Category Archives: politics

What’s in this Wall Street reform bill….

that some might decide to filibuster it?

Last week’s Congressional votes have opened the door for both houses of Congress to finally take up the bill developed by the Senate Committee on Banking, Housing, and Urban Affairs. The next two weeks will be spent, the New York TimesCarl Hulse observed, with both parties competing to amend the bill.

As our own Diane Vacca observed last fall, the late-2008 crash alerted all of us to the fact that the dissolution of the post-Great Depression controls on banking had some very serious downsides. Among them, perhaps, was the discrediting of the very ratings agencies investors have traditionally depended on (such as Moody’s and Standard & Poor’s), something DeutscheBank’s Karen Weaver foreshadowed in an interview with us six months before the Big Bust. So who can we depend on to keep our money safe, short of putting it all in gold bars under the bed?

To one extent or another, all the legislators working on the Wall Street reform bill are trying to answer that question.

But what’s in the bill that was filed, and what has been voted on so far? Like the problem it’s trying to address, it’s long and complex. Below is a sampling of how the bill tries to address some of the more obvious fault lines–the systemic problems identified by the Financial Crisis Inquiry Commission–drawn from the committee’s own summaries.

Stopping the casino: “Wall Street should have a socially important purpose, and not resemble a casino, where people are more concerned with valuing an option than valuing a business,” investment guru Warren Buffett said recently. The Senate bill incorporatesthe ‘Volcker Rule,’ suggested by former Fed chairman Paul Volcker, which requires regulators to implement regulations for banks, their affiliates and holding companies, to prohibit proprietary trading, investment in and sponsorship of hedge funds and private equity funds, and to limit relationships with hedge funds and private equity funds. Nonbank financial institutions supervised by the Fed will also have restrictions on proprietary trading and hedge fund and private equity investments.

Reining in derivatives: Perhaps the knottiest of the issues the Senate is wrestling with is that of all the new financial instruments, fabricated from mathematical sleight-of-hand and other people’s money.

According to a report from the Congressional Research Service, for a while these instruments seemed like the best game in town: “Since 2000, growth in derivatives markets has been explosive (although the financial crisis has caused some retrenchment since 2008). Between 2000 and the end of 2008, the volume of derivatives contracts traded on exchanges, such as futures exchanges, and the notional value of total contracts traded in the over-the-counter (OTC) market3 grew by 475 and 522 percent respectively. By contrast, during nearly unprecedented credit and housing booms, the respective value of corporate bonds and home mortgages outstanding grew by 95 and 115 percent over the same period.” Then came the crash; a few weeks ago we posted footage of former regulator Brooksley Born exposing the damage. Arkansas senator Blanche Lincoln (right) has given the issue particular heat, and authored the derivatives section of this bill.

Of course, many sensible investors already spurned derivatives when they had the choice. Take, for example, Warren Buffet’s Berkshire Hathaway holding company: hedge fund manager Alan Schram, reporting on a shareholders meeting of the company, noted that Berkshire holds “250 derivative contracts, down from some 23,000 contracts ten years ago, with a notional value of 1 percent of that of some other large institutions.” But many of America’s pension funds and 401(k)s were not quite so farsighted.

Derivatives “have some utility but have to be conducted safely, under responsible rules,” Buffett told shareholders. So what sort of “responsible rules” does the Senate bill currently propose? For starters, it would “require issuers to disclose more information about the underlying assets and to analyze the quality of the underlying assets” of derivatives and, perhaps more importantly, “require that companies that sell products like mortgage-backed securities to retain at least five percent of the credit risk, “unless the underlying loans meet standards that reduce riskiness.” It would also change the rules and the composition of the Municipal Securities Rulemaking Board, to stop outside “investment managers” from placing bets with the taxpayer funds and pension contributions.

More systemically, it brings “an estimated 90 percent of the market for derivatives, which are essentially bets on the future price of something, onto a regulated trading exchange—similar to a stock exchange, where price and volume data are publicly available to potential investors,” Brooksley Born’s former aide Michael Greenburger told ProPublica’s Marian Wang. “It leaves certain exceptions for foreign exchange deals and commercial use (such as an airline company’s use of derivatives to hedge against prices of fuel skyrocketing).” Let’s watch as senators parry over those exceptions, and see whether what they agree on is enough.

