Money, Banking and Torture: It's Just Shocking!

Official Washington seems shocked that torture has been the rule above the law during the Bush administration. Reaction to the release of the Justice Department memos on the subject seems almost naive--and certainly with no sense of history (in this case, very recent history).

I remember former defense secretary Robert McNamara saying in a documentary about the Vietnam War that he wished he had known more about the country before conducting a war there. Didn't anyone in the Pentagon or White House bother to tell him about French expert Bernard Fall and his books on the Indochinese war such as Hell In A Very Small Place? At Yale in the mid-60s, I met Fall when he came to lecture, read his books and followed his articles in the New Republic. I also took courses on the history and economy of Southeast Asia. Knowledge of the place was neither Top Secret nor hidden.

Similarly with the story of the Bush administration, the CIA and torture, information has not been secret nor unreported. Wisconsin history professor Alfred McCoy's book, A Question of Torture: CIA Interrogation from the Cold War to the War on Terror, explains the origins of many of the techniques described in the Justice Department memos. The film Taxi to the Dark Side reports on the torture methods used by US officials in Afghanistan and at Guantanamo; it won the Academy Award for best documentary in 2007. New Yorker writer and former Wall Street Journal reporter Jane Mayer's book The Dark Side: The Inside Story of How the War on Terror Turned into a War on American Ideals is a model of investigative reporting on the legal machinations behind the Bush administration's approach to fighting terrorism. The New Yorker is not a difficult publication to locate.

Fortunately, a few members of Congress such as Senators Carl Levin, Diane Feinstein, and Patrick Leahy know this current history and understand that the nation cannot and should not sweep it under the rug. Only a thorough airing of the issue will allow the US to rebuild its reputation among civilized nations and to undertake the institutional reforms needed to prevent this unAmerican behavior from being repeated in the future.

The best way to do this, as President Obama has recognized and endorsed, is a bipartisan Congressional commission or Select committee which will hold comprehensive hearings, subpoena witnesses, examine documents, and report to the American people on how and why torture became a seemingly acceptable part of US international behavior. The country has done this before with the Church Committee investigations of CIA excesses during the Cold War. The Republic did not fall, nor did American national security suffer. We still prevailed in the Cold War--and we can certainly triumph against rag tag jihadists without resorting to torture (see Reza Aslan's new book, How To Win A Cosmic War: God, Globalization and the End of the War on Terror, for a nuanced rethinking of US anti-terrorism strategy).

As with the torture issue, so with money and banking; we need more sunlight, not less.

Already there seems to be moves afoot by Washington pundits, some politicians, and lots of Wall Streeters to put the financial crisis behind us, to move on to economic recovery (when it comes), and not bother ourselves with why the financial crisis happened or how to assure that the US economy and global markets are not put in dire jeopardy again.

As with the CIA and torture, we need to rely on Congress and key Senators to lead the way.

The Obama administration has its hands full simply dealing with the economic recovery, from restructuring the auto industry to keeping the big banks afloat, to passing a Federal Budget; they cannot be expected to explore root causes or even propose long term structural reform.

One of the few national politicians who saw the economic storm coming is Senator Byron Dorgan, the populist Democrat from North Dakota. Ten years ago, in the debate over the Financial Services Modernization Act which repealed Glass-Steagal and lifted FDR era regulations on banks, Senator Dorgan prophetically warned: "This bill will ...raise the likelihood of future massive taxpayer bailouts....I also think we will in ten years time, look back and say: We should not have done that because we forgot the lessons of the past; those lessons represent timeless truths that were as true in the year 2000 or 2010 as they were in year 1930 or 1935." Dorgan warned against financial institutions investing in derivatives, and about banks that would become "too big to fail" and require bailouts with taxpayer money.

Dorgan has written a book, Reckless! How Debt, Deregulation and Dark Money Nearly Bankrupted America to be published next month. He has also proposed legislation to establish a Senate Select Committee to hold hearings on the financial crisis---on its root causes, and on the structural reforms needed to prevent future meltdowns. Senator John McCain is a leading co-sponsor of the initiative.

