This is Change? 20 Hawks, Clintonites and Neocons to Watch for in Obama's White House
By Jeremy Scahill, AlterNet

U.S. policy is not about one individual, and no matter how much faith people place in President-elect Barack Obama, the policies he enacts will be fruit of a tree with many roots. Among them: his personal politics and views, the disastrous realities his administration will inherit, and, of course, unpredictable future crises. But the best immediate indicator of what an Obama administration might look like can be found in the people he surrounds himself with and who he appoints to his Cabinet. And, frankly, when it comes to foreign policy, it is not looking good. Obama has a momentous opportunity to do what he repeatedly promised over the course of his campaign: bring actual change. But the more we learn about who Obama is considering for top positions in his administration, the more his inner circle resembles a staff reunion of President Bill Clinton's White House. Although Obama brought some progressives on board early in his campaign, his foreign policy team is now dominated by the hawkish, old-guard Democrats of the 1990s. This has been particularly true since Hillary Clinton conceded defeat in the Democratic primary, freeing many of her top advisors to join Obama's team. "What happened to all this talk about change?" a member of the Clinton foreign policy team recently asked the Washington Post. "This isn't lightly flavored with Clintons. This is all Clintons, all the time." Amid the euphoria over Obama's election and the end of the Bush era, it is critical to recall what 1990s U.S. foreign policy actually looked like. Bill Clinton's boiled down to a one-two punch from the hidden hand of the free market, backed up by the iron fist of U.S. militarism. Clinton took office and almost immediately bombed Iraq (ostensibly in retaliation for an alleged plot by Saddam Hussein to assassinate former President George H.W. Bush). He presided over a ruthless regime of economic sanctions that killed hundreds of thousands of Iraqis, and under the guise of the so-called No-Fly Zones in northern and southern Iraq, authorized the longest sustained U.S. bombing campaign since Vietnam. Under Clinton, Yugoslavia was bombed and dismantled as part of what Noam Chomsky described as the "New Military Humanism." Sudan and Afghanistan were attacked, Haiti was destabilized and "free trade" deals like the North America Free Trade Agreement and the General Agreement on Tariffs and Trade radically escalated the spread of corporate-dominated globalization that hurt U.S. workers and devastated developing countries. Clinton accelerated the militarization of the so-called War on Drugs in Central and Latin America and supported privatization of U.S. military operations, giving lucrative contracts to Halliburton and other war contractors. Meanwhile, U.S. weapons sales to countries like Turkey and Indonesia aided genocidal campaigns against the Kurds and the East Timorese. The prospect of Obama's foreign policy being, at least in part, an extension of the Clinton Doctrine is real. Even more disturbing, several of the individuals at the center of Obama's transition and emerging foreign policy teams were top players in creating and implementing foreign policies that would pave the way for projects eventually carried out under the Bush/Cheney administration. With their assistance, Obama has already charted out several hawkish stances. Among them: -- His plan to escalate the war in Afghanistan; -- An Iraq plan that could turn into a downsized and rebranded occupation that keeps U.S. forces in Iraq for the foreseeable future; -- His labeling of Iran's Revolutionary Guard as a "terrorist organization;" -- His pledge to use unilateral force inside of Pakistan to defend U.S. interests; -- His position, presented before the American Israel Public Affairs Committee (AIPAC), that Jerusalem "must remain undivided" -- a remark that infuriated Palestinian officials and which he later attempted to reframe; -- His plan to continue the War on Drugs, a backdoor U.S. counterinsurgency campaign in Central and Latin America; -- His refusal to "rule out" using Blackwater and other armed private forces in U.S. war zones, despite previously introducing legislation to regulate these companies and bring them under U.S. law. Obama did not arrive at these positions in a vacuum. They were carefully crafted in consultation with his foreign policy team. While the verdict is still out on a few people, many members of his inner foreign policy circle -- including some who have received or are bound to receive Cabinet posts -- supported the invasion and occupation of Iraq. Some promoted the myth that Saddam had weapons of mass destruction. A few have worked with the neoconservative Project for the New American Century, whose radical agenda was adopted by the Bush/Cheney administration. And most have proven track records of supporting or implementing militaristic, offensive U.S. foreign policy. "After a masterful campaign, Barack Obama seems headed toward some fateful mistakes as he assembles his administration by heeding the advice of Washington's Democratic insider community, a collective group that represents little 'change you can believe in,'" notes veteran journalist Robert Parry, the former Associated Press and Newsweek reporter who broke many of the stories in the Iran-Contra scandal in the 1980s. As news breaks and speculation abounds about cabinet appointments, here are 20 people to watch as Obama builds the team who will shape U.S. foreign policy for at least four years: Joe Biden There was no stronger sign that Obama's foreign policy would follow the hawkish tradition of the Democratic foreign policy establishment than his selection of Sen. Joe Biden as his running mate. Much has been written on Biden's tenure as head of the Senate Foreign Relations Committee, but his role in the invasion and occupation of Iraq stands out. Biden is not just one more Democratic lawmaker who now calls his vote to authorize the use of force in Iraq "mistaken;" Biden was actually an important facilitator of the war. In the summer of 2002, when the United States was "debating" a potential attack on Iraq, Biden presided over hearings whose ostensible purpose was to weigh all existing options. But instead of calling on experts whose testimony could challenge the case for war -- Iraq's alleged WMD possession and its supposed ties to al-Qaida -- Biden's hearings treated the invasion as a foregone conclusion. His refusal to call on two individuals in particular ensured that testimony that could have proven invaluable to an actual debate was never heard: Former Chief United Nations Weapons Inspector Scott Ritter and Hans von Sponeck, a 32-year veteran diplomat and the former head of the U.N.'s Iraq program. Both men say they made it clear to Biden's office that they were ready and willing to testify; Ritter knew more about the dismantling of Iraq's WMD program than perhaps any other U.S. citizen and would have been in prime position to debunk the misinformation and outright lies being peddled by the White House. Meanwhile, von Sponeck had just returned from Iraq, where he had observed Ansar al Islam rebels in the north of Iraq -- the so-called al-Qaida connection -- and could have testified that, rather than colluding with Saddam's regime, they were in a battle against it. Moreover, he would have pointed out that they were operating in the U.S.-enforced safe haven of Iraqi Kurdistan. "Evidence of al-Qaida/lraq collaboration does not exist, neither in the training of operatives nor in support to Ansar-al-Islam," von Sponeck wrote in an Op-Ed published shortly before the July 2002 hearings. "The U.S. Department of Defense and the CIA know perfectly well that today's Iraq poses no threat to anyone in the region, let alone in the United States. To argue otherwise is dishonest." With both men barred from testifying, rather than eliciting an array of informed opinions, Biden's committee whitewashed Bush's lies and helped lead the country to war. Biden himself promoted the administration's false claims that were used to justify the invasion of Iraq, declaring on the Senate floor, "[Saddam Hussein] possesses chemical and biological weapons and is seeking nuclear weapons." With the war underway, Biden was then the genius who passionately promoted the ridiculous plan to partition Iraq into three areas based on religion and ethnicity, attempting to Balkanize one of the strongest Arab states in the world. "He's a part of the old Democratic establishment," says retired Army Col. Ann Wright, the State Department diplomat who reopened the U.S. embassy in Kabul in 2002. Biden, she says, has "had a long history with foreign affairs, [but] it's not the type of foreign affairs that I want." Rahm Emanuel Obama's appointment of Illinois Congressman Rahm Emanuel as Chief of Staff is a clear sign that Clinton-era neoliberal hawks will be well-represented at 1600 Pennsylvania Ave. A former senior Clinton advisor, Emanuel is a hard-line supporter of Israel's "targeted assassination" policy and actually volunteered to work with the Israeli Army during the 1991 Gulf War. He is close to the right-wing Democratic Leadership Council and was the only member of the Illinois Democratic delegation in the Congress to vote for the invasion of Iraq. Unlike many of his colleagues, Emanuel still defends his vote. As chair of the Democratic Congressional Campaign Committee in 2006, Emanuel promoted the campaigns of 22 candidates, only one of who supported a swift withdrawal from Iraq, and denied crucial Party funding to anti-war candidates. "As for Iraq policy, at the right time, we will have a position," he said in December 2005. As Philip Giraldi recently pointed out on Antiwar.com, Emanuel "advocates increasing the size of the U.S. Army by 100,000 soldiers and creating a domestic spying organization like Britain's MI5. More recently, he has supported mandatory paramilitary national service for all Americans between the ages of 18 and 25." While Obama has at times been critical of Clinton-era free trade agreements, Emanuel was one of the key people in the Clinton White House who brokered the successful passage of NAFTA. Hillary Rodham Clinton For all the buzz and speculation about the possibility that Sen. Clinton may be named Secretary of State, most media coverage has focused on her rivalry with Obama during the primary, along with the prospect of her husband having to face the intense personal, financial and political vetting process required to secure a job in the new administration. But the question of how Clinton would lead the operations at Foggy Bottom calls for scrutiny of her positions vis-a-vis Obama's stated foreign-policy goals. Clinton was an ardent defender of her husband's economic and military war against Iraq throughout the 1990s, including the Iraq Liberation Act of 1998, which ultimately laid the path for President George W. Bush's invasion. Later, as a U.S. senator, she not only voted to authorize the war, but aided the Bush administration's propaganda campaign in the lead-up to the invasion. "Saddam Hussein has worked to rebuild his chemical and biological weapons stock, his missile-delivery capability and his nuclear program," Clinton said when rising to support the measure in October 2002. "He has also given aid, comfort and sanctuary to terrorists, including al-Qaida members … I want to insure that Saddam Hussein makes no mistake about our national unity and for our support for the president's efforts to wage America's war against terrorists and weapons of mass destruction." "The man who vowed to deliver us from 28 