By Pam Martens: May 6, 2008
The Obama phenomenon has been likened to that of cults, celebrity groupies and Messiah worshipers. But what we’re actually witnessing is ObamaMania (as in tulip mania), the third and final bubble orchestrated and financed by the wonderful Wall Street folks who brought us the first two: the Nasdaq/tech bubble and a subprime-mortgage-in-every-pot bubble.
To understand why Wall Street desperately needs this final bubble, we need to first review how the first two bubbles were orchestrated and why.
In March of 2000, the Nasdaq stock market, hyped with spurious claims for startup tech and dot.com companies, reached a peak of over 5,000. Eight years later, it’s trading in the 2,300 range and most of those companies no longer exist. From peak to trough, Nasdaq transferred over $4 trillion from the pockets of small mania-gripped investors to the wealthy and elite market manipulators.
The highest monetary authority during those bubble days, Alan Greenspan, chairman of the Federal Reserve, consistently told us that the market was efficient and stock prices were being set by the judgment of millions of “highly knowledgeable” investors.
Mr. Greenspan was the wind beneath the wings of a carefully orchestrated wealth transfer system known as “pump and dump” on Wall Street. As hundreds of court cases, internal emails, and insider testimony now confirm, this bubble was no naturally occurring phenomenon any more than the Obama bubble is.
First, Wall Street firms issued knowingly false research reports to trumpet the growth prospects for the company and stock price; second, they lined up big institutional clients who were instructed how and when to buy at escalating prices to make the stock price skyrocket (laddering); third, the firms instructed the hundreds of thousands of stockbrokers serving the mom-and-pop market to advise their clients to sit still as the stock price flew to the moon or else the broker would have his commissions taken away (penalty bid). While the little folks’ money served as a prop under prices, the wealthy elite on Wall Street and corporate insiders were allowed to sell at the top of the market (pump-and-dump wealth transfer).
Why did people buy into this mania for brand new, untested companies when there is a basic caveat that most people in this country know, i.e., the majority of all new businesses fail? Common sense failed and mania prevailed because of massive hype pumped by big media, big public relations, and shielded from regulation by big law firms, all eager to collect their share of Wall Street’s rigged cash cow.
The current housing bubble bust is just a freshly minted version of Wall Street’s real estate limited partnership frauds of the ‘80s, but on a grander scale. In the 1980s version, the firms packaged real estate into limited partnerships and peddled it as secure investments to moms and pops. The major underpinning of this wealth transfer mechanism was that regulators turned a blind eye to the fact that the investments were listed at the original face amount on the clients’ brokerage statements long after they had lost most of their value.
Today’s real estate related securities (CDOs and SIVs) that are blowing up around the globe are simply the above scheme with more billable hours for corporate law firms.
Wall Street created an artificial demand for housing (a bubble) by soliciting high interest rate mortgages (subprime) because they could be bundled and quickly resold for big fees to yield-hungry hedge funds and institutions. A major underpinning of this scheme was that Wall Street secured an artificial rating of AAA from rating agencies that were paid by Wall Street to provide the rating. When demand from institutions was saturated, Wall Street kept the scheme going by hiding the debt off its balance sheets and stuffed this long-term product into mom-and-pop money markets, notwithstanding that money markets are required by law to hold only short-term investments. To further perpetuate the bubble as long as possible, Wall Street prevented pricing transparency by keeping the trading off regulated exchanges and used unregulated over-the-counter contracts instead. (All of this required lots of lobbyist hours in Washington.)
But how could there be a genuine national housing price boom propelled by massive consumer demand at the same time there was the largest income and wealth disparity in the nation’s history? Rational thought is no match for manias.
That brings us to today’s bubble. We are being asked to accept on its face the notion that after more than two centuries of entrenched racism in this country, which saw only five black members of the U.S. Senate, it’s all being eradicated with some rousing stump speeches.
We are asked to believe that those kindly white executives at all the biggest Wall Street firms, which rank in the top 20 donors to the Obama presidential campaign, after failing to achieve more than 3.5 per cent black stockbrokers over 30 years, now want a black populist president because they crave a level playing field for the American people.
The number one industry supporting the Obama presidential bid, by the start of February, — the crucial time in primary season — according to the widely respected, nonpartisan Center for Responsive Politics, was “lawyers/law firms” (most on Wall Street’s payroll), giving a total of $11,246,596.
This presents three unique credibility problems for the yes-we-can-little-choo-choo-that-could campaign: (1) these are not just “lawyers/law firms;” the vast majority of these firms are also registered lobbyists at the Federal level; (2) Senator Obama has made it a core tenet of his campaign platform that the way he is going to bring the country hope and change is not taking money from federal lobbyists; and (3) with the past seven ignoble years of lies and distortions fresh in the minds of voters, building a candidacy based on half-truths is not a sustainable strategy to secure the west wing from the right wing.
Yes, the other leading presidential candidates are taking money from lawyers/law firms/lobbyists, but Senator Obama is the only one rallying with the populist cry that he isn’t. That makes it not only a legitimate but a necessary line of inquiry.
The Obama campaign’s populist bubble is underpinned by what, on the surface, seems to be a real snoozer of a story. It all centers around business classification codes developed by the U.S. government and used by the Center for Responsive Politics to classify contributions. Here’s how the Center explained its classifications in 2003:
“The codes used for business groups follow the general guidelines of the Standard Industrial Classification (SIC) codes initially designed by the Office of Management and Budget and later replaced by the North American Industry Classification System (NAICS)…”
The Akin Gump law firm is a prime example of how something as mundane as a business classification code can be gamed for political advantage. According to the Center for Responsive Politics, Akin Gump ranks third among all Federal lobbyists, raking in $205,225,000 to lobby our elected officials in Washington from 1998 through 2007. The firm is listed as a registered federal lobbyist with the House of Representatives and the Senate; the firm held lobbying retainer contracts for more than 100 corporate clients in 2007. But when its non-registered law partners, the people who own this business and profit from its lobbying operations, give to the Obama campaign, the contribution is classified as coming from a law firm, not a lobbyist.
