Google Analytics

Saturday, July 31, 2010

A thought about ethics in Congress

The striking thing about the issues raised by the Congressional Ethics Committee concerning the third longest serving member of Congress is how utterly trivial they are! Using official Congressional stationery to "demand" contributions to a pet project to be named after him as one example. The list goes on and on.

The message is clear enough. Members of Congress believe they are a world apart from the rest of us, and our rules don't apply to them.

The only solution I can think of is to join Stop by and take a look.

The Truth About The Auto Industry Jobs

In Michigan yesterday, the President said "Today, the U.S. Automakers have added 55,000 jobs since last June, the strongest growth in more than 10 years in the auto industry." Then he went on to claim the $60 Billion we invested in GM and Chrysler as the cause for this celebration.

It is simply stunning how uniformed he is about one of the basic U.S. industries. Here are the facts.

There are nineteen auto plants in the U.S. in the following states;
South Carolina

And these seven states employ 441,989 people directly in the auto industry. To put that number is perspective, Michigan has 205,962 jobs and only 9,000 are with GM.

And the companies in these seven states have jobs that pay good wages, provide health insurance and retirement benefits. And none of these jobs are going anywhere.

We have a healthy auto industry today. It is just not in Detroit and it is not unionized.

Is it possible that Obama is so totally mis-informed, or is he just hugely cynical?

Either answer is extremely depressing!

Friday, July 30, 2010

We Are In A World Of Hurt And The Future Does Not Look Good

Here are the dots for you to connect.

*70% of the Gross National Product is created by consumer spending.

*Consumer spending grew at 1.6% in the last quarter.

*Consumer spending would have to grow something around 3.0% just to create enough new jobs to absorb population growth.

*15 million Americans are currently unemployed.

*5 million Americans have been unemployed for over two years and have no further unemployment benefits.

*There are currently five applicants for every job opening.

*A very large, but exactly how many is not known, number of the unemployed cannot move to seek new work because their homes are under water.

*15 million Americans are currently under-employed, or have stopped looking for work.

*So Americans are not spending money (some don't have much to spend)and saving it for the unknown future, or paying down current debts.

*Small businesses have created about 70% of all new jobs for the last thirty years.

*Small businesses are not hiring new employees because they don't have sales enough to pay for new employees.

*Small businesses are going broke, or out of business at (record?) high rates because of a lack of sales.

*The administration does not have the faintest clue about what to do about this.

*They want encourage small businesses to hire new employees by giving them looser credit while the last thing any small business wants to do is borrow money and increase their debt load and payments.

*On the other hand, major U.S. corporations are sitting on record amounts of cash, some of which they are spending to improve operations, but not to hire new employees.

*The administration's response to this problem is offer large borrowers the lowest possible interest rates, but they don't seem to understand that major corporations don't need to borrow money because they have cash.

*Wall Street bankers, however, love the low rates since they have practically "free" money to work with and their record profits demonstrate that fact.

*Obama was in Detroit today bragging about the fact the $61 billion we invested in Detroit saved 900 jobs!!! We need about 18 million new jobs. He also doesn't understand that the auto industry is very healthy, but is no longer located in Detroit.

*Congress is saying all the stimulus money is used up and no more should be expended.

*So the net result of all of this is that high rates of joblessness will stretch out into the future, and the Great Recession will get deeper and deeper.

*But the Fed is printing money right and left, and all that cash will lead to inflation for sure.

*If, however, the government would give the mayors and the state highway departments the recovered TARP money to use to repair and replace infrastructure problems in their jurisdictions we could put 15 million Americans to work in a matter of weeks. Just do not fund new projects, period.

*This would put people back to work immediately and would put cash back into the economy. It would also have what economists call the "multiplier effect". That means the dollars spent at the supermarket would go to the farmers and then to their seed companies, and so on.

*It would people back to work in their own areas and avoid the underwater problem.

*And here is the Great Good News. We will have to pay for our infrastructure repairs sooner or later. This way would produce some really good effects.

*For more details, see, or read it as a Kindle book.

*But if you can see a brighter side to the dots above, please let know and I will share it with everyone who reads this rant.

Thursday, July 29, 2010

Like I Said, We Have A Lousy Tax Policy

Here is exactly my point made in today's Washington Post. It is worth your time to read.

In American politics, stupidity is the name of the game

By E.J. Dionne Jr.
Thursday, July 29, 2010; A23

Can a nation remain a superpower if its internal politics are incorrigibly stupid?

Start with taxes. In every other serious democracy, conservative political parties feel at least some obligation to match their tax policies with their spending plans. David Cameron, the new Conservative prime minister in Britain, is a leading example.

He recently offered a rather brutal budget that includes severe cutbacks. I have doubts about some of them, but at least Cameron cared enough about reducing his country's deficit that alongside the cuts he also proposed an increase in the value-added tax, from 17.5 percent to 20 percent. Imagine: a fiscal conservative who really is a fiscal conservative.

That could never happen here because the fairy tale of supply-side economics insists that taxes are always too high, especially on the rich.

This is why Democrats will be fools if they don't try to turn the Republicans' refusal to raise taxes on families earning more than $250,000 a year into an election issue. If Democrats go into a headlong retreat on this, they will have no standing to govern.

The simple truth is that the wealthy in the United States -- the people who have made almost all the income gains in recent years -- are undertaxed compared with everyone else.

Consider two reports from the Center on Budget and Policy Priorities. One, issued last month, highlighted findings from the Congressional Budget Office showing that "the gaps in after-tax income between the richest 1 percent of Americans and the middle and poorest fifths of the country more than tripled between 1979 and 2007."

The other, from February, used Internal Revenue Service data to show that the effective federal income tax rate for the 400 taxpayers with the very highest incomes declined by nearly half in just over a decade, even as their pre-tax incomes have grown five times larger.

The study found that the top 400 households "paid 16.6 percent of their income in federal individual income taxes in 2007, down from 30 percent in 1995." We are talking here about truly rich people. Using 2007 dollars, it took an adjusted gross income of at least $35 million to make the top 400 in 1992, and $139 million in 2007.

The notion that when we are fighting two wars, we're not supposed to consider raising taxes on such Americans is one sign of a country that's no longer serious. Why do so few foreign policy hawks acknowledge that if they lack the gumption to ask taxpayers to finance the projection of American military power, we won't be able to project it in the long run?

And if we are unwilling to have a full-scale debate over whether nation-building abroad is getting in the way of nation-building at home, we will accomplish neither.

Our discussion of the economic stimulus is another symptom of political irrationality. It's entirely true that the $787 billion recovery package passed last year was not big enough to keep unemployment from rising above 9 percent.

But this is not actually an argument against the stimulus. On the contrary, studies showing that the stimulus created or saved as many as 3 million jobs are very hard to refute. It's much easier to pretend that all this money was wasted, although the evidence is overwhelming that we should have stimulated more.

Then there's the structure of our government. Does any other democracy have a powerful legislative branch as undemocratic as the U.S. Senate?

When our republic was created, the population ratio between the largest and smallest state was 13 to 1. Now, it's 68 to 1. Because of the abuse of the filibuster, 41 senators representing less than 11 percent of the nation's population can, in principle, block action supported by 59 senators representing more than 89 percent of our population. And you wonder why it's so hard to get anything done in Washington?

I'm a chronic optimist about America. But we are letting stupid politics, irrational ideas on fiscal policy and an antiquated political structure undermine our power.

We need a new conservatism in our country that is worthy of the name. We need liberals willing to speak out on the threat our daft politics poses to our influence in the world. We need moderates who do more than stick their fingers in the wind to calculate the halfway point between two political poles.

And, yes, we need to reform a Senate that has become an embarrassment to our democratic claims.

The Spot Light Is On Arizona Today

Most of the media attention today is on Arizona because this is the day that Arizona's new tough law on illegal immigrants goes into effect.

But this circus misses the point completely. Arizona is trying to call attention to the complete failure of Congress and the Administration to deal with our border problems. And, indeed, we have a southern border problem.

Before he decided to run for President, John McCain had a sensible and fair proposal for dealing with the problem, but when he decided to run, he had to abandon it to keep the far right of the party behind him.

There can't be any serious argument that aren't thousands and thousands of Mexicans (primarily)illegally crossing the border to look for work. If we didn't have them here we would not have lettuce, strawberries, apples, and lots of other foods in our supermarkets. But the operative word is "illegal" and we need a way to deal with those conflicting goals. However, this is a problem that can be solved relatively easily. Ronald Reagan's "bracero" program would be a good place to start.

The real problem is not Mexicans crossing the border to look for work - though that is a problem - it is the incredible cross border trade in narcotics. Meth, cocaine, marijuana and heroin flow North across the border and cash and guns flow South.

