time they try to manifest their religious identity in public affairs, they are deluged by accusations of being "American Taliban" trying to set up a "theocracy." Let members of the country class object to anything the ruling class says or does, and likely as not their objection will be characterized as "religious," that is to say irrational, that is to say not to be considered on a par with the "science" of which the ruling class is the sole legitimate interpreter. Because aggressive, intolerant secularism is the moral and intellectual basis of the ruling class's claim to rule, resistance to that rule, whether to the immorality of economic subsidies and privileges, or to the violation of the principle of equal treatment under equal law, or to its seizure of children's education, must deal with secularism's intellectual and moral core. This lies beyond the boundaries of politics as the term is commonly understood.

The Classes Clash

The ruling class's appetite for deference, power, and perks grows. The country class disrespects its rulers, wants to curtail their power and reduce their perks. The ruling class wears on its sleeve the view that the rest of Americans are racist, greedy, and above all stupid. The country class is ever more convinced that our rulers are corrupt, malevolent, and inept. The rulers want the ruled to shut up and obey. The ruled want self-governance. The clash between the two is about which side's vision of itself and of the other is right and which is wrong. Because each side -- especially the ruling class -- embodies its views on the issues, concessions by one side to another on any issue tend to discredit that side's view of itself. One side or the other will prevail. The clash is as sure and momentous as its outcome is unpredictable.

In this clash, the ruling class holds most of the cards: because it has established itself as the fount of authority, its primacy is based on habits of deference. Breaking them, establishing other founts of authority, other ways of doing things, would involve far more than electoral politics. Though the country class had long argued along with Edmund Burke against making revolutionary changes, it faces the uncomfortable question common to all who have had revolutionary changes imposed on them: are we now to accept what was done to us just because it was done? Sweeping away a half century's accretions of bad habits -- taking care to preserve the good among them -- is hard enough. Establishing, even reestablishing, a set of better institutions and habits is much harder, especially as the country class wholly lacks organization. By contrast, the ruling class holds strong defensive positions and is well represented by the Democratic Party. But a two to one numerical disadvantage augurs defeat, while victory would leave it in control of a people whose confidence it cannot regain.

Certainly the country class lacks its own political vehicle -- and perhaps the coherence to establish one. In the short term at least, the country class has no alternative but to channel its political efforts through the Republican Party, which is eager for its support. But the Republican Party does not live to represent the country class. For it to do so, it would have to become principles-based, as it has not been since the mid-1860s. The few who tried to make it so the party treated as rebels: Barry Goldwater and Ronald Reagan. The party helped defeat Goldwater. When it failed to stop Reagan, it saddled his and subsequent Republican administrations with establishmentarians who, under the Bush family, repudiated Reagan's principles as much as they could. Barack Obama exaggerated in charging that Republicans had driven the country "into the ditch" all alone. But they had a hand in it. Few Republican voters, never mind the larger country class, have confidence that the party is on their side. Because, in the long run, the country class will not support a party as conflicted as today's Republicans, those Republican politicians who really want to represent it will either reform the party in an unmistakable manner, or start a new one as Whigs like Abraham Lincoln started the Republican Party in the 1850s.

The name of the party that will represent America's country class is far less important than what, precisely, it represents and how it goes about representing it because, for the foreseeable future, American politics will consist of confrontation between what we might call the Country Party and the ruling class. The Democratic Party having transformed itself into a unit with near-European discipline, challenging it would seem to require empowering a rival party at least as disciplined. What other antidote is there to government by one party but government by another party? Yet this logic, though all too familiar to most of the world, has always been foreign to America and naturally leads further in the direction toward which the ruling class has led. Any country party would have to be wise and skillful indeed not to become the Democrats' mirror image.

Yet to defend the country class, to break down the ruling class's presumptions, it has no choice but to imitate the Democrats, at least in some ways and for a while. Consider: The ruling class denies its opponents' legitimacy. Seldom does a Democratic official or member of the ruling class speak on public affairs without reiterating the litany of his class's claim to authority, contrasting it with opponents who are either uninformed, stupid, racist, shills for business, violent, fundamentalist, or all of the above. They do this in the hope that opponents, hearing no other characterizations of themselves and no authoritative voice discrediting the ruling class, will be dispirited. For the country class seriously to contend for self-governance, the political party that represents it will have to discredit not just such patent frauds as ethanol mandates, the pretense that taxes can control "climate change," and the outrage of banning God from public life. More important, such a serious party would have to attack the ruling class's fundamental claims to its superior intellect and morality in ways that dispirit the target and hearten one's own. The Democrats having set the rules of modern politics, opponents who want electoral success are obliged to follow them.

Suppose that the Country Party (whatever its name might be) were to capture Congress, the presidency, and most statehouses. What then would it do? Especially if its majority were slim, it would be tempted to follow the Democrats' plan of 2009-2010, namely to write its wish list of reforms into law regardless of the Constitution and enact them by partisan majorities supported by interest groups that gain from them, while continuing to vilify the other side. Whatever effect this might have, it surely would not be to make America safe for self-governance because by carrying out its own "revolution from above" to reverse the ruling class's previous "revolution from above," it would have made that ruinous practice standard in America. Moreover, a revolution designed at party headquarters would be antithetical to the country class's diversity as well as to the American Founders' legacy.

Achieving the country class's inherently revolutionary objectives in a manner consistent with the Constitution and with its own diversity would require the Country Party to use legislation primarily as a tool to remove obstacles, to instruct, to reintroduce into American life ways and habits that had been cast aside. Passing national legislation is easier than getting people to take up the responsibilities of citizens, fathers, and entrepreneurs.

Reducing the taxes that most Americans resent requires eliminating the network of subsidies to millions of other Americans that these taxes finance, and eliminating the jobs of government employees who administer them. Eliminating that network is practical, if at all, if done simultaneously, both because subsidies are morally wrong and economically counterproductive, and because the country cannot afford the practice in general. The electorate is likely to cut off millions of government clients, high and low, only if its choice is between no economic privilege for anyone and ratifying government's role as the arbiter of all our fortunes. The same goes for government grants to and contracts with so-called nonprofit institutions or non-governmental organizations. The case against all arrangements by which the government favors some groups of citizens is easier to make than that against any such arrangement. Without too much fuss, a few obviously burdensome bureaucracies, like the Department of Education, can be eliminated, while money can be cut off to partisan enterprises such as the National Endowments and public broadcasting. That sort of thing is as necessary to the American body politic as a weight reduction program is essential to restoring the health of any human body degraded by obesity and lack of exercise. Yet shedding fat is the easy part. Restoring atrophied muscles is harder. Reenabling the body to do elementary tasks takes yet more concentration.

The grandparents of today's Americans (132 million in 1940) had opportunities to serve on 117,000 school boards. To exercise responsibilities comparable to their grandparents', today's 310 million Americans would have radically to decentralize the mere 15,000 districts into which public school children are now concentrated. They would have to take responsibility for curriculum and administration away from credentialed experts, and they would have to explain why they know better. This would involve a level of political articulation of the body politic far beyond voting in elections every two years.

If self-governance means anything, it means that those who exercise government power must depend on elections. The shorter the electoral leash, the likelier an official to have his chain yanked by voters, the more truly republican the government is. Yet to subject the modern administrative state's agencies to electoral control would require ordinary citizens to take an interest in any number of technical matters. Law can require environmental regulators or insurance commissioners, or judges or auditors to be elected. But only citizens' discernment and vigilance could make these officials good. Only citizens' understanding of and commitment to law can possibly reverse the patent disregard for the Constitution and statutes that has permeated American life. Unfortunately, it is easier for anyone who dislikes a court's or an official's unlawful act to counter it with another unlawful one than to draw all parties back to the foundation of truth.

