How Wall Street Has Turned Housing Into a Dangerous Get-Rich-Quick Scheme — Again

Reprinted with permission from TomDispatch.com

The Empire Strikes Back 
How Wall Street Has Turned Housing Into a Dangerous Get-Rich-Quick Scheme — Again 

By Laura Gottesdiener

You can hardly turn on the television or open a newspaper without hearing about the nation’s impressive, much celebrated housing recovery. Home prices are rising! New construction has started! The crisis is over! Yet beneath the fanfare, a whole new get-rich-quick scheme is brewing.

Over the last year and a half, Wall Street hedge funds and private equity firms have quietly amassed an unprecedented rental empire, snapping up Queen Anne Victorians in Atlanta, brick-faced bungalows in Chicago, Spanish revivals in Phoenix. In total, these deep-pocketed investors have bought more than 200,000 cheap, mostly foreclosed houses in cities hardest hit by the economic meltdown.

Wall Street’s foreclosure crisis, which began in late 2007 and forced more than 10 million people from their homes, has created a paradoxical problem. Millions of evicted Americans need a safe place to live, even as millions of vacant, bank-owned houses are blighting neighborhoods and spurring a rise in crime. Lucky for us, Wall Street has devised a solution: It’s going to rent these foreclosed houses back to us. In the process, it’s devised a new form of securitization that could cause this whole plan to blow up — again.

Since the buying frenzy began, no company has picked up more houses than the Blackstone Group, the largest private equity firm in the world. Using a subsidiary company, Invitation Homes, Blackstone has grabbed houses at foreclosure auctions, through local brokers, and in bulk purchases directly from banks the same way a regular person might stock up on toilet paper from Costco.

In one move, it bought 1,400 houses in Atlanta in a single day. As of November, Blackstone had spent $7.5 billion to buy 40,000 mostly foreclosed houses across the country. That’s a spending rate of $100 million a week since October 2012. It recently announced plans to take the business international, beginning in foreclosure-ravaged Spain.

Few outside the finance industry have heard of Blackstone. Yet today, it’s the largest owner of single-family rental homes in the nation — and of a whole lot of other things, too. It owns part or all of the Hilton Hotel chain, Southern Cross Healthcare, Houghton Mifflin publishing house, the Weather Channel, Sea World, the arts and crafts chain Michael’s, Orangina, and dozens of other companies.

Blackstone manages more than $210 billion in assets, according to its 2012 Securities and Exchange Commission annual filing. It’s also a public company with a list of institutional owners that reads like a who’s who of companies recently implicated in lawsuits over the mortgage crisis, including Morgan Stanley, Citigroup, Deutsche Bank, UBS, Bank of America, Goldman Sachs, and of course JP Morgan Chase, which just settled a lawsuit with the Department of Justice over its risky and often illegal mortgage practices, agreeing to pay an unprecedented $13 billion fine.

In other words, if Blackstone makes money by capitalizing on the housing crisis, all these other Wall Street banks — generally regarded as the main culprits in creating the conditions that led to the foreclosure crisis in the first place — make money too.

An All-Cash Goliath

In neighborhoods across the country, many residents didn’t have to know what Blackstone was to realize that things were going seriously wrong.

Last year, Mark Alston, a real estate broker in Los Angeles, began noticing something strange happening. Home prices were rising. And they were rising fast — up 20% between October 2012 and the same month this year. In a normal market, rising home prices would mean increased demand from homebuyers. But here was the unnerving thing: the homeownership rate was dropping, the first sign for Alston that the market was somehow out of whack.

The second sign was the buyers themselves.

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About 5% of Blackstone’s properties, approximately 2,000 houses, are located in the Charlotte metro area. Of those, just under 1,000 (pictured above) are in Mecklenberg County, the city’s center. (Map by Anthony Giancatarino, research by Symone New.)

“I went two years without selling to a black family, and that wasn’t for lack of trying,” says Alston, whose business is concentrated in inner-city neighborhoods where the majority of residents are African American and Hispanic. Instead, all his buyers — every last one of them — were besuited businessmen. And weirder yet, they were all paying in cash.

