In Planet of Slums, socialist historian Mike Davis mapped the brutal urban realities shared by more than one billion of the earth’s inhabitants, unmoored by neoliberal globalization from the “formal” world economy. From Baghdad to Karachi and from Lagos to Los Angeles and beyond, as ever-broader segments of the world’s population are transformed into “a surplus humanity,” the master class presents “no scenario” for ameliorating the immiseration it has itself designed through the “normal” functioning of a grotesque system of exploitation and injustice.

The vast expansion of planetary slum zones amid sumptuary wealth and dystopian high-rise palaces of glass and steel patrolled 24/7 by armed sentries, are future portents of a regime where the savage inequalities of the “free market” go hand in hand with the terminal vacuousness of the “Real Housewives of Orange County.” As economist Michel Chossudovsky points out, the current economic crisis gripping late capitalism is hardly an accident of history:

…downsizing, corporate restructuring and relocation of production to cheap labor havens in the Third World have been conducive to increased levels of unemployment and significantly lower earnings to urban workers and farmers. This new international economic order feeds on human poverty and cheap labor: high levels of national unemployment in both developed and developing countries have contributed to depressing real wages. Unemployment has been internationalized, with capital migrating from one country to another in a perpetual search for cheaper supplies of labor.¹

Under existent conditions, a racist discourse of “feral cities” haunts the imagination of military theoreticians. Considered a “breeding ground” of subversion by ruling class economists, politicians and sociologists, the urban battles of the future are being “wargamed” today.

Military Operations on Urban Terrain and Other Horrors of a Horrible System

Pentagon strategists refer to their doctrine of urban warfighting as Military Operations on Urban Terrain (MOUT). But urban warfare pose multiple risks and challenges for military planners; not least of which are recognizing “targets” across a complex environment of multistory apartment blocks, small- and large scale industrial infrastructure, power grids, political and cultural centers, sports complexes, houses of worship and transportation hubs.

Fraught with problems not readily amenable to technological “fixes,” Durham University geographer Stephen Graham cites one military theorist’s view of the conundrums faced by 21st century “warfighters”,

Urban operations represent a black hole in the current Revolution in Military Affairs pantheon of technological advantage […]. The technologies traditionally ascribed to the current Revolution in Military Affairs phenomenon will have negligible impact on Military Operations in Urban Terrain.²

Indeed, there is a powerful imperative driving military strategists and their political masters: the stark recognition that capital’s economic/political project for domination is an acute failure, one which is creating conditions for chronic “low-intensity warfare” campaigns in cities against a panoply of “insurgent forces.”

In Venezuela for example, autonomous groups such as the 23 de Enero People’s Army, the “Tupamaros,” La Piedrita, Militia Zero, the Zapatista Collective or the Revolutionary Movement of Bolivarian Defense, neighborhood organizations of battle-hardened veterans who have at best, a strained relationship with Hugo Chávez’s Bolivarian government, will form the backbone of armed resistance to any outside intervention or internal counterrevolution by Venezuela’s CIA-NED-financed elite “opposition.” As George Ciccariello-Maher describes:

It was in [the] context of repression that the Venezuelan popular militia movement was born. Neither entirely clandestine nor fully open, small groups began to spring up to defend local barrios from both the state and the burgeoning parallel violence of narcotrafficking. Small groups, masked and armed, began to make semi-public appearances, giving an ultimatum to local drug dealers: either you stop selling drugs or you’ll be killed. The police, too, found themselves all the more frequently victims of armed ambushes and shootouts with masked militias. In order to explain this phenomenon, the police, government officials, and even more appreciative local residents adopted a single moniker, derived from the Uruguayan urban guerrilla struggle: in mythical fashion, these militias were deemed “Tupamaros.”³

Masters and mistresses of American barrios and “ghettoes,” Brazilian favelas and South Asian chawls where even police fear to tread, rapid urbanization has radically undermined the high-tech advantages built-up by the U.S. since the dawn of the Cold War, thwarting American fantasies of “dominating the battlespace” through “network-centric warfare” (NCW).

According to NCW theory, an alleged “information advantage” is leveraged into a competitive warfighting upper hand through “robust networking” of well-informed, though geographically dispersed forces. But as the U.S. military discovered in Iraq, the high-tech systems built at a cost of tens of billions of dollars were brought to ground by disposable cell phones, garage door openers, twenty year old ordnance and the will to resist. Multiply radical neighborhood militias such as the “Tupamaros” on a planetary scale and it becomes abundantly clear that imperialism has its work cut out for it!

