I was passing through the Mojave Desert and by chance stopped by a local thrift store in Joshua Tree. I’m glad I did, because I spotted a book that I just had to own. At $0.50, it was priced to sell. And as you can tell from the title above, the book’s a classic. It’s bound to remain fresh and relevant through the ages—not as a useful guide to homeownership, but as a fossil record of the biggest real estate scam in the history of the United States.

A lot of people still wonder how and why so many millions of people bought such ridiculously overpriced homes and took out mortgages and loans they clearly could not afford?

Extra! Extra! Yasha Levine makes frontpage news in Victorville!

That’s what I kept wondering when I moved out to Victorville back in the Spring of 2009 to do immersion reporting from the front line of the real estate meltdown. Located about 100 miles east of Los Angeles on the edge of the Mojave Desert, Victorville got higher and crashed harder, in terms of real estate, than almost any other place in California. It doubled its size to 100,000 in just eight short years, growing from an isolated hick outpost into a booming commuter suburb filled with the cheapest McTractHomes south of Fresno. By the time I got there, Victorville was a ruined city filled with empty master planned communities, some of them half built and abandoned, rotting dry in the sun. I spent nearly two years reporting on the real estate swindle out there, and I never could stop thinking about the central question: How the hell were people coerced into moving out here?  Why would anyone think that buying a $500,000 house in a desert 100 miles away from Los Angeles be good idea, no matter what kind of loan deal you got or how booming the market. What kind of propaganda were these people subjected to?

Well, this book provides a part of the answer: people were explicitly instructed to do so.

The Automatic Millionaire Homeowner hit the front bookcase displays at Barnes and Noble in March 2006, at the very top of the real estate market and just a few months before the whole thing crashed and burned. Its main message was simple: If you take out a mortgage to buy a home, you will always make money. There is no way you can lose—no matter when you buy, how much you pay or what type of loan you get. And the kicker is: both the book and finance expert who wrote it were bankrolled by Wells Fargo and Bank of America.

This book is just one of dozens—if not hundreds—of similar self-help snake oil guides promising a sure bet system to get rich in real estate. But it’s a good example of the massive propaganda effort financed by Wall Street that was designed to funnel as many people as possible into the mortgage meat grinder. The book was packed with blatant lies that seem so obvious and even comic in retrospect. The book was not put out by some shady fly by night operation, but by a supposedly credible financial expert who had the backing of the most well-known and respected banks, TV networks and newspapers.

But the whole thing was a fraud, shamelessly boosted by some of the biggest names in news media—none of whom have been held accountable for their role in defrauding millions of Americans.

So let’s take a look…Crack open the book and turn to the introduction, it begins like this:

What if I told you the smartest investment you would ever make during your lifetime would be a home!

What if I told you that in just an hour or two I could share with you a simple system that would help you become rich through homeownership?

What if I told you that this system was called the Automatic Millionaire Homeowner—and that if you spent an hour or two with me, you could learn how to become one? [emphasis mine]

Would you be interested? Would you be willing to spend a few hours with me? Would you like to become an Automatic Millionaire Homeowner?

Interested? Intrigued? Want to know more? Well, turn a couple of pages and you get this:

As I sit here in August 2005, I have no idea when you will be reading what I’m writing. Maybe it’s March 2006 (when this book is scheduled to be published)—by which time the real estate market could be slowing or cooling down to modest single-digit annual gains (or not). Perhaps this book was bought by a friend of yours who passed it along to you—and it’s now 2007 and those once “certain” boom markets are going bust due to speculation. Or maybe the opposite has happened—interest rates have remained at historic lows, and home prices have continued their march upward.

In fact, it doesn’t really matter when you happen to be reading this or what’s going on right now in the markets. This book is not about the boom . . . or the busts. . . . What this book is about is the truth. And the truth is this:

Nothing you will ever do in your lifetime
is likely to make you as much money as
buying a home and living in it. [emphasis in the original]

What’s this sure-fire system? Well, it’s so simple it fits on the inside flap! Here’s how you do it:

What Makes The Automatic Millionaire Homeowner Essential:

■ You don’t need a big down payment to buy a home.

■ You don’t need great credit.

■ You should buy even if you have credit-card debt.

■ You can buy a second home even if you’re still paying off the first.

■ You can get started in any market-boom or bust.

■ It’s easier to be a landlord than you think.

Just a few months after the book came out, the real estate market went into a death-spiral. Victorville and other Mojave Desert exurbs like Palmdale and Lancaster were packed to the brim with people who followed this book’s advice to the letter. They took out no down payment adjustable rate mortgages, bought at the peak of bubble, had horrible credit scores, were struggling to make ends meet and were probably up the hilt in credit card debt. Over the next year and a half, home prices collapsed by 30% and just kept falling. By the time that I packed my bags and fled West towards the Pacific Ocean in 2010, homes that had sold for nearly $400,000 at the top of the market in 2006 couldn’t find a buyer at $50,000 or $75,000. People were kicked out of their homes, lost all the “investment” payments they had made on the loan and had to find other places to live—rental homes if they were lucky; their cars or tents at the hobo camp down on the banks of the Mojave River if they weren’t.

So the Automatic Millionaire was a bust—well, at least as far as the now-former homeowners were concerned. But as we now know, the latest homeownership craze was never meant to benefit the homeowners. The only Automatic Millionaires created by this book were David Bach and the financial oligarchy he served.

See, before David Bach began his bright career as a New York Times bestselling author dedicated to spreading the gospel of homeownership, he was a senior vice president of Morgan Stanley and a partner of The Bach Group, a wealth management outfit started by his father. Yep, he was born into it. Finance runs through his veins!

So it’s no surprise that both Bank of America and Wells Fargo sponsored David Bach and his revolutionary Automatic Millionaire Homeowner wealth creation system.

Here’s an excerpt from Wells Fargo’s press release:

Wells Fargo Home Mortgage Joins with David Bach to Promote Shared Vision of the Lifelong Benefits of Homeownership to Millions of Americans

Best-Selling Author, Leading Retail Lender to Encourage People to Build Long-Term Financial Success through Homeownership

DES MOINES, Iowa – Oct. 28, 2005 – Wells Fargo Home Mortgage today announced a three-year agreement with financial coach David Bach, author of several best-selling books including No. 1 New York Times best-seller The Automatic Millionaire. The partnership is designed to increase the number of first-time, second-home and investment homebuyers and help homeowners best manage the equity in their home as an asset to achieve their long-term financial goals.

Yep, Wells Fargo is only interested in educating homeowners for the greater good. And the bank is not alone. Just look at all the smart people who praise and recommend his work. They wouldn’t lie, not with their reputations on the line!

Jean Chatzky, Financial Editor of NBC’s Today, blurbed: “The Automatic Millionaire gives you, step-by-step, everything you need to secure your financial future. When you do it David Bach’s way, failure is not an option.”

Fox’s Bill O’Reilly also endorsed the Automatic Millionaire wealth creation system: “David Bach’s no-spin financial advice is beautiful because it’s so simple. If becoming self-sufficient is important to you, then this book is a must.” Yep, this is the same O’Reilly who bashed homeowner “losers” who took out loans that they weren’t able to pay, and yet here he is endorsing a plan that says there’s no such thing homeowner who loses money. Wonder what kind of cut Bill gets off Bach’s loot?

He rips you off, puts you in debt and sticks by your side to help make sure you pay it off. What a guy!

So what’s up with David Bach today?

The man’s still doing regular TV gigs and giving financial advice to unsuspecting victims, including a weekly appearance on NBC’s Today Show. But he’s changed his racket: Bach’s no longer out to make automatic millionaires; these days he’s motivating debtors to get second/third jobs and convincing them to adopt austerity measures in their own personal lives. He’ll help you pare down your consumption footprint to the bare minimum necessary for physical survival. Yep, Bach’s our debt handler. His job is to make sure we peons keep making those monthly payments to Wells Fargo and Bank of America!

The day that degenerate shysters like David Bach are afraid to show their faces in public and feel the need to flee across the border is the day that we’ll know that we as a country are making progress towards a brighter future.

Yasha Levine is an editor of The eXiled and co-founder of the S.H.A.M.E. Project. Read his book: The Corruption of Malcolm Gladwell.

Click the cover, buy the book!

Looks like it’s official: Come 2012, California governor Jerry Brown is gonna try to trick voters into approving one of the most brazen water heists in American history. Gov. Brown’s plan would give control over a huge chunk of Northern California’s water supply to a handful of billionaire Central Valley plantation owners and Southern California real estate developers, allowing them to use even more of the state’s over-tapped water supply, a shared public resource, as a private commodity that they can then turn around and sell on the open market for huge easy profits.

While I took my eye off the California water beat the past few months, the Sacramento Bee reported this shocking detail, buried in a story on Brown’s plan to build a high speed rail:

The rail project is one of two major infrastructure projects on Brown’s agenda. He said today that he will have a plan for the other project – a peripheral canal or other way to move water through or around the Delta – within a year.

What’s a “peripheral canal”? It’s a massive, multi-billion dollar aqueduct that has been a dream-project of California’s oligarchy for a long, long time. The reason: it would give a few billionaire farmers and real estate developers—the two most powerful interests in the state—a new and exclusive way to tap into Northern California’s vast water supply, and pipe it down south via the 700-mile California Aqueduct, handing an unprecedented amount of water-commodity wealth to the state’s megarich. On top of expanding their farm holdings and fueling future real estate developments in the southlands, the peripheral canal will be a key part of a long-term strategy by powerful interests to lay down infrastructure that would enable the creation of a full-fledged “water market” and allow these interests to privatize and sell state water to the highest bidder on the open market, just like any other commodity—and they’d get ahold of this commodity all at the taxpayers’ expense.

It’s a scam of such monumental proportions that even Enron’s deregulation con artists were eager to get in on the action, back when they set up a water trading subsidiary in California at the height of the dot-com bubble.

PPIC, a think tank funded by the billionaire Bechtel family, recommends building the peripheral canal

I’ve written about a few of the water marketing schemes currently available to California’s billionaire farmers and assorted water interests, many of which include nothing more than buying water at subsidized rates from the state, then turning around and selling it back to a different government agency for a massive profit. Here’s what I wrote about in 2009:

Take the deal that went down this summer between a farmer with a stake in the Kern bank and a McTractHome paradise in the Mojave Desert, 100 miles east of Los Angeles. For roughly $73 million, the Mojave Water Agency acquired permanent rights to 14,000 acre-feet of water pumped out of the Sacramento Delta and delivered via the State Aqueduct, enough water to flood an area the size of San Francisco six inches deep or hydrate up to 30,000 families for a whole year.

The farmer selling the water was not really a “farmer” in the poor, homesteading, buck-toothed sense of the word, but a private Bay Area-based company called Sandridge Partners owned by the Vidovich family. In addition to running a lucrative cotton and almond growing operation in the heart of the Central Valley, the Vidoviches also control a small real estate empire in the Silicon Valley, building and managing estate developments: office complexes, condominiums, mobile home parks, hotels and shopping centers.

