This week on CounterSpin: A new investigative series by McClatchy newspapers’ Greg Gordon reveals that in 2006 and 2007, Goldman Sachs sold more than $40 billion in securities backed by risky home mortgages, “but never told the buyers it was secretly betting that a sharp drop in U.S. housing prices would send the value of those securities plummeting.” Sounds important. We’ll talk to Greg Gordon about his story.
Also on the show: Israel/Palestine is in headlines at the moment as the press engage both Secretary of State Hillary Clinton’s changing line on settlements and the continued fallout from a UN report critical of Israel’s actions in Gaza early this year. We’ll talk with Phyllis Bennis, author of, among other titles, Understanding the Palestinian-Israeli Conflict: A Primer
That’s coming up, but first as usual, we’ll look back at the week’s press.
—New York Times reporter Alissa Rubin’s November 1 look back on her experience as a war correspondent in Iraq is mostly interesting, though when she gets to the part where she draws the big lessons, the piece takes an Orwellian turn:
In the culture of “respectable” American journalism, imputing bad intentions to U.S. policy—at least until decades after the fact—is rarely done. Thus, uncounted dead, wounded and displaced are often written off as the unfortunate byproduct of American idealism or optimism. And so for instance U.S. policy in 1980s Central America was generally described as a matter of democratic idealism—bloody, but idealistic. And so for Rubin, it was mostly “wishful thinking” that killed the “fathers and brothers, mothers and sons” of Iraq.
—When Honduran coup leader Roberto Micheletti finally agreed to let ousted president Manuel Zelaya finish out his term in a reconciliation government, the Washington Post editorial page called it “a win in Honduras”—but who was the loser, according to the paper? Hint: Regular readers won’t be suprised.
The Post argued in an October 31 editorial that Zelaya’s return will make the upcoming presidential election legitimate—and since neither of the two leading candidates is allied with the democratically-elected Zelaya, that “means that Honduras’s democracy should be preserved, and Mr. Chávez’s attempted coup rebuffed.”
Yes, while you may have thought the coup at hand was the one where Zelaya was forced out of the country by Honduran military leaders, the truly twisting editorial logic at the Post has it that the real coup was Zelaya’s plan to hold a referendum on whether to rewrite the constitution, a move which, though it could not, as we’ve discussed, have led to Zelaya remaining in office, still somehow represented what the Post calls a “model of populist authoritarianism” which, if you’re still following, is also promoted by Hugo Chávez, who is, well, very bad.
As for the actual coup, as most of the world’s people understand the term, the Post concedes that did “violate democratic norms” but more nefariously, it provided “Mr. Chávez and his client with a convenient means to rally support.” So the anti-democratic event of a military coup was a vital step toward democracy because of the way it put down the aspirations of the democratically elected leader, because he had support from another democratically elected leader, the two of them forming the region’s primary obstacle to, um, democracy. It’s really very simple.
—Washington Post ombud Andrew Alexander wrote a column November 1 about journalistic conflicts of interest. One of his main examples was Howard Kurtz, the paper’s own media reporter, who listeners may know moonlights as the host of a program about the media on CNN, Reliable Sources. The Post‘s conflict of interest rules say that journalists “cannot accept payment from any person, company or organization that he or she covers.” What’s more: the rules seem to anticipate precisely the situation that Kurtz is in, since they do allow journalists to sometimes accept money from broadcast organizations—as long as covering those broadcasters is not part of the journalist’s job.
So why don’t these rules apply to Howard Kurtz? Apparently because he’s Howard Kurtz. As Kurtz told Alexander: “My track record makes clear that I’ve been as aggressive toward CNN—and The Washington Post, for that matter—as I would be if I didn’t host a weekly program there.” Kurtz’s response makes it clear that he, like many corporate journalists, doesn’t understand what it means to say that someone has a conflict of interest. If you are both reporting on and working for a particular organization, than you have interests as a reporter and other interests as an employee. To point out that those interests are in conflict is not to say that everyone in that situation will choose to ignore their journalistic responsibilities—it’s to say that reporters shouldn’t have to make that choice, if it can be avoided.
