US Government Asset Seizures on the Rise

By Simon Black - 08/26/11  

The Wall Street Journal published a disturbing article earlier this week entitled “Federal Asset Seizures Rise, Netting Innocent With Guilty.”

You can already imagine the crux of the article.

In the United States, there are hundreds of regulations which authorize dozens federal agencies to confiscate private property — homes, cars, bank accounts, gold, company shares, and even personal effects.

Ironically, most Americans still think that they live in a country where you’re innocent until proven guilty. Nothing could be further from the truth, and it’s just another clear example of how the US Constitution has become a worthless piece of toilet paper for the federal government.

The Fifth Amendment states that “No person shall be…deprived of life, liberty, or property, without due process of law.” Tell that James Lieto, a New York businessman who was relieved of $392,000 when the armored car company used by his check-cashing firm was taken down by the FBI.

Lieto was innocent and not implicated in any wrongdoing, but the FBI took his money regardless as it just happened to be in the wrong place at the wrong time.

Last October, another businessman named Raul Stio was suspected of wrongdoing by the Treasury Department. The government seized over $150,000 from his account, yet in the 10-months that followed, Stio has still not been charged with a crime.

According to Justice Department statistics, the total value of confiscated property exceeded $2.5 billion in 2010, more than double from five years ago. The average take per case? $166,000…and the vast majority of cases were non-criminal.

It’s truly staggering to think about how much can be taken away from you in the blink of an eye, all without any judicial oversight or right to a hearing.

The reason could be anything. Maybe you violated some arcane, meaningless regulation among the hundreds of thousands of pages of US Code (ignorance of the law is NOT an excuse!). Maybe you were at the wrong place at the wrong time. Or maybe they had no real reason at all other than mere suspicion.

One minute you have money, the next you’re completely locked out of your wealth and livelihood. They force YOU to prove to them that you aren’t guilty, but they take away any means you had to defend yourself.

Look, this is the new reality in America. The entire country has become a nation of criminals — there isn’t a single man, woman, or child alive who is not in violation of some obscure regulation or cannot be ‘suspected’ of wrongdoing.

This is really just a form of cannibalism — a government feeding on its own citizens in order to keep the party going just a little bit longer. They’ll raise taxes, seize assets, take over pension funds, erode freedoms, start wars and send people to die — whatever it takes to maintain the status quo.

I’ve long advocated for an internationalization strategy: diversifying various assets and interests overseas so that no one single government has total control over your livelihood.
Store your gold in Switzerland. Open a bank account in Hong Kong. Register your company in the BVI. Establish a ‘backup’ residency in Chile. Expand your business in Brazil. Get a better job in Singapore. Obtain a second passport in Malta. Open a brokerage account in the Cayman Islands.

This approach is NOT just for the super rich. In fact, I’ve helped all kinds of people to internationalize, young and old, rich and poor.

Taking some simple steps to protect yourself will give you extraordinary peace of mind. You’ll know that, without doubt, you have some savings socked away that NOBODY can touch. You’ll know that you have a solid emergency backup plan. You’ll know that everything you’ve worked for won’t vanish in an instant.

Regards,
Simon Black,
for The Daily Reckoning

Rick’s Perry’s Tall Tales of Texas

August 29, 2011

 

Behind the Curtain of the Texas Miracle

by MICHAEL WINSHIP

Although born and raised and raised in a small town in the Finger Lakes region of New York, I’m the hybrid child of an upstate NY father and a mother from Texas — they met at Fort Hood (then Camp Hood) during World War II. And you thought different species couldn’t mate.


As a result, we were the only kids on the block who said, “Y’all,” or had relatives named Bubba, Vade, Hoyt and Cleburne. My mother’s father was known in our family as Granddaddy Lloyd. CARE packages of unshelled pecans and Frito-Lay products (then largely unknown above the Mason-Dixon Line) would arrive at Christmastime. And among the books in our house was a buff-covered, dog-eared paperback titled Tall Tales of Texas.


I flipped through it over and over. Inside were wild and woolly stories of the outlaw Sam Bass, frontiersman and Texas Ranger Bigfoot Wallace, Davy Crockett at the Alamo. Even taller were tales of Pecos Bill, with his lasso made from a live rattlesnake, the toughest cowboy in the world; and his wife Slue-Foot Sue, riding down the Rio Grande on the back of a giant catfish.


So, courtesy of some Lone Star DNA and basic reading comprehension skills, I think I know a Texas tall tale when I hear one, and presidential candidate and Texas Governor Rick Perry’s tales of “the Texas miracle” are as tall as they come.


Between December 2000 and December 2010, the state did have a net gain of 907,000 jobs, more than half the 1.6 million new jobs nationwide during that same period. But a lot of the state’s success in job creation looks more like dumb luck than evidence of ole Pecos Perry’s political prowess or expertise in governance. “It’s not that the emperor has no clothes,” Dan Hamermesh, an economics professor at the University of Texas, told the website AOL Jobs. “But he’s got little more than a fig leaf over his crotch. It is a true fact, but he had nothing to do with it.”

Perry points to deregulation and low taxes, including an incentive program called the Texas Enterprise Fund, said to have created 58,000 jobs, but there were many factors largely beyond his control, including increased trade between the United States and Mexico and the high price of gasoline that pumped revenue into the state, accompanied by new technologies for oil and gas extraction. In the August 15 New York Times, Clifford Krauss reported, “The oil and gas industry now delivers roughly $325 billion a year to the state, directly and indirectly. It brings in $13 billion in state tax receipts, or roughly 40 percent of the total, financing up to 20 percent of the state budget.”

What’s more, a lot of the increase has been funded — say it ain’t so, Pecos! — by federal largesse, including President Obama’s economic stimulus. In the last ten years, federal spending in the state has more than doubled to over $200 billion a year (thanks in large part to NASA and the many military installations in the state, including the aforementioned Fort Hood, one of the world’s largest military bases and the biggest single employer in Texas).


Of all the US government jobs added in this country between 2007 and 2010, 47 percent of them were in Texas. According to Jared Bernstein, former economic adviser to Joe Biden, “Texas employment wasn’t down much at all in these years, as the state lost only 53,000 jobs. But looming behind that number are large losses in the private sector (down 178,000) and large gains (up 125,000) in government jobs.” Which shows, Bernstein goes on, that Texas has followed “a traditional Keynesian game plan: as the private sector contracts, turn to the public sector to temporarily make up part of the difference.”


In 2009, Governor Perry made a show of rejecting $556 million in federal funds for unemployment, saying there were too many strings attached. In fact, that money was equal to only two percent of the more than $20 billion in stimulus money Texas did accept, including cash used to cover 97 percent of the state budget’s shortfall for 2010, according to the National Conference of State Legislatures.

This, in spite of GOP attacks on the public sector, Perry’s claim that the stimulus was failed and misguided and the pledge in the announcement of his presidential candidacy that he would “work every day to make Washington, DC, as inconsequential in your lives as I can.”


As the August 20 Washington Post noted, “The significant role of government in Texas’ relative prosperity stands in stark contrast to the ‘go-it-alone’ image cultivated by Perry, who credits a lack of government interference for fostering a business-friendly environment in Texas.”

For those like Governor Perry who brag about being no-nonsense, freedom-loving cowpokes, it’s a delusion that goes all the way back to the early settlement of the American West. As Patricia Nelson Limerick writes in her seminal history The Legacy of Conquest, “At any period in Western history, the rhetoric of Western independence was best taken with many grains of salt.” Whether it was fighting Indians or gaining access to public grazing lands, the federal government has always been integral. “Nothing so undermines the Western claim to a tradition of independence,” she writes, “as this matter of federal support to Western development…

“And yet humans have a well-established capacity to meet facts of life with disbelief. In a region where human interdependence has been self-evident, Westerners have woven a net of denial.” Sounds familiar.


