TBR News November 17, 2014

Nov 17 2014


The Voice of the White House

          Washington, D.C. November 17, 2014: “The American media, ever attentive to the needs of the American oligarchs, have been bleating frantically about the problems, mostly invented or the direct result of CIA manipulations, while studiously avoiding a far, far more serious domestic problem. When, not if, this problem erupts into full public view, it will create domestic havoc not seen in this country since the Boston Tea Party. I am speaking here of the Great Mortgage Scandals that have wrecked the American housing market but greatly enriched many politicians and, far more important, the major banks. I have appended an article on the genesis of this major disaster, the child of Republican Senator Phil Graham* and co-fathered by one Angelo Mozilo, head of Countrywide Mortgage. The end result of their deliberate and thoroughly crooked manipulation of both the mortgage and real estate markets has created a situation where over 70 million Americans, with mortgages, do not have title to their homes and never will. In short, the larger American banks took millions of mortgages, legitimate and questionable, chopped them up and packaged them as “Investment Packages.” These were sold, mostly overseas, and it is now completely impossible for anyone, bank or individual, to ascertain just who is the actual holder of millions of home, and business, mortgages. It is very easy for Americans concerned about this to find out if they have a clear title to their homes. Lawyers and helpful “financial advising firms” are not necessary. All a curious person has to do is to go to their county records repository, usually in the county courthouse complexes, and look at the file on the questioned property. These are public records and are open to the public. If one sees the word “MERS” attached to the mortgage, that is the sign that there is no known title holder and the house cannot be properly sold. And if one finds this is the case, is there a remedy? No, there is not. Legal action is not possible and the only solution would be found in Congressional action granting title to the victims of these frauds. But the current American Congress is careful not to annoy the major banks who spend a great deal of money keeping them in office and cooperative. And although the White House is fully conversant with this problem, they would never do anything to annoy the financial industry in America. In essence, the banks, and obedient media outlets, Congressmen and even the President himself are smiling at all of us and saying, “Bend over dear and I will drive you home.”


*William Philip “Phil” Gramm (born July 8, 1942) is an American economist and politician, who has served as a Democratic Congressman (1979–1983), a Republican Congressman (1983–1985) and a Republican Senator (1985–2002) from Texas. He later became a lobbyist for UBS and founded a public policy and lobbying firm, Gramm Partners. Some economists state that the 1999 legislation spearheaded by Gramm and signed into law by President Clinton – the Gramm-Leach-Bliley Act — was significantly to blame for the 2007 subprime mortgage crisis and 2008 global economic crisis.[16][17] The Act is most widely known for repealing portions of the Glass–Steagall Act, which had regulated the financial services industry.[18] The Act passed the House and Senate by an overwhelming majority on November 4, 1999 -Gramm lives in Helotes, outside San Antonio, Texas.Wikipedia


Countrywide: Subprime Kings and Fraud Masters

Many factors combined to create the current housing crisis in the United States.

Low interest rates after the 2001 stock market crash spurred the housing boom. Housing prices skyrocketed above historic trendlines. People were duped into thinking prices would rise forever, but it was inevitable that the housing bubble would burst, and houses would suddenly be worth a lot less. With house prices falling, lots of people are now finding they owe more than their house is worth. This problem is exacerbated by predatory loan arrangements that have left millions facing suddenly rising mortgage payments.

A lot of people and corporations deserve blame for this state of affairs.

Instead of warning consumers about the housing bubble – which would have gone a long way to counter the excessive price run-ups – then-Federal Reserve Chair Alan Greenspan denied a bubble was occurring.

Wall Street firms created exotic investment instruments that made possible the purchase and trading of large numbers of mortgages. This created conditions so that banks and initial lenders took less care in issuing mortgages – since they wouldn’t be responsible for mortgages gone bad. The Wall Street firms not only sold these instruments to duped investors, they took on major liabilities on their own – even though it was obvious the housing bubble would have to burst.

Rating agencies like Moody’s and Standard & Poor’s, which evaluated the riskiness of these new mortgage investment instruments, failed utterly. The housing bubble meant mortgage investments were sure to lose money, but the ratings agencies gave them top ratings anyway. Along with the “innovation” of the Wall Street firms, the ratings agencies helped maintain a market that dramatically exacerbated, and to a considerable degree may have created, the housing bubble.

Financial bubbles create an incentive for criminal and shady activity. Just like the stock bubble of the late 1990s created the climate for Enron and dozens of other companies to cook their books, the housing bubble created incentives for predatory lenders to exploit consumers.

The predatory lenders offered low rates, at least at first. Rates would rise later, but the lenders said that – because home prices were rising so fast and would continue to do so – borrowers could always refinance with a new loan.

 The biggest of the predatory lenders was Countrywide, a mortgage lender acquired by Bank of America in January 2008. The company and its CEO, Angelo Mozilo, made a bundle, while setting up thousands and thousands of families for financial ruin.

“Over the past few years,” says Martin Eakes of the Center for Responsible Lending, “by steering millions of people into bad loans, Countrywide has been the largest rogue mortgage lender in the country. According to Countrywide’s own data, more than 80 percent of its exotic adjustable-rate loans were made to borrowers that do not meet current banking standards. Countrywide knew that these homeowners would not be able to make their monthly loan payments after dramatic payment increases became effective.”

The Center for Responsible Lending has compiled a dossier on Countrywide’s irresponsible practices, presented in a report, “Unfair and Unsafe.” Its devastating report, based on customer complaints, lawsuits, regulatory actions, news accounts, government reports and company documents, shows how Countrywide engaged in rampant wrongdoing:

Predatory lending. “Lawsuits filed around the country have accused Countrywide of preying on borrowers through a variety of unfair and fraudulent tactics that have siphoned equity out of their homes and pushed many into foreclosure,” notes “Unfair and Unsafe.” “Borrowers and regulators have accused the company of: steering borrowers with good credit into higher-cost ‘subprime’ loans; gouging minority borrowers with discriminatory rates and fees; working in cahoots with mortgage brokers who use bait-and-switch tactics to land borrowers into loans they can’t afford; targeting elderly and non-English-speaking borrowers for abusive loans; and packing loans with inflated and unauthorized fees.”   

In one lawsuit, Albert Zacholl, a 74-year-old man living in Southern California, alleges that Countrywide and a pair of mortgage brokers “cold-called and aggressively baited” him. They promised him $30,000 cash, a mortgage that would replace his previous mortgage (which was leaving him owing more each month) and a monthly payment that would not exceed $1,700. Zacholl told the brokers that his income consisted of a pension of $350 a month and Social Security payments of $958, and that with help from his son, he could afford a mortgage up to $1,700. According to the lawsuit, the broker falsified his loan application by putting down an income of $7,000 a month, and then arranged for a high-interest mortgage that required him to pay more than $3,000 a month (and failed to deliver the $30,000 cash payment). The motivation for the scam, according to the lawsuit, was to collect $13,000 in fees.                         

