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Global Research, July 4, 2008

Is the war against Iran on hold?

Tehran is to allow foreign investors, in what might be interpreted as an overture to the West, to acquire full ownership of Iran’s State enterprises in the context of a far-reaching “free market” style privatization program.

With the price of crude oil at 140 dollars a barrel, the Iranian State is not in a financial straightjacket as in the case of most indebted developing countries, which are obliged by their creditors to sell their State assets to pay off a mounting external debt. What are the political motivations behind this measure? And why Now?

Several Western companies have already been approached. Tehran will allow foreign capital  “to purchase unlimited shares of state-run enterprises which are in the process of being sold off”.

While Iran’s privatization program was launched during the government of Mohammed Khatami  in the late 1990s, the recent sell-off of shares in key state enterprises points to a new economic design. The underlying measure is far-reaching. It goes beyond the prevailing privatization framework applied in several developing countries within America’s sphere of influence:

“The move is designed to attract greater foreign investment and is part of the country’s sweeping economic liberalization program.

Iran will no longer make a distinction between domestic and foreign firms that wish to purchase state-run companies as long as the combined foreign ownership in any particular industry does not exceed 35%. … As an example, a foreign firm may purchase an Iranian steel company but it would not be allowed to buy every business enterprise in Iran’s steel industry.

Among the new incentive measures announced, foreign firms may also transfer their annual profit from their Iranian company out of the country in any currency they wish.”

It is important to carefully analyze this decision. The timing of the announcement by Iran’s Privatization Organization (IPO) coincides with mounting US-Israeli threats to wage an all out war against Iran.

Moreover, the divestment program is compliant with the demands of the “Washington Consensus”. The International Monetary Fund (IMF) has confirmed, with some reservations, that Tehran is committed to a “continued transition toward a viable and efficient market economy” while also implying .that the building of “investor confidence” requires an acceleration of  the privatization program.

In its May 2008 Review (Art. 4 Consultations), the IMF praised Tehran for its divestment program, which essentially transfers the ownership of State assets into private hands, while also underscoring that the program was being carried out in a speedily and efficient fashion.

Under the threat of war, is this renewed initiative by Tehran to privatize key industries intended to meet the demands of the Bush Administration?

The Bretton Woods institutions are known to directly serve US interests. They are not only in liaison with Wall Street and the US Treasury, they are also in contact with the US State Department, the Pentagon and NATO. The IMF-World Bank are often consulted prior to the onslaught of a major war. In the war’s aftermath, they are involved in providing “post conflict reconstruction” loans.  In this regard, the World Bank is a key player in channelling “foreign aid” to both Iraq and Afghanistan.

The privatization measures suggest that Iran is prepared to allow foreign capital to gain control over important key sectors of the Iranian economy.

According to the chairman of the Iranian Privatization Organization (IPO) Gholamreza Kord-Zanganeh some 230 state-run companies are slated to be privatized by end of the Iranian year (March 2009). The shares of some 177 State companies were offered in Tehran Stock Exchange in the last Iranian year (ending March 2008).

Already the state-owned Telecommunication Company of Iran (TCI) has indicated that “a number of foreign telcos have expressed an interest in acquiring its shares when the government sells off part of its interest in a month’s time. Local press reports did not name the potential investors. TCI has a monopoly in Iran’s fixed line market and is also the country’s largest cellular operator via its subsidiary MCI.” France’s Alcatel, the MTN Group of South Africa and Germany’s Siemens already have sizeable interests in Iran’s telecom industry.

Other key sectors of the economy including aluminum, copper, the iron and steel industry have recently been put up for privatization, with the shares of State companies floated on the Tehran Stock Exchange (TSE)

More than Meets the Eye

Is this decision by Tehran to implement a far-reaching privatization program, in any way connected with continuous US saber rattling and diplomatic arm twisting?

At first sight it appears that Tehran is caving into Washington’s demands so as to avoid an all war.

Iran’s assets would be handed over on a silver platter to Western foreign investors, without the need for America to conquer new economic frontiers through military means?

But there is more than meets the eye.

Washington has no interest in the imposition of a privatization program on Iran, as an “alternative” to an all out war. In fact quite the opposite. There are indications that the Bush adminstration’s main objective is to stall the privatization program.

