- SKULL.GIF
- Jan 20, 2017
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This country is completely bugfuck insane and so many of us are playing with fire here
not even the "good states" are safe
Matt Taibbi, the Divide posted:This is the kind of person at whom the weight of the state’s financial fraud prosecution apparatus tends to be trained in America. Markisha entered the financial fraud patrol zone when she walked through those doors at the FRC. For three hundred dollars a month, she was about to become more heavily scrutinized by the state than any twelve Wall Street bankers put together.
The amounts of money spent in these kinds of welfare programs are very small, but the levels of political capital involved are mountainous. You can always score political points banging on black welfare moms on meth. And the bureaucracy she was about to enter reflects that intense, bitterly contemptuous interest. Markisha was walking into a vast, machinelike system that is not only more or less designed to produce felony fraud convictions, but is also amazingly effective at a second goal—letting her know exactly what voters out there think of her.
On the day she goes to sign up for CalWORKs, Markisha knows to show up early. Friends she knew who’d been in the system had warned her: get there early. Get there way before the doors open. You’ll see why when you get there, they told her.
In the neighborhoods people talk. Some welfare offices are more notorious than others. In San Diego I heard over and over again that the Lemon Grove office was the best. Sometimes, people say, you can see a counselor at Lemon Grove in less than an hour—you might not even see people yelling and screaming. The Market Street office, on the other hand, has a bad rep. Same with the Seventy-Third Street office. The problem is, you can’t choose which office to go to. It depends on your address. And Markisha’s address puts her in the Seventy-Third Street group.
On the morning of October 15, 2011, she shows up at the Seventy-Third Street office at 8:30 a.m. It’s a giant hall with linoleum floors and plastic chairs—exactly what you’d expect, like a DMV, only even more depressing. There’s already a huge line of people.
“People were standing up against the walls, there was people everywhere, all over, it was crazy,” she says. The drill is, you show up, take a number, and wait—and wait. Markisha takes her number and sits down.
An hour passes, two hours. She has no idea when anyone is going to see her, and all the people in the packed room are in the same boat.
Mothers with children are in the office, and by late morning the children are starting to get antsy because they haven’t eaten, but you can’t leave the place or you lose your spot in line. A chill goes through the room in the middle of the day when a woman steps outside the building to get a smoke and returns to find that her number has been called. She has to leave and come back another day.
More hours pass. Markisha is squirming in her seat. By the late afternoon the crowd, which not only hasn’t subsided over the course of the day but has just gotten bigger, is turning hostile. At around three in the afternoon there’s a screaming match somewhere in the recesses of the office. Markisha can hear a man yelling at a welfare worker because a glitch in the system has cost him his benefits; something about a wrong address, which they’re telling him they can’t fix. He storms out of the office to oohs and aahs. By then the place is a zoo. “The kids is running around, because they hungry,” she says. “They’re running around, snatching stuff off the walls, drinking water, screaming.”
The scene gets so intense, Markisha ends up pulling out her cell phone and taking a video panorama of the chaos. Nobody even blinks when they see her standing up filming the nightmare. You see all kinds of stuff in here: Who cares about some girl filming something?
More hours pass. It’s after five now. A young Latin man just ahead of Markisha goes in and just as quickly is dragged out by security when he explodes at a worker after finding out he can’t get his food stamp card—Markisha doesn’t know why. “I’ve been here since eight o’clock in the morning and I’m still here after five o’clock!” he shouts. “I’m just coming for my EBT card! I need my EBT card!”
Security drags him past Markisha, chucks him out the door. “I was like, dang,” she says. “I didn’t know what to think.” Finally, at 5:30, after nine hours, Markisha is shown into an office where a bored-looking older black woman stares blankly at her from behind a mass of papers.
“Let me tell you something right away, honey,” the woman says. “We got two whole rooms of papers right behind us here. Two rooms of applications to go through. So it’s going to be forty-five days before you get your benefits.”
By law, forty-five days is the maximum period of time the state can take before processing benefits. Markisha needs the money yesterday, but whatever; she knows enough not to say anything. She answers the woman’s questions. How many people live in your household? What’s your income? How come you can’t get a job?
