Archive for the ‘Business’ Category
George Packer has a thought-provoking article in the New Yorker:
A hundred years ago, the popular image of the worker was a sweaty toiler, his face smudged with coal dust or scorched by the blast furnace, oppressed by the industrial machine but not its total victim. He was coiled with potential energy that was frightening to some and inspiring to others—he had the country’s future in his muscular hands. By the time Studs Terkel published his oral history “Working,” forty years ago next month, that image had blurred. The Chicago steelworker at the start of the book was a working stiff, bored and trapped by his job but still able to take its existence for granted. And he now had company—among others, a hospital aide, a supermarket cashier, a pair of hair stylists. These were the last days of secure blue-collar work, and the beginning of wage stagnation in the service economy.
In the decades after 1974, the archetypal worker became a store greeter at Walmart—part time, nonunion, making near-poverty wages. The animating spirit of her working life was no longer the dignity of labor, the drama of factory strife, or the slackness of union bureaucracy—it was required cheerfulness barely concealing an unhappiness that she was too afraid to show. She was isolated, anxious, and, basically, powerless, under the constant threat of having no job at all.
As the bottom fell out of the working class, this attitude spread to . . .
Again, the criteria defining “fair” would be of interest.
Also, his article on Amazon.com is worth reading.
Interesting post by Greg Grandin at Informed Comment:
Many in the United States were outraged by the remarks of conservative evangelical preacher Pat Robertson, who blamed Haiti’s catastrophic 2010 earthquake on Haitians for selling their souls to Satan. Bodies were still being pulled from the rubble — as many as 300,000 died — when Robertson went on TV and gave his viewing audience a little history lesson: the Haitians had been “under the heel of the French” but they “got together and swore a pact to the devil. They said, ‘We will serve you if you will get us free from the French.’ True story. And so, the devil said, ‘OK, it’s a deal.’”
A supremely callous example of right-wing idiocy? Absolutely. Yet in his own kooky way, Robertson was also onto something. Haitians did, in fact, swear a pact with the devil for their freedom. Only Beelzebub arrived smelling not of sulfur, but of Parisian cologne.
Haitian slaves began to throw off the “heel of the French” in 1791, when they rose up and, after bitter years of fighting, eventually declared themselves free. Their French masters, however, refused to accept Haitian independence. The island, after all, had been an extremely profitable sugar producer, and so Paris offered Haiti a choice: compensate slave owners for lost property — their slaves (that is, themselves) — or face its imperial wrath. The fledgling nation was forced to finance this payout with usurious loans from French banks. As late as 1940, 80% of the government budget was still going to service this debt.
In the on-again, off-again debate that has taken place in the United States over the years about paying reparations for slavery, opponents of the idea insist that there is no precedent for such a proposal. But there is. It’s just that what was being paid was reparations-in-reverse, which has a venerable pedigree. After the War of 1812 between Great Britain and the U.S., London reimbursed southern planters more than a million dollars for having encouraging their slaves to run away in wartime. Within the United Kingdom, the British government also paid a small fortune to British slave owners, including the ancestors of Britain’s current Prime Minister, David Cameron, to compensate for abolition (which Adam Hochschild calculated in his 2005 book Bury the Chains to be “an amount equal to roughly 40% of the national budget then, and to about $2.2 billion today”).
Advocates of reparations — made to the descendants of enslaved peoples,not to their owners — tend to calculate the amount due based on the negative impact of slavery. They want to redress either unpaid wages during the slave period or injustices that took place after formal abolition (including debt servitude and exclusion from the benefits extended to the white working class by the New Deal). According to one estimate, for instance, 222,505,049 hours of forced labor were performed by slaves between 1619 and 1865, when slavery was ended. Compounded at interest and calculated in today’s currency, this adds up to trillions of dollars.
But back pay is, in reality, the least of it. The modern world owes its very existence to slavery.
Voyage of the Blind
Consider, for example, the way the advancement of medical knowledge waspaid for with the lives of slaves.
The death rate on the trans-Atlantic voyage to the New World was staggeringly high. Slave ships, however, were more than floating tombs. They were floating laboratories, offering researchers a chance to examine the course of diseases in fairly controlled, quarantined environments. Doctors and medical researchers could take advantage of high mortality rates to identify a bewildering number of symptoms, classify them into diseases, and hypothesize about their causes.
Corps of doctors tended to slave ports up and down the Atlantic seaboard. Some of them were committed to relieving suffering; others were simply looking for ways to make the slave system more profitable. In either case, they identified types of fevers, learned how to decrease mortality and increase fertility, experimented with how much water was needed for optimum numbers of slaves to survive on a diet of salted fish and beef jerky, and identified the best ratio of caloric intake to labor hours. Priceless epidemiological information on a range of diseases — malaria, smallpox, yellow fever, dysentery, typhoid, cholera, and so on — was gleaned from the bodies of the dying and the dead.
When slaves couldn’t be kept alive, their autopsied bodies still provided useful information. Of course, as the writer Harriet Washington has demonstrated in her stunning Medical Apartheid, such experimentation continued long after slavery ended: in the 1940s, one doctor said that the “future of the Negro lies more in the research laboratory than in the schools.” As late as the 1960s, another researcher, reminiscing in a speech given at Tulane Medical School, said that it was “cheaper to use Niggers than cats because they were everywhere and cheap experimental animals.”
Medical knowledge slowly filtered out of the slave industry into broader communities, since slavers made no proprietary claims on the techniques or data that came from treating their slaves. For instance, an epidemic of blindness that broke out in 1819 on the French slaver Rôdeur, which had sailed from Bonny Island in the Niger Delta with about 72 slaves on board, helped eye doctors identify the causes, patterns, and symptoms of what is today known as trachoma.
The disease first appeared on the Rôdeur not long after it set sail, initially in the hold among the slaves and then on deck. In the end, it blinded all the voyagers except one member of the crew. According to a passenger’s account, sightless sailors worked under the direction of that single man “like machines” tied to the captain with a thick rope. “We were blind — stone blind, drifting like a wreck upon the ocean,” he recalled. Some of the sailors went mad and tried to drink themselves to death. Others retired to their hammocks, immobilized. Each “lived in a little dark world of his own, peopled by shadows and phantasms. We did not see the ship, nor the heavens, nor the sea, nor the faces of our comrades.”
But they could still hear the cries of the blinded slaves in the hold.
This went on for 10 days, through storms and calms, until the voyagers heard the sound of another ship. The Spanish slaver San León had drifted alongside the Rôdeur. But the entire crew and all the slaves of that ship, too, had been blinded. When the sailors of each vessel realized this “horrible coincidence,” they fell into a silence “like that of death.” Eventually, the San León drifted away and was never heard from again.