Such a Select Committee would hold extensive hearings, hear from a variety of experts, and examine the workings of the Federal Reserve, the private banking system, and hybrid organizations such as Fannie Mae and Freddie Mac, consider them as a whole, and ask how they can work better to provide the credit needed by a modern, globalized economy without unleashing and rewarding unbridled greed, fraud and speculative abuse.

Money--how it is created and how it functions in the economy often seems mysterious and opaque to most Americans. Few understand how central banks regulate the money supply or how private banks create money and provide credit. Money is a social construct, no longer backed by gold or other precious metals. Readers looking for a primer should start with the late economist John Kenneth Galbraith's clear-eyed volume, Money: Whence It Came, Where It Went, and then move on to the political history recounted in Lords of Finance--The Bankers Who Broke the World, by Liaquat Ahamed, a splendid biographical rendering of the Central Bankers of the 1920s and 1930s who led us to the Great Depression. If you have energy left, pick up William Greider's award winning reportage in his book, Secrets of the Temple: How the Federal Reserve Runs The Country.

Most of our fellow citizens won't have time for such self-education. That's why the country needs a public discussion of money and banking--an economics tutorial for the nation. Congressional leaders and the White House should endorse and pass Senator Dorgan's initiative.

It's time to stop being shocked by events. Let's learn from them. Let the hearings begin--on money and on torture.

Comments

[ThomH]

A teach-in on money and banking would explore :

How the nation allows banks to create money from nothing, then charge us interest when we we borrow it;

Why we should claw back from banks the power to create money and thus the power to control the country;

How we can pay down the national debt with government-issued greenbacks, simultaneously increasing bank reserve requirements to 100% to prevent inflation;

Why the present fractional reserve banking system is inherently doomed to collapse in exactly the kind of credit crash we are now seeing.

For more, see www.monetary.org www.moneyasdebt.net www.webofdebt.com www.moneymasters.com http://whatsnotso.blogs.com

[The Ghost]

CAPITALISM: DESIGNED TO CHEAT YOU.

[themodernleader]

A compelling and timely argument for openness on two callumnies that have been hidden from the American people too long. Thank you for your patriotism.

[hgovernick]

With regards to banking, we need more sunlight on computer programs and just how easy it would be for "the right hacker" to REALLY make all the bailout money disappear.­.. permanently, untraceabl­y... the master keystroke to hide all traces of corruption from those involved, whether in the private sector or government, and eliminate any possibility of investigating and prosecuting the criminals, both small and large, involved.

[dsws]

A commission? That's your recommendation for how to regulate the financial system? How about something substantive. Here's mine: http://docs.google.com/Doc?id=dg2v62ws_1f9pgwnzf

[it is me]

Well, let's just hope that the committees and hearings are more productive than the hearings thus far on the financial crisis. If we are going to have senators just screaming and yelling and making like they are the parents of a 5 year-old we will never get anywhere. Very little is still considered to be "known" about the cause of the crisis (well, aside from the many people that know that it was caused by greed on the part of everyone - companies, CEOs, shareholders, and yes, even the average American) but we have had numerous hearings. Let's at least make these hearings productive so that we can get to the bottom of things. Not bringing in people to sit and say "we didn't know".

[gobarackgo]

Here's a good place to start educating yourself on the bailout -- according to the Wall Street Journal, it's not a boondoggle after all, it's actually something of a bargain:

http://online.wsj.com/article/SB124042677481544533.html?mod=mktw

[droz9]

If there were no terrorists there wouldn't be any need for torture...

[mosh]

Taking your simple minded logic to its rightful conclusion - - if there was no American Imperialism there would be no terrorists. Chicken and egg, baby, chicken and egg.

[mosh]

Gee - then how come the communist Chinese used torture on our soldiers during the Korean war?? Were we the 'terrorists' then?

[metalpipe]

Money--how it is created and how it functions in the economy often seems mysterious and opaque to most Americans.

Exactly why I have always advocated the mandatory study of personal finance in high schools. It is utterly absurd that we are sent into the world without basic knowlege of how to invest, how to save, what it means financially to have children, and the meaning of a liabilty vs an asset. The crap we are given in school is designed to keep us dumbed down.

