A Washington State University fraternity was accused of culturally appropriating the Asian-American Pacific Islander community after the group wore grass skirts for charity.
The WSU Phi Gamma Delta fraternity (FIJI) held an event Monday to raise money for an unknown charity cause. During the event, they wore grass skirts to “serenade” several sororities on campus, according to a statement released by the Interfraternity Council (IFC), an organization which oversees Greek life at WSU.
“Their actions represent clear examples of cultural appropriation which does not align with the values of the Interfraternity Community, or Washington State University,” the statement, released Tuesday, read.
“The Interfraternity Council condemns these and all acts of cultural appropriation regardless of the intention behind them.”
It is unclear if complaints were filed against FIJI by students or if WSU administration will punish the organization. However, the IFC has taken responsibility for the incident and is disciplining the fraternity.
I’m going to bed tonight exhausted, angry and tired. Tired of this. Tired of the work our communities have to do to fight this. Tired of students we have to sit next to everyday thinking this is ok. Tired of the lack of action on the part of WSU administration. Tired of it all. pic.twitter.com/3rpmtN6II8
FIJI members have agreed to apologize to “those harmed,” receive education on cultural appropriation and cultural competency, as well as “participate in cross-community forums” with groups affected by the incident. The fraternity has also been called to go before the WSU Greek Standards Board, according to the IFC.
FIJI also released a statement Tuesday, apologizing for the incident.
“We understand that our behavior was inappropriate and culturally insensitive,” the apology stated.
“We are committed to creating a more understanding culture through education on racial, ethnic, and cultural sensitivity and appreciation.”
“Our hope is that, through this process and education, that our chapter will become more aware about our community, that this behavior does not happen again,” FIJI added. “We also commit to working with leaders of the multicultural community and residential Greek community to ensure these incidents are prevented in the future.”
“The punishment of the FIJI fraternity for their islander philanthropy represents the growing target on the back of fraternities all over campus,” a WSU student, who is a member of a different campus fraternity, told Campus Reform on the condition of anonymity.
“If the fraternity members were poorly representing the Pacific Island culture by acting inappropriately, then an argument could be made for action, however they were doing nothing more than raising money for a charitable cause, and wearing grass skirts,” the student added.
“I believe very few people were offended by this act, and if the IFC wants to take action on a cause like this, it should be expected that they also punish the Kappa Alpha Theta sorority for their "Rock the Casa" philanthropy, where they serve Mexican food for a charitable cause."
IFC, FIJI, and WSU administration did not respond to Campus Reform’s requests for comment.
A university professor in Sweden is under investigation for "anti-feminism" and "transphobia" after he said that there are fundamental differences between men and women which are "biologically founded" and that genders cannot be regarded as "social constructs alone," reports Academic Rights Watch.
For his transgression, Germund Hesslow - a professor of neuroscience at Lund University - who holds dual PhDs in philosophy and neurophysiology, may lose his job - telling RT that a "full investigation" has been ordered, and that there "have been discussions about trying to stop the lecture or get rid of me, or have someone else give the lecture or not give the lecture at all."
“If you answer such a question you are under severe time pressure, you have to be extremely brief — and I used wording which I think was completely innocuous, and that apparently the student didn't,” Hesslow said.
Hesslow was ordered to attend a meeting by Christer Larsson, chairman of the program board for medical education, after a female student complained that Hesslow had a "personal anti-feminist agenda." He was asked to distance himself from two specific comments; that gay women have a "male sexual orientation" and that the sexual orientation of transsexuals is "a matter of definition."
The student's complaint reads in part (translated):
I have also heard from senior lecturers that Germund Hesslow at the last lecture expressed himself transfobically. In response to a question of transexuallism, he said something like "sex change is a fly". Secondly, it is outrageous because there may be students during the lecture who are themselves exposed to transfobin, but also because it may affect how later students in their professional lives meet transgender people. Transpersonals already have a high level of overrepresentation in suicide statistics and there are already major shortcomings in the treatment of transgender in care, should not it be countered? How does this kind of statement coincide with the university's equal treatment plan? What has this statement given for consequences? What has been done for this to not be repeated? -Academic Rights Watch
After being admonished, Hesslow refused to distance himself from his comments, saying that he had "done enough" already and didn't have to explain and defend his choice of words.
"At some point, one must ask for a sense of proportion among those involved. If it were to become acceptable for students to record lectures in order to find compromising formulations and then involve faculty staff with meetings and long letters, we should let go of the medical education altogether," Hesslow said in a written reply to Larsson.
He also rejected the accusation that he had a political agenda - stating that his only agenda was to let scientific fact, not new social conventions, dictate how he teaches his courses.
A school district in Clark County, Indiana, will soon be randomly drug testing students who want to participate in extracurricular activities like sports, band, and driving to school.
