The Darknet Project: netroots activists dream of global mesh network
A low-power, open source, open hardware mesh access point

the DARKNET PROJECT
http://arstechnica.com/open-source/news/2011/11/the-darknet-plan-netroots-activists-dream-of-global-mesh-network.ars
Netroots activists dream of global mesh network
by Ryan Paul

A group of Internet activists gathered last week in an Internet Relay Chat (IRC) channel to begin planning an ambitious project—they hope to overcome electronic surveillance and censorship by creating a whole new Internet. The group, which coordinates its efforts through the Reddit social networking site, calls its endeavor The Darknet Project (TDP). The goal behind the project is to create a global darknet, a decentralized web of interconnected wireless mesh networks that operate independently of each other and the conventional internet. In a wireless mesh network, individual nodes can relay data for other nodes, ensuring that the routing of data remains robust as nodes on the network are added and removed. The idea behind TDP is that such a network would be resistant to censorship and shutdown because there would be no central point of control over the infrastructure. “Basically, the goal of the darknet plan project is to create an alternative, more free internet through a global mesh network,” explained a TDP organizer who goes by the Internet handle ‘Wolfeater.’ “To accomplish this, we will establish local meshes and connect them via current infrastructure until our infrastructure begins to reach other meshes.”

TDP seems to have been influenced in part by an earlier unofficial effort launched by the Internet group Anonymous called Operation Mesh. The short-lived operation, which was conceived as a response to the Anti-Counterfeiting Trade Agreement (ACTA) and its potential impact on Internet infrastructure, called for supporters to create a parallel Internet of wireless mesh networks. The idea is intriguing, but it poses major technical and logistical challenges, and it’s hard to imagine that TDP will ever move beyond the conceptual stage. The group behind the effort is big on ideas but short on technical solutions for rolling out a practical implementation. During the IRC meeting, they struggled to coordinate a simple discussion about how to proceed with their agenda. Still, despite TDP’s dysfunctional organizational structure and lack of concrete strategy, their message seems to resonate with an audience on the Internet. And enthusiasm for mesh networks and decentralized Internet isn’t isolated to the tinfoil hat crowd; serious government programs aim at producing similar technology. Earlier this year, the New York Times reported on a US government-funded program to create wireless mesh networks that could help dissidents circumvent political censorship in authoritarian countries. As repressive governments continue to get better at thwarting circumvention of their censorship tools, dissidents will need more robust tools of their own to continue propagating information. The US State Department seems to view decentralized darknets as an important area of research for empowering free expression abroad.

A growing number of independent open source software projects have also emerged to fill the need for darknet technology. Many of these projects are backed by credible non-profit organizations and segments of the security research community. Such projects could find a useful ally in the TDP if they were to engage with the growing community and help mobilize its members in a constructive direction. Unlike TDP, the original Operation Mesh coordinators had specific technologies in mind: they highlighted the I2P anonymous network layer software and the BATMAN ad-hoc wireless routing protocol as the best prospective candidates. Both projects are actively maintained and have modest communities, though the I2P website is currently down. Promising projects like Freenet develop software for building darknets on top of existing Internet infrastructure. Another group that might benefit from broader community support is Serval, a project to create ad-hoc wireless mesh networks using regular smartphones. The group has recently developed a software prototype that runs on Android handsets. They are actively looking for volunteers to help test the software and participate in anumber of other ways. TDP members who are serious about fostering decentralized Internet infrastructure could meaningfully advance their goals by assisting any of the previously mentioned projects. The growing amount of popular grassroots support for Internet decentralization suggests that the momentum behind darknets is increasing.

DIMNETs
http://arstechnica.com/tech-policy/news/2011/11/anonymous-bit-dimnet-tries-to-be-a-hedge-against-dns-censorship.ars
Anonymous “dimnet” tries to create hedge against DNS censorship
by Sean Gallagher

With concern mounting over the potential impact of the Stop Online Piracy Act and claims that it could make the Domain Name Service more vulnerable, one group is looking to circumvent the threat of domain name blocking and censorship by essentially creating a new Internet top-level domain outside of ICANN control. Called Dot-BIT, the effort currently uses proxies, cryptography, and a small collection of DNS servers to create a section of the Internet’s domain address space where domains can be provisioned, moved, and traded anonymously. So far, over 4,000 domains have been registered within Dot-BIT’s .bit virtual top level domain (TLD). Those domains are visible only to people who use a proxy service that draws address information from the project’s distributed database, or to those using one of the project’s two public DNS servers. While it’s not exactly a “darknet” like the Tor anonymizing network’s .onion domain, .bit isn’t exactly part of the open Internet, either—call it a “dimnet.” Just how effective a virtual top-level domain will be in preventing censorship by ISPs and governments—or even handling a rapidly growing set of registered domains—is unclear at best.

How it works
Dot-BIT is derived from a peer-to-peer network technology called Namecoin, derived from the Bitcoin digital currency technology. Just as with Bitcoin, the system is driven by cryptographic tokens, called namecoins. Tobuy an address in that space, you either have to “mine” namecoins by providing compute time (running client software that uses the computer’s CPU or graphics processing unit) to handle the processing of transactions within the network, or buy them through an exchange with cash or Bitcoins. All of those approaches essentially provide support to the Namecoin distributed name system’s infrastructure. You can also get an initial payout of free namecoins from a “faucet” site designed to help bootstrap the network. The cost of entry is pretty low: currently, registering a new domain costs about 1.6 namecoins, which can be had for about five cents. Your registration isn’t associated with your name, address, and phone number—instead, it’s linked to your cryptographic identity, preserving anonymity. Once you’ve registered a domain, you can assign it by sending out a JSON-formatted update request, mapping the domain to a DNS or providing IP addresses and host names to be distributed through Dot-BIT’s proxies and public DNS servers. That information is then spread across all of the network’s peer systems.

Simple, right?
Namecoin’s approach heavily favors early adopters, since once you’ve registered a domain, you can transfer it to someone else—or squat on it until someone pays you for it. That seems to be what a lot of early .bit adopters are counting on. For example, using Firefox and the FoxyProxy add-on to surf .bit-land to audi.bit lands you on a “this domain for sale” page. But while Dot-BIT may allow for an anonymous and relatively secure exchange of DNS information, it won’t necessarily prevent censorship by ISPs. If the .bit top-level domain becomes the target of laws like SOPA, it can be shut down pretty quickly by cutting off the head—its own internal DNS—either through port blocking or other filtering. And since it lacks the anonymizing routing abilities of “hidden” networks like Tor’s .onion domain, it won’t protect the identities of publishers and users who visit sites that use a .bit name. At the moment, then, it’s not certain what purpose .bit will actually serve, other than as an experiment in novel ways to create a DNS—or someplace for hackers to spend their illicitly earned Bitcoins.

the ‘INFORMAL SECTOR’
http://globalguerrillas.typepad.com/globalguerrillas/2011/12/bitcoin-finds-its-intrinsic-value.html
http://globalguerrillas.typepad.com/globalguerrillas/2011/12/the-proliferation-of-darknets.html

It’s time to update/widen the term to accommodate a wider range of modern activity.  A darknet:

is a closed, private communications network that is used for purposes not sanctioned by the state (aka illegal).

Darknets can be built in the following ways:

  • Software.  A virtual, encrypted network that runs over public network infrastructure (most of the US government/economy uses this method).
  • Hardware.  A parallel physical infrastructure.  This hardware can be fiber optic cables or wireless.  Parallel wireless infrastructures (whether for cell phones or Internet access are fairly inexpensive to build and conceal).
  • In most cases, we see a mix of the two.

Examples of Darknets:

  • The Zetas have built a huge wireless darknet (a private, parallel communications network) that connects the majority of Mexico’s states.  Most of the other cartels also have wireless darknets and there are also lots of local darknets.
  • Hezbollah (in Lebanon) runs its own fiber optic network.
  • TOR.  A voluntary, decentralized ad hoc network that anonymizes network connections.
  • Botnets (up to 4 m computers strong) that can be used for global private communications.
  • Etc.  The list goes on  and on….

The future?  Darknets that power alternative economies.  A network layer for accelerating the dark globalization of the $10 Trillion System D.

SYSTEM D
http://www.foreignpolicy.com/articles/2011/10/28/black_market_global_economy
The Shadow Superpower
Forget China: the $10 trillion global black market is the world’s fastest growing economy — and its future.
by Robert Neuwirth / 10.28.2011

With only a mobile phone and a promise of money from his uncle, David Obi did something the Nigerian government has been trying to do for decades: He figured out how to bring electricity to the masses in Africa’s most populous country. It wasn’t a matter of technology. David is not an inventor or an engineer, and his insights into his country’s electrical problems had nothing to do with fancy photovoltaics or turbines to harness the harmattan or any other alternative sources of energy. Instead, 7,000 miles from home, using a language he could hardly speak, he did what traders have always done: made a deal. He contracted with a Chinese firm near Guangzhou to produce small diesel-powered generators under his uncle’s brand name, Aakoo, and shipped them home to Nigeria, where power is often scarce. David’s deal, struck four years ago, was not massive — but it made a solid profit and put him on a strong footing for success as a transnational merchant. Like almost all the transactions between Nigerian traders and Chinese manufacturers, it was also sub rosa: under the radar, outside of the view or control of government, part of the unheralded alternative economic universe of System D.

You probably have never heard of System D. Neither had I until I started visiting street markets and unlicensed bazaars around the globe. System D is a slang phrase pirated from French-speaking Africa and the Caribbean. The French have a word that they often use to describe particularly effective and motivated people. They call them débrouillards. To say a man is a débrouillard is to tell people how resourceful and ingenious he is. The former French colonies have sculpted this word to their own social and economic reality. They say that inventive, self-starting, entrepreneurial merchants who are doing business on their own, without registering or being regulated by the bureaucracy and, for the most part, without paying taxes, are part of “l’economie de la débrouillardise.” Or, sweetened for street use, “Systeme D.” This essentially translates as the ingenuity economy, the economy of improvisation and self-reliance, the do-it-yourself, or DIY, economy. A number of well-known chefs have also appropriated the term to describe the skill and sheer joy necessary to improvise a gourmet meal using only the mismatched ingredients that happen to be at hand in a kitchen. I like the phrase. It has a carefree lilt and some friendly resonances. At the same time, it asserts an important truth: What happens in all the unregistered markets and roadside kiosks of the world is not simply haphazard. It is a product of intelligence, resilience, self-organization, and group solidarity, and it follows a number of well-worn though unwritten rules. It is, in that sense, a system.

It used to be that System D was small — a handful of market women selling a handful of shriveled carrots to earn a handful of pennies. It was the economy of desperation. But as trade has expanded and globalized, System D has scaled up too. Today, System D is the economy of aspiration. It is where the jobs are. In 2009, the Organisation for Economic Co-operation and Development (OECD), a think tank sponsored by the governments of 30 of the most powerful capitalist countries and dedicated to promoting free-market institutions, concluded that half the workers of the world — close to 1.8 billion people — were working in System D: off the books, in jobs that were neither registered nor regulated, getting paid in cash, and, most often, avoiding income taxes.

Kids selling lemonade from the sidewalk in front of their houses are part of System D. So are many of the vendors at stoop sales, flea markets, and swap meets. So are the workers who look for employment in the parking lots of Home Depot and Lowe’s throughout the United States. And it’s not only cash-in-hand labor. As with David Obi’s deal to bring generators from China to Nigeria, System D is multinational, moving all sorts of products — machinery, mobile phones, computers, and more — around the globe and creating international industries that help billions of people find jobs and services. In many countries — particularly in the developing world — System D is growing faster than any other part of the economy, and it is an increasing force in world trade. But even in developed countries, after the financial crisis of 2008-09, System D was revealed to be an important financial coping mechanism. A 2009 study by Deutsche Bank, the huge German commercial lender, suggested that people in the European countries with the largest portions of their economies that were unlicensed and unregulated — in other words, citizens of the countries with the most robust System D — fared better in the economic meltdown of 2008 than folks living in centrally planned and tightly regulated nations. Studies of countries throughout Latin America have shown that desperate people turned to System D to survive during the most recent financial crisis. This spontaneous system, ruled by the spirit of organized improvisation, will be crucial for the development of cities in the 21st century. The 20th-century norm — the factory worker who nests at the same firm for his or her entire productive life — has become an endangered species. In China, the world’s current industrial behemoth, workers in the massive factories have low salaries and little job security. Even in Japan, where major corporations have long guaranteed lifetime employment to full-time workers, a consensus is emerging that this system is no longer sustainable in an increasingly mobile and entrepreneurial world.

So what kind of jobs will predominate? Part-time work, a variety of self-employment schemes, consulting, moonlighting, income patching. By 2020, the OECD projects, two-thirds of the workers of the world will be employed in System D. There’s no multinational, no Daddy Warbucks or Bill Gates, no government that can rival that level of job creation. Given its size, it makes no sense to talk of development, growth, sustainability, or globalization without reckoning with System D. The growth of System D presents a series of challenges to the norms of economics, business, and governance — for it has traditionally existed outside the framework of trade agreements, labor laws, copyright protections, product safety regulations, antipollution legislation, and a host of other political, social, and environmental policies. Yet there’s plenty that’s positive, too. In Africa, many cities — Lagos, Nigeria, is a good example — have been propelled into the modern era through System D, because legal businesses don’t find enough profit in bringing cutting- edge products to the third world. China has, in part, become the world’s manufacturing and trading center because it has been willing to engage System D trade. Paraguay, small, landlocked, and long dominated by larger and more prosperous neighbors, has engineered a decent balance of trade through judicious smuggling. The digital divide may be a concern, but System D is spreading technology around the world at prices even poor people can afford. Squatter communities may be growing, but the informal economy is bringing commerce and opportunity to these neighborhoods that are off the governmental grid. It distributes products more equitably and cheaply than any big company can. And, even as governments around the world are looking to privatize agencies and get out of the business of providing for people, System D is running public services — trash pickup, recycling, transportation, and even utilities.

Just how big is System D? Friedrich Schneider, chair of the economics department at Johannes Kepler University in Linz, Austria, has spent decades calculating the dollar value of what he calls the shadow economies of the world. He admits his projections are imprecise, in part because, like privately held businesses everywhere, businesspeople who engage in trade off the books don’t want to open their books (most successful System D merchants are obsessive about profit and loss and keep detailed accounts of their revenues and expenses in old-fashioned ledger books) to anyone who will write anything in a book. And there’s a definitional problem as well, because the border between the shadow and the legal economies is blurry. Does buying some of your supplies from an unlicensed dealer put you in the shadows, even if you report your profit and pay your taxes? How about hiding just $1 in income from the government, though the rest of your business is on the up-and-up? And how about selling through System D even if your business is in every other way in compliance with the law? Finding a firm dividing line is not easy, as Keith Hart, who was among the first academics toacknowledge the importance of street markets to the economies of the developing world, warned me in a recent conversation: “It’s very difficult to separate the nice African ladies selling oranges on the street and jiggling their babies on their backs from the Indian gangsters who control the fruit trade and who they have to pay rent to.” Schneider suggests, however, that, in making his estimates, he has this covered. He screens out all money made through “illegal actions that fit the characteristics of classical crimes like burglary, robbery, drug dealing, etc.” This means that the big-time criminals are likely out of his statistics, though those gangsters who control the fruit market are likely in, as long as they’re not involved in anything more nefarious than running a price-fixing cartel. Also, he says, his statistics do not count “the informal household economy.” This means that if you’re putting buckles on belts in your home for a bit of extra cash from a company owned by your cousin, you’re in, but if you’re babysitting your cousin’s kids while she’s off putting buckles on belts at her factory, you’re out.

Schneider presents his numbers as a percentage of the total market value of goods and services made in each country that same year — each nation’s gross domestic product. His data show that System D is on the rise. In the developing world, it’s been increasing every year since the 1990s, and in many countries it’s growing faster than the officially recognized gross domestic product (GDP). If you apply his percentages (Schneider’s most recent report, published in 2006, uses economic data from 2003) to the World Bank’s GDP estimates, it’s possible to make a back-of-the-envelope calculation of the approximate value of the billions of underground transactions around the world. And it comes to this: The total value of System D as a global phenomenon is close to $10 trillion. Which makes for another astonishing revelation. If System D were an independent nation, united in a single political structure — call it the United Street Sellers Republic (USSR) or, perhaps, Bazaaristan — it would be an economic superpower, the second-largest economy in the world (the United States, with a GDP of $14 trillion, is numero uno). The gap is narrowing, though, and if the United States doesn’t snap out of its current funk, the USSR/Bazaaristan could conceivably catch it sometime this century. In other words, System D looks a lot like the future of the global economy. All over the world — from San Francisco to São Paulo, from New York City to Lagos — people engaged in street selling and other forms of unlicensed trade told me that they could never have established their businesses in the legal economy. “I’m totally off the grid,” one unlicensed jewelry designer told me. “It was never an option to do it any other way. It never even crossed my mind. It was financially absolutely impossible.” The growth of System D opens the market to those who have traditionally been shut out.

This alternative economic system also offers the opportunity for large numbers of people to find work. No job-cutting or outsourcing is going on here. Rather, a street market boasts dozens of entrepreneurs selling similar products and scores of laborers doing essentially the same work. An economist would likely deride all this duplicated work as inefficient. But the level of competition on the street keeps huge numbers of people employed. It liberates their entrepreneurial energy. And it offers them the opportunity to move up in the world. In São Paulo, Édison Ramos Dattora, a migrant from the rural midlands, has succeeded in the nation’s commercial capital by working as a camelô — an unlicensed street vendor. He started out selling candies and chocolates on the trains, and is now in a more lucrative branch of the street trade — retailing pirate DVDs of first-run movies to commuters around downtown. His underground trade — he has to watch out for the cops wherever he goes — has given his family a standard of living he never dreamed possible: a bank account, a credit card, an apartment in the center of town, and enough money to take a trip to Europe. Even in the most difficult and degraded situations, System D merchants are seeking to better their lives. For instance, the garbage dump would be the last place you would expect to be a locus of hope and entrepreneurship. But Lagos scavenger Andrew Saboru has pulled himself out of the trash heap and established himself as a dealer in recycled materials. On his own, with no help from the government or any NGOs or any bank (Andrew has a bank account, but his bank will never loan him money — because his enterprise is unlicensed and unregistered and depends on the unpredictable labor of culling recyclable material from the megacity’s massive garbage pile), he has climbed the career ladder. “Lagos is a city for hustling,” he told me. “If you have an idea and you are serious and willing to work, you can make money here. I believe the future is bright.” It took Andrew 16 years to make his move, but he succeeded, and he’s proud of the business he has created. We should be too. As Joanne Saltzberg, who heads Women Entrepreneurs of Baltimore — a business development group — told me, we need to change our attitude and to salute the achievements of those who are engaged in this alternate economy. “We only revere success,” she said. “I don’t think we honor the struggle. People who have no access to business development resources. People who have to work two and three jobs just to survive. When you are struggling in this economy and still you commit yourself to having a better life, that’s really something to honor.”

RADIO ZETA
http://www.washingtonpost.com/world/americas/equipment-seizures-show-mexican-drug-cartels-operate-sophisticated-communications-networks/2011/12/26/gIQAjJu6IP_print.html
http://www.wired.com/dangerroom/2011/12/cartel-radio-mexico/
How Mexico’s Drug Cartels Stay Networked
by Spencer Ackerman / December 27, 2011

Arranging drug sales on a cellphone, cryptic email or even a pager? That’s strictly for the small-time dealer. If you’re a Mexican drug cartel, you have your own radio network. Since 2006, the cartels have maintained an encrypted DIY radio network that stretches across nearly all 31 Mexican states, even down south into Guatemala. The communications infrastructure of the narco-gangs that have turned Mexico into a gangster’s paradise consists of “professional-grade” radio antennas, signal relays and simple handheld radios that cost “millions of dollars” — and which the Mexican authorities haven’t been able to shut down. If it sounds like a military-grade communications apparatus, it should. The notorious Zetas, formerly the enforcers for the Gulf Cartel and now its chief rival, were born out of Mexican Special Forces. But the Zetas aren’t stupid enough to make big deals over a radio frequency, even an encrypted one. According to a picture of what you might call Radio Zeta that’s emerged after three raids by the Mexican authorities, the bosses only communicate through the Internet. The radio network is for lookouts and lower-level players.

Here’s how it works, according to a fascinating Associated Press piece. The cartels divide up territory into “plazas.” The plaza boss has the responsibility for establishing nodes on the network — getting the antennas in place, concealing them as necessary, making sure the signal-boosting repeaters extend the network’s reach, equipping cartel personnel with handheld radios, and replacing what the security forces destroy. The cartels have even gone green, with solar panels powering the radio towers. The network is primarily an early warning reconnaissance system. “Halcons,” or “hawks,” holler on the handhelds when the federal police or soldiers roll through cartel territory. But it’s also an occasional offensive tool to intimidate the security forces. The cartels have been known to hijack military radio networks to broadcast threats. That’s keeping in line with the Zetas’ alarming tactic of slaughtering people for allegedly talking openly about cartel activity over the Internet.

Since September, three large raids conducted by Mexico’s beleaguered security forces have attempted to disrupt the radio network by snatching up its hardware. But much of the infrastructure — the towers, the receivers — is cheap enough to be easily replaced. The network is “low-cost, highly extendable and maintainable,” a security consultant told the AP. But there’s an alternative for taking down the cartel broadcasts. Since the U.S. already provides intelligence and security assistance to Mexico’s drug war, maybe it’s time to think about providing somemilitary-grade jammers as well. Mexico doesn’t seem to have a better idea for taking Radio Zeta off the air.


{Freenet means controversial information does not need to be stored in physical data havens such as this one, Sealand. Photograph: Kim Gilmour/Alamy}

FREENET
http://www.guardian.co.uk/technology/2009/nov/26/dark-side-internet-freenet
The dark side of the internet
by Andy Beckett / 25 November 2009

Fourteen years ago, a pasty Irish teenager with a flair for inventions arrived at Edinburgh University to study artificial intelligence and computer science. For his thesis project, Ian Clarke created “a Distributed, Decentralised Information Storage and Retrieval System”, or, as a less precise person might put it, a revolutionary new way for people to use theinternet without detection. By downloading Clarke’s software, which he intended to distribute for free, anyone could chat online, or read or set up a website, or share files, with almost complete anonymity. “It seemed so obvious that that was what the net was supposed to be about – freedom to communicate,” Clarke says now. “But [back then] in the late 90s that simply wasn’t the case. The internet could be monitored more quickly, more comprehensively, more cheaply than more old-fashioned communications systems like the mail.” His pioneering software was intended to change that. His tutors were not bowled over. “I would say the response was a bit lukewarm. They gave me a B. They thought the project was a bit wacky … they said, ‘You didn’t cite enough prior work.'” Undaunted, in 2000 Clarke publicly released his software, now more appealingly called Freenet. Nine years on, he has lost count of how many people are using it: “At least 2m copies have been downloaded from the website, primarily in Europe and the US. The website is blocked in [authoritarian] countries like China so there, people tend to get Freenet from friends.” Last year Clarke produced an improved version: it hides not only the identities of Freenet users but also, in any online environment, the fact that someone is using Freenet at all.

Installing the software takes barely a couple of minutes and requires minimal computer skills. You find the Freenet website, read a few terse instructions, and answer a few questions (“How much security do you need?” … “NORMAL: I live in a relatively free country” or “MAXIMUM: I intend to access information that could get me arrested, imprisoned, or worse”). Then you enter a previously hidden online world. In utilitarian type and bald capsule descriptions, an official Freenet index lists the hundreds of “freesites” available: “Iran News”, “Horny Kate”, “The Terrorist’s Handbook: A practical guide to explosives and other things of interests to terrorists”, “How To Spot A Pedophile [sic]”, “Freenet Warez Portal: The source for pirate copies of books, games, movies, music, software, TV series and more”, “Arson Around With Auntie: A how-to guide on arson attacks for animal rights activists”. There is material written in Russian, Spanish, Dutch, Polish and Italian. There is English-language material from America and Thailand, from Argentina and Japan. There are disconcerting blogs (“Welcome to my first Freenet site. I’m not here because of kiddie porn … [but] I might post some images of naked women”) and legally dubious political revelations. There is all the teeming life of the everyday internet, but rendered a little stranger and more intense. One of the Freenet bloggers sums up the difference: “If you’re reading this now, then you’re on the darkweb.” The modern internet is often thought of as a miracle of openness – its global reach, its outflanking of censors, its seemingly all-seeing search engines. “Many many users think that when they search on Google they’re getting all the web pages,” says Anand Rajaraman, co-founder of Kosmix, one of a new generation of post-Google search engine companies. But Rajaraman knows different. “I think it’s a very small fraction of the deep web which search engines are bringing to the surface. I don’t know, to be honest, what fraction. No one has a really good estimate of how big the deep web is. Five hundred times as big as the surface web is the only estimate I know.”

Unfathomable and mysterious
“The darkweb”; “the deep web”; beneath “the surface web” – the metaphors alone make the internet feel suddenly more unfathomable and mysterious. Other terms circulate among those in the know: “darknet”, “invisible web”, “dark address space”, “murky address space”, “dirty address space”. Not all these phrases mean the same thing. While a “darknet” is an online network such as Freenet that is concealed from non-users, with all the potential for transgressive behaviour that implies, much of “the deep web”, spooky as it sounds, consists of unremarkable consumer and research data that is beyond the reach of search engines. “Dark address space” often refers to internet addresses that, for purely technical reasons, have simply stopped working. And yet, in a sense, they are all part of the same picture: beyond the confines of most people’s online lives, there is a vast other internet out there, used by millions but largely ignored by the media and properly understood by only a few computer scientists. How was it created? What exactly happens in it? And does it represent the future of life online or the past? Michael K Bergman, an American academic and entrepreneur, is one of the foremost authorities on this other internet. In the late 90s he undertook research to try to gauge its scale. “I remember saying to my staff, ‘It’s probably two or three times bigger than the regular web,”‘ he remembers. “But the vastness of the deep web . . . completely took my breath away. We kept turning over rocks and discovering things.” In 2001 he published a paper on the deep web that is still regularly cited today. “The deep web is currently 400 to 550 times larger than the commonly defined world wide web,” he wrote. “The deep web is the fastest growing category of new information on the internet … The value of deep web content is immeasurable … internet searches are searching only 0.03% … of the [total web] pages available.” In the eight years since, use of the internet has been utterly transformed in many ways, but improvements in search technology by Google, Kosmix and others have only begun to plumb the deep web. “A hidden web [search] engine that’s going to have everything – that’s not quite practical,” says Professor Juliana Freire of the University of Utah, who is leading a deep web search project called Deep Peep. “It’s not actually feasible to index the whole deep web. There’s just too much data.”

