Category Archives: Articles

Driving While Black


“Oh, God, help me! Oh, my God! Oh, no no no! Oh, God, help me! Help me, God! Help me, God! Please, God, save me! Oh, God! Oh, my God!”

Our instructors call him the Screamer. We are not told his name, which is just as well. That added bit of humanity would make his debasement all the more difficult to watch.

Judging from the enthusiasm of the California Highway Patrol officers who are training us, the Screamer promises to be a high point of sorts in our lessons. Several times during this morning’s classes, when the lectures have dragged, one or another of our uniformed instructors has called out from the back of the classroom, “Play the Screamer!” And so, eventually, they do.

As the video equipment is being readied, a sergeant briefs us on what we are about to see: a tape of an actual search made by an Operation Pipeline team in rural Arkansas. The tape will demonstrate several things, we are told, not the least of which is the effectiveness of the training we are receiving. We will see with our own eyes just how well Operation Pipeline works.

The television monitor flickers on and we see a smeary black-and-white shot of a gangly man in a checkered shirt. He is standing by a car, alongside some highway in the boondocks, trailer trucks roaring by. On the tape, it is the dead of winter, overcast and blustery, and the man keeps brushing long strands of hair from his eyes as he nervously answers questions from the two Arkansas state troopers towering over him. He is nobody, some jobless hillbilly plucked from the traffic stream by two cops who have been specially trained–like us–to spot suspicious characters.

The troopers give the man the once-over and tell him they want to search his car. He reluctantly agrees and is shoved into the backseat of their unoccupied prowl car, behind the dash-mounted video camera, and from then on, we watch through his eyes as the Pipeline team searches his car.

When the trunk lid pops open, the man begins to whimper. When one of the troopers reaches in and tosses a black plastic garbage bag onto the hood of the patrol car, he lets loose with a piercing off-camera shriek.

“Help me! Help me, God! Help me, God! Please, God, save me! Oh, God! Oh, my God!”

He keeps it up, alternating between wails and moans, for what seems like an eternity, gibbering at the visions he is conjuring of his near future. Just when he seems finished, when it seems certain his lungs can take no more, he starts up again, screaming even louder than before. “Oh, God, save me! Oh, sweet God, please! Please save me!”

“Now, look, look,” our instructor says excitedly, pointing at the screen. “The troopers are finally gonna hear him!”

As a gut-wrenching howl erupts from inside the patrol car, one of the cops looks up slowly from the Screamer’s trunk and gives the camera a puzzled glance. Comedy.

The classroom explodes with laughter.


CURTIS V. RODRIGUEZ IS A SAN JOSE LAWYER. He looks far younger than his forty years, has a couple kids, owns a house, drives a nice car. He’s a prime example of an emerging army in California: educated urban professionals who happen not to have white skin.

Last June, he and a friend, fellow attorney Arturo Hernandez, drove Rodriguez’s Mazda Millenia to Merced on a mundane legal task: taking pictures of a client’s house. On their way through the windy Pacheco Pass, in the mountain range separating the Pacific coast from the dusty farms of the San Joaquin Valley, they saw some cars that had been pulled over and were being searched by California Highway Patrol officers. In every instance, it seemed, the car’s driver was a dark-skinned male.

On the way back, hours later, they saw more. One after another, every couple of miles.

“After seeing the third car in a row–same deal, driver is a dark-skinned Latino and the cops have them standing off on the side of the road–Art and I looked at each other and said, ‘Do you believe this?’ ” Rodriguez says. “It was obvious whom they were stopping. It’s not like there are that many dark-skinned Latinos on the road, but that’s all they had. Art got the camera out and started taking pictures of the stops, because we figured no one would believe us.”

Hernandez began snapping away, getting photos of a fourth car whose dusky occupants were being questioned by the roadside. As the Millenia whizzed by the fifth such vehicle, a highway patrolman looked up and saw Hernandez with the Olympus. Soon, the Mazda’s rearview mirror was filled with the chrome grille of the trooper’s hard-charging Crown Victoria.

“I’m driving like a saint,” Rodriguez recalls. “I’m going under the speed limit, straight down the middle of the lane. There’s nothing he can do to me. But he turns on his lights and pulls me over. He walks up and tells me I was weaving, which is a total lie, because I was driving that car like it was on rails.”

The trooper then told Rodriguez he wanted to search the Mazda, and Rodriguez scoffed. To hell with that, he thought. I didn’t go to law school for nothing. No way, he told the officer, am I consenting to a search. I know my constitutional rights. Art and I are criminal lawyers. The Fourth Amendment protects us from this kind of nonsense. If you want to search the car, get a warrant. Otherwise, just give me a ticket and let me go.

The trooper was unmoved. He looked at the two attorneys calmly and ordered them out of the vehicle. I’m in fear for my life, he informed them in a monotone. The passenger made suspicious motions, which gives me the right to search your car–for my own safety. Rodriguez’s license and registration were taken back to the cruiser, where a drug dog sniffed at them indifferently. Not surprisingly, the search turned up nothing.

Rodriguez was dumbfounded. “The whole thing was about as illegal as you can get. He had no cause to pull me over. He had no reason to search my car. He knows I’m a lawyer, and he goes ahead and does it anyway! So the thing I’m wondering is, what happens to the people who aren’t lawyers?”

What sometimes happens is this: They get frisked, and sniffed by dogs, their luggage gets dumped out and pawed, on occasion their cars are towed away and dismantled back at the police station. Other times, their vehicles are taken apart on the spot. If they’re lucky, they are simply left standing alongside the road, frightened and mystified, holding an expensive traffic ticket they didn’t deserve and wondering why, out of all the cars on the highway, the police came after them.

In most cases, it can be summed up in two words: Operation Pipeline. Like tens of thousands of other innocent motorists, Curtis Rodriguez had been sucked up and spit out by one of the federal government’s more secretive antidrug campaigns, a giant vacuum cleaner of a program financed by the U. S. Drug Enforcement Administration and run by hundreds of state and local police agencies across the country. Over the past thirteen years, Operation Pipeline has been waging an expanding and largely invisible war on the nation’s highways against “mules,” people who haul cash and drugs for dope dealers. In its time, Pipeline has scored some impressive victories. But as with any war, it has left considerable collateral damage in its wake: legions of law-abiding motorists who have been ticketed, interrogated, and searched simply because they looked or acted funny–or happened not to be white.

“It isn’t just blacks and Hispanics, though they do seem to be the majority,” says Utah attorney W. Andrew McCullough. “In my experience, any motorist who looks different is a candidate for getting pulled over by these folks.”

Complaints of racially motivated traffic enforcement are nothing new, of course. But in the last couple of years, these complaints have become louder and more persistent. Some legal experts, such as constitutional-law professor David A. Harris of the University of Toledo, believe we are in the midst of a “national epidemic of race-based traffic enforcement.”

That perception has been strengthened by recent civil-rights suits filed in Maryland and New Jersey and statistical studies done in North Carolina and Florida proving that on some highways, the traffic laws have been enforced far more stringently against dark-skinned drivers. Because of these documented cases of roadside racism, Democratic congressman John Conyers of Michigan was able to persuade the Republicans in the House last year to pass a bill requiring traffic police to record the race of the drivers they stop so that the phenomenon could be studied nationwide, but the measure died in the Senate. Last September, the California legislature overwhelmingly passed a similar bill–sponsored by Senator Kevin Murray of Los Angeles, who himself had been subjected to a questionable search–only to see it vetoed by Governor Pete Wilson.

For the most part, police characterize these cases as isolated lapses in judgment by rogue officers or insensitive police commanders who’ve sent out the “wrong signal” to the troops. But what no one has seemed to notice so far is the thread that connects many of these seemingly unrelated cases: this unheralded federal program called Operation Pipeline.

I ended up inside Pipeline last summer as an investigator for the California Legislature after hearing stories from law-enforcement sources about special CHP units that were pulling Latino motorists off the interstates on a whim and rousting them in an effort to find guns, cash, and drugs. What was happening on California’s highways, I discovered, was happening across the country–methodically and with increasing frequency.

Operation Pipeline has helped give rise to a new catchphrase in the minority community: DWB, Driving While Black, or Driving While Brown. Yet few outside of law-enforcement circles have even heard of Operation Pipeline.

The DEA, Operation Pipeline’s federal sponsor, doesn’t talk about it much, which is odd, since the agency considers Pipeline to be “one of the nation’s most effective drug-interdiction programs.”

But with 301 police commands in forty-eight states now participating in Pipeline in some fashion–from the tiny Picayune Police Department in Mississippi to the New York State Police–the program is in danger of becoming a victim of its own excess. The problems have become so obvious to the CHP that the agency recently embarked on a major overhaul of its Pipeline program.

Two months before Curtis Rodriguez had his car tossed, a reporter had asked a veteran California Highway Patrol sergeant to explain the operating principle behind this campaign to remove contraband from highway travelers. The answer: volume, volume, volume.

“It’s sheer numbers,” he said. “Our guys make a lot of stops. You’ve got to kiss a lot of frogs before you find a prince.” California Highway Patrol canine units kissed nearly thirty-four thousand frogs in 1997. Only 2 percent of them were carrying drugs. In other states, up to 95 percent of all Pipeline searches have been found to be dry holes.

An Ohio trooper testified in a drug-seizure case a few years ago that he’d personally conducted 786 searches in a single year, sometimes for no other reason than to keep in practice. The state judge, James Brogan, was outraged.

“If we multiply this among all agencies and officers who are currently using routine traffic stops to search the vehicles of citizens they suspect of no crime, the number of individual citizens being asked to relinquish their privacy rights . . . is staggering,” Brogan wrote.

Within the past year, according to one DEA official, Attorney General Janet Reno and her top aides have begun asking questions about Pipeline, wondering why the program keeps spawning complaints from black and Hispanic motorists and lawsuits accusing the police of racism and selective enforcement.

Frankly, it’s not much of a mystery. The answer can be found in the muddy median strip of I-95, a four-lane concrete corridor that cuts through the desolate coastal swamps of Florida. It’s where Operation Pipeline arose and where it grew to become what it is today.


LIKE THE PHRENOLOGISTS OF THE NINETEENTH CENTURY, who believed that a person’s personality could be divined from the shape of his skull, Robert L. Vogel Jr. believes he can spot drug traffickers from the general cut of their jib.

“Bob has a God-given sixth sense,” Vogel’s dark-haired wife, Jeannie, says earnestly. “A lot of people are jealous of that or can’t understand it.”

Vogel discovered his unusual talent in the mid-1980s, while working as a Florida state trooper, cruising I-95 outside Daytona Beach and Port Orange, looking for traffic miscreants. Certain drivers, he noticed, just gave him a bad feeling inside. When he searched their cars, he would frequently find drugs or weapons.

A compact, soft-spoken Vietnam vet who bears a faint resemblance to Richard Gere, Bob Vogel is a deliberate, methodical man, serious about his job, so he began compiling his observations about the drivers who set off the alarm bells in his head. He discovered common traits among them and gathered these together into a list of “indicators,” which he began mentally checking off whenever he pulled someone over.

He broke down the indicators into two types: physical and behavioral. The physical indicators were the ones he could see as he scanned the interior of his quarry’s car. Such things as car phones and pagers, radar detectors and radio scanners, were obvious. But there were many others. Cops regard the indicators as something akin to a magician’s secrets. Our Pipeline instructor warned against disclosing them in court lest “the bad guys” find out. But in truth, records of them can be found in a good public library. Among the most common:

Air fresheners, especially the ones that look like leaves or little pine trees. Pipeline cops call them “the felony forest.” They can be used to mask the odor of drugs. Having fabric softener, coffee grounds, or laundry detergent lying around is also a sign something could be amiss.
Fast-food wrappers on the floor. Evidence of “hard travel”; suggests a desire not to leave the drug load, even to get a sit-down meal. Pillows and blankets in the car fall under this rubric as well.
Maps with cities circled on them. A circled “drug source” or “drug destination”–which covers just about all major cities–is more evidence of a motorist’s true nature.
Tools on the floor, for easy access to those hidden compartments full of drugs and money. Tinted windows, new tires on an older car, or high mileage on a new car are also worrisome signs.
A single key in the ignition. Most people, presumably, have lots of keys on their key chains. Solitary keys suggest someone just handed the driver a key.
Not enough luggage for a long trip or too much luggage for a short one. Rental cars are extremely suspicious, as is an auto-registration certificate in someone else’s name.
Vogel acknowledges that each of these indicators can be found in the cars of innocent citizens and, by itself, is no indication of criminal activity. But when they are found in combination, he insists, it means you’ve got a potential drug mule on your hands. Spotting them is nothing more than good, basic police work, he says, and, as shown by the thousands of drug seizures Pipeline units make every year, obviously he is right.

But it’s when you get to the next step–the behavioral indicators–that things get a bit trickier, that Vogel’s sixth sense comes into play. It’s also when good, basic police work can sometimes mutate into racism and stereotyping. In a deposition in 1997, Utah state trooper Paul Mangelson, one of the nation’s best-known Operation Pipeline instructors and a frequent consultant to other police agencies, offered an insight into how the behavioral indicators work: “The secret of criminal interdiction is being able to read people. And there are things about people and things they do that are a definite tip-off,” Mangelson explained. “I don’t necessarily teach this, but on a freeway, prior to stopping somebody, I like to pull up in the inside lane, traffic permitting, and observe the individual.”

“Now, when you pull up alongside of somebody and take a look at them,” Mangelson was asked, “would this be any joe motorist or somebody that has already attracted your attention?”

“Somebody that I’ve already decided I’m going to stop. I want to see his reaction as I pull up alongside of him. For example, will he make eye contact with me? And I maintain that if a guy is doing something illegal, ninety-nine times out of a hundred he won’t look at you. Number two, he knows good and well that you are there, and he is going to have a death grip on that steering wheel, and you can probably see that his knuckles are turning white. That’s a very good indicator that guy is dirty. Something is illegal in that car.”

Other indicators, he said, are adornments like “earrings, nose rings, eyelid rings. Those are things that are common denominators with people who are involved with crimes. Tattoos would go along with that,” particularly tattoos of “marijuana leaves.”

Bumper stickers also give him a feel for the soul of the driver. “Deadhead stickers are things that almost–the people in those kinds of vehicles are almost always associated with drugs.”

How about ACLU stickers? “Yeah, I look for them.”

“What about, for instance, Hispanics in an out-of-state vehicle?”

“A lot of Hispanics are transporting narcotics,” Mangelson said. “That’s common knowledge. I don’t think it matters whether they’re in an out-of-state vehicle or not.”

What if he saw pornography in the car? “I would certainly have a belief that drugs could be in the vehicle.”

Not surprisingly, such unorthodox crime-fighting techniques were not immediately embraced by the courts. In Florida, Bob Vogel was viewed as something of an oddball at first. Judges, he learned, were simply unwilling to make allowances for a cop with clairvoyance.

When the federal eleventh-circuit court of appeals got a look at Vogel’s police work, the judges denounced it as illegal, unconstitutional, and possibly un-American. You mean you pulled over someone because you thought he looked like a drug dealer? the judges gasped. What was your probable cause?

“That trooper Vogel’s ‘hunch’ about the appellants proved correct is perhaps a tribute to his policeman’s intuition, but it is not sufficient to justify, ex post facto, a seizure,” the judges wrote in a 1986 opinion. To condone Vogel’s methods, they wrote, would mean that every car on the road could be pulled over and searched, which “would run counter to our Constitution’s promise against unreasonable searches and seizures.”

Undeterred by the stinging judicial rebuke and the queasiness of some of his bosses, Vogel plowed ahead. “No one else was doing this but me, and there were some people who were nervous about it, but there always has to be someone to test the waters,” Vogel says quietly. “I’ve never been a quitter.”

He looked over the legal opinions and slightly changed his approach. Instead of pulling over a driver merely for looking suspicious, he would find other reasons to stop the shifty-looking ones. He found them by the hundreds in the thick volumes of the Florida vehicle code: rarely enforced laws against driving with burned-out license-plate lights, out-of-kilter headlights, obscured tags, and windshield cracks. State codes bulge with such niggling prohibitions, some dating from the days of the horseless carriage.

“The vehicle code gives me fifteen hundred reasons to pull you over,” one CHP officer told me.

For Vogel, it was the perfect solution to his problem. Since it’s nearly impossible for drivers to go ten feet without violating some obscure ordinance, Vogel would simply tag along and wait for it to happen. Then he would pounce. Nobody could complain about that; he was duly enforcing the traffic laws of the State of Florida. And with that one refinement, Operation Pipeline was up and running.

After Vogel pulled a car over, he would search it, and, sure enough, sometimes he would find drugs. Once in a while, he would find a lot of drugs. Newspaper reporters started writing stories about him, marveling at the way he was able to turn a routine traffic stop into a major drug bust.