The political realities of urban combat inhibit the tactical requirements necessary to “secure” an urban “battlespace.” Short of obliterating a city as the United States did during its series of destructive campaigns in Fallujah in 2003-2004, military options are fairly limited. Resorting to overwhelming force in the absence of broad political support in the area is hardly the way to win “hearts and minds,” as the Pentagon discovered much to its horror in Vietnam during the 1968 Tet Offensive, when the U.S. simultaneously achieved a fleeting tactical victory and a devastating strategic defeat.

As a result of recent urban combat debacles, MOUT strategists are building simulated cities in the American outback as a “living laboratory” for protracted combat operations in an urban environment.

Mainly as a consequence of widespread opposition to 1999 “Urban Warrior” exercises when the Marine Corps’ Urban Warfighting Laboratory and U.S. Army Special Forces staged “realistic” war games on the streets of American cities, the Pentagon is creating entire pseudo landscapes and ghostly architectures: the urban space transformed into a militarist simulacrum.

Bryan Finoki, the editor of Subtopia: A Field Guide to Urban Militarism writes:

Somewhere out there in the restricted strata of Defense real estate the Marine Corps is taking over cities in an imaginary Third World that have been grafted and turned into some sort of urban template for a spectacularly unseen militarized stage show. There are multiple MOUT facilities all over the world, but in addition to two that already exist at Twentynine Palms, there is a brand new site cropping up along the fringes that’s being called CAMOUT, or Combined-Arms Military Operations in Urban Terrain. Pronounced “K-MOUT”, it is expected to be the Mecca, so to speak, of the entire MOUT program.⁴

Covering some 280 acres, a half-hour’s drive from the Marine Corps’ Twentynine Palms Air Ground Combat Center the training facility is “roughly the size of downtown San Diego,” journalist Kelly O’Sulllivan writes. CAMOUT “will feature an Olympic-size soccer stadium, a hospital, airport, large marketplace, prison, police compounds, schools, an industrial center, extensive underground tunnel systems and two embassies.”

And at a cost of some $250 million, CAMOUT is slated to be the largest such facility owned by the Defense Department. Orbiting somewhere between war and entertainment, the Pentagon is designing a disquieting netherworld, a series of Potemkin villages whose sole purpose is to perfect its apparatus of death and destruction.

Stephen Graham writes:

The global complex of urban warfare training cities involve a different relationship to political violence to the atom-bombed suburban homes or fire-bombed tenements and rice-paper structures of the 20th century. For here, the simulation is not designed to sustain attempts at outright urban annihilation through total war. Rather, its purpose is to hone skills of occupation, counter-insurgency warfare, and urban remodelling via expeditionary, colonial war.⁵

Constructed for the maximum recreation of war’s nightmare and horror, these simulated cities are filled with dazzling special effects courtesy of Hollywood. In addition to “realistic” settings and “culturally accurate” renditions of Middle Eastern architecture, these deranged spaces feature an array of olfactory sensations such as “…dead bodies, burning rubber, diesel fumes.” According to special effects wizard Manuel Chaves who runs the urban warfare site at Fort Wainright, Alaska: “I can do nine different buildings, nine different smells. Generally, if it’s a burning building, we put something really nasty in there like burning bodies.”

A $13 million facility built on a 30 acre site in Fort Knox, Kentucky named Zussman village is able to accommodate “hundreds of role-playing ‘insurgents,’ who dress in keffiyehs and are armed with AK47s and RPGs.” According to Graham, “a ‘Third World’ slum is being constructed near the railroad.”

To emphasize the importance of urban warfare simulation in current military doctrine, in 2006 Congress commissioned the RAND Corporation to produce a report on the efficacy of current training facilities. RAND did, and with a characteristic racist subtext to boot.

RAND researchers evaluated training facilities for their architectural and infrastructural “realism” in mirroring conditions allegedly present in the “megaslums” of the global south. Those with “clutter/debris/filth,” “slums/shanty towns/walled compounds,” “subterranean complexes” and simulated “government, hospital/prison/asylum structures,” scored highest according to Graham.

Adding to the mix, RAND researchers recommended that U.S. military planners consider the possibility of “appropriating” entire “ghost towns” within the continental U.S., in other words, cities that have been deindustrialized and largely abandoned. RAND “specialists” conclude: “the use of abandoned towns has moved beyond the concept phase into what might be considered the early test and development phase.”