years of Bushes and Clintons has been stocking up on Clintonites," New York Times columnist Maureen Dowd recently wrote. "How, one may ask, can he put Hillary -- who voted to authorize the Iraq war without even reading the intelligence assessment -- in charge of patching up a foreign policy and a world riven by that war?" Beyond Iraq, Clinton shocked many and sparked official protests by Tehran at the United Nations when asked during the presidential campaign what she would do as president if Iran attacked Israel with nuclear weapons. "I want the Iranians to know that if I'm the president, we will attack Iran," she declared. "In the next 10 years, during which they might foolishly consider launching an attack on Israel, we would be able to totally obliterate them." Clinton has not shied away from supporting offensive foreign policy tactics in the past. Recalling her husband's weighing the decision of whether to attack Yugoslavia, she said in 1999, "I urged him to bomb. … You cannot let this go on at the end of a century that has seen the major holocaust of our time. What do we have NATO for if not to defend our way of life?" Madeleine Albright While Obama's house is flush with Clintonian officials like former Secretary of State Warren Christopher, Defense Secretary William Perry, Director of the State Department Office of Policy Planning Greg Craig (who was officially named Obama's White House Counsel) and Navy Secretary Richard Danzig, perhaps most influential is Madeleine Albright, Bill Clinton's former Secretary of State and U.N. ambassador. Albright recently served as a proxy for Obama, representing him at the G-20 summit earlier this month. Whether or not she is awarded an official role in the administration, Albright will be a major force in shaping Obama's foreign policy. "It will take time to convince skeptics that the promotion of democracy is not a mask for imperialism or a recipe for the kind of chaos we have seen in the Persian Gulf," Albright recently wrote. "And it will take time to establish the right identity for America in a world that has grown suspicious of all who claim a monopoly on virtue and that has become reluctant to follow the lead of any one country." Albright should know. She was one of the key architects in the dismantling of Yugoslavia during the 1990s. In the lead-up to the 1999 "Kosovo war," she oversaw the U.S. attempt to coerce the Yugoslav government to deny its own sovereignty in return for not being bombed. Albright demanded that the Yugoslav government sign a document that would have been unacceptable to any sovereign nation. Known as the Rambouillet Accord, it included a provision that would have guaranteed U.S. and NATO forces "free and unrestricted passage and unimpeded access throughout" all of Yugoslavia -- not just Kosovo -- while also seeking to immunize those occupation forces "from any form of arrest, investigation or detention by the authorities in [Yugoslavia]." Moreover, it would have granted the occupiers "the use of airports, roads, rails and ports without payment." Similar to Bush's Iraq plan years later, the Rambouillet Accord mandated that the economy of Kosovo "shall function in accordance with free-market principles." When Yugoslavia refused to sign the document, Albright and others in the Clinton administration unleashed the 78-day NATO bombing of Serbia, which targeted civilian infrastructure. (Prior to the attack, Albright said the U.S. government felt "the Serbs need a little bombing.") She and the Clinton administration also supported the rise to power in Kosovo of a terrorist mafia that carried out its own ethnic-cleansing campaign against the province's minorities. Perhaps Albright's most notorious moment came with her enthusiastic support of the economic war against the civilian population of Iraq. When confronted by Lesley Stahl of “60 Minutes” that the sanctions were responsible for the deaths of "a half-million children … more children than died in Hiroshima," Albright responded, "I think this is a very hard choice, but the price -- we think the price is worth it." (While defending the policy, Albright later called her choice of words "a terrible mistake, hasty, clumsy, and wrong.") Richard Holbrooke Like Albright, Holbrooke will have major sway over U.S. policy, whether or not he gets an official job. A career diplomat since the Vietnam War, Holbrooke's most recent government post was as President Clinton's ambassador to the U.N. Among the many violent policies he helped implement and enforce was the U.S.-backed Indonesian genocide in East Timor. Holbrooke was an Assistant Secretary of State in the late 1970s at the height of the slaughter and was the point man on East Timor for the Carter Administration. According to Brad Simpson, director of the Indonesia and East Timor Documentation Project at the National Security Archive at George Washington University, "It was Holbrooke and Zbigniew Brzezinski [another top Obama advisor], both now leading lights in the Democratic Party, who played point in trying to frustrate the efforts of congressional human-rights activists to try and condition or stop U.S. military assistance to Indonesia, and in fact accelerated the flow of weapons to Indonesia at the height of the genocide." Holbrooke, too, was a major player in the dismantling of Yugoslavia and praised the bombing of Serb Television, which killed 16 media workers, as a significant victory. (The man who ordered that bombing, now-retired Army Gen. Wesley Clark, is another Obama foreign policy insider who could end up in his cabinet. While Clark is known for being relatively progressive on social issues, as Supreme Allied Commander of NATO, he ordered bombings and attacks that Amnesty International labeled war crimes.) Like many in Obama's foreign policy circle, Holbrooke also supported the Iraq war. In early 2003, shortly after then-Secretary of State Colin Powell's speech to the UN, where he presented the administration's fraud-laden case for war to the UN (a speech Powell has since called a "blot" on his reputation), Holbrooke said: "It was a masterful job of diplomacy by Colin Powell and his colleagues, and it does not require a second vote to go to war. … Saddam is the most dangerous government leader in the world today, he poses a threat to the region, he could pose a larger threat if he got weapons of mass destruction deployed, and we have a legitimate right to take action." Dennis Ross Middle East envoy for both George H.W. Bush and Bill Clinton, Ross was one of the primary authors of Obama's aforementioned speech before AIPAC this summer. He cut his teeth working under famed neoconservative Paul Wolfowitz at the Pentagon in the 1970s and worked closely with the Project for the New American Century. Ross has been a staunch supporter of Israel and has fanned the flames for a more hostile stance toward Iran. As the lead U.S. negotiator between Israel and numerous Arab nations under Clinton, Ross' team acted, in the words of one U.S. official who worked under him, as "Israel's lawyer." "The 'no surprises' policy, under which we had to run everything by Israel first, stripped our policy of the independence and flexibility required for serious peacemaking," wrote U.S. diplomat Aaron David Miller in 2005. "If we couldn't put proposals on the table without checking with the Israelis first, and refused to push back when they said no, how effective could our mediation be? Far too often, particularly when it came to Israeli-Palestinian diplomacy, our departure point was not what was needed to reach an agreement acceptable to both sides but what would pass with only one -- Israel." After the Clinton White House, Ross worked for the Washington Institute for Near East Policy, a hawkish pro-Israel think tank, and for FOX News, where he repeatedly pressed for war against Iraq. Martin Indyk Founder of the Washington Institute for Near East Policy, Indyk spent years working for AIPAC and served as Clinton's ambassador to Israel and Assistant Secretary of State for Near East Affairs, while also playing a major role in developing U.S. policy toward Iraq and Iran. In addition to his work for the U.S. government, he has worked for the Israeli government and with PNAC. "Barack Obama has painted himself into a corner by appealing to the most hard-line, pro-Israel elements in this country," Ali Abunimah, founder of ElectronicInifada.net, recently told Amy Goodman of Democracy Now!, describing Indyk and Dennis Ross as "two of the most pro-Israel officials from the Clinton era, who are totally distrusted by Palestinians and others across the Middle East, because they're seen as lifelong advocates for Israeli positions." Anthony Lake Clinton's former National Security Advisor was an early supporter of Obama and one of the few top Clintonites to initially back the president-elect. Lake began his foreign policy work in the U.S. Foreign Service during Vietnam, working with Henry Kissinger on the "September Group," a secret team tasked with developing a military strategy to deliver a "savage, decisive blow against North Vietnam." Decades later, after working for various administrations, Lake "was the main force behind the U.S. invasion of Haiti in the mid-Clinton years," according to veteran journalist Allan Nairn, whose groundbreaking reporting revealed U.S. support for Haitian death squads in the 1990s. "They brought back Aristide essentially in political chains, pledged to support a World Bank/IMF overhaul of the economy, which resulted in an increase in malnutrition deaths among Haitians, and set the stage for the current ongoing political disaster in Haiti." Clinton nominated Lake as CIA Director, but he failed to win Senate confirmation. Lee Hamilton Hamilton is a former chairman of the House Foreign Affairs Committee and was co-chairman of both the Iraq Study Group and 9/11 Commission. Robert Parry, who has covered Hamilton's career extensively, recently ran a piece on Consortium News that characterized him this way: "Whenever the Republicans have a touchy national-security scandal to put to rest, their favorite Democratic investigator is Lee Hamilton. … Hamilton's carefully honed skill for balancing truth against political comity has elevated him to the status of a Washington Wise Man." Susan Rice Former Assistant Secretary of Sate Susan Rice, who served on Bill Clinton's National Security Council, is a potential candidate for the post of ambassador to the U.N. or as a deputy national security advisor. She, too, promoted the myth that Saddam had WMDs. "It's clear that Iraq poses a major threat," she said in 2002. "It's clear that its weapons of mass destruction need to be dealt with forcefully, and that's the path we're on." (After the invasion, discussing Saddam's alleged possession of WMDs, she said, "I don't think many informed people doubted that.") Rice has also been a passionate advocate for a U.S. military attack against Sudan over the Darfur crisis. In an op-ed co-authored with Anthony Lake, she wrote, "The United States, preferably with NATO involvement and African political support, would strike Sudanese airfields, aircraft and other military assets. It could blockade Port Sudan, through which Sudan's oil exports flow. Then U.N. troops would deploy -- by force, if necessary, with U.S. and NATO backing." John Brennan A longtime CIA official and former head of the National Counterterrorism Center, Brennan is one of the coordinators of Obama's intelligence transition team and a top contender for either CIA Director or Director of National Intelligence. He was also recently described by Glenn Greenwald as "an ardent supporter of torture and one of the most emphatic advocates of