The Rôdeur’s one seeing mate managed to pilot the ship to Guadeloupe, an island in the Caribbean. By now, a few of the crew, including the captain, had regained some of their vision. But 39 of the Africans hadn’t. So before entering the harbor the captain decided to drown them, tying weights to their legs and throwing them overboard. The ship was insured and their loss would be covered: the practice of insuring slaves and slave ships meant that slavers weighed the benefits of a dead slave versus living labor and acted accordingly.
Events on the Rôdeur caught the attention of Sébastien Guillié, chief of medicine at Paris’s Royal Institute for Blind Youth. He wrote up his findings — which included a discussion of the disease’s symptoms, the manner in which it spread, and best treatment options — and published them in Bibliothèque Ophtalmologique, which was then cited in other medical journals as well as in an 1846 U.S. textbook, A Manual of the Diseases of the Eye.
Slaves spurred forward medicine in other ways, too. Africans, for instance, were the primary victims of smallpox in the New World and were also indispensable to its eradication. In the early 1800s, Spain ordered that all its American subjects be vaccinated against the disease, but didn’t provide enough money to carry out such an ambitious campaign. So doctors turned to the one institution that already reached across the far-flung Spanish Empire: slavery. They transported the live smallpox vaccine in the arms of Africans being moved along slave routes as cargo from one city to another to be sold: doctors chose one slave from a consignment, made a small incision in his or her arm, and inserted the vaccine (a mixture of lymph and pus containing the cowpox virus). A few days after the slaves set out on their journey, pustules would appear in the arm where the incision had been made, providing the material to perform the procedure on yet another slave in the lot — and then another and another until the consignment reached its destination. Thus the smallpox vaccine was disseminated through Spanish America, saving countless lives.
Slavery’s Great Schism
In 1945, Allied troops marched into the first of the Nazi death camps. What they saw inside, many have remarked, forced a radical break in the West’s moral imagination. The Nazi genocide of Jews, one scholar has written, is history’s “black hole,” swallowing up all the theological, ethical, and philosophical certainties that had earlier existed.
Yet before there was the Holocaust, there was slavery, an institution that also transformed the West’s collective consciousness, as I’ve tried to show in my new book, The Empire of Necessity: Slavery, Freedom, and Deception in the New World.
Take, for example, the case of the Joaquín, a Portuguese frigate that left Mozambique in late 1803 with 301 enslaved East Africans. . .
Curiouser and curiouser. Pam Martens and Russ Martens report at Wall Street on Parade:
On the evening of Sunday, December 15 of last year, six weeks before the onset of the latest rash of tragic deaths of young men in their 30s employed at JPMorgan, the Pearland, Texas police received a call of a person in distress outside a Walgreens pharmacy at 6122 Broadway in Pearland. The individual in distress was Jason Alan Salais, a 34-year old Information Technology specialist who had worked at JPMorgan Chase since May 2008.
A family member confirmed to Wall Street On Parade that Salais died of a heart attack on the same evening the report of distress went in to the police. The incidence of heart attack or myocardial infarction among men aged 20 to 39 is one half of one percent of the population, according to the National Center for Health Statistics and National Heart, Lung, and Blood Institute, based on 2007 to 2010 data, marking this as another unusual death at JPMorgan.
A person identifying himself as Dave Steiner wrote the following about Salais in the online condolence book provided by the funeral home: “My condolences to your entire family at the sudden passing of Jason. When I had the pleasure of interviewing Jason to be a part of the team at J.P. Morgan back in 2008, it was clear to me within just a few short minutes that he was a man of character, intelligence, work ethic, kindness and integrity. In the years that followed, and until the sad news of this week, I was witness to his hard work, the friendships he built, stories of his beloved family and of course baseball…”
According to the LinkedIn profile for Salais, he was engaged in Client Technology Service “L3 Operate Support” and previously “FXO Operate L2 Support” at JPMorgan. Prior to joining JPMorgan in 2008, Salais had worked as a Client Software Technician at SunGard and a UNIX Systems Analyst at Logix Communications.
Six weeks after the sudden death of Salais, Gabriel Magee, a 39-year old Vice President who was also engaged in Information Technology at JPMorgan, this time in London, died under extremely suspicious circumstances. A Coroner’s Inquest into the matter will be held on May 15 in London.
Family and friends report that Magee was a happy, healthy, vibrant young man who emailed his girlfriend on the evening of January 27 to say he was finishing up at work and would be home shortly. When he did not arrive, his girlfriend notified police and called local hospitals. According to the Metropolitan Police in London, at around 8:02 a.m. the next morning, workers looking out their windows saw Magee’s body lying on a 9th level rooftop that jutted out from the 33-story JPMorgan building in the Canary Wharf section of London.
London newspapers immediately called the death a suicide, initially suggesting that thousands of commuters had seen Magee jump from the 33rd level rooftop. When Wall Street On Parade pressed the Metropolitan Police on the issue of actual eyewitnesses who had seen Magee jump, the Police backed away from the suggestion that the fall had actually been observed by eyewitnesses.
Magee worked in the European headquarters for JPMorgan at 25 Bank Street in the borough of Tower Hamlets. Drawings and plans submitted by JPMorgan to the borough after it purchased the building for £495 million in 2010, show that the 9th floor roof is accessible “via the stair from level 8 within the existing Level 9 plant enclosure…”
According to Magee’s LinkedIn profile, his specific area of specialty at JPMorgan was . . .
Everyone knows about the military-industrial complex, which, in his farewell address, President Eisenhower warned had the potential to “endanger our liberties or democratic process” but have you heard of the “Deep State?”
Mike Lofgren, a former GOP congressional staff member with the powerful House and Senate Budget Committees, joins Bill to talk about what he calls the Deep State, a hybrid of corporate America and the national security state, which is “out of control” and “unconstrained.” In it, Lofgren says, elected and unelected figures collude to protect and serve powerful vested interests. “It is … the red thread that runs through the history of the last three decades. It is how we had deregulation, financialization of the economy, the Wall Street bust, the erosion or our civil liberties and perpetual war,” Lofgren tells Bill.
Lofgren says the Deep State’s heart lies in Washington, DC, but its tentacles reach out to Wall Street, which Lofgren describes as “the ultimate backstop to the whole operation,” Silicon Valley and over 400,000 contractors, private citizens who have top-secret security clearances. Like any other bureaucracy, it’s groupthink that drives the Deep State.
In conjunction with this week’s show, Mike Lofgren has written an exclusive essay, “Anatomy of the Deep State.”
