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  For example, in 2009 Microsoft, IBM, Texas Instruments, Sprint Nextel, Intel, Motorola, and scores of other corporations announced thousands of layoffs of the qualified American engineers who “are in short supply.”

  IBM has offered to help to relocate its “redundant” but “scarce” American engineers to its operations in India, China, Brazil, Mexico, the Czech Republic, Russia, South Africa, Nigeria, and the United Arab Emirates at the salaries prevailing in those countries.. http://www.informationweek.com/story/showArticle.jhtml?articleID=213000389

  On January 28, 2009, USA Today reported: “In 2007, the last full year for which detailed employment numbers are available, 121,000 of IBM's 387,000 workers [31%] were in the U.S. Meanwhile, staffing in India has jumped from just 9,000 workers in 2003 to 74,000 workers in 2007.”

  In order to penetrate and to serve foreign markets, US corporations need overseas operations. There is nothing unusual or unpatriotic about direct foreign investment in plant and equipment. However, many US companies use foreign labor to manufacture abroad the products that they sell in American markets. If Henry Ford had used Indian, Chinese, or Mexican workers to manufacture his cars, Indians, Chinese and Mexicans could possibly have purchased Fords, but not Americans.

  In 2009 US Senators Charles Grassley and Bernie Sanders offered an amendment to the Troubled Asset Relief Program (TARP) bill that would prevent companies receiving bailout money from discharging American employees and replacing them with foreigners on H-1B visas.

  The U.S. Chamber of Commerce and immigration advocates, such as the American Immigration Lawyers Association, immediately went to work to defeat or to water down the amendment. Senator Grassley’s attempt to prevent American corporations from replacing American workers with foreigners on H-1B work visas in the midst of the most serious economic crisis since the Great Depression was met with outrage from the U.S. Chamber of Commerce, an organization determined to protect the multi-million dollar bonuses paid to American CEOs for reducing labor costs by replacing their American employees with foreign employees.

  On January 23, 2009, Senator Grassley wrote to Microsoft CEO Steve Ballmer:

  “I am concerned that Microsoft will be retaining foreign guest workers rather than similarly qualified American employees when it implements its layoff plan. As you know, I want to make sure employers recruit qualified American workers first before hiring foreign guest workers. For example, I cosponsored legislation to overhaul the H-1B and L-1 visa programs to give priority to American workers and to crack down on unscrupulous employers who deprive qualified Americans of high-skilled jobs. Fraud and abuse is rampant in these programs, and we need more transparency to protect the integrity of our immigration system.

  “Last year, Microsoft was here on Capitol Hill advocating for more H-1B visas. The purpose of the H-1B visa program is to assist companies in their employment needs where there is not a sufficient American workforce to meet their technology expertise requirements. However, H-1B and other work visa programs were never intended to replace qualified American workers. Certainly, these work visa programs were never intended to allow a company to retain foreign guest workers rather than similarly qualified American workers, when that company cuts jobs during an economic downturn.

  “It is imperative that in implementing its layoff plan, Microsoft ensures that American workers have priority in keeping their jobs over foreign workers on visa programs.

  “My point is that during a layoff, companies should not be retaining H-1B or other work visa program employees over qualified American workers. Our immigration policy is not intended to harm the American workforce. I encourage Microsoft to ensure that Americans are given priority in job retention. Microsoft has a moral obligation to protect these American workers by putting them first during these difficult economic times.”

  Senator Grassley is rightly concerned that recession layoffs will shield increased jobs offshoring and use of H-1B workers. On February 13, 2009, Pravda reported that “America has begun the initial steps to final outsourcing of it’s last dominant industry”--oil/gas and oil/gas services. Pravda reports that “as with other formerly dominant industries, such as light manufacturing, IT, textiles,” recession is “used as the knife to finally do in the workers.”

  According to Pravda, “IT (Information Technology) is a prime example. The companies used the dot.com bust to lay off hundreds of thousands of tech workers around the US and Britain, citing low profits or debt. The public as a whole accepted this, as part of the economic landscape and protests were few, especially with a prospect of the situation turning around. However, shortly after the turn around in the economy, it became very clear that there would be no turn around in the IT employment industry. Not only were companies outsourcing everything they could, under the cover of the recession, they had shipped in tens of thousands of H-1B work visaed workers who were paid on the cheap.” http://english.pravda.ru/world/americas/107104-america_dominant_industry-0

  It is rare to find US Representatives and Senators, such as Grassley, who will take a stand against powerful special interests. Some do so inadvertently, forgetting that patriotism is no longer a characteristic of the American business elite. Hoping to stimulate American rather than foreign businesses, the House version of the economic stimulus bill, the American Recovery and Reinvestment Act of 2009, required that funds provided by the bill cannot be used to purchase foreign-made iron, steel, and textiles.

  The Senate provision was more sweeping, mandating that all manufactured goods purchased with stimulus money be American-made.