[Romeover]

Money, including gold, has always been a social construct.

[jake1492]

The elephant in the room is the steady erosion of our industrial base.
We have been content to substitute phony growth for getting to the root of that problem.

[joebhed]

jake,
the steady erosion of our industrial or manufacturing base, as well as the corresponding excessive growth of the financial services industry and the financialization of the economy, have the same common root cause.
As my Dad would put it - the improper priority USE of the money supply.

It's not an accident, nor a normal course of economic business, despite what Tom Friedman might say.

The priority use of the money supply, as my Dad used to say, is to ensure the economic stability of the nation and the fullest possible employment of all Americans. That's the mandate that was given to the private bankers of this country when they received the cartel privilege to CREATE all of the nation's money as a debt, on which they get to collect the tax of interest.

If you want to restore the manufacturing base of this country so as to employ all the people in paying jobs so they can afford to buy all the things we are manufacturing, then what you need to do is to take back the money-creation power from those who do not care about these outcomes.

Of all people, napoleon called it pretty well:
"Money has no motherland; financiers are without patriotism and without decency"

Abolish the private debt-money system of the FED.
Support Dennis Kucinich's call for debt-free money issuance directly by the US Treasury.
Monetary transformation.
Full employment.

[IndianaJohn]

When it was first formed, the Fed was just a clearing house for checks.

In the 1930's, President Roosevelt was dealing with the problem of persistent deflation. As the connections between money supply/def­lation/inf­lation were discovered, the Fed was given tools to control the money supply so the deflationary cycle could be brought under control. Since then, deflation has not returned and inflation has been kept to nominal levels by a money supply that has been well targeted, with two exceptions.

In the 1960's President Nixon ordered Fed chairman, Arthur Burns, to loosen money supply to boost the economy. When Burns resisted, Nixon threatened to abolish the Fed. Burns relented, relaxed controls on the money supply and set the stage for the inflation problems of the 1970's.

The second case was recently when, according to Paul Krugman, Arthur Burns's former student, Alan Greenspan, failed to act with independence and followed loose money policy favored by George Bush, leading to excess production for which we are now paying.

Problems with the Fed have occurred when it has responded to the demands of politicians, not when it has acted independently. When a politician wants to get their hands on money, it is not because it is in your best interest, it is because it is in their best interest. The number one job of any politician is not to serve the public, it is to get reelected.

[jake1492]

Good article.

[TakeNoNeoConPrisoners]

While I support sooner rather than later investigation, indictment and prosecution of all of those that gave the go ahead on torture as well as the good little CIA agents just doing their job and following orders like the Nazzis and Japanese during WW II, I understand what Obama is doing here. This is a very serious matter and Obama is playing it safe and letting the facts come out, give them time to be aborbed by the general public and the politicos, until a crescendo arises for legal action against the guilty. And then letting Holder and the DOJ go after the smaller fish to get to the bigger ones. This will play out in time and may take most of his 1-st term in office and perhaps till the end of his 2-nd term to get the big fish - Bush-Cheney. But by waiting for a majority consensus on prosecution, Obama will take the heat off of himself and the charges that will surely come from the lunatic right, that all Obams is doing is playing politics.

Patience and deliberation are the operative words here.

[NoMoFearNoMoHate]

"Money is a social construct, no longer backed by gold or other precious metals."

Thankfully! Do you know what happened when it WAS backed by that stuff?

[jake1492]

what happened?

[NoMoFearNoMoHate]

Groups leveraged it against the United Kingdom and us, the United States of America, during the World Wars to hinder our war effort forcing us to abandon it in order to be able to continue to fight.

Anyone who could dig the stuff up could devalue your currency.

It was ridiculous. There's a handful of very good, soundly reasoned ideas that led us to jettison the insane notion.

[HNWBanker]

Obama will do no such thing. He moved to the center and is taking his order like a good boy. He ditched the bonus tax and made it clear that he's 'moving on.'

[jake1492]

we'll see