We have to realize that we are on the edge of having a failed narco state on our Southern border. Twenty four thousand Mexicans have been killed in the past two years in drug related crimes. Thirty journalists have been killed for pursing stories about the narcos. Mayors, police chiefs, federal police and hundreds of innocents have been killed by the narcos. A leading candidate for President has been kidnapped and is still missing. (Can you imagine John McCain being kidnapped in broad daylight and nobody doing anything about it?)

The narcos have equipped them selves with AK-47s, hand grenades and shoulder fired rockets. A couple of weeks ago, they booby trapped a car with C4 and killed policemen and medics who responded to a call for assistance. Al Queda would have been proud of the execution.

Nevertheless, Congress and the Administration are doing absolutely nothing to recognize that Calderon's government is failing in its fight against the narcos.

The simple fact is that the narcos are winning and are the on the way to taking over (for all practical purposes) the government of Mexico.

If you think that Mexicans crossing the border to look for work is a problem, just wait until the hordes of frightened Mexicans cross the border to save their lives??

Since Congress won't recognize the problem and deal with it, we have to replace Congress. (We can't do anything about the Administration for two more years.)

Go to to see what you can do now.

Monday, July 26, 2010

Who is at fault? BP? The Feds?

I have been having a running argument with a friend about who had the primary responsibility for the horrible mess in the Gulf of Mexico. He says it's the government and I say it is BP. That started me thinking about some personal experiences with government inspection. Here is a summary.

I worked my way through the University of Minnesota with the GI bill and summer jobs laying pipeline in North Dakota, Montana, Wyoming, etc. I was an apprentice pipeline welder and belonged to Pipeline Welders Union 267, Oklahoma City. The thing that made the job interesting is that we worked seven days a week, at least ten hours a day. That meant sometime on Thursday, you got paid time and a half, which was a pretty big number, for the rest of the week.

The pipe was 36" and 48", and the pipes were 30-40 feet long. Big pieces of steel! Here is how it works.

The surveyors go first, marking the right of way. Then the bulldozer guys clear the brush, trees, etc. Next comes the ditcher. A huge machine with a series of huge buckets mounted in a circle, and that dug the ditch. Then trucks brought the pipe and dumped next to the ditch. Next came the spacer and a dozer operator. Their job was to align the next piece of pipe with the last piece of pipe so there was a 3/16" space between the two pipes all the way around. It was amazing to watch. Think about the size of that pipe!! This guy was always the king of the crew. How fast he could work set the tempo for the entire crew. The tackers came next. One of each side of the pipe. They put eight to twelve tack welds to hold the two pieces together. Next came the first weld guys. They would lay down a bead over the tackers work all around the pipe.

We came next. Our job was to lay down two or three finish welds on each joint. Since this took time, there were usually five groups finish welders and we worked leap frog. I would drag the cables to the weld site, steel brush each weld as we finished it, and when we were done, drag all the gear back to our rig which would then get dragged to the front of the line.

Behind us came to huge machine that applied hot tar and wrapped tar paper around the entire pipe. When that was done, the government inspector examined the entire weld with an X ray machine.

O.K., got the picture?

Each job would start slowly, e.g., a quarter of a mile laid, etc. Then sometime toward the end of the week, the inspector would show up with a huge TV set, or a dozen cases of really good scotch in his truck or station wagon. When that happened, we would fly, a mile, a mile and half, or even two miles of pipe in the ground every day.

I can guarantee you that every weld my welders laid down was perfect, but I am telling you that some of those guys had the biggest hangovers, when we rode the bus to the job each morning, that I have ever seen.

Now there are thousands of pipelines crossing the U.S., through open fields and under cities. In total, there are hundreds of thousands of miles of such pipelines moving crude oil (as were ours), finished products, e.g., gasoline, and natural gas. And they were all laid just like I described above.

For ten years, I lived in terror that some pipelines somewhere would start blowing up and kill a lot of people.

It has now been fifty years, and to the best of my knowledge, there has only been a single pipeline incident. A long time ago, a pipe blew in a suburb of Philadelphia, but nobody got hurt.

So here is the thought problem. How did that happen? What made it work? When you have an answer, you will have solved our problem.

More on Elizabeth Warren

Here is today's New York Times take on Elizabeth Warren and her chances, and why we need her. Don't forget to email Obama, your Senators and Representative.

Washington Memo
Warren’s Candidacy Raises a Partisan Debate
Published: July 25, 2010

Elizabeth Warren last week won the endorsements of several dozen Congressional Democrats, two of the nation’s leading labor groups and her hometown newspaper, The Boston Globe.
Enlarge This Image
Manuel Balce Ceneta/Associated Press

Elizabeth Warren faces criticism about being too partisan.

One would be forgiven for thinking that the Harvard professor is running for elected office.

Instead, Ms. Warren’s supporters want President Obama to nominate her as the first head of a new consumer financial protection bureau created by the legislation he signed into law last week. They say that Ms. Warren, who conceived the idea and helped shepherd its passage into law, is the only acceptable choice to finish the project.

“It is essential to the bill and very, very important that Elizabeth Warren be appointed,” Representative Barney Frank, Democrat of Massachusetts and an architect of the law, said Friday on MSNBC.

There is little question that Ms. Warren has become a hero to liberals who see her as a scourge of the banking industry.

But the loud, insistent campaign — highly unusual for presidential appointments other than Supreme Court nominees or cabinet positions — also reflects deep anxiety that the work of overhauling financial regulation is shifting from Congress to agencies that are insulated from public pressure and will write and put into effect hundreds of new rules.

Ms. Warren’s supporters regard her as the best person to represent consumers during that process. But they also crave the symbolic value of her appointment, which almost certainly would cause a partisan confirmation battle, as an affirmation that the White House is committed to imposing significant new restrictions on the financial industry.

“A lot of us are terrified about what happens in rule-making,” said Stephen Lerner of the Service Employees International Union, which is pressing the administration to nominate Ms. Warren. “Symbolically, it does seem incredibly important to pick somebody who not only invented the idea, but someone who doesn’t claim to be a neutral.”

Bankers oppose her nomination for exactly that reason. Roger M. Beverage, head of the Oklahoma Bankers Association, said that Ms. Warren was widely respected in Oklahoma, where she was raised and is still remembered as a high school debate champion. But he said that his members did not believe she would understand the needs and concerns of community banks.

“Not that she’s not competent. Goodness gracious, I would never say that. She’s exceptionally bright. We just fear what she might come up with,” Mr. Beverage said. “She’s a partisan and she’s bull-headed and she’s opinionated. And she’s terrific. She’s a great advocate. We just respectfully disagree with her view of the world.”

Ms. Warren herself has not campaigned publicly for the nomination, though people who know her say that she would welcome it.

The debate over her candidacy threatens to sour the celebration of a law that the White House hoped would rally Democrats facing difficult midterm elections. The consumer bureau will be the popular face of the law, which also subjects more financial companies to federal oversight, extends regulation to activities including derivatives trading and creates a new council to detect risks to the financial system and broader economy.

So far, the administration has sought to walk a fine line, embracing Ms. Warren and her supporters while refraining from granting their demand. The White House has vetted Ms. Warren and at least two other candidates for the job, officials say.

“I have the highest regard for Elizabeth. We have not made decisions about who we’re going to appoint yet,” Mr. Obama said Friday on ABC’s “Good Morning America.”

Ms. Warren proposed the creation of a federal agency to protect consumers of financial products, in a 2007 article that said the government put more effort in protecting people who buy toaster ovens than people who borrow money to buy homes.

The idea resonated with Mr. Obama and his senior advisers, and it became a centerpiece of the administration’s proposal to overhaul financial regulation. The White House worked with Ms. Warren to flesh out the details, and it worked with her to win the support of Congress. But some administration officials are not sure that Ms. Warren is the best choice to run the new agency.

There is no doubt about her status as a symbol.

“She represents to a large part of the country — not just people caught up in the damage of the crisis, but people who view this system as being fundamentally broken — she represents one of the most compelling advocates for reform,” Treasury Secretary Timothy F. Geithner said at a breakfast with reporters last week.

In an interview Sunday on ABC’s “This Week,” Mr. Geithner cited what he called Ms. Warren’s “enormous credibility” and said that, despite her criticism of the Treasury Department, he had no concerns about her possible appointment.

But others have expressed doubts about Ms. Warren’s qualifications, including some Senate Democrats whose votes would be required to confirm her nomination. Detractors say that Ms. Warren lacks management experience, and that she is too partisan to be an effective referee.

The other known candidates are both consumer advocates who have more experience in government: Michael S. Barr, an assistant Treasury secretary who played a central role in drafting the financial legislation, and Eugene I. Kimmelman, a former consumer advocate, now deputy assistant attorney general in the antitrust division of the Justice Department.

Even some admirers worry that a draining confirmation battle could weaken the new bureau during the critical period when its scope and powers are being defined by its early decisions.

Senator Christopher J. Dodd, Democrat of Connecticut and chairman of the banking committee, warned last week that it would be difficult to gather the 60 votes to confirm Ms. Warren.