  The U.S. Chamber of Commerce, the National Association of Manufacturers, Caterpillar, General Electric, other transnational corporations, and editorial writers, whose newspapers are owned by corporate interests or are dependent on corporate advertising, set out to defeat the buy American requirement. As far as these anti-American organizations are concerned, the stimulus bill has nothing to do with American jobs or the American economy. It only has to do with the special interest appetites that have the political power to rip off the American taxpayers. [see Manufacturing & Technology News, February 4, 2009]

  Representing the corporate interests, Senator John McCain declared the Senate provision to be “protectionism” and harmful to America. McCain alleged that the buy American provision would cause a second Great Depression. U.S. Chamber of Commerce President Thomas Donohue said that buying foreign-made goods was “economic patriotism.” President Obama even appointed apologists for jobs offshoring to his National Economic Council. The American economic elite hide their treason to the American people behind “free trade.”

  The ruins of America’s once great manufacturing and industrial cities stand as monuments to the success that the US Chamber of Commerce and global corporations have had “in saving Americans from protectionism.” According to the 2010 US census data, the population of Detroit, Michigan, once America’s 4th largest city and a powerhouse of US manufacturing, declined by 25% in the first decade of the 21st century. With large areas of the once great city consisting of abandoned buildings and houses, the city is attempting to shrink its borders by 40 square miles.

  In the first decade of the 21st century, Gary, Indiana, lost 22% of its population. Flint, Michigan, lost 18%. Cleveland, Ohio, lost 17%. Pittsburgh, Pennsylvania lost 7%, South Bend, Indiana, lost 6%, and Rochester, New York, lost 4%. These cities were once the home of American manufacturing and industrial might.

  Between 1990 and 2010, St. Louis, Missouri, lost 20% of its population, and 19% of its housing units stand vacant. As the United States’ ability to make things disappears, the hubris of America’s leaders rises as they fancy themselves to be a hegemonic superpower. Photographs of the ruins that now comprise what once were centers of US productive might are abundantly supplied on the Internet. See, for example, “The Ruins of Detroit.” http://www.marchandmeffre.com/detroit/

  Where Did The Money Go?

  The wealth that has been extracted by jobs offshoring
and financial fraud has reappeared in “Richistan,” a new country within America. Author Robert Frank describes the new world of the super-rich and their fantastic conspicuous consumption.

  In Richistan there is a two-year waiting list for $50 million 200-foot yachts. In Richistan expensive Rolex watches are considered Wal-Mart junk. Richistanians sport $736,000 Franck Muller timepieces on their wrists, sign their names with $700,000 Mont Blanc jewel-encrusted pens. Their valets, butlers (with $100,000 salaries), and bodyguards carry the $42,000 Louis Vitton handbags of wives and mistresses.

  Richistanians join clubs open only to those with $100 million, pay $650,000 for golf club memberships, eat $50 hamburgers and $1,000 omelettes, drink $90 a bottle Bling mineral water and down $10,000 “martinis on a rock” (gin or vodka poured over a diamond) at New York’s Algonquin Hotel.

  Who are the Richistanians? They are CEOs who have moved their companies abroad and converted the wages they formerly paid Americans into $100 million compensation packages for themselves. They are investment bankers and hedge fund managers, who created and marketed the subprime mortgage derivatives that brought financial crisis to the world. One of them was paid $1.7 billion in 2006. The $575 million that each of 25 other top earners were paid is paltry by comparison, but unimaginable wealth to everyone else.

  The real wages and salaries of Americans who are not Richistanians are lower than a decade or several decades ago. With their debts at all time highs, with the prices of their main asset--their homes--collapsing from overbuilding, fraudulent finance, and foreclosures, and with scant opportunities to rise for the children they struggled to educate, Americans who are not privileged Richistanians face a dim future.

  The financial crisis was piled on top of the devastation inflicted on Americans by jobs offshoring. The debt monetization that accompanies this crisis threatens Americans with inflation and the US dollar with the loss of its role as world reserve currency. The large federal budget deficits threaten the social safety net and the pension (Social Security) and health care (Medicare) systems for the elderly. Once again, the gains for a few come at the expense of the loss of the many.

  Fraud By Banksters

  Matt Taibbi (Griftopia, 2010) and Gretchen Morgenson and Joshua Rosner (RECKLES$ Endangerment, 2011) document the financial crisis associated with subprime derivatives and credit default swaps as the result of stupidity, greed, and criminality on the part of both government policymakers and financial executives.

  The US government set the crisis in motion with the repeal in 1999 of the Glass-Steagall Act, which had kept commercial and investment banking separated since 1933.

  Deregulation of the derivatives market followed. Soon fraud was running rampant, and debt was leveraged to irresponsible heights. The incompetent fools responsible for these “financial reforms” were portrayed in the media as heroes of Caesarian stature.

  Mortgage securitization was the vehicle that spread Wall Street’s fraudulent “securities” around the world. Securitization allows lenders to issue mortgages for fees and to sell the mortgages to third parties, who combine them with mortgages from other lenders. The collection of mortgages is then sold to investors. Securitization removed the risk of payment failure from lenders, who thus became less concerned with the credit-worthiness of borrowers.