Between 2005 and 2009, the mortgage crisis, fueled by racially discriminatorylending practices, destroyed 53% of African American wealth and 66% of Hispanic wealth, figures that stagger the imagination. As a result, it’s safe to say that few blacks or Hispanics today are buying homes outright, in cash. Blackstone, on the other hand, doesn’t have a problem fronting the money, given its $3.6 billion credit line arranged by Deutsche Bank. This money has allowed it to outbid families who have to secure traditional financing. It’s also paved the way for the company to purchase a lot of homes very quickly, shocking local markets and driving prices up in a way that pushes even more families out of the game.

“You can’t compete with a company that’s betting on speculative future value when they’re playing with cash,” says Alston. “It’s almost like they planned this.”

In hindsight, it’s clear that the Great Recession fueled a terrific wealth and asset transfer away from ordinary Americans and to financial institutions. During that crisis, Americans lost trillions of dollars of household wealth when housing prices crashed, while banks seized about five million homes. But what’s just beginning to emerge is how, as in the recession years, the recovery itself continues to drive the process of transferring wealth and power from the bottom to the top.

From 2009-2012, the top 1% of Americans captured 95% of income gains. Now, as the housing market rebounds, billions of dollars in recovered housing wealth are flowing straight to Wall Street instead of to families and communities. Since spring 2012, just at the time when Blackstone began buying foreclosed homes in bulk, an estimated $88 billion of housing wealth accumulation has gone straight to banks or institutional investors as a result of their residential property holdings, according to an analysis by TomDispatch. And it’s a number that’s likely to just keep growing.

“Institutional investors are siphoning the wealth and the ability for wealth accumulation out of underserved communities,” says Henry Wade, founder of the Arizona Association of Real Estate Brokers.

But buying homes cheap and then waiting for them to appreciate in value isn’t the only way Blackstone is making money on this deal. It wants your rental payment, too.

Securitizing Rentals

Wall Street’s rental empire is entirely new. The single-family rental industry used to be the bailiwick of small-time mom-and-pop operations. But what makes this moment unprecedented is the financial alchemy that Blackstone added. In November, after many months of hype, Blackstone released history’s first rated bond backed by securitized rental payments. And once investors tripped over themselves in a rush to get it, Blackstone’s competitors announced that they, too, would develop similar securities as soon as possible.

Depending on whom you ask, the idea of bundling rental payments and selling them off to investors is either a natural evolution of the finance industry or a fire-breathing chimera.

“This is a new frontier,” comments Ted Weinstein, a consultant in the real-estate-owned homes industry for 30 years. “It’s something I never really would have dreamt of.”

However, to anyone who went through the 2008 mortgage-backed-security crisis, this new territory will sound strangely familiar.

“It’s just like a residential mortgage-backed security,” said one hedge-fund investor whose company does business with Blackstone. When asked why the public should expect these securities to be safe, given the fact that risky mortgage-backed securities caused the 2008 collapse, he responded, “Trust me.”

For Blackstone, at least, the logic is simple. The company wants money upfront to purchase more cheap, foreclosed homes before prices rise. So it’s joined forces with JP Morgan, Credit Suisse, and Deutsche Bank to bundle the rental payments of 3,207 single-family houses and sell this bond to investors with mortgages on the underlying houses offered as collateral. This is, of course, just a test case for what could become a whole new industry of rental-backed securities.

Many major Wall Street banks are involved in the deal, according to a copy of the private pitch documents Blackstone sent to potential investors on October 31st, which was reviewed by TomDispatch. Deutsche Bank, JP Morgan, and Credit Suisse are helping market the bond. Wells Fargo is the certificate administrator. Midland Loan Services, a subsidiary of PNC Bank, is the loan servicer. (By the way, Deutsche Bank, JP Morgan Chase, Wells Fargo, and PNC Bank are all members of another clique: the list of banks foreclosing on the most families in 2013.)

According to interviews with economists, industry insiders, and housing activists, people are more or less holding their collective breath, hoping that what looks like a duck, swims like a duck, and quacks like a duck won’t crash the economy the same way the last flock of ducks did.

“You kind of just hope they know what they’re doing,” says Dean Baker, an economist with the Center for Economic and Policy Research. “That they have provisions for turnover and vacancies. But have they done that? Have they taken the appropriate care? I certainly wouldn’t count on it.” The cash flow analysis in the documents sent to investors assumes that 95% of these homes will be rented at all times, at an average monthly rent of $1,312. It’s an occupancy rate that real estate professionals describe as ambitious.