But her supporters are spoiling for the fight.

With midterm elections fast approaching, they are itching for a public debate about consumer protection. There also is frustration among some liberals that the White House has in several instances chosen not to take up the issues that they consider most important.

Mr. Frank said that liberals would be justified in holding Mr. Obama accountable for this decision.

“We didn’t get a public option and other things we wanted. That wasn’t his fault,” said Mr. Frank, referring to the removal of a major provision from health care legislation. “The economic recovery bill, the stimulus, it wasn’t as big as it should have been. That wasn’t his fault. He couldn’t get the votes.

“With regard to appointing Elizabeth Warren, that’s his decision. No one can stop him from making it.”

Sunday, July 25, 2010

Support Elizabeth Warren

We have pointed out in the past that there are only two people in all of Washington that you can actually count on to tell the truth; Peter Orszag and Elizabeth Warren.

Peter had now gone off to make a lot of money so we are down to Elizabeth Warren.

That piece of crap that the Wall Street bankers just got passed, The Financial Regulations Bill, does absolutely nothing to end Too Big To Fail, which is the excuse Henry Paulson use to rescue Goldman Sachs with your money, and would have been the most important part of a banking regulations bill.

But one thing that the bill did was create a new office of Consumer Affairs. However, the wording is so vague that who enforces it makes all the difference. One name on the short list for that job is Elizabeth Warren. Today's New York Times Editorial Page explains why you should email Obama, both your senators and representative to make sure she gets the job. Do it just as soon as you read the Editorial below.


President Obama should nominate Elizabeth Warren to head the new Bureau of Consumer Financial Protection, and not only because of her credentials.

Ms. Warren — a bankruptcy expert at Harvard Law School, an Oklahoma native whose father was bilked of his savings by a business partner — developed the idea for the bureau in a 2007 article. Since then, as head of the panel that monitors the bank bailouts, she has become one of the nation’s most prominent consumer advocates.

There are other candidates, of course. What Mr. Obama needs to recognize is that this particular job, at this particular time, is about more than competence. As the reform bill went through Congress, the banks were unrelenting in trying to kill or weaken the bureau. Having failed, they want influence in selecting its director.

Meanwhile, polls have shown public mistrust or misunderstanding of the administration’s economic policies. Mr. Obama’s choice to head the bureau must demonstrate that he cares more about ordinary Americans than about Wall Street, that he understands that the public interest differs — sometimes sharply — from the interests of big banks. He needs someone the banks do not want, and that someone is Ms. Warren.

Bank lobbyists say a regulator like Ms. Warren would overreact in protecting consumers from abusive loans, constraining needed credit. That is unfounded. In her academic work and in the 2007 article introducing the idea of the bureau, Ms. Warren has shown that she understands the power of credit to do good.

But she also knows credit can wreak havoc. In 2007, she wrote: “For a growing number of families who are steered into over-priced credit products, risky subprime mortgages, and misleading insurance plans, trust in a creditor turns out to be costly. And for families who get tangled up with truly dangerous financial products, the result can be wiped-out savings, lost homes, higher costs for car insurance, denial of jobs, troubled marriages, bleak retirements, and broken lives.”

The banks don’t oppose Ms. Warren because she doesn’t get it. They oppose her because she does.

Friday, July 23, 2010

Same old, Same old, Same old, nothing changes

If you are having trouble making your mortgage payment, or worrying about losing your job, you may want to check out the average bonuses at Goldman Sachs this year. And remember that Goldman Sach's impending bankruptcy was the event driving the creation of the ultra silly TARP.

Federal Report Faults Banks on Huge Bonuses

With the financial system on the verge of collapse in late 2008, a group of troubled banks doled out more than $2 billion in bonuses and other payments to their highest earners. Now, the federal authority on banker pay says that nearly 80 percent of that sum was unmerited.

In a report to be released on Friday, Kenneth R. Feinberg, the Obama administration’s special master for executive compensation, is expected to name 17 financial companies that made questionable payouts totaling $1.58 billion immediately after accepting billions of dollars of taxpayer aid, according to two government officials with knowledge of his findings who requested anonymity because of the sensitivity of the report.

The group includes Wall Street giants like Goldman Sachs, JPMorgan Chase and the American International Group as well as small lenders like Boston Private Financial Holdings. Mr. Feinberg’s report points to companies that he says paid eye-popping amounts or used haphazard criteria for awarding bonuses, the people with knowledge of his findings said, and he has singled out Citigroup as the biggest offender.

Even so, Mr. Feinberg has very limited power to reclaim any money. He can use his status as President Obama’s point man on pay to jawbone the companies into reimbursing the government, but he has no legal authority to claw back excessive payouts.

Mr. Feinberg’s political leverage has been weakened by the banks’ speedy repayment of their bailout funds. Eleven of the 17 companies that received criticism in the report have repaid the government with interest, so they have no outstanding obligations to reimburse.

As a result, Mr. Feinberg will merely propose that the banks voluntarily adopt a “brake provision” that would allow their boards to nullify or alter any bonus payouts or employment contracts in the event of a future financial crisis. All 17 companies have told Mr. Feinberg that they will consider adopting the provision, though none has committed to do so.

Mr. Feinberg is expected to call the payouts ill advised but not unlawful or contrary to the public interest, the people with knowledge of his report said.

On Wall Street, meanwhile, profits and pay have already rebounded. Goldman Sachs is on pace to hand out an average of $544,000 per worker in salary and bonuses, though many could earn several times that amount. JPMorgan Chase’s investment bank is on track to pay its workers, on average, about $425,000, while the average Morgan Stanley employee could collect about $260,000.

If the second half of 2010 plays out like the first half, Wall Street bonuses will be paid out at about the same level as last year and similar to 2007 levels, when the crisis had just started to unfold.

“It’s healthier than I would have ever expected a year ago,” said Alan Johnson, a longtime compensation consultant who specializes in financial services.

Mr. Feinberg was named last month as the independent administrator for claims tied to the BP oil spill, making it likely that the release of his findings on the financial firms will be his final act as the overseer of banker pay.

The review, mandated by the 2009 economic stimulus bill, broadened the scope of Mr. Feinberg’s duties to include examining the pay packages of top earners at 419 companies that accepted bailout funds. However, it did not give him the power to demand changes to the compensation arrangements, as he did in each of the last two years at seven companies that received multiple bailouts.

Mr. Feinberg spent five months reviewing compensation paid to each company’s 25 highest earners between October 2008, when the first bailouts were dispensed, and February 2009, when the stimulus bill took effect. He narrowed his scrutiny to about 600 executives at 17 banks, with payouts totaling $2.03 billion.

Mr. Feinberg’s criteria for identifying the worst offenders were large payouts, in aggregate or to specific individuals; overly generous exit packages; or a failure to provide clear performance criteria or other rationale for extra pay.

Mr. Feinberg then approached each of the 17 companies with his proposed remedy during conference calls over the last two weeks. The 11 companies that have fully repaid their bailout money are American Express, Bank of America, Bank of New York Mellon, Boston Private, Capital One Financial, Goldman Sachs, JPMorgan, Morgan Stanley, PNC Financial, US Bancorp and Wells Fargo.

The six companies that have not fully repaid their bailout funds are A.I.G, Citigroup, the CIT Group, M&T Bank, Regions Financial and SunTrust Banks.

Among the banks that have not fully repaid the government, Citigroup was identified by Mr. Feinberg as having the most egregious compensation packages during the bailout period, according to officials with knowledge of his report. The bank handed out several hundred million dollars in pay in 2008 as it struggled to stay afloat.

Roughly two-thirds of the outsize payouts were from bonuses awarded to Andrew Hall and another trader who were part of the bank’s Phibro energy trading unit. Citigroup sold that business to Occidental Petroleum last fall, under pressure from Mr. Feinberg, after the disclosure that Mr. Hall had received a $100 million payout.

Mr. Feinberg is not expected to name individual executives who received the highest awards.

His review is among several compensation initiatives scrutinizing banker pay. In June, the Federal Reserve ordered about two dozen of the biggest banks to address several pay practices that, even after the crisis, it said encouraged excessive risk-taking.

European banking regulators introduced tough new standards for bonus payments earlier this month. And the Federal Deposit Insurance Corporation is developing a plan that would partly tie bank insurance premiums to the perceived risk of their executive pay packages. That proposal could be reviewed by the agency’s board as early as next month.

Everything Changes, All The Time

This week's Economist has a paragraph that bears some thought. It goes like this:

"Two decades ago Japan accounted for 14% of the global economy. It is now worth 8%. In 1988 eight of the top ten companies by value and eight of the top ten banks were Japanese; today none makes either list."

Two decades ago I conducted business strategy seminars around the world and the one visual that I used that got more response than any other was the one with these data showing Japanese companies taking over the world.