How, for example, to remind America of, and to drive home to the ruling class, Lincoln's lesson that trifling with the Constitution for the most heartfelt of motives destroys its protections for all? What if a country class majority in both houses of Congress were to co-sponsor a "Bill of Attainder to deprive Nancy Pelosi, Barack Obama, and other persons of liberty and property without further process of law for having violated the following ex post facto law..." and larded this constitutional monstrosity with an Article III Section 2 exemption from federal court review? When the affected members of the ruling class asked where Congress gets the authority to pass a bill every word of which is contrary to the Constitution, they would be confronted, publicly, with House Speaker Nancy Pelosi's answer to a question on the Congress's constitutional authority to mandate individuals to purchase certain kinds of insurance: "Are you kidding? Are you kidding?" The point having been made, the Country Party could lead public discussions around the country on why even the noblest purposes (maybe even Title II of the Civil Rights Bill of 1964?) cannot be allowed to trump the Constitution.

How the country class and ruling class might clash on each item of their contrasting agendas is beyond my scope. Suffice it to say that the ruling class's greatest difficulty -- aside from being outnumbered -- will be to argue, against the grain of reality, that the revolution it continues to press upon America is sustainable. For its part, the country class's greatest difficulty will be to enable a revolution to take place without imposing it. America has been imposed on enough.

Editor's Note: This version corrects an error that appears the print edition of this article, which incorrectly lists Barack Obama as a research assistant to Laurence Tribe in 1984. He in fact was an assistant to Tribe in 1988-89.

Angelo M. Codevilla is professor emeritus of international relations at Boston University.

Source: http://spectator.org/archives/2010/07/16/americas-ruling-class-and-the/print

Sunday, July 18, 2010

Elizabeth Warren (United States) vs. Geithner (global bank cartel)

Sat, July 17, 2010 5:41:44 PM
[New post] Elizabeth Warren (United States) vs. Geithner (global bank cartel)
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Elizabeth Warren (United States) vs. Geithner (global bank cartel)
dvrabel | July 17, 2010 at 9:41 pm | Categories: Uncategorized | URL: http://wp.me/pYeKf-Y

Elizabeth Warren is the perfect person, the only person really, to head the agency that was largely created due to her efforts--the Consumer Financial Protection Bureau. Since the crash of 2008, she has been a rare advocate for the people in the midst of a Harvard/Wall St/Washington DC establishment, embodied in the Council on Foreign Relations (CFR), that unilaterally supports the top capital holders of the world and their banks. It's rather shocking to see a publicly visible Harvard professor who has lost neither her ability to see the truth through the establishment's fog, nor her capacity for empathy and compassion for the people beyond Harvard's walls. But it's awesome to see it.

On the other hand, it's revolting to see Tim Geithner oppose her nomination (according to the Huffington Post). This is just one more piece of evidence in the already obvious case that Geithner represents the global bank cartel that has effectively foreclosed on many countries around the world and is now turning against the developed west. He does not represent the American republic, so of course he would oppose an advocate for the people like Warren.

Geithner would have no business sitting in the Treasury if its job was to serve the people. But the purpose of Treasury has been for a long time to serve as the collection agency for the global bank cartel that established itself as a permanent parasitic monopoly living off the people of the United States since the Federal Reserve Act of 1913 (see Revisiting American History). Now that the cartel has sucked as much wealth as possible from the U.S. and put it under an impossible debt load, Treasury's job has shifted to managing the cartel's foreclosure on the country as it restructures the world under a new global monetary system.

Geithner is perfect for this role. The people may blame him because they can see through him. He can't sell the people on their own destruction like Harvard/Yale banker Robert Rubin could. He's not likable like Harvard banker Jamie Dimon is. So the cartel will escape blame as it always does by using its media to focus the public rage that will emerge in the next phase of the depression not only on politicians, a staged enemy like Iran, and a general sense of corruption, but also on CFR insider Geithner if necessary (capos and hit men are readily sacrificed when appropriate). The cartel might then put CFR insider Jamie Dimon in Treasury to bat clean up and sell the American people on the final stage of the global restructuring.

The bottom line: put pressure on the administration to appoint Elizabeth Warren to this role rather than letting yet another patsy for the bank cartel takeover another agency. She will bring one small voice of the people to the government.

However, she will not be able to stop the global restructuring process. She may not even be aware of it. Stopping that will require the awareness and willpower of we the people. As I've said before, if we the people do not stop it, then the bank cartel and royal families are unfortunately correct that Thomas Jefferson's noble idea of self government was just that--an idea.

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Friday, July 16, 2010

About this blog

When I started this blog in 2007, I started not knowing what it was that I wanted to write about. I began with the alternative news because the mainstream news failed to give me a satisfactory explanation for what I was experiencing: anomie, distress, loss, disconnect, etc. I wanted to use this blog as a means of self discovery and to work out the feeling of unease I was experiencing with my life and with the world in general. I have to say that during this (so far) three year process, I have begun to get a sense of what SheepleLiberation ought to be about. Distractions are endless in our world. We are led down frivolous paths and into empty walls 99/100% of the time. This is intentional. Yes it is intentional. It is by design. The world we call our own is a mental construction inside our heads that is controlled by others. If you doubt me, than you obviously have not investigated the media and propaganda. I suggest you start by reading Edward Bernays. Bernays, a nephew of Sigmund Freud, is known as the father of modern "public relations" also known as propaganda. Propaganda designs and then maintains the above mentioned mental construction that we take as "our world".

It is not our world, of course. For most of us, "our world" is a fiction, a specter. The feeling of unreality we tend to have is evidence of this. We struggle to main this fiction of ourselves, but we do so uneasily. Either, we ourselves are insane or the world we inhabit is insane. Perhaps it is both. What then can we do to extricate ourselves from the miasma we find ourselves submerged in?

In actively looking at this question for the last three years, I have decided to focus on the money system. I have learned that the nature of our world is such that everyone has been made a slave to a debt based economy, which is not an economy at all. We think we are free, but this is a fiction. I will write about this and it will become my focus here. I will not explore UFOs, reptilian shape shifters, Mayan calendars or other such things. A quick Google search will find you plenty to read about if that sort of thing floats your boat. Instead, I will focus on the concrete. Additionally, I will continue to post pieces by others that are germane to the topic and which forwards the purpose of this blog which is to liberate you. Please check out the piece by Damon Vrabel posted on Goldman Sachs. It is illustrative of the mentality that governs those who work there and gives a sense of how they rationalize their actions. After reading it, ask yourself what you do, and how you rationalize what you do in your daily undertaking. This is a good place to begin, I think.

Goldman Sachs’ Spirituality and Psychology

Goldman Sachs’ Spirituality and Psychology
Posted on June 28, 2010 by dvrabel

As a perfect case study illustrating how our economic system feeds our psychology and spirituality, one of CSPER’s tenets, I thought I’d share what an old classmate from Harvard b-school, a Goldman MD, said earlier this week after stumbling on some of my material. It’s similar to what others have said…

“You’re off the deep end…I know I add value to my clients and to society at large and I am very comfortable with that.”

Of course claiming to “add value” is just repeating empty talking points from the fraudulent Economics 101 folks like this learned as students (see the first 4 lessons of Renaissance 2.0 to revisit the flaws of the economics taught in colleges today). This is an example of how the “best and brightest” have no real ability to think independently, but simply a good ability to memorize what the system tells them as kids so they become its best servants (no surprise, the latter half of Lesson 6 pt 3 mentions how the system builds conformity in us, not free thinking).

Most of you know the truth about Goldman by now–a parasite that uses debt and its membership in the unconstitutional money cartel (lesson 1) to feed on the productive economy, what little of it exists anymore–so I won’t go into that. What I want to do here is show how this ties to self-esteem (psychology) and sense of purpose in life (spirituality).

Psychology: These employees are “comfortable” with their roles in firms like Goldman. You can imagine the level of internal disconnect they have with the real impact their firm has on the population–the fact that their huge paychecks come from the indebtedness of the American people and being an inside cartel member. Not only do they have no intellectual understanding of it, but a big reason they don’t have an understanding is because they can’t face the truth. They stay in the academic clouds believing they “add value” because they can’t look for the truth without losing belief in their identity. It would be a psychological blow. The role we play in the economic system is inextricably tied to our psychology. So by avoiding the truth, they’re psychologically “very comfortable.” But this also means they’re psychologically narcissistic–narcissism is a dangerous disconnect from reality and truth.

