Thursday, April 29, 2010

Columbia Professor Joseph Massad on Colonialism as Peace

Professor Joseph Massad of Columbia University spoke Wednesday evening, April 28 at a well-attended meeting sponsored by the Columbia-Barnard Students for Justice in Palestine.

His topic was "Colonialism as Peace"

I'm not going to reconstruct his entire talk, I was too mesmerized to take notes. But my aging brain did retain the main points. So the following is an enthusiastic paraphrase.
--Rick Congress

According to the Zionist dictionary colonialism is defined as peace. Thus, when Israel expands its West Bank colonies (known as "settlements" in the Israeli lexicon -- something that sounds peaceful, calming and, well, settled) it is practicing peace. If colonialism is peace then anti-colonialism is war and resistance to colonialism is terrorism.

The acts of aggression come when the Palestinians, mistakenly seeing the places where they and their ancestors have lived for centuries -- if not longer -- as their rightful home, resist, and thereby practice terrorism. This terrorism requires the Zionist state to practice self-defense to safeguard their security.

Now we see the problem is really one of translation, the Palestinians need to understand the true meaning of peace, terrorism, self-defense and security. If they would only willingly surrender to anything and everything the Israeli government does and might do in the future, then everything would be nice and peaceful.

Their lack of a sophisticated grounding in semantics, syntax and grammar has brought about the situation of Israel not finding a reliable negotiating partner to join Israel in the peace process. This is a truly lamentable situation for the peaceful, self-defending government and armed forces of Israel to be in.

Netanyahu, Leiberman et al are doing their best to practice peace and all they get in return is terrorism, which necessitates self-defense. Israel knows, as do all modern, western people know: that when colonial stealing of land takes place (peace) this is a benign act of compassion. If this good deed is opposed, then there is no alternative except to fight terrorism.

Israel needs for the Palestinians to take part in the peace process so they can be demobilized, demoralized and tied up in endless windbaggery. This is known as being a trustworthy partner in peace. Cynics might call this being tied up like a sheep for shearing, but cynicism is a bad thing.

Now that this topic is finished we can go on to the real meaning of the term West Bank.

When the Zionist state talks about the West Bank what they really mean is half of the West Bank. Their definition of the whole West Bank does not include East Jerusalem, or an expanded area of control around East Jerusalem, or other areas that they really don't want to give back.

So when then Prime Minister Barack met with Yassir Arafat at Camp David in 2000 and offered him 91 per cent of the West Bank for a Palestinian state what he really was saying is that Arafat could have 91 per cent of 50 per cent. How could Arafat have turned down such a generous offer? The proposed Palestinian state would also have been contiguous! How about that for generosity?

When the Zionists say a contiguous state what they mean is a noncontiguous state on the West Bank divided into three cantons (and Gaza would be the fourth canton) criss crossed by Jews-only roads and surrounded by IDF bases. One of the problems that caused Arafat to reject such a good deal is that he didn't understand the real meaning of the words West Bank and contiguous. He didn't consult a Zionist dictionary for these terms.

Tuesday, April 27, 2010



SUPPORT BOYCOTT, DIVEST AND SANCTIONS AGAINST ISRAEL: End the occupation, dismantle the illegal (meaning all of them) colonies (settlements)

Ze'ev Jacobtinsky's vision of 1923 is today's reality

Vladimir (Ze'ev) Jacobtinsky was the leader of Revisionist Zionism in Palastine in the early pre and post Balfor Declaration days. As the leader of the politically rightist Revisionists (who claimed all land on both sides of the Jordan River) he was David Ben Gurion's (the leader of the social democratic Labor Zionists) arch rival. They both wanted an exclusively Jewish state, but differed on how to get one and on internal social-economic policy. Likud prime ministers Menachum Begin and Itsak Shamir Were followers of Jacobtinsky in the British Mandate days. Begin was part of the Irgun, a Jewish terrorist group that assasinated British Mandate officials and soldiers and later became its commander. The Irgun merged with the regular Zionist army in 1948.

This essay is remarkable for it's honesty and plain spoken nature. Jaobtinsky (revered in Israel and the spiritual father of Netanyahu) envisioned an apartheid "bi-national" situation in Palestine. I use the term "situation" because the state was to be for Jews only.
--Rick Congress

The Iron Wall (We and the Arabs)
by Ze'ev Jabotinsky

(First published in Russian under the title O Zheleznoi Stene in Rasswyet, November 4, 1923).

Contrary to the excellent rule of getting to the point immediately, I must begin this article with a personal introduction. The author of these lines is considered to be an enemy of the Arabs, a proponent of their expulsion, etc. This is not true. My emotional relationship to the Arabs is the same as it is to all other peoples -- polite indifference.

My political relationship is characterized by two principles. First: the expulsion of the Arabs from Palestine is absolutely impossible in any form. There will always be two peoples in Palestine. Second: I am proud to have been a member of that group which formulated the Helsingfors Program. We formulated it, not only for Jews, but for all peoples, and its basis is the equality of all nations. I am prepared to swear, for us and our descendants, that we will never destroy this equality and we will never attempt to expel or oppress the Arabs. Our credo, as the reader can see, is completely peaceful.

But it is absolutely another matter if it will be possible to achieve our peaceful aims through peaceful means. After this introduction I can now get to the point. That the Arabs of the Land of Israel should willingly come to an agreement with us is beyond all hopes and dreams at present, and in the foreseeable future. This inner conviction of mine I express so categorically not because of any wish to dismay the moderate faction in the Zionist camp but, on the contrary, because I wish to save them from such dismay.
Apart from those who have been virtually “blind” since childhood, all the other moderate Zionists have long since understood that there is not even Land of Israel to “Palestine” becoming a country with a Jewish majority.