Rather than being applauded by Washington as a move in the right direction, Tehran’s privatization program coincides with the launching (May 2008) of a far-reaching resolution in the US Congress (H.CON. RES 362), calling for the imposition of Worldwide financial sanctions directed against Iran:

“[H. CON. RES. 362] urges the President, in the strongest of terms, to immediately use his existing authority to impose sanctions on the Central Bank of Iran, … international banks which continue to conduct financial transactions with proscribed Iranian banks; … energy companies that have invested $20,000,000 or more in the Iranian petroleum or natural gas sector in any given year since the enactment of the Iran Sanctions Act of 1996; and all companies which continue to do business with Iran’s Islamic Revolutionary Guard Corps.” (See full text of H.CON RES 362) (emphasis added)

The resolution further demands that “the President initiate an international effort to immediately and dramatically increase the economic, political, and diplomatic pressure on Iran …. prohibiting the export to Iran of all refined petroleum products; imposing stringent inspection requirements on all persons, vehicles, ships, planes, trains, and cargo entering or departing Iran; and prohibiting the international movement of all Iranian officials not involved in negotiating the suspension of Iran’s nuclear program.”(emphasis added)

Were these economic sanctions to be carried out and enforced, they would paralyze trade and monetary transactions. Needless to say they would also undermine Iran’s privatization program and foreclose the transfer of Iranian State assets into foreign hands.

Economic Warfare

Now why on earth would the Bush administration be opposed to the adoption of a neoliberal-style divestment program, which would strip the Islamic Republic of some of its most profitable assets?

If “economic conquest” is the ultimate objective of a profit driven military agenda, what then is the purpose of bombing Iran, when Iran actually accepts to hand over its assets at rock-bottom prices to foreign investors, in much the same way as in other compliant developing countries including Indonesia, the Philippines, Brazil,  etc?

The largest foreign investors in Iran are China and Russia.

While US companies are notoriously absent from the list of foreign direct investors, Germany, Italy and Japan have significant investment interests in oil and gas, the petrochemical industry, power generation and construction as well as in banking. Together with China and Russia, they are the main beneficiaries of the privatization program.

One of the main objectives of the proposed economic sanctions under H. RES CON 362 is to prevent foreign companies (including those from the European Union and Japan) , from acquiring a greater stake in the Iranian economy under Tehran’s divestment program.

Other countries with major foreign investment interests in Iran include France, India, Norway, South Korea, Sweden and Switzerland. Sweden’s Svedala Industri has major interests in Iran’s copper mines.

France, Japan and Korea have interests in the automobile industry, in the form of licensing agreements with Iranian auto manufacturers.

Italy’s ENI Oil Company is involved in the development of phases 4 and 5 of the South Pars oil field amounting to 3.8 billion dollars.(See Iranian Privatisation Organization, 2008 report) Total and the Anglo-Dutch conglomerate Shell are involved in natural gas.

While the privatization process does not allow for the divestment of Iran’s State oil company, it creates an environment which favors foreign investment by a number of countries including China, Russia, Italy, Malaysia, etc. in oil refinery, the petrochemical industry, the oil services economy as well as oil and gas infrastructure including exploration and oil-gas pipelines.

While several US corporations are (unofficially) conducting business in Iran, the US trade sanctions regime (renewed under the Bush adminstration) outlaws US  citizens and companies from doing business in Iran. In other words, US corporations would not be allowed to acquire Iranian State assets under the privatisation program unless the US trade sanctions regime were to be lifted.

Moreover, all foreign firms are treated on an equal footing. There is no preferential treatment for US companies, no corrupt colonial style arrangement as in war-torn Iraq, which favors the outright transfer of ownership and control of entire sectors of the national economy to a handful of US corporations.

In other words, Tehran’s privatization program does not serve US economic and strategic interests. It tends to favor countries which have longstanding trade and investment relations with the Islamic Republic.

It favors Chinese, Russian, European and Japanese investors at the expense of the USA.

It undermines and weakens American hegemony. It goes against Washington’s design to foster a “unipolar” New World Order through both economic and military means.

And that is why Washington wants to shunt this program through a Worldwide economic sanctions regime which would, if implemented, paralyze trade, investment and monetary flows with Iran.

The proposed economic sanctions’ regime under H. CON 362 is intended to isolate Iran and prevent the transfer of Iranian assets into the hands of competing economic powers including China, Russia, the European Union and Japan.  It is tantamount to a declaration of war.

In a bitter irony, H CON 362 serves to undermine the economic interests of several of America’s allies. The Resolution would prevent them from positioning themselves in the Middle East, despite the fact that these allies (e.g. France and Germany) are also involved through NATO in the planning of the war on Iran.

War and Financial Manipulation

The Bush administration has opted for an all out war on Iran in alliance with Israel, with a view to establishing an exclusive American sphere of influence in the Middle East.