Spirituality: They say they add value to “society at large.” That’s the key. They reach the realm of religion when they say that. It’s their raisson d’etre. They think they’re saving the world. Remember Goldman CEO Blankfein saying his firm does God’s work? Well, these folks show that they’ve been fully baptized into the cult. This is the type of mentality necessary to fuel the catastrophic destruction of society we’ve witnessed. Your average low-rent criminal mentality would NOT be enough to fuel what the Wall Street cartel has done to the world over the last several years. It takes spirituality, a belief that you’re serving a higher purpose, warped though it may be, to pull that off.

So I hope this helps make the case for CSPER and explain why I connected the S P and E together. The connection is critical. The economic system defines what we spend most of our waking hours doing, which means it can’t help but be a primary determinant of our psychology and spirituality. So an economic system built on an immoral, unhealthy monetary system cannot help but breed immoral spirituality and unhealthy psychology over time. It must be changed.

Source: http://csper.wordpress.com/2010/06/28/goldman-sachs-spirituality-and-psychology/

Friday, October 23, 2009

Where has Liberator been?

It's been some time since I last updated this blog. I manage a blog out of my MySpace page that now has over 1,000 readers. I have to say it's nice to connect with so many of like mind. Nevertheless, this blog has gone neglected. Readers visiting here who want to keep up with the latest activities should avail themselves of the MySpace blog linked above. Additionally, I invite you to friend me to avail yourself of the bulletins I post there almost on a daily basis. I'm still not sure where this blog will be going, but some ideas are still jelling. Stay tuned.

Monday, May 25, 2009

American Psycho on the War Path

American Psychos Trying to Pervade the World
by MNN
A psychopath is chronically immoral and anti-social, covered by a mask of sanity and always searching for victims. U.S. movers and shakers who are trying to gain control of the world come from an elite background. Many go to the northeastern U.S. schools like Harvard, Princeton and Yale.
They get jobs on Wall Street in Manhattan and Washington DC.
The spirit of mad George Yellowhair Custer persists to this day in U.S. policy

By day they work in top jobs. They make their way up into behind-the-scenes positions where they carry out the will of those who are trying to set up the new world order system. This eventually includes forays into brutal violence and blood lust against defenseless unarmed people. Their bizarre initiations include killing innocent people at random. The end game is total control.

Psychopaths have to look normal to cover up their vile nature and training. They have no morals or ethics which frees them to carry out genocide, starvation, spreading pandemics and desecrating the environment. When they are confronted with their crimes, they maintain a studied blandness.

Psychopaths are possessive, greedy, have no deep feelings, no ties and are manipulators. They have no conscience. They start out with small simple crimes. This is not enough. They graduate to mass murder. It's like a mad dog that has eaten human flesh. He stepped over the line and therefore has to be shot.

Psychopaths like to talk about their activities, such as depopulating the world, creating one world government and one world religion, with them running it. There is no one world order without one world religion!

Psychopaths want the world to know how vicious and sadistic they are to instill fear. Because they think the agenda is so advanced they now openly show their contempt for humanity. Henry Kissinger doesn't mind being credited with the policy to rid the world of "useless eaters". Prince Philip boasts he wants to be reincarnated as a virus to kill off most of the people of the world. Maurice Strong of the Manitou Foundation, who is creating a one world religion, has close ties with both these men. It's a cabal!

It takes one to know one. To carry out these atrocities, recruiters carefully select psycho enforcers for their lack of empathy.

What happened to the Hippocratic oath? Psychologists and medical personnel sat next to the Iraqi victims as they were being tortured by U.S. soldiers and specialists. In Abu Graib Prison the U.S. soldiers got a kick out of raping little boys, torturing and killing the prisoners. They even took pictures and films as souvenirs. [Did Cheney and Bush get their jollies looking at them?]

The U.S. mistakenly thinks it still has a good reputation as humanitarians. At one time no one believed they could be such monsters. To most it is so heinous the mind cannot wrap itself around it.

The attacks by the Canada Border Services Agency guards CBSA at Cornwall Ontario are getting progressively more vicious. These are a few of hundreds of recent assaults. Last June 2008 they grabbed two grandmothers and beat them. One had a heart attack.

A mother of 7 was taken out to the parking lot and accosted by five CBSA guards. They tried to rape her. She fought them off. They charged her with assault. This case is still in court.

One young pregnant mother was put under the x-ray machine for commercial tractor trailers. She lost the baby and had another that had some rare medical problems.

Three young children were taken inside the customs building for hours and questioned. They were ages 18 months, 3 and 4. They would not let the parents communicate with them.

The swarming technique being used by CBSA agents is when five or six surround a victim like a shark feeding frenzy. A superior on a cell phone stands nearby and instructs them. They have complete confidence that their superiors will support them, right up to the president and prime minister's offices. Now these goons want guns in their hands!

In the 1997 Somalia Inquiry Report, Canadian soldiers on a peacekeeping mission had made bets. The first one to kill a Somalian would get a bottle of wine. We see this same mentality at the border crossings, except that the Indigenous will be the targets. The border guards are the commandos who will try to hunt us down.

MNN is publicizing CBSA routine brutality and racism because mainstream media won't. The guards seem to be getting a kick out of the publicity in Indian country. It's part of their psychopathology.

Canada's Prime Minister, Stephen Harper, looks like the controlling maniac with an appetite for the jugular. He did not go to Harvard but has the U.S. cowboy mentality.

These psychopaths want control no matter what. Their sadism trickles down from the top to the rank and file. Harper shows that "studied" placid expression. He is surrounded by people who are more than willing to carry out "the agenda". Soon they will be marching around in military attire saluting him.

American psychopaths are exporting their depravity from what was formerly called the School of the Americas in Fort Benning Georgia. Death squads were trained there to be adjuncts to the dictators that the U.S. had installed in South America. It is now called the Western Hemisphere Institute for Security Cooperation which still contravenes the Geneva Conventions.

The U.S. is the new Babylon, a world super power that takes whatever it wants from anywhere. They don't have the economic superiority, but do have the most lethal military.

President Obama is following the Bush agenda. Some change, eh! Are we surprised? What is the public's reaction? Denial and complacency! They pretend to misunderstand. When confronted these maniacs are trained to smile, just like any serial killer.


Kahentinetha & Karakwine, MNN Mohawk Nation News
www.mohawknationnews.com

Friday, March 27, 2009

The Big Takeover


The Big Takeover

The global economic crisis isn't about money - it's about power. How Wall Street insiders are using the bailout to stage a revolution

MATT TAIBBI

Posted Mar 19, 2009 12:49 PM


It's over — we're officially, royally fucked. No empire can survive being rendered a permanent laughingstock, which is what happened as of a few weeks ago, when the buffoons who have been running things in this country finally went one step too far. It happened when Treasury Secretary Timothy Geithner was forced to admit that he was once again going to have to stuff billions of taxpayer dollars into a dying insurance giant called AIG, itself a profound symbol of our national decline — a corporation that got rich insuring the concrete and steel of American industry in the country's heyday, only to destroy itself chasing phantom fortunes at the Wall Street card tables, like a dissolute nobleman gambling away the family estate in the waning days of the British Empire.

The latest bailout came as AIG admitted to having just posted the largest quarterly loss in American corporate history — some $61.7 billion. In the final three months of last year, the company lost more than $27 million every hour. That's $465,000 a minute, a yearly income for a median American household every six seconds, roughly $7,750 a second. And all this happened at the end of eight straight years that America devoted to frantically chasing the shadow of a terrorist threat to no avail, eight years spent stopping every citizen at every airport to search every purse, bag, crotch and briefcase for juice boxes and explosive tubes of toothpaste. Yet in the end, our government had no mechanism for searching the balance sheets of companies that held life-or-death power over our society and was unable to spot holes in the national economy the size of Libya (whose entire GDP last year was smaller than AIG's 2008 losses).