Graham reports that attention was focused on the virtually abandoned copper-mining town of Playas, New Mexico. The town has also been used extensively by the Department of Homeland Security for training anti-suicide bomb squads. Apparently, the destruction of U.S. manufacturing, mining and industrial infrastructure under the pressure of neoliberal globalization is viewed as a “plus” in some quarters.

“Over the course of time, towns and cities eventually die,” writes Steve Rowell of the Center for Land Use Interpretation in Culver City, California. “Despite this and despite the receding U.S. economy, the industries of defense and disaster preparedness are flourishing, reversing this trend in some of the most remote areas of the nation. The war on terror is redefining the American pastoral in an unexpected way.” In the case of Playas, its new role is “as a generic American suburb under simulated attack.” And, in future, as a simulated “Arab city” where U.S. “warfighters” come to hone skills for expeditionary war, Graham reports.

Despite adverse publicity generated by “Urban Warrior” exercises, RAND analysts insist they continue. Indeed, such displays of militarist omniscience will be even more necessary in the future because “no purpose-built urban training site and no simulation for many years to come will be able to present the heterogeneity and complexity of a modern megalopolis.”

Am I BLUE?

But wargaming isn’t the only front where simulated urban battles are being fought and refought. Enter the Defense Advanced Research Projects Agency (DARPA).

Under contract to DARPA, capitalist grifter Computer Science Corporation, combined electronic mapping and satellite image technology to create purely electronic representations of cities that are, or may in the future, come under the purview of U.S. military occupation. Scores of cities around the world are being electronically mapped by the National Geospatial-Intelligence Agency (NGA) in order to create a “virtualized reality” for U.S. “warfighters.”

Within complex simulation models, the structures of Middle Eastern or indeed, any city, have been classified using “Urban Terrain Zones” based “on international databases of the construction materials and practices used in the different parts of target cities: steel, glass and concrete in city cores, older brick, stone or mud in casbahs,” Graham informs us.

And even larger simulations of global south megacities are providing grist for the murderous mill of U.S. military “gamers” as they imagine full-scale counterinsurgent warfare well into the future. One electronic simulation, “Urban Resolve,” has actually mapped an eight square mile swathe of Jakarta, Indonesia in three dimensions! According to Graham, “this has been done down to the interior of the (1.6 million) buildings, and also involves 109,000 mobile ‘vehicles’ and ‘civilians,’ as well as the subterranean infrastructures.”

Such projects are expanding exponentially. Under the heading, Urban Reasoning and Geospatial Exploitation Technology (URGENT), DARPA’s Information Processing Techniques Office (IPTO), is searching for “new technologies” to defeat urban insurgencies. According to IPTO’s “Mission Statement” on the program:

The recognition of targets in urban environments poses unique operational challenges for the warfighter. … Today’s urban missions involve analyzing a multitude of urban objects in the area of regard. As military operations in urban regions have grown, the need to identify urban objects has become an important requirement for the military. Understanding the locations, shapes, and classifications of objects is needed for a broad range of pressing urban mission planning analytical queries.

A related program, Building Labels for Urban Environments (BLUE),

seeks innovative approaches that exploits surveillance video data to classify buildings automatically. In addition to visual feature data such as color and line orientation, video captures data concerning motion over time. The latter affords the opportunity for automated recognition of patterns in moving objects in the vicinity of buildings. These motion patterns may be reliable indicators of a building’s function. BLUE technology should be able to learn patterns that distinguish building types and to process video from surveillance video data, such as that collected from high-endurance military UAV platforms, to label buildings correctly.

As we have seen, the U.S. ruling class is intent on deploying its entire high-tech arsenal against the global south and perhaps someday soon, on the streets of American cities. Tied intimately into the defense, computing, entertainment and “homeland security” industries, the Pentagon’s quixotic quest to “dominate the battlespace,” is reflective of the precariousness of the entire U.S. neocolonial project in the post-Cold War world.

Despite its abject failure against urban insurgents in Iraq, the U.S. military’s obsession with building simulation models of urban landscapes and electronic mapping suites of real cities tell us a great deal about the masters’ preoccupation–and fear–with the direction things are heading.

