YOU’VE GOT MONEY

https://www.dwolla.com/home

PEER-TO-PEER PAYMENTS
http://blog.programmableweb.com/2011/12/06/new-payment-apis-a-survey-of-innovation-pride-and-suspicion/

“An innovator here is Dwolla, which I heard of months before finding FaceCash in our API index. Dwolla is a digital cash system that allows money to be sent to both individuals and businesses without using the credit card networks. This eliminates the credit card network fees, and that’s a big win for a lot of businesses. There is some big news coming out on the December 15th which Dwolla says will mark a pivot point for the company’s strategy, firmly setting them on a new direction. Clearly the business strategy is still evolving.

Dwolla enjoys wider developer engagement with API libraries in iOS objective C, PHP, and Ruby on github while FaceCash has none. Another nice point about the Dwolla API is the facilitator fee. This allows the developer to charge a transaction fee to users of the application, making the route to income quite clear. This built in payback mechanism is like developer bait. It’s an easy target that can motivate programmers to work with the API and this baiting concept is becoming more common.”

Dwolla_US_Map_Full.jpg

http://www.readwriteweb.com/archives/how_mobile_payments_will_evolve_in_the_next_severa.php
http://www.readwriteweb.com/archives/how_soccer_star_rio_ferdinands_app_shows_the_futur.php
http://www.readwriteweb.com/archives/the_mobile_payments_capital_of_the_us_des_moines_i.php
Permanent link to The Mobile Payments Capital of the U.S: Des Moines, Iowa?
by Dan Rowinski  / November 7, 2011

Where is the mobile payments capital of the United States? Salt Lake City has groundswell as a test city of a variety of platforms. The big cities and tech hubs like San Francisco, New York, Chicago, Boston and Portland, Ore. have a growing interest by brands and retailers. Yet, what if we told you that Des Moines, Iowa may be the U.S. leader in mobile payments? It may be true. Des Moines is the home of mobile payments platform Dwolla. It is an interesting case study – local startup creating buzz within the community and getting retailers and consumers to actually use the platform. Dwolla has created a mobile payments ecosystem from the bottom up. Could this be a model that the top-down brands like the financial institutions, tech giants and payments experts could follow to success?

Groundswell In Middle America
Within a 5-mile radius of Des Moines there are 500 to 700 business that are using mobile payments through Dwolla. The company works kind of like a payments version of Foursquare. You check at the register in the store using your phone and a pre-loaded Dwolla account. Currently, Dwolla only uses pre-loaded accounts for retail environments at this time but it is likely that the company will be able to partner with banks and financial institutions in the near future to go straight from a bank account to the retailer. The CEO of Dwolla, Ben Milne says that the company is looking at the, “cumbersome effects of having to pre-load” and will be trying to ease the pain points of consumers and merchants using the system. We talk a lot about these “pain points” when it comes to retail and payments, mobile or otherwise. Right now, in Dwolla’s infrastructure, the pain points are pre-loading and then making sure that merchants are set up on their end to handle the processing system. The latter is actually the easy part. With its FiSync, Spots and Proxi programs, the threshold for instituting Dwolla at the point of sale is actually not all that difficult. It also helps that Dwolla is a local company and can physically enter merchants’ stores to assist with the process. Dwolla sees itself more like Visa than PayPal. EBay may actually disagree with that considering that it is pushing very hard into the mobile wallets segment of the mobile payments industry and Dwolla operates in much the same way. Dwolla wants to position itself as a go-to resource for financial institutions to create a mobile payments infrastructure in communities such as Des Moines. Square, with its recent Card Case update, is also playing in this space.

des_moines_close_up_dwolla.jpg

Benefits To Consumers, Retailers
Dwolla is processing about $1 million in payments each day with about $150,000 of that coming specifically from Des Moines, according to Milne. “We think that it is a little ironic that it is in Des Moines and not Los Angeles,” Milne told ReadWriteWeb. Consumers benefit from Dwolla because of the location and social features of the platform. In June of this year, we called Dwolla’s Grid API the “Facebook Connect for mobile payments.” All sensitive personal information of the user is stored within Dwolla. An interesting quote from Milne in that article: “If Visa could blow up their current payment model and start over today, would they build a network that forces consumers to expose critical financial data in order to buy a bagel?” said Milne. The benefit of Dwolla is that it is basically electronic cash. This is one of the truest “mobile wallets” concepts. What do you do when you leave the house in the morning? Open your wallet and make sure there is some cash in there. What is stopping you from doing the same with your smartphone? Proxi was released by Dwolla in August. It allows users to open the app and see what merchants are accepting mobile payments via Dwolla in their vicinity. There has been no large marketing program tied to the Des Moines rollout of Dwolla. Milne stresses that the company is an active participant in the community, educating both merchants and consumers about where and how mobile payments can be used. The cash perspective of Dwolla is an interesting one. The company can position itself to be both the front end and back end of the payment process. As such, Google Wallet, Square, Intuit GoPayment (or any of the other dongle-based competitors) could theoretically tie into it as a backend. Dwolla is setting itself up not for competition, but for partnerships. As we have seen with Urban Airship in the mobile infrastructure space, that approach tends to work better than trying to crush potential enemies.

KILLER APP
http://www.businessinsider.com/this-28-year-old-is-making-sure-credit-cards-wont-exist-in-the-next-few-years-2011-11?op=1

There’s a tiny 12-person startup churning out of Des Moines, Iowa. Dwolla was founded by 28-year-old Ben Milne; it’s an innovative online payment system that sidesteps credit cards completely. Milne has no finance background, yet his little operation is moving between $30 and $50 million per month; it’s on track to move more than $350 million in the next year. Unlike PayPal, Dwolla doesn’t take a percentage of the transaction. It only asks for $0.25  whether it’s moving $1 or $1,000. We interviewed Milne about how he is building a credit card killer and Square rival from the middle of the nation where VCs and press are scarce.

BI: We hear you’re making credit card companies angry. How are you doing that?

Ben Milne: Ultimately we’re trying to build the next Visa, not the next PayPal.  We’re building a human network based on how we think the future of payments will work. The current model needs to be blown up. Dwolla started out of my old company.  I owned a speaker manufacturing company and we sold everything directly through a website.  I got really obsessed with interchange fees and how not to pay them.  Every time a merchant gets paid with a credit card they have to give up a percentage.  In my case, I was losing $55,000 a year to credit card companies.  I felt like they were stealing from me — I was getting paid and somebody was taking money out of my pocket. So I thought, how do I get paid through a website without paying credit card fees?  We pitched a bank, and amazingly enough they said, “We’ll give it a shot.” That was three years ago, so we’ve been working on the project for a really long time. In December of last year we figured out how to legally do what we do.

How many transactions are you doing?

The average transaction volume for Dwolla is right around $500 dollars. We move between $30 and $50 million per month.

What’s your story?

I’m 28.  I started my first company, Elemental Design, when I was 18.  I dropped out of University of Northern Iowa and built that. I started college because I thought that’s where I was supposed to go.  I applied to one college, I got in, went, and realized it wasn’t for me.  I had customers so I stopped going to class. We grew that company from a $1,200 investment to over one million in revenue in four years with three or four people and without outside investment.  The company was running itself and I wanted to work on another project.

You don’t have a finance background and yet you built Dwolla?

It’s been helpful in some strange ways.  I think the first financial institution we went into only listened to me for entertainment.  They let me get in to pitch the full executive team at the bank. I don’t look like a banker, they knew I didn’t have a banking background. They actually agreed to work with Dwolla after two hours of arguing with me and me scribbling on a whiteboard about how the whole thing could work. Had I been more typical, maybe they wouldn’t have listened to me.  In that respect, I think that not knowing how the mechanics worked was good — we just knew the way we wanted them to work.

What did you do for the first two years when Dwolla wasn’t technically legal?

Well it was legal, we just couldn’t operate outside of Iowa. For the first two years we built out the platform. We did a sh*tload of testing on a small scale because legally we couldn’t launch Dwolla nationwide.  We spent two years inside of Iowa fine-tuning Dwolla with the financial institutions, building out some of the initial models, and trying to figure out how to legally do what we do.

How’d you find a legal loophole?

Moving money is an exceptionally regulated business.  We’re in Iowa, which is sort of conservative — I don’t know if that helped us or hurt us, but in the long term I think it helped us.  We figured to do this legally, we had two options: we could take in a tremendous amount of money and go out and get licenses, which is how most people do it.  But we didn’t have access to that kind of capital here. The other option was to bring in really strategic investors, which is what we did. One of our investors is a financial institution; one is a financial services company. Our investors do credit and debit processing for banks.  So when you get a credit card from your bank, it’s being issued by companies like them.  Our investors are also distributing our product to financial institutions.  So we’ve been building a payment network, and we can do it legally because of who our investors are. We launched in December of last year and started moving $50,000 a week. Now we’re hovering around $1 million a day.  We hit that milestone in June or July. Now we’ve quieted things down. We had to tap the brakes because the way you handle money needs to be managed correctly.  We have some new partners on board and we’re going to hit it hard in December again.  We’ve got some stuff coming out in December that we think should be really big.

How does Dwolla work and how is it different from PayPal?

With Dwolla, payments are made directly from your bank account.  No credit or debit cards are allowed.  And because they don’t exist in the system, we don’t have to bring the fees into the system. You can spend any amount of money and when you do that, the person on the other end doesn’t have to pay 1, 2, 3 or 4%. They only pay $0.25 a transaction, which is especially helpful when it’s $1,000, $2,000 or $5,000 transactions.  Obviously PayPal becomes very cost prohibitive with those larger transactions. The biggest difference between ideas like this and a PayPal — and PayPal is a phenomenal idea, Square is too — is that those are built on top of networks like Visa and MasterCard. We’re building our own.

Can users only send money to Dwolla members?

No, you can send money to anyone.  Only the person sending it has to have a Dwolla account to initiate the transaction.  The person receiving it will have to sign up for an account, but we’ve been surprised at the conversion there.  It’s worked relatively well.  We leverage social networks really heavily as contact lists, which is one thing we do really different.  You can send money with an email address or with a phone number, but the most popular way to do it is to connect to Facebook and type in a friend’s name. We think, in the long term, sending money should be as easy and effortless as finding a friend on Facebook.  That’s really a behavior we try to mimic when it comes to peer-to-peer payments.  When someone does not have a Dwolla account, they get a wall post that says, “You’ve got money.”  If a friend sent that to you and it was their name and their face, you would have a different emotional connection to that than an arbitrary email from hellokitten32@aol.com.  It’s a totally different interaction and one that’s been really helpful for us in converting users into the system.

What kind of purchases and money transfers is Dwolla being used for?

We do pretty well in B2B; 11% of our business is person-to-person, and the large majority is business-to-business, consumer-to-business, and business-to-consumer.  The platform was originally built for taking in payments through websites, and we have APIs that allow you to do that.  We haven’t experienced the scale on those quite yet. Where we’ve seen a ton of transactions right now is with people paying monthly rent.  If I’m a landlord and I want to collect it, taking a credit card payment means missing out on 3% of an $1800 charge.  Dwolla is $0.25 cents. The average Dwolla transaction is right around $500. PayPal takes 2.9% plus $.30 a transaction.

Why hasn’t anyone side-stepped the credit card companies before? 

I think a lot of it is timing and luck.  And a little bit of getting your foot in the door.  One of our investors is a $1.8 billion financial institution. That’s atypical anywhere, let alone in Iowa.  Having them on board allowed us to get into a lot of rooms. We serve everyone from the landlord taking in one payment to the individual buying a coffee with their cellphone, to billion-dollar corporations.  Because we’re so atypical and look at mobile payments differently, we got in the room with the Federal Reserve and the U.S. Treasury who allowed us to have a conversation, not only from a corporate standpoint, but from a government monetary distribution standpoint. All banks are connected by one ACH system.  Credit card companies utilize that same system to pay off your credit card charges.  Banks internally set along that same system to move money in their own banks.  This system in its own right is riddled with flaws — tons of fraud issues and waste and delays.  If you’ve ever had a payment take a few days to clear, its because they’re waiting on that ACH system. We want to fix that system between the banks, take out the delays and make it instant.  If we can create this ubiquitous cash layer of distribution between consumers and merchants and developers and financial institutions, that actually fixes the problem.

No one has built a payment network in 30 years — since credit cards.  Everybody has concentrated on how we build a portal for credit cards, from digital wallets to Square. We don’t believe in credit cards.  We believe in authorization and in lower cost transfers.  Our generation actually understands that when you buy sh*t, it comes out of your bank account and you have to pay for that.

Since you’re hooked up to bank accounts, users don’t have to have money in a Dwolla account to make a transfer?

You can hold money inside of Dwolla but you don’t have to.  We’re finding a lot of consumers want to hold it there.  There is actually a positive average balance inside of Dwolla for each consumer.  We also have businesses that use Dwolla to do payroll, so they’ll keep a balance in there to cover the cost.

You could have an account of $0 in Dwolla and there would be no fee?

The only fee would be if someone paid you.  We take a quarter.  We really want that quarter. It’s all we want!

How do Dwolla’s mobile payments work?

We built out a mobile facing system; your mobile phone is just a different view of a website, so a mobile payment is just an authorization on your cell phone. We take the website, plop it into the cell phone, start adding proximity solutions so you can see which Dwolla merchants are close to you, and then make it easy to pay once you go into a store that accepts our system. Dwolla uses the GPS feature and allows you to make a payment in real-time.

So you’re saying if a Starbucks accepts Dwolla I’ll be able to see that on a Google Map, go there and charge the coffee to my phone?

Yes, you’ll just walk into the store and pay.  It’s like checking in on Foursquare, you’re just paying instead of checking in. We started in one coffee shop and now we’re working with 400 or 500 merchants.  Part of us scaling out is we  have to pick inflection points and then do some hiring to actively pursue those communities and integrate with them.  We’ll be beginning that in December.

Do banks have to pay to be integrated with Dwolla?

No, we just give them the service and then your bank account comes with Dwolla.  There are 16 banks across the country that come with Dwolla.  We’re talking to some huge financial institutions about doing the same thing. Banks are going to have trouble being relevant in mobile.  The fundamental issue with mobile payments is: how do you get to your cash regardless of where you bank?  No one has cracked that nut.  I truly feel like we’ve not only cracked that nut but we’re already selling it into financial institutions.

You don’t have to pay the banks anything to log in and access accounts?

Nope.  We built a web service that connects with the financial institutions and we do not have to pay them to work with them.  We’re a service provider to them and we work at the same time to make their customers happy.

Who are your investors?

We’ve raised $1.3 million. Veridian Credit Union is one of our primary investors. The other investor is a company called The Members Group which provides credit, debit, ACH and security solutions to banks and credit unions.

How big is the Dwolla team?

We’re about 12 people — that’s a beast of a startup in Iowa.  We were smaller last December, about 2 or 3 people, so we’ve had pretty good growth. Most everyone is in Des Moines. We’ve experienced strong early stage validation and have generated revenue that says “Hey, this thing can work well.”  We’ve got this little fire and now we’re trying to figure out how to pour a sh*tload of gas on it, and really make this scale out.  The beginning of that is in December and right now we’re trying to ensure we have the right partners to really kick that thing off really hard.

What happens in December?

Oh, it’s going to be good.

What is it?

We’ve got this product coming out in December that solves a whole bunch of really big problems inside of the ACH system, which all banks are connected to, and it does it in a way that’s never been done before.

Are you raising capital?

We have a lot of really positive conversations going on at the moment and we’re trying to figure out who the right partner to work with is.  We’re fortunate that our current investors are very supportive of what we’re doing.

How are you doing all this from Iowa?  It seems like this company should be on Wall Street.

Maybe.  Right now Des Moines is the right place for us to be.  In the future there’s going to have to be a lot of business development outside of Des Moines and there are some things we won’t be able to do from here. If we can convince people in Iowa, who are more conservative by nature, to use Dwolla then my personal feeling is we’ve really got something there.  Had we been outside of Iowa, maybe we would have tried to scale things up too quickly and maybe it would have blown up in our faces.  Maybe not. In my own naive way, I would never build a company anywhere but Iowa so maybe I just don’t know any better.  My personal feeling is, if you want to build it, where you are is just an excuse. Figure out what the area has to offer you and then leverage that.  Hustle your ass off and make it work.

NO FEES for TRANSACTIONS under $10
http://techcrunch.com/2011/12/01/dwolla-drops-fees-for-transactions-under-10-in-prelude-to-larger-announcement/
Dwolla Drops Fees For Transactions Under $10 In Prelude To Larger Announcement
by Devin Coldewey  /  December 1st, 2011

Online and mobile payment service Dwolla has announced that all transactions under $10 will have no fee from now on. This is of course great news for small businesses and merchants whose average transaction is below that. Anything above still carries the flat $0.25 fee. The company has a history of experimentation, and the payments space is certainly ripe for disruption from any number of angles, but it’s still not clear what has enabled this particular move. After all, operational overhead is a real thing, and while nobody doubts the company’s honest interest in changing payment processing, it’s not likely they just did this in the spirit of the season. In all likelihood it has something to do with the announcement they’re planning for two weeks from now, which will mark the company’s first birthday (or rather, the first anniversary of their national launch) and, according to CEO Ben Milne, represent a major and “necessary” platform pivot by the company.

PROXI
http://techcrunch.com/2011/08/24/dwolla-launches-proxi-for-proximity-based-mobile-payments/
Dwolla Launches “Proxi” For Proximity-Based Mobile Payments
by Sarah Perez  /  August 24th, 2011

Online and mobile payment platform Dwolla just launched a new feature called “Proxi” which allows users to send and receive cash-based mobile payments based on their current proximity to another connected device. The technology bypasses the need for special hardware, like Square’s plastic dongles or NFC chips built into a phone, in order to make mobile payments. Instead, the interface provides a simple way for Dwolla’s users to find nearby contacts and send them money using only the mobile app itself.

Dwolla, for those unaware, is a company with a unique take on digital payments. Its vision is that consumers, not third-parties, should dictate how their payments network operates. What this means for Dwolla and its users is a payments network that’s devoid of personal information. And most importantly, Dwolla’s inroad to this planned disruption is cash, an under-represented market in electronic payments.

Dwolla’s “Proxi” Beta
With the new “Proxi” (beta) feature, Dwolla founder Ben Milne explains that the company is looking to accomplish much of the same thing that NFC makes possible, but without the need for expensive hardware. With NFC, there’s added security, because you have to be physically present to pay. Proxi uses GPS for that same reason. When launching Proxi, the mobile app pulls up a list of those who are close to you and able to accept payments, including both nearby users and merchants. And like everything else Dwolla does, Proxi considers users’ security first. For example, you can control whether you want to be visible only to your contacts or to a wider range of Dwolla users, you can control how long you will be visible, and you can control the distance at which you are visible, with settings for 300 ft., 1 mile or 5 miles. The Proxi beta will initially be available on iOS, and will roll out to other mobile platforms (Android, Windows Phone) in the coming weeks. The beta is private for now, but TechCrunch readers canrequest immediate access here: https://www.dwolla.com/proxi/beta. There will be limited spots available, so access is on a first-come, first-serve basis.

Pros and Cons of the Dwolla System
Proxi is the sort of feature that could take Dwolla from “interesting idea” territory to becoming a more practical application. Secure, person-to-person (or person-to-business) mobile payments without the high fees associated with PayPal, or the need for special hardware? Sounds good here. The only drawback is that Dwolla doesn’t directly connect to your own bank account, in the same way that your debit card does, which could confuse first-time users who don’t understand why other financial institutions are involved. Instead, Dwolla has partnerships with The Veridian Group, a subsidiary of Veridian Credit Union, in Waterloo, Iowa, and The Members Group (TMG) another financial and credit union service organization owned by Iowa credit unions and their members. Through these organizations’, which hold the funds in Dwolla’s users’ accounts, people can send and receive money from their own bank accounts. And while Dwolla is easy to use, it’s hardly available for use everywhere, the way that your debit would be. Finally, although Dwolla’s fees aren’t outrageous, they are present. Dwolla has a flat 25-cents per transaction fee, regardless of the transaction amount. That’s lower than PayPal’s 30-cents per transaction fee. There’s also no additional percentage amount per transaction, even though PayPal currently charges an additional 2.9% for transactions under $3,000. Dwolla currently has 40,000 users, with user-to-user transactions representing the highest volume of transactions and B2B transactions representing the highest dollar value.

“RIDICULOUS MONEY”
http://www.businessinsider.com/dwolla-investors-funding-2011-12#ixzz1g3mGUHci

“Now we know a thing or two about investors. And when they see a startup with numbers like that, they start to drool.  There’s no way Dwolla can hide from them, even in Iowa. Milne says that the amount of investor interest they have is actually absurd, and the term sheets they’re seeing are “really ridiculous.” When we asked how much money investors have offered Dwolla for its next round Milne wouldn’t comment. When we asked if it was more than $50 million, he just smiled and repeated, “it’s ridiculous.” Milne says his inbox has been flooded by more than 700 investors who have reached out about funding Dwolla. It’s quite a change from the first $1 million Dwolla raised — that was a long, painful 12-month process. To help him keep track of the inquiries, Milne’s assistant started a spreadsheet that lists all 700 investors; investors Milne has heard of or who have been recommended to him are at the top. Investors are being aggressive to get their firms at the top of his stack. Milne told us about one firm that really impressed him. Two of the partners flew out to Iowa for a meeting. Soon after, Milne and the partners had a disagreement over the phone.   “They seemed to think Dwolla should go in one direction and we wanted to go in another. So I told them the deal wouldn’t work,” says Milne. The next day, one of the partners showed up on his doorstep in Iowa. In less than 24 hours he had booked a flight from Silicon Valley and flown out to Des Moine — again — to patch up the misunderstanding in person. ”I was blown away,” Milne said. “That was really cool.” Dwolla will likely be raising a strategic round very soon. Despite investors waving gobs of money at him, Milne says he is looking to keep his future funding modest.”

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the CREDIT UNION EXODUS


Painting by Anthony Freda www.AnthonyFreda.com

a HOLIDAY OPPORTUNITY
http://moveyourmoneyproject.org/find-bankcredit-union
http://www.findacreditunion.org/
http://www.asmarterhoice.org/

BANK TRANSFER DAY
http://thinkprogress.org/special/2011/11/03/360804/650000-americans-credit-unions/
650,000 Americans Joined Credit Unions Last Month — More Than In All Of 2010 Combined
by Zaid Jilani on Nov 3, 2011

One of the tactics the 99 Percenters are using to take back the country from the 1 percent is to move their money from big banks to credit unions, community banks, and other smaller financial unions that aren’t gambling with our nation’s future. Now, the Credit Union National Association (CUNA) reports that a whopping 650,000 Americans have joined credit unions since Sept. 29 — the date that Bank of America announced it would start charging a $5 monthly debit fee, a move it backed down on this week. To put that in perspective, there were only 600,000 new members for credit unions in all of 2010. “These results indicate that consumers are clearly making a smarter choice by moving to credit unions where, on average, they will save about $70 a year in fewer or no fees, lower rates on loans and higher return on savings,” said CUNA President Bill Cheney. This Saturday, 99 Percenters are calling on Americans to move their money from big banks to credit unions and community banks on what is being called “Bank Transfer Day.” If you want to stand with the 99 Percent and take part in this action, use the Move Your Money project’s community bank and credit union finder tool to find out how.

http://www.cuna.org/public/press/press-release/issues/hundreds-thousands-of-consumers-billions-of-$$-move-credit-unions
http://www.americanbanker.com/issues/176_214/customers-flee-for-credit-unions-1043783-1.html
Bank Customers Flee to CUs
by Ed Roberts / 11.3.2011

An estimated 650,000 consumers have closed their bank accounts and opted for credit union membership over the past four weeks, according to CUNA, bringing the approach to Saturday’s Bank Transfer Day to a crescendo. In a survey of 5,000 of its credit union members CUNA estimates that at least 650,000 consumers across the nation have joined credit unions since Sept. 29, the day Bank of America unveiled its now-rescinded $5 monthly debit card fee. Also during that time, CUNA estimates that credit unions have added $4.5 billion in new savings accounts, likely from the new members and existing members shifting their funds. The survey results also show that more than four in every five credit unions experiencing member growth since Sept. 29 attributed the growth to consumer reaction to new fees imposed by banks, or a combination of consumer reactions to the new bank fees plus the social media-inspired “Bank Transfer Day,” Nov. 5. “These results indicate that consumers are clearly making a smarter choice by moving to credit unions where, on average, they will save about $70 a year in fewer or no fees, lower rates on loans and higher return on savings.” said CUNA President Bill Cheney. Cheney said the growth is particularly noticeable at larger credit unions (those with $100 million or more in assets, which account for about 20% of all credit unions – but count about 80% of all credit union members). The CUNA survey shows that more than 70% of these credit unions reported they have seen growth in memberships and deposits since Sept. 29.

HOW to JOIN a CREDIT UNION
http://motherjones.com/politics/2011/11/how-to-move-money-big-banks-credit
How Do I Move My Money Out of a Big Bank?
by Josh Harkinson / Nov. 3, 2011

Saturday is the deadline for Bank Transfer Day, the call for a mass money exodus from big banks to credit unions and small community banks. Over 80,000 have pledged online to punish “too big to fail” banks by withdrawing their funds. Still on the fence? Wondering where to start? We’ve got a handy primer below on how it works, and check out what happened when MoJo reporter Josh Harkinson tried moving his money out of Wells Fargo.

Why would I want to move my money out of my existing bank?
You’ll probably save money in the long run. According to a 2009 year study by the Filene Research Institute, the average credit union account holder paid $71.47 in annual fees, compared to $183.14 paid by the typical bank customer. And new restrictions on debit card fees imposed last month by the Dodd-Frank Act have sent banks scrambling for even more ways to nickel and dime their customers in pursuit of profits. Nonprofit credit unions, on the other hand, only need to break even. They also tend to plow their money into back into basic loans in their own communities, instead of dabbling in the kind of complex and risky securitized investments that caused large banks to go bust and drag down the economy. It’s important to note that credit unions and small local banks aren’t recession-proof: a striking 17 percent of Florida’s bank failures since 2008 were community banks.
What’s the process?
Don’t expect to be able to open a credit union account and close your old bank account in one day. You’ll need to receive new checks and a debit card in the mail, switch over any automated deposits and electronic bill paying services, and wait for pending financial transactions to clear. Only then should you give your old bank the boot. Here’s a searchable map that locates credit unions near you.
How long does it take?
You’ll probably need to wait one or two weeks to get a debit card and checks in the mail, though some credit unions will issue you temporary versions. Besides that, it’s just a matter of finding the time to switch over your bills.
Aren’t credit unions less convenient than big banks?
Not necessarily. While individual credit unions typically have fewer branches than corporate banks, many participate in “shared branching,” allowing customers to make a deposit or withdrawal at other participating credit unions. Also, many credit unions have implemented advanced online banking options including direct-deposit, online bill-pay, and mobile banking using your cell phone.
What about ATMs?
Ask your local credit union if it’s a member of the Co-op Network. Customers at credit unions in the network can use a smart phone app to find any one of 24,000 fee-free ATMs across the country. “You actually get access to more fee-free ATMs than if you were at Bank of America,” says Ben Rogers, research director for the Filene Research Institute, a think tank that studies Credit Unions. Some Credit Unions will even refund any fees that you rack up using other banks’ ATMs.
If everyone moves their money out of big banks, how much money do the banks stand to lose?
Currently, total deposits for all banks and savings and loans, including personal and business accounts, come to $7.5 trillion.
Are big banks freaking out over this?
Most big banks rely on their vast numbers of personal checking and savings accounts to shore up their cash reserves and make lucrative investments. “If everybody moved their money, it would make a huge difference,” Rogers says. Still, the nearly 80,000 people who’ve made online pledges to join Bank Transfer Day probably won’t cause bankers to break a sweat—at least not yet. Add another 400,000 of them, and “you’d get not just frowns, but maybe gasps in the board room.”
How are credit unions benefiting from this?
Credit unions across the country have added upwards of 650,000 new customers since September 29 (the day Bank of America unveiled its now-defunct $5 monthly fee for debit cards), according to a survey of 5,000 credit unions by the Credit Union National Association. The group also estimates that credit unions have added $4.5 billion in new savings since then, likely from these new members and transfers from other banks. But CUNA spokesman Patrick Keefe says these numbers barely move the needle for big banks: “It’s actually a drop in the ocean for them. They are huge.”
Is there any scenario in which my big bank actually benefits if I do this?
Yes and no. If you have about $400 in a savings account and average about $1000 in a checking account and have nothing else with your bank, then you’re probably what your bank would call an “unprofitable customer.” But most banks want to keep unprofitable customers onboard in hopes of later cross-selling them on credit cards and loans. “I don’t think that there’s a ton of banks actively smiling and smirking because they are scaring away all these unprofitable customers,” Rogers says. “Nobody really wants to lose customers.”



