Pentagon Tries to Blame Financial Crisis on Foreign Financial Terrorists → Washingtons Blog
Pentagon Tries to Blame Financial Crisis on Foreign Financial Terrorists - Washingtons Blog

Tuesday, March 1, 2011

Pentagon Tries to Blame Financial Crisis on Foreign Financial Terrorists

The Pentagon is paying contractors to claim that it was foreign financial terrorists - instead of fraud by American financial executives - which caused the 2008 financial crisis.

While a Pentagon contractor said, “This is the equivalent of box cutters on an airplane,” Paul Backen - a Yale University professor who has studied economic warfare - said he saw “no convincing evidence that ‘outside forces’ colluded to bring about the 2008 crisis.”

Indeed, the claim that terrorism caused the financial crisis is about as believable as Gaddafi trying to blame the Libyan protests on Osama Bin Laden, or al-Maliki blaming Al Qaeda for the Iraqi protests.

But it's not an isolated incident. In fact, the government is trying in many ways to convince us that financial fraud is isolated, not systemic, and - most of all - not important to rein in.

For example, the U.S State Department's website says (click on link entitled "economic")"

Economic conspiracy theories are often based on the false, but popular, idea that powerful individuals are motivated overwhelmingly by their desire for wealth, rather than the wide variety of human motivations we all experience.

This one-dimensional, cartoonish view of human nature is at the heart of Marxist ideology, which once held hundreds of millions under its sway.)

If I didn't know better, I would say that the State Department is implying that anyone that questions the intent behind even one particular powerful individual's actions is a conspiracy theorist or a Marxist.

Similarly, Obama's current head of the Office of Information and Regulatory Affairs - and a favored pick for the Supreme Court (Cass Sunstein) - previously:

Defined a conspiracy theory as "an effort to explain some event or practice by reference to the machinations of powerful people, who have also managed to conceal their role."

William K. Black - professor of economics and law, and the senior regulator who put 1,000 top executives in jail during the S & L crisis - says that that the government's entire strategy now - as during the S&L crisis - is to cover up how bad things are: "the entire strategy is to keep people from getting the facts".

Similarly , 7 out of the 8 giant, money center banks went bankrupt in the 1980's during the "Latin American Crisis", and the government's response was to cover up their insolvency.

So powerful people have conspired to try to downplay the severity of various economic crises.

And - as Matt Taibbi notes that the government is doing more to protect them than to prosecute them:
Federal regulators and prosecutors have let the banks and finance companies that tried to burn the world economy to the ground get off with carefully orchestrated settlements — whitewash jobs that involve the firms paying pathetically small fines without even being required to admit wrongdoing. To add insult to injury, the people who actually committed the crimes almost never pay the fines themselves; banks caught defrauding their shareholders often use shareholder money to foot the tab of justice.


A veritable mountain of evidence indicates that when it comes to Wall Street, the justice system not only sucks at punishing financial criminals, it has actually evolved into a highly effective mechanism for protecting financial criminals. This institutional reality has absolutely nothing to do with politics or ideology — it takes place no matter who's in office or which party's in power. To understand how the machinery functions, you have to start back at least a decade ago, as case after case of financial malfeasance was pursued too slowly or not at all, fumbled by a government bureaucracy that too often is on a first-name basis with its targets. Indeed, the shocking pattern of nonenforcement with regard to Wall Street is so deeply ingrained in Washington that it raises a profound and difficult question about the very nature of our society: whether we have created a class of people whose misdeeds are no longer perceived as crimes, almost no matter what those misdeeds are. The SEC and the Justice Department have evolved into a bizarre species of social surgeon serving this nonjailable class, expert not at administering punishment and justice, but at finding and removing criminal responsibility from the bodies of the accused.

The systematic lack of regulation has left even the country's top regulators frustrated. Lynn Turner, a former chief accountant for the SEC, laughs darkly at the idea that the criminal justice system is broken when it comes to Wall Street. "I think you've got a wrong assumption — that we even have a law-enforcement agency when it comes to Wall Street," he says.

A wild conspiracy theory?

Kansas City Fed President Thomas Hoenig doesn't think so. He recommends Taibbi's article.

Indeed, Bill Gross, Nouriel Roubini, Laurence Kotlikoff, Steve Keen, Michel Chossudovsky, the Wall Street Journal and Bernie Madoff all say that the U.S. economy is a giant Ponzi scheme.

