The New Deal: When Lawyers Became the Masters of our Destiny by Making Paper more valuable than Property


New Deal of Deception by Designation: “Security”                                  A Working Draft of Research in Progress © Charles Edward Lincoln Sunday October 23, 2011 

         The “New Deal” is the name given by political historians to the “recovery & relief” programs initiated during Franklin Delano Roosevelt’s first term as President (March 4, 1933-January 20, 1937).   While many of Roosevelt’s iconic “relief” programs, including the NRA, the WPA, and CCC were either struck down by the Supreme Court or repealed during World War II, the modern legacy of the New Deal includes some familiar names of the most powerful governmental agencies and programs.

The list of six most famous “New Deal” agencies which remain active today, still operating under their original names, includes (1) the Federal Deposit Insurance Corporation (FDIC), (2) the Federal Crop Insurance Corporation (FCIC), (3) the Federal Housing Administration (FHA), and (4) the Tennessee Valley Authority (TVA). By far the largest “New Deal” programs still in existence today are (5) the Social Security Administration (headed by the Independent “Commissioner of Social Security”) and (6) the Securities and Exchange Commission (SEC)—because these two “independent commissions” in essence control and define the modern economy.  All of these programs are tightly knit together in one single tapestry of centralization of economic “command and control”.

What each of these six programs had in common with the other was nothing less than the transformation of various areas of American life by redefining it, by altering the cultural and normative understandings of certain words, phrases, and standards of behavior and transforming the legal landscape, replacing the traditional Anglo-American common law with modern regulatory codes.  The trajectory of each program merits some attention and reflection here, from the most general program to the most specific and limited.

TVA: TEMPLATE FOR A CENTRALLY PLANNED FUTURE

         Most discrete and delineated territorially within the country, and yet most overwhelmingly powerful in regard to “cradle to grave” impact on the lives of those forming its target population, the TVA was the most comprehensive governmental regional reorganization and restructuring plan ever undertaken in world history, and remains the longest lived such plan (still operating up to the present day after almost eighty years as a major techno-economic and socio-cultural planning “corporation”).

Chartered by Congress during Roosevelt’s famous “First Hundred Days” (in May 1933), the TVA manifests, in essence, the ideal of the Centrally Planned Society: a region including parts of seven States in the Protestant Old South transformed and reshaped under the leadership of an ethnic Jew of Austro-Slovakian parentage named David Eli Lilienthal, trained at Harvard by fellow Austrian-born Jew Felix Frankfurter. Frankfurter was famous in teens and twenties as a socialist radical, paving the way for the New Deal by advocated “judicial restraint” in dealing with government misdeeds, including greater freedom for administrative agencies from judicial oversight…..  In practice, this meant that (as Roosevelt’s 1938 appointee to the Supreme Court as the third Jewish Supreme Court Justice to Replace Benjamin Cardozo) Frankfurter would generally uphold all executive branch actions, including those of administrative agencies and government corporations against all constitutional challenges so long as they did not “shock the conscience” (meaning of course, his own conscience).

After 20 years in government, establishing first the TVA and then the Atomic Energy Commission, Lilienthal worked for several years for the investment bank Lazard Freres, and in 1955, formed an engineering and consulting firm called Development and Resources Corporation (D&R) which took the TVA’s objectives worldwide: major centrally planned public power and public works projects. Lilienthal was able to leverage the financial backing of Lazard Freres to found his company. He hired former associates from the TVA to work with him at D&R.  D&R focused on overseas clients, including Post-Mossadegh/Early Shahist Iran, and similarly politically oriented “forced cultural evolution” or “regional development” projects to suppress regional dissent and thus support U.S. backed regimes or programs in Colombia, Venezuela, India, Southern Italy, Ghana, Nigeria, Morocco, and above all, South Vietnam.

Because of Lilienthal’s leadership, TVA is said to be the model which the State of Israel emulated in its reorganization and redesign of Palestine after 1947, and the Tennessee Valley Authority stands as the template for U.S. Overseas Development up through and including the reconstruction of Iraq after 2003—a nearly eighty year run.  Nothing quite like the TVA ever happened again inside the United States, however.