To paraphrase Yogi Berra, forecasting is really hard to do, especially when it is about the future.

Thursday, July 22, 2010

More in the Washington Post

If the Monday entry of Dana Priest's story interested you, make sure you go the Washington Post and read the Tuesday and Wednesday episodes.

Sunday, July 18, 2010

Wow!! Art Imitates Life!!

See last post about Barry Eisler. Then read Dana Priest's column in today's Washington Post. That should scare you good!!

A hidden world, growing beyond control

Monday, July 19, 2010; 1:53 AM

The top-secret world the government created in response to the terrorist attacks of Sept. 11, 2001, has become so large, so unwieldy and so secretive that no one knows how much money it costs, how many people it employs, how many programs exist within it or exactly how many agencies do the same work.

These are some of the findings of a two-year investigation by The Washington Post that discovered what amounts to an alternative geography of the United States, a Top Secret America hidden from public view and lacking in thorough oversight. After nine years of unprecedented spending and growth, the result is that the system put in place to keep the United States safe is so massive that its effectiveness is impossible to determine.

The investigation's other findings include:

* Some 1,271 government organizations and 1,931 private companies work on programs related to counterterrorism, homeland security and intelligence in about 10,000 locations across the United States.

* An estimated 854,000 people, nearly 11/2 times as many people as live in Washington, D.C., hold top-secret security clearances.

* In Washington and the surrounding area, 33 building complexes for top-secret intelligence work are under construction or have been built since September 2001. Together they occupy the equivalent of almost three Pentagons or 22 U.S. Capitol buildings - about 17 million square feet of space.

* Many security and intelligence agencies do the same work, creating redundancy and waste. For example, 51 federal organizations and military commands, operating in 15 U.S. cities, track the flow of money to and from terrorist networks.

* Analysts who make sense of documents and conversations obtained by foreign and domestic spying share their judgment by publishing 50,000 intelligence reports each year - a volume so large that many are routinely ignored.

These are not academic issues; lack of focus, not lack of resources, was at the heart of the Fort Hood shooting that left 13 dead, as well as the Christmas Day bomb attempt thwarted not by the thousands of analysts employed to find lone terrorists but by an alert airline passenger who saw smoke coming from his seatmate.

They are also issues that greatly concern some of the people in charge of the nation's security.

"There has been so much growth since 9/11 that getting your arms around that - not just for the DNI [Director of National Intelligence], but for any individual, for the director of the CIA, for the secretary of defense - is a challenge," Defense Secretary Robert M. Gates said in an interview with The Post last week.

In the Department of Defense, where more than two-thirds of the intelligence programs reside, only a handful of senior officials - called Super Users - have the ability to even know about all the department's activities. But as two of the Super Users indicated in interviews, there is simply no way they can keep up with the nation's most sensitive work.

"I'm not going to live long enough to be briefed on everything" was how one Super User put it. The other recounted that for his initial briefing, he was escorted into a tiny, dark room, seated at a small table and told he couldn't take notes. Program after program began flashing on a screen, he said, until he yelled ''Stop!" in frustration.

"I wasn't remembering any of it," he said.

Underscoring the seriousness of these issues are the conclusions of retired Army Lt. Gen. John R. Vines, who was asked last year to review the method for tracking the Defense Department's most sensitive programs. Vines, who once commanded 145,000 troops in Iraq and is familiar with complex problems, was stunned by what he discovered.

"I'm not aware of any agency with the authority, responsibility or a process in place to coordinate all these interagency and commercial activities," he said in an interview. "The complexity of this system defies description."

The result, he added, is that it's impossible to tell whether the country is safer because of all this spending and all these activities. "Because it lacks a synchronizing process, it inevitably results in message dissonance, reduced effectiveness and waste," Vines said. "We consequently can't effectively assess whether it is making us more safe."

The Post's investigation is based on government documents and contracts, job descriptions, property records, corporate and social networking Web sites, additional records, and hundreds of interviews with intelligence, military and corporate officials and former officials. Most requested anonymity either because they are prohibited from speaking publicly or because, they said, they feared retaliation at work for describing their concerns.

The Post's online database of government organizations and private companies was built entirely on public records. The investigation focused on top-secret work because the amount classified at the secret level is too large to accurately track.

Today's article describes the government's role in this expanding enterprise. Tuesday's article describes the government's dependence on private contractors. Wednesday's is a portrait of one Top Secret America community. On the Web, an extensive, searchable database built by The Post about Top Secret America is available at

Defense Secretary Gates, in his interview with The Post, said that he does not believe the system has become too big to manage but that getting precise data is sometimes difficult. Singling out the growth of intelligence units in the Defense Department, he said he intends to review those programs for waste. "Nine years after 9/11, it makes a lot of sense to sort of take a look at this and say, 'Okay, we've built tremendous capability, but do we have more than we need?' " he said.

CIA Director Leon Panetta, who was also interviewed by The Post last week, said he's begun mapping out a five-year plan for his agency because the levels of spending since 9/11 are not sustainable. "Particularly with these deficits, we're going to hit the wall. I want to be prepared for that," he said. "Frankly, I think everyone in intelligence ought to be doing that."

In an interview before he resigned as the director of national intelligence in May, retired Adm. Dennis C. Blair said he did not believe there was overlap and redundancy in the intelligence world. "Much of what appears to be redundancy is, in fact, providing tailored intelligence for many different customers," he said.

Blair also expressed confidence that subordinates told him what he needed to know. "I have visibility on all the important intelligence programs across the community, and there are processes in place to ensure the different intelligence capabilities are working together where they need to," he said.

Weeks later, as he sat in the corner of a ballroom at the Willard Hotel waiting to give a speech, he mused about The Post's findings. "After 9/11, when we decided to attack violent extremism, we did as we so often do in this country," he said. "The attitude was, if it's worth doing, it's probably worth overdoing."

Outside a gated subdivision of mansions in McLean, a line of cars idles every weekday morning as a new day in Top Secret America gets underway. The drivers wait patiently to turn left, then crawl up a hill and around a bend to a destination that is not on any public map and not announced by any street sign.

Liberty Crossing tries hard to hide from view. But in the winter, leafless trees can't conceal a mountain of cement and windows the size of five Wal-Mart stores stacked on top of one another rising behind a grassy berm. One step too close without the right badge, and men in black jump out of nowhere, guns at the ready.

Past the armed guards and the hydraulic steel barriers, at least 1,700 federal employees and 1,200 private contractors work at Liberty Crossing, the nickname for the two headquarters of the Office of the Director of National Intelligence and its National Counterterrorism Center. The two share a police force, a canine unit and thousands of parking spaces.

Liberty Crossing is at the center of the collection of U.S. government agencies and corporate contractors that mushroomed after the 2001 attacks. But it is not nearly the biggest, the most costly or even the most secretive part of the 9/11 enterprise.

In an Arlington County office building, the lobby directory doesn't include the Air Force's mysteriously named XOIWS unit, but there's a big "Welcome!" sign in the hallway greeting visitors who know to step off the elevator on the third floor. In Elkridge, Md., a clandestine program hides in a tall concrete structure fitted with false windows to look like a normal office building. In Arnold, Mo., the location is across the street from a Target and a Home Depot. In St. Petersburg, Fla., it's in a modest brick bungalow in a run-down business park.

Every day across the United States, 854,000 civil servants, military personnel and private contractors with top-secret security clearances are scanned into offices protected by electromagnetic locks, retinal cameras and fortified walls that eavesdropping equipment cannot penetrate.

This is not exactly President Dwight D. Eisenhower's "military-industrial complex," which emerged with the Cold War and centered on building nuclear weapons to deter the Soviet Union. This is a national security enterprise with a more amorphous mission: defeating transnational violent extremists.

Much of the information about this mission is classified. That is the reason it is so difficult to gauge the success and identify the problems of Top Secret America, including whether money is being spent wisely. The U.S. intelligence budget is vast, publicly announced last year as $75 billion, 21/2 times the size it was on Sept. 10, 2001. But the figure doesn't include many military activities or domestic counterterrorism programs.

At least 20 percent of the government organizations that exist to fend off terrorist threats were established or refashioned in the wake of 9/11. Many that existed before the attacks grew to historic proportions as the Bush administration and Congress gave agencies more money than they were capable of responsibly spending.

The Pentagon's Defense Intelligence Agency, for example, has gone from 7,500 employees in 2002 to 16,500 today. The budget of the National Security Agency, which conducts electronic eavesdropping, doubled. Thirty-five FBI Joint Terrorism Task Forces became 106. It was phenomenal growth that began almost as soon as the Sept. 11 attacks ended.

Nine days after the attacks, Congress committed $40 billion beyond what was in the federal budget to fortify domestic defenses and to launch a global offensive against al-Qaeda. It followed that up with an additional $36.5 billion in 2002 and $44 billion in 2003. That was only a beginning.