FISA expansions and telecom immunity." While claiming to oppose waterboarding, labeling it "inconsistent with American values" and "something that should be prohibited," Brennan has simultaneously praised the results achieved by "enhanced interrogation" techniques. "There has been a lot of information that has come out from these interrogation procedures that the agency has, in fact, used against the real hard-core terrorists," Brennan said in a 2007 interview. "It has saved lives. And let's not forget, these are hardened terrorists who have been responsible for 9/11, who have shown no remorse at all for the death of 3,000 innocents." Brennan has described the CIA's extraordinary rendition program -- the government-run kidnap-and-torture program enacted under Clinton -- as an absolutely vital tool. "I have been intimately familiar now over the past decade with the cases of rendition that the U.S. Government has been involved in," he said in a December 2005 interview. "And I can say without a doubt that it has been very successful as far as producing intelligence that has saved lives." Brennan is currently the head of Analysis Corporation, a private intelligence company that was recently implicated in the breach of Obama and Sen. John McCain's passport records. He is also the current chairman of the Intelligence and National Security Alliance (INSA), a trade association of private intelligence contractors who have dramatically increased their role in sensitive U.S. national security operations. (Current Director of National Intelligence Mike McConnell is former chairman of the INSA.) Jami Miscik Miscik, who works alongside Brennan on Obama's transitional team, was the CIA's Deputy Director for Intelligence in the run-up to the Iraq war. She was one of the key officials responsible for sidelining intel that contradicted the official line on WMD, while promoting intel that backed it up. "When the administration insisted on an intelligence assessment of Saddam Hussein's relationship to al-Qaida, Miscik blocked the skeptics (who were later vindicated) within the CIA's Mideast analytical directorate and instructed the less-skeptical counterterrorism analysts to 'stretch to the maximum the evidence you had,' " journalist Spencer Ackerman recently wrote in the Washington Independent. "It's hard to think of a more egregious case of sacrificing sound intelligence analysis in order to accommodate the strategic fantasies of an administration. … The idea that Miscik is helping staff Obama's top intelligence picks is most certainly not change we can believe in." What's more, she went on to a lucrative post as the Global Head of Sovereign Risk for the now-bankrupt Lehman Brothers. John Kerry and Bill Richardson Both Sen. Kerry and Gov. Richardson have been identified as possible contenders for Secretary of State. While neither is likely to be as hawkish as Hillary Clinton, both have taken pro-war positions. Kerry promoted the WMD lie and voted to invade Iraq. "Why is Saddam Hussein attempting to develop nuclear weapons when most nations don't even try?" Kerry asked on the Senate floor in October 2002. "According to intelligence, Iraq has chemical and biological weapons … Iraq is developing unmanned aerial vehicles capable of delivering chemical and biological warfare agents." Richardson, whose Iraq plan during his 2008 presidential campaign was more progressive and far-reaching than Obama's, served as Bill Clinton's ambassador to the UN. In this capacity, he supported Clinton's December 1998 bombing of Baghdad and the U.S.-led sanctions against Iraq. "We think this man is a threat to the international community, and he threatens a lot of the neighbors in his region and future generations there with anthrax and VX," Richardson told an interviewer in February 1998. While Clinton's Secretary of Energy, Richardson publicly named Wen Ho Lee, a scientist at the Los Alamos National Laboratory, as a target in an espionage investigation. Lee was accused of passing nuclear secrets to the Chinese government. Lee was later cleared of those charges and won a settlement against the U.S. government. Robert Gates Washington consensus is that Obama will likely keep Robert Gates, George W. Bush's Defense Secretary, as his own Secretary of Defense. While Gates has occasionally proved to be a stark contrast to former Secretary of Defense Donald Rumsfeld, he would hardly represent a break from the policies of the Bush administration. Quite the opposite; according to the Washington Post, in the interest of a "smooth transition," Gates "has ordered hundreds of political appointees at the Pentagon canvassed to see whether they wish to stay on in the new administration, has streamlined policy briefings and has set up suites for President-elect Barack Obama's transition team just down the hall from his own E-ring office." The Post reports that Gates could stay on for a brief period and then be replaced by Richard Danzig, who was Clinton's Secretary of the Navy. Other names currently being tossed around are Democratic Sen. Jack Reed, Republican Sen. Chuck Hagel (a critic of the Iraq occupation) and Republican Sen. Richard Lugar, who served alongside Biden on the Senate Foreign Relations Committee. Ivo H. Daalder Daalder was National Security Council Director for European Affairs under President Clinton. Like other Obama advisors, he has worked with the Project for the New American Century and signed a 2005 letter from PNAC to Congressional leaders, calling for an increase in U.S. ground troops in Iraq and beyond. Sarah Sewall Former Deputy Assistant Secretary of Defense for Peacekeeping and Humanitarian Assistance during the Clinton administration, Sewall served as a top advisor to Obama during the campaign and is almost certain to be selected for a post in his administration. In 2007, Sewall worked with the U.S. military and Army Gen. David Petraeus, writing the introduction to the University of Chicago edition of the Army/Marine Corps Counterinsurgency Field Manual. She was criticized for this collaboration by Tom Hayden, who wrote, "the Petraeus plan draws intellectual legitimacy from Harvard's Carr Center for Human Rights Policy, whose director, Sarah Sewall, proudly embraces an 'unprecedented collaboration [as] a human rights center partnered with the armed forces.'” "Humanitarians often avoid wading into the conduct of war for fear of becoming complicit in its purpose," she wrote in the introduction. "'The field manual requires engagement precisely from those who fear that its words lack meaning." Michele Flournoy Flournoy and former Clinton Deputy Defense Secretary John White are co-heading Obama's defense transition team. Flournoy was a senior Clinton appointee at the Pentagon. She currently runs the Center for a New American Security, a center-right think-tank. There is speculation that Obama could eventually name her as the first woman to serve as defense secretary. As the Wall Street Journal recently reported: "While at CNAS, Flournoy helped to write a report that called for reducing the open-ended American military commitment in Iraq and replacing it with a policy of 'conditional engagement' there. Significantly, the paper rejected the idea of withdrawing troops according to the sort of a fixed timeline that Obama espoused during the presidential campaign. Obama has in recent weeks signaled that he was willing to shelve the idea, bringing him more in line with Flournoy's thinking." Flournoy has also worked with the neoconservative Project for the New American Century. Wendy Sherman and Tom Donilon Currently employed at Madeline Albright's consulting firm, the Albright Group, Sherman worked under Albright at the State Department, coordinating U.S. policy on North Korea. She is now coordinating the State Department transition team for Obama. Tom Donilon, her co-coordinator, was Assistant Secretary of State for Public Affairs and Chief of Staff at the State Department under Clinton. Interestingly, Sherman and Donilon both have ties to Fannie Mae that didn't make it onto their official bios on Obama's change.gov Web site. "Donilon was Fannie's general counsel and executive vice president for law and policy from 1999 until the spring of 2005, a period during which the company was rocked by accounting problems," reports the Wall Street Journal. *** While many of the figures at the center of Obama's foreign policy team are well-known, two of its most important members have never held national elected office or a high-profile government position. While they cannot be characterized as Clinton-era hawks, it will be important to watch Denis McDonough and Mark Lippert, co-coordinators of the Obama foreign policy team. From 2000 to 2005, McDonough served as foreign policy advisor to Senate Democratic Leader Tom Daschle and worked extensively on the use-of-force authorizations for the attacks on Afghanistan and Iraq, both of which Daschle supported. From 1996 to 1999, McDonough was a professional staff member of the House International Relations Committee during the debate over the bombing of Yugoslavia. More recently, he was at the Center for American Progress working under John Podesta, Clinton's former chief of staff and the current head of the Obama transition. Mark Lippert is a close personal friend of Obama's. He has worked for Vermont Sen. Patrick Leahy, as well as the Senate Appropriations Committee and the Democratic Policy Committee. He is a lieutenant in the Navy Reserve and spent a year in Iraq working intelligence for the Navy SEALs. "According to those who've worked closely with Lippert," Robert Dreyfuss recently wrote in The Nation, "he is a conservative, cautious centrist who often pulled Obama to the right on Iraq, Iran and the Middle East and who has been a consistent advocate for increased military spending. 'Even before Obama announced for the presidency, Lippert wanted Obama to be seen as tough on Iran,' says a lobbyist who's worked the Iran issue on Capitol Hill, 'He's clearly more hawkish than the senator.' " *** Barack Obama campaigned on a pledge to bring change to Washington. "I don't want to just end the war," he said early this year. "I want to end the mindset that got us into war." That is going to be very difficult if Obama employs a foreign policy team that was central to creating that mindset, before and during the presidency of George W. Bush. "Twenty-three senators and 133 House members who voted against the war -- and countless other notable individuals who spoke out against it and the dubious claims leading to war -- are apparently not even being considered for these crucial positions," observes Sam Husseini of the Institute for Public Accuracy. This includes dozens of former military and intelligence officials who spoke out forcefully against the war and continue to oppose militaristic policy, as well as credible national security experts who have articulated their visions for a foreign policy based on justice. Obama does have a chance to change the mindset that got us into war. More significantly, he has a popular mandate to forcefully challenge the militaristic, hawkish tradition of modern U.S. foreign policy. But that work would begin by bringing on board people who would challenge this tradition, not those who have been complicit in creating it and are bound to continue advancing it. Jeremy Scahill pledges to be the same journalist under an Obama administration that he was during Bill Clinton and George Bush's presidencies. He is the author of Blackwater: The Rise of the World's Most Powerful Mercenary Army and is a frequent contributor to The Nation and Democracy Now! He is a Puffin Foundation Writing Fellow at the Nation Institute.

