Monthly Archives: March 2010

Geithner and Dodd Oppose Fed Audit Which Could Reveal Billions in Toxic Assets

23 Tuesday Mar 2010

Posted by in bailout, economy, Financial Crisis, financial reform, financial regulation, Politics, Wall Street

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How much more of these “junk loans” are bring “warehoused” on the books at the Fed? A question to which we may never know the answer if Treasury Secretary Geithner and Senator Chris Dodd have anything to say about it:

“As Lehman Brothers careened toward bankruptcy in 2008, the New York Federal Reserve Bank came to its rescue, sopping up junk loans that the investment bank couldn’t sell in the market, according to a report from court-appointed examiner Anton R. Valukas.

Without an audit, the Fed is able to conceal the specifics of what it holds on its balance sheet. If the Lehman deal is any indication, the Fed is hiding billions of dollars in toxic loans on its books.”

The New York Fed, under the direction of now-Treasury Secretary Tim Geithner, knowingly allowed itself to be used as a “warehouse” for junk loans, the report says, even though Fed guidelines say it can only accept investment grade bonds.

Meanwhile, the Fed and Geithner both strongly oppose a congressional measure to authorize an independent audit of the central bank and its lending facilities. The provision passed the House but is under attack in the Senate, where Banking Committee Chairman Chris Dodd (D-Conn.) says he hopes to stop it.

I suspect this has a lot to do with Secretary Geithner’s strong opposition:

“The Valukas report found clear evidence that the New York Fed  knew that Lehman was sending it garbage that it had no intention to market. In other words, the baskets of assets were created for the specific purpose of selling to the Fed for far more than they were worth.

Lehman knew it too: “No intention to market” was scrawled on one of the internal presentations about the assets…Geithner himself was aware that there was a gap between what Lehman claimed the assets were worth and what they were really worth.”

What else don’t we know? The stonewall is on:

“The Fed won’t say how much more toxic “garbage” is in the Fed’s “warehouse”…The Treasury didn’t immediately respond to a request for comment.”

Sounds an awful lot like fraud and obstruction of justice to me.

Guantanamo Detainee Ordered Released

23 Tuesday Mar 2010

Posted by in George W. Bush, Justice Department, Politics, torture, war on terror

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In another victory for the rule of law and a defeat for the Bush administration’s “war on terror” policies (sadly continued by the Obama administration), U.S. District Judge James Robertson has ordered the release of Mohamedou Slahi, who has been held at Guantanamo since 2002, without charges. The Miami Herald has the story:

“A federal judge on Monday ordered the Pentagon to release a long-held Mauritanian captive at Guantánamo Bay who was once considered such a high-value detainee that former Secretary of Defense Donald Rumsfeld designated him for “special interrogation techniques.”

About those “special techniques” ordered by Rumsfeld

“Slahi is the 34th Guantánamo detainee ordered freed since the U.S. Supreme Court ruled detainees could challenge their incarceration in federal court, but his name was already well known because of investigations into detainee abuse.

The interrogations were so abusive a highly regarded Pentagon lawyer, Marine Lt. Col. Stuart Couch, quit the case five years ago rather than prosecute him at the Bush administration’s first effort to stage military commissions.”

Those probes found Slahi had been subjected to sleep deprivation, exposed to extremes of heat and cold, moved around the base blindfolded, and at one point taken into the bay on a boat and threatened with death. Investigators also found interrogators had told him they would arrest his mother and have her jailed as the only female detainee at Guantánamo if he did not cooperate.

And as if any further proof of the ineffectiveness of those interrogation methods were needed (emphasis added):

“In November 2006 he wrote his lawyers that he had denied any wrongdoing while in custody until he was tortured. “I yess-ed every accusation my interrogators made,” after they tortured him, he said. “I even wrote the infamous confession about me planning to hit the CN Tower in Toronto.”

The Obama Justice Department is “reviewing the ruling.” *Sigh* Here’s the only “review” needed:

“He’s been incarcerated, tortured and interrogated and rendered illegally,” said attorney Nancy Hollander of Albuquerque, N.M., who represents Slahi free of charge. “After almost 10 years the government has not been able to meet the minimal burden to detain him that’s required under habeas. He should be free.”

As The Health Care Reform Turns

18 Thursday Mar 2010

Posted by in Congress, Democrats, health care, Politics, Uncategorized

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In today’s episode of  “As The Health Care Reform Turns”:

“House Democrats are inching toward the majority they need to pass health care legislation, giving them added confidence as they work out the last details of the bill and gird for a showdown as soon as this weekend.”