“EXODUS”
http://techpresident.com/blog-entry/mass-exodus-big-banks-organizing-online
Mass Exodus from Big Banks is Organizing Online
by Nick Judd / November 2, 2011

Over 35,000 people have indicated support on Facebook for a mass Nov. 5 exodus of personal bank accounts from big banks and into credit unions, called “Bank Transfer Day” — one of several online groups with the same basic message, popularized by Anonymous, Occupy Wall Street and others, and just the latest in a series of ground-up actions protesting the practices of big banks. These online efforts trace their origin back to news from September, in response to new provisions in the Dodd-Frank financial overhaul law that would limit the amounts that banks could charge merchants for the use of debit cards. News broke at the time that banks would seek instead to pass the fees along to customers in the form of monthly charges for the use of the cards. As anger at a new fee during tough economic times met the current direct-action national zeitgeist, fueled by Occupy Wall Street, initiatives began to spring up online.

The “Bank Transfer Day” Facebook page belongs to an L.A. gallery owner named Kristen Christian, but the idea might actually be the brainchild of Arianna Huffington, who floated the idea in 2009 as a response to financial institutions not lending much of the money they received from the federal bank bailout. That call to action didn’t make a lasting splash at the time, but has found new life. From Santa Cruz to New Mexico to Wisconsin, credit unions are reporting an uptick in new accounts. The Progressive Change Campaign Committee, on the occasion of Bank of America’s announcement yesterday that it would not impose a planned $5 monthly fee for debit card purchases, said that over 51,000 have pledged through their platform to move their money from big banks, including 21,500 from Bank of America. PCCC co-founder Adam Green also wrote in an email that the wired progressive group plans to release an online tool, “Banxodus,” that will help people find “good-guy” banks near them.

Yesterday was a big day for online organizing against big-bank behavior. Also on occasion of the Bank of America announcement, Change.org released an announcement pointing to a 300,000-signatory petition hosted on their online petitions platform. “Bank of America announced Tuesday that it will drop its $5 debit card fee after more than 300,000 people from all 50 states joined a viral campaign on Change.org started by 22-year-old Bank of America customer Molly Katchpole,” Change.org proclaimed in a press release sent yesterday. Katchpole is enjoying national media attention, but her online petition also came amid a nationwide upheaval against the current structure of the financial services industry — and with droves of people actually taking their money away from Bank of America.

Bank of America officials said in a statement that customer input was the reason they canceled their plans. Decisions by JP Morgan Chase & Co. and Wells Fargo to walk back their own debit card fees came last week. “We have listened to our customers very closely over the last few weeks and recognize their concern with our proposed debit usage fee,” David Darnell, Bank of America’s co-chief operating officer, said in a statement. “Our customers’ voices are most important to us. As a result, we are not currently charging the fee and will not be moving forward with any additional plans to do so.” The fee reversal may have come too late for Bank of America. Local newspapers across the country are full of stories like this one, from the Worcester (Mass.) Telegram & Gazette:

For many months, Sean J. McLoughlin considered leaving Bank of America and switching to a bank that didn’t charge him fees just for having checking accounts. When Bank of America said in September it would charge customers $5 a month for using debit cards, his decision to leave the big bank became easier. “I said ‘Forget it, I’m done,’ ” he said.

TOO BIG to JAIL?
http://www.zerohedge.com/contributed/only-way-save-economy-break-giant-insolvent-banks
The Government Created the Giant Banks

As MIT economics professor and former IMF chief economist Simon Johnson points out, the official White House position is that:

(1) The government created the mega-giants, and they are not the product of free market competition

(2) The White House needs to “regulate and oversee them”, even though it is clear that the government has no real plans to regulate or oversee the banking behemoths

(3) Giant banks are good for the economy

This is false … giant banks are incredibly destructive for the economy.

We Do NOT Need the Big Banks to Help the Economy Recover

Do we need the Too Big to Fails to help the economy recover?

No.

The following top economists and financial experts believe that the economy cannot recover unless the big, insolvent banks are broken up in an orderly fashion:

  • Dean and professor of finance and economics at Columbia Business School, and chairman of the Council of Economic Advisers under President George W. Bush, R. Glenn Hubbard
  • The leading monetary economist and co-author with Milton Friedman of the leading treatise on the Great Depression, Anna Schwartz
  • Economics professor and senior regulator during the S & L crisis, William K. Black
  • Professor of entrepreneurship and finance at the Chicago Booth School of Business, Luigi Zingales

Others, like Nobel prize-winning economist Paul Krugman, think that the giant insolvent banks may need to be temporarily nationalized.

In addition, many top economists and financial experts, including Bank of Israel Governor Stanley Fischer – who was Ben Bernanke’s thesis adviser at MIT – say that – at the very least – the size of the financial giants should be limited.

Even the Bank of International Settlements – the “Central Banks’ Central Bank” – has slammed too big to fail. As summarized by the Financial Times:

The report was particularly scathing in its assessment of governments’ attempts to clean up their banks. “The reluctance of officials to quickly clean up the banks, many of which are now owned in large part by governments, may well delay recovery,” it said, adding that government interventions had ingrained the belief that some banks were too big or too interconnected to fail.

This was dangerous because it reinforced the risks of moral hazard which might lead to an even bigger financial crisis in future.

And as I noted in December 2008, the big banks are the major reason why sovereign debt has become a crisis:

 BIS points out in a new report that the bank rescue packages have transferred significant risks onto government balance sheets, which is reflected in the corresponding widening of sovereign credit default swaps:

The scope and magnitude of the bank rescue packages also meant that significant risks had been transferred onto government balance sheets. This was particularly apparent in the market for CDS referencing sovereigns involved either in large individual bank rescues or in broad-based support packages for the financial sector, including the United States. While such CDS were thinly traded prior to the announced rescue packages, spreads widened suddenly on increased demand for credit protection, while corresponding financial sector spreads tightened.

In other words, by assuming huge portions of the risk from banks trading in toxic derivatives, and by spending trillions that they don’t have, central banks have put their countries at risk from default.

Similarly, a study of 124 banking crises by the International Monetary Fund found that propping banks which are only pretending to be solvent hurts the economy:

Existing empirical research has shown that providing assistance to banks and their borrowers can be counterproductive, resulting in increased losses to banks, which often abuse forbearance to take unproductive risks at government expense. The typical result of forbearance is a deeper hole in the net worth of banks, crippling tax burdens to finance bank bailouts, and even more severe credit supply contraction and economic decline than would have occurred in the absence of forbearance.

Cross-country analysis to date also shows that accommodative policy measures (such as substantial liquidity support, explicit government guarantee on financial institutions’ liabilities and forbearance from prudential regulations) tend to befiscally costly and that these particular policies do not necessarily accelerate the speed of economic recovery.

***

All too often, central banks privilege stability over cost in the heat of the containment phase: if so, they may too liberally extend loans to an illiquid bank which is almost certain to prove insolvent anyway. Also, closure of a nonviable bank is often delayed for too long, even when there are clear signs of insolvency (Lindgren, 2003). Since bank closures face many obstacles, there is a tendency to rely instead on blanket government guarantees which, if the government’s fiscal and political position makes them credible, can work albeit at the cost of placing the burden on the budget, typically squeezing future provision of needed public services.

The big banks have been bailed out to the tune of many trillions, dragging the economy down a bottomless pit from which we can’t escape. See thisthisthis and this. Unless we break them up, we will never escape.

If We Break Up the Giants, Smaller Banks Will Thrive … And Loan More to Main Street

Do we need to keep the TBTFs to make sure that loans are made?

Nope.

USA Today points out:

Banks that received federal assistance during the financial crisis reduced lending more aggressively and gave bigger pay raises to employees than institutions that didn’t get aid, a USA TODAY/American University review found.

***

The amount of loans outstanding to businesses and individuals fell 9.1% for the 12 months ending Sept. 30, 2009, at banks that participated in TARP compared with a 6.2% drop at banks that didn’t.

Dennis Santiago – CEO and Managing Director of Institutional Risk Analytics (Chris Whalen’s company) – notes:

The really shocking numbers are in the unused line of credit commitments of banks to U.S. business. This is the canary number I like to look at because it is a direct expression of banking and finance confidence in Main Street industry. It’s gone from $92 billion in Dec -2007 to just $24 billion as of Sep-2010. More importantly, the vast majority of this contraction of credit availability to American industry has been by the larger banks, C&I LOC from $87B down to $18.8B by the institutions with assets over $10B. Poof!

Fortune reports that smaller banks are stepping in to fill the lending void left by the giant banks’ current hesitancy to make loans. Indeed, the article points out that the only reason that smaller banks haven’t been able to expand and thrive is that the too-big-to-fails have decreased competition:

Growth for the nation’s smaller banks represents a reversal of trends from the last twenty years, when the biggest banks got much bigger and many of the smallest players were gobbled up or driven under…

As big banks struggle to find a way forward and rising loan losses threaten to punish poorly run banks of all sizes, smaller but well capitalized institutions have a long-awaited chance to expand.

BusinessWeek notes:

As big banks struggle, community banks are stepping in to offer loans and lines of credit to small business owners…

At a congressional hearing on small business and the economic recovery earlier this month, economist Paul Merski, of the Independent Community Bankers of America, a Washington (D.C.) trade group, told lawmakers that community banks make 20% of all small-business loans, even though they represent only about 12% of all bank assets. Furthermore, he said that about 50% of all small-business loans under $100,000 are made by community banks…

Indeed, for the past two years, small-business lending among community banks has grown at a faster rate than from larger institutions, according to Aite Group, a Boston banking consultancy. “Community banks are quickly taking on more market share not only from the top five banks but from some of the regional banks,” says Christine Barry, Aite’s research director. “They are focusing more attention on small businesses than before. They are seeing revenue opportunities and deploying the right solutions in place to serve these customers.”

Fed Governor Daniel K. Tarullo said:

The importance of traditional financial intermediation services, and hence of the smaller banks that typically specialize in providing those services, tends to increase during times of financial stress. Indeed, the crisis has highlighted the important continuing role of community banks…

For example, while the number of credit unions has declined by 42 percent since 1989, credit union deposits have more than quadrupled, and credit unions have increased their share of national deposits from 4.7 percent to 8.5 percent. In addition, some credit unions have shifted from the traditional membership based on a common interest to membership that encompasses anyone who lives or works within one or more local banking markets. In the last few years, some credit unions have also moved beyond their traditional focus on consumer services to provide services to small businesses, increasing the extent to which they compete with community banks.

Thomas M. Hoenig pointed out in a speech at a U.S. Chamber of Commerce summit in Washington:

During the recent financial crisis, losses quickly depleted the capital of these large, over-leveraged companies. As expected, these firms were rescued using government funds from the Troubled Asset Relief Program (TARP). The result was an immediate reduction in lending to Main Street, as the financial institutions tried to rebuild their capital. Although these institutions have raised substantial amounts of new capital, much of it has been used to repay the TARP funds instead of supporting new lending.

On the other hand, Hoenig pointed out:

In 2009, 45 percent of banks with assets under $1 billion increased their business lending.

45% is about 45% more  than the amount of increased lending by the too big to fails.

Indeed, some very smart people say that the big banks aren’t really focusing as much on the lending business as smaller banks.

Specifically since Glass-Steagall was repealed in 1999, the giant banks have made much of their money in trading assets, securities, derivatives and other speculative bets, the banks’ own paper and securities, and in other money-making activities which have nothing to do with traditional depository functions.

Now that the economy has crashed, the big banks are making very few loans to consumers or small businesses because theystill have trillions in bad derivatives gambling debts to pay off, and so they are only loaning to the biggest players and those who don’t really need credit in the first place. See this and this.

So we don’t really need these giant gamblers. We don’t reallyneed JP Morgan, Citi, Bank of America, Goldman Sachs or Morgan Stanley. What we need are dedicated lenders.

The Fortune article discussed above points out that the banking giants are not necessarily more efficient than smaller banks:

The largest banks often don’t show the greatest efficiency. This now seems unsurprising given the deep problems that the biggest institutions have faced over the past year.

“They actually experience diseconomies of scale,” Narter wrote of the biggest banks. “There are so many large autonomous divisions of the bank that the complexity of connecting them overwhelms the advantage of size.”

And Governor Tarullo points out some of the benefits of small community banks over the giant banks:

Many community banks have thrived, in large part because their local presence and personal interactions give them an advantage in meeting the financial needs of many households, small businesses, and agricultural firms. Their business model is based on an important economic explanation of the role of financial intermediaries–to develop and apply expertise that allows a lender to make better judgments about the creditworthiness of potential borrowers than could be made by a potential lender with less information about the borrowers.

A small, but growing, body of research suggests that the financial services provided by large banks are less-than-perfect substitutes for those provided by community banks.

It is simply not true that we need the mega-banks. In fact, as many top economists and financial analysts have said, the “too big to fails” are actually stifling competition from smaller lenders and credit unions, and dragging the entire economy down into a black hole.

The Failure to Break Up the Big Banks Is Causing Rampant Fraud


Top economists and experts on fraud say that fraud is not only widespread, it is actually the business model adopted by the giant banks. See thisthisthisthisthis and this.

In addition, Richard Alford – former New York Fed economist, trading floor economist and strategist – showed that banks that get too big benefit from “information asymmetry” which disrupts the free market.

Nobel prize winning economist Joseph Stiglitz noted in September that giants like Goldman are using their size to manipulate the market:

“The main problem that Goldman raises is a question of size: ‘too big to fail.’ In some markets, they have a significant fraction of trades. Why is that important? They trade both on their proprietary desk and on behalf of customers. When you do that and you have a significant fraction of all trades, you have a lot of information.”

Further, he says, “That raises the potential of conflicts of interest, problems of front-running, using that inside information for your proprietary desk. And that’s why the Volcker report came out and said that we need to restrict the kinds of activity that these large institutions have. If you’re going to trade on behalf of others, if you’re going to be a commercial bank, you can’t engage in certain kinds of risk-taking behavior.”

The giants (especially Goldman Sachs) have also used high-frequency program trading which not only distorted the markets– making up more than 70% of stock trades – but which also let the program trading giants take a sneak peak at what the real (aka “human”) traders are buying and selling, and then trade on the insider information. See thisthisthisthis and this. (This is frontrunning, which is illegal; but it is a lot bigger than garden variety frontrunning, because the program traders are not only trading based on inside knowledge of what their own clients are doing, they are also trading based on knowledge of what all other traders are doing).

Goldman also admitted that its proprietary trading program can “manipulate the markets in unfair ways”. The giant banks have also allegedly used their Counterparty Risk Management Policy Group (CRMPG) to exchange secret information and formulate coordinated mutually beneficial actions, all with thegovernment’s blessings.

In other words, a handful of giants doing it, it can manipulate the entire economy in ways which are not good for the American citizen.

The Failure to Break Up the Big Banks Is Dooming Us to a Derivatives Depression

All independent experts agree that unless we rein in derivatives, will have another – bigger – financial crisis.

But the big banks are preventing derivatives from being tamed.

We have also pointed out that derivatives are still very dangerous for the economy, that the derivatives “reform” legislation previously passed has probably actually weakenedexisting regulations, and the legislation was “probably written by JP Morgan and Goldman Sachs“.

As I noted last year

Harold Bradley – who oversees almost $2 billion in assets as chief investment officer at the Kauffman Foundation – told the Reuters Global Exchanges and Trading Summit in New York that a cabal is preventing swap derivatives from being forced onto clearing exchanges:

There is no incentive from the moneyed interests in either Washington or New York to change it…

I believe we are in a cabal. There are five or six players only who are engaged and dominant in this marketplace and apparently they own the regulatory apparatus. Everybody is afraid to regulate them.

That’s bad enough.

But Bob Litan of the Brookings Institute wrote a paper (here’s asummary) showing that – even if real derivatives legislation is ever passed – the 5 big derivatives players will still prevent any real change. James Kwak notes that Litan is no radical, but has previously written in defense in financial “innovation”.

Here’s a good summary from Rortybomb, showing that this is yet another reason to break up the too big to fails:

Litan is worried about the “Dealer’s Club” of the major derivatives players. I particularly like this paper as the best introduction to the current oligarchy that takes place in the very profitable over-the-counter derivatives trading market and credit default swap market. [Litton says]:

I have written this essay primarily to call attention to the main impediments to meaningful reform: the private actors who now control the trading of derivatives and all key elements of the infrastructure of derivatives trading, the major dealer banks. The importance of this “Derivatives Dealers’ Club” cannot be overstated. All end-users who want derivatives products, CDS in particular, must transact with dealer banks…I will argue that the major dealer banks have strong financial incentives and the ability to delay or impede changes from the status quo — even if the legislative reforms that are now being widely discussed are adopted — that would make the CDS and eventually other derivatives markets safer and more transparent for all concerned…

Here, of course, I refer to the major derivatives dealers – the top 5 dealer-banks that control virtually all of the dealer-to-dealer trades in CDS, together with a few others that participate with the top 5 in other institutions important to the derivatives market. Collectively, these institutions have the ability and incentive, if not counteracted by policy intervention, to delay, distort or impede clearing, exchange trading and transparency

Market-makers make the most profit, however, as long as they can operate as much in the dark as is possible – so that customers don’t know the true going prices, only the dealers do. This opacity allows the dealers to keep spreads high…

In combination, these various market institutions – relating to standardization, clearing and pricing – have incentives not to rock the boat, and not to accelerate the kinds of changes that would make the derivatives market safer and more transparent. The common element among all of these institutions is strong participation, if not significant ownership, by the major dealers.

So Bob Litan is waving a giant red flag that the top dealer-banks that control the CDS market can more or less, through a variety of means he lays out convincingly in the paper, derail or significantly slow down CDS reform after the fact if it passes.

***

If you thought we’d at least get our arms around credit default swap reform from a financial reform bill, you should read this report from Litan as a giant warning flag. In case you weren’t sure if you’ve heard anyone directly lay out the case on how the market and political concentration in the United States banking sector hurts consumers and increases systemic risk through both political pressures and anticompetitive levels of control of the institutions of the market, now you have. It’s not Matt Taibbi, but it’s much further away from a “everything is actually fine and the Treasury is in control of reform” reassurance. Which should scare you, and give you yet another good reason for size caps for the major banks.

53246864840716464 2380196514216991388?l=georgewashington2.blogspot The Only Way to Save the Economy:  Break Up the Giant, Insolvent BanksMoreover, the big banks are still dumping huge amounts of their toxic derivatives on the taxpayer. And see this.

Why Aren’t They Be Broken Up?

So what is the real reason that the TBTFs aren’t being broken up?

Certainly, there is regulatory capture, cowardice and corruption:

  • Joseph Stiglitz (the Nobel prize winning economist) said recently that the U.S. government is wary of challenging the financial industry because it is politically difficult, and that he hopes the Group of 20 leaders will cajole the U.S. into tougher action
  • Economic historian Niall Ferguson asks:

    Guess which institutions are among the biggest lobbyists and campaign-finance contributors? Surprise! None other than the TBTFs [too big to fails].

  • Manhattan Institute senior fellow Nicole Gelinas agrees:

    The too-big-to-fail financial industry has been good to elected officials and former elected officials of both parties over its 25-year life span

  • Investment analyst and financial writer Yves Smith says:

    Major financial players [have gained] control over the all-important over-the-counter debt markets…It is pretty hard to regulate someone who has a knife at your throat.

  • William K. Black says:

    There has been no honest examination of the crisis because it would embarrass C.E.O.s and politicians . . .Instead, the Treasury and the Fed are urging us not to examine the crisis and to believe that all will soon be well. There have been no prosecutions of the chief executives of the large nonprime lenders that would expose the “epidemic” of fraudulent mortgage lending that drove the crisis. There has been no accountability…

    The Obama administration and Fed Chairman Ben Bernanke have refused to investigate the nature and causes of the crisis. And the administration selected Timothy Geithner, who with then Treasury Secretary Paulson bungled the bailout of A.I.G. and other favored “too big to fail” institutions, to head up Treasury.

    Now Lawrence Summers, head of the White House National Economic Council, and Mr. Geithner argue that no fundamental change in finance is needed. They want to recreate a secondary market in the subprime mortgages that caused trillions of dollars of losses.

    Traditional neo-classical economic theory, particularly “modern finance theory,” has been proven false but economists have failed to replace it. No fundamental reform can be passed when the proponents are pretending that there really is no crisis or need for change.

  • Harvard professor of government Jeffry A. Frieden says:

    Regulatory agencies are often sympathetic to the industries they regulate. This pattern is so well known among scholars that it has a name: “regulatory capture.” This effect can be due to the political influence of the industry on its regulators; or to the fact that the regulators spend so much time with their charges that they come to accept their world view; or to the prospect of lucrative private-sector jobs when regulators retire or resign.

  • Economic consultant Edward Harrison agrees:Regulating Wall Street has become difficult in large part because of regulatory capture.

But there is an even more interesting reason . . .

The number one reason the TBTF’s aren’t being broken up is [drumroll] . . . the ‘ole 80?s playbook is being used.

As the New York Times wrote in February:

In the 1980s, during the height of the Latin American debt crisis, the total risk to the nine money-center banks in New York was estimated at more than three times the capital of those banks. The regulators, analysts say, did not force the banks to value those loans at the fire-sale prices of the moment, helping to avert a disaster in the banking system.

In other words, the nine biggest banks were all insolvent in the 1980s.

Indeed, Richard C. Koo – former economist at the Federal Reserve Bank of New York and doctoral fellow with the Fed’s Board of Governors, and now chief economist for Nomura –confirmed this fact last year in a speech to the Center for Strategic & International Studies. Specifically, Koo said that -after the Latin American crisis hit in 1982 – the New York Fed concluded that 7 out of 8 money center banks were actually “underwater” and “bankrupt”, but that the Fed hid that fact from the American people.

So the government’s failure to break up the insolvent giants – even though virtually all independent experts say that is the only way to save the economy, and even though there is no good reason not to break them up – is nothing new.

William K. Black’s statement that the government’s entire strategy now – as in the S&L crisis – is to cover up how bad things are (“the entire strategy is to keep people from getting the facts”) makes a lot more sense.

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{Lehman still existed in 2007 dataset used}

http://arxiv.org/abs/1107.5728v2
The network of global corporate control
by Stefania Vitali, James B. Glattfelder & Stefano Battisto
28 Jul 2011 (v1), last revised 19 Sep 2011 (this version, v2)

“The structure of the control network of transnational corporations affects global market competition and financial stability. So far, only small national samples were studied and there was no appropriate methodology to assess control globally. We present the first investigation of the architecture of the international ownership network, along with the computation of the control held by each global player. We find that transnational corporations form a giant bow-tie structure and that a large portion of control flows to a small tightly-knit core of financial institutions. This core can be seen as an economic “super-entity” that raises new important issues both for researchers and policy makers.”


The 1318 transnational corporations that form the core of the economy. Superconnected companies are red, very connected companies are yellow. The size of the dot represents revenue (Image: PLoS One)

a SUPER-ENTITY
http://www.newscientist.com/article/mg21228354.500-revealed–the-capitalist-network-that-runs-the-world.html
Revealed – the capitalist network that runs the world
by Andy Coghlan and Debora MacKenzie / 19 October 2011

AS PROTESTS against financial power sweep the world this week, science may have confirmed the protesters’ worst fears. An analysis of the relationships between 43,000 transnational corporations has identified a relatively small group of companies, mainly banks, with disproportionate power over the global economy. The study’s assumptions have attracted some criticism, but complex systems analysts contacted by New Scientist say it is a unique effort to untangle control in the global economy. Pushing the analysis further, they say, could help to identify ways of making global capitalism more stable.

The idea that a few bankers control a large chunk of the global economy might not seem like news to New York’s Occupy Wall Street movement and protesters elsewhere. But the study, by a trio of complex systems theorists at the Swiss Federal Institute of Technology in Zurich, is the first to go beyond ideology to empirically identify such a network of power. It combines the mathematics long used to model natural systems with comprehensive corporate data to map ownership among the world’s transnational corporations (TNCs). “Reality is so complex, we must move away from dogma, whether it’s conspiracy theories or free-market,” says James Glattfelder. “Our analysis is reality-based.” Previous studies have found that a few TNCs own large chunks of the world’s economy, but they included only a limited number of companies and omitted indirect ownerships, so could not say how this affected the global economy – whether it made it more or less stable, for instance.

The Zurich team can. From Orbis 2007, a database listing 37 million companies and investors worldwide, they pulled out all 43,060 TNCs and the share ownerships linking them. Then they constructed a model of which companies controlled others through shareholding networks, coupled with each company’s operating revenues, to map the structure of economic power. The work, to be published in PloS One, revealed a core of 1318 companies with interlocking ownerships (see image). Each of the 1318 had ties to two or more other companies, and on average they were connected to 20. What’s more, although they represented 20 per cent of global operating revenues, the 1318 appeared to collectively own through their shares the majority of the world’s large blue chip and manufacturing firms – the “real” economy – representing a further 60 per cent of global revenues.

When the team further untangled the web of ownership, it found much of it tracked back to a “super-entity” of 147 even more tightly knit companies – all of their ownership was held by other members of the super-entity – that controlled 40 per cent of the total wealth in the network. “In effect, less than 1 per cent of the companies were able to control 40 per cent of the entire network,” says Glattfelder. Most were financial institutions. The top 20 included Barclays Bank, JPMorgan Chase & Co, and The Goldman Sachs Group.