Within a year of being publicly flayed by the highest federal appeals court in the Southeast, Bob Vogel was honored four times with law-enforcement awards. 60 Minutes sent down a camera crew and produced a flattering profile depicting a dedicated, hardworking policeman trying his best to fight the drug war. Vogel became a local hero. In 1988, he was elected sheriff of Volusia County, and one of his first official acts was to set up a special antidrug unit in his image: the oddly named Selective Enforcement Team, handpicked deputies who had Vogel’s training methods instilled by the master himself.

Vogel had his admirers in Washington as well. By 1987, the DEA had formally adopted his highway drug-interdiction system and begun funding a training program to preach Vogel’s gospel around the country. (Though Vogel did not invent the notion of using profiles to spot potential drug couriers, he pioneered their adaptation to highway travelers, and my CHP instructors credited him as Pipeline’s creator. Previous police use of drug-courier profiles had been largely confined to airports.)

With DEA financing, training courses were set up, and they began churning out thousands of Pipeline graduates a year, officers who would return home and train thousands more.

It spread like a virus.


IF YOU COME INTO CONTACT WITH ONE OF THE ESTIMATED TWENTY-SEVEN THOUSAND Operation Pipeline grads currently cruising the highways, chances are you’ll never know it. The officer who pulls you over will look the same as any other traffic cop. Same hat. Same badge. Same car. He will not tell you he is a narcotics officer, and you will never suspect it, because, after all, who ever heard of drug agents passing out tickets for broken taillights?

The mechanics of a Pipeline stop are much like a minuet, except the trooper is the only one who hears the music or knows the steps–all of which lead inexorably to a thorough search of your car.

“I’m looking for anything that will get me in that car or get him out of the car,” Utah trooper Mangelson explained in his 1997 deposition.

Because of various court rulings and constitutional impediments, things must be done delicately and in the proper order, so as not to overtly violate your rights.

It will begin like any traffic stop. You’ll be asked for your license and registration, and while looking over your papers, the officer will ask you a series of questions about your travel plans. He’ll be friendly and polite: Where are you heading? How long will you be there? He’ll ask what you do for a living, or something equally innocuous.

“And when I’m doing this, you know, I’m not sitting there grilling you,” Mangelson said. “I’m doing it in a way that you probably don’t even realize what I’m doing.”

What he’s doing is called an interrogation, and your responses are being watched very closely. Did you have to think before answering? Did you repeat his questions? Are you being too helpful, too cooperative, or too talkative? Those are all bad signs, as bad as monosyllabic answers. If you have a passenger, the passenger will be taken off to the side and interrogated separately. The officer will check to see if your stories match.

“Criminals on the road are–how can I put it? I’ve always used this theory. If a guy can convince me of his legitimacy of being where he is or where he’s going, then there’s probably not much criminal activity going on,” Mangelson said. “But by the same token, if he tells me he’s going to Salt Lake, and I say, ‘What takes you to Salt Lake?’ and he goes, ‘I’m going to see a friend.’ If I say, ‘What’s your friend’s name?’ and he doesn’t know the friend’s name or he rattles some name off the wall, [I ask] ‘What’s his address?’ He’s now becoming extremely nervous, and he can’t tell me the friend’s address, doesn’t know the phone number. ‘How are you going to visit your friend if you don’t know his address or phone number?’ By now, he’s trembling. The veins are poking out on the side of the neck and you can see his heart beating there and his hands are shaking and his mouth is so dry, he can’t even talk to you. You know he’s dirty. And he knows I’m on to him.”

The indicators are tallied up. No indicators, no problem. Unless you’ve got a gun or a kilo of cocaine lying on the front seat, you’ll be kicked loose. You may not even get a ticket. Many Pipeline officers don’t write them or write only enough of them to maintain the facade that they are traffic policemen.

If your indicators are on the high side, however, this is what will happen. You’ll be given your papers back, and then the officer will hang around and strike up a conversation. What most drivers don’t realize is that at this point, they have magically crossed into a whole new legal universe. At the moment your license and registration are returned, you are technically free to leave. In the eyes of the law, the traffic stop is over. Now you and Officer Friendly are just having a “consensual” chat. And your new friend is free to ask you anything.

From here, it’s almost a script.

You’ll be told that the local police have been having a problem with people ferrying guns and drugs along this part of the highway, but they’re doing their best to stop it. Good, you may say. Glad to hear it. The officer will nod and say he’s happy you see it that way. By the way, you wouldn’t happen to have any guns or drugs in your car, would you?

Me? you will ask. Oh, no. Of course not.

Then the officer will look at you and say, Then you don’t mind if I take a look-see, do you?

If you’re like nine out of ten people who get asked this question, you’ll gulp and say, No, no, officer, go right ahead.

You’ll be asked to consent–orally or on paper–to a search, but don’t think too hard or hesitate to comply, because those are more indicators of drug trafficking, as is refusing to allow the search. (And here’s where things can get dangerous, where the psychopath who won’t be taken might pull his gun. A 1992 Pipeline stop in South Carolina resulted in a shoot-out that killed the officer and wounded his suspect. And this past January, a veteran Pipeline officer in Georgia was murdered during a stop.)

“If they refuse, the stuff’s in the trunk,” our CHP instructor tells us matter-of-factly. A refusal justifies calling out the dogs and letting a drug-sniffing canine take a walk around your car. If Fido gets a whiff of something, the cop doesn’t need your permission anymore.

Most drivers consent. This can authorize a complete search of everything, including your luggage and your person. It allows the officer literally to take your car apart with an air hammer, which has happened. One of the CHP’s first Pipeline officers, Richard Himbarger, was legendary for carrying an electric screwdriver in his patrol car and removing heater ducts, fenders, trunk lids, and interior body panels, right by the side of the road.

“Once they’ve given consent,” our CHP instructor tells us, “they’ve dug their own grave.”


DEPUTY LOU GARCIA WAS ASSIGNED TO SHERIFF VOGEL’S SELECTIVE ENFORCEMENT TEAM IN 1989. A canine-unit officer, Garcia would be summoned at all hours to walk his drug dog, Condor, near the cars the SET squad had pulled over on I-95. Lots of times, he’d be out on the highway at 3:00 a.m., splashing through swamps with Condor, chasing down panic-stricken motorists who’d bolted into the darkness. He didn’t mind. Garcia was thrilled to have been chosen to work with Vogel’s crew. The sheriff took good care of his boys: overtime, fancy Stetson hats, rapid promotions. By all accounts, Vogel was equally thrilled to have Lou Garcia on his team, and he commended the officer repeatedly.

“Thanks to you, our drug- and money-interdiction program is working,” Vogel wrote in one enthusiastic letter.

The son of a New Mexico coal miner, Garcia had come to the Volusia County Sheriff’s Office after fifteen years in the U. S. Army as a paratrooper, a military policeman, and a drill instructor. He hired on at the sheriff’s office in 1985 at $10.50 an hour and was in paradise. “When I finally got to be a deputy, I felt I had achieved my goal in life.”

But his wife, Angie, began noticing that her husband was increasingly moody after his shift. “He’d get home sometimes after being out on that highway,” she says, “and he’d just be shaking his head, and I’d ask him what was wrong, and he’d say, ‘You won’t believe what they’re doing out there.’ ”

Garcia says he soon discovered the secret of Vogel’s highly touted highway interdiction program: The cops concentrated on minority drivers, narrowing the universe of motorists to those they thought most likely to have drugs or guns, even though, in reality, drugs and guns turn up in searches of their vehicles with the same frequency as in those of white drivers. Garcia says he was present at a gathering of deputies on the median of I-95 when Vogel instructed them to focus their attention on black and Hispanic drivers. Vogel denies that happened, but another deputy, Frank Josenhans, corroborates Garcia’s story.

Still, it wasn’t as if Garcia needed to hear it from the sheriff’s mouth. “I knew who they were stopping. I saw the people. It was blacks, mostly, and they were all being pulled over for weaving. The black race was the only race I knew of that wasn’t able to stay in a lane. Black people just couldn’t seem to do it.”

What Garcia was witnessing in Volusia County was not an aberration. As more and more police departments signed up for Operation Pipeline, it began happening in other places, too. Sometimes the police didn’t even bother to hide it. Georgia state troopers told an Atlanta reporter in 1987 that they watched for rented cars from south Florida driven by blacks or Latinos.

Officer Richard Curtis of the Lexington, Kentucky, police department admitted under oath in a drug-interdiction case that race was one of the indicators looked at, as were out-of-state license plates. In another case, Alabama state trooper John Guthrie tes-tified that his indicators included “Texas plates” and “Mexicans.”

The “cocaine-courier profile” used by the New Mexico State Police along I-40 surfaced in court in the late 1980s. The very first indicator: “The vehicle occupants are usually resident aliens from Colombia.” This profile, it turned out, had been sent to police departments nationwide by the DEA’s El Paso Intelligence Center, the department that manages the Pipeline program and provides its annual funding of roughly $800,000.

Ironically, that’s the same amount of money the taxpayers of Eagle County, Colorado–which encompasses the ski resort of Vail–forked over to settle a class-action suit filed on behalf of 402 black and Hispanic drivers who had been stopped and searched by the High Country Drug Task Force, a Pipeline unit funded directly by the DEA. The task force “systematically violated the constitutionally protected rights of blacks and Hispanics to travel and be free from unreasonable seizures,” U. S. district judge James Carrigan wrote in a blistering criticism of the program in 1990. The evidence that race was used as an indicator, Carrigan ruled, was “undeniable,” and such practice amounted to “a racist assumption.”

Federal public defender Bryan Lessley obtained internal Oregon State Police records showing that the number of Hispanics being stopped on the highways near Grants Pass by a Pipeline unit was “grossly out of proportion” to the number of Hispanics on the road. He uncovered state-police training manuals that told Pipeline students a “high percentage” of narcotics traffickers were Hispanic.

In New Jersey, state-police Pipeline units assigned to the southern end of the New Jersey Turnpike were found by a superior-court judge to have had “at least a de facto policy . . . of targeting blacks for investigation and arrest,” which resulted in the dismissal of six hundred cases. A former New Jersey state trooper, Kenneth Wilson, admitted in a sworn statement that he was trained to target blacks and Hispanics. A statistical analysis by John Lamberth of Temple University backed up Wilson’s claims. Lamberth found that though blacks made up only 13 percent of the drivers on the turnpike, they accounted for nearly half the stops made by drug-seeking troopers.
The Maryland State Police made perhaps the biggest tactical blunder in the program’s history in 1992, when a Pipeline unit pulled over a black family in a rental car outside Washington, D. C., ordered them out into the rain, and then ran a drug-sniffing dog in and out of their car, over their repeated objections. The driver turned out to be a Harvard Law graduate, Robert Wilkins, a public defender who was on his way home from a family funeral in Chicago. Wilkins slapped the Maryland State Police with a civil-rights suit and accepted a settlement that forced the cops to keep detailed records of their Pipeline stops for the next three years. The results were more proof of Pipeline’s unique affinity for minorities: Of the 732 people who were detained and searched during 1995 and 1996, 75 percent were black and 5 percent Hispanic. The Maryland ACLU has filed another civil-rights suit based on those figures.


A GRANDMOTHERLY WOMAN IN A SLAB-SIDED PLYMOUTH FURY III ZIPS BY. Not a chance, I think. Next is a man in a suit, driving a gigantic white Lincoln Navigator, cell phone pressed to his ear. Mr. Business. With my luck, he’d turn out to be a lawyer. Pass. A teenage girl in her mom’s station wagon. Ditto. Then comes the carload of Mexicans.

They look as though they’re having one hell of a time, laughing, arms hanging out the window. Then they spot the CHP cruiser I’m sitting in, and the party is over. They look around furtively, sit up straight, won’t meet my steely gaze. The driver begins practicing the ten-and-two hand position on the steering wheel that he probably hasn’t used since driver’s ed. Bingo. A whole bunch of indicators right there. These guys are mine.

That is the result of my first drill using the lessons I gained from Pipeline school. I am sitting in the front seat of the head instructor’s patrol car, shaded by a giant oak. We are parked perpendicular to a bucolic two-lane highway in the hills beyond Susanville, California, checking out the sparse midmorning traffic. It is day two of my Pipeline training class, and I am putting my newly acquired observational skills to the test.

No one has instructed me to look for Mexicans; in fact, we were informed that racial profiling is illegal and frowned upon. But we were also taught that it is the Colombians and the Mexicans whose cartels are bringing most of the dope in and that a lot of drug mules are hired off the streets of Tijuana for $500 in cash. Not many gringos I’ve seen fit that description.

Plus, the Mexicans just look shifty to me. What are they doing, I wonder, driving around, yukking it up at 10:30 in the morning in the middle of the week? I am at work. Why aren’t they? And if they are unemployed, where’d they get the money for that nice Mercury?

And then I realize the problem with Operation Pipeline.

If I were looking for unsafe drivers, as most patrolmen do, it wouldn’t make any difference to me what the driver looked like or how he acted when he drove by or whether I thought he could afford his car. All I would care about would be how he was driving.

But that’s not my job as a Pipeline officer. My job is to get drugs and guns off the highway, so I look for people who look like they might have them. And since I have only a limited time out on the highway each day, I’m not going to waste it pulling over people who look like upstanding citizens–people who look like me and my friends, for instance.

I remember what my instructors told me repeatedly. If something appears “abnormal,” investigate. Always ask yourself whether this is something that you would do or say. If not, be suspicious. And suddenly, the baseline for determining who gets pulled over and searched is a forty-three-year-old white suburbanite’s vision of normalcy. Most of the white people I have seen driving by, I have to admit, look pretty normal to me. But the Mexicans don’t. Plus, there are all those indicators: their nervousness upon seeing a police car, the air freshener dangling from the mirror, their goddamn refusal to look at me.

It’s no wonder, I realize, that 90 percent of the people arrested by the CHP’s Pipeline units during the last two years have been minorities. They never stood a chance.

If I were empowered to do so, I could pull them over on some pretext to satisfy my curiosity. Maybe I would find something–drug-tainted money, a loaded gun, a kilo or two of cocaine or methamphetamine. Or maybe just a peaceable carload of people going from here to there, not owing me or anyone else an explanation. But if I do this long enough and use the indicators I’ve learned to pull over a volume of people, I will invariably find criminals. That was a big bag of dope in the Screamer’s trunk, after all. But does that justify scaring the bejesus out of the thousands of other motorists–the honest ones whose taxes pay my salary and pave these roads–whom I will misjudge? Will they think being interrogated and searched was a fair trade?

And what of the enormous waste of police manpower that goes into stopping and searching thousands of cars in which nothing more incriminating than old gum wrappers is found? Even the cops admit that highway seizures don’t make a dent in the quarter-trillion-dollar-a-year American narcotics industry. So, in the end, one is left to wonder: What is the point of all this harassment, this inefficiency, this futility? Is it really a way of finding contraband? Or is it, perhaps, a way of acclimating us to a future in which we will be routinely shadowed, stopped, and frisked by the police–a nation of suspects?


IN 1996, THE U. S. SUPREME COURT UNANIMOUSLY ENDORSED BOB VOGEL’S METHOD OF STOPPING PEOPLE FOR MINOR TRAFFIC VIOLATIONS IN ORDER TO SEARCH THEIR CARS FOR DRUGS. An officer’s real reason for pulling over a car didn’t matter a whit, the justices said, so long as some type of traffic offense–no matter how trivial–occurred first. It made no difference that the motor-vehicle codes gave the cops a license to “single out almost whomever they wish for a stop,” Justice Antonin Scalia wrote. It was not the role of the Supreme Court to decide whether there were too many traffic laws or which ones should no longer be enforced.
Since that ruling, known as the Whren decision, state and local police participation in Operation Pipeline has soared. Enrollments in DEA training schools are way up. “After Whren,” one of my CHP instructors told me, “the game was over. We won.”

Last fall, another Supreme Court decision, rejecting the search of an Iowa motorist’s car without probable cause, was widely hailed in the media as reinforcing the privacy rights of drivers. But since Pipeline officers are trained to legally justify a “reasonable suspicion,” or, of course, get the driver’s permission, before searching a car, this court decision may actually boost the popularity of Operation Pipeline.

That’s why it’s so ironic that Bob Vogel is no longer on the front lines of this particular war. Though his methods have received the stamp of unanimous approval from the highest court in the land, he’s quit teaching and has mothballed his drug-interdiction program. After a while, he said, it just wasn’t worth it.

