Wednesday, September 30, 2009

U.S. economic crisis was long time in the making

By Kevin G. Hall | McClatchy Newspapers

WASHINGTON — Americans have always assumed that financial crises happen in basket-case countries, not here. So how then did the U.S. follow the lead of Argentina, Mexico and Thailand by plunging into this one?

Economists Carmen Reinhart and Kenneth Rogoff answer that question in a provocative new book, "This Time Is Different."

The authors, both former top economists at the International Monetary Fund who're now teaching, respectively, at the University of Maryland and Harvard University, offer examples of mistakes made repeatedly over "eight centuries of financial folly."

In the preface, they offer a crystal-clear analysis of why we are where we are.

"If there is one common theme to the vast range of crises we consider in this book, it is that excessive debt accumulation, whether it be by the government, banks, corporations, or consumers, often poses greater systemic risks than it seems during a boom," they wrote.

"Infusions of cash can make a government look like it is providing greater growth to its economy than it really is. Private-sector borrowing binges can inflate housing and stock prices far beyond their long-run sustainable levels, and make banks seem more stable and profitable than they really are."

Sound familiar?

Monday, September 28, 2009

Greenspan says the "Fed" is not subject to inspection or regulation

This guy was given a hero's standing ovation by Congress during his watch as Federal Reserve Chariman, imagine my (total lack of) shock. It is a scandal encompassing Congressional corruption, executive branch bribery, international espionage, warmongering skullduggery, nuclear proliferation – even bisexual honey traps! "Sex! War! Bribes! Spies! Treason!"

Saturday, September 26, 2009

Tom DeLay did more to harm the security of America than almost anyone of his era..

The "Audit the Fed Bill" (H.R. 1207)

As of today Ron Paul is only 1 vote shy of a veto-proof bill. The bill certainly will have unintended consequences, as do all bills but the Fed can no longer exists as it currently does and still claim to be a "National Asset"

Barney Frank told an amazing history of how Republicans for decades blocked Paul from having these hearings.

Long before he danced with the stars, then-House Majority Leader Tom DeLay two-stepped all over fellow Texas Rep. Ron Paul’s hopes of overseeing the Federal Reserve, according to an account provided by House Financial Services Committee Chairman Barney Frank .

In a broader interview with my colleagues Phil Mattingly and Benton Ives, Frank offered this assessment of how DeLay and other GOP leaders tiptoed around giving Paul — who wants to abolish the Fed — the gavel of the subcommittee with jurisdiction over it:

“In 2003, Ron Paul was in line to be chairman of the Domestic Monetary Policy Subcommittee of this committee. Specifically and solely to frustrate Ron from being the chairman, they merged the Subcommittee on Domestic Monetary Policy with the Subcommittee on International Monetary Policy. Ron Paul then complained to Tom DeLay, and Tom DeLay told [then-Chairman Mike] Oxley [R-Ohio] ‘Don’t change it’ … [T]wo years later, even though they merged the two subcommittees in the progression, Ron was then again ready to be chairman, this time of the combined one. [Then-Rep. Deborah] Pryce [R-Ohio] was dragooned to come back and assert a subcommittee chairmanship … Ron at that point said to me, ‘I guess I have to wait for you to be chairman for me to have any authority around here.’ The Republican Party was a staunch defender of the Fed against Ron Paul.”

Paul and Frank share an interest in auditing the Fed, though neither Frank nor any other member of the House has signed onto Paul’s bill to repeal the Federal Reserve Act.

The general outlines of Frank’s account — though not DeLay’s hand — were confirmed by Republican sources. Paul said he didn’t recall DeLay’s involvement, but he acknowledged Republican leaders didn’t want him to have the subcommittee chairmanship.

“They just got rid of one” subcommittee, Paul said of the first time he was passed over. “They wouldn’t have enjoyed me being chairman.”

But Paul has a defender in the current top Republican on the Financial Services Committee, Rep. Spencer Bachus of Alabama, who appointed him to the leading spot on the subcommittee with Republicans in the minority.

“There are people who said ‘Is this the best thing to do?’ I felt like it was,” Bachus said. “I’m glad I appointed him. I have no regret.
What will happen now that the hearings on the bill are taking place? How much trouble will Paul have in keeping the 'Audit the Fed' Bill from being a feast for big government types to use for extending the intervention of government in the financial sector? My thought on this has changed somewhat by listening to this testimony. The timing for Paul to keep the bill focused on what Paul wants the bill to accomplish may work, in that there are huge discussions about reforming the financial sector anyway. Over recent months, the government intervetionists have developed other avenues to extend their interventions, without needing the 'Audit the Fed' bill as a tool to use for reform. Thus, advocacy for this bill, given the timing, may result in the 'Audit the Fed' bill getting focused on just where Paul wants the focus.

Both Finance Services chairman Barney Frank and Rep. Melvin L. Watt both commented this morning that the bill should be part of a larger reform package. This type of action is a double edged sword. In a larger bill, it most likely won't get as much focus, so Paul can keep it focused on what he wants, on the other hand, if someone else in Congress hooks on to it and wants changes, who knows how the 'Audit the Fed' bill will turn out. But, right now, I am a little more optimistic that the bill will accomplish want Paul wants it to--only because intervetionists now have other platforms from which to do their intervening.

Friday, September 25, 2009

Ron Paul about The Federal Reserve as a secret group with no oversight.

Does the Fed Manipulate the Stock Market? Where is the Gold?

The Federal Reserve is Bankrupt

This is an interesting and original viewpoint, I haven't seen it before, but it makes sense and gives potent original insight into their shenanigans.

By Benjamin Fulford

It is the Federal Reserve Board that is bankrupt, not the USA

The American people are finally waking up to the evil nature of the Federal Reserve Board. However, the Pentagon and alphabet soup agency types have not quite figured everything out yet. They think that if the Fed goes down, Americans will suffer a catastrophic drop in living standards but it does not have to be so. With a smooth transition to a new financial system, the American people will be able to get on just fine. The US annual current account deficit, that is to say the amount of stuff Americans buy from the rest of the world with their credit card, was, at its peak, 7% of GDP. Now that their credit card is being cancelled Americans will have to pay with cash, that means they will have to buy 7% less than before. That 7% drop has already happened.

Since the Federal Reserve Board and Washington D.C. are corporations that have nothing to do with the constitutional United States of America, if they go bankrupt, the constitutional government of the US would not owe that money. Furthermore, the new financial system will pay off accumulated overseas debts of the American people (this is a one-off deal folks) with gold. The new financial system is run by a group of honest bankers, plutocrats and regulators who support a new Marshall plan to end poverty and stop environmental destruction. To accomplish this they would like the full cooperation of the Pentagon and the various agencies. That means they will keep paying them their salaries and probably will also give them a pay rise.

It is the Feds, with their threats of violence and plots of terror in a desperate attempt to keep power, who are dragging the US into chaos. Their solution is to force the American people to pay off the Fed debts over a period of hundreds of years. The French people finally payed-off the last of the Napoleonic debt only a few years ago.

So folk in the military and other agencies need to ask themselves if they are patriots or enforcers of debt slavery.

"Good girls go to heaven and bad girls go to Sturgis!"

Reno Nevada hosts "Street Vibrations" (a Mini-Sturgis) September 24-27. Hope to see you there.

Of Myth And Legend - 2009
Sturgis Motorcycle Rally
By Frosty Wooldridge

That's why ALL the boys, including preacher's sons, go to Sturgis! Let's ride!

On the back of one motorcycle rider's shirt, "One week of Sturgis makes the other 51 weeks bearable!" Further down the road, another rider sported a T-shirt that read, "If you can read this, the bitch fell off!" A few miles down the road, a female rider's T-shirt read, "I'm the bitch that fell off so I bought my own bike; besides Viagra couldn't help him so I fell off on purpose!"

Three weeks previous to the granddaddy of motorcycle rallies, Sturgis, South Dakota, my brother Howard and sister Linda said, "Hey, let's meet in Sturgis!" I said, "Go for it! I'll meet you at Hog Heaven campground!"

The first weekend of August, Sandi and I strapped the camping gear to the Wing for our journey from Denver, Colorado to Sturgis, South Dakota. We hit I-70 headed east into the soup of Denver just as the sun cracked the horizon. Beautiful strawberry rays lit gray sky banners streaming over the skyscrapers of the city. We dodged traffic on our way to I-76 headed east.

Within 45 minutes, we flew through early morning mist as the traffic lightened on our way onto the multicolored Great Plains of America.
One hundred and fifty years ago, we might have seen some of the 60 million buffalo grazing among the wildflowers. But today, windmills for water tanks and thousands of cattle munched on the eternal grasses. Above, a hawk or two sailed on thermals as he looked for his breakfast below.

Once out of the city, the sky opened to its proverbial blue while it rolled all the way to the horizon for 360 degrees. Something about being on a motorcycle on the Great Plains, riding a modern iron horse under big skies that fill a man's heart with the beat of the universe. We passed through cold spots, hot spots and misty clouds hanging low to the earth. We rolled past big 18-wheeler rigs heading eastbound.

In some places, the grasses grew so tall, the backs of cattle resembled torpedoes moving slowly toward an unknown target. Again, above, hawks plied the sky with outstretched wings.

Soon, we reached Sterling and headed north along a country road.
Big turbines caught the wind to create electricity for farmers and towns along the way. Farmers cut the midsummer grass and big balers rolled it into giant round wheels. In several places, they still baled those 60 pound bales that I threw around as a teenager on the farm.

At I-80 in Nebraska, we stopped at Cabela's Sporting store to see the sculptors and sports gear offered to travelers from all over the West. After a gas up, we headed north toward Allison. An hour later, we move through old town, filled with tractors and cars out of the 50s, silos and railroad terminals.

We stopped at the Stonehenge of North America that recreated Stonehenge in England, but this artist constructed his artwork out of cars. Recently, archeologists discovered that Stonehenge represented an old burial ground. The remaining pillars formed a vast infrastructure for the rich and the poor to be buried so they might find their way to heaven.

Back on the road, we enjoyed trees growing along rolling hills that morphed into rock strewn hills and small mountains in the distance. Soon, we rolled into big curves with lakes off to the side.

When we hit South Dakota, huge evergreens shot heavenward with a serpentine road turning, diving and climbing through their silent beauty. Off to our right, big columns of gray rock strutted skyward in a vertical display of grandeur.

As we traveled, the air freshened, the temperature cooled and the road slipped quietly under the purring motor of the Wing. I thought about how much fun to see my sister Linda after three years and my brother Howard, and all of us together for such a grand event. We had traveled to Alaska, 10,000 miles in two months, back in 2003.
We had ridden from Michigan to California back in 1980. Quite a feat for siblings with different lifestyles and connections!