The same holds true for Greenberg Traurig, the law firm that employed the criminally inclined lobbyist, Jack Abramoff. Greenberg Traurig ranks ninth among all lobbyists for the same period, with lobbying revenues of $96,708,249. Its partners and employee donations to the Obama campaign of $70,650 by February 1 – again at that strategic time — appear not under lobbyist but the classification lawyers/law firms, as do 30 other corporate law firm/lobbyists.
Additionally, looking at Public Citizen’s list of bundlers for the Obama campaign (people soliciting donations from others), 27 are employed by law firms registered as federal lobbyists. The total sum raised by bundlers for Obama from these 27 firms as of February 1: $2,650,000. (There are also dozens of high powered bundlers from Wall Street working the Armani-suit and red-suspenders cocktail circuits, like Bruce Heyman, managing director at Goldman Sachs; J. Michael Schell, vice chairman of Global Banking at Citigroup; Louis Susman, managing director, Citigroup; Robert Wolf, CEO, UBS Americas. Each raised over $200,000 for the Obama campaign.)
Senator Obama’s premise and credibility of not taking money from federal lobbyists hangs on a carefully crafted distinction: he is taking money, lots of it, from owners and employees of firms registered as federal lobbyists but not the actual individual lobbyists.
But is that dealing honestly with the American people? According to the website of Akin Gump, it takes a village to deliver a capital to the corporations:
“The public law and policy practice [lobbying] at Akin Gump is integrated throughout the firm’s offices in the United States and abroad. As part of a full-service law firm, the group is able to draw upon the experience of members of other Akin Gump practices – including bankruptcy, communications, corporate, energy, environmental, labor and employment, health care, intellectual property, international, real estate, tax and trade regulation – that may have substantive, day-to-day experience with the issues that lie at the heart of a client’s situation. This is the internal component of Akin Gump’s team-based approach: matching the needs of clients with the appropriate area of experience in the firm … Akin Gump has a broad range of active representations before every major committee of Congress and executive branch department and agency.”
When queried about this, Massie Ritsch, communications director at the Center for Responsive Politics, says: “The wall between a firm’s legal practice and its lobbying shop can be low – the work of an attorney and a lobbyist trying to influence regulations and laws can be so intertwined. So, if anything, the influence of the lobbying industry in presidential campaigns is undercounted.”
Those critical thinkers over at the Black Agenda Report for the Journal of African American Political Thought and Action have zeroed in on the making of the Obama bubble:
“The 2008 Obama presidential run may be the most slickly orchestrated marketing machine in memory. That’s not a good thing. Marketing is not even distantly related to democracy or civic empowerment. Marketing is about creating emotional, even irrational bonds between your product and your target audience.”
And slick it is. According to the Obama campaign’s financial filings with the Federal Election Commission (FEC) and aggregated at the Center for Responsive Politics, the Obama campaign has spent over $52 million on media, strategy consultants, image building, marketing research and telemarketing.
The money has gone to firms like GMMB, whose website says its “goal is to change minds and change hearts, win in the court of public opinion and win votes” using “the power of branding – with principles rooted in commercial marketing,” and Elevation Ltd., which targets the Hispanic population and has “a combined experience of well over 50 years in developing and implementing advertising and marketing solutions for Fortune 500 companies, political candidates, government agencies.” Their client list includes the Department of Homeland Security.
There’s also the Birmingham, Alabama, based The Parker Group which promises: “Valid research results are assured given our extensive experience with testing, scripting, skip logic, question rotation and quota control … In-house list management and maintenance services encompass sophisticated geo-coding, mapping and scrubbing applications.” (Is it any wonder America’s brains are scrambled?)
The Wall Street plan for the Obama-bubble presidency is that of the cleanup crew for the housing bubble: sweep all the corruption and losses, would-be indictments, perp walks and prosecutions under the rug and get on with an unprecedented taxpayer bailout of Wall Street. (The corporate law firms have piled on to funding the plan because most were up to their eyeballs in writing prospectuses or providing legal opinions for what has turned out to be bogus AAA securities. Lawsuits naming the Wall Street firms will, no doubt, shortly begin adding the law firms that rendered the legal guidance to issue the securities.) Who better to sell this agenda to the millions of duped mortgage holders and foreclosed homeowners in minority communities across America than our first, beloved, black president of hope and change?
Why do Wall Street and the corporate law firms think they will find a President Obama to be accommodating? As the Black Agenda Report notes, “Evidently, the giant insurance companies, the airlines, oil companies, Wall Street, military contractors and others had closely examined and vetted Barack Obama and found him pleasing.”
That vetting included his remarkable “yes” vote on the Class Action Fairness Act of 2005, a five-year effort by 475 lobbyists, despite appeals from the NAACP and every other major civil rights group. Thanks to the passage of that legislation, when defrauded homeowners of the housing bubble and defrauded investors of the bundled mortgages try to fight back through the class-action vehicle, they will find a new layer of corporate-friendly hurdles.
I personally admire Senator Obama. I want to believe Senator Obama is not a party to the scheme. But corporate interests have had plenty of time to do their vetting. Democracy demands no less of we, the people.
This article originally appeared at www.CounterPunch.org.