“Henryville High School and Borden High School will randomly select ten students each quarter and test them for ten drugs that teenagers are most likely to use,” local ABC 13reported.
“If students test positive, they will be ineligible for one-third of scheduled extracurricular activities after the first offense.
“After the third offense, the student will become ineligible for the rest of their high school career.”
While some parents support the new policy and hope it will discourage students from bringing drugs to school, others, like Lance Leach, feel it is too invasive.
“There has to be a reasoning, and you have to talk to a parent beforehand,” he said.
“Like suspicious behavior or they got caught doing something, then maybe, but not just random drug testing.“
The ACLU agrees. The civil liberties organization has long fought against drug testing in schools. In 1998, the organization attempted to challenge drug testing for afterschool activities in Indiana schools, but the Supreme Court refused to hear their arguments. The following year, they challenged an Oklahoma school district, arguing in that case, the after school activities were directly linked with coursework throughout the normal day, and that drug testing infringed on students’ “right to a public education, as well as of the Fourth Amendment protection against illegal search and seizure,” the New York Times reported at the time.
In 2002, however, the Supreme Court ruled it was constitutional for schools to drug test students participating in extracurricular activities because it was an effective method of deterring drug use.
This assessment turned out to be untrue.
The Washington Postexamined one 2013 study that “looked at 14 years of data on student drug use and found that school drug testing was associated with ‘moderately lower marijuana use,’ but increased use of other, more dangerous illicit drugs.”
Another study found “drug testing was ‘was not associated with changes in substance use.’”
Over the years, a number of other experts have expressed their opposition to the practice over legal concerns and the sheer fact that it doesn’t work. The ACLU has cited the American Academy of Pediatrics, while other doctors have also expressed skepticism.
Nevertheless, in 2015, nearly one in five public high schools had drug testing policies in place:
“[A] nationally-representative survey of 1,300 school districts found that among the districts with drug testing programs, 28 percent randomly tested all students — not just ones participating in after-school programs. These schools are opening themselves up to a legal challenge.”
In a wide ranging interview with The Hill onTuesday conducted in the Oval Office, President Trump was asked to give his take on the biggest mistake in American history.
Considering just how open-ended a question that is, it's perhaps surprising that he merely went back less than a couple decades into the Bush presidency, though Trump's base will certainly welcome it as it hearkens back to his "America First" foreign policy vision of the campaign trail.
“The worst single mistake ever made in the history of our country: going into the Middle East, by President Bush,” the president during his interview with Hill.TV.
“Obama may have gotten them (U.S. soldiers) out wrong, but going in is to me the biggest single mistake made in the history of our country,” he said.
Trump explained the reasoning behind this choice, and why it wasn't something like the civil war or another defining and devastating event reaching far into American History.
“Because we spent $7 trillion in the Middle East. Now if you wanna fix a window some place they say, 'oh gee, let’s not do it. Seven trillion, and millions of lives — you know, ‘cause I like to count both sides. Millions of lives,” the president explained.
Some scholars and humanitarian groups estimate that over one million Iraqis were killed in the US invasion and occupation of Iraq starting in 2003. A 2008 Opinion Research Business (ORB) poll, for example, found that approximately 1.03 million people had died as a result of the war.
“To me it's the worst single mistake made in the history of our country. Civil war you can understand. Civil war, civil war. That’s different. For us to have gone into the Middle East, and that was just, that was a bad day for this country, I will tell you.”
Various estimates on the Iraq war's cost have put the total taxpayer bill as low as near $2 trillion, but none dispute that it is in the multiple trillions, and estimates will vary widely depending on if veteran care is factored into it.
The comments echo things Trump said on the campaign trail in 2016. For example during one of his first major foreign policy speeches then candidate Trump said, “I will never send our finest into battle unless necessary, and I mean absolutely necessary, and will only do so if we have a plan for victory with a capital V.” And referencing the famous quote of John Quincy Adams, he said during the same speech, “The world must know that we do not go abroad in search of enemies.”
He had previously shocked pundits for being the first Republican nominee for president to trash George W. Bush's decision to go to war in Iraq, and has more recently likened it to"throwing a big fat brick into a hornet's nest".
All of this is a hopeful sign considering the extremely heightened and dangerous tensions over Syria this week, and given Trump seems to have vacillated between "bringing the troops home" and getting more involved. On Monday Trump hinted that a decision on the U.S. role in Syria is coming soon.
Commenting on the over 2,000 troops now in Syria ostensibly as part of the "anti-ISIL" coalition campaign, Trump indicated this mission could end soon: “We’re very close to being finished with that job,” he said. He followed with: “And then we’re going to make a determination as to what we’re going to do.”