Accompanying Governor Perry’s denial is cronyism and patronage, both good ole boy-style and corporate (of the $102 million in campaign contributions raised for his gubernatorial races, Katrina vanden Heuvel wrote, half came “from just 204 sources,” and the
 Los Angeles Times reports, “Nearly half of those mega-donors received hefty business contracts, tax breaks or appointments under Perry.”)

So, too, with greed comes hubris and shortsightedness. The Times‘ Krauss reported, “Critics, among them Democrats… have long complained that the state’s economic health came at a steep price: a long-term hollowing out of its prospects because of deep cuts to education spending, low rates of investment in research and development, and a disparity in the job market that confines many blacks and Hispanics to minimum-wage jobs without health insurance.”

A report from the policy research and advocacy group Demos and the Austin-based Center for Public Policy Priorities notes “27 percent of Texas workers lack health insurance compared to 17 percent nationally. The ranks of the uninsured have grown steadily as access to employer-sponsored health insurance has declined… Fewer than half (48 percent) of the state’s workers have access to a retirement plan at work, a figure that has plummeted since reaching a high of 61 percent in 2000.”


Over the past twenty years, college costs in Texas have quadrupled, with the steepest jump occurring since tuition was deregulated by the state in 2003. Former first lady Barbara Bush observed in a February op-ed that the state ranks 49th in verbal SAT scores, 47th in literacy and 46th in average math SAT scores: “We rank 36th in the nation in high school graduation rates. An estimated 3.8 million Texans do not have a high school diploma… the United Way estimates that the price tag for dropouts to Texas taxpayers in $9.6 billion every year.” But the state’s latest budget cut $4 billion from public schools.


A recent, four part series on Perry’s Texas from a team at the Houston Chronicle reports, “After a decade of Perry-style frugality the Texas welcome mat is growing increasingly threadbare as the state struggles to accommodate a booming, young populace hoping to travel its roads, get educated in its schools, drink its water and access its health care system. During Perry’s tenure the state has postponed investment or turned to debt to finance crucial infrastructure needs, experts say.”

The average urban Texan loses a week a year to traffic delays on the state’s “overburdened” highway system. While Perry boasts of luring thousands of doctors to the state, “lawmakers this year cut $805 million from doctors serving Medicaid patients” and “postponed $4 billion in Medicaid costs for payment in the next payment cycle.” Texas is 48th out of 50 states in the number of physicians per 100,000 residents.


Perry doubts climate change is real, yet, “As Texas endures its most severe one-year drought in its history, state leaders have identified $53 billion in state investments needed to expand water capacity by 2060 but have not resolved how to pay for it. Unless Texas increases its water resources, experts say 83% of Texans will not have an adequate supply of water in times of drought.” Perry issued a proclamation urging Texans to pray for rain.


With more bad news ahead, stagnant wages and an explosion in population and the labor force that now has unemployment advancing much faster that Perry’s touted job growth, “the Texas miracle” is heading into a ditch.


Which brings to mind another tall tale, the old joke about the Texan who says to an Eastern visitor, “Yessir, I can drive across my ranch all day and all night and still not get to the other end.” To which the visitor replies, “I know what you mean. I have a car like that, too.”

Why Does Rick Perry Hate Old, Poor People? 

The decade's biggest scam

Terrorism

By Glenn Greenwald

Monday, Aug 29, 2011- Salon

The Los Angeles Times examines the staggering sums of money expended on patently absurd domestic "homeland security" projects: $75 billion per year for things such as a Zodiac boat with side-scan sonar to respond to a potential attack on a lake in tiny Keith County, Nebraska, and hundreds of "9-ton BearCat armored vehicles, complete with turret" to guard against things like an attack on DreamWorks in Los Angeles.  All of that -- which is independent of the exponentially greater sums spent on foreign wars, occupations, bombings, and the vast array of weaponry and private contractors to support it all -- is in response to this mammoth, existential, the-single-greatest-challenge-of-our-generation threat:

"The number of people worldwide who are killed by Muslim-type terrorists, Al Qaeda wannabes, is maybe a few hundred outside of war zones. It's basically the same number of people who die drowning in the bathtub each year," said John Mueller, an Ohio State University professor who has written extensively about the balance between threat and expenditures in fighting terrorism.

Last year, McClatchy characterized this threat in similar terms: "undoubtedly more American citizens died overseas from traffic accidents or intestinal illnesses than from terrorism."

The March, 2011, Harper's Index expressed the point this way: "Number of American civilians who died worldwide in terrorist attacks last year: 8 -- Minimum number who died after being struck by lightning: 29."  That's the threat in the name of which a vast domestic Security State is constructed, wars and other attacks are and continue to be launched, and trillions of dollars are transferred to the private security and defense contracting industry at exactly the time that Americans -- even as they face massive wealth inequality -- are told that they must sacrifice basic economic security because of budgetary constraints.

Despite these increasing economic insecurities -- actually, precisely because of them -- the sprawling domestic Security State continues unabated.  The industry journal National Defense Magazine today trumpets: "Homeland Security Market ‘Vibrant’ Despite Budget Concerns."  It details how budget cuts mean "homeland security" growth may not be as robust as once predicted, but "Lockheed Martin, General Dynamics, Boeing and Northrop Grumman . . . have been winning more contracts from DHS"; as a Boeing spokesman put it: "You’ll still continue to see domestically significant investment on the part of the government and leveraging advances in technology to stand up and meet those emerging threats and needs.”

Of course, the key to sustaining this Security State bonanza -- profit for private industry and power for Security State officials --  is keeping fear levels among the citizenry as high as possible, as National Defense expressly notes, and that is accomplished by fixating even on minor and failed attacks, each one of which is immediately seized upon to justify greater expenditures, expansion of security measures, and a further erosion of rights:

Polls still show that there is increasing public concern about another terrorist attack. It is this fear and an unrealistic American perception of risk that will continue to propel some aspects of the market, analysts say. . . .
Small-scale attacks, whether successful or not, will continue to prompt additional spending, the market analysts at Homeland Security Research Corp. say. They point to the failed 2009 Christmas plot of a man trying to blow up a flight to Detroit with explosives sewn into his underwear and the attempted car-bombing in Times Square early the next year. Though unsuccessful, these events led to immediate White House intervention, congressional hearings and an airport screening upgrade costing more than $1.6 billion.

The LA Times, while skillfully highlighting these wasteful programs, depicts them as some sort of unintended inefficiencies.  That is exactly what they are not.  None of this is unintended or inefficient but is achieving exactly the purposes for which it is designed.  That's true for two reasons.

First, this wastefulness is seen as inefficient only if one falsely assumes that its real objective is to combat Terrorist threats.  That is not the purpose of what the U.S. Government does.

As Daniel Weeks explains today, the Congress -- contrary to popular opinion -- is not "broken"; it is working perfectly for its actual owners.  Or, as he puts it, "Washington isn't broken -- it’s fixed":

Our problem today is not a broken government but a beholden one: government is more beholden to special-interest shareholders who fund campaigns than it is to ordinary voters. Like any sound investor, the funders seek nothing more and nothing less than a handsome return -- deficits be darned -- in the form of tax breaks, subsidies and government contracts.

The LA Times, and most people who denounce these spending "inefficiencies," have the causation backwards: fighting Terrorism isn't the goal that security spending is supposed to fulfill; the security spending (and power vested by surveillance) is the goal itself, and Terrorism is the pretext for it.  For that reason, whether the spending efficiently addresses a Terrorism threat is totally irrelevant.

Second, while the Security State has little to do with addressing ostensible Terrorist threats, it has much to do with targeting perceived domestic and political threats, especially threats brought about by social unrest from austerity and the growing wealth gap.  This Alternet article by Sarah Jafee, entitled "How the Surveillance State Protects the Interests Of the Ultra-Rich," compiles much evidence -- including what I offered two weeks ago -- demonstrating that the prime aim of the growing Surveillance State is to impose domestic order, preserve prevailing economic prerogatives and stifle dissent and anticipated unrest.