The essay—and an important essay it is—begins:
Rome lived upon its principal till ruin stared it in the face. Industry is the only true source of wealth, and there was no industry in Rome. By day the Ostia road was crowded with carts and muleteers, carrying to the great city the silks and spices of the East, the marble of Asia Minor, the timber of the Atlas, the grain of Africa and Egypt; and the carts brought out nothing but loads of dung. That was their return cargo.
– The Martyrdom of Man by Winwood Reade (1871)
There is the visible government situated around the Mall in Washington, and then there is another, more shadowy, more indefinable government that is not explained in Civics 101 or observable to tourists at the White House or the Capitol. The former is traditional Washington partisan politics: the tip of the iceberg that a public watching C-SPAN sees daily and which is theoretically controllable via elections. The subsurface part of the iceberg I shall call the Deep State, which operates according to its own compass heading regardless of who is formally in power. 
During the last five years, the news media has been flooded with pundits decrying the broken politics of Washington. The conventional wisdom has it that partisan gridlock and dysfunction have become the new normal. That is certainly the case, and I have been among the harshest critics of this development. But it is also imperative to acknowledge the limits of this critique as it applies to the American governmental system. On one level, the critique is self-evident: In the domain that the public can see, Congress is hopelessly deadlocked in the worst manner since the 1850s, the violently rancorous decade preceding the Civil War.Yes, there is another government concealed behind the one that is visible at either end of Pennsylvania Avenue, a hybrid entity of public and private institutions ruling the country…
As I wrote in The Party is Over, the present objective of congressional Republicans is to render the executive branch powerless, at least until a Republican president is elected (a goal that voter suppression laws in GOP-controlled states are clearly intended to accomplish). President Obama cannot enact his domestic policies and budgets: Because of incessant GOP filibustering, not only could he not fill the large number of vacancies in the federal judiciary, he could not even get his most innocuous presidential appointees into office. Democrats controlling the Senate have responded by weakening the filibuster of nominations, but Republicans are sure to react with other parliamentary delaying tactics. This strategy amounts to congressional nullification of executive branch powers by a party that controls a majority in only one house of Congress.
Despite this apparent impotence, President Obama can liquidate American citizens without due processes, detain prisoners indefinitely without charge, conduct dragnet surveillance on the American people without judicial warrant and engage in unprecedented — at least since the McCarthy era — witch hunts against federal employees (the so-called “Insider Threat Program”). Within the United States, this power is characterized by massive displays of intimidating force by militarized federal, state and local law enforcement. Abroad, President Obama can start wars at will and engage in virtually any other activity whatsoever without so much as a by-your-leave from Congress, such as arranging the forced landing of a plane carrying a sovereign head of state over foreign territory. Despite the habitual cant of congressional Republicans about executive overreach by Obama, the would-be dictator, we have until recently heard very little from them about these actions — with the minor exception of comments from gadfly Senator Rand Paul of Kentucky. Democrats, save a few mavericks such as Ron Wyden of Oregon, are not unduly troubled, either — even to the extent of permitting seemingly perjured congressional testimony under oath by executive branch officials on the subject of illegal surveillance.
These are not isolated instances of a contradiction; they have been so pervasive that they tend to be disregarded as background noise. During the time in 2011 when political warfare over the debt ceiling was beginning to paralyze the business of governance in Washington, the United States government somehow summoned the resources to overthrow Muammar Ghaddafi’s regime in Libya, and, when the instability created by that coup spilled over into Mali, provide overt and covert assistance to French intervention there. At a time when there was heated debate about continuing meat inspections and civilian air traffic control because of the budget crisis, our government was somehow able to commit $115 million to keeping a civil war going in Syria and to pay at least £100m to the United Kingdom’s Government Communications Headquarters to buy influence over and access to that country’s intelligence. Since 2007, two bridges carrying interstate highways have collapsed due to inadequate maintenance of infrastructure, one killing 13 people. During that same period of time, the government spent $1.7 billion constructing a building in Utah that is the size of 17 football fields. This mammoth structure is intended to allow the National Security Agency to store a yottabyte of information, the largest numerical designator computer scientists have coined. A yottabyte is equal to 500 quintillion pages of text. They need that much storage to archive every single trace of your electronic life.
Yes, there is another government concealed behind the one that is visible at either end of Pennsylvania Avenue, a hybrid entity of public and private institutions ruling the country according to consistent patterns in season and out, connected to, but only intermittently controlled by, the visible state whose leaders we choose. My analysis of this phenomenon is not an exposé of a secret, conspiratorial cabal; the state within a state is hiding mostly in plain sight, and its operators mainly act in the light of day. Nor can this other government be accurately termed an “establishment.” All complex societies have an establishment, a social network committed to its own enrichment and perpetuation. In terms of its scope, financial resources and sheer global reach, the American hybrid state, the Deep State, is in a class by itself. That said, it is neither omniscient nor invincible. The institution is not so much sinister (although it has highly sinister aspects) as it is relentlessly well entrenched. Far from being invincible, its failures, such as those in Iraq, Afghanistan and Libya, are routine enough that it is only the Deep State’s protectiveness towards its higher-ranking personnel that allows them to escape the consequences of their frequent ineptitude. 
How did I come to write an analysis of the Deep State, and why am I equipped to write it? . . .
And also be sure to read the comments. It seems that many agree.
Full Show: The Deep State Hiding in Plain Sight
Juan Cole on the Vulnerability of the Network
Heidi Boghosian on Mass Surveillance
Danielle Brian on Legalized Corruption
Andrew Bacevich on Washington’s Tacit Consensus
Henry Giroux on Resisting the Neoliberal Revolution
Reactions to Mike Lofgren’s Essay on the Deep State
Tim Wu on the Partisan Sideshow and Silicon Valley
UPDATE: It occurs to me that it could all flow from one simple meme: that profit is the primary goal. Once that it is in place, the entire complex self-assembles. It’s a self-licking ice-cream cone.
Have you ever—even once—clicked on “Agree” when presented with a lengthy text specifying Terms & Conditions for a software program or service? Or, perhaps better, have you ever—even once—read the Terms & Conditions before agreeing?
Thom Hartmann explains at Alternet what you’re missing if you click without reading:
Let’s talk about those pesky terms and conditions.
Last month, I had a chance to talk with John McAfee, the founder of the popular McAfee computer security programs.
We talked about how people usually don’t read the terms and conditions of the smartphone applications that they download onto their phones.
But McAfee did read the terms and conditions of the Bank of America smartphone application, and what he saw was pretty shocking.
McAfee told me that, by agreeing to the terms and conditions for the Bank of America application, “You give the Bank of America application, which is the remote banking application, the permission to turn on your phone and make phone calls at your expense and without telling you, to turn on your camera and microphone without telling you at any time, and to transmit pictures and sound files.”