A US-Israel sponsored military operation directed against Iran, would largely backlash on the economic and financial interests of several of America’s allies, including Germany, Italy, France, and Japan.

More generally, a war on Iran would hit corporate interests involved in the civilian economy as opposed to those more directly linked to the military industrial complex and the war economy. It would undermine local and regional economies, the consumer manufacturing and services economy, the automobile industry, the airlines, the tourist and leisure economy, etc.

Moreover, an all out war feeds the profit driven agenda of global banking, including the institutional speculators in the energy market, the powerful Anglo-American oil giants and America’s weapons producers, the big five defense contractors plus British Aerospace Systems Corporation, which play a major role in the formulation of US foreign policy and the Pentagon’s military agenda, not to mention the gamut of mercenary companies and military contractors.

A small number of global corporations and financial institutions feed on war and destruction to the detriment of  important sectors of economic activity, Broadly speaking, the bulk of the civilian economy is threatened.

What we are dealing with are conflicts and rivalries within the upper echelons of the global capitalist system, largely opposing those corporate players which have a direct interest in the war to the broader capitalist economy which ultimately depends on the continued development of civilian consumer and investment demand.

These vested interests in a profit driven war also feed on economic recession and financial dislocation. The process of economic collapse which results, for instance, from the speculative hikes in oil and food prices, triggers bankruptcies on a large scale, which ultimately enable a handful of global corporations and financial institutions to “pick up the pieces” and consolidate their global control over the real economy as well as over the international monetary system.

Financial manipulation is intimately related to military decision-making. Major banks and financial institutions have links to the military and intelligence apparatus. Advanced knowledge or inside information by these institutional speculators regarding specific “false flag” terrorist attacks, or military operations in the Middle East is the source of tremendous speculative gains.

Both the war agenda and the proposed economic sanctions regime trigger, quite deliberately, a global atmosphere of insecurity and economic chaos.

In turn, the institutional speculators in London, Chicago and New York not only feed on economic chaos and uncertainty, their manipulative actions in the energy and commodity markets contribute to spearheading large sectors of the civilian economy into bankruptcy.

The economic and financial dislocations resulting from the hikes in the prices of crude oil and food staples are the source of financial gains by a handful of global actors. Speculators are not concerned with the far-reaching consequences of a broader Middle East war, which could evolve into a World War Three scenario.

The pro-Israeli lobby in the US indirectly serves these powerful financial interests.  In the current context, Israel is an ally with significant military capabilities which serves America’s broader objective in the Middle East. Washington, however, has little concern for the security of Israel, which in the case of a war on Iran would be the first target of retaliatory military action by Tehran.

The broader US objective consists in establishing, through military and economic means, an exclusive US sphere of influence throughout the Middle East.

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The Kassandra Project

Global Research, June 25, 2008

“If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around them will deprive the people of all property until their children wake up homeless on the continent their fathers conquered. The issuing power should be taken from the banks and restored to the people, to whom it properly belongs.”

– Thomas Jefferson, Letter to Treasury Secretary Albert Gallatin (1802)

Jefferson had it right. More than 1.5 million homeowners are expected to enter foreclosure this year, and about half of them are expected to have their homes repossessed. If the dire consequences Jefferson warned of 200 years ago have been slow in coming, it is because they have been concealed by what Jerome a Paris calls the Anglo Disease – “the highly unequal economy whereby the rich and the financial sector . . . capture most of the income but hide it by providing cheap debt to the middle classes so that they can continue to spend.” He calls “finance” the “cannibalistic” sector in today’s economy. Writing in The European Tribune this month, he states:

“[O]ne of the more attractive features of the financial world, for its promoters, is its ability to concentrate huge fortunes in a small number of hands, and promote this as a good thing (these people are said to be creating wealth, rather than capturing it). . . . [O]f course, the reality is that such wealth concentration is created by squeezing the rest, as is obvious in the stagnation of incomes for most in the middle and lower rungs of society. This is not so much wealth creation as wealth redistribution, from the many to the few. But what has made this unequality . . . tolerable is that the financial world itself was able to provide a convenient smokescreen, in the form of cheap debt, provided in abundance to all. The wealthy used it to grab real assets in funny money, and the rest were kindly allowed to keep on spending by tapping their future income rather than their insufficient current one; in a nutshell, the debt bubble hid the class warfare waged by the rich against everybody else . . . .”1

Now the debt bubble is bursting, with the anticipated real estate crash, banking crisis, foreclosures, and inevitable recession. “The income capture mechanisms set up during the bubble have not been reversed, so the pain is falling disproportionately on the poorest,” writes Jerome a Paris. Meanwhile, finance is being bailed out. What’s to be done? “[T]he financiers . . . will say that more ‘reform’ and ‘deregulation’ and tax cuts are needed,” he says, but “maybe it’s time to stop listening to what is highly self-interested drivel, and take back what they grabbed: it’s not theirs.”