In 1992, The Orlando Sentinel began printing stories that essentially accused Vogel’s SET unit of being racist thugs who were stealing money from innocent travelers. The newspaper said it found nearly two hundred cases in which deputies had taken a driver’s cash but made no arrests, and 90 percent of those cases involved minority drivers.

And then the tapes came out. It seemed Vogel’s boys had been videotaping their stops for posterity, and 148 hours of them were turned over to the newspaper. Example: a May 16, 1990, stop of a white driver. SET sergeant Dale Anderson strolls up to the car and asks the man how he’s doing.

“Not very good,” the driver replies.

“Could be worse,” Anderson reminds him. “Could be black.”

The civil-rights suits flew fast and furious after that. The U.S. Justice Department announced an investigation, and FBI agents started snooping around. A federal grand jury was empaneled.

The Sentinel won a Pulitzer prize for its exposé, a fact that grates on Vogel to this day. “Anybody who saw those stories would have thought I was some racist, tobacco-chewing, Billy Bob, redneck southern sheriff,” he complains. He leans forward slightly and asks me, mistakenly, if I was aware that the editor who oversaw the Sentinel’s coverage was an African-American.

“I’ll bet they didn’t tell you that part,” he says.

Eventually, the hubbub subsided. The discrimination suits were dismissed after federal judges declared that they had not seen convincing evidence of racial injustice. And the Justice Department, while muttering darkly about Vogel’s methods, declined to prosecute him on civil-rights charges, reportedly because it didn’t think a jury would convict him.

Critics called the investigation a whitewash, but there was more involved than that. History, for one thing. For more than a decade, Bob Vogel’s controversial system has been officially endorsed, financed, and espoused by the DEA–an arm of the Justice Department. Having Operation Pipeline’s creator brought up on federal civil-rights charges would have put the Justice Department and every other police agency involved in a rather awkward spot, especially when so many civil-rights suits were pending.

Vogel sees this as total vindication. “I’ve been investigated by just about everyone–the FBI, the Justice Department, the NAACP, the ACLU–and they haven’t been able to win a solitary case,” he says. “This whole thing is something that drug lawyers grabbed ahold of to try to beat some arrests by dragging race into it.”

If that’s true, he is asked, then why has this program had such lopsided racial results in state after state? Why are the statistics so one-sided?

Vogel stiffens. “Let me have my assistant, Lenny Davis, come in and answer that question for you. He might have an explanation for it.” A few minutes later, Chief Deputy Davis, a large, friendly black man, sits down and solemnly assures me that the reason so many blacks and Hispanics are being pulled over is because so many of them are involved in the drug business.

Vogel sits next to his chief deputy, nodding. But he doesn’t say a word.

This article originally appeared in the April 1999 edition of Esquire Magazine

Gary Webb: The Suppression of Uncomfortable Inquiries

Gary Webb was an award winning investigative journalist who is best known for his 1996 series of articles in the San Jose Mercury News, entitled “Dark Alliance.” The series exposed a crack-cocaine drug trafficking ring operated by associates of the Nicaraguan Contra Rebels, acting with the knowledge and protection of the CIA, which extended from Los Angeles, CA, to the Midwestern United States. Continue reading Gary Webb: The Suppression of Uncomfortable Inquiries

The Last Sermon of Archbishop Oscar Romero

March 23, 1980

Let no one be offended because we use the Divine words read at our mass to shed light on the social, political and economic situation of our people. Not to do so would be un-Christian. Christ desires to unite himself with humanity, so that the light he brings from God might become life for nations and individuals.

I know many are shocked by this preaching and want to accuse us of forsaking the Gospel for Politics. But I reject this accusation. I am trying to bring to life the message of the Second Vatican Council and the meetings at Medellin and Puebla. The documents from these meetings should not just be studied theoretically. They should be brought to life and translated into the real struggle to preach the Gospel as it should be for our people. Each week I go about the country listening to the cries of the people, their pain from so much crime, and the ignominy of so much violence. Each week I ask the Lord to give me the right words to console, to denounce, to call for repentance. And even though I may be a voice crying in the desert, I know that the church is making the effort to fulfill its mission….

Every country lives its own “Exodus”; today El Salvador is living its own Exodus. Today we are passing to our liberation through a desert strewn with bodies and where anguish and pain are devastating us. Many suffer the temptation of those who walked with Moses and wanted to turn back and did not work together. It is the same old story. God, however, wants to save the people by making a new history….

History will not fail; God sustains it. That is why I say that insofar as historical projects attempt to reflect the eternal plan of God, to that extent they reflect the kingdom of God. This attempt is the work of the Church. Because of this, the Church, the people of God in history, is not attached to any one social system, to any political organization, to any party. The Church does not identify herself with any of those forces because she is the eternal pilgrim of history and is indicating at every historical moment what reflects the Kingdom of God and what does not reflect the Kingdom of God. She is the servant of the Kingdom of God.

The great task of Christians must be to absorb the spirit of God’s kingdom and, with souls filled with the Kingdom of God, to work on the projects of history. It’s fine to be organized in popular groups; it’s all right to form political parties; it’s all right to take part in the government. It’s fine as long as you are a Christian who carries the reflection of the Kingdom of God and tries to establish it where you are working, and as long as you are not being used to further worldly ambitions. This is the great duty of the people of today. My dear Christians, I have always told you, and I will repeat, that the true liberators of our people must come from us Christians, from the people of God. Any historical plan that’s not based on what we spoke of in the first point-the dignity of the human being, the love of God, the kingdom of Christ among people-will be a fleeting project. Your project, however, will grow in stability the more it reflects the eternal design of God. It will be a solution of the common good of the people every time, if it meets the needs of the people…. Now I invite you to look at things through the eyes of the church, which is trying to be the Kingdom of God on earth and so often must illuminate the realities of our national situation.

We have lived through a tremendously tragic week. I could not give you the facts before, but a week ago last Saturday, on 15 March, one of the largest and most distressing military operations was carried out in the countryside. The villages affected were La Laguna, Plan de Ocotes and El Rosario. The operation brought tragedy: a lot of ranches were burned, there was looting, and-inevitably-people were killed. In La Laguna, the attackers killed a married couple, Ernesto Navas and Audelia Mejia de Navas, their little children, Martin and Hilda, thirteen and seven years old, and eleven more peasants.

Other deaths have been reported, but we do not know the names of the dead. In Plan de Ocotes, two children and four peasants were killed, including two women. In El Rosario, three more peasants were killed. That was last Saturday.

Last Sunday, the following were assassinated in Arcatao by four members of ORDEN: peasants Marcelino Serrano, Vincente Ayala, twenty-four years old, and his son, Freddy. That same day, Fernando Hernandez Navarro, a peasant, was assassinated in Galera de Jutiapa, when he fled from the military.

Last Monday, 17 March, was a tremendously violent day. Bombs exploded in the capital as well as in the interior of the country. The damage was very substantial at the headquarters of the Ministry of Agriculture. The campus of the national university was under armed siege from dawn until 7 P.M. Throughout the day, constant bursts of machine-gun fire were heard in the university area. The archbishop’s office intervened to protect people who found themselves caught inside.

On the Hacienda Colima, eighteen persons died, at least fifteen of whom were peasants. The administrator and the grocer of the ranch also died. The armed forces confirmed that there was a confrontation. A film of the events appeared on TV, and many analyzed interesting aspects of the situation.

At least fifty people died in serious incidents that day: in the capital, seven persons died in events at the Colonia Santa Lucia; on the outskirts of Tecnillantas, five people died; and in the area of the rubbish dump, after the evacuation of the site by the military, were found the bodies of four workers who had been captured in that action.

Sixteen peasants died in the village of Montepeque, thirty-eight kilometers along the road to Suchitoto. That same day, two students at the University of Central America were captured in Tecnillantas: Mario Nelson and Miguel Alberto Rodriguez Velado, who were brothers. The first one, after four days of illegal detention, was handed over to the courts. Not so his brother, who was wounded and is still held in illegal detention. Legal Aid is intervening on his behalf.

Amnesty International issued a press release in which it described the repression of the peasants, especially in the area of Chalatenango. The week’s events confirm this report in spite of the fact the government denies it. As I entered the church, I was given a cable that says, “Amnesty International confirmed today [that was yesterday] that in El Salvador human rights are violated to extremes that have not been seen in other countries.” That is what Patricio Fuentes (spokesman for the urgent action section for Central America in Swedish Amnesty International) said at a press conference in Managua, Nicaragua.

Fuentes confirmed that, during two weeks of investigations he carried out in El Salvador, he was able to establish that there had been eighty-three political assassinations between 10 and 14 March. He pointed out that Amnesty International recently condemned the government of El Salvador, alleging that it was responsible for six hundred political assassinations. The Salvadorean government defended itself against the charges, arguing that Amnesty International based its condemnation on unproved assumptions.

Fuentes said that Amnesty had established that in El Salvador human rights are violated to a worse degree than the repression in Chile after the coupe d’etat. The Salvadorian government also said that the six hundred dead were the result of armed confrontations between army troops and guerrillas. Fuentes said that during his stay in El Salvador, he could see that the victims had been tortured before their deaths and mutilated afterward.

The spokesman of Amnesty International said that the victims’ bodies characteristically appeared with the thumbs tied behind their backs. Corrosive liquids had been applied to the corpses to prevent identification of the victims by their relatives and to prevent international condemnation, the spokesman added. Nevertheless, the bodies were exhumed and the dead have been identified. Fuentes said that the repression carried out by the Salvadorian army was aimed at breaking the popular organizations through the assassination of their leaders in both town and country.

According to the spokesman of Amnesty International, at least three thousand five hundred peasants have fled from their homes to the capital to escape persecution. “We have complete lists in London and Sweden of young children and women who have been assassinated for being organized,” Fuentes stated….

I would like to make a special appeal to the men of the army, and specifically to the ranks of the National Guard, the police and the military. Brothers, you come from our own people. You are killing your own brother peasants when any human order to kill must be subordinate to the law of God which says, “Thou shalt not kill.” No soldier is obliged to obey an order contrary to the law of God. No one has to obey an immoral law. It is high time you recovered your consciences and obeyed your consciences rather than a sinful order. The Church, the defender of the rights of God, of the law of God, of human dignity, of the person, cannot remain silent before such an abomination. We want the government to face the fact that reforms are valueless if they are to be carried out at the cost of so much blood. In the name of God, in the name of this suffering people whose cries rise to heaven more loudly each day, I implore you, I beg you, I order you in the name of God: stop the repression.

The Church preaches your liberation just as we have studied it in just as we have studied it in the Holy Bible today. It is a liberation that has, above all else, respect for the dignity of the person, hope for humanity’s common good, and the transcendence that looks before all to God and only from God derives its hope and its strength.

Learn More about Archbishop Oscar Romero on his Bio Page 

The Right to Record

In this age of citizen activism, recording devices, such as cellphones, tabs and digital video/audio recorders are essential tools for collecting evidence and preserving information about conversations, interviews, and phone calls in which you participate. It is also a good way to document what takes place in a court hearing or public meeting, whether for personal reference or later broadcast over news or social media networks. A number of laws affect your ability to use a recording device in these contexts. Here are some practical tips to help you avoid legal trouble when recording conversations, phone calls, public hearings, and protests.  Continue reading The Right to Record

Interfaith Dialogue and Higher Education

by S. Alan Ray

In the fall of 2009, I participated in the sixth conference of Interfaith Youth Core, an organization and social movement devoted to building “mutual respect and pluralism among young people from different religious traditions by empowering them to work together to serve others” (IFYC 2010). On that occasion, Dr.Eboo Patel, founder and executive director of Interfaith Youth Core, raised a significant question that has since set me thinking: Given how other social movements have deeply affected curricula, student programming, and institutional priorities, what is the highest aspiration we can set for colleges and universities around interfaith cooperation? As I see it, there are at least two main ways to understand and respond to this excellent question.

Model one: Interfaith cooperation as participation in a zero-sum game

The question can be understood to assume that interfaith cooperation is a social movement, like the racial equality–based civil rights movements in the United States in the 1960s and the feminist, gay rights, and disability rights movements of the 1970s, 1980s, and 1990s. As interfaith cooperation comes on the academic scene in the twenty-first century, it must compete with institutional norms and practices established by these predecessor social movements. In an environment where other social movements have significantly affected university curricula, programming, and priorities, the question goes, what is the highest aspiration for proponents of interfaith cooperation? Here, “highest aspiration” means something like “maximum effect.”

In the highly occupied social terrain of our day, this model presents a kind of zero-sum game, where interfaith cooperation achieves its impact by displacing the effects of other social movements. Those effects are highly secular but, say some, they conduce to the common good in a way faith-based effects do not. Secular practices admit of no special pleading by religious adherents, who are perceived to be seeking to smuggle in private or parochial agendas that are unrelated to the public good. Thus, on this model, if one creates a place for interfaith cooperation in a college or university, one does so against competing agendas and philosophies and by displacing them to some extent. Those (secular) competitors are styled as rational, while faith of any kind is positioned as irrational; or, as objectively valued discourses versus subjectively espoused faith statements; or, as truth claims subject to public warrants and criteria of verification versus truth claims subject to verification by so-called “religious feelings,” or dogmas and doctrines based on supposed divine revelations.

In this zero-sum strategic vision of interfaith dialogue on campuses, if different religious faiths cooperate, it is in part due to a common enemy or enemies—rationalism, reductionist explanations of religion, perhaps materialism. At the level of tactics, public display of differences between faiths may be suppressed for strategic reasons or emphasized, depending on whether it is helpful or hurtful to signal the specificity of one’s religious tradition. Also within this model are overtly faith-based colleges or universities, enclaves of quite particular religious missions, that go about their work in a wholly different episteme or master frame than that utilized by nonreligious colleges and universities. Assuming, however, that we are talking about the penetration of interfaith activities onto a so-called secular campus, what is the most one may hope for? In such a situation, the highest aspiration is to acquire strategic space within the curriculum, within student organizations and other platforms, and within the administration in order to advance the cause of interfaith dialogue.

We have seen this model of religious “strangers” in a secular “strange land” played out time and again in the post-Enlightenment history of liberal education, but perhaps never with the intensity and polarization of the last forty years. Departments of religious studies, if they exist and their content is not dispersed to other departments in the humanities and social sciences, are problematic creatures, viewed with suspicion if not derision by their more “scientific” peers. Academic departments of theology would be a contradiction in terms. Support for student cocurriculum and activities, and administrators charged with overseeing student life, are viewed skeptically if their content or mission includes faith-based organizations.

Why is this so? The civil rights movement of Dr. King, Rabbi Heschel, Elmhurst College’s own alumni Reinhold and H. Richard Niebuhr, and countless others was informed and drew strength from the words of the Christian and Hebrew scriptures. The work of Dorothy Day, founder of the Catholic Worker movement, and Thomas Merton, the Trappist monk who inspired millions through a life of “contemplation in a world of action,” vividly embodied Catholic social justice teaching and the authoritative statements of Vatican Council II.

Yet through ethnic studies, women’s studies, gay and lesbian studies, intercultural studies, indigenous persons studies, critical race theory—all marvelous additions to American university life, in my view—the social movements of the last forty years have left their mark on the academy in a profoundly secular way. It is as though the rejection of religious belief as a relevant frame for truth-seeking is the price of admission to the academy and of acceptance as an interdisciplinary exploration or a free-standing department. Thus is inter-faith cooperation mooted as a legitimate resource for the core work of academic life.

An example of this model in action is my own graduate school alma mater, Harvard University. In 2006, Harvard flirted with the idea of requiring its undergraduates to take a course in a category called Faith and Reason. The Preliminary Report of the Task Force on General Education (2006) contained the recommendation, but it was ultimately not adopted. I view this as unfortunate, since the major faith traditions are conspicuously playing an increasingly pivotal role in world and domestic affairs. Rarely if ever has faith been less “private” and more a legitimate part of the public discourse—even, indeed especially, on university campuses. Yet, interfaith cooperation remains marginal to the intellectual enterprise of this most famous of research universities, even as the university itself acknowledges religion’s importance to the lives of the vast majority of Harvard’s students. As the Report of the Task Force on General Education states, “Religion has historically been, and continues to be, a force shaping identity and behavior throughout the world. Harvard is a secular institution, but religion is an important part of our students’ lives” (2007, 11). Harvard’s Pluralism Project, under the extraordinary leadership of Professor Diana Eck, has long served as an example of vibrant interreligious dialogue and learning. However, because the university as a “secular institution” functions within the model of intereligious dialogue as a zero-sum game, speech and conduct denominated as religious will inevitably yield pride of place (and funds and prestige) to ostensively nonreligious discourse and practices, thus refracting religious studies among the disciplines and marginalizing or inadequately integrating statements by religious adherents about themselves or the world.