AlterNet

Beyond the Bailout: Agenda for a New Economy
by David Korten

The financial crisis has put to rest the myths that our economic institutions are sound and markets work best when deregulated. Our economic institutions have failed, not only financially, but also socially and environmentally. This, combined with the election of a new president with a mandate for change, creates an opportune moment to rethink and redesign.

President-elect Obama has promised to grow the economy from the bottom up. That would be a substantial improvement over growing the top at the expense of the bottom. The real need, however, is a bottom-up transformation of our economic values and institutions to align with the imperatives and opportunities of the 21st century. It involves a five part agenda: clean up Wall Street, play by market rules, self-finance the real economy, measure what we really want, and convert to debt-free money.

The recent market meltdown and the resulting bailout commitments of more than a trillion dollars have focused the nation’s attention on the devastating consequences of Wall Street deregulation. This is but the tip of the iceberg of a failed economy in serious need of basic redesign.

Our economy is wildly out of balance with human needs and the natural environment. The result is disaster for both. Wages are falling in the face of soaring food and energy prices. Consumer debt and housing foreclosures are setting historic records. The middle class is shrinking. The unconscionable and growing worldwide gap between rich and poor with its related social alienation is producing social collapse, which in turn produces crime, terrorism, and genocide.

At the same time, excessive consumption is pushing Earth’s ecosystem into collapse. Scientists are in almost universal agreement that human activity bears substantial responsibility for climate change and the related increase in droughts, floods, and wildfires.

We face a monumental economic challenge that goes far beyond anything being discussed in the U.S. Congress. The hardships imposed by temporarily frozen credit markets pale by comparison.

This would be a good time to start evaluating economic performance against indicators of what we really want—healthy children, families, communities, and natural systems.

The Wall Street bailout package that Congress passed in its moment of panic did nothing to address the structural cause of the credit freeze, let alone the structural cause of the economy’s even more serious environmental and social failures. On the positive side, the financial crisis has put to rest the myths that our economic institutions are sound and that markets work best when deregulated. It creates an opportune moment for deep change.

Here are some essential steps toward a system redesign that can put us on the path to a just and sustainable economy that works for all.

1) CLEAN UP WALL STREET

The first item of business is to get the immediate crisis under control. Wall Street institutions have long claimed their trading activities create wealth, provide the funds that keep business moving, increase economic efficiency, and stabilize markets. The financial meltdown pulled away the curtain to reveal a corrupt system that runs on speculation, the stripping of corporate assets, predatory lending, and asset bubbles like the real estate and dot-com “booms.”

If the people involved produce anything of value, it is purely incidental to their primary quest for speculative gains, which placed the entire global economy at risk and led to extortionate demands for taxpayer bailouts when their bets went bad. For these labors, the 50 highest-paid private investment fund managers in 2007 averaged $588 mil. in compensation—19,000 times as much as average worker pay.