John Driffill of the University of London, a macroeconomics expert, says the value of the analysis is not just to see if a small number of people controls the global economy, but rather its insights into economic stability. Concentration of power is not good or bad in itself, says the Zurich team, but the core’s tight interconnections could be. As the world learned in 2008, such networks are unstable. “If one [company] suffers distress,” says Glattfelder, “this propagates.” “It’s disconcerting to see how connected things really are,” agrees George Sugihara of the Scripps Institution of Oceanography in La Jolla, California, a complex systems expert who has advised Deutsche Bank.

Yaneer Bar-Yam, head of the New England Complex Systems Institute (NECSI), warns that the analysis assumes ownership equates to control, which is not always true. Most company shares are held by fund managers who may or may not control what the companies they part-own actually do. The impact of this on the system’s behaviour, he says, requires more analysis. Crucially, by identifying the architecture of global economic power, the analysis could help make it more stable. By finding the vulnerable aspects of the system, economists can suggest measures to prevent future collapses spreading through the entire economy. Glattfelder says we may need global anti-trust rules, which now exist only at national level, to limit over-connection among TNCs. Bar-Yam says the analysis suggests one possible solution: firms should be taxed for excess interconnectivity to discourage this risk. One thing won’t chime with some of the protesters’ claims: the super-entity is unlikely to be the intentional result of a conspiracy to rule the world. “Such structures are common in nature,” says Sugihara.

Newcomers to any network connect preferentially to highly connected members. TNCs buy shares in each other for business reasons, not for world domination. If connectedness clusters, so does wealth, says Dan Braha of NECSI: in similar models, money flows towards the most highly connected members. The Zurich study, says Sugihara, “is strong evidence that simple rules governing TNCs give rise spontaneously to highly connected groups”. Or as Braha puts it: “The Occupy Wall Street claim that 1 per cent of people have most of the wealth reflects a logical phase of the self-organising economy.” So, the super-entity may not result from conspiracy. The real question, says the Zurich team, is whether it can exert concerted political power. Driffill feels 147 is too many to sustain collusion. Braha suspects they will compete in the market but act together on common interests. Resisting changes to the network structure may be one such common interest.

The top 50 of the 147 superconnected companies
1. Barclays plc
2. Capital Group Companies Inc
3. FMR Corporation
4. AXA
5. State Street Corporation
6. JP Morgan Chase & Co
7. Legal & General Group plc
8. Vanguard Group Inc
9. UBS AG
10. Merrill Lynch & Co Inc
11. Wellington Management Co LLP
12. Deutsche Bank AG
13. Franklin Resources Inc
14. Credit Suisse Group
15. Walton Enterprises LLC
16. Bank of New York Mellon Corp
17. Natixis
18. Goldman Sachs Group Inc
19. T Rowe Price Group Inc
20. Legg Mason Inc
21. Morgan Stanley
22. Mitsubishi UFJ Financial Group Inc
23. Northern Trust Corporation
24. Société Générale
25. Bank of America Corporation
26. Lloyds TSB Group plc
27. Invesco plc
28. Allianz SE 29. TIAA
30. Old Mutual Public Limited Company
31. Aviva plc
32. Schroders plc
33. Dodge & Cox
34. Lehman Brothers Holdings Inc*
35. Sun Life Financial Inc
36. Standard Life plc
37. CNCE
38. Nomura Holdings Inc
39. The Depository Trust Company
40. Massachusetts Mutual Life Insurance
41. ING Groep NV
42. Brandes Investment Partners LP
43. Unicredito Italiano SPA
44. Deposit Insurance Corporation of Japan
45. Vereniging Aegon
46. BNP Paribas
47. Affiliated Managers Group Inc
48. Resona Holdings Inc
49. Capital Group International Inc
50. China Petrochemical Group Company

* Lehman still existed in the 2007 dataset used

http://blogs.scientificamerican.com/observations/2011/08/08/ownership-ties-among-global-corporations-strangely-resemble-a-bow-tie/
Ownership Ties Among Global Corporations Strangely Resemble a Bow Tie
by Sophie Bushwick / August 8, 2011

Large international corporations can control a wide variety of smaller companies. For example, Scientific American is a publication of Nature Publishing Group, which is a subsidiary of the Georg Von Holtzbrinck Publishing Group in Germany. This group also owns a number of other publishers in the U.S., United Kingdom, and Germany, a pyramid that includes American suspense thrillers, British textbooks, a German weekly newspaper and more. But corporate pyramids like that of the Von Holtzbrinck Publishing Group do not stand alone: The web of relationships among companies is tangled and complex, as a July 28 paper published to pre-print blogarXiv.org reveals.

A team of ETH Zurich (Swiss Federal Institute of Technology Zurich) researchers used a network model to map the ownership relations among more than 43,000 transnational corporations, which do not identify themselves with one country but rather use a global perspective and employ an international roster of executives. Owning shares in a company grants the owner some direct control of that entity, and indirect control of any companies in the parent-company’s pyramid. By treating each major corporation as a node and drawing links between companies that owned shares of others, the researchers uncovered the tendrils of control that link one pyramid to another.

The links between nodes, shown above, represent influence that can flow two ways: any corporation could either influence or be influenced by any other corporation. Directly owning shares of a company gave a corporation more influence than indirect ownership, and the researchers assigned their links certain weights to reflect this difference. At first glance, the picture that emerged looks quite convoluted. However, the researchers discovered that the web of connections clustered into four different components that took the shape of a bow tie. In the illustration, red dots represent nodes, green arrows point from share-owner to the owned company, and the flow of control points in the direction of the most power.

The researchers observed a central cluster in which influence goes both ways between all the nodes, called the strongly connected component, or SCC, as shown above. Within the SCC, each member either directly or indirectly owns some of every other member’s shares. Second, there was the in group, companies that owned shares in various members of the SCC, but were not under the SCC’s influence: Influence “flowed” in but not out. Part three was the in-group’s opposite, the companies who were influenced by, but did not own shares in, the SCC companies—this became the out group. Finally, the fourth component of the network consists of the tubes and tendrils, or T&T, companies that remain separate from the SCC but may have ties to members of the in or out groups. The above illustration actually represents a generic version of a bow tie network, a category of network that can also be used to describe how Web pages are related. The researchers found that the corporate network looked more like the illustration below, which shows that the out group is much larger than the in group or even the SCC.

Only the tiny, elite in group gets to influence the SCC core without submitting to its influence at all. A significant amount of the corporations, however, still fall into the central strongly connected component, which indicates that many of the major market players have complex economic relationships with one another. “What are the implications for global financial stability?” said the researchers in their paper. “What are the implications for market competition?” The study may not have uncovered a corporate conspiracy, but it does show that corporations are not lone behemoths: They are inter-dependent and influence one another a great deal. Applying a scientific model to the market can help provide a clearer picture of how the world economy runs. And perhaps a hint at what our corporate overlords are wearing.

Image credit: Stefano Battiston et al., ETH Zurich (Swiss Federal Institute of Technology Zurich)

WAIT WHAT DO THEY DO for MONEY?
http://www.newdeal20.org/2011/10/14/who-are-the-1-and-what-do-they-do-for-a-living-61759/
Who are the 1% and What Do They Do for a Living?
by Mike Konczal / 10/14/2011
There’s good reason to focus on the top 1%: they’re distorting our economy.

A lot of emphasis is on the “99%” versus the “1%” in these protests. But who are the 1% and what do they do for a living? Are they all Wilt Chamberlains and Oprahs and other people taking part in the dynamism of the new economy? Nope. It’s same as it ever was — high-level management and the financial sector. Suzy Khimm goes through the numbers here. I’m curious about occupations. I’ll hand the mic off to “Jobs and Income Growth of Top Earners and the Causes of Changing Income Inequality: Evidence from U.S. Tax Return Data“ by Bakija, Cole, and Heim. This is the latest and greatest report on occupations and inequality. Here’s a chart of the occupations of the top 1%:

distribution_1_percent

Inequality has fractals. Let’s go into the top 0.1% — what do they look like?  Here’s the chart of the occupations of the top 0.1%, including capital gains:

It boils down to managers, executives, and people who work in finance. From the paper: “[o]ur findings suggest that the incomes of executives, managers, supervisors, and financial professionals can account for 60 percent of the increase in the share of national income going to the top percentile of the income distribution between 1979 and 2005.”

For fun, there are more than twice as many people listed as “Not working or deceased” than are in “arts, media, sports.” For every elite sports player who earned a place at the top of the income pyramid due to technology changes and superstar, tournament-style labor markets that broadcast him across the globe, there are two trust fund babies.

The top 1% of managers and executives often means C-level employees, especially CEOs. And their earnings versus the average worker have skyrocketed in the past 30 years, so this shouldn’t be surprising:

How has this evolved over time?  Can we get a cross-section of that protest sign above?

Same candidates. There’s a reason the protests ended up on Wall Street: The top 1% and top 0.1% comprises all the senior bosses and the financial sector. One of the best things about Occupy Wall Street is that there is no chatter about Obama or Perry or whatever is the electoral political issue of the day. There are a lot of people rethinking things, discussing, learning, and conceptualizing the kinds of world they want to create. Since so much about inequality is a function of the legal structure known as a “corporation,” I’d encourage you to check out Alex Gourevitch on how the corporate is structured in our laws.

The paper notes that stock market returns drive much of the manager’s income. This is related to a process of financialization, something JW Mason has done a fantastic job outlining here. The “dominant ethos among managers today is that a business exists only to enrich its shareholders, including, of course, senior managers themselves,” and this is done by paying out more in dividends that is earned in profits. Think of it as our-real-economy-as-ATM-machine, cashing out wealth during the good times and then leaving workers and the rest of the real economy to deal with the aftermath.

Both articles mention chapter 6 of Doug Henwood’s Wall Street; anyone interested in how things have changed and where they need to go would be wise to check it out. It’s even available for free pdf book download here.

There’s good reason to focus on the top 1% instead of the top 10 or 50%. There is evidence that financial pay at this elite level is correlated with deregulation and the other legal changes that brought on the crisis. High-ranking senior corporate executives’ pay has dwarfed workers’ salaries, but is only a reward for engaging in shady financial engineering practices. These problems require a legal solution and thus they require a democratic challenge and a rethinking of how we want to structure our economy. Here’s to the 99% and Occupy Wall Street helping get us there.

{Mike Konczal is a Fellow at the Roosevelt Institute.}

BLACKROCK
http://www2.blackrock.com/global/home/AboutUs/History/index.htm

STATE STREET
http://www.statestreet.com/wps/portal/internet/corporate/home/aboutstatestreet/corporateoverview/history/!ut/p/c4/04_SB8K8xLLM9MSSzPy8xBz9CP0os3i_0CADCydDRwP_IGdnA08Tc38fINvY3dFEPzg1Lz40WL8g21ERABezIio!/

VANGUARD
https://personal.vanguard.com/us/content/Home/WhyVanguard/AboutVanguardWhoWeAreContent.jsp

FIDELITY
http://jobs.fidelity.com/ourculture/ourvalues/ourvalue_fidvalue.shtml

FOUR COMPANIES RUN EVERYTHING
http://english.pravda.ru/business/finance/18-10-2011/119355-The_Large_Families_that_rule_the_world-0/
The Large Families that rule the world / 18.10.2011

We are speaking of 6, 8 or maybe 12 families who truly dominate the world. Know that it is a mystery difficult to unravel. But what are the names of the families who run the world and have control of states and international organizations like the UN, NATO or the IMF?

To try to answer this question, we can start with the easiest: inventory, the world’s largest banks, and see who the shareholders are and who make the decisions. The world’s largest companies are now: Bank of America, JP Morgan, Citigroup, Wells Fargo, Goldman Sachs and Morgan Stanley. Let us now review who their shareholders are.

Bank of America:
State Street Corporation, Vanguard Group, BlackRock, FMR (Fidelity), Paulson, JP Morgan, T. Rowe, Capital World Investors, AXA, Bank of NY, Mellon.

JP Morgan:
State Street Corp., Vanguard Group, FMR, BlackRock, T. Rowe, AXA, Capital World Investor, Capital Research Global Investor, Northern Trust Corp. and Bank of Mellon.

Citigroup:
State Street Corporation, Vanguard Group, BlackRock, Paulson, FMR, Capital World Investor, JP Morgan, Northern Trust Corporation, Fairhome Capital Mgmt and Bank of NY Mellon.

Wells Fargo:
Berkshire Hathaway, FMR, State Street, Vanguard Group, Capital World Investors, BlackRock, Wellington Mgmt, AXA, T. Rowe and Davis Selected Advisers.

We can see that now there appears to be a nucleus present in all banks: State Street Corporation, Vanguard Group, BlackRock and FMR (Fidelity). To avoid repeating them, we will now call them the “big four”

Goldman Sachs:
“The big four,” Wellington, Capital World Investors, AXA, Massachusetts Financial Service and T. Rowe.

Morgan Stanley:
“The big four,” Mitsubishi UFJ, Franklin Resources, AXA, T. Rowe, Bank of NY Mellon e Jennison Associates. Rowe, Bank of NY Mellon and Jennison Associates.
 
We can just about always verify the names of major shareholders. To go further, we can now try to find out the shareholders of these companies and shareholders of major banks worldwide.

Bank of NY Mellon:
Davis Selected, Massachusetts Financial Services, Capital Research Global Investor, Dodge, Cox, Southeatern Asset Mgmt. and … “The big four.”

State Street Corporation (one of the “big four”):
Massachusetts Financial Services, Capital Research Global Investor, Barrow Hanley, GE, Putnam Investment and … The “big four” (shareholders themselves!).

BlackRock (another of the “big four”):
PNC, Barclays e CIC.

Who is behind the PNC? FMR (Fidelity), BlackRock, State Street, etc. And behind Barclays? BlackRock

And we could go on for hours, passing by tax havens in the Cayman Islands, Monaco or the legal domicile of Shell companies in Liechtenstein. A network where companies are always the same, but never a name of a family.

In short: the eight largest U.S. financial companies (JP Morgan, Wells Fargo, Bank of America, Citigroup, Goldman Sachs, U.S. Bancorp, Bank of New York Mellon and Morgan Stanley) are 100% controlled by ten shareholders and we have four companies always present in all decisions: BlackRock, State Street, Vanguard and Fidelity.

In addition, the Federal Reserve is comprised of 12 banks, represented by a board of seven people, which comprises representatives of the “big four,” which in turn are present in all other entities.

In short, the Federal Reserve is controlled by four large private companies: BlackRock, State Street, Vanguard and Fidelity. These companies control U.S. monetary policy (and world) without any control or “democratic” choice. These companies launched and participated in the current worldwide economic crisis and managed to become even more enriched.

To finish, a look at some of the companies controlled by this “big four” group:
Alcoa Inc.
Altria Group Inc.
American International Group Inc.
AT&T Inc.
Boeing Co.
Caterpillar Inc.
Coca-Cola Co.
DuPont & Co.
Exxon Mobil Corp.
General Electric Co.
General Motors Corporation
Hewlett-Packard Co.
Home Depot Inc.
Honeywell International Inc.
Intel Corp.
International Business Machines Corp
Johnson & Johnson
JP Morgan Chase & Co.
McDonald’s Corp.
Merck & Co. Inc.
Microsoft Corp.
3M Co.
Pfizer Inc.
Procter & Gamble Co.
United Technologies Corp.
Verizon Communications Inc.
Wal-Mart Stores Inc.
Time Warner
Walt Disney
Viacom
Rupert Murdoch’s News Corporation.,
CBS Corporation
NBC Universal

The same “big four” control the vast majority of European companies counted on the stock exchange. In addition, all these people run the large financial institutions, such as the IMF, the European Central Bank or the World Bank, and were “trained” and remain “employees” of the “big four” that formed them. The names of the families that control the “big four”, never appear.

{Translated from the Portuguese version by Lisa Karpova / Pravda.Ru}

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CHAVEZ WANTS HIS GOLD

ALL 200 TONS OF IT
http://online.wsj.com/article/SB10001424053111903392904576512961180570694.html
Venezuela Plans to Move Reserve Funds
by Jose de Cordoba & Ezequiel Minaya / August 17, 2011

Venezuela plans to transfer billions of dollars in cash reserves from abroad to banks in Russia, China and Brazil and tons of gold from European banks to its central bank vaults, according to documents reviewed Tuesday by The Wall Street Journal. The planned moves would include transferring $6.3 billion in cash reserves, most of which Venezuela now keeps in banks such as the Bank for International Settlements in Basel, Switzerland, and Barclays Bank in London to unnamed Russian, Chinese and Brazilian banks, one document said. Venezuela also plans to move 211 tons of gold it keeps abroad and values at $11 billion to the vaults of the Venezuelan Central Bank in Caracas where the government keeps its remaining 154 tons of bullion, the document says.

Venezuelan officials were tight-lipped. Representatives of the ministry of finance and the central bank said there was no official comment, and no one was authorized to address the issue. Lately, senior Venezuelan officials have criticized Venezuela’s dependence on the dollar. Last Saturday, Venezuelan Foreign Minister Nicolas Maduro said the world’s financial system, based on the dollar, “had entered into a crisis of uncertainty and we are planning to construct a new international monetary system, and especially in South America, protect ourselves from this situation,” he said.

The Bank of England recently received a request from the Venezuelan government about transferring the 99 tons of gold Venezuela holds in the bank back to Venezuela, said a person familiar with the matter. A spokesman from the Bank of England declined to comment whether Venezuela had any gold on deposit at the bank. A spokesman for the Bank for International Settlements where Venezuela keeps $3.7 billion of its cash reserves, and 11.2 tons of gold, Venezuela values at $544 million, according to the document, also declined to comment.

Analysts said the planned move made little economic or financial sense, since Venezuela would be taking its money out of secure banks in safe countries and putting it in countries that are not as safe and perhaps in currencies such as the Chinese yuan or the Russian ruble, which are not reserve currencies. “It’s a big risk,” said José Guerra, a former official at Venezuela’s central bank. Mr. Guerra said he also had heard about the documents whose authenticity was confirmed to him by Central Bank officials. Mr. Guerra said one possible reason for the planned moves could be that Venezuela is afraid it could be compelled to pay billions of dollars in compensations to foreign companies that have gone to court to recover damages for companies Venezuelan President Hugo Chávez has nationalized. Another reason could be that China may have asked for collateral for billions of dollars it has loaned Venezuela, Mr. Guerra said.

Venezuela faces a sizable bill from arbitration but it’s difficult to pin down a reliable estimate. “It’s a wide range from $10 billion to $40 billion and beyond,” says Tamara Herrera, chief economist of Síntesis Financiera, an economic consulting firm based in Caracas. “There are many ongoing negotiations; the major ones of course are with oil companies.” One of the documents outlining the moves appears to have been drafted by Jorge Giordani, Venezuela’s planning and finance minister, in conjunction with Nelson Merentes, the central bank president, for Mr. Chávez’s approval. It calls for the transfer of the cash and gold reserves as of Aug. 8 in a maximum of two months. Another document prepared by Foreign Minister Nicolas Maduro for Mr. Chávez’s approval calls for Messrs. Giordani and Merentes to prepare a plan to safeguard Venezuela’s international reserves given “the recent U.S. debt crisis and its impact on the dollar as a world reserve currency.” The crisis, the document says, “has lit all the alarm signals as to whether it’s convenient to maintain our reserves in that currency.” The document also notes that “the powers of the North” have “pillaged” Libya’s international reserves as a result of the sanctions applied to Libya. “That makes us reflect on the need to elaborate a plan to monitor and secure the funds that the Republic maintains in international banks to meet its commitments abroad.

For some analysts, the reference to Libya signaled a possible political motive. The charismatic Mr. Chávez, who has said he will run again for president next year’s elections, is being treated with chemotherapy for cancer in Cuba. Neither Mr. Chávez’s type of cancer nor Mr. Chávez’s prognosis has been made public. Moving the reserves may signal that Mr. Chávez and his associates could be preparing some drastic political moves—such as canceling elections—that could incur international condemnation and perhaps trigger sanctions. “It doesn’t augur well for Venezuela,” says Roger Noriega, a former high-ranking state department official during the Bush administration.

Opposition congressman Julio Montoya said he received leaked copies of the proposal to move the funds from concerned officials of the finance ministry. “We don’t know if (Chávez) has signed it,” Mr. Montoya said during a press conference Tuesday. The congressman from Zulia state criticized what he called the “secretive” nature of the president’s deliberation over the measure. Mr. Montoya said that the proposal raised the question if Venezuela was being pressured into transferring its reserves because of its growing ties with China and Russia.

To fund the country’s large-scale social programs, Mr. Chávez has turned to resource-hungry China for assistance on everything from financing to housing and machinery. Last year, Venezuela received a $20 billion credit line from the China Development Bank for housing, which it is paying back with oil shipments. While China has been Venezuela’s largest creditor in recent years, Russia has been a major arms supplier to the South American nation. Most recently, Venezuela announced it was finalizing agreements for two additional credit lines of $4 billion each with Russia and China, with a portion of the Russian funds earmarked for the Venezuelan military. Venezuelan officials have also said they have recently reached an agreement with Brazil for a $4 billion line of credit.

PHYSICAL TRANSFER
http://www.ft.com/intl/cms/s/0/e08657a4-c9b9-11e0-b88b-00144feabdc0.html#axzz1VPZKy4uA
Traders prepare for Chávez gold transfer
by Jack Farchy & Benedict Mander / August 18, 2011

Bullion traders are preparing for one of the largest transfers of physical gold in recent history after Hugo Chávez, Venezuela’s president, ordered the country’s gold reserves to be returned to Caracas. Venezuela’s central bank is the world’s 15th largest holder of gold, with 365.8 tonnes, of which some 211 tonnes, worth $12.3bn, are held overseas, according to a proposal for the transfer from the Venezuelan central bank and finance ministry.

Gold traders and logistics specialists said the transfer of 211 tonnes of gold – about 17,000 standard 400-ounce bars – would represent one of the largest moves of physical gold in decades. While billions of dollars worth of gold is traded every day, only a tiny proportion of it moves from vaults in London, New York and Zurich. Mike Cundy, director of security for G4S, which along with Brink’s dominates the bullion logistics industry, said: “This would be a very big one – I can’t think of another case where we’ve moved that sort of thing.” A large proportion of the gold is in London, according to figures in the proposal document, with the Bank of England holding 99.2 tonnes. The Venezuelan central bank also has gold deposit accounts with Barclays, HSBC and Standard Chartered that would be delivered to the Bank of England, traders said.

Mr Chávez said on Wednesday night that he had signed the plan to repatriate at least 90 per cent of Venezuela’s gold reserves as well as moving foreign exchange reserves out of US and European banks. The country could still reverse its decision at the last minute, analysts warned. The move is part of a broader strategy to decrease dependence on countries that Venezuela considers hostile: the proposal document cited the possibility that the US Federal Reserve could freeze dollar assets. Countries such as Iran and Libya, which have been subject to international sanctions, have in the past repatriated gold reserves, traders said. Libya’s foreign reserves were frozen after war broke out this year. “There is a growing preference among many different communities in the gold market to have their physical gold at home,” said Edel Tully, precious metals strategist at UBS.

Venezuela would need to transport the gold in several trips, traders said, since the high value of gold means it would be impossible to insure a single aircraft carrying 211 tonnes. It could take about 40 shipments to move the gold back to Caracas, traders estimated.
“It’s going to be quite a task. Logistically, I’m not sure if the central bank realises the magnitude of the task ahead of them,” said one senior gold banker. As Venezuela was preparing for the repatriation in recent months, bullion stored in the Bank of England occasionally traded at a small but unusual premium to gold in other London vaults. Traders said the most likely explanation was that the Venezuelan central bank had been converting short-term gold deposits into physical gold. Mr Chávez has rejected doubts over whether the Venezuelan central bank has sufficient vault space to store 365.8 tonnes. “If there isn’t enough room to store the gold in the central bank vaults, I can lend you the basement of the Miraflores presidential palace,” he said.


“A last check of physical gold inventory in JP Morgan’s vault showed only 338,303 total ounces of gold… roughly 10.6 tons.”

THE THING IS
http://www.bloomberg.com/news/2011-08-17/chavez-preparing-government-takeover-of-venezuela-s-gold-mining-industry.html

Venezuelan President Hugo Chavez ordered his government to repatriate $11 billion in gold held in banks abroad to safeguard the country from the economic crisis and said he’ll nationalize the local gold industry. Venezuela has about 211 tons of its 365 tons of gold reserves held abroad at institutions including the Bank of England, JPMorgan Chase & Co. (JPM), Barclays Plc (BARC), Standard Chartered Plc (STAN) and the Bank of Nova Scotia (BNS), according to a government document.
“We’ve held 99 tons of gold at the Bank of England since 1980. I agree with bringing that home,” Chavez said today on state television. “It’s a healthy decision.” Chavez, who has said he wants to eliminate the “dictatorship” of the U.S. dollar, has called on Venezuela’s central bank to diversify its $28.7 billion in reserves away from U.S. institutions. Some cash reserves, which total $6.3 billion, will be shifted into currencies from emerging markets including China, Russia, Brazil and India, central bank President Nelson Merentes said today at a news conference.

‘Brutal Place’
Earlier today Chavez said he plans to take control of the country’s gold industry to halt illegal mining and boost reserves. The government is preparing a decree to stop illegal miners exploiting deposits of gold and coltan, an ore containing tantalum, used in mobile phones and video-game consoles, he said. Venezuela faces international arbitration over nationalized gold assets from three companies including Crystallex International Corp. (KRY), a Canadian gold producer whose Las Cristinas mine was taken over by the government in February. Chavez has increased state control over the economy since 2006 by nationalizing companies in the oil, petrochemicals, cement, metal, mining and telecommunications industries. “Venezuela has established its position as a brutal place to do business,” Tom Winmill, who manages the Midas Fund in New York, said today in a telephone interview. “Whether it’s a small cap like Crystallex or a large cap like Barrick or Anglo Gold, it doesn’t really make any difference because no one is going to put another nickel into that country,” he said.

Relaxed Restrictions
The South American country, in an effort to boost stalled production and take advantage of rising prices, last year relaxed restrictions on gold exports to allow some companies and joint ventures with the government to send as much as 50 percent of their output abroad.
Venezuela state gold producer Minerven has been shut for 15 days amid a strike, newspaper El Mundo reported today, citing company President Luis Herrera. “The area is run by the mafia,” Chavez said of the gold industry today. “We’re going to nationalize gold. We can’t keep allowing them to take it away.” Rusoro Mining Ltd. (RML), the only publicly traded gold miner still in Venezuela, is in talks with the government to increase gold exports, Chief Executive Officer Andre Agapov said today in a telephone interview. “We can sell gold in the local market, but we want to sell as much gold as possible at international prices,” Agapov said. He said he didn’t have any information on a possible nationalization.

Stock Falls
The company’s stock fell 17 percent to 12.5 Canadian cents on the Toronto Stock Exchange today. It’s fallen 69 percent this year. Venezuela produces 11 metric tons of gold a year, and illegal miners extract an additional 10 to 11 tons a year, Chavez said in May. Venezuela’s National Guard first seized control of the Las Cristinas mine, which has reserves of about 27 million ounces, in November 2001 from Canada’s Vanessa Ventures. Venezuela’s 365.8 metric tons of gold reserves makes it the 15th-largest holder of the precious metal in the world, according to an August report from the World Gold Council. Venezuela’s gold holdings accounted for about 61 percent of the nation’s international reserves, according to the report. Gold futures for December delivery rose $8.80, or 0.5 percent, to $1,793.80 an ounce on the Comex in New York. Prices touched a record $1,817.60 on Aug. 11.