Pointing out disparities between surveillance programs and the Terrorist threat is futile because they're not aimed at that threat.  The British Government, for instance, is continuing its efforts to restrict social media in the wake of the poverty-fueled riots that plagued that country; as The New York Times reports today, it is secretly meeting with representatives of Twitter, Facebook, and the company that owns Blackberry "to discuss voluntary ways to limit or restrict the use of social media to combat crime and periods of civil unrest."  That revelation prompted taunting condemnations of British tyranny from China and Iran, both of which have been routinely excoriated for surveillance abuses and Internet suppression of the type increasingly common in the West.

Meanwhile, much of the anti-Terrorism weaponry in the U.S. ends up being deployed for purposes of purely domestic policing.  As the LA Times notes: those aforementioned BearCats are "are now deployed by police across the country; the arrests of methamphetamine dealers and bank robbers these days often look much like a tactical assault on insurgents in Baghdad."  Drones are used both in the Drug War and to patrol the border.  Surveillance measures originally justified as necessary to fight foreign Terrorists are routinely turned far more often inward, and the NSA -- created with a taboo against domestic spying -- now does that regularly.

Exaggerating, manipulating and exploiting the Terrorist threat for profit and power has been the biggest scam of the decade; only Wall Street's ability to make the Government prop it up and profit from the crisis it created at the expense of everyone else can compete for that title.  Nothing has altered the mindset of the American citizenry more than a decade's worth of fear-mongering  So compelling is fear-based propaganda, so beholden are our government institutions to these private Security State factions, and so unaccountable is the power bestowed by these programs, that even a full decade after the only Terrorist attacks on U.S. soil, its growth continues more or less unabated.

Windfalls of War: Pentagon's No-Bid Contracts Triple in 10 Years of War

Monday, August 29, 2011 by iWatchNews.org
Taxpayer is the loser when Pentagon doesn't require competition among contractors. "The lack of competition is a scandal," says one expert.
by Sharon Weinberger

 

As U.S. military deaths and injuries from roadside bombs escalated after the invasion of Iraq, the Pentagon rushed to find solutions.

 Competition is normally the cornerstone of better prices and better products, but the urgency of dealing with improvised explosive devices, or IEDs, has been cited to justify a number of sole-source contracts to companies promising quick solutions over a decade of war.

One such company was Tucson-based Applied Energetics , which markets a futuristic weapon that shoots beams of lightning to detonate roadside bombs. The company won over $50 million in military contracts for their lightning weapon, all without full and open competition, even though there was another company marketing similar technology. Despite test failures, the company, in part thanks to congressional support, continued to get funding.

In August, the Marine Corps, which was on the verge of awarding the company yet another sole-source contract for the lightning weapon, cancelled the latest $3 million deal after the commander of the unit in Afghanistan decided it didn’t meet their needs.

In the meantime, a competitor, called Xtreme Alternative Defense Systems , an Indiana-based firm with its own lightning-based counter-bomb technology, says it’s had good results with only a fraction of the federal funding that Applied Energetics has received—$1.5 million. The company is preparing to test its technology at a military range. “We did our own development based on state grants” and federal funds, says Pete Bitar, the head of the company. “I cashed out my 401(k).”

The bomb fighting contract is a small example of a problem that’s been exacerbated by 10 years of war: awarding contracts without competition. While the Pentagon says its overall level of competition has remained steady over the past 10 years, publicly available data shows that Defense Department dollars flowing into non-competitive contracts have almost tripled since the terrorist attacks of 9/11. According to analysis by the Center for Public Integrity’s iWatch News, the data shows that the value of Pentagon contracts awarded without competition topped $140 billion in 2010, up from $50 billion in 2001.

And despite repeated pledges to reform the process, non-competitive contracts are a hard habit to break. According to federal data, the Pentagon’s competed contracts, based on dollar figures, fell to 55 percent in the first two quarters of 2011, a number lower than any point in the last 10 years since the terrorist attacks of 9/11.

There are a number of legal loopholes that allow the Defense Department, as well as other federal agencies, to avoid competition and to select a single company to provide the desired goods and services. In some cases, there may be only one legitimate supplier of needed goods, or the government can argue that it has “an unusual and compelling urgency,” and that holding a competition would have a detrimental impact on government operations or national security.

But those exceptions have become increasingly abused, according to numerous studies. In fact, an analysis of over a dozen government reports and investigations, and interviews with eight former government officials and experts, found a number of concerns about DOD competition practices — attributable in large part to the past 10 years of war. Those include:

• The use of large umbrella contracts to purchase goods and services that could be competed individually, thus resulting in lower price;
• Justifying sole source contracts by citing an “urgent and compelling need,” when in fact the urgency stemmed from the agency’s lack of planning for requirements that have been known for years.
• Extending large contracts as a “bridge,” rather than re-competing them.
• An overall failure to utilize competition in cases that could result in cost savings and better performance.

These alarming trends have not gone unnoticed. Sole-source and other noncompetitive contracting practices at the Pentagon have been the subject of numerous investigations by the Government Accountability Office, the Defense Department’s Inspector General, and the Commission on Wartime Contracting, among other government watchdogs.

The consequence, according to those investigative agencies and commissions: wasted dollars, lower quality goods and services, and in some cases, outright fraud.

Reports of limited and no-bid contracting, particularly in Iraq and Afghanistan, captured headlines in the early days of the Coalition Provisional Authority in Iraq, when companies like Custer Battles, later convicted of fraud , were given sole-source security contracts for security and reconstruction, including one worth $16.5 million to provide security at Baghdad International Airport. Among the accusations eventually levied against the company, which had no prior track record, was that it charged grossly inflated prices, in part by using fictitious companies to “lease” equipment to the government.

In his 2008 presidential campaign, candidate Barack Obama railed against such contracts, accusing them of wasting taxpayer dollars, and promised to rein in such spending.

In 2009, President Obama followed up those campaign promises with a memo directing a broad overhaul of government contracting, including limits to sole-source and non-competitive contracting. “Excessive reliance by executive agencies on sole-source contracts (or contracts with a limited number of sources) and cost-reimbursement contracts creates a risk that taxpayer funds will be spent on contracts that are wasteful, inefficient, subject to misuse, or otherwise not well designed to serve the needs of the Federal Government or the interests of the American taxpayer,” the president wrote in the 2009 memorandum , citing reports by multiple government agencies. Moving back to full and open competition, the memo continued, could save the government billions of dollars. But in two-and-half years, the Obama administration has made no progress in competing military contracts.

Even the Pentagon’s senior leadership has acknowledged the problem: a 2010 memo by Undersecretary Ashton Carter, the Pentagon’s senior procurement official, called for greater competition, along the lines of the earlier Obama memo, and promised the Pentagon would make its contracting process more open to competitive bidding. “Maximize the use of multiple-source, continuously competitive contracts,” a briefing accompanying the memo states.

However,  campaign pledges and memos have made little headway in combating the problem. “The lack of competition in the Defense Department is a scandal,” said Charles Tiefer , a professor at the University of Baltimore School of Law and a member of the congressionally mandated Commission on Wartime Contracting in Iraq and Afghanistan.

The ultimate question is whether non-competitive contracts are due to trends beyond the Pentagon’s control, such as the lack of qualified competitors and the urgency of wartime contracting, or whether they are the result of poor policies and procedures. The Pentagon maintains that its competition rates are lower because of the nature of the things it buys: large weapons and major systems that then have large follow-on contracts that must, by their nature, go to the original supplier. “These high-dollar non-competitive procurements significantly impact the Department's overall level of competition to produce the 61.7 percent competition rate for FY2010,” says Cheryl Irwin, a Pentagon spokeswoman.