Leverage requirements. The word “leverage” may make you think of a grizzled Timothy Hutton on a Fox TV show. But for banks and shadow bankers, it means how much in the way of assets has to stand behind your investment, whether in cash, real estate, or farm implements. “If you’re a bank, the upside of leverage is that it gives you a lot of money that you can use, well, to make more money,” writes Washington Post wonk Ezra Klein. “It’s the difference between investing $1 in the stock market and $40. The downside is that it makes your firm fragile.”

If your leverage is at 2:1 — that is to say, you’ve borrowed one dollar to add to the dollar you already had — you could lose a full dollar and still be able to pay your creditor back. If you’re at 10:1, anything beyond a 10 percent decline in your assets means that if your creditors want repayment, you can’t pay them back (as you’ve lost more than your original dollar). At 20:1, a 5 percent decline will put you underwater. At 40:1, a mere 2.5 percent decline can finish you off. The more leverage you have, the less bad luck you can survive.

Therefore, the Senate bill would create a Financial Oversight Regulatory Commission, which would “impos[e] tough new capital and leverage requirements that make it undesirable to get too big” and therefore “too big to fail.” C-SPAN addicts, here are your marching orders: keep track of how this aspect of the bill changes in upcoming weeks.

Preventing future runs on the “shadow banking” system: What happened in September 2008, when all credit froze, did not include hordes of depositors rushing to pull their money out of Chase or Bank of America branches. Those institutions are covered, and regulated, by the Federal Deposit Insurance Corporation (FDIC). What did happen was an immediate blowout in the complex, interwoven, and immensely profitable network of financial institutions operating outside federal supervision, which magnified the collapse of one sector (subprime mortgages) until it nearly broke the economy.

Chief among these, perhaps, are hedge funds and reinsurance companies (think AIG). The Dodd bill establishes an Office of National Insurance to better monitor the latter, and would require a hedge fund with significant assets to register with the SEC like any other broker. Hedge funds, according to the bill summary, would have to “provide information about their trades and portfolios necessary to assess systemic risk. This data will be shared with the systemic risk regulator and the SEC will report to Congress annually on how it uses this data to protect investors and market integrity.

As even the most casual observer of last week’s Senate hearings on Goldman Sachs might have noticed, it’s a long and complicated way back to the stability investors once expected. “It took twenty-five years of misguided economic theorizing and legislation, along with insufficient regulation, to create an outlaw financial sector,” wrote economist John Cassidy for The New Yorker. “Rehabilitating it will be a mighty, multiyear endeavor.” So, it seems from today’s news, will even trying to talk about it.

Coming soon: our report on the controversial bailout-or-no-bailout provisions, the current state of the Consumer Financial Protection Agency, and how the Senate plans to deal with those suddenly rascally ratings agencies.

(First posted at Women’s Voices for Change.)

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Henrietta Lacks’ grandkids: “How can you judge the 1950s by the ethics of today?”

When Rebecca Skloot walked into the Kimmel Cancer Center in Philadelphia last week to talk about The Immortal Life of Henrietta Lacks, she was riding a wave of positive reviews for the book she had been working on for nearly half her life. The Boston Globe had called it “a well-written, carefully researched, complex saga of medical research, bioethics, and race in America.” Salon termed it “a heroic work of cultural and medical journalism,” and the New York Times thought it “a thorny and provocative book about cancer, racism, scientific ethics and crippling poverty [that] floods over you like a narrative dam break.”

At the Kimmel Cancer Center (part of Thomas Jefferson University), the crowd was made up of scientists and physicians, many of whom knew Henrietta Lacks only as HeLa, for the cell line named after her unusual, fast-growing cells. Over the years, HeLa cells have been used for cancer research, to test the polio vaccine, unlock the secrets of DNA transcription, and thousands of other medical projects.

Among the crowd was Dr. Leonard Freedman, dean of research at Thomas Jefferson, whose lab invented a new tool for DNA research using HeLa. “You know, I used to do a lot of science with these cell lines,” Freedman said to this reporter just before the lecture. But the book was a revelation: “We knew the cells came from some woman, but we even had her name wrong. And we certainly didn’t know any of what’s in the book.”

Dr. Edith P. Mitchell.