I thought about my brother Howard and how he had made a new life with Karen in Washington, DC. I thought about how he had created a new career and lived it with gusto. I thought about how he changed the face of the War on Drugs with his superb speaking and writing.
I felt great pride in his accomplishments. He had ridden Misty across the United States. He authored a superb book. He made our dad and mom proud for his incredible contributions in the world. I felt a tear run down my cheek as I thought about what a privilege I enjoyed to not only be his longest friend, but his brother and to know him for a lifetime. He lived what Thoreau said, ""If you advance confidently toward your dreams, and endeavor to live the life, which you have imagined, you will meet with success unexpected in common hours. You will pass through invisible boundaries and live with the license of a higher order of beings."

And my sister, I am so proud of her. She endured much in the past 10 years. But, she kept her spirit skyward. She gained her MBA at Wisconsin. She's working on a new book. She found a great man in Orrin and she brought two great kids into the world. She offers life her best and life has offered its best to her. She's a woman of many talents whether playing a guitar or painting the dance floor. Jean Luc Picard Captain of the Starship Enterprise, said, "Time is a companion that goes with us on a journey. It reminds us to cherish each moment, because it will never come again. What we leave behind is not as important as how we have lived."

On the back of my bike, Sandi, my sparkle sunshine, comes up with ideas and inspiration. She talks to me and inspires me. She also has written a book and brought two fine young men into the world.
She continually moves through life with great joy and tremendous enthusiasm. I feel blessed beyond all measure to share my life with her.

And the road, ahead, it calls, it dips, it rises, it shoots straight and cuts left. The Wing moves effortlessly toward our destination in Deadwood. We pass through towns, hamlets and villages on our way. We pass through 'old' America of what once was and continues into the 21st century. At some point, much of America will hunger to get back to the 'old' America for the 'new' America changes too fast, too much and without regard to enduring traditions of this country.

But for a moment in time, for one week, Sturgis represents all of America! It features the grand parade of the Iron Horse and the 'true grit' that made this country! It may be a myth and it may be a legend, but for those who power two wheels into the turns, it's a feeling, a gut reaction to freedom. It's the sweet spot of cycling that carries the soul to a quiet moment of elation. Some might say that Iron Horse creates a giddiness, ecstasy, euphoria and sheer delight of the soul.

I scanned ahead, watching the road. I cranked the throttle as I headed the big machine along the snaking highway. In Deadwood, we saw a thousand bikes before turning east toward Sturgis. The road curled through a steep canyon with a river below.

Entering Sturgis during the rally can be likened to another world.
I can describe it, but it must be lived to understand it. We pulled into the campground. Later, we headed downtown where the "Gauntlett" awaited. What describes the Gauntlett? The entire main street of Sturgis for six blocks gets cordoned off and only motorcycles can drive on the street. They park so as to create a line of bikes on the left and right and in the middle so that only one groove travels both ways. Bikers ride their fancy bikes from $1,000.000 to $100,000.00.

We had seen motorcycles in the shape of the Starship Enterprise, a buffalo, a 57 tri-motorcycle Cadillac, a Barker Lounger bike complete with lamp and beer holder, an old John Deere tractor. That first night, we saw a motorcycle with elk horns on the front and a giant grizzly beat draped over the bike with its head reaching out the back. The bear sported motorcycle goggles. On top of the bear, a fox with goggles also looked back. Draped off to the sides, two stuffed coyotes also featured goggles. They represented some wild bikin' dudes! I feared for my life to run into the owner!

Along the street, tattoo venders inked up peoples' arms, legs, chests and backs. Eagles soared and snakes curled around their arms and up their necks. At the annual tattoo contest in Sturgis, you couldn't help but feel sorry for the winner. They usually had their bodies covered with hideous figures. One lady, wearing a bikini, slim and blond, sported "Tony the Tiger" crawling up her back with his paws up the back side of her arms and his legs down her legs.
His tail curled around her right leg all the way down to her ankles. Yes, all in orange and black tattoo! Can you imagine the conversation you might enjoy if you engaged her and what kind of a mind she represented or presented? Carl Yung and Freud might write a whole new book on what goes around in her mind!

Leather! You could smell it in the air, in every shop and you could buy all colors as long as you chose black. Also, in nine days, $12 million changed hands in Sturgis with a whopping crowd of 400,000 cyclists. People from over 100 countries visited the rally and all 50 states and 10 Canadian provinces. Each shop caters to folks with food, trinkets, T-shirts, bags, used parts, tires, oil changes, detailing and just about everything under the sun.

Out on the main strip, you could buy $72,000.00 motorcycles, tri-bikes and custom everything.

We decided to turn in early so we traveled back to our campsite.

Next morning, I called Howard. He and Karen spent the a.m. riding down to Mount Rushmore with the four great presidents: Teddy Roosevelt, Franklin D. Roosevelt, Washington and Jefferson. Those great men represent energy, leadership and faith in the American way of life.

Howard, Karen, Linda, Orrin, Scott, Sandi and I met on the main street of Sturgis. We toured the city and spent the morning talking about the sights, sounds and people walking around Sturgis. Scott, Linda's son found himself in new surroundings. Much different than Madison, Wisconsin!

We ate lunch at the Broken Spoke Saloon where a band played too loud and Scott got too close to a woman's belly button as he tried to eat a slab of whipped cream. Too funny as she shoved his nose into her navel. All in great fun! Near the end of the day, we jumped on the bikes for a ride to Deadwood, South Dakota where we saw more cyclists and stopped in at Number 10 Saloon where Wild Bill Hickok suffered a gunshot to the back of the head and died instantly back on August 2, 1876. Aces and eights make up the Dead Man's Hand from that day to this day. We viewed a wonderful train exhibit in the basement of one of the hotels. Extensive and intricate! Beautiful work!

Later, we toured north along a fantastic canyon toward Spearfish.
We stopped in for a quick conversation at the motel and biked over to a Mexican Restaurant for a fabulous meal. Stories, laughter and jokes all around from our wild and crazy crew.

Later, at dusk, we jumped on the bikes for an almost surreal ride back to Sturgis. With the sun setting, the air perfect, and the sky glowing with the last rays of the sun-the four of us riders and mates on the back slipped through the ending of the day and the beginning of the night. Tall mountains on both sides of the expressway guided us toward our destination. Sandi took shots of Orrin, Linda, Howard and Karen. Nothing quite like being on a motorcycle when the still air invites every breath and your skin tingles with the magic of racing the wind. The moment reminded me of riding with my siblings to Alaska and those magic moments and great pictures for our scrapbooks. Soon, the sun vanished, the stars appeared and the lights of the bikes cut through the darkness. We rolled into Sturgis to watch the evening's festivities on the "Gauntlet".

After parking our bikes along the Gauntlet, we stood waiting for all the wild and crazy bikers in costume to make their appearances. We didn't find it a great night for watching, but before we left, one gal wore a string teddy with a body stocking and not much else.

As with all good times, they must come to an end as we all go back to our busy lives. We gave each other a hug and jumped back on our bikes. Scott, Sandi and I rode back to our campground in the woods. Next morning, we cleared camp. Scott took off early to eat breakfast with his mom. Sandi and I broke camp and headed toward Wyoming.

Sturgis! A wild moment, a good time and a shared memory for Linda, Orrin, Howard, Karen, Scott, Frosty and Sandi.

As I headed my bike into the wind, the trees sped past, the road flew under my pegs, the wind refreshed my lungs and the morning sun brightened the day. Sandi and I stopped at an all you can eat restaurant for a great breakfast. Bikers lined the streets of Custer and we even met the guy who looks like General George Armstrong Custer. Sandi had taken a picture with him the year before.

No doubt, history rolls across the hills of South Dakota, Wyoming, Nebraska and Colorado. We headed south with saddle bags full of memories. Yippee ki yea and away we sped into the morning sun!

The Economy is a Lie, Too

When Bernanke says "the recession is over" he means it's over for the rich, powerful and priveleged. The rest of us don't count!


Americans cannot get any truth out of their government about anything, the economy included. Americans are being driven into the ground economically, with one million school children now homeless, while Federal Reserve chairman Ben Bernanke announces that the recession is over.

The spin that masquerades as news is becoming more delusional. Consumer spending is 70% of the US economy. It is the driving force, and it has been shut down. Except for the super rich, there has been no growth in consumer incomes in the 21st century. Statistician John Williams of reports that real household income has never recovered its pre-2001 peak.

The US economy has been kept going by substituting growth in consumer debt for growth in consumer income. Federal Reserve chairman Alan Greenspan encouraged consumer debt with low interest rates. The low interest rates pushed up home prices, enabling Americans to refinance their homes and spend the equity. Credit cards were maxed out in expectations of rising real estate and equity values to pay the accumulated debt. The binge was halted when the real estate and equity bubbles burst.

As consumers no longer can expand their indebtedness and their incomes are not rising, there is no basis for a growing consumer economy. Indeed, statistics indicate that consumers are paying down debt in their efforts to survive financially. In an economy in which the consumer is the driving force, that is bad news.

The banks, now investment banks thanks to greed-driven deregulation that repealed the learned lessons of the past, were even more reckless than consumers and took speculative leverage to new heights. At the urging of Larry Summers and Goldman Sachs’ CEO Henry Paulson, the Securities and Exchange Commission and the Bush administration went along with removing restrictions on debt leverage.

When the bubble burst, the extraordinary leverage threatened the financial system with collapse. The US Treasury and the Federal Reserve stepped forward with no one knows how many trillions of dollars to “save the financial system,” which, of course, meant to save the greed-driven financial institutions that had caused the economic crisis that dispossessed ordinary Americans of half of their life savings.

The consumer has been chastened, but not the banks. Refreshed with the TARP $700 billion and the Federal Reserve’s expanded balance sheet, banks are again behaving like hedge funds. Leveraged speculation is producing another bubble with the current stock market rally, which is not a sign of economic recovery but is the final savaging of Americans’ wealth by a few investment banks and their Washington friends. Goldman Sachs, rolling in profits, announced six figure bonuses to employees.

The rest of America is suffering terribly.

The unemployment rate, as reported, is a fiction and has been since the Clinton administration. The unemployment rate does not include jobless Americans who have been unemployed for more than a year and have given up on finding work. The reported 10% unemployment rate is understated by the millions of Americans who are suffering long-term unemployment and are no longer counted as unemployed. As each month passes, unemployed Americans drop off the unemployment role due to nothing except the passing of time.

The inflation rate, especially “core inflation,” is another fiction. “Core inflation” does not include food and energy, two of Americans’ biggest budget items. The Consumer Price Index (CPI) assumes, ever since the Boskin Commission during the Clinton administration, that if prices of items go up consumers substitute cheaper items. This is certainly the case, but this way of measuring inflation means that the CPI is no longer comparable to past years, because the basket of goods in the index is variable.

The Boskin Commission’s CPI, by lowering the measured rate of inflation, raises the real GDP growth rate. The result of the statistical manipulation is an understated inflation rate, thus eroding the real value of Social Security income, and an overstated growth rate. Statistical manipulation cloaks a declining standard of living.