John Vidovich, the current patriarch of the family business, and his wife Lydia live in an $11.4 million Los Altos Hills home. Hilly, wooded and overlooking the bay just south of San Francisco, it’s one of the ritziest places to live in Northern California and the 8th most expensive zip code in America.

Despite — or maybe because of — the family’s extreme wealth, Sandridge Partners is one of the top welfare queen-farmers in the country. In 2007, it received $1 million in federal farm subsidies, more than any other farmer that year, raking in an additional $6.8 million between 1995 and 2006…But their $73-million water deal shows that farm subsidies aren’t the only, or even the most, lucrative handout that has the Vidoviches living well. The money paid out via farm subsidies pale in comparison to the massive profits that can be reaped from simply reselling the heavily taxpayer subsidized water they receive from the state.

…Just look at these profit margins: these days, Central Valley farmers buy water from California’s Department of Water Resources for a heavily-subsidized $100 to $500 per acre-foot, while city slickers in San Francisco pay around $8,500 for the same water. With this kind of discount, Vidoviches could score a ten- to fifty-fold spread on their purchase-to-sale price. Even if they paid the maximum price of $500 per acre-foot, the water they sold to the Mojave Desert for $73 million would have only cost them $7 million. That’s $66 million in pure profit, and all they have to do is let a couple of hundred acres of almond groves wither and let California taxpayers, their ritzy Los Altos Hills neighbors included, fill up their bank accounts.

With the peripheral canal, the John Vidoviches of California would be able to rip off residents and taxpayers on a bigger scale than ever before. So it’s not surprising that, over the years, they’ve made several attempts to get the thing built. Hell, even Jerry Brown is no stranger to the sleazy scheme. His father, Governor Pat Brown, was responsible for laying down the original California Aqueduct (now called “Governor Edmund G. Brown California Aqueduct”), which the peripheral canal would feed into, more than 50 years ago.

Jerry tried to push his father’s plan to completion back in the late 70s and early 80s, during his first term as California governor. But he failed after wealthy Central Valley farmers threw their support behind a coalition of environmentalists and Northern California water districts to defeat the project. It’s not that the billionaire farmers were against the peripheral canal — they simply feared that Southern California real estate developers were trying to pull a fast one on them and cut them out of the water racket.

The next big push came nearly 30 years later, with Arnold Schwarzenegger spending his entire last term as California governor trying to make the peripheral canal work for everyone, with ample help from both the Democrats and Republicans. Here’s how I described it back in late 2009:

Governor Schwarzenegger has been trying to push the project through California’s legislature … and has received ample support from both sides of the isle. In September, Democratic Senator Dianne Feinstein backed the governor and badgered the Obama administration to step in and help California’s struggling farmers…That same month, second-rate FOX news anchor Sean Hannity jetted to Fresno to lead an AstroTurf campaign — complete with paid Latino “protesters” and funded by the PR firm Burson-Marsteller, which has done work for a wide range of evil clients, from the tobacco industry to Blackwater to the junta in Argentina — and push for exactly the same thing.

It looked like Arnold had the project in the bag. California voters were primed with years of unrelenting drought hysteria that predicted imminent doom and total collapse of agriculture in the state unless the peripheral canal was built. The state legislature lashed together a $12 billion bond package, confident that it would pass if put to a statewide vote in 2011. But just as Arnold was getting ready for an easy victory, GAIA rained on his billionaire parade, dumping historic amounts of water on California that wiped out the state’s drought in just a matter of months, undercutting the entire “drought” argument for building the pricey canal. California pols had no choice but to table the peripheral-canal bond issue until the 2012 elections, and to hope that they’d be able to come up with a new PR strategy next year.

Drilling large tunnels to divert water around the delta would create more than 129,000 jobs, almost all of them during the seven-year construction period, according to a recent analysis.

The report by a University of California at Berkeley economist does not examine how the peripheral canal or tunnel plan might create or destroy jobs in other ways, such as the proposed conversion of tens of thousands of acres of delta farmland to wetland habitat.

It is not the full cost-benefit analysis that some observers have called for before the Bay Delta Conservation Plan is put into action…

Terry Erlewine, general manager of the State Water Contractors, said that beyond the long-term economic benefit of protecting the state’s water supply, the jobs report shows “clear immediate benefits.”

“Investing in new conveyance will put tens of thousands of Californians back to work during the seven-year construction phase,” he said…

Sunding’s analysis considers a large and small tunnel. His estimates include not only direct construction jobs, but also indirect jobs such as the production of steel and concrete. His report assumes jobs will be created new hires spend their earnings.

Of the 129,000-plus jobs, more than 50,000 would be in San Joaquin County.

Today, the peripheral canal—or “delta water tunnel” as they’re calling it—is no longer about saving poor California “small farmers” (who don’t really exist), nor is it about rescuing millions of water-starved Southern Californians from death by dehydration. It’s about jobs, jobs, jobs, and recharging the economy with a shovel-ready public works project. So what if it costs $12 billion (not including interest and financing charges), privatizes a good chunk of California’s water, enriches a handful of billionaires at taxpayer expense and only creates a few temporary construction jobs?

Yasha Levine is an editor of The eXiled. You can reach him at levine [at] exiledonline.com Want to know more? Check out some of my California Water Wars reporting out of Victorville, California:

• The Story of How Beverley Hills Billionaire Farmers Stewart and Lynda Resnick Have Privatized California’s Water Supply
• Billionaires Scheme to Pull Off Katrina-Style Wealth Transfer That Could Destroy California
• Billionaire Thugs Plot to Steal California’s Water and Everything They Tell You is a Lie…
• More…

“Ha-ha! Those suckers will believe anything! “

This article appeared in the October 17, 2011 edition of The Nation

There’s right-wing hypocrisy, and then there’s this: Charles Koch, billionaire patron of free-market libertarianism, privately championed the benefits of Social Security to Friedrich Hayek, the leading laissez-faire economist of the twentieth century. Koch even sent Hayek a government pamphlet to help him take advantage of America’s federal retirement insurance and healthcare programs.

This extraordinary correspondence regarding Social Security began in early June 1973, weeks after Koch was appointed president of the Institute for Humane Studies. Along with his brothers, Koch inherited his father’s privately held oil company in 1967, becoming one of the richest men in America. He used this fortune to help turn the IHS, then based in Menlo Park, California, into one of the world’s foremost libertarian think tanks. Soon after taking over as president, Koch invited Hayek to serve as the institute’s “distinguished senior scholar” in preparation for its first conference on Austrian economics, to be held in June 1974.

Hayek initially declined Koch’s offer. In a letter to IHS secretary Kenneth Templeton Jr., dated June 16, 1973, Hayek explains that he underwent gall bladder surgery in Austria earlier that year, which only heightened his fear of “the problems (and costs) of falling ill away from home.” (Thanks to waves of progressive reforms, postwar Austria had near universal healthcare and robust social insurance plans that Hayek would have been eligible for.)

IHS vice president George Pearson (who later became a top Koch Industries executive) responded three weeks later, conceding that it was all but impossible to arrange affordable private medical insurance for Hayek in the United States. However, thanks to research by Yale Brozen, a libertarian economist at the University of Chicago, Pearson happily reported that “social security was passed at the University of Chicago while you [Hayek] were there in 1951. You had an option of being in the program. If you so elected at that time, you may be entitled to coverage now.”

A few weeks later, the institute reported the good news: Professor Hayek had indeed opted into Social Security while he was teaching at Chicago and had paid into the program for ten years. He was eligible for benefits.

On August 10, 1973, Koch wrote a letter appealing to Hayek to accept a shorter stay at the IHS, hard-selling Hayek on Social Security’s retirement benefits, which Koch encouraged Hayek to draw on even outside America. He also assured Hayek that Medicare, which had been created in 1965 by the Social Security amendments as part of Lyndon Johnson’s Great Society programs, would cover his medical needs.

Koch writes: “You may be interested in the information that we uncovered on the insurance and other benefits that would be available to you in this country. Since you have paid into the United States Social Security Program for a full forty quarters, you are entitled to Social Security payments while living anywhere in the Free World. Also, at any time you are in the United States, you are automatically entitled to hospital coverage.”

Then, taking on the unlikely role of Social Security Administration customer service rep, Koch adds, “In order to be eligible for medical coverage you must apply during the registration period which is anytime from January 1 to March 31. For your further information, I am enclosing a pamphlet on Social Security.”

* * *

The private correspondence between two of the most important figures shaping the Republican Party’s economic policies—billionaire libertarian Charles Koch and Nobel Prize–winning economist Friedrich Hayek, godfather of today’s free-market movement—were obtained by Yasha Levine from the Hayek archives at the Hoover Institution at Stanford University. This is the first time the content of these letters has been reported on.

The documents offer a rare glimpse into how these two major free-market apostles privately felt about government assistance programs—revealing a shocking degree of cynicism and an unimaginable betrayal of the ideas they sold to the American public and the rest of the world.

Charles Koch and his brother, David, have waged a three-decade campaign to dismantle the American social safety net. At the center of their most recent push is the Koch-funded Americans for Prosperity, which has co-sponsored Tea Party events, spearheaded the war against healthcare reform and supported Wisconsin Governor Scott Walker’s attack on public sector unions. FreedomWorks, another conservative group central to the rise of the Tea Party and the right-wing attempt to dismantle Social Security and Medicare, emerged from an advocacy outfit founded by the Koch brothers called Citizens for a Sound Economy. FreedomWorks now exists as a separate entity that champions the “Austrian school” of economics.

Hayek, a founder of that school of thought, is primarily known for two major works. The first, The Road to Serfdom (1944), grudgingly accepts the possibility that some “free” countries might find it necessary to set up a bare-minimum catastrophic social insurance program limited to the very neediest, so long as the benefits do not incentivize productive members of society to abandon free-market retirement savings or medical insurance.

Hayek’s comparatively liberal attitude toward social insurance hardened considerably by the time he published his 1960 opus, The Constitution of Liberty. Despite privately spending the intervening years paying into Social Security, Hayek devoted an entire chapter—titled “Social Security”—to denouncing the modern welfare state as a gateway to tyranny and moral decay. Ironically, one of Hayek’s main objections to government programs like Social Security was the “fundamental absurdity” of using tax dollars to promote their benefits. In other words, Hayek publicly objected to the kind of brochure that Charles Koch sent him. In their private correspondence, however, we could find no objection to this “fundamental absurdity.”

By the mid-1970s, Hayek had fully distanced himself from the modest benefits he’d originally conceded to in The Road to Serfdom. In his preface to the 1976 edition, he explained his “error”: “I had not wholly freed myself from all the current interventionist superstitions, and in consequence still made various concessions which I now think unwarranted.”