The same was true for Dr. Edith P. Mitchell, a clinical professor of medicine and program leader in the school’s Gastrointestinal Oncology program (and a general with the Missouri National Guard. “My first exposure to HeLa cells occurred when I was a young student, and was told not to contaminate anything,” Mitchell explained, “because, and I quote, ‘Those HeLa cells will grow all over the place.’”

All of this, Mitchell added, made her eager to secure Skloot as the center’s lecturer for Black History Month. Some might find this a paradoxical choice, seeing Henrietta Lacks’s story as a prime example of the medical community’s injustices to African-Americans. (For more on this history, see Medical Apartheid by Harriet Washington, who helped advise Skloot on her book.) Mitchell had a different view: “What does all this have to do with Black History Month?” she asked the crowd. “I say it’s connected to our history—by which I mean,” she said, glancing pointedly at the mostly white faces, “the history of the human race.”

Skloot asked the audience of 200: “How many people in the room knew about Helen Lane, before today?” About 100 hands went up. “And how many have worked with HeLa cells?” Two dozen raised their hands.

Then Skloot began to trace the story of a young mother of five who came to a clinic at Johns Hopkins, in 1951 “the only hospital in Baltimore that would see black patients,” after discovering a lump on her cervix.

Back then, “informed consent” laws didn’t exist, she added. The only consent needed was the patient’s signature on a form granting Johns Hopkins permission “to perform any operative procedures that they may deem necessary in the surgical treatment of Henrietta Lacks.”

It was immediately clear that Lacks had a full-blown tumor. She was given the prescribed treatment of the time, a course of radiation. But her diagnostic lab sample soon took on a life of its own.

That specimen, Skloot explained, was sent somewhere having nothing to do with treatment: to cell biologist George Gey, inventor of the “roller drum” used in labs worldwide, who was in the process of gathering all the cervical-cancer cells he could find.

“Gey thought he could isolate cells that had characteristics that were only cancer,” said Skloot. “So he collected them, but until he got Henrietta’s, the cells just always died. Hers didn’t.”

In fact, they doubled every four hours. The manically reproducing cells behaved the same way in Lacks’s body: she died eight months after entering the clinic. But her cells now had their own rooms at Johns Hopkins, and Gey was beginning to publish the fact that he’d found and perfected the line he called HeLa. Soon every scientist wanted his own supply, and eventually facilities were built to mass-produce HeLa cells and ship them around the world.

“I first heard about the HeLa cells when I was 16, at community college taking a class for high school credit,” said Skloot. “My teacher said what all teachers said in those days: ‘There are these cells, there was this woman, her name was Henrietta Lacks, and she was black.’ And I was like, That’s it? That’s all we know? He told me to go find out some more and write an extra-credit paper about it,” she laughed. “About a year ago I sent him my manuscript for this book: ‘Hi, remember that paper I owe you?’”

It took Skloot nearly two years to gain the confidence of Henrietta’s daughter Deborah Lacks- Pullum, whose journey to understanding is the core of Skloot’s book.

“I was just the next in a line of white people who wanted something,” Skloot said, adding that she gained Lacks-Pullum’s trust only after she offered to include her on the quest, taking her on lab visits and field research. During the years that HeLa had become increasingly renowned—the first cells to go into space, the first whose genes were mapped—the family, back in Baltimore and Virginia, had been largely unaware that Henrietta’s cells had even survived.

Asked what the family thought of her book, Skloot said that “there was a lot of pain associated with the story to them, and there were certain parts they avoided—like accounts of her death. But I think it was also sort of cathartic.” Deborah Lacks-Pullum remained deeply traumatized for many years. After learning about the HeLa cells and the research it had facilitated, said Skloot, “she believed her mother’s soul was in these cells. She wondered, ‘How can my mother rest in peace, if you’re shooting her cells to the moon?’”

Graphic from WIRED Magazine shows the global reach of the HeLa cells.

Other members of the family were, and are, passionately angry. “Her brothers became very angry when they knew the cells were being bought and sold,” said Skloot. She pointed out that any researcher in the hall that day could go online and buy a vial of HeLa for about $250, with other HeLa-derived products costing up to $10,000. Meanwhile, many members of the Lacks family are without health insurance. “They keep saying, ‘If our mother is so important, why can’t I get access to health care?’”