SEE ALSO : THE FAKE-GOLD STANDARD
http://spectregroup.wordpress.com/2008/03/18/the-fake-gold-standard/

THE FAKE-GOLD STANDARD (cont.)   [UNCONFIRMED]
http://viewzone2.com/fakegoldx.html
Fake gold bars!
by Dan Eden / December 04, 2009

It’s one thing to counterfeit a twenty or hundred dollar bill. The amount of financial damage is usually limited to a specific region and only affects dozens of people and thousands of dollars. Secret Service agents quickly notify the banks on how to recognize these phony bills and retail outlets usually have procedures in place (such as special pens to test the paper) to stop their proliferation. But what about gold? This is the most sacred of all commodities because it is thought to be the most trusted, reliable and valuable means of saving wealth. A recent discovery — in October of 2009 — has been suppressed by the main stream media but has been circulating among the “big money” brokers and financial kingpins and is just now being revealed to the public. It involves the gold in Fort Knox — the US Treasury gold — that is the equity of our national wealth. In short, millions (with an “m”) of gold bars are fake! Who did this? Apparently our own government.

Background
In October of 2009 the Chinese received a shipment of gold bars. Gold is regularly exchanges between countries to pay debts and to settle the so-called balance of trade. Most gold is exchanged and stored in vaults under the supervision of a special organization based in London, the London Bullion Market Association (or LBMA). When the shipment was received, the Chinese government asked that special tests be performed to guarantee the purity and weight of the gold bars. In this test, four small holed are drilled into the gold bars and the metal is then analyzed. Officials were shocked to learn that the bars were fake. They contained cores of tungsten with only a outer coating of real gold. What’s more, these gold bars, containing serial numbers for tracking, originated in the US and had been stored in Fort Knox for years. There were reportedly between 5,600 to 5,700 bars, weighing 400 oz. each, in the shipment! At first many gold experts assumed the fake gold originated in China, the world’s best knock-off producers. The Chinese were quick to investigate and issued a statement that implicated the US in the scheme.

What the Chinese uncovered:
Roughly 15 years ago — during the Clinton Administration [think Robert Rubin, Sir Alan Greenspan and Lawrence Summers] — between 1.3 and 1.5 million 400 oz tungsten blanks were allegedly manufactured by a very high-end, sophisticated refiner in the USA [more than 16 Thousand metric tonnes]. Subsequently, 640,000 of these tungsten blanks received their gold plating and WERE shipped to Ft. Knox and remain there to this day. According to the Chinese investigation, the balance of this 1.3 million to 1.5 million 400 oz tungsten cache was also gold plated and then allegedly “sold” into the international market. Apparently, the global market is literally “stuffed full of 400 oz salted bars”. Perhaps as much as 600-billion dollars worth.

An obscure news item originally published in the N.Y. Post [written by Jennifer Anderson] in late Jan. 04 perhaps makes sense now.

DA investigating NYMEX executive
Manhattan, New York, –Feb. 2, 2004. A top executive at the New York Mercantile Exchange is being investigated by the Manhattan district attorney. Sources close to the exchange said that Stuart Smith, senior vice president of operations at the exchange, was served with a search warrant by the district attorney’s office last week. Details of the investigation have not been disclosed, but a NYMEX spokeswoman said it was unrelated to any of the exchange’s markets. She declined to comment further other than to say that charges had not been brought. A spokeswoman for the Manhattan district attorney’s office also declined comment.”

The offices of the Senior Vice President of Operations — NYMEX — is exactly where you would go to find the records [serial number and smelter of origin] for EVERY GOLD BAR ever PHYSICALLY settled on the exchange. They are required to keep these records. These precise records would show the lineage of all the physical gold settled on the exchange and hence “prove” that the amount of gold in question could not have possibly come from the U.S. mining operations — because the amounts in question coming from U.S. smelters would undoubtedly be vastly bigger than domestic mine production.

No one knows whatever happened to Stuart Smith. After his offices were raided he took “administrative leave” from the NYMEX and he has never been heard from since. Amazingly, there never was any follow up on in the media on the original story as well as ZERO developments ever stemming from D.A. Morgenthau’s office who executed the search warrant. Are we to believe that NYMEX offices were raided, the Sr. V.P. of operations then takes leave — all for nothing?

The revelations of fake gold bars also explains another highly unusual story that also happened in 2004:

LONDON, April 14, 2004 (Reuters) – NM Rothschild & Sons Ltd., the London-based unit of investment bank Rothschild [ROT.UL], will withdraw from trading commodities, including gold, in London as it reviews its operations, it said on Wednesday.

Interestingly, GATA’s Bill Murphy speculated about this back in 2004:

“Why is Rothschild leaving the gold business at this time my colleagues and I conjectured today? Just a guess on my part, but [I] suspect something is amiss. They know a big scandal is coming and they don’t want to be a part of it… [The] Rothschild wants out before the proverbial “S” hits the fan.” – BILL MURPHY, LEMETROPOLE, 4-18-2004

The Gold Antitrust Action Committee (GATA) is an organisation which has been nipping at the heels of the US Treasury Federal Reserve for several years now. The basis of GATA’s accusations is that these institutions, in coordination with other complicit central banks and the large gold-trading investment banks in the US, have been manipulating the price of gold for decades.

What is the GLD?
GLD is a short form for Good London Delivery. The London Bullion Market Association (LBMA) has defined “good delivery” as a delivery from an entity which is listed on their delivery list or meets the standards for said list and whose bars have passed testing requirements established by the associatin and updated from time to time. The bars have to be pure for AU in an area of 995.0 to 999.9 per 1000. Weight, Shape, Appearance, Marks and Weight Stamps are regulated as follows:

Weight: minimum 350 fine ounces AU; maximum 430 fine ounces AU, gross weight of a bar is expressed in troy ounces, in multiples of 0.025, rounded down to the nearest 0.025 of an troy ounce.

Dimensions: the recommended dimensions for a Good Delivery gold bar are: Top Surface: 255 x 81 mm; Bottom Surface: 236 x 57 mm; Thickness: 37 mm.

Fineness: the minimum 995.0 parts per thousand fine gold. Marks: Serial number; Assay stamp of refiner; Fineness (to four significant figures); Year of manufacture (expressed in four digits).

After reviewing their prospectus yet again, it becomes pretty clear that GLD was established to purposefully deflect investment dollars away from legitimate gold pursuits and to create a stealth, cesspool / catch-all, slush-fund and a likely destination for many of these fake tungsten bars where they would never see the light of day — hidden behind the following legalese “shield” from the law:

[Excerpt from the GLD prospectus on page 11]“Gold bars allocated to the Trust in connection with the creation of a Basket may not meet the London Good Delivery Standards and, if a Basket is issued against such gold, the Trust may suffer a loss. Neither the Trustee nor the Custodian independently confirms the fineness of the gold bars allocated to the Trust in connection with the creation of a Basket. The gold bars allocated to the Trust by the Custodian may be different from the reported fineness or weight required by the LBMA’s standards for gold bars delivered in settlement of a gold trade, or the London Good Delivery Standards, the standards required by the Trust. If the Trustee nevertheless issues a Basket against such gold, and if the Custodian fails to satisfy its obligation to credit the Trust the amount of any deficiency, the Trust may suffer a loss.”

Earlier this year GATA filed a second Freedom of Information Act (FOIA) request with the Federal Reserve System for documents from 1990 to date having to do with gold swaps, gold swapped, or proposed gold swaps.

On Aug. 5, The Federal Reserve responded to this FOIA request by adding two more documents to those disclosed to GATA in April 2008 from the earlier FOIA request. These documents totaled 173 pages, many parts of which were redacted (blacked out). The Fed’s response also noted that there were 137 pages of documents not disclosed that were alleged to be exempt from disclosure.

GATA appealed this determination on Aug. 20. The appeal asked for more information to substantiate the legitimacy of the claimed exemptions from disclosure and an explanation on why some documents, such as one posted on the Federal Reserve Web site that discusses gold swaps, were not included in the Aug. 5 document release.

In a Sept. 17, 2009, letter on Federal Reserve System letterhead, Federal Reserve governor Kevin M. Warsh completely denied GATA’s appeal. The entire text of this letter can be examined at http://www.gata.org/files/GATAFedResponse-09-17-2009.pdf. The first paragraph on the third page is the most revealing:

“In connection with your appeal, I have confirmed that the information withheld under exemption 4 consists of confidential commercial or financial information relating to the operations of the Federal Reserve Banks that was obtained within the meaning of exemption 4. This includes information relating to swap arrangements with foreign banks on behalf of the Federal Reserve System and is not the type of information that is customarily disclosed to the public. This information was properly withheld from you.”

The above statement is an admission that the Federal Reserve has been involved with the fake gold bar swaps and that it refuses to disclose any information about its activities!

Why use tungsten?
If you are going to print fake money you need to have the special paper, otherwise the bills don’t feel right and can be easily detected by special pens that most merchants and banks use. Likewise, if you are going to fake gold bars you had better be sure they have the same weight and properties of real gold.

In early 2008 millions of dollars in gold at the central bank of Ethiopia turned out to be fake. What were supposed to be bars of solid gold turned out to be nothing more than gold-plated steel. They tried to sell the stuff to South Africa and it was sent back when the South Africans noticed this little problem.

The problem with making good-quality fake gold is that gold is remarkably dense. It’s almost twice the density of lead, and two-and-a-half times more dense than steel. You don’t usually notice this because small gold rings and the like don’t weigh enough to make it obvious, but if you’ve ever held a larger bar of gold, it’s absolutely unmistakable: The stuff is very, very heavy.

The standard gold bar for bank-to-bank trade, known as a “London good delivery bar” weighs 400 troy ounces (over thirty-three pounds), yet is no bigger than a paperback novel. A bar of steel the same size would weigh only thirteen and a half pounds.

According to gold expert, Theo Gray, the problem is that there are very few metals that are as dense as gold, and with only two exceptions they all cost as much or more than gold.

The first exception is depleted uranium, which is cheap if you’re a government, but hard for individuals to get. It’s also radioactive, which could be a bit of an issue.

The second exception is a real winner: tungsten. Tungsten is vastly cheaper than gold (maybe $30 dollars a pound compared to $12,000 a pound for gold right now). And remarkably, it has exactly the same density as gold, to three decimal places. The main differences are that it’s the wrong color, and that it’s much, much harder than gold. (Very pure gold is quite soft, you can dent it with a fingernail.)

A top-of-the-line fake gold bar should match the color, surface hardness, density, chemical, and nuclear properties of gold perfectly. To do this, you could could start with a tungsten slug about 1/8-inch smaller in each dimension than the gold bar you want, then cast a 1/16-inch layer of real pure gold all around it. This bar would feel right in the hand, it would have a dead ring when knocked as gold should, it would test right chemically, it would weigh *exactly* the right amount, and though I don’t know this for sure, I think it would also pass an x-ray fluorescence scan, the 1/16″ layer of pure gold being enough to stop the x-rays from reaching any tungsten. You’d pretty much have to drill it to find out it’s fake.

Such a top-quality fake London good delivery bar would cost about $50,000 to produce because it’s got a lot of real gold in it, but you’d still make a nice profit considering that a real one is worth closer to $400,000.

What’s going to happen now?
Politicians like Ron Paul have been demanding that the Federal Reserve be more transparent and open up their records for public scrutiny. But the Fed has consistently refused, stating that these disclosures would undermine its operation. Yes, it certainly would!

UPDATE: Audit of Fed Reserve Amendment Passes!
In an unprecedented defeat for the Federal Reserve, an amendment to audit the multi-trillion dollar institution was approved by the House Finance Committee with an overwhelming and bipartisan 43-26 vote on Thursday afternoon despite harried last-minute lobbying from top Fed officials and the surprise opposition of Chairman Barney Frank (D-Mass.), who had previously been a supporter.

The measure, cosponsored by Reps. Ron Paul(R-Texas) and Alan Grayson (D-Fla.), authorizes the Government Accountability Office to conduct a wide-ranging audit of the Fed’s opaque deals with foreign central banks and major U.S. financial institutions. The Fed has never had a real audit in its history and little is known of what it does with the trillions of dollars at its disposal.

The manufacture of fake gold bars goes back years and, because of this, it is not likely that the originator of this scheme will ever be revealed or brought to justice. Meanwhile the world is just beginning to learn that much of its national reserves of gold may be fake. If more testing reveals that this gold was guaranteed by Fort Knox and the US Treasury then perhaps they will demand an exchange for “real” gold — wouldn’t you?

This is all happening at a time when the US economy is at its lowest and most vulnerable. The effects could be devastating.

Some investors are already selling gold commodities before these facts are widely known. They are investing instead in silver — the next best metal. This will undoubtedly drive silver prices up.

According to Jim Willie, 24 year market analyst and Ph.D in statistics, “The bust cometh, and it will be spectacular. The stories told in the press will be peculiar, since not told objectively. The headlines might be a comedy, with phony reports of foreign subterfuge, when the perpetrators are home grown.”

This is yet another story in the decline of America and capitalism — a decline based on greed, deception and fraud.

UPDATE MARCH 5, 2010
Largest Private Refinery Discovers Gold-Plated Tungsten Bar
by Patrick A. Heller

Recently, the German television station ProSieben ran a news story covering W. C. Heraeus in Hanau, Germany, the world’s largest privately owned refinery. In the story, Wilfried Hörner, the head of the gold foundry, shows a 500 gram bar (16.0755 troy ounces) received from an unidentified bank. The bar had the right physical dimensions to be an authentic gold bar, but one of the Heraeus employees suspected something funny. After the bar was cut in half, you can see that the inside is tungsten, with only a coating of gold on the outside.

Last fall, Rob Kirby of Kirby Analytics in Toronto reported that China’s central bank had discovered some 400-ounce gold-plated tungsten bars among those it had recently received from bonded warehouses. It was later learned that at least four counterfeit bars were found and that all had come from sources in the United States. As suspicions grow about counterfeit bars among those held in bonded warehouses for delivery against either COMEX or London Bullion Market Association contracts or shares of exchange traded funds, investors could panic. So, you can understand that there has been almost a total blackout on news coverage on this story.

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LIBYAN REBELS START NEW CENTRAL BANK

CENTRAL BANKS MASTER LIST | BANK for INTERNATIONAL SETTLEMENTS
http://www.bis.org/cbanks.htm


http://www.nationaljournal.com/the-homemade-weapons-of-libya-s-rebel-forces-20110615
“A Libyan rebel fighter smokes a cigarette next to an improvised multiple rocket launcher in the back of a pickup truck, as the rebels prepare to make an advance, in the desert on the outskirts of Ajdabiya, on April 14.” (AP Photo/Ben Curtis)”

UNPRECEDENTED
http://www.bloomberg.com/news/2011-03-21/libyan-rebel-council-sets-up-oil-company-to-replace-qaddafi-s.html
Libyan Rebel Council Forms Central Bank to Replace Qaddafi’s
by Bill Varner  /  Mar 22, 2011

Libyan rebels in Benghazi said they have created a new national oil company to replace the corporation controlled by leader Muammar Qaddafi whose assets were frozen by the United Nations Security Council. The Transitional National Council released a statement announcing the decision made at a March 19 meeting to establish the “Libyan Oil Company as supervisory authority on oil production and policies in the country, based temporarily in Benghazi, and the appointment of an interim director general” of the company.

The Council also said it “designated the Central Bank of Benghazi as a monetary authority competent in monetary policies in Libya and the appointment of a governor to the Central Bank of Libya, with a temporary headquarters in Benghazi.” The Security Council adopted a resolution on March 17 that froze the foreign assets of the Libyan National Oil Corp. and the Central Bank of Libya, both described in the text as “a potential source of funding” for Qaddafi’s regime.

Libya holds Africa’s largest oil reserve. Output has fallen to fewer than 400,000 barrels a day, Shokri Ghanem, chairman of the National Oil Corp., said on March 19. The country produced 1.59 million barrels a day in January, according to estimates compiled by Bloomberg. Exports may be halted for “many months” because of sanctions and unrest, the International Energy Agency said. Brent crude for May settlement on the London-based ICE Futures Europe exchange fell 0.3 percent to $114.62 as of 8:50 a.m. It surged to a 2 1/2-year high of $119.79 on Feb 24 as geopolitical tensions spread throughout the Middle East and North Africa. The European benchmark will average $109 a barrel this year, up from a previous forecast of $98, on expectations of an “extended shutdown” of Libyan oil supplies, Societe Generale SA said in a monthly review dated yesterday.

The statement by the Transitional National Council also said the rebels would “urgently prepare a file on the referral of Qaddafi and his gang and his associates involved in the killing of Libyans to the International Criminal Court.” The Security Council referred allegations of human rights violations by the Qaddafi regime to the court in a resolution adopted on Feb. 26. The statement said the council would begin choosing ambassadors to foreign countries. The UN said yesterday that Deputy Ambassador Ibrahim Dabbashi, who broke with the regime last month and said he was then representing the rebels, was no longer Libya’s accredited ambassador. Ambassador Mohammed Shalgham, who also broke with the regime, similarly lost his accreditation when Qaddafi appointed former UN General Assembly President Abdussalam Treki as envoy to the world body. Treki hasn’t presented his credentials yet to Secretary- General Ban Ki-moon, a prerequisite for officials taking the post.


“A convoy of Libyan rebels deploy around the western gate of Ajdabiya on April 19.” (AP Photo/Nasser Nasser)

BROUGHT to YOU BY
http://www.ntclibya.org/english/meeting-on-19-march-2011/

the Interim Transitional National Council

“Meeting Outcomes of the Interim National Council held on 19 March 2011 BENGHAZI, LIBYA – The Interim National Council met on Saturday, 19 March 2011, and discussed a number of important national issues on the current circumstances of the country and the importance of taking necessary actions. The outcome of the meeting is summarized as follows:

First: The Council discussed all the developments on the ground, including the crimes committed by the Qadhafi regime against the Libyan people the Libyan people as well as the report submitted on the implementation of Security Council Resolutions 1970 and 1973 decided accordingly the following:

1-      To welcome the mentioned resolutions and urge the international community to expedite the initiative to implement the resolutions in order to protect the Libyan people and assist them in achieving the legitimate demand.

2-      To call upon the Libyans throughout the country to be cautions and to continue to demonstrate peacefully in order to achieve their legitimate demands by going out to the streets and peaceful sit-ins, particularly after the international community ensured the protection of Libyan civilians in accordance with Resolution 1973 and demanding the international community to ensure the safety of Libyan civilians.

3-      To urgently prepare a file on the referral of Qadhafi, his gang and his associates involved in killing of Libyans, to the international Criminal Court and entrusting a technical and legal team to complete the procedures.

4-      To intensify contacts with brotherly and friendly countries for the recognition of the Transitional National Council and welcome the positive response of many countries to deal with the Transitional National Council and urge other nations to an early recognition of the Council and urge other nations to an early recognition of the Council as the sole legitimate representative of Libyan People.

5-      To choose a number of ambassadors and representatives of Libya to foreign countries, according to proposal submitted by Foreign Affairs submitted for approval.

Second: The Designation of the Central Bank of Benghazi as a monetary authority competent in monetary policies in Libya and appointment of a Governor to the Central Bank of Libya, with a temporary headquarters in Benghazi.

Third: The establishment of Libyan Oil Company as supervisory Authority on oil production and policies in the country, based temporarily in Benghazi and appointment of an interim Director-General for the Libyan Oil Company.”


“A rebel fighter rests on a weapon mounted on the back of a pickup truck on the front line between them and Muammar el-Qaddafi forces, 30 km south of Misurata, on May 27.” (AP Photo/Rodrigo Abd

SKEPTICISM
http://thenewamerican.com/world-mainmenu-26/africa-mainmenu-27/6915-libyan-rebels-create-central-bank-oil-company

As analysts debate possible motives behind President Obama’s United Nations-backed military intervention in Libya, one angle that has received attention in recent days is the rebels’ seemingly odd decision to establish a new central bank to replace dictator Muammar Gadhafi’s state-owned monetary authority — possibly the first time in history that revolutionaries have taken time out from an ongoing life-and-death battle to create such an institution, according to observers. In a statement released last week, the rebels reported on the results of a meeting held on March 19. Among other things, the supposed rag-tag revolutionaries announced the “[d]esignation of the Central Bank of Benghazi as a monetary authority competent in monetary policies in Libya and appointment of a Governor to the Central Bank of Libya, with a temporary headquarters in Benghazi.”

The Gadhafi regime’s central bank — unlike the U.S. Federal Reserve, which is owned by private shareholders — was among the few central banks in the world that was entirely state-owned. At the moment, it is unclear exactly who owns the rebel’s central bank or how it will be governed. The so-called Interim Transitional National Council, the rebels’ self-appointed new government for Libya purporting to be the “sole legitimate representative of Libyan People,” also trumpeted the creation of a new “Libyan Oil Company” based in the rebel stronghold city of Benghazi. The North African nation, of course, has the continent’s largest proven oil reserves. The U.S. government and the U.N. have both recently announced that the rebels would be free to sell oil under their control — if they do it without Gaddafi’s National Oil Corporation. And the first shipments are set to start next week, according to news reports citing a spokesman for the rebels.

But the creation of a new central bank, even more so than the new national oil regime, left analysts scratching their heads. “I have never before heard of a central bank being created in just a matter of weeks out of a popular uprising,” noted Robert Wenzel in an analysis for the Economic Policy Journal. “This suggests we have a bit more than a rag tag bunch of rebels running around and that there are some pretty sophisticated influences.” Wenzel also noted that the uprising looked like a “major oil and money play, with the true disaffected rebels being used as puppets and cover” while the transfer of control over money and oil supplies takes place. And other analysts agreed. A popular blog called The Economic Collapse used sarcasm to express suspicions about the strange rebel announcement. “Perhaps when this conflict is over those rebels can become time management consultants. They sure do get a lot done,” joked the piece, entitled “Wow That Was Fast! Libyan Rebels Have Already Established A New Central Bank Of Libya.” The blog also commented, sarcastically again, on the possibility of outside involvement. “What a skilled bunch of rebels — they can fight a war during the day and draw up a new central bank and a new national oil company at night without any outside help whatsoever. If only the rest of us were so versatile! … Apparently someone felt that it was very important to get pesky matters such as control of the banks and control of the money supply out of the way even before a new government is formed,” read the piece.

Even mainstream news outlets were puzzled. “Is this the first time a revolutionary group has created a central bank while it is still in the midst of fighting the entrenched political power?” wondered CNBC senior editor John Carney. “It certainly seems to indicate how extraordinarily powerful central bankers have become in our era.” But some observers are convinced that the central bank issue was actually the primary motivation for the international war against Libya‘s dictatorship. In an article that has spread far and wide across the web, entitled “Globalists Target 100% State Owned Central Bank of Libya,” author Eric Encina maintains that the world’s “globalist financiers and market manipulators” could not stand the Libyan monetary authority’s independence, explaining:

Currently, the Libyan government creates its own money, the Libyan Dinar, through the facilities of its own central bank. One major problem for globalist banking cartels is that in order to do business with Libya, they must go through the Libyan Central Bank and its national currency, a place where they have absolutely zero dominion or power-broking ability. Hence, taking down the Central Bank of Libya (CBL) may not appear in the speeches of Obama, Cameron and Sarkozy but this is certainly at the top of the globalist agenda for absorbing Libya into its hive of compliant nations. And when Gadhafi is gone and the dust has settled, according to Encina, “you will see the Allied reformers move in to reform Libya’s monetary system, pumping it full of worthless dollars, priming it for a series of chaotic inflationary cycles.” The future of Libya’s vast gold stockpiles could also be in jeopardy, he noted.

Numerous other analysts and experts have also pointed to the central banking issue as one of the top factors leading up to the Western backing of Libyan rebels. Monetary historian Andrew Gause, for example, recently shared his concerns about the matter publicly. Other points made in the rebels’ odd announcement last week included preparations to send Gadhafi to the U.N.’s International Criminal Court for trial, the selection of diplomats to send abroad, and the desire for other governments to recognize the Transitional National Council as the legitimate new rulers of Libya. France has already done so, and other governments may soon follow suit.

Of course, the U.S. government claims to have very little knowledge about who the rebels actually are. But the U.S. Commander of NATO forces recently admitted to the Senate that hints of al Qaeda involvement have been detected among the rebels. The terror group was created, armed, funded, and trained by the U.S. government decades ago, as Secretary of State Hillary Clinton admitted even recently. But since then, it has targeted American embassies and other U.S. targets. As The New American reported over the weekend, elements of al Qaeda and affiliated terror groups are indeed among the leadership of the revolution. But despite that fact, the U.S. government and the international coalition are providing air support and weapons for the new central-bank-creating rebels. Where the conflict goes from here is uncertain, but Western regimes have vowed not to let Gaddafi remain in power.


“A rebel poses with an armful of rocket-propelled grenades taken from an armored personnel carrier captured from forces loyal to Libyan leader Muammar el-Qaddafi on the outskirts of the town of Zliten, west of the rebel-held port city of Misurata, on June 10.” (Reuters/Abdelkader Belhessin)

MEANWHILE: QADDAFI HAS $100+ BILLION STASHED
http://www.sfgate.com/cgi-bin/article.cgi?f=/g/a/2011/07/15/bloomberg1376-LOF9MG6S972901-254BJ5BEJ5PGELCM4FF1HAHRT3.DTL

July 16 (Bloomberg) — Muammer Qaddafi has at least $100 billion of assets abroad and Libya’s Transitional National Council expects a portion of the frozen funds to be released or to obtain borrowing against them. “To be safe we’re saying there’s over $100 billion,” spokesman Mahmoud Shammam said today by telephone from Istanbul, where the U.S. and its allies recognized the council as the sole legitimate governing authority in Libya at a meeting yesterday. “We need some necessity expenses and to get loans against a percentage.” The council requires $3 billion over six months to cover the budget and expects to get a $100 million loan from Turkey in the next three days, Shammam said. Kuwait has pledged $180 million, while Italy and other governments said yesterday that Libyan assets held by their countries “will be released or we’ll get loans against them,” he said. The TNC is saying the unfrozen funds won’t be spent, rather used as collateral to cover borrowing until an elected government is in place, Shammam said.

the LIBYA CONTACT GROUP
http://www.reuters.com/article/2011/07/15/us-libya-meeting-usa-idUSTRE76E2QF20110715
Seeking to free funds, U.S. recognizes Libya rebels
by Andrew Quinn / Jul 15, 2011

(Reuters) – The United States Friday recognized Libya’s rebel National Transitional Council (TNC) as a legitimate government, a diplomatic boost which could unlock billions of dollars in frozen assets. U.S. Secretary of State Hillary Clinton said Washington would extend formal recognition to the Benghazi-based TNC until a fully representational interim government can be established. “The TNC has offered important assurances today, including the promise to pursue a process of democratic reform that is inclusive both geographically and politically,” Clinton said in prepared remarks. “Until an interim authority is in place, the United States will recognize the TNC as the legitimate governing authority for Libya, and we will deal with it on that basis.”