With the quick infusion of money, military and intelligence agencies multiplied. Twenty-four organizations were created by the end of 2001, including the Office of Homeland Security and the Foreign Terrorist Asset Tracking Task Force. In 2002, 37 more were created to track weapons of mass destruction, collect threat tips and coordinate the new focus on counterterrorism. That was followed the next year by 36 new organizations; and 26 after that; and 31 more; and 32 more; and 20 or more each in 2007, 2008 and 2009.

In all, at least 263 organizations have been created or reorganized as a response to 9/11. Each has required more people, and those people have required more administrative and logistic support: phone operators, secretaries, librarians, architects, carpenters, construction workers, air-conditioning mechanics and, because of where they work, even janitors with top-secret clearances.

With so many more employees, units and organizations, the lines of responsibility began to blur. To remedy this, at the recommendation of the bipartisan 9/11 Commission, the George W. Bush administration and Congress decided to create an agency in 2004 with overarching responsibilities called the Office of the Director of National Intelligence (ODNI) to bring the colossal effort under control.

While that was the idea, Washington has its own ways.

The first problem was that the law passed by Congress did not give the director clear legal or budgetary authority over intelligence matters, which meant he wouldn't have power over the individual agencies he was supposed to control.

The second problem: Even before the first director, Ambassador John D. Negroponte, was on the job, the turf battles began. The Defense Department shifted billions of dollars out of one budget and into another so that the ODNI could not touch it, according to two senior officials who watched the process. The CIA reclassified some of its most sensitive information at a higher level so the National Counterterrorism Center staff, part of the ODNI, would not be allowed to see it, said former intelligence officers involved.

And then came a problem that continues to this day, which has to do with the ODNI's rapid expansion.

When it opened in the spring of 2005, Negroponte's office was all of 11 people stuffed into a secure vault with closet-size rooms a block from the White House. A year later, the budding agency moved to two floors of another building. In April 2008, it moved into its huge permanent home, Liberty Crossing.

Today, many officials who work in the intelligence agencies say they remain unclear about what the ODNI is in charge of. To be sure, the ODNI has made some progress, especially in intelligence-sharing, information technology and budget reform. The DNI and his managers hold interagency meetings every day to promote collaboration. The last director, Blair, doggedly pursued such nitty-gritty issues as procurement reform, compatible computer networks, tradecraft standards and collegiality.

But improvements have been overtaken by volume at the ODNI, as the increased flow of intelligence data overwhelms the system's ability to analyze and use it. Every day, collection systems at the National Security Agency intercept and store 1.7 billion e-mails, phone calls and other types of communications. The NSA sorts a fraction of those into 70 separate databases. The same problem bedevils every other intelligence agency, none of which have enough analysts and translators for all this work.

The practical effect of this unwieldiness is visible, on a much smaller scale, in the office of Michael Leiter, the director of the National Counterterrorism Center. Leiter spends much of his day flipping among four computer monitors lined up on his desk. Six hard drives sit at his feet. The data flow is enormous, with dozens of databases feeding separate computer networks that cannot interact with one another.

There is a long explanation for why these databases are still not connected, and it amounts to this: It's too hard, and some agency heads don't really want to give up the systems they have. But there's some progress: "All my e-mail on one computer now," Leiter says. "That's a big deal."

To get another view of how sprawling Top Secret America has become, just head west on the toll road toward Dulles International Airport.

As a Michaels craft store and a Books-A-Million give way to the military intelligence giants Northrop Grumman and Lockheed Martin, find the off-ramp and turn left. Those two shimmering-blue five-story ice cubes belong to the National Geospatial-Intelligence Agency, which analyzes images and mapping data of the Earth's geography. A small sign obscured by a boxwood hedge says so.

Across the street, in the chocolate-brown blocks, is Carahsoft, an intelligence agency contractor specializing in mapping, speech analysis and data harvesting. Nearby is the government's Underground Facility Analysis Center. It identifies overseas underground command centers associated with weapons of mass destruction and terrorist groups, and advises the military on how to destroy them.

Clusters of top-secret work exist throughout the country, but the Washington region is the capital of Top Secret America.

About half of the post-9/11 enterprise is anchored in an arc stretching from Leesburg south to Quantico, back north through Washington and curving northeast to Linthicum, just north of the Baltimore-Washington International Marshall Airport. Many buildings sit within off-limits government compounds or military bases.

Others occupy business parks or are intermingled with neighborhoods, schools and shopping centers and go unnoticed by most people who live or play nearby.

Many of the newest buildings are not just utilitarian offices but also edifices "on the order of the pyramids," in the words of one senior military intelligence officer.

Not far from the Dulles Toll Road, the CIA has expanded into two buildings that will increase the agency's office space by one-third. To the south, Springfield is becoming home to the new $1.8 billion National Geospatial-Intelligence Agency headquarters, which will be the fourth-largest federal building in the area and home to 8,500 employees. Economic stimulus money is paying hundreds of millions of dollars for this kind of federal construction across the region.

It's not only the number of buildings that suggests the size and cost of this expansion, it's also what is inside: banks of television monitors. "Escort-required" badges. X-ray machines and lockers to store cellphones and pagers. Keypad door locks that open special rooms encased in metal or permanent dry wall, impenetrable to eavesdropping tools and protected by alarms and a security force capable of responding within 15 minutes. Every one of these buildings has at least one of these rooms, known as a SCIF, for sensitive compartmented information facility. Some are as small as a closet; others are four times the size of a football field.

Anti-Deception Technologies
From avatars and lasers to thermal cameras and fidget meters, this multimedia gallery takes a look at some of the latest technologies being developed by the government and private companies to thwart terrorists. Launch Gallery »

SCIF size has become a measure of status in Top Secret America, or at least in the Washington region of it. "In D.C., everyone talks SCIF, SCIF, SCIF," said Bruce Paquin, who moved to Florida from the Washington region several years ago to start a SCIF construction business. "They've got the penis envy thing going. You can't be a big boy unless you're a three-letter agency and you have a big SCIF."

SCIFs are not the only must-have items people pay attention to. Command centers, internal television networks, video walls, armored SUVs and personal security guards have also become the bling of national security.

"You can't find a four-star general without a security detail," said one three-star general now posted in Washington after years abroad. "Fear has caused everyone to have stuff. Then comes, 'If he has one, then I have to have one.' It's become a status symbol."

Among the most important people inside the SCIFs are the low-paid employees carrying their lunches to work to save money. They are the analysts, the 20- and 30-year-olds making $41,000 to $65,000 a year, whose job is at the core of everything Top Secret America tries to do.

At its best, analysis melds cultural understanding with snippets of conversations, coded dialogue, anonymous tips, even scraps of trash, turning them into clues that lead to individuals and groups trying to harm the United States.

Their work is greatly enhanced by computers that sort through and categorize data. But in the end, analysis requires human judgment, and half the analysts are relatively inexperienced, having been hired in the past several years, said a senior ODNI official. Contract analysts are often straight out of college and trained at corporate headquarters.

When hired, a typical analyst knows very little about the priority countries - Iraq, Iran, Afghanistan and Pakistan - and is not fluent in their languages. Still, the number of intelligence reports they produce on these key countries is overwhelming, say current and former intelligence officials who try to cull them every day. The ODNI doesn't know exactly how many reports are issued each year, but in the process of trying to find out, the chief of analysis discovered 60 classified analytic Web sites still in operation that were supposed to have been closed down for lack of usefulness. "Like a zombie, it keeps on living" is how one official describes the sites.

The problem with many intelligence reports, say officers who read them, is that they simply re-slice the same facts already in circulation. "It's the soccer ball syndrome. Something happens, and they want to rush to cover it," said Richard H. Immerman, who was the ODNI's assistant deputy director of national intelligence for analytic integrity and standards until early 2009. "I saw tremendous overlap."

Even the analysts at the National Counterterrorism Center (NCTC), which is supposed to be where the most sensitive, most difficult-to-obtain nuggets of information are fused together, get low marks from intelligence officials for not producing reports that are original, or at least better than the reports already written by the CIA, FBI, National Security Agency or Defense Intelligence Agency.

When Maj. Gen. John M. Custer was the director of intelligence at U.S. Central Command, he grew angry at how little helpful information came out of the NCTC. In 2007, he visited its director at the time, retired Vice Adm. John Scott Redd, to tell him so. "I told him that after 41/2 years, this organization had never produced one shred of information that helped me prosecute three wars!" he said loudly, leaning over the table during an interview.

Two years later, Custer, now head of the Army's intelligence school at Fort Huachuca, Ariz., still gets red-faced recalling that day, which reminds him of his frustration with Washington's bureaucracy. "Who has the mission of reducing redundancy and ensuring everybody doesn't gravitate to the lowest-hanging fruit?" he said. "Who orchestrates what is produced so that everybody doesn't produce the same thing?"