But sheer scale is not the only problem. “When we’ve crawled [searched] several sites, we’ve gotten blocked,” says Freire. “You can actually come up with ways that make it impossible for anyone [searching] to grab all your data.” Sometimes the motivation is commercial – “people have spent a lot of time and money building, say, a database of used cars for sale, and don’t want you to be able to copy their site”; and sometimes privacy is sought for other reasons. “There’s a well-known crime syndicate called the Russian Business Network (RBN),” says Craig Labovitz, chief scientist at Arbor Networks, a leading online security firm, “and they’re always jumping around the internet, grabbing bits of [disused] address space, sending out millions of spam emails from there, and then quickly disconnecting.” The RBN also rents temporary websites to other criminals for online identity theft, child pornography and releasing computer viruses. The internet has been infamous for such activities for decades; what has been less understood until recently was how the increasingly complex geography of the internet has aided them. “In 2000 dark and murky address space was a bit of a novelty,” says Labovitz. “This is now an entrenched part of the daily life of the internet.” Defunct online companies; technical errors and failures; disputes between internet service providers; abandoned addresses once used by the US military in the earliest days of the internet – all these have left the online landscape scattered with derelict or forgotten properties, perfect for illicit exploitation, sometimes for only a few seconds before they are returned to disuse. How easy is it to take over a dark address? “I don’t think my mother could do it,” says Labovitz. “But it just takes a PC and a connection. The internet has been largely built on trust.”

Open or closed?
In fact, the internet has always been driven as much by a desire for secrecy as a desire for transparency. The network was the joint creation of the US defence department and the American counterculture – the WELL, one of the first and most influential online communities, was a spinoff from hippy bible the Whole Earth Catalog – and both groups had reasons to build hidden or semi-hidden online environments as well as open ones. “Strong encryption developed in parallel with the internet,” says Danny O’Brien, an activist with the Electronic Frontier Foundation, a long-established pressure group for online privacy. There are still secretive parts of the internet where this unlikely alliance between hairy libertarians and the cloak-and-dagger military endures. The Onion Router, or Tor, is an American volunteer-run project that offers free software to those seeking anonymous online communication, like a more respectable version of Freenet. Tor’s users, according to its website, include US secret service “field agents” and “law enforcement officers . . . Tor allows officials to surf questionable websites and services without leaving tell-tale tracks,” but also “activists and whistleblowers”, for example “environmental groups [who] are increasingly falling under surveillance in the US under laws meant to protect against terrorism”. Tor, in short, is used both by the American state and by some of its fiercest opponents. On the hidden internet, political life can be as labyrinthine as in a novel by Thomas Pynchon.

The hollow legs of Sealand
The often furtive, anarchic quality of life online struck some observers decades ago. In 1975, only half a dozen years after the internet was created, the science-fiction author John Brunner wrote of “so many worms and counter-worms loose in the data-net” in his influential novel The Shockwave Rider. By the 80s “data havens”, at first physical then online locations where sensitive computerised information could be concealed, were established in discreet jurisdictions such as Caribbean tax havens. In 2000 an American internet startup called HavenCo set up a much more provocative data haven, in a former second world war sea fort just outside British territorial waters off the Suffolk coast, which since the 60s had housed an eccentric independent “principality” called Sealand. HavenCo announced that it would store any data unless it concerned terrorism or child pornography, on servers built into the hollow legs of Sealand as they extended beneath the waves. A better metaphor for the hidden depths of the internet was hard to imagine. In 2007 the highly successful Swedish filesharing website The Pirate Bay – the downloading of music and films for free being another booming darknet enterprise – announced its intention to buy Sealand. The plan has come to nothing so far, and last year it was reported that HavenCo had ceased operation, but in truth the need for physical data havens is probably diminishing. Services such as Tor and Freenet perform the same function electronically; and in a sense, even the “open” internet, as online privacy-seekers sometimes slightly contemptuously refer to it, has increasingly become a place for concealment: people posting and blogging under pseudonyms, people walling off their online lives from prying eyes on social networking websites. “The more people do everything online, the more there’s going to be bits of your life that you don’t want to be part of your public online persona,” says O’Brien. A spokesman for the Police Central e-crime Unit [PCeU] at the Metropolitan Police points out that many internet secrets hide in plain sight: “A lot of internet criminal activity is on online forums that are not hidden, you just have to know where to find them. Like paedophile websites: people who use them might go to an innocent-looking website with a picture of flowers, click on the 18th flower, arrive on another innocent-looking website, click something there, and so on.” The paedophile ring convicted this autumn and currently awaiting sentence for offences involving Little Ted’s nursery in Plymouth met on Facebook. Such secret criminal networks are not purely a product of the digital age: codes and slang and pathways known only to initiates were granting access to illicit worlds long before the internet. To libertarians such as O’Brien and Clarke the hidden internet, however you define it, is constantly under threat from restrictive governments and corporations. Its freedoms, they say, must be defended absolutely. “Child pornography does exist on Freenet,” says Clarke. “But it exists all over the web, in the post . . . At Freenet we could establish a virus to destroy any child pornography on Freenet – we could implement that technically. But then whoever has the key [to that filtering software] becomes a target. Suddenly we’d start getting served copyright notices; anything suspect on Freenet, we’d get pressure to shut it down. To modify Freenet would be the end of Freenet.”

Always recorded
According to the police, for criminal users of services such as Freenet, the end is coming anyway. The PCeU spokesman says, “The anonymity things, there are ways to get round them, and we do get round them. When you use the internet, something’s always recorded somewhere. It’s a question of identifying who is holding that information.” Don’t the police find their investigations obstructed by the libertarian culture of so much life online? “No, people tend to be co-operative.” The internet, for all its anarchy, is becoming steadily more commercialised; as internet service providers, for example, become larger and more profit-driven, the spokesman suggests, it is increasingly in their interests to accept a degree of policing. “There has been an increasing centralisation,” Ian Clarke acknowledges regretfully. Meanwhile the search engine companies are restlessly looking for paths into the deep web and the other sections of the internet currently denied to them. “There’s a deep implication for privacy,” says Anand Rajaraman of Kosmix. “Tonnes and tonnes of stuff out there on the deep web has what I call security through obscurity. But security through obscurity is actually a false security. You [the average internet user] can’t find something, but the bad guys can find it if they try hard enough.” As Kosmix and other search engines improve, he says, they will make the internet truly transparent: “You will be on the same level playing field as the bad guys.” The internet as a sort of electronic panopticon, everything on it unforgivingly visible and retrievable – suddenly its current murky depths seem in some ways preferable. Ten years ago Tim Berners-Lee, the British computer scientist credited with inventing the web, wrote: “I have a dream for the web in which computers become capable of analysing all the data on the web – the content, links, and transactions between people … A ‘Semantic Web’, which should make this possible, has yet to emerge, but when it does, the day-to-day mechanisms of trade, bureaucracy and our daily lives will be handled by machines talking to machines.” Yet this “semantic web” remains the stuff of knotty computer science papers rather than a reality. “It’s really been the holy grail for 30 years,” says Bergman. One obstacle, he continues, is that the internet continues to expand in unpredictable and messy surges. “The boundaries of what the web is have become much more blurred. Is Twitter part of the web or part of something else? Now the web, in a sense, is just everything. In 1998, the NEC laboratory at Princeton published a paper on the size of the internet. Who could get something like that published now? You can’t talk about how big the internet is. Because what is the metric?”

Gold Rush
It seems likely that the internet will remain in its Gold Rush phase for some time yet. And in the crevices and corners of its slightly thrown-together structures, darknets and other private online environments will continue to flourish. They can be inspiring places to spend time in, full of dissidents and eccentrics and the internet’s original freewheeling spirit. But a darknet is not always somewhere for the squeamish. On Freenet, there is a currently a “freesite” which makes allegations against supposed paedophiles, complete with names, photographs, extensive details of their lives online, and partial home addresses. In much smaller type underneath runs the disclaimer: “The material contained in this freesite is hearsay . . . It is not admissable in court proceedings and would certainly not reach the burden of proof requirement of a criminal trial.” For the time being, when I’m wandering around online, I may stick to Google.

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Cliff Wood with the Ohio Cooperative Solar looks over the installation on the roof of the Euclid Public Library.

CO-OPERATIVES
http://www.garalperovitz.com/2011/12/worker-owners-of-the-world-unite/
http://www.nytimes.com/2011/12/15/opinion/worker-owners-of-america-unite.html
by Gar Alperovitz / December 14, 2011

The Occupy Wall Street protests have come and mostly gone, and whether they continue to have an impact or not, they have brought an astounding fact to the public’s attention: a mere 1 percent of Americans own just under half of the country’s financial assets and other investments. America, it would seem, is less equitable than ever, thanks to our no-holds-barred capitalist system. But at another level, something different has been quietly brewing in recent decades: more and more Americans are involved in co-ops, worker-owned companies and other alternatives to the traditional capitalist model. We may, in fact, be moving toward a hybrid system, something different from both traditional capitalism and socialism, without anyone even noticing. Some 130 million Americans, for example, now participate in the ownership of co-op businesses and credit unions. More than 13 million Americans have become worker-owners of more than 11,000 employee-owned companies, six million more than belong to private-sector unions. And worker-owned companies make a difference. In Cleveland, for instance, an integrated group of worker-owned companies, supported in part by the purchasing power of large hospitals and universities, has taken the lead in local solar-panel installation, “green” institutional laundry services and a commercial hydroponic greenhouse capable of producing more than three million heads of lettuce a year.

Local and state governments are likewise changing the nature of American capitalism. Almost half the states manage venture capital efforts, taking partial ownership in new businesses. Calpers, California’s public pension authority, helps finance local development projects; in Alaska, state oil revenues provide each resident with dividends from public investment strategies as a matter of right; in Alabama, public pension investing has long focused on state economic development. Moreover, this year some 14 states began to consider legislation to create public banks similar to the longstanding Bank of North Dakota; 15 more began to consider some form of single-payer or public-option health care plan. Some of these developments, like rural co-ops and credit unions, have their origins in the New Deal era; some go back even further, to the Grange movement of the 1880s. The most widespread form of worker ownership stems from 1970s legislation that provided tax benefits to owners of small businesses who sold to their employees when they retired. Reagan-era domestic-spending cuts spurred nonprofits to form social enterprises that used profits to help finance their missions. Recently, growing economic pain has provided a further catalyst. The Cleveland cooperatives are an answer to urban decay that traditional job training, small-business and other development strategies simply do not touch. They also build on a 30-year history of Ohio employee-ownership experiments traceable to the collapse of the steel industry in the 1970s and ’80s.

Further policy changes are likely. In Indiana, the Republican state treasurer, Richard Mourdock, is using state deposits to lower interest costs to employee-owned companies, a precedent others states could easily follow. Senator Sherrod Brown, Democrat of Ohio, is developing legislation to support worker-owned strategies like that of Cleveland in other cities. And several policy analysts have proposed expanding existing government “set aside” procurement programs for small businesses to include co-ops and other democratized enterprises. If such cooperative efforts continue to increase in number, scale and sophistication, they may suggest the outlines, however tentative, of something very different from both traditional, corporate-dominated capitalism and traditional socialism. It’s easy to overestimate the possibilities of a new system. These efforts are minor compared with the power of Wall Street banks and the other giants of the American economy. On the other hand, it is precisely these institutions that have created enormous economic problems and fueled public anger. During the populist and progressive eras, a decades-long buildup of public anger led to major policy shifts, many of which simply took existing ideas from local and state efforts to the national stage. Furthermore, we have already seen how, in moments of crisis, the nationalization of auto giants like General Motors and Chrysler can suddenly become a reality. When the next financial breakdown occurs, huge injections of public money may well lead to de facto takeovers of major banks. And while the American public has long supported the capitalist model, that, too, may be changing. In 2009 a Rasmussen poll reported that Americans under 30 years old were “essentially evenly divided” as to whether they preferred “capitalism” or “socialism.” A long era of economic stagnation could well lead to a profound national debate about an America that is dominated neither by giant corporations nor by socialist bureaucrats. It would be a fitting next direction for a troubled nation that has long styled itself as of, by and for the people.




OWN IT
http://articles.latimes.com/2011/nov/28/local/la-me-richmond-20111128
They’re owning this cooperation
by Lee Romney / November 28, 2011

Where a hot dog stand now is the main lunchtime option for city workers in this distressed Bay Area town, soon they’ll be able to choose from steel-cut oatmeal, goat cheese empanadas and white bean and kale stew, prepared in a mobile cafe. Its owners will share in the decision-making — and any profits. Richmond Solar has trained needy residents to work as green-energy installers and now aims to transform some into bosses by forming a worker-owned cooperative. The city’s first bicycle shop has opened with similar dreams: Young men who have volunteered to learn the repair trade soon may be elevated to co-owners. “I’m just gonna ride it out with everyone to get where we need to go,” Mercedes Burnell, 19, said as he prepared to replace a crankshaft and pedals at Richmond SPOKES.

The flurry of democratic enterprise has been guided by Mayor Gayle McLaughlin, a former schoolteacher who visited Mondragon, Spain, and recognized a possible path out of the poverty and unemployment that plague her city. The Basque hill town is dominated by Mondragon Corp., a web of cooperatives that employ 83,000 workers and together represent Spain’s seventh-largest business. Co-op clusters based on Mondragon’s model have emerged in Cleveland and the Bronx, N.Y., among other cities. Richmond, with a 16% unemployment rate, hopes to follow suit. The city’s industrial roots date back more than a century, when it was home to the Santa Fe Railroad terminus and a Standard Oil refinery. World War II shipyards swelled the population to nearly its current 103,000. But Richmond has struggled since and is regularly listed among the nation’s 25 most dangerous cities. Since August, Bay Area co-op veteran Terry Baird — a burly man with a gray beard and a penchant for South African freedom songs — has been on the city payroll, helping to piece together cooperative ventures in Richmond’s economically barren pockets.

Mondragon Corp. was created in 1956 and fine-tuned over half a century, McLaughlin said, “but you have to start somewhere. One of the prerequisites of starting a co-op is need, and that is something that we have in Richmond.” Demand matters too. Baird aims to start small, with food and service co-ops such as a plumber’s collective that won’t require hefty upfront investment. Then the city hopes to bring government and other big employers on board, setting up ventures to meet their buying needs. McLaughlin, a Green Party member who’s been mayor since 2006, visited Mondragon last year and was dazzled by the scale of the worker-driven enterprises. “My understanding of co-ops from the 1960s and 1970s was that they were small and interesting,” said McLaughlin, who was immediately sold on the idea of replicating the formula in Richmond. The Mondragon story began with a Catholic priest. In 1943, Father Jose Maria Arizmendiarrieta — who had narrowly escaped death by firing squad during the Spanish Civil War — started a technical school for working-class boys. By 1956, graduates had helped form the first cooperative to make kerosene stoves. A cooperative bank followed in 1959. The corporation, which reported a $242-million profit last year, now includes 255 industrial, retail and financial cooperatives, with others focusing on education and research. Manufacturing co-ops churn out metal-cutting tools, washing machines and bicycles. A retail co-op runs Spain’s third-largest grocery chain. A Mondragon construction venture built Bilbao’s Guggenheim Museum. About 85% of the corporation’s employees are co-op members. But the original edict of one-worker/one vote remains, through an elected general assembly with representatives from each cooperative. Recently, the assembly voted to cut everyone’s pay rather than risk layoffs at any one co-op. The compensation of the highest-paid worker is capped at seven times that of the lowest. Some of the corporation’s overall profits go toward offsetting losses at any individual enterprise. Workers also receive a share in the corporation, based on their contributions, every year, with more money flowing into interest-bearing accounts disbursed at retirement.

The U.S. has a history of cooperative movements, beginning with enterprises organized in the late 19th century by the Knights of Labor and highlighted by the burst of food co-ops and consumer buying clubs of the 1960s. Recent years have seen a resurgence. “It’s less counterculture utopian,” said Melissa Hoover, executive director of the San Francisco-based U.S. Federation of Worker Owned Cooperatives, “and more engaged with people in the economy.” Some of the growth is sector-based: Green-cleaning ventures launched by immigrant women, for example, are common. But philanthropists and community developers increasingly have focused their attention on the co-op model as a way to revitalize urban areas. No city experiment has made more of a splash than Cleveland’s. With support from universities and medical centers that border the downtown area targeted for development, the Cleveland Foundation — a donor-based organization dedicated to bettering the city — has channeled millions of dollars into the Mondragon-inspired Evergreen Cooperatives. A solar panel installation-and-weatherization company and a green commercial laundry are up and running with a combined 50 worker-owners, said Lillian Kuri, program director of the Cleveland Foundation. An urban farming co-op is scheduled to open in the spring. In addition to providing financing for co-op ventures, Evergreen Cooperatives makes services such as child care available to the workers and provides no-cost healthcare. Ted Howard, an architect of Cleveland’s experiment and founder of the University of Maryland’s Democracy Collaborative, said worker-ownership is supplanting other forms of inner-city revival. “When you’re hiring people even in a decent job that pays a living wage — if they … have no retirement account, no rainy day savings — a job alone is not enough,” Howard said.

In addition to offering the chance to share in profits, worker-owned companies are rooted in the community and won’t “pack up and move,” he said. The co-op model has found interest among government officials in Washington D.C., Amarillo, Texas, and Atlanta, Howard said, but Richmond stands alone in hiring a coordinator. “I don’t know any city in America that’s done that,” he said. Enter Baird, a Richmond resident who in 1997 helped found the worker-owned Arizmendi Bakery cooperative in Oakland. The Arizmendi Assn. of Cooperatives now includes six Bay Area bakeries. All workers earn the same pay rate. Profits are distributed at year’s end in proportion to hours worked. Though he may be a co-op evangelist, Baird knows the model won’t work without a product or service consumers will pay for, a decent location and a group of people who are able to work together. During a recent tour of Richmond, Baird pointed out candidates for cooperative ventures: A vacant 5,000-square-foot building is under consideration for a handyman’s cooperative. A faded onetime coin laundry near a city park could become a bakery or restaurant. Then there’s the weedy lot that one woman hopes to transform into a cooperative garden and farm stand. In the heart of the old downtown sits Richmond SPOKES. Brian Drayton, once a junior zookeeper in Baltimore, spent years developing youth programs for a range of nonprofits, stressing art and environmental sustainability. When he opened the community space and “bike lounge” as a nonprofit last month, young men from the neighborhood poured in to find out what he was doing. Then they rolled up their sleeves and helped lay gleaming wood flooring. As a local artist covered the walls in vivid murals, they stuck around to learn the bike trade. Baird has been meeting with a group of five or so men to discuss a worker-owned collective.

Richmond Solar Executive Director Michelle McGeoy has secured funds for her co-op from, among others, Chevron (formerly Standard Oil and now the city’s largest employer) and the California Endowment — a private foundation that seeks to promote healthy communities. The company has set an initial target of having 10 worker-owners by next spring. Then there’s the Liberty Ship Cafe, whose seven owners were drawn together while taking a class on developing cooperatives at the Richmond library. The California Endowment has helped fund this project as well. On Dec. 1, the collective will start selling its breakfast and lunch fare at a farmers market near the civic center. The plan is to begin deliveries to government office workers soon after. Julio Chavez, 40, studied communications in his native Guatemala before coming to the U.S. and working as an electrician. In recent months, he has joined the other Liberty Ship Cafe partners in testing recipes for sancocho — a traditional Latin American soup — and other delicacies in a rented church kitchen. “It’s a difficult time, so one has to do different things, to search for options,” Chavez said. Challenges remain. While Mondragon is united by its Basque culture, Baird noted, Richmond is fragmented by race and class and shadowed by chronic violence. On top of the usual cost of business, cooperatives require training — not just in job-specific skills but on how to manage a business and make sure everyone’s voice is heard. “The real thing that can take a [cooperative] business down,” Hoover said, “is a group that’s not prepared to make decisions together.” On a recent rainy day, the Liberty Ship Cafe workers met to discuss just that. Concetta Abraham, a 76-year-old native of Italy, provides much of the group’s cooking magic. While tasting her savory pozole, the collective determined how long each member should be allowed to speak on agenda items and discussed the importance of not interrupting one another. “We’re from different countries, different cultures and are different ages,” said 68-year-old Carlos Ruiller, who was born in Peru. “There’s a period where we’ll have to suffer and adapt. But I’m hopeful. We’re all equals starting out — like soldiers.”


TRANSCRIPT
http://www.garalperovitz.com/abc/
http://www.democracynow.org/2011/12/15/worker_owners_of_america_unite_will

AMY GOODMAN: Alperovitz finds that 130 million Americans are members of some kind of cooperative, and 13 million Americans work in an employee-owned company. He says the U.S. may be heading toward something very different from both corporate-dominated capitalism and from traditional socialism. Gar Alperovitz is a professor of political economy at the University of Maryland. His op-ed is called “Worker-Owners of America, Unite!” It’s out today in the New York Times. A new edition of his book, America Beyond Capitalism: Reclaiming Our Wealth, Our Liberty, and Our Democracy, has also just been published. So, what’s the evidence for this, Gar?

GAR ALPEROVITZ: Well, it’s piling up right beneath the surface, that the press, the normal press, hasn’t been covering. You know, 130 million people, that’s 40 percent of United States, involved in credit unions, co-ops all over the country, that don’t get any publicity. And roughly 13 million people, in one kind or another, have worker-owned companies—again, five or six million more people than are involved in labor unions. And several states are attempting to set up state banks, like the existing Bank of North Dakota. A number of cities are trying to set up city banks. San Francisco and Portland are the latest ones on the list. So, if you look deeper, you find wonderful experiments going on. One really interesting one in Cleveland, where there’s a group of cooperatively owned businesses by—in the community that are building a hydroponic land kind of greenhouse, producing three to five million heads of lettuce a year, a gigantic laundry—all this worker-owned. And again, the press hasn’t been covering it, but there—it gives you a sense of what could happen if the Occupy movement gets serious about simply building on what’s already out there.

JUAN GONZALEZ: But in terms of a critical mass for the economy, are we talking about here cooperatives that have a significant share of the economic activity in the country, or are we talking largely about very small co-ops that, while they may involve a lot of people, don’t really have that much impact on the overall economy of the country?

GAR ALPEROVITZ: Well, that’s the interesting thing. Of course most of this is still much smaller than the giant corporations—I mean, the ones that got us into trouble and the ones that got nationalized, as in GM and Chrysler and the big banks. And at some point, we’re going to have to go to that level. But what’s happening, and I think because of the pain levels, we’re seeing these things grow over time simply because the pain is growing. And the ones I mentioned in Cleveland are not small. We’ve got a laundry—an industrial-scale laundry going on there, owned by the workers in that community, that’s probably the most ecologically advanced in the country. This large greenhouse that’s developing, three to five million heads of lettuce. These are not your little corner stores. So I see a trend of expanding possibility, building step by step on what’s already out there. We’ve learned a lot in the last several decades. And I think it’s going to grow over time because of the pain levels. That’s what the evidence suggests.

AMY GOODMAN: Talk more about the banks and the credit unions, the state banks that are developing.

GAR ALPEROVITZ: Well, we’ve had, since the beginning part of the century in North Dakota, a state-owned bank, highly successful. The press doesn’t cover it. But it’s a bank that exists just like other banks, but it doesn’t speculate. It doesn’t use money to do what the Wall Street banks are doing. And as I say, there are about 14 states that have introduced legislation to reproduce that, help finance small business, on the one hand, but co-ops and worker-owned firms, and most of this with a real green edge to it, ecologically developed. And in these city banks, the same thing, trying to focus—for instance, in San Francisco, there’s about $2 billion in state—in city money, that’s taxpayer money. Instead of putting it in the Bank of America, the proposal is put it in a city bank or a city credit union and then use that to finance development in the city. And I think that direction, using those public monies, and not simply to finance corporations or speculation, but doing it in a way that builds up this already developing knowledge and base of worker-owned companies, community-owned developments, neighborhood developments, co-ops, that form of development, the way to think about it is the—you know, the two to three decades before the Progressive Era and the Populist Era really made a big national impact. There was a developmental process, step by step, at the state level. Take the women’s right to vote, the same thing: step by step, state by state by state, building up over three to four to five decades. But I think the pain level is so high, it’s going to be quicker this time. So I take this local development process very seriously. And I think it can lead to national change, as the New Deal did at one point when the pain levels really struck. You know, at the other—

JUAN GONZALEZ: You also talk—

GAR ALPEROVITZ: At the other—go ahead.

JUAN GONZALEZ: If I can, you also talk about the changing attitudes, especially among young Americans, toward concepts like capitalism and socialism. Could you talk about that, as well?

GAR ALPEROVITZ: Yeah, there was a Rasmussen poll—now, we’re talking about a fairly conservative polling group—in 2009. People under 30, they found, were equally disposed as to whether capitalism or socialism was a better system. And now that’s a big change. We’re past the time in the Cold War when anyone who mentioned anything like a worker-owned company or cooperative or public-owned enterprise was written out of court. Lots of younger people are looking at what will work in the midst of a failing economy, where the large corporations are falling day by day and the speculators on Wall Street are speculating away the money. I think we’re seeing a change in attitude, both increasing doubts about what’s now going on in the economy, deep doubts, very deep doubts—thanks to Occupation, it’s crystallized—but this other trend of saying, “What do you want? Where are we going?” in some ways to democratize the economy in a very American way, something very—you can explain to your neighbors, this is—this makes sense, in these cities that I’ve been talking about. You get a whole larger coalition of people understanding there’s a hell of a lot of pain here, we can develop something here that moves us in a direction of democratizing local economies and beyond.

AMY GOODMAN: Finally, Gar Alperovitz, the name of your book, America Beyond Capitalism. Do you think that’s possible in this country?

GAR ALPEROVITZ: Well, I’m a—you know, I’m a historian and a political economist. Changes of major kinds, if you look at decade-by-decade development, fundamental systemic change is as common as grass in world history. A lot of pain. But I think an America beyond capitalism is a real possibility. Again, if you stand back, the way the civil rights folks did—my heroes are the civil rights leaders in the 1930s and ’40s, the ones who laid the basis for the big change that came in the ’60s, and I think that’s the way to understand what’s going on at the grassroots level and the sort of things that Occupation has been teaching us. Get in there now and begin to develop that base and that foundation for the transformation.

GREECE
http://www.spiked-online.com/index.php/site/article/11390/
http://wallstreetpit.com/85811-a-financial-coup-detat-in-the-making

LIBYA
http://www.deathandtaxesmag.com/97180/goldman-sachs-and-gaddafi-a-splendid-conspiracy/

GOLDMAN SACHS CONQUERS EUROPE
http://www.independent.co.uk/news/business/analysis-and-features/what-price-the-new-democracy-goldman-sachs-conquers-europe-6264091.html
by Stephan Foley / 18 November 2011

The ascension of Mario Monti to the Italian prime ministership is remarkable for more reasons than it is possible to count. By replacing the scandal-surfing Silvio Berlusconi, Italy has dislodged the undislodgeable. By imposing rule by unelected technocrats, it has suspended the normal rules of democracy, and maybe democracy itself. And by putting a senior adviser at Goldman Sachs in charge of a Western nation, it has taken to new heights the political power of an investment bank that you might have thought was prohibitively politically toxic. This is the most remarkable thing of all: a giant leap forward for, or perhaps even the successful culmination of, the Goldman Sachs Project.

