The Ileana Ros-Lehtinen/AIPAC driven House Resolution 867 boiled down to a call for censorship of the Goldstone Report without “any endorsement or further consideration” from the Obama Administration, rife with inaccuracies and undermines support for the universality of human rights.

It is no surprise that Congress is trying to cover their culpable asses for during the 23 days of Israeli assault on Gaza, “Washington provided F-16 fighter planes, Apache helicopters, tactical missiles, and a wide array of munitions, including white phosphorus and DIME. The weapons required for the Israeli assault were decided upon in June 2008, and the transfer of 1,000 bunker-buster GPS-guided Small Diameter Guided Bomb Units 39 (GBU-39) were approved by Congress in September. The GBU 39 bombs were delivered to Israel in November (prior to any claims of Hamas cease fire violation!) for use in the initial air raids on Gaza.

One of the few who have been to Gaza, Congressman Baird D-WA, wrote,

H.Res. 867 is very serious business. If, as Goldstone asserts and the evidence I have seen supports, there were in fact gross violations of international law and human rights on all sides, we cannot in good conscience support H.Res. 867.

This is about much more than just another imposed political litmus test that we are all too often asked to perform. This is about whether we as individuals and this Congress as an institution find it acceptable to drop white phosphorous on civilian targets, to rocket civilian communities, to destroy hospitals and schools, to use civilians as human shields, and to deliberately destroy nonmilitary factories, industries and basic water, electrical and sanitation infrastructure. This is about whether it is acceptable to restrict the movement, opportunities and hopes of more than a million people every single day.

At the end of the day, this is also about our own domestic security. If we are seen internationally as condoning violations of human rights and international law, if our money and our weaponry play a leading role in those violations, and if we reflexively obstruct the findings of someone with the credentials, history and integrity of Justice Goldstone, it can only diminish our international standing and our own security.

In a 71-page report released March 25, 2009, by Human Rights Watch, Israel’s repeated firing of US-made white phosphorus shells over densely populated areas of Gaza was indiscriminate and is evidence of war crimes.

“Rain of Fire: Israel’s Unlawful Use of White Phosphorus in Gaza,” provides eye witness accounts of the devastating effects that white phosphorus munitions had on civilians and civilian property in Gaza.

“Human Rights Watch researchers found spent shells, canister liners, and dozens of burnt felt wedges containing white phosphorus on city streets, apartment roofs, residential courtyards, and at a United Nations school in Gaza immediately after hostilities ended in January.

“Militaries officially use white phosphorus to obscure their operations on the ground by creating thick smoke. It has also been used as an incendiary weapon, though such use constitutes a war crime.

“In Gaza, the Israeli military didn’t just use white phosphorus in open areas as a screen for its troops,” said Fred Abrahams, senior emergencies researcher at Human Rights Watch and co-author of the report.

“It fired white phosphorus repeatedly over densely populated areas, even when its troops weren’t in the area and safer smoke shells were available. As a result, civilians needlessly suffered and died.”

During the 23 days of attack on Gaza, the UN Security Council, Amnesty International, International Red Cross, and global voices of protest rose up and demanded a ceasefire, but both houses of Congress overwhelmingly endorsed resolutions to support a continuation of Israel’s so called “self defense” and its collective punishment upon Gaza.

Secretary of State Hillary Clinton walked on coals poured out of righteous rage in Morocco after her moronic praise for Prime Minister Netanyahu’s “reasonable compromise” in which he “proposed a moratorium on new housing units in the West Bank, but would allow building or finishing about 3,000 more units and would exclude East Jerusalem from any building limits.”

All the settlements are illegal under international law and the precedent of US failure to act was well established by 1973, when Ariel Sharon bragged to Winston Churchill III, “We’ll make a pastrami sandwich of them. We’ll insert a strip of Jewish settlement, right across the West Bank, so that in 25 years time, neither the United Nations, nor the United States, nobody, will be able to tear it apart.”

Back in 2005, top U.S. law enforcement officials attended a briefing organized by the Council for the National Interest regarding how charities “such as B’nai B’rith and Hadassah were in direct control of the World Zionist Organization and directly linked to a massive money-laundering operation…and the settlements are an indirect generator of terrorism against the United States.”¹

It is the American government’s hypocrisy in collusion with Israel’s negation of international law, UN resolutions, and denial of equal human rights for Palestinians which are at the root of the instability in the Middle East.

Beginning in the 1990’s and even more so after 9/11, US politicians blind allegiance to Israel has been furthered by the claim that both states are threatened by Arab terrorist groups and rogue states bent on acquiring weapons of mass destruction.

Many Americans see Israel as an ally and Iran and Syria as our mutual enemies. The “war on terror” has become a tactic to infuse fear while it ignores that much of the anger in the Arab world is in response to Israel’s 40+ years of military occupation of Palestine and The Wall where ever it is built on legally owned Palestinian property which is “financed with U.S. aid at a cost of $1.5 million per mile. The Israeli wall prevents residents from receiving health care and emergency medical services. In other areas, the barrier separates farmers from their olive groves which have been their families’ sole livelihood for generations.”²

On February 1, 2007, Senator Clinton spoke at an AIPAC Conference, “Both Israelis and Americans know so well, a democracy is far more than just holding elections. Democracy has to spring from an active and open citizenry dedicated to tolerance, to respect for differences, to the rule of law, to policies that lift us up not tear us down as fellow human beings, and to the value of human life…

“We also know that the dangers posed to Israel have been compounded by the rise to power of Hamas…Hamas…leaders have refused to disarm, to reject violence, or even to recognize the right of Israel to exist.”

The Palestinian Authority first agreed in 1988 to recognize Israel and reaffirmed this in 1993 during the Oslo Accords. Hamas has repeatedly issued olive branches of recognition to Israel, but Israel ignores all offers to make peace through justice.

On November 15, 2005, Senator Hillary Clinton stood on the Jerusalem side of The Wall and was quoted in Ha’aretz, expressing support for The Wall because it “is against terrorists” and “not against the Palestinian people.”

After I read Senator Clinton’s inaccurate and insensitive remarks in Ha’aretz, I immediately contacted her through her website. My email bounced back to me, for I am no longer a New York constituent, but I was born and lived my first three years in The Village and came of age in Levittown, Long Island.

I snail mailed Hillary a respectful letter informing her that even a little one such as me, knew all about the many gaps and lack of ’security’ along The Wall that every taxi driver and ANY would be ‘terrorist’ also knew about in order to travel from the West Bank to Jerusalem without having to stop for SECURITY.

I also reminded her that we were in the midst of the UN Decade of Creating a Culture of NONVIOLENCE for all the children of the world. The only response I received from Senator Clinton was to be put on the DNC’s mailing list soliciting funds.

As a Senator, Clinton repeatedly said, “I’ve been a strong supporter of Israel’s right to build a security barrier to keep terrorists out. I have spoken out against the International Court of Justice for questioning Israel’s right to build that fence of security.”

International Law states occupation is to be temporary and maintain the status quo and that the occupiers are not to transfer their population into occupied territory. And what RIGHT has anyone to put a fence up on somebody else’s property?

As a Senator, Hillary said: “I went to see the fence with my own eyes. During a trip to Gilo, a Jerusalem neighborhood, I was greeted by Col. Danny Tirza, who was overseeing the construction of the security fence.

“Col. Tirza’s explanation in his graphic depiction of what was part of the daily life of people living in that one neighborhood, gave me an even greater appreciation for the imperative of the fence and the need to do everything possible to protect Israel against these continuing attacks.”

The truth is that in 2000, before the construction of The Wall began, there were less ‘attacks’ than in 2008 and the Orwellian spun ‘neighborhoods’ are all ILLEGAL colonies for everyone exist on legally owned Palestinian land, NOT on Israeli owned land!

I have seen “the fence” too and it divides Palestinians from Palestinians with 25 to 30 foot high concrete slabs or wire equipped with razor barbs, trenches, sniper towers, military roads, electronic surveillance, remote controlled infantry and buffer zones that stretch over 100 miles wide and deny Palestinians access to their legally owned land, their families, jobs, and resources.

The Wall has eviscerated the sister cities of Bethlehem and Jerusalem and will soon completely separate Bethlehem from her sister villages of Beit Sahour and Beit Jala. Bethlehem’s significance to and historic ties with Palestinian East Jerusalem and its economic demise caused by The Wall heralded the beginning of what the BBC reported on November 5, 2009:

Palestinians might have to abandon the goal of an independent state if Israel continues to expand Jewish settlements, Saeb Erekat, the chief Palestinian negotiator said, “It may be time for President Abbas to tell his people the truth, that with the continuation of settlement activities, the two-state solution is no longer an option.”

Mr. Erekat also dismissed Netanyahu’s, ‘generous offer’ saying it only opened the door to more settlements in the next two years and that “Israel has the choice, settlements or peace.”

Erekat also said Palestinians made a mistake in the last round of talks by agreeing to negotiate without insisting that Israel settlement building be stopped, and added this time things would be different, meaning the alternative for Palestinians is to “refocus their attention on the one-state solution where Muslims, Christians and Jews can live as equals” as they would in true democracies.

After Clinton met with Egyptian Foreign Minister Ahmed Aboul Gheit, he called for a resumption of talks, “We have to concentrate on the end game and we must not waste time adhering to this issue or that as a start for the negotiations.”

Senator Clinton once said, “It is not enough for us to say the right things; we’ve got to be smart and tough enough to do the right things that will protect American and Israeli interests now and forever.”

Tough and smart would comprehend that America’s best interests and Israel’s security demand justice for Palestine: end the occupation and ensure equal human rights for all. And integrity would have no fear of international law.

1. Grant F. Smith, Foreign Agents: The American Israel Public Affairs Committee from the 1963 Fulbright Hearings to the 2005 Espionage Scandal, (2007, Institute for Research: Middle Eastern Policy, Washington D.C.) p. 158.
2. Washington Report on Middle East Affairs, p. 43, Jan/Feb. 2007.

The Senate is pressing ahead with the bill despite overwhelming disapproval from liberal and conservative economists. Their main objection? It’s a waste of money. The Brookings Institute estimates that the $8,000 credit costs taxpayers $43,000 per home. This is based on the fact that 85% of the nearly 2 million buyers were planning to buy a home anyway. The new add-ons to the bill mean that its final costs will be much greater than originally anticipated.

The senate bill is nothing but a $6,500 bribe to keep people in their homes and out of foreclosure. It’s another giveaway to the banks so they don’t have to face the mountain of debt they generated through fraudulent loans. The banks aren’t satisfied with merely blowing up the financial system and extracting trillions of dollars from taxpayers to fix the mess they left behind. Now they want to ensure that they’re a constant drain on public resources, by diverting dollars earmarked for healthcare or state aid into broken institutions run by high-stakes gamblers. The Congress has played a critical role in this fiasco.

The Senate has also shrugged off the many reports of fraud related to the home-buyer credit. Here’s an excerpt from the Wall Street Journal which summarizes hundreds of similar stories:

News of the latest taxpayer-funded mortgage scam has traveled fast. The Treasury’s inspector general for tax administration, J. Russell George, recently told Congress that at least 19,000 filers hadn’t purchased a home when they claimed the credit. For another 74,000 filers, claiming a total of $500 million in credits, evidence suggests that they weren’t first-time buyers.

Among those claiming bogus credits, at least some of them were definitely first-timers. The credit has already been claimed by 500 people under the age of 18, including a four-year-old. This pre-K housing whiz likely bought because mom and dad make too much to qualify for the full credit…

As a “refundable” tax credit, it guarantees the claimants will get cash back even if they paid no taxes. A lack of documentation requirements also makes this program a slow pitch in the middle of the strike zone for scammers. The Internal Revenue Service and the Justice Department are pursuing more than 100 criminal investigations related to the credit, and the IRS is reportedly trying to audit almost everyone who claims it this year.¹

Does it bother senators that the public is being plucked like a Thanksgiving turkey, once again?

Everything that has been done to prop up the ailing housing market, has really been aimed at helping the banks. The Fed has launched the biggest government intervention in history– purchasing more than $900 billion in mortgage-backed securities, $200 billion in agency debt, and another $300 billion in long-term US Treasuries–all to stabilize a market which was sabotaged by the Fed’s low interest rates and the banks abyssal lending standards. Private label “securitized” mortgages have defaulted at 5-times the rate of conventional loans, clear proof of fraud.

The Fed’s capital injections will eventually add $2 trillion to the aggregate value of the residential real estate market. The Fed is doing its best to prevent the market from clearing by keeping home prices artificially high. That’s the only way to avoid more bank failures.

The Fed’s intervention is a sign of desperation. In the long-run, the action is unlikely to have any bearing on prices which will be determined by incomes and supply. Housing inventory is still unusually high, which is putting downward pressure on prices. Distress sales (short sales, foreclosures etc) represent 45 percent of all home sales, which reduces the number of creditworthy buyers for organic sales.

So, what has the Fed’s multi-trillion dollar intervention achieved aside from creating a fake market with fake interest rates, fake financing, fake down-payment ($8,000 first-time home buyer giveaway) and fake media coverage of a fake rebound. Not much, really. The Wall Street Journal’s James Hagerty sums it up like this:

Uncle Sam’s interventions in the housing market have pushed home prices 5% higher on a national average than they would have been otherwise, Goldman Sachs estimates in a report released late Friday…

But these artificial props won’t last forever and may have created a false bottom in the market.

“The risk of renewed home-price declines remains significant,” Goldman economist Alec Phillips writes in the report, “and our working assumption is a further 5% to 10% decline by mid-2010.”²

Over $1 trillion has been committed so far, and prices have budged a mere 5%. Does Fed chair Ben Bernanke really believe this is an affordable plan?

The Administration’s Making Home Affordable Modification Program (HAMP) will have only a marginal effect on the rate of foreclosures when the next wave of pay-option adjustable-rate mortgages and other oddball loans come due. And, when the loans reset, more banks will default pushing even more inventory onto the market at firesale prices. Foreclosures have exceeded 300,000 for the last 3 months and the inventory-backlog suggests the worst is still to come.

This is from Diana Golobay at housingwire.com:

Recent analysis by the Amherst Securities Group indicates the housing industry will not only worsen as a delayed pipeline of foreclosed loans begins to liquidate, but that the Administration’s Making Home Affordable Modification Program (HAMP) will have no lasting effect on keeping delinquent loans current…

Amherst estimates this “shadow inventory” at around 7m housing units, or 135% of a full year of existing home sales, compared with 1.27m units in this bucket in early 2005. The backlog is due to high transition rates, low cure rates and a longer timeline for loan liquidation — in other words, loans continue to transition into the delinquency/foreclosure pipeline at a rapid pace, but are moving out at a very slow pace.

The loans, however, are “destined to liquidate” and will impact the signs of recovery seen in recent months by pulling down house prices through distressed sales.³

So, what can Bernanke do to head-off a bigger meltdown in housing?

The Fed revealed its long-term strategy in the minutes of its September 22-23 FOMC meeting. Here’s an except from the Fed’s statement:

The Committee agreed that it would continue to evaluate the timing and overall amounts of its purchases of securities in light of the evolving economic outlook and conditions in financial markets. Members discussed the importance of maintaining flexibility to expand the asset purchase programs should the economic outlook deteriorate or to scale back the programs should economic and financial conditions improve more than anticipated.

In other words, the Fed is planning to continue its quantitative easing (QE) program (monetisation) which pumps liquidity into the system and puts more downward pressure on the dollar. Bernanke is trying to inflate-away the problems in housing, but with little success. In fact, according to Robert Shiller, who created the index for measuring house prices in 20 major cities, the Fed may have generated another bubble. This is from the UK Telegraph:

The S&P Case-Shiller index… showed that house prices were up 1 percent from the previous month, following a 1.2 percent increase in July. However, August’s prices were still down 11.3 percent year-on-year, highlighting the continued problems in the market as a whole. Professor Shiller, who is credited with calling both the late 1990’s tech market bubble and the bubble that led to the US property market crash three years ago, pointed to price increases in areas including San Francisco and Minneapolis, which have seen double-digit gains in the last four months. He said that if these rises are viewed on an annualised basis they could be seen as “bubble territory.’⁴

Housing prices will continue to tumble through 2010 no matter what the Fed does. In fact, on Wednesday the Commerce Dept reported that sales of new one-family houses in September dropped to a rate of 402,000, down 3.8 percent from August. That’s 7.8 percent below 2008, well below economists worst predictions. The news sent stocks plummeting.

The sense that the economy is returning to normal, is an illusion nurtured by the financial media. This week’s dismal consumer confidence data, shows that the public “isn’t buying it.” And, neither are investors, who continue to avoid equities despite a seven-month, 68 percent rally in global stocks. According to Bloomberg, “Almost 40 percent of investors and analysts in the latest quarterly survey… say they are still hunkering down. U.S. investors are even more cautious, with more than 50 percent saying they are in a defensive crouch.” The mood is grim. The public has lost faith in the media, in the Fed, and in public institutions. The “cheery predictions” are no longer having any effect. No doubt, this will make it even harder to stabilize the teetering housing market.

1. ”First Time Fraudsters,” Wall Street Journal
2. James Hagerty, “Uncle Sam Adds 5% to Prices of Homes, Goldman Says,” Wall Street Journal
3. Diana Golobay, “Amherst Sees 7m Foreclosures Poised to Distress House Prices,” housingwire.com
4. UK Telegraph

There is also a correlation between stock prices and the dollar which should be considered. As equities have soared, the dollar has plunged. That’s because investors have become less risk-adverse than they were after Lehman Bros. collapsed. Now they have resumed speculation. Still, the S&P 500 is up over 60 percent since March 9, (which prices in a full three year recovery) which is “too much too fast.” According to John Hussman, “90% of stocks (are) suspended above their 50- and 200-day moving averages for as sustained a period as we have now observed.” (Hussman Funds Weekly Market Comment) That suggests that stocks are wildly overbought and that the market will soon correct, perhaps, violently.

Also, there is no shortage of investors and central banks willing to buy US debt which supports the greenback. Consider this report in last week’s Bloomberg:

Investors can’t get enough Treasuries even as the U.S. budget deficit climbs beyond $1 trillion, the government sells a record amount of debt and the dollar declines to the weakest level since August 2008.

Foreign buyers increased their holdings for a fourth consecutive month in August, to an all-time high of $3.45 trillion, according to Treasury Department data released Oct. 16. U.S. demand is being spurred by a rising savings rate and concern the economic recovery may falter. Fixed-income funds have attracted 18 times more money than stock funds this year, according to data compiled by Morningstar Inc. and Bloomberg.

Long-term, it is likely to be tough-sledding for the dollar, as government spending increases and fiscal deficits keep piling up. But in the short-term, investors believe that deflation is the biggest problem facing the economy. The surge in US Treasuries proves that point.

The notion that the dollar will crash, has become an article of faith among doomsayers, Libertarians, survivalists, leftists and goldbugs. (I’m as guilty as anyone) But is the theory supported by the facts?

First of all, “crash” is an ambiguous term. I take it to mean a plunge in the value of the currency to a hyper-inflationary range. What we are seeing now, however, is the Fed managing the value of the dollar downward to increase exports and reduce the real value of household and financial sector debt. That is not a crash; it is a planned demolition with the intention of improving the US’s position vis-a-vis its main trading partners. It is a type of currency warfare which is making the dollar more competitive at the expense of people who save. It’s exactly what Bernanke wants.

All the Zimbabwe talk is pure nonsense.

The reserve currency system is inherently unfair and invites all kinds of abuses. It gives the United States greater access to credit and elevates the dollar above all the other currencies. The dollar should be dethroned as the de facto international currency so that there can be greater parity between the currencies.

Those who believe that a “dollar crash” will bring the government to its senses or change the system, are mistaken. It won’t happen. Real structural change requires political activism and a vision of a system that is more equitable then the one presently in place. There’s no substitute for hard work.

It appears as though the savior may be riding in on a pale horse.

According to a September 5 New York Times article, banks like Credit Suisse and Goldman Sachs are exploring new investment schemes that involve buying up life insurance policies from sick and elderly people, bundling them into huge securities, and selling shares in the securities to investors.