To appreciate the frustrating effects that cabining off discussion of religious issues qua religious can have, one need only read a recent story in the Harvard Crimson, the university’s award-winning student newspaper, entitled, “Religious Discussion Desired”:

“Challenges to Faith at Harvard,” a panel discussion moderated by the Harvard Political Union last night, examined the social and intellectual pressures that influence undergraduates’ religious life.

The panelists and audience were in agreement that more religious discourse should occur on campus in order to incorporate the diversity of religious viewpoints. Many of the panelists said that Harvard’s climate helped to ground their religious beliefs.”

“At Harvard, I am forced to think about what I believe, and to explain why I believe X, Y, or Z,” said Aneesh V. Kulkarni ’10, a member of Dharma, Harvard’s Hindu organization . . .

However, some panelists said that Harvard’s attitude towards religion is at times problematic. “At Harvard, we are told to think critically about every aspect of our lives, except for faith and religion,” said Stephanie M. Cole ’11, a member of the Harvard-Radcliffe Christian Fellowship . . .

The panelists in turn said that pluralism is included in each religious tradition.

“You don’t have to agree to a certain political opinion in order to be a member of the Catholic Student Association,” said Katherine J. Calle ’10. “The expression two Jews, four opinions is a good one, I think,” said Jason W. Schnier ’11, a member of Hillel.(Dibella 2009)

The “challenges to faith” described above are not limited to Harvard, but arise on most campuses where interfaith dialogue is seen as a competitor to nonreligious discourse and practices. Is there a way to bring interfaith cooperation more into the arena of academic discussion, without doing violence to the precepts of truth-seeking and open inquiry so valued in a secular liberal learning environment?

To move toward an answer, I think one must leave the first model, sketched above, which conceives of the academy as strategically organized zones of competing world views and social practices. Rather, on a second model, Eboo Patel’s question—to what can interfaith cooperation aspire in the academy?—can mean that interfaith cooperation as a social movement inherits a campus cultural environment that has been shaped by decades of specific social movements and their philosophies (of equal rights, due process, tolerance, and other institutional values derived from the Enlightenment). Within this matrix we ask, what is the highest aspiration that proponents of interfaith cooperation can hold and seek to advance?

Model Two: Interfaith cooperation as critical reappropriation of tradition.

This second model eschews stereotypes of the secular and religious, and it recognizes that all faiths, including secularism, are living realities conditioned by multiple cultural currents—currents that affect religious, non-religious, and even antireligious philosophies alike. The abstractions of theologies and of Enlightenment-based philosophies of the person and world are replaced by living individuals and concrete communities, like the Harvard students quoted above, whose members experience a complex world in similar ways. Strategic rationality and gamesmanship are replaced by communicative rationality and dialogue, and by the identification of common problems and threats in the environment. Religious traditions and nonreligious traditions are mined for rhetorical and performative resources—ways to say and do things—that stimulate mutual allegiances across religious boundaries and religious-nonreligious boundaries. Public displays of differences are not suppressed for strategic ends, but rather are subordinated to achieving common objectives through collective action. This is followed by reflection back within one’s tradition (secular or religious) on the meaning of this collective action for adherents of the tradition and, indeed, for the claims of the tradition itself. The critical reappropriation of tradition through reflection on collective action becomes a legitimate academic move, in fact a way of life and self-formation for students as well as for administrators and faculty.

There are four moments in this dialectical model. The first is marked by the creation of robust intrafaith occasions for learning about and interpreting one’s own religious tradition—liturgical, educational, communal, and individual—and inviting alienated or disaffected nominal members to join the conversation. I call this moment charging the batteries. The second moment in the dialectic involves naming issues of concern to the college or university community that are shared among faiths and persons and groups of no faith tradition, and then offering religiously based interpretations of these issues, listening to interpretations offered by those who reject religion or a particular tradition, and doing so on and off campus—indeed potentially around the world. Such issues include, for example, environmental and economic justice, poverty, racism, sexism, and homophobia as well as issues related to getting a meaningful job and starting life as a young adult. This second moment, which focuses on engaging in issues-based discussions with all college stakeholders and stakeholders worldwide, can be called issues-based dialogue. Working together to address the issues with all stakeholders and engaging in critically informed social reform—in short, taking collective action—is the third moment. The fourth moment is marked by each stakeholder’s critical exploration of the meaning of this collective action either for one’s own religious tradition and its theologies of self and world, or for one’s own secular tradition and its philosophies of rights and ethical systems. The objective is to educate and to open oneself to the possibility of deep change and thus incipiently to reform those theologies and philosophies themselves. In this final moment, one engages in dialogue aimed at personal change through reflection on collective action—or, in a phrase, self-formation.

Note the model presented above does not strive for a consensus of philosophies or theologies. It begins in the specificity of traditions and returns there, but invites tradition transformation through issues-based dialogue, working together on common problems, and reflection on shared experiences. In short, I believe that our highest aspiration for interfaith cooperation on campus is to create tradition-based opportunities for radical change of self and world, which include the possible transformation of one’s own tradition.

Interfaith dialogue at Elmhurst College

I would like to sketch what my campus has been doing recently to try to achieve that aspiration. But first, a word of framing. Elmhurst College is an affiliate of the United Church of Christ (UCC). In 2008–9, the year I began my presidency, we initiated and completed a broad-based strategic planning process. We named for the first time five core values: intellectual excellence; community; social responsibility; stewardship; and faith, meaning, and values. With regard to the last of these—faith, meaning, and values—we state that “we value the development of the human spirit in its many forms and the exploration of life’s ultimate questions through dialogue and service. We value religious freedom and its expressions on campus. Grounded in our own commitments and traditions as well as those of the UCC, we cherish values that create lives of intellectual excellence, strong community, social responsibility, and committed stewardship” (Elmhurst 2010).

Regarding the first moment of the aspiration to interfaith cooperation, “charging the batteries,” I note that Elmhurst students voluntarily engage in religious services appropriate to their needs and responsive to their religious calendars. These services are coordinated by the college chaplain and numerous cochaplains representing the major faith traditions. For example, recent work has gone into enhancing liturgical and social opportunities for Catholics, who make up 40 percent of the student body. At this UCC-affiliated college we now have monthly Masses, a start-of-the-year Mass, and inclusion of Catholic priests and lay leaders in ceremonial roles at college events such as graduation and baccalaureate. Last year, we reviewed the adequacy of prayer spaces on campus for our Muslim students. We are currently looking for a Buddhist cochaplain. To “charge the batteries” and educate the community, we host annual public lectures focused on major religious traditions: the Al-Ghazali (Muslim), Bernardin (Catholic), Heschel (Jewish), Niebuhr (Protestant) Lectures and an Evangelical Lecture. We honor religious figures whose lives and work align with our mission, such as our award in September 2009 of our highest honor, the Niebuhr Medal, to Fr. Gustavo Gutierrez, founder of Latin American liberation theology. And for those students who wish to explore questions of ultimate meaning through intentionally nonreligious frames of thought, we also support a strong and visible secular student association.

As to the second moment of interfaith cooperation, issues-based dialogue, we offer a number of forums for naming and exploring issues of concern to the educational community. Because “where” is often crucial to successful discussions, we moved the office of the chaplain to its own house on campus in order to increase its visibility and to facilitate the creation of sacred space and interfaith conversations. We support a spiritual life council, an interfaith group consisting of and led by students and our chaplain that engages in dialogue on traditional religious questions and issues of social justice. We also administer the Niebuhr Center. Named for our two alumni and funded in part by a grant from the Lilly Endowment, the Niebuhr Center offers students from all faiths the opportunity to explore careers of service, whether as ordained religious leaders or as laypersons. Through the Niebuhr Center and outside it, we offer numerous study abroad opportunities through which students come face to face with world issues and alternate points of view, and we host an increasing number of students from outside the United States who eagerly engage in issues-based dialogue with their American counterparts.

For the past two years, the Niebuhr Center has sponsored events entitled “Sacred Conversations on Race.” Held on campus and at Bethel Green Church, a largely African American congregation in Chicago’s west side, these events bring together members of the Elmhurst College community, church members, and national leaders on race relations to discuss this important topic from Protestant, Catholic, and Muslim perspectives. In the fall of 2010, we will launch the Niebuhr Forum on Religion in Public Life, which will bring prominent writers on religion together with panels of Christian, Jewish, and Muslim scholars and movement leaders to discuss the contemporary salience of Reinhold Niebuhr’s thought. In addition, a large and growing number of academic courses—such as our campuswide first-year seminars—and cocurricular student groups focused on world peace, hunger, disease, gender justice, and sexual orientation provide concrete opportunities for students, faculty, and administrators to identify shared issues of concern and to engage in dialogue from their various religious and nonreligious perspectives. Our faculty, chaplain, administrators, and I are also very active in interreligious dialogue throughout the Chicago area and beyond, and we frequently collaborate with Chicago Theological Seminary, a leading progressive Christian voice that shares our affiliation with the UCC.

For the third moment, collective action, the Niebuhr Center is again an example of critically informed work toward social justice. Last fall, we co-organized a rally with Bethel Green Church against gun violence in Chicago’s Austin neighborhood. Our students went into the neighborhood to urge residents to attend the service, which featured an impassioned speech by social activist and local pastor Rev. Michael Pfleger.

Liturgy and ceremony can also be moments of collective action. After all, “liturgy” means “the work of the people.” As a Native American and a citizen of the Cherokee Nation, I have tried to create occasions for ceremonial engagement by our non-Native community members with members of Chicago’s Anawim Center(a traditional Native American spirituality and service organization), the American Indian Center of Chicago, and other indigenous peoples’ groups including the Cherokee Nation. As part of a week-long Native American Awareness Week, we brought together students, faculty, prominent scholars, and representatives of indigenous peoples’ communities to educate ourselves about the history of colonization in America and, with members of traditional Native American communities, to celebrate their—by which I mean our—religious, political, and cultural self-determination today. A highlight of the week included a traditional smudging ceremony, which was held in our chaplain’s office, conducted by members of the Anawim Center, and attended by students from a variety of traditions—religious and secular.

More than a hundred of our students travel annually to multiple sites around the country to work with Habitat for Humanity, an experience that brings religious and nonreligious students together in the service of the homeless and communities lacking adequate facilities. Finally, the college has embarked on an annual theme-based set of service and education projects. For 2009–10, our focus was on poverty, both worldwide and close to home in DuPage County, and we gave service and educated both the college and the general public in myriad ways throughout the year.

Finally, in the fourth moment of interfaith cooperation, self-formation, our students engage in personal transformation through reflection on their collective action. Back in their spiritual “homes”—whether through the Spiritual Life Council, faith-based groups, or the Secular Students Association; through other meetings of affinity groups; or informally and alone—our students ask themselves what they have learned about their faith and value systems through their many experiences of collective action. For all students, every year, the college will provide what we call the Elmhurst Experience, a model of intentional liberal learning that has student self-formation as one of its two focuses. We are doing this even now through the Big Questions Orientation, an intensive, multiday, small-cohort, new student orientation that asks first-year students to act cooperatively; to reflect on themselves, their world, and their values; and to engage in off-campus service learning, which is followed immediately by their first formal academic experience, the credit-bearing first-year seminar. The first-year seminar brings together the same cohort and the same set of instructors—one faculty member and one staff member—who led the orientation, and the seminar pedagogy, focused on an interesting, interdisciplinary topic, encourages students to take intellectual and social risks and, hopefully, to begin a lifelong love of learning. The college is also focusing on residential campus communities as sites for student self-formation. In terms of sparking interfaith cooperation—or, at least, constructive conflict resolution—few experiences compare to living in residence halls!

Through our recently adopted new program of general education, the Elmhurst Experience will be extended beyond the first year. The new program requires each undergraduate to complete a course in the category Religious Studies in Context, which has replaced a narrower requirement in Judeo-Christian Heritage and Religious Faith. In all these ways and others, Elmhurst College is aspiring to generate opportunities for genuine interfaith dialogue and student self-formation.

The opportunities for changing student lives through changing the world, and changing the world through changing student lives, are immense. The challenges to this work are inherent in a model of higher education that pits religious against secular faiths, thereby marginalizing religion and impoverishing liberal education. An alternative model, which I have sketched here, grounds action in communities of faith and commitment, religious and non-religious, and transforms both communities and their members through collective action and reflection on shared experiences. In such a radically transformative dialogue, anyone and anything may be changed. But a commitment to such deep change, I believe, is a principle that unites rather than divides most religious and secular communities and is, therefore, a cause for optimism.


Dibella, G. A. 2009. Religious discussion desired. Harvard Crimson, November 4,

Elmhurst College. 2009. Elmhurst College strategic plan 2009–2014,

Harvard University Faculty of Arts and Sciences. 2006.Preliminary report of the task force on general education.Cambridge, MA: Harvard University,

———. 2007. Report of the task force on general education.Cambridge, MA: Harvard University,

IFYC. Interfaith Youth Core,

S. Alan Ray is professor of religion and society and president of Elmhurst College.

A printed copy of this article originally appeared in the American Association of American Colleges & University publication, Liberal Education, Summer 2010, Vol. 96, No. 3

The Major Tenets of Liberation Theology

The Aims of Theology

“Theology is an understanding which both grows and, in a certain sense, changes. If the commitment of the Christian community in fact takes different forms throughout history, the understanding which accompanies the vicissitudes of this commitment will be constantly renewed and will take untrodden paths.”

Gustavo Gutierrez, A Theology of Liberation (1973)

“Much contemporary theology seems to start from the challenge of the nonbeliever. He questions our religious world and faces it with a demand for profound purification and renewal.

…But the challenge in a continent like Latin America does not come primarily from the man who does not believe, but from the man who is not a man, who is not recognized as such by the existing social order: he is in the ranks of the poor, the exploited; he is the man who scarcely knows that he is a man. His challenge is not aimed first at our religious world, but at our economic, social, political, and cultural world; therefore, it is an appeal for a revolutionary transformation of the very basis of a dehumanizing society.

The question is not therefore how to speak of God in an adult world, but how to proclaim Him as a Father in a world that is not human.”

Gustavo Gutierrez, “Liberation, Theology, and Proclamation” (1974)

“In our theological efforts we have called this ‘Theology of Liberation’ because ‘liberation’ is very often translated to ‘salvation.’ How do we say to the poor, ‘God loves you’? This question is larger than our answers. It means it is an open question, and we try in this liberation theology, and I can say in the different liberation theologies, to try to answer this point.”

Gustavo Gutierrez, remarks at Elmhurst College (2009)

Love of Neighbor

“One of the teachers of the law came and heard them debating. Noticing that Jesus had given them a good answer, he asked him, “Of all the commandments, which is the most important?

“The most important one,” answered Jesus, “is this: ‘Hear, O Israel: The Lord our God, the Lord is one. Love the Lord your God with all your heart and with all your soul and with all your mind and with all your strength.’ The second is this: ‘Love your neighbor as yourself.’ There is no commandment greater than these.”

Mark 12:28-31, New International Version

“Love of neighbor is an essential component of Christian life. But as long as I apply that term only to the people who cross my path and come asking me for help, my world will remain pretty much the same. Individual almsgiving and social reformism is a type of love that never leaves its own front porch.

… On the other hand my world will change greatly if I go out to meet other people on their path and consider them as my neighbor, as the good Samaritan did… The Gospel tells us that the poor are the supreme embodiment of our neighbor. It is this option that serves as the focus for a new way of being human and Christian in today’s Latin America.”

Gustavo Gutierrez, “Liberation Praxis and Christian Faith” (1979)

Christian Duty to Address Social Injustice

“Defend the cause of the weak and fatherless; maintain the rights of the poor and oppressed. Rescue the weak and needy; deliver them from the hand of the wicked.”

Psalm 82:3-4, New International Version

“The Christian faithful are also obliged to promote social justice and, mindful of the precept of the Lord, to assist the poor.”

1983 CIC, canon 222.2

“According to Catholic teaching, through one’s words, prayers and deeds one must show solidarity with, and compassion for, the poor. Therefore, when instituting public policy one must always keep the ‘preferential option for the poor’ at the forefront of one’s mind. Accordingly, this doctrine implies that the moral test of any society is; ‘how it treats its most vulnerable members.’ The poor have the most urgent moral claim on the conscience of the nation. We are called to look at public policy decisions in terms of how they affect the poor.”

Option for the Poor, Major themes from Catholic Social Teaching, Archdiocese of St. Paul & Minneapolis.

“I am not refusing the necessity, even today, of immediate help to the poor, but I say it is not enough. Today the call is to try to change the social structure and to change some mental categories—to be clearer about mental categories, the feeling of superiority, for example, to some cultures. This is a mental category and we need to change this.