It is not just Mr Monti. The European Central Bank, another crucial player in the sovereign debt drama, is under ex-Goldman management, and the investment bank’s alumni hold sway in the corridors of power in almost every European nation, as they have done in the US throughout the financial crisis. Until Wednesday, the International Monetary Fund’s European division was also run by a Goldman man, Antonio Borges, who just resigned for personal reasons. Even before the upheaval in Italy, there was no sign of Goldman Sachs living down its nickname as “the Vampire Squid”, and now that its tentacles reach to the top of the eurozone, sceptical voices are raising questions over its influence. The political decisions taken in the coming weeks will determine if the eurozone can and will pay its debts – and Goldman’s interests are intricately tied up with the answer to that question.

Simon Johnson, the former International Monetary Fund economist, in his book 13 Bankers, argued that Goldman Sachs and the other large banks had become so close to government in the run-up to the financial crisis that the US was effectively an oligarchy. At least European politicians aren’t “bought and paid for” by corporations, as in the US, he says. “Instead what you have in Europe is a shared world-view among the policy elite and the bankers, a shared set of goals and mutual reinforcement of illusions.”

This is The Goldman Sachs Project. Put simply, it is to hug governments close. Every business wants to advance its interests with the regulators that can stymie them and the politicians who can give them a tax break, but this is no mere lobbying effort. Goldman is there to provide advice for governments and to provide financing, to send its people into public service and to dangle lucrative jobs in front of people coming out of government. The Project is to create such a deep exchange of people and ideas and money that it is impossible to tell the difference between the public interest and the Goldman Sachs interest.

Mr Monti is one of Italy’s most eminent economists, and he spent most of his career in academia and thinktankery, but it was when Mr Berlusconi appointed him to the European Commission in 1995 that Goldman Sachs started to get interested in him. First as commissioner for the internal market, and then especially as commissioner for competition, he has made decisions that could make or break the takeover and merger deals that Goldman’s bankers were working on or providing the funding for. Mr Monti also later chaired the Italian Treasury’s committee on the banking and financial system, which set the country’s financial policies. With these connections, it was natural for Goldman to invite him to join its board of international advisers. The bank’s two dozen-strong international advisers act as informal lobbyists for its interests with the politicians that regulate its work. Other advisers include Otmar Issing who, as a board member of the German Bundesbank and then the European Central Bank, was one of the architects of the euro. Perhaps the most prominent ex-politician inside the bank is Peter Sutherland, Attorney General of Ireland in the 1980s and another former EU Competition Commissioner. He is now non-executive chairman of Goldman’s UK-based broker-dealer arm, Goldman Sachs International, and until its collapse and nationalisation he was also a non-executive director of Royal Bank of Scotland. He has been a prominent voice within Ireland on its bailout by the EU, arguing that the terms of emergency loans should be eased, so as not to exacerbate the country’s financial woes. The EU agreed to cut Ireland’s interest rate this summer.

Picking up well-connected policymakers on their way out of government is only one half of the Project, sending Goldman alumni into government is the other half. Like Mr Monti, Mario Draghi, who took over as President of the ECB on 1 November, has been in and out of government and in and out of Goldman. He was a member of the World Bank and managing director of the Italian Treasury before spending three years as managing director of Goldman Sachs International between 2002 and 2005 – only to return to government as president of the Italian central bank. Mr Draghi has been dogged by controversy over the accounting tricks conducted by Italy and other nations on the eurozone periphery as they tried to squeeze into the single currency a decade ago. By using complex derivatives, Italy and Greece were able to slim down the apparent size of their government debt, which euro rules mandated shouldn’t be above 60 per cent of the size of the economy. And the brains behind several of those derivatives were the men and women of Goldman Sachs.

The bank’s traders created a number of financial deals that allowed Greece to raise money to cut its budget deficit immediately, in return for repayments over time. In one deal, Goldman channelled $1bn of funding to the Greek government in 2002 in a transaction called a cross-currency swap. On the other side of the deal, working in the National Bank of Greece, was Petros Christodoulou, who had begun his career at Goldman, and who has been promoted now to head the office managing government Greek debt. Lucas Papademos, now installed as Prime Minister in Greece’s unity government, was a technocrat running the Central Bank of Greece at the time. Goldman says that the debt reduction achieved by the swaps was negligible in relation to euro rules, but it expressed some regrets over the deals. Gerald Corrigan, a Goldman partner who came to the bank after running the New York branch of the US Federal Reserve, told a UK parliamentary hearing last year: “It is clear with hindsight that the standards of transparency could have been and probably should have been higher.” When the issue was raised at confirmation hearings in the European Parliament for his job at the ECB, Mr Draghi says he wasn’t involved in the swaps deals either at the Treasury or at Goldman.

It has proved impossible to hold the line on Greece, which under the latest EU proposals is effectively going to default on its debt by asking creditors to take a “voluntary” haircut of 50 per cent on its bonds, but the current consensus in the eurozone is that the creditors of bigger nations like Italy and Spain must be paid in full. These creditors, of course, are the continent’s big banks, and it is their health that is the primary concern of policymakers. The combination of austerity measures imposed by the new technocratic governments in Athens and Rome and the leaders of other eurozone countries, such as Ireland, and rescue funds from the IMF and the largely German-backed European Financial Stability Facility, can all be traced to this consensus. “My former colleagues at the IMF are running around trying to justify bailouts of €1.5trn-€4trn, but what does that mean?” says Simon Johnson. “It means bailing out the creditors 100 per cent. It is another bank bailout, like in 2008: The mechanism is different, in that this is happening at the sovereign level not the bank level, but the rationale is the same.” So certain is the financial elite that the banks will be bailed out, that some are placing bet-the-company wagers on just such an outcome. Jon Corzine, a former chief executive of Goldman Sachs, returned to Wall Street last year after almost a decade in politics and took control of a historic firm called MF Global. He placed a $6bn bet with the firm’s money that Italian government bonds will not default. When the bet was revealed last month, clients and trading partners decided it was too risky to do business with MF Global and the firm collapsed within days. It was one of the ten biggest bankruptcies in US history.

The grave danger is that, if Italy stops paying its debts, creditor banks could be made insolvent. Goldman Sachs, which has written over $2trn of insurance, including an undisclosed amount on eurozone countries’ debt, would not escape unharmed, especially if some of the $2trn of insurance it has purchased on that insurance turns out to be with a bank that has gone under. No bank – and especially not the Vampire Squid – can easily untangle its tentacles from the tentacles of its peers. This is the rationale for the bailouts and the austerity, the reason we are getting more Goldman, not less. The alternative is a second financial crisis, a second economic collapse. Shared illusions, perhaps? Who would dare test it?

Mario Monti, Lucas Papademos and Mario Draghi have something in common: they have all worked for the American investment bank. This is not a coincidence, but evidence of a strategy to exert influence that has perhaps already reached its limits.

a ‘FRATERNAL ASSOCIATION’
http://www.presseurop.eu/en/content/article/1177241-our-friends-goldman-sachs
Our friends from Goldman Sachs…
by Marc Roche / 16 November 2011 / Le Monde

Serious and competent, they weigh up the pros and cons and study all of the documents before giving an opinion. They have a fondness for economics, but these luminaries who enter into the temple only after a long and meticulous recruitment process prefer to remain discreet. Collectively they form an entity that is part pressure group, part fraternal association for the collection of information, and part mutual aid network. They are the craftsmen, masters and grandmasters whose mission is “to spread the truth acquired in the lodge to the rest of the world.” According to its detractors, the European network of influence woven by American bank Goldman Sachs (GS) functions like a freemasonry. To diverse degrees, the new European Central Bank President, Mario Draghi, the newly designated Prime Minister of Italy, Mario Monti, and the freshly appointed Greek Prime Minister Lucas Papademos are totemic figures in this carefully constructed web.

Heavyweight members figure large in the euro crisis
Draghi was Goldman Sachs International’s vice-chairman for Europe between 2002 and 2005, a position that put him in charge of the the “companies and sovereign” department, which shortly before his arrival, helped Greece to disguise the real nature of its books with a swap on its sovereign debt. Monti was an international adviser to Goldman Sachs from 2005 until his nomination to lead the Italian government. According to the bank, his mission was to provide advice “on European business and major public policy initiatives worldwide”. As such, he was a “door opener” with a brief to defend Goldman’s interest in the corridors of power in Europe. The third man, Lucas Papademos, was the governor of the Greek central bank from 1994 to 2002. In this capacity, he played a role that has yet to be elucidated in the operation to mask debt on his country’s books, perpetrated with assistance from Goldman Sachs. And perhaps more importantly, the current chairman of Greece’s Public Debt Management Agency, Petros Christodoulos, also worked as a trader for the bank in London. Two other heavyweight members of Goldman’s European network have also figured large in the euro crisis: Otmar Issing, a former member of the Bundesbank board of directors and a one-time chief economist of the European Central Bank, and Ireland’s Peter Sutherland, an administrator for Goldman Sachs International, who played a behind the scenes role in the Irish bailout.

Relay exclusive information to the bank’s trading rooms
How was this loyal network of intermediaries created? The US version of this magic circle is composed of former highly placed executives of the bank who effortlessly enter the highest level of the civil service. In Europe, on the other hand, Goldman Sachs has worked to accumulate a capital of relationships. But unlike its competitors, the bank has no interest in retired diplomats, highly placed national and international civil servants, or even former prime ministers and ministers of finance. Goldman’s priority has been to target central bankers and former European commissioners. Its main goal is to legally collect information on initiatives in the near future and on the interest rates set by central banks. At the same time, Goldman likes its agents to remain discreet. That is why its loyal subjects prefer not to mention their filiation in interviews or in the course of official missions. These well-connected former employees simply have to talk about this and that secure in the knowledge that their prestige will inevitably be rewarded with outspoken frankness on the part of those in powerful positions. Put simply they are there to see “which way the wind is blowing,” and thereafter to relay exclusive information to the bank’s trading rooms.

Bid for global dominance
Now that it has a former director at the head of the ECB, a former intermediary leading the Italian government, and another in charge in Greece, the bank’s antagonists are eager to highlight the extraordinary power of its network in in Frankfurt, Rome and Athens, which could prove extremely useful in these turbulent times. But looking beyond these details, the power of Goldman’s European government before and during the financial ordeal of 2008 may well prove to be an obstacle. The relationships maintained by experienced former central bankers are less likely to be useful now that politicians are aware of the unpopularity of finance professionals who are seen to be responsible for the present crisis. Where Goldman Sachs used to be able to exercise its talents, it now has to contend with opposition from public authorities raising questions about a series of scandals. A well stocked address book is no longer sufficient in a complex and highly technical financial world, where a new generation of industry leaders are less likely to be imbued with an unquestioning respect for the establishment. In their bid for global dominance, they no longer need to rely on high finance crusaders in the Goldman mould, while the quest to protect shareholder’s rights, demands for more transparency and active opposition from the media, NGOs, and institutional investors continue to erode the potency of “the network effect.”

{Translated from the French by Mark McGovern}

The giant American investment bank which is accused of helping the Greek state to conceal the real nature of its financial situation while speculating on its debts can count on a remarkable network of advisers with very close links to European leaders, reports Le Monde.

“GOVERNMENT SACHS”
http://www.presseurop.eu/en/content/article/1177241-our-friends-goldman-sachs
Goldman Sachs, the international web
by Marc Roche / 3 March 2010 / Le Monde

Petros Christodoulou affects not to care about compliments or their source. Ever since he was a teenager, this top-of-the-class student has grown used to hearing his praises sung. Appointed on 19 February to the head of the organization for the management of Greek public debt, he has arrived at the top of the tree. However, the trouble is that the former manager of global markets at the National Bank of Greece (NBG) is at the centre of an inquiry, announced on 25 February by the United States Federal Reserve, on contracts relating to Greek national debt, which link Goldman Sachs and other companies to the government in Athens. The New York based investment bank was paid as a banking advisor to the Greek government while speculating on the Hellenic nation’s sovereign debt. In particular, the American regulator is interested in the role played by Petros Christodoulou, who, in collaboration with Goldman, supervised the creation of the London company Titlos to transfer debt from Greece’s national accounts to the NBG. Before joining the NBG in 1998, Mr Christodoulou had worked as a banker for – you guessed it – Goldman Sachs.

“Government Sachs”
The affair has highlighted the powerful network of influence that Goldman Sachs has maintained in Europe since 1985 – a tightly woven group of underground and high-profile go-betweens and loyal supporters, whose address books open the doors of ministries of finance. These carefully recruited and extraordinarily well-paid advisors understand all the subtleties of the corridors of power within the European Union, and have a direct line to decision makers that they can call during moments of crisis. But who are the members of the European arm of the institution which is so powerful in Washington that it is referred to as “government Sachs”? The key figure is Peter Sutherland, chairman of Goldman Sachs International, the bank’s London-based European subsidiary. The former European commissioner for competition and ex-chairman of BP, is an essential link between the investment bank and the 27 EU member states and Russia. In France, Goldman Sachs benefits from the support of Charles de Croisset, a former chairman of Crédit Commercial de France (CCF), who took over from Jacques Mayoux, a government inspector of finances and former chairman of Société Générale. In the United Kingdom, it can count on Lord Griffiths, who advised former prime minister Margaret Thatcher, and in Germany, on Otmar Issing, a one-time board member of the Bundesbank and ex-chief economist of the European Central Bank (ECB).

Discreetly advances its interests
And that is not to mention the many Goldman alumni who go onto hold positions of power, which the bank can count on to advance its position. The best known of these is Mario Draghi, Goldman’s vice-president for Europe between 2001 and 2006, who is the current governor of the Bank of Italy and Chairman of international regulator, the Financial Stability Board. But do not expect to come across former diplomats in the austere corridors of Goldman Sachs International. As an institution with real world interests, the bank prefers to recruit financiers, economists, central bankers, and former highly placed civil servants from international economic organizations, but considers retired ambassadors to be jovial status symbols without any real high-level contacts or business sense. For Goldman Sachs, this network has the advantage of enabling it to discreetly advance its interests. In the Financial Times of 15 February, Otmar Issing published an article voicing his hostility to any attempt by the European Union to rescue Greece. However, he omitted to mention the fact that he has been an international advisor to Goldman Sachs since 2006. Nor did he say that the bank’s traders, who have been speculating against the single European currency, might well lose their shirts if the EU does intervene.


Max Keiser & Catherine Austin Fitts on Goldman Sachs (2009)

$7 TRILLION in SECRET LOANS
http://www.slate.com/articles/business/moneybox/2011/11/the_7_trillion_secret_loan_program_the_government_and_big_banks_should_be_punished_for_deceiving_the_public_about_their_hush_hush_bailout_scheme_.html
The government and the big banks deceived the public about their $7 trillion secret loan program. They should be punished
by Eliot Spitzer  /   Nov. 30, 2011

Imagine you walked into a bank, applied for a personal line of credit, and filled out all the paperwork claiming to have no debts and an income of $200,000 per year. The bank, based on these representations, extended you the line of credit. Then, three years later, after fighting disclosure all the way, you were forced by a court to tell the truth: At the time you made the statements to the bank, you actually were unemployed, you had a $1 million mortgage on your house on which you had failed to make payments for six months, and you hadn’t paid even the minimum on your credit-card bills for three months. Do you think the bank would just say: Never mind, don’t worry about it? Of course not. Whether or not you had paid back the personal line of credit, three FBI agents would be at your door within hours. Yet this is exactly what the major American banks have done to the public. During the deepest, darkest period of the financial cataclysm, the CEOs of major banks maintained in statements to the public, to the market at large, and to their own shareholders that the banks were in good financial shape, didn’t want to take TARP funds, and that the regulatory framework governing our banking system should not be altered. Trust us, they said. Yet, unknown to the public and the Congress, these same banks had been borrowing massive amounts from the government to remain afloat. The total numbers are staggering: $7.7 trillion of credit—one-half of the GDP of the entire nation. $460 billion was lent to J.P. Morgan, Bank of America, Citibank, Wells Fargo, Goldman Sachs, and Morgan Stanley alone—without anybody other than a few select officials at the Fed and the Treasury knowing. This was perhaps the single most massive allocation of capital from public to private hands in our history, and nobody was told. This was not TARP: This was secret Fed lending. And although it has since been repaid, it is clear why the banks didn’t want us to know about it: They didn’t want to admit the magnitude of their financial distress.

The banks’ claims of financial stability and solvency appear at a minimum to have been misleading—and may have been worse. Misleading statements and deception of this sort would ordinarily put a small-market player or borrower on the wrong end of a criminal investigation. So where are the inquiries into the false statements made by the bank CEOs? And where are the inquiries about the Fed and Treasury officials who stood by silently as bank representatives made claims that were false, misleading, or worse? Only now, because of superb analysis done by Bloomberg reporters—who litigated against the Fed and the banks for years to get the information—are we getting a full picture of the Fed and Treasury lending. The reporters also calculated that recipient banks and other borrowers benefited by approximately $13 billion simply by taking advantage of the “spread” between their cost of capital in these almost interest-free loans and their ability to lend the capital.

In addition to the secrecy, what is appalling is that these loans were made with no strings attached, no conditions, and no negotiation to achieve any broader public purpose. Even if one accepts the notion that the stability of the financial system could not be sacrificed, those who dispensed trillions of dollars to private parties made no apparent effort to impose even minimal obligations to condition the loans on the structural reforms needed to prevent another crisis, made no effort to require that those responsible for creating the crisis be relieved of their jobs, took zero steps towards the genuine mortgage-reform that is so necessary to begin a process of economic renewal. The dollars lent were simply a free bridge loan so the banks could push onto others the responsibility for the banks’ own risk-taking. If ever there was an event to justify the darkest, most conspiratorial view held by many that the alliance of big money on Wall Street and big government produces nothing but secret deals that profit insiders—this is it.

So what to do? The revelations of the secret loan program may provide the opportunity for Occupy Wall Street to suggest a few concrete steps that would be difficult to oppose.

First: Demand a hearing where the bank executives have to answer questions—under oath—about the actual negotiations, or lack thereof, that led to these loans; about the actual condition of each of the borrowing banks and whether that condition differed from the public statements made by the banks at the time.

Second: Require the recipient banks to use this previously undisclosed gift—the profit they made by investing this almost interest-free money—to write down the value of mortgages of those who are underwater. The loans to the banks were meant to solve a short-term liquidity problem, not be a source of profits to fund bonuses. Take back the profits and put them to apublic use.

Third: Require the government officials responsible for authorizing these loans to explain why there was no effort made to condition these loans on changes in policy that would protect the public going forward.

Fourth: Ask congress to examine every filing and statement made to Congress by the banks about their financial condition and their indebtedness to see if any misrepresentations were made in an effort to hide these trillions of dollars of loans. Misleading Congress can be a felony, and willful deception of the Congress to hide the magnitude of the public bailouts should not go unprosecuted.

Finally: Demand that politicians return all contributions made by the institutions that got hidden loans. Pressure the politicians who continue to feed from the trough of Wall Street, even as they know all too well how the banks and others have gamed the system and the public.

“RESCUE”
http://www.nomiprins.com/thoughts/2011/11/30/the-feds-european-rescue-another-back-door-us-bank-goldman-b.html
The Fed’s European “Rescue”: Another back-door US Bank / Goldman bailout?
by Nomi Prins /  November 30, 2011

In the wake of chopping its Central Bank swap rates today, the Fed has been called a bunch of names: a hero for slugging the big bailout bat in the ninth inning, and a villain for printing money to help Europe at the expense of the US. Neither depiction is right. The Fed is merely continuing its unfettered brand of bailout-economics, promoted with heightened intensity recently by President Obama and Treasury Secretary, Tim Geithner in the wake of Germany not playing bailout-ball.  Recall, a couple years ago, it was a uniquely American brand of BIG bailouts that the Fed adopted in creating $7.7 trillion of bank subsidies that ran the gamut from back-door AIG bailouts (some of which went to US / some to European banks that deal with those same US banks), to the purchasing of mortgage-backed–securities, to near zero-rate loans (for banks). Similarly, today’s move was also about protecting US banks from losses – self inflicted by dangerous derivatives-chain trades, again with each other, and with European banks. Before getting into the timing of the Fed’s god-father actions, let’s discuss its two kinds of swaps (jargon alert – a swap is a trade between two parties for some time period – you swap me a sweater for a hat because I’m cold, when I’m warmer, we’ll swap back). The Fed had both of these kinds of swaps set up and ready-to-go in the form of : dollar liquidity swap lines and foreign currency liquidity swap lines. Both are administered through Wall Street’s staunchest ally, and Tim Geithner’s old stomping ground, the New York Fed.

The dollar swap lines give foreign central banks the ability to borrow dollars against their currency, use them for whatever they want – like to shore up bets made by European banks that went wrong, and at a later date, return them. A ‘temporary dollar liquidity swap arrangement” with 14 foreign central banks was available between December 12, 2007 (several months before Bear Stearn’s collapse and 9 months before the Lehman Brothers’ bankruptcy that scared Goldman Sachs and Morgan Stanley into getting the Fed’s instant permission to become bank holding companies, and thus gain access to any Feds subsidies.) Those dollar-swap lines ended on February 1, 2010. BUT – three months later, they were back on, but this time the FOMC re-authorized dollar liquidity swap lines with only 5 central banks through January 2011. BUT – on December 21, 2010 – the FOMC extended the lines through August 1, 2011. THEN– on June 29th, 2011, these lines were extended through August 1, 2012.  AND NOW – though already available, they were announced with save-the-day fanfare as if they were just considered.

Then, there are the sneakily-dubbed “foreign currency liquidity swap” lines, which, as per the Fed’s own words, provide “foreign currency-denominated liquidity to US banks.” (Italics mine.) In other words, let US banks play with foreign bonds. These were originally used with 4 foreign banks on April, 2009  and expired on February 1, 2010. Until they were resurrected today, November 30, 2011, with foreign currency swap arrangements between the Fed, Bank of Canada, Bank of England, Bank of Japan. Swiss National Bank and the European Central Bank. They are to remain in place until February 1, 2013, longer than the original time period for which they were available during phase one of the global bank-led meltdown, the US phase. (For those following my work, we are in phase two of four, the European phase.) That’s a lot  of jargon, but keep these two things in mind: 1) these lines, by the Fed’s own words, are to provide help to US banks. and 2) they are open ended.

There are other reasons that have been thrown up as to why the Fed acted now – like, a European bank was about to fail. But, that rumor was around in the summer and nothing happened. Also, dozens of European banks have been downgraded, and several failed stress tests. Nothing. The Fed didn’t step in when it was just Greece –or Ireland  – or when there were rampant ‘contagion’ fears, and Italian bonds started trading above 7%, rising unabated despite the trick of former Goldman Sachs International advisor Mario Monti replacing former Prime Minister, Silvio Berlusconi’s with his promises of fiscally conservative actions (read: austerity measures) to come. Perhaps at that point, Goldman thought they had it all under control, but Germany’s bailout-resistence was still a thorn, which is why its bonds got hammered in the last auction, proving that big Finance will get what it wants, no matter how dirty it needs to play.  Nothing from the Fed, except a small increase in funding to the IMF. Rating agency Moody’s  announced it was looking at possibly downgrading 87 European banks. Still the Fed waited with open lines. And then, S&P downgraded the US banks again, including Goldman ,making their own financing costs more expensive and the funding of their seismic derivatives positions more tenuous. The Fed found the right moment. Bingo.

Now, consider this: the top four US banks (JPM Chase, Citibank, Bank of America and Goldman Sachs) control nearly 95% of the US derivatives market, which has grown by 20% since last year to  $235 trillion. That figure is a third of all global derivatives of $707 trillion (up from $601 trillion in December, 2010 and $583 trillion mid-year 2010. )

Breaking that down:  JPM Chase holds 11% of the world’s derivative exposure, Citibank, Bank of America, and Goldman comprise about 7% each. But, Goldman has something the others don’t – a lot fewer assets beneath its derivatives stockpile. It has 537 times as many (from 440 times last year) derivatives as assets. Think of a 537 story skyscraper on a one story see-saw. Goldman has $88 billon in assets, and $48 trillion in notional derivatives exposure. This is by FAR the highest ratio of derivatives to assets of any so-called bank backed by a government. The next highest ratio belongs to Citibank with $1.2 trillion in assets and $56 trillion in derivative exposure, or 46 to 1. JPM Chase’s ratio is 44 to 1. Bank of America’s ratio is 36 to 1. Separately Goldman happened to have lost a lot of money in Foreign Exchange derivative positions last quarter. (See Table 7.) Goldman’s loss was about equal to the total gains of the other banks, indicative of some very contrarian trade going on. In addition, Goldman has the most credit risk with respect to the capital  it holds, by a factor of 3 or 4 to 1 relative to the other big banks. So did the Fed’s timing have something to do with its star bank? We don’t really know for sure.

Sadly, until there’s another FED audit, or FOIA request, we’re not going to know which banks are the beneficiaries of the Fed’s most recent international largesse either, nor will we know what their specific exposures are to each other, or to various European banks, or which trades are going super-badly. But we do know from the US bailouts in phase one of the global meltdown, that providing ‘liquidity’ or ‘greasing the wheels of ‘ banks in times of ‘emergency’ does absolute nothing for the Main Street Economy. Not in the US. And not in Europe. It also doesn’t fix anything, it just funds bad trades with impunity.

LEVERAGE
http://www.nomiprins.com/thoughts/2011/11/21/as-the-world-crumbles-the-ecb-spins-fed-smirks-and-us-banks.html
As the World Crumbles: the ECB spins, FED smirks, and US Banks Pillage
by Nomi Prins / November 21, 2011

Often, when I troll around websites of entities like the ECB and IMF, I uncover little of startling note. They design it that way. Plus, the pace at which the global financial system can leverage bets, eviscerate capital, and cry for bank bailouts financed through austerity measures far exceeds the reporting timeliness of these bodies. That’s why, on the center of the ECB’s homepage, there’s a series of last week’s rates – and this relic – an interactive Inflation Game (I kid you not)  where in 22 different languages you can play the game of what happens when inflation goes up and down. If you’re feeling more adventurous, there’s also a game called Economia, where you can make up unemployment rates, growth rates and interest rates and see what happens. What you can’t do is see what happens if you bet trillions of dollars against various countries to see how much you can break them, before the ECB, IMF, or Fed (yes, it’ll happen) swoops in to provide “emergency” loans in return for cuts to pension funds, social programs, and national ownership of public assets. You also can’t input real world scenarios, where monetary policy doesn’t mean a thing in the face of  tidal waves of derivatives’ flow. You can’t gauge say, what happens if Goldman Sachs bets $20 billion in leveraged credit default swaps against Greece, and offsets them (partially) with JPM Chase which bets $20 billion, and offsets that with Bank of America, and then MF Global (oops) and then…..you see where I’m going with this.