Buying shares is essentially a bet–that the people whose insurance policies on which the securities are based will die “on time” or earlier than expected. According to the Times, “The earlier the policyholder dies, the bigger the return–though if people live longer than expected, investors could get poor returns or even lose money.”

Just when it seemed impossible for Wall Street–still counting the trillions in taxpayer dollars it received in a government bailout to save it from collapse–to sink any lower, greed came to the rescue with the development of a grim new market.

As Karl Marx and Frederick Engels wrote in the Communist Manifesto, “The need of a constantly expanding market for its products chases the bourgeoisie over the whole surface of the globe. It must nestle everywhere, settle everywhere, establish connections everywhere.”

Now, the financial crisis has driven capitalists to the nursing and retirement homes, and to the bedsides of the sick and dying.

The credit rating agency DBRS–whose Senior Vice President Kathleen Tillwitz informed the Times that “our phones have been ringing off the hook with inquiries”–is studying how to rate pools of life insurance policies. The main challenge is figuring out how to pool people together. As the Times wrote:

The solution? A bond made up of life settlements would ideally have policies from people with a range of diseases–leukemia, lung cancer, heart disease, breast cancer, diabetes, Alzheimer’s. That is because if too many people with leukemia are in the securitization portfolio, and a cure is developed, the value of the bond would plummet.

If the sub-prime mortgage market boom is any indication, an increased demand for existing life insurance policies spurred by increased securitization would lead to widespread abuse and fraud–with policy originators faced with the same incentives that encouraged mortgage brokers to deceive borrowers with “teaser” interest rates that ballooned several years into repayment.

In this case, the victims would be the elderly, the sick, and those who depend on life insurance benefit payouts in the case of the death of a loved one.

A further element of instability would be added if life insurance-backed securities take off–the likely proliferation of illegal “stranger-owned life insurance” or “STOLI” policies.

A STOLI is a policy created when a broker or investor convinces someone, usually a senior citizen, to take out a life insurance policy, with the promise to sell it quickly for a one-time payment. According to Reuters, “The death benefits are immediately transferred to investors, usually hedge funds.”

The securitization of life insurance policies would likely lead to an increase in the number of illegal STOLIs, once the banks exhaust the possibilities of buying up existing, legitimate policies to package into securities. In turn, insurance companies would have an incentive to crack down on this practice to avoid paying death benefits to the investors, leaving the market prone to crisis.

Other challenges for a credit rating agency like DBRS include figuring out what “would happen if health reform passed, for example, and better care for a large number of Americans meant that people generally started living longer? Or if a magic-bullet cure for all types of cancer was developed?” These eventualities, while prolonging and improving the lives of millions, would be bad for investors’ bottom line.

The “potential risk for investors,” the Times continued, is that “some people could live far longer than expected. It is not just a hypothetical risk. That is what happened in the 1980s, when new treatments prolonged the life of AIDS patients. Investors who bought their policies on the expectation that the most victims would die within two years ended up losing money.”

According to an ABC News story:

The industry for selling life insurance [policies to investors] first sprang up during the AIDS epidemic of the late 1980s. “Companies loved AIDS because it was a predictable death sentence,” says Gloria Wolk, a life-settlement expert who learned about the practice while volunteering at AIDS services clinics. “The shorter and more certain the life expectancy, the higher the returns promised to investors and the greater the lump sum offered to patients. It was a grim mix of free-market capitalism and human mortality.”

Wolk nevertheless said she “saw the industry make a huge difference in the lives of terminally ill patients and their families”–by providing victims with funds to pay for the exorbitant health care and other costs associated with dying from AIDS, while it was ignored by a government run by Ronald Reagan.

The only conceivable defense of the practice of bundling life insurance policies into securities and selling them to investors to profit from the deaths of policyholders is that it enables those who sell their policies to get more than they would if they simply sold policies back to the insurance company.

But this option is only attractive because health care costs in the U.S. place quality care out of reach–for the nearly 50 million people without health insurance, and for tens of millions more who are insured, but can’t afford the co-pays and deductibles that pile up when they get sick or injured.

Similarly, for the elderly whose retirement savings have been eroded by the current crisis, the inadequacy of Social Security, and by the long-term shift from defined-benefit pension plans to 401(k)s based on the stock market, the main reason most would be tempted to sell their life insurance policies is that our government neglects to provide a decent standard of living for elderly workers who have outlived their usefulness to the exploiting class.

In other words, the market for securities backed by life insurance policies depends on the absence of universal single-payer health care for all and the lack of a sufficient social safety net for senior citizens.

Almost as disturbing as first-tier financial institutions betting on death is the matter-of-fact reporting of the New York Times.

The Times article, titled “Wall Street Pursues Profit in Bundles of Life Insurance,” ignores completely the question of the morality of human beings gambling on the lives of others, indexing the sick based on the nature of their affliction and when it is likely to kill them, and crossing their fingers that no cure for cancer is discovered. This is a brilliant illustration of Marx’s assertion that capitalism “has left no other bond between [people] than naked self-interest, than callous “cash payment.”"

It says a lot about capitalist society’s brutality and indifference to human life that the newspaper of record could cover this story without pause, going no deeper than the pros and cons from the perspective of investors–while “Ads by Google” accompany the story, inviting readers to “sell your life insurance policy” and “find low cost life insurance.”

Nor does the Times question the logic of devoting massive wealth to a market that creates no new value in the form of goods or services, and is of no use to anyone but the few who will profit from it.

According to the Times article, there are $26 trillion in life insurance policies in the U.S, and “some in the industry predict the market [for life-insurance-backed securities] could reach $500 billion.” That sum is nearly three times the total of all the budget shortfalls of every state government for fiscal year 2010.

A just society based on human need would use that $500 billion to preserve and expand essential services that are on the chopping block as states balance their budgets.

A just society based on human need would devote those resources not to betting on death, but providing top quality care to the sick, researching new cures and treatments (and making them available to all), and ensuring that the elderly live the last years of their lives in dignity and security.

According to the economic “experts,” the U.S. economy is beginning to “recover.” But the very nature of the recovery–a return to big bonuses and salaries for Wall Street executives alongside deepening and sustained unemployment, cuts in social services and health care “reform” that amounts to a massive government handout to the health insurance industry–demolishes any idea that the U.S. is not a class society.

It is time to build the socialist alternative. Our lives and dignity depend on it.

The dispute focuses on the responsibility of relief organizations to speak out against injustice in the communities in which they work. Since September of 2006, St. Bernard Parish has been aggressive in passing racially discriminatory laws and ordinances. Although these laws have faced condemnation in Federal court and in the media, rebuilding organizations active in the parish have so far refused to take a public position.

Racial discrimination has a long history in St. Bernard politics. Judge Leander Perez, a fiery leader who dominated the parish for almost 50 years, was known nationally as a spokesman for racial segregation. The main road through the Parish was named after Perez, and his legacy still has a hold on the political scene there. Lynn Dean, a member of the St Bernard parish council told reporter Lizzy Ratner, “They don’t want the blacks back… What they’d like to do now with Katrina is say, we’ll wipe out all of them. They’re not gonna say that out in the open, but how do you say? Actions speak louder than words. There’s their action.”

The action Lynn was referencing is a “blood relative” ordinance the council passed in 2006. The law made it illegal for Parish homeowners to rent to anyone not directly related to the renter. In St Bernard, which was 85% white before Katrina hit, this effectively kept African Americans, many of whom were still displaced from New Orleans and looking for nearby housing, from moving in. The Greater New Orleans Fair Housing Action Center sued the Parish, saying the ordinance violated the 1968 Fair Housing Act. A judge agreed, saying it was racially discriminatory in intent and impact.

The story doesn’t end there. St. Bernard’s government agreed to a settlement, but the illegal ordinance was followed by another, blocking multi-family construction in the Parish. Last month, U.S. District Judge Ginger Berrigan found the Parish to be in contempt of court, saying, “The Parish Council’s intent…is and was racially discriminatory.” An editorial in the New Orleans Times-Picayune agreed, saying, “This ruling strips off the camouflage and reveals St. Bernard’s actions for what they really are: an effort to keep lower-income people and African-Americans from moving into the mostly white parish.”

Relief Work Questioned

St. Bernard Parish was heavily damaged by flooding in the aftermath of Katrina. Thirteen percent of households lived below the federal poverty line, and every home took in water. Many organizations and volunteers have come through to volunteer time and donate money, including United Way, Salvation Army, and the Greater New Orleans Foundation.

An organization called the St. Bernard Project, which was founded in 2006 by two transplants from Washington, DC, has become one of the most high profile organizations active in the region, with millions of dollars in corporate and individual donations and thousands of volunteers.

This has been a big couple of weeks for the St. Bernard Project. On August 29, President Obama mentioned them in his weekly address, saying, “The St. Bernard Project has drawn together volunteers to rebuild hundreds of homes, where people can live with dignity and security.” Last week, the touring production of the Broadway show The Color Purple, produced by Oprah Winfrey, announced that they will be raising money for the organization, and that author Alice Walker will be personally participating in the fundraising. Last year, CNN named co-founder Liz McCartney its Hero of the Year.

But this national acclamation has only increased criticisms of the work happening in the Parish. Lance Hill, the executive director of the Southern Institute for Education and Research at Tulane University, first raised his voice on the issue in 2006, after the ordinance was passed. Hill is quick to point out that he is not against rebuilding work in the Parish. However, he adds, “If they chose to rebuild homes that Blacks and Jews would be barred from, at a minimum they have a moral obligation to inform volunteers of the policies of the Parish. To not do so is to mislead volunteers and donors and to become complicit with racism.”

Hill is also one of the signatories of an open letter, released this week, which expresses deep concerns over rebuilding efforts in the parish. “Regrettably, many relief and volunteer organizations chose not to respond to the ‘blood relative’ law, remaining silent on this issue,” the letter states. “With the benefit of hindsight, we now know that St. Bernard Parish officials interpreted silence as consent, which has now emboldened this rogue government to pursue other means to defy the Fair Housing Act.”

Organizers say that the letter is intended to pressure organizations to think about larger issues of injustice as they work in the region. “It is time that we take a stand against housing discrimination in St. Bernard and throughout the Gulf Coast,” the letter states. “And make clear what the moral imperatives are for all organizations that seek to rebuild the Gulf Coast as a fair and just society.” Among the signers of the letter are human rights organizations like the National Economic and Social Rights Initiative, regional groups like Moving Forward Gulf Coast, and local initiatives like MayDay Nola, which works on housing in New Orleans.

Zack Rosenburg, the cofounder of St. Bernard Project, is angered by the complaints of Hill and others. “We are not an advocacy group and we’re not commenting on that,” he told me, referring to the laws of the Parish. “We’re helping people get home.” Rosenburg added that at least 30% of the families they have worked with have been African American, and he asked me to “think about the Black families who are living in FEMA trailers and want to move home, before writing this piece… try to build things up instead of pulling things down.”

Lance Hill and other advocates claim that working on relief without challenging systemic injustices actually exacerbates the problem. They point out that the number of houses rebuilt for African Americans in the community – perhaps two hundred at the most, if you include all nonprofits working in the area – pales in comparison to the thousands that have potentially been excluded by the laws of the parish. “The main reason that these relief groups have had to disproportionately rebuild Black rentals,” explains Hill, “is because the Parish is tearing down or blocking construction of affordable housing faster than the relief groups can rebuild.”

“This is why this issue in St. Bernard has troubled me so much,” adds Hill. “Exclusion is at the core of the injustices of Katrina. The deliberate efforts to prevent people from returning and the denial that these policies and practices were in place has been the central issue. The exclusionary ideology that was widespread in the white community in New Orleans became law in St. Bernard.”

Organizers hope that the multiple levels of pressure will ultimately challenge elected officials in St. Bernard Parish to make the area an example of rebuilding with justice for all. “Our silence doesn’t help anybody,” says Hill. “It destroys more than the relief groups can ever dream of building.”

I do not want to explore whether or not nonviolence is the best strategic or moral form of anti-colonial resistance. The difference between violence and nonviolence is not as trenchant as most commentators imagine. Violence and nonviolence, both amorphous terms, are in constant dialectic, and no historical example can be found of either of these approaches being effective without the other present. Undertaking nonviolent resistance is an ethical and strategic decision with which I have no quarrel. In fact, I have tremendous admiration for those who practice this method at the risk of their personal safety and in the service of national liberation.

I dislike the frequent lecturing from Western liberals to Palestinians about the merits of nonviolence, an act as misguided as it is patronizing. Michael Tomasky of The Guardian, for example, posed the following hypothetical amid Israel’s January, 2009, massacre of civilians in the Gaza Strip: “A hypothetical question for you. Suppose the Palestinian liberation movement, going way back to the founding of the PLO in 1964, had been dedicated to nonviolent struggle as opposed to armed struggle, and the Palestinians had had a Gandhi, and not an Arafat.” The Palestinians, Tomasky surmises, would have had a state over twenty years ago. His colleague Gershom Gorenberg argues that “[t]hrough violence—from airplane hijackings to suicide bombings and rocket fire—Palestinians have failed to reach political independence…. So why not adopt the strategy of nonviolent civil disobedience, the methods of Gandhi?” Gorenberg wonders, “Is that kind of radicalism imaginable in Islam?”

On CommonDreams.org, Marty Jezer explains, “Palestinian nonviolence seems a romantic fantasy, an idealistic dream. But perhaps idealism is the most realistic approach at this time; and nonviolence the solution most grounded in reality. I challenge anybody to come up with an equivalent strategy, one that assures Israelis their security and Palestinians their state.” Michael Lerner asks what he imagines to be a self-evident question: “Who are Palestine’s friends? Those who encourage a path of non-violence and abandoning [sic] the fantasy that armed struggle combined with political isolation of Israel will lead to a good outcome for Palestinians.”

It would be too time consuming to respond to all the problems in these passages, but in them we can identify some useful points of analysis. The most important point is that the Palestinians do practice nonviolence. They have done so ever since Zionists began settling their land, a process that is by its very nature violent. Today, as throughout the twentieth century, one can find ample examples of intrepid and imaginative civil resistance. I have met very few Westerners who have traveled to Palestine and didn’t return home inspired.

An interesting feature of Palestinian nonviolence is that it usually evokes a ferocious response by Israel. During the 1980s, peaceful demonstrators had their bones broken at the behest of Yitzhak Rabin. Earlier generations were deported and had their homes demolished. Today’s nonviolent activists are often shot, imprisoned, or beaten. The village of Bi’lin in the West Bank has done a weekly protest for over four years. During the course of these peaceful gatherings, the Israeli military has been utterly brutal. In April, 2009, soldiers shot and killed an unarmed demonstrator, Bassem Ibrahim Abu Rahmah. Abu Rahmah was hit in the chest with a tear-gas grenade, the same weapon that earlier in the year cracked open the skull of American demonstrator Tristan Anderson. In June, 2009, one of the leaders of the Bi’lin demonstrations, Adeeb Abu Rahme, was arrested and kept in military detention without due process. The breathless appeals by concerned Western liberals for the Palestinians to practice nonviolence are both ludicrous and immoral in light of the historical record and the invidious violence of the Israeli state.

The Palestinians have always mixed violence and nonviolence, like all anti-colonial movements. It is through a host of racist presuppositions and an inherent commitment to Zionism that American liberals imagine that somehow Palestinians are a special case, that their reliance on violence is culturally innate (Gershon Gorenberg) or that they are motivated by factors other than liberation, such as anti-Semitism and civilizational envy (Alan Dershowitz). The inability or unwillingness of so many liberal intellectuals to recognize the long tradition of Palestinian nonviolent resistance bespeaks tacit racism in addition to a hypocritical devotion to Israel’s normative and continuous state violence.

These calls for Palestinian nonviolence pretend to be ethically disinterested, but they are entangled with troublesome politics that are fundamentally destructive and undemocratic. For instance, they are often accompanied by appeals to avoid criticism of Zionism (Norman Finkelstein), to eschew effective nonviolent tactics such as boycott and divestment (Michael Lerner), and to reject counterproductive things like binationalism and right of return (Finkelstein and Lerner). In other words, the Palestinians should reject violence, and while they’re at it go ahead and give up all of their legal entitlements and decolonial aspirations.

My good friend, the philosopher Mohammed Abed, pointed out to me recently that the grueling endurance of life under military occupation—waiting hours at checkpoints, being denied medical care, having universities shut down—is itself a testament to an unusual commitment to nonviolence. I suspect that when many Western liberals urge the Palestinians (and other colonized people) to undertake nonviolence, they are using a truncated definition of the term informed by a poor or distorted understanding of the concept. In this usage, they conflate nonviolence with passivity. It is a great convenience to the liberal advocates of colonization to have a colonized population comprised of passive resistors. But colonized people are never as stupid and gullible as their liberal saviors imagine them to be.

The Palestinians, anyway, are far too evolved to listen to those who would use their courage and diligence to dispossess them of their right to active resistance. Violent or nonviolent, their choice of resistance isn’t the business of liberal armchair ethicists. Those ethicists are fond of claiming that if the Palestinians resisted nonviolently they would have already achieved their liberation. This claim is factually untrue. It is just as likely that if liberal commentators would assess their own profound support of violence they would have a lot less to say to others and more time to devote to their own failed selves.

There comes a time comes when silence is betrayal… History will have to record that the greatest tragedy of this period of social transition was not the strident clamor of the bad people, but the appalling silence of the good people.

We are called to speak for the weak, for the voiceless, for victims… We will have to repent in this generation not merely for the hateful words and actions of the bad people but for the appalling silence of the good people.

The ultimate measure of a man is not where he stands in moments of comfort, but where he stands at times of challenge and controversy.

Cowardice asks the question: is it safe? Expediency asks the question: is it politic? Vanity asks the question: is it popular?

But conscience asks the question: is it right? And there comes a time when one must take a position that is neither safe, nor politic, nor popular- but one must take it simply because it is right.

– Reverend Martin Luther King Jr.

Since 1967, the Israeli authorities have demolished more than 24,000 Palestinian homes in the Occupied Territories.

Some are considered “collateral damage” in military operations; such as the 4,000 homes that were demolished in Israel’s December-January assault on Gaza.

Some are as collective punishment; such as the obliteration of the Jenin refugee camp in 2002.

Many are for lack of a building permit, which Israel denies to Palestinians; and due to the unjust justice system of Israel, the courts have ordered thousands of Palestinian families to demolish their own homes while threatening them with fines and imprisonment.

Currently there are tens of thousands of demolition orders on Palestinian homes in East Jerusalem and the West Bank .

The unjust justice system of Israel ignores that the Fourth Geneva Convention forbids an Occupying Power from extending its law and administration into an occupied territory.

The very process of granting or denying permits to Palestinians is blatantly illegal under international humanitarian law.

Missing from Israel’s security framing is the very fact of occupation, which Israel both denies exists…and that “security” requires Israel control over the entire country… rendering impossible a just peace based on human rights, international law, reconciliation.¹

International Law states occupation is to be temporary, but Israeli courts rule on the basis that there is no occupation and therefore the Fourth Geneva Convention protecting civilians under occupation is irrelevant to their sense of justice.

Jeff Halper, the American-Israeli founder of ICAHD/Israeli Committee Against House Demolitions informed this reporter: “Before 1947, the Palestinians owned 94% of the country. Then the UN gave away 56% to the Jews and today they have 78% of the land. Hamas cannot accept the legitimacy of Israel stealing their land, just as no colonial people would ever give up the claim to their homeland.”

The first house ICAHD rebuilt was in 1998 — the Beit Arabyia house — the name for the home of the Arabiya family with seven children which has been rebuilt at least four times by the efforts of ICAHD and the JCHR/Jurist Center for Human Rights, a Palestinian NGO focused on legal advocacy for Palestinians in the Jerusalem area.

Jeff said, “Israel has no constitution but has a Declaration of Independence which promised that Israel would abide by conditions and UN resolutions. They have not fulfilled the agreement which was the basis of their independence.”