Then the whopper. “How much,” the woman asks, “is your baby daddy giving you a month?”
“My what?” Markisha says.
“Your baby daddy,” the woman repeats. “He giving you money or not?”
Markisha answers: he is not. By the time the woman finishes with her, Markisha is in a panic, but she’s been approved for benefits. Go home, they tell her, and wait for someone from the DA’s office to search your home.
Wait when?
Just wait, they tell her.
Trying to get on welfare is like trying to get Rolling Stones tickets in the 1970s—you have to camp out in front of the entrance long before the ticket window opens. You go there, you take a number, then you sit all day long while people scream and yell all around you. If you have kids, you have to bring their lunches and you have to be careful about when you take them to the bathroom, because you might miss your call. “It’s worst in the afternoon,” says Anna Alvarez, a twenty-one-year-old with a newborn baby who applied for benefits with her husband, Diego. “The kids get hungry and they start screaming and acting out.”
Some people I interviewed went to the FRC and went through this all-day-in-a-DMV-from-hell process three and four times before they even got their initial meeting.
But the kicker is, if you get all the way through the process, and actually get your meeting, and you get approved, they then tell you to go home and sit tight for your P100 search. And they don’t tell you when that will be, except to say that it’s generally within a week and a half. You then have to be at home at all times until they show up—it’s like sitting shivah, except you have to do it for more than a week.
“If the investigator shows up and no one’s there,” says Halpern, “they shove a card under your door that says, ‘We could not verify your eligibility,’ and you don’t get your benefits.”
The couple Diego and Anna handled their vigil in shifts, with one staying at home at all times, and the other, usually Diego, going out to work (he works at a Little Caesars) or to buy groceries. In their case, the investigator showed up six days later. In Markisha’s case, it was only a few days, but she had a problem: she was attending a court-ordered recovery program at eleven a.m. every Wednesday. It was literally illegal for her to miss the class; she could face charges. She explained this to the people at the FRC, but they weren’t interested. Right on cue, the investigator then showed up at 10:30 a.m. on that following Wednesday. He’s an older white guy, about fifty years old. He knocks, steps just barely inside the apartment, and takes a quick look around.
“You sure you don’t live here with the baby’s father?” he says.
Eric had just come by to take their son to school. The boy wasn’t home. The investigator doesn’t like this.
“I don’t think you’re really living here with your son,” he says.
Again, this is a constant feature of the welfare application process. Literally every single person I interviewed in San Diego at some point had a caseworker or someone from the DA’s office accuse them of lying within minutes. One woman named Selena, a quiet twenty-eight-year-old from Mexico who cleans houses and lives with her elderly mother, met the investigator by chance, coming home from work cleaning apartments just as he was leaving—Selena’s mother had let him in. The investigator asked Selena where she had been.
Cleaning houses, she said.
Yeah? the investigator asked. How much did you make?
Selena opened her wallet and showed him: $120. That money was for four apartments, she tried to explain, but he wouldn’t hear it. The investigator chirped that the going rate for an apartment cleaning was sixty bucks. Apparently he was speaking from experience haggling with maids.
“You’re lying to me about that money,” he said. “You didn’t earn that much cleaning apartments.”
Selena is meek, quiet, a little stout, and looks very much like someone who cleans houses for a living. The investigator, within minutes of meeting her, was accusing her of … what? Hooking? Selling crack?
Back to Markisha’s home search: the investigator didn’t like the absence of the child, despite the fact that it was 10:30 a.m. on a school day. She was sharing the apartment with another tenant, a local barber, but the investigator didn’t want to see his room. In fact, he didn’t want to see Markisha’s room, which had two beds in it, one for her and one for her son. He just stood in the doorway, looking around.
“I asked him if he wanted to see my room,” Markisha says. “But he said no. He just stood there.”
After a few minutes, the investigator jotted a few notes down, clicked his pen, and turned to walk out the door. “Okay,” he said. “That’s my investigation.”