We’re doomed if even their board games don’t come close to mimicking the real situation in Europe, or in the US, yet they supply funds to banks torpedoing local populations with impunity. These central entities also don’t bother to examine (or notice) the intermingled effect of leveraged derivatives and debt transactions per country; which is why no amount of funding from the ECB, or any other body, will be able to stay ahead of the hot money racing in and out of various countries.  It’s not about inflation – it’s about the speed, leverage, and daring of capital flow, that has its own power to select winners and losers. It’s not the ‘inherent’ weakness of national economies that a few years ago were doing fine, that’s hurting the euro. It’s the external bets on their success, failure, or economic capitulation running the show. Similarly, the US economy was doing much better before banks starting leveraging the hell out of our subprime market through a series of toxic, fraudulent, assets.

Elsewhere in my trolling, I came across a gem of a working paper on the IMF website, written by Ashoka Mody and Damiano Sandri,  entitled ‘The Eurozone Crisis; How Banks and Sovereigns Came to be Joined at the Hip” (The paper does not ‘necessarily represent the views of the IMF or IMF policy’.) The paper is full of mathematical formulas and statistical jargon, which may be why the media didn’t pick up on it, but hey, I got a couple of degrees in Mathematics and Statistics, so I went all out.  And it’s fascinating stuff. Basically, it shows that between the advent of the euro in 1999, and 2007, spreads between the bonds of peripheral countries and core ones in Europe were pretty stable. In other words, the risk of any country defaulting on its debt was fairly equal, and small. But after the 2007 US subprime asset crisis, and more specifically, the advent of  Federal Reserve / Treasury Department construed bailout-economics, all hell broke loose – international capital went AWOL daring default scenarios, targeting them for future bailouts, and when money leaves a country faster than it entered, the country tends to falter economically. The cycle is set.

The US subprime crisis wasn’t so much about people defaulting on loans, but the mega-magnified effects of those defaults on a $14 trillion asset pyramid created by the banks. (Those assets were subsequently sold, and used as collateral for other borrowing and esoteric derivatives combinations, to create a global $140 trillion debt binge.) As I detail in It Takes Pillage, the biggest US banks manufactured more than 75% of those $14 trillion of assets. A significant portion was sold in Europe – to local banks, municipalities, and pension funds – as lovely AAA morsels against which more debt, or leverage, could be incurred. And even thought the assets died, the debts remained.

Greek banks bought US-minted AAA assets and leveraged them. Norway did too (through the course of working on a Norwegian documentary, I discovered that 8 tiny towns in Norway bought $200 million of junk assets from Citigroup, borrowed money from local banks to pay for them, and pledged 10 years of power receipts from hydroelectric plants in return. The AAA assets are now worth zero, the power has been curtailed for residents, and the Norwegian banks want their money back–blood from a stone.) The same kind of thing happend in Italy, Spain, Portugal, Ireland, Holland, France, and even Germany – in different degrees and with specific national issues mixed in.  Problem is – when you’ve already used worthless collateral to borrow tons of money you won’t ever be able to repay, and international capital slams you in other ways, and your funding costs rise, and your internal development and lending seize up, you’re screwed – or rather the people in your country are screwed.

In the IMF paper, the authors convincingly make the case that it wasn’t just the US subprime asset meltdown itself that initiated Europe’s implosion, but the fact that our Federal Reserve and Treasury Department adopted a reckless don’t-let-em-fail doctrine. Even though Bear Stearns and Lehman Brothers failed, their investors, the huge ones anyway, were protected. The Fed subsidized, and still subsidizes, $29 billion of risk for JPM Chase’s acquisition of Bear. The philosophy of saving banks and their practices poisoned Europe, as those same financial firms played euro-roulette in the global derivatives markets, once the subprime betting train slowed down.

The first fatal stop of the US bailout mentaility was the ECB’s 2010 bailout of Anglo Irish bank, which got the lion’s share of the ECB’s Irish-bailout: $51 billion euro of ELA (Emergency Loan Assistance) and $100 billion euro of regular lending at the time. After the international financial community saw the pace and volume of Irish bank bailouts, the game of euro-roulette went turbo, country by country.  More ‘fiscally conservative’ governments are replacing any semblance of population-supportive ones. The practice of  extracting ‘fiscal prudency’ from people and providing bank subsidies for bets gone wrong has infected all of Europe. It will continue to do so, because anything less will threathen the entire Euro experiement, plus otherwise, the US banks might be on the hook again for losses, and the Fed and Treasury won’t let that happen. They’ve already demonstrated that. It’d be just sooo catastrophic.

In the wings, the smugness of Treasury Secretary Tim Geithner and Fed Chairman, Ben Bernanke is palpable – ‘hey, we acted heroically and “decisively” to provide a multi-trillion dollar smorgasbord  of subsidies for our biggest banks and look how great we  (er, they) are doing now? Seriously, Europe – get your act together already, don’t do the trickle-bailout game – just dump a boatload of money into the same banks – and a few of your own before they go under  – do it for the sake of global economic stability. It’ll really work. Trust us.’ Most of the media goes along with the notion that US banks exposed to the ‘euro-contagion’ will hurt our (nonexistent) recovery. US Banks assure us, they don’t have much exposure – it’s all hedged. (Like it was all AAA.) The press doesn’t tend to question the global harm caused by never having smacked US banks into place, cutting off their money supply, splitting them into commercial and speculative parts ala Glass-Steagall and letting the speculative parts that should have died, die, rather than enjoy public subsidization and the ability to go globe-hopping for more destructive opportunity, alongside some of the mega-global bank partners.

Today, the stock prices of the largest US banks are about as low as they were in the early part of 2009, not because of euro-contagion or Super-committee super-incompetence (a useless distraction anyway) but because of the ongoing transparency void surrouding the biggest banks amidst their central-bank-covered risks, and the political hot potato of how many emergency loans are required to keep them afloat at any given moment.  Because investors don’t know their true exposures, any more than in early 2009. Because US banks catalyzed the global crisis that is currently manifesting itself in Europe. Because there never was a separate US housing crisis and European debt crisis. Instead, there is a worldwide, systemic, unregulated, uncontained,  rapacious need for the most powerful banks and financial institutions to leverage whatever could be leveraged in whatever forms it could be leveraged in. So, now we’re just barely in the second quarter of the game of thrones, where the big banks are the kings, the ECB, IMF and the Fed are the money supply, and the populations are the powerless serfs. Yeah, let’s play the ECB inflation game, while the world crumbles.

MEANWHILE:
the WORLD ACCORDING to GOLDMAN SACHS
http://www.bloomberg.com/news/2011-11-28/secret-fed-loans-undisclosed-to-congress-gave-banks-13-billion-in-income.html
Secret Fed Loans Gave Banks $13 Billion Undisclosed to Congress
by Bob Ivry, Bradley Keoun and Phil Kuntz   /  Nov 27, 2011

The Federal Reserve and the big banks fought for more than two years to keep details of the largest bailout in U.S. history a secret. Now, the rest of the world can see what it was missing. The Fed didn’t tell anyone which banks were in trouble so deep they required a combined $1.2 trillion on Dec. 5, 2008, their single neediest day. Bankers didn’t mention that they took tens of billions of dollars in emergency loans at the same time they were assuring investors their firms were healthy. And no one calculated until now that banks reaped an estimated $13 billion of income by taking advantage of the Fed’s below-market rates, Bloomberg Markets magazine reports in its January issue. Saved by the bailout, bankers lobbied against government regulations, a job made easier by the Fed, which never disclosed the details of the rescue to lawmakers even as Congress doled out more money and debated new rules aimed at preventing the next collapse. A fresh narrative of the financial crisis of 2007 to 2009 emerges from 29,000 pages of Fed documents obtained under the Freedom of Information Act and central bank records of more than 21,000 transactions. While Fed officials say that almost all of the loans were repaid and there have been no losses, details suggest taxpayers paid a price beyond dollars as the secret funding helped preserve a broken status quo and enabled the biggest banks to grow even bigger.

‘Change Their Votes’
“When you see the dollars the banks got, it’s hard to make the case these were successful institutions,” says Sherrod Brown, a Democratic Senator from Ohio who in 2010 introduced an unsuccessful bill to limit bank size. “This is an issue that can unite the Tea Party and Occupy Wall Street. There are lawmakers in both parties who would change their votes now.” The size of the bailout came to light after Bloomberg LP, the parent of Bloomberg News, won a court case against the Fed and a group of the biggest U.S. banks called Clearing House Association LLC to force lending details into the open. The Fed, headed by Chairman Ben S. Bernanke, argued that revealing borrower details would create a stigma — investors and counterparties would shun firms that used the central bank as lender of last resort — and that needy institutions would be reluctant to borrow in the next crisis. Clearing House Association fought Bloomberg’s lawsuit up to the U.S. Supreme Court, which declined to hear the banks’ appeal in March 2011.

$7.77 Trillion
The amount of money the central bank parceled out was surprising even to Gary H. Stern, president of the Federal Reserve Bank of Minneapolis from 1985 to 2009, who says he “wasn’t aware of the magnitude.” It dwarfed the Treasury Department’s better-known $700 billion Troubled Asset Relief Program, or TARP. Add up guarantees and lending limits, and the Fed had committed $7.77 trillion as of March 2009 to rescuing the financial system, more than half the value of everything produced in the U.S. that year. “TARP at least had some strings attached,” says Brad Miller, a North Carolina Democrat on the House Financial Services Committee, referring to the program’s executive-pay ceiling. “With the Fed programs, there was nothing.” Bankers didn’t disclose the extent of their borrowing. On Nov. 26, 2008, then-Bank of America (BAC) Corp. Chief Executive Officer Kenneth D. Lewis wrote to shareholders that he headed “one of the strongest and most stable major banks in the world.” He didn’t say that his Charlotte, North Carolina-based firm owed the central bank $86 billion that day.

‘Motivate Others’
JPMorgan Chase & Co. CEO Jamie Dimon told shareholders in a March 26, 2010, letter that his bank used the Fed’s Term Auction Facility “at the request of the Federal Reserve to help motivate others to use the system.” He didn’t say that the New York-based bank’s total TAF borrowings were almost twice its cash holdings or that its peak borrowing of $48 billion on Feb. 26, 2009, came more than a year after the program’s creation. Howard Opinsky, a spokesman for JPMorgan (JPM), declined to comment about Dimon’s statement or the company’s Fed borrowings. Jerry Dubrowski, a spokesman for Bank of America, also declined to comment. The Fed has been lending money to banks through its so- called discount window since just after its founding in 1913. Starting in August 2007, when confidence in banks began to wane, it created a variety of ways to bolster the financial system with cash or easily traded securities. By the end of 2008, the central bank had established or expanded 11 lending facilities catering to banks, securities firms and corporations that couldn’t get short-term loans from their usual sources.

‘Core Function’
“Supporting financial-market stability in times of extreme market stress is a core function of central banks,” says William B. English, director of the Fed’s Division of Monetary Affairs. “Our lending programs served to prevent a collapse of the financial system and to keep credit flowing to American families and businesses.” The Fed has said that all loans were backed by appropriate collateral. That the central bank didn’t lose money should “lead to praise of the Fed, that they took this extraordinary step and they got it right,” says Phillip Swagel, a former assistant Treasury secretary under Henry M. Paulson and now a professor of international economic policy at the University of Maryland. The Fed initially released lending data in aggregate form only. Information on which banks borrowed, when, how much and at what interest rate was kept from public view. The secrecy extended even to members of President George W. Bush’s administration who managed TARP. Top aides to Paulson weren’t privy to Fed lending details during the creation of the program that provided crisis funding to more than 700 banks, say two former senior Treasury officials who requested anonymity because they weren’t authorized to speak.

Big Six
The Treasury Department relied on the recommendations of the Fed to decide which banks were healthy enough to get TARP money and how much, the former officials say. The six biggest U.S. banks, which received $160 billion of TARP funds, borrowed as much as $460 billion from the Fed, measured by peak daily debt calculated by Bloomberg using data obtained from the central bank. Paulson didn’t respond to a request for comment. The six — JPMorgan, Bank of America, Citigroup Inc. (C)Wells Fargo & Co. (WFC)Goldman Sachs Group Inc. (GS) and Morgan Stanley — accounted for 63 percent of the average daily debt to the Fed by all publicly traded U.S. banks, money managers and investment- services firms, the data show. By comparison, they had about half of the industry’s assets before the bailout, which lasted from August 2007 through April 2010. The daily debt figure excludes cash that banks passed along to money-market funds.

Bank Supervision
While the emergency response prevented financial collapse, the Fed shouldn’t have allowed conditions to get to that point, says Joshua Rosner, a banking analyst with Graham Fisher & Co. in New York who predicted problems from lax mortgage underwriting as far back as 2001. The Fed, the primary supervisor for large financial companies, should have been more vigilant as the housing bubble formed, and the scale of its lending shows the “supervision of the banks prior to the crisis was far worse than we had imagined,” Rosner says. Bernanke in an April 2009 speech said that the Fed provided emergency loans only to “sound institutions,” even though its internal assessments described at least one of the biggest borrowers, Citigroup, as “marginal.” On Jan. 14, 2009, six days before the company’s central bank loans peaked, the New York Fed gave CEO Vikram Pandit a report declaring Citigroup’s financial strength to be “superficial,” bolstered largely by its $45 billion of Treasury funds. The document was released in early 2011 by the Financial Crisis Inquiry Commission, a panel empowered by Congress to probe the causes of the crisis.

‘Need Transparency’
Andrea Priest, a spokeswoman for the New York Fed, declined to comment, as did Jon Diat, a spokesman for Citigroup. “I believe that the Fed should have independence in conducting highly technical monetary policy, but when they are putting taxpayer resources at risk, we need transparency and accountability,” says Alabama Senator Richard Shelby, the top Republican on the Senate Banking Committee. Judd Gregg, a former New Hampshire senator who was a lead Republican negotiator on TARP, and Barney Frank, a Massachusetts Democrat who chaired the House Financial Services Committee, both say they were kept in the dark. “We didn’t know the specifics,” says Gregg, who’s now an adviser to Goldman Sachs. “We were aware emergency efforts were going on,” Frank says. “We didn’t know the specifics.”

Disclose Lending
Frank co-sponsored the Dodd-Frank Wall Street Reform and Consumer Protection Act, billed as a fix for financial-industry excesses. Congress debated that legislation in 2010 without a full understanding of how deeply the banks had depended on the Fed for survival. It would have been “totally appropriate” to disclose the lending data by mid-2009, says David Jones, a former economist at the Federal Reserve Bank of New York who has written four books about the central bank. “The Fed is the second-most-important appointed body in the U.S., next to the Supreme Court, and we’re dealing with a democracy,” Jones says. “Our representatives in Congress deserve to have this kind of information so they can oversee the Fed.” The Dodd-Frank law required the Fed to release details of some emergency-lending programs in December 2010. It also mandated disclosure of discount-window borrowers after a two- year lag.

Protecting TARP
TARP and the Fed lending programs went “hand in hand,” says Sherrill Shaffer, a banking professor at the University of Wyoming in Laramie and a former chief economist at the New York Fed. While the TARP money helped insulate the central bank from losses, the Fed’s willingness to supply seemingly unlimited financing to the banks assured they wouldn’t collapse, protecting the Treasury’s TARP investments, he says. “Even though the Treasury was in the headlines, the Fed was really behind the scenes engineering it,” Shaffer says. Congress, at the urging of Bernanke and Paulson, created TARP in October 2008 after the bankruptcy of Lehman Brothers Holdings Inc. made it difficult for financial institutions to get loans. Bank of America and New York-based Citigroup each received $45 billion from TARP. At the time, both were tapping the Fed. Citigroup hit its peak borrowing of $99.5 billion in January 2009, while Bank of America topped out in February 2009 at $91.4 billion.

No Clue
Lawmakers knew none of this. They had no clue that one bank, New York-based Morgan Stanley (MS), took $107 billion in Fed loans in September 2008, enough to pay off one-tenth of the country’s delinquent mortgages. The firm’s peak borrowing occurred the same day Congress rejected the proposed TARP bill, triggering the biggest point drop ever in the Dow Jones Industrial Average. (INDU) The bill later passed, and Morgan Stanley got $10 billion of TARP funds, though Paulson said only “healthy institutions” were eligible. Mark Lake, a spokesman for Morgan Stanley, declined to comment, as did spokesmen for Citigroup and Goldman Sachs. Had lawmakers known, it “could have changed the whole approach to reform legislation,” says Ted Kaufman, a former Democratic Senator from Delaware who, with Brown, introduced the bill to limit bank size.

Moral Hazard
Kaufman says some banks are so big that their failure could trigger a chain reaction in the financial system. The cost of borrowing for so-called too-big-to-fail banks is lower than that of smaller firms because lenders believe the government won’t let them go under. The perceived safety net creates what economists call moral hazard — the belief that bankers will take greater risks because they’ll enjoy any profits while shifting losses to taxpayers. If Congress had been aware of the extent of the Fed rescue, Kaufman says, he would have been able to line up more support for breaking up the biggest banks. Byron L. Dorgan, a former Democratic senator from North Dakota, says the knowledge might have helped pass legislation to reinstate the Glass-Steagall Act, which for most of the last century separated customer deposits from the riskier practices of investment banking. “Had people known about the hundreds of billions in loans to the biggest financial institutions, they would have demanded Congress take much more courageous actions to stop the practices that caused this near financial collapse,” says Dorgan, who retired in January.

Getting Bigger
Instead, the Fed and its secret financing helped America’s biggest financial firms get bigger and go on to pay employees as much as they did at the height of the housing bubble. Total assets held by the six biggest U.S. banks increased 39 percent to $9.5 trillion on Sept. 30, 2011, from $6.8 trillion on the same day in 2006, according to Fed data. For so few banks to hold so many assets is “un-American,” says Richard W. Fisher, president of the Federal Reserve Bank of Dallas. “All of these gargantuan institutions are too big to regulate. I’m in favor of breaking them up and slimming them down.” Employees at the six biggest banks made twice the average for all U.S. workers in 2010, based on Bureau of Labor Statistics hourly compensation cost data. The banks spent $146.3 billion on compensation in 2010, or an average of $126,342 per worker, according to data compiled by Bloomberg. That’s up almost 20 percent from five years earlier compared with less than 15 percent for the average worker. Average pay at the banks in 2010 was about the same as in 2007, before the bailouts.

‘Wanted to Pretend’
“The pay levels came back so fast at some of these firms that it appeared they really wanted to pretend they hadn’t been bailed out,” says Anil Kashyap, a former Fed economist who’s now a professor of economics at the University of Chicago Booth School of Business. “They shouldn’t be surprised that a lot of people find some of the stuff that happened totally outrageous.” Bank of America took over Merrill Lynch & Co. at the urging of then-Treasury Secretary Paulson after buying the biggest U.S. home lender, Countrywide Financial Corp. When the Merrill Lynch purchase was announced on Sept. 15, 2008, Bank of America had $14.4 billion in emergency Fed loans and Merrill Lynch had $8.1 billion. By the end of the month, Bank of America’s loans had reached $25 billion and Merrill Lynch’s had exceeded $60 billion, helping both firms keep the deal on track.

Prevent Collapse
Wells Fargo bought Wachovia Corp., the fourth-largest U.S. bank by deposits before the 2008 acquisition. Because depositors were pulling their money from Wachovia, the Fed channeled $50 billion in secret loans to the Charlotte, North Carolina-based bank through two emergency-financing programs to prevent collapse before Wells Fargo could complete the purchase. “These programs proved to be very successful at providing financial markets the additional liquidity and confidence they needed at a time of unprecedented uncertainty,” says Ancel Martinez, a spokesman for Wells Fargo. JPMorgan absorbed the country’s largest savings and loan, Seattle-based Washington Mutual Inc., and investment bank Bear Stearns Cos. The New York Fed, then headed by Timothy F. Geithner, who’s now Treasury secretary, helped JPMorgan complete the Bear Stearns deal by providing $29 billion of financing, which was disclosed at the time. The Fed also supplied Bear Stearns with $30 billion of secret loans to keep the company from failing before the acquisition closed, central bank data show. The loans were made through a program set up to provide emergency funding to brokerage firms.

‘Regulatory Discretion’
“Some might claim that the Fed was picking winners and losers, but what the Fed was doing was exercising its professional regulatory discretion,” says John Dearie, a former speechwriter at the New York Fed who’s now executive vice president for policy at the Financial Services Forum, a Washington-based group consisting of the CEOs of 20 of the world’s biggest financial firms. “The Fed clearly felt it had what it needed within the requirements of the law to continue to lend to Bear and Wachovia.” The bill introduced by Brown and Kaufman in April 2010 would have mandated shrinking the six largest firms. “When a few banks have advantages, the little guys get squeezed,” Brown says. “That, to me, is not what capitalism should be.” Kaufman says he’s passionate about curbing too-big-to-fail banks because he fears another crisis.

‘Can We Survive?’
“The amount of pain that people, through no fault of their own, had to endure — and the prospect of putting them through it again — is appalling,” Kaufman says. “The public has no more appetite for bailouts. What would happen tomorrow if one of these big banks got in trouble? Can we survive that?” Lobbying expenditures by the six banks that would have been affected by the legislation rose to $29.4 million in 2010 compared with $22.1 million in 2006, the last full year before credit markets seized up — a gain of 33 percent, according to OpenSecrets.org, a research group that tracks money in U.S. politics. Lobbying by the American Bankers Association, a trade organization, increased at about the same rate, OpenSecrets.org reported. Lobbyists argued the virtues of bigger banks. They’re more stable, better able to serve large companies and more competitive internationally, and breaking them up would cost jobs and cause “long-term damage to the U.S. economy,” according to a Nov. 13, 2009, letter to members of Congress from the FSF. The group’s website cites Nobel Prize-winning economist Oliver E. Williamson, a professor emeritus at the University of California, Berkeley, for demonstrating the greater efficiency of large companies.

‘Serious Burden’
In an interview, Williamson says that the organization took his research out of context and that efficiency is only one factor in deciding whether to preserve too-big-to-fail banks.  “The banks that were too big got even bigger, and the problems that we had to begin with are magnified in the process,” Williamson says. “The big banks have incentives to take risks they wouldn’t take if they didn’t have government support. It’s a serious burden on the rest of the economy.” Dearie says his group didn’t mean to imply that Williamson endorsed big banks. Top officials in President Barack Obama’s administration sided with the FSF in arguing against legislative curbs on the size of banks.

Geithner, Kaufman
On May 4, 2010, Geithner visited Kaufman in his Capitol Hill office. As president of the New York Fed in 2007 and 2008, Geithner helped design and run the central bank’s lending programs. The New York Fed supervised four of the six biggest U.S. banks and, during the credit crunch, put together a daily confidential report on Wall Street’s financial condition. Geithner was copied on these reports, based on a sampling of e- mails released by the Financial Crisis Inquiry Commission. At the meeting with Kaufman, Geithner argued that the issue of limiting bank size was too complex for Congress and that people who know the markets should handle these decisions, Kaufman says. According to Kaufman, Geithner said he preferred that bank supervisors from around the world, meeting in Basel, Switzerland, make rules increasing the amount of money banks need to hold in reserve. Passing laws in the U.S. would undercut his efforts in Basel, Geithner said, according to Kaufman. Anthony Coley, a spokesman for Geithner, declined to comment.

‘Punishing Success’
Lobbyists for the big banks made the winning case that forcing them to break up was “punishing success,” Brown says. Now that they can see how much the banks were borrowing from the Fed, senators might think differently, he says. The Fed supported curbing too-big-to-fail banks, including giving regulators the power to close large financial firms and implementing tougher supervision for big banks, says Fed General Counsel Scott G. Alvarez. The Fed didn’t take a position on whether large banks should be dismantled before they get into trouble. Dodd-Frank does provide a mechanism for regulators to break up the biggest banks. It established the Financial Stability Oversight Council that could order teetering banks to shut down in an orderly way. The council is headed by Geithner. “Dodd-Frank does not solve the problem of too big to fail,” says Shelby, the Alabama Republican. “Moral hazard and taxpayer exposure still very much exist.”

Below Market
Dean Baker, co-director of the Center for Economic and Policy Research in Washington, says banks “were either in bad shape or taking advantage of the Fed giving them a good deal. The former contradicts their public statements. The latter — getting loans at below-market rates during a financial crisis — is quite a gift.” The Fed says it typically makes emergency loans more expensive than those available in the marketplace to discourage banks from abusing the privilege. During the crisis, Fed loans were among the cheapest around, with funding available for as low as 0.01 percent in December 2008, according to data from the central bank and money-market rates tracked by Bloomberg. The Fed funds also benefited firms by allowing them to avoid selling assets to pay investors and depositors who pulled their money. So the assets stayed on the banks’ books, earning interest. Banks report the difference between what they earn on loans and investments and their borrowing expenses. The figure, known as net interest margin, provides a clue to how much profit the firms turned on their Fed loans, the costs of which were included in those expenses. To calculate how much banks stood to make, Bloomberg multiplied their tax-adjusted net interest margins by their average Fed debt during reporting periods in which they took emergency loans.

Added Income
The 190 firms for which data were available would have produced income of $13 billion, assuming all of the bailout funds were invested at the margins reported, the data show. The six biggest U.S. banks’ share of the estimated subsidy was $4.8 billion, or 23 percent of their combined net income during the time they were borrowing from the Fed. Citigroup would have taken in the most, with $1.8 billion. “The net interest margin is an effective way of getting at the benefits that these large banks received from the Fed,” says Gerald A. Hanweck, a former Fed economist who’s now a finance professor at George Mason University in Fairfax, Virginia. While the method isn’t perfect, it’s impossible to state the banks’ exact profits or savings from their Fed loans because the numbers aren’t disclosed and there isn’t enough publicly available data to figure it out. Opinsky, the JPMorgan spokesman, says he doesn’t think the calculation is fair because “in all likelihood, such funds were likely invested in very short-term investments,” which typically bring lower returns.

Standing Access
Even without tapping the Fed, the banks get a subsidy by having standing access to the central bank’s money, says Viral Acharya, a New York University economics professor who has worked as an academic adviser to the New York Fed. “Banks don’t give lines of credit to corporations for free,” he says. “Why should all these government guarantees and liquidity facilities be for free?” In the September 2008 meeting at which Paulson and Bernanke briefed lawmakers on the need for TARP, Bernanke said that if nothing was done, “unemployment would rise — to 8 or 9 percent from the prevailing 6.1 percent,” Paulson wrote in “On the Brink” (Business Plus, 2010).

Occupy Wall Street
The U.S. jobless rate hasn’t dipped below 8.8 percent since March 2009, 3.6 million homes have been foreclosed since August 2007, according to data provider RealtyTrac Inc., and police have clashed with Occupy Wall Street protesters, who say government policies favor the wealthiest citizens, in New York, Boston, Seattle and Oakland, California. The Tea Party, which supports a more limited role for government, has its roots in anger over the Wall Street bailouts, says Neil M. Barofsky, former TARP special inspector general and a Bloomberg Television contributing editor. “The lack of transparency is not just frustrating; it really blocked accountability,” Barofsky says. “When people don’t know the details, they fill in the blanks. They believe in conspiracies.”