We must hold Wall Street accountable, recover some of our losses from those responsible, and preclude a repetition of the credit collapse. The recommendations of the Institute for Policy Studies (IPS), a Washington, D.C., think tank, are a good place to start. In “A Sensible Plan for Recovery,” IPS calls on Congress to make Wall Street pay for both the bailout and a true economic stimulus package. The plan recommends a securities transactions tax, a minimum corporate income tax, recovery of bonuses paid to Wall Street CEOs responsible for the crisis, an end to corporate tax havens, and an end to tax loopholes for CEO pay. IPS also calls for extensive federal regulation to limit speculation and assert real oversight over financial markets.

Implementing these recommendations will be an excellent start on limiting speculation, restoring a progressive tax system to achieve a more equitable distribution of economic power, and putting the more predatory Wall Street firms out of business.

Additional steps will be needed to break up concentrations of corporate power, beginning with Wall Street, and to hold the remaining banks accountable to the public interest. Treasury Secretary Henry Paulson’s decision to buy a government equity stake in troubled banks is a positive step that may open the way to a deeper restructuring of the financial system.

The federal government should immediately reinstate the provisions of the Glass-Steagall Act prohibiting the merger of commercial and investment banks, and force the breakup of financial conglomerates and any other Wall Street institutions that are too big to fail. As Senator Bernie Sanders has observed, “If a company is too big to fail, it is too big to exist.”

2) PLAY BY MARKET RULES

Once we extinguish the immediate fire, we can turn our attention to redesigning the potentially beneficial institutions of finance to align with the imperatives of sustainability and equity. Ironically, given the excesses committed by Wall Street in the name of market freedom, the economy we need to create looks remarkably like the market economy vision of Adam Smith, revered by many as the father of capitalism.

Smith envisioned a world of local market economies populated by small entrepreneurs, artisans, and family farmers with strong community roots engaged in producing and exchanging goods and services to meet the needs of themselves and their neighbors. His vision bears little resemblance to the Wall Street economy of footloose global capital, credit default swaps, reckless speculation, and global corporate empires.

As I elaborated in When Corporations Rule the World and The Post-Corporate World: Life After Capitalism, socially efficient market allocation depends on a number of important conditions that Wall Street and those economists devoted to the ideology of neoliberal market fundamentalism routinely ignore. These include:

To avoid the distortion of unfair competitive practices, markets must be regulated to assure that these essential conditions are maintained. Think of them as basic principles for securing the healthy, just, and sustainable function of Main Street economies.

3) SELF-FINANCE THE REAL ECONOMY

Far from serving the financial needs of Main Street, Wall Street treats Main Street like a colony to be managed for the benefit of its colonial master. In alliance with the Federal Reserve, Wall Street players have used a combination of control over the money supply, predatory lending practices, and lobbying and campaign contributions to suppress wages, dismantle social safety nets, and capture the value of productivity gains for themselves. The top 1 percent of U.S. income earners increased their share of national cash income from 9 percent to 19 percent between 1980 and 2005, according to Charles R. Morris in The Trillion Dollar Meltdown. Income for 90 percent of households fell relative to inflation, household savings rates dropped to less than 1 percent, and household debt soared as Main Street workers struggled to hold their lives together.

Creating a fair distribution of wealth by restoring progressive tax rates, increasing the minimum wage, containing health care costs, and regulating mortgage and credit card interest rates is an essential element of a post-bailout economic agenda. This will help those at the bottom, restore household savings and purchasing power, and, combined with the debt-free money system proposed below, eliminate Main Street dependence on Wall Street financing. The financial services needs of Main Street economies are best served by a federally regulated network of independent, locally owned community banks that fulfill the classic textbook banking function of acting as intermediaries between local people looking for a secure place for their savings and local people who need loans to buy a home or finance a business. Evidence that people with savings are moving their accounts from the giant banks with questionable balance sheets to smaller local banks is a positive step.

Wall Street interests have also rigged the economic game to give a competitive advantage to mega-corporations over the local independent businesses that are the heart and soul of Main Street economies. The New Rules Project of the Institute for Local Self Reliance provides a wealth of recommendations for restoring a proper balance in favor of Main Street that also merits serious consideration.

4) MEASURE WHAT WE REALLY WANT

The only legitimate function of an economic system is to serve life. At present, however, we assess economic performance solely against financial indicators—gross domestic product (GDP) and stock prices—while disregarding social and environmental consequences. We are now paying the price for years of managing the economy for financial performance, which translates into making money for people who have money—that is, making rich people richer. It was not a wise choice. We now bear the devastating costs of this foolishness in the form of massive social and environmental damage and financial instability.

This would be a good time to start evaluating economic performance against indicators of what we really want—healthy children, families, communities, and natural systems. This would place life values ahead of money values and dramatically reframe the public policy side of our economic decision-making. Happiness, by the way, is an important indicator of physical and psychological health.

We might well continue to track GDP, a measure of economic throughput, as a quite useful indicator of the economic cost of producing a given level of health and well-being. When we recognize that GDP represents cost, not gain, it becomes clear why making it grow is a mistake. A number of researchers have been pointing out that happiness, as well as other indicators of human, social, and environmental health, have been declining even as GDP increased, but their appeals have been largely ignored. We continue to manage our economies to maximize the cost, rather than the benefit, of economic activity. The shock of financial collapse creates an opportunity to draw attention to this substantial anomaly. We will know we have turned an important corner when business news reporters happily announce, “It has been a successful quarter. Happiness rose by two points and GDP is down by one point.”

5) CONVERT TO DEBT-FREE MONEY

This brings us to the most important reform of all: changing the way we create money. One key to Wall Street’s power and to the inherent instability of the financial system is the current practice of private banks creating money with a simple bookkeeping entry each time they make a loan. Because the bookkeeping entry creates only the principal, but not the interest, unless the economy grows fast enough to generate sufficient demand for loans to create the new money required to make the interest payments on the previous loans, debts go into default and the financial system and the economy collapse. The demand for repayment with interest of nearly every dollar in circulation virtually assures the economy will fail unless GDP and inequality are constantly growing.

Leading economists and political figures, including Thomas Jefferson and Benjamin Franklin, have advocated replacing the system of bank-created debt-money with an alternative system in which the government creates debt-free money by spending it into existence to fund public goods like infrastructure or education. The suggestion that government create money with the stroke of a pen sets off all sorts of alarm bells about runaway inflation. The primary change, however, would simply be that the entry is made by government for a public good rather than by a private bank for private profit. Ellen Hodgson Brown’s The Web of Debt is an informative current review of issues and options.

Privately issued debt-money adds to debt and taxes and bears major responsibility for environmental destruction because it requires infinite growth, extreme inequality because it assures an upward flow of wealth from Main Street to Wall Street, and economic instability because issuing loans to fuel reckless speculation generates handsome short-term bank profits. Publicly issued debt-free money would greatly reduce debt, taxes, and environmental harm, be more equitable, and increase financial stability. In a democracy, it should be ours to choose.

This is an opportune moment to move forward an agenda to replace the failed money-serving institutions of our present economy with the institutions of a new economy dedicated to serving life. The idea that we humans might put life ahead of money may seem unrealistic and contrary to our human nature. Surely, that is what our prevailing cultural story would have us believe. That story, however, has no more validity than the story that Wall Street speculation serves a higher public purpose. As I noted in my article We are Hard-Wired to Care and Connect in the Fall 2008 issue of YES!, scientists have found that the human brain is hard-wired for compassion and connection.

My many years living abroad in Africa, Latin America, and Asia taught me that people of every race, religion, and nationality the world over share a dream of a world of happy, healthy children, families, and communities living in vibrant, healthy, natural environments. When they see an opportunity, people are willing to make extraordinary investments of their life energy in an effort to actualize this dream, as regularly documented in the pages of YES! Liberated from the predatory grip of Wall Street, this long-suppressed energy has the potential to transform our relationships with one another and Earth, and to realize our shared dream of a world that works for all.

