Last year we awarded Dylan Ratigan one of our First Amendment Awards for Outstanding Journalism for his job calling out the scammers who were bringing down the economy. Dylan and I were chatting about how things have played out since then, and what we need to do to continue fixing the broken infrastructure of capitalism …

Damien Hoffman: Dylan, what financial reform do you think we’ll end up with?

Dylan Ratigan: Since it’s Washington, I have no idea. But if I were to bet, I think we’ll end up with derivatives reform. I’d love to see it deal with the issue of collateral because that would expose the fraud of the entire system. Credit derivatives are just a mechanism to monetize the future for the present.

Actually, three things would expose the fraud: forcing investors to post collateral on derivatives, an audit of the Fed, or an assignment of forbearance to the homeowner and away from the banks. These three problems illustrate that we’ve got a highly leveraged banking system in which the bank executives are paying themselves a lot of money. They are claiming it’s a yield to our economy when — if the state bears the rip in the banking system — it’s nothing more than a tax on capital.

Damien: What about the transfer of risks?

Dylan Ratigan: We’ve got an inefficiency by which a few people figured out how to monetize the future and then sell the government a mathematical formula that is wrong. Then, they had the state bear the risk of that wrongness. This allows the private sector banking system to retain the profits and transfer the losses. It’s a pretty bad deal for the country.

Damien: The country can’t afford it right now.

Dylan Ratigan: Right. But the bankers don’t care. That’s why they are viciously fighting off any attempt to reform the status quo. The Democrats and the Republicans have a tremendous fear that it will reveal the leverage. That would call into question why the people running these banks are paying themselves all this money when there’s accounting and underwriting fraud at the heart of these banks who are misrepresenting their assets. Basically, they’re levering their misrepresentations through accounting relief with the Treasury and then paying themselves.

Damien: So are we in a Catch-22 where either we expose the fraud or if we’re too scared to expose it, we end up recreating the same playing field which is going to lead to an even worse or similar style crash somewhere down the line?

Dylan Ratigan: Yes, exactly. That’s exactly right. But we may have a few years. It is like we’re being told we’re going to have a heart attack. But instead of just taking advantage of the fact that we’ve been given a five-year warning to make a plan – getting off the sugar, maybe some exercise, whatever – everybody is still trying to deny the heart attack by saying, “We’re not going to have a heart attack.”

It’s kicking the can down the road to our generation and the next generation.

Damien: If we go down this road again, we will be in a lot worse trouble because the boomers are going to be tapping Social Security and Medicare like never before. So then how the hell are we going to pay for anything?

Dylan Ratigan: The end game is the paper currency is toast. Look at the implied rate of returns or the pension funds at 8%. Then look at the demographics. There’s not enough money, right? Paper currency has no value. So how do you get out of that?

Well, we actually have to start to produce things of value. This means we need to have an efficient lending and investing mechanism as well as a robust educational mechanism. People must make something for other people as their job. Then we will have a value-creating society as opposed to a value-extracting society. Right now we’ve mastered the art of extraction.

Damien: How do we make the switch when extracting is so much easier in the current system?

Dylan Ratigan: You and me and everybody else must become aware of the penalties that are being assigned to our generation in the form of social disruption or potential austerity measures and taxation. Not to mention the deprivation that is less felt but is very much present through high yields, underwater homes, etc.

But the government and banks don’t want to do it because they’re afraid of what they would have to do if we all understood the scam.

Stay tuned for Part II of my interview with Dylan …

If you like Zero Hedge, you’ll love WikiLeaks. WikiLeaks is the self-proclaimed “intelligence agency of the people.”

Salon reports:

[Wikileaks] obtained and then published a wide array of secret, incriminating documents that expose the activities of numerous governments and corporations.  Among many others, they posted the Standard Operating Manual for Guantanamo, documents showing how corrupt offshore loans precipitated the economic collapse in Iceland, the notorious emails between climate scientists, documents showing toxic dumping off the coast of Africa, and many others.  They have recently come into possession of classified videos relating to civilian causalities under the command of Gen. David Petraeus, as well as documentation relating to civilian-slaughtering airstrikes in Afghanistan which the U.S. military had agreed to release, only to change their mind.