Every reader has some idea of the early history of other countries which have been settled. I suggest that he recall all known instances. If he should attempt to seek but one instance of a country settled with the consent of those born there he will not succeed. The inhabitants (no matter whether they are civilized or savages) have always put up a stubborn fight. Furthermore, how the settler acted had no effect whatsoever. The Spaniards who conquered Mexico and Peru, or our own ancestors in the days of Joshua ben Nun behaved, one might say, like plunderers. But those “great explorers,” the English, Scots and Dutch who were the first real pioneers of North America were people possessed of a very high ethical standard; people who not only wished to leave the redskins at peace but could also pity a fly; people who in all sincerity and innocence believed that in those virgin forests and vast plains ample space was available for both the white and red man. But the native resisted both barbarian and civilized settler with the same degree of cruelty.

Another point which had no effect at all was whether or not there existed a suspicion that the settler wished to remove the inhabitant from his land. The vast areas of the U.S. never contained more than one or two million Indians. The inhabitants fought the white settlers not out of fear that they might be expropriated, but simply because there has never been an indigenous inhabitant anywhere or at any time who has ever accepted the settlement of others in his country. Any native people -- its all the same whether they are civilized or savage -- views their country as their national home, of which they will  always be the complete masters. They will not voluntarily allow, not only a new master, but even a new partner. And so it is for the Arabs. Compromisers in our midst attempt to convince us that the Arabs are some kind of fools who can be tricked by a softened formulation of our goals, or a tribe of money grubbers who will abandon their birth right to Palestine for cultural and economic gains. I flatly reject this assessment of the Palestinian Arabs. Culturally they are 500 years behind us, spiritually they do not have our endurance or our strength of will, but this exhausts all of the internal differences. We can talk as much as we want about our good intentions; but they understand as well as we what is not good for them. They look upon Palestine with the same instinctive love and true fervor that any Aztec looked upon his Mexico or any Sioux looked upon his prairie. To think that the Arabs will voluntarily consent to the realization of Zionism in return for the cultural and economic benefits we can bestow on them is infantile. This childish fantasy of our “Arabo-philes” comes from some kind of contempt for the Arab people, of some kind of unfounded view of this race as a rabble ready to be bribed in order to sell out their homeland for a railroad network.

This view is absolutely groundless. Individual Arabs may perhaps be bought off but this hardly means that all the Arabs in Eretz Israel are willing to sell a patriotism that not even Papuans will trade. Every indigenous people will resist alien settlers as long as they see any hope of ridding themselves of the danger of foreign settlement.

Some of us imagined that a misunderstanding had occurred, that because the Arabs did not understand our intentions, they opposed us, but, if we were to make clear to them how modest and limited our aspirations are, they would then stretch out their arms in peace. This too is a fallacy that has been proved so time and again. I need recall only one incident. Three years ago, during a visit here, Sokolow delivered a great speech about this very “misunderstanding,” employing trenchant language to prove how grossly mistaken the Arabs were in supposing that we intended to take away their property or expel them from the country, or to suppress them. This was definitely not so. Nor did we even want a Jewish state. All we wanted was a regime representative of the League of Nations. A reply to this speech was published in the Arab paper Al Carmelin an article whose content I give here from memory, but I am sure it is a faithful account.

Our Zionist grandees are unnecessarily perturbed, its author wrote. There is no misunderstanding. What Sokolow claims on behalf of Zionism is true. But the Arabs already know this. Obviously, Zionists today cannot dream of expelling or suppressing the Arabs, or even of setting up a Jewish state. Clearly, in this period they are interested in only one thing -- that the Arabs not interfere with Jewish immigration. Further, the Zionists have pledged to control immigration in accordance with the country's absorptive economic capacity. But the Arabs have no illusions, since no other conditions permit the possibility of immigration.

The editor of the paper is even willing to believe that the absorptive capacity of Eretz Israel is very great, and that it is possible to settle many Jews without affecting one Arab. “Just that is what the Zionists want, and what the Arabs do not want. In this way the Jews will, little by little, become a majority and, ipso facto, a Jewish state will be formed and the fate of the Arab minority will depend on the goodwill of the Jews. But was it not the Jews themselves who told us how pleasant‚ being a minority was? No misunderstanding exists. Zionists desire one thing -- freedom of immigration -- and it is Jewish immigration that we do not want.”

The logic employed by this editor is so simple and clear that it should be learned by heart and be an essential part of our notion of the Arab question. It is of no importance whether we quote Herzl or Herbert Samuel to justify our activities. Colonization itself has its own explanation, integral and inescapable, and understood by every Arab and every Jew with his wits about him. Colonization can have only one goal. For the Palestinian Arabs this goal is inadmissible. This is in the nature of things. To change that nature is impossible.

A plan that seems to attract many Zionists goes like this: If it is impossible to get an endorsement of Zionism by Palestine's Arabs, then it must be obtained from the Arabs of Syria, Iraq, Saudi Arabia and perhaps of Egypt. Even if this were possible, it would not change the basic situation. It would not change the attitude of the Arabs in the Land of Israel towards us. Seventy years ago, the unification of Italy was achieved, with the retention by Austria of Trent and Trieste. However, the inhabitants of those towns not only refused to accept the situation, but they struggled against Austria with redoubled vigor. If it were possible (and I doubt this) to discuss Palestine with the Arabs of Baghdad and Mecca as if it were some kind of small, immaterial borderland, then Palestine would still remain for the Palestinians not a borderland, but their birthplace, the center and basis of their own national existence. Therefore it would be necessary to carry on colonization against the will of the Palestinian Arabs, which is the same condition that exists now.

