Making War In Libya... For Goldman Sachs And J.P. Morgan?

An overwhelming majority of Americans don't like our involvement in the bombing campaign against Libya but whether you think that what looks like the congressional wrist slap goes far enough, the resolution Webb and Corker are proposing on that war, it certainly guarantees that there will be a debate on U.S. policies there and-- at least in theory-- if Obama can't make an argument on the merits (and so far he hasn't been able to), then Congress will be bound to restrain the executive branch over reach. That would be a first in many decades. This is the press release that went out with S.J.Res, 18 this week:

Senators Jim Webb (D-VA) and Bob Corker (R-TN) today introduced a joint resolution requiring the Administration to provide a detailed justification of U.S. operations in Libya and prohibiting the deployment of U.S. troops on the ground there. It further calls on the President to request authorization for the continuation of U.S. involvement in NATO activities and states that Congress should fully debate such a request expediently. Nearly 90 days after the initiation of force in Libya, such debate has not occurred.

The bipartisan resolution states, “The President has failed to provide Congress with a compelling rationale based upon United States national security interests for current United States military activities regarding Libya.” It calls for an unclassified report to provide essential information to Congress and the American public to evaluate U.S. involvement in Libya and appropriately debate it.

“When we examine the conditions under which the President ordered our military into action in Libya, we are faced with the prospect of a very troubling historical precedent that has the potential to haunt us for decades,” said Senator Webb. “The issue for us to consider is whether a President-- any President-- can unilaterally begin, and continue, a military campaign for reasons that he alone defines as meeting the demanding standards worthy of risking American lives and expending billions of dollars of our taxpayers’ money. It is important for Congress to step in and clearly define the boundaries of our involvement.”

“It has now been more than 80 days since the United States first launched military action in Libya in what was supposed to be only a very limited operation, but neither the Congress nor the American people have any clearer view of the administration’s stated mission or end game for our military involvement in Libya. Having been denied answers, repeatedly, to these fundamental questions or even a comprehensive debate to consider the merits of U.S. involvement in such an engagement, it’s long past time to set a final deadline to get the information every man and woman who puts on a uniform and every taxpayer who funds the operation deserves,” Senator Corker said.

The joint resolution, which would have the force of law, requires the Administration to publicly answer a detailed series of questions about the Libya operation within 14 days of enactment. Parts of the resolution mirror bills passed in the House of Representatives.

Someplace Webb and Corker don't have the imaginations or the will to go is to ask what the hell we're doing bombing the hell out of this small country in the first place. Why Libya instead of, say, Syria or Bahrain, each of which is doing far worse to its citizens, the ostensible "reason" we're involved with this massive attack on Libya? In a pair of powerful investigative articles that would do far more credit to the Senate than the toothless joint resolution, journalist Russ Baker posits that evidence makes it clear that Qaddafi has been set up and that the U.S. in part of a plan to create an “Arab Spring” for the Good Old Boys-- CIA, banks, oil companies. Hopefully, you've been following Matt Taibbi's exciting reporting on the relationship between Qaddafi and the bandits at Goldman Sachs.

Libya was eager to join the big leagues of finance, and its investors were “awed” by an Arabic-speaking Goldman executive who urged them into an options deal that bet on the fortunes of companies including Citigroup Inc. C +0.23% , Allianz DE:ALV -1.33% and Italy’s UniCredit IT:UCG +2.08%.

The LIA, Libya’s sovereign wealth fund, was charmed by the demonstration and decided to go all-in with a $1.5 billion bet. Goldman very quickly lost them 98 percent of that money.

I never knew it was even possible to lose 98 percent of an investment that quickly. If you sent a blind, three-legged donkey into Caesar’s palace with $1.5 billion in chips, it could probably stay solvent longer than this options package Goldman sold to Qaddafi.

How could the Libyans be enticed to take such a crappy deal? See if this sounds familiar: according to the Wall Street Journal, the Libyan fund manager felt that Goldman had "misrepresented" the fantastic investment opportunity Goldman sold to them, and also made trades "without proper authorization."

...Having managed to get their bankers out of Libya with their heads still attached to their shoulders, Goldman decided to make up for losing $1.5 billion of Qaddafi’s money by offering the international pariah a $3.7 billion equity stake that would have made him one of the largest single owners of the bank.

In con-man parlance, this is called the reload. You beat someone in a Ponzi scheme for his life’s savings, and when he shows up at your door with an axe, you get him to mortgage his house to buy a stake in the Brooklyn Bridge. After blowing $1.5 billion of Libya’s money almost instantaneously, Goldman’s solution to the problem was to immediately get Qaddafi reaching back into his pocket for a cash sum over twice the size of the original losses. It’s really hard not to admire the sheer balls of the whole deal.