The Declaration of the Establishment of the State of Israel was signed on May 14, 1948 the day the British Mandate over Palestine expired:

On the day of the termination of the British mandate and on the strength of the United Nations General Assembly declare The State of Israel will be based on freedom, justice and peace as envisaged by the prophets of Israel: it will ensure complete equality of social and political rights to all its inhabitants irrespective of religion it will guarantee freedom of religion [and] conscience and will be faithful to the Charter of the United Nations.

Jeff elaborated:

We really are only but actors in a play. When we wake up to that, and become an active participant in the human drama and pursue justice, things must change because injustice is unsustainable… One out of three Israeli children lives below the poverty line. It’s probably about 80% for Palestinians. Jews are like everyone else, those who have been abused grow up to be abusers. Things here have been turned on their head: its victim mentality and denial about the occupation. Once Israelis accept the fact that they are occupiers they will have to admit their State Terrorism.

Since 1967 the Israeli government has destroyed over 22,000 Palestinian homes. 95% of the cases have nothing to do with security. All these homes are on Palestinian private property. The Israeli government will not grant permits for them to build on their own land, and in reality are quietly transferring the Palestinians administratively from the land. They make conditions so intolerable that the Palestinians give up and leave and this is exactly what they are after. Not only do the Palestinians receive no warning when their homes are to be destroyed they are fined $1,500.00!

The reasons for the demolitions are: for The Wall, to establish illegal settlements, build roads and because the Israeli government wants to keep Palestinians confined to the islands [areas A and B] in the West Bank and so Palestinian land remain under the control of the Israeli government.

When you incorporate occupied territories, highways, settlements and use resources it is all illegal according to the Fourth Geneva Convention which states the status quo must be retained so that negotiations can happen. Unilateral actions are illegal. The occupying power is responsible for those under its control.

Tony Blair said 70% of all the conflicts in the world can be traced back to the Israeli Palestinian conflict. This conflict impacts the global community and especially everyone in the USA. This whole issue is based on Human Rights and it is a global issue requiring global intervention.

There have been three stages to make this occupation permanent. The first was to establish the facts on the ground; the settlements. There are ½ million Israeli’s and four million Palestinians here. They have been forced into Bantustan; truncated mini states; prison states. It is apartheid and Israel is not a democracy, it is an ethnocracy: full rights to Jews, but not Palestinians.

In 1977, Sharon came in with a mandate, money and resources to make the Israeli presence in the West Bank irreversible. The second stage began in April 2004 when America approved the Apartheid/Convergence/Realignment Plan and eight settlement blocs. This is just like South Africa!

The Bush Sharon letter exchange guaranteed that the USA considers the settlements non-negotiable. The Convergence Plan and The Wall create the borders and that is what defines Bantustans. Congress ratified the Bush plan and only Senator Byrd of West Virginia voted no and nine House Representatives.

Israel has set up a matrix of control; a thick web of settlements guaranteed to make the occupation permanent by establishing facts on the ground.

Israel denies there is an occupation, so everything is reduced to terrorism. It is our job to insist upon the human rights issue, for occupied people have International Law on their side.

Israeli policy is to maintain a 72% Jewish and 28% Arab population. Palestinians cannot get building permits to build upon their legally owned land. The Arab land has been re-zoned as green space, and the green space will be re-zoned for the settlements.

Every single Palestinian home in Jerusalem has a demolition order. The entire West Bank has been zoned as agricultural land by Israel, and that will also be re-zoned again for more settlements.

Under international law all the settlements are considered illegal colonies-but they are spun as “neighborhoods” by politicians and a limp and lazy media.

During an ICAHD bus tour, on my way to the Beit Arabiya Peace House, I witnessed acres of tree stumps that had once been miles of olive trees; but they were chopped off by the Israeli army.

Jeff commented, “It has been said that the Israelis do not love this land, they just want to possess it. I don’t just have a political problem with this Judiaization of the Old City; it is ecologically and environmentally offensive.”

It also is spiritually impoverished for the raping and pillaging of what is claimed holy ground refutes and denies the biblical meaning of dominion. The ancients understood dominion meant to nurture, love and protect but the destruction of indigenous peoples homes, the stealing and destroying of their legally owned property, has got to be an abomination unto God as well as a crime against humanity.

The Beit Arabiya Peace House, is at the crossroads of Areas A, B and C and the home has become a symbol of nonviolent persistent resistance and a meeting place for Israelis, Palestinian and International peace activists at the intersection of Areas A, B, and C.

The smallest of the three is Area A, which is under Palestinian authority. Areas B and C are under Israeli control.

When I saw Jeff last in June 2009, he told me there was another demolition order of the Beit Arabyia home, but during my visit I was captivated by a mural painted on the outer wall created by the North American Workers Against the USA occupation of Iraq and the Israeli occupation of Palestine.

The mural depicted Rachel Corrie, the American who was run over by a USA made Caterpillar bulldozer in Gaza when she stood up to defend the home of a pharmacist with five children four days before the USA began bombing Baghdad. Also depicted was a pregnant Palestinian woman of ten who had also been run over by a Caterpillar in Gaza.

The angelic images of the two women floated above a depiction of a USA made Caterpillar bulldozer that had tipped to one side and was flanked by tanks and images of weapons of destruction along with images of people and a railroad track; a reminder that prior to 1948, Jews and Palestinians had worked together in peaceful solidarity to build a railroad.

The Arabyia home/Peace Center is at the cornerstone of the village of the Anata and the Shufat refugee camps, in the very area where the prophet Jeremiah in the 6th century B.C. critiqued the violent conflicts in the Mid East, which were already old news: “I hear violence and destruction in the city, sickness and wounds are all I see.” [Jeremiah 6:7]

Mohammad Alatar, film producer of The Iron Wall addressed my group after we broke bread and ate a typical Palestinian feast prepared by the Arabiya family:

“I am a Muslim Palestinian American and when my son asked me who my hero was I took three days to think about it. I told him my hero is Jesus, because he took a stand and he died for it.

“What really needs to be done is for the churches to be like Jesus; to challenge the Israeli occupation and address the apartheid practices as moral issues.

“Even if every church divested and boycotted Israel it would not harm Israel. After the USA and Russia, Israel is the third largest arms exporter in the world. It is a moral issue that the churches must address.”

The Obama Administration has demanded Israel freeze all construction of its illegal settlements; but the building continues. Money talks louder than words and people of conscience are exerting pressure to get Israel to change its behavior. The quickest and most effective way to do this is by ending U.S. military aid, which is being misused by Israel in violation of U.S. law to kill and injure Palestinian civilians and sustain Israel’s illegal occupation of the Palestinian West Bank, East Jerusalem, and Gaza Strip.

1. Jeff Halper, Obstacles to Peace, A Re-Framing of the Palestinian-Israeli Conflict, page 1.

In fact, it was little more than a skirmish that fell way short of addressing the real problem in the world’s richest nation. Today it’s even greater and increasing exponentially under a president who, unlike Johnson, declared war on the poor and disadvantaged to favor privilege over growing needs and essential social change.

In his book, Harrington wrote:

“In morality and in justice every citizen should be committed to abolishing the other America, for it is intolerable that the richest nation in human history should allow such needless suffering. But more than that, if we solve the problem of the other America we will have learned how to solve the problems of all of America.” Sadly, we didn’t then nor have we now.

Perhaps more than anything, increasing homelessness and hunger highlight the growing problem as, in the face of deteriorating economic conditions and growing human needs, administration policies are indifferent, counterproductive, uncaring and hostile.

In December 2008, Reuters reported that “Homelessness and demand for emergency food are rising in the United States as the economy founders,” according to a December 2008 US Conference of Mayor’s Task Force on Hunger and Homelessness survey of 25 American cities. Chief causes cited were growing poverty, unemployment, and unaffordable housing costs with greater than ever expected challenges in 2009. At the time, it was reported that “Cities continue to develop aggressive strategies to prevent homelessness” and provide other essential services, but that was then and this is now.

An Epidemic of State Budget Shortfalls

As economic conditions deteriorate, the Center on Budget and Policy Priorities (CBPP)’s July 29 report highlighted the growing problem. Titled “New Fiscal Year Brings No Relief from Unprecedented State Budget Problems,” it cited the following issues:

– at least 48 states “addressed or still face shortfalls in (their FY 2010) budgets,” the result of “the worst decline in tax receipts in decades;”
– at issue is a $163 billion deficit or 24% of their budgets, and these numbers keep rising as conditions worsen;
– at least 33 states “already anticipate” 2011 deficits that may exceed 2010 ones; and
– for FYs 2010 and 2011, shortfalls of at least $350 billion are expected, and FY 2012 may bring little or no relief.

In response, deep social service cuts are being implemented, putting the burden on vulnerable Americans to cope and survive. The situation is grave and worsening with at least 21 states cutting “low-income children’s or families’ eligibility for health insurance or reduce their access to health care services.”

Elderly and disabled persons programs are also being reduced or eliminated. So are services for home and child care, rehabilitation, and other essential needs for the poor and low-income households. The most vulnerable of all are affected, yet more cuts are expected as new budget pressures arise.

Pre-school, K-12, and higher education cuts are being made as well. Public payrolls and hours worked are being slashed, exacerbating the growing unemployment problem, worse still by cutting pay for the still-employed. Tax increases may also be considered at the worst possible time.

“Expenditure cuts and tax increases are problematic policies during an economic downturn because they reduce overall demand and can make the downturn deeper. When states cut spending, they lay off employees, cancel contracts with vendors, eliminate or lower payments to businesses and nonprofit organizations that provide direct services, and cut benefit payments to individuals.”

Demand is then reduced because households have less to spend. As a result, the economic crisis deepens. CBPP said federal assistance is crucial, yet the Obama administration declined while providing trillions to Wall Street and other corporate favorites. That’s the state of governance in America today under Republican and Democrat administrations, each no different from the other.

Hunger in America

On its web site, Feeding America (formerly America’s Second Harvest) said in “the land of plenty,” one in eight Americans (meaning millions) face growing hunger problems, and not just the poor and unemployed. They’re “often hard-working adults, children and seniors who simply cannot make ends meet” and have to forego meals at times, even for days.

Hunger and Poverty Facts

– in (pre-crisis) 2007, 37.5 million people were impoverished; they comprised:
– 12.5% of the population and 9.8% of families;
– 20.3 million or 10.9% of people aged 18 – 64;
– 13.3 million or 18% of children under age 18; and
– 3.7 million or 9.7% of seniors aged 65 or older who benefit from Social Security and Medicare.

In addition:

– 36.2 million Americans are food insecure, including 12.4 million children;
– they comprise 13 million or 11.1% of households;
– 4.7 million households experience “very low food security” meaning hunger is a persistent problem;
– households with children have double the food insecurity as ones with none;
– single women-headed households are worst off with 30.2% of them insecure; and
– 53.9% of food-insecure households rely on one or more of the following federal programs – food stamps, the National School Lunch Program, and the Special Supplement Nutrition Program for Women, Infants and Children (WIC); in addition, Feeding America (in 2007) provided emergency food aid to about 25 million low-income people, 8% more than in 2001.

On August 6, the US Department of Agriculture reported a record 34.4 million Americans (one in nine) receiving food stamps in May as unemployment keeps surging. It was the sixth consecutive monthly record, and every state showed an increase as economic conditions worsen.

On September 10, the Commerce Department will release 2008 census data expected to show around another 1.5 million people added to the poverty rolls over 2007 figures — a total of nearly 39 million representing 12.7% of Americans. According to Rebecca Blank, Economic Affairs Undersecretary, final numbers aren’t yet in and may be worse than expected because of how bad things are for growing numbers in the country. She believes if (U-3) unemployment hits 10% (up from 9.4% now), poverty could reach 14.8% this year and rising because of jobs and homes lost, savings exhausted, and the sharpest ever decline in personal wealth between mid-2007 and December 2008.

Worst of all, conditions for most people are deteriorating as businesses, states, and local governments shed workers and cut budgets at the worst possible time. It promises harder times ahead and potentially millions more impoverished.

Homelessness Facts

Annually, two-three million Americans, including 1.3 million children, experience homelessness and many more are at risk. Most vulnerable are those losing jobs, homes, and the millions of low-income workers paying 50% or more of their income in rent so that a missed paycheck, health emergency, or unexpected financial burden makes them vulnerable to homelessness at a time government aid is being cut.

Criminalizing the Homeless

In the face of a growing burden on society’s most needy, the National Law Center on Homelessness and Poverty reported that “many cities use the criminal justice system to punish people living on the street for doing” what they must to survive. Local ordinances prohibit sleeping, camping, eating, sharing food, sitting, loitering, and/or begging in public places with criminal penalties imposed on offenders. Some cities even punish organizations and individuals for helping, and the idea always is to keep the unwanted out of sight, mind, and preferably out of cities, at least in or near more affluent areas or business districts.

As economic conditions deteriorate, the problem will grow and so will the plight of the homeless as cities crack down harder in violation of constitutional and international human rights laws.

The OECD’s 2008 Report, “Growing Unequal?: Income Distribution and Poverty in OECD Countries

It states that America “is the country with the highest inequality level and poverty rate” among the 30 OECD countries, ranking only ahead of Mexico and Turkey. In addition, since 2000, inequality grew rapidly, “continuing a long-term trend (going) back to the 1970s” when inflation-adjusted household incomes began falling. Other data cited includes:

– the gap between rich and middle and poorer income groups widened;
– government redistribution of income “plays a relatively minor role in the United States,” partly because social service spending is low and falling; in 2008 America, it was 9% of household incomes compared to 22% on average in OECD countries;
– social mobility in America is low, and children of poor families are less likely to become rich; and
– “wealth is distributed much more unequally than income: the top 1% controls some 25-33% of total net worth and the top 10% holds 71%;” other estimates place these disparities much higher and widening as social inequalities increase, high-paying jobs disappear, the middle class keeps shrinking, poverty grows, and federal and state governments cut essential services in the face of increasing need among greater numbers of people.

The Working Poor Keep Getting Poorer

The Working Poor Families Project October 2008 study highlighted similar problems from 2002 through 2006. Titled “Still Working Hard, Still Falling Short: New Findings on the Challenges Confronting America’s Working Families,” it reported:

– jobs paying poverty-level wages rose by 4.7 million;
– low-income working families (earning less than double the Census definition of poverty) increased by 350,000;
– below poverty-level jobs rose to 29.4 million and comprise 22% of all jobs compared to 19% in 2002;
– most disturbing is that this happened during a period of economic growth, but at the same time wages haven’t kept pace with the cost of living;
– low income family numbers rose to nearly 9.6 million or 28% of the population;
– children in them number 21 million;
– 72% of low-income families with working adults in them performed the equivalent of one and one-quarter jobs – a far greater burden than in other OECD countries; and
– income inequality is highest in New York; California is fourth, but all states are in a race to the bottom as conditions deteriorate everywhere, so all rankings are disturbing compared to the late 1990s.

The US Labor Department’s latest productivity report highlights the plight of workers even more. It rose 6.4% in Q 2, the largest gain since 2003, while workers’ compensation fell sharply, 2.2% on an annualized basis. According to Mark Vitner of Wells Fargo Bank, the productivity increase “is almost entirely the result of cost-cutting, not improved ways of producing goods and providing services.” It also shows how powerless workers are at a time of massive job cuts, so staying employed takes precedence over wages paid and benefits. The result is profits up, pay down, benefits disappearing, and American workers transitioning to serfs.

More confirmation comes from the latest Internal Revenue Service statistics for 2007 showing that the income disparity between the top 10% and bottom 90% reached “a higher level than any other year since 1917 and even surpasses 1928, the peak of the stock market bubble in the ‘roaring’ 1920s,” according to data from University of California economist Emmanuel Saez. He noted that “2007 was an incredibly good year for the super rich” and added:

“Based on the US historical record, falls in income concentration due to recessions are temporary unless drastic policy changes such as financial regulation or significantly more progressive taxation are implemented and prevent income concentration from coming back.”

But these are no ordinary times as the US sinks slowly into depression. The super-rich are exploiting it to their advantage, while millions of working Americans are losing jobs, homes, benefits, savings, futures, and safety net protections. The 2007 data reflected the peak of the current cycle. What’s ahead will be far more grim, disturbing, and reflective of an America that is no more.

The Economic Policy Institute’s (EPI) State of Working America: 2008-2009

As the economy contracted in 2008, job losses and unemployment accelerated, but EPI’s report missed the worst of it from early 2009 to the present. It cited:

– wages losing ground to inflation;
– high energy costs;
– the burst housing bubble;
– millions of defaults on home loans followed by foreclosures;
– declining financial markets and frozen credit;
– less health care coverage and fewer higher-paying jobs with good benefits; and
– “for the first time since the mid-1940s, the real incomes of middle-class families are lower at the end of this business cycle than they were when it started;” as a result, “prosperity is eluding working families” as they fall further behind, now more than ever as depression takes hold.

EPI calls family income “the core building block of American living standards.” Yet during the last business cycle, significant productivity growth was accompanied by stagnant or falling real incomes. “That has never happened before.” The latest economic recovery bypassed the middle class and created greater income inequality. The Bush administration’s tax cuts exacerbated the problem by helping the top 1% mostly, the middle class marginally, and low-income families not at all.

Clear racial disparities show whites consistently better off than blacks and Hispanics, men doing better than women, huge class distinctions, and mobility up the income ladder bypasses most at lower levels. One study showed that about 60% of families starting out in the bottom fifth stratum were still there a decade later. At the same time, over half the top income ones kept their position.

EPI concludes that “where you start out in the income scale has a strong influence (over) where you end up (so) the rate of economic mobility is low” in the richest country in the world where the select few alone benefit. All others lose out as their incomes don’t keep pace with inflation and their living standards erode.

Another study implies that a poor family of four with two children needs nine to 10 generations to reach middle-income status. It means where you’re born is where you’ll stay. So-called rags-to-riches tales are just folklore, and stagnant or downward mobility today is more serious than ever.

Wages and salaries comprise three-fourths of family income, and for the middle class, it’s even higher. Yet since 2002, they didn’t grow at all despite historically high productivity, meaning business benefitted, not workers who fell further behind. Women and minorities fare worst plus everyone in lower income categories. During the 2002 – 07 recovery, no progress was made “in reducing the share of workers with low earnings (in) all race/ethnic groups and for both genders….The very highest earners have done considerably better than other workers for at least (the past) 30 years, but they (did) extraordinarily well over the last 10 years.”

In addition, eroding “employer-provided benefits, most notably pensions and health insurance, is an important aspect of the deterioration in job quality (and economic security) for many workers.” Most harmed are young workers facing bleak prospects, older ones losing jobs and not wanted, and the erosion of unionization since the 1950s, especially since the late 1970s.

Overall, 2002-07 growth was a jobless recovery followed by the subsequent wiping out of five years of modest gains. From 2000-2007, average annual job growth was an anemic 0.6%, well below the 1990s 1.8% figure. In addition, the unemployment rate rose 0.7% from March 2001 (the last business cycle’s peak) to December 2007 even though average workers age increased and the labor force participation rate shrank — “both of which should have put downward pressure on the” unemployment rate. The great American job creation machine faltered badly in the new millennium and now has collapsed.

Net family wealth also determines household well-being, particularly from income and financial assets, including real estate. Yet in America, the top 1% controls more than the bottom 90% combined and the disparity is growing. In 1962, the bottom 80%’s share was 19.1%. In 2004, it was 15.3%, the difference shifting to the top 5%.

In addition, until the current downturn, average household debt grew much faster than income, fueled by increases in mortgages, home equity loans, and high credit card balances. Since the housing bubble burst and home prices collapsed, the damage done has been enormous with still more to come.

The result is growing poverty levels as discussed above with numbers increasing as economic conditions weaken. “The backsliding against poverty in the 2000s is most notable among the least advantaged,” especially blacks, Hispanics, mother-only families, and the poor unable to keep pace.

It shows up in inequality in health security in the form of inadequate or no insurance, lower life expectancies for poor and lower income households, and an eroding safety net for the most needy. Rising health care costs, lost or no benefits, and an economic crisis have increased the plight of millions of the country’s least advantaged.