So it's time to admit it: We're fools, protagonists in a kind of gruesome comedy about the marriage of greed and stupidity. And the worst part about it is that we're still in denial — we still think this is some kind of unfortunate accident, not something that was created by the group of psychopaths on Wall Street whom we allowed to gang-rape the American Dream. When Geithner announced the new $30 billion bailout, the party line was that poor AIG was just a victim of a lot of shitty luck — bad year for business, you know, what with the financial crisis and all. Edward Liddy, the company's CEO, actually compared it to catching a cold: "The marketplace is a pretty crummy place to be right now," he said. "When the world catches pneumonia, we get it too." In a pathetic attempt at name-dropping, he even whined that AIG was being "consumed by the same issues that are driving house prices down and 401K statements down and Warren Buffet's investment portfolio down."

Liddy made AIG sound like an orphan begging in a soup line, hungry and sick from being left out in someone else's financial weather. He conveniently forgot to mention that AIG had spent more than a decade systematically scheming to evade U.S. and international regulators, or that one of the causes of its "pneumonia" was making colossal, world-sinking $500 billion bets with money it didn't have, in a toxic and completely unregulated derivatives market.

Nor did anyone mention that when AIG finally got up from its seat at the Wall Street casino, broke and busted in the afterdawn light, it owed money all over town — and that a huge chunk of your taxpayer dollars in this particular bailout scam will be going to pay off the other high rollers at its table. Or that this was a casino unique among all casinos, one where middle-class taxpayers cover the bets of billionaires.

People are pissed off about this financial crisis, and about this bailout, but they're not pissed off enough. The reality is that the worldwide economic meltdown and the bailout that followed were together a kind of revolution, a coup d'état. They cemented and formalized a political trend that has been snowballing for decades: the gradual takeover of the government by a small class of connected insiders, who used money to control elections, buy influence and systematically weaken financial regulations.

The crisis was the coup de grâce: Given virtually free rein over the economy, these same insiders first wrecked the financial world, then cunningly granted themselves nearly unlimited emergency powers to clean up their own mess. And so the gambling-addict leaders of companies like AIG end up not penniless and in jail, but with an Alien-style death grip on the Treasury and the Federal Reserve — "our partners in the government," as Liddy put it with a shockingly casual matter-of-factness after the most recent bailout.

The mistake most people make in looking at the financial crisis is thinking of it in terms of money, a habit that might lead you to look at the unfolding mess as a huge bonus-killing downer for the Wall Street class. But if you look at it in purely Machiavellian terms, what you see is a colossal power grab that threatens to turn the federal government into a kind of giant Enron — a huge, impenetrable black box filled with self-dealing insiders whose scheme is the securing of individual profits at the expense of an ocean of unwitting involuntary shareholders, previously known as taxpayers.

I. PATIENT ZERO

The best way to understand the financial crisis is to understand the meltdown at AIG. AIG is what happens when short, bald managers of otherwise boring financial bureaucracies start seeing Brad Pitt in the mirror. This is a company that built a giant fortune across more than a century by betting on safety-conscious policyholders — people who wear seat belts and build houses on high ground — and then blew it all in a year or two by turning their entire balance sheet over to a guy who acted like making huge bets with other people's money would make his dick bigger.

That guy — the Patient Zero of the global economic meltdown — was one Joseph Cassano, the head of a tiny, 400-person unit within the company called AIG Financial Products, or AIGFP. Cassano, a pudgy, balding Brooklyn College grad with beady eyes and way too much forehead, cut his teeth in the Eighties working for Mike Milken, the granddaddy of modern Wall Street debt alchemists. Milken, who pioneered the creative use of junk bonds, relied on messianic genius and a whole array of insider schemes to evade detection while wreaking financial disaster. Cassano, by contrast, was just a greedy little turd with a knack for selective accounting who ran his scam right out in the open, thanks to Washington's deregulation of the Wall Street casino. "It's all about the regulatory environment," says a government source involved with the AIG bailout. "These guys look for holes in the system, for ways they can do trades without government interference. Whatever is unregulated, all the action is going to pile into that."

The mess Cassano created had its roots in an investment boom fueled in part by a relatively new type of financial instrument called a collateralized-debt obligation. A CDO is like a box full of diced-up assets. They can be anything: mortgages, corporate loans, aircraft loans, credit-card loans, even other CDOs. So as X mortgage holder pays his bill, and Y corporate debtor pays his bill, and Z credit-card debtor pays his bill, money flows into the box.

The key idea behind a CDO is that there will always be at least some money in the box, regardless of how dicey the individual assets inside it are. No matter how you look at a single unemployed ex-con trying to pay the note on a six-bedroom house, he looks like a bad investment. But dump his loan in a box with a smorgasbord of auto loans, credit-card debt, corporate bonds and other crap, and you can be reasonably sure that somebody is going to pay up. Say $100 is supposed to come into the box every month. Even in an apocalypse, when $90 in payments might default, you'll still get $10. What the inventors of the CDO did is divide up the box into groups of investors and put that $10 into its own level, or "tranche." They then convinced ratings agencies like Moody's and S&P to give that top tranche the highest AAA rating — meaning it has close to zero credit risk.

Suddenly, thanks to this financial seal of approval, banks had a way to turn their shittiest mortgages and other financial waste into investment-grade paper and sell them to institutional investors like pensions and insurance companies, which were forced by regulators to keep their portfolios as safe as possible. Because CDOs offered higher rates of return than truly safe products like Treasury bills, it was a win-win: Banks made a fortune selling CDOs, and big investors made much more holding them.

The problem was, none of this was based on reality. "The banks knew they were selling crap," says a London-based trader from one of the bailed-out companies. To get AAA ratings, the CDOs relied not on their actual underlying assets but on crazy mathematical formulas that the banks cooked up to make the investments look safer than they really were. "They had some back room somewhere where a bunch of Indian guys who'd been doing nothing but math for God knows how many years would come up with some kind of model saying that this or that combination of debtors would only default once every 10,000 years," says one young trader who sold CDOs for a major investment bank. "It was nuts."

Now that even the crappiest mortgages could be sold to conservative investors, the CDOs spurred a massive explosion of irresponsible and predatory lending. In fact, there was such a crush to underwrite CDOs that it became hard to find enough subprime mortgages — read: enough unemployed meth dealers willing to buy million-dollar homes for no money down — to fill them all. As banks and investors of all kinds took on more and more in CDOs and similar instruments, they needed some way to hedge their massive bets — some kind of insurance policy, in case the housing bubble burst and all that debt went south at the same time. This was particularly true for investment banks, many of which got stuck holding or "warehousing" CDOs when they wrote more than they could sell. And that's were Joe Cassano came in.

Known for his boldness and arrogance, Cassano took over as chief of AIGFP in 2001. He was the favorite of Maurice "Hank" Greenberg, the head of AIG, who admired the younger man's hard-driving ways, even if neither he nor his successors fully understood exactly what it was that Cassano did. According to a source familiar with AIG's internal operations, Cassano basically told senior management, "You know insurance, I know investments, so you do what you do, and I'll do what I do — leave me alone." Given a free hand within the company, Cassano set out from his offices in London to sell a lucrative form of "insurance" to all those investors holding lots of CDOs. His tool of choice was another new financial instrument known as a credit-default swap, or CDS.

The CDS was popularized by J.P. Morgan, in particular by a group of young, creative bankers who would later become known as the "Morgan Mafia," as many of them would go on to assume influential positions in the finance world. In 1994, in between booze and games of tennis at a resort in Boca Raton, Florida, the Morgan gang plotted a way to help boost the bank's returns. One of their goals was to find a way to lend more money, while working around regulations that required them to keep a set amount of cash in reserve to back those loans. What they came up with was an early version of the credit-default swap.

In its simplest form, a CDS is just a bet on an outcome. Say Bank A writes a million-dollar mortgage to the Pope for a town house in the West Village. Bank A wants to hedge its mortgage risk in case the Pope can't make his monthly payments, so it buys CDS protection from Bank B, wherein it agrees to pay Bank B a premium of $1,000 a month for five years. In return, Bank B agrees to pay Bank A the full million-dollar value of the Pope's mortgage if he defaults. In theory, Bank A is covered if the Pope goes on a meth binge and loses his job.

