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1. It sanctions fraud and embezzlement as "business as usual"

2. It sponsors risk-taking via guarantees, backstops, bailouts, loans and limitless liquidity to the financial industry

3. It creates an illusion of financial stability which masks both the systemic fraud and embezzlement and the extreme vulnerability of the entire financial edifice.

Parallel Shadow Structures of Privilege

One technique for legitimizing the illegitimate is to present a formal, visible structure that is carefully legitimized for public consumption. Examples include bank earnings statements, state university admissions policies and job openings at institutions such as universities, corporations and state agencies.

Behind a carefully nurtured facade of legitimacy, however, lies a well-cloaked parallel shadow structure of privilege, also formalized with its own rules and procedures but opaque to public scrutiny or even awareness.

In this sense, the "legitimate" structure is an artifice constructed for the express purpose of presenting enough transparent transactions to convince the public that it is the "one, true system" rather than a facade to cloak the real action: a shadow system operated for the benefit of the few at the expense of the many.

The "shadow" system of governance is comprised of elected officials who demand backdoor loopholes and favors, "fox hired to guard the chicken coop" technocrats who move fluidly (the infamous revolving-door) between corporate headquarters, the State and lobbying firms, where cartel lobbyists write the regulations that are duly passed into law.

The "shadow banking system" is an entire parallel universe of assets, credit, risk and liabilities which are completely invisible to anyone studying the "transparent" financial statements of the banks.

These shadow assets are "off-balance-sheet," meaning an examination of the bank's public balance sheet will not disclose them. Various credit instruments and derivatives can also be held off-balance sheet, rendering the task of actually measuring the bank's risk and total credit outstanding essentially impossible.

Insiders--the privileged few--can then skim the gains from shadow assets purchased with shareholder funds for themselves and their cronies via various accounting and tax schemes.

Even non-financial corporations maintain off-balance-sheet derivatives and accounts.

Behind the facade of an apparently transparent admissions policy, insiders within a prestigious state university system may maintain a shadow system of admissions available to political favorites, major donors and other cronies. In this manner the accomplished non-privileged student can be rejected for opaque reasons and the mediocre offspring of a well-connected crony admitted under ambiguously defined "special circumstances."

Job openings at institutions are duly made public in compliance with transparency rules, but behind this facade the job description and process have been rigged to insure the hiring of cronies.

These are but three of countless examples of apparently legitimate processes and institutions being mere facades to mask the illegitimate distribution of privileges to various Elites.

When this corruption is revealed, then the defense is bashfully schoolyard: everybody does this, it's standard practice; my only mistake was getting caught. The excuses are cold comfort indeed for the non-privileged many deceived for the benefit of the few.

In what might be considered a grand irony, the tables of "shadow systems" within institutions can be turned on the Elites. Transparent non-privileged parallel structures can be established which bypass the corrupted Elite-run institution entirely.

As the State and its institutions devolve, opportunities to set up alternative self-organizing, transparent formal organizations which completely bypass the Elites' concentrations of power and privilege will arise.

I will address these further in Chapter Twenty-Six: Structuring the New American State.