Good idea, but how? The financiers own the media, and their massively funded lobbies control Congress. How can we the people get enough clout to take on the giant financial and corporate giants? What can we do that will make politicians sit up and take notice?

How about swarming the courts? New case law indicates that a majority of the 750,000 homeowners expected to lose their homes this year could have a valid defense to foreclosure. As much as $2 trillion in real estate may be vulnerable to this defense, providing a very big stick for a lobby of motivated debtors. Mobilizing that group, in turn, could light a fire under the investors in mortgage-backed securities — the pension funds, money market funds and insurance companies holding these “orphan” mortgages. These investors also wield a very big stick, in the form of major law firms on retainer. When the embattled banks demand a bailout because they are “too big to fail,” the taxpayers can respond, “You have already failed. It is time to try something new.”

The Legal Trump Card: Make Them Produce the Note

A basic principle of contract law is that a plaintiff suing on a written contract must produce the signed contract proving he is entitled to relief. If there is no signed mortgage note or recorded assignment, foreclosure is barred. The defendant must normally raise this defense, and most defaulting homeowners, unaware of legal procedure and concerned about the expense of hiring an attorney, just let their homes go uncontested. But when the plaintiffs bringing subprime foreclosure actions have been challenged, in most cases they haven’t been able to produce the notes.

Why not? It appears to be more than just sloppy paperwork. The banks that originally entered into these risky subprime arrangements generally did so because they had no intention of holding the loans on their books. The mortgages were immediately sliced and diced, bundled up as mortgage-backed securities (MBS), and sold off to investors. Loan originators sold the mortgages to financial institutions or other banks, which then sold the rights to the monthly mortgage payment income to investors, while transferring the responsibility to collect these payments to specialized mortgage servicing companies. The result has been to slice up the mortgage contract, with no party really having ownership of the original paperwork. When foreclosure has been initiated, the servicer or trustee acting as plaintiff now has trouble proving that it originated the mortgage or owned the loan. In order for a second bank or financial institution to have standing to bring a foreclosure lawsuit in court, it must have been assigned the mortgage; and with the collapse of the housing market, many of the subprime lenders have gone out of business, making it impossible to contact the originating mortgage company. Other paperwork has just been lost in the shuffle.2

Why weren’t the mortgage notes assigned to the MBS holders when they were first sold? Apparently because the investors aren’t even matched up with specific properties until after default. Here is how the MBS scheme works: when the mortgages are first bundled by the banks, all of the subprime mortgages go into the same pool. The bundled mortgages are chopped into “securities” that are sold to many investors — banks, hedge funds, money market funds, pension funds — with different “tranches” or levels of risk. The first mortgages to default are then assigned to the high-risk “BBB-” tranche of investors. As defaults increase, later defaulting mortgages are assigned down the chain of risk to the supposedly more secure tranches.3 That means the investors get the mortgages only after the defendants breached the agreement to pay.

It also means the investors weren’t a party to the agreement when it was breached, making it hard to prove they were injured by the breach.

The investors have another problem: the delay in assigning particular mortgages to particular investors means there was no “true sale” of the security (the home) at the time of securitization. A true sale of the collateral is a legal requirement for forming a valid security (a secured interest in the property as opposed to simply a debt obligation backed by collateral). As a result, the investors may have trouble proving they have any interest in the property, secured or unsecured.4

The Dog-Ate-My-Note Defense

When the securitizing banks acting as trustees for the investors are unable to present written proof of ownership at a time that would entitle them to foreclose, they typically file what’s called a lost-note affidavit. April Charney is a Florida legal aid attorney well versed in these issues, having gotten foreclosure proceedings dismissed or postponed for 300 clients in the past year. In a February 2008 Bloomberg article, she was quoted as saying that about 80 percent of these cases involved lost-note affidavits. “Lost-note affidavits are pattern and practice in the industry,” she said. “They are not exceptions. They are the rule.”3