They Didn't MEAN to Cause a Depression

Sunstein argues:
Many social effects, including large movements in the economy, occur as a result of the acts and omissions of many people, none of whom intended to cause those effects. The Great Depression of the 1930s was not self-consciously engineered by anyone; increases in the unemployment or inflation rate, or in the price of gasoline, may reflect market pressures rather than intentional action.
However, Sunstein is neither an economist nor a criminologist, and - as such - is completely out of his depth.

Whether or not anyone intended to cause the Great Depression, top economists - including Robert Shiller, Robert Kuttner, William Black and John Kenneth Galbraith, and the former chief accountant of the S.E.C. ( Lynn Turner) - have said that criminal fraud led to the Great Depression (and to the current crisis). Even Alan Greenspan says fraud caused the current crisis.

Economics professor James K. Galbraith testified as follows to the Senate Judiciary Committee's Subcommittee on Crime:
I write to you from a disgraced profession. Economic theory, as widely taught since the 1980s, failed miserably to understand the forces behind the financial crisis. ... Economists [argued that] widespread fraud therefore could not occur. Not all economists believed this – but most did.

Thus the study of financial fraud received little attention. Practically no research institutes exist; collaboration between economists and criminologists is rare; in the leading departments there are few specialists and very few students. Economists have soft-pedaled the role of fraud in every crisis they examined, including the Savings & Loan debacle, the Russian transition, the Asian meltdown and the bubble. They continue to do so now. At a conference sponsored by the Levy Economics Institute in New York on April 17, the closest a former Under Secretary of the Treasury, Peter Fisher, got to this question was to use the word “naughtiness.” This was on the day that the SEC charged Goldman Sachs with fraud. ..."


An older strand of institutional economics understood that a security is a contract in law. It can only be as good as the legal system that stands behind it. Some fraud is inevitable, but in a functioning system it must be rare. It must be considered – and rightly – a minor problem. If fraud – or even the perception of fraud – comes to dominate the system, then there is no foundation for a market in the securities. They become trash. And more deeply, so do the institutions responsible for creating, rating and selling them. Including, so long as it fails to respond with appropriate force, the legal system itself.


Ask yourselves: is it possible for mortgage originators, ratings agencies, underwriters, insurers and supervising agencies NOT to have known that the system of housing finance had become infested with fraud? Every statistical indicator of fraudulent practice – growth and profitability – suggests otherwise. Every examination of the record so far suggests otherwise. The very language in use: “liars’ loans,” “ninja loans,” “neutron loans,” and “toxic waste,” tells you that people knew. I have also heard the expression, “IBG,YBG;” the meaning of that bit of code was: “I’ll be gone, you’ll be gone.”


Some appear to believe that “confidence in the banks” can be rebuilt by a new round of good economic news, by rising stock prices, by the reassurances of high officials – and by not looking too closely at the underlying evidence of fraud, abuse, deception and deceit. As you pursue your investigations, you will undermine, and I believe you may destroy, that illusion.

But you have to act. The true alternative is a failure extending over time from the economic to the political system. Just as too few predicted the financial crisis, it may be that too few are today speaking frankly about where a failure to deal with the aftermath may lead.

In this situation, let me suggest, the country faces an existential threat. Either the legal system must do its work. Or the market system cannot be restored. There must be a thorough, transparent, effective, radical cleaning of the financial sector and also of those public officials who failed the public trust. The financiers must be made to feel, in their bones, the power of the law. And the public, which lives by the law, must see very clearly and unambiguously that this is the case.
William K. Black has made the same points.

Sunstein is Using the Wrong Standard

Of course, "intent to cause" harm is not the standard. If two criminals disable the power to a nuclear power plant in order to steal a computer containing valuable information (to sell it to a foreign country), and if the lack of power to the cooling systems causes a core meltdown which releases radioactivity into the surrounding town, they are guilty of mass murder, even if they didn't intentionally try to expose anyone to radioactivity.

Similarly, if two robbers unplug an old tycoon's dialysis machine so that they can steal his wallet, ring and watch, and don't bother to plug it back in, they are guilty of murder even if they didn't actually intend to kill him.

Likewise, as Nobel prize winning economist George Akerloff demonstrated in 1993, big financial players intentionally loot the economy time and again, knowing that could very well lead to an economic crisis.

This is not rocket science. It is a dynamic which has been understood for "hundreds of years".