Baker starts by asking if there is any actual evidence that the claims by Qaddafi’s defecting Justice Minister, Mustafa Mohamed Abud Al Jeleil, that Qaddafi was the culprit behind the bombing of Pan Am 103 are true. "This story," he points out, "made it into major news media throughout the world, without anyone stopping to raise questions about the propaganda benefit of the statement, or of the timing." And though no one has seen any of the promised "evidence," the original headlines did the trick-- anyone watching television or reading stories then would have been led to believe that Qaddafi was behind the Lockerbie tragedy. That's when Obama called on Qaddafi to step down and started down the road to the "humanitarian" attacks on Tripoli.

By December 2010, when a Tunisian man set himself on fire, the Arab Spring revolt was under way—in Egypt, Bahrain, and elsewhere. Pretty quickly, it was clear to everyone that the Western powers were in danger of losing crucial oil suppliers—and vital military bases.
It certainly was convenient that, right about that time, Libya showed signs of moving in the opposite direction-- into the US camp. Read our piece here about the CIA ties to the Libyan uprising.

Then consider the timing of February’s ramped-up claim by the defecting Libyan official, that Qaddafi himself had ordered the Lockerbie bombing.

If that wasn’t enough in the propaganda department to get the global public worked up, next came the Libya rape story. The average person doesn’t have the time or appetite to follow the kinds of complex corporate maneuverings that fascinate us here, but they do understandably get upset about bombs on civilian aircraft and rape.

...We noted the timing of the story, the alacrity with which the Western press grabbed it and spread it, and the simple fact that there’s no evidence tying Qaddafi in any way to any such act. Even the woman herself doesn’t claim that.  Yet it infuriated untold millions and postings all over the Web show that it moved a lot of public opinion into the column supporting military action to remove the Libyan leader.

That the corporate media cannot see what is going on here, or refuses to see, tells us how far we have not come since the Gulf of Tonkin Resolution.

Still, we can hear the other shoe dropping if we listen carefully enough. For example, the website Politico ran a little item the other day on a powwow between Hillary Clinton and corporate executives over business opportunities in Iraq.

FIRST LOOK: WALL STREET IN IRAQ? – Secretary of State Hillary Clinton and Deputy Secretary Tom Nides (formerly chief administrative officer at Morgan Stanley) will host a group of corporate executives at State this morning as part of the Iraq Business Roundtable. Corporate executives from approximately 30 major U.S. companies-- including financial firms Citigroup, JPMorganChase and Goldman Sachs-- will join U.S. and Iraqi officials to discuss economic opportunities in the new Iraq. Full list of corporate participants.

Give it a couple of years, and they’ll be having the same party celebrating a more sympathetic regime in Libya.

Ready For Another Goldman Sachs Wrist Slap?

J.P. Morgan was never tried for treason... so no one remembers what he did-- and people still do it

I've been reading Glen Yeadon's book, Nazi Hydra in America and everyday I come across more and more iconic American names complicit in the rise of fascism, certainly in Italy, Spain and Germany but also in attempts to bring fascism to America in the 1920s and '30s-- right up to and including an attempted coup d'etat against President Roosevelt by Wall Street and Big Business titans with names like duPont, Rockefeller, Bush, Mellon and Morgan.

Yeadon quotes Newsweek here:

The fresh look at wartime culpability may extend to other American icons. In 1940 one of the nation's most prestigious law firms, Sullivan & Cromwell, joined together with the Wallenberg family of Sweden--famed for producing Raoul, a Holocaust martyr who saved Jews in Budapest--to represent Nazi German interests, says Abe Weissbrodt, a former Treasury Department lawyer who prosecuted the case in 1946. The scam? Sullivan & Cromwell drafted a voting trust agreement making the Wallenbergs' Enskilda Bank a dummy owner of the U.S. subsidiary of Bosch, a German engine-parts maker, so the Nazis could retain control. The papers were drawn up by John Foster Dulles, a Germanophile who later became secretary of State and whose name today graces Washington's international airport. (The scheme worked during the war, but in 1948 Bosch was finally auctioned to a U.S. buyer.) The record is compelling in terms of warranting questions about Dulles's motives and his own allegiances," says historian Masurovsky. "One might say about him what Treasury said about Chase and J.P. Morgan, that they had allegiance to their own corporate interests and not to their country."

None of the worst culprits were ever punished. In fact, they or their progeny went on to attain the highest levels in our society, mostly still working towards fascism. Never punished... it just keeps me awake at night. We never seem to punish the rich and powerful no matter how heinous their crimes against society. So it was with an "I'm believe it when I see it" attitude that I took in Wednesday's announcement by Carl Levin (D-MI) that one of the decades-long institutional grand criminals of American life, Goldman Sachs might be in for a rough time. I'm not sure if Senator Levin is being duplicitous or naive... we'll see. Tom Braithwaite covered it for the Financial Times.

Carl Levin, chairman of the Senate investigative subcommittee, said there was “real hope” law enforcement authorities would act on his panel’s report accusing Goldman Sachs of misleading investors and Congress.

The Senate report criticised rating agencies, regulators and other banks. But Goldman has drawn particular focus. Eric Holder, attorney-general, said this month the justice department was looking at the report “that deals with Goldman."