Tom Burghardt is a researcher and activist based in the San Francisco Bay Area. In addition to publishing in Covert Action Quarterly, Love & Rage and Antifa Forum, he is the editor of Police State America: U.S. Military “Civil Disturbance” Planning, distributed by AK Press.

From Dissident Voice

The Venezuelan opposition is so rabid and so bloodthirsty, they’ll stop at nothing to get Hugo Chavez out of office. They’ll stage violence as a way of “protesting” it. They’ll even kill their own. We saw that already on April 11, 2002, when they staged a coup in which rooftop snipers and undercover sharpshooters, in concert with Metropolitan Caracas police officers (controlled by an anti-Chavez mayor, Alfredo Peña) fired on Chavista and anti-Chavista demonstrators alike. In the final death toll, there were more Chavistas than anti-Chavistas killed, but the point of my mentioning it is this: They will even kill their own if it “helps” them politically. They have absolutely no compunctions about it.

Here, however, is one example of such terror tactics backfiring, badly. In recent violence at the University of Los Andes (ULA), a young anti-Chavista demonstrator, Douglas Rojas, was fatally wounded by shrapnel. 48 hours later, he was declared dead. His fellow M-13ers were quick to blame the death on the police, who they say fired on them with shotguns full of the stuff.

But the following video tells a different story:

In it, we see the motionless Douglas Rojas on the ground, masked and wearing a single glove and with a pool of blood beneath his head, surrounded by other students, who are waiting for an ambulance from the ULA medical clinic to pick him up. At one point, about 1:05 in the video, we can hear a bystander saying “Don’t touch him!” He’s lying face-down, which begs the question: from which direction was he hit?

An autopsy has since determined that he was hit from from behind. This is consistent with the way his body lay at the scene; persons struck from behind tend to fall forward, while persons struck from the front will usually fall on their backs.

But here’s the rub: At the time of the fatal impact, Douglas Rojas was facing the police, who were more than 25 metres away and behind a security fence. There were no officers behind him. All that was behind him were his fellow demonstrators. The projectile that killed him entered through the back of the head and at point-blank range. And indeed, at 4:05 in the video, according to Aporrea, a bystander can be heard yelling “Point-blank, for God’s sake!” Several others can also be heard repeating the phrase, “Que bolas” (“what balls”).

What balls, indeed. The escualidos have lost no time making grotesque hay of this murder in Mérida, as well as that of another young student, 19-year-old Roxana Vargas Quintero, in Caracas, who studied journalism and worked part-time on the production team of RCTV’s local version of “Who Wants To Be A Millionaire”. Naturally both deaths have resulted in more “protests”, which in turn threaten to cause more deaths. All of which they will undoubtedly exploit—even when the deaths were their own doing, as Douglas Rojas’s obviously was.

After all, they have no problem with killing their own young. Why should they have a problem with eating them?

PS: The video I posted has already been (predictably) removed from YouTube. Nevertheless, I was able to see it twice and describe in detail what happened. I have now replaced it with an identical copy from RuTube. Ironically, the OTHER video, which I only linked as “making grotesque hay”, is still up, although it is MUCH more offensive. It sets its blatant crapaganda to satanic fascist thrash-metal. Someone please notify YouTube that THAT one is the real violator of their terms of service.

From News of the Restless

In Cochabama, Bolivia, factory workers and union leaders began a hunger strike in July to protest management abuses and deteriorating conditions at the Manaco shoe factory, a subsidiary of the Canadian-based global conglomerate Bata. Among the hunger strikers is the well-known Bolivian unionist and global justice leader Oscar Olivera.

Eleven days into the hunger strike, the following statement was issued in the name of the National Confederation of Bolivian Workers and the Factory Workers Federation of Cochabamba.

THIS HUNGER strike picket has brought to light a problem that is common among all Bolivian factory workers who find ourselves defenseless and, as we did in April 2000 and October 2003, have raised our voice against the injustice and have acted with dignity.

An agreement has been reached for our comrade Alejandro Saravia that is less unjust than what the company was originally trying to get away with. This, as we said, does not mean, however, that this problem of life and of livelihood will be solved with a few coins. We reserve the right to continue protesting against the violation of rights, not only for those of Alejandro, but also for those of many more Manaco workers. Alejandro today received a minimum compensation for his 28 exemplary years of work in this factory.