Part of Kurtz’s job as a media reporter, it should be noted, is to point out other journalists’ conflicts of interest. How he can possibly do that given his own personal situation is hard to imagine.
—Afghan activist and politician Malalai Joya has been on a media tour to discuss her book, A Woman Among Warlords. As noted by Eric Garris at AntiWar.com, Joya was treated very differently by CNN International than by CNN. Appearing on CNN October 28 Joya described Afghan civilians crushed between the oppression of Taliban warlords on the ground, and the fatal bombing from the sky of occupation forces. CNN host Heidi Collins seemed offended by part of that:
Perhaps some people would take great issue with Joya’s characterization; perhaps some people would prefer the word “picnic,” but before calling her guest out as hopelessly or hysterically subjective, Collins might check with a group like the International Committee of the Red Cross, whose expressed position is that “Once a situation exists which factually amounts to an occupation the law of occupation applies—whether or not the occupation is considered lawful. Therefore, for the applicability of the law of occupation, it makes no difference whether an occupation has received Security Council approval, what its aim is, or indeed whether it is called an “invasion”, “liberation”, “administration” or “occupation.” As the law of occupation is primarily motivated by humanitarian considerations, it is solely the facts on the ground that determine its application.”
I suppose CNN‘s Collins could claim to be speaking for all of those no doubt real people who don’t understand international law or who disapprove of it, but CNN should consider how much should such ideas be allowed to shape a newscast.
—And finally, former vice president Al Gore is on the cover of the November 9 Newsweek, to coincide with the release of his new book Our Choice: A Plan to Solve the Climate Crisis. The piece on the inside is a mostly favorable take on Gore’s work, though reporter Sharon Begley couldn’t resist throwing in a little dig at Gore’s wonkiness:
Imagine that—a description of wind power, with a graphic in a book about green energy. Once a hopeless wonk, always a hopeless wonk.
As to our memories of those 2000 debates, maybe Begley meant to type “reporters” instead of “voters.” The public reaction to the first Bush-Gore debate was pretty well studied, and the polls showed that most people thought Gore won. In any event, it’s hard to believe reporters found anyone who seriously called for fewer facts in debates, though imagining such an audience must make a journalist’s job much easier to do.
CounterSpin: Goldman Sachs is often portrayed as the gold standard of Wall Street investment firms. The smartest, by virtue of its having weathered the recent financial storms, and virtuous too, encouraging its top officials to take time out for public service. Of course the public service part has left Goldman well-connected in high government circles.
But some recent reports have also tarnished Goldman’s image. Not least of these a series of investigative reports published by McClatchy newspapers that suggest, among other things, that Goldman secretly bet on the housing collapse. Joining us now to talk about the story is the series’ author, Greg Gordon.
Welcome to CounterSpin Greg Gordon!
Greg Gordon: Hi, Steve, thanks for having me.
CS: Well, let’s begin with why Goldman, why did you investigate Goldman and what did you find?
GG: Well, we investigated Goldman because Goldman is sort of the 24-karat investment bank, it’s the most prestigious investment bank in the world and because Goldman of all the Wall Street firms came out of this subprime meltdown intact, virtually intact. They lost a billion and a half dollars where everybody else was writing off tens of billions or folding entirely. So we looked at how they got out and the way in which they appear to have escaped disaster is that they secretly made wagers that the U.S. housing market would decline at the same time that they were selling off bonds which were backed by risky mortgages.
They would portray themselves as an insignificant player in the subprime market, but actually Goldman was not that small. They sold $135 billion in bonds or securities backed by risky mortgages that were registered in the United States and then many more tens of billions of dollars overseas or offshore. So that was sort of the first part is they did this using these exotic bets known as credit default swaps and they did it in dark markets where nobody really knew they were doing it. And they saved themselves billions of dollars, covered themselves. Of course they bought $20 billion of this kind of protection from the big insurer AIG. Then we looked at what’s been going on with these mortgages after they’ve defaulted and found that Goldman Sachs in various of its subsidiaries had been reduced to filing papers seeking foreclosure of homes across the country to try to recover what they can for their bond holders and perhaps in some cases for themselves.