There’s one significant way, however, in which this kind of security differs from its mortgage-backed counterpart. When banks repossess mortgaged homes as collateral, there is at least the assumption (often incorrect due to botched or falsified paperwork from the banks) that the homeowner has, indeed, defaulted on her mortgage. In this case, however, if a single home-rental bond blows up, thousands of families could be evicted, whether or not they ever missed a single rental payment.

“We could well end up in that situation where you get a lot of people getting evicted… not because the tenants have fallen behind but because the landlordshave fallen behind,” says Baker.

Bugs in Blackstone’s Housing Dreams

Whether these new securities are safe may boil down to the simple question of whether Blackstone proves to be a good property manager. Decent management practices will ensure high occupancy rates, predictable turnover, and increased investor confidence. Bad management will create complaints, investigations, and vacancies, all of which will increase the likelihood that Blackstone won’t have the cash flow to pay investors back.

If you ask CaDonna Porter, a tenant in one of Blackstone’s Invitation Homes properties in a suburb outside Atlanta, property management is exactly the skill that Blackstone lacks. “If I could shorten my lease — I signed a two-year lease — I definitely would,” says Porter.

The cockroaches and fat water bugs were the first problem in the Invitation Homes rental that she and her children moved into in September. Porter repeatedly filed online maintenance requests that were canceled without anyone coming to investigate the infestation. She called the company’s repairs hotline. No one answered.

The second problem arrived in an email with the subject line marked “URGENT.” Invitation Homes had failed to withdraw part of Porter’s November payment from her bank account, prompting the company to demand that she deliver the remaining payment in person, via certified funds, by five p.m. the following day or incur “the additional legal fee of $200 and dispossessory,” according to email correspondences reviewed by TomDispatch.

Porter took off from work to deliver the money order in person, only to receive an email saying that the payment had been rejected because it didn’t include the $200 late fee and an additional $75 insufficient funds fee. What followed were a maddening string of emails that recall the fraught and often fraudulent interactions between homeowners and mortgage-servicing companies. Invitation Homes repeatedly threatened to file for eviction unless Porter paid various penalty fees. She repeatedly asked the company to simply accept her month’s payment and leave her alone.

“I felt really harassed. I felt it was very unjust,” says Porter. She ultimately wrote that she would seek legal counsel, which caused Invitation Homes to immediately agree to accept the payment as “a one-time courtesy.”

Porter is still frustrated by the experience — and by the continued presence of the cockroaches. (“I put in another request today about the bugs, which will probably be canceled again.”)

A recent Huffington Post investigation and dozens of online reviews written by Invitation Homes tenants echo Porter’s frustrations. Many said maintenance requests went unanswered, while others complained that their spiffed-up houses actually had underlying structural issues.

There’s also at least one documented case of Blackstone moving into murkier legal territory. This fall, the Orlando, Florida, branch of Invitation Homes appeared to mail forged eviction notices to a homeowner named Francisco Molina, according to the Orlando Sentinel. Delivered in letter-sized manila envelopes, the fake notices claimed that an eviction had been filed against Molina in court, although the city confirmed otherwise. The kicker is that Invitation Homes didn’t even have the right to evict Molina, legally or otherwise. Blackstone’s purchase of the house had been reversed months earlier, but the company had lost track of that information.

The Great Recession of 2016?

These anecdotal stories about Invitation Homes being quick to evict tenants may prove to be the trend rather than the exception, given Blackstone’s underlying business model. Securitizing rental payments creates an intense pressure on the company to ensure that the monthly checks keep flowing. For renters, that may mean you either pay on the first of the month every month, or you’re out.

Although Blackstone has issued only one rental-payment security so far, it already seems to be putting this strict protocol into place. In Charlotte, North Carolina, for example, the company has filed eviction proceedings against a full 10% of its renters, according to a report by the Charlotte Observer.

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About 9% of Blackstone’s properties, approximately 3,600 houses, are located in the Phoenix metro area. Most are in low- to middle-income neighborhoods. (Map by Anthony Giancatarino, research by Jose Taveras.)

Forty thousand homes add up to only a small percentage of the total national housing stock. Yet in the cities Blackstone has targeted most aggressively, the concentration of its properties is staggering. In Phoenix, Arizona, some neighborhoods have at least one, if not two or three, Blackstone-owned homes on just about every block.