In court papers, the Center for Responsible Lending reports, Countrywide responded that Zacholl “consented to the terms of the transaction” and that any problems were the result of his own “negligence and carelessness.”

Dangerous products.

Countrywide has been a leader in pushing unsound mortgage terms. These include “exploding” subprime adjustable rate mortgages – with reasonable interest rates in the first year that jump in subsequent years, often by as much as 30 percent to 50 percent.

Conflicts of interest.

 “Countrywide has created a corporate structure designed to allow its subsidiaries to work hand-in-hand in squeezing borrowers with excessive fees and penalties,” according to “Unfair and Unsafe.” Countrywide affiliates handle appraisals, credit reports, flood certifications and other documentation for new loans; provide “force-placing” insurance for borrowers whose homeowners insurance has lapsed; and serve as a foreclosure trustee. The interconnections enable Countrywide to charge high fees, and deny borrowers the benefit of third parties’ independent judgment and independent interests.

Broken promises on loan modifications.

The company has a history of failing to fully live up to its promises to help borrowers keep their homes by modifying onerous loans, according to “Unfair and Unsafe.” The report cites a Fall 2007 Credit Suisse review that ranked Countrywide as one of the mortgage lenders least willing to adjust loan terms.

Countrywide says it is committed to working out fair arrangements to keep homeowners in their houses. In December, it entered into an arrangement with the community group ACORN designed to help subprime borrowers.

“During the first 11 months of 2007, Countrywide helped more than 69,000 customers retain their homes through solutions such as loan modifications, long-term repayment plans, special forbearance and other options,” says Steve Bailey, a Countrywide senior managing director of loan administration. “Regardless of the reason for the payment difficulties, Countrywide wants to try to find reasonable solutions for our borrowers.”

Abusive loan servicing.

Borrowers claim that Countrywide has engaged in sloppy and  fraudulent loan servicing that has produced unwarranted fees and foreclosures.

With the collapse of the housing market in 2007, Countrywide’s fortunes turned, its mortgage-backed securities plummeted in value, and the company seemed on the edge of bankruptcy. In January 2008, Bank of America agreed to buy the company.

Do not weep for company co-founder and long-time CEO Angelo Mozilo, however. Mozilo grabbed compensation worth $185 million from 2002-2006, according to an analysis by the U.S. House of Representatives Committee on Oversight and Government Reform. Between November 2006 and December 2007, Mozilo sold $150 million in stock – effectively jumping from a sinking corporate ship for which he was supposedly at the helm, or at least on the captain’s deck.

“Particularly, the discrepancy between Mr. Mozilo’s compensation and Countrywide’s performance is striking,” concludes the Oversight Committee analysis. “In 2007, Countrywide announced a $1.2 billion loss in the third quarter and an additional loss of $422 million in the fourth quarter.” By the end of the year, the company’s stock fell 80 percent from its February peak. “During the same period, Mr. Mozilo was paid $1.9 million in salary, received $20 million in stock awards contingent upon performance, and sold $121 million in stock.”

Mozilo retired as CEO in 2006, remaining as company chair and an employee. The House Oversight Committee analysis shows that his compensation contract, taking effect in 2007, was outrageous, and based in part on recommendations from a compensation consultant loyal to Mozilo rather than Countrywide.   

 Even so, Mozilo was bitter that the company did not give him everything he wanted. In an e-mail message turned up by the Oversight Committee, Mozilo wrote to the compensation consultant:

“I appreciate your input but at this stage in my life at Countrywide this process is no longer about money but more about respect and acknowledgement of my accomplishments. … Boards have been placed under enormous pressure by the left wing anti business press and the envious leaders of unions and other so called ‘CEO Comp Watchers’ and therefore Boards are being forced to protect themselves irrespective of the potential negative long term impact on public companies. I strongly believe that a decade from now there will be a recognition that entrepreneurship has been driven out of the public sector resulting in underperforming companies and a willingness on the part of Boards to pay for performance.”

With attention focused on the discrepancy between Mozilo’s compensation package and Countrywide’s well-being, he waived various payments – totaling $37.5 million – he could have received once Bank of America finalizes its takeover.

In March 2008, Mozilo appeared before the House Oversight Committee to explain his compensation.

 “Countrywide’s board,” he testified, “has aligned the interests of our top executives, including me, with shareholders by making our compensation primarily performance-based – namely, tied to earnings per share and share price appreciation. Since 1982 through early 2007, Countrywide’s stock appreciated over 23,000 percent, reaching a peak market value of over $25 billion from a starting value of zero. As a result, over recent years, I have received substantial income from bonuses under a formula that was approved by our shareholders on at least two occasions.”

He also received substantial stock options, explaining, these were “options that required the price of the stock to rise above the option price before any income could be realized, thereby aligning me squarely with our shareholders.” In anticipation of his retirement, he testified, he put in place a plan to cash in some stock options earned in earlier years. His sales were thus planned in advance of Countrywide’s downturn. But he continues to hold substantial shares in Countrywide – shares worth much less than before the company’s stock collapsed.

Mozilo testified that he is “very proud of the home ownership opportunities that Countrywide has provided for over 20 million families,” while acknowledging the hardship faced by homeowners and Countrywide employees and shareholders.

“In my 55 years in the industry,” he said, “this by far is the worst housing crisis I have ever seen, combined with an unprecedented collapse of the credit and liquidity markets.”

“The problem we face,” he said, “is the deterioration of the value of homes. As values were going up, we had no problem. We had no delinquencies and no foreclosures, because people had options, because people run into three things in their lives generally – loss of job, loss of marriage, loss of health. When that happens and they own a home, and it impacts their income, they generally have a way out – sell the house, refinance, do something.

“That equity that they have in their homes has been virtually wiped out. And that’s what’s exacerbating this whole foreclosure problem.”

Wasn’t that problem entirely foreseeable? Didn’t Countrywide’s lending policies – which generously might be called aggressive – depend on constantly rising housing values in what was obviously a bubble market?

Borrowers, Beware: The Robo-Signers Aren’t Finished Yet

November. 15, 2014

by Gretchen Morgenson  

New York Times

         Remember the robo-signers, those mortgage loan automatons who authenticated thousands of foreclosure documents over the years without verifying the information they were swearing to?

Well, they’re back, in a manner of speaking, at least in Florida. Their dubious documents are being used to hound former borrowers years after their homes went into foreclosure.

Robo-signer redux, as it might be called, has come about because of an aggressive pursuit of former borrowers by debt collectors hired by Fannie Mae, the mortgage finance giant. What Fannie is trying to recoup from these borrowers is the difference between what the borrowers owed on the mortgages when they were foreclosed and the amount Fannie received when it resold the properties.