We consider it a hopeful and a good sign that Trump is possibly revisiting his "America First" foreign policy pledges by identifying the Iraq War as the worst mistake in US history.
ORIGINAL LINK
By Theresa Wrangham As Vaccine Awareness Week 2018 approaches, I am reminded how precious freedom of speech is in our country and how important it is to defend it. This week, NVIC was informed that Pinterest removed our account. The Pinterest Team stated, “many of your pins violate our...
“That was when they suspended the Constitution. They said it would be temporary. There wasn't even any rioting in the streets. People stayed home at night, watching television, looking for some direction. There wasn't even an enemy you could put your finger on.”—Margaret Atwood, The Handmaid's Tale
We can pretend that the Constitution, which was written to hold the government accountable, is still our governing document.
The reality we must come to terms with, however, is that in the America we live in today, the government does whatever it wants, freedom be damned.
“We the people” have been terrorized, traumatized, and tricked into a semi-permanent state of compliance by a government that cares nothing for our lives or our liberties.
The bogeyman’s names and faces may change over time (terrorism, the war on drugs, illegal immigration, etc.), but the end result remains the same: our unquestioning acquiescence to anything the government wants to do in exchange for the phantom promise of safety and security.
Thus, in the so-called named of national security, the Constitution has been steadily chipped away at, undermined, eroded, whittled down, and generally discarded to such an extent that what we are left with today is but a shadow of the robust document adopted more than two centuries ago.
Most of the damage, however, has been inflicted upon the Bill of Rights—the first ten amendments to the Constitution—which historically served as the bulwark from government abuse.
A recitation of the Bill of Rights—set against a backdrop of government surveillance, militarized police, SWAT team raids, asset forfeiture, eminent domain, overcriminalization, armed surveillance drones, whole body scanners, stop and frisk searches (all sanctioned by Congress, the White House, the courts and the like)—would understandably sound more like a eulogy to freedoms lost than an affirmation of rights we truly possess.
Here is what it means to live under the Constitution today.
The First Amendment is supposed to protect the freedom to speak your mind, assemble and protest nonviolently without being bridled by the government. It also protects the freedom of the media, as well as the right to worship and pray without interference. In other words, Americans should not be silenced by the government. To the founders, all of America was a free speech zone.
Despite the clear protections found in the First Amendment, the freedoms described therein are under constant assault. Increasingly, Americans are being arrested and charged with bogus “contempt of cop” charges such as “disrupting the peace” or “resisting arrest” for daring to film police officers engaged in harassment or abusive practices. Journalists are being prosecuted for reporting on whistleblowers. States are passing legislation to muzzle reporting on cruel and abusive corporate practices. Religious ministries are being fined for attempting to feed and house the homeless. Protesters are being tear-gassed, beaten, arrested and forced into “free speech zones.” And under the guise of “government speech,” the courts have reasoned that the government can discriminate freely against any First Amendment activity that takes place within a government forum.
The Second Amendment was intended to guarantee “the right of the people to keep and bear arms.” Essentially, this amendment was intended to give the citizenry the means to resist tyrannical government. Yet while gun ownership has been recognized by the U.S. Supreme Court as an individual citizen right, Americans remain powerless to defend themselves against SWAT team raids and government agents armed to the teeth with military weapons better suited for the battlefield. As such, this amendment has been rendered null and void.
The Third Amendment reinforces the principle that civilian-elected officials are superior to the military by prohibiting the military from entering any citizen’s home without “the consent of the owner.” With the police increasingly training like the military, acting like the military, and posing as military forces—complete with heavily armed SWAT teams, military weapons, assault vehicles, etc.—it is clear that we now have what the founders feared most—a standing army on American soil.
The Fourth Amendment prohibits government agents from conducting surveillance on you or touching you or invading you, unless they have some evidence that you’re up to something criminal. In other words, the Fourth Amendment ensures privacy and bodily integrity. Unfortunately, the Fourth Amendment has suffered the greatest damage in recent years and has been all but eviscerated by an unwarranted expansion of police powers that include strip searches and even anal and vaginal searches of citizens, surveillance (corporate and otherwise) and intrusions justified in the name of fighting terrorism, as well as the outsourcing of otherwise illegal activities to private contractors.
The Fifth Amendment and the Sixth Amendment work in tandem. These amendments supposedly ensure that you are innocent until proven guilty, and government authorities cannot deprive you of your life, your liberty or your property without the right to an attorney and a fair trial before a civilian judge. However, in the new suspect society in which we live, where surveillance is the norm, these fundamental principles have been upended. Certainly, if the government can arbitrarily freeze, seize or lay claim to your property (money, land or possessions) under government asset forfeiture schemes, you have no true rights.