Just like they don’t tell you when they’re coming, they don’t tell you what their investigatory conclusions are. Markisha had to wait. A few weeks later she found out she was rejected—because the investigator didn’t believe she was living with her son.
Now she’s appealing the decision. In the meantime, she lost her apartment and is living with her aunt. Technically speaking, however, she’s temporarily in a safer place than applicants who immediately pass the search process. She dodged a bullet in the sense that the state decided she was lying before she started getting her checks. Once you start actually collecting benefits, you get put on the clock for a fraud case.
The couple Diego and Anna, for instance, were doing everything right. They are both bright, fit young kids; Anna is petite and cherubic, and Diego is on the shorter side but clean-cut, engaging, and good-looking. They met at the gym in the first months of 2011 and quickly fell in love. In the summer, they discovered Anna was pregnant, but they were not panicking then. Both were working, at the only sorts of jobs really available to young people in America—Anna at a Carl’s Jr., and Diego at a Panda Express. Diego actually had gotten a raise at Panda Express and was doing well.
“I was making pretty decent money there,” he says. “We were doing okay.” And though Anna had to ride on the bus for two hours in each direction to go to her job at Carl’s Jr., she was managing.
“We were able to pay our rent,” she says.
But then Panda Express downsized and Diego lost his job. And Anna, growing more and more visibly pregnant, was not going to be able to keep working the night shift at Carl’s Jr., with two-hour bus rides each way. So late in 2011, they made a fateful decision, to go on benefits, to help them at the very least through the birth of the baby.
Diego had immigration status because his mother had been the victim of extensive domestic violence. The Violence Against Women Act of 1994, signed into law by Bill Clinton, gave temporary immigration status to the victims of domestic violence, for the simple reason that in many immigrant households, abusive husbands prevent their wives and children from going through the naturalization process as a way of keeping power over them. (Selena, the house-cleaner, fell into that category.) So when the husband is removed from the home, his wife and children are given temporary status and immediately qualify for benefits.
Diego had had his U visa since 2006 and had qualified to receive his own benefits as an adult for two years, but he was only now applying, and he was only applying for food stamps. Anna, meanwhile, applied for the full CalWORKs package, which included cash aid and food stamps. They went into the Market Street FRC in December 2011, and initially everything seemed fine. “The woman was really nice,” Anna says. “We had no problems at all. She told us we qualified.”
You have to be so poor as to have nothing at all to qualify for welfare. In California, to qualify for benefits, you can’t have more than $2,000 in assets to your name. If you have a car, the car can’t be worth more than $3,000. The actual equation for income level in California is complicated, but put it this way: a hypothetical family of three, like Diego and Anna would soon be, cannot have a gross income of more than $714 a month and still qualify for CalWORKs. The math is too involved to list here, but if you’re getting benefits, you have to know those formulas like the back of your hand.
Why? Because when you apply for CalWORKs, they hand you a very involved application form, and this form becomes the legal bible by which you must live, on pain of prosecution. The CalWORKs cover sheet/application comes with a snappy little Orwellian logo at the top of the first page, a cutesy drawing of a small pile of dollar bills surrounded by the words: quote:WORK PAYS
In so many ways quote:The form goes on to give a summary of the benefits process (you receive a more detailed package of all the rules separately) and contains a lengthy passage about the consequences of lying to the state. You are reminded that you must attest to the veracity of everything you write and that you can be jailed for up to three years for lying about getting cash aid and up to twenty years for lying about food stamps (we will find, as we look at the frauds committed at banks and other such companies, that the penalties for fraud seem to increase as the amounts lost get smaller).
You’re also told, ominously, that if there is an overpayment, “you will have to pay it back even if the County made an error.”
You’re then asked to answer nineteen questions, which include things like “How much income does everyone, including children, get or will get this month?” (You find out at another part of the form that the words “You, anyone, everyone” in welfare applications all mean “any and all persons who live in your home.”) You’re asked if “your food will run out in three days”; you’re asked if you have an eviction notice “or notice to pay or quit.”
You fill out this form, and then at the bottom you sign your name to the following statement:
I declare under penalty of perjury under the laws of the United States of America and the State of California that the information I have given on this form is true, correct, and complete.