These monetary amounts — and they can be significant — are known as deficiency judgments. It is legal in most states for lenders to pursue them. (California is one notable exception.) The time limit for debt collectors to go after former borrowers varies from state to state; Florida allows deficiencies to be pursued for 20 years, and borrowers must pay a compounded annual interest rate of 4.5 percent.

The problem, experts say, arises when robo-signed documents enabled banks to foreclose even when they didn’t have legal standing to do so.

“Sending these cases to debt collectors when the underlying foreclosures involved unlawful robo-signing is unfair and potentially even deceptive,” said Kathleen C. Engel, a research professor at Suffolk University Law School in Boston. “Fannie Mae is not entitled to collect on those debts when the foreclosure was unlawful.”

A Fannie Mae spokesman, Andrew J. Wilson, declined to comment on Ms. Engel’s contention. But he said Fannie filed deficiencies “in a minority of cases where there was a foreclosure.” He acknowledged, however, that Fannie was bringing several thousand cases in Florida because of a recent state law requiring that any such borrower suits be filed by July 1 of this year.

            “We do so in instances where we determine the borrower had the ability to pay but chose not to,” Mr. Wilson said. When asked how the company determined a person’s ability to pay, he declined to disclose the method.

Fannie Mae is certainly justified in going after deficiencies from former borrowers, especially those who can pay. And given that the company is taxpayer-owned, its attempts to recover this money are to the greater good.

But as Ms. Engel noted, Fannie’s position loses some ground when the deficiencies it’s pursuing are based on documents filed by known robo-signers. And it turns out that there are quite a few of those.

Before a bank can foreclose on a borrower, it must prove that it has the right to do so. The lender must produce documentation, for example, showing that it holds the note underlying the mortgage.

But this paperwork was often missing or inaccurate. Faced with mounting foreclosures in 2009 and onward, law firms representing the banks set up assembly lines to create new documents giving them the right to foreclose.

Finally, in 2012, these robo-signers got the attention of state attorneys general, who struck a $25 billion settlement with five major banks that had foreclosed, often without proper documentation.

It is true that the deficiencies being pursued by Fannie involve foreclosures that were approved by the Florida courts. But during the height of the foreclosure crisis, those courts were so overwhelmed that they created a new system to speed the process. Staffed with retired judges, it was known as a rocket docket, and lawyers who defended borrowers in these courtrooms said many judges seemed more intent on clearing the backlog than in closely examining the facts of each case.

During the summer of 2010, when Bill McCollum was Florida’s attorney general, he told me he was concerned about the dangers posed by judges who accepted as factual what was put forward in foreclosure documents. “Thousands of final judgments of foreclosure against Florida homeowners may have been the result of the allegedly improper actions of these law firms,” he said.

Four years later, his fears are being realized. Chip Parker, a partner at Parker & DuFresne in Jacksonville, Fla., says he has 60 cases of former borrowers being pursued by Fannie for deficiency judgments involving documents handled by known robo-signers. There are undoubtedly many others, given the several thousand cases being brought by Fannie.

Some of Mr. Parker’s cases involve documents signed by an employee of a defunct Florida law firm and foreclosure mill operated by David J. Stern, who was disbarred this year. That employee, Cheryl Samons, signed over 1,000 foreclosure documents a day, according to a deposition released by the state attorney general in 2010. Ms. Samons could not be reached for comment last week.

Other cases handled by Mr. Parker involve documents signed by lawyers who were disciplined for robo-signing practices in late 2013 by the Florida bar.

Fannie Mae is being represented in these deficiency matters by Dyck-O’Neal, a debt collector in Dallas. Representatives of Dyck-O’Neal did not return a phone call seeking comment.

If Dyck-O’Neal pursues borrowers knowing that robo-signing might have tainted a foreclosure, it could run afoul of state laws barring unfair or deceptive acts or practices, said Ms. Engel, an expert in foreclosure law.

“These entities often go into lower-level trial courts and file brief complaints without adequately documenting the basis for the claims,” Ms. Engel said. “Ninety-five percent of borrowers don’t even show up — they think they don’t have a defense, or they’re scared or can’t afford a lawyer. As long as judges don’t question the claims, the debt collectors win.”

While Fannie contends that it goes after only former borrowers with the resources to repay their debts, it’s not clear that the people being targeted for deficiencies can pay them back.

Ed Lawrence, an electrician in Queens, moved to Brevard County, Fla., to start a new business in 2007 but was not as successful as he had hoped. He fell behind on his mortgage, and his home went into foreclosure. Among the papers is an assignment of mortgage signed by Ms. Samons.

His deficiency judgment is $92,466. “It is beyond my comprehension how I am supposed to pay this,” Mr. Lawrence said in an interview last week. “I’m 60 and basically living hand-to-mouth.”

Mr. Lawrence is not an anomaly among Mr. Parker’s clients, the lawyer said. Most of the people he represents went into foreclosure as a result of divorce, illness or the shattered economy.

An additional challenge for borrowers facing these suits is that many have left Florida and must defend these cases from a distance. Late last month, Mr. Parker filed a class action against Dyck-O’Neal, contending that its attempts to collect these deficiencies violated the Fair Debt Collection Practices Act, which bars debt collectors from suing consumers in courts that are distant or inconvenient to them.

The lead plaintiff in the class action is a former borrower who was sued in Florida but who lives in St. Louis.

“It’s bad enough that Fannie Mae and their collectors are pursuing consumers many years after they’ve lost their homes,” Mr. Parker said. “But the fact that these lawsuits may be built on a foundation of foreclosure fraud is galling.”

Amazing, isn’t it, how the effects of the foreclosure crisis go on and on?