The Seventh Amendment guarantees citizens the right to a jury trial. Yet when the populace has no idea of what’s in the Constitution—civic education has virtually disappeared from most school curriculums—that inevitably translates to an ignorant jury incapable of distinguishing justice and the law from their own preconceived notions and fears. However, as a growing number of citizens are coming to realize, the power of the jury to nullify the government’s actions—and thereby help balance the scales of justice—is not to be underestimated. Jury nullification reminds the government that “we the people” retain the power to ultimately determine what laws are just.
The Eighth Amendment is similar to the Sixth in that it is supposed to protect the rights of the accused and forbid the use of cruel and unusual punishment. However, the Supreme Court’s determination that what constitutes “cruel and unusual” should be dependent on the “evolving standards of decency that mark the progress of a maturing society” leaves us with little protection in the face of a society lacking in morals altogether.
The Ninth Amendment provides that other rights not enumerated in the Constitution are nonetheless retained by the people. Popular sovereignty—the belief that the power to govern flows upward from the people rather than downward from the rulers—is clearly evident in this amendment. However, it has since been turned on its head by a centralized federal government that sees itself as supreme and which continues to pass more and more laws that restrict our freedoms under the pretext that it has an “important government interest” in doing so.
As for the Tenth Amendment’s reminder that the people and the states retain every authority that is not otherwise mentioned in the Constitution, that assurance of a system of government in which power is divided among local, state and national entities has long since been rendered moot by the centralized Washington, DC, power elite—the president, Congress and the courts. Indeed, the federal governmental bureaucracy has grown so large that it has made local and state legislatures relatively irrelevant. Through its many agencies and regulations, the federal government has stripped states of the right to regulate countless issues that were originally governed at the local level.
If there is any sense to be made from this recitation of freedoms lost, it is simply this: our individual freedoms have been eviscerated so that the government’s powers could be expanded.
Yet those who gave us the Constitution and the Bill of Rights believed that the government exists at the behest of its citizens. It is there to protect, defend and even enhance our freedoms, not violate them.
It was no idle happenstance that the Constitution opens with these three powerful words: “We the people.” As the Preamble proclaims:
We, the people of the United States, in order to form a more perfect Union, establish justice, insure domestic tranquility, provide for the common defense, promote the general welfare, and secure the blessings of liberty to ourselves and our posterity, do ordain and establish this CONSTITUTION for the United States of America.
In other words, we have the power to make and break the government. We are the masters and they are the servants. We the American people—the citizenry—are the arbiters and ultimate guardians of America’s welfare, defense, liberty, laws and prosperity.
Many who responded to the survey had a strange conception of what was in the First Amendment. For example, 21% said the “right to own a pet” was listed someplace between “Congress shall make no law” and “redress of grievances.” Some 17% said that the First Amendment contained the “right to drive a car,” and 38% believed that “taking the Fifth” was part of the First Amendment.
In fact, while some educators want students to learn about freedom, they do not necessarily want them to exercise their freedoms in school. As the researchers conclude, “Most educators think that students already have enough freedom, and that restrictions on freedom in the school are necessary. Many support filtering the Internet, censoring T-shirts, disallowing student distribution of political or religious material, and conducting prior review of school newspapers.”
Government leaders and politicians are also ill-informed. Although they take an oath to uphold, support and defend the Constitution against “enemies foreign and domestic,” their lack of education about our fundamental rights often causes them to be enemies of the Bill of Rights.
As Jefferson wrote in 1820: “I know no safe depository of the ultimate powers of our society but the people themselves; and if we think them not enlightened enough to exercise their control with a wholesome discretion, the remedy is not to take it from them, but to inform their discretion by education. This is the true corrective of abuses of constitutional power.”
From the President on down, anyone taking public office should have a working knowledge of the Constitution and the Bill of Rights and should be held accountable for upholding their precepts. One way to ensure this would be to require government leaders to take a course on the Constitution and pass a thorough examination thereof before being allowed to take office.
Some critics are advocating that students pass the United States citizenship exam in order to graduate from high school. Others recommend that it must be a prerequisite for attending college. I’d go so far as to argue that students should have to pass the citizenship exam before graduating from grade school.
Here’s an idea to get educated and take a stand for freedom: anyone who signs up to become a member of The Rutherford Institute gets a wallet-sized Bill of Rights card and a Know Your Rights card. Use this card to teach your children the freedoms found in the Bill of Rights.
If this constitutional illiteracy is not remedied and soon, freedom in America will be doomed.
Our national priorities need to be re-prioritized. For instance, some argue that we need to make America great again. I, for one, would prefer to make America free again.
As actor-turned-activist Richard Dreyfuss warned:
“Unless we teach the ideas that make America a miracle of government, it will go away in your kids’ lifetimes, and we will be a fable.You have to find the time and creativity to teach it in schools, and if you don’t, you will lose it. You will lose it to the darkness, and what this country represents is a tiny twinkle of light in a history of oppression and darkness and cruelty. If it lasts for more than our lifetime, for more than our kids’ lifetime, it is only because we put some effort into teaching what it is, the ideas of America: the idea of opportunity, mobility, freedom of thought, freedom of assembly.”