When Morgan presented their plans for credit swaps to regulators in the late Nineties, they argued that if they bought CDS protection for enough of the investments in their portfolio, they had effectively moved the risk off their books. Therefore, they argued, they should be allowed to lend more, without keeping more cash in reserve. A whole host of regulators — from the Federal Reserve to the Office of the Comptroller of the Currency — accepted the argument, and Morgan was allowed to put more money on the street.

What Cassano did was to transform the credit swaps that Morgan popularized into the world's largest bet on the housing boom. In theory, at least, there's nothing wrong with buying a CDS to insure your investments. Investors paid a premium to AIGFP, and in return the company promised to pick up the tab if the mortgage-backed CDOs went bust. But as Cassano went on a selling spree, the deals he made differed from traditional insurance in several significant ways. First, the party selling CDS protection didn't have to post any money upfront. When a $100 corporate bond is sold, for example, someone has to show 100 actual dollars. But when you sell a $100 CDS guarantee, you don't have to show a dime. So Cassano could sell investment banks billions in guarantees without having any single asset to back it up.

Secondly, Cassano was selling so-called "naked" CDS deals. In a "naked" CDS, neither party actually holds the underlying loan. In other words, Bank B not only sells CDS protection to Bank A for its mortgage on the Pope — it turns around and sells protection to Bank C for the very same mortgage. This could go on ad nauseam: You could have Banks D through Z also betting on Bank A's mortgage. Unlike traditional insurance, Cassano was offering investors an opportunity to bet that someone else's house would burn down, or take out a term life policy on the guy with AIDS down the street. It was no different from gambling, the Wall Street version of a bunch of frat brothers betting on Jay Feely to make a field goal. Cassano was taking book for every bank that bet short on the housing market, but he didn't have the cash to pay off if the kick went wide.

In a span of only seven years, Cassano sold some $500 billion worth of CDS protection, with at least $64 billion of that tied to the subprime mortgage market. AIG didn't have even a fraction of that amount of cash on hand to cover its bets, but neither did it expect it would ever need any reserves. So long as defaults on the underlying securities remained a highly unlikely proposition, AIG was essentially collecting huge and steadily climbing premiums by selling insurance for the disaster it thought would never come.

Initially, at least, the revenues were enormous: AIGFP's returns went from $737 million in 1999 to $3.2 billion in 2005. Over the past seven years, the subsidiary's 400 employees were paid a total of $3.5 billion; Cassano himself pocketed at least $280 million in compensation. Everyone made their money — and then it all went to shit.

II. THE REGULATORS

Cassano's outrageous gamble wouldn't have been possible had he not had the good fortune to take over AIGFP just as Sen. Phil Gramm — a grinning, laissez-faire ideologue from Texas — had finished engineering the most dramatic deregulation of the financial industry since Emperor Hien Tsung invented paper money in 806 A.D. For years, Washington had kept a watchful eye on the nation's banks. Ever since the Great Depression, commercial banks — those that kept money on deposit for individuals and businesses — had not been allowed to double as investment banks, which raise money by issuing and selling securities. The Glass-Steagall Act, passed during the Depression, also prevented banks of any kind from getting into the insurance business.

But in the late Nineties, a few years before Cassano took over AIGFP, all that changed. The Democrats, tired of getting slaughtered in the fundraising arena by Republicans, decided to throw off their old reliance on unions and interest groups and become more "business-friendly." Wall Street responded by flooding Washington with money, buying allies in both parties. In the 10-year period beginning in 1998, financial companies spent $1.7 billion on federal campaign contributions and another $3.4 billion on lobbyists. They quickly got what they paid for. In 1999, Gramm co-sponsored a bill that repealed key aspects of the Glass-Steagall Act, smoothing the way for the creation of financial megafirms like Citigroup. The move did away with the built-in protections afforded by smaller banks. In the old days, a local banker knew the people whose loans were on his balance sheet: He wasn't going to give a million-dollar mortgage to a homeless meth addict, since he would have to keep that loan on his books. But a giant merged bank might write that loan and then sell it off to some fool in China, and who cared?

The very next year, Gramm compounded the problem by writing a sweeping new law called the Commodity Futures Modernization Act that made it impossible to regulate credit swaps as either gambling or securities. Commercial banks — which, thanks to Gramm, were now competing directly with investment banks for customers — were driven to buy credit swaps to loosen capital in search of higher yields. "By ruling that credit-default swaps were not gaming and not a security, the way was cleared for the growth of the market," said Eric Dinallo, head of the New York State Insurance Department.

The blanket exemption meant that Joe Cassano could now sell as many CDS contracts as he wanted, building up as huge a position as he wanted, without anyone in government saying a word. "You have to remember, investment banks aren't in the business of making huge directional bets," says the government source involved in the AIG bailout. When investment banks write CDS deals, they hedge them. But insurance companies don't have to hedge. And that's what AIG did. "They just bet massively long on the housing market," says the source. "Billions and billions."

In the biggest joke of all, Cassano's wheeling and dealing was regulated by the Office of Thrift Supervision, an agency that would prove to be defiantly uninterested in keeping watch over his operations. How a behemoth like AIG came to be regulated by the little-known and relatively small OTS is yet another triumph of the deregulatory instinct. Under another law passed in 1999, certain kinds of holding companies could choose the OTS as their regulator, provided they owned one or more thrifts (better known as savings-and-loans). Because the OTS was viewed as more compliant than the Fed or the Securities and Exchange Commission, companies rushed to reclassify themselves as thrifts. In 1999, AIG purchased a thrift in Delaware and managed to get approval for OTS regulation of its entire operation.

Making matters even more hilarious, AIGFP — a London-based subsidiary of an American insurance company — ought to have been regulated by one of Europe's more stringent regulators, like Britain's Financial Services Authority. But the OTS managed to convince the Europeans that it had the muscle to regulate these giant companies. By 2007, the EU had conferred legitimacy to OTS supervision of three mammoth firms — GE, AIG and Ameriprise.

That same year, as the subprime crisis was exploding, the Government Accountability Office criticized the OTS, noting a "disparity between the size of the agency and the diverse firms it oversees." Among other things, the GAO report noted that the entire OTS had only one insurance specialist on staff — and this despite the fact that it was the primary regulator for the world's largest insurer!

"There's this notion that the regulators couldn't do anything to stop AIG," says a government official who was present during the bailout. "That's bullshit. What you have to understand is that these regulators have ultimate power. They can send you a letter and say, 'You don't exist anymore,' and that's basically that. They don't even really need due process. The OTS could have said, 'We're going to pull your charter; we're going to pull your license; we're going to sue you.' And getting sued by your primary regulator is the kiss of death."

When AIG finally blew up, the OTS regulator ostensibly in charge of overseeing the insurance giant — a guy named C.K. Lee — basically admitted that he had blown it. His mistake, Lee said, was that he believed all those credit swaps in Cassano's portfolio were "fairly benign products." Why? Because the company told him so. "The judgment the company was making was that there was no big credit risk," he explained. (Lee now works as Midwest region director of the OTS; the agency declined to make him available for an interview.)

In early March, after the latest bailout of AIG, Treasury Secretary Timothy Geithner took what seemed to be a thinly veiled shot at the OTS, calling AIG a "huge, complex global insurance company attached to a very complicated investment bank/hedge fund that was allowed to build up without any adult supervision." But even without that "adult supervision," AIG might have been OK had it not been for a complete lack of internal controls. For six months before its meltdown, according to insiders, the company had been searching for a full-time chief financial officer and a chief risk-assessment officer, but never got around to hiring either. That meant that the 18th-largest company in the world had no one checking to make sure its balance sheet was safe and no one keeping track of how much cash and assets the firm had on hand. The situation was so bad that when outside consultants were called in a few weeks before the bailout, senior executives were unable to answer even the most basic questions about their company — like, for instance, how much exposure the firm had to the residential-mortgage market.