Skloot cautioned that the facts don’t support the media hype that something illegal has been done. Over the decades, she said, stories about the Lackses ran like much of the negative coverage of her book: Woman’s cells stolen, millions made, family still poor. But there’s no evidence of actual theft in a country where consent laws were hazy, she said—only a built-in structural injustice toward people without power.

“George Gey has been held up for decades as this guy who stole her cells, maybe didn’t treat her right,” said Skloot. On the other hand, some scientists have objected to the fact that the book raises ethical issues at all. “One stood up and told me it was irresponsible to tell the story, that this is going to give people the idea that they own their cells.” But Skloot refuses to see the story in cut-and-dried terms. “This has been held up as another Tuskegee,” she said, referring to the notorious forty-year syphilis study that used sharecroppers as its subjects, “and it’s just not.”

According to Skloot, even Lacks’s grandchildren don’t think so. Most of them are in their thirties, she said, “the first generation to have much schooling—one granddaughter is finishing up a masters’ in psychology. And they look at this whole thing from a very different perspective from their parents, saying things like ‘You can’t judge the 1950s from the ethics of today.’ They’re very proud to have come from her.” When the family came up to New York for a book-signing like this one, she said, “the room sort of erupted in cheers. All the scientists were saying to them, ‘This is what I did with the cells, this is what’s important,’ and asking them for autographs.”

With Roland Pattillo of Morehouse College, Skloot has set up the Henrietta Lacks Foundation to benefit the Lacks family. She spoke of one scientist who pledged to donate to the foundation: “‘A dollar every time I process a batch of these cells,’ he said. So I got a dollar and a dollar, and then he realized, ‘Whoa, this is going to add up!’”

Another potential source of compensation for the Lackses is a movie or TV adaptation, which would require producers to purchase not only rights from Skloot but ‘life rights’ from the family. The book has already sparked quite a bit of interest from studios, she said. Like Henrietta Lacks’s immortal cells, her story—complex, controversial, and needing to be told—is likely to be with us for some time to come.

First posted at Women’s Voices For Change.

Some news and a promise

I almost literally crawled under a rock toward the end of the year, in an effort to finally get this book completed. I can now report honestly that it’s almost there. (For a cheat sheet on its ultimate shape, check out my draft introduction at the book’s own site.)

Some  bits and pieces from around here – some more personal than usual:

  • With the book’s delivery in sight (promises, promises, I know, but….), I’m now blogging daily (ditto) at the Ain’t Marching site. Subscribe to its feed if you can so you don’t miss out. Today, for example, I comment on two medical-whistleblower stories, and on the intrepid reporters who’ve been crucial in exposing them.
  • Speaking of intrepid reporters, the unparalleled Jina Moore keeps breaking new ground, and rolling out new features from her work in Liberia (a project of the Pulitzer Center on Crisis Reporting).  Check it all out at her new site: this week she has a LONG, smart piece in the Christian Science Monitor Sunday mag, but I’m also intrigued by her older, sly piece on the guy who stole all the lawbooks, citing intellectual-property laws. (He needs some African Stephen James Joyce to give him a spanking.)
  • The web magazine I edit, Women’s Voices for Change, just gave me a taste of what it’s like to be in the magazine world: huge changes, a few layoffs, and a hot new editorial director who’s promised to make it famous. I’ll keep you posted as things proceed.
  • Meanwhile, I’m waiting to see if these folks find my work interesting enough to invite me in and give me hell for a few years. Maybe I won’t have to write more than two books that took Ph.D,-level work without that degree to show for it.

Matt Taibbi: “The entire economy was a fake”

The latest Rolling Stone piece from Matt Taibbi, our Tiresias of Wall Street, was horrifying enough for Halloween (as Susie Madrak points out),  with its latest details of how it all came down. It also gave the best summary I’ve seen of the whole Dantean reality created by it all.

Back when I was writing for Chelsea Now and trying, at the height of the bubble, to figure out how it all worked (and wondering whether I needed an MBA), my colleague Albert Amateau told me a story. I was getting headaches trying to sort out how it could all be legal that the air above your building, the years until you die, were all being “monetized” at such a rapid pace. A few years ago, said Al, he’d been offered a chance at a job writing for a newsletter entirely about derivatives, those malleable catalysts of much market hysteria. It didn’t work out, said Al, one of the best craftsmen in the business, but it told him that people like he and I had wasted our talents studying literature and poetry. It was people on Wall Street that had learned how to really make money with fiction.