Last week, the European Court of Human Rights ruled that the U.K.’s GCHQ spy agency is in violation of the European Convention on Human Rights with its mass surveillance programs. The court ultimately found that these activities violate the family and privacy rights of British and European citizens, and this assertion ultimately includes a rejection of the United States’ activities considering GCHQ has obtained much of its data from the NSA.
The suit was brought by Amnesty International, Big Brother Watch, the ACLU, the Bureau of Investigative Journalism, and other civil liberties groups. It addresses provisions of the U.K.’s 2000 Investigatory Powers Act, and though a new version of the law was passed in 2016 and is yet to be enacted, many of the issues the court identified remain in the 2016 bill.
Though the court stopped short of saying intelligence sharing between agencies like GCHQ, NSA, and members of the “Five Eyes” spying alliance violate the human rights convention, it said “using such intelligence sharing to bypass restrictions on surveillance of a member state’s own citizens would be a violation of the charter,”Ars Technica summarized. (In a 2015 ruling, a U.K. court ruled intelligence sharing did, in fact, violate European law).
The Guardian clarified the ruling, which found some activities are in violation of the charter but maintained others are not:
“By a majority of five to two votes, the Strasbourg judges found that GCHQ’s bulk interception regime violated article 8 of the European convention on human rights, which guarantees privacy, because there were said to be insufficient safeguards, and rules governing the selection of ‘related communications data’ were deemed to be inadequate.
“The regime used by the UK government for sharing intelligence with foreign governments did not violate either article 8 or article 10, which guarantees freedom of speech. Not was there any evidence, the judges said, to suggest that the intelligence services were abusing their powers.”
The court also failed to decide that the intelligence agencies are abusing their powers, saying, “there is no evidence to suggest that the intelligence services are abusing their powers.” Still, it also found that there are insufficient safeguards from the U.K’s Investigatory Powers Tribunal to prevent potential abuse (the Investigatory Powers Tribunal is equivalent to the United States’ Foreign Intelligence Surveillance Act system, whose courts approve nearly all warrant requests). From Ars Technica:
“The Court found that the way the UK government collected data from communications service providers was in violation of Article 8 of the ECHR (private and family life rights). It also found that both the method of bulk interception of communications and the process for obtaining communications metadata from service providers violated Article 10 (freedom of expression) because of ‘insufficient safeguards in respect of confidential journalistic material.’ And of particular concern to the court was the lack of any oversight into what Internet traffic was collected or what filters were used to determine which traffic was of interest.”
Notably, the U.K. laws the court took the most issue with mirror the American Patriot Act. “The decision sends a clear message that similar surveillance programs, such as those conducted by the NSA, are also incompatible with human rights,” said ACLU attorney Patrick Toomey.
Because the U.K. system is so similar to that of the United States — and because the U.K. relies heavily on the NSA — the ruling could have a ripple effect on the perceived legitimacy of these practices.
Journalists and free press advocates are responding with alarm to newly released documents revealing the U.S. government's secret rules for using Foreign Intelligence Surveillance Act (FISA) court orders to spy on reporters, calling the revelations "important" and "terrifying."
The documents - obtained and released by the Freedom of the Press Foundation and the Knight First Amendment Institute at Columbia University through an ongoing Freedom of Information Act (FOIA) lawsuit filed last November - confirm long held suspicions that federal officials can target journalists with FISA orders.
The two 2015 memos from former Attorney General Eric Holder to the Federal Bureau of Investigation (FBI) lay out procedures to ensure that the attorney general or deputy attorney general signs off on any FISA applications "targeting known media entities or known members of the media."
These secret rules, as Cora Currier reported for The Intercept, "apply to media entities or journalists who are thought to be agents of a foreign government, or, in some cases, are of interest under the broader standard that they possess foreign intelligence information."
"There's a lack of clarity on the circumstances when the government might consider a journalist an agent of a foreign power," Ramya Krishnan, a staff attorney with the Knight Institute told Currier.
"Think about WikiLeaks; the government has said they are an intelligence operation."
Additionally, even if they aren't personally targeted by FISA orders, Krishnan pointed out that "journalists merely by being contacted by a FISA target might be subject to monitoring - these guidelines, as far as we can tell, don't contemplate that situation or add any additional protections."
Freedom of the Press Foundation executive director Trevor Timm noted that while "the fact that these were kept secret during the Obama administration is cause for great concern," President Donald Trump "has repeatedly stated his hatred for the media, and his Attorney General Jeff Sessions has already tripled the amount of leak investigations since the Obama era (when they were already at an all time high)."