Clinton’s announcement came as the Libya Contact Group, meeting in Istanbul, formally recognized the opposition as the representative of the Libyan people — sealing its diplomatic status as the successor government to embattled leader Muammar Gaddafi. The contact group, made up of more than 30 governments and international and regional organizations, also authorized U.N. special envoy Abdul Elah Al-Khatib to present terms for Gaddafi to leave power in a political package that will include a ceasefire to halt fighting in the civil war. Clinton said any deal “must involve Gaddafi’s departure” from power and a halt to violence. “Increasingly the people of Libya are looking past Gaddafi. They know, as we all know, that it is no longer a question of whether Gaddafi will leave power, but when,” she said. U.S. officials said the decision on formal diplomatic recognition marked an important step toward unblocking more than $34 billion in Libyan assets in the United States but cautioned it could still take time to get funds flowing to the cash-strapped Benghazi council. “We expect this step on recognition will enable the TNC to access additional sources of funding,” Clinton told reporters after the meeting, saying Washington would discuss with allies “the most effective and appropriate method” to do this. They also said no decisions had been made on upgrading U.S. representation in Benghazi — now a small office headed by special envoy Chris Stevens — or on bringing the TNC into the United Nations and other international organizations. Clinton acknowledged that the United States had “taken its time” in deciding on formal recognition of the TNC, but now firmly believed this was the way forward. “We think they are have made great strides and are on the right path,” she said.

U.S. President Barack Obama signed an executive order on February 25 freezing the assets of Gaddafi, his family and top officials, as well as the Libyan government, the country’s central bank and sovereign wealth funds. Most of the frozen assets are liquid in the form of cash and securities. U.S. officials have pledged to free up some of the money for the TNC, which has run dangerously short of cash to pay for salaries and basic services even as it takes on more of the responsibilities of government. But discussions with Congress on mechanisms to free up the money ran into legal complications — some of which could be swept away by U.S. recognition of the TNC as Libya’s legitimate government. “Our hope is that in a relatively short time frame we will be able to make progress (on funds) but there’s a lot of moving pieces here,” one senior State Department official said. The United States could direct banks to transfer frozen funds directly to the TNC, but this might still run foul of U.N. financial sanctions in place on Libya. A second option would be for the United States to establish a line of credit backed by the frozen assets as several other countries have done.

Clinton’s announcement formally recognizing the TNC marked the end of a process which began in February when Obama declared that Gaddafi had lost his legitimacy as Libya’s leader because of his brutal response to anti-government protesters. “We wanted to send a very clear signal to Gaddafi and the people around him that we are looking past Gaddafi to a future without him,” the senior U.S. official said. “We felt that taking this step today sends that message loud and clear.” The United States closed its embassy in Tripoli in February and withdrew its diplomatic staff, but maintains embassy staff working in Washington to develop ties with the TNC. The United States and Gaddafi’s government have been estranged for most of the past four decades, and only resumed contacts in 2003 when Tripoli gave up its pursuit of weapons of mass destruction and took responsibility for its role in the 1988 bombing of Pan Am flight 103 over Lockerbie, Scotland.


Central Bank of Libya offices in Tripoli

the CENTRAL BANK of LIBYA
http://en.wikipedia.org/wiki/Central_Bank_of_Libya
http://cbl.gov.ly/en/
http://cbl.gov.ly/en/home/index.php?cid=94
“The Central Bank of Libya (CBL) is 100% state ownership and represents the monetary authority in The Great Socialist People’s Libyan Arab Jamahiriya and enjoys the status of autonomous corporate body.”

DEFECTED CENTRAL BANK GOVERNOR: ‘CASH MAY BE HIDDEN in DESERT”
http://video.ft.com/v/946393675001/Libyan-cash-may-be-hidden-in-desert
May 17 2011 : “Farhat Bengdara was, until he defected, at the heart of the Libyan regime as central bank governor. As rebels began the uprising against Muammer Gaddafi, Bengdara flew to Turkey and began to help the other side. In this revealing interview with the FT’s Middle East editor Roula Khalaf, he describes where Libya’s gold is kept, how Gaddafi may have foreign reserve cash hidden in the desert and the powerful effect of western sanctions.” (video 8m 44sec)

100% STATE-OWNED
http://www.marketoracle.co.uk/Article27208.html
Globalists Target 100% State Owned Central Bank of Libya
by Patrick_Henningsen / Mar 28, 2011

Eric V. Encina writes: One seldom mentioned fact by western politicians and media pundits: the Central Bank of Libya is 100% State Owned. The world’s globalist financiers and market manipulators do not like it and would continue to their on-going effort to dethrone Muammar Muhammad al-Gaddafi, bringing an end to Libya as independent nation. Currently, the Libyan government creates its own money, the Libyan Dinar, through the facilities of its own central bank. Few can argue that Libya is a sovereign nation with its own great resources, able to sustain its own economic destiny. One major problem for globalist banking cartels is that in order to do business with Libya, they must go through the Libyan Central Bank and its national currency, a place where they have absolutely zero dominion or power-broking ability. Hence, taking down the Central Bank of Libya (CBL) may not appear in the speeches of Obama, Cameron and Sarkozy but this is certainly at the top of the globalist agenda for absorbing Libya into its hive of compliant nations. When the smoke eventually clears from all the cruise missiles and cluster bombs, you will see the Allied reformers move in to reform Libya’s monetary system, pumping it full of worthless dollars, priming it for a series of chaotic inflationary cycles.

The CBL is currently a 100% state owned entity and represents the monetary authority in The Great Socialist People’s Libyan Arab Jamahiriya. The financial structure and general operation procedures of a state bank is of course much different than that of an American or European based central bank. Form starters it is not privately owned, for-profit bank with a undisclosed list of private shareholders like the US Federal Reserve and the Bank of England are. Libyan constitutional law establishing the CBL stipulates that its central bank maintains monetary stability in Libya and promotes sustained growth of its national economy. Libya also holds more bullion as a proportion of gross domestic product than any country except Lebanon, according to the London-based World Gold Council using January data from the International Monetary Fund. The value of gold is based on the March 25 close of $1,429.74 an ounce. Will this gold remain in Libya once Allied forces have taken control of Tripoli, or will it lost, or exchanged for pallets upon pallets of paper aka US dollars?



“THE PLAN”
http://www.atimes.com/atimes/Middle_East/MD14Ak02.html

There is no denying at least one very popular achievement of the Libyan government: it brought water to the desert by building the largest and most expensive irrigation project in history, the US$33 billion GMMR (Great Man-Made River) project. Even more than oil, water is crucial to life in Libya.  The GMMR provides 70% of the population with water for drinking and irrigation, pumping it from Libya’s vast underground Nubian Sandstone Aquifer System in the south to populated coastal areas 4,000 kilometers to the north. The Libyan government has done at least some things right.

Another explanation for the assault on Libya is that it is “all about oil”, but that theory too is problematic. As noted in the National Journal, the country produces only about 2% of the world’s oil. Saudi Arabia alone has enough spare capacity to make up for any lost production if Libyan oil were to disappear from the market. And if it’s all about oil, why the rush to set up a new central bank?

Another provocative bit of data circulating on the Net is a 2007 “Democracy Now” interview of US General Wesley Clark (Ret). In it he says that about 10 days after September 11, 2001, he was told by a general that the decision had been made to go to war with Iraq. Clark was surprised and asked why. “I don’t know!” was the response. “I guess they don’t know what else to do!” Later, the same general said they planned to take out seven countries in five years: Iraq, Syria, Lebanon, Libya, Somalia, Sudan, and Iran. What do these seven countries have in common? In the context of banking, one that sticks out is that none of them is listed among the 56 member banks of the Bank for International Settlements (BIS). That evidently puts them outside the long regulatory arm of the central bankers’ central bank in Switzerland.

The most renegade of the lot could be Libya and Iraq, the two that have actually been attacked. Kenneth Schortgen Jr, writing on Examiner.com, noted that “[s]ix months before the US moved into Iraq to take down Saddam Hussein, the oil nation had made the move to accept euros instead of dollars for oil, and this became a threat to the global dominance of the dollar as the reserve currency, and its dominion as the petrodollar.”  According to a Russian article titled “Bombing of Libya – Punishment for Ghaddafi for His Attempt to Refuse US Dollar”, Gaddafi made a similarly bold move: he initiated a movement to refuse the dollar and the euro, and called on Arab and African nations to use a new currency instead, the gold dinar. Gaddafi suggested establishing a united African continent, with its 200 million people using this single currency.

During the past year, the idea was approved by many Arab countries and most African countries. The only opponents were the Republic of South Africa and the head of the League of Arab States. The initiative was viewed negatively by the USA and the European Union, with French President Nicolas Sarkozy calling Libya a threat to the financial security of mankind; but Gaddafi was not swayed and continued his push for the creation of a united Africa.  And that brings us back to the puzzle of the Libyan central bank. In an article posted on the Market Oracle, Eric Encina observed: “One seldom mentioned fact by western politicians and media pundits: the Central Bank of Libya is 100% State Owned … Currently, the Libyan government creates its own money, the Libyan Dinar, through the facilities of its own central bank. Few can argue that Libya is a sovereign nation with its own great resources, able to sustain its own economic destiny. One major problem for globalist banking cartels is that in order to do business with Libya, they must go through the Libyan Central Bank and its national currency, a place where they have absolutely zero dominion or power-broking ability. Hence, taking down the Central Bank of Libya (CBL) may not appear in the speeches of Obama, Cameron and Sarkozy but this is certainly at the top of the globalist agenda for absorbing Libya into its hive of compliant nations.”

Libya not only has oil. According to the International Monetary Fund (IMF), its central bank has nearly 144 tonnes of gold in its vaults. With that sort of asset base, who needs the BIS, the IMF and their rules? All of which prompts a closer look at the BIS rules and their effect on local economies. An article on the BIS website states that central banks in the Central Bank Governance Network are supposed to have as their single or primary objective “to preserve price stability”.

They are to be kept independent from government to make sure that political considerations don’t interfere with this mandate. “Price stability” means maintaining a stable money supply, even if that means burdening the people with heavy foreign debts. Central banks are discouraged from increasing the money supply by printing money and using it for the benefit of the state, either directly or as loans.

In a 2002 article in Asia Times Online titled “The BIS vs national banks” Henry Liu maintained: “BIS regulations serve only the single purpose of strengthening the international private banking system, even at the peril of national economies. The BIS does to national banking systems what the IMF has done to national monetary regimes. National economies under financial globalization no longer serve national interests. FDI [foreign direct investment] denominated in foreign currencies, mostly dollars, has condemned many national economies into unbalanced development toward export, merely to make dollar-denominated interest payments to FDI, with little net benefit to the domestic economies.” He added, “Applying the State Theory of Money, any government can fund with its own currency all its domestic developmental needs to maintain full employment without inflation.” The “state theory of money” refers to money created by governments rather than private banks.

The presumption of the rule against borrowing from the government’s own central bank is that this will be inflationary, while borrowing existing money from foreign banks or the IMF will not. But all banks actually create the money they lend on their books, whether publicly owned or privately owned. Most new money today comes from bank loans. Borrowing it from the government’s own central bank has the advantage that the loan is effectively interest-free. Eliminating interest has been shown to reduce the cost of public projects by an average of 50%.  And that appears to be how the Libyan system works. According to Wikipedia, the functions of the Central Bank of Libya include “issuing and regulating banknotes and coins in Libya” and “managing and issuing all state loans”. Libya’s wholly state-owned bank can and does issue the national currency and lend it for state purposes.  That would explain where Libya gets the money to provide free education and medical care, and to issue each young couple $50,000 in interest-free state loans. It would also explain where the country found the $33 billion to build the Great Man-Made River project. Libyans are worried that North Atlantic Treaty Organization-led air strikes are coming perilously close to this pipeline, threatening another humanitarian disaster.

So is this new war all about oil or all about banking? Maybe both – and water as well. With energy, water, and ample credit to develop the infrastructure to access them, a nation can be free of the grip of foreign creditors. And that may be the real threat of Libya: it could show the world what is possible.  Most countries don’t have oil, but new technologies are being developed that could make non-oil-producing nations energy-independent, particularly if infrastructure costs are halved by borrowing from the nation’s own publicly owned bank. Energy independence would free governments from the web of the international bankers, and of the need to shift production from domestic to foreign markets to service the loans.  If the Gaddafi government goes down, it will be interesting to watch whether the new central bank joins the BIS, whether the nationalized oil industry gets sold off to investors, and whether education and healthcare continue to be free.

{Ellen Brown is an attorney and president of the Public Banking Institute, http://PublicBankingInstitute.org. In Web of Debt, her latest of eleven books, she shows how a private cartel has usurped the power to create money from the people themselves, and how we the people can get it back. Her websites are  http://webofdebt.com and http://ellenbrown.com.}

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the PSYCHOPATH PART of the BRAIN

brain image
This study found reduced connectivity between an area of prefrontal cortex (PFC, red) and the amygdala (blue). The white matter pathway connecting the two structures (the uncinate fasciculus) is shown in green.

STRUCTURAL ABNORMALITIES
http://www.med.wisc.edu/news-events/news/psychopaths-brains-show-differences-in-structure-and-function/32979
Psychopaths’ Brains Show Differences in Structure and Function

Images of prisoners’ brains show important differences between those who are diagnosed as psychopaths and those who aren’t, according to a new study led by University of Wisconsin-Madison researchers. The results could help explain the callous and impulsive antisocial behavior exhibited by some psychopaths.The study showed that psychopaths have reduced connections between the ventromedial prefrontal cortex (vmPFC), the part of the brain responsible for sentiments such as empathy and guilt, and the amygdala, which mediates fear and anxiety.

Two types of brain images were collected. Diffusion tensor images (DTI) showed reduced structural integrity in the white matter fibers connecting the two areas, while a second type of image that maps brain activity, a functional magnetic resonance image (fMRI), showed less coordinated activity between the vmPFC and the amygdala. “This is the first study to show both structural and functional differences in the brains of people diagnosed with psychopathy,” says Michael Koenigs, assistant professor of psychiatry in the University of Wisconsin School of Medicine and Public Health. “Those two structures in the brain, which are believed to regulate emotion and social behavior, seem to not be communicating as they should.” The study, which took place in a medium-security prison in Wisconsin, is a unique collaborative between three laboratories, UW-Madison psychology Professor Joseph Newman has had a long term interest in studying and diagnosing those with psychopathy and has worked extensively in the Wisconsin corrections system. Dr. Kent Kiehl, of the University of New Mexico and the MIND Research Network, has a mobile MRI scanner that he brought to the prison and used to scan the prisoners’ brains. Koenigs and his graduate student, Julian Motzkin, led the analysis of the brain scans.


The video shows interactions between microglia (yellow) and dendritic spines (green) in the brain of a living mouse. Each frame is taken 5 minutes apart. The cell body of the microglia in the upper right corner is stable throughout the imaging session, but the microglial processes (looking like tentacles) are extremely dynamic, perpetually changing their morphology and dynamic interactions with small and transient dendritic spines over a span of minutes. http://www.med.wisc.edu/news-events/images-and-video-for-the-media/25328

The study compared the brains of 20 prisoners with a diagnosis of psychopathy with the brains of 20 other prisoners who committed similar crimes but were not diagnosed with psychopathy. “The combination of structural and functional abnormalities provides compelling evidence that the dysfunction observed in this crucial social-emotional circuitry is a stable characteristic of our psychopathic offenders,” Newman says. “I am optimistic that our ongoing collaborative work will shed more light on the source of this dysfunction and strategies for treating the problem.” Newman notes that none of this work would be possible without the extraordinary support provided by the Wisconsin Department of Corrections, which he called “the silent partner in this research.” He says the DOC has demonstrated an unprecedented commitment to supporting research designed to facilitate the differential diagnosis and treatment of prisoners. The study, published in the most recent Journal of Neuroscience, builds on earlier work by Newman and Koenigs that showed that psychopaths’ decision-making mirrors that of patients with known damage to their ventromedial prefrontal cortex (vmPFC). This bolsters evidence that problems in that part of the brain are connected to the disorder. ”The decision-making study showed indirectly what this study shows directly – that there is a specific brain abnormality associated with criminal psychopathy,” Koenigs adds.


CRIMINAL JUSTICE IMPLICATIONS
http://www.thedailypage.com/daily/article.php?article=35292
UW-Madison Psychiatry imaging study finds brains of psychopaths are different
by Matt Hrodey  /  11/22/2011

The Koenigs Lab, an appendage of the University of Wisconsin Department of Psychiatry, says something about the multidisciplinary nature of neuroscience. Named for Michael Koenigs, an assistant professor of psychiatry, the lab includes a postdoctoral researcher with degrees in psychology and comparative religion, graduate students with backgrounds in biology, philosophy and English, and a scientist trained in applied math. Centered on the mind and nervous system, neuroscience is exploding, and there’s practically no topic it won’t take on, be it Shakespeare, meditation or consciousness itself. Or psychopathy.

In a paper to be published in the Nov. 30 Journal of Neuroscience, Koenigs, along with veteran UW psychopathy researcher Joseph Newman, will unveil new evidence of a physical basis for the disorder. In the study, Koenigs and Newman use brain scans of 40 inmates (20 psychopaths and 20 others) from Fox Lake Correctional Institution in Fox Lake, Wisconsin. In the scans of psychopathic brains, the researchers discovered poor connections between an important brain segment — the “ventromedial prefrontal cortex” (VMPFC) — and another crucial to emotional processing, the almond-shaped amygdala. The study will be the largest yet published that examines this link, according to Koenigs. Researchers used two types of brain scans: one testing the integrity of “white matter” structures connecting the VMPFC and the amygdala, and another tesing how well they communicate. Both types of scans found a weakened link in the brains of psychopaths.

Better understanding such abnormalities could, one day, reorder how the justice system responds to criminals who have them. “Can we hold them as accountable as someone who doesn’t have these abnormalities?” Koenigs asks. Scientists have studied the connection between the VMPFC and amygdala before. In one experiment using rodents, scientists found that stimulating the VMPFC suppressed the amygdala. Koenigs primarily studies brain injuries, particularly those in the VMPFC, where the brain is believed to regulate emotion, process threats, guide decision-making and direct social behavior. Damage to this segment, located just behind the forehead in the frontal lobes, tends to make patients more aggressive, irritable and less sensitive to others. “They’re not the same person they used to be,” Koenigs says. “They develop very striking personality changes reminiscent of psychopathy.”

Is a VMPFC deficiency to blame for psychopathy? It’s not clear. And scientists don’t know if the VMPFC is failing to regulate the amygdala or if the amydala is failing to send crucial emotional feedback to the VMPFC. “Normally, considering a decision [to rob someone] and the harm you would inflict would be marked with a negative emotional state,” says Koenigs. But in psychopaths, this affect is flat. To do their study at Fox Lake, Koenigs and Newman enlisted a mobile MRI lab run by Kent Kiehl, an associate professor of psychology at the University of New Mexico. The lab, pulled by a tractor trailer, brings the scanner to the inmates. Across the field of neuroscience, researchers are rapidly exploiting the powers of MRI scanning, particularly “functional” scanning, which tracks blood flow in the brain. This flow, because it is directed to busy neurons, is a precise indicator of brain activity. The new study is Newman’s first foray into brain imaging. “There’s a very strong bias toward using brain measurements,” he says, “and there’s been a lot of wonderful progress. People want to see how far we can go.”

Psychopathy is not as rare as some might believe. According to researchers, psychopaths make up an estimated 1% of the U.S. population and between 10% to 20% of the country’s prisoners. In his 30 years of studying psychopathy, Newman has theorized the existence of an “attention bottleneck” in the psychopathic mind that prevents it from fully receiving emotional and other inhibitory signals that say, “Stop! Reconsider! Reevaluate!” The conventional theory on psychopaths is that they lack emotion, be it fear, empathy or guilt, that would otherwise inform decision-making. Newman doesn’t deny that but insists on the importance of attention. “It feels like I’m trying to identify a learning disability,” he says. Our minds unconsciously monitor us. It happens in secret. Our conscious minds don’t know of it until the unconscious sounds an alarm — such as when a nagging suspicion of “having forgotten something” turns out to be true (the oven is still on; the keys were left on the car seat). The psychopathic brain may be very bad at automatically diverting attention to these types of cues if the psychopath is locked into “goal-driven” behavior, a kind of tunnel vision. Such an impairment, if it exists, doesn’t necessarily lead to crime. “Environmental factors are critical,” says Newman. They could be parental abuse, substance abuse or socioeconomic disadvantage. But once classified as a psychopath, an offender is two to five times more likely to reoffend than one who isn’t.

Newman tested his “attention bottleneck” theory in a study published earlier this year. In that study, 87 maximum-security inmates, some classified as psychopaths, sat down in front of computers. Two things appeared on the screen: a square, either red or green, and a letter, either uppercase or lowercase. In some of the trials, researchers startled inmates with a low-intensity shock after showing a red square. (Prisoners were told of the mild “buzzes” before they volunteered.) Each was shocked a total of 24 times, always after a red square. Then, to conclude the trials, the computer asked the prisoners to identify either the case of the letter or the color of the box. The human body, when conditioned to fear something, will startle at its appearance. This is called “fear-potentiated startle.” In the experiment, the red box primed the inmates to startle upon receiving the shock, and they did — with one major exception. In trials where psychopaths first saw the letter, followed by a red square, their startle was greatly diminished. Newman and the other researchers, Arielle Baskin-Sommers, a graduate student at UW-Madison, and John Curtin, a psychology professor, concluded that by presenting the letter first — thereby making the red square “secondary information that is not goal relevant” — the psychopaths fell victim to the “attention bottleneck” as theorized by Newman. They saw the square, but its meaning was not fully absorbed because the letter (and its case) had already won their attention.

There’s growing speculation today that neuroscience could revolutionize the U.S. criminal justice system, overthrowing the old precept of culpability. One indication of the promise of this growing field is a new dual degree program at UW-Madison that will train students in both neuroscience and the law. The “Neuroscience and the Law” track, part of the broader Neuroscience & Public Policyprogram, will allow students to earn a J.D. degree in law and a Ph.D. degree in neuroscience. Applications to join the new track’s first class come due this December. Professor Ron Kalil, a neuroscientist who studies brain injuries and the brain’s innate ability to repair itself, says the new program grew out of a 2010 meeting he had, over coffee, with Pilar Ossorio, an associate professor of law and bioethics. The two left with a “let’s do this” attitude, according to Kalil, but getting university approval for the new track didn’t happen overnight. To make the program official, they needed the approval of four university committees. They succeeded, adding “Neuroscience and the Law” to the existing tracks combining neuroscience and public policy and neuroscience and international public policy. Of neuroscience’s broad range, Kalil says, “At one end you have the study of molecules and proteins that make up parts of neurons, and at the other, the field tries to wrestle with issues that have been on the table since people started to think of themselves as human.” One of these is how to respond to crime, and what punishment is appropriate. “There are a lot of people who are not insane, but they’re not normal,” he says. “Where do we draw the line?”

YOUR BOSS is PSYCHO  (I KNOW, RIGHT?)
http://blogs.forbes.com/jeffbercovici/2011/06/14/why-some-psychopaths-make-great-ceos/
Why (Some) Psychopaths Make Great CEOs
by Jeff Bercovici / Jun 14 2011

British journalist Jon Ronson immersed himself in the world of mental health diagnosis and criminal profiling to understand what makes some people psychopaths — dangerous predators who lack the behavioral controls and tender feelings the rest of us take for granted. Among the things he learned while researching his new book, “The Psychopath Test: A Journey Through the Madness Industry”: the incidence of psychopathy among CEOs is about 4 percent, four times what it is in the population at large. I spoke with him recently about what that means and its implications for the business world and wider society.

Q. Are we really to understand that there’s some connection between what makes people psychopaths and what makes them CEO material?
A. At first I was really skeptical because it seemed like an easy thing to say, almost like a conspiracy theorist’s type of thing to say. I remember years and years ago a conspiracy theorist telling me the world was ruled by blood-drinking, baby-sacrificing lizards. These psychologists were essentially saying the same thing. Basically, when you get them talking, these people [ie. psychopaths] are different than human beings. They lack the things that make you human: empathy, remorse, loving kindness. So at first I thought this might just be psychologists feeling full of themselves with their big ideological notions. But then I met Al Dunlap. [That would be “Chainsaw” Al Dunlap, former CEO of Sunbeam and notorious downsizer.] He effortlessly turns the psychopath checklist into “Who Moved My Cheese?” Many items on the checklist he redefines into a manual of how to do well in capitalism. There was his reputation that he was a man who seemed to enjoy firing people, not to mention the stories from his first marriage — telling his first wife he wanted to know what human flesh tastes like, not going to his parents’ funerals. Then your realize that because of this dysfunctional capitalistic society we live in those things were positives. He was hailed and given high-powered jobs, and the more ruthlessly his administration behaved, the more his share price shot up.

Q. So you can just go down the list of Fortune 500 CEOs and say, “psychopath, psychopath, psychopath…”
A. Well, no. Dunlap was an exceptional figure, wasn’t he? An extreme figure. I think my book offers really good evidence that the way that capitalism is structured really is a physical manifestation of the brain anomaly known as psychopathy. However, I woudn’t say every Fortune 500 chief is a psychopath. That would turn me into an ideologue and I abhor ideologues.

Q. Is it an either/or thing? It seems to me, thinking about it, that a lot of the traits on the checklist would be be useful in a corporate ladder-climbing situation. So maybe there are a lot of CEOs who simply have some psychopathic tendencies.
A. It is a spectrum, but there’s a cutoff point. If you’re going by the Hare checklist [the standard inventory used in law enforcement, devised by leading researcher Robert Hare], where the top score is 40, the average anxiety-ridden business failure like me — although the fact that my book just made the Times best sellers list makes it difficult to call myself that — would score a 4 or 5. Somebody you have to be wary of would be in early 20s and a really hard core damaged person, a really dangerous psychopath, would score around a 30. In law the cutoff is 29. There are absolutes in psychopathy and the main absolute is a literal absence of empathy. It’s just not there. In higher-scoring psychopaths, what grows in the vacant field where that empathy should be is a joy in manipulating people, a lack of remorse, a lack of guilt. If you’ve got a little bit of empathy, you’re kind of not a psychopath.

Q. So maybe there’s a sweet spot? A point on the spectrum somewhere short of full-blown psychopathy that’s most conducive to success in business.
A. That’s possible. Obviously there are items on the checklist you don’t want to have if you’re a boss. You don’t want poor behavioral controls. It’d be better if you don’t have promiscuous behavior. It’d be better if you don’t have serious behavioral problems in childhood, because that will eventually come out. But you do want lack of empathy, lack of remorse, glibness, superficial charm, manipulativeness. I think the other positive traits for psychopaths in business is need for stimulation, proneness to boredom. You want somebody who can’t sit still, who’s constantly thinking about how to better things. A really interesting question is whether psychopathy can be a positive thing. Some psychologists would say yes, that there are certain attributes like coolness under pressure, which is sort of a fundamental positive. But Robert Hare would always say no, that in the absence of empathy, which is the definition in psychology of a psychopath, you will always get malevolence. Basically, high-scoring psychopaths can be brilliant bosses but only ever for short term. Just like Al Dunlap, they always want to make a killing and move on. And then you’ve got this question of what came first? Is society getting more and more psychopathic in its kind of desire for short-term killings? Is that because we kind of admire psychopaths in all their glib, superficial charm and ruthlessness?