He's hardly the only one irritated. In a secure office in Washington, a senior intelligence officer was dealing with his own frustration. Seated at his computer, he began scrolling through some of the classified information he is expected to read every day: CIA World Intelligence Review, WIRe-CIA, Spot Intelligence Report, Daily Intelligence Summary, Weekly Intelligence Forecast, Weekly Warning Forecast, IC Terrorist Threat Assessments, NCTC Terrorism Dispatch, NCTC Spotlight . . .

It's too much, he complained. The inbox on his desk was full, too. He threw up his arms, picked up a thick, glossy intelligence report and waved it around, yelling.

"Jesus! Why does it take so long to produce?"

"Why does it have to be so bulky?"

"Why isn't it online?"

The overload of hourly, daily, weekly, monthly and annual reports is actually counterproductive, say people who receive them. Some policymakers and senior officials don't dare delve into the backup clogging their computers. They rely instead on personal briefers, and those briefers usually rely on their own agency's analysis, re-creating the very problem identified as a main cause of the failure to thwart the attacks: a lack of information-sharing.

The ODNI's analysis office knows this is a problem. Yet its solution was another publication, this one a daily online newspaper, Intelligence Today. Every day, a staff of 22 culls more than two dozen agencies' reports and 63 Web sites, selects the best information and packages it by originality, topic and region.

Analysis is not the only area where serious overlap appears to be gumming up the national security machinery and blurring the lines of responsibility.

Within the Defense Department alone, 18 commands and agencies conduct information operations, which aspire to manage foreign audiences’ perceptions of U.S. policy and military activities overseas.

And all the major intelligence agencies and at least two major military commands claim a major role in cyber-warfare, the newest and least-defined frontier.

"Frankly, it hasn't been brought together in a unified approach," CIA Director Panetta said of the many agencies now involved in cyber-warfare.

"Cyber is tremendously difficult" to coordinate, said Benjamin A. Powell, who served as general counsel for three directors of national intelligence until he left the government last year. "Sometimes there was an unfortunate attitude of bring your knives, your guns, your fists and be fully prepared to defend your turf." Why? "Because it's funded, it's hot and it's sexy."

Last fall, U.S. Army Maj. Nidal Malik Hasan allegedly opened fire at Fort Hood, Tex., killing 13 people and wounding 30. In the days after the shootings, information emerged about Hasan's increasingly strange behavior at Walter Reed Army Medical Center, where he had trained as a psychiatrist and warned commanders that they should allow Muslims to leave the Army or risk "adverse events." He had also exchanged e-mails with a well-known radical cleric in Yemen being monitored by U.S. intelligence.

But none of this reached the one organization charged with handling counterintelligence investigations within the Army. Just 25 miles up the road from Walter Reed, the Army's 902nd Military Intelligence Group had been doing little to search the ranks for potential threats. Instead, the 902's commander had decided to turn the unit's attention to assessing general terrorist affiliations in the United States, even though the Department of Homeland Security and the FBI's 106 Joint Terrorism Task Forces were already doing this work in great depth.

The 902nd, working on a program the commander named RITA, for Radical Islamic Threat to the Army, had quietly been gathering information on Hezbollah, Iranian Republican Guard and al-Qaeda student organizations in the United States. The assessment "didn't tell us anything we didn't know already," said the Army's senior counterintelligence officer at the Pentagon.

Secrecy and lack of coordination have allowed organizations, such as the 902nd in this case, to work on issues others were already tackling rather than take on the much more challenging job of trying to identify potential jihadist sympathizers within the Army itself.

Beyond redundancy, secrecy within the intelligence world hampers effectiveness in other ways, say defense and intelligence officers. For the Defense Department, the root of this problem goes back to an ultra-secret group of programs for which access is extremely limited and monitored by specially trained security officers.

These are called Special Access Programs - or SAPs - and the Pentagon's list of code names for them runs 300 pages. The intelligence community has hundreds more of its own, and those hundreds have thousands of sub-programs with their own limits on the number of people authorized to know anything about them. All this means that very few people have a complete sense of what's going on.

"There's only one entity in the entire universe that has visibility on all SAPs - that's God," said James R. Clapper, undersecretary of defense for intelligence and the Obama administration's nominee to be the next director of national intelligence.

Such secrecy can undermine the normal chain of command when senior officials use it to cut out rivals or when subordinates are ordered to keep secrets from their commanders.

One military officer involved in one such program said he was ordered to sign a document prohibiting him from disclosing it to his four-star commander, with whom he worked closely every day, because the commander was not authorized to know about it. Another senior defense official recalls the day he tried to find out about a program in his budget, only to be rebuffed by a peer. "What do you mean you can't tell me? I pay for the program," he recalled saying in a heated exchange.

Another senior intelligence official with wide access to many programs said that secrecy is sometimes used to protect ineffective projects. "I think the secretary of defense ought to direct a look at every single thing to see if it still has value," he said. "The DNI ought to do something similar."

The ODNI hasn't done that yet. The best it can do at the moment is maintain a database of the names of the most sensitive programs in the intelligence community. But the database does not include many important and relevant Pentagon projects.

Because so much is classified, illustrations of what goes on every day in Top Secret America can be hard to ferret out. But every so often, examples emerge. A recent one shows the post-9/11 system at its best and its worst.

Last fall, after eight years of growth and hirings, the enterprise was at full throttle when word emerged that something was seriously amiss inside Yemen. In response, President Obama signed an order sending dozens of secret commandos to that country to target and kill the leaders of an al-Qaeda affiliate.

In Yemen, the commandos set up a joint operations center packed with hard drives, forensic kits and communications gear. They exchanged thousands of intercepts, agent reports, photographic evidence and real-time video surveillance with dozens of top-secret organizations in the United States.

That was the system as it was intended. But when the information reached the National Counterterrorism Center in Washington for analysis, it arrived buried within the 5,000 pieces of general terrorist-related data that are reviewed each day. Analysts had to switch from database to database, from hard drive to hard drive, from screen to screen, just to locate what might be interesting to study further.

As military operations in Yemen intensified and the chatter about a possible terrorist strike increased, the intelligence agencies ramped up their effort. The flood of information into the NCTC became a torrent.

Somewhere in that deluge was even more vital data. Partial names of someone in Yemen. A reference to a Nigerian radical who had gone to Yemen. A report of a father in Nigeria worried about a son who had become interested in radical teachings and had disappeared inside Yemen.

These were all clues to what would happen when a Nigerian named Umar Farouk Abdulmutallab left Yemen and eventually boarded a plane in Amsterdam bound for Detroit. But nobody put them together because, as officials would testify later, the system had gotten so big that the lines of responsibility had become hopelessly blurred.

"There are so many people involved here," NCTC Director Leiter told Congress.

"Everyone had the dots to connect," DNI Blair explained to the lawmakers. "But I hadn't made it clear exactly who had primary responsibility."

And so Abdulmutallab was able to step aboard Northwest Airlines Flight 253. As it descended toward Detroit, he allegedly tried to ignite explosives hidden in his underwear. It wasn't the very expensive, very large 9/11 enterprise that prevented disaster. It was a passenger who saw what he was doing and tackled him. "We didn't follow up and prioritize the stream of intelligence," White House counterterrorism adviser John O. Brennan explained afterward. "Because no one intelligence entity, or team or task force was assigned responsibility for doing that follow-up investigation."

Blair acknowledged the problem. His solution: Create yet another team to run down every important lead. But he also told Congress he needed more money and more analysts to prevent another mistake.

More is often the solution proposed by the leaders of the 9/11 enterprise. After the Christmas Day bombing attempt, Leiter also pleaded for more - more analysts to join the 300 or so he already had.

The Department of Homeland Security asked for more air marshals, more body scanners and more analysts, too, even though it can't find nearly enough qualified people to fill its intelligence unit now. Obama has said he will not freeze spending on national security, making it likely that those requests will be funded.

More building, more expansion of offices continues across the country. A $1.7 billion NSA data-processing center will be under construction soon near Salt Lake City. In Tampa, the U.S. Central Command’s new 270,000-square-foot intelligence office will be matched next year by an equally large headquarters building, and then, the year after that, by a 51,000-square-foot office just for its special operations section.

Just north of Charlottesville, the new Joint-Use Intelligence Analysis Facility will consolidate 1,000 defense intelligence analysts on a secure campus.

Meanwhile, five miles southeast of the White House, the DHS has broken ground for its new headquarters, to be shared with the Coast Guard. DHS, in existence for only seven years, already has its own Special Access Programs, its own research arm, its own command center, its own fleet of armored cars and its own 230,000-person workforce, the third-largest after the departments of Defense and Veterans Affairs.

Soon, on the grounds of the former St. Elizabeths mental hospital in Anacostia, a $3.4 billion showcase of security will rise from the crumbling brick wards. The new headquarters will be the largest government complex built since the Pentagon, a major landmark in the alternative geography of Top Secret America and four times as big as Liberty Crossing.