"This is critically important information at a time when press freedom has been under threat from the government, and its role in our democracy has never been more important," Timm added, calling on the DOJ to disclose how often journalists have been subjected to FISA court orders, and why the rules were kept secret until this suit.
"It makes me wonder, what other rules are out there, and how have these rules been applied?" Victoria Baranetsky, general counsel with the Center for Investigative Reporting, previously of Reporters Committee for the Freedom of the Press, told Currier. "The next step is figuring out how this has been used."
The DOJ's rules for obtaining a FISA court order to target a journalist, Timm explained, "are entirely separate from - and much less stringent—than the rules for obtaining subpoenas, court orders, and warrants against journalists" detailed in the DOJ's "media guidelines," which Holder "strengthened in 2015 after several scandals involving surveillance of journalists during the Obama era."
However, Holder's guidelines still concerned media advocates, Currier noted, "because they left room for the use of National Security Letters," which "are administrative orders with which the FBI can obtain certain phone and financial records without a judge's oversight." Currier previously reported on the FBI's 2013 rules for such orders, and concerns about them, in 2016.
You can read the DOJ's rules for targeting journalists with FISA court orders here.
The day Lehman went bankrupt I left the office in London for Waterloo Station and realized that something monumental had happened. The faces of the dozens of people waiting patiently for trains from the center to their homes were revealing. Most of them were, like me, City workers. Panic.
I remember when Freddie Mac and Fannie Mae - both government entities - were bailed out, because it happened shortly before the Lehman collapse. They were the largest originators of subprime mortgages.
Why were subprime mortgages originated by Freddie and Fannie given maximum rating and credit quality? Because they had the government stamp.
What had happened with Lehman? The CEO, Richard Fuld, had been saying for some time that its situation was impeccable, that solvency and liquidity ratios were strong and the viability of the bank was out of the question. He also repeated something we hear too often nowadays, that the shares were simply under the “attack of speculators”. Many of my readers will remember similar excuses in Popular, Monte dei Paschi, Abengoa, Tesla and so many others. This “speculator attack” excuse was used a lot years later during the Eurozone crisis.
Lehman Brothers was not a commercial bank, managing deposits of retail savers, it was an investment bank. Their clients were “competent persons” that is, those that regulators deem with sufficient knowledge of the risk and complexity of the financial products they are offered. It is not possible to contract the services of an investment bank without being a competent person. Lehman was not run by incompetent people. It was managed by people that firmly believed in the system and that analysed risk the way that central banks and governments tell them to. Lehman accumulated high-risk mortgages in its assets because it believed, as so many analysts, commentators and experts said, that these assets had very little risk.
Crises never happen due to accumulation in high-risk assets, but due to the massive accumulation of assets that the entire mainstream deems as “low risk”. Houses never fall, the economy is booming, etc.
Lehman was a prime example of mainstream consensus analysis of risk and economic opportunity. When asset prices fall, buy more.
Lehman did not buy low. It bought in the middle of an already building bubble. More importantly, it did not sell high. It kept riding the gravy train.
Lehman acquired five mortgage lenders in 2003 and 2004, including subprime lenders, when house prices were already soaring. Its acquisitions were lauded by many analysts as genius. As the bubble grew, Lehman’s real estate division led the capital markets unit profits to soar more than 50% between 2004 and 2006. it was the fastest growing division in the entire business. Valuations reflected that “success” sending the multiples at which brokers valued the Lehman stock at all-time highs.
Janet Yellen said in 2005:
“In my view, it makes sense to organize one’s thinking around three consecutive questions –three hurdles to jump before pulling the monetary policy trigger.
First, if the bubble were to deflate on its own, would the effect on the economy be exceedingly large?
Second, is it unlikely that the Fed could mitigate the consequences?
Third, is monetary policy the best tool to use to deflate a house-price bubble?
My answers to these questions in the shortest possible form are, “no,” “no,” and “no.””
Her analysis would not be as clear later in her years as Chairman of the Fed, where she saw no signs of bubbles.
Yellen was not as clear on the housing bubble as it looks. She also spoke of “sophisticated financial products that mitigate risk and facilitate access to housing financing” and Bernanke spoke of “a slowdown, but not a fall“. In essence, she said what most were saying. “Housing is a relatively small sector of the economy, and its decline should be self-correcting”. No, it was not.
Bernanke, on the other hand, saw no bubble and no risk for the economy in 2005. Even in 2007, he saw no risk for the broader economy as subprime mortgages started to collapse.
Lehman beat consensus numerous times and reported record earnings every year from 2005 to 2007. It was unstoppable, an analyst told me at the time. “They buy cheap and always deliver”. “Naysayers are always proven wrong”, he said. In fact Lehman bought in the middle of a bubble and rode it like The Beach Boys sang. “Catch a wave and you’ll feel on top of the world”.