III. THE CRASH

Ironically, when reality finally caught up to Cassano, it wasn't because the housing market crapped but because of AIG itself. Before 2005, the company's debt was rated triple-A, meaning he didn't need to post much cash to sell CDS protection: The solid creditworthiness of AIG's name was guarantee enough. But the company's crummy accounting practices eventually caused its credit rating to be downgraded, triggering clauses in the CDS contracts that forced Cassano to post substantially more collateral to back his deals.

By the fall of 2007, it was evident that AIGFP's portfolio had turned poisonous, but like every good Wall Street huckster, Cassano schemed to keep his insane, Earth-swallowing gamble hidden from public view. That August, balls bulging, he announced to investors on a conference call that "it is hard for us, without being flippant, to even see a scenario within any kind of realm of reason that would see us losing $1 in any of those transactions." As he spoke, his CDS portfolio was racking up $352 million in losses. When the growing credit crunch prompted senior AIG executives to re-examine its liabilities, a company accountant named Joseph St. Denis became "gravely concerned" about the CDS deals and their potential for mass destruction. Cassano responded by personally forcing the poor sap out of the firm, telling him he was "deliberately excluded" from the financial review for fear that he might "pollute the process."

The following February, when AIG posted $11.5 billion in annual losses, it announced the resignation of Cassano as head of AIGFP, saying an auditor had found a "material weakness" in the CDS portfolio. But amazingly, the company not only allowed Cassano to keep $34 million in bonuses, it kept him on as a consultant for $1 million a month. In fact, Cassano remained on the payroll and kept collecting his monthly million through the end of September 2008, even after taxpayers had been forced to hand AIG $85 billion to patch up his fuck-ups. When asked in October why the company still retained Cassano at his $1 million-a-month rate despite his role in the probable downfall of Western civilization, CEO Martin Sullivan told Congress with a straight face that AIG wanted to "retain the 20-year knowledge that Mr. Cassano had." (Cassano, who is apparently hiding out in his lavish town house near Harrods in London, could not be reached for comment.)

What sank AIG in the end was another credit downgrade. Cassano had written so many CDS deals that when the company was facing another downgrade to its credit rating last September, from AA to A, it needed to post billions in collateral — not only more cash than it had on its balance sheet but more cash than it could raise even if it sold off every single one of its liquid assets. Even so, management dithered for days, not believing the company was in serious trouble. AIG was a dried-up prune, sapped of any real value, and its top executives didn't even know it.

On the weekend of September 13th, AIG's senior leaders were summoned to the offices of the New York Federal Reserve. Regulators from Dinallo's insurance office were there, as was Geithner, then chief of the New York Fed. Treasury Secretary Hank Paulson, who spent most of the weekend preoccupied with the collapse of Lehman Brothers, came in and out. Also present, for reasons that would emerge later, was Lloyd Blankfein, CEO of Goldman Sachs. The only relevant government office that wasn't represented was the regulator that should have been there all along: the OTS.

"We sat down with Paulson, Geithner and Dinallo," says a person present at the negotiations. "I didn't see the OTS even once."

On September 14th, according to another person present, Treasury officials presented Blankfein and other bankers in attendance with an absurd proposal: "They basically asked them to spend a day and check to see if they could raise the money privately." The laughably short time span to complete the mammoth task made the answer a foregone conclusion. At the end of the day, the bankers came back and told the government officials, gee, we checked, but we can't raise that much. And the bailout was on.

A short time later, it came out that AIG was planning to pay some $90 million in deferred compensation to former executives, and to accelerate the payout of $277 million in bonuses to others — a move the company insisted was necessary to "retain key employees." When Congress balked, AIG canceled the $90 million in payments.

Then, in January 2009, the company did it again. After all those years letting Cassano run wild, and after already getting caught paying out insane bonuses while on the public till, AIG decided to pay out another $450 million in bonuses. And to whom? To the 400 or so employees in Cassano's old unit, AIGFP, which is due to go out of business shortly! Yes, that's right, an average of $1.1 million in taxpayer-backed money apiece, to the very people who spent the past decade or so punching a hole in the fabric of the universe!

"We, uh, needed to keep these highly expert people in their seats," AIG spokeswoman Christina Pretto says to me in early February.

"But didn't these 'highly expert people' basically destroy your company?" I ask.

Pretto protests, says this isn't fair. The employees at AIGFP have already taken pay cuts, she says. Not retaining them would dilute the value of the company even further, make it harder to wrap up the unit's operations in an orderly fashion.

The bonuses are a nice comic touch highlighting one of the more outrageous tangents of the bailout age, namely the fact that, even with the planet in flames, some members of the Wall Street class can't even get used to the tragedy of having to fly coach. "These people need their trips to Baja, their spa treatments, their hand jobs," says an official involved in the AIG bailout, a serious look on his face, apparently not even half-kidding. "They don't function well without them."

IV. THE POWER GRAB

So that's the first step in wall street's power grab: making up things like credit-default swaps and collateralized-debt obligations, financial products so complex and inscrutable that ordinary American dumb people — to say nothing of federal regulators and even the CEOs of major corporations like AIG — are too intimidated to even try to understand them. That, combined with wise political investments, enabled the nation's top bankers to effectively scrap any meaningful oversight of the financial industry. In 1997 and 1998, the years leading up to the passage of Phil Gramm's fateful act that gutted Glass-Steagall, the banking, brokerage and insurance industries spent $350 million on political contributions and lobbying. Gramm alone — then the chairman of the Senate Banking Committee — collected $2.6 million in only five years. The law passed 90-8 in the Senate, with the support of 38 Democrats, including some names that might surprise you: Joe Biden, John Kerry, Tom Daschle, Dick Durbin, even John Edwards.

The act helped create the too-big-to-fail financial behemoths like Citigroup, AIG and Bank of America — and in turn helped those companies slowly crush their smaller competitors, leaving the major Wall Street firms with even more money and power to lobby for further deregulatory measures. "We're moving to an oligopolistic situation," Kenneth Guenther, a top executive with the Independent Community Bankers of America, lamented after the Gramm measure was passed.

The situation worsened in 2004, in an extraordinary move toward deregulation that never even got to a vote. At the time, the European Union was threatening to more strictly regulate the foreign operations of America's big investment banks if the U.S. didn't strengthen its own oversight. So the top five investment banks got together on April 28th of that year and — with the helpful assistance of then-Goldman Sachs chief and future Treasury Secretary Hank Paulson — made a pitch to George Bush's SEC chief at the time, William Donaldson, himself a former investment banker. The banks generously volunteered to submit to new rules restricting them from engaging in excessively risky activity. In exchange, they asked to be released from any lending restrictions. The discussion about the new rules lasted just 55 minutes, and there was not a single representative of a major media outlet there to record the fateful decision.

Donaldson OK'd the proposal, and the new rules were enough to get the EU to drop its threat to regulate the five firms. The only catch was, neither Donaldson nor his successor, Christopher Cox, actually did any regulating of the banks. They named a commission of seven people to oversee the five companies, whose combined assets came to total more than $4 trillion. But in the last year and a half of Cox's tenure, the group had no director and did not complete a single inspection. Great deal for the banks, which originally complained about being regulated by both Europe and the SEC, and ended up being regulated by no one.

Once the capital requirements were gone, those top five banks went hog-wild, jumping ass-first into the then-raging housing bubble. One of those was Bear Stearns, which used its freedom to drown itself in bad mortgage loans. In the short period between the 2004 change and Bear's collapse, the firm's debt-to-equity ratio soared from 12-1 to an insane 33-1. Another culprit was Goldman Sachs, which also had the good fortune, around then, to see its CEO, a bald-headed Frankensteinian goon named Hank Paulson (who received an estimated $200 million tax deferral by joining the government), ascend to Treasury secretary.

Freed from all capital restraints, sitting pretty with its man running the Treasury, Goldman jumped into the housing craze just like everyone else on Wall Street. Although it famously scored an $11 billion coup in 2007 when one of its trading units smartly shorted the housing market, the move didn't tell the whole story. In truth, Goldman still had a huge exposure come that fateful summer of 2008 — to none other than Joe Cassano.