While you may not exactly be signing away your life to Bank of America, you’re giving the big bank a great deal of access to your private life whenever it wants. That’s pretty scary.
And Bank of America isn’t the only big bank or corporation using terms and conditions to barge in on your private life.
Fellow big bank Capital One sent out a new contract update with new terms and conditions to its credit card holders.
And as the Los Angeles Times puts it, the bank, “makes clear it can drop by any time it pleases.”
The new terms and conditions specify that the bank, “may contact you in any manner we choose” including emails, calls, texts, and faxes.
Ok, that’s not terrible.
But then comes the part when Capital One says it might make “personal visits” which can be “at your home and at your place of employment.”
So, say you’re a Capital One credit card holder, and you forget to make a monthly payment. According to the terms and conditions that you just agreed to, Capital One can come to your office and harass you to make that payment. And if you’ve left work for the day, bank representatives could come to your home.
And if you’re lucky enough to avoid a “personal visit” from Capital One, the bank may still call you at all hours of the night, without revealing its identity.
That’s because the new terms and conditions also state that . . .
Moyers & Company have an excellent interview with Susan Crawford. The blurb:
Susan Crawford, former special assistant to President Obama for science, technology and innovation, and author of Captive Audience: The Telecom Industry and Monopoly Power in the New Gilded Age, joins Bill to discuss how our government has allowed a few powerful media conglomerates to put profit ahead of the public interest — rigging the rules, raising prices, and stifling competition. As a result, Crawford says, all of us are at the mercy of the biggest business monopoly since Standard Oil in the first Gilded Age a hundred years ago.
“The rich are getting gouged, the poor are very often left out, and this means that we’re creating, yet again, two Americas, and deepening inequality through this communications inequality,” Crawford tells Bill.
Click the link to view the interview. And Kevin Drum notes at Mother Jones:
Felix Salmon says we have plenty of bandwidth in America. Contra Tyler Cowen, we don’t need to spend a bajillion dollars rolling out a new nationwide network based on new pipes or new technology:
What we do need, on the other hand, is the ability of different companies to provide broadband services to America’s households. And here’s where the real problem lies: the cable companies own the cable pipes, and the regulators refuse to force them to allow anybody else to provide services over those pipes. This is called local loop unbundling, it’s the main reason for low broadband prices in Europe, and of course it’s vehemently opposed by the cable companies.
Local loop unbundling, in the broadband space, would be vastly more effective than waiting for some hugely expensive new technology to be built, nationally, in parallel to the existing internet infrastructure. The problem with Cowen’s dream is precisely the monopoly rents that the cable companies are currently extracting. If and when any new competitor arrives, the local monopolist has more room to cut prices and drive the competitor out of business than the newcomer has.
Cable companies have a thousand ready-made technical incantations to explain why they can’t possibly open up their networks to competitors. To listen to them, you’d think this would be akin to letting a five-year-old mess around with your electric wiring. This is delicate stuff! You can’t just let anyone start sending bits around on it.
It’s all special pleading, of course, of the same type that Ma Bell engaged in when people wanted to start putting answering machines on their phone lines. But everyone understands there would be technical requirements they’d have to meet, just as answering machines had to meet reasonable technical requirements back in the day. Regulators would have to be involved to make sure everyone plays nice with each other, but that’s far from impossible.
No, this is all about money, as you already guessed. Allowing other companies to use their last-mile pipes would (a) take away some of their broadband rents, (b) force cable companies to genuinely compete on price and features, and (c) allow competitors onto their network who couldn’t care less about cannibalizing TV business. If I were a cable company, I’d fight that tooth and nail too.
But that doesn’t mean the rest of us have to take their arguments seriously. The rest of us should be in favor of competition, not the profit margins of local cable TV monopolies.
Again, the sole corporate focus—increase profits always by any means necessary—undermines the common welfare.
The USDA has been severely compromised by unrelenting industry pressure. Wenonah Hauter givens an example in the Progressive Populist:
Earlier this year, Food & Water Watch received information that USDA’s Food Safety and Inspection Service (FSIS) was going to permit a trade association — the National Chicken Council — to collect data in poultry plants to assess the rate of foodborne pathogens in chicken parts. The information came in the form of an e-mail from the Assistant FSIS Administrator for Field Operations Daniel Engeljohn, informing his district managers that he was aware of the effort and gave his full blessing to the project. What was troubling about the e-mail was that it told the district managers that the purpose of the data collection was for the industry to develop its own voluntary pathogen performance standards that it was going to enforce on poultry processing plants. It went on to say that FSIS inspection personnel assigned to the plants were not to interfere with the National Chicken Council data collection and that they had no right to look at the data that was collected.
In other words, the poultry industry would create the standards for pathogen levels in chicken parts, and they would only “voluntarily” stick with them. Not only would the industry be able to decide how much salmonella or campylobacter there is on your chicken, but there would be no USDA enforcement of the standard.
Welcome to the latest in privatization of chicken inspections that the industry is pushing, with the USDA’s blessing. Another example is the “Modernization of Poultry Slaughter Inspection,” the proposed plan whose “modern” twist is to turn most poultry inspection over to the very companies that produce our poultry, leaving only one government inspector per plant to inspect over 175 birds per minute — or three birds per second.
This hasn’t happened overnight. The industry has been chipping away at the USDA’s mandate to protect our food system for over a decade. Since the late 1990s, . . .
Continue reading. I would feel better if industry were not driven solely by a drive to cut costs and increase profits. That motivation is insufficient to protect our health and the quality of our food supply—indeed, our health and the quality of the food supply often get in the way, which is why we get industry postures as the above.
Rebecca Leber reports in ThinkProgress:
As ExxonMobil’s CEO, it’s Rex Tillerson’s job to promote the hydraulic fracturing enabling the recent oil and gas boom, and fight regulatory oversight. The oil company is the biggest natural gas producer in the U.S., relying on the controversial drilling technology to extract it.
The exception is when Tillerson’s $5 million property value might be harmed. Tillerson has joined a lawsuit that cites fracking’s consequences in order to block the construction of a 160-foot water tower next to his and his wife’s Texas home.
The Wall Street Journal reports the tower would supply water to a nearby fracking site, and the plaintiffs argue the project would cause too much noise and traffic from hauling the water from the tower to the drilling site. The water tower, owned by Cross Timbers Water Supply Corporation, “will sell water to oil and gas explorers for fracing [sic] shale formations leading to traffic with heavy trucks on FM 407, creating a noise nuisance and traffic hazards,” the suit says.
Though Tillerson’s name is on the lawsuit, a lawyer representing him said his concern is about the devaluation of his property, not fracking specifically.