And you keep signing those forms for as long as you have benefits. If you’re on any kind of public assistance, you have to fill out, every quarter, a form called a QR 7, or “Eligibility/Status Report.” In that form you have to attest to all the basic facts of your life—whom you live with, whether you have a car, where you work and how much you earn, and so on. And if any of that information doesn’t jibe with what the state knows or thinks it knows, you get started down the road to a fraud case.
In any case, Anna and Diego signed the form, went home, waited and waited for the P100 search (“A drag because you can’t go out and look for a job,” says Diego), made it through that, and appeared from there to be fine, receiving benefits at the end of the month, as expected.
The sum total of the benefits was $246 in cash for Anna, plus food stamps for both of them. As the New Year rolled around, they began to think they were going to be okay. Diego got another job at another fast food place, this time at Little Caesars (“No delivering—I’m making pizzas,” he says cheerfully), and they were already thinking about the time when they might be able to get off the benefits.
Then they got a letter in the mail.
Welfare applicants all talk in hushed tones about the dread of the mail system. Everyone in the California system has a monster collection of ominous little green forms, and to the last they all tell stories about getting a letter with good news one day that is contradicted by a new letter the next day accusing them of fraud.
This is what happened to Diego and Anna. Almost immediately after receiving their first month’s benefits, Anna got a letter saying that upon further review, the state had ruled that Diego had not been eligible to receive benefits. Therefore, the notice said, Anna—not Diego, but Anna—now owed the state $148 to compensate for the month of food stamps he had “improperly” received.
The state was wrong—Diego did qualify for the food stamps—but that didn’t matter. Recouping “erroneous” overpayments to welfare recipients has become a craze for states all over the country. In 2010 Barack Obama’s Department of Agriculture lifted a ten-year ban on collecting food stamp overpayments, and states all over the country went hog wild trying to recover lost monies.
For instance, in 2011, the state of Ohio—the same state that lost tens of millions in the early 2000s when its pension fund bought severely overpriced mortgage-backed securities from a Lehman Brothers banker named John Kasich, who would later become governor—tried to recoup some of its losses by sending out 22,000 notices to Ohioans seeking “overpayments” in either welfare or food stamps.
Many if not most of these “overpayments” were actually the state’s own errors, but they went as far back as 1986 anyway, seeking checks as small as $78. A sixty-four-year-old retired construction worker named Dave Jenkinson got a notice asking him to repay $248 for cash assistance he got in the 1980s; if he didn’t pay, it would be withheld from his paycheck.
“They blame me like it’s my fault,” says Jenkinson, who doesn’t even remember getting cash aid.
This, roughly, is the situation Anna and Diego found themselves in. They were told to pony up the cash or else the money would be withheld from their paychecks. More notices piled up that month. One, curiously, informed them that according to their calculations, Diego had earned more than seven hundred dollars in January.
Diego and Anna were flabbergasted. Diego had gotten just one paycheck from Little Caesars in January, and it was for only two days’ work. “I made thirty-six dollars,” he laughs now.
In late January they went into the FRC to plead their case, one of ten different trips they would make to the office between December 2011 and March 2012. In the course of that meeting a bizarre incident took place. Diego saw that the caseworker had his photo ID on file; he asked for a copy of that document. The caseworker exploded.
“He got up and threw a pair of scissors down on the desk,” says Anna. “We had no idea what was going on.”
“He’s like, ‘How do I know that’s even you?’ ” says Diego. “Then he stormed out.”
Not surprisingly, nothing at that meeting got resolved. Oh, well; they at least still had Anna’s benefits. The couple dug in and tried to enjoy the last month before their first child was born. Meanwhile the notices kept coming in the mail, most still harping about that food stamp money. By March there would be more than twenty of them.
Then, two weeks before their first son, Jonah, was born, they got a bombshell in the mail. “I got a new notice,” says Anna. “It said I had received an overpayment. They said I had received five hundred sixteen dollars in cash aid. But I’d actually only received two hundred forty-six dollars. I had the stubs to prove it and everything.”