Goldman Sachs, it turns out, was Cassano's biggest customer, with $20 billion of exposure in Cassano's CDS book. Which might explain why Goldman chief Lloyd Blankfein was in the room with ex-Goldmanite Hank Paulson that weekend of September 13th, when the federal government was supposedly bailing out AIG.

When asked why Blankfein was there, one of the government officials who was in the meeting shrugs. "One might say that it's because Goldman had so much exposure to AIGFP's portfolio," he says. "You'll never prove that, but one might suppose."

Market analyst Eric Salzman is more blunt. "If AIG went down," he says, "there was a good chance Goldman would not be able to collect." The AIG bailout, in effect, was Goldman bailing out Goldman.

Eventually, Paulson went a step further, elevating another ex-Goldmanite named Edward Liddy to run AIG — a company whose bailout money would be coming, in part, from the newly created TARP program, administered by another Goldman banker named Neel Kashkari.

V. REPO MEN

There are plenty of people who have noticed, in recent years, that when they lost their homes to foreclosure or were forced into bankruptcy because of crippling credit-card debt, no one in the government was there to rescue them. But when Goldman Sachs — a company whose average employee still made more than $350,000 last year, even in the midst of a depression — was suddenly faced with the possibility of losing money on the unregulated insurance deals it bought for its insane housing bets, the government was there in an instant to patch the hole. That's the essence of the bailout: rich bankers bailing out rich bankers, using the taxpayers' credit card.

The people who have spent their lives cloistered in this Wall Street community aren't much for sharing information with the great unwashed. Because all of this shit is complicated, because most of us mortals don't know what the hell LIBOR is or how a REIT works or how to use the word "zero coupon bond" in a sentence without sounding stupid — well, then, the people who do speak this idiotic language cannot under any circumstances be bothered to explain it to us and instead spend a lot of time rolling their eyes and asking us to trust them.

That roll of the eyes is a key part of the psychology of Paulsonism. The state is now being asked not just to call off its regulators or give tax breaks or funnel a few contracts to connected companies; it is intervening directly in the economy, for the sole purpose of preserving the influence of the megafirms. In essence, Paulson used the bailout to transform the government into a giant bureaucracy of entitled assholedom, one that would socialize "toxic" risks but keep both the profits and the management of the bailed-out firms in private hands. Moreover, this whole process would be done in secret, away from the prying eyes of NASCAR dads, broke-ass liberals who read translations of French novels, subprime mortgage holders and other such financial losers.

Some aspects of the bailout were secretive to the point of absurdity. In fact, if you look closely at just a few lines in the Federal Reserve's weekly public disclosures, you can literally see the moment where a big chunk of your money disappeared for good. The H4 report (called "Factors Affecting Reserve Balances") summarizes the activities of the Fed each week. You can find it online, and it's pretty much the only thing the Fed ever tells the world about what it does. For the week ending February 18th, the number under the heading "Repurchase Agreements" on the table is zero. It's a significant number.

Why? In the pre-crisis days, the Fed used to manage the money supply by periodically buying and selling securities on the open market through so-called Repurchase Agreements, or Repos. The Fed would typically dump $25 billion or so in cash onto the market every week, buying up Treasury bills, U.S. securities and even mortgage-backed securities from institutions like Goldman Sachs and J.P. Morgan, who would then "repurchase" them in a short period of time, usually one to seven days. This was the Fed's primary mechanism for controlling interest rates: Buying up securities gives banks more money to lend, which makes interest rates go down. Selling the securities back to the banks reduces the money available for lending, which makes interest rates go up.

If you look at the weekly H4 reports going back to the summer of 2007, you start to notice something alarming. At the start of the credit crunch, around August of that year, you see the Fed buying a few more Repos than usual — $33 billion or so. By November, as private-bank reserves were dwindling to alarmingly low levels, the Fed started injecting even more cash than usual into the economy: $48 billion. By late December, the number was up to $58 billion; by the following March, around the time of the Bear Stearns rescue, the Repo number had jumped to $77 billion. In the week of May 1st, 2008, the number was $115 billion — "out of control now," according to one congressional aide. For the rest of 2008, the numbers remained similarly in the stratosphere, the Fed pumping as much as $125 billion of these short-term loans into the economy — until suddenly, at the start of this year, the number drops to nothing. Zero.

The reason the number has dropped to nothing is that the Fed had simply stopped using relatively transparent devices like repurchase agreements to pump its money into the hands of private companies. By early 2009, a whole series of new government operations had been invented to inject cash into the economy, most all of them completely secretive and with names you've never heard of. There is the Term Auction Facility, the Term Securities Lending Facility, the Primary Dealer Credit Facility, the Commercial Paper Funding Facility and a monster called the Asset-Backed Commercial Paper Money Market Mutual Fund Liquidity Facility (boasting the chat-room horror-show acronym ABCPMMMFLF). For good measure, there's also something called a Money Market Investor Funding Facility, plus three facilities called Maiden Lane I, II and III to aid bailout recipients like Bear Stearns and AIG.

While the rest of America, and most of Congress, have been bugging out about the $700 billion bailout program called TARP, all of these newly created organisms in the Federal Reserve zoo have quietly been pumping not billions but trillions of dollars into the hands of private companies (at least $3 trillion so far in loans, with as much as $5.7 trillion more in guarantees of private investments). Although this technically isn't taxpayer money, it still affects taxpayers directly, because the activities of the Fed impact the economy as a whole. And this new, secretive activity by the Fed completely eclipses the TARP program in terms of its influence on the economy.

No one knows who's getting that money or exactly how much of it is disappearing through these new holes in the hull of America's credit rating. Moreover, no one can really be sure if these new institutions are even temporary at all — or whether they are being set up as permanent, state-aided crutches to Wall Street, designed to systematically suck bad investments off the ledgers of irresponsible lenders.

"They're supposed to be temporary," says Paul-Martin Foss, an aide to Rep. Ron Paul. "But we keep getting notices every six months or so that they're being renewed. They just sort of quietly announce it."

None other than disgraced senator Ted Stevens was the poor sap who made the unpleasant discovery that if Congress didn't like the Fed handing trillions of dollars to banks without any oversight, Congress could apparently go fuck itself — or so said the law. When Stevens asked the GAO about what authority Congress has to monitor the Fed, he got back a letter citing an obscure statute that nobody had ever heard of before: the Accounting and Auditing Act of 1950. The relevant section, 31 USC 714(b), dictated that congressional audits of the Federal Reserve may not include "deliberations, decisions and actions on monetary policy matters." The exemption, as Foss notes, "basically includes everything." According to the law, in other words, the Fed simply cannot be audited by Congress. Or by anyone else, for that matter.

VI. WINNERS AND LOSERS

Stevens isn't the only person in Congress to be given the finger by the Fed. In January, when Rep. Alan Grayson of Florida asked Federal Reserve vice chairman Donald Kohn where all the money went — only $1.2 trillion had vanished by then — Kohn gave Grayson a classic eye roll, saying he would be "very hesitant" to name names because it might discourage banks from taking the money.

"Has that ever happened?" Grayson asked. "Have people ever said, 'We will not take your $100 billion because people will find out about it?'"

"Well, we said we would not publish the names of the borrowers, so we have no test of that," Kohn answered, visibly annoyed with Grayson's meddling.

Grayson pressed on, demanding to know on what terms the Fed was lending the money. Presumably it was buying assets and making loans, but no one knew how it was pricing those assets — in other words, no one knew what kind of deal it was striking on behalf of taxpayers. So when Grayson asked if the purchased assets were "marked to market" — a methodology that assigns a concrete value to assets, based on the market rate on the day they are traded — Kohn answered, mysteriously, "The ones that have market values are marked to market." The implication was that the Fed was purchasing derivatives like credit swaps or other instruments that were basically impossible to value objectively — paying real money for God knows what.

"Well, how much of them don't have market values?" asked Grayson. "How much of them are worthless?"