In bygone days of American prosperity, American incomes rose with productivity. It was the real growth in American incomes that propelled the US economy.

In today’s America, the only incomes that rise are in the financial sector that risks the country’s future on excessive leverage and in the corporate world that substitutes foreign for American labor. Under the compensation rules and emphasis on shareholder earnings that hold sway in the US today, corporate executives maximize earnings and their compensation by minimizing the employment of Americans.

Try to find some acknowledgement of this in the “mainstream media,”
or among economists, who suck up to the offshoring corporations for grants.

The worst part of the decline is yet to come. Bank failures and home foreclosures are yet to peak. The commercial real estate bust is yet to hit. The dollar crisis is building.
When it hits, interest rates will rise dramatically as the US struggles to finance its massive budget and trade deficits while the rest of the world tries to escape a depreciating dollar.

Since the spring of this year, the value of the US dollar has collapsed against every currency except those pegged to it. The Swiss franc has risen 14% against the dollar. Every hard currency from the Canadian dollar to the Euro and UK pound has risen at least 13 % against the US dollar since April 2009. The Japanese yen is not far behind, and the Brazilian real has risen 25% against the almighty US dollar. Even the Russian ruble has risen 13% against the US dollar.

What sort of recovery is it when the safest investment is to bet against the US dollar?

The American household of my day, in which the husband worked and the wife provided household services and raised the children, scarcely exists today. Most, if not all, members of a household have to work in order to pay the bills. However, the jobs are disappearing, even the part-time ones.

If measured according to the methodology used when I was Assistant Secretary of the Treasury, the unemployment rate today in the US is above 20%. Moreover, there is no obvious way of reducing it. There are no factories, with work forces temporarily laid off by high interest rates, waiting for a lower interest rate policy to call their workforces back into production.

The work has been moved abroad. In the bygone days of American prosperity, CEOs were inculcated with the view that they had equal responsibilities to customers, employees, and shareholders. This view has been exterminated. Pushed by Wall Street and the threat of takeovers promising “enhanced shareholder value,” and incentivized by “performance pay,” CEOs use every means to substitute cheaper foreign employees for Americans. Despite 20% unemployment and cum laude engineering graduates who cannot find jobs or even job interviews, Congress continues to support 65,000 annual H-1B work visas for foreigners.

In the midst of the highest unemployment since the Great Depression what kind of a fool do you need to be to think that there is a shortage of qualified US workers?

Paul Craig Roberts was Assistant Secretary of the Treasury in the Reagan administration. He is coauthor of The Tyranny of Good Intentions. This fall CounterPunch/AK Press will publish Robert's War of the Worlds: How the Economy Was Lost. He can be reached at:

Thursday, September 24, 2009

Disapointed with the Fed.

Imagine my shock that the Fed couldn't put the final bandaid on the "boo boo".

Federal Reserve Admits Hiding Gold Swap Arrangements, GATA Says

I can't vouch for GATA committee credibility, but it looks like they may have their facts right. I would be surprised if they are wrong.

Press Release
Source: Gold Anti-Trust Action Committee Inc.
On Wednesday September 23, 2009, 9:30 am EDT

MANCHESTER, Conn.--(BUSINESS WIRE)--The Federal Reserve System has disclosed to the Gold Anti-Trust Action Committee Inc. that it has gold swap arrangements with foreign banks that it does not want the public to know about.

The disclosure, GATA says, contradicts denials provided by the Fed to GATA in 2001 and suggests that the Fed is indeed very much involved in the surreptitious international central bank manipulation of the gold price particularly and the currency markets generally.

The Fed's disclosure came this week in a letter to GATA's Washington-area lawyer, William J. Olson of Vienna, Virginia (, denying GATA's administrative appeal of a freedom-of-information request to the Fed for information about gold swaps, transactions in which monetary gold is temporarily exchanged between central banks or between central banks and bullion banks. (See the International Monetary Fund's treatise on gold swaps here:

The letter, dated September 17 and written by Federal Reserve Board member Kevin M. Warsh (see, formerly a member of the President's Working Group on Financial Markets, detailed the Fed's position that the gold swap records sought by GATA are exempt from disclosure under the U.S. Freedom of Information Act.

Warsh wrote in part: "In connection with your appeal, I have confirmed that the information withheld under Exemption 4 consists of confidential commercial or financial information relating to the operations of the Federal Reserve Banks that was obtained within the meaning of Exemption 4. This includes information relating to swap arrangements with foreign banks on behalf of the Federal Reserve System and is not the type of information that is customarily disclosed to the public. This information was properly withheld from you."

When, in 2001, GATA discovered a reference to gold swaps in the minutes of the January 31-February 1, 1995, meeting of the Federal Reserve's Federal Open Market Committee and pressed the Fed, through two U.S. senators, for an explanation, Fed Chairman Alan Greenspan denied that the Fed was involved in gold swaps in any way. Greenspan also produced a memorandum written by the Fed official who had been quoted about gold swaps in the FOMC minutes, FOMC General Counsel J. Virgil Mattingly, in which Mattingly denied making any such comments. (See

The Fed's September 17 letter to GATA confirming that the Fed has gold swap arrangements can be found here:

While the letter, GATA says, is far from the first official admission of central bank scheming to suppress the price of gold (for documentation of some of these admissions, see and, it comes at a sensitive time in the currency and gold markets. The U.S. dollar is showing unprecedented weakness, the gold price is showing unprecedented strength, Western European central banks appear to be withdrawing from gold sales and leasing, and the International Monetary Fund is being pressed to take the lead in the gold price suppression scheme by selling gold from its own supposed reserves in the guise of providing financial support for poor nations.

GATA will seek to bring a lawsuit in federal court to appeal the Fed's denial of our freedom-of-information request. While this will require many thousands of dollars, the Fed's admission that it aims to conceal documentation of its gold swap arrangements establishes that such a lawsuit would have a distinct target and not be just a fishing expedition.

In pursuit of such a lawsuit and its general objective of liberating the precious metals markets and making them fair and transparent, GATA again asks for financial support from the public and from all gold and silver mining companies that are not at the mercy of market-manipulating governments and banks. GATA is recognized by the U.S. Internal Revenue Service as a non-profit educational and civil rights organization and contributions to it are federally tax-exempt in the United States. For information on donating to GATA, please visit here:

People also can help GATA by bringing this information to the attention of financial news organizations and urging them to investigate the Fed's involvement in gold swaps particularly and the gold (and silver) price suppression generally.

Wednesday, September 23, 2009

NY Bakery Workers Take On Goldman Sachs

NY Bakery Workers Take
On Goldman Sachs

Support the Stella D'Oro Bakery Workers' Demonstration Against Goldman Sachs on Sept. 25 !

Call for A 1% Tobin Tax on the Wall Street Derivatives Monsters
On Friday September 25th at 5pm, a much-needed demonstration against Goldman Sachs, 85 Broadway, in Manhattan has been called. The protest in support of the workers of the Stella d'Oro against the closing of the bakery should be supported by people across the country.

It is Goldman Sachs that has lead the Wall Street gamblers in creating the present financial meltdown crisis and production depression. Now with the insane Bush-Obama $24 trillion bailout, 'Welfare for Wall Street,' the 'Zombie banks' like Goldman Sachs, and their holding companies continue to destroy companies for profit.

Broad support of this march is vital. If we had real leaders in Washington who worked for the general welfare of the people, as opposed to being paid agents of Goldman Sachs and Wall Street, then Goldman Sachs would have been put into bankruptcy reorganization. We recognize that financial speculation is the cause of this crisis and must be stopped.

As the crisis is strangling the people of the nation, it is Wall Street who must share in the called sacrifice. The best way is to make Wall Street pay for the crisis is by means of a Tobin tax on all financial trnasctions, especially derivatives. In many places in the US , people pay 5% to 10% sales taxes on food and necessities, but Wall Street pays no taxes on its gambling. A 1 % Tobin Tax would help to claw back this $1.5 quadrillion dollar speculative orgy, while providing needed funds for investment in people such as Medicare for all, and a return to a productive economy, not the fake speculative one.
Lets us support the Stella d'Oro workers by joining them and joining together against this foe of America's workers and economy, keep Stella d'Oro jobs in New York, and make Wall Street pay its share with a Tobin Tax.

Last Chance to exit before quagmire.

The military report seems to confuse strategic and operational. Are these guys for real? How can we trust them to lead the war effort if they don't even use the proper terms for their proposed efforts. Counter insurgency doctrine, is operational, not strategic.

The Washington Post yesterday made available an unclassified version of Gen. Stanley McChrystal’s long-awaited report on the war in Afghanistan. Politically, the report is bold, in that it acknowledges the enemy has the initiative and we have been fighting the war – for eight years – in counterproductive ways. But intellectually, both as analysis and as prescription, it is five pounds of substance in a 50-pound bag.

The report’s message can be summarized in one sentence: we need to start doing classic counterinsurgency, and to do so, we need more "resources," i.e., troops. In a narrow, technical sense, that statement is valid. Classic counterinsurgency doctrine says we need hundreds of thousands more troops in Afghanistan.

Past that syllogism, the report’s validity becomes questionable. Defects begin with the study’s failure to address Fourth Generation war’s first and most important question: Is there a state in Afghanistan? At times, the report appears to assume a state; elsewhere, it speaks of the Afghan state’s weaknesses. It never addresses the main fact, namely that at present there is no state, and under the current Afghan government there is no prospect of creating one.

The failure to acknowledge the absence of a state leads the rest of the report through the looking glass. For example, it puts great emphasis on expanding the Afghan National Security Forces (army and police). But absent a state, there are no state armed forces. The ANSF are militiamen who take a salary paid, through intermediaries, by foreign governments. How many Pashtun do you find in the ANSF?

Similarly, the report laments that Afghanistan’s prisons have become recruiting centers for the Taliban. It calls for getting the U.S. out of the prison business and turning it all over to the Afghan government. But who will then run those "state" prisons? The Taliban, of course, just as they do now.

In a curious passage, the report says, on page 2-20,

"The greater resources [ISAF requires] will not be sufficient to achieve success, but will enable implementation of the new strategy. Conversely, inadequate resources will likely result in failure. However, without a new strategy, the mission should not be resourced."

Here we encounter the report’s most dangerous failing. It confuses the strategic and the operational levels of war. In fact, the report does not offer a new strategy, but a new operational-level plan. How the war is fought, i.e., by following classic counter-insurgency doctrine, is operational, not strategic.

America must find a new strategy, since the current strategy depends on an Afghan state that does not exist. But the report offers no new strategy. The passage on page 2-20 thus ends up saying, "If you don’t give us more troops, we will fail. But you shouldn’t give us more troops unless we adopt a new strategy, which we don’t have. And even if you do give us the troops we want for the new strategy we haven’t got, they will not be enough to achieve success." This reveals utter intellectual confusion.