As a result of this “overpayment,” Anna was now permanently denied benefits. Both young people were pushed off the rolls because of errors made by the state. The total amount of “overpayment” was now perilously close to the four-hundred-dollar number that is generally considered the minimum threshold for the state to press a fraud case. As it was, the Alvarezes were going to be out at least that much money in taxes, which would be taken out of any future paychecks earned by Diego or (if and when she goes back to Carl’s Jr. or some other, closer workplace) Anna.
But according to the state, they’d also committed fraud at least three times: when Diego received benefits without qualifying for them, when Diego “lied” about his January income, and when Anna overcollected in cash aid without paying the money back.
The young couple are now in a permanent state of dread, never knowing when they might be dragged into another mess or charged with a crime. “I think about it a lot,” says Anna. “It’s on my mind all the time.” In addition to having an uphill climb just to keep food on the table every month, she and her husband are in a zone where one wrong number, one slip of the tongue, one computer error, can put you in legal jeopardy forever. “It’s literally dangerous to be poor,” says Halpern.
The couple’s only shot to fix things is to get a volunteer lawyer to help them sort it all out before it turns into a criminal case. And you have to sort it out now, because once prosecutors file in cases like this, it’s over.
“Welfare recipients are so unsympathetic that public defenders don’t even bother trying to fight the cases,” says Hilda Chan, a young lawyer who works with the poor in San Diego.
I found this out myself when I contacted the public defender’s office in one California county (not San Diego) and asked to speak to an attorney who handles welfare fraud cases. I was initially told there was no such person. When I countered that there had to be someone, given that I’d just been told by that county’s district attorney’s office that they processed thirty felony fraud cases a month, I was put on hold. When the receptionist came back, I was told that “we do of course handle welfare fraud cases, but that attorney is not in at the moment.”
While the country’s best and highest-paying legal jobs are the province of superstar corporate defense firms like Davis Polk and WilmerHale that routinely handle financial fraud cases—if you want to find a lawyer who’s defended a bank against an SEC fraud charge, you won’t have to go very far—it’s very difficult to find a lawyer, any lawyer, who has actually put up a defense in a welfare fraud case. They beg off them, find excuses to avoid them, and if they do get stuck with them, they plead them out. “Public defenders don’t want to take these cases,” says Kaaryn Gustafson, a professor at the University of Connecticut.
Meanwhile, one of the curious, and curiously stupid, features of the way welfare is administered in many states is that no single caseworker stays with any applicant’s case; each time the recipient interacts with the state, he deals with a new person. And each new person who looks at the file may interpret the facts differently. Thus Diego may qualify in the first caseworker’s eyes, but not in the second. A person can be in the CalWORKs program for years and never get to know any caseworker.
That virtually guarantees a few things. One is that no sympathetic relationship ever develops between client and caseworker, which politically is probably considered a good thing.
Two is that there’s an explosion of errors that are infinitely more difficult and more expensive to sort out than they would be if someone with personal knowledge of the case was involved from the jump. Now there’s an endless parade of Annas and Diegos and Markishas filing formal appeals with the state, explaining their whole life stories from the start in each meeting, instead of just calling a caseworker on the phone, reminding them of a fact or two, and having them change a number on a screen.
The system therefore clearly doesn’t really work for the state, either. It’s like opening a hospital where no doctor could ever see the same patient twice—the bureaucratic version of Memento, where the characters have to go back in time to re-create a whole universe of facts from the beginning in each new scene.
Lastly, minus the possibility for human interaction (or the satisfaction of seeing a client get back on his feet), the welfare caseworker’s job inevitably becomes a blistering hell of constant, irrational paperwork and seemingly inane requests from needy people. It’s no wonder that so many of them throw scissors and explode at their clients. You would, too, if that was your life every day.
In fact, the only creative component to the caseworker’s job in the current system is the investigative angle, which is not an accident. Since the great welfare reforms of the mid-1990s, when Bill Clinton broke up the traditional welfare state and introduced reforms like workfare and the end to permanent cash aid, the entire welfare apparatus has gone through a transformation, wherein thousands of people who were caseworkers previously became fraud investigators under the new system. “Sometimes, they even kept the same offices,” says Gustafson. “They would take a welfare caseworker, retrain him or her to be a fraud investigator, and put him or her back in the same desk.”