"None are worthless," Kohn snapped.

"Then why don't you mark them to market?" Grayson demanded.

"Well," Kohn sighed, "we are marking the ones to market that have market values."

In essence, the Fed was telling Congress to lay off and let the experts handle things. "It's like buying a car in a used-car lot without opening the hood, and saying, 'I think it's fine,'" says Dan Fuss, an analyst with the investment firm Loomis Sayles. "The salesman says, 'Don't worry about it. Trust me.' It'll probably get us out of the lot, but how much farther? None of us knows."

When one considers the comparatively extensive system of congressional checks and balances that goes into the spending of every dollar in the budget via the normal appropriations process, what's happening in the Fed amounts to something truly revolutionary — a kind of shadow government with a budget many times the size of the normal federal outlay, administered dictatorially by one man, Fed chairman Ben Bernanke. "We spend hours and hours and hours arguing over $10 million amendments on the floor of the Senate, but there has been no discussion about who has been receiving this $3 trillion," says Sen. Bernie Sanders. "It is beyond comprehension."

Count Sanders among those who don't buy the argument that Wall Street firms shouldn't have to face being outed as recipients of public funds, that making this information public might cause investors to panic and dump their holdings in these firms. "I guess if we made that public, they'd go on strike or something," he muses.

And the Fed isn't the only arm of the bailout that has closed ranks. The Treasury, too, has maintained incredible secrecy surrounding its implementation even of the TARP program, which was mandated by Congress. To this date, no one knows exactly what criteria the Treasury Department used to determine which banks received bailout funds and which didn't — particularly the first $350 billion given out under Bush appointee Hank Paulson.

The situation with the first TARP payments grew so absurd that when the Congressional Oversight Panel, charged with monitoring the bailout money, sent a query to Paulson asking how he decided whom to give money to, Treasury responded — and this isn't a joke — by directing the panel to a copy of the TARP application form on its website. Elizabeth Warren, the chair of the Congressional Oversight Panel, was struck nearly speechless by the response.

"Do you believe that?" she says incredulously. "That's not what we had in mind."

Another member of Congress, who asked not to be named, offers his own theory about the TARP process. "I think basically if you knew Hank Paulson, you got the money," he says.

This cozy arrangement created yet another opportunity for big banks to devour market share at the expense of smaller regional lenders. While all the bigwigs at Citi and Goldman and Bank of America who had Paulson on speed-dial got bailed out right away — remember that TARP was originally passed because money had to be lent right now, that day, that minute, to stave off emergency — many small banks are still waiting for help. Five months into the TARP program, some not only haven't received any funds, they haven't even gotten a call back about their applications.

"There's definitely a feeling among community bankers that no one up there cares much if they make it or not," says Tanya Wheeless, president of the Arizona Bankers Association.

Which, of course, is exactly the opposite of what should be happening, since small, regional banks are far less guilty of the kinds of predatory lending that sank the economy. "They're not giving out subprime loans or easy credit," says Wheeless. "At the community level, it's much more bread-and-butter banking."

Nonetheless, the lion's share of the bailout money has gone to the larger, so-called "systemically important" banks. "It's like Treasury is picking winners and losers," says one state banking official who asked not to be identified.

This itself is a hugely important political development. In essence, the bailout accelerated the decline of regional community lenders by boosting the political power of their giant national competitors.

Which, when you think about it, is insane: What had brought us to the brink of collapse in the first place was this relentless instinct for building ever-larger megacompanies, passing deregulatory measures to gradually feed all the little fish in the sea to an ever-shrinking pool of Bigger Fish. To fix this problem, the government should have slowly liquidated these monster, too-big-to-fail firms and broken them down to smaller, more manageable companies. Instead, federal regulators closed ranks and used an almost completely secret bailout process to double down on the same faulty, merger-happy thinking that got us here in the first place, creating a constellation of megafirms under government control that are even bigger, more unwieldy and more crammed to the gills with systemic risk.

In essence, Paulson and his cronies turned the federal government into one gigantic, half-opaque holding company, one whose balance sheet includes the world's most appallingly large and risky hedge fund, a controlling stake in a dying insurance giant, huge investments in a group of teetering megabanks, and shares here and there in various auto-finance companies, student loans, and other failing businesses. Like AIG, this new federal holding company is a firm that has no mechanism for auditing itself and is run by leaders who have very little grasp of the daily operations of its disparate subsidiary operations.

In other words, it's AIG's rip-roaringly shitty business model writ almost inconceivably massive — to echo Geithner, a huge, complex global company attached to a very complicated investment bank/hedge fund that's been allowed to build up without adult supervision. How much of what kinds of crap is actually on our balance sheet, and what did we pay for it? When exactly will the rent come due, when will the money run out? Does anyone know what the hell is going on? And on the linear spectrum of capitalism to socialism, where exactly are we now? Is there a dictionary word that even describes what we are now? It would be funny, if it weren't such a nightmare.

VII. YOU DON'T GET IT

The real question from here is whether the Obama administration is going to move to bring the financial system back to a place where sanity is restored and the general public can have a say in things or whether the new financial bureaucracy will remain obscure, secretive and hopelessly complex. It might not bode well that Geithner, Obama's Treasury secretary, is one of the architects of the Paulson bailouts; as chief of the New York Fed, he helped orchestrate the Goldman-friendly AIG bailout and the secretive Maiden Lane facilities used to funnel funds to the dying company. Neither did it look good when Geithner — himself a protégé of notorious Goldman alum John Thain, the Merrill Lynch chief who paid out billions in bonuses after the state spent billions bailing out his firm — picked a former Goldman lobbyist named Mark Patterson to be his top aide.

In fact, most of Geithner's early moves reek strongly of Paulsonism. He has continually talked about partnering with private investors to create a so-called "bad bank" that would systemically relieve private lenders of bad assets — the kind of massive, opaque, quasi-private bureaucratic nightmare that Paulson specialized in. Geithner even refloated a Paulson proposal to use TALF, one of the Fed's new facilities, to essentially lend cheap money to hedge funds to invest in troubled banks while practically guaranteeing them enormous profits.

God knows exactly what this does for the taxpayer, but hedge-fund managers sure love the idea. "This is exactly what the financial system needs," said Andrew Feldstein, CEO of Blue Mountain Capital and one of the Morgan Mafia. Strangely, there aren't many people who don't run hedge funds who have expressed anything like that kind of enthusiasm for Geithner's ideas.

As complex as all the finances are, the politics aren't hard to follow. By creating an urgent crisis that can only be solved by those fluent in a language too complex for ordinary people to understand, the Wall Street crowd has turned the vast majority of Americans into non-participants in their own political future. There is a reason it used to be a crime in the Confederate states to teach a slave to read: Literacy is power. In the age of the CDS and CDO, most of us are financial illiterates. By making an already too-complex economy even more complex, Wall Street has used the crisis to effect a historic, revolutionary change in our political system — transforming a democracy into a two-tiered state, one with plugged-in financial bureaucrats above and clueless customers below.

The most galling thing about this financial crisis is that so many Wall Street types think they actually deserve not only their huge bonuses and lavish lifestyles but the awesome political power their own mistakes have left them in possession of. When challenged, they talk about how hard they work, the 90-hour weeks, the stress, the failed marriages, the hemorrhoids and gallstones they all get before they hit 40.

"But wait a minute," you say to them. "No one ever asked you to stay up all night eight days a week trying to get filthy rich shorting what's left of the American auto industry or selling $600 billion in toxic, irredeemable mortgages to ex-strippers on work release and Taco Bell clerks. Actually, come to think of it, why are we even giving taxpayer money to you people? Why are we not throwing your ass in jail instead?"

But before you even finish saying that, they're rolling their eyes, because You Don't Get It. These people were never about anything except turning money into money, in order to get more money; valueswise they're on par with crack addicts, or obsessive sexual deviants who burgle homes to steal panties. Yet these are the people in whose hands our entire political future now rests.

Good luck with that, America. And enjoy tax season.

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Source: http://www.rollingstone.com/politics/story/26793903/the_big_takeover/