We have achieved this in the way we know how, in our own way, with the mobilization of the rank-and-file workers of other factories, with our hunger strike, in order to ensure that these companies will not continue to get away with lying and exploiting. We have seen in this conflict the desperation, the fear, and the lies of the company, which to this day is still requiring its workers to choose between hunger and renouncing their rights as workers.

And we acted alone against the company, due to the fact that the Manaco union, which once made us proud, is today a refuge of a group of traitors who are servants of management. The Federation of Factory Workers of Cochabamba and the General Confederation of Bolivian Workers do not recognize a union incapable of fighting for consistent work and the well-being of their membership…They should be lackeys and foremen, not union leaders.

Nor can it be said that the government came to our defense. Two days of tensions and agreements are not worth anything: neither the Departmental Administration of Labor nor the Labor Minister resolved the conflict, nor did they support Alejandro Saravia in his just demands. What was gained was rather our collective success. Given that all they did was hide and make agreements behind the backs of those affected, it would have been better if they had not come at all. At least now we can understand the labor politics of this government “of change” and are not expecting anything from it, because it appears to be a continuation of its predecessors.

Would that the Manaco corporation nor any company in Bolivia feel at ease, because we are beginning to fight for our brothers and sisters who are today hostages of their trickery and because the forms of struggle and claiming of our rights are more alive today than ever, as our hunger strike and protests show. And if today we lift this hunger strike, it is to continue the fight, such that the demands and the protests will become our tools.

Translation by Sarah Hines.

From Socialist Worker

News: In which a MoJo reporter goes to a gun show in search of some serious firepower.

By Bruce Falconer

In a warehouse on the outskirts of the rural Shenandoah Valley town of Fishersville, Virginia, it didn’t take long to spot what I was looking for. There were plenty of guns lined up neatly on display tables, everything from Civil War-style muskets to handguns to hunting rifles, but I was in the market for something with a bit more firepower. At a table near the entrance, I found it: a Chinese-made mak-90 semiautomatic rifle, a variation of the Russian AK-47 designed to circumvent federal regulations on the import of assault weapons. “It’s the same gun,” the dealer told me. “They just eliminated the pistol grip, replaced it with a threaded thumb grip, and took off the flash suppressor.” This particular model came with a five-round detachable clip, but the dealer assured me it would accept larger magazines, including a 75-round “ammunition drum.” He was uncomfortable trading in handguns, he said, explaining that “there’s too much controversy about them,” but was willing to sell the mak-90 to anyone with a valid ID and $450.

The reemergence of imported assault rifles on the US market signals a dramatic shift in federal firearms policy. By 1998, four years after a federal ban on assault weapons took effect, gun manufacturers had easily managed to bypass the law by making small alterations to their weapons. To close the loophole, the Clinton administration prohibited the Bureau of Alcohol, Tobacco, Firearms, and Explosives from granting import permits for 58 types of assault weapons, adding to an import rule first put in place by George H.W. Bush. These included dozens of AK-47 variants and other high-powered semiautomatic rifles that could accept high-capacity magazines originally designed for military use.

But not only did the current Bush administration allow the 1994 assault weapons ban to lapse, it has also, through the atf, permitted gun manufacturers to game the import rules, effectively reopening American borders to foreign assault weapons. While the import ban remains nominally in force, gun importers are now able to easily skirt it by assembling the guns in the US. Describing the manufacturing process at Florida-based Century International Arms Incorporated, a leading importer of foreign assault weapons, an official in the atf’s firearms import branch told me “they import the parts” and combine them with US-made materials specifically prohibited by the import ban. That way, technically speaking, the guns “are made in this country,” he said. But according to Kristen Rand, the legislative director at the Violence Policy Center, a Washington-based gun control advocacy group, the atf is simply shirking its responsibility. “They’ve created this Alice in Wonderland world, where if you take it apart and put it back together then it’s no longer an import, but the end result is the same,” she says. “They just keep making this their own moving target.”

Another loophole was created for the sks semiautomatic carbine, developed in 1945 for use by the Soviet army until it was replaced by the more rugged AK-47. The Bush administration reclassified the sks as a “curio,” adding it to the atf’s list of such weapons, most over 50 years old and considered collectors’ items, that are automatically authorized for import. However, the atf reported in 2002 that the sks was “the rifle model most frequently encountered by law enforcement officers” and noted that the guns “are capable of penetrating the type of soft body armor typically worn by law enforcement officers.” Since being added to the atf’s curios list, the sks has become one of the cheapest assault rifles on the market—less expensive, at between $89 and $250, than most handguns.