Publicly, in academia and in politics, in the media and in propaganda, these two major figures—one the sponsor, the other the mandarin—have been pushing Americans to do away with Social Security and Medicare for our own good: we will become freer, richer, healthier and better people.

But the exchange between Koch and Hayek exposes the bad-faith nature of their public arguments. In private, Koch expresses confidence in Social Security’s ability to care for a clearly worried Hayek. He and his fellow IHS libertarians repeatedly assure Hayek that his government-funded coverage in the United States would be adequate for his medical needs.None of them—not Koch, Hayek or the other libertarians at the IHS—express anything remotely resembling shame or unease at such a betrayal of their public ideals and writings. Nowhere do they worry that by opting into and taking advantage of Social Security programs they might be hastening a socialist takeover of America. It’s simply a given that Social Security and Medicare work, and therefore should be used.

* * *

Shortly after this exchange, in 1974, Hayek won the Nobel Prize in economics. The next year he went on something of a victory tour of the United States, which ended at the IHS, where he spent the summer as a resident scholar. Hayek returned to Menlo Park again in the summer of 1977. The Nation has filed a Freedom of Information Request with the Social Security Administration to discover if, in fact, Hayek received Social Security payments or used Medicare during his residencies at the institute or at any other time. At press time, these requests have not been answered.

Meanwhile, in 1974, Charles Koch founded the Cato Institute (called the Charles Koch Foundation until 1977). This think tank has done more than any other to push for an end to Social Security. In 1983 the Cato Journal published a blueprint of how to destroy Social Security, “Achieving a ‘Leninist Strategy,’” by Stuart Butler and Peter Germanis. The authors acknowledged that a strong coalition of Americans backed Social Security and thus saw the need for “guerrilla warfare against both the current Social Security system and the coalition that supports it.” Victory could be far in the future, “but then, as Lenin well knew, to be a successful revolutionary, one must also be patient and consistently plan for real reform,” they write.

As part of Cato’s campaign, the institute has launched various groups and projects, including the Project on Social Security Choice, whose co-chair is José Piñera, architect of Augusto Pinochet’s controversial pension privatization scheme in Chile. Cato Institute members and alumni also dominated President George W. Bush’s commission on Social Security in his first term and spearheaded Bush’s failed attempt to privatize the program in the early months of his second term.

Thanks in part to Hayek’s writings and to the Koch brothers’ decades-long war on the social safety net, Americans are among the Western world’s few citizens without universal healthcare. Not surprisingly, life expectancy here has fallen to forty-ninth place in the world, while medical costs are double those of other Western nations. By contrast, Hayek’s native Austria, which has a public health plan that covers 99 percent of the population, boasts a healthcare system ranked ninth in the world by the World Health Organization.

* * *

When Texas Governor Rick Perry, a front-runner in the Republican primary for president, derides Social Security as a “Ponzi scheme” or a “monstrous lie,” that rhetoric can be traced back to the work of Hayek and Koch. And yet we now know that in private practice, Hayek was perfectly content to pay into Social Security and that Koch encouraged him to draw upon both Social Security and Medicare. Did they really believe what they wrote? Or were these attacks just scare-talk meant for the rubes, for you and us, “the public”?

Calling this mere hypocrisy downplays the seriousness of their fraud. Koch and Hayek are no more hypocritical than the used-car salesman who knowingly sells a lemon to a gullible buyer, or the financial agency that rates “AAA” instruments it knows are crap. This is a grand swindle played on a trusting, gullible public, a scam whose goal is to con America’s dying middle class into handing over their retirement money to the richest 0.1 percent, convincing them that in doing so, they’re “empowering” themselves and protecting their “individual liberty.”

Another question hangs over all this: Why didn’t Charles Koch offer to put up some of his enormous wealth to pay for Hayek’s temporary medical insurance? One obvious answer: because the state had already offered a better and freer program. But perhaps Koch’s stinginess also reveals the social ethic behind libertarian values: every man for himself; selfishness is a virtue.

Read this story at TheNation.com.

Mark Ames is the author of Going Postal: Rage, Murder and Rebellion from Reagan’s Workplaces to Clinton’s Columbine.

Click the cover & buy the book!

People don’t seem that interested in talking about Wall Street’s unpunished and ongoing rape of America anymore these days. And that’s too bad. Because Koch Industries has a lot more in common with Wall Street than most people realize.

Here’s a hint to how deeply the Kochs are involved in the same shady financial machinations we usually associate with Wall Street scammers: an investigation just released by the Center for Public Integrity reveals that the Kochs were major players in the fight against financial regulation in 2009 and 2010, bankrolling an army of lobbyists who swarmed Congress and shredded the fin-reg bill.

That’s right, we can thank the Kochs for the $400-600 trillion of so-called “over-the-counter derivatives,” essentially unregulated bets on everything from mortgages to oil prices to weather conditions, still being traded in the dark today, despite the fact that they were what sucked money out of the real economy, caused the meltdown of the world’s financial markets, precipitated the bank bailouts and are currently pumping up world food and energy prices:

[Koch Industries] spent heavily on lobbyists who worked to shape the 2010 Dodd-Frank Act and other vehicles for financial reform. The Koch lobbyists focused, in particular, on provisions aimed at regulating systemic risk in the financial markets, and the use of derivatives. … And in past Congresses, Koch lobbyists labored to preserve the exemption, known as the “Enron Loophole,” that excused energy commodity contracts from regulation.

But the Dodd-Frank law gave the Commodity Futures Trading Commission and the Securities and Exchange Commission the authority to craft new rules to subject traders in the energy industry to increased regulation and transparency, capital and margin requirements, and supervision by a derivatives clearing house. Koch lobbyists worked to favorably shape the bill, and have not stopped working since it was passed.

Within a few weeks after President Obama signed the legislation, Koch lobbyist Gregory Zerzan had secured a coveted meeting with SEC Commissioner Troy Paredes, a Bush appointee, and his counsel, Gena Lai, to discuss how the government would implement the law.

Everyone was focused on demonizing Goldman Sachs and friends, not realizing that the Kochs and other shadowy billionaire families were right there with them. A Bloomberg article from the summer of 2010 gives a bit more detail about intersection of Koch and Wall Street interests:

Industry groups backed by Koch Industries Inc. and Cargill Inc. are fighting a Senate bill that would reshape almost 30 years of policy that allowed the $605 trillion over-the-counter derivatives market to surge and helped trigger the financial crisis in 2008.

Legislation introduced by Senator Christopher Dodd, a Connecticut Democrat, would give the Commodity Futures Trading Commission authority over most of the U.S. market, the broadest expansion of its authority since becoming an independent agency in 1974.

[...]

At stake is control of one of Wall Street’s most lucrative businesses. Trading revenue in unregulated markets last year generated an estimated $28 billion for five U.S. dealers including JPMorgan Chase & Co., Goldman Sachs Group Inc. and Morgan Stanley, according to company reports collected by the Federal Reserve and people familiar with banks’ income sources.

The over-the-counter derivatives market has escaped the commission’s reach since the first interest rate swap was traded in 1981. The transactions fell outside a law requiring that all futures be traded on regulated exchanges. Before swaps came along, risk-management trading outside of the exchanges was generally restricted to “forwards,” or bilateral trades that provided for physical delivery between commercial parties, such as a farmer and a grain elevator.

What has not been reported is that a big part of Koch Industries’ expansion over the past few decades has occurred in the dark realms of unregulated derivative trading. The Kochs weren’t just playing the market for themselves, but provided financial and risk management services to other companies. Now their clients include airlines, utilities, oil companies, pension funds, hedge funds and endowments.

It’s no secret. You can read all about in a brochure put out by the good folks at Koch Supply and Trading LP, one of the Koch Industries subsidiaries that provides financial services. The company trades in all sorts of derivatives, including crude oil, fuel, natural gas, electricity, emissions credits, metals, fertilizer, currency, municipal bonds, interest rates…the list goes on and on. Hell, they even trade in Leninist carbon credits and brag about being the first to offer clients weather derivatives—that’s when you place bets on the chance of rain.

But Koch Industries is not just a regular financial/risk management services provider. Because the company is a major producer and/or distributer of many of the commodities that it bets on, it not only has insider knowledge but physical control of market conditions. That gives it a whole lot of power to game and manipulate markets from both the speculative and physical ends—something that even the most powerful investment houses can’t do on their own. Best part is: only insiders know how much or how little manipulation exists because the derivatives are exempted from regulation.

Remember when Enron conspired to shutdown their power plants to jack up the price of electricity in California?

On one tape, an Enron official named Bill tells an employee called Rich at a Las Vegas power plant to take the plant offline on a confected excuse. The conversation took place on January 17 2001, in the last days of the Clinton administration, as blackouts were rolling across California, cutting off electricity to more than one million people, and after the energy secretary, Bill Richardson, had ordered generators across the west to direct their output to the troubled state.

“Ah, we want you guys to get a little creative, and come up with a reason to go down,” Bill says on the tape. “Anything you want to do over there? Any cleaning, anything like that?”

“OK, so we’re just comin’ down for some maintenance, like a forced outage type thing?” Rich replies, according to transcripts published yesterday. “I think that’s a good plan, Rich,” Bill says. “… I knew I could count on you.”

Is it so far fetched to think that the Kochs would do something similar with oil, ethanol, natural gas, fertilizer or any of the other commodities that they physically control? Of course they’re doing it. Why else would they fight to keep the “Enron Loophole” from being regulated out of existence?

As the Bloomberg article noted, the Kochs are not the only secretive multi-billionaires scamming America by gaming unregulated markets completely under the radar. So, if you’re a salaried journalist and want to dazzle your editors with a great story, you might want to look into the role that “family-owned” Cargill, Inc., the largest private company in America, has played in pumping up world food prices. That I’ll give out for free. Anything else will cost money.

Want to know more? Check out the new The eXiled Vs. The Koch Brothers page. And watch Dylan Ratigan giving us props for breaking the Koch/Tea Party story first:

So by now you’ve probably heard that Charles and David Koch are really really dedicated to libertarianism. They’re not just interested in screwing Americans with regressive 18th century economic policies, but also support noble positions that even far-leftists should be able to get behind. One of the big ones is: they are opposed to war and empire.

Well, at least that’s what libertarians say.

The Kochs “opposed the Iraq War” and “want to substantially cut military spending,” recently wrote David Bernstein, a libertarian lawyer and author of a political thriller called You Can’t Say That! The Growing Threat to Civil Liberties from Antidiscrimination Laws. In fact, Dave thinks that the Kochs support so many left-leaning social policies that they are actually not libertarians at all, but “liberaltarians”:

The Kochs would appear to be the perfect liberaltarians–they support gay marriage, drug legalization, opposed the Iraq War, want to substantially cut military spending, and gave $20 million to the ACLU to oppose the Patriot Act (compared to a relatively piddling $43,000 to Scott Walker’s election campaign).