But an agreement with Arabs outside the Land of Israel is also a delusion. For nationalists in Baghdad, Mecca and Damascus to agree to such an expensive contribution (agreeing to forego preservation of the Arab character of a country located in the center of their future “federation”) we would have to offer them something just as valuable. We can offer only two things: either money or political assistance or both. But we can offer neither. Concerning money, it is ludicrous to think we could finance the development of Iraq or Saudi Arabia, when we do not have enough for the Land of Israel. Ten times more illusionary is political assistance for Arab political aspirations. Arab nationalism sets itself the same aims as those set by Italian nationalism before 1870 and Polish nationalism before 1918: unity and independence. These aspirations mean the eradication of every trace of British influence in Egypt and Iraq, the expulsion of the Italians from Libya, the removal of French domination from Syria, Tunis, Algiers and Morocco. For us to support such a movement would be suicide and treachery. If we disregard the fact that the Balfour Declaration was signed by Britain, we cannot forget that France and Italy also signed it. We cannot intrigue about removing Britain from the Suez Canal and the Persian Gulf and the elimination of French and Italian colonial rule over Arab territory. Such a double game cannot be considered on any account.

Thus we conclude that we cannot promise anything to the Arabs of the Land of Israel or the Arab countries. Their voluntary agreement is out of the question. Hence those who hold that an agreement with the natives is an essential condition for Zionism can now say “no” and depart from Zionism. Zionist colonization, even the most restricted, must either be terminated or carried out in defiance of the will of the native population. This colonization can, therefore, continue and develop only under the protection of a force independent of the local population -- an iron wall which the native population cannot break through. This is, in toto, our policy towards the Arabs. To formulate it any other way would only be hypocrisy.

Not only must this be so, it is so whether we admit it or not. What does the Balfour Declaration and the Mandate mean for us? It is the fact that a disinterested power committed itself to create such security conditions that the local population would be deterred from interfering with our efforts.

All of us, without exception, are constantly demanding that this power strictly fulfill its obligations. In this sense, there are no meaningful differences between our “militarists” and our “vegetarians.” One prefers an iron wall of Jewish bayonets, the other proposes an iron wall of British bayonets, the third proposes an agreement with Baghdad, and appears to be satisfied with Baghdad's bayonets -- a strange and somewhat risky taste -- but we all applaud, day and night, the iron wall. We would destroy our cause if we proclaimed the necessity of an agreement, and fill the minds of the Mandatory with the belief that we do not need an iron wall, but rather endless talks. Such a proclamation can only harm us. Therefore it is our sacred duty to expose such talk and prove that it is a snare and a delusion.

All this does not mean that any kind of agreement is impossible, only a voluntary agreement is impossible. As long as there is a spark of hope that they can get rid of us, they will not sell these hopes, not for any kind of sweet words or tasty morsels, because they are not a rabble but a nation, perhaps somewhat tattered, but still living. A living people makes such enormous concessions on such fateful questions only when there is no hope left. Only when not a single breach is visible in the iron wall, only then do extreme groups lose their sway, and influence transfers to moderate groups. Only then would these moderate groups come to us with proposals for mutual concessions. And only then will moderates offer suggestions for compromise on practical questions like a guarantee against expulsion, or equality and national autonomy.

I am optimistic that they will indeed be granted satisfactory assurances and that both peoples, like good neighbors, can then live in peace. But the only path to such an agreement is the iron wall, that is to say the strengthening in Palestine of a government without any kind of Arab influence, that is to say one against which the Arabs will fight. In other words, for us the only path to an agreement in the future is an absolute refusal of any attempts at an agreement now.

Tuesday, April 20, 2010

The Jim Crow legal status of Palestinian Citizens of Israel

From The Palestine Chronicle, more documentation of Apartheid in Israel   Why There Are No 'Israelis' in the Jewish State
By Jonathan Cook - Nazareth

A group of Jews and Arabs are fighting in the Israeli courts to be recognised as 'Israelis', a nationality currently denied them, in a case that officials fear may threaten the country’s self-declared status as a Jewish state.

Israel refused to recognise an Israeli nationality at the country’s establishment in 1948, making an unusual distinction between “citizenship” and “nationality”. Although all Israelis qualify as “citizens of Israel”, the state is defined as belonging to the “Jewish nation”, meaning not only the 5.6 million Israeli Jews but also more than seven million Jews in the diaspora.

Critics say the special status of Jewish nationality has been a way to undermine the citizenship rights of non-Jews in Israel, especially the fifth of the population who are Arab. Some 30 laws in Israel specifically privilege Jews, including in the areas of immigration rights, naturalisation, access to land and employment.

Arab leaders have also long complained that indications of "Arab" nationality on ID cards make it easy for police and government officials to target Arab citizens for harsher treatment.

The interior ministry has adopted more than 130 possible nationalities for Israeli citizens, most of them defined in religious or ethnic terms, with “Jewish” and “Arab” being the main categories.

The group’s legal case is being heard by the supreme court after a district judge rejected their petition two years ago, backing the state’s position that there is no Israeli nation.

The head of the campaign for Israeli nationality, Uzi Ornan, a retired linguistics professor, said: “It is absurd that Israel, which recognises dozens of different nationalities, refuses to recognise the one nationality it is supposed to represent.”