This inundation has some concerned that the private equity giant, perhaps in conjunction with other institutional investors, will exercise undue influence over regional markets, pushing up rental prices because of a lack of competition. The biggest concern among many ordinary Americans, however, should be that, not too many years from now, this whole rental empire and its hot new class of securities might fail, sending the economy into an all-too-familiar tailspin.

“You’re allowing Wall Street to control a significant sector of single-family housing,” said Michael Donley, a resident of Chicago who has been investigating Blackstone’s rapidly expanding presence in his neighborhood. “But is it sustainable?” he wondered. “It could all collapse in 2016, and you’ll be worse off than in 2008.”


Laura Gottesdiener is a journalist and the author of A Dream Foreclosed: Black America and the Fight for a Place to Call Home, published in August by Zuccotti Park Press. She is an editor for Waging Nonviolence and has written for Rolling StoneMs., Playboy, the Huffington Post, and other publications. She lived and worked in the People’s Kitchen during the occupation of Zuccotti Park. This is her second TomDispatch piece.

[Note: Special thanks to Symone New and Jose Taveras for conducting the difficult research to locate Blackstone-owned properties. Special thanks also to Anthony Giancatarino for turning this data into beautiful maps.]

Follow TomDispatch on Twitter and join us on Facebook or Tumblr. Check out the newest Dispatch Book, Ann Jones’s They Were Soldiers: How the Wounded Return From America’s Wars — The Untold Story.

Copyright 2013 Laura Gottesdiener

Obama’s Washington is the Rodney Dangerfield of the Middle East

Reprinted with permission from Tomdispatch.com

By Bob Dreyfuss

Put in context, the simultaneous raids in Libya and Somalia last month, targeting an alleged al-Qaeda fugitive and an alleged kingpin of the al-Shabab Islamist movement, were less a sign of America’s awesome might than two minor exceptions that proved an emerging rule: namely, that the power, prestige, and influence of the United States in the broader Middle East and its ability to shape events there is in a death spiral.

Twelve years after the U.S. invaded Afghanistan to topple the Taliban and a decade after the misguided invasion of Iraq — both designed to consolidate and expand America’s regional clout by removing adversaries — Washington’s actual standing in country after country, including its chief allies in the region, has never been weaker. Though President Obama can order raids virtually anywhere using Special Operations forces, and though he can strike willy-nilly in targeted killing actions by calling in the Predator and Reaper drones, he has become the Rodney Dangerfield of the Middle East. Not only does no one there respect the United States, but no one really fears it, either — and increasingly, no one pays it any mind at all.

There are plenty of reasons why America’s previously unchallenged hegemony in the Middle East is in free fall. The disastrous invasions of Afghanistan and Iraq generated anti-American fervor in the streets and in the elites. America’s economic crisis since 2008 has convinced many that the United States no longer has the wherewithal to sustain an imperial presence. The Arab Spring, for all its ups and downs, has challenged the status quo everywhere, leading to enormous uncertainty while empowering political forces unwilling to march in lockstep with Washington. In addition, oil-consuming nations like China and India have become more engaged with their suppliers, including Saudi Arabia, Iran, and Iraq. The result: throughout the region, things are fast becoming unglued for the United States.

Its two closest allies, Israel and Saudi Arabia, are sullenly hostile, routinely ignore Obama’s advice, and openly oppose American policies. Iraq and Afghanistan, one formerly occupied and one about to be evacuated, are led, respectively, by Prime Minister Nouri al-Maliki, an inflexible sectarian Shiite closely tied to Iran, and President Hamid Karzai, a corrupt, mercurial leader who periodically threatens to join the Taliban. In Egypt, three successive regimes — those of President Hosni Mubarak, Mohammad Morsi of the Muslim Brotherhood, and the chieftains of the July 2013 military coup — have insouciantly flouted U.S. wishes.

Turkey, ostensibly a NATO ally but led by a quirky Islamist, is miffed over Obama’s back-and-forth policy in Syria and has shocked the U.S. by deciding to buy a non-NATO-compatible missile defense system from China. Libya, Somalia, and Yemen have little or no government at all. They have essentially devolved into a mosaic of armed gangs, many implacably opposed to the United States.

This downward spiral has hardly escaped attention. In a recent address to the National Council on U.S.-Arab Relations, Chas Freeman, the former American ambassador to Saudi Arabia, described it in some detail. “We have lost intellectual command and practical control of the many situations unfolding there,” said Freeman, whose nomination by Obama in 2009 to serve as head of the National Intelligence Council was shot down by the Israel Lobby. “We must acknowledge the reality that we no longer have or can expect to have the clout we once did in the region.”