Yet even as foreign-made assault weapons are pouring in, information about their importation and use in crime is no longer accessible. The atf maintains databases both of the firearms-import licenses it has granted and of the traces it has conducted on weapons recovered at crime scenes. But in 2003, at the urging of the National Rifle Association, Rep. Todd Tiahrt (R-Kan.) attached a last-minute amendment to a spending bill, prohibiting the agency from publishing import and trace data. (“I wanted to make sure I was fulfilling the needs of my friends who are firearms dealers,” Tiahrt told the Washington Post.) The nra’s motivation, says Dr. Garen Wintemute, an ER physician and director of the Violence Prevention Research Program at the University of California-Davis, was to prevent atf data from being used against the gun industry in court. “Cities and advocacy organizations were bringing litigation against gun manufacturers for irresponsible marketing and also, in some cases, against individual retailers,” he says. “Complete trace data would have helped them in doing that.”

In March, however, the Associated Press managed to obtain atf trace data for 2007, which showed a sharp increase in the number of trace requests for weapons, such as the AK-47 and sks, that fire 7.62-by-39-mm rounds—from just 1,140 traces in 1993, the year before the assault-weapons ban was enacted, to 8,547 last year. Already, since the ban’s expiration in 2004, the atf has documented an 11 percent rise in the number of traces run on AK-47s and similar weapons—an increase that suggests more AKs are on the streets and are being used to commit crimes.

At the Fishersville gun show, crowd members seemed particularly drawn to the assault weapons on display—hefting them, staring down their barrels, sliding open their metal bolts with a satisfying action-movie click. In addition to the AKs, dealers displayed dozens of AR-15s, a semiautomatic variation of the US military’s M-16, as well as a variety of World War II and Cold War-era surplus weapons. At one table, a little boy admired a .50-caliber sniper rifle, capable of downing a jumbo jet, while at another a man held a cheap Romanian AK knockoff to his shoulder. His T-shirt read “‘Freedom At Any Cost.’—Randy Weaver, Ruby Ridge, Idaho.” The only thing that prevented me from becoming the proud owner of a mak-90 was my Washington, DC, driver’s license: The district has the nation’s strictest gun rules. (At press time the law was under review by the Supreme Court.) But if I really wanted the mak-90, one dealer pointed out, all I had to do was move to Virginia.

There is, of course, a wide variety of assault weapons on the market. The expiration of the federal ban has essentially thrown the doors wide open—if the gun exists, you can buy it, so long as it is not fully automatic, the only kind of assault weapon still illegal under federal law. But it’s the AKs that pose the greatest threat, primarily due to their affordability. Police chiefs in cities across the country are involved in something of an arms race, says Scott Knight, chief of the Chaska, Minnesota, police department and chairman of the Firearms Committee at the International Association of Chiefs of Police. “When I started as a police officer, we had our sidearm, and we had a shotgun in the car. Then we moved from the shotgun to a 9 mm carbine or rifle. And actually, I’m just moving from that 9 mm to an AR-15. The reason is that the officer has been encountering a better-armed offender with alarming regularity…a better-armed, better-equipped, more-ready-to-shoot criminal than in the past.”

Nowhere, perhaps, has this been more noticeable (and quantifiable) than in south Florida. Speaking at the National Violent Crime Summit, a gathering of law enforcement executives held in suburban Chicago last September, Miami police chief John Timoney described how AK-47s have become the weapon of choice among violent criminals in his city. “Two or three years ago, we had the lowest homicide rate since 1967 in Miami,” he said. “Then the homicides skyrocketed with the availability of AK-47s. And it went from 3 percent of all homicides being committed with AKs, up to 9 percent two years ago, then 18 percent last year, and this year it is around 20 percent. And it’s going up…We’re being flooded with these AK-47s.” Garry McCarthy of the Newark, New Jersey, police department agreed. “We’ve got a 30 percent reduction in shooting incidents this year, but only a 5 percent reduction in murder,” he said. “So it is higher-caliber bullets. I hadn’t seen an AK-47 in New York City going back 15 years…In Newark, in our first six or eight months, we recovered about 15 of them. [We have had] running gun battles through the streets.”