When he is acting as Exxon CEO, not a homeowner, Tillerson has lashed out at fracking critics and proponents of regulation. “This type of dysfunctional regulation is holding back the American economic recovery, growth, and global competitiveness,” he said in 2012. Natural gas production “is an old technology just being applied, integrated with some new technologies,” he said in another interview. “So the risks are very manageable.”
In shale regions, less wealthy residents have protested fracking development for impacts more consequential than noise, including water contamination and cancer risk. Exxon’s oil and gas operations and the resulting spills not only sinks property values, but the spills have leveled homes and destroyed regions.
Exxon, which pays Tillerson a total $40.3 million, is staying out of the legal tangle. A spokesperson told the WSJ it “has no involvement in the legal matter.”
The GOP doesn’t much like things like NPR and PBS: publicly supported entertainment and art (although both seem to work hard for donations from people and groups that then are allowed to veto or alter shows). But apparently tax-supported programming is very widespread. See this ThinkProgress article by Alyssa Rosenberg on how production budgets assume that that they will get fairly substantial support from taxpayers.
Kevin Drum has an excellent post on the trend in various governments around the world—including, in some respects, the United States. And to some degree, the takeover of governments by business interests is simply the logical evolution that has driven capitalism: increasing profits by any means at all, and taking over a government can really boost profits.
Emily Atkin writes at ThinkProgress:
There is an abandoned house in Alberta, Canada, where Alain Labrecque used to live. Tucked in the farming community of Peace River, it is a place brimming with personal history, rooted to his grandfather’s land where his parents and eight aunts and uncles grew up, and where Alain’s own children were born. Now, Alain’s property and the surrounding area are primarily home to large, black cylinders of oil.
The oil is from Alberta’s much-famed tar sands, a large area of land that contains clay, bitumen, and a good deal of sand. Inside the tanks, heavy crude from the sands is heated, until it becomes viscous enough to transport. Many of those tanks currently vent freely into the atmosphere.
As the third-largest proven crude oil reserve in the world and the key ingredient of the controversial Keystone XL pipeline, and with production value that is expected to nearly triple by 2018, the Canadian tar sands have become an unseen symbol in America. For some, that symbol represents jobs, energy security, and economic prosperity. For others, it’s pollution, addiction to fossil fuels, and a threat to a livable climate. What generally is not conveyed, however, is an image of the families who live there, and who have been there long before the tar sands boom.
Though Alain once thought having the tanks on his property would be a blessing, he now describes them as a curse. After experiencing an unusual kind of sickness — fainting, weight loss, gray skin, strange growths — that he believes was caused by the tanks’ unregulated emissions, Alain and his family were eventually forced to move to British Columbia. They have pegged Baytex Energy, the owner of the tanks, as their enemy. Baytex has produced studies claiming innocence, but has also offered to buy the Labrecques’ land in exchange for their silence. So, taking their doctor’s own advice, the family decided to move, and fight the battle for their home from afar.
The doctor’s words to them? “He said, ‘You are just a small, little bolt in this huge robot, and you don’t matter. Move.’”
Prosperity in Paradise
As a family with a rich history of working for and benefiting from the oil industry, never in their wildest dreams did Karla and Alain think they would be the ones fighting this fight.
“You’ve gotta understand, I’ve worked for oil sands, I was a contractor,” Alain said in an interview with ThinkProgress. “I’ve never been negative toward oil. Never thought this would happen.”
The Labrecques’ large and long family history begins in 1929, when 18-year-old Joseph Labrecque homesteaded a piece of land near Peace River, Alberta, Canada — an oil-rich area that Baytex Energy Corp. now calls the “Reno Field.” Joseph cleared the land, and eventually settled down with a wife and nine children, seven boys and two girls.
As Joseph’s children grew up, five of his sons stayed in the area, taking up the land that surrounded their father’s. Even now, the Labrecques still largely make up the population of the one-by-five mile Reno Field.
Oil came into the picture in 2004. Representatives for Koch Exploration, a company owned by notorious billionaire brothers Charles and David Koch, approached one of Joseph’s sons, Mike, asking for permission to drill. Mike was in favor and Koch Exploration drilled the land, eventually selling it to Prosper Petroleum in 2008. Prosper continued to drill wells until the land was finally purchased by Baytex in February 2011.
But for the Labrecques, ownership was not really an issue — in fact, there were no issues. Their environment was clean, their kids were healthy. Drilling added value to their land and cash to their pockets.
One of Mike’s nephews, Alain, was happy with the royalty payments he received from the oil. They paired nicely with the fact that 2010 was his best farming year yet. “It was just no thought of negative thing, period,” Alain testified under oath before the Alberta Energy Regulator . “Things were just starting to click.”
Just as things were becoming comfortable for Alain in December of 2010, he began experiencing some minor health issues. He also owns a logging business, and was busy trying to get the trucks ready for the season. As he was working on the engines, he began to get headaches — nothing serious, he said, but big enough where he had to pop an Advil every few hours. As time went on, he gained a new ailment: eye-twitching, or as he says, a “quick little pull on the eyes.” The headaches persisted. And he was not the only one with problems.
“Why is the little girl always falling?” Alain recalled thinking of his then-two-year-old daughter. He assumed she was just clumsy. But then, in March 2011, his wife, Karla, fell down the stairs. She began to notice that she could make herself faint if she turned her head too far to the left. Around that time, Alain noticed his house smelled like gas — the same smell they would smell the evenings before outside, when Baytex would vent its simmering tanks of oil sands. He checked the furnace, the carbon monoxide monitor. Nothing.
The symptoms progressed. Every night, Karla said she would fall asleep to popping ears. She had sinus congestion, hot and cold flashes. She began to feel as if her arms were hollow. She developed “massive” headaches, like migraines, but different. “I get migraines; this is not like a migraine,” she said. “This is like somebody’s taking a two-by-four to your head.”
Their then three-year-old son, they said, started developing dark grey circles under his eyes, and struggled with constipation. Despite being put on laxatives, he would sometimes go a week without a bowel movement. He once went 12 days. As time passed, Alain developed a growth on his head, which was removed by a doctor.
Alain’s uncle Mike was initially annoyed at the complaining. “I guess in a way I thought I had a good job here, and I didn’t want anybody rocking the boat,” he said.
But then the symptoms started for him too. By winter of 2011, he was sweating through three pillows a night. His skin turned gray and he lost 45 pounds. His wife Leona, who lived in the city during the week for work, said Mike would go into “comatose sleeps.” His voice became hoarse, and his speech became slurred. He began to believe he had cancer.