The government opposes the case, claiming that the campaign’s real goal is to “undermine the state’s infrastructure” -- a presumed reference to laws and official institutions that ensure Jewish citizens enjoy a privileged status in Israel.

Mr Ornan, 86, said that denying a common Israeli nationality was the linchpin of state-sanctioned discrimination against the Arab population.

“There are even two laws -- the Law of Return for Jews and the Citizenship Law for Arabs -- that determine how you belong to the state,” he said. “What kind of democracy divides its citizens into two kinds?”

Yoel Harshefi, a lawyer supporting Mr Ornan, said the interior ministry had resorted to creating national groups with no legal recognition outside Israel, such as “Arab” or “unknown”, to avoid recognising an Israeli nationality.

In official documents most Israelis are classified as “Jewish” or “Arab”, but immigrants whose status as Jews is questioned by the Israeli rabbinate, including more than 300,000 arrivals from the former Soviet Union, are typically registered according to their country of origin.

“Imagine the uproar in Jewish communities in the United States, Britain or France, if the authorities there tried to classify their citizens as “Jewish” or “Christian”,” said Mr Ornan.

The professor, who lives close to Haifa, launched his legal action after the interior ministry refused to change his nationality to “Israeli” in 2000. An online petition declaring “I am an Israeli” has attracted several thousand signatures.

Mr Ornan has been joined in his action by 20 other public figures, including former government minister Shulamit Aloni. Several members have been registered with unusual nationalities such as “Russian”, “Buddhist”, “Georgian” and “Burmese”.

Two Arabs are party to the case, including Adel Kadaan, who courted controversy in the 1990s by waging a lengthy legal action to be allowed to live in one of several hundred communities in Israel open only to Jews.

Uri Avnery, a peace activist and former member of the parliament, said the current nationality system gave Jews living abroad a far greater stake in Israel than its 1.3 million Arab citizens.

“The State of Israel cannot recognise an ‘Israeli’ nation because it is the state of the ‘Jewish’ nation … it belongs to the Jews of Brooklyn, Budapest and Buenos Aires, even though these consider themselves as belonging to the American, Hungarian or Argentine nations.”

International Zionist organisations representing the diaspora, such as the Jewish National Fund and the Jewish Agency, are given in Israeli law a special, quasi-governmental role, especially in relation to immigration and control over large areas of Israeli territory for the settlement of Jews only.

Mr Ornan said the lack of a common nationality violated Israel’s Declaration of Independence, which says the state will “uphold the full social and political equality of all its citizens, without distinction of religion, race or sex”.

Indications of nationality on ID cards carried by Israelis made it easy for officials to discriminate against Arab citizens, he added.

The government has countered that the nationality section on ID cards was phased out from 2000 -- after the interior ministry, which was run by a religious party at the time, objected to a court order requiring it to identify non-Orthodox Jews as “Jewish” on the cards.

However, Mr Ornan said any official could instantly tell if he was looking at the card of a Jew or Arab because the date of birth on the IDs of Jews was given according to the Hebrew calendar. In addition, the ID of an Arab, unlike a Jew, included the grandfather’s name.

“Flash your ID card and whatever government clerk is sitting across from you immediately knows which ‘clan’ you belong to, and can refer you to those best suited to ‘handle your kind’,” Mr Ornan said.

The distinction between Jewish and Arab nationalities is also shown on interior ministry records used to make important decisions about personal status issues such as marriage, divorce and death, which are dealt with on entirely sectarian terms.

Only Israelis from the same religious group, for example, are allowed to marry inside Israel -- otherwise they are forced to wed abroad – and cemeteries are separated according to religious belonging.

Some of those who have joined the campaign complain that it has damaged their business interests. One Druze member, Carmel Wahaba, said he had lost the chance to establish an import-export company in France because officials there refused to accept documents stating his nationality as “Druze” rather than “Israeli”.

The group also said it hoped to expose a verbal sleight of hand that intentionally mistranslates the Hebrew term “Israeli citizenship” on the country’s passports as “Israeli nationality” in English to avoid problems with foreign border officials.

B Michael, a commentator for Yedioth Aharonoth, Israel’s most popular newspaper, has observed: “We are all Israeli nationals -- but only abroad.”

The campaign, however, is likely to face an uphill struggle in the courts.

A similar legal suit brought by a Tel Aviv psychologist, George Tamrin, failed in 1970. Shimon Agranat, head of the supreme court at the time, ruled: “There is no Israeli nation separate from the Jewish people. … The Jewish people is composed not only of those residing in Israel but also of diaspora Jewries.”

That view was echoed by the district court in 2008 when it heard Mr Ornan’s case.

The judges in the supreme court, which held the first appeal hearing last month, indicated that they too were likely to be unsympathetic. Justice Uzi Fogelman said: “The question is whether or not the court is the right place to solve this problem.”

- Jonathan Cook is a writer and journalist based in Nazareth, Israel. His latest books are “Israel and the Clash of Civilisations: Iraq, Iran and the Plan to Remake the Middle East” (Pluto Press) and “Disappearing Palestine: Israel's Experiments in Human Despair” (Zed Books). He contributed this article to Visit: (A version of this article originally appeared in The National,, published in Abu Dhabi.)

Sunday, April 18, 2010

Elie Wiesel is a lying, racist schmuck

Wiesel  is simply “a terrible fraud.”  
-- Noam Chomsky

 by Rick Congress
 The professional holocaust salesman is at it again. This time in a full-page ad in today's New York Times (Sunday, April 18, 2010) about Jerusalem.