Until the music stopped.
In 2007, Lehman reported net income of a record $4.2 billion on revenues of $19.3 billion. Unstoppable. However, house prices were already showing signals of weakness and subprime mortgages were already cracking in the market. Enter the experts.
The voice on the street, the words of market experts were almost unanimous. It was a correction, nothing else. We were living a new paradigm.
Even holders of subprime packages refused to lend to shortsellers because they believed the assets were super safe.
We must now remember the heroes, those investors and analysts who warned of those risks and who were accused of being stupid, almost terrorism for showing that the risks were enormous. They should be praised today as well.
Bubbles always look like a new paradigm. Valuations soar and the prudent investors are left speechless, looking like fools because they “missed” the rally. 2007 was exactly that. And the hundreds of experts at Lehman as well as most mainstream repeated over and over again the same mantras. “Just a correction”, “value opportunities” and more importantly, when reminded of the tech bubble years earlier “this time is different”. Houses are hard assets, technology is a promise. This time is different. it wasn’t.
And, like all bubbles, it burst when the patience of even the most prudent analyst was tested.
Here is what we learned from Lehman. Or what we did not learn, considering the bubble of everything we are living:
The share price of a bank is the thin veil of hope between its assets and its liabilities. Risk builds slowly and happens fast. Lehman’s assets were falling in value as liabilities rose with margin calls being triggered everywhere. Those uniquely profitable assets that were so scarce they could always be sold higher to many investors found no bid at all.
We constantly hear that there is enormous liquidity in the market waiting to buy a correction and that investors are cautious and would jump at the opportunity created by a market drop. It does not happen. The marginal buyer disappears.
Lehman’s solvency and liquidity ratios evaporated in months. The bleeding became a massive hemorrhage.
Lehman also showed the futility of stress tests and traditional risk analysis. The impact of exposure to one asset class cannot be analyzed believing everything else remains equal.
The two most dangerous words in economics are “ceteris paribus”. All else remaining equal. Nothing remains equal. It is such nonsense I cannot even believe that we still read thousands of pages of academic research and analysts’ reports based on that premise.
Lehman’s exposure to subprime was deemed “manageable” by bulls. It was not. The bank prided itself on having reduced debt, increased liquidity and sold assets throughout 2007.
By then it was too late. it did not survive the end of the year.
Lehman was not a cause of the financial crisis. it was a symptom of a more significant disease. A crisis created by excess risk and high debt has been “solved” by adding more debt and incentivising risk.
The timeline is always the same.
First, deny the risk.
Then, deem it manageable.
Afterwards, take measures to “please” markets or rating agencies that are too small and too late.
Stock collapses.
Following that, blame speculators.
Finally, close the shop.
The monetary and financial system learned something else from Lehman. To hide any new case under the massive monetary laughing gas cloud.
We have seen other cases, but asset prices have continued to soar under the excess of monetary policies. Central banks have injected more than $20 trillion in the economies sending financial assets to all-time highs.
However, Japan, China or Europe have showed how that placebo effect stops working. The ECB and BOJ examples are clear. Massive liquidity stops working as an asset price inflation machine when it becomes part of the liquidity. The Bank of Japan started buying ETFs and in 2018 the market stopped rallying while the Topix fell 7%, the ECB prolonged its quantitative easing program and European stocks still fell 4%. Chinese stocks fell more than 10% despite massive liquidity pumping.
More than $9 trillion in negative-yield bonds can cause much more damage to the economy than all investment banks in 2008 combined.
The world is well prepared to avoid repeating the 2008 crisis. The risk is that we are not prepared for the next one. Because global monetary and fiscal policies are aimed at increasing, not decreasing, risk taking and debt.
Monetary laughing gas has covered all asset classes with a fake blanket of security, disguising risk with ultra-low rates. We have solved a crisis of excess risk, debt and imbalances increasing debt, imbalances and taking more risk for lower returns.
We have learned a few things from Lehman, except that it seems that we want to replicate the same bubble with inflationary policies. The Lehman crisis was solved incentivising more Lehmans.
The next one will probably not be 2008-style crisis, it will likely be a Japanese stagnation solution, as the biggest risk today is in sovereign debt.
When the bubble bursts, governments and central banks will blame speculators and lack of regulation. And fuel the next bubble.
One of most fascinating characteristics of progressives (also known as “liberals”) is the blindness they display to the adverse consequences of their very own government programs.
Instead of acknowledging what their statist programs do to people and then calling for their repeal, they inevitably call for new government programs to address the ills that their government programs are causing.