The proper response of the White House, the Pentagon, and Congress to Gen. McChrystal’s report is, "Back to the drawing board, fellas."

How might Fourth Generation theory help us rewrite the report? At the operational level, most of what it recommends under the rubric of counterinsurgency is sound. Drawing on the report’s concept of "proper resourcing" that allows for "appropriate and acceptable risk," we would concentrate our counterinsurgency efforts in a few provinces, such as Helmand, to show the Taliban we can fight it to a stalemate. We would endeavor to do so while gradually drawing troop levels down, not sending in more troops. The goal of these actions on the operational level would be to buy time both in Afghanistan and on the home front.

We would use that time to implement a genuine new strategy. It would proceed from these facts:

There is no state in Afghanistan, and none can be created by or for the current Afghan government.
Our strategic goal, as Gen. McChrystal’s report states in its first paragraph, is to prevent al-Qaeda’s return to Afghanistan.
There is currently no evidence of al-Qaeda presence in Afghanistan. One of the best open sources of intelligence, Nightwatch, recently stated this directly, and Gen. McChrystal’s report hints at it.
Our strategic goal would be to see the creation of a state in Afghanistan that can and will prevent al-Qaeda’s return. Who can do that? The Taliban. We would use the time bought by counterinsurgency operations to negotiate with the Taliban, the Haqqani Network, the Hezb-e Islami Gulbuddin, and other Afghan leaders, including some in the current Afghan government, toward a power-sharing arrangement. A government that includes the Taliban can create a state.

The risk is the Taliban’s willingness to keep al-Qaeda out. Why should Mullah Omar agree to that? Because al-Qaeda no longer needs Afghan bases. It has far more useful ones in Pakistan. That is why it is not in Afghanistan now.

If President Obama and Congress accept Gen. McChrystal’s report and adopt a new operational plan in support of the current strategy, building an Afghan state around the regime now in Kabul, they will guarantee an American defeat. Sending more American troops to Afghanistan will only magnify the defeat. Ironically, what Washington needs to do is follow Gen. McChrystal’s own recommendation and refuse more resources without a new strategy.

Let’s hope the politicians realize this is their last exit before a bottomless quagmire.

Landmark Decision Promises Massive Relief For Homeowners And Trouble For Banks

By Ellen Brown

September 22, 2009 "Information Clearing House" -- - A landmark ruling in a recent Kansas Supreme Court case may have given millions of distressed homeowners the legal wedge they need to avoid foreclosure. In Landmark National Bank v. Kesler, 2009 Kan. LEXIS 834, the Kansas Supreme Court held that a nominee company called MERS has no right or standing to bring an action for foreclosure. MERS is an acronym for Mortgage Electronic Registration Systems, a private company that registers mortgages electronically and tracks changes in ownership. The significance of the holding is that if MERS has no standing to foreclose, then nobody has standing to foreclose – on 60 million mortgages. That is the number of American mortgages currently reported to be held by MERS. Over half of all new U.S. residential mortgage loans are registered with MERS and recorded in its name. Holdings of the Kansas Supreme Court are not binding on the rest of the country, but they are dicta of which other courts take note; and the reasoning behind the decision is sound.

Eliminating the “Straw Man” Shielding Lenders and Investors from Liability
The development of “electronic” mortgages managed by MERS went hand in hand with the “securitization” of mortgage loans – chopping them into pieces and selling them off to investors. In the heyday of mortgage securitizations, before investors got wise to their risks, lenders would slice up loans, bundle them into “financial products” called “collateralized debt obligations” (CDOs), ostensibly insure them against default by wrapping them in derivatives called “credit default swaps,” and sell them to pension funds, municipal funds, foreign investment funds, and so forth. There were many secured parties, and the pieces kept changing hands; but MERS supposedly kept track of all these changes electronically. MERS would register and record mortgage loans in its name, and it would bring foreclosure actions in its name. MERS not only facilitated the rapid turnover of mortgages and mortgage-backed securities, but it has served as a sort of “corporate shield” that protects investors from claims by borrowers concerning predatory lending practices. California attorney Timothy McCandless describes the problem like this:

“[MERS] has reduced transparency in the mortgage market in two ways. First, consumers and their counsel can no longer turn to the public recording systems to learn the identity of the holder of their note. Today, county recording systems are increasingly full of one meaningless name, MERS, repeated over and over again. But more importantly, all across the country, MERS now brings foreclosure proceedings in its own name – even though it is not the financial party in interest. This is problematic because MERS is not prepared for or equipped to provide responses to consumers’ discovery requests with respect to predatory lending claims and defenses. In effect, the securitization conduit attempts to use a faceless and seemingly innocent proxy with no knowledge of predatory origination or servicing behavior to do the dirty work of seizing the consumer’s home. . . . So imposing is this opaque corporate wall, that in a “vast” number of foreclosures, MERS actually succeeds in foreclosing without producing the original note – the legal sine qua non of foreclosure – much less documentation that could support predatory lending defenses.”

The real parties in interest concealed behind MERS have been made so faceless, however, that there is now no party with standing to foreclose. The Kansas Supreme Court stated that MERS’ relationship “is more akin to that of a straw man than to a party possessing all the rights given a buyer.” The court opined:

“By statute, assignment of the mortgage carries with it the assignment of the debt. . . . Indeed, in the event that a mortgage loan somehow separates interests of the note and the deed of trust, with the deed of trust lying with some independent entity, the mortgage may become unenforceable. The practical effect of splitting the deed of trust from the promissory note is to make it impossible for the holder of the note to foreclose, unless the holder of the deed of trust is the agent of the holder of the note. Without the agency relationship, the person holding only the note lacks the power to foreclose in the event of default. The person holding only the deed of trust will never experience default because only the holder of the note is entitled to payment of the underlying obligation. The mortgage loan becomes ineffectual when the note holder did not also hold the deed of trust.” [Citations omitted; emphasis added.]

MERS as straw man lacks standing to foreclose, but so does original lender, although it was a signatory to the deal. The lender lacks standing because title had to pass to the secured parties for the arrangement to legally qualify as a “security.” The lender has been paid in full and has no further legal interest in the claim. Only the securities holders have skin in the game; but they have no standing to foreclose, because they were not signatories to the original agreement. They cannot satisfy the basic requirement of contract law that a plaintiff suing on a written contract must produce a signed contract proving he is entitled to relief.

The Potential Impact of 60 Million Fatally Flawed Mortgages
The banks arranging these mortgage-backed securities have typically served as trustees for the investors. When the trustees could not present timely written proof of ownership entitling them to foreclose, they would in the past file “lost-note affidavits” with the court; and judges usually let these foreclosures proceed without objection. But in October 2007, an intrepid federal judge in Cleveland put a halt to the practice. U.S. District Court Judge Christopher Boyko ruled that Deutsche Bank had not filed the proper paperwork to establish its right to foreclose on fourteen homes it was suing to repossess as trustee. Judges in many other states then came out with similar rulings.

Following the Boyko decision, in December 2007 attorney Sean Olender suggested in an article in The San Francisco Chronicle that the real reason for the bailout schemes being proposed by then-Treasury Secretary Henry Paulson was not to keep strapped borrowers in their homes so much as to stave off a spate of lawsuits against the banks. Olender wrote:

“The sole goal of the [bailout schemes] is to prevent owners of mortgage-backed securities, many of them foreigners, from suing U.S. banks and forcing them to buy back worthless mortgage securities at face value – right now almost 10 times their market worth. The ticking time bomb in the U.S. banking system is not resetting subprime mortgage rates. The real problem is the contractual ability of investors in mortgage bonds to require banks to buy back the loans at face value if there was fraud in the origination process.

“. . . The catastrophic consequences of bond investors forcing originators to buy back loans at face value are beyond the current media discussion. The loans at issue dwarf the capital available at the largest U.S. banks combined, and investor lawsuits would raise stunning liability sufficient to cause even the largest U.S. banks to fail, resulting in massive taxpayer-funded bailouts of Fannie and Freddie, and even FDIC . . . .

“What would be prudent and logical is for the banks that sold this toxic waste to buy it back and for a lot of people to go to prison. If they knew about the fraud, they should have to buy the bonds back.”

Needless to say, however, the banks did not buy back their toxic waste, and no bank officials went to jail. As Olender predicted, in the fall of 2008, massive taxpayer-funded bailouts of Fannie and Freddie were pushed through by Henry Paulson, whose former firm Goldman Sachs was an active player in creating CDOs when he was at its helm as CEO. Paulson also hastily engineered the $85 billion bailout of insurer American International Group (AIG), a major counterparty to Goldmans’ massive holdings of CDOs. The insolvency of AIG was a huge crisis for Goldman, a principal beneficiary of the AIG bailout.

In a December 2007 New York Times article titled “The Long and Short of It at Goldman Sachs,” Ben Stein wrote:

“For decades now, . . . I have been receiving letters [warning] me about the dangers of a secret government running the world . . . . [T]he closest I have recently seen to such a world-running body would have to be a certain large investment bank, whose alums are routinely Treasury secretaries, high advisers to presidents, and occasionally a governor or United States senator.”

The pirates seem to have captured the ship, and until now there has been no one to stop them. But 60 million mortgages with fatal defects in title could give aggrieved homeowners and securities holders the crowbar they need to exert some serious leverage on Congress – serious enough perhaps even to pry the legislature loose from the powerful banking lobbies that now hold it in thrall.

Tuesday, September 22, 2009

Guns or Butter?

More U.S. troops to Afghanistan? Obama's caught in a vise

Obama has a clear choice. Does he want to be a Democrat or be a President?

He was elected to be President, so be one!! The choices are bleak.
(1) NATO is surrounded in Afghanistan and logistical support is limited to air convoys. More troops will make that worse. McCrystal has made his choice, he wants to be part of the Military Industrial Complex where winning isn't the objective, profits are the objective.
(2) Leave Afghanistan, the graveyard of empires, and maybe shift his attention to Pakistan, which really matters.
(3)increase the NATO contingent and continue a war policy that has only 1 in 10 chances of success anyway.

Sun Tzu in his book "The Art of War" says never commit to a losing choice. Withdraw and recomit at a better time. Winning is always a political objective not a military expediency.

Whatever he choses you can depend on 1 thing the Military Industrial comlex has a backup plan to make more profit and paint anyone that doesn't support their profit's bottom line as weak on National Security.


If the Afghan War was ever winnable the Cheney-Bushistas (bullshistas) would have done so, because they wanted and craved the glory. They soon discovered, after a few staged and super-hyped "successes", that they couldn't win their war and were mired down. To distance themselves from the looming catastrophe, they made a name change from American Forces to NATO Forces. To escape even more embarrassment, for their reckless adventure in Afghanistan, they "ginned up" and super-hyped another war to find those "WMD's" that were here or there and maybe even everywhere. In quick succession they began appointing a series of new NATO and American Commanders in 2 "theaters" of war. (They were all American Generals) Unfortunately all these Generals in Command have adopted historically failed military strategies. They should have read "The Art of War" or the military strategies of Alexander The Great. The Cheney-Bushistas last desperate act before the 2008 elections was to download their unfinished business onto another Presidency and blame it for the loss.