What really happened in Beijing: Putin, Obama, Xi — and the back story the media won’t tell you
Ukraine, Iran’s nukes, the price of oil: There are ties worthy of a Bourne film, if the media connected the dots
November 13, 2014

by Patrick L. Smith


            By way of events on the foreign side, the past few weeks start to resemble some once-in-a-while event in the heavens when everyone is supposed to go out and watch as the sun, moon and stars align. There are lots of things happening, and if we put them all together, the way Greek shepherds imagined constellations, a picture emerges. Time to draw the picture.
            The situation on the ground in Ukraine is getting messy again. Equally, events of the past year now leave Ukraine’s economy not far from sheer extinction. You have not read of this because it does not fit the approved story, but Ukraine’s heart barely beats. Further east, we hear in the financial markets that the ruble’s decline brings Russia to the brink of another financial collapse.
            Let’s see. Oil prices are now below $80 a barrel. It costs me nearly $20 less to put gasoline in my car than it did a year ago, and good enough. But why has the price of crude tumbled in so short an interval? It makes little sense when you gather the facts, and — goes without saying — you get no help with that from our media.
Let’s keep on trucking. Secretary of State Kerry went to Oman for another round of talks on the Iranian nuclear question last weekend. Russia recently emerged as a potentially key part of a deal, which will be the make-or-break of Kerry’s record. In effect, he now greets Russian Foreign Minister Sergei Lavrov with one hand and punches him well below the belt with the other. Somewhere beyond our view this must make sense.
            En avant! Obama went to Beijing last week for a sit-down with Xi Jinping, who makes Vladimir Putin look like George McGovern when he wants to, which is not infrequently. Still in the Chinese capital, our president then attended a meeting with other Asian leaders to push a trade agreement, one primary purpose of which is to isolate China by bringing the rest of the region into the neoliberal fold. (Or trying to. Washington will never get the overladen, overimposing Trans-Pacific Partnership off the ground, in my view.)
            A big item on Xi’s agenda — he was in on the Pacific economic forum, too — was the recent launch of an Asians-only lending institution intended to rival the Asian Development Bank, the World Bank affiliate doing the West’s work in the East. Being entirely opposed to people helping themselves advance without American assistance and all that goes with it, Washington used all means possible to sink this ship. When Obama got off the plane in Beijing, the Asian Infrastructure Investment Bank had $50 billion in capital and 20 members, more to come in both categories.
            Xi, meantime, had a productive encounter — another — with the formidable Vlad. My sources in attendance tell me both put in strong performances. In short order, Russia will send enough natural gas eastward to meet much of China’s demand and — miss this not — in the long run could price out American supplies in other Pacific markets, which are key to the success of the current production boom out West.
            This is a lot of dots to connect. As I see it, the running themes in all this are two:      There is constructive activity and there is the destructive. Readers may think this oversimplifies, but for this there is the ever-lively comment box below. I am willing to listen.
            Let’s go back to early September. On the 5th, Germany brokered a cease-fire between the Ukraine government in Kiev and the rebels in the eastern Donbass region. Washington made it plain it wanted no part of this, preferring to continue open hostilities. And then strange things happened.
            Less than a week after the Minsk Protocol was signed, Kerry made a little-noted trip to Jeddah to see King Abdullah at his summer residence. When it was reported at all, this was put across as part of Kerry’s campaign to secure Arab support in the fight against the Islamic State.
            Stop right there. That is not all there was to the visit, my trustworthy sources tell me. The other half of the visit had to do with Washington’s unabated desire to ruin the Russian economy. To do this, Kerry told the Saudis 1) to raise production and 2) to cut its crude price. Keep in mind these pertinent numbers: The Saudis produce a barrel of oil for less than $30 as break-even in the national budget; the Russians need $105.
            Shortly after Kerry’s visit, the Saudis began increasing production, sure enough — by more than 100,000 barrels daily during the rest of September, more apparently to come. Last week they dropped the price of Arab Light by 45 cents a barrel, Bloomberg News just reported. This has proven a market mover, sending prices to $78 a barrel at writing.
            Think about this. Winter is coming, there are serious production outages now in Iraq, Nigeria, Venezuela and Libya, other OPEC members are screaming for relief, and the Saudis make back-to-back moves certain to push falling prices still lower? You do the math, with Kerry’s unreported itinerary in mind, and to help you along I offer this from an extremely well-positioned source in the commodities markets: “There are very big hands pushing oil into global supply now,” this source wrote in an e-mail note the other day.
            The Russians, meantime, are reported to be sending soldiers and artillery back across, or maybe just across, the Ukrainian border. This we read, but we read nothing as to why this may be so, assuming for argument’s sake it is. We are invited to accept that there is no reason worth reporting.
            I decline the invitation. The possibility-likelihood-probability — it is impossible to say, we are so ill-informed — is that these reported deployments are in reaction to moves kept out of sight. Given Washington’s disapproval of the Minsk accord and its underhanded manipulations in the oil markets since it was signed, I label this a likelihood, at least, maybe more.
            As to the Ukrainian economy, this is getting sordid even before the International Monetary Fund gets its mitts on the place. A Royal Bank of Scotland analyst in Hong Kong, Roland Hinterkoerner, just published a tour d’horizon, a few of the highlights (or lowlights) being these:
            •With the Russian ruble cratering, Kiev recently had to remove a currency peg of 13 hryvnia to the dollar. It dropped 15 percent in the next five trading sessions. From a rate of 8 to 1 a year ago, it now cost 16 hryvnia to buy a dollar.
            •With the banking system in peril, a third of deposits had been withdrawn—before the currency collapsed, this is. “There is no way to repair this damage by doing some kind of recapitalization exercise that may still work in the eurozone,” the RBS man writes.
            •Efforts to stem the hryvnia’s fall have dangerously depleted foreign currency reserves. As of October, the central bank had $12.6 billion dollars in assets—taxi fare in the context.
             •Ukraine owes Russia $1.6 billion in gas bills by yearend—and then faces fees of $700 million a month for new supplies.
            •The Ukrainian automobile association, to burrow in slightly, just reported that new car registrations fell by 65 percent in October from the previous year, to 5,900 units—this in a nation of 46 million. The No. 1 producer, Saporisky Awtomobilebudiwny Sawod, turned out 1,007 vehicles. It has 21,000 employees on the payroll.
            This kind of report leaves me nearly speechless — and our correspondents silent, of course. All that we have read of this past year, events taking place in the name of democracy and a better life for Ukrainians, comes to this. “The economy?” Hinterkoerner concludes. “What economy?”
             Onward. “Going forward,” as the State Department’s chirpy spokespeople like to put it.
            Kerry just finished up in Oman, where a round of talks on the Iran question were held just short of the Nov. 24 deadline for a deal. Russia’s role in these talks has suddenly grown potentially large. To break the impasse over Iran’s centrifuge count, Moscow offers to take most of Iran’s stockpile of unprocessed uranium and send back enriched fuel when Iran needs it to power the nuclear energy program it wants. This is a reprise of an idea first floated five years ago, and this time Tehran finds it acceptable, at least tentatively.
            Put this in the larger context: With the prospect of ending three and a half decades of pointless hostility within reach, this is the moment to be battering Russia as near to a pulp as possible with sanctions, market interventions to its disadvantage, and who can tell what on the military side in Ukraine? You start to think Washington simply cannot help itself, and more on this in a minute.
            And so to Beijing. Nobody will put it this way, but Obama arrived with one failure already accomplished and others to come. It was a mistake to oppose the Beijing-sponsored Asian lending institution in the first place, and already it begins to cost the Americans. The TPP trade pact is no further along, you may have noticed. The climate pact Obama and Xi signed looks so far like an agreement for the sake of an agreement — something Obama could bring home in triumph. The only “successes” American media were able to report were a few market-opening measures of benefit to specific American corporations. Nothing visionary, fair to say. A junior trade negotiator could have got this done.
            And here is why, a point hardly lost on the Chinese: There is no vision on the American side, only resistance and objection. Xi has consistently urged a “new great power relationship,” and if someone can explain why this is not a perfectly logical thought in the face of 21st century realities, again, to the comment box with it.
Washington’s claim to be an unrivaled Pacific power by destiny goes back to Teddy Roosevelt’s imperial cruise around the region after the U.S. defeated the Spanish and massacred the Jefferson-reading Filipino democratic movement. We simply cannot surrender the turf, realities be damned.
            Xi, on the other hand, is all about realities, and not a few have to do with stronger ties with Russia. Xi and Putin shook hands on a historically huge, $400 billion gas deal earlier this year. How did Obama feel when the two announced during his visit that they have just reached another one, this time for $325 billion?
Details: The gas will arrive from Siberia by way of a not-yet-constructed pipeline. PetroChina will take a 10 percent share of a subsidiary of Rosneft, the Russian gas company. By 2020, China will source a quarter of its demand from Russia; the Russians, in turn, will by then sell more gas to China than they now send to Europe.
Listen to the sound of the world turning. Wonder why your media do not pass it on to you.
            Always more in this line, it seems. Russia is also in numerous other energy deals with China, including one that doubles petroleum exports to the People’s Republic. Then there is the Silk Road Investment Fund, a $40 billion vehicle to finance development projects in the seven nations of Central Asia. Relations with Vietnam and Japan, horrible of late, now appear to be on the mend. So much, maybe, for Washington’s role as protector of the region from the reawakening empire.
            “Add this up,” writes Ken Courtis, a close observer of the international scene for decades, “and you have the outline of a number of important initiatives which will be key to China’s increased lead role in development through investment in other emerging market economies.”
            Courtis had a curious exchange with Putin during some of the economic forum sessions in Beijing. He asked if Russia would provide North Korea security guarantees if it agreed to renounce nuclear weapons.
            Putin replied in part: “Your question is too clever. This is not the moment yet even to raise that question, let alone answer it. Often, the problem in the world is not that small countries, who feel they are under siege, are unwilling to change. Rather, it is that the bigger countries are all piling on like bullies in the school yard – and they don’t know when to stop.”
            I hope Kerry and Obama were listening at that moment. As Courtis heard it, “I think Putin was signaling to the West that there will be no more help from Russia with sanctions on North Korea, or anywhere else. One could also read Iran, Syria, Venezuela, etc., into that line of reasoning.”
            I agree. We can start to connect the stars, then, see our constellation, and identify the costs of a consistent pattern of destructive behavior on Washington’s part here, there and everywhere. Specific to the case, the Sino-Russian energy deals cannot possibly be taken as other than long-term responses to the West’s renewal of Cold War hostilities toward Russia and its refusal to countenance China’s emergence. More narrowly, Putin wants an Iran deal to demonstrate Russia’s importance as a global player, yes, but he is not so far from fed up even there.
            The obvious question is what we are watching as all these events unfold and then coalesce into a single reality. This peculiar moment seems to make this reality clear. Nostalgic for the period of primacy known as the American Century, the U.S. cannot accept its passing. Logically enough, the task becomes essentially destructive of the world as it is a-borning — an effort, in the end, to destroy history itself.
            The planet’s other major powers, for all their imperfections and, indeed, disgraces, understand that their time has come, parity between West and non-West is upon us. This is the core reality, not to be lost sight of. China’s and Russia’s domestic problems are rather like America’s; they are to be resolved by Chinese, Russians and Americans, a point we understand easily when it comes to the interference of others but not the other way around, when the question is our interference elsewhere.
            All too bad. But only for those who insist on holding on to the wrong end of the stick. This century’s winners and losers are not yet clearly marked — I have to preserve my optimism on this point — but with each passing event, each mistake, who is fated for which side becomes a little more evident.
            I like the thought a Chinese scholar-turned-diplomat-turned scholar again made at a dinner in Beijing the other night, as passed on by a friend. He spoke of Ukraine, but the remark applies across the board.
            “From our perspective, we see all of this agitation as noise at the surface,” he said. Then he cited that scene from “Macbeth” at Dunsinane Castle, “Life’s but a walking shadow, a poor player that struts and frets his hour upon the stage, and then is heard no more. It is a tale told by an idiot, full of sound and fury, signifying nothing.”
            The Chinese — always attuned to the long view. Who are the idiots in this man’s rendering?
            I leave it there.