The GAO, in multiple decisions, has said that “failure to plan” for a procurement that results in an urgent need does not constitute a basis for a sole source competition, and has, on a number of occasions, sided with protesting companies that argue the only urgency was an agency’s failure to conduct a timely competitive procurement.

One report commissioned by the Pentagon’s Office of Industrial Policy and conducted by the federally-funded Institute for Defense Analyses appears to suggest it’s a systemic problem. “We found that the use of short-term contracts and modifications to fill the gap in services between the end of one contract and the beginning of the next is a significant source of sole source contracts,” the report concluded.

The study, which looked specifically at contracts for services, found that there wasn’t a lack of qualified companies; rather, nearly a quarter of the sole-source awards were justified based on “bridge contracts” that extended existing contracts without competition. “For sole source contracts there does appear to be a problem, not with the industrial base or with competition, but with DOD practices and policies,” the report concluded.

Noncompetitive, sole-source contracts are by no means unique to the Pentagon. Other agencies have been accused of giving short shrift to competition, such as the Federal Emergency Management Agency, which awarded over half of its immediate post-Hurricane Katrina contracts without full competition, according to one congressional report. But based on total dollars, the Pentagon, according to publicly available data analyzed by iWatch News , lags behind all other major departments in competitive contracting. The Pentagon's competition rate of about 61 percent places it will below other agencies. The State Department in 2010 competed almost 75 percent of its contract dollars, the Department of Homeland Security competed almost 77 percent, and the Energy Department competed 94 percent.

Nevertheless, sole source contracts, ranging from training to equipment, continue to be handed out on a near daily basis, often with little explanation beyond a stated “urgent requirement.” On July 18 of this year, DRS Technical Services of Herndon, Va., received a contract worth nearly $20 million for training and mentoring Afghan police.It was the only  bid solicited for the contract, according to the Pentagon.
 
A spokesperson for Army Contracting Command said the sole source contract, which was actually for fielding communications equipment to Afghan police, was due to an “urgent requirement that necessitated an award to the incumbent DRS pending competition.” That same contract was also the subject of a 2009 DOD Inspector General investigation, which criticized the contractor’s and the Army’s inventory controls.

'Fracking': Rock Fracturing's Relation to Quakes

Monday, August 29, 2011 by The San Francisco Chronicle

by David R. Baker 

 

The earthquakes that rattled Blackpool, England, in April and May wouldn't have attracted much notice in California. The strongest rated a mere 2.3 in magnitude.

As fracking has spread, most complaints have focused on the threat of groundwater contamination. But some opponents have also asked whether the process - which, after all, involves breaking subterranean rocks - could cause earthquakes as well. But their possible connection to "fracking" raised eyebrows on both sides of the Atlantic.

The epicenter of one of the quakes lay less than 500 meters from a well used for hydro-fracturing, the process of pumping pressurized water and chemicals deep underground to crack rocks and release oil or natural gas. The company fracking the well halted operations and started studying the possible link.

As fracking has spread, most complaints have focused on the threat of groundwater contamination. But some opponents have also asked whether the process - which, after all, involves breaking subterranean rocks - could cause earthquakes as well.

The question is particularly pertinent in seismically active California, where the use of fracking appears to be growing. Fracking projects have been reported in Santa Barbara County and the Sacramento Valley.

Last week's 5.8 temblor in Virginia even prompted a round of speculation in the blogosphere that fracking could be to blame. There are, however, no fracking wells near the quake's epicenter or in any of the surrounding counties, according to the Virginia Department of Mines, Minerals and Energy.

Mild tremorsScientists say fracking does cause tiny earthquakes, but they're too small to be felt on the Earth's surface. The process can also cause quakes large enough to be noticed on the surface, but only if done near a fault line. And even then, the resulting tremors are likely to be mild.

"You're not going to get a really big earthquake," said Mark Zoback, a Stanford University geophysics professor who has studied the issue. "To get a big earthquake, you'd need a really big fault. When these oil fields are being developed, the companies are very aware of where the faults are. They don't want to do something stupid."

Some of the quakes that critics have blamed on fracking may have been caused by a related process - the disposal of the water used in fracking.

Similarity to air hockeyMany, but not all, fracking operations inject the wastewater deep underground. As the quantity of water builds up over time, it can change the pressure along a fault line, making the fault more likely to move.

"It's a little bit like an air hockey table," said Cliff Frohlich, associate director of the Institute for Geophysics at the University of Texas, Austin. "You pump air into an air hockey table so that when you push something, it will slip."

Frohlich was part of a team of researchers who studied a series of small quakes that struck near Dallas in 2008 and 2009, in an area where natural gas companies had used fracking. The epicenter turned out to be within a kilometer of a water disposal well, under the Dallas-Fort Worth International Airport. The largest quake measured 3.3.

"These earthquakes were not cases where frack jobs got out of hand," he said. "In a way, it was good news for the companies. If it's disposal that causes the quakes, you've got lots of options."

Those options include treating the water on the surface or shipping the water to a disposal well that isn't near a fault.

In July, Arkansas officials placed a moratorium on new disposal wells in a portion of the state shaken by hundreds of quakes, the largest of which reached magnitude 4.7. Four wells that had been used to dispose of water from fracking operations were shut down.

As fracking becomes more common in California, environmentalists want state officials to keep a close eye on any link to tremors.

Locating faultsA state bill that would force companies to disclose the chemicals they use in fracking originally contained a clause that would have required the companies to report whether the wells they planned to frack were near known fault lines. The clause, however, was taken out as a compromise with the oil and gas industry, said Renee Sharp, California director for the Environmental Working Group. She'd still like to see the state adopt that requirement.
"At least we'd know what was going on, so there'd be the possibility of really studying this issue," Sharp said.

Zoback says seismicity related to fracking and disposal wells is a manageable problem, one that shouldn't derail the growing production of gas from shale rock formations. Oil and gas companies need to identify faults near potential well sites, stay away from the faults, monitor for quakes during operations and stop work if quakes occur.

"I think we can replace coal with natural gas - I'm kind of militant about this," said Zoback, who recently served on a U.S. Department of Energy committee that recommended ways to protect the environment during fracking operations. "We've got to develop shale gas in an environmentally responsible way, and that means air and water quality, and it means not causing earthquakes."

Obama Picks Jobs Expert as Top Advisor

Monday, August 29, 2011 by Agence France Presse

by Stephen Collinson 

 

WASHINGTON — US President Barack Obama on Monday nominated Alan Krueger, a Princeton University expert on unemployment, as his top economic adviser as he plots an "urgent" new offensive on the jobs crisis.

Obama described Krueger as one of America's top economists who understood the challenges that country faces, with a recovery that has been too tepid to to make significant cuts in an (U3) unemployment rate of 9.1%.

Krueger, if confirmed by the Senate, will serve as chairman of the Council of Economic Advisers and succeed long-time Obama confidante Austan Goolsbee who left the administration to return to academia in Chicago.

Next week, the president will lay out a new plan to create jobs and slice into the deficit, projected to hit $1.6 trillion this year, which is certain to ignite a new political firestorm with Republicans.

"Our great economic challenge as a nation remains how to get this economy growing," Obama said as he appeared with Krueger in the White House Rose Garden and previewed his big speech.

The president promised "steps that Congress can take immediately to put more money in the pockets of working class families and middle class families and to make it easier for small businesses to hire people.

"That's our urgent mission, and that's what I'm fighting for every single day," he said.
"My hope and expectation is we can put country before party and get something done for the American people. That's what I will be fighting for," Obama said.

Republicans in the House of Representatives, however, have already signaled that they oppose some of Obama's likely policy prescriptions and say the best way to stimulate growth would be to loosen government control over the economy.

The White House says that Obama is interested in finding deficit cuts that go beyond the current $1.5 trillion mandate of a congressional supercommittee set up to recommend multi-year spending reductions.