Because the Cheney-Bush Presidency didn't negotiate long term leases with Kyrgyzstan, (A logistical blunder with imminent consequences) the Government of Kyrgyzstan will close the US military base in Manas to Americans. They have virtually ordered the Americans (NATO) out of their Country, shutting an indispensable supply line for America(NATO). The only remaining land supply lines are through the steep gorges and nearly indefensible high mountain passes like the Khyber Pass between Afghanistan and Pakistan. The steep and narrow valley gorges between Kyrgyzstan, Tajikistan and Afghanistan are already under siege and effectively closed. The Taliban have demonstrated they can close any high mountain pass between Afghanistan and Tajikistan or Pakistan, almost at will. America (NATO) may have to fight it's way out of Afghanistan through Pakistan. This is a Military Planer's nightmare and it could come true. Lets hope not, but the logistical odds are against us, about 10 to 1.

If the passes were cut off, then the only exit would be by expensive, cumbersome and limited airlift, leaving most of the heavy weapons and materials behind. Only a moron would deploy forces into areas without reliable logistical support. But that's exactly what the Cheney-Bush Presidency did. The 103,000 troops under McChrystal's command in Afghanistan, include 63,000 Americans, more than half of whom arrived this year as part of an escalation strategy begun under the previous Cheney-Bush Presidency. Under the Obama Presidency the force is set to rise to 110,000 including 68,000 Americans by December 2009.

If you have Google Earth I encourage you to familiarize yourself with the countries on all sides of Afghanistan and ask yourself the following question; How can I give adequate logistical support to the present forces or more forces in the future? Then take a ground eye view of the Khyber Pass and ask yourself; How could I move thousands or even 10 troops through this natural killing field? You can't and you shouldn't because these passes can close at any time for any reason. Currently all passes between Afghanistan and Pakistan are closed because of an "agriculture inspection" quarrel. These switchback passes are narrow and enclosed within steep gorges and high canyon walls. Vulnerable bridges can be closed by landslides, earthquakes, snow, rain, mud slides, flash floods, Taliban attacks or simple quarrels between neighboring tribes. Any of which can disable or wipe out infrastructure for weeks at a time. Imagine the predicament of a battalion including heavy vehicles and tanks caught between two non-existent bridges and a steep cliff on one side and a deep gorge on the other. Do you begin to see their vulnerabilities, now just add rain or snow. Would the Taliban allow them to pass without a single casualty? Even if 1 tank were simply disabled could the others continue unhindered?

All domestic costs including Congressional allocations of about a hundred or so billion dollars a year, will be between $3 to $6 trillion dollars. This is equal to 1/4 to 1/2 our Gross Domestic Production. Most if not all of our domestic programs, including Medi-Care and Social Security will become impossible. Afghanistan will be politically fatal for this and future Presidencies. All choices will end in tears. Now the logical question arises; "Should we bet the farm and go for it"? Unfortunately the Cheney-Bush Presidency already did and the farm is in jeopardy

In the background we can still hear the apoplectic Pentagon shill, Dick Cheney, shouting out his constant and reckless drivel, desperately continuing to shift the blame onto the following Presidency. He is obviously and irresponsibly defending his fabricated justifications for invading Afghanistan and Iraq. There was no meaningful reason to invade Afghanistan. I agree with George F. Will, "Only Pakistan really mattered".

In a recent article by James Cordesman he lays out his reasons for the apparent failures up to today. The main point I would make about his article is; He is fully vested in failed policies and was a prominent talking head during the cheer leading portion of the run-up to the Afghan and Iraqi wars. He also lays out the same tired and discredited view that it's ”Not our fault”. (When will they ever take responsibility for their job?) It is my recollection that during every funding request, they were given more money than they asked for and they spent it. I remember seeing pallets of money being unloaded in Baghdad and it simply disappeared without any accounting, whatsoever. Maybe Afghanistan became the stepsister of Iraq, but they had a job to do and they are now whining about not having sufficient support. Well here is the best advice that the Military/Industrial Complex can get; “Get out now and take full responsibility for your failure”. Be Patriots not Parasites"!!

By Steven Thomma, Jonathan S. Landay and David Lightman | McClatchy Newspapers
WASHINGTON — With the military and Republicans publicly pressuring him to send more troops to Afghanistan soon and his own administration now deeply divided about how to proceed there, the eight-year war against al Qaida and the Taliban has become an increasingly urgent policy and political dilemma for President Barack Obama.

He can escalate an unpopular and open-ended war and risk a backlash from his liberal base or refuse his commanders and risk being blamed for a military loss that could tar him and his party as weak on national security.

Obama's decision could be a defining moment of his presidency, and it will reveal much about how he leads. Friends and enemies around the world will be watching — and judging — whether he's firmly in charge or whether he instinctively seeks some safe middle ground.

"This is tough for Democrats. They own this war. They own what happens from here on out. This is a bit of a mess for them all the way around," said Juan Carlos Zarate, a senior adviser at Center for Strategic and International Studies and a former official in the Bush and Clinton administrations.

In interviews with McClatchy last week, military officials and other advocates of escalation expressed their frustration at what they consider "dithering" from the White House. Then, while Obama indicated in television interviews Sunday that he isn't ready to consider whether to send more troops to Afghanistan, someone gave The Washington Post a classified Pentagon report arguing that more troops are necessary to prevent defeat.

The White House insisted anew Monday that the president won't be stampeded into a quick decision on more troops, saying that he first wants to make sure there's a sound strategy in place to secure Afghanistan and make certain that it can't be used as a haven for al Qaida terrorists, as it was before 2001.

His hesitation reflects deep divisions within his own administration and deep uncertainty about whether, even with tens of thousands more troops, the U.S. can succeed in Afghanistan without a less corrupt and legitimately elected Afghan government, greater cooperation from neighboring Pakistan and more time and money than the American public and the Congress may be willing to commit.

Opponents of escalation, led by Vice President Joe Biden and his national security adviser, Antony Blinken; Deputy National Security Adviser Tom Donilon; and deputy secretaries of state Jacob Lew and Jim Steinberg, fear that Afghanistan is a quagmire that will further undermine the administration's domestic political agenda and hurt the Democrats in next year's congressional elections.

The Pentagon itself is sharply divided over what to do, said several defense officials who weren't authorized to speak publicly and requested anonymity, with much, but not all, of the uniformed military lined up behind Army Gen. Stanley McChrystal, the commander of U.S. troops in Afghanistan. McChrystal wrote the leaked memo, but top policy advisers such as Deputy Secretary of Defense Michele Flournoy oppose his plan. Some senior officers also are concerned that sending more troops to Afghanistan would add to the already severe strains on an Army and Marine Corps from the wars in Iraq and Afghanistan.

Opponents of a buildup contend that al Qaida, which they note is based in Pakistan, not in Afghanistan, could be neutralized by having U.S. special forces standing by and ready to attack bin Laden's followers once actionable intelligence on their locations is acquired.

This group "wants to find an area where you can pay off enough warlords to provide you with security and then launch from there," another defense official said, requesting anonymity because he wasn't authorized to speak publicly. Meantime, he said, this group would continue building up and training Afghan security forces.

That alternative, however, would require more U.S. troops to train Afghan forces.

McChrystal and other proponents of committing more troops argue, as his memo does, that success in Afghanistan is "still achievable" but without more U.S. troops soon, the war "will likely result in failure."

The internal debate behind closed doors comes as the American people increasingly oppose the war. In one recent poll for CNN, 58 percent said they opposed the war, while 39 percent favored it. The poll was conducted Sept 11-13.

They also don't much like the idea of sending more troops. A McClatchy-Ipsos poll at the end of August found 56 percent of Americans opposed to sending more troops, while 35 percent favored it.

Not surprisingly, many Democrats in Congress oppose sending more troops. Many of them will face re-election next year.

"It would be a major mistake to increase troop levels — we're getting sucked into something we'll never be able to get out of," said Rep. Jim McGovern, D-Mass.

Rep. Lynn Woolsey, D-Calif., said it would be a waste of manpower to send more troops to Afghanistan. "There's no military solution to Afghanistan," she said.

Other Democrats want to wait for Obama to take the lead rather than risk splitting with their leader over a controversial war in the first year of his presidency.

"Until the president makes a decision on this, I think we're really jumping way ahead of ourselves to find out what we need in Afghanistan," said Senate Majority Leader Harry Reid, D-Nev.

Republicans are urging Obama to give McChrystal what he wants — and threatening to lambaste Obama if he backs down.

Rep. John Boehner, R-Ohio, his party's leader in the House of Representatives, noted that Obama in March endorsed the idea of a strong counterinsurgency strategy to secure Afghanistan.

"I am deeply troubled, however, by reports that the White House is delaying action on the general's request for more troops . . . . It's time for the president to clarify where he stands on the strategy he has articulated, because the longer we wait, the more we put our troops at risk."

Senate Republican leader Mitch McConnell of Kentucky echoed Boehner in calling for Obama to give McChrystal what he asks: "Anything less would confirm al Qaida's view that America lacks the strength and the resolve to endure a long war."

White House Press Secretary Robert Gibbs said Monday that Obama refuses to be rushed into a decision and that he won't order more troops unless a clear strategy demands that.

"The president obviously has seen General McChrystal's report and has had a chance to look at it and is in the process of, with his national security team and those at the Pentagon, working through some of the strategic assessments that the president thinks need to be evaluated," Gibbs said.

Gibbs refused to say whether that might include scaling back the Afghanistan mission to a strategy focused more narrowly on al Qaida leaders.

"The president is going to focus on getting the strategy right," Gibbs said, "and I'm not going to go through what options he may or may not have."

There are currently 65,000 U.S. troops in Afghanistan. There are expected to be 68,000 by November with the arrival of the last of the 17,700 troops and 4,000 trainers Obama ordered in the spring. There are an additional 39,000 NATO troops.

(William Douglas and Nancy A. Youssef contributed to this article.)

US eyes more drone hits on terror havens


Lets look at everything; First we invade Afghanistan, grave yard of empires, then we invade Iraq, grave yard for 1,000,000+ Iraqui citizens and now we start screwing with Pakistan. What a bunch of idiots! But Like I have always said; "It's not about winning it's about corporate profit"

WASHINGTON – The White House is looking at expanding counterterror operations in Pakistan to refocus on eliminating al-Qaida instead of mounting a major military escalation in Afghanistan.

Two senior administration officials said Monday that the renewed fight against the terrorist organization could lead to more missile attacks on Pakistan terrorist havens by unmanned U.S. spy planes. The officials spoke on condition of anonymity because no decisions have been made.

Top aides to President Barack Obama said he wants more time to decide.