In an editorial on October 29th, the New York Times ruefully concluded: “It is not every day that America finds itself facing open rebellion from its allies, yet that is what is happening with Saudi Arabia, Turkey, and Israel.” And in a front-page story on the administration’s internal deliberations, the Times’s Mark Landler reported that, over the summer, the White House had decided to scale back its role in the Middle East because many objectives “lie outside [its] reach,” and henceforth would adopt a “more modest strategy” in the region.

Perhaps the most profound irony embedded in Washington’s current predicament is this: Iran, for decades the supposed epicenter of anti-Americanism in the region, is the country where the United States has perhaps its last opportunity to salvage its position. If Washington and Tehran can negotiate a détente — and it’s a big if, given the domestic political power of hawks in both countries — that accord might go a long way toward stabilizing Washington’s regional credibility.

Debacle in Syria

Let’s begin our survey of America’s Greater Middle Eastern fecklessness with Exhibit A: Syria. It is there, where a movement to oust President Bashar al-Assad devolved into a civil war, that the United States has demonstrated its utter inability to guide events. Back in the summer of 2011 — at the very dawn of the conflict — Obama demanded that Assad step down.  There was only one problem: short of an Iraq-style invasion of Syria, he had no power to make that happen. Assad promptly called his bluff, escalated the conflict, and rallied support from Russia and Iran. Obama’s clarion call for his resignation only made things worse by convincing Syrian rebels that the United States would come to their aid.

A year later, Obama drew a “red line” in the sand, suggesting that any use of chemical weapons by Syrian forces would precipitate a U.S. military response. Again Assad ignored him, and many hundreds of civilians were gassed to death in multiple uses of the dreaded weapons.

The crowning catastrophe of Obama’s Syria policy came when he threatened a devastating strike on Assad’s military facilities using Tomahawk cruise missiles and other weaponry. Instead of finding himself leading a George W. Bush-style “coalition of the willing” with domestic support, Obama watched as allies scattered, including the usually reliable British and the Arab League. At home, political support was nearly nil and evaporated from there. Polls showed Americans overwhelmingly opposed to a war with or attack on Syria.

When, in desperation, the president appealed to Congress for a resolution to authorize the use of military force against that country, the White House found (to its surprise) that Congress, which normally rubber-stamps such proposals, would have none of it. Paralyzed, reluctant to choose between backing down and striking Syria by presidential fiat, Obama was rescued in humiliating fashion by a proposal from Syria’s chief ally, Russia, to dismantle and destroy that country’s chemical weapons arsenal.

Adding insult to injury, as Secretary of State John Kerry scrambles to organize a long-postponed peace conference in Geneva aimed at reaching a political settlement of the civil war, he is faced with a sad paradox: while the Syrian government has agreed to attend the Geneva meeting, also sponsored by Russia, America’s allies, the anti-Assad rebels, have flatly refused to go.

Laughingstock in Egypt

Don’t think for a second that Washington’s ineffectiveness stops with the ongoing Syrian fiasco.

Next door, in a country whose government was installed by the United States after the 2003 invasion, the Obama administration notoriously failed to convince the Iraqis to allow even a small contingent of American troops to remain there past 2011. Since then, that country has moved ever more firmly into Iran’s orbit and has virtually broken with Washington over Syria.

Since the start of the civil war in Syria, Shiite-led Iraq has joined Shiite Iran in supporting Assad, whose ruling minority Alawite sect is an offshoot of Shiism. There have been widespread reports that pro-Assad Iraqi Shiite militias are traveling to Syria, presumably with the support or at least acquiescence of the government. IgnoringWashington’s entreaties, it has also allowed Iran to conduct a virtual Berlin Airlift-style aerial resupply effort for Syria’s armed forces through Iraqi air space. Last month, in an appearance before the Council on Foreign Relations in New York during the United Nations General Assembly session, Iraqi Foreign Minister Hoshyar Zebari undiplomatically warned Obama that his government stands against the U.S. decision — taken in a secret presidential finding in April and only made public last summer — to provide arms to Syria’s rebels. (“We oppose providing military assistance to any [Syrian] rebel groups.”)