And if law enforcement is noticing an uptick in AK-style rifles, it may soon confront a smaller, more easily concealable version: the AK pistol. According to Dr. Wintemute, police recently recovered one in Newark. “You can hide such a thing easily in your pant leg, and you can put the magazine somewhere else,” he says. “You can be walking around the street with, in essence, a concealable rifle with hundreds of rounds of ammunition, ready to rock.” Advertising its Romanian-manufactured AK handgun, Century International Arms Incorporated calls it “a real conversation starter.”

Bruce Falconer is a reporter in Mother Jones Washington bureau.

From Mother Jones

July 16, 2008

 THE EMERGENCY government intervention to support Fannie Mae and Freddie Mac, the government-sponsored agencies that own or guarantee nearly half of U.S. mortgages, is the latest sign of the deepening world financial crisis.

So alarming was the threat of a collapse by Fannie and Freddie that the biggest bank failure in 20 years, at mortgage lender IndyMac, took second place in the business press.

At least, that is, until the stock markets opened on July 14, when investors dumped stocks of other banks rumored to be in trouble. Wall Street analysts predict that as many as 150 more banks could fail in the coming months, virtually all as a result of mortgage-related losses.

But the bigger fear among politicians and investors was the liquidity crisis of Fannie and Freddie, the twin engines of the U.S. mortgage machine. A few months ago, the Bush administration allowed the two companies to reduce their capital reserve requirements to enable them to buy or guarantee $200 billion in mortgages.

With Wall Street investment banks stuck with housing-related losses and reluctant to buy mortgage-backed securities, the government pushed Fannie and Freddie even further into the role of picking up the slack. This, the argument went, would induce banks into making mortgage loans, thereby shoring up the collapsing housing market.

Meanwhile, the Democratic-controlled Congress raised the limit on the size of the loans that Freddie and Fannie are allowed to guarantee from $417,000 to $729,750 in 224 high-cost markets.

In the past, the two companies had been banned by Congress from purchasing or guaranteeing such jumbo loans, in part because Wall Street successfully lobbied to get that lucrative business for itself. But once the credit crunch hit, the investment banks that previously viewed Freddie and Fannie as rivals now demanded their help.

Thus, in entering the jumbo loan market, “Freddie said it will finance up to 90 percent of a property’s value, giving an instant source of liquidity to Wells Fargo Co., JPMorgan Chase & Co., Citigroup and Washington Mutual Inc.,” the Wall Street Journal noted then.

But instead of easing the crisis, Freddie and Fannie have been nearly overwhelmed by it.

The decline in the companies’ stock prices by 45 percent in one week reflected investors’ fears that the companies had an insufficient amount of capital reserves to compensate for losses resulting from foreclosures. The two companies have $81 billion in capital reserves—but that’s just 1.58 percent of their $5.1 trillion of investments and loan guarantees. Fannie has lost $7.2 billion since the middle of 2007, and Freddie has lost $4.6 billion over the same period.

To raise capital, Freddie proposed issuing stock worth $5.5 billion. But with share prices so low, this would have diluted the value of existing shares—and accelerated the decline of the stock price.

- - - - - - - - - - - - - - - -

THE CATASTROPHIC consequences of a failure by Freddie and Fannie—which were created by the federal government to assist the mortgage market, but are run as private companies—meant that some form of government intervention was inevitable. The only questions were what form it would take—and whether it would work.

So on July 13—in a Sunday announcement timed for the opening of stock markets in Asia—Treasury Secretary Henry Paulson declared that the U.S. government would stand behind the two companies.

The rescue consists of three parts: an unspecified expansion of the Treasury Department line of credit to the two companies; authority for the Treasury to purchase shares in the companies to help boost their capital reserves; and the ability to borrow at the Federal Reserve’s “discount window” for troubled banks. Paulson also proposed that Congress give the Fed new regulatory powers over the two companies.

It was the second major emergency intervention in four months by Paulson and Fed Chair Ben Bernanke. In March, the Treasury and the Fed teamed up to force the sale of the investment bank Bear Stearns to rival JPMorgan Chase at a fire-sale price—in order to prevent a bankruptcy that could have disrupted financial markets worldwide.

This time, the crisis is even more severe. “Freddie is insolvent, and Fannie is running on fumes. They’re going to end up being nationalized,” Len Blum of the investment bank Westwood Capital told Reuters. “The entire financial web depends on them. If they failed, it would make Bear Stearns look like a picnic.”