We also looked at the offshore aspect of this—how they sold these securities through the Cayman Islands and they didn’t have the same disclosure requirements that they have in the United States when they’re being watched more closely by the Securities and Exchange Commission, and so some of these prospectuses that were very closely held—I got ahold of a couple of them—and they exaggerated the safety of these securities.
Here’s Goldman Sachs selling triple-A rated securities that are based on a failing housing market and on mortgages that were not underwritten properly by the shady mortgage bankers.
And then lastly we took a real close look at the way Goldman had entered into business relationships with New Century Mortgage, which started out in the mid-’90s with about $350 million in revenues and the decade later had rocketed to number two in the subprime industry with close to $60 billion in sales. And Goldman made more than a dozen deals with New Century and sold off its mortgages, and if you take a good look at some of these pools of loans you can see where lots of what’s known as “liar’s loans” among them—where people just stated their income and there was no verification—and there are all kinds of other failings in the mortgages.
CS: So your series shows that while Goldman Sachs was selling as highly rated bonds stuff that was essentially junk, that really hit hard on some pension funds and other investors. But what are the legal questions here, if it is a violation of the law is it because Goldman did not disclose to potential investors or to investors?
GG: One of the key questions is—and I’ll take even a step back: here you’re selling triple-A rated securities, why do you need to hedge them? Why do you need to bet the other way, secretly, on them if they’re really triple-A securities? And I asked Goldman Sachs can you give me another example of triple-A securities that you were also hedging, and I didn’t get an example from the company.
The legal questions are going to come down to—if anybody gets off the dime and investigates this stuff, and I kind of feel that it warrants an investigation by some government agency—is what did Goldman know? What was the state of Goldman’s knowledge, was Goldman selling these bonds when it thought they were toxic waste? And is that why they were hedging, is that why they were betting the other way? Because if that’s the case, that would be securities fraud.
There are also, you mentioned, these pension fund suits alleging that Goldman omitted material facts when it circulated these prospectuses on the securities because allegedly Goldman did not say fully enough that these mortgage lenders were using poor lending practices. They were really checking out who they were giving subprime mortgages to or other risky types of mortgages.
CS: Well you mentioned that you thought the series and your investigative report merited official investigation, but could it be that Goldman is so well-connected that it may evade the kind of official scrutiny that you’re suggesting should be done because they’re so well-connected?
GG: I don’t throw around conspiracy theories a lot. Having been in Washington for 32 years, I’ve seen a lot, but you really have to question—I mean, this is a major campaign donor to both parties and a major player in Washington. They provided Treasury secretaries during the Clinton years and again during the Obama administration, and in fact, the current Treasury secretary’s chief of staff is a former Goldman lobbyist. By the way, a former Goldman official named Adam Storch was just named to a senior job in the Securities and Exchange Commission’s enforcement unit. So you wonder what it would take to get an investigation, but there’s a new team running law enforcement apparatus in Washington, and we’ll have to see.
CS: Well, we’re running out of time, so of course I have a two-part question for you: I want to ask you, even though it’s still early, if you’re seeing other journalists becoming interested in picking up and advancing your story and relatedly in this day and age, isn’t it difficult for journalists to do that as the beat of investigative financial journalism seems to be going through the same straits as other journalistic beats?
GG: McClatchy has thirty daily newspapers across the country, and we like every other newspaper company, are in tough financial times, and I’m very proud of McClatchy for keeping our two investigative slots in Washington, but you wonder, how much longer will it be able to hang on? We need newspaper readers. I think democracy needs newspaper readers because I think democracy needs newspapers. And to your question about whether others will follow on what we’ve done on this, I hope so, but we are planning to follow what we’ve done. We’ve gotten a lot of tips since the story came out, and we’re going to try and follow them. We’ll see where they go you know, we’re very eager to do that.
CS: We will certainly follow them too. We’ve been speaking with Greg Gordon, investigative reporter with McClatchy newspapers. You can read his series on Goldman Sachs online at www.McClatchyDC.com.