He's been out there guarding the status of world's greatest sufferers and victims for the Jews (Armenians, pfttt! Five milliion Congolese killed in ongoing massacres as we speak...kid stuff!) We, the Jews are the only ones who know about suffering...and I, that is, we, get a free pass to do anything we want.

Putting in his own two sheckels about objections to the accelerated ethnic cleansing carried out by Israel in Jerusalem, he rants about Jerusalem being only for Jews and no one else (here's a thumb in your eye Christians!).

He repeats the fake zionist historical narrative of exclusivity; and the outright lie that Palestinians have the right to live anywhere in east or west Jerusalem. Palestinians are being evicted from their homes, Palestinian neighborhoods are being claimed as Jewish based on forged deeds and fake archeology (look! we excavated a 3,000 year old can of King David Beer! This area is ours!).

And he lies about Muslims and Christians having access to their places of worship under Israeli rule. The opposite is happening with curfews, check-points, designation of Muslim shrines as being Jewish holy places, etc. Access is being made more difficult. But leave it to Weisel, he loves to make the victim the criminal.

This shameless reactionary has been a cheerleader for Bush's invasion of Iraq, he's waving the flag for attacking Iran, and can be expected to continue to crudely trade on the holocaust as an excuse to cover up any and all crimes committed by Israel, and also make a lot of money in the process.

Friday, April 16, 2010

Looting Main Street, Matt Taibbi from Rolling Stone


Looting Main Street

How the nation's biggest banks are ripping off American cities with the same predatory deals that brought down Greece

Posted Mar 31, 2010 8:15 AM

If you want to know what life in the Third World is like, just ask Lisa Pack, an administrative assistant who works in the roads and transportation department in Jefferson County, Alabama. Pack got rudely introduced to life in post-crisis America last August, when word came down that she and 1,000 of her fellow public employees would have to take a little unpaid vacation for a while. The county, it turned out, was more than $5 billion in debt — meaning that courthouses, jails and sheriff's precincts had to be closed so that Wall Street banks could be paid.

As public services in and around Birmingham were stripped to the bone, Pack struggled to support her family on a weekly unemployment check of $260. Nearly a fourth of that went to pay for her health insurance, which the county no longer covered. She also fielded calls from laid-off co-workers who had it even tougher. "I'd be on the phone sometimes until two in the morning," she says. "I had to talk more than one person out of suicide. For some of the men supporting families, it was so hard — foreclosure, bankruptcy. I'd go to bed at night, and I'd be in tears."

Homes stood empty, businesses were boarded up, and parts of already-blighted Birmingham began to take on the feel of a ghost town. There were also a few bills that were unique to the area — like the $64 sewer bill that Pack and her family paid each month. "Yeah, it went up about 400 percent just over the past few years," she says.
The sewer bill, in fact, is what cost Pack and her co-workers their jobs. In 1996, the average monthly sewer bill for a family of four in Birmingham was only $14.71 — but that was before the county decided to build an elaborate new sewer system with the help of out-of-state financial wizards with names like Bear Stearns, Lehman Brothers, Goldman Sachs and JP Morgan Chase. The result was a monstrous pile of borrowed money that the county used to build, in essence, the world's grandest toilet — "the Taj Mahal of sewer-treatment plants" is how one county worker put it. What happened here in Jefferson County would turn out to be the perfect metaphor for the peculiar alchemy of modern oligarchical capitalism: A mob of corrupt local officials and morally absent financiers got together to build a giant device that converted human shit into billions of dollars of profit for Wall Street — and misery for people like Lisa Pack.

And once the giant shit machine was built and the note on all that fancy construction started to come due, Wall Street came back to the local politicians and doubled down on the scam. They showed up in droves to help the poor, broke citizens of Jefferson County cut their toilet finance charges using a blizzard of incomprehensible swaps and refinance schemes — schemes that only served to postpone the repayment date a year or two while sinking the county deeper into debt. In the end, every time Jefferson County so much as breathed near one of the banks, it got charged millions in fees. There was so much money to be made bilking these dizzy Southerners that banks like JP Morgan spent millions paying middlemen who bribed — yes, that's right, bribed, criminally bribed — the county commissioners and their buddies just to keep their business. Hell, the money was so good, JP Morgan at one point even paid Goldman Sachs $3 million just to back the fuck off, so they could have the rubes of Jefferson County to fleece all for themselves.
Birmingham became the poster child for a new kind of giant-scale financial fraud, one that would threaten the financial stability not only of cities and counties all across America, but even those of entire countries like Greece. While for many Americans the financial crisis remains an abstraction, a confusing mess of complex transactions that took place on a cloud high above Manhattan sometime in the mid-2000s, in Jefferson County you can actually see the rank criminality of the crisis economy with your own eyes; the monster sticks his head all the way out of the water. Here you can see a trail that leads directly from a billion-dollar predatory swap deal cooked up at the highest levels of America's biggest banks, across a vast fruited plain of bribes and felonies — "the price of doing business," as one JP Morgan banker says on tape — all the way down to Lisa Pack's sewer bill and the mass layoffs in Birmingham.

Once you follow that trail and understand what took place in Jefferson County, there's really no room left for illusions. We live in a gangster state, and our days of laughing at other countries are over. It's our turn to get laughed at. In Birmingham, lots of people have gone to jail for the crime: More than 20 local officials and businessmen have been convicted of corruption in federal court. Last October, right around the time that Lisa Pack went back to work at reduced hours, Birmingham's mayor was convicted of fraud and money-laundering for taking bribes funneled to him by Wall Street bankers — everything from Rolex watches to Ferragamo suits to cash. But those who greenlighted the bribes and profited most from the scam remain largely untouched. "It never gets back to JP Morgan," says Pack.