Though Mike’s symptoms persisted, he continued to work. Since he lived right in the middle of the Reno Field, he was hired by Baytex to clear snow at the sites, and use his tractor to pull tanker trucks into and out of the sites whenever wet conditions or snow inhibited truck movements. In April 2012, he was called to go help another worker at a Baytex site. Feeling dizzy, Mike stopped at his office, and told his supervisor he was feeling too lightheaded to go the site, too dizzy to operate his tractor.
“I said the way I feel right now — I said, I — I can’t do it,” he recalled. “So I said, is there anything that you can do?”
A few phone calls later, Mike was fired.
Pinpointing the Problem
When Mike did work for Baytex, it was basically the same as it was when he worked for Koch and Prosper, the two companies that owned the site before. Except, he says, there was one change that he found peculiar. When Koch and Prosper operated the tanks, it would take nearly three hours to load the bitumen from the tanks into the tanker trucks. Now, with Baytex, it took only 30 to 45 minutes.
“[Mike] and the other landowners believe that Baytex increased the temperature of the tanks and possibly added chemical thinners to allow the heavy oil to be loaded faster,” a statement on the landowners’ “Stop Baytex” website reads.
Baytex spokesperson and director of stakeholder relations Andrew Loosely, however, told ThinkProgress that not only had the company not increased the temperature of the tanks, but that Baytex’s process for liquefying the tar sands is essentially the same as when Prosper Petroleum’s. “It’s untrue,” Loosely said. “Our process is no different than what was going down before. In fact, we’ve lowered the temperature that Prosper was operating their tanks at.”
When Prosper had owned the tanks, it operated them at 194 degrees, whereas Baytex operates them at 176, Loosely said. Prosper had also used an open venting system, he said, and no method of capturing its emissions. In fact, Baytex has more so-called “vapor recovery systems” that capture the emissions and turn them into usable fuel than Prosper did, he said.
Baytex’s process is called Cold Heavy Oil Production with Sand, or CHOPS. It is a radically different production process than conventional oil drilling, and is designed for the hard-to-extract tar sands — a thick mixture of heavy oil, sand, and water. To extract the most tar sands, the CHOPS process uses wider drill holes. The well is then “perforated,” meaning there are holes up and down the sides of the underground pipe. Those holes are able to suck in everything — the sand, the oil, and the water.
Then, the mixture is put into tanks and heated. The heating process separates the sand and the water, and the oil is ready to be transported to a pipeline or rail facility. The process, according to the Alberta government, should produce anywhere from 94 to 314 barrels of oil every day, per well, “in almost all cases.” Considering Baytex has 23 well pads in the Reno Field, that could mean more than 300,000 gallons of oil produced from the field every day. In September 2013, Baytex produced 53,550 gallons per day.
But inevitably, CHOPS doesn’t just produce tar sands. It also winds up creating a good deal of chemical- and bitumen-related waste product, according to the Alberta government. There is so much waste, in fact, that the government estimates waste management accounts for 15 to 35 percent of operating costs for the CHOPS process. The waste is considered “non-hazardous,” however, so while it can be noxious and smelly, it presents “no known health hazards” to the community.
After identifying the smell in their home as the same smell from the CHOPS tanks, Karla and Alain in 2011 asked Baytex to take steps to remedy the emissions. Baytex responded by shutting down its drilling operations, and hiring a company called Chemistry Matters, Inc. to conduct an air quality study. Chemistry Matters’ founder and sole proprietor, Dr. Court Sandau, describes his company on his LinkedIn page as providing “data validation services for contentious or litigious matters — when you need it to be right.”
That air quality study found that no health-based limits on emissions were exceeded in the area surrounding the Labrecques’ home. The bitumen produced in the area is rich in sulfur, which likely contributed to the foul smells, but levels of sulfur in the air did not violate regulated standards for human health, the report said. Baytex resumed its operations.
The Labrecques take issue with Baytex’s study, and believe it failed to monitor air quality at night — the time when emissions were released and when odors were strongest.
“They produce air quality studies that say, ‘No, everything’s all OK,’ trying to prove that we’re lying to them,” Karla said. “They make you feel like you’re the troublemaker — a ‘Why don’t you just shut your mouth’ type of thing.”
Indeed, Baytex has attempted to keep the Labrecques quiet. Before moving to British Columbia in 2011, after a year of complaining, the Labrecques entered into alternative dispute resolution with Baytex, where the company offered to buy their 160-acre farm for as much as it would have been worth before the environmental damage. No one else would have offered the Labrecques that much. But there was a catch.
According to the sale contract the Labrecques provided ThinkProgress, the sale of their land would have meant silence. No social media posts from them, their children, or their children’s children about Baytex. No more StopBaytex.ca, no more “Stop Baytex” group on Facebook — those would be turned over to the company. No communicating with government representatives about issues concerning Baytex. No talking to the media.
Karla and Alain did not sign the contract, and wound up finding a buyer for the farmland portion of their property. They still own the land on which their home sits. The same cannot be said for Alain’s next door neighbor and brother, who took the deal partly because his wife was pregnant when the emissions were at their most unbearable. He is unauthorized to speak to the media.
At a January hearing on Baytex’s emissions, an environmental health expert hired by the Alberta government testified that many Alberta doctors are afraid to speak out against the oil sands, and afraid to connect it to health issues. A family doctor for the Labrecques, Dr. John O’Connor, agrees. He was threatened with having his license taken away for talking about cancer rates near the oil sands in 2006.
“My experience … strongly suggests to me that government does not want to know [and] is not interested in knowing what’s going on,” Dr. O’Connor told the Vancouver Sun.
Solutions and Regulations
In the eyes of the Canadian government, Baytex is operating within the rule-book. CHOPS operators are not obligated by current regulations to install odor-reduction or vapor recovery systems.
But from their new home, the Labrecques are calling for regulatory reform. . .
Read it, and the article to which it links. Disgusting but somehow unsurprising.
Nicole Perlroth writes in the NY Times:
In the last year, Eastern European cybercriminals have stolen Brian Krebs’s identity a half dozen times, brought down his website, included his name and some unpleasant epithets in their malware code, sent fecal matter and heroin to his doorstep, and called a SWAT team to his home just as his mother was arriving for dinner.
“I can’t imagine what my neighbors think of me,” he said dryly.
Mr. Krebs, 41, tries to write pieces that cannot be found elsewhere. His widely read cybersecurity blog, Krebs on Security, covers a particularly dark corner of the Internet: profit-seeking cybercriminals, many based in Eastern Europe, who make billions off pharmaceutical sales, malware, spam, frauds and heists like the recent ones that Mr. Krebs was first to uncover at Adobe, Target and Neiman Marcus.
He covers this niche with much the same tenacity of his subjects, earning him their respect and occasional ire.