Therefore, Sunstein's argument that - because the heads of the giant financial companies probably didn't intend to cause a depression - that shows that there was no conspiracy to commit fraud makes as little sense as saying that the criminals who caused a nuclear meltdown or killed the old tycoon couldn't have engaged in a conspiracy.

In fact, nobel prize winning economist Joseph Stiglitz, PhD economists Dean Baker, Michael Hudson, Paul Craig Roberts and Michel Chossudovsky and Time Magazine's Justin Fox all say that financial conspiracies have been committed by big American financial players. Leading Austrian economist Murray Rothbard agreed.

The REAL Conspiracy

Indeed, the real conspiracy is that the government is trying to hide the fact that massive conspiracy to commit fraud by Wall Street's biggest players is a prime cause of the financial crisis.

As I noted a year ago:

The label "conspiracy theory" is commonly used to try to discredit criticism of the powerful in government or business.


Acceptable Versus Unacceptable Conspiracy Theories

Bernie Madoff's Ponzi scheme was a conspiracy. The heads of Enron were found guilty of conspiracy, as was the head of Adelphia. Numerous lower-level government officials have been found guilty of conspiracy. See this, this, this, this and this.

Time Magazine's financial columnist Justin Fox writes:

Some financial market conspiracies are real ...

Most good investigative reporters are conspiracy theorists, by the way.

Indeed, conspiracies are so common that judges are trained to look at conspiracy allegations as just another legal claim to be disproven or proven by the evidence.

But - while people might admit that corporate executives and low-level government officials might have engaged in conspiracies - they may be strongly opposed to considering that the wealthiest or most powerful might possibly have done so.

Indeed, those who most loudly attempt to ridicule and discredit conspiracy theories tend to focus on defending against criticism involving the powerful.

This may be partly due to psychology: it is scary for people to admit that those who are supposed to be their "leaders" protecting them may in fact be human beings with complicated motives who may not always have their best interests in mind. And see this.



Michael Kelly, a Washington Post journalist and neoconservative critic of anti-war movements on both the left and right, coined the term "fusion paranoia" to refer to a political convergence of left-wing and right-wing activists around anti-war issues and civil liberties, which he claimed were motivated by a shared belief in conspiracism or anti-government views.

In other words, prominent neocon writer Kelly believes that everyone who is not a booster for government power and war is a crazy conspiracy theorist.

Similarly, psychologists who serve the government eagerly label anyone "taking a cynical stance toward politics, mistrusting authority, endorsing democratic practices, ... and displaying an inquisitive, imaginative outlook" as crazy conspiracy theorists.

This is not really new. In Stalinist Russia, anyone who criticized the government was labeled crazy, and many were sent to insane asylums.

Using the Power of the State to Crush Criticism of the Government

The bottom line is that the power of the state is used to crush criticism of major government policies and actions (or failures to act) and high-level government officials.

Pay attention, and you'll notice that criticism of "conspiracy theories" is usually aimed at attempting to protect the state and key government players. The power of the state is seldom used to crush conspiracy theories regarding people who are not powerful . . . at least to the extent that they are not important to the government.
Sunstein has called for the use of state power to crush conspiracy allegations of state wrongdoing. See this, this and this.

And as I've previously noted, the government is using massive state power to try to redirect people away from even questioning the financial system. See this, this, this and this. Indeed, claims of "national security" are being used to keep criminal fraud hidden and out of public view.

And as Glenn Greenwald points out, the government is already implementing Sunstein's program (starting around 20 minutes into video):

And the government is gaming many of the economic indicators - such as unemployment - and allowing the big financial players to use ipse dixit accounting and sleights of hand, in order to try to convince everyone that things are not that bad, that everything is returning to normal, that the fraud isn't really that widespread. As Warren Buffet noted, when the water level drops, the rocks at the bottom of the river are exposed. In other words, if the true financial conditions of the big financial players - and the U.S. economy - were reported, the massive fraud would be exposed.


  1. It seems obvious that since we learned that GHW Bush and Reagan were knighted by England's thieving queen for bringing home the bacon to England, something has been amiss.

    Back in the early 1970's, by looking into the disappearances and financial records concerning Jimi Hendrix' accounts and investments through the corrupt Yameta music management, those opportunities and ratlines for money laundering facilitated by British protectorates and the centralized banking system became fact to me. Others assured me that I was not 'seeing things'.
    England proper claimed no jurisdiction over their 'protectorates' banking activities when England felt like it. This was just the drug markets and Hendrix's problems, so legal claims were of a limited nature. This money-ratline system has developed into a complex (but not too complex), stable system of looting and exporting of filthy lucre like so many bails of hay.