In many places (and San Diego is one such place), the welfare caseworkers and fraud investigators working for the DA’s office actually work out of the same building, wing, or office. “San Diego has satellite DA’s offices in the welfare offices,” says Gustafson. “People come in to talk to a caseworker, they have no idea they’re talking to a fraud investigator.”
To give an example of how many welfare workers have migrated to law enforcement in the post-Clinton era: in 2002, in just one California county (Santa Clara), the Board of Supervisors reassigned thirty-seven welfare caseworkers to new jobs as investigators. There are so many welfare fraud investigators now, they’re actually unionizing and bargaining collectively. They even have their own lobbyist organizations; in California, for instance, we now have the California Welfare Fraud Investigators Association, and similar organizations now exist in Nevada, New York, Ohio, Colorado, and numerous other states.
These associations have effectively lobbied for increased welfare fraud prosecution and investigation and have helped create a new cottage industry within government. Some states have actually increased funding for fraud investigation because the programs are paid for by federal funds they would lose if they weren’t spent—in other words, rather than lose funding because of reduced welfare rolls, states simply increase the amount of staff for welfare fraud investigation.
This results in mountains of fraud cases. At the end of 2007, for instance, there were more than 52,000 welfare fraud investigations pending in the state of California alone. That number is actually lower than it was in the late Clinton years, when the state of California paid counties a cash incentive to make welfare fraud cases—they were given 25 percent of any cash recovered. Between 2001 and 2007, the number of cases that actually went to court dropped by about half.
But the caseload is still huge. California counties like San Diego, Alameda, Riverside, Bayview, and others all file upward of forty or fifty cases a month, and in some cases as many as a hundred cases a month. These cases are often felony fraud cases, and DAs are hot for them because (a) they never, ever lose them and (b) it boosts their records. Fans of The Wire will connect to this dynamic: nothing quite jukes the stats like forty unopposed felony convictions a month. “DAs love these cases,” says Gustafson. “It raises their profiles before elections.”
So how does a numerical glitch like any of the ones in Diego and Anna’s case turn into a criminal charge? It happens in dozens of ways. A caseworker at an FRC sees an applicant leaving in a nice car, a P100 investigator sees those Victoria’s Secret panties, or, very often, a neighbor calls in with a tip, sometimes for a cash reward. Beyond that, the state has computers scanning countless different databases—phone and utility bills, school registration, birth certificates, leases, voter registration, the DMV, tax data, unemployment compensation, and on and on—that can uncover discrepancies. The recipient is then sent a notice and asked to come in to speak to a fraud investigator.
In some parts of California, welfare recipients when they first walk into that initial meeting are asked to sign what is called a disqualification consent agreement. The form reads as follows:
(1) [T]he accused understands the consequences of the signed consent agreement;
(2) consenting to the disqualification will result in a reduction in benefits for the disqualification period;
(3) the actual disqualification penalty to be imposed; and
(4) any remaining members of the [family] may be held liable for any overpayments that the accused has not already repaid.
Many people who sign this form do so thinking that they will simply be asked to pay money back, and they have no idea that it could be used as the basis of a criminal prosecution. They walk into these offices and not only sign away their benefits, they talk themselves right into jail.
And that’s the last thing that people need to understand about these cases: people really go to real jail behind this madness. It happens casually and effortlessly. And quickly. If you follow white-collar fraud cases like the federal government’s halfhearted investigation of Goldman Sachs executive Fabrice Tourre, accused of helping a hedge fund billionaire named John Paulson defraud a pair of European banks out of over a billion dollars, you see that these cases move at the speed of a molasses spill. Motions and counter-motions drag cases out for years and years.