            Patrick Smith is the author of “Time No Longer: Americans After the American Century.”   


More Federal Agencies Are Using Undercover Operations

November. 15, 2014

by Eric Lichtblau and Willam M. Arkin  

New York Times


WASHINGTON — The federal government has significantly expanded undercover operations in recent years, with officers from at least 40 agencies posing as business people, welfare recipients, political protesters and even doctors or ministers to ferret out wrongdoing, records and interviews show.

At the Supreme Court, small teams of undercover officers dress as students at large demonstrations outside the courthouse and join the protests to look for suspicious activity, according to officials familiar with the practice.

At the Internal Revenue Service, dozens of undercover agents chase suspected tax evaders worldwide, by posing as tax preparers or accountants or drug dealers or yacht buyers, court records show.

At the Agriculture Department, more than 100 undercover agents pose as food stamp recipients at thousands of neighborhood stores to spot suspicious vendors and fraud, officials said.

Undercover work, inherently invasive and sometimes dangerous, was once largely the domain of the F.B.I. and a few other law enforcement agencies at the federal level. But outside public view, changes in policies and tactics over the last decade have resulted in undercover teams run by agencies in virtually every corner of the federal government, according to officials, former agents and documents.

Some agency officials say such operations give them a powerful new tool to gather evidence in ways that standard law enforcement methods do not offer, leading to more prosecutions. But the broadened scope of undercover work, which can target specific individuals or categories of possible suspects, also raises concerns about civil liberties abuses and entrapment of unwitting targets. It has also resulted in hidden problems, with money gone missing, investigations compromised and agents sometimes left largely on their own for months or even years.

“Done right, undercover work can be a very effective law enforcement method, but it carries serious risks and should only be undertaken with proper training, supervision and oversight,” said Michael German, a former F.B.I. undercover agent who is a fellow at New York University’s law school. “Ultimately it is government deceitfulness and participation in criminal activity, which is only justifiable when it is used to resolve the most serious crimes.”

Some of the expanded undercover operations have resulted from heightened concern about domestic terrorism since the Sept. 11, 2001, attacks.

But many operations are not linked to terrorism. Instead, they reflect a more aggressive approach to growing criminal activities like identity theft, online solicitation and human trafficking, or a push from Congress to crack down on more traditional crimes.