All this amounts to a black market in confidential information. However, it’s dominated by the supply side because demand never necessitates whether a whistle blower sumbits to WikiLeaks.

Unfortunately for WikiLeaks, black markets aren’t appreciated by leviathans. Therefore, the Pentagon recently added the site “to the list of the enemies threatening the security of the United States.”

Whether or not you think information should be free, WikiLeaks is giving the global public a firsthand view into how governments intentionally manipulate public perception and volition. It will be interesting to see whether the site will find itself before the Supreme Court to preserve its existence.

Should WikiLeaks be protected under the First Amendment? Or, are they a threat to national security? Let us know in the comments below …

Dean Erwin Chemerinsky

Last week I covered the incredibly important yet widely unnoticed update on the corporate speech case before the Supreme Court (Citizens United v. Federal Election Commission). This week I want to follow up and share my exclusive interview with top Constitutional Law authority, and Dean of UC Irvine School of Law, Erwin Chemerinsky …

“This case will have a profound effect in changing the nature of elections in the United States.”

Damien Hoffman: Dean Chemerinsky, what is the issue before the Supreme Court in Citizens United v. Federal Election Commission?

Dean Chemerinsky: The Supreme Court asked for briefing over the summer in new arguments on the question whether corporations have a First Amendment right to spend money in election campaigns. Previously, the Supreme Court has upheld the ability of the government to  restrict corporate expenditures in political campaigns. Now it appears there are five votes on the Court — Chief Justice Roberts, Justice Scalia, Justice Thomas, Justice Kennedy, and Justice Alito — who want to overrule those precedents and uphold that corporations do have a First Amendment right to spend money in election campaigns.

Damien: If the Court overrules the precedent, will the new law have an impact on elections?

Dean Chemerinsky: This case will have a very significant effect on federal, state, and local elections. Corporations have tremendous wealth and they could then use it to get the candidates of their choice elected or the candidates they opposed defeated.

Citizens United will be a very significant change in unleashing corporate wealth to be spent, but future cases will deal with the concept of contributions.

For example, there are probably five votes on the Court who will hold that the restrictions on corporate contributions to candidates violates the First Amendment. However, during oral argument, Justice Kennedy indicated he wouldn’t want to go that far in this case — that’s for a future day.

These same five Justices will also probably vote that any limits on contributions other than disclosure requirements violate the First Amendment.

Damien: This begs the question for the Court to consider whether there exists a distinguishing characteristic between human beings who can vote in elections and corporations which cannot.

Dean Chemerinsky: In First National Bank of Boston v. Bellotti, the Supreme Court stressed the reason for protecting corporate speech was to inform the public. The public’s ability to hear and learn would be enhanced if there are more speakers. Ever since, the Supreme Court has been less willing to draw a distinction between corporate speech and individual speech.

Obviously, the Bill of Rights was meant to protect individuals, not corporations. I think protecting corporate speech would be very troubling to those on the Court who are Originalists. Ironically, those are the same Justices who are likely to give corporations Free Speech rights.

I think the Court is going to accept corporations have First Amendment rights and therefore the right to spend money in election campaigns.

Damien: From a policy perspective, does it matter that human beings have a much broader set of interests in our society including social interests, religious/spiritual interests, environmental interests, familial interests, quality of life interests, etc? While corporations operate under one focused mission to create a profit for shareholders? Doesn’t giving corporations the same Constitutional protections as humans mean we are creating a society which will look more like a corporate utopia since they can outspend individuals in Washington?

Dean Chemerinsky: Giving corporations the right to unlimited amounts of money in elections is troubling for many reasons. It’s troubling from the shareholders’ perspective. Corporate wealth is the wealth of their shareholders. Spending money in campaigns may be spending money against the political desires and interests of their shareholders.

Also, corporations have accumulations of wealth unmatched in our society. Corporations can simply outspend all other interests and drown out all other voices in the political process. There are many different interests in our society, but like you said, corporations have zero interests other than maximizing the wealth of their shareholders.

The bottom line is this case will have a profound effect in changing the nature of elections in the United States.

Damien: I don’t understand why corporations need Free Speech rights in elections if all the human beings which comprise what we call a “corporation” already have full Free Speech protections under the First Amendment. Technically speaking, there is no abridgment of anyone’s speech insofar as anyone who either works for or owns shares in corporations.