If you want to get all Glenn Beck about it, you could lay the blame for this entire mess at the feet of weepy, tree-hugging environmentalists. It all started with the Cahaba River, the longest free-flowing river in the state of Alabama. The tributary, which winds its way through Birmingham before turning diagonally to empty out near Selma, is home to more types of fish per mile than any other river in America and shelters 64 rare and imperiled species of plants and animals. It's also the source of one of the worst municipal financial disasters in American history.
Back in the early 1990s, the county's sewer system was so antiquated that it was leaking raw sewage directly into the Cahaba, which also supplies the area with its drinking water. Joined by well — intentioned citizens from the Cahaba River Society, the EPA sued the county to force it to comply with the Clean Water Act. In 1996, county commissioners signed a now-infamous consent decree agreeing not just to fix the leaky pipes but to eliminate allsewer overflows — a near-impossible standard that required the county to build the most elaborate, ecofriendly, expensive sewer system in the history of the universe. It was like ordering a small town in Florida that gets a snowstorm once every five years to build a billion-dollar fleet of snowplows.

The original cost estimates for the new sewer system were as low as $250 million. But in a wondrous demonstration of the possibilities of small-town graft and contract-padding, the price tag quickly swelled to more than $3 billion. County commissioners were literally pocketing wads of cash from builders and engineers and other contractors eager to get in on the project, while the county was forced to borrow obscene sums to pay for the rapidly spiraling costs. Jefferson County, in effect, became one giant, TV-stealing, unemployed drug addict who borrowed a million dollars to buy the mother of all McMansions — and just as it did during the housing bubble, Wall Street made a business of keeping the crook in his house. As one county commissioner put it, "We're like a guy making $50,000 a year with a million-dollar mortgage."
To reassure lenders that the county would pay its mortgage, commissioners gave the finance director — an unelected official appointed by the president of the commission — the power to automatically raise sewer rates to meet payments on the debt. The move brought in billions in financing, but it also painted commissioners into a corner. If costs continued to rise — and with practically every contractor in Alabama sticking his fingers on the scale, they were rising fast — officials would be faced with automatic rate increases that would piss off their voters. (By 2003, annual interest on the sewer deal had reached $90 million.) So the commission reached out to Wall Street, looking for creative financing tools that would allow it to reduce the county's staggering debt payments.

Wall Street was happy to help. First, it employed the same trick it used to fuel the housing crisis: It switched the county from a fixed rate on the bonds it had issued to finance the sewer deal to an adjustable rate. The refinancing meant lower interest payments for a couple of years — followed by the risk of even larger payments down the road. The move enabled county commissioners to postpone the problem for an election season or two, kicking it to a group of future commissioners who would inevitably have to pay the real freight.

But then Wall Street got really creative. Having switched the county to a variable interest rate, it offered commissioners a crazy deal: For an extra fee, the banks said, we'll allow you to keep paying a fixed rate on your debt to us. In return, we'll give you a variable amount each month that you can use to pay off all that variable-rate interest you owe to bondholders.

In financial terms, this is known as a synthetic rate swap — the spidery creature you might have read about playing a role in bringing down places like Greece and Milan. On paper, it made sense: The county got the stability of a fixed rate, while paying Wall Street to assume the risk of the variable rates on its bonds. That's the synthetic part. The trouble lies in the rate swap. The deal only works if the two variable rates — the one you get from the bank, and the one you owe to bondholders — actually match. It's like gambling on the weather. If your bondholders are expecting you to pay an interest rate based on the average temperature in Alabama, you don't do a rate swap with a bank that gives you back a rate pegged to the temperature in Nome, Alaska.

Not unless you're a fucking moron. Or your banker is JP Morgan.
In a small office in a federal building in downtown Birmingham, just blocks from where civil rights demonstrators shut down the city in 1963, Assistant U.S. Attorney George Martin points out the window. He's pointing in the direction of the Tutwiler Hotel, once home to one of the grandest ballrooms in the South but now part of the Hampton Inn chain.
"It was right around the corner here, at the hotel," Martin says. "That's where they met — that's where this all started."

They means Charles LeCroy and Bill Blount, the two principals in what would become the most important of all the corruption cases in Jefferson County. LeCroy was a banker for JP Morgan, serving as managing director of the bank's southeast regional office. Blount was an Alabama wheeler-dealer with close friends on the county commission. For years, when Wall Street banks wanted to do business with municipalities, whether for bond issues or rate swaps, it was standard practice to reach out to a local sleazeball like Blount and pay him a shitload of money to help seal the deal. "Banks would pay some local consultant, and the consultant would then funnel money to the politician making the decision," says Christopher Taylor, the former head of the board that regulates municipal borrowing. Back in the 1990s, Taylor pushed through a ban on such backdoor bribery. He also passed a ban on bankers contributing directly to politicians they do business with — a move that sparked a lawsuit by one aggrieved sleazeball, who argued that halting such legalized graft violated his First Amendment rights. The name of that pissed-off banker? "It was the one and only Bill Blount," Taylor says with a laugh.

Blount is a stocky, stubby-fingered Southerner with glasses and a pale, pinched face — if Norman Rockwell had ever done a painting titled "Small-Town Accountant Taking Enormous Dump," it would look just like Blount. LeCroy, his sugar daddy at JP Morgan, is a tall, bloodless, crisply dressed corporate operator with a shiny bald head and silver side patches — a cross between Skeletor and Michael Stipe.