At convenience stores, for example, undercover agents, sometimes using actual minors as decoys, look for illegal alcohol and cigarette sales, records show. At the Education Department, undercover agents of the Office of Inspector General infiltrate federally funded education programs looking for financial fraud. Medicare investigators sometimes pose as patients to gather evidence against health care providers. Officers at the Small Business Administration, NASA and the Smithsonian do undercover work as well, records show.

Part of the appeal of undercover operations, some officials say, is that they can be an efficient way to make a case.

“We’re getting the information directly from the bad guys — what more could you want?” said Thomas Hunker, a former police chief in Bal Harbour, Fla., whose department worked with federal customs and drug agents on hundreds of undercover money-laundering investigations in recent years.

Mr. Hunker said sending federal and local agents undercover to meet with suspected money launderers “is a more direct approach than getting a tip and going out and doing all the legwork and going into a court mode.”

“We don’t have to go back and interview witnesses and do search warrants and surveillance and all that,” he added.

But the undercover work also led federal auditors to criticize his department for loose record-keeping and financial lapses, and Mr. Hunker was fired last year amid concerns about the operations.

A Critical Tool’

Most undercover investigations never become public, but when they do, they can prove controversial. This month, James B. Comey, the director of the F.B.I., was forced to defend the bureau’s tactics after it was disclosed that an agent had posed as an Associated Press reporter in 2007 in trying to identify the source of bomb threats at a Lacey, Wash., high school. Responding to criticism from news media advocates, Mr. Comey wrote in a letter to The New York Times that “every undercover operation involves ‘deception,’ which has long been a critical tool in fighting crime.”

Just weeks before, the Drug Enforcement Administration stoked controversy after disclosures that an undercover agent had created a fake Facebook page from the photos of a young woman in Watertown, N.Y. — without her knowledge — to lure drug suspects.

And in what became a major political scandal for the Obama administration, agents from the Bureau of Alcohol, Tobacco, Firearms and Explosives allowed guns to slip into Mexico in 2011 in an undercover operation known as Fast and Furious.

In response to that episode, the Justice Department issued new guidelines to prosecutors last year designed to tighten oversight of undercover operations and other “sensitive” investigative techniques, officials said. Before prosecutors approve such tactics, the previously undisclosed guidelines require that they consider whether an operation identifies a “clearly defined” objective, whether it is truly necessary, whether it targets “significant criminal actors or entities,” and other factors, the officials said.

Peter Carr, a department spokesman, said that undercover operations are necessary in investigating crime but that agents and prosecutors must follow safeguards. “We encourage these operations even though they may involve some degree of risk,” he said.

Some agency officials say such operations give them a powerful new tool to gather evidence in ways that standard law enforcement methods do not offer, leading to more prosecutions. But the broadened scope of undercover work, which can target specific individuals or categories of possible suspects, also raises concerns about civil liberties abuses and entrapment of unwitting targets. It has also resulted in hidden problems, with money gone missing, investigations compromised and agents sometimes left largely on their own for months or even years.

“Done right, undercover work can be a very effective law enforcement method, but it carries serious risks and should only be undertaken with proper training, supervision and oversight,” said Michael German, a former F.B.I. undercover agent who is a fellow at New York University’s law school. “Ultimately it is government deceitfulness and participation in criminal activity, which is only justifiable when it is used to resolve the most serious crimes.”

Some of the expanded undercover operations have resulted from heightened concern about domestic terrorism since the Sept. 11, 2001, attacks.

But many operations are not linked to terrorism. Instead, they reflect a more aggressive approach to growing criminal activities like identity theft, online solicitation and human trafficking, or a push from Congress to crack down on more traditional crimes.

At convenience stores, for example, undercover agents, sometimes using actual minors as decoys, look for illegal alcohol and cigarette sales, records show. At the Education Department, undercover agents of the Office of Inspector General infiltrate federally funded education programs looking for financial fraud. Medicare investigators sometimes pose as patients to gather evidence against health care providers. Officers at the Small Business Administration, NASA and the Smithsonian do undercover work as well, records show.

Part of the appeal of undercover operations, some officials say, is that they can be an efficient way to make a case.

“We’re getting the information directly from the bad guys — what more could you want?” said Thomas Hunker, a former police chief in Bal Harbour, Fla., whose department worked with federal customs and drug agents on hundreds of undercover money-laundering investigations in recent years.

Mr. Hunker said sending federal and local agents undercover to meet with suspected money launderers “is a more direct approach than getting a tip and going out and doing all the legwork and going into a court mode.”

“We don’t have to go back and interview witnesses and do search warrants and surveillance and all that,” he added.

But the undercover work also led federal auditors to criticize his department for loose record-keeping and financial lapses, and Mr. Hunker was fired last year amid concerns about the operations.

Those guidelines apply only to the law enforcement agencies overseen by the Justice Department. Within the Treasury Department, undercover agents at the I.R.S., for example, appear to have far more latitude than do those at many other agencies. I.R.S. rules say that, with prior approval, “an undercover employee or cooperating private individual may pose as an attorney, physician, clergyman or member of the news media.”

An I.R.S. spokesman acknowledged that undercover investigators are allowed to pose in such roles with approval from senior officials. But the agency said in a statement that senior officials “are not aware of any investigations where special agents have ever posed as attorneys, physicians, members of the clergy or members of the press specifically to gain information from a privileged relationship.”

The agency declined to say whether I.R.S. undercover agents have posed in these roles in an effort to get information that was not considered “privileged,” meaning the type of confidential information someone shares with a lawyer or doctor.

José Marrero, a former I.R.S. supervisor in Miami, said he knew of situations in which tax investigators needed to assume the identity of doctors to gain the trust of a medical professional and develop evidence that is tightly held.

“It’s very rare that you do that, but it does happen,” Mr. Marrero, who has a consulting firm in Fort Lauderdale, Fla., and continues to work with federal agents on undercover investigations, said in an interview. “These are very sensitive jobs, and they’re scrutinized more closely than others.”

Oversight, though, can be minimal. A special committee meant to oversee undercover investigations at the Bureau of Alcohol, Tobacco, Firearms and Explosives, for instance, did not meet in nearly seven years, according to the Justice Department’s inspector general. That inquiry found that more than $127 million worth of cigarettes purchased by the bureau disappeared in a series of undercover investigations that were aimed at tracing the black-market smuggling of cigarettes.

In one investigation, the bureau paid an undercover informant from the tobacco industry nearly $5 million in “business expenses” for his help in the case. (The agency gained new authority in 2004 allowing it to take money seized in undercover investigations and “churn” it back into future operations, a source of millions in revenue.)