Dean Chemerinsky: Certainly, from the Originalist perspective corporations would not be protected by the First Amendment or any of the other rights in the Constitution. Yet, a long time ago the Supreme Court went down the path of giving corporations some, although not all, Constitutional rights.

Damien: Well, I’d like to ask the Supreme Court a few questions. Dean Chemerinsky, congratulations on your Deanship at the new UC Irvine School of Law. Thank you for taking the time to educate me.

Dean Chemerinsky: Anytime. I enjoyed speaking with you and thank you very much.

An irony of Shakespearean proportions is unfolding as I write this: the Town Hall discourse revolves around complaints government is getting too big, yet in the quieter halls of the US Supreme Court corporations are on the verge of capturing the largest swath of power since they were ruled legal persons. Let’s take a closer look before we wake up in an Orwellian distopia:

The Issue: Whether corporations have a First Amendment right to spend money in election campaigns?

According to UC Irvine Law School Dean Erwin Chemerinsky, the nation’s leading Constitutional Law expert, “Previously the Supreme Court upheld the ability of the government to restrict corporate expenditures in political campaigns. Now it appears there are five votes on the Court — Chief Justice Roberts, Justice Scalia, Justice Kennedy, Justice Thomas, and Justice Alito — who want to overrule those precedents.”

Although corporations have stuffed cash into tons of loopholes such as Political Action Committees, a change in the current law would allow corporations to siphon off money from their wealth-creating machines and directly turn politicians into outsourced independent contractors. If you are pissed about the financial crisis and what Washington allowed to happen, you ain’t seen nothing yet.

The proponents of expanding corporate speech insist the current law is an unconstitutional abridgment of First Amendment protected Freedom of Speech. However, speech is curtailed in instances where it can be an extreme detriment to our society (as opposed to our feelings). For example, we do not have the right to go into a crowded place and scream, “Fire!”

Before offering more examples of limited speech rights, this begs several incredibly critical questions about the society we are trying to create under the Constitution. First and foremost, should the legal fiction called a “corporation” be inherently endowed with the full set of rights entitled to human beings under the Constitution? If so, we are saying corporations are now equal citizens under the law and our society should boldly reflect their values and interests even if they compete with those of human beings.

I immediately wonder why corporations even need unlimited Freedom of Speech rights. They already have reasonable Freedom of Speech protections (First National Bank of Boston v. Bellotti, 435 U.S. 765 (1978)). Further, everyone who works at a corporation and all the shareholders already have the highest level of Freedom of Speech rights protected by the Constitution. If we give corporations the same Freedom of Speech rights as humans, we are functionally giving extra powers of speech to corporate executives in the C-Suite. After watching how they ran our economy into a shitpit, should we allow this handful of business people to use their out-sized coffers to drown out the incredibly less financed individual citizens?

If we allow robots to influence elections, that society will reflect the values of robots. If you let corporations influence elections, that society will reflect the values of corporations. Unlike human beings, corporations do not have values. Instead, by law, corporations are legal fictions which operate solely to produce profits for shareholders. Therefore, human values such as life, liberty, happiness, health, spirituality/religion, kindness, relationships, the environment, etc. will all compete with the myopic legally mandated interest of corporations.

Given that the Founders never once mentioned the word ‘corporation’ in the Bill of Rights, I find it impossible to believe they intended to elevate businesses to the level of human being. Such an expansion of stature is like remaking the movie The Terminator and substituting the androids with C-Suite controlled parchment charters against which humankind battles for survival as we know it.

There are many other issues for you to chew on while daydreaming through your next meeting or commute:

Should corporations influence the electoral process if they do not have the right to vote and are not human beings?

Can corporations spend money supporting political persons and issues which conflict with the wishes of shareholders?

Is bringing corporations under the protection of the Constitution the most extreme example of judicial activism?

In the weeks to come we will address these questions with some exciting interviews. Until then, I highly recommend this quick read …

Have you signed up for your FREE 14-day, no risk trial of our acclaimed Premium Newsletter? Click here now.

If you are interested in real-time market analysis, click here to follow Wall St. Cheat Sheet on Twitter.

Want to read more Wall St. & Washington? Try these:

The Case Against a Global Central Bank

Has the Federal Reserve Failed?