Mr. Krebs — a former reporter at The Washington Post who taught himself to read Russian while jogging on his treadmill and who blogs with a 12-gauge shotgun by his side — is so entrenched in the digital underground that he is on a first-name basis with some of Russia’s major cybercriminals. Many call him regularly, leak him documents about their rivals, and try to bribe and threaten him to keep their names and dealings off his blog. . .
Well worth reading. It makes me feel hope.
A strong editorial in the NY Times:
North Carolina citizens have good reason to wonder just whom their environmental regulators are trying to protect. The state’s Department of Environment and Natural Resources has engaged in a series of maneuvers that seem designed to protect the state’s largest utility, Duke Energy, from paying big fines for water pollution from coal ash ponds and meeting reasonable requirements that it move toxic coal ash to lined landfills away from rivers and lakes used for drinking water and recreation.
Meanwhile, the rest of the country — having heard of the damaging North Carolina coal ash spill this month — must be wondering why the federal government has yet to move against a serious pollution problem it has known about for years.
One answer is the political power of the utilities. In North Carolina, a coalition of environmental groups, led by the Southern Environmental Law Center, tried three times over the past year to sue Duke Energy in federal court for violating the Clean Water Act, only to be pre-empted by the state regulatory agency, which asserted its authority to protect the public through enforcement actions in state courts. Once in control of the litigation, the state regulators quickly proposed a sweetheart settlement of suits against two Duke Energy plants. It would have imposed total fines and costs of about $99,000, a pittance for a company with operating revenues of $19.6 billion in 2012, plus a cleanup plan riddled with loopholes.
Critics blamed the new Republican governor, Pat McCrory, who had worked at Duke Energy for 29 years, and the businessman he appointed to head the environmental department, John Skvarla. Federal prosecutors have opened a criminal investigation into the Dan River spill and issued subpoenas for the records of Duke Energy and the environmental department.
The third suit was still pending when coal ash spilled on Feb. 2 into the Dan River, near the Virginia border, through a ruptured pipe at another Duke Energy plant that is no longer in use. The state’s Department of Health and Human Services has warned people not to have contact with the water or sediment downstream and not to eat fish or shellfish from that area.
On Feb. 9, The Associated Press revealed that lenient state regulators had maneuvered to block the environmental groups. The environment agency, embarrassed by the spill and the revelations, immediately asked the state judge to hold its proposed settlement in abeyance while it conducted a comprehensive review of all coal ash facilities in the state. We can only hope that this is a genuine attempt to solve the problem and not a stalling tactic. Meanwhile, Duke Energy has apologized for the big leak and pledged to make things right, but it has not committed to moving the waste to safer locations.
This tawdry tale illustrates . . .
Samuel Bowles and Arjun Jayadev write in the NY Times:
Another dubious first for America: We now employ as many private security guards as high school teachers — over one million of them, or nearly double their number in 1980.
And that’s just a small fraction of what we call “guard labor.” In addition to private security guards, that means police officers, members of the armed forces, prison and court officials, civilian employees of the military, and those producing weapons: a total of 5.2 million workers in 2011. That is a far larger number than we have of teachers at all levels.
What is happening in America today is both unprecedented in our history, and virtually unique among Western democratic nations. The share of our labor force devoted to guard labor has risen fivefold since 1890 — a year when, in case you were wondering, the homicide rate was much higher than today.
Is this the curse of affluence? Or of ethnic diversity? We don’t think so. The guard-labor share of employment in the United States is four times what it is in Sweden, where living standards rival America’s. And Britain, with its diverse population, uses substantially less guard labor than the United States.
In America, growing inequality has been accompanied by a boom in gated communities and armies of doormen controlling access to upscale apartment buildings. We did not count the doormen, or those producing the gates, locks and security equipment. One could quibble about the numbers; we have elsewhere adopted a broader definition, including prisoners, work supervisors with disciplinary functions, and others.
But however one totes up guard labor in the United States, there is a lot of it, and it seems to go along with economic inequality. States with high levels of income inequality — New York and Louisiana — employ twice as many security workers (as a fraction of their labor force) as less unequal states like Idaho and New Hampshire.
When we look across advanced industrialized countries, we see the same pattern: the more inequality, the more guard labor. As the graph shows, the United States leads in both.
Continue reading. Graphs at the link.
The NSA certainly has little respect for law, which makes their full-throated condemnation of Edward Snowden a bit rich. James Risen and Laura Poitras have an article in today’s NY Times about NSA eavesdropping on a US law firm’s communications with its client, a foreign government negotiating a trade agreement with the US. The NSA repeatedly claims that it must be allowed to do anything that it wants in order to fight the scourge of terrorism, but this eavesdropping has nothing whatsoever to do with terrorism (as often seems to be the case—cf. the heads of state of Germany and Brazil). The NSA is truly out of control, and at a very bad time: when we have a Congress that is able to do very little.
The article begins:
The list of those caught up in the global surveillance net cast by theNational Security Agency and its overseas partners, from social media users to foreign heads of state, now includes another entry: American lawyers.
A top-secret document, obtained by the former N.S.A. contractor Edward J. Snowden, shows that an American law firm was monitored while representing a foreign government in trade disputes with the United States. The disclosure offers a rare glimpse of a specific instance of Americans ensnared by the eavesdroppers, and is of particular interest because lawyers in the United States with clients overseas have expressed growing concern that their confidential communications could be compromised by such surveillance.
The government of Indonesia had retained the law firm for help in trade talks, according to the February 2013 document. It reports that the N.S.A.’s Australian counterpart, the Australian Signals Directorate, notified the agency that it was conducting surveillance of the talks, including communications between Indonesian officials and the American law firm, and offered to share the information.
The Australians told officials at an N.S.A. liaison office in Canberra, Australia, that “information covered by attorney-client privilege may be included” in the intelligence gathering, according to the document, a monthly bulletin from the Canberra office.
The law firm was not identified, but Mayer Brown, a Chicago-based firm with a global practice, was then advising the Indonesian government on trade issues.
On behalf of the Australians, the liaison officials asked the N.S.A. general counsel’s office for guidance about the spying. The bulletin notes only that the counsel’s office “provided clear guidance” and that the Australian eavesdropping agency “has been able to continue to cover the talks, providing highly useful intelligence for interested US customers.”
The N.S.A. declined to answer questions about the reported surveillance, including whether information involving the American law firm was shared with United States trade officials or negotiators.
Duane Layton, a Mayer Brown lawyer involved in the trade talks, said he did not have any evidence that he or his firm had been under scrutiny by the Australian or American intelligence agencies. “I always wonder if someone is listening, because you would have to be an idiot not to wonder in this day and age,” he said in an interview. “But I’ve never really thought I was being spied on.”