In fact, Paulson and Bernanke are trying to avoid nationalization—not least because taking Fannie and Freddie onto the government books would increase the U.S. national debt to more than $14 trillion overnight. At the same time, however, the two men were compelled to act decisively in order to preserve the credibility of the U.S. government and the financial system.

According to the most recent data from the Treasury Department, foreign investors own 21.4 percent of U.S. government agency debt—much of it from Fannie and Freddie. An outright collapse of the two companies would not only make these securities worthless, but create a crisis of confidence in U.S. Treasury bonds that finance the U.S. trade and budget deficits.

Letting Fannie and Freddie go under—as some right-wingers proposed on the grounds that the free market needed to right itself—would almost certainly trigger a world financial crash worse than anything since the Great Depression of the 1930s.

As a result, the Fed and the Treasury Department will do almost anything to protect bondholders in Fannie and Freddie. At the same time, Bernanke and Paulson are under pressure to boost the stock prices of the two companies, since shares in Fannie and Freddie are widely held by big mutual and pension funds. If the two companies’ stocks continue to slide, it will add to the fall of the stock market generally, particularly for financial institutions.

So Paulson, the former CEO of Goldman Sachs and an official in an administration supposedly committed to free-market solutions, declared that the U.S. Treasury might become a direct investor in Fannie and Freddie.

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HOW DID Wall Street get to this point? Right-wing critics of Fannie and Freddie have long claimed that the hybrid status of the companies violates the norms of the free market. Because they are government sponsored, the companies benefit from an implicit guarantee that the U.S. government would stand behind them in any crisis. Therefore, they could hold fewer capital reserves and borrow at lower interest rates than their private competitors.

At the same time, however, Fannie and Freddie were run like private companies for the benefit of shareholders. Their huge size and special quasi-governmental status gave them the ability to manipulate the political system even more effectively than their fully private rivals on Wall Street.

As the Washington Post reported, “a top lobbyist for Freddie Mac held more than 75 fundraisers for members of the House Financial Services Committee in an 18-month period several years ago, raising nearly $3 million, according to records brought to light in a federal investigation. The lobbyist’s fundraising dinners typically featured the committee’s Republican chairman at the time, Michael G. Oxley of Ohio.

“Those and other activities led to a record $3.8 million fine against Freddie Mac in 2006 for allegedly violating federal election law.”

The companies also protected themselves by hiring top officials from both Republican and Democratic administrations. Fannie, for example, hired former White House Budget Director Franklin Raines of the Clinton administration and Robert Zoellick, former U.S. trade representative under George W. Bush and now president of the World Bank.

These political connections ensured that even after Freddie Mac manipulated its earnings statements in 2003 and Fannie Mae did likewise in 2004, there were practically no consequences.

“For years, anyone warning that Fannie and Freddie should beef up their financial positions was ridiculed or run over by the lobbying machines these companies kept oiled and close at hand,” wrote the New York Times’ Gretchen Morgenson. “So their lucrative arrangement remained the same: business as usual, with all its riches, was the goal. After all, wasting money by inflating their cash cushions would just crimp their style.”

Even the market-fundamentalist Wall Street Journal editorial board argued that the U.S. government is better off making direct investments in the two companies rather than simply loaning them more money.

“We haven’t suddenly become socialists,” the Journal explained. “What taxpayers need to understand is that Fannie and Freddie already practice socialism, albeit of the dishonest kind. Their profit is privatized but their risk is socialized. We’re proposing a more honest form of socialism, with the prospect of long-term reform.”

When the Wall Street Journal calls for an “honest form of socialism,” you know the crisis is deep.

We were told a year ago that the mortgage crisis was “contained” to sub-prime mortgages issued by unscrupulous lenders to working people who couldn’t keep up with the adjustable rates. Next, we found out that the bad loans went far beyond the sub-prime market—and that the main players were the biggest names on Wall Street: Citigroup, UBS, Lehman Brothers, Bear Stearns and more. The amount of bad mortgage loans written off so far is $400 billion, and counting.

The result has been a credit crunch that’s squeezing the life out of the U.S. economy. But the Federal Reserve can’t cut interest rates any further to spur growth without aggravating inflation in food and oil prices. In fact, the latest injection of money into the system to support Fannie and Freddie will likely lead to a further decline in the value of the dollar and increase inflationary pressures.

The Bernanke-Paulson rescue plan may keep Fannie Mae and Freddie Mac afloat. But it won’t provide a solution to a financial crisis that looks likely to get much worse.

From Socialist Worker