Meanwhile, Washington is also flailing in its policy toward Egypt, where the Obama administration has been singularly hapless.  In a rare feat, it has managed to anger and alienate every conceivable faction in that politically divided country. In July, when Egypt’s military ousted President Mohammad Morsi and violently clamped down on the Muslim Brotherhood, the Obama administration made itself look ridiculous to Egyptians (and to the rest of the Middle East) by refusing to call what happened a coup d’état, since under U.S. law that would have meant suspending aid to the Egyptian military.

As it happened, however, American aid figured little in the calculations of Egypt’s new military leaders. The reason was simple enough: Saudi Arabia and the Arab states of the Persian Gulf, bitter opponents of the Morsi government, applauded the coup and poured at least $12 billion in cash into the country’s near-empty coffers.  In the end, making no one happy, the administration tried to split the difference: Obama declared that he would suspend the delivery of some big-ticket military items like Apache attack helicopters, Harpoon missiles, M1-A1 tank parts, and F-16 fighter planes, but let other aid to the military continue, including counterterrorism assistance and the sale of border security items. Such a split decision only served to underscore the administration’s lack of leverage in Cairo. Meanwhile, there are reports that Egypt’s new rulers may turn to Russia for arms in open defiance of a horrified Washington’s wishes.

Saudi and Israeli Punching Bag

The most surprising defection from the pro-American coalition in the Middle East is, however, Saudi Arabia. In part, that kingdom’s erratic behavior may result from a growing awareness among its ultraconservative, kleptocratic princelings that they face an increasingly uncertain future. Christopher Davidson’s new bookAfter the Sheikhs: The Coming Collapse of the Gulf Monarchies, outlines the many pressures building on the country.

One significant cause of instability, claims Davidson, is the “existence of substantial Western military bases on the Arabian Peninsula, [which are considered] an affront to Islam and to national sovereignty.” For decades, such an American military presence in the region provided a security blanket for the Saudi royals, making the country a virtual U.S. protectorate. Now, amid the turmoil that has followed the war in Iraq, the Arab Spring, and the rise of an assertive Iran, Saudi Arabia isn’t sure which way to turn, or whether the United States is friend or foe.

Since 2003, the Saudi rulers have found themselves increasingly unhappy with American policy. Riyadh, the area’s chief Sunni power, was apoplectic when the United States toppled Iraq’s Sunni leader Saddam Hussein and allowed Iran to vastly increase its influence in Baghdad. In 2011, the Saudi royal family blamed Washington for not doing more to prevent the collapse of the conservative and pro-Saudi Mubarak government in Egypt.

Now, the Saudis are on the verge of a complete break over Washington’s policies toward Syria and Iran. As the chief backers of the rebels in Syria, they were dismayed when Obama chose not to bomb military sites around Damascus. Because it views Iran through the lens of a regional Sunni-Shiite struggle for dominance, it is no less dismayed by the possible emergence of a U.S.-Iran accord from renewed negotiations over that country’s nuclear program.

To express its pique, its foreign minister abruptly canceled his address to the United Nations General Assembly in September, shocking U.N. members. Then, adding insult to injury, Saudi Arabia turned down a prestigious seat on the Security Council, a post for which it had long campaigned. “Upset at President Barack Obama’s policies on Iran and Syria,” reported Reuters, “members of Saudi Arabia’s ruling family are threatening a rift with the United States that could take the alliance between Washington and the kingdom to its lowest point in years.”

That news service quoted Saudi Arabia’s intelligence chief, Prince Bandar bin Sultan, as saying that his country was on the verge of a “major shift” in its relations with the U.S. Former head of Saudi intelligence Prince Turki al-Faisal lambasted America’s Syria policy this way: “The current charade of international control over Bashar’s chemical arsenal would be funny if it were not so blatantly perfidious. [It is] designed not only to give Mr. Obama an opportunity to back down [from military strikes], but also to help Assad to butcher his people.”

This is shocking stuff from America’s second most reliable ally in the region. As for reliable ally number one, Israeli Prime Minister Benjamin Netanyahu has visibly decided to be anything but a cooperative partner in the region, making Obama’s job more difficult at every turn. Since 2009, he has gleefully defied the American president, starting with his refusal to impose a freeze on illegal settlements in the occupied West Bank when specifically asked to do so by the president at the start of his first term. Meanwhile, most of the world has spent the past half-decade on tenterhooks over the possibility that his country might actually launch a much-threatened military strike on Iran’s nuclear facilities.