EPI’s report highlights a nation of growing inequality, lower wages, fewer benefits, diminished worker bargaining power, and disempowered unions v. market fundamentalists, complicit government officials, and their “You’re-on-Your-Own” (YOYO) ideology against which they’re powerless.

They believe markets know best so let them, arguing that alternatives “will create the wrong incentives.” Recent decades reveal the folly of this approach on American workers’ living standards. Exposing the “ownership society” myth, all household security measures, including net worth, have fallen despite a few years of late 1990s progress.

Today, “The macro-economy is in serious disrepair, beset by the spillovers from the bursting….housing bubble, high energy prices, and unsustainable levels of household indebtedness” causing economic collapse and the possibility of a deep, protracted depression. So far, remedial measures have been patchwork and counterproductive as growing millions face greater uncertainties with no imminent signs of relief and federal and state governments not caring or helping.

In 2009, the State of Working America is dire and worsening enough for millions of households to face greater than ever challenges on their own with government indifferent to their plight.

Concluding an early 1980s edition of his book, Michael Harrington sensed what “Other Americans” were up against in writing:

“I end this review, then, on an ambivalent note. There was progress; there could have been more progress; the poor need not always be with us. But it will take political movements much more imaginative and militant than those in existence in 1980 to bring that progress about. Until that happens, the poor will be with us.” And today, in exponentially growing far greater numbers because nothing is being done to reverse them.

Over the summer, the Tarabin tribe, all of them Israeli citizens, have had the sole access road to their homes sealed off, while the dirt track they must use instead is regularly blocked by temporary checkpoints at which their papers and vehicles are inspected at length.

Coils of razor wire encircle much of the village, and children as young as eight have been arrested in a series of night-time raids.

“Four-fifths of our youngsters now have files with the police and our drivers are being repeatedly fined for supposed traffic violations,” said Tulab Tarabin, one of Amra’s 400 Bedouin inhabitants. “Every time we are stopped, the police ask us: ‘Why don’t you leave?’”

Lawyers and human rights activists say a campaign of pressure is being organised against the Tarabin at the behest of a nearby Jewish community, Omer, which is determined to build a neighbourhood for Israeli army officers on the tribe’s land.

“The policy in Israel is that when Jews need land, the Bedouin must move – no matter how long they have been living in their homes or whether their communities predate Israel’s creation,” said Morad al Sana, a lawyer with the Adalah legal centre for Israel’s Arab minority. “The Tarabin’s crime is that they refuse to budge.”

The 180,000 Bedouin in the Negev have never been welcome, says Oren Yiftachel, a geographer at Ben Gurion University of the Negev in Beersheva. They are descendants of a few thousand who managed to avoid expulsion from the southern semi-desert region during the 1948 war that founded Israel.

Many of the surviving Bedouin, including the Tarabin, were forcibly relocated from their extensive ancestral lands in the 1950s to an area close to the Negev’s main city, Beersheva, Prof Yiftachel said. Israel declared the Bedouin lands as “state land” and established a series of overcrowded “townships” to house the tribes instead.

“The stated goal is one of ‘Judaisation’,” Prof Yiftachel added, referring to a long-standing policy of concentrating the rural Bedouin into urban reservations to free up land for Jewish settlement. About half of the Negev’s Bedouin, some 90,000, have refused to move.

According to a recent report from the Association of Civil Rights in Israel (ACRI), the townships have “continuously ranked as the poorest, least developed and most crime-ridden towns in Israel.”

The refuseniks, such as the Tarabin, have faced unrelenting pressure to leave their 45 rural communities, none of which is recognised by the state. The villagers endure “third world conditions,” according to ACRI.

“The unrecognised villages are denied basic services to their homes, including water and electricity, and the villages themselves have no master plans,” Mr al Sana said.

As a result, he added, the villagers are forced to live in tin shacks and tents because concrete homes are invariably destroyed by the authorities. In the past two years, several shacks as well as the local kindergarten in Amra have been demolished.

The stark contrast between the dusty encampment of Amra and the green lawns and smart villas of Omer, only a stone’s throw away and the country’s third wealthiest community, is unsettling even for some of Omer’s 7,000 residents.

One, Yitzhak Nevo, a philosophy professor at Ben Gurion University and a leading activist with Dukium, a Negev coexistence group, said that, although the lands on which the Tarabin live fall under Omer’s jurisdiction, the Bedouin have been entirely excluded. “Even though they live within Omer’s municipal limits, their children get no education from us; our health clinic does not treat them; they are not hooked up to our water or electricity supplies and their refuse is not collected.”

He said Amra had been treated as nothing more than an eyesore until the mid-1990s when the powerful mayor, Pinhas Badash, decided that the Tarabin were both harming property values and obstructing the town’s expansion plans.

As Omer’s new neighbourhoods reached the limits of Amra, Mr Badash stepped up the pressure on the villagers to leave. A few years ago he pushed through the building of a new community for the Tarabin away from Omer. Two-thirds of the tribe relocated, while the remainder fought the attempted eviction through the courts.

“It was a very dirty business in which those in the tribe who left first were offered cheap land on which to build while the rest were threatened that they would be offered nothing,” Mr al Sana said.

Amra’s remaining Bedouin have found themselves surrounded by a tall wire fence to separate them from Omer. Two gates, ordered by the courts to ensure the Bedouin continued to have road access through the town, were sealed this year.

Since the beginning of the summer police patrol Amra’s side of the fence around the clock and the Tarabin report that a private security firm chases off any of them found inside Omer.

Nissim Nir, a spokesman for Mr Badash, denied that the Tarabin were being hounded. Omer made a generous offer to relocate them from their “illegal” site, he said.

Recently Mr Badash announced that thousands of acres around Omer would be forested with the intention of stopping the Bedouin from returning to the area once they had been evicted.

Mr Tarabin, 33, accused the police of being little more than hired hands carrying out Mr Badash’s plan.

“We are being suffocated. There are night-time searches of our homes using bogus pretexts, and arrests of young children. We are photographed and questioned as we go about our business. At the roadblocks they endlessly check cars entering and leaving, and fines are issued. No one visits us unless they have to, and we stay home unless we have to leave.”

He added: “Why is it so impossible for Omer to imagine allowing us to be a neighbourhood of the town?”

A report by Human Rights Watch last year severely criticised Israel’s treatment of the Bedouin.

I don’t get to use the word “heroic” very often. Van Heerden is heroic. The Deputy Director of the Louisiana State University Hurricane Center, it was van Heerden who told me, on camera, something so horrible, so frightening, that, if it weren’t for his international stature, it would have been hard to believe:

“By midnight on Monday the White House knew. Monday night I was at the state Emergency Operations Center and nobody was aware that the levees had breeched. Nobody.”

On the night of August 29, 2005, van Heerden was shut in at the state emergency center in Baton Rouge, providing technical advice to the rescue effort. As Hurricane Katrina came ashore, van Heerden and the State Police there were high-fiving it: Katrina missed the city of New Orleans, turning east.

What they did not know was that the levees had cracked. For crucial hours, the White House knew, but withheld the information that the levees of New Orleans had broken and that the city was about to drown. Bush’s boys did not notify the State of the flood to come which would have allowed police to launch an emergency hunt for the thousands that remained stranded.

“Fifteen hundred people drowned. That’s the bottom line,” said von Heerden. He shouldn’t have told me that. The professor was already in trouble for saying, publicly, that the levees around New Orleans were no good, too short, by 18″. They couldn’t stand up to a storm like Katrina. He said it months before Katrina hit – in a call to the White House, and later in the press.

So, even before Katrina, even before our interview, the professor was in hot water. Van Heerden was told by University officials that his complaints jeopardized funding from the Bush Administration. They tried to gag him. He didn’t care: he ripped off the gag and spoke out.

It didn’t matter to Bush, to the State, to the University, that van Heerden was right- devastatingly right. Exactly as van Heerden predicted, the levees could not stand up to the storm surge.

In 2006, I met van Heerden in his office at the University’s hurricane center; a cubby filled with charts of the city under water. He’s a soft-spoken, even-tempered man, given to understatement and academic reserve. But his words were hand grenades: the Bush White House did nothing about the levees, despite warning after warning.

Why? A hurricane is an Act of God. But a levee failure is an Act of Bush — of the federal government. Under the Flood Control Act of 1928, once the levees break, it’s Washington’s responsibility to save lives — and to compensate the victims for lost homes and lost loved ones.

By telling me this, the professor had to know he was putting his job on the line. This week marks the fourth anniversary of the drowning of New Orleans.

Shakoor Aljuwani of the Rebuilding Lives Coalition reminds me it is also the fourth year of exile for more than half of the low-income Black residents who once lived in the Crescent City. In the Lower Ninth Ward, 81% have yet to return.

And it marks the end of Dr. van Heerden’s career at LSU. They got him. Once the network cameras were turned away from New Orleans, as America and Anderson Cooper shifted attention to Brad and Angelina and other news, the University put an end to Dr. van Heerden. “In 2006 they started the nonsense — they stopped me from teaching. They tried last year to get faculty to vote me out.”

His contract was not renewed; he was forced out too, dumped along with the chief of the Hurricane Center who led the academics who supported van Heerden’s research. The Man Who Was Right was fired.

Cronies and Contracts

I did not seek out professor van Heerden about Bush’s deadly silence. Rather, I’d come to LSU to ask him about a strange little company, “Innovative Emergency Management,” a politically well-connected firm that, a year before the hurricane, had finagled a contract to plan the evacuation of New Orleans.

Innovative Emergency Management knew a lot about political contributions, but seemed to have zero experience in hurricane response planning. In fact, their “plan” for New Orleans called for evacuating the city by automobile. When Katrina hit, 127,000 wheel-less New Orleans folk were left to float out.

And van Heerden knew all about it. Well before the hurricane, I discovered, he’d pointed out flaws in the “Innovative” plan — and was threatened for the revelation by a state official. The same official later joined the payroll of Innovative Emergency Management.

When I asked the company, at their office, for a copy of the plan, they body-blocked our Democracy Now! camerawoman and called the cops.

Not everyone shared the harsh fate of van Heerden. Just this month, Innovative Emergency Management, the firm with the drive-for-your-life plan, was handed a fat contract by the State of Alabama to draft – you guessed it – a hurricane evacuation plan for Mobile.

The City That Care Forgot

After the flood, I filmed the uplifting story of Common Ground, the commune of Katrina survivors who, under the leadership of the community organizer Malik Rahim, rebuilt a shattered hulk of a building with their own sweat and donated materials. They housed 350 displaced families.

Since I broadcast that film in 2006, Rahim and the tenants were evicted by speculators who bought the building. Just before Christmas, elderly residents were carried out and dumped in the street, literally, by marshals. The speculators paid the families who build their new edifice not one dime.

We also filmed the story of Patricia Thomas, a woman fighting to return to her home in the beautiful Lafitte public housing project. Speculators have long lusted for this property on the edge of the French Quarter.

And now the speculators have it. Patricia’s home, unscathed by Katrina, was nevertheless bulldozed. As Rahim puts it, “They wanted them poor niggers out of there and they ain’t had no intention to allow it to be reopened to no poor niggers.” Their plan succeeded. Patricia, homeless, died last year.

This Friday, take a moment to remember a courageous professor, an indefatigable activist and the refugee families who once lived in what was once called, “The City That Care Forgot.”

Now, in 2009, you could call it the city that everyone forgot.

Up a darkened stairway and through the detritus of a building that looks like its been scavenged for anything of value to sell, Rohn and Miller enter a sundrenched room. Inside is Michael Palmer, a 57-year-old white former construction worker and merchant seaman who has made a home here. Palmer – his friends call him Mickey – is in some ways lucky. He found a room with a door that locks. He salvaged some furniture from other parts of the hospital, so he has a bed, a couch, and a rug. Best of all, he has a fourth-floor room with a balcony. “Of all the homeless,” he says, “I probably have the best view.”

Mickey has lived here for six months. He’s been homeless since shortly after Katrina, and this is by far the best place he’s stayed in that time. “I’ve lived on the street,” he says. “I’ve slept in a cardboard box.” He is a proud man, thin and muscled with a fresh shave, clean clothes and a trim mustache. He credits a nearby church, which lets him shave and shower.

But Palmer would like to be able to pay rent again. “My apartment was around $450. I could afford $450. I can’t afford $700 or $800 and that’s what the places have gone up to.” Keeping himself together, well-dressed and fresh, Mickey is trying to go back to the life he had. “I have never lived on the dole of the state,” he says proudly. “I’ve never been on welfare, never collected food stamps.” Palmer rented an apartment before Katrina. He did repairs and construction. “I had my own business,” he says. “I had a pickup truck with all my tools, and all that went under water.”

Palmer is one of thousands of homeless people living in New Orleans’ storm damaged and abandoned homes and buildings. Four years after Katrina, recovery and rebuilding has come slow to this city, and there are many boarded-up homes to choose from. The Greater New Orleans Community Data Center counts 65,888 abandoned residential addresses in New Orleans, and this number doesn’t include any of the many non-residential buildings, like the hospital Mickey stays in. Overall, about a third of the addresses in the city are vacant or abandoned, the highest rate in the nation. UNITY for the Homeless is the only organization surveying these spaces, and Miller and Rohn are the only fulltime staff on the project. They have surveyed 1,330 buildings – a small fraction of the total number of empty structures. Of those, 564 were unsecured. Nearly 40% of them showed signs of use, including a total of 270 bedrolls or mattresses.

Using conservative estimates, UNITY estimates at least 6,000 squatters, and a total of about 11,000 homeless individuals in the city.

UNITY workers have also found that not all people living in New Orleans’ abandoned homes are squatters. In the last three months alone, they have found nine homeowners living in their own toxic, flood-damaged, often completely unrepaired homes. These are people living in buildings — identified as abandoned and not fit for human habitation — that they (or extended family members) actually own.

The abandoned building dwellers they’ve found are generally older than the overall homeless population, with high rates of disability and illness. The average age of folks they have found is 45, and the oldest was 90. Over 70% report or show signs of psychiatric disorders, and 42% show signs of disabling medical illnesses and problems. Disabling means “people that are facing death if not treated properly,” clarifies Rohn. “We’re not talking about something like high blood pressure.”

Life in Abandoned Homes

“This leg here bent backwards and the muscle came up,” says Naomi Burkhalter, an elderly Black woman in a wheelchair, sitting outside of the abandoned house she lives in and gesturing to her badly twisted leg. She was injured during Katrina, and can’t walk. She stays in a flood-damaged house in New Orleans’ Gert Town neighborhood, with no electricity or running water. She says the owner – who cannot afford to repair the home – knows she lives there, along with two other women. When they need water, they fill bottles up from neighbors. When she needs to get in and out of her house, she crawls, very slowly dragging herself up and down the steps with her hands, leaving her wheelchair outside and hoping no one takes it. Miss Naomi worked at a shrimp company and rented an apartment before Katrina. Now, between her injury and higher rents, she can no longer afford her former home. “My rent was 350 dollars,” she explains. “But when I came back, my rent was up to $1200.” Burkhalter has been homeless since then.

UNITY has received funding from the federal government for 752 housing vouchers specifically to help house the city’s homeless population. They have put people on a list, with those in the most danger of dying if they don’t get help on the top of the list. However, the vouchers still have not arrived, and at least 16 people from the list have already died while waiting. “The stress and trauma that these people have endured cannot be overstated,” says Martha Kegel, executive director of UNITY. “The neighborhood infrastructure that so many people depended on is gone.”

This problem was exacerbated by the demolition of thousands of units of public housing, an act which not only took away the community that many people found brought them comfort and safety, but has also made affordable rentals for poor New Orleanians even harder to find. Section 8 subsidized housing has been offered as a solution for those displaced from public housing and other poor renters, but a new study from Greater New Orleans Fair Housing Action Center (GNOFHAC) shows that discrimination keeps many people from finding quality housing through the program. According to the report, 82% of landlords in the city either refused to accept Section 8 vouchers, or added insurmountable requirements.

The study found that both discrimination on the part of landlords (99% of Section 8 voucher holders in Orleans parish are Black) and mismanagement on the part of the housing agency were barriers. One prospective landlord told a tester for GNOFHAC that he wouldn’t rent to Section 8 holders, “until Black ministers…start teaching morals and ethics to their own, so they don’t have litters of pups like animals, and they’re not milking the system.”

The mismanagement from the Housing Authority of New Orleans (HANO) was also a big problem for prospective landlords. “I faxed HANO the needed information 12 times for the rent I was never paid” said one landlord. Another housing provider said, “I called every day for a month and never got a call back.”

Last month, more than a hundred members of STAND for Dignity, a grassroots membership project of the New Orleans Workers Center for Racial Justice, protested outside of the offices of HANO, decrying their lack of action. A single mother named Ayesha told the crowd that she had been on the Section 8 waiting list for eight years, and still hasn’t received any help. She is paying 80% of her income on rent, and has been forced to go months at a time without water, gas or lights. George Tucker, another member of STAND, and also (like Mickey Palmer) a former merchant mariner, told the assembled crowd his story of being evicted from his apartment because HANO lost his paperwork. Because of bureaucratic carelessness, he was homeless for thirteen months. “This governmental crookedness is not new,” he said. “But it cannot continue without consequences.”

Last week, at least partly in response to criticism from folks like the members of STAND, HANO announced that they would accept new applications for Section 8 vouchers, for the first time in six years. The period that they will accept applications in is only a week long – from September 6 through 12.

Fear and Harassment

“My best friend died three weeks ago in this chair,” says Mickey Palmer gesturing next to him in his room in the abandoned hospital. “There was two other people staying here with me. One gentleman got in an accident about two months ago and he’s paralyzed in the hospital. Another friend of mine OD’ed and died here three weeks ago. My best friend. So I’m here alone.”

Palmer also fears police harassment. “The police hate homeless people,” he declares. “They’ll arrest me on drunk in public,” he says. “I haven’t had a drink in months.” Gesturing around the room that he has made into a home, he adds, “Of course, this is illegal. If I get caught I can not only be evicted, but incarcerated. I could go to jail for trespassing.”

This fear drives the homeless further underground, and makes it even harder for organizations like UNITY to find them and offer help. “Our city has a long history of police criminalization of homelessness, so people have reason to hide,” explains Martha Kegel.

Despite the size and scope of this problem, help has been hard to come by, from either the city, state, or federal government. “I’m not a politician and I’m not politically savvy,” says Palmer. “But I don’t think they care.”

In a rare step forward last month, both houses of Louisiana’s legislature unanimously passed a bill creating a statewide agency – to be almost entirely funded by the federal government – to address the issue of homelessness. However, Governor Jindal vetoed the bill. Jindal also vetoed funding for the New Orleans Adolescent Hospital, further reducing medical and mental health services in the city – another factor that has made life hard for many homeless folks in the city. As rates of mental illness rise in the city, we now have less treatment available then ever before.

For people like Mickey, caught in a city with few good paying jobs, much more expensive housing, and ever-decreasing social services, there are not many options. “At one time we were part of the city and part of the workforce,” Mickey says. “But people cannot afford the housing in New Orleans anymore. I find most of the people I know, my friends, they can’t afford the rent.”

Like most people in his position, Palmer has felt hopelessness at his plight. “I try not to get depressed, he says, nervously flicking his lighter. “But this can get you depressed. Coming back here last night got me a little depressed.”

But soon weeds began encroaching, white tailed rabbits bounded up and down the berms and a flock of goldfinches settled in, each perching in a cyclone fence slot in an avian pyramid.

Now the site of the half-built, bankrupt Sienna Court Condominiums in Evanston resembles a zoo exhibit with cliffs, savannahs, trickling water from sprinklers and a construction ladder turned three-story roost for its grackle, house sparrow and gull residents. Location, location.

And the human residents of the “wetland reversion,” their units spaced as far apart as streetlights and their resale dreams dashed into receivership?

They’re discovering the only thing worse than living next to a construction zone is not living next to a construction zone.