FHA: TO ABOLISH THE DISTINCTIONS BETWEEN CITIES AND URBAN AREAS

         After the TVA’s design to redefine 100% of the way of life in a general region, the next broadest program of the six surviving New Deal Programs has been the acquisition and maintenance of interests in housing.  Born of a depression wherein millions were displaced, providing housing for about forty years for tens of millions, the New Deal legacy in 2011 is a cloaked depression, or perhaps a planned “genocide” in which an astounding 30-50 million Americans are losing or have lost their homes acquired and maintained since the New Deal under the aegis of Federal Government Programs.

For its “constructive” part in the transformation, the Federal Housing Authority was a massive nationwide “lending” umbrella project to fund the mass construction of housing—it also could be called the “Suburban Genesis Authority” or “the Abolition of Urban-Rural Distinctions Authority.”  Just as the TVA transformed parts of the landscape from Virginia through Tennessee to Mississippi, the Federal Housing Authority played a decisive role in moving people out of the cities and off farms into the vast suburban wastelands which now occupy immense percentages of the most fertile farm land in the world and are increasingly marred by decay and degeneracy brought on by foreclosure and eviction—empty ruins being sold off through “Investment Visa EB-5” and “Green Card” sales to thousands of Arabic and Chinese foreign investors with interests hard to characterize or predict except with the wildest speculation.

The Federal Housing Authority was originally created by the National Housing Act of 1934, which was amended in 1938 (Roosevelt’s Second Term) to create the Federal National Mortgage Association “Fannie Mae”, which under Lyndon B. Johnson and Richard M. Nixon metamorphosized and split into “Ginny Mae” (Government National Mortgage Association”) and “Freddie Mac” (Federal Home Loan Mortgage Association) to “foster competition”, even though all three entities remained entirely government controlled and Freddie and Fannie are now [since their “renationalization” by executive fiat in September 2008] owned by the U.S. Treasury Department and controlled by FHFA (Federal Housing Finance Authority).

The Federal Housing Authority now exists within the Department of Housing and Urban Development.  “HUD” was established in 1965 among the first steps of Lyndon B. Johnson’s program called the “Great Society”, which was not coincidentally also the first major expansion of Government Centralization in the United States SINCE the “New Deal” (and also not coincidentally formed part of the same program as the Civil Rights Act of 1964 and the Voting Rights Act of 1965).  The Federal Housing Authority remains today the key government agency supervising the Banking Industry’s role in mortgage finance and securitization of home loans.

In short, the TVA was all about completely reconditioning and reworking technology, society and culture in one region considered particularly “backward” and in need of “development”.  And having done so without significant protest or expressions of pain, TVA, became the model for “foreign aid” for the development of “Third World” Countries, while the FHA was a more general program to restructure the urban and rural landscape by “stimulating” housing construction and lowering costs nationwide.  There are those who say that the housing foreclosure and eviction crisis brought on by Federal financial programs means that the time for a national TVA has finally come, and that the next “Third World Country” to be forceably re-engineered and developed is the U.S., except this time it will be a much more diverse consortium of Near Eastern and Chinese experts who will impose their own standards of “conscience” on our legal system and the interpretation of our constitution.

THE FOURTH BRANCH OF GOVERNMENT: INDEPENDENT COMMMISSIONS OR AGENCIES, INCLUDING THE SEC, SOCIAL SECURITY, IRS, AND FEDERAL RESERVE: UTTERLY UNCONSTITUTIONAL & CONTROLLED BY INDUSTRY INSIDERS

Regarding distinct onomastic pattern characterizes the list of six after the TVA “Corporation” and the sub-cabinet level FHA: two “Insurance Corporations” and two “Security Commissions”— (1) the Federal Deposit Insurance Corporation (FDIC), (2) the Federal Crop Insurance Corporation (FCIC), together with (5) the Social Security System and (6) the Securities and Exchange Commission (SEC).

It is worth noting that in 1933 the United States Government owned no corporations whatsoever, at least not “outright”, although it had certainly chartered and funded some, including the great transcontinental railroads in the 19th century and many large banks after the creation of the Federal Reserve System in 1913, and regulated many others, especially after the enactment of the Sherman Antitrust Act in 1890 and (never coincidentally, the establishment of the first “Independent Commission” namely) the Interstate Commerce Commission (“ICC”) in 1887.