In the end, Geithner had his way. The Brown-Kaufman proposal to limit the size of banks was defeated, 60 to 31. Bank supervisors meeting in Switzerland did mandate minimum reserves that institutions will have to hold, with higher levels for the world’s largest banks, including the six biggest in the U.S. Those rules can be changed by individual countries. They take full effect in 2019. Meanwhile, Kaufman says, “we’re absolutely, totally, 100 percent not prepared for another financial crisis.”


{Lehman still existed in 2007 dataset used}

http://arxiv.org/abs/1107.5728v2
The network of global corporate control
by Stefania Vitali, James B. Glattfelder & Stefano Battisto
28 Jul 2011 (v1), last revised 19 Sep 2011 (this version, v2)

“The structure of the control network of transnational corporations affects global market competition and financial stability. So far, only small national samples were studied and there was no appropriate methodology to assess control globally. We present the first investigation of the architecture of the international ownership network, along with the computation of the control held by each global player. We find that transnational corporations form a giant bow-tie structure and that a large portion of control flows to a small tightly-knit core of financial institutions. This core can be seen as an economic “super-entity” that raises new important issues both for researchers and policy makers.”


The 1318 transnational corporations that form the core of the economy. Superconnected companies are red, very connected companies are yellow. The size of the dot represents revenue (Image: PLoS One)

a SUPER-ENTITY
http://www.newscientist.com/article/mg21228354.500-revealed–the-capitalist-network-that-runs-the-world.html
Revealed – the capitalist network that runs the world
by Andy Coghlan and Debora MacKenzie / 19 October 2011

AS PROTESTS against financial power sweep the world this week, science may have confirmed the protesters’ worst fears. An analysis of the relationships between 43,000 transnational corporations has identified a relatively small group of companies, mainly banks, with disproportionate power over the global economy. The study’s assumptions have attracted some criticism, but complex systems analysts contacted by New Scientist say it is a unique effort to untangle control in the global economy. Pushing the analysis further, they say, could help to identify ways of making global capitalism more stable.

The idea that a few bankers control a large chunk of the global economy might not seem like news to New York’s Occupy Wall Street movement and protesters elsewhere. But the study, by a trio of complex systems theorists at the Swiss Federal Institute of Technology in Zurich, is the first to go beyond ideology to empirically identify such a network of power. It combines the mathematics long used to model natural systems with comprehensive corporate data to map ownership among the world’s transnational corporations (TNCs). “Reality is so complex, we must move away from dogma, whether it’s conspiracy theories or free-market,” says James Glattfelder. “Our analysis is reality-based.” Previous studies have found that a few TNCs own large chunks of the world’s economy, but they included only a limited number of companies and omitted indirect ownerships, so could not say how this affected the global economy – whether it made it more or less stable, for instance.

The Zurich team can. From Orbis 2007, a database listing 37 million companies and investors worldwide, they pulled out all 43,060 TNCs and the share ownerships linking them. Then they constructed a model of which companies controlled others through shareholding networks, coupled with each company’s operating revenues, to map the structure of economic power. The work, to be published in PloS One, revealed a core of 1318 companies with interlocking ownerships (see image). Each of the 1318 had ties to two or more other companies, and on average they were connected to 20. What’s more, although they represented 20 per cent of global operating revenues, the 1318 appeared to collectively own through their shares the majority of the world’s large blue chip and manufacturing firms – the “real” economy – representing a further 60 per cent of global revenues.

When the team further untangled the web of ownership, it found much of it tracked back to a “super-entity” of 147 even more tightly knit companies – all of their ownership was held by other members of the super-entity – that controlled 40 per cent of the total wealth in the network. “In effect, less than 1 per cent of the companies were able to control 40 per cent of the entire network,” says Glattfelder. Most were financial institutions. The top 20 included Barclays Bank, JPMorgan Chase & Co, and The Goldman Sachs Group.

John Driffill of the University of London, a macroeconomics expert, says the value of the analysis is not just to see if a small number of people controls the global economy, but rather its insights into economic stability. Concentration of power is not good or bad in itself, says the Zurich team, but the core’s tight interconnections could be. As the world learned in 2008, such networks are unstable. “If one [company] suffers distress,” says Glattfelder, “this propagates.” “It’s disconcerting to see how connected things really are,” agrees George Sugihara of the Scripps Institution of Oceanography in La Jolla, California, a complex systems expert who has advised Deutsche Bank.

Yaneer Bar-Yam, head of the New England Complex Systems Institute (NECSI), warns that the analysis assumes ownership equates to control, which is not always true. Most company shares are held by fund managers who may or may not control what the companies they part-own actually do. The impact of this on the system’s behaviour, he says, requires more analysis. Crucially, by identifying the architecture of global economic power, the analysis could help make it more stable. By finding the vulnerable aspects of the system, economists can suggest measures to prevent future collapses spreading through the entire economy. Glattfelder says we may need global anti-trust rules, which now exist only at national level, to limit over-connection among TNCs. Bar-Yam says the analysis suggests one possible solution: firms should be taxed for excess interconnectivity to discourage this risk. One thing won’t chime with some of the protesters’ claims: the super-entity is unlikely to be the intentional result of a conspiracy to rule the world. “Such structures are common in nature,” says Sugihara.

Newcomers to any network connect preferentially to highly connected members. TNCs buy shares in each other for business reasons, not for world domination. If connectedness clusters, so does wealth, says Dan Braha of NECSI: in similar models, money flows towards the most highly connected members. The Zurich study, says Sugihara, “is strong evidence that simple rules governing TNCs give rise spontaneously to highly connected groups”. Or as Braha puts it: “The Occupy Wall Street claim that 1 per cent of people have most of the wealth reflects a logical phase of the self-organising economy.” So, the super-entity may not result from conspiracy. The real question, says the Zurich team, is whether it can exert concerted political power. Driffill feels 147 is too many to sustain collusion. Braha suspects they will compete in the market but act together on common interests. Resisting changes to the network structure may be one such common interest.

The top 50 of the 147 superconnected companies
1. Barclays plc
2. Capital Group Companies Inc
3. FMR Corporation
4. AXA
5. State Street Corporation
6. JP Morgan Chase & Co
7. Legal & General Group plc
8. Vanguard Group Inc
9. UBS AG
10. Merrill Lynch & Co Inc
11. Wellington Management Co LLP
12. Deutsche Bank AG
13. Franklin Resources Inc
14. Credit Suisse Group
15. Walton Enterprises LLC
16. Bank of New York Mellon Corp
17. Natixis
18. Goldman Sachs Group Inc
19. T Rowe Price Group Inc
20. Legg Mason Inc
21. Morgan Stanley
22. Mitsubishi UFJ Financial Group Inc
23. Northern Trust Corporation
24. Société Générale
25. Bank of America Corporation
26. Lloyds TSB Group plc
27. Invesco plc
28. Allianz SE 29. TIAA
30. Old Mutual Public Limited Company
31. Aviva plc
32. Schroders plc
33. Dodge & Cox
34. Lehman Brothers Holdings Inc*
35. Sun Life Financial Inc
36. Standard Life plc
37. CNCE
38. Nomura Holdings Inc
39. The Depository Trust Company
40. Massachusetts Mutual Life Insurance
41. ING Groep NV
42. Brandes Investment Partners LP
43. Unicredito Italiano SPA
44. Deposit Insurance Corporation of Japan
45. Vereniging Aegon
46. BNP Paribas
47. Affiliated Managers Group Inc
48. Resona Holdings Inc
49. Capital Group International Inc
50. China Petrochemical Group Company

* Lehman still existed in the 2007 dataset used

http://blogs.scientificamerican.com/observations/2011/08/08/ownership-ties-among-global-corporations-strangely-resemble-a-bow-tie/
Ownership Ties Among Global Corporations Strangely Resemble a Bow Tie
by Sophie Bushwick / August 8, 2011

Large international corporations can control a wide variety of smaller companies. For example, Scientific American is a publication of Nature Publishing Group, which is a subsidiary of the Georg Von Holtzbrinck Publishing Group in Germany. This group also owns a number of other publishers in the U.S., United Kingdom, and Germany, a pyramid that includes American suspense thrillers, British textbooks, a German weekly newspaper and more. But corporate pyramids like that of the Von Holtzbrinck Publishing Group do not stand alone: The web of relationships among companies is tangled and complex, as a July 28 paper published to pre-print blogarXiv.org reveals.

A team of ETH Zurich (Swiss Federal Institute of Technology Zurich) researchers used a network model to map the ownership relations among more than 43,000 transnational corporations, which do not identify themselves with one country but rather use a global perspective and employ an international roster of executives. Owning shares in a company grants the owner some direct control of that entity, and indirect control of any companies in the parent-company’s pyramid. By treating each major corporation as a node and drawing links between companies that owned shares of others, the researchers uncovered the tendrils of control that link one pyramid to another.

The links between nodes, shown above, represent influence that can flow two ways: any corporation could either influence or be influenced by any other corporation. Directly owning shares of a company gave a corporation more influence than indirect ownership, and the researchers assigned their links certain weights to reflect this difference. At first glance, the picture that emerged looks quite convoluted. However, the researchers discovered that the web of connections clustered into four different components that took the shape of a bow tie. In the illustration, red dots represent nodes, green arrows point from share-owner to the owned company, and the flow of control points in the direction of the most power.

The researchers observed a central cluster in which influence goes both ways between all the nodes, called the strongly connected component, or SCC, as shown above. Within the SCC, each member either directly or indirectly owns some of every other member’s shares. Second, there was the in group, companies that owned shares in various members of the SCC, but were not under the SCC’s influence: Influence “flowed” in but not out. Part three was the in-group’s opposite, the companies who were influenced by, but did not own shares in, the SCC companies—this became the out group. Finally, the fourth component of the network consists of the tubes and tendrils, or T&T, companies that remain separate from the SCC but may have ties to members of the in or out groups. The above illustration actually represents a generic version of a bow tie network, a category of network that can also be used to describe how Web pages are related. The researchers found that the corporate network looked more like the illustration below, which shows that the out group is much larger than the in group or even the SCC.

Only the tiny, elite in group gets to influence the SCC core without submitting to its influence at all. A significant amount of the corporations, however, still fall into the central strongly connected component, which indicates that many of the major market players have complex economic relationships with one another. “What are the implications for global financial stability?” said the researchers in their paper. “What are the implications for market competition?” The study may not have uncovered a corporate conspiracy, but it does show that corporations are not lone behemoths: They are inter-dependent and influence one another a great deal. Applying a scientific model to the market can help provide a clearer picture of how the world economy runs. And perhaps a hint at what our corporate overlords are wearing.

Image credit: Stefano Battiston et al., ETH Zurich (Swiss Federal Institute of Technology Zurich)

WAIT WHAT DO THEY DO for MONEY?
http://www.newdeal20.org/2011/10/14/who-are-the-1-and-what-do-they-do-for-a-living-61759/
Who are the 1% and What Do They Do for a Living?
by Mike Konczal / 10/14/2011
There’s good reason to focus on the top 1%: they’re distorting our economy.

A lot of emphasis is on the “99%” versus the “1%” in these protests. But who are the 1% and what do they do for a living? Are they all Wilt Chamberlains and Oprahs and other people taking part in the dynamism of the new economy? Nope. It’s same as it ever was — high-level management and the financial sector. Suzy Khimm goes through the numbers here. I’m curious about occupations. I’ll hand the mic off to “Jobs and Income Growth of Top Earners and the Causes of Changing Income Inequality: Evidence from U.S. Tax Return Data“ by Bakija, Cole, and Heim. This is the latest and greatest report on occupations and inequality. Here’s a chart of the occupations of the top 1%:

distribution_1_percent

Inequality has fractals. Let’s go into the top 0.1% — what do they look like?  Here’s the chart of the occupations of the top 0.1%, including capital gains:

It boils down to managers, executives, and people who work in finance. From the paper: “[o]ur findings suggest that the incomes of executives, managers, supervisors, and financial professionals can account for 60 percent of the increase in the share of national income going to the top percentile of the income distribution between 1979 and 2005.”

For fun, there are more than twice as many people listed as “Not working or deceased” than are in “arts, media, sports.” For every elite sports player who earned a place at the top of the income pyramid due to technology changes and superstar, tournament-style labor markets that broadcast him across the globe, there are two trust fund babies.

The top 1% of managers and executives often means C-level employees, especially CEOs. And their earnings versus the average worker have skyrocketed in the past 30 years, so this shouldn’t be surprising:

 

snap20060621

How has this evolved over time?  Can we get a cross-section of that protest sign above?

Same candidates. There’s a reason the protests ended up on Wall Street: The top 1% and top 0.1% comprises all the senior bosses and the financial sector. One of the best things about Occupy Wall Street is that there is no chatter about Obama or Perry or whatever is the electoral political issue of the day. There are a lot of people rethinking things, discussing, learning, and conceptualizing the kinds of world they want to create. Since so much about inequality is a function of the legal structure known as a “corporation,” I’d encourage you to check out Alex Gourevitch on how the corporate is structured in our laws.

The paper notes that stock market returns drive much of the manager’s income. This is related to a process of financialization, something JW Mason has done a fantastic job outlining here. The “dominant ethos among managers today is that a business exists only to enrich its shareholders, including, of course, senior managers themselves,” and this is done by paying out more in dividends that is earned in profits. Think of it as our-real-economy-as-ATM-machine, cashing out wealth during the good times and then leaving workers and the rest of the real economy to deal with the aftermath.

Both articles mention chapter 6 of Doug Henwood’s Wall Street; anyone interested in how things have changed and where they need to go would be wise to check it out. It’s even available for free pdf book download here.

There’s good reason to focus on the top 1% instead of the top 10 or 50%. There is evidence that financial pay at this elite level is correlated with deregulation and the other legal changes that brought on the crisis. High-ranking senior corporate executives’ pay has dwarfed workers’ salaries, but is only a reward for engaging in shady financial engineering practices. These problems require a legal solution and thus they require a democratic challenge and a rethinking of how we want to structure our economy. Here’s to the 99% and Occupy Wall Street helping get us there.

{Mike Konczal is a Fellow at the Roosevelt Institute.}

BLACKROCK
http://www2.blackrock.com/global/home/AboutUs/History/index.htm

STATE STREET
http://www.statestreet.com/wps/portal/internet/corporate/home/aboutstatestreet/corporateoverview/history/!ut/p/c4/04_SB8K8xLLM9MSSzPy8xBz9CP0os3i_0CADCydDRwP_IGdnA08Tc38fINvY3dFEPzg1Lz40WL8g21ERABezIio!/

VANGUARD
https://personal.vanguard.com/us/content/Home/WhyVanguard/AboutVanguardWhoWeAreContent.jsp

FIDELITY
http://jobs.fidelity.com/ourculture/ourvalues/ourvalue_fidvalue.shtml

FOUR COMPANIES RUN EVERYTHING
http://english.pravda.ru/business/finance/18-10-2011/119355-The_Large_Families_that_rule_the_world-0/
The Large Families that rule the world / 18.10.2011

We are speaking of 6, 8 or maybe 12 families who truly dominate the world. Know that it is a mystery difficult to unravel. But what are the names of the families who run the world and have control of states and international organizations like the UN, NATO or the IMF?

To try to answer this question, we can start with the easiest: inventory, the world’s largest banks, and see who the shareholders are and who make the decisions. The world’s largest companies are now: Bank of America, JP Morgan, Citigroup, Wells Fargo, Goldman Sachs and Morgan Stanley. Let us now review who their shareholders are.

Bank of America:
State Street Corporation, Vanguard Group, BlackRock, FMR (Fidelity), Paulson, JP Morgan, T. Rowe, Capital World Investors, AXA, Bank of NY, Mellon.

JP Morgan:
State Street Corp., Vanguard Group, FMR, BlackRock, T. Rowe, AXA, Capital World Investor, Capital Research Global Investor, Northern Trust Corp. and Bank of Mellon.

Citigroup:
State Street Corporation, Vanguard Group, BlackRock, Paulson, FMR, Capital World Investor, JP Morgan, Northern Trust Corporation, Fairhome Capital Mgmt and Bank of NY Mellon.

Wells Fargo:
Berkshire Hathaway, FMR, State Street, Vanguard Group, Capital World Investors, BlackRock, Wellington Mgmt, AXA, T. Rowe and Davis Selected Advisers.

We can see that now there appears to be a nucleus present in all banks: State Street Corporation, Vanguard Group, BlackRock and FMR (Fidelity). To avoid repeating them, we will now call them the “big four”

Goldman Sachs:
“The big four,” Wellington, Capital World Investors, AXA, Massachusetts Financial Service and T. Rowe.

Morgan Stanley:
“The big four,” Mitsubishi UFJ, Franklin Resources, AXA, T. Rowe, Bank of NY Mellon e Jennison Associates. Rowe, Bank of NY Mellon and Jennison Associates.

We can just about always verify the names of major shareholders. To go further, we can now try to find out the shareholders of these companies and shareholders of major banks worldwide.

Bank of NY Mellon:
Davis Selected, Massachusetts Financial Services, Capital Research Global Investor, Dodge, Cox, Southeatern Asset Mgmt. and … “The big four.”

State Street Corporation (one of the “big four”):
Massachusetts Financial Services, Capital Research Global Investor, Barrow Hanley, GE, Putnam Investment and … The “big four” (shareholders themselves!).

BlackRock (another of the “big four”):
PNC, Barclays e CIC.

Who is behind the PNC? FMR (Fidelity), BlackRock, State Street, etc. And behind Barclays? BlackRock

And we could go on for hours, passing by tax havens in the Cayman Islands, Monaco or the legal domicile of Shell companies in Liechtenstein. A network where companies are always the same, but never a name of a family.

In short: the eight largest U.S. financial companies (JP Morgan, Wells Fargo, Bank of America, Citigroup, Goldman Sachs, U.S. Bancorp, Bank of New York Mellon and Morgan Stanley) are 100% controlled by ten shareholders and we have four companies always present in all decisions: BlackRock, State Street, Vanguard and Fidelity.

In addition, the Federal Reserve is comprised of 12 banks, represented by a board of seven people, which comprises representatives of the “big four,” which in turn are present in all other entities.

In short, the Federal Reserve is controlled by four large private companies: BlackRock, State Street, Vanguard and Fidelity. These companies control U.S. monetary policy (and world) without any control or “democratic” choice. These companies launched and participated in the current worldwide economic crisis and managed to become even more enriched.

To finish, a look at some of the companies controlled by this “big four” group:
Alcoa Inc.
Altria Group Inc.
American International Group Inc.
AT&T Inc.
Boeing Co.
Caterpillar Inc.
Coca-Cola Co.
DuPont & Co.
Exxon Mobil Corp.
General Electric Co.
General Motors Corporation
Hewlett-Packard Co.
Home Depot Inc.
Honeywell International Inc.
Intel Corp.
International Business Machines Corp
Johnson & Johnson
JP Morgan Chase & Co.
McDonald’s Corp.
Merck & Co. Inc.
Microsoft Corp.
3M Co.
Pfizer Inc.
Procter & Gamble Co.
United Technologies Corp.
Verizon Communications Inc.
Wal-Mart Stores Inc.
Time Warner
Walt Disney
Viacom
Rupert Murdoch’s News Corporation.,
CBS Corporation
NBC Universal

The same “big four” control the vast majority of European companies counted on the stock exchange. In addition, all these people run the large financial institutions, such as the IMF, the European Central Bank or the World Bank, and were “trained” and remain “employees” of the “big four” that formed them. The names of the families that control the “big four”, never appear.

{Translated from the Portuguese version by Lisa Karpova / Pravda.Ru}

http://participatorybudgeting.org/

http://www.watsonblogs.org/participatorybudgeting/examplespb.html
http://www.csmonitor.com/Commentary/Opinion/2011/0405/Government-can-t-solve-budget-battles-Let-citizens-do-it
Government can’t solve budget battles? Let citizens do it
by Daniel Altschuler and Josh Lerner / April 5, 2011

In recent weeks, Americans have watched budget battles tear apart Congress and state governments. This may be just the beginning. As states and cities across the country confront staggering budget shortfalls, they face a double whammy: Voters are already disillusioned with government, and now elected officials have fewer resources to address citizens’ concerns. Recent polls show that Americans are as disgruntled as ever with Congress and both major parties. Meanwhile, the economic crisis has left federal, state, and city legislators short of funds for public goods like education and health care. Faced with such daunting budget dilemmas, what are politicians to do? Two words: Look south! “Participatory budgeting” (PB), a model popular throughout Latin America, may offer a way to do more with less, and to reconnect citizens with government.

PB gives taxpayers a voice and a vote in how government spends public money. Unlike consultations, PB enables ordinary people to directly decide budget spending. Citizens receive training, identify and prioritize local needs, develop spending proposals, and vote on the proposed projects. Then the government carries out the top proposals, participants monitor progress, and the cycle begins anew. First developed in Brazil, PB has spread to over 1,200 municipalities around the world. Throughout the Americas, Europe, Africa, and Asia, it has brought people into the political process, taught them civic skills, and encouraged them to work together. Where the state provides sufficient support – through training, facilitation, and expert guidance – PB can reverse dissatisfaction with government and increase transparency, accountability, and efficiency.

Taking root: Chicago to New York
PB has recently taken root in Canadian and American soils. Chicago’s 49th Ward, for example, uses this process to distribute $1.3 million of annual discretionary funds. The ward’s residents have praised the opportunity to make meaningful decisions, take ownership over the budget process, and win concrete improvements for their neighborhood – from community gardens and sidewalk repairs to street lights and public murals. The initiative proved so popular that the ward’s alderman, Joe Moore, credits PB with helping to reverse his political fortunes. After struggling to win a tight run-off in his last election, Mr. Moore enjoyed a commanding electoral victory in 2011. Other elected officials are taking note. Following Moore’s successful pilot process, seven other aldermanic candidates who pledged to implement PB won office in Chicago’s February elections. And six more candidates who support the concept are on the ballot in today’s run-off elections.

The wave is not stopping in Chicago, either. Elected officials and community leaders elsewhere – from New York City to San Francisco and from Greensboro, N.C. to Springfield, Mass. – are considering launching similar initiatives. In the coming months, organizations in these and other cities are holding public forums on PB. They hope to inspire local officials to share meaningful decision-making power with their constituents, while encouraging community groups to demand a place at the budgeting table. Examples in Latin America have already shown that both factors – committed officials and motivated community groups – are essential to effective participatory budgeting.

PB can work at national, state levels
And PB is not just for municipal governments. In other countries, states, counties, housing authorities, and schools have also used it to allocate public budgets. American officials should follow suit. Governors, for instance, could create pilot programs to ensure citizen participation in state infrastructure spending decisions. At the federal level, the Obama administration could use PB to disburse funds in departments with a history of promoting citizen involvement, such as Housing and Urban Development (HUD) and the Environmental Protection Agency (EPA). HUD, for instance, could encourage housing authorities to conduct PB with residents. Toronto’s housing authority has been doing this since 2001.

PB has bipartisan appeal
At its heart, PB exemplifies two bipartisan ideals: transparent, effective service delivery and civic engagement. Both Democrats and Republicans are striving to get the most out of depleted resources and serve citizens’ needs as efficiently as possible. PB has a proven track record of rising to this challenge, by injecting public scrutiny, knowledge, and creativity into budgeting. PB’s other starting point – maximizing civic participation – also has bipartisan appeal. Republicans have long advocated voluntarism and service, while President Obama has emphasized civic engagement – that democracy is about “we” rather than “I”, and that government is “us” not “them.” At a time when our country seems as divided as ever, PB offers a concrete policy idea to spur citizen involvement and constructive public debate. If we heed the lessons from previous experiments, this model could bring citizens and officials together, to discuss real issues and make difficult decisions. Given the recent headlines from Washington and Wisconsin, this may seem like a utopian vision. But PB has worked in countries across the globe for over 20 years. It can work here, too.

an OPEN LETTER to NYC
“On behalf of NYC Council Members Lander [Brooklyn], Mark-Viverito [Manhattan], Williams [Brooklyn], and Ulrich [Queens], I would like to invite you to join the Steering Committee for an exciting new experiment in democracy. This fall, the four NYC Council Members will launch a participatory budgeting (PB) process for their discretionary funds, in which residents of their districts will directly decide how to spend around $6 million in cumulative capital money, which the council members will be allocating from their capital budgets. PB is a best practice of democratic governance practiced in over 1,000 cities around the world, but this will be only the second such officially organized process in the US, and the largest to date. After the initial year, the Council Members and other project partners hope to be joined by their colleagues in other districts, to build a more democratic and transparent approach to public spending in New York. You can find more information about the initiative in the attached project brief. We hope that you will join a City-Wide Steering Committee to help design and oversee the process. We anticipate that the Steering Committee will meet a total of 6-9 times between June 2011 and April 2012. In July it will design the basic participatory process through two workshops. During each subsequent phase of the process, it will be responsible for making key decisions about issues that arise.

The Steering Committee will include: Each Council Member’s office; Community Voices Heard (the lead community partner) and The Participatory Budgeting Project (the lead technical assistance partner); City-wide organizations working in five areas: good government, research, policy, community organizing, and community education; Community Boards from each district; Up to three local community-based organizations from each district.

If you are interested in participating in the Steering Committee, please let me know, or if you have any questions. We look forward to working with you on this groundbreaking initiative.”

CONTACT
Josh Lerner
http://www.participatorybudgeting.org
email : josh@participatorybudgeting.org

Ward 49 Ballot
All 49th Ward residents age 16 and over, regardless of voter registration or citizenship status, were invited to vote on the 36 budget proposals developed by the community {photo by Josh Lerner}

CHICAGO’s 49th WARD
http://www.yesmagazine.org/people-power/chicagos-1.3-million-experiment-in-democracy
Chicago’s $1.3 Million Experiment in Democracy
by Josh Lerner, Megan Wade Antieau  /   Apr 20, 2010

On Chicago’s far north side, citizens are taking democracy into their own hands. Through the first “participatory budgeting”experiment in the United States, residents of Chicago’s 49th Ward have spent the past year deciding how to spend $1.3 million in taxpayer dollars. Over 1,600 community members stepped up to decide on improvements for their neighborhoods, showing how participatory budgeting can pave the way for a new kind of grassroots democracy, in Chicago and beyond.

From Porto Alegre to Chicago
Chicago may seem an unlikely site for participatory democracy, given the city’s famous patronage system and lack of transparency in public finances. Faced with this system, community groups end up competing for budgetary scraps—an exhausting struggle. But frustration with backroom dealing is in part what makes Chicago and the United States ready for new ways of managing public money. In 2007, Alderman Joe Moore discovered an alternative at a US Social Forum session on participatory budgeting. There, he learned about Porto Alegre, Brazil, where since 1990 tens of thousands of people have been directly deciding how to spend as much as 20 percent of their city’s annual budget. Moore also learned how participatory budgeting has gone global, spreading to over 1,200 cities around the world and winning the United Nations’ recognition as a best practice of democratic governance. No U.S. city had let citizens directly decide how to spend public money, but Moore saw Chicago’s 49th Ward as the perfect place to try.