Reprinted From:

YES Magazine

Marcello Lucero's Killing Follows Months Of Anti-Immigrant Agitation

By Patrick Young CARECEN

The horrible murder of Marcello Lucero is the latest and deadliest of a series of anti-immigrant attacks in Suffolk County. The seven young men charged in the attack come from an area a few miles south of the hamlet of Farmingville, the epicenter of anti-immigrant organizing on Long Island. Farmingville first gained national attention in 2000 when two young men abducted a pair of Mexican day laborers and tried to beat them to death. It was in the headlines again a few years later when five high school students burned down the house of a Latino family, whose sleeping occupants barely escaped with their lives.

Since then, human rights advocates have urged politicians in Suffolk to stop using the scapegoating of immigrants as a path to electoral victory. We have failed.

For example, after the beating of the two Farmingville day laborers, a member of the county legislature declared that if Mexicans moved to his town he, too, would greet them with a baseball bat. This year, as tensions mounted around immigration, the county legislature saw no less than five anti-immigrant bills proposed and a Congressional candidate ran for election in the district where the attackers were from on an anti-immigrant platform.

Suffolk's political class, led by the County Executive and the Presiding Officer of the Legislature, have done nothing to bring together the county's nearly 200,000 immigrants and 1.4 million native-born residents. Unlike other nearby suburban counties like Nassau and Westchester, Suffolk government has repeatedly missed opportunities to foster understanding and instead has depicted the hard-working immigrants of the county as a "problem" begging to be solved.

Should it surprise us that young men, hearing immigrants being described as criminals and invaders, would take it upon themselves to solve the problem with knives?

Reprinted From:

Long Island Wins Blog

Naomi Klein on the Bailout Profiteers and the Multi-Trillion-Dollar Crime Scene

AMY GOODMAN: World leaders from nearly two dozen countries met in Washington over the weekend to discuss plans to increase regulation of international financial activity. They acknowledged that a failure of market oversight in countries like the United States had precipitated the financial crisis.

Meanwhile, here at home, it’s been a month into the Bush administration’s more than $700 billion bank bailout. Last week, Treasury Secretary Henry Paulson outlined a new bailout strategy intended to boost consumer borrowing and promote financing for companies that give out loans. President-elect Obama’s transition team is reportedly working on improving the management of the bailout come January 20th.

But that’s two months away and according to the Washington Post, with $290 billion already committed, the Bush administration has taken no action to fill congressionally-mandated independent positions to oversee how the bailout is used.

According to Naomi Klein’s latest article in The Nation, “The more details emerge, the clearer it becomes that Washington’s handling of the Wall Street bailout is not merely incompetent. It is borderline criminal.” The article is called “In Praise of a Rocky Transition.”

Naomi Klein, investigative journalist, author of The Shock Doctrine, joins us now from Toronto, Canada.

Welcome to Democracy Now!, Naomi.

NAOMI KLEIN: Thanks so much, Amy.

AMY GOODMAN: “Criminal”? Explain.

NAOMI KLEIN: Well, there’s a few elements now that are being described as illegal that we’re finding out. First of all, the equity deals that were negotiated with the largest banks and also some smaller banks, representing $250 billion worth of the bailout money, this is the deal to inject equity into the banks in—to inject capital into the banks in exchange for equity. The idea was to address the so-called credit crunch to get banks lending again. The legislation that enabled this was quite explicit that it had to encourage lending. Barney Frank, who was one of the architects of that legislation, has said that it violates the act if the money is not going to that purpose and is instead going to bonuses, is instead going to dividends, going to salaries, going to mergers. He said that violates the acts, i.e. it’s illegal. But what we know is that it’s going precisely to those purposes. It is going to bonuses. It is going to shareholders. And it is not going to lending. The banks have been quite explicit about this. Citibank has talked about using the money to buy other banks.

Then there’s other aspects of this that are borderline illegal. We found out that in the midst of the crisis, the Bush—the Treasury Department pushed through a tax windfall for the banks, a piece of legislation that allows the banks to save a huge amount of money when they merge with each other. And the estimate is that this represents a loss of $140 billion worth of tax revenue for the US government. Many tax attorneys who were interviewed by the Washington Post said that they felt that the way in which the Treasury Department went about this by unilaterally changing the tax code was illegal, that this had to be—this had to include Congress. Congress only found out about it after the fact.

There’s another piece of this puzzle that is also borderline illegal, which is that in addition to the $700 billion that we are discussing, the $700 billion bailout, there’s another $2 trillion that’s been handed out by the Federal Reserve in emergency loans to financial institutions, to banks, that actually we don’t really know who they’re handing the money out to, because, apparently, it’s a secret. They could be handing it out to a range of other corporations—I think they are—but they’re saying that they won’t disclose who has received these taxpayer loans, because it could cause a run on the banks, it could cause the market to lose confidence in the institutions that have taken these loans. Once again, that represents an additional $2 trillion.

The other thing that the Fed won’t disclose is what they have accepted as collateral in exchange for these loans. This is a really key point, because, of course, at the heart of the financial crisis is—are these so- called distressed assets. The value of these assets is enormously controversial. They may be worth very little. So if the Fed has accepted distressed assets as collateral in exchange for these loans, there’s a very good chance the taxpayers aren’t going to be getting this money back. So Bloomberg News has launched a lawsuit in federal court to find out who has received the loans and what has been accepted as collateral, because they believe that this lack of transparency is illegal. So that’s why we’re calling this the “trillion-dollar crime scene” or the “multi-trillion-dollar crime scene.” And they’re really challenging lawmakers to call them out, the Treasury is.

And I think, you know, Amy, the last time I was on Democracy Now!, we were talking about Henry Paulson’s original three-page proposal, the $700 trillion stickup, where he basically said, “Give me $700 trillion. Don’t ask any questions. I can never be challenged by any arm of government or any court of law.” Now, that aspect of the bailout was supposedly dealt with, and we were all reassured that there was going to be transparency, accountability, legality. But now we’re finding out that, in fact, Henry Paulson has achieved his original goal by stealth, because there is no accountability, and lawmakers are very hesitant to challenge this, because they’re afraid of causing a run on the banks, of causing more market instability. So, essentially, what the Bush administration has done is said, you know, “We dare you to challenge us and be responsible for the great depression.” And the Democrats, not known for their firm spines, have so far failed to challenge them in anything other than rhetoric.

AMY GOODMAN: And what’s very interesting about this, of course, as I talked to you before the election, but now the election is over, and the Democrats are not in a weaker position, but in a far more powerful position, and they are meeting this week.

NAOMI KLEIN: Right. They actually—they have a lot of leeway in which to act on this. You know, if Barney Frank means what he says, that this violates the act, then of course they can challenge the deals that have already been signed, these terrible equity deals that are so much worse than what Gordon Brown negotiated in Britain. I mean, let’s remember, Gordon Brown got voting rights at the banks that they bailed out, seats on the boards, 12 percent dividends for US tax—for UK taxpayers, as opposed to the five percent negotiated in the US and no voting rights and no seats on the board. Other thing Gordon Brown did is he got it in writing that the banks had to start lending, as opposed to Henry Paulson, who didn’t get it in writing, and the banks are not lending.

So, there is room to move, but, you know, the logic that has really gripped lawmakers is that they can’t rock the boat. And we hear this across the board, really, in the talk of, you know, who to appoint as Treasury Secretary, how to approach economic policy in this period. We hear all these phrases—you know, continuity, smooth transition. And really, that’s code for more of the same, because what the market wants is for there not to be tough regulation, is for the free money to keep flowing. What will upset the market, what will create a rocky transition, is if it’s clear that there’s a new sheriff in town, that they’re going to have to follow the law, that they’re going to cut off all of this corporate welfare, there’s going to be real accountability, real conditions attached to the money. You know what? The market really doesn’t want that.

Unfortunately for the market, voters have just voted for change. They voted for a candidate who really turned the election into a referendum on this economic policy of rampant deregulation. So you’ve really got a problem here. How do you reconcile the market’s desire for status quo with the voters’ demand for real change? There is no way to do that without a few bumps along the way. And I’m quite concerned that what we’re seeing from Obama’s team is an accepting of this logic that they need to give the market what it wants, which is continuity, smooth transition, which is really just code for more of the same. And when you hear names like Larry Summers being bandied about for Treasury Secretary, that’s feeding the market exactly what it wants, which is more of the same.