The proposed shift would bolster the U.S. mission in the region on Obama's long-stated goal of dismantling al-Qaida. White House and Pentagon officials are debating whether to send more troops to Afghanistan.

THIS IS A BREAKING NEWS UPDATE. Check back soon for further information. AP's earlier story is below.

WASHINGTON (AP) — President Barack Obama's top commander in Afghanistan has told him that without more troops the United States could lose the war that Obama has described as the nation's foremost military priority.

Obama must now decide whether to commit thousands of additional American forces or try to hold the line against the Taliban with the troops and strategy he has already approved. Obama made clear in television interviews Sunday that he is reassessing whether his narrowed focus on countering the Afghan insurgency is working and will not be rushed into a decision about additional troops.

"Resources will not win this war, but under-resourcing could lose it," Gen. Stanley McChrystal wrote in a five-page summary of the war as he found it upon taking command this summer.

McChrystal's confidential 66-page report, sent to Defense Secretary Robert Gates on Aug. 30, is now under review at the White House.

"Although considerable effort and sacrifice have resulted in some progress, many indicators suggest the overall effort is deteriorating," McChrystal said of the war's progress.

Obama approved 21,000 additional U.S. troops earlier this year, on the advice of Gates and other senior defense and military leaders. That will bring the number of U.S. troops in Afghanistan to a record 68,000 by the end of this year, working alongside 38,000 NATO-led troops.

The question now is whether to divert troops from Iraq or make other adjustments to expand that force significantly early next year. Gates and others have repeatedly warned that too large a force would do more harm than good in a country hostile to anything it sees as foreign meddling. But Adm. Mike Mullen, chairman of the Joint Chiefs of Staff, told Congress last week he thinks more troops are probably necessary.

Pentagon press secretary Geoff Morrell said in a statement that the McChrystal assessment "is a classified, pre-decisional document, intended to provide President Obama and his national security team with the basis for a very important discussion about where we are now in Afghanistan and how best to get to where we want to be."

While asserting that more troops are needed, McChrystal, the top U.S. and NATO commander in Afghanistan, also pointed out an "urgent need" to significantly revise strategy. The U.S. needs to interact better with the Afghan people, McChrystal said, and better organize its efforts with NATO allies.

"We run the risk of strategic defeat by pursuing tactical wins that cause civilian casualties or unnecessary collateral damage. The insurgents cannot defeat us militarily; but we can defeat ourselves," he wrote.

In his blunt assessment of the tenacious Taliban insurgency, McChrystal warned that unless the U.S. and its allies gain the initiative and reverse the momentum of the militants within the next year the U.S. "risks an outcome where defeating the insurgency is no longer possible."

The content of the report was first reported by The Washington Post, which said it withheld publication of portions of the document at the government's request.

Morrell confirmed the report, but said the Pentagon would not release McChrystal's assessment.

"While we would have much preferred none of this be made public at this time we appreciate the paper's willingness to edit out those passages which would likely have endangered personnel and operations in Afghanistan," Morrell said in an e-mail statement.

The Pentagon and the White House are awaiting a separate, more detailed request for additional troops and resources. Media reports Friday and Saturday said McChrystal has finished it but was told to pocket it, partly because of the charged politics surrounding the decision. McChrystal's senior spokesman, Rear Adm. Gregory Smith, told The Associated Press on Sunday the report is not complete.

On Monday, another Pentagon spokesman said he cannot predict when the request will arrive, and said McChrystal's depiction of the war is one tool the administration will use to choose its path.

"The way forward in Afghanistan ... is more complex than just the security aspect of it," Pentagon spokesman Bryan Whitman said. "There are political aspects, developmental aspects, economic, a range of things you have to look at."

A spokesman for Afghanistan's Defense Ministry said Sunday the Afghan government would not second-guess international military commanders on the need for more troops, but said that the greatest need is on the other side of the Afghan-Pakistan border, where the insurgency is infiltrating Afghanistan.

In Congress, the war has taken on a highly partisan edge. Senate Republicans are demanding more forces to turn around a war that soon will enter its ninth year, while members of Obama's own Democratic Party are trying to put on the brakes. Obama said in the Sunday interviews that he will not allow politics to govern his decision.

The president said he has not asked McChrystal to sit on his request for U.S. reinforcements.

"No, no, no, no," Obama responded when asked whether he or aides had directed McChrystal to temporarily withhold a request for additional U.S. forces and other resources.

"Are we doing the right thing?" he asked during one of a series of interviews broadcast Sunday. "Are we pursuing the right strategy?"

Obama gave no deadline for making a decision about whether to send more Americans into harm's way.

"The only thing I've said to my folks is, 'A, I want an unvarnished assessment, but, B, I don't want to put the resource question before the strategy question,'" Obama said. "Because there is a natural inclination to say, 'If I get more, then I can do more.' "

Mullen told Congress last week he expected McChrystal's request for additional forces and other resources "in the very near future." The White House has remained vague about how long it would take to receive the report and act on it.

Obama spoke on CNN's "State of the Union," ABC's "This Week," NBC's "Meet the Press," and CBS' "Face the Nation."


Associated Press writer Rahim Faiez in Kabul contributed to this report.

Monday, September 21, 2009

1 in 4 FHA Mortgage Loans in Foreclosure or Delinquency

BY: Mac Slavo- September 21st, 2009

The current FHA report is now out for servicing delinquencies and defaults, and as expected it is indeed worse, not better. The administration continues to LIE about claimed “improvements” in the character of home finance.

22.9% of all FHA loans are either delinquent or in foreclosure.—

Let’s see - 30 days are up, 60 days are up, 90+ days are up, default+foreclosure is up and 60+ including foreclosures are of course up.

Improvement? Where? This is current as of August now and the internals continue to deteriorate.

For a closer look at the specific deflault rates, we urge readers to visit the Market Ticker and read Karl Denninger’s full analysis. No matter what you hear in the mainstream media, or from Wall Street, or from the White House, the numbers do not lie. We’ll see how the numbers get spun on this one, though we would not be surprised if most people watching cable and network news never hear about it.

The 1 in 4 number may be alarming to some, but in reality, all of these loans are backstopped by the Federal Government, so if the SHTF, we can feel confident knowing that Uncle Sam the taxpayers will take care of the bill for those predatory loans. Responsible tax payers understand that sometimes individuals get greedy, bite off more than they can chew, and then need a bailout so they don’t lose their homes. We are true believers in taking from those with the ability to pay and giving to those without that ability. Hey, this is America, and that’s what we’re all about.

New online banking threat

Mike Harvey , Technology Correspondent

The Trojan horse from the film Troy is hard to miss, but the latest Clampi Trojan virus is much more subtle
Cyber criminals have created a highly sophisticated Trojan virus that steals online banking log-in details from infected computers.

The Clampi virus, which is spreading rapidly across hundreds of thousands of computers in Britain and the United States, infects computers when users visit websites that host a malicious code.

Once on the computer, the virus sits unnoticed until the user logs on to bank, credit card or other financial websites. It then captures log-in and password information and sends it to a server run by the attackers. They can then tell the compromised computer to send money to accounts that they control, or they can buy goods with the stolen credit card details.

The trojan has a list of more than 4,500 finance-related websites that it monitors, including British high street banks. Security experts warned that it was one of the stealthiest and most pervasive threats to computers using the Microsoft Windows operating systems.

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Orla Cox, security operations manager with Symantec, the online security company, said: “Clampi is a complex threat. People are only just beginning to understand how it operates.”

Researchers have found that the list of sites that Clampi is monitoring includes banks, credit card companies, online casinos, e-mail, wire transfer services, retail sites, utilities, share brokerages, mortgage lenders and government sites.

Ms Cox said: “The first big wave was in the US in July, but it is spreading around the world, particularly English-language countries. We have seen samples of it targeting UK high street banks. There is potential for another wave to come.”

It is estimated that more than 1,000 out of 40,000 or more infected computers have been in Britain. Only computers running Microsoft Windows are affected. Most of the infections seem to have occurred among small and medium-sized businesses, many of which have been reluctant to reveal how they have fallen victim.

In America, $75,000 (£46,000) was stolen in July from Slack Auto Parts, a car parts supplier in Gainesville, Georgia. In August, criminals used Clampi to steal online banking details for the public school district in Sands Spring, Oklahoma. The attackers then submitted a series of false payroll payments, totalling more than $150,000.

The attack was one of a series on American schools in which criminals hired unsuspecting money mules — people who transfer money or fraudulently obtained high-value goods — to receive the transfers of stolen cash and then wire the money out of the country. Cyber criminals stole more than $700,000 from the Western Beaver School District in 74 fraudulent electronic transfers, The Washington Post reported.

Clampi is one of a new wave of viruses to target the online banking system. Its emergence came as security experts warned that malicious websites hiding trojan viruses were no longer confined to sites such as gambling and pornography.

A recent report by IBM security systems found an increase in malicious content such as viruses on trusted sites, including popular search engines, blogs, online magazines and mainstream news sites. The number of links to malicious web pages rose by more than 500 per cent in the first half of this year. Last week, attackers placed a virus in an advert on the website of The New York Times.

Trojan viruses such as Clampi accounted for 55 per cent of all new malicious software in the first half of the year, IBM said, up from 46 per cent for the same period last year. Researchers say that variants of Clampi — also known as Ligats or Ilomo — have been around since 2005, but the new version appears to be spreading more quickly.

Heading off hackers

Do not click on suspicious links to unknown sites within e-mails, instant messages or social networking sites

Be cautious about doing business with unknown e-commerce sites and always use a credit card, not a debit card

Install a comprehensive security solution and keep it up-to-date

Use a security solution that offers browser protection and a website rating service Browser protection will block questionable downloads from getting on to your computer, and website rating services can warn you if a site is infected

Secure your wi-fi connection with a strong password to ensure that others cannot connect to your network and access data stored on your computer

Any user whose system has been infected by Clampi should immediately change any and all passwords used on that system for any websites, but particularly financial credentials

Source: Symantec

Fed Rejects Geithner Request for Study of Governance, Structure

By Craig Torres and Robert Schmidt

Sept. 21 (Bloomberg) -- The Federal Reserve Board has rejected a request by U.S. Treasury Secretary Timothy Geithner for a public review of the central bank’s structure and governance, three people familiar with the matter said.

The Obama administration proposed on June 17 a financial- regulatory overhaul including a “comprehensive review” of the Fed’s “ability to accomplish its existing and proposed functions” and the role of its regional banks. The Fed was to lead the study and enlist the Treasury and “a wide range of external experts.”

Some top central bank officials, after agreeing to the review, saw a potential threat to Fed independence after the Treasury released the proposal, two of the people said. The Obama plan said the Treasury would consider recommendations from the review and “propose any changes to the Fed’s governance and structure.”