Democracy in Action
The 49th Ward, home to over 60,000 people and the neighborhood of Rogers Park, is known for its diversity and vibrant community life. Over 80 languages are spoken within less than two square miles. Independent-minded citizens have often put intense pressure on local officials. Concerned that Moore wasn’t responding to ward needs, they nearly voted him out of office in the last election. So how does one of the nation’s most diverse neighborhoods bring opinionated residents together to make difficult budget decisions? Moore started by setting aside his $1.3 million “menu money,” the discretionary budget that each alderman receives for capital infrastructure projects. In April 2009, with guidance from The Participatory Budgeting Project, Moore invited leaders of all the ward’s community organizations and institutions to form a Steering Committee, which decided the timeline and structure of the process. “At the community meetings everyone was complaining about their block,” says 49th Ward resident Laurent Pernot. “But now every single committee has taken stewardship of the whole ward as their mission.”

At a series of neighborhood assemblies starting in November, residents brainstormed initial spending ideas and self-selected community representatives who would transform those ideas into concrete proposals. These representatives, along with Steering Committee mentors, split into six thematic committees. They then spent four months meeting with experts, conducting research, and developing budget proposals. The Public Safety Committee, for instance, received many requests for security cameras. To learn more, they visited the neighborhood’s 24-hour camera viewing center. As community representative Marilou Kessler explained, “everyone [on the committee] came—about 15-16 people on a workday. It was astonishing cooperation.” The trip shifted the committee’s priorities: They learned that the cameras are used only occasionally, mostly by specialty police teams, and are not continuously monitored. After police explained that lighting is more effective at deterring crime, the committee replaced several camera proposals with street light proposals.

At first, some skeptics worried about what residents would propose. Would they rush through inappropriate projects, or focus just on their personal needs? Not quite. To identify sidewalks most in need of repair, Transportation Committee members walked almost every block of the ward, in the middle of the Chicago winter. “I will never look at sidewalks the same way again!” reflected Dena Al-Khatib, one of the sidewalk inspectors. Community representatives also learned to move beyond their initial assumptions and priorities. As Laurent Pernot of the Transportation Committee said, “At the community meetings everyone was complaining about their block… But now every single committee has taken stewardship of the whole ward as their mission.”

After months of work and more neighborhood assemblies, the community representatives presented a ballot of 36 specific budget proposals, and then helped organize a publicity campaign. The Arts and Other Committee put together an artistic exhibition of proposals at Mess Hall, a local cultural center. Andy De La Rosa, an artist on the committee, found himself swayed by the proposals from other committees. “This is all extra,” he said of his committee’s proposals for murals, artistic bike racks, and historical markers. “I hope people vote for the streets.” On April 10th, all ward residents age 16 and over, regardless of voter registration or citizenship status, were invited to vote on the proposals at a local high school. In the week beforehand, 428 residents voted early at the Alderman’s office—more early voters per day than during the 2008 presidential election. On the final voting day, a stream of people filled the school cafeteria, reading over proposals, consulting with community representatives, and voting for up to eight projects on paper ballots. In the end, 1,652 residents turned out, not to elect someone to decide for them, but to make their own decisions about the ward. The turnout vastly exceeded expectations, considering the brand-new process, lack of media coverage, and absence of any other elections or ballot measures to inspire turnout. The $1.3 million was enough to fund the 14 most popular projects. The proposal to fix sidewalks received the most votes, and other funded projects included bike lanes, community gardens, murals, traffic signals, and street lighting. Every committee had at least one proposal funded.

Democratizing Democracy
But participatory budgeting in Chicago still has a long way to go. Like at most community meetings in the ward, turnout did not reflect the full diversity of residents. In most participatory budgeting processes, disadvantaged communities turn out in droves, but not yet in the 49th Ward. Despite additional Spanish-language assemblies, materials, and outreach, Latino turnout was particularly low. According to Latino leaders, this was due largely to general distrust of government and worries about immigration status. Some community organizers added that there was too little time for one-on-one meetings with such leaders early on, and that the infrastructure funding did not speak to the concerns of many low-income residents. Had turnout been more diverse, would funding have been allocated differently? Organizers will have a chance to find out, since Moore has already committed to continuing participatory budgeting. As he wrote in a letter to constituents, it “exceeded even my wildest dreams. It was more than an election. It was a community celebration and an affirmation that people will participate in the civic affairs of their community if given real power to make real decisions.” Community representatives are already debating how to deepen community engagement by building on the outreach from this year. Important as it is, the ward’s $1.3 million discretionary budget is just the beginning. Residents are now discussing how to bring participatory budgeting to other budgets, and some reformers in other wards are already considering running on a participatory budgeting platform in the next municipal elections. This energy shows the power of truly democratic experiences, and opens up new possibilities for democracy in Chicago and beyond.


How would you like to distribute 200 million dollars to your fellow citizens? That’s the amount of money the city of Porto Alegre spends in an average year for construction and services—money not committed to fixed expenses like debt service and pensions.

a PEOPLE’s BUDGET
http://www.yesmagazine.org/issues/what-would-democracy-look-like/562
Porto Alegre’s Budget Of, By, And For the People
by David Lewit / Dec 31, 2002

Fifty thousand residents of Porto Alegre—poor and middle class, women and men, leftist and centrist—now take part in the participatory budgeting process for this city of a million and a half people, and the numbers involved have grown each year since its start in 1989. Then, only 75 percent of homes had running water. Today 99 percent have treated water and 85 percent have piped sewage. In seven years, housing assistance jumped from 1,700 families to 29,000. In 12 years, the number of public schools increased from 29 to 86, and literacy has reached 98 percent. Each year the bulk of new street-paving projects has gone to the poorer, outlying districts. In addition to these achievements, corruption, which before was the rule, has virtually disappeared.

Democracy is thriving as citizens gain competence in talking with the mayor, specialists in agencies, and fellow citizens of different means. The participatory budgeting cycle starts in January of each year with dozens of assemblies across the city designed to ensure the system operates with maximum participation and friendly interaction. One study shows that poor people, less well-educated people, and black people are not inhibited in attending and speaking up, even though racial discrimination is strong in Brazil. One experienced participant described the dynamic as follows: “The most important thing is that more and more people come. Those who come for the first time are welcome. We let them make demands during technical meetings—they can speak their mind and their anxieties. We have patience for it because we were like that once. And if a person has an issue, we set up a meeting for him, and create a commission to accompany him. You have the responsibility of not abandoning him. That is the most important thing.”

Power and learning
Each February there is instruction from city specialists in technical and system aspects of city budgeting. Regular folks learn fast because what they are learning empowers them to change conditions that limit or extend their lives. This is perhaps an extension of the teachings of Paolo Freire, the Brazilian educator who enabled peasants to quickly learn to read by making use of materials about power, landlords, and politics, and by a learning process of liberation as well as deliberation. In March there are plenary assemblies in each of the city’s 16 districts as well as assemblies dealing with such areas as transportation, health, education, sports, and economic development. These large meetings—with participation that can reach over 1,000—elect delegates to represent specific neighborhoods. The mayor and staff attend to respond to citizen concerns.

In subsequent months these delegates meet weekly or biweekly in each district to acquaint themselves with the technical criteria involved in requesting a project be brought to a district and to deliberate about the district’s needs. Representatives from the city’s departments participate according to their specialties. These intermediary meetings come to a close when, at a second regional plenary, regional delegates prioritize the district’s demands and elect councillors to serve on the Municipal Council of the Budget. The council is a 42-member forum of representatives of all the districts and thematic meetings. Its main function is to reconcile the demands of each district with available resources, and to propose and approve an overall municipal budget. The resulting budget is binding—the city council can suggest changes but not require them. The budget is submitted to the mayor who may veto it and remand it to the Municipal Council of the Budget, but this has never happened. If there are residual problems, the council works out changes, returning to their neighborhoods for feedback. The internet provides an ongoing vehicle for involvement in participatory budgeting, which the city now extends to city planning features like land use and long-term major investments. The city posts progress reports, budget updates, and a calendar of all meetings.

An important by-product of the participatory budgeting process is a burgeoning of civic activity. As participatory budgeting developed, the numbers of political, cultural, and neighborhood groups has doubled, especially in poorer districts where results of self-generated new city expenditures are remarkable. People in wealthier districts also like what’s going on. The value of their properties in poorer districts is rising. A new city “energy of accomplishment” spawned a campaign to get property owners to pay their taxes, and it worked.

A livable city
Porto Alegre is one of the most livable cities in Brazil. The experiment has spread to more than 100 cities in Brazil and also to Montevideo, Uruguay and Cürdoba, Argentina. Here are the words of participant Luis Carlos Pereira about the changes he’s seen in his neighborhood: Before participatory budgeting, “there was no sewer, school, health clinic, or transportation. Now, a reservoir has been built with 6 million liters of water, the streets have been paved, and a school opened.” Eloah dos Santos Alves, a white-haired woman from the Leste region of the city, says “I have participated in the participatory budgeting process since 1989. In general, 85 percent of the needs have been met. We have a recycling warehouse, schools, day cares, and medical clinics. And I would like to let everyone know that I have never been treated differently for not being part of the PT”—the Workers’ Party, whose candidate, Luiz Inácio Lula da Silva was elected president of Brazil on October 27, 2002.

brain image
This study found reduced connectivity between an area of prefrontal cortex (PFC, red) and the amygdala (blue). The white matter pathway connecting the two structures (the uncinate fasciculus) is shown in green.

STRUCTURAL ABNORMALITIES
http://www.med.wisc.edu/news-events/news/psychopaths-brains-show-differences-in-structure-and-function/32979
Psychopaths’ Brains Show Differences in Structure and Function

Images of prisoners’ brains show important differences between those who are diagnosed as psychopaths and those who aren’t, according to a new study led by University of Wisconsin-Madison researchers. The results could help explain the callous and impulsive antisocial behavior exhibited by some psychopaths.The study showed that psychopaths have reduced connections between the ventromedial prefrontal cortex (vmPFC), the part of the brain responsible for sentiments such as empathy and guilt, and the amygdala, which mediates fear and anxiety.

Two types of brain images were collected. Diffusion tensor images (DTI) showed reduced structural integrity in the white matter fibers connecting the two areas, while a second type of image that maps brain activity, a functional magnetic resonance image (fMRI), showed less coordinated activity between the vmPFC and the amygdala. “This is the first study to show both structural and functional differences in the brains of people diagnosed with psychopathy,” says Michael Koenigs, assistant professor of psychiatry in the University of Wisconsin School of Medicine and Public Health. “Those two structures in the brain, which are believed to regulate emotion and social behavior, seem to not be communicating as they should.” The study, which took place in a medium-security prison in Wisconsin, is a unique collaborative between three laboratories, UW-Madison psychology Professor Joseph Newman has had a long term interest in studying and diagnosing those with psychopathy and has worked extensively in the Wisconsin corrections system. Dr. Kent Kiehl, of the University of New Mexico and the MIND Research Network, has a mobile MRI scanner that he brought to the prison and used to scan the prisoners’ brains. Koenigs and his graduate student, Julian Motzkin, led the analysis of the brain scans.


The video shows interactions between microglia (yellow) and dendritic spines (green) in the brain of a living mouse. Each frame is taken 5 minutes apart. The cell body of the microglia in the upper right corner is stable throughout the imaging session, but the microglial processes (looking like tentacles) are extremely dynamic, perpetually changing their morphology and dynamic interactions with small and transient dendritic spines over a span of minutes. http://www.med.wisc.edu/news-events/images-and-video-for-the-media/25328

The study compared the brains of 20 prisoners with a diagnosis of psychopathy with the brains of 20 other prisoners who committed similar crimes but were not diagnosed with psychopathy. “The combination of structural and functional abnormalities provides compelling evidence that the dysfunction observed in this crucial social-emotional circuitry is a stable characteristic of our psychopathic offenders,” Newman says. “I am optimistic that our ongoing collaborative work will shed more light on the source of this dysfunction and strategies for treating the problem.” Newman notes that none of this work would be possible without the extraordinary support provided by the Wisconsin Department of Corrections, which he called “the silent partner in this research.” He says the DOC has demonstrated an unprecedented commitment to supporting research designed to facilitate the differential diagnosis and treatment of prisoners. The study, published in the most recent Journal of Neuroscience, builds on earlier work by Newman and Koenigs that showed that psychopaths’ decision-making mirrors that of patients with known damage to their ventromedial prefrontal cortex (vmPFC). This bolsters evidence that problems in that part of the brain are connected to the disorder. “The decision-making study showed indirectly what this study shows directly – that there is a specific brain abnormality associated with criminal psychopathy,” Koenigs adds.



CRIMINAL JUSTICE IMPLICATIONS
http://www.thedailypage.com/daily/article.php?article=35292
UW-Madison Psychiatry imaging study finds brains of psychopaths are different
by Matt Hrodey  /  11/22/2011

The Koenigs Lab, an appendage of the University of Wisconsin Department of Psychiatry, says something about the multidisciplinary nature of neuroscience. Named for Michael Koenigs, an assistant professor of psychiatry, the lab includes a postdoctoral researcher with degrees in psychology and comparative religion, graduate students with backgrounds in biology, philosophy and English, and a scientist trained in applied math. Centered on the mind and nervous system, neuroscience is exploding, and there’s practically no topic it won’t take on, be it Shakespeare, meditation or consciousness itself. Or psychopathy.

In a paper to be published in the Nov. 30 Journal of Neuroscience, Koenigs, along with veteran UW psychopathy researcher Joseph Newman, will unveil new evidence of a physical basis for the disorder. In the study, Koenigs and Newman use brain scans of 40 inmates (20 psychopaths and 20 others) from Fox Lake Correctional Institution in Fox Lake, Wisconsin. In the scans of psychopathic brains, the researchers discovered poor connections between an important brain segment — the “ventromedial prefrontal cortex” (VMPFC) — and another crucial to emotional processing, the almond-shaped amygdala. The study will be the largest yet published that examines this link, according to Koenigs. Researchers used two types of brain scans: one testing the integrity of “white matter” structures connecting the VMPFC and the amygdala, and another tesing how well they communicate. Both types of scans found a weakened link in the brains of psychopaths.

Better understanding such abnormalities could, one day, reorder how the justice system responds to criminals who have them. “Can we hold them as accountable as someone who doesn’t have these abnormalities?” Koenigs asks. Scientists have studied the connection between the VMPFC and amygdala before. In one experiment using rodents, scientists found that stimulating the VMPFC suppressed the amygdala. Koenigs primarily studies brain injuries, particularly those in the VMPFC, where the brain is believed to regulate emotion, process threats, guide decision-making and direct social behavior. Damage to this segment, located just behind the forehead in the frontal lobes, tends to make patients more aggressive, irritable and less sensitive to others. “They’re not the same person they used to be,” Koenigs says. “They develop very striking personality changes reminiscent of psychopathy.”

Is a VMPFC deficiency to blame for psychopathy? It’s not clear. And scientists don’t know if the VMPFC is failing to regulate the amygdala or if the amydala is failing to send crucial emotional feedback to the VMPFC. “Normally, considering a decision [to rob someone] and the harm you would inflict would be marked with a negative emotional state,” says Koenigs. But in psychopaths, this affect is flat. To do their study at Fox Lake, Koenigs and Newman enlisted a mobile MRI lab run by Kent Kiehl, an associate professor of psychology at the University of New Mexico. The lab, pulled by a tractor trailer, brings the scanner to the inmates. Across the field of neuroscience, researchers are rapidly exploiting the powers of MRI scanning, particularly “functional” scanning, which tracks blood flow in the brain. This flow, because it is directed to busy neurons, is a precise indicator of brain activity. The new study is Newman’s first foray into brain imaging. “There’s a very strong bias toward using brain measurements,” he says, “and there’s been a lot of wonderful progress. People want to see how far we can go.”

Psychopathy is not as rare as some might believe. According to researchers, psychopaths make up an estimated 1% of the U.S. population and between 10% to 20% of the country’s prisoners. In his 30 years of studying psychopathy, Newman has theorized the existence of an “attention bottleneck” in the psychopathic mind that prevents it from fully receiving emotional and other inhibitory signals that say, “Stop! Reconsider! Reevaluate!” The conventional theory on psychopaths is that they lack emotion, be it fear, empathy or guilt, that would otherwise inform decision-making. Newman doesn’t deny that but insists on the importance of attention. “It feels like I’m trying to identify a learning disability,” he says. Our minds unconsciously monitor us. It happens in secret. Our conscious minds don’t know of it until the unconscious sounds an alarm — such as when a nagging suspicion of “having forgotten something” turns out to be true (the oven is still on; the keys were left on the car seat). The psychopathic brain may be very bad at automatically diverting attention to these types of cues if the psychopath is locked into “goal-driven” behavior, a kind of tunnel vision. Such an impairment, if it exists, doesn’t necessarily lead to crime. “Environmental factors are critical,” says Newman. They could be parental abuse, substance abuse or socioeconomic disadvantage. But once classified as a psychopath, an offender is two to five times more likely to reoffend than one who isn’t.

Newman tested his “attention bottleneck” theory in a study published earlier this year. In that study, 87 maximum-security inmates, some classified as psychopaths, sat down in front of computers. Two things appeared on the screen: a square, either red or green, and a letter, either uppercase or lowercase. In some of the trials, researchers startled inmates with a low-intensity shock after showing a red square. (Prisoners were told of the mild “buzzes” before they volunteered.) Each was shocked a total of 24 times, always after a red square. Then, to conclude the trials, the computer asked the prisoners to identify either the case of the letter or the color of the box. The human body, when conditioned to fear something, will startle at its appearance. This is called “fear-potentiated startle.” In the experiment, the red box primed the inmates to startle upon receiving the shock, and they did — with one major exception. In trials where psychopaths first saw the letter, followed by a red square, their startle was greatly diminished. Newman and the other researchers, Arielle Baskin-Sommers, a graduate student at UW-Madison, and John Curtin, a psychology professor, concluded that by presenting the letter first — thereby making the red square “secondary information that is not goal relevant” — the psychopaths fell victim to the “attention bottleneck” as theorized by Newman. They saw the square, but its meaning was not fully absorbed because the letter (and its case) had already won their attention.

There’s growing speculation today that neuroscience could revolutionize the U.S. criminal justice system, overthrowing the old precept of culpability. One indication of the promise of this growing field is a new dual degree program at UW-Madison that will train students in both neuroscience and the law. The “Neuroscience and the Law” track, part of the broader Neuroscience & Public Policyprogram, will allow students to earn a J.D. degree in law and a Ph.D. degree in neuroscience. Applications to join the new track’s first class come due this December. Professor Ron Kalil, a neuroscientist who studies brain injuries and the brain’s innate ability to repair itself, says the new program grew out of a 2010 meeting he had, over coffee, with Pilar Ossorio, an associate professor of law and bioethics. The two left with a “let’s do this” attitude, according to Kalil, but getting university approval for the new track didn’t happen overnight. To make the program official, they needed the approval of four university committees. They succeeded, adding “Neuroscience and the Law” to the existing tracks combining neuroscience and public policy and neuroscience and international public policy. Of neuroscience’s broad range, Kalil says, “At one end you have the study of molecules and proteins that make up parts of neurons, and at the other, the field tries to wrestle with issues that have been on the table since people started to think of themselves as human.” One of these is how to respond to crime, and what punishment is appropriate. “There are a lot of people who are not insane, but they’re not normal,” he says. “Where do we draw the line?”

YOUR BOSS is PSYCHO  (I KNOW, RIGHT?)
http://blogs.forbes.com/jeffbercovici/2011/06/14/why-some-psychopaths-make-great-ceos/
Why (Some) Psychopaths Make Great CEOs
by Jeff Bercovici / Jun 14 2011

British journalist Jon Ronson immersed himself in the world of mental health diagnosis and criminal profiling to understand what makes some people psychopaths — dangerous predators who lack the behavioral controls and tender feelings the rest of us take for granted. Among the things he learned while researching his new book, “The Psychopath Test: A Journey Through the Madness Industry”: the incidence of psychopathy among CEOs is about 4 percent, four times what it is in the population at large. I spoke with him recently about what that means and its implications for the business world and wider society.

Q. Are we really to understand that there’s some connection between what makes people psychopaths and what makes them CEO material?
A. At first I was really skeptical because it seemed like an easy thing to say, almost like a conspiracy theorist’s type of thing to say. I remember years and years ago a conspiracy theorist telling me the world was ruled by blood-drinking, baby-sacrificing lizards. These psychologists were essentially saying the same thing. Basically, when you get them talking, these people [ie. psychopaths] are different than human beings. They lack the things that make you human: empathy, remorse, loving kindness. So at first I thought this might just be psychologists feeling full of themselves with their big ideological notions. But then I met Al Dunlap. [That would be “Chainsaw” Al Dunlap, former CEO of Sunbeam and notorious downsizer.] He effortlessly turns the psychopath checklist into “Who Moved My Cheese?” Many items on the checklist he redefines into a manual of how to do well in capitalism. There was his reputation that he was a man who seemed to enjoy firing people, not to mention the stories from his first marriage — telling his first wife he wanted to know what human flesh tastes like, not going to his parents’ funerals. Then your realize that because of this dysfunctional capitalistic society we live in those things were positives. He was hailed and given high-powered jobs, and the more ruthlessly his administration behaved, the more his share price shot up.

Q. So you can just go down the list of Fortune 500 CEOs and say, “psychopath, psychopath, psychopath…”
A. Well, no. Dunlap was an exceptional figure, wasn’t he? An extreme figure. I think my book offers really good evidence that the way that capitalism is structured really is a physical manifestation of the brain anomaly known as psychopathy. However, I woudn’t say every Fortune 500 chief is a psychopath. That would turn me into an ideologue and I abhor ideologues.

Q. Is it an either/or thing? It seems to me, thinking about it, that a lot of the traits on the checklist would be be useful in a corporate ladder-climbing situation. So maybe there are a lot of CEOs who simply have some psychopathic tendencies.
A. It is a spectrum, but there’s a cutoff point. If you’re going by the Hare checklist [the standard inventory used in law enforcement, devised by leading researcher Robert Hare], where the top score is 40, the average anxiety-ridden business failure like me — although the fact that my book just made the Times best sellers list makes it difficult to call myself that — would score a 4 or 5. Somebody you have to be wary of would be in early 20s and a really hard core damaged person, a really dangerous psychopath, would score around a 30. In law the cutoff is 29. There are absolutes in psychopathy and the main absolute is a literal absence of empathy. It’s just not there. In higher-scoring psychopaths, what grows in the vacant field where that empathy should be is a joy in manipulating people, a lack of remorse, a lack of guilt. If you’ve got a little bit of empathy, you’re kind of not a psychopath.

Q. So maybe there’s a sweet spot? A point on the spectrum somewhere short of full-blown psychopathy that’s most conducive to success in business.
A. That’s possible. Obviously there are items on the checklist you don’t want to have if you’re a boss. You don’t want poor behavioral controls. It’d be better if you don’t have promiscuous behavior. It’d be better if you don’t have serious behavioral problems in childhood, because that will eventually come out. But you do want lack of empathy, lack of remorse, glibness, superficial charm, manipulativeness. I think the other positive traits for psychopaths in business is need for stimulation, proneness to boredom. You want somebody who can’t sit still, who’s constantly thinking about how to better things. A really interesting question is whether psychopathy can be a positive thing. Some psychologists would say yes, that there are certain attributes like coolness under pressure, which is sort of a fundamental positive. But Robert Hare would always say no, that in the absence of empathy, which is the definition in psychology of a psychopath, you will always get malevolence. Basically, high-scoring psychopaths can be brilliant bosses but only ever for short term. Just like Al Dunlap, they always want to make a killing and move on. And then you’ve got this question of what came first? Is society getting more and more psychopathic in its kind of desire for short-term killings? Is that because we kind of admire psychopaths in all their glib, superficial charm and ruthlessness?

Q. There’s a certain sour grapes aspect to accusing CEOs of being psychopaths. It’s very tempting to look at anyone more successful than you are and say, “It must be because he’s a monster.”
A. There’s a terribly seductive power in becoming a psychopath stalker. It can really dehumanize you. I can look at, say, Dominique Strauss Kahn, who, if one assumes that what one is hearing about him is true, certainly he hits a huge amount of items on the checklist — the $30,000 suits, the poor behavioral controls, the impulsivity, the promiscuous sexual behavior. But of course when you say this you’re in terrible danger of being seduced by the checklist, which I really like to add as a caveat. It kind of turns you into a bit of a psychopath yourself in that that you start to shove people into that box. It robs you of empathy and your connection to human beings. Which is why people like Robert Hare are kind of useful. I’m against the way that people like me can be seduced into misusing the checklist, but I’m not against the checklist.

PSYCHOPATHIC C.E.O.s
http://www.nytimes.com/2004/12/12/magazine/12PSYCHO.html
by Michael Steinberger / December 12, 2004

Ever wonder what leads a lavishly compensated C.E.O. to cheat, steal and lie? Perhaps he’s a psychopath, and now there is a test, the B-Scan 360, that can help make that determination. The B-Scan was conceived by Paul Babiak, an industrial psychologist, and Robert Hare, the creator of the standard tool for diagnosing psychopathic features in prison inmates. The B-Scan is the first formalized attempt to uncover similar tendencies in captains of industry, and it speaks to a growing suspicion that psychopaths may be especially adept at scaling the corporate ladder.

Indeed, Babiak and Hare could not have chosen a more propitious moment to roll out the B-Scan, which is now in the trial stage. The recent rash of damaging corporate scandals — combined with legislation making boards far more liable for executive malfeasance — has given companies good reason to screen current employees more rigorously. According to Babiak and Hare, white-collar psychopaths are not apt to become serial rapists or murderers. Rather, they are prone to being ”subcriminal” psychopaths: smooth-talking, energetic individuals who easily charm their way into jobs and promotions but who are also exceedingly manipulative, narcissistic and ruthless. The purpose of the B-Scan is to smoke out these “snakes in suits”. The individual being evaluated does not actually take the test. Instead, it is given to his or her superiors, subordinates and peers. They rate the subject in four broad categories — organizational maturity, personal style, emotional style and social style — and 16 subcategories, like reliability, honesty and sincerity.

Babiak and Hare say that decisions to promote or dismiss ought not to be made on the basis of the B-Scan alone and that it is possible, with good coaching and training, to turn a talented executive with mild psychopathic tendencies into an effective manager. They acknowledge too that strong corporate leadership may require a certain degree of guile, egoism and callousness. But they point out that the frenzied nature of modern business — the constant downsizing, the relentless merging and acquiring — provides a very fertile environment for havoc-wreaking psychopaths, who thrive on chaos and risk-taking. As Hare put it in one interview, ”If I couldn’t study psychopaths in prison, I would go down to the Stock Exchange.”