The scheme they operated went something like this: LeCroy paid Blount millions of dollars, and Blount turned around and used the money to buy lavish gifts for his close friend Larry Langford, the now-convicted Birmingham mayor who at the time had just been elected president of the county commission. (At one point Blount took Langford on a shopping spree in New York, putting $3,290 worth of clothes from Zegna on his credit card.) Langford then signed off on one after another of the deadly swap deals being pushed by LeCroy. Every time the county refinanced its sewer debt, JP Morgan made millions of dollars in fees. Even more lucrative, each of the swap contracts contained clauses that mandated all sorts of penalties and payments in the event that something went wrong with the deal. In the mortgage business, this process is known as churning: You keep coming back over and over to refinance, and they keep "churning" you for more and more fees. "The transactions were complex, but the scheme was simple," said Robert Khuzami, director of enforcement for the SEC. "Senior JP Morgan bankers made unlawful payments to win business and earn fees."

Given the shitload of money to be made on the refinancing deals, JP Morgan was prepared to pay whatever it took to buy off officials in Jefferson County. In 2002, during a conversation recorded in Nixonian fashion by JP Morgan itself, LeCroy bragged that he had agreed to funnel payoff money to a pair of local companies to secure the votes of two county commissioners. "Look," the commissioners told him, "if we support the synthetic refunding, you guys have to take care of our two firms." LeCroy didn't blink. "Whatever you want," he told them. "If that's what you need, that's what you get. Just tell us how much."

Just tell us how much. That sums up the approach that JP Morgan took a few months later, when Langford announced that his good buddy Bill Blount would henceforth be involved with every financing transaction for Jefferson County. From JP Morgan's point of view, the decision to pay off Blount was a no-brainer. But the bank had one small problem: Goldman Sachs had already crawled up Blount's trouser leg, and the broker was advising Langford to pickthem as Jefferson County's investment bank.
The solution they came up with was an extraordinary one: JP Morgan cut a separate deal with Goldman, paying the bank $3 million to fuck off, with Blount taking a $300,000 cut of the side deal. Suddenly Goldman was out and JP Morgan was sitting in Langford's lap. In another conversation caught on tape, LeCroy joked that the deal was his "philanthropic work," since the payoff amounted to a "charitable donation to Goldman Sachs" in return for "taking no risk."
That such a blatant violation of anti-trust laws took place and neither JP Morgan nor Goldman have been prosecuted for it is yet another mystery of the current financial crisis. "This is an open-and-shut case of anti-competitive behavior," says Taylor, the former regulator.
With Goldman out of the way, JP Morgan won the right to do a $1.1 billion bond offering — switching Jefferson County out of fixed-rate debt into variable-rate debt — and also did a corresponding $1.1 billion deal for a synthetic rate swap. The very same day the transaction was concluded, in May 2003, LeCroy had dinner with Langford and struck a deal to do yet another bond-and-swap transaction of roughly the same size. This time, the terms of the payoff were spelled out more explicitly. In a hilarious phone call between LeCroy and Douglas MacFaddin, another JP Morgan official, the two bankers groaned aloud about how much it was going to cost to satisfy Blount:

LeCroy: I said, "Commissioner Langford, I'll do that because that's your suggestion, but you gotta help us keep him under control. Because when you give that guy a hand, he takes your arm." You know?
MacFaddin: [Laughing] Yeah, you end up in the wood-chipper.
All told, JP Morgan ended up paying Blount nearly $3 million for "performing no known services," in the words of the SEC. In at least one of the deals, Blount made upward of 15 percent of JP Morgan's entire fee. When I ask Taylor what a legitimate consultant might earn in such a circumstance, he laughs. "What's a 'legitimate consultant' in a case like this? He made this money for doing jack shit."

As the tapes of LeCroy's calls show, even officials at JP Morgan were incredulous at the money being funneled to Blount. "How does he get 15 percent?" one associate at the bank asks LeCroy. "For doing what? For not messing with us?"
"Not messing with us," LeCroy agrees. "It's a lot of money, but in the end, it's worth it on a billion-dollar deal."

That's putting it mildly: The deals wound up being the largest swap agreements in JP Morgan's history. Making matters worse, the payoffs didn't even wind up costing the bank a dime. As the SEC explained in a statement on the scam, JP Morgan "passed on the cost of the unlawful payments by charging the county higher interest rates on the swap transactions." In other words, not only did the bank bribe local politicians to take the sucky deal, they got local taxpayers to pay for the bribes. And because Jefferson County had no idea what kind of deal it was getting on the swaps, JP Morgan could basically charge whatever it wanted. According to an analysis of the swap deals commissioned by the county in 2007, taxpayers had been overcharged at least $93 million on the transactions.

JP Morgan was far from alone in the scam: Virtually everyone doing business in Jefferson County was on the take. Four of the nation's top investment banks, the very cream of American finance, were involved in one way or another with payoffs to Blount in their scramble to do business with the county. In addition to JP Morgan and Goldman Sachs, Bear Stearns paid Langford's bagman $2.4 million, while Lehman Brothers got off cheap with a $35,000 "arranger's fee." At least a dozen of the county's contractors were also cashing in, along with many of the county commissioners. "If you go into the county courthouse," says Michael Morrison, a planner who works for the county, "there's a gallery of past commissioners on the wall. On the top row, every single one of 'em but two has been investigated, indicted or convicted. It's a joke."