Then there’s Justin Raimando, the “conservative-paleo-libertarian” editorial director of Antiwar.com, who gave the billionaires two thumbs up, writing last summer: “The Kochs, and Cato, have been staunch opponents of the Af-Pak war, as well as the escalation of the war on our civil liberties that George W. Bush started and Obama has continued.” Nick Gillespie, the leather-jacket-wearing libertarian editor in chief of Reason.com, even links to an anonymous self reddit post that pretty much says the same thing.

So you’re probably asking yourself three questions: “1) Is what they’re saying true? 2) Can I trust a libertarian law professor from George Koch-Mason University? 3) What in God’s name is a ‘conservative-paleo-libertarian’?”

Luckily for you, we here at the The eXiled are used to doing the heavily investigative lifting. So after spending about 45 minutes looking through the evidence and tallying up the results, we can finally answer question #1. The other two you can figure out for yourself.

Data pulled from publicly-accessible federal contract databases shows that over the past 15 years, the Kochs have milked the U.S. war machine for about $170 million, all while funding libertarian groups, organizations and media outfits with anti-war positions. In just four years, from 1996 through 1999, Koch Industries picked up around $85 million in contracts to supply the Department of Defense with fuel.

Isn’t that noble of them?

Over the next decade, as U.S. interventionist policy spun out of control after 9/11 and our military got bogged down in two hopeless wars, Koch Industries showed no sign of slowing down or reducing its business dealings with the America’s statist-imperialist military machine. In fact, the Kochs found a new to way to make a profit. On top of getting lucrative fuel contracts with the DoD, Koch Industries also started supplying the army with food.

From 2000 to 2004, the company pulled in $2 to 6 million a year in contracts to supply the DoD with fuel, chemicals, food, paper supplies, water purification systems and few other assorted knickknacks But after acquiring the paper and pulp giant Georgia-Pacific, Koch Industries’ contracts with the DoD went through the roof. From 2005 to 2006, Koch Industries raked in nearly $68 million worth of contracts to supply the Defense Commissary Agency with “Subsistence/Food Items for Resale” through their Georgia-Pacific subsidiary located in Atlanta, Georgia. By the end of the decade in 2010, the Kochs had secured a total of $84.7 million in defense contracts.

And the kicker? 80% of these contracts were of a “non-competitive type”.

Mark Ames just published a post about all the Koch whores who tried to discredit our investigative scoop linking the Tea Party with the billionaire Kochs, and how our pathetic news media helped them lead the witch hunt, while being consistently wrong about the Kochs. That trend continues today with people like Ezra Klein, who in a recent column tries to downplay the importance of the Kochs, clearly not knowing what he’s talking about.

For example. In the post, Klein wrote:

Sometimes they are part of the coalition that succeeds, as in the case of energy policy. Sometimes they are part of the coalition that fails, as in the case of foreign policy. In the end, they’re probably more important than the Coors family but vastly less important than the Chamber of Commerce.

Yep, as their war profiteering clearly showed, the Kochs “failed” in the case of foreign policy. That’s one hundred seventy million taxpayer dollars worth of war profiteering failure. Gee, I bet the Kochs are horrified at the prospect of the US war machine grinding on in Afghanistan and Iraq for another decade. Quick, they need to pay a libertard to write something radical for Cato Unbound!

Want to know more? Check out Dylan Ratigan giving us props for breaking the Koch/Tea Party/Evil Oligarchs story first:

You didn’t hear this on Fox News or the Drudge Report, but on October 10 Venezuela seized and nationalized a massive fertilizer plant part-owned by Koch Industries. The media silence is a bit puzzling. You’d think that the seizure of property belonging to America’s second-largest private company, owned by one of the most powerful families in the country and the bankrollers of today’s libertarian/Tea Party revolution—the billionaire brothers Charles and David Koch–would be considered newsworthy. But no, even though their Venezuela plant was nationalized a whole three months ago, other than a handful of short business-wire dispatches, this has yet to make the news. Even Koch Industries has been suspiciously silent on the matter.

One reason why the Kochs could be keeping the news under wraps is that the nationalization of the fertilizer plant may appear to be bad news for Charles and David Koch, but here’s the big surprise: the Kochs made hundreds of millions on every end of this deal…and even more surprising, bond markets cheered the nationalization. In other words, the free markets championed by the Kochs gave a big thumbs-down to Kochs’ negative influence on the value of the business, while at the same time, the free-market Kochs earned huge windfalls doing business with socialists. No wonder this story hasn’t made the rounds.

Here’s what happened: When Chavez’s nationalization of the plant took Koch Industries out of the picture, bond investors responded by driving up the value of the company’s bond debt by a whopping 33 percent. That means they had a lot more confidence that the debts would be paid back AFTER the free-market Kochs were out of the picture. As every business school flunky knows, price fluctuations of bonds are very much like those of stocks: the more they cost, the higher the confidence in a given company. And that means investors had less faith in the ability of the Kochs to run a tight business operation than they did in a bunch of Venezuelan socialist bureaucrats.

For a free-market family like the Kochs, such a big pro-nationalization thumbs up from the Invisible Hand isn’t just bad PR, it’s downright embarrassing.

Here’s a dispatch filed by United Arab Emirates-based Gulf Today describing the nationalization:

Koch Industries awaits Venezuela takeover

October 18, 2010

CARACAS: Koch Industries said it had received no word that Venezuela nationalised Fertinitro, a large fertilizer maker in which the US-based group has a substantial stake.

Venezuela’s President Hugo Chavez announced that the takeover of Fertinitro, one of the world’s main producers of nitrogen fertilizer, days after vowing to radicalize his socialist “revolution” following legislative elections last month.

Koch has a 35 per cent stake in Fertinitro and Venezuelan state-run petrochemicals company Pequiven has 35 per cent. Saipem, a unit of Italy’s Eni, holds 20 per cent and local brewer and food company Polar has the rest.

“Koch Fertilizer has not received any official or informal notice, nor have we received any notification from Fertinitro regarding any disruption,” a Koch spokeswoman told Reuters by email. “We are attempting to obtain details and information.”

What were true-believer libertarians like the Kochs doing running a fertilizer plant in Venezuela with two state-run companies, anyway? After all, Charles Koch’s own Cato Institute brain trust has been writing for decades that government-owned enterprises are less efficient and productive than private companies. The answer is simple: they were there for the subsidies.

As I revealed last September, the Kochs have a long history of tapping into socialist programs, despite their staunch libertarian rhetoric. Starting with their father, Frederick C. Koch, who amassed the family fortune building up Soviet oil infrastructure in the 1930s during Stalin’s first Five Year Plan, the family has been sucking on the big government teat for as long as they’ve been in business, using government subsidies to maximize their own profits, even while funding the libertarian movement and trying to deny government spending on anyone or anything else.

Here are just a few of Charles and David Koch’s socialist business deals and schemes from the past few decades: they enrolled their Matador Cattle operation in a New Deal program that allows ranchers to use federal land basically for free, log public forests for private gain and have taxpayers cover the operating costs, and routinely use the government’s power of eminent domain to forcibly seize private property on behalf of Koch Industries’ various oil and gas pipeline subsidiaries, which stretch from Texas all the way up to the border with Canada.

Fertinitro, where the Kochs come to get their welfare checks…

Their venture in Venezuela followed the same old corporate welfare business strategy. Even as Charles Koch was publicly blaming the Venezuela’s poverty and economic woes on the country’s socialist policies, his company was taking advantage of the country’s heavily subsidized natural gas. Fertilizer production requires massive amounts of natural gas, which can account for 50 percent of operating costs and seriously eat into profit margins—unless, of course, the natural gas is subsidized by the state. And that is exactly why, in 1998, Koch Industries partnered up with two state-owned companies to build one of the biggest nitrogen-based fertilizer plants in the world. By investing $100 million—or  just 10% of the $1 billion project—the Kochs were able to tap into a guaranteed supply of cheap natural gas, courtesy of the socialist Venezuelan government.

Steven Bodzin, a former Bloomberg journalist, found that “just on the natural gas, never mind the electricity or water subsidies, Koch profits from a direct Venezuelan government subsidy of $1.23 for every thousand cubic feet of gas consumed at Fertinitro.” For Koch Industries, whose role in the partnership is to unload half of the 6 million tons of fertilizer produced by Fertinitro every year on the American market, that equals up to $123.6 million in subsidies every year–which means that the Kochs recouped their investment after just one year.

It’s clear why Koch Industries went to business with Venezuela (who wouldn’t sign up for a deal where they can make 1.2 times their investment just in the first year?) The question is: Why did Venezuela needed to sign up for such a shitty deal with Koch Industries?

Let’s look back at the history of this project.

Planning for the Fertinitro project started a few years before Hugo Chavez became president in 1999, and at a time when Venezuela was being subjected to brutal IMF’s “structural reforms”, which included the usual painful “austerity” cuts in social programs, and privatization of state industries:

During the 1990s, under the second term of President Carlos Andres Pérez, neoliberal reforms were introduced. In his February 2, 1989, inauguration speech, the newly elected Pérez riled against the International Monetary Fund (IMF) and other international lending organizations, but just a few weeks later he announced a neoliberal policy packet known as El Gran Viraje—the great turnaround. Under pressure from foreign creditors to implement an IMF-style austerity program, he dismantled protections, deregulated prices, and reduced social spending.

IMF “reforms” allowed foreign companies to siphon off Venezuela’s vast resource wealth. It was not “wholly unusual for the government of Rafael Caldera to sign contracts that were wholly injurious to the national interest—hence the backlash that led to the election of Chavez and then the latter’s sweeping nationalization strategies,” said Dr Julia Buxton, of University of Bradford. At the time, Venezuela sold oil to foreign companies at below the costs of production and handed out state assets to foreign corporations for free, like when Venezuela sold off the entire information-technology division of PDVSA, one of the world’s leading oil companies, for $1,000 to US defense contractor and Fortune 500 company SAIC.

As one of the world’s biggest fertilizer middlemen, Koch Industries—which seems to control about 5% of the global fertilizer market and is the world’s third-largest marketer of the stuff—was the sort of multinational American company well positioned to take advantage of these harsh IMF reforms, whereby wealth would be transferred out of impoverished Venezuela and into the Kochs’ libertarian coffers.

Unfortunately for the Kochs, the subsidized racket didn’t last forever. In October 2010, a full 11 years of having the libertarian billionaire brothers draining hundreds of millions of dollars of Venezuela’s wealth into their pockets, Chavez finally put an end to their relationship.

“The Koch company grabbed all our fertilizer and was selling it abroad at speculative prices,” Venezuela’s Oil Minister Rafael Ramirez told workers at the fertilizer plant. “The future is for the workers, for you who build socialism, for the men and women working in our national industries, to safeguard for our people, our communities, the benefits of worker control over such important companies.”

A few weeks after Venezuela announced the nationalization, The Economist predicted that it would have dire consequences for Venezuela’s economy, and warned that the government might not honor the fertilizer plant’s several hundred million dollars in debt obligations. But according to Bloomberg, the price of the plant’s bond notes didn’t go down at all—it went up by 33 percent! That’s right, as soon as Hugo Chavez announced the takeover, the bonds became more valuable, meaning that bond holders believed that the business was worth more with Koch Industries out of the picture.

