A DOS Attack on the US Economy?

To those who spend time managing Internet networks, DOS is the acronym for Denial Of Service. It refers to an attack on a computer network or server in which massive numbers of ‘requests’ are blasted at the system until its capacity is overloaded and crashes. It’s a technique used by online criminals to threaten businesses who depend on the web for their livelihood and extort money, and by politically or ideologically motivated attackers to silence websites that oppose their ideas.

I never thought about what is happening to the US economy in those terms until I came across a reference to the Cloward-Piven Strategy while reading a political discussion about President Obama’s Stimulus Bill and the debate of the Spending Bill currently happening in Congress. After reading many opinions back and forth about the President’s strategy and its pros and cons, a comment was made that referenced the Cloward-Piven Strategy and said the economic crises is just the current manifestation of this tactic.

Back in 1966 Richard Andrew Cloward and Frances Fox Piven recognized that only a small percentage of the people eligible for welfare assistance where actually signed up. They further realized that if the total number of eligible people were to sign up, the system would be crushed because it was not adequate to support that many people. This would devastate local government budgets and create a social and financial crisis that would set the stage to force massive response from the federal government. Richard Andrew Cloward and Frances Fox Piven were hoping to see a national minimum income established.

The technique is a ‘shock-and-awe’ process and requires fast follow-up to enact changes before the wider population recovers from the shock and a backlash occurs. It looks for weaknesses in the system and then overwhelms them until they undergo a catastrophic failure that ‘demands action’ to fix the crisis.

Does any of this sound familiar?

As I read about Richard Andrew Cloward’s and Frances Fox Piven’s ideas, about the ways in which community organizers worked to mobilize the poor to sign up en mass and overwhelm the welfare system – I started to get a very creepy feeling that the current market meltdown might have been engineered to provide an overwhelming crisis that would enable the wholesale radical transformation of our economic system.

The banking crisis has its roots in the sub-prime mortgage markets and the failures there were setup by the Community Reinvestment Act (CRA) during the Carter administration (and revised and amended by congress during both Republican and Democratic leadership) and the practice of aggregating sub-prime loans through Fannie Mae and Freddie Mac for sale as ‘mortgage backed securities’ that began during the Clinton administration and carried on through the Bush administration as well. The Federal Housing Enterprises Financial Safety and Soundness Act of 1992 required Fannie Mae and Freddie Mac to devoteĀ  a percentage of their mortgage securitization efforts to support affordable housing.

The CRA is an attempt to stop a discriminatory lending practice known as ‘redlining’ which banks were using to keep minority borrowers from qualifying for loans. It punishes lenders for not making loans to minority borrowers who cannot meet strict income and asset requirements to qualify for loans. In 1998, Senator Phil Gramm accused some organized community groups of using ‘extortion’ tactics on banks through the CRA.

With considerable amounts of pressure from community groups and political leaders to ‘relax’ standards for down payments and income requirements, banks uneasily began to make very risky loans. Then, the Fannie Mae and Freddie Mac aggregation process allowed banks to get these risky loans ‘off the books’ by burying them in other financial instruments which themselves were poorly regulated.

With the risk seemingly mitigated, and a new boom in the real estate market that resulted from a huge new pool of buyers, good old-fashioned greed took over.

Speculators bought and sold properties and ran up the costs of homes. Traders bought and sold the exotic new financial instruments into which the high risk loans had been buried. Every armchair financial genius was busy hatching plans to ‘flip properties’ and get rich (which further drove up prices.) Borrowers took out Adjustable Rate Mortgages (ARM) with low introductory rates with the expectation that home values would continue to rise and they’d just re-finance when the rates went up.

Until one day, the payments started coming due and the money wasn’t there – and the prices of homes stopped going up.

The system got overwhelmed and crashed – Denial Of Service!

All the people holding those exotic financial instruments suddenly discovered the surprises buried deep inside – bad debt. Banks stopped loaning money, people stopped buying things – house values plummeted, companies went bankrupt, people lost jobs, and suddenly the federal government is jumping in to buy up the economy and fix everything.

Crisis. Opportunity. Massive transitions.

Secretary of State Hillary Clinton told an audience at the European Parliament, “never waste a good crisis…”

I’d have been willing to chalk it all up to coincidence except for these articles that I came across. They trace some of the key players in the changes that set the stage for this crisis all the way back to Richard Andrew Cloward and Frances Fox Piven and their strategy for a DOS attack on the welfare system.

ACORN’s Food Stamp Mortgages
Cloward-Piven Strategy

These articles are both written by politically conservative writers, but they make enough reasonable connections between the players in this socio/political/economic drama to give pause. Even the very neutral Wikipedia article on the Cloward-Piven_Strategy is enough to make me wonder if there is more going on than meets the eye.

Is the US economy staggering under the strain of massive Denial-of-Service attack on the banking system designed to provide the social disruption required to enact massive structural change? Or, are we simply being crushed by our own greed and desperately looking for someone to blame? Given the lasting impact that our government’s decisions will have the American way of life and national identity, I think it’s worth doing some additional reading.

Andrew Seltz

Andrew was born in Michigan, raised there and in Tennessee, and has since lived outside Orlando, in Chicago, New York City, and now Birmingham, Alabama. He produces videos and websites for a living and is married to a beautiful, generous, loving woman who also happens to be a talented actress and writer - www.ellenseltz.com. They have two daughters.

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