But Obama is also seen as likely to call for a rise in taxes on the wealthiest Americans, spending on job-creating infrastructure and money for other jobs programs which Republicans have pledged to block.

The Wall Street Journal, which first reported the appointment, said Krueger would likely prove to be an advocate for more concerted action by the government to tackle high unemployment.

He served as assistant treasury secretary for economic policy during Obama's first two years in the White House and has also served as chief economist for the Treasury and the US Department of Labor.

Krueger also wrote a well reviewed book called What Makes a Terrorist? which examined the societal, economic and political conditions that breed terrorism and their psychological and economic consequences.

Republicans, however, mined Krueger's long list of published articles and comments to argue he was wedded to increasing taxes, more environmental regulation and had incorrectly predicted the extent of the jobs crisis.

The CEA is a three-member body that interprets prevailing economic conditions and provides policy recommendations to the president.

Its most high profile role in recent months has been to comment on monthly jobless figures which have shown that new positions are not being created quickly enough in a slowing recovery to bring down unemployment significantly.

President Obama's Job Creation Mirage

Monday, August 29, 2011 by The Guardian/UK
We've heard plenty about Obama's post Labor Day job creation speech, but will it contain anything that might actually work?
by Dean Baker

 

President Obama has discovered how serious the recession is. That's what he told an audience in Chicago last week. To be fair, he was referring to revised data from the commerce department showing that the falloff in GDP was larger than originally reported.
But ridicule is appropriate. He and we knew all along how many people were out of work. The employment numbers told us the size of the hole and the desperate need for government action.

This sort of ridiculous comment, and President Obama's weak response to the recession over the first two and a half years of his presidency, explains the tidal wave of scepticism facing his widely hyped upcoming speech on jobs after the Labor Day weekend. The list of remedies leaked ahead of time does little to inspire hope.

At the top of the list of job-creating measures is extending the 2 percentage-point reduction in the social security payroll tax. This provides no boost to the economy, since it just keeps in place a tax cut that was already there, but if the cut is allowed to end at the start of 2012, it will be a drag on growth.

As it stands, the social security program is being fully reimbursed for the lost tax revenue, but there is always the possibility that Republicans will use this as a basis for attacking the program. Given President Obama's willingness to support cuts to social security, it is understandable that this part of his jobs agenda doesn't generate much enthusiasm.

A second item frequently mentioned is an infrastructure bank. This would allow the government to treat long-lived infrastructure investment as capital expenditures depreciated over their expected lifetimes, rather than expenditures to be paid for in full in the years the construction takes place. This is good policy and accounting (it is the same approach used by both private businesses and state governments), but it is not going to create many jobs and certainly not in the next couple of years.

The other items on the list are less clear. On bad days, we hear that President Obama is going to tout the trade agreements with Panama, South Korea and Colombia. These deals are all problematic at best, but even their supporters can't claim with a straight face that they will generate any noticeable number of jobs.

There are also reports that President Obama may propose some sort of tax subsidy for job creation. Such a subsidy can be bad or not so bad. One of the proposals, temporarily eliminating the employer side of the payroll tax, is a great plan – if your intention is to give still more money to business and undermine social security.

There is extensive research showing that increases in the minimum wage of 15-20% have no measurable impact on employment. If raising the cost of labor by 15-20% doesn't reduce employment, then we can't think that reducing the cost of labor by 6.2% as a result of temporarily eliminating the payroll tax will increase employment. (Sorry, Mr President, logic can be cruel.) This means that we should expect few jobs will be created by this sort of subsidy; we will just be further supplementing the record profit share of national income.

And if we pursue that policy, we will also be raising further questions about social security. It is important to remember that if the point is simply to hand a specific sum to business or individuals, we can do this without ever mentioning "social security" at all. In other words, if the point is to give businesses a tax subsidy equal to 6.2% of their payroll, then we can just specify that they get a tax credit equal to 6.2% of their payroll. It is understandable why Republicans, who explicitly want to end social security as we know it, would insist on tying the subsidy to the social security tax. It is hard to understand why President Obama would adopt the same approach.

Of course, we should not be defeatist about creating jobs. Anyone who cares knows how to do it.

At the top of the list should be a jobs program for young people that would be modelled on the Civilian Conservation Corps. There are many parts of the country where the unemployment rate for young people is 40-50%. These young people have no realistic prospect of getting jobs. Giving them work at or near the minimum wage, cleaning up streets, parks and abandoned buildings in their neighbourhood, can make a big difference in their lives – and considerably enhance those localities.

A more far-reaching policy would be to promote work-sharing as an alternative to layoffs. The money that is paid out in unemployment insurance could instead subsidise shortened work hours. If just 10% of the people who lose their jobs each month could be retained with this policy, it would be create another 2.4 million jobs a year. This policy has been so successful in Germany that its unemployment rate is now lower than before the downturn even though its growth has been almost the same as ours.

Finally, getting the dollar down is the most important long-term job creation policy. If we managed to get back towards balanced trade, it would lead to almost 6 million  manufacturing jobs.

On past form, however, President Obama seems unlikely to go for real job-creation measures. Look forward to being disappointed – especially if you're one of the unfortunate unemployed.

Three Charts to Email to Your Right-Wing Friends

(Sorry, but two of these charts are misleading. They are accurate. But the spending chart says Obama only increased spending by 7%. It's still way to high because he added some wars to the existing ones that eat up most of the budget. But if he had done just a couple of the things he campaigned he would d do, spending actually would have gone down. The stimulus chart is misleading because even though we might have had 17 months of job increases, the total number of jobs per month is pathetic, and barely over the number of jobs needed to be created  just to keep up with the number of workers added every month (152,000). So subtract 152,000 from each of those totals to see what his 'net total job creation per month' number really is.--jef)

Monday 29 August 2011

by: Dave Johnson, Campaign for America's Future | Op-Ed

 Problem: Your right-wing friends are plugged into the FOX-Limbaugh lie machine, and keeps sending you emails about "Obama spending" and "Obama deficits" and how the "Stimulus" just made things worse. 

Solution: Here are three "reality-based" charts to send to him. These charts show what actually happened.

 

Spending

Government spending increased dramatically under Bush. It has not increased much under Obama. Note that this chart does not reflect any spending cuts resulting from deficit-cutting deals.

Deficits

Notes, this chart includes Clinton's last budget year for comparison.

The numbers in these two charts come from Budget of the United States Government: Historical Tables Fiscal Year 2012. They are just the amounts that the government spent and borrowed, period, Anyone can go look then up. Peoplewho claim that Obama "tripled the deficit" are either misled or are trying to mislead.

The Stimulus and Jobs

In this chart, the RED lines on the left side -- the ones that keep doing DOWN -- show what happened to jobs under the policies of Bush and the Republicans. We were losing lots and lots of jobs every month, and it was getting worse and worse. The BLUE lines -- the ones that just go UP -- show what happened to jobs when the stimulus was in effect. We stopped losing jobs and started gaining jobs, and it was getting better and better. The leveling off on the right side of the chart shows what happened as the stimulus started to wind down: job creation leveled off at too low a level.

It looks a lot like the stimulus reversed what was going on before the stimulus.

Conclusion: THE STIMULUS WORKED BUT WAS NOT ENOUGH!

More False Things

These are just three of the false things that everyone "knows." Some others are (click through): Obama bailed out the banks, businesses will hire if they get tax cuts, health care reform cost $1 trillion, Social Security is a Ponzi Scheme or is "going broke", government spending "takes money out of the economy."

Why This Matters

These things really matter. We all want to fix the terrible problems the country has. But it is so important to know just what the problems are before you decide how to fix them. Otherwise the things you do to try to solve those problems might just make them worse. If you get tricked into thinking that Obama has made things worse and that we should go back to what we were doing before Obama -- tax cuts for the rich, giving giant corporations and Wall Street everything they want -- when those are the things that caused the problems in the first place, then we will be in real trouble.validate carbon trading in the US.