This is important and worth repeating: Koch Industries’ involvement in the fertilizer plant was actually a drag on the operation and investor confidence. Getting rid of the Koch’s stake in Fertinitro had the effect of boosting the value of the company, which is funny considering the fact that Koch Industries was the only major private investor in the fertilizer plant.

But it makes perfect sense. Who would want to invest in a company owned by a billionaire freeloader like Charles Koch, who siphons funds out of other people’s pockets and into his personal bank account, while adding nothing of value?  No wonder bond holders reacted so positively to the nationalization.

Nope, you won’t find it here…

So for all the enterprising Americans out there wondering “What’s the secret to the Kochs’ success?” The answer isn’t pretty—especially if you’re one of the gullible Tea Party libertarians who believe the Kochs practice the free-market libertarianism that they preach. Their ability to reap billions and billions in profits year after year isn’t about buying low and selling high, but about buying subsidized-by-the-state, and selling subsidized-by-the-state. Using taxpayer money to cover the costs and ensure profits every time—that’s the simple formula to the Kochs’ success.

First published on Alternet

Welcome to Gilded Age 2.0, a time when government has become an appendage to the super-rich, used by industrialists, financiers and corporate robber barons to monopolize the economy and strip regular citizens of power and money. One example of just how much corporate cash and oligarchical interests have corrupted America’ democratic institutions comes out of California, where a giant corporation is spending tens of millions of dollars to push through a law that would snuff out competition and enshrine its corporate monopoly in California’s State Constitution.

It sounds outrageous, but it is perfectly legal here in the Golden State, where a form of “direct democracy” introduced 100 years ago allows voters to write laws straight into the state constitution. All that is required is a ballot initiative and a two-thirds majority vote by the people. Ironically, direct democracy was introduced to the state by the Progressive Party as a direct response to the runaway corruption of the Gilded Age, a way to shift power away from corporate and moneyed interests that dominated the legislature and to give it back to the people. Hiram Johnson, California’s progressive governor from 1911 to 1917, said that it would “restore absolute sovereignty to the people” by allowing voters to trump elected politicians.

It’s true, direct democracy gave California’s citizens a way to bypass their representative government, but it also gave a way for the rich and corporate to write their wishes directly into the highest law of the land — all they’d have to do is convince, cajole or dupe the people into voting their way.

And that is exactly what executives at Pacific Gas & Electric, a giant energy monopoly in California, decided to do. Over the past nine months, they’ve spent massive amounts of cash on political strategists, lobbyists, professional signature gatherers, astroturfers and political ad campaigns in the hopes of scaring and duping California residents into voting “yes” on Proposition 16 in the upcoming June 8 primary election.

Convincing voters to vote against their own interests hasn’t been easy, or cheap — especially when just about every newspaper in the state has come out with an editorial line attacking the amendment, which has been dubbed “PG&E Monopoly-Protecting Ballot Initiative” by some and a “tapeworm” by others.

The Sacramento Bee said that the amendment would ”insulate PG&E from competition, permanently locking its business advantage into the state constitution.” Mercury News called it “an outrageous measure…its sole purpose is to protect PG&E profits.” The Los Angeles Times waxed poetic, describing Prop 16 as “dagger aimed directly at a movement to enable municipalities to offer renewable green power to their residents in competition with private utilities.”

According to San Francisco-based utility watchdog, TURN, Proposition 16 would “sabotage existing law allowing communities to choose alternatives to PG&E” by mandating a two-thirds supermajority vote from residents in order for a municipality to form a public utility company or for an existing public utility to expand its services to new customers.

To push it through, PG&E’s political team has been waging a dirty political campaign that would make Karl Rove proud. As this article goes to print, records filed with the California Secretary of State show that the company had spent a whopping $25 million on the amendment. PG&E execs indicated that they are willing to spend up to $35 million. The utility has been using that cash to set up fake grassroots organizations to engage the Golden State in an aggressive, no-holds-barred disinformation war, airing misleading TV ads, launching aggressive direct-marketing campaigns and pestering people with telemarketing blitzes that warn of apocalypse if Prop 16 is not passed — doing all of it with their customers’ money.

“Never … have I seen political activity by a regulated utility so far outside the bounds of acceptable conduct,” said John Geesman, former executive director of the California Energy Commission, according to the San Francisco Bay Guardian. “It ought to be illegal to take ratepayer dollars and use it against ratepayer interests.”

True, it should be illegal for private companies to shaft customers with customer money, but it is nothing new for PG&E.

For starters, PG&E was one of the prime backers of the catastrophic law that deregulated California’s energy sector, which led to rampant fraud, manipulation and speculation in the electricity market by energy-trading companies like Enron, causing artificial electricity shortages, massive black-outs, 20-fold increases in electricity rates and, ultimately, to PG&E’s own bankruptcy.

“California’s three big utilities lobbied intensely to pass the 1996 deregulation bill … The California utilities believed that they would thrive from electric utility deregulation and become international energy companies,” according to a 2001 Public Citizen report on California’s energy deregulation. “However, now that they have been beat at their own game by bigger and meaner companies like Enron, and [sic] they are crawling back to the legislature and begging for another consumer bailout.”

Instead of letting the deregulated market do its magic and let a more competitive company step in, PG&E lobbied California’s pliable legislators for a 40% rate increase and two rounds of bailouts that came to a total of $16 billion, courtesy of PG&E customers. In fact, the utility’s 5 million ratepayers are still paying for the company’s mistakes through mandatory fees. By the time PG&E’s bankruptcy-related debts are paid off in 2012, ratepayers will each have dished out around $1,500 to keep it from collapsing.

But wait, there’s more.  Not only does PG&E enjoy a government-sanctioned monopoly throughout most of Northern California, but, on top of all the bailouts, California legislators have guaranteed the company 11% profit margins. It’s the kind of risk-free free market that corporate dreams are made of, allowing PG&E to squeeze $1.22 billion in pure profit from its ratepayer-suckers in 2009. Best of all, PG&E didn’t have to divert any of that cash towards paying down its debts — that’s what the customers are there for, remember? To show its gratitude, PG&E constantly jacks up electricity rates, skimps on service and generally makes its customers pay the highest electricity rates in the state.  According to the Fresno Bee , PG&E charges double the average electricity rates of most public utilities and one-third more than its private counterparts in Southern California.

That kind of price gouging translates to some very attractive executive compensation packages. In 2009, Peter Darbee, PG&E’s CEO, received a compensation package of $9.4 million (earning a bit less than Goldman Sachs Group Chairman Lloyd Blankfein, who took in a total of $9.8 million in 2009). Darbee’s pay was up nearly 9% from the previous year, despite a 10% drop in PG&E’s profitability, according to the Associated Press. Since 2000, Darbee received a  total of $48,560,044 in salary, stock options, pension benefits and bonuses, according to utility watchdog TURN.

But nothing lasts forever, and recently PG&E’s robber baron execs have begun to fear that their gravy train might be coming an end. It seems PG&E customers have started to finally wake up to the fact that they are being fleeced, and have started a slow-burning revolt that seeks to replace PG&E’s corporate monopoly with local public utilities.

To escape PG&E clutches, municipalities up and down California have been eyeing a 2002 law known as “community choice aggregation,” or CAA, which allows California cities and counties to become energy wholesalers who purchase power on behalf of their residents. The formation of CCAs poses a direct threat to PG&E’s monopoly by giving ratepayers greater bargaining power and allowing local governments to buy power from any energy producer — independent wind and solar energy companies, for instance — while using PG&E just for its power lines. In effect, it allows Californians to tap into and directly benefit from their state’s energy deregulation. “CCAs hold the potential for a substantial improvement in the energy market and increased efficiency,” determined a 2005 study of community choice aggregation by the Goldman School of Public Policy at the University of California, Berkeley.

Naturally, this had PG&E freaking out. After all, its business model is built on monopolistic price gouging, not competition.

Paul Hauser, an official from a municipal utility in Redding, a rural region in California’s far north, offered a glimpse into the kind of money PG&E stands to lose from a grassroots public utility revolution when he testified at a legislative hearing on Proposition 16 in February 2010. According to Hauser, customers served by his utility would pay an extra $440 per year if they had to be served by PG&E.

Now imagine the panic-stricken mental calculations that would shoot through a PG&E exec’s brain: $440 multiplied by 5 million ratepayers comes out to an annual loss of $2 billion in revenue, completely wiping out company’s profits. Just losing its monopoly in San Francisco, PG&E’s home city, could mean losing $140 million in income.

To protect its racket, PG&E has been waging war on uppity municipalities trying to enter the electricity business. Ever since the CCA law came into effect in 2002, the utility has been racing up and down the state, squashing local ballot measures that would enact CCAs with scare tactics and expensive disinformation campaigns.

In 2006, PG&E spent more than $13 million to defeat an attempt by Yolo County to join the Sacramento Municipal Utility District (which charges customers about a third of what PG&E does). Two years later, PG&E spent $10 million to squash San Francisco’s attempt to form a CCA that would allow the city to purchase a higher percentage of its electricity from green energy sources, something that PG&E could not provide. It was asymmetrical political warfare, with PG&E outspending the opposition in San Francisco 160 to 1.

The company’ most recent attempt to thwart the formation of a CCA was in Marin County, north of Golden Gate bridge going from San Francisco. PG&E launched a last-minute disinformation campaign, hoping to turn the population against the local CCA a few months before it was scheduled to become law in March 2009. Residents were barraged by inflammatory mailers with “frightening-looking graphics,” and pestered with phone calls from a supposedly independent group called “ommon Sense Coalition”telling customers to oppose the formation of a CAA, and fliers that predicted doom and gloom. Residents were shocked and turned off by the aggressiveness of the campaign. PG&E even threatened to stop supplying power to Marin if the CCA went into effect, and attempted to bribe cities with energy efficiency funds to opt out of the county’s CCA.

“They’re phone-banking, they’ve got call centers is Iowa and Palm Springs calling saying, ‘Do you know that your electricity is about to be switched [off] with no warning?’” a Marin resident told ABC News in April.

Marin’s CCA went into effect in March 2010 as planned, while PG&E’s strong-arm tactics resulted in an official rebuke from California’s Public Utilities Commission, which passed a resolution forbidding PG&E from refusing to supply electricity to CCAs.

But even while they were waging a losing war in Marin, PG&E’s brass had already switched strategies. With an upwards of 40 municipalities planning to break free of PG&E’s monopoly by forming CCAs, the utility decided to stop wasting money on local fights, figuring that it would be cheaper and more effective to take all the uppity municipalities all at once.