Q. There’s a certain sour grapes aspect to accusing CEOs of being psychopaths. It’s very tempting to look at anyone more successful than you are and say, “It must be because he’s a monster.”
A. There’s a terribly seductive power in becoming a psychopath stalker. It can really dehumanize you. I can look at, say, Dominique Strauss Kahn, who, if one assumes that what one is hearing about him is true, certainly he hits a huge amount of items on the checklist — the $30,000 suits, the poor behavioral controls, the impulsivity, the promiscuous sexual behavior. But of course when you say this you’re in terrible danger of being seduced by the checklist, which I really like to add as a caveat. It kind of turns you into a bit of a psychopath yourself in that that you start to shove people into that box. It robs you of empathy and your connection to human beings. Which is why people like Robert Hare are kind of useful. I’m against the way that people like me can be seduced into misusing the checklist, but I’m not against the checklist.

PSYCHOPATHIC C.E.O.s
http://www.nytimes.com/2004/12/12/magazine/12PSYCHO.html
by Michael Steinberger / December 12, 2004

Ever wonder what leads a lavishly compensated C.E.O. to cheat, steal and lie? Perhaps he’s a psychopath, and now there is a test, the B-Scan 360, that can help make that determination. The B-Scan was conceived by Paul Babiak, an industrial psychologist, and Robert Hare, the creator of the standard tool for diagnosing psychopathic features in prison inmates. The B-Scan is the first formalized attempt to uncover similar tendencies in captains of industry, and it speaks to a growing suspicion that psychopaths may be especially adept at scaling the corporate ladder.

Indeed, Babiak and Hare could not have chosen a more propitious moment to roll out the B-Scan, which is now in the trial stage. The recent rash of damaging corporate scandals — combined with legislation making boards far more liable for executive malfeasance — has given companies good reason to screen current employees more rigorously. According to Babiak and Hare, white-collar psychopaths are not apt to become serial rapists or murderers. Rather, they are prone to being ”subcriminal” psychopaths: smooth-talking, energetic individuals who easily charm their way into jobs and promotions but who are also exceedingly manipulative, narcissistic and ruthless. The purpose of the B-Scan is to smoke out these “snakes in suits”. The individual being evaluated does not actually take the test. Instead, it is given to his or her superiors, subordinates and peers. They rate the subject in four broad categories — organizational maturity, personal style, emotional style and social style — and 16 subcategories, like reliability, honesty and sincerity.

Babiak and Hare say that decisions to promote or dismiss ought not to be made on the basis of the B-Scan alone and that it is possible, with good coaching and training, to turn a talented executive with mild psychopathic tendencies into an effective manager. They acknowledge too that strong corporate leadership may require a certain degree of guile, egoism and callousness. But they point out that the frenzied nature of modern business — the constant downsizing, the relentless merging and acquiring — provides a very fertile environment for havoc-wreaking psychopaths, who thrive on chaos and risk-taking. As Hare put it in one interview, ”If I couldn’t study psychopaths in prison, I would go down to the Stock Exchange.”

CONTACT
Paul Babiak
http://www.hrbackoffice.com/index-4.html
email : Inquiry [at] PaulBabiak [dot] com

Robert Hare
http://www.hare.org/
http://www.hare.org/links/media.html
http://www.hare.org/references/main.html
email : contact [at] hare [dot] org

PSYCHOPATHY CHECKLIST
http://en.wikipedia.org/wiki/Hare_Psychopathy_Checklist
http://www.hare.org/scales/
Psychopathy Scales

PCL-R   PCL:SV   P-SCAN   PCL:YV   APSD   TREATMENT GUIDELINES

“Dr. Hare has spent over 35 years researching psychopathy and is the developer of theHare Psychopathy Checklist-Revised (PCL-R), and a co-author of its derivatives, thePsychopathy Checklist: Screening Version (PCL:SV), the P-Scan, the Psychopathy Checklist: Youth Version (PCL:YV), and the Antisocial Process Screening Device(APSD). He is also a co-author of the Guidelines for a Psychopathy Treatment Program. The Hare Psychopathy Checklist-Revised, with demonstrated reliability and validity, is rapidly being adopted worldwide as the standard instrument for researchers and clinicians. The PCL-R and PCL:SV are strong predictors of recidivism, violence and response to therapeutic intervention. They play an important role in most recent risk-for-violence instruments. The PCL-R was reviewed in Buros Mental Measurements Yearbook (1995), as being the “state of the art” both clinically and in research use. In 2005, the Buros Mental Measurements Yearbook review listed the PCL-R as “a reliable and effective instrument for the measurement of psychopathy and is considered the ‘gold standard’ for measurement of psychopathy.”


Bison skull pile, 1870s

HR PROBLEM
http://www.humanresourcesmagazine.com.au/articles/51/0c030a51.asp
Catching the corporate psychopath
by Stuart Fagg / 15 June 2005

Rodney Adler, Ray Williams, Bernie Ebbers. These men have much in common. For a start they were once all hailed as successful businessmen and players of acumen, and secondly they are all now behind bars for their roles in the collapse of their companies. Of course they are not the only ones paying for their misdemeanours – there are plenty of share and policy holders who will attest to that. They also have one final thing in common – they all exhibit the behaviours of corporate psychopaths. According to Dr Robert Hogan, a US expert in personality profiling, however, it would seem that the likes of Adler are aberrations in the business world. But corporate psychopaths are far from unusual in the corporate world. By Hogan’s reckoning, the result of decades of research, incompetent and potentially damaging management accounts for some 60-70 per cent of the total pool in the US. When he brought these views to bear initially in the early 1990s, they were not popular and were dismissed by many that refused to believe that there were that many potential corporate psychopaths in US business. However, these days, and particularly having seen the damage wreaked by individuals after the scandals at Enron, WorldCom, OneTel and HIH, boards of directors and the share market are demanding more ethical executives. With the potential for increased liability under the Corporations Act, this trend may continue going forward. All well and good, but what is the impact of these corporate psychopaths? After all, some of the qualities that define such people also define some of the most successful people in business. “Researchers looked at Fortune 1000 companies that had 15 years of performance right at the average of their industry, and then a change and 15 subsequent years of sustained performance significantly above the average for the industry. Out of 1,000 companies they found 11,” Hogan said. “They investigated the 11 companies and found that the constant was the CEO. All 11 CEOs were understated and humble and that’s a stake in the heart for the theory of the celebrity CEO or charismatic leader.”

While background checks and screening are gaining popularity in Australian business, and in some cases being applied at higher executive levels, personality profiling remains a relatively unexplored concept in Australia. However, that may change. The Australian Prudential Regulation Authority, for example, is set to publish proposals for standards governing the fitness and propriety of responsible persons in financial institutions. The proposed standards are designed to weed out executives who have been declared bankrupt, failed to manage personal debts or held responsibility in a failed institution. Additionally anyone with a civil or criminal conviction related to dishonesty in dealings with financial institutions will also be barred. “The proposals are designed to reflect community expectations about persons who fill positions of responsibility in these industries and will set minimum benchmarks for people in, or wishing to enter, these industries at director, senior management or advisory level,” said Dr John Laker, APRA chairman. Traditionally, APRA has always focussed on the institution it is regulating, rather than the individuals running the institution. But, recent events in Australia and internationally have highlighted the importance of enuring that people in positions of power at companies are subject to the same scrutiny as the company itself. With regulated entities being required to develop their own policies, personality assessment may become more commonplace in sectors such as the insurance industry. But there is something of a grey area in the assessments. For example, financial markets traders must display some of the more undesirable qualities –ruthlessness, overt smartness and a tendency to gamble – for senior management to succeed in their positions. “We have a lot of data on traders and as a group they are real smart and really crazy,” said Hogan. “But don’t let them into management positions. People like that – Bill Clinton is a great example – tend to self nominate into leadership roles. They think they’re so hot they want to be in charge.”

Background checks and screening may not, however, detect these characteristics and head off the appointment of a potentially damaging executive. “The really bad guys will sail through a background check and will do really well in interviews. They do really well in assessment centres. The really dangerous ones are really smart, really charming and really fast on their feet and people love them.” This is where personality assessment earns its stripes, according to Hogan. Through developing his assessment system, Hogan has amassed an impressive data repository from the 3 million tests that have been carried out using his methodology. This data accurately tracks personality trends in business, and once companies see the data, said Hogan, it’s a relatively easy sell. But what happens if the CEO of the company is the corporate psychopath? “That’s our worst nightmare,” he told Human Resources. “When you assess the management team and see all these problems come from them, how can you fix that? But if you can find a company that’s willing to pay attention to data it’s an easy deal for us.”

“CHAINSAW” AL DUNLAP
http://www.portfolio.com/executives/2009/04/22/Al-Dunlap-Profile

“Picked by the board of Scott Paper Co. as the man to turn the struggling company around, Dunlap earned his nickname by slicing 11,000 employees. When Scott merged with Kimberly-Clark, Dunlap’s payoff was estimated at more than $100 million. Such scenarios are familiar. So are the debates over where to draw the line between painful-but-necessary restructuring and cold-hearted recklessness. Yet Dunlap stood out for the obvious joy he took in slamming his detractors as purveyors of “nonsense,” “rubbish,” and “socialism.” Chainsaw Al was the middle finger of the free market’s invisible hand.

Dunlap’s memoir-cum-manifesto, Mean Business, roughly coincided with his next CEO star turn, which was also to be his last. Sunbeam’s stock surged on the news that the Chainsaw was coming; massive workforce reductions and factory closures followed within months. His book clearly explained what set him apart from “addle-brained” and “weak” executives: “I’m a superstar in my field,” he wrote. Could there be a clearer sell signal? Unable to flip Sunbeam to a new buyer, as he’d done with Scott, Dunlap was stuck actually running the company. He failed spectacularly. Within two miserable years, the board fired him. The tactics he’d used to stave off losses—the company overstated its net income by $60 million, which was real money back then—earned him a civil suit from the SEC and a class-action suit by shareholders. Dunlap eventually settled both and was barred from serving as an officer or director of any public company. You could call Chainsaw Al’s story a fall from grace, but in his case, that’s probably not the proper word.”

UM, TOTALLY
http://www.fastcompany.com/magazine/96/open_boss.html
Is Your Boss a Psychopath?
by Alan Deutschman / December 19, 2007

One of the most provocative ideas about business in this decade so far surfaced in a most unlikely place. The forum wasn’t the Harvard Business School or one of those $4,000-a-head conferences where Silicon Valley’s venture capitalists search for the next big thing. It was a convention of Canadian cops in the far-flung province of Newfoundland. The speaker, a 71-year-old professor emeritus from the University of British Columbia, remains virtually unknown in the business realm. But he’s renowned in his own field: criminal psychology. Robert Hare is the creator of the Psychopathy Checklist. The 20-item personality evaluation has exerted enormous influence in its quarter-century history. It’s the standard tool for making clinical diagnoses of psychopaths — the 1% of the general population that isn’t burdened by conscience. Psychopaths have a profound lack of empathy. They use other people callously and remorselessly for their own ends. They seduce victims with a hypnotic charm that masks their true nature as pathological liars, master con artists, and heartless manipulators. Easily bored, they crave constant stimulation, so they seek thrills from real-life “games” they can win — and take pleasure from their power over other people.

On that August day in 2002, Hare gave a talk on psychopathy to about 150 police and law-enforcement officials. He was a legendary figure to that crowd. The FBI and the British justice system have long relied on his advice. He created the P-Scan, a test widely used by police departments to screen new recruits for psychopathy, and his ideas have inspired the testing of firefighters, teachers, and operators of nuclear power plants. According to the Canadian Press and Toronto Sun reporters who rescued the moment from obscurity, Hare began by talking about Mafia hit men and sex offenders, whose photos were projected on a large screen behind him. But then those images were replaced by pictures of top executives from WorldCom, which had just declared bankruptcy, and Enron, which imploded only months earlier. The securities frauds would eventually lead to long prison sentences for WorldCom CEO Bernard Ebbers and Enron CFO Andrew Fastow. “These are callous, cold-blooded individuals,” Hare said. “They don’t care that you have thoughts and feelings. They have no sense of guilt or remorse.” He talked about the pain and suffering the corporate rogues had inflicted on thousands of people who had lost their jobs, or their life’s savings. Some of those victims would succumb to heart attacks or commit suicide, he said.

Then Hare came out with a startling proposal. He said that the recent corporate scandals could have been prevented if CEOs were screened for psychopathic behavior. “Why wouldn’t we want to screen them?” he asked. “We screen police officers, teachers. Why not people who are going to handle billions of dollars?” It’s Hare’s latest contribution to the public awareness of “corporate psychopathy.” He appeared in the 2003 documentary The Corporation, giving authority to the film’s premise that corporations are “sociopathic” (a synonym for “psychopathic”) because they ruthlessly seek their own selfish interests — “shareholder value” — without regard for the harms they cause to others, such as environmental damage. Is Hare right? Are corporations fundamentally psychopathic organizations that attract similarly disposed people? It’s a compelling idea, especially given the recent evidence. Such scandals as Enron and WorldCom aren’t just aberrations; they represent what can happen when some basic currents in our business culture turn malignant. We’re worshipful of top executives who seem charismatic, visionary, and tough. So long as they’re lifting profits and stock prices, we’re willing to overlook that they can also be callous, conning, manipulative, deceitful, verbally and psychologically abusive, remorseless, exploitative, self-delusional, irresponsible, and megalomaniacal. So we collude in the elevation of leaders who are sadly insensitive to hurting others and society at large.

But wait, you say: Don’t bona fide psychopaths become serial killers or other kinds of violent criminals, rather than the guys in the next cubicle or the corner office? That was the conventional wisdom. Indeed, Hare began his work by studying men in prison. Granted, that’s still an unusually good place to look for the conscience-impaired. The average Psychopathy Checklist score for incarcerated male offenders in North America is 23.3, out of a possible 40. A score of around 20 qualifies as “moderately psychopathic.” Only 1% of the general population would score 30 or above, which is “highly psychopathic,” the range for the most violent offenders. Hare has said that the typical citizen would score a 3 or 4, while anything below that is “sliding into sainthood.” On the broad continuum between the ethical everyman and the predatory killer, there’s plenty of room for people who are ruthless but not violent. This is where you’re likely to find such people as Ebbers, Fastow, ImClone CEO Sam Waksal, and hotelier Leona Helmsley. We put several big-name CEOs through the checklist, and they scored as “moderately psychopathic”; our quiz on page 48 lets you try a similar exercise with your favorite boss. And this summer, together with New York industrial psychologist Paul Babiak, Hare begins marketing the B-Scan, a personality test that companies can use to spot job candidates who may have an MBA but lack a conscience. “I always said that if I wasn’t studying psychopaths in prison, I’d do it at the stock exchange,” Hare told Fast Company. “There are certainly more people in the business world who would score high in the psychopathic dimension than in the general population. You’ll find them in any organization where, by the nature of one’s position, you have power and control over other people and the opportunity to get something.”

There’s evidence that the business climate has become even more hospitable to psychopaths in recent years. In pioneering long-term studies of psychopaths in the workplace, Babiak focused on a half-dozen unnamed companies: One was a fast-growing high-tech firm, and the others were large multinationals undergoing dramatic organizational changes — severe downsizing, restructuring, mergers and acquisitions, and joint ventures. That’s just the sort of corporate tumult that has increasingly characterized the U.S. business landscape in the last couple of decades. And just as wars can produce exciting opportunities for murderous psychopaths to shine (think of Serbia’s Slobodan Milosevic and Radovan Karadzic), Babiak found that these organizational shake-ups created a welcoming environment for the corporate killer. “The psychopath has no difficulty dealing with the consequences of rapid change; in fact, he or she thrives on it,” Babiak claims. “Organizational chaos provides both the necessary stimulation for psychopathic thrill seeking and sufficient cover for psychopathic manipulation and abusive behavior.”

And you can make a compelling case that the New Economy, with its rule-breaking and roller-coaster results, is just dandy for folks with psychopathic traits too. A slow-moving old-economy corporation would be too boring for a psychopath, who needs constant stimulation. Its rigid structures and processes and predictable ways might stymie his unethical scheming. But a charge-ahead New Economy maverick — an Enron, for instance — would seem the ideal place for this kind of operator. But how can we recognize psychopathic types? Hare has revised his Psychopathy Checklist (known as the PCL-R, or simply “the Hare”) to make it easier to identify so-called subcriminal or corporate psychopaths. He has broken down the 20 personality characteristics into two subsets, or “factors.” Corporate psychopaths score high on Factor 1, the “selfish, callous, and remorseless use of others” category. It includes eight traits: glibness and superficial charm; grandiose sense of self-worth; pathological lying; conning and manipulativeness; lack of remorse or guilt; shallow affect (i.e., a coldness covered up by dramatic emotional displays that are actually playacting); callousness and lack of empathy; and the failure to accept responsibility for one’s own actions. Sound like anyone you know? (Corporate psychopaths score only low to moderate on Factor 2, which pinpoints “chronically unstable, antisocial, and socially deviant lifestyle,” the hallmarks of people who wind up in jail for rougher crimes than creative accounting.)

This view is supported by research by psychologists Belinda Board and Katarina Fritzon at the University of Surrey, who interviewed and gave personality tests to 39 high-level British executives and compared their profiles with those of criminals and psychiatric patients. The executives were even more likely to be superficially charming, egocentric, insincere, and manipulative, and just as likely to be grandiose, exploitative, and lacking in empathy. Board and Fritzon concluded that the businesspeople they studied might be called “successful psychopaths.” In contrast, the criminals — the “unsuccessful psychopaths” — were more impulsive and physically aggressive.

The Factor 1 psychopathic traits seem like the playbook of many corporate power brokers through the decades. Manipulative? Louis B. Mayer was said to be a better actor than any of the stars he employed at MGM, able to turn on the tears at will to evoke sympathy during salary negotiations with his actors. Callous? Henry Ford hired thugs to crush union organizers, deployed machine guns at his plants, and stockpiled tear gas. He cheated on his wife with his teenage personal assistant and then had the younger woman marry his chauffeur as a cover. Lacking empathy? Hotel magnate Leona Helmsley shouted profanities at and summarily fired hundreds of employees allegedly for trivialities, like a maid missing a piece of lint. Remorseless? Soon after Martin Davis ascended to the top position at Gulf & Western, a visitor asked why half the offices were empty on the top floor of the company’s Manhattan skyscraper. “Those were my enemies,” Davis said. “I got rid of them.” Deceitful? Oil baron Armand Hammer laundered money to pay for Soviet espionage. Grandiosity? Thy name is Trump.

In the most recent wave of scandals, Enron’s Fastow displayed many of the corporate psychopath’s traits. He pressured his bosses for a promotion to CFO even though he had a shaky grasp of the position’s basic responsibilities, such as accounting and treasury operations. Suffering delusions of grandeur after just a little time on the job, Fastow ordered Enron’s PR people to lobby CFO magazine to make him its CFO of the Year. But Fastow’s master manipulation was a scheme to loot Enron. He set up separate partnerships, secretly run by himself, to engage in deals with Enron. The deals quickly made tens of millions of dollars for Fastow — and prettified Enron’s financials in the short run by taking unwanted assets off its books. But they left Enron with time bombs that would ultimately cause the company’s total implosion — and lose shareholders billions. When Enron’s scandals were exposed, Fastow pleaded guilty to securities fraud and agreed to pay back nearly $24 million and serve 10 years in prison.

“Chainsaw” Al Dunlap might score impressively on the corporate Psychopathy Checklist too. What do you say about a guy who didn’t attend his own parents’ funerals? He allegedly threatened his first wife with guns and knives. She charged that he left her with no food and no access to their money while he was away for days. His divorce was granted on grounds of “extreme cruelty.” That’s the characteristic that endeared him to Wall Street, which applauded when he fired 11,000 workers at Scott Paper, then another 6,000 (half the labor force) at Sunbeam. Chainsaw hurled a chair at his human-resources chief, the very man who approved the handgun and bulletproof vest on his expense report. Dunlap needed the protection because so many people despised him. His plant closings kept up his reputation for ruthlessness but made no sense economically, and Sunbeam’s financial gains were really the result of Dunlap’s alleged book cooking. When he was finally exposed and booted, Dunlap had the nerve to demand severance pay and insist that the board reprice his stock options. Talk about failure to accept responsibility for one’s own actions. While knaves such as Fastow and Dunlap make the headlines, most horror stories of workplace psychopathy remain the stuff of frightened whispers. Insiders in the New York media business say the publisher of one of the nation’s most famous magazines broke the nose of one of his female sales reps in the 1990s. But he was considered so valuable to the organization that the incident didn’t impede his career.

Most criminals — whether psychopathic or not — are shaped by poverty and often childhood abuse as well. In contrast, corporate psychopaths typically grew up in stable, loving families that were middle class or affluent. But because they’re pathological liars, they tell romanticized tales of rising from tough, impoverished backgrounds. Dunlap pretended that he grew up as the son of a laid-off dockworker; in truth, his father worked steadily and raised his family in suburban comfort. The corporate psychopaths whom Babiak studied all went to college, and a couple even had PhDs. Their ruthless pursuit of self-interest was more easily accomplished in the white-collar realm, which their backgrounds had groomed them for, rather than the criminal one, which comes with much lousier odds. Psychopaths succeed in conventional society in large measure because few of us grasp that they are fundamentally different from ourselves. We assume that they, too, care about other people’s feelings. This makes it easier for them to “play” us. Although they lack empathy, they develop an actor’s expertise in evoking ours. While they don’t care about us, “they have an element of emotional intelligence, of being able to see our emotions very clearly and manipulate them,” says Michael Maccoby, a psychotherapist who has consulted for major corporations.

Psychopaths are typically very likable. They make us believe that they reciprocate our loyalty and friendship. When we realize that they were conning us all along, we feel betrayed and foolish. “People see sociopathy in their personal lives, and they don’t have a clue that it has a label or that others have encountered it,” says Martha Stout, a psychologist at the Harvard Medical School and the author of the recent best-seller The Sociopath Next Door: The Ruthless Versus the Rest of Us (Broadway Books, 2005). “It makes them feel crazy or alone. It goes against our intuition that a small percentage of people can be so different from the rest of us — and so evil. Good people don’t want to believe it.” Of course, cynics might say that it can be an advantage to lack a conscience. That’s probably why major investors installed Dunlap as the CEO of Sunbeam: He had no qualms about decimating the workforce to impress Wall Street. One reason outside executives get brought into troubled companies is that they lack the emotional stake in either the enterprise or its people. It’s easier for them to act callously and remorselessly, which is exactly what their backers want. The obvious danger of the new B-Scan test for psychopathic tendencies is that companies will hire or promote people with high scores rather than screen them out. Even Babiak, the test’s codeveloper, says that while “a high score is a red flag, sometimes middle scores are okay. Perhaps you don’t want the most honest and upfront salesman.”

Indeed, not every aberrant boss is necessarily a corporate psychopath. There’s another personality that’s often found in the executive suite: the narcissist. While many psychologists would call narcissism a disorder, this trait can be quite beneficial for top bosses, and it’s certainly less pathological than psychopathy. Maccoby’s book The Productive Narcissist: The Promise and Perils of Visionary Leadership (Broadway Books, 2003) portrays the narcissistic CEO as a grandiose egotist who is on a mission to help humanity in the abstract even though he’s often insensitive to the real people around him. Maccoby counts Apple’s Steve Jobs, General Electric’s Jack Welch, Intel’s Andy Grove, Microsoft’s Bill Gates, and Southwest Airlines’ Herb Kelleher as “productive narcissists,” or PNs. Narcissists are visionaries who attract hordes of followers, which can make them excel as innovators, but they’re poor listeners and they can be awfully touchy about criticism. “These people don’t have much empathy,” Maccoby says. “When Bill Gates tells someone, ‘That’s the stupidest thing I’ve ever heard,’ or Steve Jobs calls someone a bozo, they’re not concerned about people’s feelings. They see other people as a means toward their ends. But they do have a sense of changing the world — in their eyes, improving the world. They build their own view of what the world should be and get others recruited to their vision. Psychopaths, in contrast, are only interested in self.”

Maccoby concedes that productive narcissists can become “drunk with power” and turn destructive. The trick, he thinks, is to pair a productive narcissist with a “productive obsessive,” or conscientious, control-minded manager. Think of Grove when he was matched with chief operating officer Craig Barrett, Gates with president Steve Ballmer, Kelleher with COO Colleen Barrett, and Oracle’s Larry Ellison with COO Ray Lane and CFO Jeff Henley. In his remarkably successful second tour of duty at Apple, Jobs has been balanced by steady, competent behind-the-scenes players such as Timothy Cook, his executive vice president for sales and operations. But our culture’s embrace of narcissism as the hallmark of admired business leaders is dangerous, Babiak maintains, since “individuals who are really psychopaths are often mistaken for narcissists and chosen by the organization for leadership positions.” How does he distinguish the difference between the two types? “In the case of a narcissist, everything is me, me, me,” Babiak explains. “With a psychopath, it’s ‘Is it thrilling, is it a game I can win, and does it hurt others?’ My belief is a psychopath enjoys hurting others.”

Intriguingly, Babiak believes that it’s extremely unlikely for an entrepreneurial founder-CEO to be a corporate psychopath because the company is an extension of his own ego — something he promotes rather than plunders. “The psychopath has no allegiance to the company at all, just to self,” Babiak says. “A psychopath is playing a short-term parasitic game.” That was the profile of Fastow and Dunlap — guys out to profit for themselves without any concern for the companies and lives they were wrecking. In contrast, Jobs and Ellison want their own companies to thrive forever — indeed, to dominate their industries and take over other fields as well. “An entrepreneurial founder-CEO might have a narcissistic tendency that looks like psychopathy,” Babiak says. “But they have a vested interest: Their identity is wrapped up with the company’s existence. They’re loyal to the company.” So these types are ruthless not only for themselves but also for their companies, their extensions of self.