While writing this book, I covered a trial, USA v. Carollo, Goldberg and Grimm, that involved the rigging of municipal bond auctions by a trio of GE Capital executives. The government had the crimes of all the defendants on tape (the companies taped themselves), and none of the defendants had anything like a credible defense for crimes that collectively cost states many millions of dollars. Yet not one of the accused saw the inside of a jail cell for nearly fifteen years (the offenses dated back as far as 1999), and even after all three were convicted and handed down multiyear sentences, they were eventually freed by a judge who essentially punished prosecutors for missing the statute of limitations for filing charges.
High-finance fraud cases are drawn out for dozens of reasons, including the obfuscatory efforts of superior defense lawyers and the overwhelming complexity of the crimes.
But welfare fraud? These cases can be generated in the blink of an eye, often because a family member or a neighbor simply decided to pick up the telephone. “No one can snitch you off like your ex or your ex’s girlfriend or your neighbor or your landlord,” says one former California district attorney whose county in the late 1990s processed more than a hundred fraud cases a month.
Gustafson, the professor, recalls interviewing a single father named Jerome for a study she was doing on how well welfare recipients understand the rules. Jerome was raising his toddler son by himself. Why? Because back when he was living with the child’s mother and her sister, the sister didn’t like him and called the welfare office to snitch him out, hoping that authorities would kick him out of the house. But the consequence of that decision was that the authorities busted not Jerome, but the mother, for not registering Jerome as a resident in the home. The mother ended up doing a year in jail. Jerome and his son now rent out a room in a converted garage.
The ad in the Riverside, California, Press-Enterprise is of the big banner variety, nicely placed in the Sunday edition—at four columns square, it’s a nice size, too, costing a thousand bucks to publish. The message is simple: the government of Riverside County, California—a politically conservative, mostly affluent region east of Los Angeles that extends to the Arizona border and includes the resort town of Palm Springs—is looking for whistle-blowers to aid the state in making fraud cases.
What kinds of fraud cases? Big cases? Well, not exactly. The ad reads:
$100 REWARD
OFFERED BY RIVERSIDE COUNTY DEPT. OF PUBLIC SOCIAL SERVICES
Dockets of the Riverside County Court System show the following persons were convicted of welfare fraud on the dates specified:
And then the ad goes on to list the names and conviction dates of six persons convicted of improperly receiving benefits. The government of Riverside County, California, essentially puts the heads of six welfare cheats on pikes and plants them in the public square once a month, to send a message to the community. “Yeah, shaming is definitely part of the motivation,” sighs Philip Robb, a former prosecutor from neighboring San Bernardino County, now engaged in a (to date unsuccessful) campaign against the ads.
Month after month, Riverside County runs the same ad and picks six new names each month to advertise. Like welfare recipients in general, the guilty are overwhelmingly female, and usually nonwhite. “They don’t do this to rapists or murderers,” says Robb. “Not even to pedophiles. It’s incredible.”
No, the only offenders the local burghers will spend money to embarrass publicly are young, single, nonwhite mothers guilty of the crime of improperly receiving benefits. And as we’ve seen, it’s a stretch to assume that they’re all really guilty. The one thing we do know is that the people on this list every month are all flat broke and incapable of hiring a decent lawyer—and who knows, the fancy folk in Palm Springs might have an interest in shaming these people for that crime, as well.
All of this goes back to Bill Clinton. It’s not a coincidence that radical welfare reform took place on the same watch that also saw a radical deregulation of the financial services industry. Clinton was a man born with a keen nose for two things: women with low self-esteem and political opportunity. When he was in the middle of a tough primary fight in 1992 and came out with a speech promising to “end welfare as we know it,” he could immediately smell the political possibilities, and it wasn’t long before this was a major plank in his convention speech (and soon in his first State of the Union address).
Clinton understood that putting the Democrats back in the business of banging on black dependency would allow his party to reseize the political middle that Democrats had lost when Lyndon Johnson threw the weight of the White House behind the civil rights effort and the War on Poverty.