CONTACT
Paul Babiak
http://www.hrbackoffice.com/index-4.html
email : Inquiry [at] PaulBabiak [dot] com

Robert Hare
http://www.hare.org/
http://www.hare.org/links/media.html
http://www.hare.org/references/main.html
email : contact [at] hare [dot] org

PSYCHOPATHY CHECKLIST
http://en.wikipedia.org/wiki/Hare_Psychopathy_Checklist
http://www.hare.org/scales/
Psychopathy Scales

PCL-R   PCL:SV   P-SCAN   PCL:YV   APSD   TREATMENT GUIDELINES

“Dr. Hare has spent over 35 years researching psychopathy and is the developer of theHare Psychopathy Checklist-Revised (PCL-R), and a co-author of its derivatives, thePsychopathy Checklist: Screening Version (PCL:SV), the P-Scan, the Psychopathy Checklist: Youth Version (PCL:YV), and the Antisocial Process Screening Device(APSD). He is also a co-author of the Guidelines for a Psychopathy Treatment Program. The Hare Psychopathy Checklist-Revised, with demonstrated reliability and validity, is rapidly being adopted worldwide as the standard instrument for researchers and clinicians. The PCL-R and PCL:SV are strong predictors of recidivism, violence and response to therapeutic intervention. They play an important role in most recent risk-for-violence instruments. The PCL-R was reviewed in Buros Mental Measurements Yearbook (1995), as being the “state of the art” both clinically and in research use. In 2005, the Buros Mental Measurements Yearbook review listed the PCL-R as “a reliable and effective instrument for the measurement of psychopathy and is considered the ‘gold standard’ for measurement of psychopathy.”


Bison skull pile, 1870s

HR PROBLEM
http://www.humanresourcesmagazine.com.au/articles/51/0c030a51.asp
Catching the corporate psychopath
by Stuart Fagg / 15 June 2005

Rodney Adler, Ray Williams, Bernie Ebbers. These men have much in common. For a start they were once all hailed as successful businessmen and players of acumen, and secondly they are all now behind bars for their roles in the collapse of their companies. Of course they are not the only ones paying for their misdemeanours – there are plenty of share and policy holders who will attest to that. They also have one final thing in common – they all exhibit the behaviours of corporate psychopaths. According to Dr Robert Hogan, a US expert in personality profiling, however, it would seem that the likes of Adler are aberrations in the business world. But corporate psychopaths are far from unusual in the corporate world. By Hogan’s reckoning, the result of decades of research, incompetent and potentially damaging management accounts for some 60-70 per cent of the total pool in the US. When he brought these views to bear initially in the early 1990s, they were not popular and were dismissed by many that refused to believe that there were that many potential corporate psychopaths in US business. However, these days, and particularly having seen the damage wreaked by individuals after the scandals at Enron, WorldCom, OneTel and HIH, boards of directors and the share market are demanding more ethical executives. With the potential for increased liability under the Corporations Act, this trend may continue going forward. All well and good, but what is the impact of these corporate psychopaths? After all, some of the qualities that define such people also define some of the most successful people in business. “Researchers looked at Fortune 1000 companies that had 15 years of performance right at the average of their industry, and then a change and 15 subsequent years of sustained performance significantly above the average for the industry. Out of 1,000 companies they found 11,” Hogan said. “They investigated the 11 companies and found that the constant was the CEO. All 11 CEOs were understated and humble and that’s a stake in the heart for the theory of the celebrity CEO or charismatic leader.”

While background checks and screening are gaining popularity in Australian business, and in some cases being applied at higher executive levels, personality profiling remains a relatively unexplored concept in Australia. However, that may change. The Australian Prudential Regulation Authority, for example, is set to publish proposals for standards governing the fitness and propriety of responsible persons in financial institutions. The proposed standards are designed to weed out executives who have been declared bankrupt, failed to manage personal debts or held responsibility in a failed institution. Additionally anyone with a civil or criminal conviction related to dishonesty in dealings with financial institutions will also be barred. “The proposals are designed to reflect community expectations about persons who fill positions of responsibility in these industries and will set minimum benchmarks for people in, or wishing to enter, these industries at director, senior management or advisory level,” said Dr John Laker, APRA chairman. Traditionally, APRA has always focussed on the institution it is regulating, rather than the individuals running the institution. But, recent events in Australia and internationally have highlighted the importance of enuring that people in positions of power at companies are subject to the same scrutiny as the company itself. With regulated entities being required to develop their own policies, personality assessment may become more commonplace in sectors such as the insurance industry. But there is something of a grey area in the assessments. For example, financial markets traders must display some of the more undesirable qualities –ruthlessness, overt smartness and a tendency to gamble – for senior management to succeed in their positions. “We have a lot of data on traders and as a group they are real smart and really crazy,” said Hogan. “But don’t let them into management positions. People like that – Bill Clinton is a great example – tend to self nominate into leadership roles. They think they’re so hot they want to be in charge.”

Background checks and screening may not, however, detect these characteristics and head off the appointment of a potentially damaging executive. “The really bad guys will sail through a background check and will do really well in interviews. They do really well in assessment centres. The really dangerous ones are really smart, really charming and really fast on their feet and people love them.” This is where personality assessment earns its stripes, according to Hogan. Through developing his assessment system, Hogan has amassed an impressive data repository from the 3 million tests that have been carried out using his methodology. This data accurately tracks personality trends in business, and once companies see the data, said Hogan, it’s a relatively easy sell. But what happens if the CEO of the company is the corporate psychopath? “That’s our worst nightmare,” he told Human Resources. “When you assess the management team and see all these problems come from them, how can you fix that? But if you can find a company that’s willing to pay attention to data it’s an easy deal for us.”

“CHAINSAW” AL DUNLAP
http://www.portfolio.com/executives/2009/04/22/Al-Dunlap-Profile

“Picked by the board of Scott Paper Co. as the man to turn the struggling company around, Dunlap earned his nickname by slicing 11,000 employees. When Scott merged with Kimberly-Clark, Dunlap’s payoff was estimated at more than $100 million. Such scenarios are familiar. So are the debates over where to draw the line between painful-but-necessary restructuring and cold-hearted recklessness. Yet Dunlap stood out for the obvious joy he took in slamming his detractors as purveyors of “nonsense,” “rubbish,” and “socialism.” Chainsaw Al was the middle finger of the free market’s invisible hand.

Dunlap’s memoir-cum-manifesto, Mean Business, roughly coincided with his next CEO star turn, which was also to be his last. Sunbeam’s stock surged on the news that the Chainsaw was coming; massive workforce reductions and factory closures followed within months. His book clearly explained what set him apart from “addle-brained” and “weak” executives: “I’m a superstar in my field,” he wrote. Could there be a clearer sell signal? Unable to flip Sunbeam to a new buyer, as he’d done with Scott, Dunlap was stuck actually running the company. He failed spectacularly. Within two miserable years, the board fired him. The tactics he’d used to stave off losses—the company overstated its net income by $60 million, which was real money back then—earned him a civil suit from the SEC and a class-action suit by shareholders. Dunlap eventually settled both and was barred from serving as an officer or director of any public company. You could call Chainsaw Al’s story a fall from grace, but in his case, that’s probably not the proper word.”

UM, TOTALLY
http://www.fastcompany.com/magazine/96/open_boss.html
Is Your Boss a Psychopath?
by Alan Deutschman / December 19, 2007

One of the most provocative ideas about business in this decade so far surfaced in a most unlikely place. The forum wasn’t the Harvard Business School or one of those $4,000-a-head conferences where Silicon Valley’s venture capitalists search for the next big thing. It was a convention of Canadian cops in the far-flung province of Newfoundland. The speaker, a 71-year-old professor emeritus from the University of British Columbia, remains virtually unknown in the business realm. But he’s renowned in his own field: criminal psychology. Robert Hare is the creator of the Psychopathy Checklist. The 20-item personality evaluation has exerted enormous influence in its quarter-century history. It’s the standard tool for making clinical diagnoses of psychopaths — the 1% of the general population that isn’t burdened by conscience. Psychopaths have a profound lack of empathy. They use other people callously and remorselessly for their own ends. They seduce victims with a hypnotic charm that masks their true nature as pathological liars, master con artists, and heartless manipulators. Easily bored, they crave constant stimulation, so they seek thrills from real-life “games” they can win — and take pleasure from their power over other people.

On that August day in 2002, Hare gave a talk on psychopathy to about 150 police and law-enforcement officials. He was a legendary figure to that crowd. The FBI and the British justice system have long relied on his advice. He created the P-Scan, a test widely used by police departments to screen new recruits for psychopathy, and his ideas have inspired the testing of firefighters, teachers, and operators of nuclear power plants. According to the Canadian Press and Toronto Sun reporters who rescued the moment from obscurity, Hare began by talking about Mafia hit men and sex offenders, whose photos were projected on a large screen behind him. But then those images were replaced by pictures of top executives from WorldCom, which had just declared bankruptcy, and Enron, which imploded only months earlier. The securities frauds would eventually lead to long prison sentences for WorldCom CEO Bernard Ebbers and Enron CFO Andrew Fastow. “These are callous, cold-blooded individuals,” Hare said. “They don’t care that you have thoughts and feelings. They have no sense of guilt or remorse.” He talked about the pain and suffering the corporate rogues had inflicted on thousands of people who had lost their jobs, or their life’s savings. Some of those victims would succumb to heart attacks or commit suicide, he said.

Then Hare came out with a startling proposal. He said that the recent corporate scandals could have been prevented if CEOs were screened for psychopathic behavior. “Why wouldn’t we want to screen them?” he asked. “We screen police officers, teachers. Why not people who are going to handle billions of dollars?” It’s Hare’s latest contribution to the public awareness of “corporate psychopathy.” He appeared in the 2003 documentary The Corporation, giving authority to the film’s premise that corporations are “sociopathic” (a synonym for “psychopathic”) because they ruthlessly seek their own selfish interests — “shareholder value” — without regard for the harms they cause to others, such as environmental damage. Is Hare right? Are corporations fundamentally psychopathic organizations that attract similarly disposed people? It’s a compelling idea, especially given the recent evidence. Such scandals as Enron and WorldCom aren’t just aberrations; they represent what can happen when some basic currents in our business culture turn malignant. We’re worshipful of top executives who seem charismatic, visionary, and tough. So long as they’re lifting profits and stock prices, we’re willing to overlook that they can also be callous, conning, manipulative, deceitful, verbally and psychologically abusive, remorseless, exploitative, self-delusional, irresponsible, and megalomaniacal. So we collude in the elevation of leaders who are sadly insensitive to hurting others and society at large.

But wait, you say: Don’t bona fide psychopaths become serial killers or other kinds of violent criminals, rather than the guys in the next cubicle or the corner office? That was the conventional wisdom. Indeed, Hare began his work by studying men in prison. Granted, that’s still an unusually good place to look for the conscience-impaired. The average Psychopathy Checklist score for incarcerated male offenders in North America is 23.3, out of a possible 40. A score of around 20 qualifies as “moderately psychopathic.” Only 1% of the general population would score 30 or above, which is “highly psychopathic,” the range for the most violent offenders. Hare has said that the typical citizen would score a 3 or 4, while anything below that is “sliding into sainthood.” On the broad continuum between the ethical everyman and the predatory killer, there’s plenty of room for people who are ruthless but not violent. This is where you’re likely to find such people as Ebbers, Fastow, ImClone CEO Sam Waksal, and hotelier Leona Helmsley. We put several big-name CEOs through the checklist, and they scored as “moderately psychopathic”; our quiz on page 48 lets you try a similar exercise with your favorite boss. And this summer, together with New York industrial psychologist Paul Babiak, Hare begins marketing the B-Scan, a personality test that companies can use to spot job candidates who may have an MBA but lack a conscience. “I always said that if I wasn’t studying psychopaths in prison, I’d do it at the stock exchange,” Hare told Fast Company. “There are certainly more people in the business world who would score high in the psychopathic dimension than in the general population. You’ll find them in any organization where, by the nature of one’s position, you have power and control over other people and the opportunity to get something.”

There’s evidence that the business climate has become even more hospitable to psychopaths in recent years. In pioneering long-term studies of psychopaths in the workplace, Babiak focused on a half-dozen unnamed companies: One was a fast-growing high-tech firm, and the others were large multinationals undergoing dramatic organizational changes — severe downsizing, restructuring, mergers and acquisitions, and joint ventures. That’s just the sort of corporate tumult that has increasingly characterized the U.S. business landscape in the last couple of decades. And just as wars can produce exciting opportunities for murderous psychopaths to shine (think of Serbia’s Slobodan Milosevic and Radovan Karadzic), Babiak found that these organizational shake-ups created a welcoming environment for the corporate killer. “The psychopath has no difficulty dealing with the consequences of rapid change; in fact, he or she thrives on it,” Babiak claims. “Organizational chaos provides both the necessary stimulation for psychopathic thrill seeking and sufficient cover for psychopathic manipulation and abusive behavior.”

And you can make a compelling case that the New Economy, with its rule-breaking and roller-coaster results, is just dandy for folks with psychopathic traits too. A slow-moving old-economy corporation would be too boring for a psychopath, who needs constant stimulation. Its rigid structures and processes and predictable ways might stymie his unethical scheming. But a charge-ahead New Economy maverick — an Enron, for instance — would seem the ideal place for this kind of operator. But how can we recognize psychopathic types? Hare has revised his Psychopathy Checklist (known as the PCL-R, or simply “the Hare”) to make it easier to identify so-called subcriminal or corporate psychopaths. He has broken down the 20 personality characteristics into two subsets, or “factors.” Corporate psychopaths score high on Factor 1, the “selfish, callous, and remorseless use of others” category. It includes eight traits: glibness and superficial charm; grandiose sense of self-worth; pathological lying; conning and manipulativeness; lack of remorse or guilt; shallow affect (i.e., a coldness covered up by dramatic emotional displays that are actually playacting); callousness and lack of empathy; and the failure to accept responsibility for one’s own actions. Sound like anyone you know? (Corporate psychopaths score only low to moderate on Factor 2, which pinpoints “chronically unstable, antisocial, and socially deviant lifestyle,” the hallmarks of people who wind up in jail for rougher crimes than creative accounting.)

This view is supported by research by psychologists Belinda Board and Katarina Fritzon at the University of Surrey, who interviewed and gave personality tests to 39 high-level British executives and compared their profiles with those of criminals and psychiatric patients. The executives were even more likely to be superficially charming, egocentric, insincere, and manipulative, and just as likely to be grandiose, exploitative, and lacking in empathy. Board and Fritzon concluded that the businesspeople they studied might be called “successful psychopaths.” In contrast, the criminals — the “unsuccessful psychopaths” — were more impulsive and physically aggressive.

The Factor 1 psychopathic traits seem like the playbook of many corporate power brokers through the decades. Manipulative? Louis B. Mayer was said to be a better actor than any of the stars he employed at MGM, able to turn on the tears at will to evoke sympathy during salary negotiations with his actors. Callous? Henry Ford hired thugs to crush union organizers, deployed machine guns at his plants, and stockpiled tear gas. He cheated on his wife with his teenage personal assistant and then had the younger woman marry his chauffeur as a cover. Lacking empathy? Hotel magnate Leona Helmsley shouted profanities at and summarily fired hundreds of employees allegedly for trivialities, like a maid missing a piece of lint. Remorseless? Soon after Martin Davis ascended to the top position at Gulf & Western, a visitor asked why half the offices were empty on the top floor of the company’s Manhattan skyscraper. “Those were my enemies,” Davis said. “I got rid of them.” Deceitful? Oil baron Armand Hammer laundered money to pay for Soviet espionage. Grandiosity? Thy name is Trump.

In the most recent wave of scandals, Enron’s Fastow displayed many of the corporate psychopath’s traits. He pressured his bosses for a promotion to CFO even though he had a shaky grasp of the position’s basic responsibilities, such as accounting and treasury operations. Suffering delusions of grandeur after just a little time on the job, Fastow ordered Enron’s PR people to lobby CFO magazine to make him its CFO of the Year. But Fastow’s master manipulation was a scheme to loot Enron. He set up separate partnerships, secretly run by himself, to engage in deals with Enron. The deals quickly made tens of millions of dollars for Fastow — and prettified Enron’s financials in the short run by taking unwanted assets off its books. But they left Enron with time bombs that would ultimately cause the company’s total implosion — and lose shareholders billions. When Enron’s scandals were exposed, Fastow pleaded guilty to securities fraud and agreed to pay back nearly $24 million and serve 10 years in prison.

“Chainsaw” Al Dunlap might score impressively on the corporate Psychopathy Checklist too. What do you say about a guy who didn’t attend his own parents’ funerals? He allegedly threatened his first wife with guns and knives. She charged that he left her with no food and no access to their money while he was away for days. His divorce was granted on grounds of “extreme cruelty.” That’s the characteristic that endeared him to Wall Street, which applauded when he fired 11,000 workers at Scott Paper, then another 6,000 (half the labor force) at Sunbeam. Chainsaw hurled a chair at his human-resources chief, the very man who approved the handgun and bulletproof vest on his expense report. Dunlap needed the protection because so many people despised him. His plant closings kept up his reputation for ruthlessness but made no sense economically, and Sunbeam’s financial gains were really the result of Dunlap’s alleged book cooking. When he was finally exposed and booted, Dunlap had the nerve to demand severance pay and insist that the board reprice his stock options. Talk about failure to accept responsibility for one’s own actions. While knaves such as Fastow and Dunlap make the headlines, most horror stories of workplace psychopathy remain the stuff of frightened whispers. Insiders in the New York media business say the publisher of one of the nation’s most famous magazines broke the nose of one of his female sales reps in the 1990s. But he was considered so valuable to the organization that the incident didn’t impede his career.

Most criminals — whether psychopathic or not — are shaped by poverty and often childhood abuse as well. In contrast, corporate psychopaths typically grew up in stable, loving families that were middle class or affluent. But because they’re pathological liars, they tell romanticized tales of rising from tough, impoverished backgrounds. Dunlap pretended that he grew up as the son of a laid-off dockworker; in truth, his father worked steadily and raised his family in suburban comfort. The corporate psychopaths whom Babiak studied all went to college, and a couple even had PhDs. Their ruthless pursuit of self-interest was more easily accomplished in the white-collar realm, which their backgrounds had groomed them for, rather than the criminal one, which comes with much lousier odds. Psychopaths succeed in conventional society in large measure because few of us grasp that they are fundamentally different from ourselves. We assume that they, too, care about other people’s feelings. This makes it easier for them to “play” us. Although they lack empathy, they develop an actor’s expertise in evoking ours. While they don’t care about us, “they have an element of emotional intelligence, of being able to see our emotions very clearly and manipulate them,” says Michael Maccoby, a psychotherapist who has consulted for major corporations.

Psychopaths are typically very likable. They make us believe that they reciprocate our loyalty and friendship. When we realize that they were conning us all along, we feel betrayed and foolish. “People see sociopathy in their personal lives, and they don’t have a clue that it has a label or that others have encountered it,” says Martha Stout, a psychologist at the Harvard Medical School and the author of the recent best-seller The Sociopath Next Door: The Ruthless Versus the Rest of Us (Broadway Books, 2005). “It makes them feel crazy or alone. It goes against our intuition that a small percentage of people can be so different from the rest of us — and so evil. Good people don’t want to believe it.” Of course, cynics might say that it can be an advantage to lack a conscience. That’s probably why major investors installed Dunlap as the CEO of Sunbeam: He had no qualms about decimating the workforce to impress Wall Street. One reason outside executives get brought into troubled companies is that they lack the emotional stake in either the enterprise or its people. It’s easier for them to act callously and remorselessly, which is exactly what their backers want. The obvious danger of the new B-Scan test for psychopathic tendencies is that companies will hire or promote people with high scores rather than screen them out. Even Babiak, the test’s codeveloper, says that while “a high score is a red flag, sometimes middle scores are okay. Perhaps you don’t want the most honest and upfront salesman.”

Indeed, not every aberrant boss is necessarily a corporate psychopath. There’s another personality that’s often found in the executive suite: the narcissist. While many psychologists would call narcissism a disorder, this trait can be quite beneficial for top bosses, and it’s certainly less pathological than psychopathy. Maccoby’s book The Productive Narcissist: The Promise and Perils of Visionary Leadership (Broadway Books, 2003) portrays the narcissistic CEO as a grandiose egotist who is on a mission to help humanity in the abstract even though he’s often insensitive to the real people around him. Maccoby counts Apple’s Steve Jobs, General Electric’s Jack Welch, Intel’s Andy Grove, Microsoft’s Bill Gates, and Southwest Airlines’ Herb Kelleher as “productive narcissists,” or PNs. Narcissists are visionaries who attract hordes of followers, which can make them excel as innovators, but they’re poor listeners and they can be awfully touchy about criticism. “These people don’t have much empathy,” Maccoby says. “When Bill Gates tells someone, ‘That’s the stupidest thing I’ve ever heard,’ or Steve Jobs calls someone a bozo, they’re not concerned about people’s feelings. They see other people as a means toward their ends. But they do have a sense of changing the world — in their eyes, improving the world. They build their own view of what the world should be and get others recruited to their vision. Psychopaths, in contrast, are only interested in self.”

Maccoby concedes that productive narcissists can become “drunk with power” and turn destructive. The trick, he thinks, is to pair a productive narcissist with a “productive obsessive,” or conscientious, control-minded manager. Think of Grove when he was matched with chief operating officer Craig Barrett, Gates with president Steve Ballmer, Kelleher with COO Colleen Barrett, and Oracle’s Larry Ellison with COO Ray Lane and CFO Jeff Henley. In his remarkably successful second tour of duty at Apple, Jobs has been balanced by steady, competent behind-the-scenes players such as Timothy Cook, his executive vice president for sales and operations. But our culture’s embrace of narcissism as the hallmark of admired business leaders is dangerous, Babiak maintains, since “individuals who are really psychopaths are often mistaken for narcissists and chosen by the organization for leadership positions.” How does he distinguish the difference between the two types? “In the case of a narcissist, everything is me, me, me,” Babiak explains. “With a psychopath, it’s ‘Is it thrilling, is it a game I can win, and does it hurt others?’ My belief is a psychopath enjoys hurting others.”

Intriguingly, Babiak believes that it’s extremely unlikely for an entrepreneurial founder-CEO to be a corporate psychopath because the company is an extension of his own ego — something he promotes rather than plunders. “The psychopath has no allegiance to the company at all, just to self,” Babiak says. “A psychopath is playing a short-term parasitic game.” That was the profile of Fastow and Dunlap — guys out to profit for themselves without any concern for the companies and lives they were wrecking. In contrast, Jobs and Ellison want their own companies to thrive forever — indeed, to dominate their industries and take over other fields as well. “An entrepreneurial founder-CEO might have a narcissistic tendency that looks like psychopathy,” Babiak says. “But they have a vested interest: Their identity is wrapped up with the company’s existence. They’re loyal to the company.” So these types are ruthless not only for themselves but also for their companies, their extensions of self.

The issue is whether we will continue to elevate, celebrate, and reward so many executives who, however charismatic, remain indifferent to hurting other people. Babiak says that while the first line of defense against psychopaths in the workplace is screening job candidates, the second line is a “culture of openness and trust, especially when the company is undergoing intense, chaotic change.” Europe is far ahead of the United States in trying to deal with psychological abuse and manipulation at work. The “antibullying” movement in Europe has produced new laws in France and Sweden. Harvard’s Stout suggests that the relentlessly individualistic culture of the United States contributes a lot to our problems. She points out that psychopathy has a dramatically lower incidence in certain Asian cultures, where the heritage has emphasized community bonds rather than glorified self-interest. “If we continue to go this way in our Western culture,” she says, “evolutionarily speaking, it doesn’t end well.” The good news is that we can do something about corporate psychopaths. Scientific consensus says that only about 50% of personality is influenced by genetics, so psychopaths are molded by our culture just as much as they are born among us. But unless American business makes a dramatic shift, we’ll get more Enrons — and deserve them.

the PSYCHOPATH TEST
http://www.npr.org/2011/05/21/136462824/a-psychopath-walks-into-a-room-can-you-tell
http://www.thisamericanlife.org/radio-archives/episode/436/the-psychopath-test
aired 05.27.2011

Recently we heard about this test that could determine if someone was a psychopath. So, naturally, our staff decided to take it. This week we hear the results. Ira explains that when the radio staff decided to take a test that reveals who is a psychopath, very quickly everyone came to believe that the highest score would go to either Robyn, Jane, or him. (6 minutes)

Underachievement Test
NPR Science Correspondent Alix Spiegel tells the story of Robert Dixon, who’s in a maximum security prison in Vacaville California and is unlikely to ever get parole because of his score on the psychopath test. The test also is called “the checklist” or, more formally, the PCL-R, which stands for “Psychopathy Check List—Revised.” Alix tells the story of its creation and reports that the man who created the test, Bob Hare, is concerned at how it’s being used today in the criminal justice system. A version of this story aired on NPR’s All Things Considered. (28 minutes)

King of the Forest
Jon Ronson investigates whether corporate leaders can, in fact, be psychopaths by visiting a former Sunbeam CEO named Al Dunlap. This is an excerpt from Ronson’s book, The Psychopath Test. (15 minutes)Song: “If I Were King of the Forest”, Wizard of Oz Soundtrack

Results
Ira and the radio show staff get their results on the psychopath test from Dr. David Bernstein, ofForensic Consultants, LLC., who administered the test to them. (6 minutes)

TAKE the QUIZ
http://www.fastcompany.com/magazine/96/open_boss-quiz.html
by Fast Company Staff / July 1, 2005

The standard clinical test for psychopathy, Robert Hare’s PCL-R, evaluates 20 personality traits overall, but a subset of eight traits defines what he calls the “corporate psychopath” — the nonviolent person prone to the “selfish, callous, and remorseless use of others.” Does your boss fit the profile? Here’s our do-it-yourself quiz drawing on the test manual and Hare’s book Without Conscience. (Disclaimer: If you’re not a psychologist or psychiatrist, this will be a strictly amateur exercise.) We’ve used the pronoun “he,” but research suggests psychologists have underestimated the psychopathic propensity of women.

For each question, score two points for “yes,” one point for “somewhat” or “maybe,” and zero points for “no.”