Since Hassan Rouhani was elected president of Iran and indicated his interest in reorienting policy to make a deal with the Western powers over its nuclear program, Israeli statements have become ever more shrill. In a September speechto the U.N. General Assembly, for instance, Netanyahu rolled out extreme rhetoric, claiming that Israel is “challenged by a nuclear-armed Iran that seeks our destruction.” This despite the fact that Iran possesses no nuclear weapons, has enriched not an ounce of uranium to weapons-grade level, and has probably not mastered the technology to manufacture a bomb. According to American intelligence reports, it has not yet even militarized its nuclear research.

Netanyahu’s speech was so full of hyperbole that observers concluded Israel was isolating itself from the rest of the world. “He was so anxious to make everything look as negative as possible he actually pushed the limits of credibility,” said Gary Sick, a former senior official in the Carter administration and an Iran expert. “He did himself harm by his exaggerations.”

Iran: Obama’s Ironic Beacon of Hope

Both Israel and Saudi Arabia are fearful that the Middle Eastern balance of power could be tipped against them if the United States and Iran are able to strike a deal. Seeking to throw the proverbial monkey wrench into the talks between Iran, the U.S., and the P5+1 powers (the permanent members of the U.N. security Council plus Germany), Israel has put forward a series of demands that go far beyond anything Iran would accept, or that the other countries would go along with. Before supporting the removal of international economic sanctions against Iran, Israelwants that country to suspend all enrichment of uranium, shut down its nuclear facilities, not be allowed any centrifuges to enrich uranium, abandon the heavy-water plant it is constructing to produce plutonium, permanently close its fortified underground installation at Fordo, and ship its stockpile of enriched uranium out of the country.

In contrast, it’s widely believed that the United States is ready to allow Iran to continue to enrich uranium, maintain some of its existing facilities, and retain a partial stockpile of enriched uranium for fuel under stricter and more intrusive inspection by the International Atomic Energy Agency.

Ironically, a U.S.-Iran détente is the one thing that could slow down or reverse the death spiral of American influence in the region. Iran, for instance, could be helpful in convincing President Assad of Syria to leave office in 2014, in advance of elections there, if radical Sunni Islamic organizations, including allies of al-Qaeda, are suppressed. Enormously influential in Afghanistan, Iran could also help stabilize that country after the departure of U.S. combat forces in 2014. And it could be enlisted to work alongside the United States and regional powers to stabilize Iraq.

More broadly, a U.S.-Iran entente might lead to a gradual de-escalation of the U.S. military presence in the Persian Gulf, including its huge naval forces, bases, and other facilities in Qatar, Bahrain, and Kuwait. It’s even conceivable that Iran could be persuaded to join other regional and global powers in seeking a just and lasting negotiated deal between Israel and the Palestinians. The United States and Iran have a number of common interests, including opposing al-Qaeda-style terrorism and cracking down on drug smuggling.

Of course, such a deal will be exceedingly difficult to nail down, if for no other reason than that the hardliners in both countries are determined to prevent it.

Right now, imagine the Obama administration as one of those vaudeville acts that keep a dozen plates spinning atop vibrating poles.  At just this moment in the Middle East, those “plates” are tipping in every direction. There’s still time to prevent them all from crashing to the ground, but it would take a masterful effort from the White House — and it’s far from clear that anyone there is up to the task.


Bob Dreyfuss is an independent investigative journalist based in Cape May, New Jersey, specializing in politics and national security. He is a contributing editor at the Nation, and his blog appears daily at TheNation.com. In the past, he has written extensively for Rolling StoneMother Jones, the American Prospect, the New Republic, and many other magazines. He is the author ofDevil’s Game: How the United States Helped Unleash Fundamentalist Islam.

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Copyright 2013 Bob Dreyfuss

 

This Little Light of Mine … I’m Gonna Let It Shine

I was in the Booksellers bookstore in Grass Valley recently and one of the clerks pointed at my pants and asked “What’s that?” I looked down and saw that the little flashlight attached to my keychain inside my pocket had accidentally switched on and was shining a light right through my pants. Without hesitation, I answered, “This little light of mine … I’m gonna let it shine!”

Which of course made me think of this wonderful opening scene — one of my all-time favorites — from the Tina Turner biopic, “What’s Love Got to Do With it?”

Bitnami