Greg Gordon thanks again for joining us today on CounterSpin!
GG: My pleasure.
CounterSpin: Israel/Palestine is a static storyline in much of U.S. media. Coverage presents two sides, locked in mortal combat, with a preference of perspective given, to be sure, to the worldview of Israel, an official U.S. ally. But does that media intransigence, if you will, reflect present day political reality? Are congressmembers who reject virtually any condemnation of Israeli government actions just reflecting the strongly held opinions of most Americans?
Joining us now is Phyllis Bennis, she’s a fellow at the Transnational Institute and the Institute for Policy Studies where she directs the New Internationalism Project. She’s also an author and her book, Understanding the Palestinian-Israeli Conflict: A Primer is just out now in a recently updated edition. She joins us now by phone from Washington, D.C.
Welcome back to CounterSpin, Phyllis Bennis!
Phyllis Bennis: Thank you. Great to be with you.
CS: Well, Palestine and Israel are never far from the front page, but one reason for the attention right now is continued debate on the so-called Goldstone report, a UN fact-finding report into the conflict in Gaza in January. Recently Congressfolk including ranking Democrats and Republicans in the House Foreign Affairs Committee, signed a resolution calling on Barack Obama to “strongly and unequivocally oppose any further consideration” of the report. Is there anything outrageous in the Goldstone report, and if not, what do things like this Congressional condemnation say about U.S. official thinking?
PB: Well, no, there’s nothing outrageous in the Goldstone report. However, it wouldn’t matter if there were, you can be pretty sure that no one in Congress, and although I don’t have the evidence of this, I would bet a great deal of my very small life’s fortune on the fact that not one of them has read it. It’s 575 pages long, the executive summary is more than 50 pages long. I doubt if very many, perhaps one or two, have read the executive summary.
The problem was not about the report, and the attack, ironically, was not about anything in the report. To this day, no one in the Obama administration and on one in Congress has been able to say that a single thing the report says is actually wrong. The attack is not on the message, it’s on the messenger. And the problem is that Congress is not aware that the discourse on this question has dramatically changed across this country.
Unfortunately, I don’t think the Obama administration is aware that the discourse has qualitatively changed. They seem to be making decisions as if the idea of real pressure on Israel—something as what should be a very small thing like holding them accountable for potential war crimes, that should be a no-brainer, as if that is somehow still political suicide. It isn’t. But I’m afraid that they really don’t get it.
CS: Well, what are some of the signs that you’re seeing? Because I saw a commentary on GRITtv recently in which you were talking about this change in the public discourse on Palestine/Israel. What are some of things you’re thinking of when you say that?
PB: I think there’s a number of interesting developments. One has to do with the changes within the Jewish community. There are Jewish anti-occupation organizations popping up all over the place, and there have been for several years. In response to that, you have the rise of J Street, the new Jewish lobby, that is challenging AIPAC directly, going head-to-head saying we’re pro-Israeli but pro-peace. Exactly what that means hasn’t really been fleshed out yet; they’re pretty new on the block. But this is a reflection of that kind of change. All of the major Jewish lobby organizations came out against Barack Obama as a candidate at various points saying he’s not pro-Israel enough, we don’t trust him, etc., etc.
Well despite that, 78 percent of American Jews voted for President Obama. So that’s a huge shift in what is now a clear inability of those lobbies to claim that they speak in the name of all Jews. More broadly, this isn’t only about the Jewish community.
You guys are concerned particularly with the media, Janine. Look at the media coverage of the 60th anniversary of Israeli independence, and compare it to ten years ago, to the 50th. The 50th anniversary, there was nothing but Israeli triumphalism across the spectrum of the U.S. press. The 60th anniversary in 2008, there was plenty of Israeli triumphalism, but you also had Palestinian voices on the front pages and on the lead stories. You had Palestinians being asked why do Palestinians use the word catastrophe to describe the creation of the state of Israel?