A block away, a curb-hugging, zero-lot-line eyesore called Ferris Homes has no wildlife reintroduction in progress because it has no green space. But a year after the 49-condominium unit building opened, the bank is foreclosing on 38 units because of unpaid construction loans. Correct. Only 11 units sold.

And how was your year?

This recession hasn’t just made things rough for people who sell things and people who can no longer buy them (because they also sell things to people who can no longer buy them.) It’s made things rough for the nation’s copywriters.

Once upon a time there were two can’t-fail headlines: Grand Opening and Sale.

Sure, you’d add “pre-construction” and “builder’s special” to Grand Opening when there was nothing to look at but homesites–also known as dirt–and a Realtor in a pixie haircut. Sure you’d add “model close-out,” when the sign for the Rivers at Lakewood or Timbers at Creekwood and red and blue balloons were up. But Grand Opening did the heavy lifting.

And sale? Once upon a time you could have any kind of sale–an end-of-year, end-of-the-summer, Christmas-in-July, we’ve-lost-our-lease sale (right), we’ve-lost-our-mind sale (having got it back from last year), back-to-school, Labor Day, Memorial Day and Father’s Day sale, we’ve-got-to-make-room-for-the-new-models (right) sale– as long as merch wasn’t on sale all the time.

Flash forward to Christmas 2008 when retailers decided the only way to salvage Christmas was to start discounting at Halloween and haven’t let up yet.

Now Grand Opening suggests its evil twin, Grand Closing–with real estate reporters replaced by count reporters–and Sale has devolved into the proverbial Every Day Low Prices which is to say merch is on sale all the time.

And it gets worse. Remember the dictum about good restaurants don’t advertise?

In this college town, “good restaurants” have fallen back on the campus marketing 101 tactic of wind-shielding cars. They are putting We Have Take-Out And Delivery hand-scrawled signs on cardboard in their windows vowing to bring you their white table cloth service in clamshells and paper bags to enjoy by TV light! Hey a customer is a customer.

Parents of Northwestern University undergrads may pay $36,756 a year for tuition, but that doesn’t mean Elizabeth Arden’s Red Door Spa could stay in business offering massages for $140 and facials for $180. It held its Grand Closing in 2008.

And the Evanston library has a new custodial challenge: what to do about the growing assemblage of “luggage” hidden behind chairs by the homeless while they wait for the overnight shelter to open.

Still, the hardest part for copywriters in this recession is not the death of Grand Opening and Sale as attention riveters and traffic creators.

It’s not finding value-reverent substitutes for “luxurious,” “pamper” and “indulge” or a way of saying “staycation” without making people roll their eyes and want to flash their unemployment cards.

It’s even not the 33 seconds of legal disclaimers mandated in radio ads that undo the preceding offer and make the announcer sound like Al Franken doing a gag.

It is finding a replacement for “needs.”

Because in the days when people bought lattes, Pilates classes and $35 cab rides, no one questioned “hair care needs,” “home-decoration needs,” or even “cruise ship” and “jewelry” needs. No one thought it insensitive and a little decadent.

Nor did anyone think recession would come to describe their new condo’s landscaping.

Mr Netanyahu told his cabinet on Sunday that Israel’s annexation of East Jerusalem following the 1967 war — what he called the city’s “unification” — meant that all residents, Jews and Palestinians alike, could buy property wherever they chose.

“Our policy is that Jerusalem residents can purchase apartments anywhere in the city,” he said. “There is no ban on Arabs buying apartments in the west of the city, and there is no ban on Jews building or buying in the city’s east.”

Mr Netanyahu was trying to justify recent construction in East Jerusalem by settler organisations in defiance of demands from the US that Israel halt all such work. In particular, US officials are objecting to the recent takeover of property by settlers in the Sheikh Jarrah neighbourhood, where Mrs Khurd used to live, as well as the Old City, Silwan and Ras al-Amud.

According to experts, however, the reality is that in both a practical and legal sense Mr Netanyahu’s “open city” is a fiction, extended only to the settlers and not to Mrs Khurd or to the 250,000 other Palestinians of East Jerusalem.

Mrs Khurd, for example, has been forced to live in a tent after settlers ousted her from her East Jerusalem home of five decades in November. She also has no hope of moving back to the house taken from her family in Talbiyeh, now in West Jerusalem, during the 1948 war that established Israel.

In addition, movement restrictions mean that almost all of the nearly four million Palestinians of the West Bank and Gaza are banned from entering the city or visiting its holy sites.

Inside Jerusalem, as in the West Bank, Israel enforces a strict programme of segregation to disadvantage the Palestinians, said Jeff Halper, of the Israeli Committee Against House Demolitions.

Israeli Jews have the freedom to live in both parts of the city, with 270,000 in West Jerusalem and a further 200,000 living in East Jerusalem in rapidly expanding settlements heavily subsidised by the state.

Palestinians, meanwhile, are denied the right to live both in West Jerusalem and in many residential areas of East Jerusalem. Even in their tightly controlled neighbourhoods in the city’s east, at least 20,000 of their homes are subject to demolition orders, said Mr Halper.

Daniel Seidemann, a Jerualem lawyer, said that in his 20 years of handling residency rights cases for Palestinians he had never heard of a Palestinian with a Jerusalem ID living in West Jerusalem.

The reason, he pointed out, was that almost all land inside Israel’s 1948 borders, including West Jerusalem, has been registered as “state land” managed by a body known as the Israel Lands Authority.

The authority allows neither Palestinians nor Israelis to buy property on state land. Instead long-term renewable leases are available to Israeli citizens and anyone eligible to immigrate to Israel under the country’s Law of Return — meaning Jews.

The settlements in East Jerusalem — now covering 35 per cent of the eastern city, according to Mr Seidemann — are also built on land declared as “state land”, in violation of international law. Again this means that only Israelis and Jewish foreign nationals are entitled to lease land there.

Because they do not hold Israeli citizenship, the Palestinians of East Jerusalem are disqualified from acquiring property either in West Jerusalem or in the settlements of East Jerusalem.

“The extraordinary situation is that a Palestinian who had his land expropriated to build the settlement of Har Homa [on the outskirts of East Jerusalem] cannot lease land there, whereas a Jew from Paris or London who is not even an Israeli citizen can.”

Mr Seidemann also pointed out that the country’s Supreme Court ruled in 1978 that a Palestinian family forced out of what became the Jewish quarter of the Old City in 1967 had no right to return to their property.

The court justified its decision on the grounds that each religious community should have its own quarter. “However, that ruling has not stopped the Israeli government from helping Jewish settlers to encroach on the Muslim and Christian quarters.”

This week, the Israeli media reported, several families from a settler organisation, Ateret Cohanim, had moved into a building in the heart of the Muslim quarter. The property was bought by Ariel Sharon in the 1980s to assert Jewish sovereignty over all of the Old City, although he never moved in.

Mr Halper said that, in addition, Jerusalem’s Palestinians, unlike its Jews, faced municipal policies designed to make life as unbearable as possible. Demolitions of Palestinian property are widespread. Police, for example, have torn down Mrs Khurd’s tent on six occasions since November and she faces a series of fines.

“Even according to Israeli figures, East Jerusalem lacks 25,000 housing units to cope with the Palestinians’ minimal needs,” said Mr Halper. “The land is available, it’s just that Israel wants to induce a severe housing shortage for Palestinians.”

The hope is that they would move to the West Bank, he said.

Mr Seidemann said a handful of Palestinian families — faced with this housing shortage — had managed to rent homes short term from Israeli owners in East Jerusalem’s larger settlements, such as French Hill and Pisgat Zeev. This marginal phenomenon, he said, had been misleadingly trumpeted as proof of the “egalitarian nature” of Israel’s property laws.

According to the Israeli media, Mr Netanyahu’s remark may have been intended to throw mud in the eyes of the US Administration as it steps up pressure on Israel to halt settlement building in East Jerusalem.

Mr Seidemann said: “The [US] State Department understands these issues better than Mr Netanyahu. There is zero possibility that his comments will be treated as credible by any of their negotiators.”

Panic ensued. The one hallway leading out of their attic apartment was engulfed in flames. Charles, Annie and James’ 19-year-old son, made a daring leap through the wall of fire and escaped, but the rest of the family was trapped. The only way out of the inferno was through the window; there were no fire escapes. Annie made it down to the second floor windowsill with the help of another son, Willis. The crowd below placed a pile of blankets on the ground to cushion her fall and told Annie, dangling for her life, to let go. She hit the pile and survived. Willis also jumped and survived. The fire, described by one Chicago firefighter as a “holocaust,” killed four of the Hickman children. They were found underneath the bed with Leslie (14), shielding the bodies of his younger siblings Elvena (9), Sylvester (7), and Velvena (3).

Hickman returned home the following morning to find his building gutted and his family gone. He recounted later that a neighbor approached him and broke the tragic news. “He said, ‘Mr. Hickman, I hate to tell you this, four of your children is burnt to death.’ And I weakened to the ground.” Even though he was distraught and wracked with pain, Hickman remembered a threat made by his landlord to burn out the tenants out of his building if they didn’t move out.

Hickman found his family, buried his children, moved into a new apartment, and returned to work. But justice eluded him. “Paper was made to burn, coal and rags. Not people. People wasn’t made to burn, ” he told his son. The police didn’t seriously investigate the case. Coleman, his landlord, was a free man. Over the next six months, Hickman became increasingly depressed and frustrated. His family worried about his mental stability. On July 16, he picked up his .32 caliber pistol and went to confront Coleman at his home on the Southside of Chicago. He found Coleman sitting in car outside his house and accused him of setting the fire. Hickman later claimed that Coleman admitted it. Hickman, a deeply religious man, raised his pistol, looked Coleman straight in the eye and said, “God is my secret judge,” and shot him four times. Coleman died three days later.

Police arrested James Hickman at his home and charged him with murder. State prosecutors sought the death penalty. The Hickman family saga could have ended with another tragedy with James facing life in prison or execution by the State of Illinois. But a small group of revolutionary socialists in Chicago, members of the Socialist Worker’s Party (SWP), took the lead in putting together a vibrant community based campaign that ultimately resulted in James Hickman going free. How did they accomplish this?

Jim Crow Chicago Style

James Hickman, like many African Americans during and immediately following the Second World War, came to Chicago to escape the grinding poverty of life in the rural Deep South. Hickman was born on February 19, 1907 near Louisville, Mississippi. His parents were sharecroppers and at ten years old he went to work in the fields. When James was sixteen years old he married Annie, who was to be his wife for the rest of his life. They had nine children together. His first goal after arriving in Chicago was to find a decent paying job to support his large family. He eventually found one at International Harvester’s Wisconsin Steel plant near the Indiana border. But finding decent housing for his family was another story.

Hickman searched for housing in Chicago when the overwhelmingly bulk of the city’s growing African-American population was still confined to a narrow sliver of land on the Southside of the city starting at what was then called 22nd Street (now called Cermak) and stretching to 62nd Street between Wentworth and Cottage Grove Avenues. More than 60,000 black workers came to Chicago from 1940 to 1944 seeking employment in war-related industries. This migration to Chicago continued after the war. “Between 1940 and 1950 Chicago’s black population swelled by 214, 534,” according to Chicago housing historian Arnold Hirsch, bringing it up to a total of 492, 265. The boundaries of the ghetto were walled off by restrictive “covenants”—deals between white homeowners and larger institutions, which stipulated that that only whites could buy homes in certain defined areas.

In 1927, the Chicago Real Estate Board began promoting racially restrictive covenants to YMCAs, churches, women’s clubs, the many chambers of commerce and property owners’ associations as a way of “protecting” the value of their property from incoming black families. This racist housing policy was backed by the city and by the policies of the federal government. It is believed that by the mid-1940s as much as 80 percent of Chicago’s residential housing was covered by restrictive covenants of one kind or another. The Supreme Court in 1948 ruled that restrictive covenants were unconstitutional, the year following the Hickman case, though little would change for many years.

The available housing for Blacks in Chicago was confined almost entirely to the South Side ghetto, leading to massive overcrowding. A small enclave of Blacks was beginning to grow on the West Side of the city, but it was plagued by the same problems that residents struggled with in the South Side ghetto. In many cases, black landlords were as guilty as white landlords of making money hand-over-fist by cutting up apartments into smaller and smaller units called “kitchenettes.” The cute sounding word really meant a dilapidated one-room apartment. According to Hirsch, “The Chicago Community Inventory estimated that there were at least 80,000 such ‘conversions’ between 1940 and 1950.” Nicholas Lemann, in history of the black migration to Chicago, The Promised Land, vividly describes the kitchenettes as “rickety three-story tenemen…with heating, plumbing, and insulation that were rudimentary at best and often completely non-functional.” Yet, there was little to no options for black families seeking shelter. The housing crunch for blacks was made worse by returning veterans. Blacks faced white violence when they tried to move into predominately white communities. This is how Jim Crow worked in Chicago. This is also how James Hickman met David Coleman.

A dangerous man

David Coleman was also from the South and came to Chicago in 1943 with ambitions to be a businessman. Coleman met a woman in July 1946 with a building to sell at 1733 West Washburne, on the West Side of Chicago; he leased it from her shortly thereafter. In effect, he had day-to-day control of the property and he collected the rents.

In the middle of August 1946, Hickman heard that an apartment was available at Coleman’s building, which was subdivided into Kitchenettes. Coleman first showed him the basement apartment for $50 a month. Hickman later told journalist John Bartlow Martin, “The water was half a leg deep in the basement…no windows, no lights, no nothing in there.” Hickman declined the basement “apartment” but Coleman quickly offered him an attic apartment for $6 a week until the space on the second floor became free. “We walked up the stairs, it so dark,” Hickman later testified, “we almost had to feel our way…I am walking around looking at it, I don’t like this. She [Annie] said, I don’t nether but surely we can stay here because we ain’t got no place.” It was a small attic that adults could barely stand-up in, and there was no electricity, no gas, and only one window. But they needed shelter for their seven children. So, despite their reservations the Hickman’s told Coleman that they would take the attic “apartment” with the expectation that the second floor apartment would be theirs soon. They gave Coleman one hundred dollars as a down payment.

Days turned to weeks and still there was no word from Coleman on the promised apartment. Finally, Hickman confronted Coleman in mid-September 1946 and demanded back his $100 deposit so he could look for another place. Coleman refused. “I won’t pay you until I get ready,” Coleman barked at Hickman. In return Hickman said he would take him to court. Hickman recalled that Coleman threatened to burn him out. “He said he had a man on the East Side ready to burn the place up if…I had him arrested.” The Hickmans swore out a warrant for Coleman’s arrest but the police didn’t arrest him.

This wasn’t the first time that Coleman threatened to burn his building. The previous fall, tenants in Coleman’s building stopped contractors (who showed up with no notice) from further cutting up their apartments into smaller units. Coleman appeared at the scene and tenants told him that he would have to go to court to evict them. He declared, “I am the owner, I don’t have to go to Court to do that, I will get everybody out of here when I want if it takes fire.”

Coleman was clearly a dangerous man, but the city authorities did nothing. In fact, the coroner’s jury that heard testimony concerning the death of the Hickman children could not decide if the fire was accidental or deliberate, and recommended that the State’s Attorney initiate an investigation into it. No serious investigation was done. In the end, Coleman was fined by the city authorities for a series of safety and health violations—totaling $450—the equivalent of $112.50 a piece for each of the dead Hickman children.

“We got there first”

Soon after Hickman shot and mortally wounded Coleman, he returned home and waited for the police to arrest him. He offered no resistance and confessed to what would soon be the murder of David Coleman. While in jail Hickman was interviewed by a two of the most important newspapers in Chicago, the Chicago Daily Defender, the leading Black newspaper in Chicago, and the Chicago Daily Tribune. But by far the best piece of journalism on Hickman was written by Robert Birchman for The Militant, the weekly newspaper of the Socialist Worker’s Party, who laid out the case. “The story of Hickman is the story of negligence and callous disregard of housing and health conditions. It is the story of the horrible slums in which the Negro people are forced to live in dilapidated, disease-ridden firetraps,” declared Birchman. “It is the most tragic of many calamities in which 22 persons have lost their lives, many others suffered injuries and hundreds made homeless as a result of fires in Chicago’s Negro ghettos since the first of the year.” Shortly after Birchman’s interview with Hickman, M.J. Myer, a Chicago labor attorney and co-counsel in the (historically important but largely forgotten) Minneapolis sedition trial of American Trotskyists in 1941, became lead counsel for Hickman. Myer released a statement shortly after the coroner’s inquest into Coleman’s death, that read in part, “In Hickman’s mind all evidence pointed to Coleman’s responsibility for the burning to death of his four children This idea has obsessed him until it reached a point where he no longer could control himself.” Myer also announced that a defense committee was being formed on Hickman’s behalf. Two other attorneys joined Myer; Leon Despres, then a counsel for the American Civil Liberties Union and soon to be a famous Chicago alderman, and William H. Temple, an African-American criminal defense attorney and a member of the Chicago NAACP executive board, giving Hickman an effective legal team. They all agreed to represent him without compensation.

How did the SWP get involved in the case so rapidly? They had 150 members in the greater Chicago area, whereas the Stalinist Communist party, by far the dominant group on the U.S. Left, had easily ten times that number, if not more. “We got there first, not the Communist Party, because our members were involved in the neighborhood in tenant rights,” longtime socialist Frank Fried, told me in a telephone interview. “They were members of the Westside Tenant’s Union.” Fried had just left the navy and was active in the liberal American Veterans Committee; he would become a leader of the SWP-initiated Hickman Defense Committee.

Immediately following the fire, the tenants in Coleman’s building organized themselves into the Chicago Area Tenants Union, which members of the SWP were actively involved in. The driving force behind the tenants’ union was the Chicago SWP organizer, Milt Zaslow (who went by the public name of Mike Bartell) and his partner Edith. “The tenants’ rights organization that began in the building where Milt, Edith and their son lived,” wrote Karin Baker and Patrick Quinn in 1997 obituary of Zaslow/Bartell. “The group pushed for improved living conditions, among other demands. At one time a renters’ strike developed that involved thousands in the city of Chicago. The campaign got so big that people in distant neighborhoods were calling them, wanting to get involved.”

The SWP also benefited from the revival of civil rights activism following the end of the war. The Congress for Racial Equality (CORE), which was founded in 1941 at the University of Chicago and pioneered many of the tactics that became mainstays of the civil rights movement of 1950s and 60s, took the lead in the fight against Jim Crow in Chicago. “Chicago CORE, after a year of inactivity, was revived in the autumn of 1945 under the chairmanship of the black schoolteacher and NAACP leader, Gerald Bullock.
Finding few members interested in action, he dropped the chapter’s rigid selection procedures and made a broad appeals for new members to which the Trotskyist Socialist Workers Party (SWP) responded,” according to historians Meier and Rudwick. Gerald Bullock would later play an important part in the Hickman defense campaign. An SWP member became the editor of the local Chicago CORE-News. One of the most successful campaigns of CORE, involving SWP members, was the campaign to desegregate the aptly named White City Skating Rink in 1946. “Although it was located in the predominantly African-American part of the city, only whites were allowed in certain areas of the park, such as the roller rink. The SWP under Milt’s leadership was central in implementing a broad-based campaign that broke the color barrier at White City.” Frank Fried recalls, “Mike was an organizer’s organizer. He got up everyday and read the four daily newspapers, and look for things to get involved in.” The Hickman case was one of them. Leon DesPres deeply believed that, “but for Mike, James Hickman would have been convicted.”

“Will you help us?”

Working quickly, SWP activists put together a Hickman Defense Committee on August 8, 1947. The focus of it’s work was, according to Fried, was “to make it politically impossible in the eyes of the people of Chicago for the prosecutors to convict Hickman, to put as much pressure that could be mobilized on the city, and take the case national to pressure the state and the city.” The committee received support from the Chicago Congress of Industrial Organizations (CIO) Industrial Union Council, the American Federation of Labor Building services employees union, the American Veterans Committee, and the Baptist Ministers Conference of Chicago. A public appeal for Hickman was signed by Willoughby Abner, first vice-president of the Chicago CIO Council and chair of the Hickman defense committee; Charles Chiakulous, president of the UAW-CIO Local 477; and Bernis Johnson, chair of the Westside NAACP Youth Council.