The possibility of more legal and regulatory issues at the bank has weighed on its stock in recent weeks. Dick Bove, analyst at Rochdale Securities, wrote last week that “pressure on the justice department to bring a criminal lawsuit against Goldman [appeared to be] building to a high pitch."

Mr Levin added to that in an interview with the Financial Times on the Senate report, which examined Wall Street practices in the run-up to the crisis. The senator was confident officials were taking it seriously. “There’s real hope here that there’s going to be a good scrub by a number of law enforcement entities, so I am not pessimistic about this.”

The senator said Goldman’s payment of $550m to settle fraud allegations from the Securities and Exchange Commission in connection with the marketing of one structured debt product did not preclude other allegations. He said Goldman executives misled his committee but suggested they might have stopped short of lies with “wiggle words."

Matt Taibbi has been prone to use stronger terms than "wiggle words" in describing the banksters in his powerful, muckraking Rolling Stone series. This week he held open the possibility that the hammer could possibly be coming down-- and he's neither duplicitous nor naive. His hope: New York state's crusading and brilliant new Attorney General, Eric Schneiderman (who we first met here at DWT early in 2008 when he was a state senator in upper Manhattan. Taibbi posits that Schneiderman's investigation "looks like it might be the first for-real attempt at a prosecution of the systemic corruption that led to the financial crisis," targeting the banks’ mortgage securitization process during the bubble years and focuses on Morgan Stanley, Bank of America, and Goldman Sachs.

This investigation has the potential to be a Mother of All Nightmares situation for the banks for a couple of reasons. For one thing, the decision to go after the securitization process is a total prosecutorial bullseye. This is the ugly heart of the wide-scale fraud scheme of the bubble era. Again, the business model during this time was a giant bait-and-switch scam. Sleazy lenders like Countrywide and New Century first created huge masses of bad loans, committing every conceivable kind of fraud to get people into loans (from doctoring income statements with white-out to phonying FICO scores to engineering fake appraisals). They then moved the bad loans quickly to the big banks, which pooled them and chopped them up (this is the “securitization” process), sprinkled hocus-pocus math on them, and them sold them to suckers around the world as AAA-rated securities.

The questions Schneiderman will seek to answer are these: did the banks securitize loans they knew were fraudulent, throwing the rotten mortgages into the stew before serving them to customers? Did they also commit insurance fraud by duping the bond insurers (known as “monoline” insurers) into thinking the mortgages were not as risky as they really were? And did they participate in the fraud scheme on a more basic level by lending huge amounts of money to the Countrywides of the world, knowing that they in turn would immediately use that money to create the bad loans? In other words, did the banks finance the fraud in addition to brokering it?

The reason this is such a potentially deadly investigation for the banks is that they seemed to be so close to getting away scot free. There is another investigation into the banks’ mortgage abuses by the states’ Attorneys General, led by Iowa AG Tom Miller, that was rumored to be headed toward a settlement, despite the fact that nothing like a complete investigation has been done. The expectation for some time has been that the banks would eventually have to pay a significant, but eminently survivable, settlement for abuses during the bubble era. Although the Miller probe was focused on practices like robo-signing and other such documentation abuses, it could theoretically have covered securitization as well.

But if the AGs were to sign off on a friendly global settlement for mortgage abuses prematurely, it would be like a DA offering a millionaire murderer a 2-year plea bargain before the cops even had a chance to interview all the eyewitnesses. It would be a blatantly political arrangement. Such a desire to get some kind of deal done and sweep the mortgage mess under the rug once and for all seems almost universal among high-ranking politicians, and particularly in the Obama administration, which has acted throughout like it wants more than anything to simply get all of this over with and put in the past.

Schneiderman’s investigation throws a monkey wrench into all of this. The banks cannot enter into a settlement with 49 states. They need all 50 at the table. But if Schneiderman breaks ranks and goes off on an end-run investigation that plunges right into the rotten core of the fraud era, then the whole pipe dream of an easy settlement vanishes in an instant. This is particularly true since Schneiderman is the most important AG, being from the state of New York, where most of the crime was probably committed.

The amount of money investors lost in this fraud scheme is probably gigantic. The ill-gotten money the banks made off that same fraud is probably similarly huge. And the damage to society, in the form of mass foreclosures and other losses, is incalculable. If the banks end up being found liable for all of these offenses, they could face truly crippling fines and penalties. This goes far beyond the question of whether one bank like Goldman defrauded a client or two or lied to investigators. This probe could be asking whether the banks’ entire revenue model during the crisis years was based on fraud.

Taibbi says Schneiderman is serious. He always has been in the past. I might caution that the banksters have paid politicians-- on both sides of the aisle-- direct bribes of $1,515,876,043 since 1990 (protection money) and have also been active in lobbying politicians as well. Take a look and how they have corrupted our entire political system:

All those billions are perfectly legal efforts by the finance sector to influence legislators