“It is not obvious at all why that is a Treasury responsibility or even appropriate why the Treasury would undertake that kind of study,” said Robert Eisenbeis, chief monetary economist at Cumberland Advisors Inc. in Vineland, New Jersey, and a former Atlanta Fed research director. “The Fed was created by Congress and it is not part of the executive branch.”

U.S. lawmakers have also called for a review of the Fed’s power and structure, saying Fed Chairman Ben S. Bernanke overstepped his authority as he bailed out creditors of Bear Stearns Cos. and American International Group Inc. while battling a crisis that led to $1.62 trillion in writedowns and losses at financial firms.

No Work Done

While the report requested by the Treasury hasn’t been formally scrapped, no work has been done on the project, which was due Oct. 1, the people said. Treasury spokesman Andrew Williams declined to comment, as did Fed spokeswoman Michelle Smith.

The central bank is performing its own reviews of possible operational changes following the financial crisis. Fed Governor Elizabeth Duke is leading an internal study of the roles of the directors that serve on each of the boards at regional Fed banks.

“The institution is trying to keep a low profile,” said Vincent Reinhart, a resident scholar at the American Enterprise Institute in Washington and the former director of Division of Monetary Affairs at the Fed Board. “To publish a report now invites comment on that report.”

‘Associated Costs’

The Senate passed 96-2 a nonbinding budget amendment in April supporting “an evaluation of the appropriate number and the associated costs” of the district banks. The measure was sponsored by Senate Banking Committee Chairman Christopher Dodd, a Connecticut Democrat, and Alabama Senator Richard Shelby, the senior Republican on the panel.

House Financial Services Committee Chairman Barney Frank, a Massachusetts Democrat, has also called for more scrutiny of the central bank, saying last year he aims to probe how the 12 regional Fed presidents are appointed and their role in setting interest rates. The Fed banks are semi-private entities, each overseen by a nine-member board of directors.

Legislation in both houses of Congress would allow for audits by the Government Accountability Office of the central bank’s monetary policy and other operations. Bernanke opposes the measure, which was introduced in the House by Representative Ron Paul of Texas, a Republican. Frank has scheduled a committee hearing on the issue for Sept. 25.

Lessons Learned

Along with the study by Duke, the Fed is reviewing how to overhaul supervision based on lessons learned from the financial crisis.

The Treasury interest in a Fed structural review partially stems from the administration’s proposal to make the central bank the lead regulator for the largest, most inter-connected financial institutions.

Fed Governor Daniel Tarullo, an Obama appointee, is working on changes to the supervisory process that are preparing the central bank for a larger role in tracking risks across the financial system.

Tarullo is focusing on bank-to-bank comparisons and quantitative scenario testing of bank portfolios. The Fed is currently examining the vulnerability of banks with assets under $100 billion to falling commercial real estate values.

Congressional leaders have balked at the notion of giving the Fed more power and are leaning toward vesting authority over capital, liquidity and risk-management practices of big banks in a council of regulators.

Supervisory Council

“There will be a council,” Frank told Bloomberg Television Sept. 14.

The review led by Duke followed the resignation in May of Stephen Friedman as New York Fed chairman because of ties to Goldman Sachs Group Inc. Friedman is a director on Goldman Sachs’s board.

Goldman Sachs became a bank holding company in September 2008, a change that would have normally barred Friedman from continuing to serve in his New York Fed post. Officials gave him a waiver so he could remain in the job, which has mostly an advisory role.

Friedman, chairman of Stone Point Capital LLC, said at the time of his resignation that he had complied with all the Fed’s rules and his service on the board was “mischaracterized as improper.”

Some analysts said a Fed revision of the role of directors is overdue.

“Allowing local bankers to play a leading role in selecting reserve bank presidents is the most worrying aspect of the current system,” Lou Crandall, chief economist at Wrightson ICAP LLC, wrote to clients in July.

District bank presidents are nominated by committees made up of people whose institutions the nominees may have supervised.

“The conflicts of interest inherent in the current system are glaring,” Crandall said.

Why haven't any Wall Street tycoons been sent to the slammer?

By Kevin G. Hall | McClatchy Newspapers
WASHINGTON — More than a year into the gravest financial crisis since the Great Depression, millions of Americans have seen their home values and retirement savings plunge and their jobs evaporate.

What they haven't seen are any Wall Street tycoons forced to swap their multi-million dollar jobs and custom-made suits for dishwashing and prison stripes.

There are plenty of civil and class-action lawsuits from aggrieved investors angered by the losses in their mortgage bonds, hedge funds or pensions. Regulators have stepped up their vigilance after the fact. But to date, no captain of finance tied to the crisis has walked the plank.

There have been some high-profile arrests and federal convictions of financial giants — such as Ponzi scheme king Bernard Madoff and Stanford Financial Group chairman Robert Allen Stanford. They weren't among the causes of the financial meltdown, however, just poster boys for an era of lax enforcement, weak regulation and devout faith in free markets.

"A lot of people who are responsible (for the crisis) seem to have gotten awfully rich in the process," said Barbara Roper, the director of investor protection for the Consumer Federation of America.

The absence of what many would call justice stands out all the more because past financial crises always had their villains. The depression-era had electricity and railroad magnate Samuel Insull, who partly inspired the movie "Citizen Kane." The savings and loan crisis of the 1980's had banker Charles Keating. Energy giant Enron Corp.'s spectacular collapse offered the late CEO Kenneth Lay, a Texas crony of President George W. Bush.

Yet there's no such poster child for the Great Recession, as today's crisis is now called.

One may yet emerge. The FBI has more than 580 large-scale corporate fraud investigations under way. At least 40 of them are scrutinizing players in sub-prime mortgage lending, which was the first domino to fall and triggered a global financial crisis.

"The investigations are very complex; it's not something that's going to turn overnight," said Bill Carter, a spokesman at FBI headquarters. "They are labor intensive. They involve a review of records."

To date, the closest thing to a prosecution of a major actor in the financial meltdown is a civil fraud case that the Securities and Exchange Commission brought on June 4 against Angelo Mozilo, the perma-tanned CEO of mortgage-lending giant Countrywide.

The SEC, in documents filed in a federal courtroom in central California, accuses Mozilo of "deliberately misleading investors" by misrepresenting the risk that Countrywide posed. The SEC also accused him of insider trading because he sold large shares of company stock and options ahead of what he allegedly knew was a coming collapse of mortgage lending.

Unless the Justice Department brings corresponding criminal charges, however, Mozilo could be hit with penalties and a ruined reputation if convicted — but he wouldn't see the inside of a jail cell.

Another big trial is imminent, however. On Oct. 13, a Brooklyn jury will begin hearing the federal prosecution of former Bear Stearns investment fund founder Ralph Cioffi and his fund manager Matthew Tannin.

Two of their hedge funds, offered to mega-wealthy investors and heavily weighted with investments in mortgage bonds backed by sub-prime loans to the weakest borrowers, collapsed in June and August of 2007. Their collapse signaled a gathering storm in mortgage finance that culminated in March 2008 with the government-brokered fire sale of their bank to JP Morgan Chase.

Both men were charged on June 19, 2008, with defrauding investors, passing off as safe the investment in mortgage bonds even though they described the market for sub-prime mortgages as "toast" in their own e-mails. Cioffi also faces charges of insider trading.

Lawyers for both men declined comment to McClatchy, but when their clients were arrested they called the pair scapegoats for the broader financial crisis.

Court documents filed in August show attorneys for the two are trying to suppress evidence that the executives' special trading notebooks have disappeared. The government suspects that Cioffi and Tannin, or someone helping them, made them disappear to cover their tracks.

Cioffi's attorneys also asked in August that the presiding judge quash the use of evidence that points to their clients' lavish lifestyle, including mansions and Ferraris. The documents accused federal prosecutors of "improper appeal to class prejudice." Tannin's attorneys joined the motion on Sept.15.

Class prejudice against bankers is what many Americans feel, evident in the death threats made against some former or current executives at insurer American International Group and other financial firms earlier this year. Wall Street switchboard operators at some institutions no longer provide addresses to phone callers.

Americans are angry because the suffering on Main Street is a spillover from the excessive risk taking and lavish compensation of executives who invested on behalf of the ultra-wealthy. Investors seeking outsized "alpha" returns turned to Wall Street, both seeking to make a short-term killing even if doing so eventually brought the near collapse of the financial system.

President Barack Obama alluded to this on Sept. 14 in a New York speech to commemorate the anniversary of the collapse of investment bank Lehman Brothers, which sent off a global financial panic.

"We will not go back to the days of reckless behavior and unchecked excess at the heart of this crisis, where too many were motivated only by the appetite for quick kills and bloated bonuses," Obama said, promising new rules. "Those on Wall Street cannot resume taking risks without regard for consequences."

There are persistent but unconfirmed reports that the FBI and grand juries are looking at the e-mails of executives of failed institutions such as Bear Stearns, which pioneered the process of pooling sub-prime loans for sale to investors, and Lehman Brothers, which was a leader in these toxic products when it collapsed.

Records from AIG, which the Federal Reserve saved from collapse on Sept. 17, 2008, are also thought to be under review. The FBI reportedly is also looking at rating agencies Fitch, Moody's and Standard & Poor's to determine if they knowingly gave pools of sub-prime mortgages AAA investment-grade ratings, the best possible, despite evidence to the contrary.

Carter, the FBI spokesman, declined comment on ongoing investigations.

The lack of any prosecution to date doesn't mean authorities aren't investigating, added Ian McCaleb, a spokesman for the Department of Justice.

"There are ongoing cases. But from a prosecution standpoint, it takes a significant amount of time to develop these things. Most financial fraud cases are very complex and it could take a while to unravel the specifics of each case," he said. "I would characterize financial fraud as one of our top priorities."

Another possibility is that a new politically appointed Financial Crisis Inquiry Commission could turn up something that leads to prosecution. The 10-member panel, created by Congress this month, began probing the origins of the crisis, has subpoena power and could compel testimony. This could, however, lead to conflicts with ongoing legal investigations.

Another reason that there've been no arrests of the perpetrators of the financial meltdown is that agencies such as the SEC, which regulates trading in stocks and bonds, and the Commodity Futures Trading Commission, which oversees the trading of contracts for future delivery of energy and farm products, lack powers of criminal prosecution.

They can bring civil charges that result in fines or pass information to federal prosecutors or the FBI, which under the Bush administration was reorganized to focus less on white-collar crime and more on national security matters and crimes against children.

Legislation introduced in the House and Senate would make it easier for the CFTC to prosecute, especially allegations of market manipulation. Measures would lower the current high threshold for determining manipulation. In 35 years, the agency has won only a single manipulation case, and it's under appeal. The bills also would give commodities regulators powers to bring criminal cases.

"Folks who do the crime shouldn't just pay a fine, but do the time," said Bart Chilton, a CFTC commissioner who's championed the need for prosecutorial powers.

Because it saves time and money, regulators traditionally have negotiated settlements with bad actors, and fines often amount to a business cost.