The crazy thing is that such arrangements — where some local scoundrel gets a massive fee for doing nothing but greasing the wheels with elected officials — have been taking place all over the country. In Illinois, during the Upper Volta-esque era of Rod Blagojevich, a Republican political consultant named Robert Kjellander got 10 percent of the entire fee Bear Stearns earned doing a bond sale for the state pension fund. At the start of Obama's term, Bill Richardson's Cabinet appointment was derailed for a similar scheme when he was governor of New Mexico. Indeed, one reason that officials in Jefferson County didn't know that the swaps they were signing off on were shitty was because their adviser on the deals was a firm called CDR Financial Products, which is now accused of conspiring to overcharge dozens of cities in swap transactions. According to a federal antitrust lawsuit, CDR is basically a big-league version of Bill Blount — banks tossed money at the firm, which in turn advised local politicians that they were getting a good deal. "It was basically, you pay CDR, and CDR helps push the deal through," says Taylor.

In the end, though, all this bribery and graft was just the table-setter for the real disaster. In taking all those bribes and signing on to all those swaps, the commissioners in Jefferson County had basically started the clock on a financial time bomb that, sooner or later, had to explode. By continually refinancing to keep the county in its giant McMansion, the commission had managed to push into the future that inevitable day when the real bill would arrive in the mail. But that's where the mortgage analogy ends — because in one key area, a swap deal differs from a home mortgage. Imagine a mortgage that you have to keep on paying even after you sell your house. That's basically how a swap deal works. And Jefferson County had done 23 of them. At one point, they had more outstanding swaps than New York City.

Judgment Day was coming — just like it was for the Delaware River Port Authority, the Pennsylvania school system, the cities of Detroit, Chicago, Oakland and Los Angeles, the states of Connecticut and Mississippi, the city of Milan and nearly 500 other municipalities in Italy, the country of Greece, and God knows who else. All of these places are now reeling under the weight of similarly elaborate and ill-advised swaps — and if what happened in Jefferson County is any guide, hoo boy. Because when the shit hit the fan in Birmingham, it really hit the fan.

For Jefferson County, the deal blew up in early 2008, when a dizzying array of penalties and other fine-print poison worked into the swap contracts started to kick in. The trouble began with the housing crash, which took down the insurance companies that had underwritten the county's bonds. That rendered the county's insurance worthless, triggering clauses in its swap contracts that required it to pay off more than $800 million of its debt in only four years, rather than 40. That, in turn, scared off private lenders, who were no longer interested in bidding on the county's bonds. The banks were forced to make up the difference — a service for which they charged enormous penalties. It was as if the county had missed a payment on its credit card and woke up the next morning to find its annual percentage rate jacked up to a million percent. Between 2008 and 2009, the annual payment on Jefferson County's debt jumped from $53 million to a whopping $636 million.

It gets worse. Remember the swap deal that Jefferson County did with JP Morgan, how the variable rates it got from the bank were supposed to match those it owed its bondholders? Well, they didn't. Most of the payments the county was receiving from JP Morgan were based on one set of interest rates (the London Interbank Exchange Rate), while the payments it owed to its bondholders followed a different set of rates (a municipal-bond index). Jefferson County was suddenly getting far less from JP Morgan, and owing tons more to bondholders. In other words, the bank and Bill Blount made tens of millions of dollars selling deals to local politicians that were not only completely defective, but blew the entire county to smithereens.

And here's the kicker. Last year, when Jefferson County, staggered by the weight of its penalties, was unable to make its swap payments to JP Morgan, the bank canceled the deal. That triggered one-time "termination fees" of — yes, you read this right — $647 million. That was money the county would owe no matter what happened with the rest of its debt, even if bondholders decided to forgive and forget every dime the county had borrowed. It was like the herpes simplex of loans — debt that does not go away, ever, for as long as you live. On a sewer project that was originally supposed to cost $250 million, the county now owed a total of $1.28 billion just in interest and fees on the debt. Imagine paying $250,000 a year on a car you purchased for $50,000, and that's roughly where Jefferson County stood at the end of last year.

Last November, the SEC charged JP Morgan with fraud and canceled the $647 million in termination fees. The bank agreed to pay a $25 million fine and fork over $50 million to assist displaced workers in Jefferson County. So far, the county has managed to avoid bankruptcy, but the sewer fiasco had downgraded its credit rating, triggering payments on other outstanding loans and pushing Birmingham toward the status of an African debtor state. For the next generation, the county will be in a constant fight to collect enough taxes just to pay off its debt, which now totals $4,800 per resident.

The city of Birmingham was founded in 1871, at the dawn of the Southern industrial boom, for the express purpose of attracting Northern capital — it was even named after a famous British steel town to burnish its entrepreneurial cred. There's a gruesome irony in it now lying sacked and looted by financial vandals from the North. The destruction of Jefferson County reveals the basic battle plan of these modern barbarians, the way that banks like JP Morgan and Goldman Sachs have systematically set out to pillage towns and cities from Pittsburgh to Athens. These guys aren't number-crunching whizzes making smart investments; what they do is find suckers in some municipal-finance department, corner them in complex lose-lose deals and flay them alive. In a complete subversion of free-market principles, they take no risk, score deals based on political influence rather than competition, keep consumers in the dark — and walk away with big money. "It's not high finance," says Taylor, the former bond regulator. "It's low finance." And even if the regulators manage to catch up with them billions of dollars later, the banks just pay a small fine and move on to the next scam. This isn't capitalism. It's nomadic thievery.