Market crash 'could hit within weeks', warn bankers

A more severe crash than the one triggered by the collapse of Lehman Brothers could be on the way, according to alarm signals in the credit markets.

By Harry Wilson, and Philip Aldrick

24 Aug 2011

 

Insurance on the debt of several major European banks has now hit historic levels, higher even than those recorded during financial crisis caused by the US financial group's implosion nearly three years ago.

Credit default swaps on the bonds of Royal Bank of Scotland, BNP Paribas, Deutsche Bank and Intesa Sanpaolo, among others, flashed warning signals on Wednesday. Credit default swaps (CDS) on RBS were trading at 343.54 basis points, meaning the annual cost to insure £10m of the state-backed lender's bonds against default is now £343,540.

The cost of insuring RBS bonds is now higher than before the taxpayer was forced to step in and rescue the bank in October 2008, and shows the recent dramatic downturn in sentiment among credit investors towards banks.

"The problem is a shortage of liquidity – that is what is causing the problems with the banks. It feels exactly as it felt in 2008," said one senior London-based bank executive.

"I think we are heading for a market shock in September or October that will match anything we have ever seen before," said a senior credit banker at a major European bank.

Despite this, bank shares rebounded on Wednesday, showing the growing disconnect between equity and credit investors. RBS closed up 9pc at 21.87p, while Barclays put on 3pc to 149.6p despite credit default swaps on the bank hitting a 12-month high. This mirrored the US trend, with Bank of America shares up 10pc in late Wall Street trade after a hitting a 12-month low on Tuesday over fears that it might have to raise as much as $200bn (£121bn).

As with the European banks, the rebound in the share price was not reflected in the credit markets, where its CDS reached a 12-month high of 384.42 basis points.

European stock markets joined in the rally. The FTSE closed up 1.5pc at 5,206 on hopes the chance of a global recession had diminished. European shares hit a one-week high, with Germany's DAX closing up 2.7pc and France's CAC 1.8pc higher. The Dow Jones index edged higher on strong durable goods orders data as markets began to accept that the US Federal Reserve is unlikely to signal fresh stimulus at Jackson Hole this Friday.

Even Moody's decision to downgrade Japan's sovereign credit rating by one notch to Aa3 did little to damage global sentiment, although Tokyo's Nikkei closed down just over 1pc.

As stock market nerves settled, gold - which has recorded steady gains recently as investors seek a safe haven - fell 5.3pc to $1,777 in London.

How the Surveillance State Protects the Interests Of the Ultra-Rich

As a global protest movement rises and spreads within the US, expect surveillance tactics honed in the "war on terror" to be used in the defense of wealth. 

By Sarah Jaffe, AlterNet
Posted on August 29, 2011

 In the aftermath of the riots that rocked London this summer, the Conservative prime minister's first response was to call for a crackdown on social networking.

Despite data collected by the Guardian showing a strong correlation between poverty and rioting, the government denied that its brutal austerity policies contributed to the desperation and rage of its young people. A  researcher found that the majority of rioters who have appeared in court come from poor neighborhoods, 41 percent of them from the poorest in the country—and 66 percent from neighborhoods that have gotten poorer between 2007 and 2010.

Of course, we don't have widespread rioting or in the US yet. But even at a relatively calm, peaceful protest in San Francisco, Bay Area Rapid Transit shut down cell phone towers in the subway system in order to stymie a mass action planned after another shooting by a BART police officer. (It was the police killing of a young man that kicked off London's riots as well.)

The techniques that were roundly decried by Western leaders when used by Egyptian president Hosni Mubarak against his people's peaceful revolution are suddenly embraced when it comes to unrest at home. Not only that, but techniques honed in the “war on terror” are now being turned on anti-austerity protesters, clamping down on discontent that was created in the first place by policies of the state.

Glenn Greenwald noted this connection in a recent piece, writing:

“The last year has seen an incredible amount of social upheaval, not just in the Arab world but increasingly in the West. The Guardian today documented the significant role which poverty and opportunity deprivation played in the British riots. Austerity misery -- coming soon to the U.S. -- has sparked serious upheavals in numerous Western nations. Even if one takes as pessimistic a view as possible of an apathetic, meek, complacent American populace, it's simply inevitable that some similar form of disorder is in the U.S.'s future as well. As but one example, just consider this extraordinary indicia of pervasive American discontent, from a Gallup finding yesterday.”

That Gallup finding was that only 11 percent of Americans are content with the way things are going in the country.

Greenwald's point, that the surveillance state is actually designed to protect the interests of the ruling class, is supported by Mike Konczal's point, in this July piece:

“From a series of legal codes favoring creditors, a two-tier justice system that ignore abuses in foreclosures and property law, a system of surveillance dedicated to maximum observation on spending, behavior and ultimate collection of those with debt and beyond, there’s been a wide refocusing of the mechanisms of our society towards the crucial obsession of oligarchs: wealth and income defense. Control over money itself is the last component of oligarchical income defense, and it needs to be as contested as much as we contest all the other mechanisms.”

Social networking sites are considered wonderful boons to commerce as long as they're collecting user data to be turned over to advertisers; but when Twitter or Facebook are used to coordinate protests or send warnings about police to fellow activists, they're suddenly dangers to civilization that must be stopped. And a young activist whose only crime was downloading journal articles from behind JSTOR's paywall to make them available to all faces 35 years in prison and up to $1 million in fines.

While corporations and banks collect data on all of us, they strongly oppose revealing any of their information to the public, even when they're quite happy to spend the public's money. As Bloomberg pointed out in a piece titled “Wall Street Aristocracy Got $1.2 Trillion in Fed's Secret Loans”, information is just now coming to light about how much money was lent to Bank of America and Citigroup by the Federal Reserve back in 2008.

Bank of America might be breathing a sigh of relief this week, as a breakaway WikiLeaks member told Der Speigel that he had destroyed 5 gigabytes of information from the troubled bank. Daniel Domscheit-Berg claimed that he destroyed the data in order to make sure the sources would not be exposed. Julian Assange had claimed this winter to have damning information on the big bank, but held out on releasing it.

But just the threat alone was enough to send BoA to web security firm HBGary—or so we found out when hacker collective Anonymous broke into HBGary's files and found a file that contained a plan to take down WikiLeaks, including attacks aimed at reporters and bloggers like Glenn Greenwald.

Whether it's government secrets or corporate secrets, the response is the same: more surveillance, more crackdowns on civil liberties, more arrests. As Greenwald notes, Democratic National Committee Chair Rep. Debbie Wasserman-Schultz is sponsoring a bill that would require Internet service providers to keep logs of their customers' activities for a full year. MasterCard and Visa shut down donations to WikiLeaks back when the information coming out was mostly just embarrassing to the government; the crackdowns on hackers and other techno-activists show the other side of the symbiotic relationship between the national security state and its secrets and corporations and their secrets.

As a burgeoning international protest movement takes shape, opposing austerity measures, decrying the wealth gap and rising inequality, and in some cases directly attacking the interests of oligarchs, we're likely to see the surveillance state developed for tracking "terrorists" turned on citizen activists peacefully protesting the actions of their government. And as U.S. elections post-Citizens United will be more and more expensive, look for politicians of both parties to enforce these crackdowns. 

Despite growing anger at austerity in other countries, those policies have been embraced by both parties here in the States. Groups like US Uncut have stepped into the fray, pointing out the connection between the tax dodging of banks like Bank of America and other corporations and the slashing of the social safety net for everyone else. The new protest movements are led not only by traditional left groups like labor unions, but a generation of young, wired activists using the Internet for innovative protest and revolutionary activism.

Paul Mason of the BBC calls them “the graduates with no future”, and here as well as around the world they have no future—youth are unemployed at nearly double the rate of the rest of the US population and many are laden with student debt, networked, and increasingly in touch with others around the world even as they feel disconnected from the political process here at home.