And that’s where the constitutional amendment comes in. PG&E CEO Darbee described his team’s eureka moment when they realized that the company could save a lot of money and effort by focusing its resources on pushing through a constitutional amendment to restrict public utilities, including CCAs, at a shareholders’ meeting in March 2010:

[R]ather than year after year different communities coming in as this or that…and us having to spend millions and millions of shareholder dollars to defend it repeatedly, we thought that [a constitutional amendment] was a way that we could sort of diminish that level unless there was a very strong, you know, mandate from voters that this was what they wanted to do.  …  So it was really a decision about could we greatly diminish this kind of activity for all going forward rather than spending $10 to $15 million a year of your money to invest in this. The answer was yes!

Obviously, the amendment would be a hard thing to sell on its merits to California voters, as it would effectively force them to continue to pay double the rates that non-PG&E customers are charged for electricity. So, during the shareholders meeting, Darbee was very explicit about how they were going to dupe Californians into voting for it.

Does this pudgy dumbshit PG&E CEO look like he deserves $10 million a year of your money?

“[It] occurred to us that people aren’t very pleased with the job that government is doing these days in general, you know … in the context of what everything that is happening with government today — the dysfunctionality of it — we concluded that it was a very ideal time!” he said. There you have it. PG&E was going to use the good ol’ Republican “slippery slope to socialism” scare and spin the amendment as a way to stop and prevent government takeover of utilities.

Darbee was fully aware of the flak PG&E would get for trying to steamroll the amendment through, but he did not seem concerned. “[T]here’s going to be some flap,” he said. “And then, presumably, you know, we’ll mend any broken fences after that.” Time is indeed the best healer and, with our short memories, it’s quick, too.

PG&E’s first order of business was to set up a shell organization to initiate and sponsor the constitutional amendment. Calling itself  ”Californians to Protect Our Right to Vote” (or “Yes on 16,” for short), the group pretended to be a grassroots coalition that represented the interests of every Californian — taxpayers, labor, environmentalists and businesses alike. In reality, its sole function was to mask the fact that PG&E is the sole backer of Proposition 16.

“In tough times, we should decide how our money is spent. That’s why we need Prop. 16,” says the Yes on 16 web site, painting Proposition 16 as a voter empowerment thing against big, bad government. “It requires voter approval before local governments can spend public money or incur public debt to get into the electricity business.” What Yes on 16 does not mention is that every single cent of the $25-plus million that had gone in and out of its coffers came directly from a corporation that would directly benefit from the amendment.

You can see the grassroot creds of Yes on 16 by looking at one of their spokespeople: Greg Larsen, a public relations man from Sacramento. Corporate flacks are obviously in high demand these days, because when Larsen isn’t shilling for PG&E at $25,000 a month (for a total of $250,000), he clocks in at his second job: shilling for the payday loansharking industry.

Here’s him being quoted by Southern California’s  Press-Enterprise on April 15, 2010, while still a paid spokesman for Yes on 16:

“The real impact of the proposed bill will be decreased consumer choice: unemployment check recipients will lose this option for short term credit in the marketplace,” said Greg Larsen, a spokesman with the California Financial Service Providers Association in Sacramento. “Payday loans are for such small amounts of money for such short periods of time, a 36 percent rate would not allow lenders to even cover their transaction costs.”    He said the industry doesn’t “see how eliminating financial choices in the marketplace benefits consumers.”

Before that, Larsen defended an agribusiness outfit that poisoned people with their fecal spinach salad mixes, and also worked as a spokesman for a shady gambling industry group bizarrely named “A Fair Share for California, a Coalition of Law Enforcement, Educators and Labor, Supported by Horse Racing and Card Clubs.”

Despite PG&E’s hyperactive propaganda campaign, opposition to Proposition 16 has been monolithic, which is highly unusual for a schizophrenic, multiple-personality-disorder state like California. Just about every politically active entity in the state has lined up against the amendment. Even the crooks over at the California Association of Realtors broke rank with the Chamber of Commerce and came out against Prop 16, which goes to show just how bad it really is. In December 2009,  nine state senators sent a letter to Darbee , calling PG&E’s support of Prop 16 “misguided as a matter of public policy” and potentially illegal. While in March, six publicly owned utilities, as well as the city and county of San Francisco, filed suit against Yes on 16, hoping to disqualify Proposition 16 from the June ballot. The lawsuit claimed that the language of the proposition was “false and misleading”:

Faced with growing competition from local government entities providing better electricity service at better rates, Pacific Gas and Electric Company (“PG&E”) hit upon a cynical strategy to protect itself from competition: promote a constitutional initiative to require a two- thirds majority vote whenever local government seeks to provide service in an area under PG&E’s control. Since PG&E could not obtain the signatures to qualify such an initiative for the ballot or persuade voters to adopt it if its true purpose and effect were revealed, PG&E crafted the language of the initiative and the petition used to qualify it to appear to be an initiative to require a two-thirds vote for a local government to tax, borrow, or spend on electricity service systems.

Although the suit did not succeed in kicking Prop 16 off the ballot, it did succeed getting the ballot initiative a less deceptive title, changing it from “Californians to Protect Our Right to Vote” to “New Two-Thirds Requirement for Local Public Electricity Providers Act.”

But even a broad-based opposition to Proposition 16 does not guarantee victory for California voters, not with the kind of moneyed game PG&E has brought to the court.

This is where democracy has brought us: the power of beneficial public agencies have been downsized, while destructive corporate power expanded. It’s been happening across America for years, and Proposition 16 would be just another step in the same direction. Because, if successful, the amendment wouldn’t just block competition from the public sector. It would turn the tables on the regulatory process and allow a corporation to impose regulations on municipalities, rather than the other way around. It isn’t deregulation, but regulation in reverse: corporations directly subjugating government through law.

Yasha Levine is a mobile home inhabitin’ editor of The eXiled. He is currently stationed in Victorville, CA. You can reach him at levine [at] exiledonline.com.

This article was first published by AlterNet.

HESPERIA, CA—Say hello to the thing that could save our gas-guzzlin’ suburban lifestyle: affordable residential solar power that’s within reach of the most cash-strapped America consumer. This breakthrough is not a result of technological innovation, but a new financing scheme cooked up on Wall Street called a “residential solar lease,” a no-money-down, low-monthly plan that has made solar electricity cheaper than the stuff we get by wire. It’s an old approach to a new source of energy, and it is taking California by storm.

“Go solar for $0 down. Now you can afford to go solar without the high initial cost of installing a system. Instead of buying the equipment, you simply lease it,”  boasts the Web site of SolarCity, a well-financed Silicon Valley start-up that has been pioneering the residential solar lease.

A solar lease is a fairly simple arrangement that is not unlike a car lease. Instead of dishing out tens of thousands of dollars upfront to buy and install a rooftop solar array, homeowners simply borrow one for a low monthly fee. Like a car lease, customers sign a contract that locks them in for a specified period of time with the option of extending their lease or buying the panels at the end of the contract. It makes sense when you consider that a typical homeowner would have to cough up between $20,000 and $50,000 to buy and install a solar panel system. A solar lease, on the other hand, would only cost them somewhere around $100 a month.

California, the world’s third-largest solar-power market, saw twice as many people file for solar power permits in 2009 than in 2008, with much of the surge in demand being driven by this newfangled solar product. (Demand is so high that a black market for stolen solar panels has sprung up in the Golden State.)

SolarCity, one of the first companies to aggressively market solar leases, signs people up for 15-year contracts that run an average of $110 a month (with a 3.5-percent increase every year). SolarCity says customers can typically expect to shave 15 percent off their electricity bill from day one, with savings potentially growing over time if energy costs continue to rise. Competing companies — like SunRun out of San Francisco or American Solar Electric out of Scottsdale — offer the same basic deals.

A $100 electricity bill is a steal for California, a state that takes fifth place for highest electricity rates in the country, especially for the millions of people who inhabit the southern, sun-baked reaches of the state.

“My bill goes over $200 during summer when we keep the central AC going twelve hours day,” explained Paul Bosacki, who sits on the city council of Hesperia, a rustic, sprawling exurb on the edge of the Mojave Desert 90 miles east of Los Angeles. Bosacki was the first — and so far the only — person to sign up for SolarCity’s lease program in his town, but he won’t be alone for long. Because now he pays $89 a month and gets all the juice his household needs, while saving $21 dollars off his average electricity bill.

We walk around to Bosacki’s backyard, where a single Joshua tree keeps watch over a jacuzzi and a panoramic view of the Mojave Desert, and he gives me a tour of his solar system: a slim grid of black panels on the roof and a box that converts its electricity to proper voltage. Bosacki might have to spend a couple of bucks a month on additional electricity from his local utility in the summer, but in the few months he’s had the system, he’s been well in the clear. “I turned it on in September and haven’t gotten a bill since,” he says, adding that he would never be able to afford the $40,000 his solar setup retails for without the solar lease.

Not only do homeowners like Bosacki save money with solar, but they stand to make some, too. The beautiful thing about the technology is that it allows you to feed all your surplus electricity — like when you’re on vacation, at work or taking a nap — into the grid. The only downside is that, until 2010, local utilities in California paid customers in electricity credits rather than in real money. But a new law will now force them to pay in real money, as in cold hard checks they’ll soon start getting in their mailboxes. Called Consumer Net Metering, this new regulation finally does an end-run around an insane California law that only allowed utility companies to sell electricity; a restriction that had been putting a serious damper on small and alternative solar projects. Now even the small-time homeowner could actually make an honest buck on the energy market. Welcome to the cheap new world of debt-financed green energy.

“We’ve been selling like crazy down here because of the lease program,” a SolarCity rep told the Orange County Register, explaining that the company had not been able to meet demand in Southern California, which has been so high it outstripped SolarCity’s meager financing ability. In April 2009, 3,000 people signed up, biding their time until SolarCity lined up more investors to fund the installations — a wait the company predicted could take a year to clear. Other solar lease companies are seeing similar growth.

“Falling prices, rising utility rates and new government incentives may finally be driving serious growth in the region’s market for residential solar power,” wrote theSacramento Bee in September 2009, when applications for solar panel installations suddenly quadrupled in the Sacramento region.

Even in this harsh credit freeze climate, investors seem to be rushing in to fill the need. While loans to American businesses have dropped by 17 percent compared with last year, solar leasing companies have taken in hundreds of million of dollars in new funding. SunRun received $105 million in financing from U.S. Bankcorp earlier last year and another $90 million in December. The bank also doubled SolarCity’s funding to $100 million. National Bank of Arizona gave SolarCity $5 million for solar leases in Arizona. Morgan Stanley, J.P. Morgan and Goldman Sachs all have been in the solar lease game from the beginning, in large part because they have been able to rig the financing and government subsidy structure in a way that guarantees profits, allowing them to easily recoup their investments through complicated tax credit and green energy derivatives schemes — all of if risk free, as usual.