Taibbi agrees:

If you squint hard enough, you can see that the derivative-driven economy of the past decade has always, in a way, been about counterfeiting. At their most basic level, innovations like the ones that triggered the global collapse — credit-default swaps and collateralized debt obligations — were employed for the primary purpose of synthesizing out of thin air those revenue flows that our dying industrial economy was no longer pumping into the financial bloodstream. The basic concept in almost every case was the same: replacing hard assets with complex formulas that, once unwound, would prove to be backed by promises and IOUs instead of real stuff. Credit-default swaps enabled banks to lend more money without having the cash to cover potential defaults; one type of CDO let Wall Street issue mortgage-backed bonds that were backed not by actual monthly mortgage payments made by real human beings, but by the wild promises of other irresponsible lenders. They even called the thing a synthetic CDO — a derivative contract filled with derivative contracts — and nobody laughed. The whole economy was a fake.

Oliver Stone got it right the first time, though many took his movie as a spur to enter the casino: I can’t wait to see what the new movie says.

Writing about war, frankly, is far more straightforward, with bodies you can see even though the good and bad guys are sometimes far more blurred.

Why I’ll be the First Amendment this Halloween

Illinois prosecutors must be getting really desperate. Their own governor has already declared a moratorium on executions, after all. Bur targeting journalism students is really beyond the pale.

First page of the Bill of Rights, the first of which is?

First page of the Bill of Rights, the first of which is?NYT via Raw Story: "Lawyers in the Cook County state’s attorney’s office say that in their quest for justice in the old case, they need every pertinent piece of information about the students’ three-year investigation into Anthony McKinney, who was convicted of fatally shooting a security guard in 1978. Mr. McKinney’s conviction is being reviewed by a judge.

Among the issues the prosecutors need to understand better, a spokeswoman said, is whether students believed they would receive better grades if witnesses they interviewed provided evidence to exonerate Mr. McKinney.”

RawStory adds:

The suggestion that students were encouraged to find evidence of wrongful prosecution even if there were none has raised alarms among some legal experts, who wonder whether Cook County prosecutors may be trying to discredit the project that has caused embarrassment for numerous prosecutors over the past decade.

“They’re either trying to undermine the investigation, or they’re trying to undermine the entire project,” Don Craven, executive director of the Illinois Press Association, told the press last week.

That settles my Halloween costume. I’m wearing tha judge’s robe I used to impersonate a dead Habeas Corpus last year: this year, it’ll be a bleeding First Amendment.

about President Obama’s Nobel

Lots of complex feelings about this, reflected well here by Andrew Sullivan. But the one I loved best was that of Farai Chideya, a role model of mine for years. so I’ve reprinted it here, with my own thoughts below that.  What do you think?

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chideya2_1When I woke up this morning to find out that President Obama had won the Nobel prize, based on diplomacy and anti-nuclear proliferation work, I immediately sent notice to my circle of friends, and then went onto the social media space to see what the other instapundits were saying.

One of them — a real, actual paid pundit — wrote, “I’m perplexed at Obama getting the Nobel Peace Prize. He’s done good work, but it does seem premature. What do you think?” That would be Nicholas Kristof of The New York Times, who has, among other things, been writing of late of the value of women in international development and diplomacy.

I tweeted back Nobel_medal_dsc06171that the Prize cites Obama’s diplomacy for embracing “values and attitudes that are shared by the majority of the world’s population.” In other words, the Nobel seems to be a “thank God you’re not trying to be a big swinging dick of a unilateral superpower” rather than a “thanks for getting rid of the nukes” letter. (If they had left the nuclear weapons out of the granting of the prize, it might actually have seemed a stronger statement.) While we are struggling mightily to come up with a strategy for the wars launched by the Bush Administration in Iraq and Afghanistan, there is little question that the level of domestic threat under this president has not skyrocketed — the leading argument against his election by some hawkish conservatives. Being the international bad cop apparently does not always make you safer.