Abner was important to the defense campaign because of his stature as a leading black trade unionist in the UAW in the Chicago area. According to historian Nelson Lichtenstein, Abner “organized thousands during the war in several South Side foundries and small manufacturing facilities.” Sidney Lens, a local trade union official, who later become a nationally known historian and antiwar leader during the Vietnam War), also played a central role in Hickman’s defense campaign. “We put a collection can for donations, a petition and leaflets about Hickman in every store, bar or restaurant we could in the black neighborhoods in Chicago,” says Fried. “People gave generously. Everybody knew about Hickman. I think the prosecution was screwed from the beginning.”

Why was the Hickman cause so popular? The reasons were explained in an article written on the case for the journal Fourth International some time before Hickman’s trial. “Every so often a previously unknown individual suddenly attracts wide attention. There is usually a social reason for this. The story connected with the particular case epitomizes the plight of voiceless millions, focusing on the needs of one group and the crimes of another, bringing into the light of day the festering rottenness of class society…. Hickman’s story is the story of Jim Crow as it is practiced north of the Mason-Dixon line.” The tragedy of James Hickman personified the plight of Chicago’s black community.

Seeking to organize a large public display of support for James Hickman and his family, the defense campaign organized rallies at several churches across Chicago. The largest rally was held on September 28, 1947 at the Metropolitan Community Church on Chicago’s South Side. To build the rally, the campaign put up “hundreds of posters announcing the event,” canvassed the area with “two sound trucks,” and handed out “40,000 leaflets.” Over 1,200 people attended with the overwhelmingly African-American audience unanimously passing a resolution calling for Hickman’s release. The featured speaker at the rally was actress Tallulah Bankhead, who starred in Alfred Hitchcock’s Lifeboat and was a member of a powerful Democratic Party family from Alabama. Her father had been speaker of the House of Representatives in the late 1930s, but she broke with her family over the conservatism of the Southern Democrats, particularly their virulent racism. Her involvement in the Hickman campaign was something of a “coup” for Sidney Lens. He recalled three decades later:

I was leaving my office on Dearborn Street one evening when I noticed her name on the marquis half a block away. She was starring in a new play. On the spur of the moment I went to the stage door and asked for her. To my surprise she knew about Hickman and was immensely sympathetic. When I asked her, however, to speak at the rally we planned at the Metropolitan Community Church, she shuddered as if I hit her with a blast of artic air. “Why, Mr. Lens, how can I make a speech?” It took a while to figure out that what she meant was that while she was capable of reciting other people’s lines, she was incapable of constructing a speech on her own. I agreed therefore to write a speech for her, and a couple of days later she advised that “I read it to my secretary and made her cry. I’ll be happy to deliver it.”

Bankhead, according to Lens, “drew tears from the whole audience, a couple of thousand people” with a riveting speech:

It seems to me a shameful condemnation of our society that 2000 years after Christ, people are still herded together into Black ghettoes merely because of their skins have different pigmentations than other people. No one condones murder or any act of violence. I hope the day shall come soon when humanity can resolve not only its racial problems but all problems coolly and rationally; when emotional acts of violence—be they individual or national—can be eliminated. So long, however, as there exists anywhere on earth one minority that is treated with contempt, that is herded into Black slum areas, that is abused and insulted, so long will we have violence, hate, brutality, savagery. So long as there exists a Jewish problem, or a Mexican problem—or a problem of any minority—so long will one form of violence beget another. I am proud to be one of the humble gladiators in this struggle against narrow prejudice and stupidity. I am glad to lend my efforts so that there shall be no more James Hickman tragedies.

Other speakers that night included the best-selling African-American author Willard Motely, and Chicago packinghouse union official Philip Weightman. Hickman’s attorney M.J. Myer roared to the crowd, “It is not Hickman who should be on trial, but the inhuman landlords and real estate interests who sacrifice human lives for profit, for they are the real criminals. They are the people who should be put behind bars and kept there.” The Communist Party, which could have contributed significant resources to the Hickman campaign, refused to participate and stood outside the Hickman defense rally handing out a pamphlet, The Great Conspiracy by Alfred Kahn, attacking the SWP and repeating old slanders that Trotskyism and fascism were in league against the Soviet Union.

Motley, author of the 1947 best-selling novel Knock on Any Door, which was made into a film starring Humphrey Bogart in 1949, played an incredibly important part in the Hickman defense campaign. He had a huge reputation at the time of the case. His book sold 47,000 copies during its first three weeks in print and a total of 350,000 during the next two years. His involvement opened many doors for supporters of Hickman. However, the one door that Motley could not open was to the Chicago Sun (soon to be the Sun-Times). The Chicago based author met Hickman in prison and wrote an eloquent appeal that the defense committee attempted to publish in the Chicago Sun, one of the largest circulating newspapers in the mid-west. The Sun’s owner Marshall Field, heir to the Field family fortune and a publicly identified liberal, refused to printed Motley’s appeal even after the defense committee was prepared to pay for the space. Motley publicly attacked Field for his hypocrisy. He is one of those “rich liberals…who talk out of both sides of their mouths.” The defense committee had Motley’s appeal circulated to many of the largest Black newspapers in the country including the Chicago Daily Defender. Motley didn’t hold back his feelings about the Hickman case:

You have seen many pictures of men who have killed. You have seen the photographs of the returned soldier. Perhaps next door lives a boy who killed some other boy during the war. In the war millions of men killed other millions of men because they believed they were a threat to their homes, their wives, their children. This threat was thousands of miles from home. These were strangers killed, with whom there had been no personal contact. James Hickman killed the man who had threatened his wife and children with a death more horrible than the Nazi gas chambers. And carried it out. This is what I was thinking of as I sat talking to Hickman today. Hickman needs help. There are three children left who need him. A wife who needs him. Will you help us help him?

“This man has paid enough”

The defense campaign scored a major victory when the State’s Attorney office announced on the eve of the trial that it was dropping its demand for the death penalty. This changed the whole atmosphere surrounding the trial. Leon Despres, co-counsel for Hickman, said that it made the trial “less edgy.” It was also a backhanded admission that the pressure of the defense campaign was working. James Hickman went on trial for the murder of David Coleman on November 5 before a white judge and an all-white jury in the Cook County Criminal Court building. The presiding judge was Rudolph Desort, the prosecutor was Assistant State’s Attorney Samuel Friedman, and M.J. Myer was the lead counsel for the defense. The prosecution presented a total of eight witnesses that included four policemen and Coleman’s half-brother, Percy Brown, who under cross-examination gave testimony that reportedly contradicted statements he had made earlier to the police.

M.J. Myer in his opening statements argued that Hickman was not guilty because he was “temporarily insane” at the time of the shooting of David Coleman. Myer placed the blame for the shooting of Coleman on the terrible living conditions in Coleman’s building and the death of the Hickman’s four children. Myer called witnesses that testified to Coleman’s previous threats to burn the tenants out of the building and James’ anguished state of mind following the fire and deaths. Two psychiatrists testified for the defense. Dr. Boris M. Ury interviewed Hickman, while he was incarcerated at Cook County Jail. Hickman spoke about the divinely inspired “mission” of his dead children’s lives. “I see the future in these four was destroyed. They would have been great people had they lived. I had a vision, but their lives was cut-off.” Dr. Ury’s report went on: “Client continued to discuss the grandiose ‘mission’ of his children: ‘The Lord had work for them to do. He had picked them out…’ Examiner [Ury] inquired whether this godly mission would be confined to work among the colored people but he was assured by his client that the mission would be applicable to all people.” Dr. Ury concluded his report by saying that Hickman shot Coleman “in a schizoid, disassociated state, feeling he was accomplishing the Lord’s will.”

Leon Despres considered James Hickman’s testimony in court “magnificent” and, at times, “poetic.” Hickman sat solemnly in the witness chair and wore a modest gray suit with a white flower in lapel, according to Chicago Daily News reporter John Culhane, who pieced together the courtroom scene from interviews with Leon Despres and access to his Despres’ case files for an article he wrote in the mid-1960s.

“This was God fixed this,” Hickman testified.

I had raised these children up and God knowed that vow I made to him…that these children was a generation to be raised up. God wasn’t pleased what happened to them….

I had two sons and two daughters who would some day be great men and women, some day they would have married, some day they would have been fathers and mothers of children. These children would have children and these children would children and another generation of Hickmans could raise up and enjoy peace.

The trial lasted nine days. On November 15, after nineteen hours of deliberation, the jury informed the judge that they couldn’t reach a decision. It was a classic “hung jury”—seven to five for acquittal. The State’s Attorney’s office initially declared that it would retry James Hickman the following January. But it soon reversed itself and announced that it was dropping the murder charge and recommending to the judge that Hickman be sentenced to two years probation if he pleaded guilty to manslaughter. He agreed and walked out of court a free man on December 16, 1947. Hickman had served a total of five months in jail. Samuel Friedman, the prosecuting attorney, said that one of the major reasons that his office didn’t want a retrial was the public support for Hickman from across the country as he held up letters of support for Hickman. “They are too numerous to read all of them here,” Freedman declared holding up a fistful of letters, resolutions and telegrams, “but the general opinion is to the effect that mercy ought to be shown to an individual who, under the stress of the loss of four children, has been punished to such an extent that society can be magnanimous and afford him a chance to return to his remaining children and his wife, and spend the rest of his lifetime in peace.” Though he admitted “some quarters” would disagree with his recommendation, Freedman concluded, “The state feels this man has paid enough with the loss of his children.”

“A chain of personal memories”

The Hickman family returned to the private lives after the trial. But within a year the case received it’s widest publicity (outside of Chicago) when Harper’s magazine commissioned renowned journalist John Bartlow Martin to write a story on the Hickman case. Martin’s writings would today be called “true crime,” but that would be a great disservice to them. They were neither lurid nor exploitative, as many true crime works are. Martin’s writing style combined the best techniques of a novelist and a journalist with the motivation of a socially conscious liberal. In his autobiography, written many decades after the Hickman case, he recounts how he approached writing the The Hickman Story:

In preparing to do the piece, I read Gunnar Myrdal’s An American Dilemma and other books, but only for my own background information—I wrote the piece almost entirely from interviews, especially interviews with Hickman and his wife and with the landlord’s relatives, I simply told the story of Hickman’s and the landlord’s lives and their world—the world below.

The “world below” was one of racism and poverty that greeted Black refugees from the Deep South. “I wanted to do not an article, crammed with demographers’ statistics, but, rather, a story about a man. James Hickman had been a sharecropper in Mississippi. He was deeply religious and deeply devoted to his children.” Martin’s article is great writing and deserves to be read by everyone today committed to social justice.

But what lift’s the story from the page is the illustrations of the Hickman case by the great American artist, Ben Shahn. Shahn’s name is not one that many Americans would recognize, but millions have seen his work, particularly his drawings of the martyred Sacco & Vanzetti, and the three murdered civil rights activists, Schwerner, Chaney and Goodman. Shahn’s drawings of the Hickman case that hung on the east wall of Leon Despres’ old law office caught the eye of reporter John Culhane, prompting him to write one of the few profiles of the case to appear in the decades that followed the trial. Shahn later wrote of his own struggle to capture the enormity of the Hickman family tragedy:

I was asked to make drawings for the story and, after several discussions with the writer, felt that I had gained enough of the feel of the situation to proceed. I examined a great deal of the factual visual material, and then I discarded all of it. It seemed to me the implications of this event transcended the immediate story; there was universality about man’s dread of fire, and his sufferings from fire. There was a universality in the pity which such a disaster invokes, had its overtones. And the relentless poverty which had pursued this man, and which dominated the story, had its own kind of universality.

Sometimes, if one is particularly satisfied with a piece of work which he has completed, he may say to himself, ‘well done,’ and go on to something else. Not in this instance, however. I found that I could not dismiss the event about which I had made drawings—the so-called “Hickman Story.”… I had some curious sense of responsibility about it, a sort of personal involvement.

The Hickman tragedy “aroused in me,” Shahn recalled, “a chain of personal memories.”

There were two great fires in my own childhood, one only colorful, the other disastrous and unforgettable. Of the first, I remember only that the Russian village in which my grandfather lived burned, and I was there. I remember the excitement, the flames breaking out everywhere…The other fire left its mark upon me and all my family, and left scars on my father’s hand and face, for he had clambered up a drainpipe and taken each of my brothers and sisters and me over the house one by one, burning himself painfully in the process. Meanwhile our house and all belongings were consumed, and my parents stricken beyond their power to recover.

The most powerful of all of Shahn’s Hickman drawings is the four huddled, deceased children. His “personal involvement” led him to use his own siblings as the basis for the drawing. “They resemble much more closely my own brothers and sisters.” John Bartlow Martin’s story and Ben Shahn’s drawings remain the most powerful documents from that era of the Hickman case. Unfortunately, the Hickman trial transcript disappeared many decades ago along with much of the paperwork related to Hickman’s legal defense. The Sidney Lens Papers at the Chicago Historical Society has some of the Hickman defense campaign literature, flyers and brochure—just enough to give you a feel for the campaign.

“Dismiss it in a sentence or two”

Despite all of this, one has to ask, how can such a powerful story disappear from the public memory? This is an amazing story, not only of rapacious greed and racism that led to an excruciatingly painful family tragedy, but also the triumph of justice over very long odds. It didn’t take place in some remote part of the country, but played itself out in Chicago, who’s crime-obsessed, tabloid press salivated over stories of much less interest. I think there were several things working against the Hickman case getting the recognition that it deserved. The case took place in 1947; over the next few years the death-grip of the Cold War would tighten around U.S. society. A virulent level of repression would drive socialist, communists and radicals of various allegiances to the very margins of American society. In many ways, the campaign to save James Hickman was one of the last echoes of the great radicalization of the American working class of the 1930s and 1940s. A successful political campaign to free an African-American man who shot and killed his landlord led by revolutionary socialists is not the type of story to be embraced during the height of the American Century. The Hickman case was simply steamrolled over by a decade and half of political repression and cultural conformity. This, however, is only a part of the answer.

The other part lies, I believe, in who writes the history of the American Left. By-and-large they were historians that were members of the Communist Party and the New Left of the 1960s, few of who have shown any interest or political sympathy for the revolutionary tradition of Marxism and the Russian Revolution in the form Trotskyism in this country in the 1930s and 1940s. “Trotskyism has been written out of the history of the American left,” notes veteran revolutionary socialist Joel Geier. There are notable exceptions, such as Alan Wald’s The New York Intellectuals or Bryan Palmer’s James P. Cannon and the Origins of the American Revolutionary Left, but too often the most popular left-wing histories of the 1930s and 1940s simply dismiss, denigrate or out-rightly censure the role of Trotskyism in the radical movement.

One of the worst examples of this is Labor Untold Story by Boyer and Morais, published by the UE, one of the unions of the CIO era that was led by the CP. It strait-forwardly ignores the Trotskyist-led great Minneapolis Teamster strikes of 1934. It was the strikes in Minneapolis, Toledo and San Francisco that directly led to the formation of the CIO. This type of censorship may be extreme but not uncommon. This includes the 1941 trial of the Trotskyists of the SWP for “subversion” under the reactionary Smith Act that became the model for the trials that destroyed the CP after WWII. Yet, as Ellen Schrecker in her Many Are The Crimes: McCarthyism in America notes, “There is little scholarship on the Trotskyist Smith Act case. While recognizing it implications for the later Smith Act cases, most writers tend to dismiss it in a sentence or two.” Instead of “dismissing it in a sentence or two,” it’s time that Trotskyism gets the proper recognition it deserves in American radical history.

There are many stories such as the Hickman case that need to be recovered from oblivion and retold. Last year Clint Eastwood’s film Changeling was released. Set in 1928 Los Angeles, it told the real-life story of Christine Collins and her search for the truth behind the kidnapping of her son and the mind-boggling public relations stunt by the LAPD, who sent her the wrong child and then attempted to shut her up when she refused to play along. It led to an explosion of public protest. The story disappeared from public memory for eight decades until screenwriter J. Michael Straczynski, a former journalist, was contacted by an old source at Los Angeles City Hall, who told him that the city was planning to destroy some of its archives and that there was “something [Straczynski] should see.” This turned out to be a transcript of a city council hearing of Collins’ case. There are thousands of stories of injustice and struggle hidden away in the archives of city halls around the country. Hopefully, younger historians can bring to light the many of these stories before they are lost to history.

I want to extend a special thank you to two people, Frank Fried and Leon Despres. Frank first told me about the Hickman case at Joel Geier’s 70th birthday party, and Leon Despres (who passed away on May 7, 2009 at 101 years old) for allowing me to discuss the case with him at his Hyde Park residence. Patrick Quinn has been extremely helpful in tracking down important sources of information on the case and commenting on the first draft of this article. I also want to thank the Chicago Historical Society for allowing me access to the Sidney Lens papers, and the Library of Congress for access to the Hickman files in John Bartlow Martin’s papers. The librarians in charge of the Willard Motley papers at the Northeastern Illinois University were very helpful but I ended up referencing different material on Motley’s role in the Hickman case.

Export-led nations are looking for an edge to revive flagging sales by keeping their currencies undervalued. But the strong dollar is making it harder for Bernanke to engineer a recovery. He’d like nothing more than to see the dollar tumble and reset at a lower rate. That would reduce the debt-load for homeowners and businesses and send consumers racing back to the shopping malls and auto showrooms. Perception management is a big part of stimulating the economy. That’s why the financial media has been air-brushing articles that focus on deflation and shifting the attention to inflation. It’s an effort to kick start consumer spending by convincing people that their money will be worth less in the future. But deflation is still enemy number one. Rising unemployment, crashing home prices, vanishing equity and tighter credit; these are all signs of entrenched deflation.

Bernanke faces three main challenges to put the economy back on track. He must remove the hundreds of billions in toxic assets from the banks balance sheets, reignite consumer spending to offset the sharp decline in aggregate demand, and fix the wholesale credit-mechanism that provides 40 percent of the credit to the broader economy. Treasury Secretary Timothy Geithner has taken over the distribution of the remaining TARP funds, and created a new program, the Public-Private Investment Partnership (PPIP), for purchasing toxic mortgage-backed assets. The PPIP will provide up to 94 percent “non-recourse” government loans for up to $1 trillion of assets which are worth less than half of their original value at today’s prices. The Treasury’s plan is an attempt to keep asset prices artificially high so that the losses will not be realized until they’ve been shifted onto the taxpayer. Here’s how John Hussman of Hussman Funds summed up Geithner’s PPIP:

From early reports regarding the toxic assets plan, it appears that the Treasury envisions allowing private investors to bid for toxic mortgage securities, but only to put up about 7% of the purchase price, with the TARP matching that amount – the remainder being “non-recourse” financing from the Fed and FDIC. This essentially implies that the government would grant bidders a put option against 86% of whatever price is bid. This is not only an invitation for rampant moral hazard, as it would allow the financing of largely speculative and inefficiently priced bids with the public bearing the cost of losses, but of much greater concern, it is a likely recipe for the insolvency of the Federal Deposit Insurance Corporation, and represents a major end-run around Congress by unelected bureaucrats.

Make no mistake — we are selling off our future and the future of our children to prevent the bondholders of U.S. financial corporations from taking losses. We are using public funds to protect the bondholders of some of the most mismanaged companies in the history of capitalism, instead of allowing them to take losses that should have been their own. All our policy makers have done to date has been to squander public funds to protect the full interests of corporate bondholders. Even Bear Stearns bondholders can expect to get 100% of their money back, thanks to the generosity of Bernanke, Geithner and other bureaucrats eager to hand out the money of ordinary Americans. (John Hussman, “The Fed and Treasury — Putting off Hard Choices with Easy Money, and Probable Chaos”)

The second part of the Fed’s plan is to fix the wholesale credit-mechanism, which means restoring the securitization markets where pools of loans are transformed into securities and sold to investors. Until Bernanke is able to lure investors back into purchasing high-risk debt-instruments comprised of student loans, mortgage securities, auto loans and credit card debt, the credit markets will continue sputter and growth will be flat. Structured-debt creates the asset base which is leveraged though traditional loans or complex derivatives. Credit expansion maximizes profit, inflates asset prices and establishes the structural framework for shifting wealth to financial institutions via speculative asset bubbles. This is the basic financial model that US banks and financial institutions hope to export to the rest of the industrial world to ensure a greater portion of global wealth for themselves and a stronger grip on the political process.