    N.Greenspan originally claimed 'derivatives' to only be a minor band-aid technique for minor book balancing and openly 'expressed dismay' at the explosive derivatives market which ensued. Yes, the same Greenspan who said,"the Fed is above the law."
    This system legally permitted and facilitated trades of truckloads of pie-in-the sky for hard-earned cash. The cash went bye-bye and the scrip sits in the office down the street.
    Combine this with the fact that recently over the course of months, computerized high- velocity trading instead of creative markets of actual trade and commerce made up over 50% of all Wall street trades, with each share traded issuing a cash commission to its trader, and you get an open and shut case of systemic fraud that a grade school class could understand.
    The snarling arrogance of the perps is matched by Robert Kaluza, the attending engineering supervisor at the DH well for BP leading up to the blow-out. The Wall Street crowd produces nothing and figures ways to scam, not produce, to get rich. They make the stock market look viable and devour the wood like termites, collecting a cash commission for every trade, regardless of impact, on top of 'fees'. I like that word, 'fees'. Fortunately, they (the termites) need airholes. We can detect their presence,IF WE LOOK,and spray them and repair the wood, IF WE GET OFF OUR FAT ASS.
    God Bless America. Have a nice day. Except you Congress. You can go to hell.

    Back to paragraph one; the SEC is still controlled by the Skull and Bones crowd, which has been loyal to England, NOT THE U.S. for over 300 years. (See The Jolly Roger Flag, Heinrich Himmler's little hat, Sir Henry Morgan, Bluebeard, et al.)
    The pirates have boarded, you civilian imbeciles, and they are quickly taking over the ship. NOT boat, SHIP-OF-STATE! TURN OFF YOUR TV SET!!! And to military personnel, PLEASE turn off your TV sets.

  2. Addendum:
    Does the pentagon say this gives me moral license to as an ongoing racket sell my stolen loot and pass blame and fault to the buyer?

  3. Keiser's also got an excellent interview with Gerald Celente. Don't know if it's part 1, 2 or 3, but Celente mentions the power of the internet and how five years ago nobody had the foggiest idea about what or who the Federal Reserve was. Suddenly... well, people are starting to connect the dots.

    Was there when I started to get interested about 9/11, and began to connect the dots.

    Started to connect the dots with Iraq too, long ago. Sure, Curveball, a real straight shooter.

    Now, I get the feeling people are moving beyond the dots and are staring to pull the threads together, hence Sunstein's fear of conspiracy theories.

    All in one day I hear Celente saying people are wising up to the Federal reserve (; Paul Craig Roberts weaving Taibbi, the Bush/Chenney destruction of civil liberties and the Kennedy assassination into one article (; and Gilad Atzmon on the Zionist Promised Planet (

    There's a change coming! And it ain't got nothing to do with al-Qaeda, not a peep out of them in North Africa.


  4. Actually, "intent to cause harm" certainly does enter into it when someone's charged with murder. The examples you give, depending on the details, might actually be reckless homicide or manslaughter or something.
    Also, just because there is and has been lots of fraud and corruption and a horrifying lack of law enforcement, doesn't mean the Great Depression or the current crisis were "caused" by fraud. Worsened or intensified, yes. But the Ponzi-scheme nature of the economy isn't due to some individual criminals. Wouldn't it be nice if these problems were just caused by specific evildoers not following the rules? That's kind of a reassuring idea -- but it ignores the fact that there are much deeper causes which go to the basic design of the debt-based economy, as well as population growth and energy depletion.

  5. Yes, it drives me nuts how even my smart liberal friends use the term "conspiriacy theory" to dismiss something as "crazy & therefore obviously wrong." I believe the corporate-owned media was encouraged to spread the word.

    Mike's point (if I hear him correctly) that the depressions can't be traced to individual wrongdoers buys into another great brainwash, that it's not individuals who make up a system.

    Of course, sometimes groups of people are simply self-deluded, but why would the media BE corporate-controlled if not to shape public opinion. Is it 'cause their hobby is TeeVee and they're just innocently doing what systems do? Sure, that's it. Else, I might be labeled a conspiracy theorist. Shudder!


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