In the ultimate analysis, poverty means death; unjust and early death. Missionaries of the 16th century, some years after their arrival on this continent, said, ‘The Indians are dying before their time.’ Well, it was true certainly, but it’s true today also. The poor are dying before their time because poverty means death—unjust and early death.”

Gustavo Gutierrez, remarks at Elmhurst College (2009)

“It is not a question of idealizing poverty, but rather of taking it on as it is—an evil—to protest against it and to struggle to abolish it. As Paul Ricoeur says, you cannot really be with the poor unless you are struggling against poverty. Because of this solidarity—which manifests itself in specific action, a style of life, a break with one’s social class—one can also help the poor and exploited to become aware of their exploitation and seek liberation from it.

Christian poverty, and expression of love, is solidarity with the poor and is a protest against poverty. This is the concrete, contemporary meaning of the witness of poverty. It is a poverty lived not for its own sake, but rather as an authentic imitation of Christ; it is a poverty which means taking on the sinful human condition to liberate humankind from sin and all its consequences.”

Gustavo Gutierrez, A Theology of Liberation (1973)

Keep Hope Alive

“But God will never forget the needy; the hope of the afflicted will never perish.”

– Psalm 9:18, New International Version

“We must also engage in our work hopefully. Hope is not the same thing as optimism. Optimism merely reflects the desire that external circumstances may one day improve. There is nothing wrong with optimism, but we may not always have reasons for it.

The theological virtue of hope is much more than optimism. Hope is based on the conviction that God is at work in our lives and in the world. Hope is ultimately a gift from God given to sustain us during difficult times. Charles Péguy described hope as the ‘little sister’ that walks between the ‘taller sisters’ of faith and charity; when the taller sisters grow tired, the little one instills new life and energy into the other two. Hope never allows our faith to grow weak or our love to falter.”

Remembering the Poor: An Interview with Gustavo Gutierrez, America Magazine (Feb. 3, 2003)

Edited by L. Christopher Skufca (Camden Civil Rights Project)

Learn more about Father Gustavo Gutierrez on his Bio Page

Are Jobs the Solution to Poverty?

By Marianne Page

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PDF version of this article (with charts) can be found HERE

Here’s a common mantra: The only enduring solutions to poverty are economic growth and the jobs it delivers. Although the mantra is delivered especially frequently in the case of less developed countries, it’s also sometimes advanced as a poverty-reduction recipe for more developed ones like the United States. If the mantra were true, it would mean that we’d be well advised to focus all of our policy efforts on growing the economy and increasing employment opportunities, thus allowing us to treat more focused, poverty-specific policies merely as temporary stopgaps.

The purpose of this article is to evaluate whether a simple pro-jobs policy of this sort would reduce poverty in the United States as much as we’d like. In carrying out this evaluation, a natural starting point is to examine the empirical association between labor market conditions and poverty. After all, if it is established that the relationship between poverty and employment opportunities is not all that strong in the United States, then providing more jobs would not likely be a viable solution to poverty.

I begin by discussing how the jobs-poverty relationship has been weakening in recent decades, due in part to ongoing changes in (a) the types of jobs that our economy is creating and (b) the sectors of the labor market that are positioned to secure these jobs. After laying out these changes, I’ll discuss their implications for crafting antipoverty policy that works.

The Empirical Relationship Between Jobs and Poverty

It is well known that economic downturns increase poverty. Jobs disappear, working hours are cut, and wages fall. This is especially true at the bottom of the income distribution. The very groups that, even in the best of times, are close to the poverty line—blacks, Hispanics, young people, and the less educated— are those that tend to suffer most during recessions [1]. During the Great Recession, for example, the poverty rate of children increased more than the rate of any other age group. This is because children typically live with younger adults, who, as a result of their relative inexperience, tend to be among the first to lose their jobs during mass layoffs.

Unless safety-net programs fully replace lost income, an across-the-board rise in unemployment will mechanically increase the number of people who are poor. Figure 1 shows the close relationship between the economy’s overall health, as measured by unemployment, and the poverty rate. The correlation between changes in unemployment and changes in poverty is 0.65.

But is the strength of this relationship changing over time? Is aggregate job growth becoming a less effective lever on poverty?

Indeed it is. Figure 2, which graphs the change in the poverty rate against the change in the employment rate (for adults aged 25–54), shows that since the 1980s there has been a weakening in the jobs-poverty relationship. Recent labor market expansions, though similar in both magnitude and duration to the 1960s expansions, do not cut poverty as much as we’d come to expect. From 1962 to 1969, employment grew 4.7 percentage points, and poverty fell 9.8 points, more than twice the employment growth. In contrast, during the mid-1980s, despite significant labor market expansion, poverty fell far less.

Why Aren’t Jobs Delivering?

In understanding why the relationship between the employment rate and poverty is weakening, it’s useful to lay out the parameters that are relevant to the strength of this relationship, parameters that pertain to the types of jobs that are available, the capacity of the low-skill labor force to acquire these jobs, and its capacity to exit poverty through means other than work. These parameters are (a) the availability of unconditional benefits (benefits that are not conditioned on employment), (b) the availability of skill-compatible employment opportunities, (c) the extent to which the available jobs provide adequate wages, and (d) the extent to which these jobs come with other employment-conditioned benefits (e.g., Earned Income Tax Credit) that may compensate for low wages. For each of these conditions, I will lay out the relevant changes and their implications for the strength of the employment-poverty relationship. This discussion is summarized in Table 1.

Unconditional benefits: If nonworking families can acquire benefits that are not conditioned on work, then there’s a road out of poverty that does not require jobs or a booming economy. That is, when unconditional benefits are widely available, the macro-level relationship between jobs and poverty will be weakened.

The main development in this regard is the rise and fall of Aid to Families with Dependent Children (AFDC). The growing prevalence of cash welfare benefits in the form of AFDC mitigated the impact of downturns after the 1960s. Just as AFDC reduced poverty during downturns, poverty did not have as far to fall when the downturn ended and the economy turned around.

However, with the elimination of AFDC in 1996, the correlation between the employment rate and poverty should have strengthened. While AFDC provided cash benefits to lowincome and primarily single-parent families with children, the new Temporary Assistance to Needy Families (TANF) program imposed strict work requirements and sanctions for non-compliance, making it harder to obtain when jobs are scarce. In short, the countercyclical effect of cash welfare use has been reduced, meaning that the ability to rely on cash welfare during recessions has declined. As a result, relative to the pre-TANF era, we expect poverty to rise more during economic downturns and to fall more during upturns. Because we haven’t observed this pattern, it suggests that other forces must be in play that counteract this expected effect.

Skill compatibility: Why, then, is job growth reducing poverty less than it once did? It’s partly because the economy is not delivering the types of jobs that poor people can fill. As David Autor has shown, most of the job growth since the late 1980s has occurred within either the low-skill or high-skill sectors, with a consequent hollowing out of opportunities in the middle [2]. One reason is that technological advances have led to the automation of (and ultimately to the displacement of) many jobs that involve “routine” tasks. Manufacturing jobs, which used to provide opportunities for workers with moderate levels of education (such as a high school diploma), have sharply declined. The Great Recession has exacerbated this trend, as employment losses have been most severe in middle-skill jobs, both in the white-collar and blue-collar sectors. The higher prevalence of jobs at the bottom should help the poor, but what’s unclear is whether the associated hollowing out in the middle is a countervailing force that increases the competition between the poor and those who had before secured middle-class jobs. All else being equal, this competition may increase unemployment at the bottom of the labor market or lower wages among those who do get jobs [3].

Wage adequacy: Even if a low-skill job is acquired, it won’t be poverty-reducing unless it delivers enough in the way of wages (or transfers) to push the recipient over the poverty threshold [4]. Over the last 40 years, the wages of low-skill jobs have been stagnant for a number of reasons, including, for example, the declining real value of the minimum wage. Between 1975 and 1995, the 20th percentile of the weekly wage distribution declined from $473 to $386, resulting in fewer jobs that provided an above-poverty wage. Recent studies have shown that a $100 reduction in the real weekly wage among workers in the bottom 20 percent of the income distribution reduces the annual probability of escaping poverty by about 15 percent [5]. The declining payoff to work could also reduce the incentive to work at all, which may in turn lead to a deterioration of skills, further reducing the likelihood of escaping poverty.

Conditional benefits: The Earned Income Tax Credit (EITC) does of course supplement low wages and should thereby raise people out of poverty. The EITC, established in 1975, provides a tax-based earnings subsidy to low-income workers, which increases the income of low-earners and could counteract a decline in the minimum wage or any decline in wages that accompanies a recession. Because the generosity of the EITC expanded significantly during the early 1990s, one might expect that, over time, the relationship between labor market opportunities and poverty would have strengthened at the macro level, rather than weakened. However, although EITC subsidies have a significant effect on the number of families whose total income falls below the poverty threshold, the EITC does not directly affect the official poverty rate, because EITC income is not counted as “money income before taxes.” This measurement artifact helps explain why the official poverty rate changed so little through the mid-2000s despite the EITC’s expansion.

Moreover, as Figure 2 shows, poverty had already become less responsive to economic growth even before the EITC became more generous in 1993. The overall employment growth of 6.2 percentage points during the 1980s was accompanied by a poverty reduction of just 2.4 percentage points, far shy of the 9.8 point reduction in the 1960s.

It follows that the weakening in the aggregate employment poverty relationship is probably driven by (a) the shortage of low-skill jobs relative to the supply of workers competing for such jobs, and (b) the relatively low earning power of the available low-skill jobs. In the following section, I comment on the policy implications of this change in the employment-poverty relationship, with a particular focus on its implications for policies that seek to reduce poverty by increasing employment.

What’s to Be Done?

An antipoverty policy that focuses on jobs and employment will need to be targeted to the current employment regime if it is to have any payoff. A simple policy of “more jobs” has become a less viable poverty solution, but there may be a package of more targeted policies that, taken together, could have substantial poverty-reducing effects.

The first, and especially important, part of this package is to promote wage growth within the low-skill sector. This might be done by increasing the minimum wage, further increasing the EITC, or through other interventions in the labor market such as skill-enhancing training programs. The second part of this package is a strong unemployment insurance (UI) system, which plays a critical role in reducing poverty associated with recessions because it provides temporary partial-wage replacement to involuntarily unemployed workers, many of whom have incomes near the poverty line. Indeed, because the rate at which UI replaces earnings varies (negatively) with earnings, UI provides relatively greater protection to low-wage workers. In most states and years, UI benefits can be received for a maximum of 26 weeks, but during the most recent recession Congress enacted emergency extensions that increased benefits in most states to 99 weeks. These UI benefits make it possible for families to maintain their prior levels of food consumption (an important determinant of well-being) in the aftermath of a job loss.

The third and final part of this three-pronged package is the continued use of nutrition assistance (SNAP) and other non-cash safety-net programs. These programs have always been sensitive to the business cycle and have become significantly more responsive to economic cycles in the wake of welfare reform. According to recent studies, SNAP benefits have become especially useful in reducing the adverse income impacts of recessions after welfare reform. When poverty measures include SNAP benefits as income, poverty rates are much lower. For example, the 2009 poverty rate would have been 7.7 percentage points lower if SNAP benefits had counted as income [6]. Although we do not know whether they are as effective as straight-on cash assistance to the poor, we do know that new countercyclical programs, like UI and SNAP, have become critical poverty-mitigation programs in the current economic regime.

This combination of policies would acknowledge, in a real way, the weakening of the employment-poverty relationship. Will the policies themselves affect the strength of that relationship? They very likely will, but sometimes in opposing ways. That is, some of the proposed policies (e.g., more generous wage subsidies) serve to strengthen that relationship, while others work by providing benefits that are not conditional on having a job (e.g., extended unemployment insurance and a preserved SNAP program) and hence will serve to weaken the employment-poverty relationship. However, by keeping the unemployed out of poverty during downturns, both UI and SNAP help to maintain family well-being in the low-skill sector, which may increase employment and reduce poverty in the long run.

PDF version of this article (with charts) can be found HERE

About the Author

Marianne Page is a professor of economics at the University of California at Davis and the deputy director of the Center for Poverty Research. Her research examines the sources of inter-generational mobility and the impact of social programs.


[1]. Danziger, S., Chavez, K., & Cumberworth, E. 2012. “Poverty and the Great Recession.” Stanford, CA: Stanford Center on Poverty and Inequality; Hout, M. & Cumberworth, E. 2012. “The Labor Force and the Great Recession.” Stanford, CA: Stanford Center on Poverty and Inequality.

[2]. Autor, D. 2010. “The Polarization of Job Opportunities in the U.S. Labor Market: Implications for Employment and Earnings.” Center for American Progress Working Paper. http:// jobs-autor.

[3]. Potential scarring from long-term unemployment adds to the complicated nature of the jobs-poverty relationship. Not only must the poor have the skills necessary for the available jobs, but they might also lose in the labor market to the extent that employers perceive low job readiness among the long-term unemployed.

[4]. Blank, R. M. 1993. “Why Were Poverty Rates So High in the 1980s?” In Papadimitrious, Dimitri B. and Edward N. Wolff (eds.) Poverty and Prosperity in the U.S. in the Late Twentieth Century. London: Macmillan Press.

[5]. Stevens, A. H. 2012. “Poverty Transitions.” In Philip N. Jefferson (ed.). The Oxford Handbook of the Economics of Poverty. Oxford: Oxford University Press.

[6]. Tiehen, L., Jolliffe, D., & Gundersen, C. Alleviating Poverty in the United States: The Critical Role of SNAP Benefits, ERR-132, U.S. Department of Agriculture, Economic Research Service, April 2012.

Social Conflict Theory

by Kent McClelland

The several social theories that emphasize social conflict have roots in the ideas of Karl Marx (1818-1883), the great German theorist and political activist. The Marxist, conflict approach emphasizes a materialist interpretation of history, a dialectical method of analysis, a critical stance toward existing social arrangements, and a political program of revolution or, at least, reform.

The materialist view of history starts from the premise that the most important determinant of social life is the work people are doing, especially work that results in provision of the basic necessities of life, food, clothing and shelter.Marx thought that the way the work is socially organized and the technology used in production will have a strong impact on every other aspect of society. He maintained that everything of value in society results from human labor. Thus,Marx saw working men and women as engaged in making society, in creating the conditions for their own existence.

Marx summarized the key elements of this materialist view of history as follows:

In the social production of their existence, men inevitably enter into definite relations, which are independent of their will, namely relations of production appropriate to a given stage in the development of their material forces of production. The totality of these relations of production constitutes the economic structure of society, the real foundation, on which arises a legal and political superstructure and to which correspond definite forms of social consciousness. The mode of production of material life conditions the general process of social, political and intellectual life. It is not the consciousness of men that determines their existence, but their social existence that determines their consciousness (Marx 1971:20).

Marx divided history into several stages, conforming to broad patterns in the economic structure of society. The most important stages for Marx’s argument were feudalism, capitalism, and socialism. The bulk of Marx’s writing is concerned with applying the materialist model of society to capitalism, the stage of economic and social development that Marx saw as dominant in 19th century Europe. For Marx, the central institution of capitalist society is private property, the system by which capital (that is, money, machines, tools, factories, and other material objects used in production) is controlled by a small minority of the population. This arrangement leads to two opposed classes, the owners of capital (called the bourgeoisie) and the workers (called the proletariat), whose only property is their own labor time, which they have to sell to the capitalists.

Owners are seen as making profits by paying workers less than their work is worth and, thus, exploiting them. (In Marxist terminology, material forces of production or means of production include capital, land, and labor, whereas social relations of production refers to the division of labor and implied class relationships.)

Economic exploitation leads directly to political oppression, as owners make use of their economic power to gain control of the state and turn it into a servant of bourgeois economic interests. Police power, for instance, is used to enforce property rights and guarantee unfair contracts between capitalist and worker. Oppression also takes more subtle forms: religion serves capitalist interests by pacifying the population; intellectuals, paid directly or indirectly by capitalists, spend their careers justifying and rationalizing the existing social and economic arrangements. In sum, the economic structure of society molds the superstructure, including ideas (e.g., morality, ideologies, art, and literature) and the social institutions that support the class structure of society (e.g., the state, the educational system, the family, and religious institutions). Because the dominant or ruling class (the bourgeoisie) controls the social relations of production, the dominant ideology in capitalist society is that of the ruling class. Ideology and social institutions, in turn, serve to reproduce and perpetuate the economic class structure. Thus, Marx viewed the exploitative economic arrangements of capitalism as the real foundation upon which the superstructure of social, political, and intellectual consciousness is built.