You have an entirely different discourse because the understanding of people in this country has changed. The use of the word apartheid to describe Israeli policies of discrimination as well as the apartheid wall, which ironically enough Israelis use the same term—they just use the word apartheid in Hebrew: “hafrada.” They use the same word. But that you couldn’t do two or three years ago. You would be hounded out as being anti-Semitic or whatever. If it was me, it would be a “self-hating Jew.” But suddenly the debate over which policies of Israel might in fact violate the international covenant against apartheid is a very viable debate. The discourse had changed dramatically.
The problem is those in power haven’t gotten it yet. And the challenge for those of us who are working to change the discourse is to get to the next level.
CS: Well, let me just ask you finally about one of the factual elements in that discourse which there is confusion over. A November 2 Washington Post article headlined, “Israel Putting Forth ‘Unprecedented’ Concessions, Clinton says,” described the Palestinian position on settlements in this way: “The Palestinians regard the land occupied by about 300,000 West Bank settlers as part of a future Palestinian state, and consider continued settlement activity an effort to influence negotiations.” Now if I’m trying to understand things, it’s not really on base to suggest that the primary objection to settlements from the Palestinian side is the role that they play in negotiations is it?
PB: No, one of the big problems in this discourse at the official level—in Congress, in the White House—is the treatment of everything on the ground as political issues to be decided in negotiations rather than the legal status of in this case Israeli settlements, which is that they’re all illegal under international law. Any international lawyer will tell you, under the Geneva Convention of 1949, article 33 is very clear.
You can’t, as an occupying power, move any of your people into the land that you’re occupying. Period. Full stop. They’re all illegal.
The problem is that the discourse hasn’t caught up to the reality, so we still have a position where President Obama, and Secretary of State Clinton, and Senator Mitchell, the special envoy, are not pressuring Israel around settlement. We don’t see—I don’t agree with those who say there’s been a cave in or a reduction of pressure, I think the problem is there never was any real pressure.
What we heard was a series of requests: please stop settlement construction. No. Please stop expanding settlements. No. Please stop expanding some settlements. No. Please stop expanding a few settlements, not including Jerusalem and only for a few months. Well, maybe…No.
That was what we heard. And then the requests stopped. Serious pressure would have been Those settlements are illegal. Your first step needs to be to immediately freeze all settlement activity as a first step towards ending them. If you choose not to do that, you know that $30 billion that I, President Obama, agreed to implement that was called for by President Bush? You can kiss that $30 billion goodbye. Americans need healthcare. Americans need education. They don’t want me to give $30 billion dollars to the Israeli military, which is what we agreed to do, and if you don’t freeze settlements, that’s the first thing that goes. The second thing will be the promise of a veto in the United Nations Security Council to prevent you from being accountable for war crimes. You know our history of providing a veto? You can kiss that goodbye, too. That’s what pressure looks like, and unfortunately, we haven’t seen that yet.
CS: Well, and perhaps it’s hair-splitting but the constant references to occupation by settlers, I think obscures a point that you’ve just made very clearly, which is when you’re talking about occupation, you’re talking about Israeli state occupation, military occupation, and not sort of pioneers as are often depicted.
PB: Absolutely. And one of the problems is we’re talking about settlements which are now the size of cities. The settlement of Ma’aleh Adumim outside of Jerusalem, it’s a city of almost 40,000 people with two colleges and I don’t know how many high schools, and lawns that are healthy and lush while the Palestinians who live down below only have access to running water twice a week. So this is a settlement, but if you ask people who live there who mainly vote Labor or who even vote the left-wing Meretz Party they’ll say you know settlers are a real problem. And you say well you live in a settlement. Oh, no, no, this is a city. The settlements are out there, those little outposts, those are the settlements, this is permanent, this is ours. And this is a real problem.
CS: We’ve been speaking with Phyllis Bennis of the Institute for Policy Studies. Her book Understanding the Palestinian-Israeli Conflict: A Primer is out now in a newly updated edition from Interlink. Thank you very much for joining us this week on CounterSpin, Phyllis Bennis.
PB: Thank you, Janine, it’s been great.
–Goldman Sachs: Low Road to High Profits, by Greg Gordon