In the past, judges have let these foreclosures proceed; but in October 2007, an intrepid federal judge in Cleveland put a halt to the practice. U.S. District Court Judge Christopher Boyko ruled that Deutsche Bank had not filed the proper paperwork to establish its right to foreclose on fourteen homes it was suing to repossess.4 That started the ball rolling, and by February 2008, judges in at least five states had followed suit. In Los Angeles in January, U.S. Bankruptcy Judge Samuel L. Bufford issued a notice warning plaintiffs in foreclosure cases to bring the mortgage notes to court and not submit copies. In Ohio, where foreclosures were up by a reported 88 percent in 2007, Attorney General Marc Dann was reported to be challenging ownership of mortgage notes in forty foreclosure cases.5

Few defendants, however, are lucky enough to have advocates like Charney and Dann in their corner, and most defaulting debtors just let their homes go. A simple challenge can be filed to the complaint even without an attorney, and some subprime borrowers have successfully defended their own foreclosure actions; but retaining an attorney is strongly recommended. People representing themselves are often not taken seriously, and they are likely to miss local rule requirements. With that warning, here is some general information on challenging standing to foreclose:

Some states are judicial foreclosure states and some are non-judicial foreclosure states. In a judicial foreclosure state (meaning the matter is heard before a judge), if a promissory note or recorded assignment naming the plaintiff is not attached to the complaint, the defendant can file a response stating the plaintiff has failed to state a claim. This can be followed with a motion called a demurrer to the complaint. Different forms of demurrers can be found in legal form books in most law libraries. In essence the demurrer states that even if everything in the complaint were true, the complaint would lack substance because it fails to set out a copy of the note, and it should therefore be dismissed. Ordinarily there is no need to cite much in the way of statutes or case law other than the authority reciting the necessity of showing the note proving the plaintiff is entitled to relief.

In a non-judicial foreclosure state such as California, foreclosure is done by a trustee without a court hearing, so the procedure is a bit trickier; but standing to foreclose can still be challenged. If the homeowner has filed for bankruptcy, the proceedings are automatically stayed, requiring the lender to bring a motion for relief from stay before going forward. The debtor can then challenge the lender’s right to the security (the house) by demanding proof of a legal or equitable interest in it.6 A homeowner facing foreclosure can also get the matter before a court without filing for bankruptcy by filing a complaint and preliminary injunction staying the proceedings pending proof of standing to foreclose. A judge would then have to rule on the merits. A complaint for declaratory relief might also be brought against the trustee, seeking to have its rights declared invalid.7

An Equitable Settlement for Everyone

These defenses can help people who are about to lose their homes, but there is another class of victims in the sub-prime mortgage crisis: investors in MBS, including the pension funds and 401Ks on which many people depend for their retirement. If the trustees representing the investors cannot foreclose, the lucky debtors may be able to stay in their homes without paying. However, the hapless investors will be left holding the bag. If the investors manage to shift liability back to the banks, on the other hand, the banks could go down and take the economy with them. How can these tricky issues be resolved in a way that is equitable for all? That question will be addressed in a followup article. Stay tuned.

Ellen Brown is a frequent contributor to Global Research. Global Research Articles by Ellen Brown

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Do you really know what’s the free market?

We selected two movies for you. You have to see them before to say “I want a globalized world”. Revolution will come my friends, revolution will come.

The Take (Eng. Ver.) (www.thetake.org)

In suburban Buenos Aires, thirty unemployed auto-parts workers walk into their idle factory, roll out sleeping mats and refuse to leave. All they want is to re-start the silent machines. But this simple act – The Take – has the power to turn the globalization debate on its head. In the wake of Argentina’s dramatic economic collapse in 2001, Latin America’s most prosperous middle class finds itself in a ghost town of abandoned factories and mass unemployment. The Forja auto plant lies dormant until its former employees take action. They’re part of a daring new movement of workers who are occupying bankrupt businesses and creating jobs in the ruins of the failed system.

Memoria del saqueo (Eng. Ver.)

After the fall of the military dictatorship in 1983, successive democratic governments launched a series of reforms purporting to turn Argentina into the world’s most liberal and prosperous economy. Less than twenty years later, the Argentinians have lost literally everything: major national companies have been sold well below value to foreign corporations; the proceeds of privatizations have been diverted into the pockets of corrupt officials; revised labour laws have taken away all rights from employees; in a country that is traditionally an important exporter of foodstuffs, malnutrition is widespread; millions of people are unemployed and sinking into poverty; and their savings have disappeared in a final banking collapse. The film highlights numerous political, financial, social and judicial aspects that mark out Argentina’s road to ruin. Written by Eduardo Casais {casaise@acm.org}

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