Marx’s view of history might seem completely cynical or pessimistic, were it not for the possibilities of change revealed by his method of dialectical analysis. (The Marxist dialectical method, based on Hegel’s earlier idealistic dialectic, focuses attention on how an existing social arrangement, or thesis, generates its social opposite, or antithesis, and on how a qualitatively different social form, orsynthesis, emerges from the resulting struggle.) Marx was an optimist. He believed that any stage of history based on exploitative economic arrangements generated within itself the seeds of its own destruction. For instance, feudalism, in which land owners exploited the peasantry, gave rise to a class of town-dwelling merchants, whose dedication to making profits eventually led to thebourgeois revolution and the modern capitalist era. Similarly, the class relations of capitalism will lead inevitably to the next stage, socialism. The class relations of capitalism embody a contradiction: capitalists need workers, and vice versa, but the economic interests of the two groups are fundamentally at odds. Such contradictions mean inherent conflict and instability, the class struggle. Adding to the instability of the capitalist system are the inescapable needs for ever-wider markets and ever-greater investments in capital to maintain the profits of capitalists. Marx expected that the resulting economic cycles of expansion and contraction, together with tensions that will build as the working class gains greater understanding of its exploited position (and thus attains class consciousness), will eventually culminate in a socialist revolution.

Despite this sense of the unalterable logic of history, Marxists see the need for social criticism and for political activity to speed the arrival of socialism, which, not being based on private property, is not expected to involve as many contradictions and conflicts as capitalism. Marxists believe that social theory and political practice are dialectically intertwined, with theory enhanced by political involvement and with political practice necessarily guided by theory. Intellectuals ought, therefore, to engage in praxis, to combine political criticism and political activity. Theory itself is seen as necessarily critical and value-laden, since the prevailing social relations are based upon alienating and dehumanizing  exploitation of the labor of the working classes.

Marx’s ideas have been applied and reinterpreted by scholars for over a hundred years, starting with Marx’s close friend and collaborator, Friedrich Engels (1825-95), who supported Marx and his family for many years from the profits of the textile factories founded by Engels’ father, while Marx shut himself away in the library of the British Museum. Later, Vladimir I. Lenin (1870-1924), leader of the Russian revolution, made several influential contributions to Marxist theory. In recent years Marxist theory has taken a great variety of forms, notably the world-systems theory proposed by Immanuel Wallerstein (1974, 1980) and the comparative theory of revolutions put forward by Theda Skocpol (1980). Marxist ideas have also served as a starting point for many of the modern feminist theorists. Despite these applications, Marxism of any variety is still a minority position among American sociologists.


Marx, Karl. 1971. Preface to A Contribution to the Critique of Political Economy, Tr. S. W. Ryanzanskaya, edited by M. Dobb. London: Lawrence & Whishart.

Skocpol, Theda. 1980. States and Social Revolutions: A Comparative Analysis of France, Russia, and China. New York: Cambridge University Press.

Wallerstein, Immanuel M. 1974. The Modern World-System: Capitalist Agriculture and the Origins of the European World-Economy in the Sixteenth Century. New York: Academic Press.

         . 1980. The Modern World-System II: Mercantilism and the Consolidation of the European World-Economy, 1600-1750. New York: Academic Press.

The Great American Bubble Machine

From tech stocks to high gas prices, Goldman Sachs has engineered every major market manipulation since the Great Depression — and they’re about to do it again

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By April 5, 2010


The first thing you need to know about Goldman Sachs is that it’s everywhere. The world’s most powerful investment bank is a great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money. In fact, the history of the recent financial crisis, which doubles as a history of the rapid decline and fall of the suddenly swindled dry American empire, reads like a Who’s Who of Goldman Sachs graduates.

 By now, most of us know the major players. As George Bush’s last Treasury secretary, former Goldman CEO Henry Paulson was the architect of the bailout, a suspiciously self-serving plan to funnel trillions of Your Dollars to a handful of his old friends on Wall Street. Robert Rubin, Bill Clinton’s former Treasury secretary, spent 26 years at Goldman before becoming chairman of Citigroup — which in turn got a $300 billion taxpayer bailout from Paulson. There’s John Thain, the asshole chief of Merrill Lynch who bought an $87,000 area rug for his office as his company was imploding; a former Goldman banker, Thain enjoyed a multi-billion-dollar handout from Paulson, who used billions in taxpayer funds to help Bank of America rescue Thain’s sorry company. And Robert Steel, the former Goldmanite head of Wachovia, scored himself and his fellow executives $225 million in golden-parachute payments as his bank was self-destructing. There’s Joshua Bolten, Bush’s chief of staff during the bailout, and Mark Patterson, the current Treasury chief of staff, who was a Goldman lobbyist just a year ago, and Ed Liddy, the former Goldman director whom Paulson put in charge of bailed-out insurance giant AIG, which forked over $13 billion to Goldman after Liddy came on board. The heads of the Canadian and Italian national banks are Goldman alums, as is the head of the World Bank, the head of the New York Stock Exchange, the last two heads of the Federal Reserve Bank of New York — which, incidentally, is now in charge of overseeing Goldman — not to mention …

But then, any attempt to construct a narrative around all the former Goldmanites in influential positions quickly becomes an absurd and pointless exercise, like trying to make a list of everything. What you need to know is the big picture: If America is circling the drain, Goldman Sachs has found a way to be that drain — an extremely unfortunate loophole in the system of Western democratic capitalism, which never foresaw that in a society governed passively by free markets and free elections, organized greed always defeats disorganized democracy.

The bank’s unprecedented reach and power have enabled it to turn all of America into a giant pump-and-dump scam, manipulating whole economic sectors for years at a time, moving the dice game as this or that market collapses, and all the time gorging itself on the unseen costs that are breaking families everywhere — high gas prices, rising consumer credit rates, half-eaten pension funds, mass layoffs, future taxes to pay off bailouts. All that money that you’re losing, it’s going somewhere, and in both a literal and a figurative sense, Goldman Sachs is where it’s going: The bank is a huge, highly sophisticated engine for converting the useful, deployed wealth of society into the least useful, most wasteful and insoluble substance on Earth — pure profit for rich individuals.

They achieve this using the same playbook over and over again. The formula is relatively simple: Goldman positions itself in the middle of a speculative bubble, selling investments they know are crap. Then they hoover up vast sums from the middle and lower floors of society with the aid of a crippled and corrupt state that allows it to rewrite the rules in exchange for the relative pennies the bank throws at political patronage. Finally, when it all goes bust, leaving millions of ordinary citizens broke and starving, they begin the entire process over again, riding in to rescue us all by lending us back our own money at interest, selling themselves as men above greed, just a bunch of really smart guys keeping the wheels greased. They’ve been pulling this same stunt over and over since the 1920s — and now they’re preparing to do it again, creating what may be the biggest and most audacious bubble yet.

If you want to understand how we got into this financial crisis, you have to first understand where all the money went — and in order to understand that, you need to understand what Goldman has already gotten away with. It is a history exactly five bubbles long — including last year’s strange and seemingly inexplicable spike in the price of oil. There were a lot of losers in each of those bubbles, and in the bailout that followed. But Goldman wasn’t one of them.

BUBBLE #1 The Great Depression

Goldman wasn’t always a too-big-to-fail Wall Street behemoth, the ruthless face of kill-or-be-killed capitalism on steroids —just almost always. The bank was actually founded in 1869 by a German immigrant named Marcus Goldman, who built it up with his son-in-law Samuel Sachs. They were pioneers in the use of commercial paper, which is just a fancy way of saying they made money lending out short-term IOUs to smalltime vendors in downtown Manhattan.

You can probably guess the basic plotline of Goldman’s first 100 years in business: plucky, immigrant-led investment bank beats the odds, pulls itself up by its bootstraps, makes shitloads of money. In that ancient history there’s really only one episode that bears scrutiny now, in light of more recent events: Goldman’s disastrous foray into the speculative mania of pre-crash Wall Street in the late 1920s.

This great Hindenburg of financial history has a few features that might sound familiar. Back then, the main financial tool used to bilk investors was called an “investment trust.” Similar to modern mutual funds, the trusts took the cash of investors large and small and (theoretically, at least) invested it in a smorgasbord of Wall Street securities, though the securities and amounts were often kept hidden from the public. So a regular guy could invest $10 or $100 in a trust and feel like he was a big player. Much as in the 1990s, when new vehicles like day trading and e-trading attracted reams of new suckers from the sticks who wanted to feel like big shots, investment trusts roped a new generation of regular-guy investors into the speculation game.

Beginning a pattern that would repeat itself over and over again, Goldman got into the investmenttrust game late, then jumped in with both feet and went hogwild. The first effort was the Goldman Sachs Trading Corporation; the bank issued a million shares at $100 apiece, bought all those shares with its own money and then sold 90 percent of them to the hungry public at $104. The trading corporation then relentlessly bought shares in itself, bidding the price up further and further. Eventually it dumped part of its holdings and sponsored a new trust, the Shenandoah Corporation, issuing millions more in shares in that fund — which in turn sponsored yet another trust called the Blue Ridge Corporation. In this way, each investment trust served as a front for an endless investment pyramid: Goldman hiding behind Goldman hiding behind Goldman. Of the 7,250,000 initial shares of Blue Ridge, 6,250,000 were actually owned by Shenandoah — which, of course, was in large part owned by Goldman Trading.

The end result (ask yourself if this sounds familiar) was a daisy chain of borrowed money, one exquisitely vulnerable to a decline in performance anywhere along the line. The basic idea isn’t hard to follow. You take a dollar and borrow nine against it; then you take that $10 fund and borrow $90; then you take your $100 fund and, so long as the public is still lending, borrow and invest $900. If the last fund in the line starts to lose value, you no longer have the money to pay back your investors, and everyone gets massacred.

In a chapter from The Great Crash, 1929 titled “In Goldman Sachs We Trust,” the famed economist John Kenneth Galbraith held up the Blue Ridge and Shenandoah trusts as classic examples of the insanity of leveragebased investment. The trusts, he wrote, were a major cause of the market’s historic crash; in today’s dollars, the losses the bank suffered totaled $475 billion. “It is difficult not to marvel at the imagination which was implicit in this gargantuan insanity,” Galbraith observed, sounding like Keith Olbermann in an ascot. “If there must be madness, something may be said for having it on a heroic scale.”

BUBBLE #2 Tech Stocks

Fast-forward about 65 years. Goldman not only survived the crash that wiped out so many of the investors it duped, it went on to become the chief underwriter to the country’s wealthiest and most powerful corporations. Thanks to Sidney Weinberg, who rose from the rank of janitor’s assistant to head the firm, Goldman became the pioneer of the initial public offering, one of the principal and most lucrative means by which companies raise money. During the 1970s and 1980s, Goldman may not have been the planet-eating Death Star of political influence it is today, but it was a top-drawer firm that had a reputation for attracting the very smartest talent on the Street.

It also, oddly enough, had a reputation for relatively solid ethics and a patient approach to investment that shunned the fast buck; its executives were trained to adopt the firm’s mantra, “long-term greedy.” One former Goldman banker who left the firm in the early Nineties recalls seeing his superiors give up a very profitable deal on the grounds that it was a long-term loser. “We gave back money to ‘grownup’ corporate clients who had made bad deals with us,” he says. “Everything we did was legal and fair — but ‘long-term greedy’ said we didn’t want to make such a profit at the clients’ collective expense that we spoiled the marketplace.”

But then, something happened. It’s hard to say what it was exactly; it might have been the fact that Goldman’s cochairman in the early Nineties, Robert Rubin, followed Bill Clinton to the White House, where he directed the National Economic Council and eventually became Treasury secretary. While the American media fell in love with the story line of a pair of baby-boomer, Sixties-child, Fleetwood Mac yuppies nesting in the White House, it also nursed an undisguised crush on Rubin, who was hyped as without a doubt the smartest person ever to walk the face of the Earth, with Newton, Einstein, Mozart and Kant running far behind.

Rubin was the prototypical Goldman banker. He was probably born in a $4,000 suit, he had a face that seemed permanently frozen just short of an apology for being so much smarter than you, and he exuded a Spock-like, emotion-neutral exterior; the only human feeling you could imagine him experiencing was a nightmare about being forced to fly coach. It became almost a national clichè that whatever Rubin thought was best for the economy — a phenomenon that reached its apex in 1999, when Rubin appeared on the cover of Time with his Treasury deputy, Larry Summers, and Fed chief Alan Greenspan under the headline The Committee To Save The World. And “what Rubin thought,” mostly, was that the American economy, and in particular the financial markets, were over-regulated and needed to be set free. During his tenure at Treasury, the Clinton White House made a series of moves that would have drastic consequences for the global economy — beginning with Rubin’s complete and total failure to regulate his
old firm during its first mad dash for obscene short-term profits.

The basic scam in the Internet Age is pretty easy even for the financially illiterate to grasp. Companies that weren’t much more than potfueled ideas scrawled on napkins by uptoolate bongsmokers were taken public via IPOs, hyped in the media and sold to the public for mega-millions. It was as if banks like Goldman were wrapping ribbons around watermelons, tossing them out 50-story windows and opening the phones for bids. In this game you were a winner only if you took your money out before the melon hit the pavement.

It sounds obvious now, but what the average investor didn’t know at the time was that the banks had changed the rules of the game, making the deals look better than they actually were. They did this by setting up what was, in reality, a two-tiered investment system — one for the insiders who knew the real numbers, and another for the lay investor who was invited to chase soaring prices the banks themselves knew were irrational. While Goldman’s later pattern would be to capitalize on changes in the regulatory environment, its key innovation in the Internet years was to abandon its own industry’s standards of quality control.

“Since the Depression, there were strict underwriting guidelines that Wall Street adhered to when taking a company public,” says one prominent hedge-fund manager. “The company had to be in business for a minimum of five years, and it had to show profitability for three consecutive years. But Wall Street took these guidelines and threw them in the trash.” Goldman completed the snow job by pumping up the sham stocks: “Their analysts were out there saying is worth $100 a share.”

The problem was, nobody told investors that the rules had changed. “Everyone on the inside knew,” the manager says. “Bob Rubin sure as hell knew what the underwriting standards were. They’d been intact since the 1930s.”

Jay Ritter, a professor of finance at the University of Florida who specializes in IPOs, says banks like Goldman knew full well that many of the public offerings they were touting would never make a dime. “In the early Eighties, the major underwriters insisted on three years of profitability. Then it was one year, then it was a quarter. By the time of the Internet bubble, they were not even requiring profitability in the foreseeable future.”

Goldman has denied that it changed its underwriting standards during the Internet years, but its own statistics belie the claim. Just as it did with the investment trust in the 1920s, Goldman started slow and finished crazy in the Internet years. After it took a little-known company with weak financials called Yahoo! public in 1996, once the tech boom had already begun, Goldman quickly became the IPO king of the Internet era. Of the 24 companies it took public in 1997, a third were losing money at the time of the IPO. In 1999, at the height of the boom, it took 47 companies public, including stillborns like Webvan and eToys, investment offerings that were in many ways the modern equivalents of Blue Ridge and Shenandoah. The following year, it underwrote 18 companies in the first four months, 14 of which were money losers at the time. As a leading underwriter of Internet stocks during the boom, Goldman provided profits far more volatile than those of its competitors: In 1999, the average Goldman IPO leapt 281 percent above its offering price, compared to the Wall Street average of 181 percent.

How did Goldman achieve such extraordinary results? One answer is that they used a practice called “laddering,” which is just a fancy way of saying they manipulated the share price of new offerings. Here’s how it works: Say you’re Goldman Sachs, and comes to you and asks you to take their company public. You agree on the usual terms: You’ll price the stock, determine how many shares should be released and take the CEO on a “road show” to schmooze investors, all in exchange for a substantial fee (typically six to seven percent of the amount raised). You then promise your best clients the right to buy big chunks of the IPO at the low offering price — let’s say’s starting share price is $15 — in exchange for a promise that they will buy more shares later on the open market. That seemingly simple demand gives you inside knowledge of the IPO’s future, knowledge that wasn’t disclosed to the day trader schmucks who only had the prospectus to go by: You know that certain of your clients who bought X amount of shares at $15 are also going to buy Y more shares at $20 or $25, virtually guaranteeing that the price is going to go to $25 and beyond. In this way, Goldman could artificially jack up the new company’s price, which of course was to the bank’s benefit — a six percent fee of a $500 million IPO is serious money.

Goldman was repeatedly sued by shareholders for engaging in laddering in a variety of Internet IPOs, including Webvan and NetZero. The deceptive practices also caught the attention of Nicholas Maier, the syndicate manager of Cramer & Co., the hedge fund run at the time by the now-famous chattering television asshole Jim Cramer, himself a Goldman alum. Maier told the SEC that while working for Cramer between 1996 and 1998, he was repeatedly forced to engage in laddering practices during IPO deals with Goldman.