Bernanke’s Term Asset-backed Securities Loan Facility (TALF) provides up to $1 trillion in non recourse loans to financial institutions willing to buy AAA-rated debt-instruments backed by consumer and small business loans. So far, the response has been tepid at best. For all practical purposes, the market is still frozen. Bernanke knows that there will be no recovery unless the credit markets are functioning properly. He also knows that the TALF won’t succeed unless he provides guarantees for the underlying collateral, which is loans that were made to applicants who have no means for paying them back. Bernanke’s guarantees will cost the taxpayer billions of dollars without any assurance that his plan will even work. It’s a complete fiasco.

From the Federal Reserve Bank of San Francisco Economic Letter, “US Household Deleveraging and Future consumption Growth” by Reuven Glick and Kevin J. Lansing:

More than 20 years ago, economist Hyman Minsky (1986) proposed a “financial instability hypothesis.” He argued that prosperous times can often induce borrowers to accumulate debt beyond their ability to repay out of current income, thus leading to financial crises and severe economic contractions.

Until recently, U.S. households were accumulating debt at a rapid pace, allowing consumption to grow faster than income. An environment of easy credit facilitated this process, fueled further by rising prices of stocks and housing, which provided collateral for even more borrowing. The value of that collateral has since dropped dramatically, leaving many households in a precarious financial position, particularly in light of economic uncertainty that threatens their jobs.

Going forward, it seems probable that many U.S. households will reduce their debt. If accomplished through increased saving, the deleveraging process could result in a substantial and prolonged slowdown in consumer spending relative to pre-recession growth rates. Alternatively, if accomplished through some form of default on existing debt, such as real estate short sales, foreclosures, or bankruptcy, deleveraging could involve significant costs for consumers, including tax liabilities on forgiven debt, legal fees, and lower credit scores. Moreover, this form of deleveraging would simply shift the problem onto banks that hold these loans as assets on their balance sheets. Either way, the process of household deleveraging will not be painless. (The Federal Reserve Bank of San Francisco Economic Letter, “US Household Deleveraging and Future consumption Growth” by Reuven Glick and Kevin J. Lansing)

The economy is in the grip of deflation. Commercial banks are stockpiling excess reserves (more than $850 billion in less than a year) to prepare for future downgrades, write-offs, defaults and foreclosures. That’s deflation. Consumers are cutting back on discretionary spending; driving, eating out, shopping, vacations, hotels, air travel. More deflation. Businesses are laying off employees, slashing inventory, abandoning plans for expansion or reinvestment. More deflation. Banks are trimming credit lines, calling in loans and raising standards for mortgages, credit cards and commercial real estate. Still more deflation. Bernanke has opened the liquidity valves to full-blast, but consumers are backing off; they’re too mired in debt to borrow, so the money sits idle in bank vaults while the economy continues to slump.

In an environment where businesses and consumers are rebuilding their balance sheets and paying off debt, there’s only one option; inflation. Bernanke will keep interest rates will stay low while increasing monetary and fiscal stimulus. The ocean of red ink will continue to rise. Still, the system-wide contraction will persist despite the Fed’s multi-trillion dollar lending programs, quantitative easing (QE) and Treasury buybacks. The “Great Unwind” is irreversible; the era of limitless credit expansion is over.

David Rosenberg, chief economist and strategist at Gluskin Sheff & Associates, believes that the equities markets have undergone a “gargantuan short-cover rally” and that stocks will retest the March 9th low, which was a 12 year low for the S&P 500 Index. Rosenberg said he doesn’t expect the economy to recover in the second half of the year.

“I’m seeing no revival of consumer spending in the second quarter,” Rosenberg said. (Bloomberg)

The conditions that supported the explosive growth of the last decade no longer exist. The credit markets are in a shambles, the banking system is hanging by a thread, and the consumer is out of gas. Traders are clinging to the slim hope that the worst is over, but they could be mistaken. There’s probably another leg down and it will be more vicious than the last.

From Tyler Durden at Zero Hedge:

In order to fully understand currency and price movements, one has to realize that the securitization of debt, and creation of derivatives amounted to a huge virtual printing press, primarily fueled by a massive increase in risk appetite which allowed for a huge expansion in the value of claims on financial assets and goods and services. It is worth pointing out, that the Fed has little to no control over this “printing press” at this point, which at last count was responsible for over 90% of the liquidity in the system.

The faux-prosperity of the last decade was largely the result of a wholesale credit system, which created a humongous amount of credit via sketchy debt instruments, off-balance sheet operations, massive leverage and derivatives. (The Fed’s liquidity and conventional bank loans play a very small part in the modern credit system) Securitization — which is the conversion of pools of loans into securities — is at the center of the storm. It formed the asset base upon which the investment banks and hedge funds stacked additional leverage creating an unstable debt pyramid that couldn’t withstand the battering of a slumping market. After two Bear Stearns funds defaulted 20 months ago, the securitization markets froze, credit dried up and the broader economy went into a tailspin. Now that investors know how risky securitized instruments really are, there’s little chance that assets will regain their original value or that the market for structured debt will stage a comeback.

Bernanke’s Term Asset-backed Loan Facility (TALF) is an attempt to restore the crashed system by offering participants generous government funding to purchase securities backed by mortgages, student loans, auto loans and credit card debt. But skittish investors have stayed on the sidelines. The severity of the downturn has dampened the appetite for risk. So Bernanke has cranked up the money supply, cut interest rates to zero and flooded the financial system with liquidity. His actions have convinced many of the experts that the country is on the fast track to hyperinflation, but that may not be the case, as explained in the Hoisington Investment Management’s Quarterly Economic Review:

Despite near term deflation risks, the overwhelming consensus view is that “sooner or later” inflation will inevitably return, probably with great momentum.

This inflationist view of the world seems to rely on two general propositions. First, the unprecedented increases in the Fed’s balance sheet are, by definition, inflationary. The Fed has to print money to restore health to the economy, but ultimately this process will result in a substantially higher general price level. Second, an unparalleled surge in federal government spending and massive deficits will stimulate economic activity. This will serve to reinforce the reflationary efforts of the Fed and lead to inflation.

(But) let’s assume for the moment that inflation rises immediately. With unemployment widespread, wages would seriously lag inflation. Thus, real household income would decline and truncate any potential gain in consumer spending…

Inflation will not commence until the Aggregate Demand (AD) Curve shifts outward sufficiently to reach the part of the Aggregate Supply (AS) curve that is upward sloping…..Therefore, multiple outward shifts in the Aggregate Demand curve will be required before the economy encounters an upward sloping Aggregate Supply Curve thus creating higher price levels. In our opinion such a process will take well over a decade. . . .

The statement that all the Fed has to do is print money in order to restore prosperity is not substantiated by history or theory. An increase in the stock of money will only lead to a higher GDP if V, or velocity, is stable. V should be thought of conceptually rather than mechanically. If the stock of money is $1 trillion and total spending is $2 trillion, then V is 2. If spending rises to $3 trillion and M2 is unchanged, velocity then jumps to 3.

. . . The historical record indicates that V may be likened to a symbiotic relationship of two variables. One is financial innovation and the other is the degree of leverage in the economy. Financial innovation and greater leverage go hand in hand, and during those times velocity is generally above its long-term average.

As the shadow banking system continues to collapse, velocity should move well below its mean, greatly impairing the efficacy of monetary policy…The problem for the Fed is that it does not control velocity or the money created outside the banking system. (Thanks to Leo Kolivakis, of Pension Pulse, “Is Inflation inevitable?“)

Bernanke can print as much money as he wants, but if the banks are hoarding, consumers are saving, businesses are cutting back, and all the money-multipliers are set to “Off”; there will be no inflation. Demand has to pick up, so that money begins to change hands quickly leading to vast amounts of new money competing for the same number of assets. But that won’t happen while the economy is shedding 600,000 jobs a month, housing prices are tumbling and consumer balance sheets are being repaired.

So if inflation is not an immediate risk, and the economy continues to shrink, isn’t Bernanke doing the right thing by trying to restart the securitization markets?

Opinions vary on this topic. On the one hand, Wall Street’s method of deploying credit appears to be more efficient than conventional (bank) loans because the money is provided by investors who are looking for higher yield rather than bankers tapping into reserves. The problem is that securitization creates incentives for fraud by rewarding loan originators who lend to applicants who have no way of repaying the debt. Unless the system is heavily regulated to insure that traditional lending standards are maintained, speculative bubbles will reemerge and there will be more financial disasters in the future. The former head of the FDIC, William Seidman, anticipated this problem way back in 1993 after cleaning up the S&L crisis. Here’s what he said in his memoirs:

“Instruct regulators to look for the newest fad in the industry and examine it with great care. The next mistake will be a new way to make a loan that will not be repaid.” (Bloomberg)

If regulators had heeded Seidman’s advice, they could have steered the country away from the present calamity.

The problem with an unregulated credit system is that investment banks and hedge funds can skim lavish salaries and bonuses for themselves on the front end before anyone discovers that the loans are fraudulent and the securities worthless. Even so, neither Congress nor the Treasury nor the Fed has taken steps to re-regulate the financial system or to hold any of the main players accountable. It’s “anything goes.” Bernanke has acted as Wall Street’s chief enabler by underwriting shoddy non performing loans, propping up rotten assets with low interest funding, and bailing out investment giants with trillions in taxpayer-backed loans. None of the $12.8 trillion Bernanke has loaned or committed to financial institutions has been approved by Congress. The Fed operates beyond any mandate and outside of any law.

The debate about securitization goes beyond questions about the quality of the underlying loans to focusing on the process itself. Securitization greatly amplifies leverage by repackaging debt into complex instruments. It’s a way of turbo-charging credit expansion. Joseph Stroupe summarizes the issue in a recent Asia Times article:

Remember that there are two fundamental camps with respect to the answer to the question of what lies at the root of the present crisis. One camp holds that America’s new generation of financial assets that resulted from the recently invented financial process known as “securitization” are fundamentally sound in value, and that an over-reaction on the part of investors to the subprime crisis has resulted in a panic-induced collapse in their valuations.

This camp believes that the securitization model can and should be revived, and that when investor confidence is restored in financial assets now seen as “toxic”, then all will be well again, almost magically, as toxic assets become valuable and attractive once again. All that need be done, it is believed, is for the government to work with Wall Street to jump-start securitization, a model this camp vehemently denies has failed, even though many trillions of dollars both spent and committed already have so far failed to get securitization’s heartbeat going again.

The other camp believes that the toxicity is inherent in the very nature of the newly developed financial assets themselves, and that once investors recognized this fact, then that is why their values collapsed. This camp sees the securitization model as fundamentally flawed, based as it is upon artificial inflation of assets, the shortsighted growth of serial asset bubbles created by an unholy de facto alliance of government, big Wall Street banks and credit-rating agencies whose credibility and integrity were profoundly compromised, and unsustainable negative real interest rates (the creation of a massive credit excess), without which the securitization model simply won’t run.

Bernanke says that the securitization markets are “frozen” and that the toxic assets should eventually regain much of their original value. But this is just wishful thinking. Investors aren’t shunning these assets because they’re afraid, but because the banks want too much for them given their implicit riskiness. Stroupe’s analysis is closer to the truth; prices have collapsed because investors recognize the inherent toxicity of the assets themselves. The market isn’t driven by fear, but by common sense. $.30 cents on the dollar is probably all they are worth.

Putting Credit Back Where it Belongs

Do people realize that the reason their home equity is vanishing, their 401ks have been slashed in half and their jobs are at risk is because Wall Street was gaming the system with leverage and financial innovation? The current downturn is not really a recession at all; it’s more like a self-inflicted wound perpetrated by avaricious speculators who put a gun to the economy’s head and blew its brains out. The banks and Wall Street have created a capital hole so vast that the entire economy is being sucked into the abyss. And it all could have been avoided.

Credit production is too important and too lethal to entrust to profit-driven vipers whose only motivation is self-enrichment. The whole system needs rethinking and public input before Bernanke wastes trillions more trying to revive the same crisis-prone business model. If “credit is the economy’s life’s-blood,” as President Obama says, then it should be distributed through a government-controlled public utility. The real lesson of the financial crisis is that privatizing credit has been a disaster.

The housing market is crashing. There are no “green shoots” or “glimmers of hope”; the market is worn to a stump, it’s kaput. Still, whenever new housing figures are released, they’re crunched and tweaked and spin-dried until they tell a totally different story: a hopeful story about an elusive “light in the tunnel.” But there is no light in the tunnel; it’s a myth. The truth is, there’s no sign of a turnaround or a “bottom” in housing at all. Not yet, at least. The real estate market is freefalling and it looks like it’s got a long way to go. So why is the media still peddling the same “rose-colored” claptrap that put the country in this pickle to begin with? Here’s an example of media spin, which appeared in Bloomberg News on Wednesday:

“US home prices rose 0.7 percent in February from the month before, the Federal Housing Finance Agency said in Washington today, a sign that low interest rates may be moderating declines in real estate values. . . . Housing market data indicates prices are starting to “stabilize,” and households’ available cash should improve through each quarter of 2009 and into 2010.” (Bloomberg)

This report is complete gibberish. The only way to get a fix on what’s really happening with housing is to compare prices year over year (yoy) not month to month. Clearly, the journalist decided to spin the story from this angle because it offered the one flimsy sign of hope in a sector that’s been reduced to rubble. But, don’t be fooled, housing isn’t staging a comeback. Not by a long shot.

This is from Marketwatch:

“The Case-Shiller index of 20 major cities fell 2.8% in January, the fastest decline on record. The Case-Shiller index rose more than the Federal Housing Finance Agency (FHFA) index did during the bubble, and it’s fallen faster since the bubble burst . . . The index was down 19% year-over-year in January.”

So, the only reason that housing prices rebounded (slightly) in February was because, one month earlier, they were “declining at the fastest pace on record.” That’s not a sign of “green shoots” like the Pollyannas say. It’s a sign of a ferocious ongoing contraction. The only thing that’s keeping housing from collapsing completely is the Fed’s purchases of Fannie and Freddie mortgage-backed securities (MBS). Bernanke’s action has pushed interest rates to record lows giving homeowners a chance to refinance rather than default on their loans. Struggling homeowners have been granted a one-time reprieve courtesy of the US taxpayer. That’s great, but the fact that the Fed is subsidizing the industry to the tune of $1.25 trillion is hardly cause for celebration. What Bernanke should have done is prevented the credit bubble from inflating in the first place.

Check out this chart on The Big Picture to see a chilling illustration of a market in
capitulation-phase.

As the caption states:

“We are now in uncharted territory — new home starts have never fallen to these levels for as long as the Commerce Department has been tracking this data (since 1959). Note also the magnitude of the drop — it is unprecedented, having easily surpassed the 1982 collapse, the present circumstances have now become slightly worse than the 1973-75 fall.”

Housing will continue to deteriorate no matter what the Fed does; the downward momentum is too great to resist. And although the refi-business is booming, new home sales are still flat. Buyers are just too scared or too broke to take advantage of the ultra-low interest rates. (4.80%, 30-year fixed) And now that Obama’s foreclosure moratorium is over, delinquencies are stacking up faster than ever before auguring another wave of foreclosures. This is from DataQuick: “Golden State Mortgage Defaults Jump to Record High”:

Lenders filed a record number of mortgage default notices against California homeowners during the first three months of this year, the result of the recession and of lenders playing catch-up after a temporary lull in foreclosure activity . . .

A total of 135,431 default notices were sent out during the January- to-March period. That was up 80.0 percent from 75,230 for the prior quarter and up 19.0 percent from 113,809 in first quarter 2008, according to MDA DataQuick.

And from Bloomberg:

Fannie Mae and Freddie Mac mortgage delinquencies among the most creditworthy homeowners rose 50 percent in a month as borrowers said drops in income or too much debt caused them to fall behind, according to data from federal regulators.

The number of so-called prime borrowers at least 60 days behind on mortgages owned or guaranteed by the companies rose to 743,686 in January, from 497,131 in December, and is almost double the total for October, the Federal Housing Finance Agency said in a report to Congress today.

So, even top-of-the-line prime borrowers are having trouble making their payments. The debt virus has now spread to all loan categories. But what about Obama’s mortgage relief program? Won’t that help keep people in their homes?

In the last two months, roughly 9,000 mortgage modifications have been worked out under Obama’s Streamlined Modification Program. At the same time delinquencies have increased by roughly 195,000 per month. That means there are 186,000 more delinquencies than modifications per month. Obama’s program is like a re-staging of grunting Sisyphus pushing his boulder up the hill — utter futility.

Many economists believe that “cramdowns” are the only way to slow the rate of foreclosures and stop the precipitous decline in housing prices. Cramdowns allow a judge to modify mortgages by marking down the face value (the principle) of the loan. When mortgages accurately reflect current market prices, people tend to stay in their homes. But when prices fall sharply and homeowners owe more on their mortgage than their home is worth, (negative equity) they simply stop making their payments and leave.

So far, cramdown legislation has passed the House, but has stalled in the Senate where it looks like it will be defeated. Powerful groups of bondholders have taken their case to Capital Hill where they’re waging a pitch battle against the Obama plan. At this point, it doesn’t look good for supporters of debt relief even though cramdowns are desperately needed to stop the hemorrhaging of foreclosures.

As we noted in an earlier article, the backlog of homes on the market is still in the vicinity of 10 months. But that excludes the vast “shadow inventory” the banks are keeping off the market. According to SF Gate:

Lenders nationwide are sitting on hundreds of thousands of foreclosed homes that they have not resold or listed for sale, according to numerous data sources. And foreclosures, which banks unload at fire-sale prices, are a major factor driving home values down.

“We believe there are in the neighborhood of 600,000 properties nationwide that banks have repossessed but not put on the market,” said Rick Sharga, vice president of RealtyTrac, which compiles nationwide statistics on foreclosures. “California probably represents 80,000 of those homes. It could be disastrous if the banks suddenly flooded the market with those distressed properties. You’d have further depreciation and carnage. (”Banks aren’t Selling Many Foreclosed Homes,” SF Gate)

Inventory has dropped from its peak in 2008, but if the estimates of the shadow inventory are accurate, then the backlog of vacant homes is still about the same. Any recovery in housing will show up first as falling inventory, since the heart of the problem is oversupply.

On Wednesday, the New York Times reported that fewer people are moving because of the troubles in housing. In fact, “Fewer Americans moved in 2008 than in any year since 1962, according to census data released Wednesday, and immigration from overseas was the lowest in more than a decade. . . . It shows that the U.S. population, often thought of as the most mobile in the developed world, seems to have been stopped dead in its tracks due to a confluence of constraints posed by a tough economic spell.” (Sam Roberts, “As housing Market Dips, more in US are Staying Put,” New York Times)

Diminished mobility is just another of the unpleasant side effects of the housing bust.

The problem with housing goes far beyond the supply/demand imbalance. True, buyers are staying away because they know that prices could fall another 15 to 20 percent, but there’s more to it than just that. The housing crisis has been a shock to the psyche. The dream of home ownership — which is so closely linked to the so-called American dream — has turned into a nightmare. The trauma of watching one’s life savings and retirement vanish in a matter of months is devastating. It’s not an experience that’s easily forgotten. Naturally, people will be more skeptical in the future about seductive interest rates and other faux inducements. Keep in mind, that after investors were burned for $7 trillion in the dot.com swindle, tech stocks swooned and the NASDAQ plunged 80 percent over the next year and a half. Housing is headed down that same bumpy path. There probably won’t be an uptick in housing until the market is flat on its back and given up for dead.