Financial oversight was found lacking in the I.R.S.’s undercover operations as well. Detailed reviews of the money spent in some of its undercover operations took as long as four and a half years to complete, according to a 2012 review by the Treasury Department’s inspector general.

Wires Crossed

Across the federal government, undercover work has become common enough that undercover agents sometimes find themselves investigating a supposed criminal who turns out to be someone from a different agency, law enforcement officials said. In a few situations, agents have even drawn their weapons on each other before realizing that both worked for the federal government.

“There are all sorts of stories about undercover operations gone bad,” Jeff Silk, a longtime undercover agent and supervisor at the Drug Enforcement Administration, said in an interview. “People are always tripping and falling over each other’s cases.”

Mr. Silk, who retired this year, cited a case that he supervised in which the D.E.A. was wiretapping suspects in a drug ring in Atlanta, only to discover that undercover agents from Immigration and Customs Enforcement were trying to infiltrate the same ring. The F.B.I. and the New York Police Department were involved in the case as well.

To avoid such problems, officials said, they have tightened “deconfliction” policies, which are designed to alert agencies about one another’s undercover operations. But problems have persisted, the officials said.

It is impossible to tell how effective the government’s operations are or evaluate whether the benefits outweigh the costs, since little information about them is publicly disclosed. Most federal agencies declined to discuss the number of undercover agents they employed or the types of investigations they handled. The numbers are considered confidential and are not listed in public budget documents, and even Justice Department officials say they are uncertain how many agents work undercover.

But current and former law enforcement officials said the number of federal agents doing such work appeared to total well into the thousands, with many agencies beefing up their ranks in recent years, or starting new undercover units. An intelligence official at the Department of Homeland Security, who spoke on condition of anonymity to discuss classified matters, said the agency alone spent $100 million annually on its undercover operations. With large numbers of undercover agents at the F.B.I. and elsewhere, the costs could reach hundreds of millions of dollars a year.

In a sampling of such workers, an analysis of publicly available résumés showed that since 2001 more than 1,100 current or former federal employees across 40 agencies listed undercover work inside the United States as part of their duties. More than half of all the work they described is in pursuit of the illicit drug trade. Money laundering, gangs and organized crime investigations make up the second-largest group of operations.

Significant growth in undercover work involves online activity, with agents taking to the Internet, posing as teenage girls to catch predators or intercepting emails and other messages, the documents noted. The F.B.I., Department of Homeland Security and Pentagon all have training programs for online undercover operations.

Defendants who are prosecuted in undercover investigations often raise a defense of “entrapment,” asserting that agents essentially lured them into a criminal act, whether it is buying drugs from an undercover agent or providing fraudulent government services.

But the entrapment defense rarely succeeds in court.

In terrorism cases — the area in which the F.B.I. has used undercover stings most aggressively — prosecutors have a perfect record in defeating claims of entrapment. “I challenge you to find one of those cases in which the defendant has been acquitted asserting that defense,” Robert S. Mueller III, a former F.B.I. director, said at an appearance this year.

The Times analysis showed that the military and its investigative agencies have almost as many undercover agents working inside the United States as does the F.B.I. While most of them are involved in

internal policing of service members and defense contractors, a growing number are focused, in part, on the general public as part of joint federal task forces that combine military, intelligence and law enforcement specialists.

At the Supreme Court, all of the court’s more than 150 police officers are trained in undercover tactics, according to a federal law enforcement official speaking on condition of anonymity because it involved internal security measures. At large protests over issues like abortion, small teams of undercover officers mill about — usually behind the crowd — to look for potential disturbances.

The agents, often youthful looking, will typically “dress down” and wear backpacks to blend inconspicuously into the crowd, the official said.

At one recent protest, an undercover agent — rather than a uniformed officer — went into the center of a crowd of protesters to check out a report of a suspicious bag before determining there was no threat, the official said. The use of undercover officers is seen as a more effective way of monitoring large crowds.

A Supreme Court spokesman, citing a policy of not discussing security practices, declined to talk about the use of undercover officers. Mr. German, the former F.B.I. undercover agent, said he was troubled to learn that the Supreme Court routinely used undercover officers to pose as demonstrators and monitor large protests.

“There is a danger to democracy,” he said, “in having police infiltrate protests when there isn’t a reasonable basis to suspect criminality.”


Michael S. Schmidt contributed reporting


Putin Is the Biggest Gold Bug

November 13, 2014

by Leonid Bershidsky



Switzerland is preparing to hold a referendum on whether to keep 20 percent of its international reserves in gold. Meanwhile, Russia, which would never ask its citizens to weigh in on such matters, is increasing its gold holdings. It accounted for 59 percent of net gold purchases by central banks in the third quarter of 2014, according to the World Gold Council. Russia has been increasing its stockpile since the global financial crisis, and the more recent Western sanctions — – which the European Union said today might be strengthened — have only confirmed to Russian policy makers that they’re doing the right thing.

Central banks have been net buyers of gold since 2010:

World Gold Council

Emerging economies drove the change: The 2008 financial crisis and Europe’s debt woes undermined faith in reserve currencies such as the dollar and the euro. Economists who are close to the Kremlin, and far removed from the global academic mainstream, have been telling President Vladimir Putin that the dollar was doomed because the Federal Reserve was printing too much money and that Russia needed to reduce its dependence on the shaky Western financial system. Those ideas may be convincing; they echo the reasoning of the Swiss populists who initiated the gold referendum.

After the annexation of Crimea in March, Putin’s economic adviser Sergei Glazyev made “financial sovereignty” a hot subject for the country’s paranoid security elite. In an interview in May, Glazyev said:

Of course, all the freely convertible currencies are today under American control: The euro through NATO mechanisms, the pound through the U.S. alliance with Great Britain, the yen through Japan’s political dependence from the U.S. Nevertheless, assets in our trade partners’ currencies are, to a certain extent, a replacement for keeping international reserves in U.S. Treasuries. So are precious metals. I believe that in a situation of growing military and political confrontation the gold price will go up again. And let’s not forget that Americans’ refusal to honor their debts will undermine trust ion the dollar not just in this country but in others. It will be a step toward the end of the American financial empire. It will give us a chance to be among the first to suggest a new configuration for the world financial system, in which the role of national currencies would be significantly higher.

Glazyev’s forecast was wrong: Russia’s newly confrontational relationship with the West didn’t cause the price of gold to recover. The spot price is down 16 percent from this year’s high, reached March 14, even though Russia’s purchases have increased. After buying just 6 metric tons of the metal in the first quarter, it acquired 109 tons in the next six months, more than in each of the previous two full years, according to the World Gold Council.