Staff researcher Julie Tate contributed to this report.

Saturday, July 17, 2010

I Need Your Help

Here is the problem. There is a writer named Barry Eisler who has written six absolutely fascinating books about a character named John Rain. The plotting is tight, the characters are so finely sketched that you think you really know them, and the locales are so precisely described you are sure you are there.

Now the thing is that Barry Eisler was in Black Ops with the CIA so you have to wonder how much of each story was taken from real life. There must be some scary stuff going on out there that never gets known.

Barry's latest book,Inside Out, has a new character, Ben Treven, who is also a Black Ops with the CIA. Inside Out is not nearly as well written as the John Rain stories, but it raises a much more profound question. Barry Eisler says the country is run by a cabal about like Eisenhower described with his "military-industrial complex", e.g., Black Water, Halliburton, Dick Cheney, et al, and that it operates mostly in the full open. He also says they conduct kidnapings and torture.

Your first reaction will be to dismiss these claims as pure invention. Then, at the end, you find seven pages of sources and references!! That is when you begin to get a funny feeling in your stomach. And then you remember Barry's job with Black Ops, and you really get nervous.

Here is the help I need. Read Inside Out and tell my your conclusion. I will report on all the reviews.

Thank you.

Friday, July 16, 2010

Wall Street Bankers Win Again, and Again, and Again......................

SEC settlement is a major victory -- for Goldman Sachs

The SEC’s $550 million settlement with Goldman Sachs is naturally being touted by the feds as a major victory, “the largest penalty ever assessed against a financial services firm in the history of the SEC.” Maybe. But there’s another way to look at it.

Goldman’s net income was more than $13 billion in 2009. So $550 million is about two weeks’ worth of earnings. Looks like Goldman figured a two-week furlough was a pretty modest price to pay to give the SEC its headline, without admitting wrongdoing, and move on.

Did anyone at the SEC think about the public benefits of a trial, in terms of sustained media scrutiny of Wall Street’s unsavory practices, whatever the outcome? Did anyone tote up the two weeks of earnings figure? Looks at first blush like another pretty smart Goldman trade.

By Matt Miller | July 15, 2010; 5:37 PM ET
From today's Washington Post


To much fanfare, Congress announced yesterday that they had passed a 2,400 page (yes, 2,400 pages!)bill that they claimed was full of financial regulations to save us all from the next Great Recession.

First of all, the bill does absolutely nothing to rein in Too Big To Fail. Remember that was Hank Paulson's justification for TARP, e.g. to save Goldman Sachs from bankruptcy.

Next, supporters of the bill claim it is full of stuff to encourage financial "innovation". Paul Volker says all those claims for innovation are absolutely meaningless. All Wall Street innovation has done is create a shadow financial industry out of sight of investors or regulators.

Finally (probably not), the backers of the bill claim that the real highlight is the creation of a new "consumer protection" agency in the Federal Reserve Bank. If you think that will work, just remember that Alan Greenspan and Ben Bernanke sat atop the Fed and watched the economy expand until it collapsed. How did that consumer protection work for you.

FixCongressFirst.Org is our best chance for surviving a totally corrupt, incompetent congress. Join up today.

Thursday, July 15, 2010


*Fifteen Million Americans unemployed.
*Five Million Americans unemployed for over 99 weeks and have no more unemployment benefits.
*Home foreclosures on track to exceed One Million this year.
*Five applicants for every job opening today.

So what does Congress do about all of this????

They go on vacation!!

Go to and join up. It is still our country. Now let's take it back from the millionaire congress people who really don't care about anyone other than themselves!!

Tuesday, July 13, 2010

The For-Profit Education Scam

I have written about my experiences in the For Profit school business before and I think you will be interested in what Tom Harkin (Senator from Iowa) wrote in today's Los Angeles Times.

"Haven't we heard this story before? It features a high pressure sales force persuading consumers in search of the American dream to go deep into debt to purchase a product of dubious value. Default rates are sky high. Taxpayer money is squandered. Top executives walk away with fortunes.

This sounds like a description of the subprime mortgage industry, which came crashing down two years ago. But what I just described is the reality at many for-profit colleges."

There is a lot more. Go to and find "The for-profit college bubble".

The amounts of money here are huge. Not as big as in housing, but scary for a very different reason.

If you default on your home mortgage, you can walk away in several different ways. But if your loan was for education, you can NEVER escape it. You will carry that loan, plus compounding interest, for the rest of your life.

And, by the way, you are the loan holder for most of these loans since you are a tax payer.

It is way past time to throw a net over these crooks.

Sunday, July 11, 2010

Wall Street Screws All The Rest Of Us Again!

Eighteen months ago, Goldman Sachs, AIG, CitiGroup and other big Wall Street players were on the verge of bankruptcy. So a reasonable question is "How are they doing today?"

The answer is "Extremely Well, Thank you."

In 2009, the members of the New York Stock Exchange earned profits of $61.4 Billion, an all time record high.

Wall Street banks have hired 2,000 new employees since February.

So how are the rest of us doing? See post below for the answer.

Fix Congress First

One million school children are homeless.

More Vietnam veterans are now homeless than were killed in action. (58,267)

Fifteen million Americans are unemployed and five million of them are out of unemployment benefits.

And Congress won't do a damn thing!!

Every member of the House of Representatives is up for re-election as well as one-third of the Senate.

Go to and sign on. We have to do something.

Wednesday, July 7, 2010

A Badge of Shame

During the 2008-2009 school year there were more than 956,000 homeless children, a 20% increase over the previous year.

If that is not shameful for the world's richest country, I don't know what is!

Tuesday, July 6, 2010

I am not the only one wondering about Washington

The unemployment emergency

By Eugene Robinson
Tuesday, July 6, 2010; A13

The good news is that unemployment has fallen to "only" 9.5 percent. The bad news is that the jobless rate is down only because so many people have given up hope of finding work. Perversely, the jobless who aren't actively looking for jobs are not counted as "unemployed." Perhaps there should be a new category: "mired in existential despair." If anyone in Washington wants to know why people in the hinterlands are angry, one simple answer is that our political leaders seem to be so calculating and unmoved about the parlous state of the economy.

The disheartening employment figures released Friday quickly became fodder for the kind of political to-and-fro that has become standard operating procedure. President Obama quickly put his spin on the numbers, noting that the private sector added 83,000 jobs in June. The president's Republican opponents noted that overall, the economy lost 125,000 jobs -- taking into account not just the private-sector gain but the end of 225,000 temporary jobs for census workers.

Last month, it was the other way around. The overall number, showing what happened in May, indicated a healthy-looking gain in jobs -- so that was what Obama wanted to talk about. But the increase reflected mostly census hiring, with the private sector adding a paltry 41,000 jobs -- which was the number the Republicans wanted to highlight.

All the spinning and counterspinning drives people crazy. And why shouldn't it? The employment numbers aren't just a monthly set of partisan talking points. They represent actual lives. They represent mortgages that might not be paid and college educations that have to be deferred; they tally mental health crises and broken marriages. Those sterile, emotionless figures speak of pain and anxiety. They mock our faith in the American dream.

Let me put it in terms that Washington understands: The party that begins to treat the unemployment crisis with the hair-on-fire urgency that it deserves is the party that will do well in November.

In the past, a steep fall into recession has often led to an equally steep climb back to prosperity. Clearly, that's not the case this time. In relatively short order, the economy lost about 7 million jobs. So far this year, we've gained back more than 600,000 -- not bad, given that in early 2009 we were shedding that many jobs each month, but not nearly enough to have the kind of impact the nation can really feel.

The debate among economists about whether or not this will prove to be a "double-dip" recession is beside the point. For most people, this feels more like one long, uninterrupted dip -- with no end in sight. Adding 83,000 private-sector jobs in June sounds like something of an accomplishment, until you realize that the U.S. economy has to add more than 125,000 jobs a month just to accommodate the natural growth of the workforce. With a gain of 83,000 jobs, we actually lost ground.

Our political leaders know that unemployment is on their constituents' minds, so they talk about it. A lot. But we're not seeing either party show the kind of courage that's really needed.

Republicans block an extension of unemployment benefits, rail about the deficit and complain that Democrats don't understand that economic renewal will come when the private sector is unleashed. The problem is that since Republicans are in the minority, they have to work with the Democrats to get anything done. I suspect that their strategy -- standing on the sidelines and yelling, "The Democrats are doing it all wrong!" -- will not win as much favor from voters as the GOP hopes.

Democrats, on the other hand, do have the power to enact an agenda. But individual members of Congress act as if they are more concerned about their own electoral prospects than about bringing those unemployment numbers down. If a second economic stimulus is the answer, then that's what Democrats should do. If the answer is something else, fine. But they should know that whether they call themselves progressives or Blue Dogs or whatever, voters see them as one party and will hold them accountable.