“Details” like what’s in the bill and how much it costs:

“House Democratic leaders on Wednesday night said the long-awaited Congressional Budget Office score of the reconciliation bill will not come out until Thursday, forcing an acknowledgment that a Saturday healthcare vote is likely off the table…But leaders are still hoping for a score on Thursday, and are still preparing for a possible vote before the end of the weekend.

…Rep. Robert Andrews (D-N.J.)…said that the delay is the result of numerous technical issues involved, and stressed that, despite any rumors to the contrary, the delays are not the result of policy problems.”

Translation: The delays are the result of policy problems. Just a hunch—Pelosi has seen the CBO numbers and they ain’t good. Hence the need to raise the tax on benefits:

“AFL-CIO President Richard Trumka is headed into a meeting with President Obama this afternoon after the White House and Congressional leaders have begun to discuss a higher-than-expected excise tax on some health care plans, in order to maintain their claim that health care legislation will reduce the deficit, a source involved in health care talks said.”

Policy problems like President Obama’s support for the so-called “Louisiana Purchase”:

“That provision, which I think should remain in, said that if a state has been affected by a natural catastrophe, that has created a special health care emergency in that state, they should get help,” Obama told Fox News’s Bret Baier…”

And since PhRMA has agreed to spend $6 million on pro-reform advertising, it’s safe to assume that the not-so-secret deal between the White House and the drug industry will be in the elusive bill as well.

So, where does HCR stand today? Pretty much in the same place its been:

“Democratic leaders say they have not nailed down the 216 votes they need for passage, but they are pressing ahead in the belief that they can get them.”

Dodd’s Toothless Consumer Protection “Watchdog”

17 Wednesday Mar 2010

Posted by in bailout, Congress, Democrats, Financial Crisis, financial reform, financial regulation, Politics, Wall Street

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Sen. Chris Dodd’s so-called “sweeping overhaul of the U.S. financial system” creates a Bureau of Consumer Financial Protection, which is supposed to be “a new, independent consumer watchdog.” You just know there’s a “but” coming here, right? Right:

“…the legislation would impose significant limits on the autonomy of the new watchdog. It would establish a Financial Stability Oversight Council [with veto power over the bureau] of nine members, all but one of whom would be existing financial regulators such as the Treasury Secretary and Comptroller of the Currency, which oversees national banks.”

In just one example, let’s take a look at what those “existing regulators” and the now-Treasury Secretary were doing in the case of Lehman Brothers, as revealed in the report by the examiner of Lehman’s bankruptcy. While management at Lehman was engaging in Enron-stlye accounting, where were the federal regulators? Looking on:

“One crucial move was to shift assets off its books at the end of each quarter in exchange for cash through a clever accounting maneuver…to make its leverage [debt] levels look lower than they were. Then they would bring the assets back onto its balance sheet days after issuing its earnings report.

And where was the government while all this “materially misleading” accounting was going on? In the vernacular of teenage instant messaging, let’s just say they had a vantage point as good as POS (parent over shoulder).”

What’s worse is that “there is no evidence that Lehman kept two sets of books or tried to hide what it was doing from regulators.” Among the spectators:

“The NY Fed, the regulatory agency led by then FRBNY President Geithner [which] stood by while Lehman deceived the public through a scheme that FRBNY officials likened to a “three card monte routine.”

The FRBNY knew that Lehman was engaged in smoke and mirrors designed to overstate its liquidity and, therefore, was unwilling to lend as much money to Lehman. The FRBNY did not, however, inform the SEC, the public, or the OTS (which regulated an S&L that Lehman owned) of what should have been viewed by all as ongoing misrepresentations.”

So much for the “watchdog” capabilities of existing regulators and the Treasury Secretary. What about the other named mentioned, the Comptroller of the Currency. That would be John Dugan, a name not many are familiar with, but who was called in an article in The Nation last December, “one of the earliest architects of the too big to fail economy”:

“Too big to fail banks were a ticking time bomb, but they might not have ravaged the global economy in 2008 without major shortcomings in consumer protection over the previous five years. As head of the Office of the Comptroller of the Currency, Dugan played a leading role in gutting the consumer protection system, allowing big banks to take outrageous risks on the predatory mortgages that led to millions of foreclosures.

“For years, the OCC has had the power and the responsibility to protect both banks and consumers, and it has consistently thrown the consumer under the bus,” says Harvard University Law School professor Elizabeth Warren, chair of the Congressional Oversight Panel for the Troubled Asset Relief Program.”

Consumer Financial Protection? Sounds more like Wall Street Financial Protection to me.