Laurie Penny wrote of how they've been treated in the UK as they fight desperately against the government's austerity agenda:

“The Metropolitan Police have made their priorities extremely clear. Up to 200 officers have been devoted to hunting down students and anti-cuts activists, knocking on the doors of school pupils and arresting them for their part in demonstrations against education cutbacks that took place nine months ago. Thirty UK Uncut protesters are still facing charges for their part in a peaceful demonstration in Fortnum and Mason, footage from the police recordings of which shows some dangerous anarchists waving placards in the foyer and batting a beach ball over a stack of expensive cheese. Up to 300 activists have been arrested so far, in a joint operation that has already cost the taxpayer £3.65m. By contrast, only eight man-hours were spent in 2009 investigating the allegation that feral press barons were being permitted to run what amounted to a protection racket at the Met.”

As J.A. Myerson explained at Truthout, the revolutions and protest movements around the world in the past year have expressed solidarity with one another, with Egyptians sending pizzas to protesters in Wisconsin's capitol and the spread of direct action anti-austerity tactics from the group UK Uncut to its spinoff here at home. Americans thrilled to the sight, via Al Jazeera livestream, of Tahrir Square, packed full of peaceful resisters, standing firm in the face of violence. Twitter and Facebook didn't create the revolutions of the so-called Arab Spring or the protests rocking Europe, but they've provided a way for the world's youth to communicate tactics and exchange ideas.

Matthew Stoller also called attention to the rise of Internet activism, not just the type of social media organizing that can call attention to a protest within hours or even minutes but the “hacktivism” of groups like Anonymous and the work of WikiLeaks in revealing the secrets of the ruling class, and how they connect with the ground protests and labor actions in places like Egypt or even Spain and Greece.

Anger is growing in the US at a stagnant economy, ongoing policies that favor the rich, and little to no help for anyone else. So far we haven't seen the kind of mass protest that's hit Europe, let alone the revolutions of the Arab Spring, but if things don't get any better, the country should prepare for social unrest.

And if that happens, expect more peaceful activists to get caught up in the web of the surveillance state.

First Federal Reserve Audit Reveals Trillions in Secret Bailouts

Sunday, August 28, 2011 by Inter Press Service

by Matthew Cardinale 

 

The first-ever audit of the U.S. Federal Reserve has revealed 16 trillion dollars in secret bank bailouts and has raised more questions about the quasi-private agency’s opaque operations.
 
 "This is a clear case of socialism for the rich and rugged, you’re-on-your-own individualism for everyone else," U.S. Senator Bernie Sanders, an Independent from Vermont, said in a statement.

The majority of loans were issues by the Federal Reserve Bank of New York (FRBNY).

"From late 2007 through mid-2010, Reserve Banks provided more than a trillion dollars… in emergency loans to the financial sector to address strains in credit markets and to avert failures of individual institutions believed to be a threat to the stability of the financial system," the audit report states.

"The scale and nature of this assistance amounted to an unprecedented expansion of the Federal Reserve System’s traditional role as lender-of-last-resort to depository institutions," according to the report.

The report notes that all the short-term, emergency loans were repaid, or are expected to be repaid.

The emergency loans included eight broad-based programs, and also provided assistance for certain individual financial institutions. The Fed provided loans to JP Morgan Chase bank to acquire Bear Stearns, a failed investment firm; provided loans to keep American International Group (AIG), a multinational insurance corporation, afloat; extended lending commitments to Bank of America and Citigroup; and purchased risky mortgage-backed securities to get them off private banks’ books.

Overall, the greatest borrowing was done by a small number of institutions. Over the three years, Citigroup borrowed a total of 2.5 trillion dollars, Morgan Stanley borrowed two trillion; Merrill Lynch, which was acquired by Bank of America, borrowed 1.9 trillion; and Bank of America borrowed 1.3 trillion.

Banks based in counties other than the U.S. also received money from the Fed, including Barclays of the United Kingdom, the Royal Bank of Scotland Group (UK), Deutsche Bank (Germany), UBS (Switzerland), Credit Suisse Group (Switzerland), Bank of Scotland (UK), BNP Paribas (France), Dexia (Belgium), Dresdner Bank (Germany), and Societe General (France).

"No agency of the United States government should be allowed to bailout a foreign bank or corporation without the direct approval of Congress and the President," Sanders wrote.
In recent days, ‘Bloomberg News’ obtained 29,346 pages of documentation from the Federal Reserve about some of these secret loans, after months of fighting in court for access to the records under the Freedom of Information Act.

Some of the financial institutions secretly receiving loans were meanwhile claiming in their public reports to have ample cash reserves, Bloomberg noted.

The Federal Reserve has neither explained how they legally justified several of the emergency loans, nor how they decided to provide assistance to certain firms but not others.

"The main problem is the lack of Congressional oversight, and the way the Fed seemed to pick winners who would be protected at any cost," Randall Wray, professor of economics at University of Missouri- Kansas City, told IPS.

"If such lending is not illegal, it should be. Our nation really did go through a liquidity crisis - a run on the short-term liabilities of financial institutions. There is only one way to stop a run: lend reserves without limit to all qualifying institutions. The Fed bumbled around before it finally sort of did that," Wray said.

"But then it turned to phase two, which was to try to resolve problems of insolvency by increasing Uncle Sam’s stake in the banksters’ fiasco. That never should have been done. You close down fraudsters, period. The Fed and FDIC (Federal Deposit Insurance Commission) should have gone into the biggest banks immediately, replaced all top management, and should have started to resolve them," Wray said.

Renewed questions about the Federal Reserve have inspired some young activists to organize grassroots protests across the U.S.

"Since its creation by the U.S. Government in 1913, the Federal Reserve has created so much new money out of thin air that it has destroyed 95 percent of the dollar’s value," Joseph Brown, a college student and one of the organizers of a recent protest of the Federal Reserve Bank of Atlanta, said.

"This hidden inflation tax benefits Wall Street and the government, but hurts the poor and those living on fixed incomes, such as senior citizens, the most," Brown said.

The U.S. Government Accountability Office (GAO) audit itself was the result of at least two years of grassroots lobbying. IPS reported in June 2009 a wide bi-partisan coalition of Members of Congress had co-sponsored legislation to audit the Federal Reserve.

The audit was ordered as an amendment by Sanders as part of the Dodd-Frank Wall Street Reform and Consumer Protection Act - a major banking overhaul passed by President Barack Obama and the U.S. Congress in 2010.

"I think this (the first ever GAO audit) was a good start to uncovering what the Fed did so that we can begin to determine whether similar actions should ever be permitted again," Wray wrote, adding, "my preliminary answer is a resounding no."

The GAO also found existing Federal Reserve policies do not prevent significant conflicts of interest. For example, "the FRBNY’s existing restrictions on its employees’ financial interests did not specifically prohibit investments in certain non-bank institutions that received emergency assistance," the report stated.

The GAO report noted on Sep. 19, 2008, William Dudley, who is now the President of the FRBNY, was granted a waiver to let him keep investments in AIG and General Electric, while at the same time the Federal Reserve granted bailout funds to the same two companies.
"No one who works for a firm receiving direct financial assistance from the Fed should be allowed to sit on the Fed’s board of directors or be employed by the Fed," Sanders said.
The GAO is currently working on a more detailed report regarding Federal Reserve conflicts of interest, which is due on Oct. 18, 2011.

Japan's Cesium Leak Equal to 168 '45 A-Bombs

Saturday, August 27, 2011 by The Japan Times

NISA compares contamination to Hiroshima blast

The amount of radioactive cesium ejected by the Fukushima reactor meltdowns is about 168 times higher than that emitted in the atomic bombing of Hiroshima, the government's nuclear watchdog said Friday.