California goes the extra mile, providing the largest solar subsidies of any state ($2.2 billion has been made available through 2016). Investors can expect to be credited 80 percent of their products’ retail cost, meaning that financiers like Goldman Sachs are able to turn an instant profit for their investors on every solar panel array — before customers even pay their first solar lease bill. The handouts have been so good, in fact, that greedy  investors are constantly demanding bigger profits.

“Investors historically expect seven percent to eight percent, which includes the tax benefits and a slice of profit during the life of the fund,” wrote Green Tech Media about the amazing profits being squeezed out of the residential solar market. “Now they want ten percent or more.”

Solar start-ups are popping up to compete for customers and the billions of dollars of federal and state subsidies for solar and renewable energy. Some are pioneering do-it-yourself solar kits you’ll be able to buy at Home Depot, while others are working to integrate solar panel technology into building materials like roof shingles and siding.

Looking through slick Web sites and optimistic sales pitches, yet with nothing real to sell, is reminiscent of the dot-com bubble. It seems like solar hype is about the only thing for sale, and a sign that America’s solar energy market is probably entering the same dangerous bubble-burst territory Spain found itself in last year, when the government heated up the solar market with with $1 billion in subsidies and then crashed the party when it ran out of money and was forced to suddenly cut funding, causing a world-wide solar recession and a glut in solar panel parts that persists even today.

But bubble or not, there are huge ramifications from this full-on race to develop affordable, ubiquitous residential solar technology.

Peak oil theories have been gaining strength ever since the real estate market collapse turned vast stretches of sub-prime suburbs into ghost sprawl, giving us a scary glimpse into our post-oil future. Its preachers have been pounding the empty oil drum, warning the masses about our helpless dependence on cheap oil and how a shortage would reduce us to pathetic hunter gatherers — all the while urging people to stock up on dry astronaut food and how-to farming guides for urbanites through their online stores.

“[T]he truth is that no combination of solar, wind and nuclear power, ethanol, biodiesel, tar sands and used French-fry oil will allow us to power Wal-Mart, Disney World and the interstate highway system — or even a fraction of these things — in the future,” James Howard Kunstler, the populist apostle of peak oil for this generation and failed Y2K theorist, prophesied in a Washington Post op-ed they called “Wake Up, America. We’re Driving Toward Disaster.” Even the New York Times has joined the scare fest with this kind of crap: “Suddenly, the economics of American suburban life, idealized around the world, are under assault as skyrocketing energy prices inflate the costs of reaching, heating and cooling homes on the distant edges of metropolitan area.”

Standing in Paul Bosacki’s backyard, on the edge of Southern California’s suburban sprawl, it is hard not to agree with the suburban doomsayers. With a panoramic view of the Mojave Desert, you can see the sub-prime suburbs creeping deeper into the open desert. This is one of the most arid, inhospitable places in America, yet it is also one of the fastest-growing, swelling to a population of almost 400,000 over the past few decades, booming higher and crashing harder than most other regions in the country. Looking at this failed McTractHome paradise and left-behind carnage — half-built master-planned communities and a sea of vacant homes with dead lawns dry and rotting in the heat — it seems there is no way it can survive, not with its four-hour daily commute to Los Angeles and summer air-conditioning bills that can feel more like mortgage payments.

But affordable roof-top solar has the power to nip a suburban energy freakout in the bud. Not only can it power the most outlandish McMansion palaces out in the hottest reaches of the American West, but it can also power the cars that get people there and back.

“You’ll be able to plug in electric vehicles into these things to charge them off your own panels,” says Bosacki, intuitively picking up on the possibilities that residential solar power have opened up for suburbia. “One day, we’ll be probably be able to lower energy costs for cars to zero. That’s one of the unintended benefits of these things.”

That is exactly what SolarCity seems to be angling for. The company was created in part by Elon Musk, a Silicon Valley millionaire and the man behind Tesla Motors, the experimental electric car company that recently rolled out its first model: the souped-up, $100,000 base price sports car called the Tesla Roadster that does 0-60 mph in 3.7 seconds. The San Francisco Business Times wrote about Musk:

At 37 years old — and with a net worth estimated at more than $300 million from past endeavors like PayPal — Musk is making contributions to clean energy that may become his legacy. Tesla was the first company to produce an electric car that gets more than 200 miles per charge, and SolarCity is one of the largest installers of solar panels in the country. SolarCity was also the first company to market solar-power systems with no down payments that could save customers money from day one.

Rumor has it Tesla is working to unveil a mass market all-electric sedan sometime after 2012, with SolarCity playing a part. SolarCity already offers charging stations as a deluxe option for its residential solar power systems; the company equipped over 2,500 electric vehicle charging stations so far and recently installed five experimental Tesla charging stations along Highway 101 from San Francisco to Los Angeles. It’s all part of a bigger strategy to provide the foundation for cheap, readily accessible solar electricity, and a ray of hope as far as our suburban lifestyle is concerned.

The fact that the biggest suburban growth has been taking place in the sunniest spots in the United States — California, Florida, Nevada, Arizona — means that these sweltering locales will become even more popular with solar power. After all, who can say no to trading up to a larger home and reducing energy bills at the same time? And that just might make solar the thing that will sucker us into the next reckless speculative real estate boom. Amen to that.

This article was first published by AlterNet.

Yasha Levine is a mobile home inhabitin’ editor of The eXiled. He is currently stationed in Victorville, CA. You can reach him at levine [at] exiledonline.com.

I was in Detroit to visit my girlfriend’s family for Thanksgiving and decided to take a look around. Knowing my tastes, locals told me to head for a burnt-out slum called Highland Park, HP for short, as it’s hands-down the worst neighborhood in the city. And that’s saying a lot because in Detroit, beyond the bunker that is the revitalized downtown, the whole world’s a ghetto.

If you want directions to see what happened to the American Dream in the age of globalization, go north on Woodward Avenue. When the empty sidewalks and spiffed-up ghosts of department stores give way to miles of vacant lots, piles of arsonists’ ash and ruined factories, you’ve hit your destination: Highland Park. A beaten-down man in a black vinyl coat was there to greet me. Waving his hands furiously while I drove by, the crack-addicted hustler shouted, “Right here! I got that shit right here!”

This first-ring suburb once boasted Chrysler’s headquarters, a Ford assembly plant and 20,000 industrial jobs. Fleeing Detroit taxes, Big Three executives built fancy homes here at the turn of the century. Behind six-foot high brick walls, their mansions lie unheated and crumbling. In 1908, Henry Ford’s assembly line was born here, in a 2.5 million- square-foot complex of reinforced concrete and glass.

Looking around it now, Philip Levine’s famous poem, “What Work Is,” comes to mind: “We stand in the rain in a long line/ waiting at Ford Highland Park. For work.” Outside the old Ford plant—now filled with broken glass and guarded by high chain-link fences—a cluster of young dealers shiver in a cold wind, also trying to make some green. Yet Levine’s evocation of 20th century hard times in Highland Park is no match for the modern-day misery that has settled here, permanently.

“In the mid-1980s, crack just hit us like a wave,” says Franklin Gaudy, a 46 year-old lifelong resident. Crack’s legacy is felt throughout a city that offers few other opportunities of escape. Middle-aged men and women shuffle out from the bulletproofed interiors of Iraqi-Christian-owned liquor stores with their heads hung low. A dilapidated drug treatment program sits between the old Ford Plant and a newish McDonald’s. Although most of Highland Park’s three-mile-square area lies in ruins, either burnt out or vacated, a few well-kept blocks of wood-frame homes do jut out of the rubble. The remaining homeowners, fearing rampant burglaries and worse, announce themselves against the falling darkness with bursts of floodlights.

For women and children forced to pick out gifts in chain drug stores along Woodward Avenue, the holidays in Highland Park are an especially grim reminder of the outside world, as viewed through TV. The Iraqi-Christian shopkeepers are even known to indignantly upbraid customers who wish them a generic “Happy Holidays,” instead of “Merry Christmas.”

Highland Park is technically a self-administered city-within-a-city, but most Detroiters lump it, as one suburbanite put it, “in the mix,” with its surrounding municipality. Industrial flight introduced the population to cradle-to-grave poverty and crack produced roving zombies, but nothing has quite transformed the look and feel of Metro Detroit like arson, and its trail is particularly evident in Highland Park. Charred carcasses of what used to be massive Victorian houses riddle the landscape. Whole blocks have no homes left at all.

Ask a white suburbanite the worst thing about the city and he’ll probably say, “Devil’s Night,” which comes like clockwork every October 30th. And there are a lot of empty houses to torch in the inner city—about 80,000, according to Forbes. Whites take it as an article of faith that roving bands of black pyromaniacs emerge from the shadows to torch abandoned houses and slip back into the trash-filled darkness. These crude racial fears ooze out of our national press corps every year, right around trick or treat time. In the October 30th 2009 Time feature, “Can Detroit Prevent a Return of ‘Devil’s Night’,” white volunteer firemen are pictured speeding through the burnt-out inner city to combat sketchily defined firebugs who are implied to be black. It’s hard to know who the perps are because they’re rarely caught. So why are whites convinced its poor blacks letting off steam? Who knows, but the whole thing looks real fishy. It reminds me of the type of shit the FBI used to get away with in the Ghetto all the time: sewing violence to disseminate fear.

An economic motive never seems far behind the flames. In 2009, after several years of decline in arson, fires burned as brightly as they ever had. Last October 22nd Highland Park suffered a five-house blaze that burned three children to death. The small local fire department blamed the tragedy on a faulty kerosene space-heater. Maybe so, but that was only one of a rash of serious fires in the Detroit Metro area last October, one of which claimed ten run-down homes on the city’s East side. Even Detroit’s own police had suspicions that speculators were behind it, using the fire as a cover to cut their losses and collect on their insurance policies.

Like many stretches of Highland Park, East Philadelphia Street has only one architectural remnant of its urban middle-class past. On Thanksgiving eve, I parked in front of number 30—a boarded-up, four-story, brown brick and gray stucco pre-War Tudor-style apartment building with ornate wings—and stepped out of my white rented Ford to snap a few photos. Twilight lent an eerie Omega Man style beauty to the quiet and abandoned landscape: high-grass covered in fallen leaves, gnarled trees, telephone poles, blackened piles of debris and not a living soul in sight.

I had the block to myself for several minutes before a blue Pontiac with tinted windows pulled up. Rolling down his passenger-side window, the driver, a black guy in a Tigers’ cap, leaned towards me and asked, “Do you mind telling me why you’re taking a picture of that building?” After glancing at my NY Press business card, he said, “We used to have thirteen houses on this block, now there is only one left. We had a grocery store we could walk to when I was growing up.” Before trailing off, he added, “That probably doesn’t sound like much to you. It was still the ghetto, but to us, you know….”