Russia’s gold stockpile is now bigger than China’s, and fifth in the world after those of the U.S., U.K., France and Italy. In dollar terms, gold made up 10.5 percent of the country’s international reserves on Nov. 1, up from 8.4 percent a year earlier. That figure also reflects the fall in the ruble’s value, as well as the decline in currency reserves caused by the central bank’s efforts to fund Russian borrowers that can’t refinance foreign debts because of the sanctions. Nonetheless, the central bank’s data, which value the country’s stock of gold at $45.3 billion, don’t appear to accurately reflect the purchases reported by the World Gold Council.

Between April and September, the dollar value of Russia’s gold reserves only increased by $1.6 billion, though the additional 109 tons of the metal acquired in the second and third quarters had a value of $4.2 billion on Oct. 1. The price drop in that period doesn’t explain the discrepancy.

In other words, Russian statistics appear to underestimate the value of the country’s gold, even as the metal accounts for a growing share of its international reserves. The central bank buys gold for rubles from local producers who before the sanctions sold much of their output to Russian banks, which exported it. Since the imposition of the sanctions, exports from Russia’s state-owned banks have stalled, even though gold isn’t covered by the restrictions. The decline in foreign demand has allowed the central bank to replenish its reserves at lower cost.

The growth of Russia’s gold reserves is evidence of both the leadership’s paranoia about the West and the country’s resilience. Few other nations are able to extract relatively liquid foreign reserves from the ground.

If the Swiss vote to increase their country’s gold reserves above 20 percent, the Swiss National Bank will be forced to make huge purchases in the market, driving up the value of the Russian stockpile. The Swiss People’s Party, if it succeeds, will have helped Russia weather the sanctions and the recent decline in the price of oil.




The ‘USA Freedom Act’ Is A Fraud
November 17, 2014
by Justin Raimondo,
            In the wake of the Edward Snowden revelations, the rush was on to rein in – or appear to rein in – the Surveillance State. The only really authentic effort was led by Rep. Justin Amash, the libertarian Braveheart, whose bill to completely defund the unconstitutional activities of the National Security Agency was narrowly defeated by a coalition of Clintonian Democrats and neoconservative Republicans.
            But that wasn’t the end of it.
            Two camps coalesced around two completely different concepts of “reform”: Sen. Diane Feinstein introduced the “FISA Improvement Act,” essentially an extension of the NSA’s powers. Rep. Jim Sensenbrunner (R-Wisconsin), author of the infamous “Patriot” Act, called it “a joke,” and the bill was universally mocked.
            On the other side of the barricades, the proponents of the original USA Freedom Act basically dismantled the promiscuous collection of Americans’ phone records and other communications by the NSA. While Feinstein’s bill languished with few co-sponsors and little support, the Freedom Act made it to the Judiciary Committee – where it was gutted of most of its content. As I wrote at the time:
            “The ‘compromise’ bill deploys the time-honored bureaucratic weapon of linguistic obfuscation to redefine language and use it in ways no ordinary person would recognize. In translating the intent of legislators into lingo describing the technical architecture of our emerging police state, terms like ‘selector’ can be interpreted broadly enough to put not even a dent in the NSA’s armor.
            “The final legislative product will be an amalgamation of the language contained in both the original Sensenbrenner bill and the Feinstein extension of the NSA’s powers, leading to the creation of a new hybrid system in which the power of the State to track, surveil, and investigate Americans on suspicion of ‘terrorism’ will be extended in more ways than it is (theoretically) restricted.”
            This is precisely what has occurred with the final bill. Rather than fundamentally changing the way the NSA scoops up data, the bill merely outsources collection to immunized telecoms, compelling them to do the NSA’s dirty work.
            The “Freedom Act” is quite free with its Orwellian redefinition of common words to mean the exact opposite of what they have traditionally meant: for example, the bill defines a “selector” in such a way as to permit NSA to report a dragnet order collecting everyone’s VISA bill as a single order targeting specific alleged terrorist outfits – when, in the real world, it would legalize surveillance of over 300 million US citizens. No wonder Deputy NSA Director Richard Ledgett says that under the terms of the bill “the actual universe of potential calls that could be queried against is potentially dramatically larger.”
            Under the present arrangement, government spies must operate within certain parameters that theoretically minimize “accidental” collections of Americans’ data. The bill actually weakens these existing minimization procedures: instead of encoding them in law it hands the job of devising “privacy procedures” to the Attorney General, rather than the FISA court. What this means is that, under the proposed legislation, if the court found the NSA or other government agency spying on an individual (and his or her network of friends and acquaintances) because they engaged in constitutionally protected speech, the court would no longer have the authority to demand the destruction of those records. This is a giant step backward.
            The so-called “transparency” provisions in the bill contain numerous loopholes, including exemptions for back door searches by the FBI, and the possibility that the DNI may issue a certification claiming there are operational reasons why he or she can’t report the number of Americans whose information has been collected. Rather than reveal anything meaningful, the provisions in the bill covering statistics to be submitted by the government will actually hide how many individuals are having their non-communications records – purchases, financial records, etc. – collected and stored. Under the procedures set up by this bill, we’ll never know how many Americans the FBI is spying on by collecting and storing their emails, call records, Internet searches, etc., because the reporting procedures are designed to conceal.
            The misnamed “USA Freedom Act” holds out the promise of “reform,” but its main purpose is to mislead. It doesn’t minimize the intrusive surveillance techniques currently used by the NSA and other government agencies: instead it codifies them, in some instances, and in other instances masks ongoing abuses.
            Some civil liberties groups, like the ACLU and the Electronic Frontier Foundation, argue that the present bill is “a first step,” and is better than nothing. This is nonsense: this bill is worse than nothing. With the passage of the USA Freedom Act the momentum for real reform will be blunted and allowed to dissipate. Further efforts to roll back the awful power of the NSA will be met with cries of “Didn’t we already do this?” If this bill passes, the Washington insiders will win out, and the Surveillance State will remain intact – arguably even more powerful than before.
            Some may say: But aren’t you taking an all-or-nothing attitude? The answer is: not at all. A real reform means a partial reining in of the NSA, with no new extensions of its reach. This bill includes a full-scale codification of abuses coupled with ambiguous and easily reinterpreted “reforms” that don’t mean what they appear to mean.
            Sen. Rand Paul (R-Kentucky), one of the original supporters of the bill before it was gutted, has said through an aide that Sen. Leahy’s reforms “don’t go far enough. There are significant problems with the bill, the most notable being an extension of the Patriot Act through December 2017.”
            This is the kind of radical-but-reasonable stance that can lead to real reform – not the phony variety being pushed by Sen. Leahy, the ACLU, and the rest of the limp-wristed beaten-down liberals who have grown so accustomed to the Warfare State that they can’t imagine anything else. Their timidity won’t restore our old Republic – only the principled stance taken by Sen. Paul and those calling for the outright repeal of the odious “Patriot” Act have a shot at doing that.

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