AMY GOODMAN: Naomi Klein, I wanted to go more to these—what you’re calling “borderline criminal” deals, the Washington Post revealing as part of the bailout, lawmakers changed Tax Code Section 382, which limits the kinds of tax shelters companies can use to—during corporate mergers, created to stop companies who avoid paying taxes by acquiring shell companies valued by the losses on their stocks. And then, going on in the piece, it says congressional aides admitted lawmakers agreed to keep the change hidden to avoid public outrage. Staffers with Senate Finance Committee chair, Max Baucus, a Democrat, reportedly asked that an administration briefing on the tax code change be kept secret. One congressional aide said, “We’re all nervous about saying this was illegal because of our fears about the marketplace. To the extent we want to try to publicly stop this, we’re going to be gumming up some important deals.”

NAOMI KLEIN: Right. I mean, this is—that’s an incredible statement, Amy, because really what they’re saying is, we can’t afford to enforce the law, because there is an economic crisis, that somehow, because there’s an economic prices, legality is a luxury that Congress can’t afford. That is a very scary statement. But this is what I mean by this logic that you have to—you know, the market, particularly a bear market, has the temperament of an ill-tempered two-year-old. I mean, it throws temper tantrums whenever it doesn’t get what it wants, whenever it is frightened. So it is really dangerous to pander to the tastes of the market in this period. It needs a little bit of tough love. That’s what people have voted for. But there will be a temper tantrum if there is a clear message that the law is going to be followed.

So, we find out that there has been this backdoor, illegal tax break handed over to the banks. And, by the way, Amy, this is an example, a classic example, of what I call disaster capitalism or the shock doctrine—right?—where the banks had been pushing for this tax break for many, many years, they weren’t able to get it through during normal circumstances, but in a crisis they push it through the back door when everybody is focused on—well, at the point that they pushed this through, which was September 30th, this was the worst of the economic crisis and people were focused on the collapse of Lehman, and they were focused on the fact that they couldn’t get the bailout legislation through. So nobody even noticed this until it was too late.

And so, this is what I mean by the strategy of the Bush administration, is now they are saying to Congress, “We dare you to stand in the way of these bank mergers, because if you do that”—because the tax break that they handed out is what encouraged a wave of bank mergers. And I really do think it is worth pausing to question this idea that what Treasury should be doing at this point is encouraging very large bank mergers, because one of the other problems that, you know, is at the root of this crisis, and certainly at the root of this unprecedented bailout, is that you have so many banks that are considered too big to fail, right? So why is it that we are not questioning this solution, the so-called solution to the crisis, which is creating even bigger banks, banks that will, once again, be too big to fail?

We’re really heading to a future where there will be, you know, three or four large banks, all of them too big to fail, which means that if they take more—they take more and more risks, which nobody is asking them not to. It’s important to understand that in exchange for the bailout money, the banks are not being told that they can’t carry the incredible leverage rates that we saw, for instance, at Bear Stearns, thirty-three to one. They aren’t being told that they can’t invest in these high-risk, complex financial instruments. They can still do whatever they want, but now they’re even bigger, which means that if they get themselves into trouble again, they will be bailed out again. So why is it that the government is cutting their taxes to encourage these mergers? The Democrats are saying, “Well, we can’t do anything now, because if we do, we will gum up these deals.” So I think we should question all of it. Across the board, I think the assumptions are faulty.

AMY GOODMAN: Naomi Klein, we have to break. but we’re going to come back to this discussion. I also want to talk to you about your piece in the Rolling Stone, “The Bailout Profiteers.” And after that, we’ll be joined by a former CIA analyst and the president of the Center for Constitutional Rights to talk about President-elect Obama’s transition team, when it comes to intelligence, deeply involved in the whole issue of the politicization of intelligence in the lead-up to war and in justifying the renditions. This is Democracy Now!, democracynow.org, the War and Peace Report. We’ll be back with Naomi Klein in a minute.

[break]

AMY GOODMAN: […] We’re also broadcasting across Canada on community radio stations, where Naomi Klein is, in Canada, in Toronto, the award-winning journalist, syndicated columnist, author of the bestseller The Shock Doctrine: The Rise of Disaster Capitalism. Her last piece in The Nation is called “In Praise of a Rocky Transition.” And the piece before that is in Rolling Stone; it’s called “The Bailout Profiteers.” Naomi Klein, lay them out.

NAOMI KLEIN: Well, what I do in the Rolling Stone piece is talk about the really uncomfortable parallels between what we saw in Iraq in the Green Zone and what we’re seeing in the US Treasury. It’s sort of the Green Zoning of the US Treasury. If we think about the way the Bush administration handled the occupation of Iraq, the working assumption was that everything that could be privatized, everything that could be outsourced, would be outsourced. And it has been very much a corporate war, as you well know. But at the same time, the handing out of the contracts in the early days was done very, very quickly, because, of course, there was this manufactured emergency that we all know was based on lies, in retrospect. But that was used, that state of emergency was used to justify no-bid contracts, to justify the fact that there was very little oversight of the contractors.

And we’re seeing all of this repeat now, but just on such a massive scale, such a larger scale. First of all, when Henry Paulson and Neel Kashkari, his deputy, announced the $700 billion bailout, they also announced that they would be outsourcing all of the work. They have handed out the work to many of the banks and Wall Street law firms that really created the crisis in the first place. But in the same way, there’s also been very little competition for these contracts. They were handed out very quickly. And at the same time, as we were discussing earlier, there is very little oversight over the process.

So, just to give you one example that I discuss in the Rolling Stone piece, there’s the general contractor, the really big contracting—it’s kind of the Halliburton of Treasury contracts—went to the bank, Bank of New York Mellon. Bank of New York Mellon, by the way, is one of the nine banks that got the equity deals, the cash injections in exchange for equity. And they are also very deep in this derivatives mess themselves, but they have been hired to handle a huge part of the bailout. So what I argue in the piece is that we actually have it backwards. It’s not the banks that have been partially nationalized; it’s Treasury that has been partially privatized by the very banks that created the crisis in the first place.

One of the things that’s really extraordinary about the Bank of New York Mellon contract is that, unlike the Halliburton contract or the Bechtel contract or the Blackwater contract, we actually don’t know how much it’s worth. It’s quite extraordinary. It’s redacted. The part of the contract that would tell taxpayers how much of their money is being given to this bank and how they’re calculating the payment for Bank of New York Mellon is all blacked out. I was reassured by Treasury three weeks ago that they would be disclosing that information within days. They still haven’t disclosed it.

Another contract that I look into in the Rolling Stone piece is for the first law firm that received a contract to advise Treasury on the equity deals, on those key equity deals that we’ve now found out are such bad deals, the ones that didn’t get it in writing that the banks were supposed to start lending, the ones that only got five percent dividends for US taxpayers when Britain got 12 percent. Well, the bank that got the—sorry, the law firm that got the contract to advise Treasury is called Simpson Thacher Bartlett. This is a Wall Street heavy-hitter firm. They’ve negotiated some of the largest bank mergers in recent years. And what we discovered in researching this piece is that Bank of—is that Simpson Thacher had represented seven of the nine banks that received the equity deals that they were advising Treasury on. And, you know, what’s important to understand is that these banks that Simpson Thacher represents on other matters represent far more of their revenue than US Treasury. So what I am arguing is that they are in a very large conflict of interest, because they really are a bankers’ law firm, not a public interest law firm.

AMY GOODMAN: Naomi Klein, can you talk about what is happening right now in Washington, what took place over the weekend, the meeting of the G20?