Health Care “Sleight of Hand”

16 Tuesday Mar 2010

Posted by in Congress, financial reform, health care, Politics, Uncategorized

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If members of Congress have any question as to why they rank somewhere below used car salesmen on the trustworthy scale, there are 2 shining examples relating to 2 pieces of proposed legislation in today’s news—one on health care reform and one on financial reform—which should make it crystal clear. First there’s this from the Washington Post:

“After laying the groundwork for a decisive vote this week on the Senate’s health-care bill, House Speaker Nancy Pelosi suggested Monday that she might attempt to pass the measure without having members vote on it.”

Wait a minute, I thought President Obama said it was time for an up or down vote on health care reform? Que pasa? I guess that only applies when the votes are there. Failing that, the need for an alternative procedure arises. Such as:

“Instead, Pelosi (D-Calif.) would rely on a procedural sleight of hand: The House would vote on a more popular package of fixes to the Senate bill; under the House rule for that vote, passage would signify that lawmakers “deem” the health-care bill to be passed.”

Note to Speaker Pelosi: For future reference, any time the words “sleight of hand” are used in relation to an action by Congress, it doesn’t exactly inspire confidence that what you’re trying to do is on the up and up.

“The tactic — known as a “self-executing rule” or a “deem and pass” — has been commonly used, although never to pass legislation as momentous as the $875 billion health-care bill. It is one of three options that Pelosi said she is considering for a late-week House vote, but she added that she prefers it because it would politically protect lawmakers who are reluctant to publicly support the measure.”

Wait another minute. Haven’t the Speaker and the Democratic leadership been extolling the virtues of this “reform” and how good it will be for us ( just trust them)?  Then why the need for “political protection?” I’m confused.

The other bit of news is Sen. Chris Dodd’s release of his so-called “sweeping financial regulatory reform” bill. This quote from Dodd at the end of a Huffington Post article says it all:

“Interestingly, Dodd seemed to want to minimize expectations for the proposed legislation’s impact by saying several times that it is not enough to prevent another crisis: “This legislation will not stop the next crisis from coming. No legislation can…”

Yes it can, Sen. Dodd. If you want it to. Ay, there’s the rub.

Rove’s Claim Goes Unchallenged By Tom Brokaw

15 Monday Mar 2010

Posted by in Iraq, Politics

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Every time I watch Meet the Press I’m reminded of the magnitude of the loss of Tim Russert. Yesterday’s program only reinforced that as an unprepared Tom Brokaw allowed Karl Rove’s claim that it was not the policy of the Bush administration to use Iraqi oil revenues to offset the cost of the war to go unchallenged. Here’s the exchange:

Brokaw’s next statement was, “Well, let’s talk about the insurgency.”

Here’s what Russert would have done. He would have been ready for Rove’s spin with this quote from the Washington Post by Bush’s deputy Defense Secretary Paul Wolfowitz:

“The oil revenue of that country could bring between 50 and 100 billion dollars over the course of the next two or three years. We’re dealing with a country that could really finance its own reconstruction, and relatively soon.”

Russert would have been ready with this, from Ari Fleischer’s press briefing in February of 2003:

“Well, the reconstruction costs remain a very — an issue for the future. And Iraq, unlike Afghanistan, is a rather wealthy country. Iraq has tremendous resources that belong to the Iraqi people. And so there are a variety of means that Iraq has to be able to shoulder much of the burden for their own reconstruction.”

That’s what a real journalist would have done, Mr. Brokaw.

Proud of War Crimes?

14 Sunday Mar 2010

Posted by in Politics, terrorism, torture, war on terror

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Proud to be war criminals—the sad, and sadly enduring, legacy of the Bush administration, which the so-called “brain” of that dark period in our history continued to attempt to rationalize and justify in a recent interview with the BBC:

“A senior adviser to former US President George W Bush has defended tough interrogation techniques, saying their use helped prevent terrorist attacks…In a BBC interview, Karl Rove, who was known as “Bush’s brain”, said he “was proud we used techniques that broke the will of these terrorists”…He said waterboarding, which simulates drowning, should not be considered torture.”

…Mr Rove said US soldiers were subjected to waterboarding as a regular part of their training…A less severe form of the technique was used on the three suspects interrogated at the US military prison at Guantanamo Bay, he added.”

“Simulates drowning” and a “less severe from of the technique?” Not so says someone who has been there, Malcolm Nance (emphasis added) :

“As a former master instructor and chief of training at the U.S. Navy Survival, Evasion, Resistance and Escape School (SERE) in San Diego, I know the waterboard personally and intimately. Our staff was required to undergo the waterboard at its fullest. I was no exception.