“Goldman, from what I witnessed, they were the worst perpetrator,” Maier said. “They totally fueled the bubble. And it’s specifically that kind of behavior that has caused the market crash. They built these stocks upon an illegal foundation — manipulated up — and ultimately, it really was the small person who ended up buying in.” In 2005, Goldman agreed to pay $40 million for its laddering violations — a puny penalty relative to the enormous profits it made. (Goldman, which has denied wrongdoing in all of the cases it has settled, refused to respond to questions for this story.)

Another practice Goldman engaged in during the Internet boom was “spinning,” better known as bribery. Here the investment bank would offer the executives of the newly public company shares at extra-low prices, in exchange for future underwriting business. Banks that engaged in spinning would then undervalue the initial offering price — ensuring that those “hot” opening-price shares it had handed out to insiders would be more likely to rise quickly, supplying bigger first-day rewards for the chosen few. So instead of opening at $20, the bank would approach the CEO and offer him a million shares of his own company at $18 in exchange for future business — effectively robbing all of Bullshit’s new shareholders by diverting cash that should have gone to the company’s bottom line into the private bank account of the company’s CEO.

In one case, Goldman allegedly gave a multimillion-dollar special offering to eBay CEO Meg Whitman, who later joined Goldman’s board, in exchange for future i-banking business. According to a report by the House Financial Services Committee in 2002, Goldman gave special stock offerings to executives in 21 companies that it took public, including Yahoo! cofounder Jerry Yang and two of the great slithering villains of the financial-scandal age — Tyco’s Dennis Kozlowski and Enron’s Ken Lay. Goldman angrily denounced the report as “an egregious distortion of the facts” — shortly before paying $110 million to settle an investigation into spinning and other manipulations launched by New York state regulators. “The spinning of hot IPO shares was not a harmless corporate perk,” then-attorney general Eliot Spitzer said at the time. “Instead, it was an integral part of a fraudulent scheme to win new investment-banking business.”

Such practices conspired to turn the Internet bubble into one of the greatest financial disasters in world history: Some $5 trillion of wealth was wiped out on the NASDAQ alone. But the real problem wasn’t the money that was lost by shareholders, it was the money gained by investment bankers, who received hefty bonuses for tampering with the market. Instead of teaching Wall Street a lesson that bubbles always deflate, the Internet years demonstrated to bankers that in the age of freely flowing capital and publicly owned financial companies, bubbles are incredibly easy to inflate, and individual bonuses are actually bigger when the mania and the irrationality are greater.

Nowhere was this truer than at Goldman. Between 1999 and 2002, the firm paid out $28.5 billion in compensation and benefits — an average of roughly $350,000 a year per employee. Those numbers are important because the key legacy of the Internet boom is that the economy is now driven in large part by the pursuit of the enormous salaries and bonuses that such bubbles make possible. Goldman’s mantra of “long-term greedy” vanished into thin air as the game became about getting your check before the melon hit the pavement.

The market was no longer a rationally managed place to grow real, profitable businesses: It was a huge ocean of Someone Else’s Money where bankers hauled in vast sums through whatever means necessary and tried to convert that money into bonuses and payouts as quickly as possible. If you laddered and spun 50 Internet IPOs that went bust within a year, so what? By the time the Securities and Exchange Commission got around to fining your firm $110 million, the yacht you bought with your IPO bonuses was already six years old. Besides, you were probably out of Goldman by then, running the U.S. Treasury or maybe the state of New Jersey. (One of the truly comic moments in the history of America’s recent financial collapse came when Gov. Jon Corzine of New Jersey, who ran Goldman from 1994 to 1999 and left with $320 million in IPO-fattened stock, insisted in 2002 that “I’ve never even heard the term ‘laddering’ before.”)

For a bank that paid out $7 billion a year in salaries, $110 million fines issued half a decade late were something far less than a deterrent —they were a joke. Once the Internet bubble burst, Goldman had no incentive to reassess its new, profit-driven strategy; it just searched around for another bubble to inflate. As it turns out, it had one ready, thanks in large part to Rubin.

BUBBLE #3 The Housing Craze

Goldman’s role in the sweeping global disaster that was the housing bubble is not hard to trace. Here again, the basic trick was a decline in underwriting standards, although in this case the standards weren’t in IPOs but in mortgages. By now almost everyone knows that for decades mortgage dealers insisted that home buyers be able to produce a down payment of 10 percent or more, show a steady income and good credit rating, and possess a real first and last name. Then, at the dawn of the new millennium, they suddenly threw all that shit out the window and started writing mortgages on the backs of napkins to cocktail waitresses and ex-cons carrying five bucks and a Snickers bar.

None of that would have been possible without investment bankers like Goldman, who created vehicles to package those shitty mortgages and sell them en masse to unsuspecting insurance companies and pension funds. This created a mass market for toxic debt that would never have existed before; in the old days, no bank would have wanted to keep some addict ex-con’s mortgage on its books, knowing how likely it was to fail. You can’t write these mortgages, in other words, unless you can sell them to someone who doesn’t know what they are.

Goldman used two methods to hide the mess they were selling. First, they bundled hundreds of different mortgages into instruments called Collateralized Debt Obligations. Then they sold investors on the idea that, because a bunch of those mortgages would turn out to be OK, there was no reason to worry so much about the shitty ones: The CDO, as a whole, was sound. Thus, junk-rated mortgages were turned into AAA-rated investments. Second, to hedge its own bets, Goldman got companies like AIG to provide insurance — known as credit default swaps — on the CDOs. The swaps were essentially a racetrack bet between AIG and Goldman: Goldman is betting the ex-cons will default, AIG is betting they won’t.

There was only one problem with the deals: All of the wheeling and dealing represented exactly the kind of dangerous speculation that federal regulators are supposed to rein in. Derivatives like CDOs and credit swaps had already caused a series of serious financial calamities: Procter & Gamble and Gibson Greetings both lost fortunes, and Orange County, California, was forced to default in 1994. A report that year by the Government Accountability Office recommended that such financial instruments be tightly regulated — and in 1998, the head of the Commodity Futures Trading Commission, a woman named Brooksley Born, agreed. That May, she circulated a letter to business leaders and the Clinton administration suggesting that banks be required to provide greater disclosure in derivatives trades, and maintain reserves to cushion against losses.

More regulation wasn’t exactly what Goldman had in mind. “The banks go crazy — they want it stopped,” says Michael Greenberger, who worked for Born as director of trading and markets at the CFTC and is now a law professor at the University of Maryland. “Greenspan, Summers, Rubin and [SEC chief Arthur] Levitt want it stopped.”

Clinton’s reigning economic foursome — “especially Rubin,” according to Greenberger — called Born in for a meeting and pleaded their case. She refused to back down, however, and continued to push for more regulation of the derivatives. Then, in June 1998, Rubin went public to denounce her move, eventually recommending that Congress strip the CFTC of its regulatory authority. In 2000, on its last day in session, Congress passed the now-notorious Commodity Futures Modernization Act, which had been inserted into an 11,000-page spending bill at the last minute, with almost no debate on the floor of the Senate. Banks were now free to trade default swaps with impunity.

But the story didn’t end there. AIG, a major purveyor of default swaps, approached the New York State Insurance Department in 2000 and asked whether default swaps would be regulated as insurance. At the time, the office was run by one Neil Levin, a former Goldman vice president, who decided against regulating the swaps. Now freed to underwrite as many housing-based securities and buy as much credit-default protection as it wanted, Goldman went berserk with lending lust. By the peak of the housing boom in 2006, Goldman was underwriting $76.5 billion worth of mortgage-backed securities — a third of which were sub-prime — much of it to institutional investors like pensions and insurance companies. And in these massive issues of real estate were vast swamps of crap.

Take one $494 million issue that year, GSAMP Trust 2006S3. Many of the mortgages belonged to second-mortgage borrowers, and the average equity they had in their homes was 0.71 percent. Moreover, 58 percent of the loans included little or no documentation — no names of the borrowers, no addresses of the homes, just zip codes. Yet both of the major ratings agencies, Moody’s and Standard & Poor’s, rated 93 percent of the issue as investment grade. Moody’s projected that less than 10 percent of the loans would default. In reality, 18 percent of the mortgages were in default within 18 months.

Not that Goldman was personally at any risk. The bank might be taking all these hideous, completely irresponsible mortgages from beneath-gangster-status firms like Countrywide and selling them off to municipalities and pensioners — old people, for God’s sake — pretending the whole time that it wasn’t grade D horseshit. But even as it was doing so, it was taking short positions in the same market, in essence betting against the same crap it was selling. Even worse, Goldman bragged about it in public. “The mortgage sector continues to be challenged,” David Viniar, the bank’s chief financial officer, boasted in 2007. “As a result, we took significant markdowns on our long inventory positions … However, our risk bias in that market was to be short, and that net short position was profitable.” In other words, the mortgages it was selling were for chumps. The real money was in betting against those same mortgages.

“That’s how audacious these assholes are,” says one hedge fund manager. “At least with other banks, you could say that they were just dumb — they believed what they were selling, and it blew them up. Goldman knew what it was doing.”

I ask the manager how it could be that selling something to customers that you’re actually betting against — particularly when you know more about the weaknesses of those products than the customer — doesn’t amount to securities fraud.

“It’s exactly securities fraud,” he says. “It’s the heart of securities fraud.”

Eventually, lots of aggrieved investors agreed. In a virtual repeat of the Internet IPO craze, Goldman was hit with a wave of lawsuits after the collapse of the housing bubble, many of which accused the bank of withholding pertinent information about the quality of the mortgages it issued. New York state regulators are suing Goldman and 25 other underwriters for selling bundles of crappy Countrywide mortgages to city and state pension funds, which lost as much as $100 million in the investments. Massachusetts also investigated Goldman for similar misdeeds, acting on behalf of 714 mortgage holders who got stuck holding predatory loans. But once again, Goldman got off virtually scot-free, staving off prosecution by agreeing to pay a paltry $60 million — about what the bank’s CDO division made in a day and a half during the real estate boom.

The effects of the housing bubble are well known — it led more or less directly to the collapse of Bear Stearns, Lehman Brothers and AIG, whose toxic portfolio of credit swaps was in significant part composed of the insurance that banks like Goldman bought against their own housing portfolios. In fact, at least $13 billion of the taxpayer money given to AIG in the bailout ultimately went to Goldman, meaning that the bank made out on the housing bubble twice: It fucked the investors who bought their horseshit CDOs by betting against its own crappy product, then it turned around and fucked the taxpayer by making him pay off those same bets.

And once again, while the world was crashing down all around the bank, Goldman made sure it was doing just fine in the compensation department. In 2006, the firm’s payroll jumped to $16.5 billion — an average of $622,000 per employee. As a Goldman spokesman explained, “We work very hard here.”

But the best was yet to come. While the collapse of the housing bubble sent most of the financial world fleeing for the exits, or to jail, Goldman boldly doubled down — and almost single-handedly created yet another bubble, one the world still barely knows the firm had anything to do with.

BUBBLE #4 $4 a Gallon

By the beginning of 2008, the financial world was in turmoil. Wall Street had spent the past two and a half decades producing one scandal after another, which didn’t leave much to sell that wasn’t tainted. The terms junk bond, IPO, sub-prime mortgage and other once-hot financial fare were now firmly associated in the public’s mind with scams; the terms credit swaps and CDOs were about to join them. The credit markets were in crisis, and the mantra that had sustained the fantasy economy throughout the Bush years — the notion that housing prices never go down — was now a fully exploded myth, leaving the Street clamoring for a new bullshit paradigm to sling.

Where to go? With the public reluctant to put money in anything that felt like a paper investment, the Street quietly moved the casino to the physical-commodities market — stuff you could touch: corn, coffee, cocoa, wheat and, above all, energy commodities, especially oil. In conjunction with a decline in the dollar, the credit crunch and the housing crash caused a “flight to commodities.” Oil futures in particular skyrocketed, as the price of a single barrel went from around $60 in the middle of 2007 to a high of $147 in the summer of 2008.

That summer, as the presidential campaign heated up, the accepted explanation for why gasoline had hit $4.11 a gallon was that there was a problem with the world oil supply. In a classic example of how Republicans and Democrats respond to crises by engaging in fierce exchanges of moronic irrelevancies, John McCain insisted that ending the moratorium on offshore drilling would be “very helpful in the short term,” while Barack Obama in typical liberal-arts yuppie style argued that federal investment in hybrid cars was the way out.

But it was all a lie. While the global supply of oil will eventually dry up, the short-term flow has actually been increasing. In the six months before prices spiked, according to the U.S. Energy Information Administration, the world oil supply rose from 85.24 million barrels a day to 85.72 million. Over the same period, world oil demand dropped from 86.82 million barrels a day to 86.07 million. Not only was the short-term supply of oil rising, the demand for it was falling — which, in classic economic terms, should have brought prices at the pump down.

So what caused the huge spike in oil prices? Take a wild guess. Obviously Goldman had help — there were other players in the physical commodities market — but the root cause had almost everything to do with the behavior of a few powerful actors determined to turn the once-solid market into a speculative casino. Goldman did it by persuading pension funds and other large institutional investors to invest in oil futures — agreeing to buy oil at a certain price on a fixed date. The push transformed oil from a physical commodity, rigidly subject to supply and demand, into something to bet on, like a stock. Between 2003 and 2008, the amount of speculative money in commodities grew from $13 billion to $317 billion, an increase of 2,300 percent. By 2008, a barrel of oil was traded 27 times, on average, before it was actually delivered and consumed.

As is so often the case, there had been a Depression-era law in place designed specifically to prevent this sort of thing. The commodities market was designed in large part to help farmers: A grower concerned about future price drops could enter into a contract to sell his corn at a certain price for delivery later on, which made him worry less about building up stores of his crop. When no one was buying corn, the farmer could sell to a middleman known as a “traditional speculator,” who would store the grain and sell it later, when demand returned. That way, someone was always there to buy from the farmer, even when the market temporarily had no need for his crops.

In 1936, however, Congress recognized that there should never be more speculators in the market than real producers and consumers. If that happened, prices would be affected by something other than supply and demand, and price manipulations would ensue. A new law empowered the Commodity Futures Trading Commission — the very same body that would later try and fail to regulate credit swaps — to place limits on speculative trades in commodities. As a result of the CFTC’s oversight, peace and harmony reigned in the commodities markets for more than 50 years.

All that changed in 1991 when, unbeknownst to almost everyone in the world, a Goldman-owned commodities-trading subsidiary called J. Aron wrote to the CFTC and made an unusual argument. Farmers with big stores of corn, Goldman argued, weren’t the only ones who needed to hedge their risk against future price drops — Wall Street dealers who made big bets on oil prices also needed to hedge their risk, because, well, they stood to lose a lot too.

This was complete and utter crap — the 1936 law, remember, was specifically designed to maintain distinctions between people who were buying and selling real tangible stuff and people who were trading in paper alone. But the CFTC, amazingly, bought Goldman’s argument. It issued the bank a free pass, called the “Bona Fide Hedging” exemption, allowing Goldman’s subsidiary to call itself a physical hedger and escape virtually all limits placed on speculators. In the years that followed, the commission would quietly issue 14 similar exemptions to other companies.

Now Goldman and other banks were free to drive more investors into the commodities markets, enabling speculators to place increasingly big bets. That 1991 letter from Goldman more or less directly led to the oil bubble in 2008, when the number of speculators in the market — driven there by fear of the falling dollar and the housing crash — finally overwhelmed the real physical suppliers and consumers. By 2008, at least three quarters of the activity on the commodity exchanges was speculative, according to a congressional staffer who studied the numbers — and that’s likely a conservative estimate. By the middle of last summer, despite rising supply and a drop in demand, we were paying $4 a gallon every time we pulled up to the pump.

What is even more amazing is that the letter to Goldman, along with most of the other trading exemptions, was handed out more or less in secret. “I was the head of the division of trading and markets, and Brooksley Born was the chair of the CFTC,” says Greenberger, “and neither of us knew this letter was out there.” In fact, the letters only came to light by accident. Last year, a staffer for the House Energy and Commerce Committee just happened to be at a briefing when officials from the CFTC made an offhand reference to the exemptions.

“I had been invited to a briefing the commission was holding on energy,” the staffer recounts. “And suddenly in the middle of it, they start saying, ‘Yeah, we’ve been issuing these letters for years now.’ I raised my hand and said, ‘Really? You issued a letter? Can I see it?’ And they were like, ‘Duh, duh.’ So we went back and forth, and finally they said, ‘We have to clear it with Goldman Sachs.’ I’m like, ‘What do you mean, you have to clear it with Goldman Sachs?'”