The issue is whether we will continue to elevate, celebrate, and reward so many executives who, however charismatic, remain indifferent to hurting other people. Babiak says that while the first line of defense against psychopaths in the workplace is screening job candidates, the second line is a “culture of openness and trust, especially when the company is undergoing intense, chaotic change.” Europe is far ahead of the United States in trying to deal with psychological abuse and manipulation at work. The “antibullying” movement in Europe has produced new laws in France and Sweden. Harvard’s Stout suggests that the relentlessly individualistic culture of the United States contributes a lot to our problems. She points out that psychopathy has a dramatically lower incidence in certain Asian cultures, where the heritage has emphasized community bonds rather than glorified self-interest. “If we continue to go this way in our Western culture,” she says, “evolutionarily speaking, it doesn’t end well.” The good news is that we can do something about corporate psychopaths. Scientific consensus says that only about 50% of personality is influenced by genetics, so psychopaths are molded by our culture just as much as they are born among us. But unless American business makes a dramatic shift, we’ll get more Enrons — and deserve them.

the PSYCHOPATH TEST
http://www.npr.org/2011/05/21/136462824/a-psychopath-walks-into-a-room-can-you-tell
http://www.thisamericanlife.org/radio-archives/episode/436/the-psychopath-test
aired 05.27.2011

Recently we heard about this test that could determine if someone was a psychopath. So, naturally, our staff decided to take it. This week we hear the results. Ira explains that when the radio staff decided to take a test that reveals who is a psychopath, very quickly everyone came to believe that the highest score would go to either Robyn, Jane, or him. (6 minutes)

Underachievement Test
NPR Science Correspondent Alix Spiegel tells the story of Robert Dixon, who’s in a maximum security prison in Vacaville California and is unlikely to ever get parole because of his score on the psychopath test. The test also is called “the checklist” or, more formally, the PCL-R, which stands for “Psychopathy Check List—Revised.” Alix tells the story of its creation and reports that the man who created the test, Bob Hare, is concerned at how it’s being used today in the criminal justice system. A version of this story aired on NPR’s All Things Considered. (28 minutes)

King of the Forest
Jon Ronson investigates whether corporate leaders can, in fact, be psychopaths by visiting a former Sunbeam CEO named Al Dunlap. This is an excerpt from Ronson’s book, The Psychopath Test. (15 minutes)Song: “If I Were King of the Forest”, Wizard of Oz Soundtrack

Results
Ira and the radio show staff get their results on the psychopath test from Dr. David Bernstein, ofForensic Consultants, LLC., who administered the test to them. (6 minutes)

TAKE the QUIZ
http://www.fastcompany.com/magazine/96/open_boss-quiz.html
by Fast Company Staff / July 1, 2005

The standard clinical test for psychopathy, Robert Hare’s PCL-R, evaluates 20 personality traits overall, but a subset of eight traits defines what he calls the “corporate psychopath” — the nonviolent person prone to the “selfish, callous, and remorseless use of others.” Does your boss fit the profile? Here’s our do-it-yourself quiz drawing on the test manual and Hare’s book Without Conscience. (Disclaimer: If you’re not a psychologist or psychiatrist, this will be a strictly amateur exercise.) We’ve used the pronoun “he,” but research suggests psychologists have underestimated the psychopathic propensity of women.

For each question, score two points for “yes,” one point for “somewhat” or “maybe,” and zero points for “no.”

[1] Is he glib and superficially charming?
Is he a likable personality and a terrific talker — entertaining, persuasive, but maybe a bit too smooth and slick? Can he pass himself off as a supposed expert in a business meeting even though he really doesn’t know much about the topic? Is he a flatterer? Seductive, but insincere? Does he tell amusing but unlikely anecdotes celebrating his own past? Can he persuade his colleagues to support a certain position this week — and then argue with equal conviction and persuasiveness for the opposite position next week? If he’s a CEO, can he appear on TV and somehow get away without answering the interviewer’s direct questions or saying anything truly substantive?
SCORE__

[2] Does he have a grandiose sense of self-worth?
Does he brag? Is he arrogant? Superior? Domineering? Does he feel he’s above the rules that apply to “little people”? Does he act as though everything revolves around him? Does he downplay his legal, financial, or personal problems, say they’re just temporary, or blame them on others?
SCORE__

[3] Is he a pathological liar?
Has he reinvented his own past in a more positive light — for example, claiming that he rose from a tough, poor background even though he really grew up middle class? Does he lie habitually even though he can easily be found out? When he’s exposed, does he still act unconcerned because he thinks he can weasel out of it? Does he enjoy lying? Is he proud of his knack for deceit? Is it hard to tell whether he knows he’s a liar or whether he deceives himself and believes his own bull?
SCORE__

[4] Is he a con artist or master manipulator?
Does he use his skill at lying to cheat or manipulate other people in his quest for money, power, status, and sex? Does he “use” people brilliantly? Does he engage in dishonest schemes such as cooking the books?
SCORE__

[5] When he harms other people, does he feel a lack of remorse or guilt?
Is he concerned about himself rather than the wreckage he inflicts on others or society at large? Does he say he feels bad but act as though he really doesn’t? Even if he has been convicted of a white-collar crime, such as securities fraud, does he not accept blame for what he did, even after getting out of prison? Does he blame others for the trouble he causes?
SCORE__

[6] Does he have a shallow affect?
Is he cold and detached, even when someone near him dies, suffers, or falls seriously ill — for example, does he visit the hospital or attend the funeral? Does he make brief, dramatic displays of emotion that are nothing more than putting on a theatrical mask and playacting for effect? Does he claim to be your friend but rarely or never ask about the details of your life or your emotional state? Is he one of those tough-guy executives who brag about how emotions are for whiners and losers?
SCORE__

[7] Is he callous and lacking in empathy?
Does he not give a damn about the feelings or well-being of other people? Is he profoundly selfish? Does he cruelly mock others? Is he emotionally or verbally abusive toward employees, “friends,” and family members? Can he fire employees without concern for how they’ll get by without the job? Can he profit from embezzlement or stock fraud without concern for the harm he’s doing to shareholders or pensioners who need their savings to pay for their retirements?
SCORE__

[8] Does he fail to accept responsibility for his own actions?
Does he always cook up some excuse? Does he blame others for what he’s done? If he’s under investigation or on trial for a corporate crime, like deceitful accounting or stock fraud, does he refuse to acknowledge wrongdoing even when the hard evidence is stacked against him?
SCORE__

Total____
If your boss scores:
1-4 | Be frustrated
5-7 | Be cautious
8-12 | Be afraid
13-16 | Be very afraid

SO CHARMING at FIRST
http://www.psychologytoday.com/articles/199401/charming-psychopath
by Robert Hare / January 01, 1994

A major part of my own quarter-century search for answers to this enigma has been a concerted effort to develop an accurate means of detecting the psychopaths among us. Measurement and categorization are, of course, fundamental to any scientific endeavor, but the implications of being able to identify psychopaths are as much practical as academic. To put it simply, if we can’t spot them, we are doomed to be their victims, both as individuals and as a society. My role in the search for psychopaths began in the 1960s at the psychology department of the University of British Columbia. There, my growing interest in psychopathy merged with my experience working with psychopaths in prison to form what was to become my life’s work. I assembled a team of clinicians who would identify psychopaths in the prison population by means of long, detailed interviews and close study of file information. From this eventually developed a highly reliable diagnostic tool that any clinician or researcher could use and that yielded a richly detailed profile of the personality disorder called psychopathy. We named this instrument the Psychopathy Checklist (Multi-Health Systems; 1991). The checklist is now used worldwide and provides clinicians and researchers with a way of distinguishing, with reasonable certainty, true psychopaths from those who merely break the rules.

What follows is a general summary of the key traits and behaviors of a psychopath. Do not use these symptoms to diagnose yourself or others. A diagnosis requires explicit training and access to the formal scoring manual. If you suspect that someone you know conforms to the profile described here, and if it is important for you to have an expert opinion, you should obtain the services of a qualified (registered) forensic psychologist or psychiatrist. Also, be aware that people who are not psychopaths may have some of the symptoms described here. Many people are impulsive, or glib, or cold and unfeeling, but this does not mean that they are psychopaths. Psychopathy is a syndrome—a cluster of related symptoms.

Key Symptoms of Psychopathy
Emotional/Interpersonal:

  • Glib and superficial
  • Egocentric and grandiose
  • Lack of remorse or guilt
  • Lack of empathy
  • Deceitful and manipulative
  • Shallow emotions

Social Deviance:

  • Impulsive
  • Poor behavior controls
  • Need for excitement
  • Lack of responsibility
  • Early behavior problems
  • Adult antisocial behavior

Glib and Superficial
Psychopaths are often voluble and verbally facile. They can be amusing and entertaining conversationalists, ready with a clever comeback, and are able to tell unlikely but convincing stories that cast themselves in a good light. They can be very effective in presenting themselves well and are often very likable and charming. One of my raters described an interview she did with a prisoner: “I sat down and took out my clipboard,” she said, “and the first thing this guy told me was what beautiful eyes I had. He managed to work quite a few compliments on my appearance into the interview, so by the time I wrapped things up, I was feeling unusually… well, pretty. I’m a wary person, especially on the job, and can usually spot a phony. When I got back outside, I couldn’t believe I’d fallen for a line like that.”

Egocentric and Grandiose
Psychopaths have a narcissistic and grossly inflated view of their own self-worth and importance, a truly astounding egocentricity and sense of entitlement, and see themselves as the center of the universe, justified in living according to their own rules. “It’s not that I don’t follow the law,” said one subject. “I follow my own laws. I never violate my own rules.” She then proceeded to describe these rules in terms of “looking out for number one.” Psychopaths often claim to have specific goals but show little appreciation regarding the qualifications required—they have no idea of how to achieve them and little or no chance of attaining these goals, given their track record and lack of sustained interest in formal education. The psychopathic inmate might outline vague plans to become a lawyer for the poor or a property tycoon. One inmate, not particularly literate, managed to copyright the title of a book he was planning to write about himself, already counting the fortune his best-selling book would bring.

Lack of Remorse or Guilt
Psychopaths show a stunning lack of concern for the effects their actions have on others, no matter how devastating these might be. They may appear completely forthright about the matter, calmly stating that they have no sense of guilt, are not sorry for the ensuing pain, and that there is no reason now to be concerned. When asked if he had any regrets about stabbing a robbery victim who subsequently spent time in the hospital as a result of his wounds, one of our subjects replied, “Get real! He spends a few months in hospital and I rot here. If I wanted to kill him I would have slit his throat. That’s the kind of guy I am; I gave him a break.” Their lack of remorse or guilt is associated with a remarkable ability to rationalize their behavior, to shrug off personal responsibility for actions that cause family, friends, and others to reel with shock and disappointment. They usually have handy excuses for their behavior, and in some cases deny that it happened at all.

Lack of Empathy
Many of the characteristics displayed by psychopaths are closely associated with a profound lack of empathy and inability to construct a mental and emotional “facsimile” of another person. They seem completely unable to “get into the skin” of others, except in a purely intellectual sense. They are completely indifferent to the rights and suffering of family and strangers alike. If they do maintain ties, it is only because they see family members as possessions. One of our subjects allowed her boyfriend to sexually molest her five-year-old daughter because “he wore me out. I wasn’t ready for more sex that night.” The woman found it hard to understand why the authorities took her child into care.

Deceitful and Manipulative
With their powers of imagination in gear and beamed on themselves, psychopaths appear amazingly unfazed by the possibility—or even by the certainty—of being found out. When caught in a lie or challenged with the truth, they seldom appear perplexed or embarrassed—they simply change their stories or attempt to rework the facts so they appear to be consistent with the lie. The result is a series of contradictory statements and a thoroughly confused listener. And psychopaths seem proud of their ability to lie. When asked if she lied easily, one woman laughed and replied, “I’m the best. I think it’s because I sometimes admit to something bad about myself. They think, well, if she’s admitting to that she must be telling the truth about the rest.”

Shallow Emotions
Psychopaths seem to suffer a kind of emotional poverty that limits the range and depth of their feelings. At times they appear to be cold and unemotional while nevertheless being prone to dramatic, shallow, and short-lived displays of feeling. Careful observers are left with the impression they are playacting and little is going on below the surface. A psychopath in our research said that he didn’t really understand what others meant by fear. “When I rob a bank,” he said, “I notice that the teller shakes. One barfed all over the money. She must have been pretty messed up inside, but I don’t know why. If someone pointed a gun at me I guess I’d be afraid, but I wouldn’t throw up.” When asked if he ever felt his heart pound or his stomach churn, he replied, “Of course! I’m not a robot. I really get pumped up when I have sex or when I get into a fight.”

Impulsive
Psychopaths are unlikely to spend much time weighing the pros and cons of a course of action or considering the possible consequences. “I did it because I felt like it,” is a common response. These impulsive acts often result from an aim that plays a central role in most of the psychopath’s behavior: to achieve immediate satisfaction, pleasure, or relief. So family members, relatives, employers, and coworkers typically find themselves standing around asking themselves what happened—jobs are quit, relationships broken off, plans changed, houses ransacked, people hurt, often for what appears as little more than a whim. As the husband of a psychopath I studied put it: “She got up and left the table, and that was the last I saw of her for two months.”

Poor Behavior Controls
Besides being impulsive, psychopaths are highly reactive to perceived insults or slights. Most of us have powerful inhibitory controls over our behavior; even if we would like to respond aggressively we are usually able to “keep the lid on.” In psychopaths, these inhibitory controls are weak, and the slightest provocation is sufficient to overcome them. As a result, psychopaths are short-tempered or hotheaded and tend to respond to frustration, failure, discipline, and criticism with sudden violence, threats or verbal abuse. But their outbursts, extreme as they may be, are often short-lived, and they quickly act as if nothing out of the ordinary has happened. For example, an inmate in line for dinner was accidentally bumped by another inmate, whom he proceeded to beat senseless. The attacker then stepped back into line as if nothing had happened. Despite the fact that he faced solitary confinement as punishment for the infraction, his only comment when asked to explain himself was, “I was pissed off. He stepped into my space. I did what I had to do. Although psychopaths have a “hair trigger,” their aggressive displays are “cold”; they lack the intense arousal experienced when other individuals lose their temper.

A Need for Excitement
Psychopaths have an ongoing and excessive need for excitement—they long to live in the fast lane or “on the edge,” where the action is. In many cases the action involves the breaking of rules. Many psychopaths describe “doing crime” for excitement or thrills. When asked if she ever did dangerous things just for fun, one of our female psychopaths replied, “Yeah, lots of things. But what I find most exciting is walking through airports with drugs. Christ! What a high!” The flip side of this yen for excitement is an inability to tolerate routine or monotony. Psychopaths are easily bored and are not likely to engage in activities that are dull, repetitive, or require intense concentration over long periods.

Lack of Responsibility
Obligations and commitments mean nothing to psychopaths. Their good intentions—”I’ll never cheat on you again”—are promises written on the wind. Horrendous credit histories, for example, reveal the lightly taken debt, the loan shrugged off, the empty pledge to contribute to a child’s support. Their performance on the job is erratic, with frequent absences, misuse of company resources, violations of company policy, and general untrustworthiness. They do not honor formal or implied commitments to people, organizations, or principles. Psychopaths are not deterred by the possibility that their actions mean hardship or risk for others. A 25-year-old inmate in our studies has received more than 20 convictions for dangerous driving, driving while impaired, leaving the scene of an accident, driving without a license, and criminal negligence causing death. When asked if he would continue to drive after his release from prison, he replied, “Why not? Sure, I drive fast, but I’m good at it. It takes two to have an accident.”

Early Behavior Problems
Most psychopaths begin to exhibit serious behavioral problems at an early age. These might include persistent lying, cheating, theft, arson, truancy, substance abuse, vandalism, and/or precocious sexuality. Because many children exhibit some of these behaviors at one time or another—especially children raised in violent neighborhoods or in disrupted or abusive families—it is important to emphasize that the psychopath’s history of such behaviors is more extensive and serious than most, even when compared with that of siblings and friends raised in similar settings. One subject, serving time for fraud, told us that as a child he would put a noose around the neck of a cat, tie the other end of the string to the top of a pole, and bat the cat around the pole with a tennis racket. Although not all adult psychopaths exhibited this degree of cruelty when in their youth, virtually all routinely got themselves into a wide range of difficulties.

Adult Antisocial Behavior
Psychopaths see the rules and expectations of society as inconvenient and unreasonable impediments to their own behavioral expression. They make their own rules, both as children and as adults. Many of the antisocial acts of psychopaths lead to criminal charges and convictions. Even within the criminal population, psychopaths stand out, largely because the antisocial and illegal activities of psychopaths are more varied and frequent than are those of other criminals. Psychopaths tend to have no particular affinity, or “specialty,” for one particular type of crime but tend to try everything. But not all psychopaths end up in jail. Many of the things they do escape detection or prosecution, or are on “the shady side of the law.” For them, antisocial behavior may consist of phony stock promotions, questionable business practices, spouse or child abuse, and so forth. Many others do things that, though not necessarily illegal, are nevertheless unethical, immoral, or harmful to others: philandering or cheating on a spouse to name a few.

Origins
Thinking about psychopathy leads us very quickly to a single fundamental question: Why are some people like this? Unfortunately, the forces that produce a psychopath are still obscure, an admission those looking for clear answers will find unsatisfying. Nevertheless, there are several rudimentary theories about the cause of psychopathy worth considering. At one end of the spectrum are theories that view psychopathy as largely the product of genetic or biological factors (nature), whereas theories at the other end posit that psychopathy results entirely from a faulty early social environment (nurture). The position that I favor is that psychopathy emerges from a complex—and poorly understood—interplay between biological factors and social forces. It is based on evidence that genetic factors contribute to the biological bases of brain function and to basic personality structure, which in turn influence the way an individual responds to, and interacts with, life experiences and the social environment. In effect, the core elements needed for the development of psychopathy—including a profound inability to experience empathy and the complete range of emotions, including fear—are in part provided by nature and possibly by some unknown biological influences on the developing fetus and neonate. As a result, the capacity for developing internal controls and conscience and for making emotional “connections” with others is greatly reduced.

Can Anything Be Done?
In their desperate search for solutions people trapped in a destructive and seemingly hopeless relationship with a psychopath frequently are told: Quit indulging him and send him for therapy. A basic assumption of psychotherapy is that the patient needs and wants help for distressing or painful psychological and emotional problems. Successful therapy also requires that the patient actively participate, along with the therapist, in the search for relief of his or her symptoms. In short, the patient must recognize there is a problem and must want to do something about it. But here is the crux: Psychopaths don’t feel they have psychological or emotional problems, and they see no reason to change their behavior to conform with societal standards they do not agree with. Thus, in spite of more than a century of clinical study and decades of research, the mystery of the psychopath still remains. Recent developments have provided us with new insights into the nature of this disturbing disorder, and its borders are becoming more defined. But compared with other major clinical disorders, little research has been devoted to psychopathy, even though it is responsible for more social distress and disruption than all other psychiatric disorders combined. So, rather than trying to pick up the pieces after the damage has been done, it would make far greater sense to increase our efforts to understand this perplexing disorder and to search for effective early interventions. The alternatives are to continue devoting massive resources to the prosecution, incarceration, and supervision of psychopaths after they have committed offenses against society and to continue to ignore the welfare and plight of their victims. We have to learn how to socialize them, not resocialize them. And this will require serious efforts at research and early intervention. It is imperative that we continue the search for clues.

{Excerpted from Without Conscience: The Disturbing World of the Psychopaths Among Us (Simon & Schuster) by Robert Hare, Ph.D. Copyright 1993.}

A Survival Guide
Although no one is completely immune to the devious machinations of the psychopath, there are some things you can do to reduce your vulnerability.

  • Know what you are dealing with. This sounds easy but in fact can be very difficult. All the reading in the world cannot immunize you from the devastating effects of psychopaths. Everyone, including the experts, can be taken in, conned, and left bewildered by them. A good psychopath can play a concerto on anyone’s heart strings.
  • Try not to be influenced by “props.” It is not easy to get beyond the winning smile, the captivating body language, the fast talk of the typical psychopath, all of which blind us to his or her real intentions. Many people find it difficult to deal with the intense, “predatory state” of the psychopath. The fixated stare, is more a prelude to self-gratification and the exercise of power rather than simple interest or empathic caring.
  • Don’t wear blinders. Enter new relationships with your eyes wide open. Like the rest of us, most psychopathic con artists and “love-thieves” initially hide their dark side by putting their “best foot forward.” Cracks may soon begin to appear in the mask they wear, but once trapped in their web, it will be difficult to escape financially and emotionally unscathed.
  • Keep your guard up in high-risk situations. Some situations are tailor-made for psychopaths: singles bars, ship cruises, foreign airports, etc. In each case, the potential victim is lonely, looking for a good time, excitement, or companionship, and there will usually be someone willing to oblige, for a hidden price.
  • Know yourself. Psychopaths are skilled at detecting and ruthlessly exploiting your weak spots. Your best defense is to understand what these spots are, and to be extremely wary of anyone who zeroes in on them.

Unfortunately, even the most careful precautions are no guarantee that you will be safe from a determined psychopath. In such cases, all you can do is try to exert some sort of damage control. This is not easy but some suggestions may be of help:

  • Obtain professional advice. Make sure the clinician you consult is familiar with the literature on psychopathy and has had experience in dealing with psychopaths.
  • Don’t blame yourself. Whatever the reasons for being involved with a psychopath, it is important that you not accept blame for his or her attitudes and behavior. Psychopaths play by the same rules—their rules—with everyone.
  • Be aware of who the victim is. Psychopaths often give the impression that it is they who are suffering and that the victims are to blame for their misery. Don’t waste your sympathy on them.
  • Recognize that you are not alone. Most psychopaths have lots of victims. It is certain that a psychopath who is causing you grief is also causing grief to others.
  • Be careful about power struggles. Keep in mind that psychopaths have a strong need for psychological and physical control over others. This doesn’t mean that you shouldn’t stand up for your rights, but it will probably be difficult to do so without risking serious emotional or physical trauma.
  • Set firm ground rules. Although power struggles with a psychopath are risky you may be able to set up some clear rules—both for yourself and for the psychopath—to make your life easier and begin the difficult transition from victim to a person looking out for yourself.
  • Don’t expect dramatic changes. To a large extent, the personality of psychopaths is “carved in stone.” There is little likelihood that anything you do will produce fundamental, sustained changes in how they see themselves or others.
  • Cut your losses. Most victims of psychopaths end up feeling confused and hopeless, and convinced that they are largely to blame for the problem. The more you give in the more you will be taken advantage of by the psychopath’s insatiable appetite for power and control.
  • Use support groups. By the time your suspicions have led you to seek a diagnosis, you already know that you’re in for a very long and bumpy ride. Make sure you have all the emotional support you can muster.

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ANTI-AUSTERITY MEASURES

http://www.ukuncut.org.uk/

Playcentre: In Camden, north London, demonstrators invaded a NatWest and set up a creche where children played, practiced musical instruments while parents caught up
Playcentre: In Camden, north London, demonstrators invaded a NatWest and set up a creche where children played, practiced musical instruments while parents caught up.

BANK BRANCH as COMMUNITY CENTER
http://www.dailymail.co.uk/news/article-1360925/Activists-turn-40-British-bank-branches-creches-classrooms-shelters-job-centres-protest-bonuses-cuts.html
Reclaiming the banks: Activists turn British banks into creches, classrooms and launderettes in protest over public service cuts  /  26th February 2011

Activists stormed more than 40 banks across Britain in protest over executive bonuses and public service cuts -  and turned them into a variety of ad hoc walk-in centres. UK Uncut said demonstrators set up creches, laundries, school classrooms, libraries, homeless shelters, drama clubs, walk-in clinics, youth centres, job centres and leisure centres at branches of RBS, NatWest and Lloyds. At 10am in Camden, north London, demonstrators invaded a NatWest and set up a creche where children played, practiced musical instruments while parents caught up. Meanwhile in nearby Islington 50 activists set up a laundry in an RBS branch in reaction to alleged council moves to cut services to the elderly, including a much-needed laundry service. They set up washing lines, clothes horses, buckets for handwashing and a team of window cleaners on the outside. The protest was attended by over 15 pensioners and local Labour MP Jeremy Corbyn. Banks were transformed into ‘hospitals’ in Liverpool and Redhill, a classroom in Cardiff, a leisure centre in Eastleigh, a job centre in Birmingham. Twenty people took tents and sleeping bags into NatWest in Brixton to create a homeless shelter.

Meanwhile in Islington 50 activists set up a laundry in an RBS branch in reaction to alleged council moves to cut services to the elderly, including a much-needed laundry serviceMeanwhile in Islington 50 activists set up a laundry in an RBS branch in reaction to alleged council moves to cut services to the elderly, including a much-needed laundry service

They set up washing lines, clothes horses, buckets for handwashing and a team of window cleaners on the outsideThey set up washing lines, clothes horses, buckets for handwashing and a team of window cleaners on the outside 

Aisha Atkins, 32, said: ‘There are alternatives to the cuts, for example, making the banks pay for a crisis they created or by stopping tax-dodging by big business and the super rich. ’But the Government is making a political choice to reduce the deficit by making ordinary people pay with job losses and savaged services. We are transforming the banks into schools, leisure centres, laundry services and homeless shelters to show that it’s our society that’s too big to fail, not a broken banking system.’ An RBS spokeswoman said: ‘We fully respect the right to peaceful protest. Minimising disruption to our customers is our priority.’

PRO-TAX-PAYING
http://www.guardian.co.uk/uk/2011/feb/27/uk-uncut-stage-protests-banks
by Jonathan Paige / 27 February 2011

UK Uncut, the anti-cuts campaign group, staged protests at more than 40 bank branches throughout Britain on a day when the group’s American counterpart, US Uncut, staged at least 50 protests. The fast growing British group, still under six months old, staged the Big Society Bail In protests to show the range of services it says have had to be cut in order to support the financial sector. Last week the group focused on Barclays, which admitted it paid just £113m tax in the UK in 2009 on reported profits of £11.6bn. This week the protests were aimed at 84% state-owned RBS, which has revealed that more than 100 of their bankers were paid more than £1m last year, while total bonuses reached close to £1bn on the bailed-out bank’s reported losses of £1.1bn for 2010. Other banks’ branches, including NatWest and Lloyds, in which the Treasury holds 41% of shares, were also targeted. In Islington, protesters turned up at a branch of RBS with buckets of soapy water, washing lines and clothes pegs in to highlight claimed council cuts to services for the elderly. Supporters included the Labour MP for Islington North, Jeremy Corbyn and pensioners from the borough. Emma, speaking for the demonstrators, said: “The banks caused the financial crisis yet it’s ordinary people across the country having to pay for it, through cuts to vital public services. By propping up banks like RBS with billions of pounds of bailout money the government has forced cuts to services like laundry help for the elderly, which is why we’re here today. ”The cuts are a political choice, not a necessity.”

In Brixton, 20 people brought tents and sleeping bags into NatWest to create a homeless shelter, while a branch of Lloyds in Oxford Street saw a teach-in featuring lecturers from other tax campaign groups including the Robin Hood Campaign and Tax Justice. A bank branch in Birmingham temporarily became a “job centre” while protesters in Nottingham set up a “big society reading room”. Many smaller towns also staged actions. Protesters in Redhill, Surrey set up a “hospital” in a branch of Natwest, while a bank branch in Eastleigh, Hampshire was turned into a “leisure centre” and one in Lewes became a drama club. Daniel Garvin, a spokesman for UK Uncut, said: “The day went extremely well. There 40 actions across the UK, which have hammered home the link between the crisis caused by the banks and the cuts to our essential services. The movement has gone international with the US staging 50 protests. It’s become a global issue, proving people can work across borders to tackle issues like corporate tax avoidance and cuts to services.”

US Uncut, despite being formed three weeks ago, has already come to the attention of the right-wing Fox News host Glenn Beck, who suggested the protests are part of a global conspiracy that includes anti-union law protests in Wisconsin and the revolts in the Middle East. In Washington DC, over 100 protesters temporarily closed down a branch of the Bank of America, which received and repaid $45 billion in the 2009 US federal bailout. US Uncut said it has exploited the tax code to pay no federal income taxes in 2009, while paying its top executives millions of dollars. ”We were inspired by UK Uncut to stage a teach-in,” said Rizvi Qureshi, of US Uncut DC. “It went on for about half an hour, before people left of their own accord and carried on protesting outside. There was a very small police presence and the protest ended without any trouble. ”This is just the beginning of a larger national campaign about tax avoidance in response to federal budget cuts. We hope to do something equally creative in the future.”