The blast wave of "Little Boy," dropped on Hiroshima on Aug. 6, 1945, destroyed most of the city and eventually killed as many as 140,000 people. The Nuclear and Industrial Safety Agency provided the estimate at the request of a Diet panel but noted that making a simple comparison between an instantaneous bomb blast and a long-term accidental leak is problematic and could lead to "irrelevant" results.

The report said the crippled Fukushima No. 1 plant has released 15,000 terabecquerels of cesium-137, which lingers for decades and can cause cancer, compared with the 89 terabecquerels released by the U.S. atomic bombing of Hiroshima.

The report estimated each of the 16 isotopes released by the "Little Boy" bomb and 31 of those detected at the Fukushima plant. NISA has said the radiation released at Fukushima was about one-sixth of that released during the 1986 Chernobyl disaster.

"Little Boy," dropped Aug. 6, 1945, destroyed most of the city and eventually killed as many as 140,000 people.

Most of the Hiroshima victims were killed in the initial heat wave, while others died from the neutron rays generated by the midair explosion or the deadly radioactive fallout. No one has died yet from radiation emitted by the Fukushima plant, where explosions caused by unvented hydrogen blew apart the upper halves of the reactor buildings but left the reactor cores in place.

The report estimated that iodine-131, another isotope that accumulates in the thyroid gland, and strontium-90, which has a 28-year half-life and can accumulate in bones, leaked from the plant in amounts roughly equal to 2½ higher than the Hiroshima atomic bomb.

A separate government report released Thursday said that 22 percent of cesium-137 and 13 percent of iodine-131 released from the plant landed on the ground, with the remainder landing either in the ocean or outside its simulation area.

The National Institute for Environmental Studies said its simulation of aerial flow, diffusion and deposition of the two isotopes released from the tsunami-hit plant showed their impact reached most of eastern Japan, stretching from Iwate Prefecture in the north and to Tokyo and Shizuoka Prefecture further south.

The study also showed that iodine-131 tended to spread radially and cesium-137 tended to create "hot spots."

There is No Moral Case for Tax Havens

Sunday, August 28, 2011 by the Independent/UK

They are the epitome of unfairness and injustice, leaving ordinary citizens to foot the bill for multinational corporations

by Paul Vallely

 

There is a building in the Cayman Islands that is home to 12,000 corporations. It must be a very big building. Or a very big tax scam. Tax havens are in the spotlight since the Chancellor, George Osborne, did a deal the other day with the Swiss authorities to slap a levy on secret bank accounts held there by British citizens. Opinions are divided on the move, which could net the Treasury £5bn, but which tacitly legitimizes bank accounts kept secret from the Inland Revenue. It is a de facto amnesty for those guilty of tax evasion crimes. And they will pay less than they would if they declared their income to the British taxman.

Are there any legitimate reasons why anyone would want to have a secret bank account – and pay a premium to maintain their anonymity – or move their money to one of the pink dots on the map which are the final remnants of the British empire: the Caymans, Bermuda, the Turks and Caicos and the British Virgin Islands?

The moral case against is clear enough. Tax havens epitomize unfairness, cheating and injustice. They replace the old morality embodied in the Golden Rule of reciprocity – that we should do as we would be done by – with a new version that insists that those who have the gold make the rules.

The old view, the neocon American Christopher Caldwell wrote recently, subscribes to a religious understanding of money that was universal in the Christian world before the rise of Protestantism, which acknowledges that people are alive but money is not, making it wrong for the latter to take precedence over the former – a notion as outdated as usury, he suggested tartly.

But what is the moral case for tax havens? We can dispense with the argument advanced by their administrators that if they didn't take the money it would simply move to more distant locations; that is the self-serving logic of a man who sells torture equipment to an oppressive regime. Apologists insist that tax havens protect individual liberty. They promote the accumulation of capital, fair competition between nations and better tax law elsewhere in the world. They also foster economic growth. So much so, the Institute of Directors has said, that Britain should not curb tax havens but emulate them, promoting the growth of more hedge funds in the UK.

Yet even if all that were true – and it is not – does it outweigh the ethical harm they do? The numbered bank accounts of tax havens are notoriously sanctuaries for the spoils of theft, fraud, bribery, terrorism, drug-dealing, illegal betting, money-laundering and plunder by Arab despots such as Gaddafi, Mubarak and Ben Ali, all of whom had Swiss accounts frozen.

The corruption spreads contagion, as the financial writer Nicholas Shaxson showed in Treasure Islands, his book about offshore finance which exposed secrecy, corruption and intimidation in places as seemingly innocent as that land of milk and money, such as Jersey in the Channel Islands.

But the moral bankruptcy of the tax haven runs deeper. Indeed it is intrinsic to its purpose. The British Virgin Islands is the global capital for the incorporation of offshore companies. Though it has a population of just 22,000, it has 823,502 registered companies which make vast amounts of money through the wonder of transfer pricing. It works like this. Suppose I manufacture a product in Africa and sell it in the UK. If I am a canny businessman I set up an intermediate company in a tax haven. It need do nothing except exist on paper. But through it I can buy all the products I make in Africa, dirt cheap, and then sell them, at a much higher cost, to my UK subsidiary. The African and British companies do not, thus, make much profit, so I have little or no tax to pay. All the money stays offshore, where taxes are low or non-existent. This is perfectly legal. But it distorts the world economy and means I pay no tax. I can also borrow where rates are lowest and keep my costs where they are most tax deductible.

That is why General Electric paid no taxes in 2010, despite $14.2bn profits. It's why Barclays, with 181 subsidiaries registered in the Caymans, paid relatively little UK tax on its worldwide profits. Rupert Murdoch's News Corp, with 152 subsidiaries in tax havens according to the US government, paid no net UK corporation tax between 1988 and 1999.

Half the world's trade flows through tax havens. Every multinational uses them routinely. So do banks. Almost 70 per cent of international trade now happens within, rather than between, multinationals. Christian Aid reckons that tax dodging costs developing countries at least $160bn a year – far more than they receive in aid. The US research center Integrity estimated that more than $1.2trn drained out of poor countries illicitly in 2008 alone.

Tax injustice is systemic to the tax haven. Barack Obama once understood that. During his election campaign he promised to crack down on corporate loopholes and tax havens. But he and other world leaders have not delivered on bursting open the seedy secret underworld of tax havens that nurtured the hedge funds, derivative trading and off-balance sheet lending that fueled the 2008 global financial crash.

Their malign influence continues, with hedge funds accounting for at least 30 per cent, and perhaps as much as 60 per cent, of current trading on the London and New York exchanges. There, they have quintupled short-selling. They have turned credit default swaps, designed as a protective insurance, into a way of betting on the failure of a company. The Caymans (population 50,000) is home to 70 per cent of hedge-fund registrations worldwide.

And, as rich people waive their taxes, poor people wave goodbye to their jobs. "The rich are different from you and me," Scott Fitzgerald famously said. "Yes," wisecracked Ernest Hemingway in response, "they have more money." Today the difference is that they pay less in taxes.

The real shame of Osborne's half-baked deal with Switzerland is that it has undermined the revised EU savings tax directive. That would have required an automatic exchange of information on income in bank accounts throughout the EU and in Switzerland, Lichtenstein and Britain's tax havens. All the EU member states, but two, had approved it. It would have dealt not just with individuals but also with companies, trusts, foundations and other complex structures.

Some say an attack on tax havens is an attack on wealth creation. It is no such thing. It is a demand for the good functioning of capitalism, balancing the demands of efficiency and of justice, and placing a value on social harmony.

The billionaire investor Warren Buffett recognized that in The New York Times when he scathingly asserted the US Congress is in thrall to the super-rich. Thanks to his clever investment managers he pays only 17.4 per cent in tax – half what his office workers pay. That does not just boost inequality. It undermines faith in the fairness and integrity of the international financial system. And that is a political time bomb.