The man introduced himself as Franklin Gaudy, a godson of Motown Records founder Berry Gordy. For the next fifteen minutes, Gaudy, who worked as a caterer and was youthful-looking although deep into middle-age, took me through the recent history of Highland Park. He talked mostly about the effects of a virulent strain of crack addiction. “It used to be so beautiful here, but crack ravaged this block,” he explained. “It was just an epidemic. There used to be eleven-old dope fiends in every house.” Embattled cops seeking to halt the spread of the virus started torching homes. “If it wasn’t the police it was the people living there, or the drug dealers,” he added. In his estimation, the crack epidemic—and the fires that raged because of it—peaked in the early nineties, then began to decline. In the mid-nineties, a whole generation of sick, tired people, “started to go to the rehabs” that had become more prevalent by then.

Even with the establishment of seizure laws, declining usage, and whole blocks reduced to ash, the cops continue to set fires, Gaudy maintains: “It’s not worth it to take people’s property for what they have here, so they just burn shit down.” At one point, another middle-aged black man drives up to tell Gaudy he’s looking for a chef to hire. During the great recession, the official unemployment rate in Detroit has skyrocketed to 30% and Gaudy, happy with his $22-per-hour from the catering hall, doesn’t bite. Asked how the current economic crisis has affected his neighbors, Gaudy says, “They about the same. People are so deep in the ghetto, they don’t know they broke.”

Highland Park is at least 95% black and has a higher crime rate per population—and is even more sparsely populated—than Detroit proper, which surrounds it on all sides. A tragic story from this burnt-out enclave spread across the mediasphere on November 19th, after an enraged 37-year old mailman named Jamar Pickney executed his 15-year-old son, who was stripped naked, begging for mercy on his aunt’s front lawn. The guilt-burdened teen had confessed to the aunt that he had fondled her toddler. When she told Pickney, he snapped. The murderer’s dreadlock-framed face became the latest symbol of “Murder City’s” endemic violence. Highland Park Mayor Hubert Yopp, new to the job, was under tremendous strain even before the calls from homicide reporters started flooding in. After a decade of control by state-appointed managers—the most recent of whom had just been indicted for embezzlement—responsibility for Highland Park’s tragic condition was shifting back to the elected city government.

As Yopp talked healing and “crisis initiative” at a press conference that Wednesday, the city’s largest private creditor, Detroit Edison, was sending a different message. The utility was cutting power to sparsely occupied apartment towers throughout the inner city for non-payment. Joe Pechi, a white slumlord who has recently filed for bankruptcy, owed DTE tens of thousands in back payments on Highland Park Tower, a four-story shabby-genteel building taking up a monolithic square block. Despite publicly admitting that tenants were paying their rents to Pechi on time, DTE claimed it had no choice. While the chain stores lured to Woodward Avenue’s cheap rents during the sub-prime bubble continued to radiate their neon come-ons into the gloom of Thanksgiving Eve, Highland Park Tower went dark, turning off the lights in the heart of America’s second most deserted citeis.

Metro Detroit’s privatized social services are nakedly corrupt. Even the shop kids whose vocational school had been shuttered mid-semester and the confused senior citizens trapped without bus service could grasp the message directed at Yopp and Highland Park Tower residents: pay up or freeze in the dark. Tenants, who had been given a weeklong taste of living off the grid back in September, became refugees. Frightened looking women and children shuffled into busses while television cameras caught the heart-numbing scene for suburban viewers. DTE has expressed no plans to return power to Highland Park Tower.

Suburbanites discussing Detroit’s disaster speak from a cultural script reflecting decades of “white flight.” According to that script, the city was, as its publicity machine once boasted, a “Wonder City”—until the 1967 Riots, when ungrateful blacks suddenly turned savage. Shaped into a cohesive narrative by neo-conservative journalists like Tamara Jacoby and Ze’ev Chafets, it’s a framework that has influenced the entire country. Summing up this framework perfectly, the cover blurb to Chafets’s “Devil’s Night: And Other True Tales of Detroit,” published in 1990—when another round of disinvestment rocked the rust belt—reads, in part: “Overnight, Detroit was violently jerked from an existence as a prosperous, integrated industrial center, to that of a seething ghetto.” As Rep. John Conyers frequently points out, black Detroiters hold a very different picture of the city’s decline. Disinvestment and white flight, he says, began in the early 1950s. Economic figures and census data from the 50s and 60s strongly bear him out. In 1961 Time, the weathervane of the media establishment, reported, “Detroit’s decline has been going on for a long while.”By the late 50s, Ford Motor Company fled Highland Park; whites had already been leaving for a decade. Lee Iaccoca made repeated pledges not to abandon Chrysler’s long-time home, but in 1992 the automaker moved fifty miles away, to Ann Arbor. Overnight, 4,500 people were left unemployed—and Highland Park lost over half of what little remained of its tax base.

Briefly during the sub-prime boom, the real-estate hype machine shilled the three-square mile area—with its $5,000 3-bedroom handy-man specials and rock-bottom property taxes—as an urban pioneer’s dream. Sweetheart deals lured a few chain stores, like McDonald’s and Walgreen’s, onto Woodward Avenue, which for decades had only been able to hold onto liquor stores, porn theaters, and hot-sheet motels. And when the sub-prime bubble burst, a wave of foreclosures displaced an estimated 5,000 people, bottoming out the population at ten thousand.

The meltdown also smoked the scammers out of the government. On December 9th 2009, two high-ranking officials in a powerful non-profit, confessed to siphoning off $750,000 from a Highland Park homeless shelter into former Detroit Mayor Kwame Kilpatrick’s coffers. Kilpatrick, among other things, is strongly suspected of having ordered the hit of a stripper. Then there was Art Blackwell, Highland Park’s emergency financial manager—and Kilpatrick’s chief political adviser—who was arraigned in October on charges he embezzled over $250,000 from the half-dead city.

Now, with an estimated 5,000 of some of the poorest people in America displaced by the real estate crash, Highland Park’s future looks grim. One local church pastor recently said that the only way to save Highland Park is to pave the way for subsistence farming.

Matt Harvey writes for the New York Press.

Everything the real estate industry tells you is a hustle. No industry is more geared toward pumping up the positive and burying anything remotely negative, leaving you — and truth — out in the cold.

The crash has not made real estate agents any more honest, but at least the gap between the industry’s crazed optimism and stark reality has grown so obvious that even the real estate industry can’t hide it anymore.

Nowhere is this more obvious than in Victorville, Calif., an exurb of Los Angeles situated in the high desert where housing bubbled up higher than just about anywhere at the peak of the subprime-lending craze and is still in free fall today.

These days, there are a lot of lies and broken dreams buried in the gravelly sand on which Victorville was built. During the last real estate boom, this barren wasteland was the mecca of low-income home ownership, proof that the American Dream was within reach of all.

Tract-home developers stripped away the rocks and tumbleweeds and Joshua trees, replacing them with mazes of curvy streets and cul-de-sacs with soothing names like Cottontail Drive, Steeplechase Road and Ladybird Lane, lining them with the cheapest McMansions in California. Things exploded out of control this past decade, with the population doubling to 100,000 in just eight years.

But that whole way of life is over now. Unemployment in Victorville is way above the national average, and violent crime has shot up. Homes prices have plunged to 1989 levels and many stand empty. Banks don’t even bother putting them on the market.

Yet, last week the press started hyping up the supposed real estate sales-driven economic turnaround that was about to sweep the country. “Honk if You Think It’s Over,” read a June 7 New York Times headline. “The panic in the Manhattan real estate market of the winter of 2009 lifted in the last few weeks, brokers say, as more and more buyers and sellers have found the courage and the comfort level to sign on the dotted line.”

The Washington Post went even further: “Economists, senior government officials and ordinary consumers are all showing greater confidence in the outlook for the economy. … There are unquestionable signs of economic progress.” ABC News went with a rhetorical structure: “Has the Recession Finally Ended? Strong Home Sales Are Just One Indicator That the Economy May Be on the Mend.”

From where I sit, this reads like pure fiction. It runs contrary to virtually every economic piece of data available: rising unemployment, growing credit card debt, a massive shadow inventory of foreclosed homes and a wave of defaulting ARM and commercial loans that’s just around the corner.

But there is something else, too. And it is as deadly to our vampiric debtor economy as a stake through the heart: the FHA loan. By guaranteeing certain mortgages, the Federal Housing Administration has been helping middle- and low-income Americans purchase their first homes ever since the 1930s. But this modest leg-up program has been been hijacked and transformed into the new subprime-loan market operated by lenders who are as corrupt, predatory and shortsighted as the original subprime lenders, and maybe even more so. Because this time taxpayers have been put on the hook for the risk well in advance. Real-estate insiders have been sounding the alarm about this new shadow subprime mortgage market — which is now almost $600 billion strong — for months now. But instead of listening, Congress has been trying to expand the FHA loan program.

Not surprisingly, it seems that risk-free loans are the only way banks can be persuaded to start lending again. But I wanted to find out firsthand how much of an impact these loans were having on the housing market. So last weekend, I shaved, put on a clean shirt and headed out for a day of shopping in Victorville.

Around here, it is much easier to shop for a brand new home than to find someone who will show you one of the many foreclosed ones. You don’t need to make an appointment with a real estate agent, hunt down open houses on a Sunday afternoon or attend auctions. All you have to do is take a drive any day of the week during normal business hours and look out for the huge signs plastered around town. They are not easy to miss.

It took me five minutes to spot a new development on the very edge of Victorville’s sprawl. The sign was dark green and advertised a development called “Braeburn at West Creek,” with luxurious and spacious homes offered for around $200,000. The development had a quiet, upper-class suburb feel to it: new cars, landscaped lawns, no traffic and wide streets. Passing a group of kids playing basketball in the middle of one of the streets, I pulled up in front of the Braeburn sales office, built into the garage of a model two-story McMansion painted a trendy brown.

It was 3 p.m. on Saturday, prime house-hunting time. With all this buying activity the industry was reporting, I half-expected to run into other bargain shoppers like myself. But I was the only customer in the real estate office.

“Hello! Have you come to see the houses?” a chipper female voice yelped from a distant corner of the office. “Give me a second, I’ll be right out.” I couldn’t get a visual on her. It was huge, this garage — er, office — big enough to hold three cars, easily the size of a decent apartment. Schematic drawings hung on the walls showing all the wonderful house configurations you could order.

That was when the voice appeared in human form: a blond middle-aged woman emerged from a corner office with a bundle of keys. Braeburn had three floor plans to choose from, she quickly started explaining. But I could only look at two of them. The third was still under construction. But if I wanted to, I could drive around and look at it: “It is quite far along in the building process.”

The homes were all quite similar: all three had two floors, four to five bedrooms and range of 2,454 to 2,765 square feet. All of them had what’s called a “great room,” something you see in new home developments that combines the kitchen, living and dining rooms into one great open space.

“We have sold 105 homes so far, and I have about 30 homes left,” the agent said, whipping out a photocopy list of Braeburn’s homes, complete with lot numbers. “Right now we are headed into this cul-de-sac. This is our last cul-de-sac.” The rest of the homes would be built on mere streets. She circled homes numbered 85 through 98 surrounding a dead-end street called Window Rock Court.