If you dig deeply enough in America, the big political swings always have something to do with race. And Clinton’s vacillating but cleverly packaged campaign to “end welfare as we know it” was a brilliant ploy by the man Toni Morrison called the “first black president” to take back the southern white voters the Democrats had seemingly lost forever when they sent the FBI into Alabama and Mississippi in the 1960s. That, and a little rolled-up-newspaper training session with rapper Sister Souljah, allowed Clinton to take four of the eleven Confederate states, seizing ground no Democrat had won for more than two decades.
But Clinton didn’t just go after Republican votes. He went after the Republicans’ money, too. He brought in a team of economic advisers who offered what was, for the Democrats, a bold new approach on the economy, an approach based upon balancing the budget on the one hand and deregulating Wall Street on the other.
In the wake of the 2008 crisis, Clinton is most frequently criticized for overseeing two radical changes to our regulatory structure: the repeal of the Glass-Steagall Act to allow the mergers of investment banks, commercial banks, and insurance companies, and the Commodity Futures Modernization Act of 2000, which deregulated the burgeoning derivatives market. Less commonly understood is that Clinton, Greenspan, Rubin, and Summers also oversaw the collapse of what are known as “selective credit controls,” the tools used to rein in irresponsible lending.
Rules like the Federal Reserve’s Regulations X and W, which mandated minimum down payments for things like home and automobile loans, were watered down if not eliminated completely during the Clinton years, and regulators under Clinton likewise refused to insist that banks and financial companies at least jack up their reserve capital to match all the crazy lending they were doing. At a critical juncture in 1993, for instance, Clinton’s SEC considered a proposal to raise capital requirements in the (then little known) derivatives market, but ultimately decided against it.
The cumulative effect of all this was an explosion of easy credit for the financial services sector, wedded to an across-the-board relaxation of economic regulations. Staffs were cut at all the major regulatory agencies, and banking watchdogs like the Office of the Comptroller of the Currency and the Office of Thrift Supervision simply stopped pursuing criminal investigations; groups that had referred thousands of cases a year to the Justice Department for prosecution during the S&L crisis completely stopped that activity by the turn of the millennium. In 2009 the OCC referred zero cases for prosecution.
On the other hand, welfare fraud was prosecuted like never before, and welfare fraud investigators multiplied like rats in every state of the country, forming unions and lobbying agencies.
Bill Clinton’s political formula for seizing the presidency was simple. He made money tight in the ghettos and let it flow free on Wall Street. He showered the projects with cops and bean counters and pulled the cops off the beat in the financial services sector. And in one place he created vast new mountain ranges of paperwork, while in another, paperwork simply vanished.
After Clinton, just to get food stamps to buy potatoes and flour, you suddenly had to hand in a detailed financial history dating back years, submit to wholesale invasions of privacy, and give in to a range of humiliating conditions. Meanwhile banks in the 1990s were increasingly encouraged to lend and speculate without filling out any paperwork at all, and eventually borrowers were freed of the burden of even having to show proof of income when they took out mortgages or car loans.
Clinton’s “third way” political strategy, in which Democrats laid down their arms of business regulation, allowed his party to compete with the Republicans for the campaign contributions of the big banks on Wall Street. By 1996, Bill Clinton’s single biggest private campaign contributor would be Goldman Sachs, a distinction he would share with the next Democratic president, Barack Obama. The other side of the new strategy also stole the Republicans’ political thunder by preemptively bashing black dependency through the welfare issue, allowing Democrats to sink their fangs into a big chunk of Richard Nixon’s “Southern strategy” based on white voters in the South.
This was canny politics for the Democratic Party, but it had an obvious consequence—a consensus. Now the political momentum in both parties traveled in the same direction. Both parties wanted to merge the social welfare system with law enforcement, creating a world that for the poor would be peopled everywhere by cops and bureaucrats and inane, humiliating rules. They wanted to put all the sharp edges of American life in that one arena, and they succeeded.
And on the other hand, both parties wanted the financial services sector to become an endless naked pillow fight, fueled by increasingly limitless amounts of cheap cash from the Federal Reserve (literally free cash, eventually). If they turned life in the projects into a police state, they turned life on Wall Street into its opposite. One lie in San Diego is a crime. But a million lies? That’s just good business.
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Dec 23, 2017 22:50