Let’s go back to the key phrase in the Nobel announcement. It states: Obama’s “diplomacy is founded in the concept that those who are to lead the world must do so on the basis of values and attitudes that are shared by the majority of the world’s population.” That’s a vision of, if not absolute consensus, then democratic thinking in the broadest sense. It’s a basic acknowledgment that the diverse, heterogeneous population of billions of people on this planet do have value regardless of poverty, wealth, resource, race, gender or religion. It’s an endorsement of democracy over the oligarchical governance of the Bush/Cheney years.

But at the same time that there will be a round of cheers and jeers based on this Nobel announcement, I still worry that we domestically are running out of patience with the Obama Administration. Or rather, running out of patience is not so bad; but as we’ve seen many times, running out of hope impacts everything from our health to education to economy. Many people are now asking “How long do we wait for change?” I respond that you never have to wait for change… it’s always happening. What you have to do is figure out how to manage that change and try to push it in positive directions.

But in addition to the health care wars, whose rhetoric is even bloodier than the floor of a triage ward, we now have individuals bringing weapons to presidential rallies and polls about whether the man in the Oval Office should be killed. So often we have asked the world to follow us… to follow us down the rabbit-hole of ill-conceived wars, or, more promising, into new lands of technology created by some of the best private companies in America.

Can we ask America to now follow the world… to value the diversity of our population as a symbol of the highest values in ethical life? Can we find a way to knit together a country which has become fractured and at some points flirted with calls to violence against a sitting president? With the election of Barack Obama, we got world credibility for dealing with our collective racial past. Do we have the same courage to deal with the present…. with Detroit; bankrupt California schools; and dismal job numbers? Can we take a line from the Nobel Prize and promise “to take our share of responsibility for a global response to global challenges”? Can we? Yes?

Founder of PopandPolitics.com, Farai Chideya has been a top journalist with NBC News, National Public Radiom and NBC. Her books include Don’t Believe the Hype, Trust: Reaching 100 Million Missing Voters, and her new novel Kiss the Sky. This editorial first appeared on the Huffington Post.
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As for me: Having traced, , as the few readers of this blog know,  Obama’s political origins including with the 1980s nuclear freeze movement, I felt the Prize as an early reward for his nonproliferation work, as well as encouragement to keep unraveling some of the Bush damage. But now, most of all, I hope it influences the current decisions on Afghanistan. Escalation is not a way to earn the  title of international peacemaker.

Roman Polanski: The 1970s Are Over, Thank God.

! CML07pride This week’s arrest of Roman Polanski felt weirdly unsurprising. It fit somehow with all the flashbacks to 1969 the media’s treated us to this year — as that TIME cover put it, “From the Moon to Charles Manson.” What will the 1970’s reminiscences be like, one wondered? Maybe like this.

But who really remembers 1977? And what does anyone really remember about Polanski’s arrest?

I actually remember that time pretty vividly. I was fifteen years old, and in some circles at my high school, relationships with older men were all the rage. They meant we were cool, outre, too daring for dating. (Not for me, mind you, though I still hoped to grow into it.) When the tabloids shrieked about Polanski’s statutory-rape conviction, I even blithely wrote an op-ed in my high school journalism class about how such “relationships” shouldn’t be illegal, even if the girl in question was 13 years old.

Of course, like most opinion writers then and now, I didn’t know what the hell I was talking about. I certainly didn’t know that the girl had told a grand jury that she was given Quaaludes and then raped, that she’d said no and asked to go home, that Polanski pled guilty to a lesser charge and then fled before final sentencing.

My main excuse now for my blitheness then is that I was fifteen, and that it didn’t last long. I’ve never been able to see a Polanski film. and cringed every time he won another award. Knowing the traumatic facts of his life, from the Holocaust to the Manson murders, plays differently with me: it can explain, perhaps, but it’s the opposite of an excuse.

This week, I was floored as news reports kept saying that Polanski had been arrested “for sex with an underage girl,” without explaining what had happened; at the sudden movement to “Free Polanski,” giving the perp what Slate’s Elizabeth Wurtzel calls “a genius exception for rape.” Even Whoopi Goldberg made my old mistake: “Things are different in Europe,” she said, and besides “It’s not rape-rape.”

I have no doubt that Goldberg has since been shown the grand jury testimony, but what’s her excuse for talking before she’d done the research? It’s on TheSmokingGun.com, for godsake.

Or she could have paid attention to Kate Harding on Salon.com’s Broadsheet column. In Reminder: Roman Polanski raped a child,”

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