A good example of this phenomenon was an article entitled “The Homelessness Crisis Continues. Maybe Libertarians Have a Solution?” which was published last June by a newsweekly in Seattle called The Stranger. The author of the piece was an associate editor at The Stranger named Eli Sanders. Sanders is no dummy. In 2012 he was awarded a Pulitzer Prize in featured writing. His book, “While the City Slept,” was a finalist for the Washington State Book Award and the Dayton Literary Peace Prize.
Yet, Sanders’ article, which mocks and ridicules libertarians, including me, for their supposed solutions to homelessness is a pathetic display of moral, political, and economic obtuseness. That’s because Sanders, like other statists, simply cannot bring himself to acknowledge and address the two root causes of homelessness, especially in Seattle — zoning and minimum-wage laws, both of which are warmly and enthusiastically embraced by both the left and the right and ardently opposed by libertarians.
What does Sanders say in his anti-libertarian screed? Ignoring libertarian calls for repeal of zoning and minimum-wage laws, he instead lists a number of other supposed libertarian solutions to homelessness, such as “giving homeless people guns,” “doing nothing,” “empowering individuals,” and “ending income taxation” (where he mentions me), all the while implicitly mocking and ridiculing libertarians for not coming up with real solutions to homelessness.
Why does Sanders choose to remain silent about libertarian opposition to zoning laws and minimum-wage laws in the context of the homelessness debate?
The answer is simple: Whether we are dealing with the drug war, the war on poverty, the forever wars on Iraq and Afghanistan, the war on immigrants, or any other statist program, statists have a terribly difficult time acknowledging the failure and destructiveness of their own government programs. They will do everything they can to avoid taking personal responsibility for what their statism has wrought.
The fact is that Seattle is one of the most zoned cities in the country. Its zoning laws date back to 1923! It also has a mandatory minimum wage of $11.50 an hour, with it slated to increase to $15 over the next several years. Surely, Sanders realizes these things. The problem is that his mindset prevents him from connecting the dots. Given that the minimum wage and zoning are so deeply embedded within the statist mindset and within Seattle society, he is unable to bring himself to recognize that these two statist programs are the root cause of the problem he laments — homelessness — and that the solution to homelessness, especially in Seattle, lies in simply repealing the city’s zoning laws and abolishing the national, state, and local minimum-wage laws.
What is zoning? It is a government program that consists of mandatory rules, regulations, and laws that prevent or inhibit low-income housing from being built within a community. It obviously doesn’t occur to Sanders that builders cannot build low-cost housing for the poor in Seattle when zoning laws prohibit them from doing so.
The situation is aggravated by the fact that the poor are locked out of the labor market by the government’s mandatory minimum wage. Suppose, for example, that a homeless man is willing to work for $5 an hour and that an employer is willing to hire him at that price. They can’t make the deal because the law makes it illegal for them to enter into that consensual transaction.
The progressive says, “We are just trying to protect the poor from being exploited.” But that’s ridiculous because a person’s whose labor is not valued by employers at the mandatory minimum isn’t going to be hired at all.
He goes unemployed, permanently. The minimum wage law is the reason why there has been a chronic, permanent unemployment rate of 30-40 percent among black teenagers for years. At the risk of belaboring the obvious, an unemployed person is prevented from earning the money he needs for a down payment on those expensive single-family homes that Seattle’s zoning laws mandate. Duh!
I grew up in Laredo, Texas, which the Census Bureau in the 1950s labeled the poorest city in the United States. Laredo did not have zoning. We had a family friend who was a builder. His specialty? Building low-income housing for the poor. He once explained to me that he would travel into Mexico (Laredo is situated on the border) and purchase low-cost building supplies, which enabled him to build low-priced housing that served poor people. His places were always super-clean, super-nice, super-maintained, and super-sold out.
Was my friend doing this out of a sense of altruism and love for the poor? On the contrary. He was doing it to make money. He was the classic example of what people on the left call a no-good, capitalist, profit-seeking, bourgeois swine. And my friend was a wealthy man because poor people loved his housing.
Among the best aspects of my friend’s low-cost housing was that residents weren’t prohibited from making too much money, as people are who live in the federal government’s public housing projects, another favorite program among statists, one that is called into existence to address the homelessness that comes with zoning laws and minimum-wage laws.
Oh, maybe I should mention something that might interest Sanders: There was never a homelessness problem in Laredo. Lots of poverty, yes. But never a homeless problem, like the one that exists in Seattle, with its statist programs of massive zoning and minimum-wage laws.
Let me conclude this article by stating that I plan to send it to Eli Sanders. I’m curious as to whether he would like to write a follow-up piece addressing the actual two main libertarian positions to end homelessness in Seattle: Repeal the city’s zoning laws and all minimum-wage laws. Don’t hold your breath. It’s easier for leftists to attack straw men than to confront the consequences of their favorite statist programs.