Washington gets all excited when someone commits an embarrassing or impolitic gaffe. Beyond the Beltway, people cannot understand why our leaders can't be similarly focused and energetic about the most tragic spasm of economic dislocation in eight decades.

Monday, July 5, 2010

A Rock and a Hard Place

Small businesses have no cash and no customers. Big businesses have lots of cash and no confidence. Where do we go from here?

Obama's CEO problem -- and ours

By Fareed Zakaria
Monday, July 5, 2010

The American economy is sputtering and we are running out of options. Interest rates can't go any lower. Another burst of government spending -- whether a good or bad idea -- looks politically impossible. Can anything protect us from the dangers of stagnation or a double dip? Actually, there is a second stimulus that could have a dramatic effect on the economy -- even more so than government spending. And it won't add to the deficit.

The Federal Reserve recently reported that America's 500 largest nonfinancial companies have accumulated an astonishing $1.8 trillion of cash on their balance sheets. By any calculation (for example, as a percentage of assets), this is higher than it has been in almost half a century. Yet most corporations are not spending this money on new plants, equipment or workers. Were they to loosen their purse strings, hundreds of billions of dollars would start pouring through the economy. These investments would probably have greater effect and staying power than a government stimulus.

To be clear: There is a strong case for a temporary and targeted government stimulus. Consumers and companies are being very cautious about spending. Right now, government spending is keeping the economy afloat. Without a second stimulus, state and local governments will have to slash spending and raise taxes, which will produce a downward spiral of higher unemployment, slower growth, lower tax revenue and a larger deficit. Joel Klein, the New York City schools chancellor, told me that when the stimulus money runs out at the end of this year, he will be forced to lay off 5,000 teachers. Multiply that example a thousand times to get a sense of what 2011 could look like.

But government spending can only be a bridge to private-sector investment. The key to a sustainable recovery and robust economic growth is to get companies investing in America. So why are they reluctant, despite having mounds of cash? I put this question to a series of business leaders, all of whom were expansive on the topic yet did not want to be quoted by name, for fear of offending people in Washington.

Economic uncertainty was the primary cause of their caution. "We've just been through a tsunami and that produces caution," one told me. But in addition to economics, they kept talking about politics, about the uncertainty surrounding regulations and taxes. Some have even begun to speak out publicly. Jeffrey Immelt, chief executive of General Electric, complained Friday that government was not in sync with entrepreneurs. The Business Roundtable, which had supported the Obama administration, has begun to complain about the myriad laws and regulations being cooked up in Washington.

One CEO told me, "Almost every agency we deal with has announced some expansion of its authority, which naturally makes me concerned about what's in store for us for the future." Another pointed out that between the health-care bill, financial reform and possibly cap-and-trade, his company had lawyers working day and night to figure out the implications of all these new regulations. Lobbyists have been delighted by all this activity. "[Obama] exaggerates our power, but he increases demand for our services," superlobbyist Tony Podesta told the New York Times.

Most of the business leaders I spoke to had voted for Barack Obama. They still admire him. Those who had met him thought he was unusually smart. But all think he is, at his core, anti-business. When I asked for specifics, they pointed to the fact that Obama has no business executives in his Cabinet, that he rarely consults with CEOs (except for photo ops), that he has almost no private-sector experience, that he's made clear he thinks government and nonprofit work are superior to the private sector. It all added up to a profound sense of distrust.

Some of this is a product of chance. The economic crisis forced the government to expand its authority in dozens of areas, from finance to automobiles. But precisely because of these circumstances, Obama needs to outline a growth and competitiveness agenda that is compelling to the business community. This might sound like psychology more than economics, and the populist left will surely scream that the last thing we need to do is pander to business. But the first thing we need is for these people to start spending their money -- soon. As a leading New York businessman who publicly supported Obama during the campaign told me, "their perception is our reality."

Fareed Zakaria is editor of Newsweek International. His e-mail address is

Saturday, July 3, 2010

The Health Care Travesty

In the U.S. we spend 16-18% (it depends slightly on who is counting) of our Gross National Product on health care. That is more than DOUBLE what any other country spends. What we get for that is infant mortality like a third world country, a mother in-birth mortality double any other developed country (and growing instead of shrinking like every other country in the world), and a shorter life span than any European country, to name just a few "benefits".

Health care spending is forecast to grow 9% next year because of that travesty of a health care bill that Congress just passed and the President signed.

And here is the really bad news. There is not one single thing in the bill to reduce the total costs or to slow down the growth rate.

And, to make it even worse, Congress specifically forbids the use of any of the findings of Peter Orzag's comparative cost studies by any government agency.

Every dollar that is wasted on unproductive health care is a dollar that cannot be spent on schools, roads, research, or any of the things that make life better.

Thursday, July 1, 2010

The New Gangs of New York-Join One

Econ Gangs of New York

* *Joshua M Brown
* June 24th, 2010

The factions that are shaping the economic dialog these days are becoming every bit as colorful and distinct as the proto-gangs that once ruled New York's notorious Five Points area. Their leaders, every bit as bellicose and recognizable.

Here's a quick idea of who's who so you can keep up with the discussion:

** *_The

Austerians_* - These are newly-minted deficit hawks, many of whom voted for tax cuts and massive spending bills under the Bush administration without so much as a peep. Dubbed 'Austerians' by blogger *Mark Thoma (Economist's View)*, this gang has found a sudden (upcoming
election-related) pang of concern over deficits and our ability to finance them. Critics say the Austerians' premature tightness will send the economy off a cliff, a la the 1930's. Their rival gang is the New Jack Keynesians.

** *_The

New Jack Keynesians_* - Politically they tend to be from the left and it's been said that they've never met an expenditure they didn't like - unless it was for tax cuts to business owners or something that might actually lead to non-government hiring. The gang's leader is Nobel Prize-winning economist *Paul Krugman*, they can often be found at their stronghold (Krugman's soapbox column in the *New York Times*) chanting 'Spend, Baby, Spend' or 'Deficits Don't Matter'.


V-Shapers_* - A wild-eyed mob of rabble rousers, the V-Shapers may scatter after a particularly messy economic report, but will reappear anytime the S&P 500 closes in the green. The gang is led by *Liz Ann Sonders (Charles Schwab)* with *Larry Kudlow (CNBC)* assuming Sergeant-at-Arms duties during most turf wars. V-Shapers are most powerful during corporate earnings season as manipulated bottom-line profit reports against easy comps are their weapon of choice these days.

** *_The

Double Dippers_* - The nomenclature "Double Dipper" can be a bit misleading as many gang members never agreed that the /single/ dip was actually over. Rather, they've insistently maintained that minus the effects of quantitative easing, fiscal stimulus and theater-of-the-absurd monetary policy, there never really was a recovery. *Michael Pento (Greenfaucet)* throws on the leathers and leads this pack, flanked by *David Rosenberg (Gluskin Sheff)* and *Meredith Whitney (eponymous firm)*. It should be remarked that this gang is growing faster than the others as of this guide's creation.

** *_The

1 Percenters_* - This syndicate is united around the belief that the Federal Reserve should immediately raise interest rates to 1 percent from their current level, /Eternal Zero/. This move, they argue, will demonstrate confidence, pull hesitant home buyers off the sidelines and jolt the banks off of their government debt-spread binge and back to consumer lending. The ringleader here is Kansas City Federal Reserve honcho *Thomas Hoenig*.



Inflationsitas_* - Gang leader *Dr. Allan Meltzer (Carnegie Mellon)* sees the potential for inflation everywhere he looks. Disregarding the actual data, which shows that we are in fact caught in the throes of a deflationary death spiral in many categories, the Inflationistas have instead decided to "look through the valley" to some point in the future in which the dreaded "printing presses" will cause a severe spike in costs. Meltzer is backed up by the likes of *Marc Faber (Gloom, Boom & Doom Report)* and virtually every prominent hedge fund manager in the world.



New Normalers_* - The mantra that we are in a low growth, high tax, heavily regulated investment world originated with gang leader *Bill Gross (Pimco)* and his second-in-command *Mohamed El-Erian*. Many a newsletter writer has flocked to the New Normal standard, most notably *John Mauldin (Thoughts From The Frontline)*. The New Normalers can typically be found casting a wary eye on the European debt turmoil or hard at work at the keyboard, prolifically pecking out multi-thousand word epistles on how things will never be the same again. And they're probably right.



Nihlists_* - Believe in nothing, man. The core belief here is that nothing can be believed in, not government, not capitalism, not paper money, not brick-and-mortar. There is a hopelessness in this crew's rhetoric that is so potent that it frightens off even the Double Dippers when their paths cross. Spiritual and intellectual leadership comes from *Dow Theorist Richard Russell*, who pens such heartwarming chestnuts as "Sell everything you own except your gold" and "Go kiss your relatives goodbye for the last time". Splinter factions within this group worship gold, guns and potable drinking water, they've been stockpiling for nearly 4 years now.