  In order to reassure investors about credit-worthiness and to appeal to risk-tolerant hedge funds, the next development was to take a pool of mortgages of varying credit-worthiness and to organize them into three tranches. The mortgages were separated into AAA, B grade, and high-risk. The triple A tranche could be sold to pension funds and institutional investors. Hedge funds would take the high-risk tranche for the high-interest rate that they offered, intending to get rid of the mortgages before they had time to go bad. The middle tranche was the one hard to sell. The interest rate on the B grade tranche was not high enough to appeal to hedge funds, and pension funds were restricted to investment grade.

  So what did the banksters do? They lumped together all the B grade tranches and repeated the process all over. The best of the lot were turned into—you guessed it—AAA, then came the B grade, and then the worst of the lot became the third tranche. And then the process was repeated again.

  This was bad enough, but even worse was happening. Many of the AAA and B grade mortgages had that rating only because of fraudulent credit scores that lenders created for borrowers and because Wall Street rating agencies assigned investment grade ratings to lower grade mortgages. The rating agencies are not independent of Wall Street. The rating agencies are paid a fee by the issuers of financial paper for the ratings. Everyone was focused on short-term profits, from the lenders who churned out mortgages for fees, to rating agencies that churned out ratings for fees, to hedge funds that had no intention of holding the high-risk tranches beyond the short-run. This is how “toxic waste” was spread throughout the financial system.

  Then it became possible to "insure" the AAA mortgages (many of which were not AAA). Once this happened, financial institutions that were required to maintain reserves against deposits or to capitalize obligations, such as insurance policies, could now substitute higher-paying mortgage derivatives for U.S. Treasury notes and still meet their reserve requirements for a ready cash reserve. Treasury notes are so liquid that they are considered the equivalent of cash, and insured AAA securitized mortgages acquired similar status.

  The insurance company, AIG, became the big provider of "insurance" in an operation run by Joe Cassano. Taibbi’s account is masterful. Cassano's "insurance" product is called a credit default swap (CDS). It was not insurance, because AIG did not set aside capital to pay any claims. And claims there would be. Not only were the AAA mortgages that were being insured littered with subprime derivatives and other toxic waste, but also investment banks and hedge funds could purchase swaps against debt instruments that they did not even own. As Taibbi puts it, people were gambling in a casino in which gamblers did not have to cover their bets or own the financial instruments that they were insuring by purchasing credit default swaps.

  While Cassano was collecting fees for bets that he could not cover, Win Neuger on the other side of AIG was lending the insurance giant's long-term portfolio of sound investments to short-sellers for a fee.

  Short-selling works like this: A short-seller has a hunch or inside information that a company's stock price is going to fall in value. He borrows the stock from AIG or some other company by putting up collateral equal to its market price on the day the stock is borrowed plus a small fee. Then he sells the stock, pockets the money and waits for the stock to fall. If his hunch or inside information is correct, and the stock falls in value, he buys the stock and returns it to AIG, pocketing the difference in the two prices.

  Normally, people who lend stock to short-sellers are content with the fee and with the interest on the collateral (cash) invested in safe instruments like Treasury bills. The lender of the stock cannot take any risk with the cash collateral, because the cash must be returned to the short-seller when he returns the borrowed stock.

  However, once questionable financial instruments got AAA ratings from Wall Street rating agencies plus insurance from AIG, these dubious financial instruments could displace US Treasuries as a place for Neuger to hold the short-sellers' collateral. You can see the untenable position into which Cassano and Neuger put AIG.

  Enter Goldman Sachs as a buyer of swaps from Cassano and a borrower of stocks from Neuger. Once the real estate bubble popped that the crazed Federal Reserve had caused, all the fraud that had been hidden by rising real estate prices appeared in its naked glory. AIG could not cover Cassano's swaps, and it could not return to short-sellers their collateral that Neuger had invested in subprime derivatives.

  This was the origin of the 2008 Troubled Asset Relief Program (TARP) bailout. Goldman Sachs (whose former executives, as Taibbi relates, controlled the U.S. Treasury, financial regulatory agencies, and the Federal Reserve) perceived a bailout as an opportunit
y to have U.S. taxpayers pay off AIG’s losing bets with Goldman Sachs and also fund with free capital supplied by the bailout more money-making opportunities for "banks too big to fail."

  As Taibbi shows, Goldman Sachs had yet more ruin to bring to America and the world. Goldman Sachs managed to get the position limits repealed that regulation imposed on speculators. Position limits served to prevent speculation from taking over commodity markets (for example, grains, metals, and oil). Position limits on speculators limited the number of options or future contracts speculators could accumulate. The repeal of the limits allowed Goldman Sachs to create a new product, index speculation, which brought hundreds of billions of dollars of speculative money into commodities markets, allowing speculators to dominate commodity markets and to manipulate commodity markets as they do equity, debt, and currency markets.

  There is much evidence of fraud and criminality on the part of financial firms and of conflicts of interest on the part of government policymakers, but no one has been held accountable and no meaningful corrective regulation has been enacted. The financial system remains a casino.

  The Conflict Of Interest That Masquerades As Government