Having been subjected to this technique, I can say: It is risky but not entirely dangerous when applied in training for a very short period. However, when performed on an unsuspecting prisoner, waterboarding is a torture technique – without a doubt. There is no way to sugarcoat it.

In the media, waterboarding is called “simulated drowning,” but that’s a misnomer. It does not simulate drowning, as the lungs are actually filling with water. There is no way to simulate that. The victim is drowning.”

I have personally led, witnessed and supervised waterboarding of hundreds of people. It has been reported that both the Army and Navy SERE school’s interrogation manuals were used to form the interrogation techniques employed by the Army and the CIA for its terror suspects. What is less frequently reported is that our training was designed to show how an evil totalitarian enemy would use torture at the slightest whim.

Rove reiterated his pride later in the interview:

“Yes, I’m proud that we kept the world safer than it was, by the use of these techniques. They’re appropriate, they’re in conformity with our international requirements and with US law.”

No they aren’t. Our “international requirements” [the Convention Against Torture] and U.S. law [U.S. Code, Title 18, Chapter 113 C]  both forbid and prescribe punishment for torture.

“Mr Rove has just written a memoir, Courage and Consequence, in which he defends the two terms of the Bush administration as “impressive, durable and significant.”

BJ Bjornson at Newshoggers:

“Well, I’ll go with significant, at least. Significant in that Bush’s two terms took the US from the acknowledged leader of the Free World, respected if not loved, to just another world hegemony that most people won’t mind seeing pass into history at this point. While Obama has repaired a bit of the damage Bush has done, the lack of any prosecutions over the war crimes that people like Rove and Cheney now flaunt to the world has left most of us rather less than impressed.”

Geithner and the Lehman “Stress Tests”

13 Saturday Mar 2010

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Timmy’s got more trouble. In a newly-released examiner’s report about the bankruptcy at Lehman Brothers, the New York Federal Reserve Bank (NYFRB), which was headed at the time by Treasury Secretary Geithner, is implicated as being in collusion with Lehman management’s efforts to keep their true financial condition hidden.

Here’s just one area of, shall we say, questionable behavior. The so-called “stress tests”:

“After March 2008 when the SEC and FRBNY began onsite daily monitoring of Lehman, the SEC deferred to the FRBNY to devise more rigorous stress-testing scenarios to test Lehman’s ability to withstand a run or potential run on the bank. The FRBNY developed two new stress scenarios: “Bear Stearns” and “Bear Stearns Light.” Lehman failed both tests. The FRBNY then developed a new set of assumptions for an additional round of stress tests, which Lehman also failed. However, Lehman ran stress tests of its own, modeled on similar assumptions, and passed. It does not appear that any agency required any action of Lehman in response to the results of the stress testing.”

Karl Denninger at Market Ticker:

“So let’s see what we got here.  They ran two sets of stress tests and the firm failed both.  Not satisfied with the results they then designed a third set, which the firm also failed (we can reasonably presume the third had less stringent requirements than the other two!)

Instead of applying any of these three, FRBNY, which was run by one Mr. Timothy Geithner… instead took Lehman’s word that all was ok and did nothing.

Wait a minute. In the spring of 2009 we were told that all the big banks ran “Stress Tests” of Geithner’s design.  But Treasury didn’t actually run them and didn’t actually get and process the data – they told the banks to do so.

Uh, that’s exactly what Lehman did, right?  And Lehman passed its own “internally computed” stress test but failed all three of the externally-computed ones.

Do you still accept that all these other banks are solvent?”

Yves Smith at naked capitalism has the solution:

“It is time for Geithner to go. He is not fit to serve as Treasury secretary.”

An Earmark Ban That’s Not Really an Earmark Ban

11 Thursday Mar 2010

Posted by in Congress, Democrats, lobbyists, Politics, special interests

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Reading this headline in the New York Times—“Leaders in House Block Earmarks to Corporations”— might give the impression that some serious reform is underway on Capitol Hill, right? Wrong. As usual with our esteemed members of Congress,  it’s all about appearance. The appearance of doing something while actually doing nothing. And again, as usual, there are loopholes big enough for Patton’s Third Army to march through.

For instance, the ban on earmarks only applies to for-profit companies, allegedly. Which means that:

“Under the new restrictions, not-for-profit institutions like schools and colleges, state and local governments, research groups, social service centers and others are still free to receive earmarks. The new restrictions, for example, would still allow the type of award to local governmental agencies that became infamous in 2005 with Alaska’s “Bridge to Nowhere.”

Loophole No. 2:

“In addition, billions added to the defense bills for existing national security programs under contract with major defense companies such as Boeing, General Dynamics, Lockheed Martin and Northrop Grumman probably would not be affected.