New Home Sales Update: On Friday, stocks skyrocketed on news that “new home sales did not fall as far as expected.” Once again, the story was presented in a way that suggested the housing market is “stabilizing”. But a closer examination of Friday’s data reveals how the media has manipulated the facts to create the impression that things are getting better. But they are not getting better; they’re getting worse. Here is a summary of Friday’s “good news”:

1) The median price of a new home fell $201,400 year over year (YOY)

2) Sales of new homes were down 31 percent from March 2008. They reached a record 1.389 million in July 2005.

3) Distressed properties accounted for about 50 percent of all sales.

4) Inventory (new homes) is still bulging at 10.7 months

5) Foreclosures are at record highs

Bernanke has provided generous “100 cents on the dollar” loans for Triple A mortgage-backed collateral that is now worth 30 cents on the dollar. The Fed stands to lose trillions of dollars on these loans because the assets will never regain their original value. Eventually the taxpayer will have to pony up the difference in higher taxes, fewer public services and a weaker dollar.

Bernanke’s liquidity injections may have sparked a flurry of speculation, but they won’t end the recession or slow the downward spiral. The relentless system-wide contraction continues apace and all of the leading economic indicators point to a deepening slump that will last for two years or more. Here’s a clip from a recent statement from the IMF:

Recessions associated with financial crises have typically been severe and protracted. Financial crises typically follow periods of rapid expansion in lending and strong increases in asset prices. Recoveries from these recessions are often held back by weak private demand and credit reflecting, in part, households’ attempts to increase saving rates to restore balance sheets. They are typically led by improvements in net trade, following exchange rate depreciations and falls in unit costs.

Globally synchronized recessions are longer and deeper than others. Excluding the present, there have been three episodes since 1960 during which 10 or more of the 21 advanced economies in the sample were in recession at the same time: 1975, 1980 and 1992 . . . Recoveries are usually sluggish, owing to weak external demand.

The recession will be a long uphill slog regardless of developments in the stock market. Bernanke admitted as much last Thursday when he said that the collapse of U.S. lending will cause “long-lasting” damage to home prices, household wealth and borrowers’ credit scores:

“One would be forgiven for concluding that the assumed benefits of financial innovation are not all they were cracked up to be. . . . The damage from this turn in the credit cycle — in terms of lost wealth, lost homes, and blemished credit histories — is likely to be long-lasting.”

Unlike Treasury Secretary Geithner, Bernanke has been surprisingly candid in his analysis of the crisis. That doesn’t mean that his policies have been worker-friendly. Far from it. But he has been a lot more honest about the shortcomings of deregulation and financial innovation. So far, the meltdown has wiped out more than $11 trillion of household wealth, sent unemployment skyrocketing, and pushed millions of people from their homes. As Bernanke admits, the country will not quickly bounce back.

Economists Kenneth Rogoff and Carmen Reinhart have conducted a study on the last 18 international financial crises and compiled their findings in a document called “Is the 2007 U.S. Subprime Financial Crisis So Different?” What they discovered was that “rising public debt is a near universal precursor of other post-war crises” and that countries that experienced large capital inflows were particularly vulnerable to crises. By 2006, two-thirds of the world’s surplus capital was flowing into the United States via its current account deficit. This flood of foreign capital kept interest rates low, housing and equity prices high, and Wall Street flush with money. Now foreign investment is drying up, housing prices are falling, the secondary market is frozen, and deflation is setting in across all sectors of the economy.

Rogoff and Reinhart believe that “recessions that follow in the wake of big financial crises tend to last far longer than normal downturns, and to cause considerably more damage. If the United States follows the norm of recent crises, as it has until now, output may take four years to return to its pre-crisis level. Unemployment will continue to rise for three more years, reaching 11–12 percent in 2011.” (Kenneth Rogoff and Carmen Reinhart, “Don’t Buy the Chirpy Forecasts,” Newsweek)

The proliferation of opaque, unregulated debt-instruments (MBSs, CDOs, CDSs) also played a big role in the present crash by reducing transparency and increasing systemic instability. Here’s Rogoff and Reinhart:

Assuming the U.S. continues going down the tracks of past financial crises, perhaps the scariest prospect is the likely evolution of public debt, which tends to soar in the aftermath of a crisis. A base-line forecast, using the benchmark of recent past crises, suggests that U.S. national debt will rise by $8.5 trillion over the next three years. Debt rises for a variety of reasons, including bailout costs and fiscal stimulus. But the No. 1 factor is the collapse in tax revenues that inevitably accompanies a deep recession.

Tax revenues are already falling sharply across the country as the recession deepens. In fact, Bloomberg News reports that, “State and local sales-tax revenue fell more sharply in the fourth quarter of 2008 than at any time in the past half century . . . ” (Corporate and personal income taxes are also declining at a record pace.) That makes it impossible to predict the ultimate cost of the crisis. But what makes it even harder is that Treasury Secretary Timothy Geithner refuses to remove toxic assets from the banks balance sheets using the usual “tried and true” methods. A recent report from a congressional oversight committee (The Warren Report) revealed that there are three ways to fix the banking system: liquidation, reorganization and subsidization. Geithner has rejected all three of these preferring to implement his own makeshift Public Private Investment Program (PPIP), which is thoroughly untested, has no base of public or political support, and is clearly designed to shift the toxic debts of the banks onto the taxpayer through publicly-funded non recourse loans. (Geithner’s plan will allow the banks to establish off-balance sheet operations so they can buy their own bad assets from themselves using 94 per cent public money) The whole thing is an obvious swindle papered over with gibberish.

So far, less than $10 billion has been transacted through Geithner’s PPIP, a mere drop in the bucket. The IMF estimates that the banks and other financial institutions may be holding up to $4 trillion in toxic assets. At the current rate, Geithner’s strategy will take a century to succeed. The Treasury Secretary knows his plan won’t fix the banking system; he’s just hoping that the economy rebounds before the government is forced to nationalize the big banks. It’s just a stalling ploy, but even so, there are risks. As the economy worsens, the likelihood of another financial meltdown or a run on the dollar increases. Foreign central banks and investors are getting restless and want to see the Treasury take positive steps to fix the system. In recent months, China has slowed its purchases of US Treasuries, traded tens of billions of USD in currency swaps, and has gone on a spending spree for raw materials — all to protect itself from weakness in the dollar. According to Bloomberg:

“People’s Bank of China Zhou Xiaochuan called for the establishment of a “super-sovereign reserve currency” last month after Chinese Premier Wen Jiabao said he’s worried a weaker US dollar may hurt China’s investments. Inflation and a depreciating dollar would erode the value of US holdings owned by international investors.”

Again, Bloomberg:

“China, Japan and Korea should establish a routine mechanism to diversify the region’s reserve currencies away from the dollar, the China Securities Journal reported, citing central bank adviser Fan Gang. The Asian countries need to consider setting up a transitional arrangement to help reduce reliance on the dollar before the problems in the international financial system are resolved.”

Geithner’s foot dragging could be extremely costly for America’s long-term economic prospects. The Treasury Secretary should be tackling the toxic assets problem head-on and stop the dilly-dallying; there’s no time to lose.

According to the Organization for Economic Co-operation and Development (OECD), “The world economy is in the midst of its deepest and most synchronized recession in our lifetimes, caused by a global financial crisis and deepened by a collapse in world trade.”

The vicious contraction has spread to every sector without exception — industrial output, credit, private consumption, exports, retail, residential investment, housing, equities prices and manufacturing — all have seen sharp cutbacks or plunging revenues. The spurious notion that “green shoots” are beginning to sprout up, is just more happy talk to divert attention from the severity of the impending storm.

The Fed is in way over its head and Bernanke knows it. Nothing is working — not the zero-percent interest rates, nor the multi-trillion dollar lending facilities, nor monetizing the debt by purchasing long-term Treasuries. It’s all been a flop. Financial institutions are deleveraging, businesses are slashing inventory, and corporations are laying off workers in droves. More than 40 percent of the credit that was sloshing around the economy via low interest loans has dried up. The banks aren’t lending and Wall Street’s credit-generating contraption — securitization — has broken down bursting the humongous equity bubble and precipitating a sudden decline in economic activity. There are no quick fixes. It will take years to reassemble the broken pieces or design a new financial architecture. It’s the end of an era.

As for housing; the situation is devolving beyond anyone’s wildest expectations. It’s not a Depression, it’s bigger and more savage — an Uber-Depression! Take a look at this chart from Barry Ritholtz’s The Big Picture.

We are in uncharted water in a leaky boat.

Housing is a millstone that’s dragging down the whole economy. The Wall Street bulls can enjoy their “sucker’s rally” for now, but it’s going to be short-lived. The fundamentals have never been this bad. It’s like a chapter from Revelation. The banks are padding their earnings reports with accounting trickery to hide their losses. The consumer is underwater and worried about losing his job or getting evicted from his home. And the government is trying to conceal the damage to the financial system through trillion dollar stealth bailouts that never get congressional approval. It’s a real mess, and the problem is that there’s just too much debt. Martin Wolf of the Financial Times summed it up like this last Monday:

Consider the salient example of the US, on whose final demand so much has for so long depended. Total private sector debt rose from 112 per cent of GDP in 1976 to 295 per cent at the end of 2008. Financial sector debt alone jumped from 16 per cent to 121 per cent of GDP over this period. How much of a reduction in these measures of leverage occurred in the crisis year of 2008? None. On the contrary, leverage rose still further.

The danger is that a turnround, however shallow, will convince the world things are soon going to be the way they were before. They will not be. It will merely show that collapse does not last forever once substantial stimulus is applied. The brutal truth is that the financial system is still far from healthy, the deleveraging of the private sectors of highly indebted countries has not begun, the needed rebalancing of global demand has barely even started and, for all these reasons, a return to sustained, private-sector-led growth probably remains a long way in the future. (Martin Wolf, “Why the ‘green shoots’ of recovery could yet wither, Financial Times)

Debt is at the very center of the current financial crisis. The massive debt-overhang can only be resolved by writing down losses, restructuring capital, and initiating debt-relief programs. The Fed and Treasury’s task is to soften the effects of a hard landing not to stop the process altogether. That would be pointless. Recessions are a necessary purgative that cleanse the system of waste and excess. Wall Street’s unprecedented credit expansion — which ballooned to gigantic proportions from fetid assets, off-balance sheet operations and mega-leveraging — ensures that this recession will be more agonizing than any before. But that just makes it all the more important. The system has to exhale before the patient can be revived.

In March, housing prices accelerated on the downside indicating bigger adjustments dead ahead. Trend lines are steeper now than ever before — nearly perpendicular. Housing prices are not falling, they’re crashing and crashing hard. Now that the foreclosure moratorium has ended, Notices of Default (NOD) have spiked to an all-time high. These Notices will turn into foreclosures in 4 to 5 months time creating another cascade of foreclosures. Market analysts predict there will be 5 MILLION MORE FORECLOSURES BETWEEN NOW AND 2011. It’s a disaster bigger than Katrina. Soaring unemployment and rising foreclosures ensure that hundreds of banks and financial institutions will be forced into bankruptcy. 40 percent of delinquent homeowners have already vacated their homes. There’s nothing Obama can do to make them stay. Worse still, only 30 percent of foreclosures have been relisted for sale suggesting more hanky-panky at the banks. Where have the houses gone? Have they simply vanished?

600,000 “Disappeared Homes”?

Here’s an excerpt from the SF Gate explaining the mystery:

Lenders nationwide are sitting on hundreds of thousands of foreclosed homes that they have not resold or listed for sale, according to numerous data sources. And foreclosures, which banks unload at fire-sale prices, are a major factor driving home values down.

“We believe there are in the neighborhood of 600,000 properties nationwide that banks have repossessed but not put on the market,” said Rick Sharga, vice president of RealtyTrac, which compiles nationwide statistics on foreclosures. “California probably represents 80,000 of those homes. It could be disastrous if the banks suddenly flooded the market with those distressed properties. You’d have further depreciation and carnage.”

In a recent study, RealtyTrac compared its database of bank-repossessed homes to MLS listings of for-sale homes in four states, including California. It found a significant disparity — only 30 percent of the foreclosures were listed for sale in the Multiple Listing Service. The remainder is known in the industry as “shadow inventory.” (”Banks aren’t Selling Many Foreclosed Homes,” SF Gate)

If regulators were deployed to the banks that are keeping foreclosed homes off the market, they would probably find that the banks are actually servicing the mortgages on a monthly basis to conceal the extent of their losses. They’d also find that the banks are trying to keep housing prices artificially high to avoid heftier losses that would put them out of business. One thing is certain, 600,000 “disappeared” homes means that housing prices have a lot farther to fall and that an even larger segment of the banking system is underwater.

Here is more on the story from Mr. Mortgage, “California Foreclosures About to Soar…Again”:

Are you ready to see the future? Ten’s of thousands of foreclosures are only 1-5 months away from hitting that will take total foreclosure counts back to all-time highs. This will flood an already beaten-bloody real estate market with even more supply just in time for the Spring/Summer home selling season . . . Foreclosure start (NOD) and Trustee Sale (NTS) notices are going out at levels not seen since mid 2008. Once an NTS goes out, the property is taken to the courthouse and auctioned within 21-45 days….The bottom line is that there is a massive wave of actual foreclosures that will hit beginning in April that can’t be stopped without a national moratorium.

JP Morgan Chase, Wells Fargo and Fannie Mae have all stepped up their foreclosure activity in recent weeks. Delinquencies have skyrocketed foreshadowing more price-slashing into the foreseeable future. According to the Wall Street Journal:

“Ronald Temple, co-director of research at Lazard Asset Management, expects home prices to fall 22% to 27% from their January levels. More than 2.1 million homes will be lost this year because borrowers can’t meet their loan payments, up from about 1.7 million in 2008.” (Ruth Simon, “The housing crisis is about to take center stage once again,” Wall Street Journal)

Another 20 percent carved off the aggregate value of US housing means another $4 trillion loss to homeowners. That means smaller retirement savings, less discretionary spending, and lower living standards. The next leg down in housing will be excruciating; every sector will feel the pain. Obama’s $75 billion mortgage rescue plan is a mere pittance; it won’t reduce the principle on mortgages and it won’t stop the bleeding. Policymakers have decided they’ve done enough and are refusing to help. They don’t see the tsunami looming in front of them plain as day. The housing market is going under and it’s going to drag a good part of the broader economy along with it. Stocks, too.

Our financial system looks ruined beyond repair. The credit default swaps crisis is 40 or so times bigger than the real estate meltdown over subprime derivatives. The top 25 banks in the United States are loaded down with $13 trillion in credit default swaps and the deal is coming unraveled. If we accept the highly dubious assumption that the debt from the financial meltdown needs to be repaid by us, were looking at $43,000 a citizen right now. And we’re just starting.

It didn’t get that way by accident. There was special legislation that enabled the current crisis.

This was classic Money Party strategy and tactics.

The strategic goal was to turn Wall Street into a big casino for the “in crowd” of major investors, funds, and institutions. No rules and no regulations: “let the market take care of it” was the philosophy.

The tactics were easy. First you set up a scholarly group called the Law and Economics movement to give your scheme legitimacy. Then you give money and other favors to members of Congress.

At the right moment, you call in your congressional markers to let the banks start doing what they did to spark the Great Depression. Walk into the Wall Street casino loaded with cash and spend like they’re on coke. Your corny academic group has a couple of judges who decide a case that gives legal grace to the scheme. The casino is legit says the court. You then go for the whole nine yards by bringing back the long outlawed derivatives, subprimes, credit default swaps, etc.

The corporate media either ignores your “long con” altogether or covers it on their back pages.

Done deal! It’s the perfect storm to create economic chaos allowing the most massive transfer of wealth since the Visigoths sacked Rome in 410 CE. It’s all about socialism for the rich and survival of the fittest for the rest of us.

But Congress and the Treasury Department will preserve the financial elite in perpetuity. Why? To begin with, they’d have to admit that they created the problem in the first place with their enabling legislation. Congress would also have to admit to absolutely zero oversight on this matter despite warnings.

Legislative, Judicial and Executive Branches — Acting in Unison Deliver the Goods

Three distinct events enabled the current economic chaos. The baseline requirement for the era of greed was satisfied in 1999 when Congress repealed key provisions of the Glass-Steagall act. That law was established during the first Great Depression. It tightly restricted the opportunities for reckless speculation by banks. They were barred from selling stocks and other speculative schemes. Title 1 of the Financial Services Modernization Act, 1999 says it all:

Facilitating affiliation among banks, securities firms and insurance companies

Commercial banks, brokerage firms, hedge funds, institutional investors, pension funds and insurance companies can freely invest in each others businesses as well as fully integrate their financial operations.

This was a bipartisan effort with the Senate version passing 90 to 8 and the House 362 to 57.

The once scorned derivatives had been the Holy Grail for “free” market radicals on Wall Street and elsewhere for years. They said that the restrictions on these products were unnecessary and stifled the free market (”free” for them). Even before Congress acted definitively in December 2000, the U.S. Court of Appeals for the 7th Circuit struck down the ability of the Securities and Exchange Commission (SEC) to rein in ruinous high risk financial schemes on Sept. 1, 1999.

Reagan appointees Richard Posner, then chief judge, and current chief judge Richard Easterbrook were key movers. They’re also heavily involved with the Law and Economics movement, a right wing, free market movement that opposes almost all regulation in Pavlovian fashion.

Credit default swaps and other derivatives had been illegal for decades. In 1981, specific rules were set up to tighten restrictions against these schemes. But all that changed on Dec. 21, 2000 when the lame duck Congress passed the “Commodity Futures Modernization Act of 2000′” making these products legal. The legislation also barred the gathering of information that would serve as early warning on the legalized gambling on credit worthiness. Regulators were helpless in looking out for the public. Here’s the title of the House version of the bill:

To reauthorize and amend the Commodity Exchange Act to promote legal certainty, enhance competition, and reduce systemic risk in markets for futures and over-the counter derivatives, and for other purposes.

This is the vital wording modifying the Securities Act of 1933 that undid the economy:

“Section 2A–Swap Agreements The Commission is prohibited from — promulgating, interpreting, or enforcing rules; or issuing orders of general applicability.” The Senate and House bills were combined in to H.R. 4577, an appropriations bill for the Departments of Labor, Health and Human Services, and Education signed by President Clinton. Someone had a perverse sense of humor.

In other words, Congress legalized what had been illegal for decades and it secured the 7th Circuit’s opening gambit of handcuffing the SEC in dealing with the new high risk financial products. Congress fixed the game so that the short staffed regulatory agencies couldn’t monitor the market even if they wanted that function.

Good luck trying to find the legislative debate on this momentous change. There was none. The enabling legislation for this disaster was passed by an overwhelming majority in the House of Representatives and by unanimous consent in the Senate.

It’s important to have a “Roll Call” for the sponsors of the “Commodity Futures Modernization Act of 2000.” They made it happen.

Expect More of the Same

The bailout and other efforts to save Wall Street firms and the large banks are essentially an effort to deal with the problems of derivatives and other market failures. Wall Street got the court decisions and legislation it wanted and then promptly proceeded to create today’s disaster.

They sold these risky products and now they have to pay off. But they don’t have the money even with the current bailouts. Where will they get it? The federal government was the only sucker left to tap and that bet came through to the tune of $4.6 trillion. There’s $4.6 trillion awaiting further requests from the Federal Reserve

The culprits are still in place at failing financial institutions.

Don’t hold your breath waiting for political action to fix the situation. Both parties were in on this mess. Huge majorities in both houses of Congress voted for key legislation to allow the biggest bank heist of all time. But his time, it was the banks pulling the heist.

That’s why the bankers have to stay in place. To remove them, would be telling, as William K. Black said recently:

But the other element of your question is we don’t want to change the bankers, because if we do, if we put honest people in, who didn’t cause the problem, their first job would be to find the scope of the problem. And that would destroy the cover up.

But it was all legal, wasn’t it?