That, too, may be changing, however. The SEC on Sept. 14 was hit with a stinging judicial rebuke for its half-hearted efforts to punish Bank of America for alleged disclosure failures in the government-brokered purchase of investment bank Merrill Lynch.

U.S. District Judge Jed Rakoff tossed out a $33 million settlement between the SEC and Bank of America, effectively calling it a fig leaf. The agency, he said, looked as if it was enforcing the law while the bank and its CEO, Kenneth Lewis, got away with a slap on the wrist.

"It is not fair, first and foremost, because it does not comport with the most elementary notions of justice and morality, in that it proposes that the shareholders who were the victims of the bank's alleged misconduct now pay the penalty for that misconduct," Rakoff wrote in a scathing 12-page opinion that ordered the complaint to proceed to trial.

McChrystal: More Forces or 'Mission Impossible'

No matter how they gin up their predicament, there is a 9 in 10 chance nothing will help "win the war". The NATO forces are surrounded, their supply lines are over-stressed, if not just plain severed. Adding more troops will only make the supply line problem more acute.

Bob Woodward interprets the General's report so it supports the view of the Military Industrial complex, not the troops. When all is said and done, these guys haven't learned anything about the art of war. But, like I have said before; "winning a war isn't the objective, profit is the objective".


McChrystal: More Forces or 'Mission Failure'
Top U.S. Commander For Afghan War Calls Next 12 Months Decisive

By Bob Woodward
Washington Post Staff Writer
Monday, September 21, 2009

The top U.S. and NATO commander in Afghanistan warns in an urgent, confidential assessment of the war that he needs more forces within the next year and bluntly states that without them, the eight-year conflict "will likely result in failure," according to a copy of the 66-page document obtained by The Washington Post.

Gen. Stanley A. McChrystal says emphatically: "Failure to gain the initiative and reverse insurgent momentum in the near-term (next 12 months) -- while Afghan security capacity matures -- risks an outcome where defeating the insurgency is no longer possible."

His assessment was sent to Defense Secretary Robert M. Gates on Aug. 30 and is now being reviewed by President Obama and his national security team.

McChrystal concludes the document's five-page Commander's Summary on a note of muted optimism: "While the situation is serious, success is still achievable."

But he repeatedly warns that without more forces and the rapid implementation of a genuine counterinsurgency strategy, defeat is likely. McChrystal describes an Afghan government riddled with corruption and an international force undermined by tactics that alienate civilians.

He provides extensive new details about the Taliban insurgency, which he calls a muscular and sophisticated enemy that uses modern propaganda and systematically reaches into Afghanistan's prisons to recruit members and even plan operations.

McChrystal's assessment is one of several options the White House is considering. His plan could intensify a national debate in which leading Democratic lawmakers have expressed reluctance about committing more troops to an increasingly unpopular war. Obama said last week that he will not decide whether to send more troops until he has "absolute clarity about what the strategy is going to be."

The commander has prepared a separate detailed request for additional troops and other resources, but defense officials have said he is awaiting instructions before sending it to the Pentagon.

Senior administration officials asked The Post over the weekend to withhold brief portions of the assessment that they said could compromise future operations. A declassified version of the document, with some deletions made at the government's request, appears at

McChrystal makes clear that his call for more forces is predicated on the adoption of a strategy in which troops emphasize protecting Afghans rather than killing insurgents or controlling territory. Most starkly, he says: "[I]nadequate resources will likely result in failure. However, without a new strategy, the mission should not be resourced."

'Widespread Corruption'

The assessment offers an unsparing critique of the failings of the Afghan government, contending that official corruption is as much of a threat as the insurgency to the mission of the International Security Assistance Force, or ISAF, as the U.S.-led NATO coalition is widely known.

"The weakness of state institutions, malign actions of power-brokers, widespread corruption and abuse of power by various officials, and ISAF's own errors, have given Afghans little reason to support their government," McChrystal says.

The result has been a "crisis of confidence among Afghans," he writes. "Further, a perception that our resolve is uncertain makes Afghans reluctant to align with us against the insurgents."

McChrystal is equally critical of the command he has led since June 15. The key weakness of ISAF, he says, is that it is not aggressively defending the Afghan population. "Pre-occupied with protection of our own forces, we have operated in a manner that distances us -- physically and psychologically -- from the people we seek to protect. . . . The insurgents cannot defeat us militarily; but we can defeat ourselves."

McChrystal continues: "Afghan social, political, economic, and cultural affairs are complex and poorly understood. ISAF does not sufficiently appreciate the dynamics in local communities, nor how the insurgency, corruption, incompetent officials, power-brokers, and criminality all combine to affect the Afghan population."

Coalition intelligence-gathering has focused on how to attack insurgents, hindering "ISAF's comprehension of the critical aspects of Afghan society."

In a four-page annex on detainee operations, McChrystal warns that the Afghan prison system has become "a sanctuary and base to conduct lethal operations" against the government and coalition forces. He cites as examples an apparent prison connection to the 2008 bombing of the Serena Hotel in Kabul and other attacks. "Unchecked, Taliban/Al Qaeda leaders patiently coordinate and plan, unconcerned with interference from prison personnel or the military."

The assessment says that Taliban and al-Qaeda insurgents "represent more than 2,500 of the 14,500 inmates in the increasingly overcrowded Afghan Corrections System," in which "[h]ardened, committed Islamists are indiscriminately mixed with petty criminals and sex offenders, and they are using the opportunity to radicalize and indoctrinate them."

Noting that the United States "came to Afghanistan vowing to deny these same enemies safe haven in 2001," he says they now operate with relative impunity in the prisons. "There are more insurgents per square foot in corrections facilities than anywhere else in Afghanistan," his assessment says.

McChrystal outlines a plan to build up the Afghan government's ability to manage its detention facilities and eventually put all such operations under Afghan control, including the Bagram Theater Internment Facility, which the United States runs.

For now, because of a lack of capacity, "productive interrogations and detainee intelligence collection have been reduced" at Bagram. "As a result, hundreds are held without charge or without a defined way-ahead. This allows the enemy to radicalize them far beyond their pre-capture orientation. The problem can no longer be ignored."

McChrystal's Plan

The general says his command is "not adequately executing the basics" of counterinsurgency by putting the Afghan people first. "ISAF personnel must be seen as guests of the Afghan people and their government, not an occupying army," he writes. "Key personnel in ISAF must receive training in local languages."

He also says that coalition forces will change their operational culture, in part by spending "as little time as possible in armored vehicles or behind the walls of forward operating bases." Strengthening Afghans' sense of security will require troops to take greater risks, but the coalition "cannot succeed if it is unwilling to share risk, at least equally, with the people."

McChrystal warns that in the short run, it "is realistic to expect that Afghan and coalition casualties will increase."

He proposes speeding the growth of Afghan security forces. The existing goal is to expand the army from 92,000 to 134,000 by December 2011. McChrystal seeks to move that deadline to October 2010.

Overall, McChrystal wants the Afghan army to grow to 240,000 and the police to 160,000 for a total security force of 400,000, but he does not specify when those numbers could be reached.

He also calls for "radically more integrated and partnered" work with Afghan units.

McChrystal says the military must play an active role in reconciliation, winning over less committed insurgent fighters. The coalition "requires a credible program to offer eligible insurgents reasonable incentives to stop fighting and return to normalcy, possibly including the provision of employment and protection," he writes.

Coalition forces will have to learn that "there are now three outcomes instead of two" for enemy fighters: not only capture or death, but also "reintegration."

Again and again, McChrystal makes the case that his command must be bolstered if failure is to be averted. "ISAF requires more forces," he states, citing "previously validated, yet un-sourced, requirements" -- an apparent reference to a request for 10,000 more troops originally made by McChrystal's predecessor, Gen. David D. McKiernan.

A Three-Headed Insurgency

McChrystal identifies three main insurgent groups "in order of their threat to the mission" and provides significant details about their command structures and objectives.

The first is the Quetta Shura Taliban (QST) headed by Mullah Omar, who fled Afghanistan after the attacks of Sept. 11, 2001, and operates from the Pakistani city of Quetta.

"At the operational level, the Quetta Shura conducts a formal campaign review each winter, after which Mullah Omar announces his guidance and intent for the coming year," according to the assessment.

Mullah Omar's insurgency has established an elaborate alternative government known as the Islamic Emirate of Afghanistan, McChrystal writes, which is capitalizing on the Afghan government's weaknesses. "They appoint shadow governors for most provinces, review their performance, and replace them periodically. They established a body to receive complaints against their own 'officials' and to act on them. They install 'shari'a' [Islamic law] courts to deliver swift and enforced justice in contested and controlled areas. They levy taxes and conscript fighters and laborers. They claim to provide security against a corrupt government, ISAF forces, criminality, and local power brokers. They also claim to protect Afghan and Muslim identity against foreign encroachment."

"The QST has been working to control Kandahar and its approaches for several years and there are indications that their influence over the city and neighboring districts is significant and growing," McChrystal writes.

The second main insurgency group is the Haqqani network (HQN), which is active in southeastern Afghanistan and draws money and manpower "principally from Pakistan, Gulf Arab networks, and from its close association with al Qaeda and other Pakistan-based insurgent groups." At another point in the assessment, McChrystal says, "Al Qaeda's links with HQN have grown, suggesting that expanded HQN control could create a favorable environment" for associated extremist movements "to re-establish safe-havens in Afghanistan."

The third is the Hezb-e-Islami Gulbuddin insurgency, which maintains bases in three Afghan provinces "as well as Pakistan," the assessment says. This network, led by the former mujaheddin commander Gulbuddin Hekmatyar, "aims to negotiate a major role in a future Taliban government. He does not currently have geographical objectives as is the case with the other groups," though he "seeks control of mineral wealth and smuggling routes in the east."

Overall, McChrystal provides this conclusion about the enemy: "The insurgents control or contest a significant portion of the country, although it is difficult to assess precisely how much due to a lack of ISAF presence. . . . "

The insurgents make money from the production and sale of opium and other narcotics, but the assessment says that "eliminating insurgent access to narco-profits -- even if possible, and while disruptive -- would not destroy their ability to operate so long as other funding sources remained intact."

While the insurgency is predominantly Afghan, McChrystal writes that it "is clearly supported from Pakistan. Senior leaders of the major Afghan insurgent groups are based in Pakistan, are linked with al Qaeda and other violent extremist groups, and are reportedly aided by some elements of Pakistan's ISI," which is its intelligence service. Al-Qaeda and other extremist movements "based in Pakistan channel foreign fighters, suicide bombers, and technical assistance into Afghanistan, and offer ideological motivation, training, and financial support."

Toward the end of his report, McChrystal revisits his central theme: "Failure to provide adequate resources also risks a longer conflict, greater casualties, higher overall costs, and ultimately, a critical loss of political support. Any of these risks, in turn, are likely to result in mission failure."

Josh Boak and Evelyn Duffy contributed to this report.