Protests have taken place in Boston, New York and the Midwest. Many actions are still underway on the west coast of the US, from Seattle in the north to San Diego in the south. A protest is also taking place in Nova Scotia, Canada, with more planned across the country. RBS said: “We fully respect the right to peaceful protest. Minimizing disruption to our customers is our priority.” The group’s chairman, Sir Philip Hampton, said the number of millionaires was lower than a year ago and that a quarter of the group’s 18,700 investment bankers would not receive a bonus from the £950m payout pool agreed with UK Financial Investments.

BANK of AMERICA PAYS NO U.S. TAXES
http://www.huffingtonpost.com/2011/02/27/us-uncut-bank-of-america-liberal-tea-party_n_828782.html

Demonstrators posing as a liberal Tea Party disrupted service at banks across the country on Saturday, in an effort to spotlight the gimmicks multi-billion dollar corporations use to avoid paying their fair share in taxes. Self-organized through anti-austerity movementU.S. Uncut, regional captains helped organize demonstrators at more than 40 different branchesof Bank of America. The newly-minted group was inspired by an article published recently in The Nation by Johann Hari: “How to Build a Progressive Tea Party.” Hari writes:

Imagine a parallel universe where the Great Crash of 2008 was followed by a Tea Party of a very different kind … Instead of the fake populism of the Tea Party, there is a movement based on real populism. It shows that there is an alternative to making the poor and the middle class pay for a crisis caused by the rich. It shifts the national conversation … This may sound like a fantasy–but it has all happened. The name of this parallel universe is Britain. As recently as this past fall, people here were asking the same questions liberal Americans have been glumly contemplating: Why is everyone being so passive? Why are we letting ourselves be ripped off? Why are people staying in their homes watching their flat-screens while our politicians strip away services so they can fatten the superrich even more?

Hari evokes the spirit of UK Uncut — a movement made up of British citizens, who, in the face of brutal budget cuts, have sought to shame corporate tax dodgers through public demonstrations — and suggests Americans follow suit. U.S. Uncut is doing just that; though many members of the group have disowned the title of Tea Party, telling HuffPost that while they were inspired by the article in The Nation, they do not want to be identified as an opposition group.

Saturday marked the group’s first coordinated event. “Billionaires got bonuses, bailouts and tax cuts, too — the least they can do is pay their fair share of taxes,” said Ryan Clay, a 28-year-old media analyst who helped organize the U.S. Uncut demonstration in Washington, DC. “I got inspired, other people got inspired, we met online, and we’re working through social media to really bring these abhorrent facts to the public.” A rally in San Francisco drew scores of protesters to a branch of Bank of America at Union Square; dressed in ordinary street clothes, they filed into the bank one by one, getting in line to speak with the tellers. Each of them carried a fake check from Bank of America made out to “The United States c/o Tax Paying Citizens,” for $1.5 billion. The sum would cover all the bank’s unpaid taxes on its 2009 earned income of $4.4 billion, demonstrators said.

Only a few people had presented their fake checks to the tellers before the bank temporarily closed for business; protesters were peacefully escorted out of the building by the police. Once on the street, however, they stayed put and kept handing out fake checks, which had facts about corporate tax avoidance written in fine print on the back, as fliers. “Two-thirds of all U.S. corporations do not pay federal income tax,” the fliers said. “BofA is the largest bank and the 5th largest corporation in America.”

“People seemed more eager to accept these fliers and actually read the information they contained than what one would usually expect from handouts with political messages,” said Leslie Dreyer, 32, a resident of Oakland, Calif., who came up with the idea of using checks as props. “When asked ‘would you like a check for 1.5 billion to cash at any BoA?’, they were amused and intrigued enough to ‘read the fine print.’” A Bank of America spokeswoman did not immediately return a request for comment. Many of the largest corporations in the country have mastered the art of evading taxes, booking expenses in the U.S. and profits in low-tax countries. A list compiled by Forbes shows that Bank of America was far from being the only multi-billion dollar corporation to avoid paying taxes on billions of dollars in earnings in 2009; it is also not the only bank to spark angry demonstrations this week.

On Wednesday morning, New York City Councilman Jumaane Williams marched into a Park Avenue Chase bank to denounce the bank’s failure to help homeowners avoid foreclosure. HuffPost’s Laura Basset reports:

“After denouncing the bank to a cheering crowd and calling its executives “bloodsuckers” for accepting bailout money and refusing to help the suffering homeowners they “preyed on,” Williams was stopped by security guards at the door and told the branch was closed. The mob then chanted “open the door” until Williams was let in, at which point he closed his account.Williams told HuffPost that when campaigning in New York City, he met at least two people on every block with mortgage troubles. He said he doesn’t want the bank to use his money to “further deteriorate the community” he represents, especially in light of chief executive Jamie Dimon’s recent $17 million bonus.”

“It’s incredible what these banks are making people go through,” he said. “It’s disgusting. They’re like bloodsuckers, just sucking the lifeblood out of communities and refusing to help out. I understand that people need to get paid to get the best and brightest and these bonuses help with that, but you can’t do that and then not assist the community and then get a taxpayer bailout to the tune of billions of dollars. That’s just greed at its worst.”

Several demonstrators crashed Bank or America’s Investor Conference Tuesday to make the point that when corporations don’t pay taxes, governments are forced to lay off public workers. A blog posting by the anti-austerity group U.S. Uncut called for protesters to gather Tuesday morning at what they called Bank of America’s “Tax Dodger Conference.” “Call your broker- if you have any shares in BofA, you’re free to come inside to the conference and tell everyone you see about BofA’s tax dodging,” the statement said. After the conference had gotten underway, demonstrators unfurled a banner reading “Tax Dodger.” “When corporations like Bank of America don’t pay their fair share of taxes, we have to ‘cut’ teachers, firefighters, and public servants,” one protester shouted. “Do you pay your taxes? So do we. Why don’t corporations pay their fair share, just like everyone else? Bank of America is Bad for America,” he added. “Bank of America pockets billions in profits and bailouts, but $0 in American taxes – that’s immoral and un-American.”

Last month, the same group organized demonstrations at 40 different Bank of America branches.
U.S. Uncut credited an article in The Nation by John Hari called “How to Build a Progressive Tea Party” with calling the group to action. “Imagine a parallel universe where the Great Crash of 2008 was followed by a Tea Party of a very different kind,” he wrote. “Instead of the fake populism of the Tea Party, there is a movement based on real populism.” The group takes their name from the British groupU.K. Uncut, which seeks to use public protests to shame corporations into paying taxes. A list compiled by Forbes showed that Bank of America paid no taxes on $4.4 billion in income in 2009.

UK UNCUT
http://www.thenation.com/article/158282/how-build-progressive-tea-party
How to Build a Progressive Tea Party
by Johann Hari | February 3, 2011

Imagine a parallel universe where the Great Crash of 2008 was followed by a Tea Party of a very different kind. Enraged citizens gather in every city, week after week—to demand the government finally regulate the behavior of corporations and the superrich, and force them to start paying taxes. The protesters shut down the shops and offices of the companies that have most aggressively ripped off the country. The swelling movement is made up of everyone from teenagers to pensioners. They surround branches of the banks that caused this crash and force them to close, with banners saying, You Caused This Crisis. Now YOU Pay. As people see their fellow citizens acting in self-defense, these tax-the-rich protests spread to even the most conservative parts of the country. It becomes the most-discussed subject on Twitter. Even right-wing media outlets, sensing a startling effect on the public mood, begin to praise the uprising, and dig up damning facts on the tax dodgers.

Instead of the fake populism of the Tea Party, there is a movement based on real populism. It shows that there is an alternative to making the poor and the middle class pay for a crisis caused by the rich. It shifts the national conversation. Instead of letting the government cut our services and increase our taxes, the people demand that it cut the endless and lavish aid for the rich and make them pay the massive sums they dodge in taxes. This may sound like a fantasy—but it has all happened. The name of this parallel universe is Britain. As recently as this past fall, people here were asking the same questions liberal Americans have been glumly contemplating: Why is everyone being so passive? Why are we letting ourselves be ripped off? Why are people staying in their homes watching their flat-screens while our politicians strip away services so they can fatten the superrich even more?

And then twelve ordinary citizens—a nurse, a firefighter, a student, a TV researcher and others—met in a pub in London one night and realized they were asking the wrong questions. “We had spent all this energy asking why it wasn’t happening,” says Tom Philips, a 23-year-old nurse who was there that night, “and then we suddenly said, That’s what everybody else is saying too. Why don’t we just do it? Why don’t we just start? If we do it, maybe everybody will stop asking why it isn’t happening and join in. It’s a bit like that Kevin Costner film Field of Dreams. We thought, If you build it, they will come.”

The new Conservative-led government in Britain is imposing the most extreme cuts to public spending the country has seen since the 1920s. The fees for going to university are set to triple. Children’s hospitals like Great Ormond Street are facing 20 percent cuts in their budgets. In London alone, more than 200,000 people are being forced out of their homes and out of the city as the government takes away their housing subsidies. Amid all these figures, this group of friends made some startling observations. Here’s one. All the cuts in housing subsidies, driving all those people out of their homes, are part of a package of cuts to the poor, adding up to £7 billion. Yet the magazine Private Eye reported that one company alone—Vodafone, one of Britain’s leading cellphone firms—owed an outstanding bill of £6 billion to the British taxpayers. According to Private Eye, Vodaphone had been refusing to pay for years, claiming that a crucial part of its business ran through a post office box in ultra-low-tax Luxembourg. The last Labour government, for all its many flaws, had insisted it pay up.

But when the Conservatives came to power, David Hartnett, head of the British equivalent of the Internal Revenue Service, apologized to rich people for being “too black and white about the law.” Soon after, Vodafone’s bill was reported to be largely canceled, with just over £1 billion paid in the end. Days later George Osborne, the finance minister, was urging people to invest in Vodafone by taking representatives of the company with him on a taxpayer-funded trip to India—a country where that company is also being pursued for unpaid taxes. Vodafone and Hartnett deny this account, claiming it was simply a longstanding “dispute” over fees that ended with the company paying the correct amount. The government has been forced under pressure to order the independent National Audit Office to investigate the affair and to pore over every detail of the corporation’s tax deal. “It was clear to us that if this one company had been made to pay its taxes, almost all these people could have been kept from being forced out of their homes,” says Sam Greene, another of the protesters. “We keep being told there’s no alternative to cutting services. This just showed it was rubbish. So we decided we had to do something.”

They resolved to set up an initial protest that would prick people’s attention. They called themselves UK Uncut and asked several liberal-left journalists, on Twitter (full disclosure: I was one of them), to announce a time and place where people could meet “to take direct action protest against the cuts and show there’s an alternative.” People were urged to gather at 9:30 am on a Wednesday morning outside the Ritz hotel in central London and look for an orange umbrella. More than sixty people arrived, and they went to one of the busiest Vodafone stores—on Oxford Street, the city’s biggest shopping area—and sat down in front of it so nobody could get in. “What really struck me is that when we explained our reasons, ordinary people walking down Oxford Street were incredibly supportive,” says Alex Miller, a 31-year-old nurse. “People would stop and tell us how they were terrified of losing their homes and their jobs—and when they heard that virtually none of it had to happen if only these massive companies paid their taxes, they were furious. Several people stopped what they were doing, sat down and joined us. I guess it’s at that point that I realized this was going to really take off.”

That first protest grabbed a little media attention—and then the next day, in a different city, three other Vodafone stores were shut down in the northern city of Leeds, by unconnected protests. UK Uncut realized this could be replicated across the country. So the group set up a Twitter account and a website, where members announced there would be a national day of protest the following Saturday. They urged anybody who wanted to organize a protest to e-mail them so it could be added to a Google map. Britain’s most prominent tweeters, such as actor Stephen Fry, joined in. That Saturday Vodafone’s stores were shut down across the country by peaceful sit-ins. The crowds sang songs and announced they had come as volunteer tax collectors. Prime Minister David Cameron wants axed government services to be replaced by a “Big Society,” in which volunteers do the jobs instead. So UK Uncut announced it was the Big Society Tax Collection Agency.

The mix of people who turned out was remarkable. There were 16-year-olds from the housing projects who had just had their £30-a-week subsidy for school taken away. There were 78-year-olds facing the closure of senior centers where they can meet their friends and socialize. A chuckling 64-year-old woman named Mary James said, “The scare stories will say this protest is being hijacked by anarchists. If anything, it’s being hijacked by pensioners!” They stopped passers-by to explain why they were protesting by asking, “Sir, do you pay your taxes? So do I. Did you know that Vodafone doesn’t?” The police looked on, bemused. There wasn’t much they could do: in a few places, they surrounded the Vodafone stores before the protesters arrived, stopping anyone from going in or out—in effect doing the protesters’ job for them. One police officer asked me how this tax dodge had been allowed to happen, and when I explained, he said, “So you mean I’m likely to lose my job because these people won’t pay up?”

UK Uncut organized entirely on Twitter, asking what it should do next and taking votes. There was an embarrassment of potential targets: the National Audit Office found in 2007 that a third of the country’s top 700 corporations paid no tax at all. UK Uncut decided to expose and protest one of the most egregious alleged tax dodgers: Sir Philip Green. He is the ninth-richest man in the country, running some of the leading High Street chain stores, including Topshop, Miss Selfridge and British Home Stores. Although he lives and works in Britain, and his companies all operate on British streets, he avoids British taxes by claiming his income is “really” earned by his wife, who lives in the tax haven of Monaco. In 2005 the BBC calculated that he earned £1.2 billion and paid nothing in taxes—dodging more than £300 million in taxes.

Far from objecting, Cameron’s government appointed Green as an official adviser, with special responsibility for “cutting waste.” So UK Uncut drew a direct line from Green’s tax exemption to the cuts in services for ordinary people. For example, Cameron had just announced the closure of the school sports partnership, which makes it possible for millions of schoolchildren to engage in healthy, competitive exercise. The protesters pointed out that if Green was made to pay taxes, the entire program could be saved, with more than £120 million left as small change. So they declared a day of action.

At the London protests against Green, everybody was asked to turn up at the largest branch of Topshop—again on Oxford Street—and mill around like ordinary shoppers. Once a whistle was blown, they were to start chanting, put on sports clothing to dramatize what was being taken away from schoolchildren and sit down by the counters to stop sales. It was the Saturday before Christmas. There was a strange frisson as everyone turned up and looked around. It was impossible to tell who was a shopper and who was a protester: they looked the same. The whistle blew—and they shut down one of the largest retail stores in Europe.

Across Britain, the same thing was happening. Even in Tunbridge Wells—a town synonymous with ultraconservatism—the Vodafone store was blockaded. Again, many people spontaneously joined in. The protests were all over that evening’s TV news. It was the most-read story on the websites of the BBC and the country’s most-read newspaper, the Daily Mail. The prime-time Channel 4 News reported, “A more eloquent and informed group of demonstrators would be hard to come across and one is struck by the wide appeal across ages and incomes, of what they had to say.” The uprisings in Tunisia and Egypt have shown how social media can be used to conduct the unfocused rage of a scattered population and harden it into a weapon. UK Uncut shows the same tactics can be used in a democracy—and there is the same need. Unemployment in the United States is at the same level as in Egypt before the uprising: 9 percent.

The UK Uncut message was simple: if you want to sell in our country, you pay our taxes. They are the membership fee for a civilized society. Most of the protesters I spoke with had never attended a demonstration before, but were driven to act by the rising unemployment, insecurity and austerity that are being outpaced only by rising rewards for the superrich. Ellie Mae O’Hagan, a 25-year-old office worker in Liverpool, one of the most economically depressed places in the country, said she was “absolutely outraged to discover that I was paying more than Philip Green in taxes.” She added, “I could see what all the cuts were doing. My brother had been made redundant, loads of my friends were unemployed and I could see it all getting worse, while these bankers get even bigger bonuses. And I thought, Right, you’ve got to do something. So I e-mailed UK Uncut to ask if there was a protest happening in Liverpool. They said, Not yet, so you organize one. So I spent forty-eight hours arranging one. And a hundred people turned up—an amazing mixture of people, who I had never met, and who didn’t know each other—and we shut down both Vodafone stores. Suddenly, it felt like we weren’t passive anymore. We were standing up for ourselves.”

At every protest, a clear and direct line was drawn from tax avoidance to real people’s lives. If they pay their bill, you won’t be forced out of your home. If they pay their bill, your grandmother won’t lose her government support. If they pay their bill, our children’s hospitals won’t be slashed. The protests began to influence the political debate. Public opinion had already been firmly for pursuing tax dodgers, with 77 percent telling YouGov pollsters there should be a crackdown. But by dramatizing and demonstrating this mood, the protesters forced it onto the agenda—and stripped away Cameron’s claims that there was no alternative to his cuts.

Polly Toynbee is one of Britain’s most influential columnists: imagine Maureen Dowd with principles instead of snark. Toynbee attended the London protests and was manhandled out of Topshop by security guards. She reported later that the protests were being watched very nervously on Downing Street. “It is no coincidence that the government immediately hurried out a ‘clampdown’ on tax avoidance, collecting £2 billion,” she tells me, “or that [its coalition partners] the Liberal Democrats suddenly remembered this was one of their big commitments. Of course, that sum is only a drop in the ocean. But this really was a jolt to the political system. It was hugely important.”

But perhaps the most striking response was from the right. One of Britain’s most famous businessmen, Duncan Bannatyne, came out in support of the protests, declaring, “We need to rebel against tax dodgers…as Government won’t.” The Financial Times conceded that “the protesters have a point” but then grumbled about them. Surprisingly, the Daily Mail, Britain’s most right-wing newspaper, became one of the movement’s most sympathetic allies. The editors could see that their Middle England readers were outraged to be paying more taxes than the superrich. So they ran their own exposé on Philip Green’s tax affairs, along with straightforward and detailed reporting of the protests.

The only part of the media that attacked UK Uncut outright was, predictably, Rupert Murdoch’s empire. This isn’t surprising given that his company, News International, is one of the world’s most egregious tax dodgers, contributing almost nothing to the US or UK treasuries. His tabloid the Sun accused UK Uncut of being a “group of up to 30,000 anarchists” scheming “to bring misery to millions of Christmas shoppers,” with plans to “set off stink bombs, leave mouldy cheese in clothes and rack up huge sales at tills and then refuse to pay.” After one of the people named in the article reported the Sun to the Press Complaints Commission, the newspaper was forced to retract the article by removing it from its website.

But these smear jobs were the best the right could muster. Conservatives ran into hiding, with almost nobody prepared to defend tax avoiders. Only a few stray voices emerged: ultraconservative blogger Tim Montgomerie, regarded as highly influential with Cameron; and Labour MP Tom Harris, our equivalent of a Blue Dog Democrat. They argued that tax avoidance is legal and therefore fine. The protesters responded that they were obviously arguing for a change in the law.

The tax-evasion defenders also tried to argue that a crackdown would “drive away” corporations, to the detriment of the nation. But the corporations are already, for all intents and purposes, “away.” They pay nothing to Britain. They have relocated everything they can. They can’t, however, physically relocate their British shops to Bangalore. It’s impossible. That remnant can certainly be taxed. What are they going to do?

Besides, the right’s claim that enforcing fair taxes drives away the rich was recently tested—and proved wrong. Toward the end of the last Labour government, officials increased the top tax rate to 50 percent. (This is still far short of the 90 percent levied on US taxpayers by President Eisenhower, during the biggest boom in American history.) Conservatives predicted disaster: London Mayor Boris Johnson said it would reduce the city to a ghost town as bankers fled to Switzerland. Yet after the taxes rose, the number of rich people applying for visas to leave Britain for Switzerland actually fell by 7 percent.

After the empirical argument collapsed, a few on the right tried to shift the argument to a moral one. They said that Green “earns all his money on his own,” so why should he have to pay any of it back to the rest of us? I responded on TV and in a blog post by suggesting a small experiment. Let’s take one branch of Topshop, and for twelve months we’ll deny any services funded by collective taxation to that store. When the rubbish piles up, we won’t send garbage men to collect it. When the rat outbreak begins, we won’t send pest control. When they catch a shoplifter, we won’t send the police. When there’s a fire, we won’t send the fire brigade. When suppliers want to get their goods to the store, there may be a problem: we won’t maintain the roads. When the employees get sick, we won’t treat them in the publicly funded hospitals. Then let Philip Green come back and tell us he does it all himself.

The last argument of the defenders has been to say it’s impossible to do anything about tax havens, so we’ll just have to accept them. But this is false. After the 9/11 attacks, the world—under US pressure—passed virtually universal laws to freeze Al Qaeda–related accounts and so prevent them from stashing or accessing money from tax havens. Where there is political will, they can be brought to heel rapidly. In the early 1960s Monaco was refusing to hand over details of French tax dodgers to the French authorities. President Charles de Gaulle surrounded the country with tanks and cut off its water supply until it relented. On a more prosaic level, many countries have integrated into their law something called a General Anti-Avoidance Principle, which stipulates that any act contrary to the spirit of the nation’s tax laws is illegal. It slams shut most loopholes overnight.

There has been an obsessive hunt by the media to discover who UK Uncut “really are.” They assume there must be secretive leaders pulling the strings somewhere. But the more I dug into the movement, the more I realized this is a misunderstanding. The old protest movements were modeled like businesses, with a CEO and a managing board. This protest movement, however, is shaped like a hive of bees, or like Twitter itself. There is no center. There is no leadership. There is just a shared determination not to be bilked, connected by tweets. Every decision made by UK Uncut is open and driven by the will of its participants. Alongside many people who had never protested, activists from across the spectrum have poured into the movement, from the students occupying their universities to protest the massive hike in fees, to antipoverty groups like War on Want, to trade unions. Indeed, even the trade union at Britain’s IRS came out in support, with ordinary tax collectors rebelling against their bosses for letting the rich wriggle out of taxes.

Think of it as an open-source protest, or wikiprotest. It uses Twitter as the basic software, but anyone can then mold the protest. The Western left has been proud of its use of social media and blogging, but all too often this hasn’t amounted to much more than clicktivism. By contrast, these protesters have tried at every turn to create a picture of George Osborne, Cameron’s finance minister, sitting in his office, about to sign off on another big tax break for a rich person, paid for by cuts to the rest of us. Is a big Facebook group going to stop him? No. Is an angry buzz on the blogosphere going to stop him? No. But what these protesters have done—putting all the online energy into the streets and straight into the national conversation—just might. And by creating a media buzz, it draws in people from far beyond the tech-savvy Twitterverse, with older activist groups—from trade unions to charities—clamoring to join.

As one UK Uncut participant, Becky Anadeche, explains, “So many campaigns rely on the premise that the less you ask somebody to do, the more likely they are to do it. This campaign has proved the opposite. People who have never even been on a protest before have been organizing them.”

British liberals and left-wingers have been holding marches and protests for years and been roundly ignored. So why did UK Uncut suddenly gain such traction? Alex Higgins, another protester, explains, “It’s because we broke the frame that people expect protest to be confined to. Suddenly, protesters were somewhere they weren’t supposed to be—they were not in the predictable place where they are tolerated and regarded as harmless by the authorities. If UK Uncut had just consisted of a march on Whitehall [where government departments are located], where we listened to a few speakers and went home, nobody would have heard of it. But this time we went somewhere unanticipated. We disrupted something they really value: trade.” A wave of bankers’ bonuses is due to be announced in February, and it would be surprising if UK Uncut did not respond with a similar program of direct action.

Can this model be transferred to the United States? Remember that a few months ago, Brits were as pessimistic about the possibility of a left-wing rival to the Tea Party as Americans are now. Of course, there are differences in political culture and tax law structure and enforcement, but there are also strong parallels. In the United States the same three crucial factors that created UK Uncut are in place. First, at the state level, Americans are facing severe budget cuts, causing the recession to worsen. Nobel Prize–winning economist Paul Krugman says state governors are acting like “50 Herbert Hoovers…slashing spending in a time of recession, often at the expense both of their most vulnerable constituents and of the nation’s economic future.”

Second, most of these cuts could be prevented simply by requiring superrich individuals and corporations to pay their taxes. The Government Accountability Office (GAO) calculated in 2008 that eighty-three of the 100 biggest US corporations hide fortunes in tax havens. And even without these shelters, the rich have been virtually exempted from taxes across America. Billionaire Warren Buffet recently conducted a straw poll in his office and found he paid a lower proportion of his income in taxes than anybody else there—and considerably less than his secretary. Indeed, tax expert Nicholas Shaxson says that in many ways “America itself is a tax haven for many rich people.” WikiLeaks is poised to release the details of a whole raft of corporations and banks using tax havens in the Cayman Islands, laying out the dodging for all to see. And third, public opinion is firmly behind going after the rich and corporations. A poll in January for 60 Minutes and Vanity Fair asked Americans which policy they would choose to reduce the deficit. By far the most popular, chosen by 61 percent of respondents, was to increase taxes on the rich. The next most popular, chosen by 20 percent, was to cut military spending. Other polls bear this out. So Americans are facing the same cuts as the Brits. They are being ripped off by corporations and rich people just like the Brits. And they are as angry as the Brits. “All it takes,” says Tom Philips, “is for a few people to do what we did in that pub that night and light the touch paper.”

During the 2008 presidential campaign, Barack Obama promised to go after tax havens. He pointed out that one building in the Cayman Islands claims to house 12,000 corporations, and said: “That’s either the biggest building or the biggest tax scam on record.” He promised he would “pay for every dime” of his spending and tax cut proposals “by closing corporate loopholes and tax havens.” Yet in office he hasn’t done this. In 2009 Congress passed the Foreign Accounts Tax Compliance Act, which shuffled a few inches forward but still doesn’t even require the automatic exchange of information from tax havens that EU law requires as a matter of right. So if a rich person opens a tax account in the Cayman Islands and hides his money there, the IRS isn’t told and doesn’t know. Yes, President Obama’s deficit commission made a few passing noises about closing tax loopholes, but the bulk of its recommendations and energy focused on going after benefits for the poor and middle class, like Social Security.

What should US Uncut target? “It’s important to go after brand names that exist in every city in America,” says Tom Purley, a UK Uncut participant. “The key to our success was that it was so easily replicated. People could do it anywhere. It took something that seems like a remote issue and connected it to a place they see every day.” Most of the companies that engage in the worst tax avoidance in the United States are Big Pharma and financial companies, which don’t have stores. But the GAO also named a number of major brands that are exploiting tax havens. They include Apple, Bank of America, Best Buy, ExxonMobil, FedEx (whose president, Frederick Smith, was named by Obama as the businessman he most admires), Kraft Foods, McDonald’s, Safeway and Target. That’s a wealth of potential targets. American citizens should ask themselves: I work hard and pay my taxes, so why don’t the richest people and the corporations? Why should I pick up the entire tab for keeping the nation running? Why should the people who can afford the most pay the least? If you’re happy with that situation, you can stay at home and leave the protesting to the Tea Party. For the rest, there’s an alternative. For too long, progressive Americans have been lulled into inactivity by Obama’s soaring promises, which come to little. As writer Rebecca Solnit says, “Hope is not a lottery ticket you can sit on the sofa and clutch, feeling lucky…. Hope is an ax you break down doors with in an emergency.” UK Uncut has just shown Americans how to express real hope—and build a left-wing Tea Party.

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