Most attorney-client conversations do not get special protections under American law from N.S.A. eavesdropping. Amid growing concerns about surveillance and hacking, the American Bar Association in 2012 revised its ethics rules to explicitly require lawyers to “make reasonable efforts” to protect confidential information from unauthorized disclosure to outsiders.
Last year, the Supreme Court, in a 5-to-4 decision, rebuffed a legal challenge to a 2008 law allowing warrantless wiretapping that was brought in part by lawyers with foreign clients they believed were likely targets of N.S.A. monitoring. The attorneys contended that the law raised risks that required them to take costly measures, like traveling overseas to meet clients, to protect sensitive communications. But the Supreme Court dismissed their fears as “speculative.”
The N.S.A. is prohibited from targeting Americans, including businesses, law firms and other organizations based in the United States, for surveillance without warrants, and intelligence officials have repeatedly said the N.S.A. does not use the spy services of its partners in the so-called Five Eyes alliance — Australia, Britain, Canada and New Zealand — to skirt the law. . .
Continue reading. I believe “skirt the law” is a tactful way of saying “break the law.”
Matt Taibbi has another excellent Rolling Stone article on the machinations of mega-banks:
Call it the loophole that destroyed the world. It’s 1999, the tail end of the Clinton years. While the rest of America obsesses over Monica Lewinsky, Columbine and Mark McGwire’s biceps, Congress is feverishly crafting what could yet prove to be one of the most transformative laws in the history of our economy – a law that would make possible a broader concentration of financial and industrial power than we’ve seen in more than a century.
But the crazy thing is, nobody at the time quite knew it. Most observers on the Hill thought the Financial Services Modernization Act of 1999 – also known as the Gramm-Leach-Bliley Act – was just the latest and boldest in a long line of deregulatory handouts to Wall Street that had begun in the Reagan years.
Wall Street had spent much of that era arguing that America’s banks needed to become bigger and badder, in order to compete globally with the German and Japanese-style financial giants, which were supposedly about to swallow up all the world’s banking business. So through legislative lackeys like red-faced Republican deregulatory enthusiast Phil Gramm, bank lobbyists were pushing a new law designed to wipe out 60-plus years of bedrock financial regulation. The key was repealing – or “modifying,” as bill proponents put it – the famed Glass-Steagall Act separating bankers and brokers, which had been passed in 1933 to prevent conflicts of interest within the finance sector that had led to the Great Depression. Now, commercial banks would be allowed to merge with investment banks and insurance companies, creating financial megafirms potentially far more powerful than had ever existed in America.
All of this was big enough news in itself. But it would take half a generation – till now, basically – to understand the most explosive part of the bill, which additionally legalized new forms of monopoly, allowing banks to merge with heavy industry. A tiny provision in the bill also permitted commercial banks to delve into any activity that is “complementary to a financial activity and does not pose a substantial risk to the safety or soundness of depository institutions or the financial system generally.”
Complementary to a financial activity. What the hell did that mean?
“From the perspective of the banks,” says Saule Omarova, a law professor at the University of North Carolina, “pretty much everything is considered complementary to a financial activity.”
Fifteen years later, in fact, it now looks like Wall Street and its lawyers took the term to be a synonym for ruthless campaigns of world domination. “Nobody knew the reach it would have into the real economy,” says Ohio Sen. Sherrod Brown. Now a leading voice on the Hill against the hidden provisions, Brown actually voted for Gramm-Leach-Bliley as a congressman, along with all but 72 other House members. “I bet even some of the people who were the bill’s advocates had no idea.”
Today, banks like Morgan Stanley, JPMorgan Chase and Goldman Sachs own oil tankers, run airports and control huge quantities of coal, natural gas, heating oil, electric power and precious metals. They likewise can now be found exerting direct control over the supply of a whole galaxy of raw materials crucial to world industry and to society in general, including everything from food products to metals like zinc, copper, tin, nickel and, most infamously thanks to a recent high-profile scandal, aluminum. And they’re doing it not just here but abroad as well: In Denmark, thousands took to the streets in protest in recent weeks, vampire-squid banners in hand, when news came out that Goldman Sachs was about to buy a 19 percent stake in Dong Energy, a national electric provider. The furor inspired mass resignations of ministers from the government’s ruling coalition, as the Danish public wondered how an American investment bank could possibly hold so much influence over the state energy grid.
There are more eclectic interests, too. After 9/11, we found it worrisome when foreigners started to get into the business of running ports, but there’s been little controversy as banks have done the same, or even started dabbling in other activities with national-security implications – Goldman Sachs, for instance, is apparently now in the uranium business, a piece of news that attracted few headlines.
But banks aren’t just buying stuff, they’re buying whole industrial processes. They’re buying oil that’s still in the ground, the tankers that move it across the sea, the refineries that turn it into fuel, and the pipelines that bring it to your home. Then, just for kicks, they’re also betting on the timing and efficiency of these same industrial processes in the financial markets – buying and selling oil stocks on the stock exchange, oil futures on the futures market, swaps on the swaps market, etc.
Allowing one company to control the supply of crucial physical commodities, and also trade in the financial products that might be related to those markets, is an open invitation to commit mass manipulation. It’s something akin to letting casino owners who take book on NFL games during the week also coach all the teams on Sundays.
The situation has opened a Pandora’s box of horrifying new corruption possibilities, but it’s been hard for the public to notice, since regulators have struggled to put even the slightest dent in Wall Street’s older, more familiar scams. In just the past few years we’ve seen an explosion of scandals – from the multitrillion-dollar Libor saga (major international banks gaming world interest rates), to the more recent foreign-currency-exchange fiasco (many of the same banks suspected of rigging prices in the $5.3-trillion-a-day currency markets), to lesser scandals involving manipulation of interest-rate swaps, and gold and silver prices.
But those are purely financial schemes. In these new, even scarier kinds of manipulations, banks that own whole chains of physical business interests have been caught rigging prices in those industries. For instance, in just the past two years, fines in excess of $400 million have been levied against both JPMorgan Chase and Barclays for allegedly manipulating the delivery of electricity in several states, including California. In the case of Barclays, which is contesting the fine, regulators claim prices were manipulated to help the bank win financial bets it had made on those same energy markets.
And last summer, The New York Times described how Goldman Sachs was caught systematically delaying the delivery of metals out of a network of warehouses it owned in order to jack up rents and artificially boost prices.
You might not have been surprised that Goldman got caught scamming the world again, but it was certainly news to a lot of people that an investment bank with no industrial expertise, just five years removed from a federal bailout, stores and controls enough of America’s aluminum supply to affect world prices.
How was all of this possible? And who signed off on it? . . .