With the aforementioned dominance of the great transcontinental railroads in the U.S. in the late 1800s, legislators in the several states established commissions to effectively supervise them. State legislators delegated power to unelected and “independent” commissions in the belief that “specialists” could more readily accumulate expert knowledge to regulate the railroads than the legislators could do on behalf of the people. However, when the U.S. Supreme Court in 1886 struck down an Illinois statute on railroad commerce involving neighboring states, the U.S. Congress intervened. Congress copied state “unelected industry specialist” approach and established the Interstate Commerce Commission (ICC) in 1887.  Congress authorized the ICC to issue orders regarding the rates set by the railroads and to enforce its orders in court.  The Constitutional authority for Independent Commissions under the United States Constitution of 1787, and as amended since then is, as the late Chief Justice Warren E. Burger once confided to me in 1993 in Palm Beach, Florida, “absolutely nil.”

However, no successful challenge to the existence of these “independent commissions” has ever been litigated through the courts.  For this reason, after the ICC, Congress established many more {independent} regulatory commissions in the early 1900s, to include the Federal Trade Commission (FTC), the Federal Power Commission (FPC), the Federal Elections Commission (FEC), the Federal Communications Commission (FCC), the Internal Revenue Service (IRS: Headed by the “Commissioner of Internal Revenue”), the Nuclear Regulatory Commission (NRC—which took over from David Lilienthal’s Atomic Energy Commission or “AEC” mentioned above), the Securities and Exchange Commission (SEC), and of course, last but not least, the Social Security Administration (SSA: Headed by the “Commissioner of Social Security”).  More recently many “Independent Agencies” such as the Environmental Protection Agency have been created, always preserving, for whatever reason, the three letter monogram style of name.

These Commissions almost always work closely with Executive Branch Cabinet Officers and Administrative Bureaucracy whose officers CAN be fired by the President.  Officers of the Independent Commissions cannot be discharged by the Chief Executive nor, at least not without impeachment, by Congress, although they serve for limited terms.  In “Constitutional Law I” at the University of Chicago with Judge Richard Allen Posner, we spent a great deal of time on the unsuccessful constitutional challenges to the Independent Commissions over the past century.

In blatant defiance of any principles of separation-of-powers, the independent commissions/independent “executive” agencies all both have and exercise powers that functionally parallel all three branches of federal government as established by the Constitution. These Commissions/Agencies legislate by publication in the Federal Register/Code of Federal Regulations when they adopt or enact their own regulations. The Environmental Protection Agency, for example, adopts or enacts regulations limiting pollution emissions by industry.

Independent agencies also carry out executive functions, such as when the Interstate Commerce Commission checks to ensure that trucks have proper safety features.  Finally, many officers of independent agencies act in judicial capacity in “administrative” courts when they hold hearings and issue fines for violations of their undemocratically decreed regulations. Their powers, however, are at least theoretically limited by Congress. Congress may alter, amend, or appeal legislation delegating authority to an agency. The president may remove the head of an agency “for cause” (but not for disagreement with policy or decisions).  Under the desperately deferential “Chevron” standard, the courts (also mostly theoretically) may (but only very occasionally do) declare agency action to be unconstitutional or outside the grant of authority from Congress.

While not officially described as an “Independent Commission”, the Federal Reserve is set up in exactly the same way as the others listed above, and for many of the same practical and political reasons, its de jure “independence” of the government means de facto dependence on the industry being regulated, namely in the Federal Reserve’s case, the banking industry. Like every other “Independent Agency,” the Federal Reserve is independent within government in that “its monetary policy decisions do not have to be approved by the President or anyone else in the executive or legislative branches of government.”  However, its authority derives from Congress and Congressional statutes and is subject to “congressional oversight.”  Additionally, the members of the Board of Governors, including its chairman and vice-chairman, are chosen by the President and confirmed by the advice and consent of the Senate. Congress and the President also exercises not insignificant political control over the Federal Reserve by appointing and setting the salaries of the system’s highest-level employees.

Thus the Federal Reserve Board is populated by Banking “Industry Insiders” and its chairman always hails from Wall Street in New York or at least La Salle Street in Chicago. Like the original ICC, the Federal Reserve epitomizes the government-and-corporate cooperation which is neither democratically controlled by the people through their elected officials for the public good nor permits any genuine “laissez-faire” free-market competition by the operation of any such primitive principles as supply and demand, never mind customer satisfaction with service.   “Independent Commissions” are quintessentially creatures of government “by the industry, of the industry, for the industry” allegedly being “regulated” in the public good.  “Independent Commissions”, in short, constitute a fraudulent and unconstitutional mixture of governmental authority and corporate (financial) power.

TRANSFORMING THE MEANING OF “SECURITY” FROM PRIVATE PROPERTY TO PUBLIC PROMISES

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