For example, when House appropriators add more funds for Boeing’s C-17 cargo aircraft, they do not disclose them as earmarks. Instead, they are considered programs essential to national security even though none of the funds are requested by the Pentagon. These funds benefit lawmaker districts where the weapons systems are built.”

So what’s the point? It’s all about “image,” “appearances” and “optics.”

“House Democrats, in a bid to rehabilitate the image of a committee long mired in ethical mishaps, announced the Appropriations panel would not approve earmarks for for-profit corporations…”

“…For Pelosi, it clearly seemed to be a bid to simultaneously rehabilitate her party’s image and that of the Appropriations Committee, several of whose members were cleared in a wide-ranging ethics probe last month.”

“…Practically, many understand this rule means very little. Defense insiders say the proposal, especially without the help of the Senate, is an empty stab at reform…But optically, the move was important for Democrats.”

“…Democrats still think it’s a step in the right direction for the body as a whole, even if just for the sake of appearances. Rep. Chris Murphy (D-Conn.), a second-term member, said he doesn’t earmark for private entities and still is able to help defense contractors in Connecticut with federal projects.”

“I think it helps some of the optics with some of the members who I think are for earmark reform,” said [Rep. Joseph] Crowley [D-NY].”

Better headline: “Congress’ Eternal Quest, How Can We Fool ‘Em Today”

Waterboarding Just “A Dunk in the Water?” New Documents Say Otherwise

10 Wednesday Mar 2010

Posted by in Dick Cheney, Obama, Politics, terrorism, torture, war on terror

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See if this sounds like what the Marquis de Cheney referred to as “ a dunk in the water,” and a “well done” technique that if he “had it to do all over again,..would do exactly the same thing.” Judge for yourself if those whose memos authorized and legitimized the following methods are guilty of nothing more than using “poor judgment.” I have a question for President Obama as well. Still think we need to “look forward, not back?” From Mark Benjamin at Salon:

…[R]ecently released internal documents reveal the controversial “enhanced interrogation” practice was far more brutal on detainees than Cheney’s description sounds, and was administered with meticulous cruelty.

…The documents also lay out, in chilling detail, exactly what should occur in each two-hour waterboarding “session.” Interrogators were instructed to start pouring water right after a detainee exhaled, to ensure he inhaled water, not air, in his next breath. They could use their hands to “dam the runoff” and prevent water from spilling out of a detainee’s mouth.

They were allowed six separate 40-second “applications” of liquid in each two-hour session – and could dump water over a detainee’s nose and mouth for a total of 12 minutes a day. Finally, to keep detainees alive even if they inhaled their own vomit during a session – a not-uncommon side effect of waterboarding – the prisoners were kept on a liquid diet. The agency recommended Ensure Plus.”

And for those defenders of waterboarding who say it can’t be torture because our soldiers go through it in SERE training:

“…the documents show that the agency’s methods went far beyond anything ever done to a soldier during training. U.S. soldiers, for example, were generally waterboarded with a cloth over their face one time, never more than twice, for about 20 seconds, the CIA admits in its own documents.

“The difference was in the manner in which the detainee’s breathing was obstructed,” the document notes. In soldier training, “The interrogator applies a small amount of water to the cloth (on a soldier’s face) in a controlled manner,” DOJ wrote. “By contrast, the agency interrogator … continuously applied large volumes of water to a cloth that covered the detainee’s mouth and nose.”

These memos show the CIA went much further than that with terror suspects, using huge and dangerous quantities of liquid over long periods of time. The CIA’s waterboarding was “different” from training for elite soldiers, according to the Justice Department document released last month.

But, the defenders also say, no matter the tactics, waterboarding worked.  It provided intelligence which “kept us safe” from future attacks, right? Wrong.

“When torture supporters would tout the value of the information Abu Zubaydah provided, they somehow failed to mention that the actionable intelligence he provided was admitted prior to his waterboarding.  After President Bush bragged about the information obtained by torturing Abu Zubaydah, the Washington Post, after reviewing case files, concluded that absolutely no credible intelligence came from Zubaydah’s interrogations that utilized torture.”

But despite all the gruesome and sadistic details contained in the documents, this is perhaps the most disturbing:

“NOTE: In order to best inform future medical judgments and recommendations, it is important that every application of the waterboard be thoroughly documented: how long each application (and the entire procedure) lasted, how much water was used in the process (realizing that much splashes off), how exactly the water was applied, if a seal was achieved, if the naso- or oropharynx was filled, what sort of volume was expelled, how long was the break between applications, and how the subject looked between each treatment.”

Paging Dr. Mengele, Dr. Josef Mengele.