[1] Is he glib and superficially charming?
Is he a likable personality and a terrific talker — entertaining, persuasive, but maybe a bit too smooth and slick? Can he pass himself off as a supposed expert in a business meeting even though he really doesn’t know much about the topic? Is he a flatterer? Seductive, but insincere? Does he tell amusing but unlikely anecdotes celebrating his own past? Can he persuade his colleagues to support a certain position this week — and then argue with equal conviction and persuasiveness for the opposite position next week? If he’s a CEO, can he appear on TV and somehow get away without answering the interviewer’s direct questions or saying anything truly substantive?
SCORE__

[2] Does he have a grandiose sense of self-worth?
Does he brag? Is he arrogant? Superior? Domineering? Does he feel he’s above the rules that apply to “little people”? Does he act as though everything revolves around him? Does he downplay his legal, financial, or personal problems, say they’re just temporary, or blame them on others?
SCORE__

[3] Is he a pathological liar?
Has he reinvented his own past in a more positive light — for example, claiming that he rose from a tough, poor background even though he really grew up middle class? Does he lie habitually even though he can easily be found out? When he’s exposed, does he still act unconcerned because he thinks he can weasel out of it? Does he enjoy lying? Is he proud of his knack for deceit? Is it hard to tell whether he knows he’s a liar or whether he deceives himself and believes his own bull?
SCORE__

[4] Is he a con artist or master manipulator?
Does he use his skill at lying to cheat or manipulate other people in his quest for money, power, status, and sex? Does he “use” people brilliantly? Does he engage in dishonest schemes such as cooking the books?
SCORE__

[5] When he harms other people, does he feel a lack of remorse or guilt?
Is he concerned about himself rather than the wreckage he inflicts on others or society at large? Does he say he feels bad but act as though he really doesn’t? Even if he has been convicted of a white-collar crime, such as securities fraud, does he not accept blame for what he did, even after getting out of prison? Does he blame others for the trouble he causes?
SCORE__

[6] Does he have a shallow affect?
Is he cold and detached, even when someone near him dies, suffers, or falls seriously ill — for example, does he visit the hospital or attend the funeral? Does he make brief, dramatic displays of emotion that are nothing more than putting on a theatrical mask and playacting for effect? Does he claim to be your friend but rarely or never ask about the details of your life or your emotional state? Is he one of those tough-guy executives who brag about how emotions are for whiners and losers?
SCORE__

[7] Is he callous and lacking in empathy?
Does he not give a damn about the feelings or well-being of other people? Is he profoundly selfish? Does he cruelly mock others? Is he emotionally or verbally abusive toward employees, “friends,” and family members? Can he fire employees without concern for how they’ll get by without the job? Can he profit from embezzlement or stock fraud without concern for the harm he’s doing to shareholders or pensioners who need their savings to pay for their retirements?
SCORE__

[8] Does he fail to accept responsibility for his own actions?
Does he always cook up some excuse? Does he blame others for what he’s done? If he’s under investigation or on trial for a corporate crime, like deceitful accounting or stock fraud, does he refuse to acknowledge wrongdoing even when the hard evidence is stacked against him?
SCORE__

Total____
If your boss scores:
1-4 | Be frustrated
5-7 | Be cautious
8-12 | Be afraid
13-16 | Be very afraid

SO CHARMING at FIRST
http://www.psychologytoday.com/articles/199401/charming-psychopath
by Robert Hare / January 01, 1994

A major part of my own quarter-century search for answers to this enigma has been a concerted effort to develop an accurate means of detecting the psychopaths among us. Measurement and categorization are, of course, fundamental to any scientific endeavor, but the implications of being able to identify psychopaths are as much practical as academic. To put it simply, if we can’t spot them, we are doomed to be their victims, both as individuals and as a society. My role in the search for psychopaths began in the 1960s at the psychology department of the University of British Columbia. There, my growing interest in psychopathy merged with my experience working with psychopaths in prison to form what was to become my life’s work. I assembled a team of clinicians who would identify psychopaths in the prison population by means of long, detailed interviews and close study of file information. From this eventually developed a highly reliable diagnostic tool that any clinician or researcher could use and that yielded a richly detailed profile of the personality disorder called psychopathy. We named this instrument the Psychopathy Checklist (Multi-Health Systems; 1991). The checklist is now used worldwide and provides clinicians and researchers with a way of distinguishing, with reasonable certainty, true psychopaths from those who merely break the rules.

What follows is a general summary of the key traits and behaviors of a psychopath. Do not use these symptoms to diagnose yourself or others. A diagnosis requires explicit training and access to the formal scoring manual. If you suspect that someone you know conforms to the profile described here, and if it is important for you to have an expert opinion, you should obtain the services of a qualified (registered) forensic psychologist or psychiatrist. Also, be aware that people who are not psychopaths may have some of the symptoms described here. Many people are impulsive, or glib, or cold and unfeeling, but this does not mean that they are psychopaths. Psychopathy is a syndrome—a cluster of related symptoms.

Key Symptoms of Psychopathy
Emotional/Interpersonal:

  • Glib and superficial
  • Egocentric and grandiose
  • Lack of remorse or guilt
  • Lack of empathy
  • Deceitful and manipulative
  • Shallow emotions

Social Deviance:

  • Impulsive
  • Poor behavior controls
  • Need for excitement
  • Lack of responsibility
  • Early behavior problems
  • Adult antisocial behavior

Glib and Superficial
Psychopaths are often voluble and verbally facile. They can be amusing and entertaining conversationalists, ready with a clever comeback, and are able to tell unlikely but convincing stories that cast themselves in a good light. They can be very effective in presenting themselves well and are often very likable and charming. One of my raters described an interview she did with a prisoner: “I sat down and took out my clipboard,” she said, “and the first thing this guy told me was what beautiful eyes I had. He managed to work quite a few compliments on my appearance into the interview, so by the time I wrapped things up, I was feeling unusually… well, pretty. I’m a wary person, especially on the job, and can usually spot a phony. When I got back outside, I couldn’t believe I’d fallen for a line like that.”

Egocentric and Grandiose
Psychopaths have a narcissistic and grossly inflated view of their own self-worth and importance, a truly astounding egocentricity and sense of entitlement, and see themselves as the center of the universe, justified in living according to their own rules. “It’s not that I don’t follow the law,” said one subject. “I follow my own laws. I never violate my own rules.” She then proceeded to describe these rules in terms of “looking out for number one.” Psychopaths often claim to have specific goals but show little appreciation regarding the qualifications required—they have no idea of how to achieve them and little or no chance of attaining these goals, given their track record and lack of sustained interest in formal education. The psychopathic inmate might outline vague plans to become a lawyer for the poor or a property tycoon. One inmate, not particularly literate, managed to copyright the title of a book he was planning to write about himself, already counting the fortune his best-selling book would bring.

Lack of Remorse or Guilt
Psychopaths show a stunning lack of concern for the effects their actions have on others, no matter how devastating these might be. They may appear completely forthright about the matter, calmly stating that they have no sense of guilt, are not sorry for the ensuing pain, and that there is no reason now to be concerned. When asked if he had any regrets about stabbing a robbery victim who subsequently spent time in the hospital as a result of his wounds, one of our subjects replied, “Get real! He spends a few months in hospital and I rot here. If I wanted to kill him I would have slit his throat. That’s the kind of guy I am; I gave him a break.” Their lack of remorse or guilt is associated with a remarkable ability to rationalize their behavior, to shrug off personal responsibility for actions that cause family, friends, and others to reel with shock and disappointment. They usually have handy excuses for their behavior, and in some cases deny that it happened at all.

Lack of Empathy
Many of the characteristics displayed by psychopaths are closely associated with a profound lack of empathy and inability to construct a mental and emotional “facsimile” of another person. They seem completely unable to “get into the skin” of others, except in a purely intellectual sense. They are completely indifferent to the rights and suffering of family and strangers alike. If they do maintain ties, it is only because they see family members as possessions. One of our subjects allowed her boyfriend to sexually molest her five-year-old daughter because “he wore me out. I wasn’t ready for more sex that night.” The woman found it hard to understand why the authorities took her child into care.

Deceitful and Manipulative
With their powers of imagination in gear and beamed on themselves, psychopaths appear amazingly unfazed by the possibility—or even by the certainty—of being found out. When caught in a lie or challenged with the truth, they seldom appear perplexed or embarrassed—they simply change their stories or attempt to rework the facts so they appear to be consistent with the lie. The result is a series of contradictory statements and a thoroughly confused listener. And psychopaths seem proud of their ability to lie. When asked if she lied easily, one woman laughed and replied, “I’m the best. I think it’s because I sometimes admit to something bad about myself. They think, well, if she’s admitting to that she must be telling the truth about the rest.”

Shallow Emotions
Psychopaths seem to suffer a kind of emotional poverty that limits the range and depth of their feelings. At times they appear to be cold and unemotional while nevertheless being prone to dramatic, shallow, and short-lived displays of feeling. Careful observers are left with the impression they are playacting and little is going on below the surface. A psychopath in our research said that he didn’t really understand what others meant by fear. “When I rob a bank,” he said, “I notice that the teller shakes. One barfed all over the money. She must have been pretty messed up inside, but I don’t know why. If someone pointed a gun at me I guess I’d be afraid, but I wouldn’t throw up.” When asked if he ever felt his heart pound or his stomach churn, he replied, “Of course! I’m not a robot. I really get pumped up when I have sex or when I get into a fight.”

Impulsive
Psychopaths are unlikely to spend much time weighing the pros and cons of a course of action or considering the possible consequences. “I did it because I felt like it,” is a common response. These impulsive acts often result from an aim that plays a central role in most of the psychopath’s behavior: to achieve immediate satisfaction, pleasure, or relief. So family members, relatives, employers, and coworkers typically find themselves standing around asking themselves what happened—jobs are quit, relationships broken off, plans changed, houses ransacked, people hurt, often for what appears as little more than a whim. As the husband of a psychopath I studied put it: “She got up and left the table, and that was the last I saw of her for two months.”

Poor Behavior Controls
Besides being impulsive, psychopaths are highly reactive to perceived insults or slights. Most of us have powerful inhibitory controls over our behavior; even if we would like to respond aggressively we are usually able to “keep the lid on.” In psychopaths, these inhibitory controls are weak, and the slightest provocation is sufficient to overcome them. As a result, psychopaths are short-tempered or hotheaded and tend to respond to frustration, failure, discipline, and criticism with sudden violence, threats or verbal abuse. But their outbursts, extreme as they may be, are often short-lived, and they quickly act as if nothing out of the ordinary has happened. For example, an inmate in line for dinner was accidentally bumped by another inmate, whom he proceeded to beat senseless. The attacker then stepped back into line as if nothing had happened. Despite the fact that he faced solitary confinement as punishment for the infraction, his only comment when asked to explain himself was, “I was pissed off. He stepped into my space. I did what I had to do. Although psychopaths have a “hair trigger,” their aggressive displays are “cold”; they lack the intense arousal experienced when other individuals lose their temper.

A Need for Excitement
Psychopaths have an ongoing and excessive need for excitement—they long to live in the fast lane or “on the edge,” where the action is. In many cases the action involves the breaking of rules. Many psychopaths describe “doing crime” for excitement or thrills. When asked if she ever did dangerous things just for fun, one of our female psychopaths replied, “Yeah, lots of things. But what I find most exciting is walking through airports with drugs. Christ! What a high!” The flip side of this yen for excitement is an inability to tolerate routine or monotony. Psychopaths are easily bored and are not likely to engage in activities that are dull, repetitive, or require intense concentration over long periods.

Lack of Responsibility
Obligations and commitments mean nothing to psychopaths. Their good intentions—”I’ll never cheat on you again”—are promises written on the wind. Horrendous credit histories, for example, reveal the lightly taken debt, the loan shrugged off, the empty pledge to contribute to a child’s support. Their performance on the job is erratic, with frequent absences, misuse of company resources, violations of company policy, and general untrustworthiness. They do not honor formal or implied commitments to people, organizations, or principles. Psychopaths are not deterred by the possibility that their actions mean hardship or risk for others. A 25-year-old inmate in our studies has received more than 20 convictions for dangerous driving, driving while impaired, leaving the scene of an accident, driving without a license, and criminal negligence causing death. When asked if he would continue to drive after his release from prison, he replied, “Why not? Sure, I drive fast, but I’m good at it. It takes two to have an accident.”

Early Behavior Problems
Most psychopaths begin to exhibit serious behavioral problems at an early age. These might include persistent lying, cheating, theft, arson, truancy, substance abuse, vandalism, and/or precocious sexuality. Because many children exhibit some of these behaviors at one time or another—especially children raised in violent neighborhoods or in disrupted or abusive families—it is important to emphasize that the psychopath’s history of such behaviors is more extensive and serious than most, even when compared with that of siblings and friends raised in similar settings. One subject, serving time for fraud, told us that as a child he would put a noose around the neck of a cat, tie the other end of the string to the top of a pole, and bat the cat around the pole with a tennis racket. Although not all adult psychopaths exhibited this degree of cruelty when in their youth, virtually all routinely got themselves into a wide range of difficulties.

Adult Antisocial Behavior
Psychopaths see the rules and expectations of society as inconvenient and unreasonable impediments to their own behavioral expression. They make their own rules, both as children and as adults. Many of the antisocial acts of psychopaths lead to criminal charges and convictions. Even within the criminal population, psychopaths stand out, largely because the antisocial and illegal activities of psychopaths are more varied and frequent than are those of other criminals. Psychopaths tend to have no particular affinity, or “specialty,” for one particular type of crime but tend to try everything. But not all psychopaths end up in jail. Many of the things they do escape detection or prosecution, or are on “the shady side of the law.” For them, antisocial behavior may consist of phony stock promotions, questionable business practices, spouse or child abuse, and so forth. Many others do things that, though not necessarily illegal, are nevertheless unethical, immoral, or harmful to others: philandering or cheating on a spouse to name a few.

Origins
Thinking about psychopathy leads us very quickly to a single fundamental question: Why are some people like this? Unfortunately, the forces that produce a psychopath are still obscure, an admission those looking for clear answers will find unsatisfying. Nevertheless, there are several rudimentary theories about the cause of psychopathy worth considering. At one end of the spectrum are theories that view psychopathy as largely the product of genetic or biological factors (nature), whereas theories at the other end posit that psychopathy results entirely from a faulty early social environment (nurture). The position that I favor is that psychopathy emerges from a complex—and poorly understood—interplay between biological factors and social forces. It is based on evidence that genetic factors contribute to the biological bases of brain function and to basic personality structure, which in turn influence the way an individual responds to, and interacts with, life experiences and the social environment. In effect, the core elements needed for the development of psychopathy—including a profound inability to experience empathy and the complete range of emotions, including fear—are in part provided by nature and possibly by some unknown biological influences on the developing fetus and neonate. As a result, the capacity for developing internal controls and conscience and for making emotional “connections” with others is greatly reduced.

Can Anything Be Done?
In their desperate search for solutions people trapped in a destructive and seemingly hopeless relationship with a psychopath frequently are told: Quit indulging him and send him for therapy. A basic assumption of psychotherapy is that the patient needs and wants help for distressing or painful psychological and emotional problems. Successful therapy also requires that the patient actively participate, along with the therapist, in the search for relief of his or her symptoms. In short, the patient must recognize there is a problem and must want to do something about it. But here is the crux: Psychopaths don’t feel they have psychological or emotional problems, and they see no reason to change their behavior to conform with societal standards they do not agree with. Thus, in spite of more than a century of clinical study and decades of research, the mystery of the psychopath still remains. Recent developments have provided us with new insights into the nature of this disturbing disorder, and its borders are becoming more defined. But compared with other major clinical disorders, little research has been devoted to psychopathy, even though it is responsible for more social distress and disruption than all other psychiatric disorders combined. So, rather than trying to pick up the pieces after the damage has been done, it would make far greater sense to increase our efforts to understand this perplexing disorder and to search for effective early interventions. The alternatives are to continue devoting massive resources to the prosecution, incarceration, and supervision of psychopaths after they have committed offenses against society and to continue to ignore the welfare and plight of their victims. We have to learn how to socialize them, not resocialize them. And this will require serious efforts at research and early intervention. It is imperative that we continue the search for clues.

{Excerpted from Without Conscience: The Disturbing World of the Psychopaths Among Us (Simon & Schuster) by Robert Hare, Ph.D. Copyright 1993.}

A Survival Guide
Although no one is completely immune to the devious machinations of the psychopath, there are some things you can do to reduce your vulnerability.

  • Know what you are dealing with. This sounds easy but in fact can be very difficult. All the reading in the world cannot immunize you from the devastating effects of psychopaths. Everyone, including the experts, can be taken in, conned, and left bewildered by them. A good psychopath can play a concerto on anyone’s heart strings.
  • Try not to be influenced by “props.” It is not easy to get beyond the winning smile, the captivating body language, the fast talk of the typical psychopath, all of which blind us to his or her real intentions. Many people find it difficult to deal with the intense, “predatory state” of the psychopath. The fixated stare, is more a prelude to self-gratification and the exercise of power rather than simple interest or empathic caring.
  • Don’t wear blinders. Enter new relationships with your eyes wide open. Like the rest of us, most psychopathic con artists and “love-thieves” initially hide their dark side by putting their “best foot forward.” Cracks may soon begin to appear in the mask they wear, but once trapped in their web, it will be difficult to escape financially and emotionally unscathed.
  • Keep your guard up in high-risk situations. Some situations are tailor-made for psychopaths: singles bars, ship cruises, foreign airports, etc. In each case, the potential victim is lonely, looking for a good time, excitement, or companionship, and there will usually be someone willing to oblige, for a hidden price.
  • Know yourself. Psychopaths are skilled at detecting and ruthlessly exploiting your weak spots. Your best defense is to understand what these spots are, and to be extremely wary of anyone who zeroes in on them.

Unfortunately, even the most careful precautions are no guarantee that you will be safe from a determined psychopath. In such cases, all you can do is try to exert some sort of damage control. This is not easy but some suggestions may be of help:

  • Obtain professional advice. Make sure the clinician you consult is familiar with the literature on psychopathy and has had experience in dealing with psychopaths.
  • Don’t blame yourself. Whatever the reasons for being involved with a psychopath, it is important that you not accept blame for his or her attitudes and behavior. Psychopaths play by the same rules—their rules—with everyone.
  • Be aware of who the victim is. Psychopaths often give the impression that it is they who are suffering and that the victims are to blame for their misery. Don’t waste your sympathy on them.
  • Recognize that you are not alone. Most psychopaths have lots of victims. It is certain that a psychopath who is causing you grief is also causing grief to others.
  • Be careful about power struggles. Keep in mind that psychopaths have a strong need for psychological and physical control over others. This doesn’t mean that you shouldn’t stand up for your rights, but it will probably be difficult to do so without risking serious emotional or physical trauma.
  • Set firm ground rules. Although power struggles with a psychopath are risky you may be able to set up some clear rules—both for yourself and for the psychopath—to make your life easier and begin the difficult transition from victim to a person looking out for yourself.
  • Don’t expect dramatic changes. To a large extent, the personality of psychopaths is “carved in stone.” There is little likelihood that anything you do will produce fundamental, sustained changes in how they see themselves or others.
  • Cut your losses. Most victims of psychopaths end up feeling confused and hopeless, and convinced that they are largely to blame for the problem. The more you give in the more you will be taken advantage of by the psychopath’s insatiable appetite for power and control.
  • Use support groups. By the time your suspicions have led you to seek a diagnosis, you already know that you’re in for a very long and bumpy ride. Make sure you have all the emotional support you can muster.

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A passenger passes a covered ticket machine with a plastic bag during a protest by PAME, a Communist Party-backed labor union, at the Syntagma Metro station in Athens.

GREEKS REFUSE AUSTERITY MEASURES
http://www.msnbc.msn.com/id/41723432/ns/business-world_business/
‘I won’t pay’ movement spreads across Greece
by Elena Becatoros / 2.22.2011

In light of austerity measures, citizens ignore tolls, transit ticket costs, even bills for healthcare

ATHENS, Greece— They blockade highway toll booths to give drivers free passage. They cover subway ticket machines with plastic bags so commuters can’t pay. Even doctors are joining in, preventing patients from paying fees at state hospitals. Some call it civil disobedience. Others a freeloading spirit. Either way, Greece’s “I Won’t Pay” movement has sparked heated debate in a nation reeling from a debt crisis that’s forced the government to take drastic austerity measures — including higher taxes, wage and pension cuts, and price spikes in public services. What started as a small pressure group of residents outside Athens angered by higher highway tolls has grown into a movement affecting ever more sectors of society — one that many say is being hijacked by left-wing parties keen to ride popular discontent. A rash of political scandals in recent years, including a dubious land swap deal with a rich monastery and alleged bribes in state contracts — has fueled the rebellious mood. At dawn last Friday, about 100 bleary-eyed activists from a Communist Party-backed labor union covered ticket machines with plastic bags at Athens metro stations, preventing passengers from paying their fares, to protest public transport ticket price hikes. Other activists have taped up ticket machines on buses and trams. And thousands of people simply don’t bother validating their public transport tickets when they take the subway or the bus. “The people have paid already through their taxes, so they should be able to travel for free,” said Konstantinos Thimianos, 36, an activist standing at the metro picket line in central Syntagma Square. In one of their frequent occupations of the toll booths on the northern outskirts of Athens recently, protesters wore brightly colored vests with “total disobedience” emblazoned across their backs, and chanted: “We won’t pay for their crisis!”

The tactic has cropped up in the health sector, with some state hospital doctors staging a blockade in front of pay counters to prevent patients from paying their €5 flat fee for consultations. Critics deride the protests as yet another example of a freeloading mentality that helped lead the country into its financial mess. “The course from initial lawlessness to final wanton irresponsibility is like a spreading cancer,” Dionysis Gousetis said in a recent column in the respected daily broadsheet Kathimerini. “Now, with the crisis as an alibi … the freeloaders don’t hide. They appear publicly and proudly and act like heroes of civil disobedience. Something like Rosa Parks or Mahatma Gandhi,” Gousetis wrote. “They’re not satisfied with not paying themselves. They are forcing others to follow them.” Many accuse left-wing parties and labor unions of usurping a grassroots movement with legitimate grievances for their own political ends. “You think that lawlessness is something revolutionary, which helps the Greek people,” Prime Minister George Papandreou said recently, lashing out in Parliament at Coalition of the Left party head Alexis Tsipras. “It is the lawlessness which we have in our country that the Greek people are paying for today.”

But there is something about the “I Won’t Pay” movement that speaks to something deeper within Greek society: a propensity to bend the rules, to rebel against authority, particularly that of the state. It is so ingrained that many Greeks barely notice the myriad small, daily transgressions — the motorcycle driving on the sidewalk, the car running the red light, the blatant disregard of yet another government attempt to ban smoking in restaurants and bars. Less innocuous is persistent and widespread tax avoidance despite increasingly desperate government measures. “There is a general culture of lawlessness, starting from the most basic thing, tax evasion or tax avoidance, which is something that Greeks have been exercising since their state was created,” said social commentator Nikos Dimou. But many see the “I Won’t Pay” movement as something much simpler: the people’s refusal to pay for the mistakes of a series of governments accused of squandering the nation’s future through corruption and cronyism. “I don’t think it’s part of the Greek character. Greeks, when they see that the law is being applied in general, they will implement it too,” said Nikos Louvros, the 55-year-old chain-smoking owner of an Athens bar that openly flouts the smoking ban. “But when it isn’t being applied to some, such as when there are ministers who have been stealing, … Well, if the laws aren’t implemented at the top, others won’t implement them.”

http://www.reuters.com/article/2011/02/23/us-greece-strike-idUSTRE71M1VJ20110223
Greek police clash with anti-austerity protesters
by Renee Maltezou / Feb 23 2011

Greek police clashed with protesters on Wednesday as around 100,000 workers, pensioners and students marched to parliament to protest austerity policies aimed at helping Greece cope with a huge debt crisis. Riot police fired scores of rounds of teargas and flash bombs at protesters hurling petrol bombs, choking the main Syndagma Square with smoke and sending crowds of striking protesters running for cover. The 24-hour strike by public and private sector employees grounded flights, closed schools and paralyzed public transport in the first nationwide walkout against cost cuts this year. In the biggest march since December 2008 riots brought the country to a standstill for weeks according to police sources and eyewitness, 100,000 Greeks marched through the streets of Athens chanting “We are not paying” and “No sacrifice for plutocracy.” Police officially put the figure at 32,000. Riot police fired teargas in several places to disperse demonstrators hurling stones and plastic bottles. Shops boarded up their windows and central Athens hotels locked their doors. Fifteen policemen and 10 civilians were injured, including one journalist slightly hurt by a petrol bomb, police officials said, while 26 protesters were detained. Protesters broke up marble paving stones for rocks to throw at police, set garbage cans on fire and damaged bus stops. Others unfolded a black banner reading “We are dying” in front of parliament. “Enough is enough! All these tax hikes are killing our businesses and we have to fire people,” said bar owner Costas Loras, 42.

Despite many strikes, the Socialist government cut pay and pensions and raised taxes last year in return for a 110 billion euro ($150 billion) bailout by the European Union and the International Monetary Fund that saved Greece from bankruptcy. Greece’s international lenders approved a new 15 billion euro tranche of the aid this month, but set a tougher target for privatization proceeds and called for more structural reforms. “This medicine is worse than the disease. It makes the rich richer and the poor poorer,” said Yannis Panagopoulos, president of Greece’s largest union GSEE. “We will continue fighting, we won’t stop.” Markets are watching for any derailment of Greece’s fiscal efforts. Analysts say strikes are unlikely to shake the government, which has a comfortable majority in parliament. “People once again expressed their opposition to the austerity measures. But no matter how big these protests are they can’t change the government’s policies,” said Costas Panagopoulos, head of ALCO pollsters. Private sector union GSEE and its public sector sister ADEDY, which together represent about 2.5 million workers or half the Greek workforce, have vowed to resist austerity measures, saying they are killing the economy.

http://www.belfasttelegraph.co.uk/news/world-news/petrol-bomb-turns-policeman-into-human-torch-as-athens-erupts-in-violence-15094426.html

Police in Greece clashed with protesters yesterday as 100,000 workers, pensioners and students marched to parliament to protest against the austerity measures aimed at coping with the country’s huge debt crisis. Riot officers fired tear gas and flash bombs as demonstrators returned fire with petrol bombs, choking the main Syndagma Square with smoke and sending crowds of striking people running for cover. Five police officers and 10 civilians were injured. At least 25 protesters were detained. One police officer was hit by a petrol bomb which set his uniform and motorcycle on fire. He was forced to remove his crash hemet and colleagues had to help extinguish the flames. The rally had been calm before the clashes. Protesters chanting “Don’t obey the rich — Fight back!” marched to parliament as the city centre was heavily policed. A brass band, tractors and cyclists joined in. The 24-hour strike by public and private sector employees grounded flights, closed schools and paralysed public transport in the first nationwide walkout against cuts this year.

Tens of thousands of people marched through the streets of Athens chanting: “We won’t pay” and “No sacrifice for plutocracy” in the biggest march since riots in December 2008 brought the country to a standstill for weeks. State hospital doctors, ambulance drivers, pharmacists, lawyers and tax collectors joined school teachers, journalists and thousands of small businesses as more middle-class groups took part in the protest than have in the past. Athens’ main shopping |district was mostly empty, as many small business owners shuttered their stores. Police fired tear gas to disperse demonstrators hurling stones and plastic bottles. Shops boarded up their windows and hotels in the |centre of Athens locked their doors. At least two people were injured and another three arrested. One group of rioting youths smashed paving stones in front of the central Bank of Greece, but there were no immediate reports of any serious damage. Despite the many strikes, the socialist government cut pay and pensions and raised taxes last year in return for a €110bn bailout by the European Union and the International Monetary Fund that saved the country from bankruptcy. Stathis Anestis, deputy leader of Greece’s largest union, the GSEE, said workers should not be asked to make more sacrifices during a third straight year of recession. “The measures forced on us by the agreement with our lenders are harsh and unfair… we are facing long-term austerity with high unemployment and destabilising our social structure,” Anestis said. “What is increasing is the level of anger and desperation… if these harsh policies continue, so will we.”