The CFTC cited a rule that prohibited it from releasing any information about a company’s current position in the market. But the staffer’s request was about a letter that had been issued 17 years earlier. It no longer had anything to do with Goldman’s current position. What’s more, Section 7 of the 1936 commodities law gives Congress the right to any information it wants from the commission. Still, in a classic example of how complete Goldman’s capture of government is, the CFTC waited until it got clearance from the bank before it turned the letter over.

Armed with the semi-secret government exemption, Goldman had become the chief designer of a giant commodities betting parlor. Its Goldman Sachs Commodities Index — which tracks the prices of 24 major commodities but is overwhelmingly weighted toward oil — became the place where pension funds and insurance companies and other institutional investors could make massive long-term bets on commodity prices. Which was all well and good, except for a couple of things. One was that index speculators are mostly “long only” bettors, who seldom if ever take short positions — meaning they only bet on prices to rise. While this kind of behavior is good for a stock market, it’s terrible for commodities, because it continually forces prices upward. “If index speculators took short positions as well as long ones, you’d see them pushing prices both up and down,” says Michael Masters, a hedge fund manager who has helped expose the role of investment banks in the manipulation of oil prices. “But they only push prices in one direction: up.”

Complicating matters even further was the fact that Goldman itself was cheerleading with all its might for an increase in oil prices. In the beginning of 2008, Arjun Murti, a Goldman analyst, hailed as an “oracle of oil” by The New York Times, predicted a “super spike” in oil prices, forecasting a rise to $200 a barrel. At the time Goldman was heavily invested in oil through its commodities trading subsidiary, J. Aron; it also owned a stake in a major oil refinery in Kansas, where it warehoused the crude it bought and sold. Even though the supply of oil was keeping pace with demand, Murti continually warned of disruptions to the world oil supply, going so far as to broadcast the fact that he owned two hybrid cars. High prices, the bank insisted, were somehow the fault of the piggish American consumer; in 2005, Goldman analysts insisted that we wouldn’t know when oil prices would fall until we knew “when American consumers will stop buying gas-guzzling sport utility vehicles and instead seek fuel-efficient alternatives.”

But it wasn’t the consumption of real oil that was driving up prices — it was the trade in paper oil. By the summer of 2008, in fact, commodities speculators had bought and stockpiled enough oil futures to fill 1.1 billion barrels of crude, which meant that speculators owned more future oil on paper than there was real, physical oil stored in all of the country’s commercial storage tanks and the Strategic Petroleum Reserve combined. It was a repeat of both the Internet craze and the housing bubble, when Wall Street jacked up present-day profits by selling suckers shares of a fictional fantasy future of endlessly rising prices.

In what was by now a painfully familiar pattern, the oil-commodities melon hit the pavement hard in the summer of 2008, causing a massive loss of wealth; crude prices plunged from $147 to $33. Once again the big losers were ordinary people. The pensioners whose funds invested in this crap got massacred: CalPERS, the California Public Employees’ Retirement System, had $1.1 billion in commodities when the crash came. And the damage didn’t just come from oil. Soaring food prices driven by the commodities bubble led to catastrophes across the planet, forcing an estimated 100 million people into hunger and sparking food riots throughout the Third World.

Now oil prices are rising again: They shot up 20 percent in the month of May and have nearly doubled so far this year. Once again, the problem is not supply or demand. “The highest supply of oil in the last 20 years is now,” says Rep. Bart Stupak, a Democrat from Michigan who serves on the House energy committee. “Demand is at a 10-year low. And yet prices are up.”

Asked why politicians continue to harp on things like drilling or hybrid cars, when supply and demand have nothing to do with the high prices, Stupak shakes his head. “I think they just don’t understand the problem very well,” he says. “You can’t explain it in 30 seconds, so politicians ignore it.”

BUBBLE #5 Rigging the Bailout

After the oil bubble collapsed last fall, there was no new bubble to keep things humming — this time, the money seems to be really gone, like worldwide-depression gone. So the financial safari has moved elsewhere, and the big game in the hunt has become the only remaining pool of dumb, unguarded capital left to feed upon: taxpayer money. Here, in the biggest bailout in history, is where Goldman Sachs really started to flex its muscle.

It began in September of last year, when then-Treasury secretary Paulson made a momentous series of decisions. Although he had already engineered a rescue of Bear Stearns a few months before and helped bail out quasi-private lenders Fannie Mae and Freddie Mac, Paulson elected to let Lehman Brothers — one of Goldman’s last real competitors — collapse without intervention. (“Goldman’s superhero status was left intact,” says market analyst Eric Salzman, “and an investment banking competitor, Lehman, goes away.”) The very next day, Paulson green-lighted a massive, $85 billion bailout of AIG, which promptly turned around and repaid $13 billion it owed to Goldman. Thanks to the rescue effort, the bank ended up getting paid in full for its bad bets: By contrast, retired auto workers awaiting the Chrysler bailout will be lucky to receive 50 cents for every dollar they are owed.

Immediately after the AIG bailout, Paulson announced his federal bailout for the financial industry, a $700 billion plan called the Troubled Asset Relief Program, and put a heretofore unknown 35-year-old Goldman banker named Neel Kashkari in charge of administering the funds. In order to qualify for bailout monies, Goldman announced that it would convert from an investment bank to a bank holding company, a move that allows it access not only to $10 billion in TARP funds, but to a whole galaxy of less conspicuous, publicly backed funding — most notably, lending from the discount window of the Federal Reserve. By the end of March, the Fed will have lent or guaranteed at least $8.7 trillion under a series of new bailout programs — and thanks to an obscure law allowing the Fed to block most congressional audits, both the amounts and the recipients of the monies remain almost entirely secret.

Converting to a bank-holding company has other benefits as well: Goldman’s primary supervisor is now the New York Fed, whose chairman at the time of its announcement was Stephen Friedman, a former co-chairman of Goldman Sachs. Friedman was technically in violation of Federal Reserve policy by remaining on the board of Goldman even as he was supposedly regulating the bank; in order to rectify the problem, he applied for, and got, a conflict of interest waiver from the government. Friedman was also supposed to divest himself of his Goldman stock after Goldman became a bank holding company, but thanks to the waiver, he was allowed to go out and buy 52,000 additional shares in his old bank, leaving him $3 million richer. Friedman stepped down in May, but the man now in charge of supervising Goldman — New York Fed president William Dudley — is yet another former Goldmanite.

The collective message of all this — the AIG bailout, the swift approval for its bank holding conversion, the TARP funds — is that when it comes to Goldman Sachs, there isn’t a free market at all. The government might let other players on the market die, but it simply will not allow Goldman to fail under any circumstances. Its edge in the market has suddenly become an open declaration of supreme privilege. “In the past it was an implicit advantage,” says Simon Johnson, an economics professor at MIT and former official at the International Monetary Fund, who compares the bailout to the crony capitalism he has seen in Third World countries. “Now it’s more of an explicit advantage.”

Once the bailouts were in place, Goldman went right back to business as usual, dreaming up impossibly convoluted schemes to pick the American carcass clean of its loose capital. One of its first moves in the post-bailout era was to quietly push forward the calendar it uses to report its earnings, essentially wiping December 2008 — with its $1.3 billion in pretax losses — off the books. At the same time, the bank announced a highly suspicious $1.8 billion profit for the first quarter of 2009 — which apparently included a large chunk of money funneled to it by taxpayers via the AIG bailout. “They cooked those first quarter results six ways from Sunday,” says one hedge fund manager. “They hid the losses in the orphan month and called the bailout money profit.”

Two more numbers stand out from that stunning first-quarter turnaround. The bank paid out an astonishing $4.7 billion in bonuses and compensation in the first three months of this year, an 18 percent increase over the first quarter of 2008. It also raised $5 billion by issuing new shares almost immediately after releasing its first quarter results. Taken together, the numbers show that Goldman essentially borrowed a $5 billion salary payout for its executives in the middle of the global economic crisis it helped cause, using half-baked accounting to reel in investors, just months after receiving billions in a taxpayer bailout.

Even more amazing, Goldman did it all right before the government announced the results of its new “stress test” for banks seeking to repay TARP money — suggesting that Goldman knew exactly what was coming. The government was trying to carefully orchestrate the repayments in an effort to prevent further trouble at banks that couldn’t pay back the money right away. But Goldman blew off those concerns, brazenly flaunting its insider status. “They seemed to know everything that they needed to do before the stress test came out, unlike everyone else, who had to wait until after,” says Michael Hecht, a managing director of JMP Securities. “The government came out and said, ‘To pay back TARP, you have to issue debt of at least five years that is not insured by FDIC — which Goldman Sachs had already done, a week or two before.”

And here’s the real punch line. After playing an intimate role in four historic bubble catastrophes, after helping $5 trillion in wealth disappear from the NASDAQ, after pawning off thousands of toxic mortgages on pensioners and cities, after helping to drive the price of gas up to $4 a gallon and to push 100 million people around the world into hunger, after securing tens of billions of taxpayer dollars through a series of bailouts overseen by its former CEO, what did Goldman Sachs give back to the people of the United States in 2008?

Fourteen million dollars.

That is what the firm paid in taxes in 2008, an effective tax rate of exactly one, read it, one percent. The bank paid out $10 billion in compensation and benefits that same year and made a profit of more than $2 billion — yet it paid the Treasury less than a third of what it forked over to CEO Lloyd Blankfein, who made $42.9 million last year.

How is this possible? According to Goldman’s annual report, the low taxes are due in large part to changes in the bank’s “geographic earnings mix.” In other words, the bank moved its money around so that most of its earnings took place in foreign countries with low tax rates. Thanks to our completely fucked corporate tax system, companies like Goldman can ship their revenues offshore and defer taxes on those revenues indefinitely, even while they claim deductions upfront on that same untaxed income. This is why any corporation with an at least occasionally sober accountant can usually find a way to zero out its taxes. A GAO report, in fact, found that between 1998 and 2005, roughly two-thirds of all corporations operating in the U.S. paid no taxes at all.

This should be a pitchfork-level outrage — but somehow, when Goldman released its post-bailout tax profile, hardly anyone said a word. One of the few to remark on the obscenity was Rep. Lloyd Doggett, a Democrat from Texas who serves on the House Ways and Means Committee. “With the right hand out begging for bailout money,” he said, “the left is hiding it offshore.”

BUBBLE #6 Global Warming

Fast-forward to today. It’s early June in Washington, D.C. Barack Obama, a popular young politician whose leading private campaign donor was an investment bank called Goldman Sachs — its employees paid some $981,000 to his campaign — sits in the White House. Having seamlessly navigated the political minefield of the bailout era, Goldman is once again back to its old business, scouting out loopholes in a new government-created market with the aid of a new set of alumni occupying key government jobs.

Gone are Hank Paulson and Neel Kashkari; in their place are Treasury chief of staff Mark Patterson and CFTC chief Gary Gensler, both former Goldmanites. (Gensler was the firm’s co-head of finance.) And instead of credit derivatives or oil futures or mortgage-backed CDOs, the new game in town, the next bubble, is in carbon credits — a booming trillion dollar market that barely even exists yet, but will if the Democratic Party that it gave $4,452,585 to in the last election manages to push into existence a groundbreaking new commodities bubble, disguised as an “environmental plan,” called cap-and-trade.

The new carbon credit market is a virtual repeat of the commodities-market casino that’s been kind to Goldman, except it has one delicious new wrinkle: If the plan goes forward as expected, the rise in prices will be government-mandated. Goldman won’t even have to rig the game. It will be rigged in advance.

Here’s how it works: If the bill passes, there will be limits for coal plants, utilities, natural-gas distributors and numerous other industries on the amount of carbon emissions (a.k.a. greenhouse gases) they can produce per year. If the companies go over their allotment, they will be able to buy “allocations” or credits from other companies that have managed to produce fewer emissions. President Obama conservatively estimates that about $646 billion worth of carbon credits will be auctioned in the first seven years; one of his top economic aides speculates that the real number might be twice or even three times that amount.

The feature of this plan that has special appeal to speculators is that the “cap” on carbon will be continually lowered by the government, which means that carbon credits will become more and more scarce with each passing year. Which means that this is a brand new commodities market where the main commodity to be traded is guaranteed to rise in price over time. The volume of this new market will be upwards of a trillion dollars annually; for comparison’s sake, the annual combined revenues of all electricity suppliers in the U.S. total $320 billion.

Goldman wants this bill. The plan is (1) to get in on the ground floor of paradigm-shifting legislation, (2) make sure that they’re the profit-making slice of that paradigm and (3) make sure the slice is a big slice. Goldman started pushing hard for cap-and-trade long ago, but things really ramped up last year when the firm spent $3.5 million to lobby climate issues. (One of their lobbyists at the time was none other than Patterson, now Treasury chief of staff.) Back in 2005, when Hank Paulson was chief of Goldman, he personally helped author the bank’s environmental policy, a document that contains some surprising elements for a firm that in all other areas has been consistently opposed to any sort of government regulation. Paulson’s report argued that “voluntary action alone cannot solve the climate change problem.” A few years later, the bank’s carbon chief, Ken Newcombe, insisted that cap-and-trade alone won’t be enough to fix the climate problem and called for further public investments in research and development. Which is convenient, considering that Goldman made early investments in wind power (it bought a subsidiary called Horizon Wind Energy), renewable diesel (it is an investor in a firm called Changing World Technologies) and solar power (it partnered with BP Solar), exactly the kind of deals that will prosper if the government forces energy producers to use cleaner energy. As Paulson said at the time, “We’re not making those investments to lose money.”

The bank owns a 10 percent stake in the Chicago Climate Exchange, where the carbon credits will be traded. Moreover, Goldman owns a minority stake in Blue Source LLC, a Utah-based firm that sells carbon credits of the type that will be in great demand if the bill passes. Nobel Prize winner Al Gore, who is intimately involved with the planning of cap-and-trade, started up a company called Generation Investment Management with three former bigwigs from Goldman Sachs Asset Management, David Blood, Mark Ferguson and Peter Harris. Their business? Investing in carbon offsets. There’s also a $500 million Green Growth Fund set up by a Goldmanite to invest in green-tech … the list goes on and on. Goldman is ahead of the headlines again, just waiting for someone to make it rain in the right spot. Will this market be bigger than the energy futures market?

“Oh, it’ll dwarf it,” says a former staffer on the House energy committee.

Well, you might say, who cares? If cap-and-trade succeeds, won’t we all be saved from the catastrophe of global warming? Maybe — but cap-and-trade, as envisioned by Goldman, is really just a carbon tax structured so that private interests collect the revenues. Instead of simply imposing a fixed government levy on carbon pollution and forcing unclean energy producers to pay for the mess they make, cap-and-trade will allow a small tribe of greedy-as-hell Wall Street swine to turn yet another commodities market into a private tax collection scheme. This is worse than the bailout: It allows the bank to seize taxpayer money before it’s even collected.

“If it’s going to be a tax, I would prefer that Washington set the tax and collect it,” says Michael Masters, the hedge fund director who spoke out against oil futures speculation. “But we’re saying that Wall Street can set the tax, and Wall Street can collect the tax. That’s the last thing in the world I want. It’s just asinine.”

Cap-and-trade is going to happen. Or, if it doesn’t, something like it will. The moral is the same as for all the other bubbles that Goldman helped create, from 1929 to 2009. In almost every case, the very same bank that behaved recklessly for years, weighing down the system with toxic loans and predatory debt, and accomplishing nothing but massive bonuses for a few bosses, has been rewarded with mountains of virtually free money and government guarantees — while the actual victims in this mess, ordinary taxpayers, are the ones paying for it.

It’s not always easy to accept the reality of what we now routinely allow these people to get away with; there’s a kind of collective denial that kicks in when a country goes through what America has gone through lately, when a people lose as much prestige and status as we have in the past few years. You can’t really register the fact that you’re no longer a citizen of a thriving first-world democracy, that you’re no longer above getting robbed in broad daylight, because like an amputee, you can still sort of feel things that are no longer there.

But this is it. This is the world we live in now. And in this world, some of us have to play by the rules, while others get a note from the principal excusing them from homework till the end of time, plus 10 billion free dollars in a paper bag to buy lunch. It’s a gangster state, running on gangster economics, and even prices can’t be trusted anymore; there are hidden taxes in every buck you pay. And maybe we can’t stop it, but we should at least know where it’s all going.

This article originally appeared in the July 9-23, 2009 of Rolling Stone.

Further Reading:

Invasion of the Home Snatchers, by Matt Taibbi (2010)

The Feds vs. Goldman, By Matt Taibbi (2010)

Wall Street’s Big Win, by Matt Taibai (2010)

Apocalypse, New Jersey: A Dispatch from America’s Most desperate Town, by Matt Taibbi (2013)

Taibblog: Commentary on Politics and the Economy by Matt Taibbi