NAOMI KLEIN: Well, you know, this was an epic lost opportunity, Amy, because I think a lot of people assume, certainly assumed originally, that what would come out of this catastrophe, what would come out of this crisis, would be a re-examination of some of the thinking that has underpinned so much of economic policy in the past thirty years. And, as I said earlier, Barack Obama turned his election campaign into a referendum on the mania for deregulation and free trade and really less trickle-down economics. He said the idea of giving more and more to the people at the top and waiting for it to trickle down to the people below, and that really resonated with voters, and they elected him on that platform. And let’s remember, Amy, because this really is about democracy, that his campaign turned around when the economic crisis really hit Wall Street. He was losing ground to McCain when the crisis hit Wall Street, and Obama started using this language of really putting the ideology of deregulation on trial. That’s when his numbers turned around. That’s when he went on his winning streak that took him all the way to Election Day. And so, I think that there has been this assumption that, OK, now we’re going to fix it.

But if we look at what just came out of the G20 summit, it’s really been a reassertion of the very—this very ideology of deregulation. On the one hand, you have the statement that you started the program with, where the world leaders said that this crisis was born of the shadow banking industry, not enough oversight, not enough regulation, too much complexity. At the same time, when they talk about solutions, they’re calling for resurrecting the failed World Trade Organization talks that collapsed this summer. And we heard, if you recall, this summer, when the Doha talks collapsed, that globalization and the Washington Consensus were dead, because developing countries had rejected it.

The other thing that they’re calling for is a greater role for the International Monetary Fund. And it’s important to understand that the reason why the International Monetary Fund and the World Trade Organization and the whole free trade agenda, generally, has been in collapse in recent years is because countries around the world are no longer willing to accept the conditions attached to joining this club, the conditions attached to an International Monetary Fund loan. In reasserting a greater role for the International Monetary Fund, in calling for the World Trade Organization talks to get back on track, these world leaders are actually calling for more financial market deregulation, more of the same.

I’ll give you one example: the Doha talks. Although much of the focus has been on agricultural subsidies, part of the Doha talks is about financial sector deregulation and the push, particularly from Britain and the United States, for countries like China and India to open up their financial services markets to US and British and European companies who want into these markets. And what’s really striking is that you hear this language of anti-protectionism, you know, that we can’t turn away from free trade. What this really means, Amy, is that Citibank and Barclays want to go into China, want to go into India, and they want to buy up Chinese and Indian banks, they want to get into these markets. But what’s so incredible in this moment is the hypocrisy, just the rampant hypocrisy, because Barclays and Citibank and all of the other banks that would benefit from this type of free trade are of course the very banks that are receiving massive state protection from their own governments in the form of the bailouts that we’ve just been discussing. So these sort of corporate welfare bums now want to use the language of anti-protectionism to go into other countries and buy up their assets, but, of course, they are being subsidized so heavily by their own taxpayers. So it’s a moment of high hypocrisy.

It’s also a moment of, as I said at the beginning, lost opportunities, because—just to give you one example, think about what these leaders could do if they really wanted to, in terms of collaborating to harmonize regulation, so that banks were no longer able to pit governments against each other for who could offer the lowest taxes, who could give them the best tax havens, who could offer the lowest regulation. There was just a hearing on Friday about hedge funds that Henry Waxman convened. And before those hearings, we heard from one of the wealthiest hedge fund owners in the country, Ken Griffin, who’s actually an Obama supporter. Ken Griffin, a billionaire hedge fund owner—he owns Citadel Investment—was asked by the committee whether he believed that hedge funds were sufficiently regulated and whether they should be more highly taxed. What Ken Griffin said was that if that happened, there would be even more jobs in the financial industry in the United States lost to Britain. And he talked about how his heart breaks when he goes to Canary Wharf in London and sees how many good jobs have been lost to Britain, which has, in many ways, lower—less regulation of hedge funds.

But what’s so striking about that, Amy, is that it would be so easy in this moment for the US government and the British government to actually harmonize their regulations so that they could—so that companies like Citadel Investment and other hedge funds would really have nowhere to run. And when you have a crisis like this, which so clearly shows the need for those types of regulations, when you have an election like there just was in the United States, where people have said clearly that this is a priority, the leaders have an opportunity to act and to close down these tax havens, to prevent this ability of governments to be pitted against one another, and have a race to the top as opposed to a race to the bottom. But they blew that opportunity, and they actually called for less regulation.

AMY GOODMAN: Just underscoring what you wrote on the whole issue of the difference in the bailouts, the British Prime Minister Gordon Brown extracting meaningful guarantees for taxpayers, voting rights on banks, seats on their boards, 12 percent in annual dividend payments to the government, a suspension of dividend payments to shareholders, restrictions on executive bonuses, a legal requirement banks lend money to homeowners and small businesses. Here in the United States, Washington Post reporting major US banks are on pace to spend more than half their bailout money on rewarding their shareholders. The thirty-three banks are set to receive some $163 billion in government bailouts; half of that sum will go to paying off shareholders over the next three years.

NAOMI KLEIN: Yeah, this bailout is really not a bailout at all; it’s a parting gift to the people that the Bush—that George Bush once referred to jokingly as “my base.” You know, in one of my columns recently, I likened it to what European colonial rulers used to do when they finally realized they had to hand over power; they would loot the treasury on the way out the door.

And the reason why there has been this dramatic change in policy just in recent days, where Henry Paulson has said, “OK, well, we’re not going to do what we originally had said at all,” which is use the bailout money to buy distressed assets, to buy bad debts, “Now we’re going to go from these equity deals with the banks to bailing out credit card companies”—the reason for that is that that first $250 billion was essentially money down the drain. They are admitting that it didn’t do what it was supposed to do, which was increase lending. So, now they’re making it up as they go along. It’s take three, take four, take five. But we’re supposed to somehow not notice that $250 billion, an astronomical sum, was just wasted, going to bonuses, going to shareholder payouts, going to CEO salaries. And now they’re trying another method to get lending going. But it really was the parting gift, Amy.

And if we think about what this money means, and this is—you know, this crisis isn’t over, and the same people who justified this bailout, who clamored for this bailout, are the very people who are going to turn around and say to Barack Obama, “We can’t afford for you to make good on your election promises. We can’t afford universal healthcare. In fact, we can’t afford what meager services Americans get in exchange for their tax dollars, like Social Security payments.” We’re already hearing this lowering of expectations now in the national discourse. So, the money—this really is, you know, reverse Robin Hood gone mad. The money has been given to the people who needed it least, and it’s going to be used to justify austerity measures imposed against those who need it most. It’s going to be used to justify cuts to food stamps. It’s going to be used to justify cuts to Social Security, to healthcare, let alone being used to justify why more ambitious plans for a national healthcare program, for green energy are not affordable. So people have to be ready for this. You know, the next shock is yet to come.

AMY GOODMAN: Your final thought, this, on the bailing out of the auto industry, the Big Three in Detroit, starting with General Motors?

NAOMI KLEIN: Well, obviously, it shouldn’t be a blank check. You know, I always think about what the International Monetary Fund does when developing countries come and ask for a loan. Think about what they’re doing right now. The International Monetary Fund says, “You want a loan? Well, here’s our list of conditions.” They used to call it structural adjustment. The same thing could be done to the auto industry. If they’re coming for a bailout, they should be structurally adjusted, and taxpayers should be playing IMF to the auto industry and insisting that they change the way they work, that they build green automobiles, that they protect jobs. It can’t simply be a blank check.

That said, what’s really disturbing is the way the Bush administration appears to be using the desire among Democrats to bail out the auto industry to horse trade the free trade deal with Colombia. You know, what we’re really seeing, Amy, is a resurrection of the entire free trade—discredited free trade agenda. This crisis being used—the shock of this crisis being used to resurrect all of these discredited deals. The Colombia free trade deal, the International Monetary Fund, the Doha round, they’re all coming back from the dead at precisely the moment that we should be actually burying, for good, this whole agenda of deregulation.

AMY GOODMAN: Naomi Klein, I want to thank you for being with us, award-winning journalist, syndicated columnist, author of the bestseller The Shock Doctrine: The Rise of Disaster Capitalism. Her latest piece is in The Nation; it’s called “In Praise of a Rocky Transition.” Before that, in Rolling Stone magazine, and that’s called “The Bailout Profiteers.” This is Democracy Now!, democracynow.org, the War and Peace Report. Naomi was speaking to us from the CBC TV studios in Toronto.

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