Sunday, May 29, 2011

Rational Thinking. Not Nationalism.

A nation that lets nationalism govern its people is doomed to be overrun by oligarchs. Nationalism, by definition is emotional and emotions cannot be the cornerstone for sound policy. If a political issue has to be solved by the State, which I think is a misnomer, then truth, an informed public, and intelligent debate have to be the driving factors behind any laws or state actions. 

This is far from the case sadly. Take for example the fight over who to replace Dominique Strauss-Kahn after the until-recently-IMF-chief faced rape charges. The search for his successor so far has been mainly a question of which nation-state coalitions will be able to push their designated candidates most successfully. Qualifications aside (you can rest assured every candidate holds a Ph.D from a prestigious institution), missing from the conversation is any substantive discussion about economic policy. Take this Bloomberg article from May 19th, appropriately titled, "Europe Aims to Keep IMF Job as Strauss-Kahn Faces Exit Call".
"South African, Russian and South Korean officials have called for a candidate from an emerging market, while Brazil indicated it won’t push for the switch. China’s government asked for a 'fair and transparent process'. --- 
German Chancellor Angela Merkel said May 16 there are “good reasons” for Europe to keep the top job. She was echoed that day by Belgian Finance Minister Didier Reynders, and by his counterparts Borg of Sweden, Jan Kees de Jager of the Netherlands and Elena Salgado of Spain yesterday." 
This divide between Emerging Market nations on the one hand, versus the European Union on the other paints clearly the inherent problem with international governing bodies, and governing institutions in general. You are always going to have a constituency that is being given to and you are always going to have a constituency that is taking from. With Portugal earlier this month being approved a $36.8 billion loan, and with Greece unable to deliver fiscal austerity (big surprise), it is only natural for the European nations to call for greater control of their finances. As of this moment, it appears as if France's finance minister Christine Lagarde will be replacing Mr. Kahn. More from Bloomberg:
"South African Finance Minister Pravin Gordhan in an interview today said Trevor Manuel, his predecessor, is 'highly respected in the world' and that the country is already in talks with other developing economies on a possible candidate. 
Bank of Korea Governor Kim Choong Soo in Seoul today said he hoped 'this will be an opportunity for a country in the emerging economies to take the post.'
Emerging markets 'have every right to compete for leading positions in international organizations,' Russia’s central bank Deputy Chairman Sergei Shvetsov said. His country in 2007 nominated a former Czech prime minister to counter Strauss- Kahn’s candidacy."
The Economist a few days ago, echoed my sentiment somewhat:
But it [Christine Lagarde] is still wrong. To begin with, the stitch-up, whereby the head of the IMF is a European and the head of the World Bank is an American, is a disgrace. International posts should be filled according to merit. And the growth of emerging economies makes it even less defensible.  
Moreover, the case against appointing a euro-zone finance minister as head of the IMF now is overwhelming. The main issue facing the fund is the euro zone. The fund is supposed to be an impartial arbiter of good economic policy. It is the only organisation likely to force a rethink of the euro zone’s failed strategy towards Greece, Ireland and Portugal.
This is still a divergence from my line which says that the nationality of the successor should not even be part of the discussion whereas the Economist is pushing for a non-Euro zone candidate. They are certainly right in that Euro zone candidates, especially Largarde, are likely to push for more bailouts for European debt-laden countries, but this type of discrimination almost perpetuates the idea that leaders should be selected based off the same feelings espoused by nationalist sentiment. It predicates the idea that you can't debate ideas and their merits by tying a nationality to a predisposed policy destined to serve that nation's interest. In the case of the new IMF chief, the discussion is a product of what I first heard Nigel Farage describe as "EU nationalism".

Robert Wenzel points out that all the Economist candidates are either insiders, banksters, or both. What I think would be beneficial is if the dialogue focused more on the prevention of bailouts (robbery), and how the debt-laden nations will actually pay down their debts and cut their deficits. The fact that Greece is in the news again a year after they're initial bailout was approved shows the extreme lack of wisdom of the elites that run the IMF. The conversation and subsequent policy needs to be moved towards no bailouts and no loans. It's bad enough that government finances are carried by the backs of taxpayers. And even worse that government finances are carried by the backs of taxpayers in other countries.

The same nationalism was witnessed earlier this month after President Obama ordered the assassination of Osama bin Laden. Hysterical chants of U.S.A.! filled the streets in D.C. and other cities. Left ignored were questions of bin Laden's guilt in the 9/11 attacks which was never proven. Questions over the violation of Pakistani sovereignty. Questions over assassinating un-armed people without giving them due process. Questions over the deaths of the other four people in the house during the raid. Questions about our war with Afghanistan and covert war with Pakistan. The fact that very few people ask these questions and search for their answers reflects vividly the integrity behind the "freest nation on Earth" and goes to show that American nationalism is about as blind as pure devotion to a sports team.

Nothing though, shouts blind nationalism like this video:

Tuesday, April 5, 2011

Obama Steps Once More to the Right: The Revival of Military Commissions for Guantanamo Detainees

The Obama Administration recently reaffirmed its support for military commissions by abandoning plans for a civilian trial in the case of Khalid Sheikh Mohammed, the alleged mastermind of the 9/11 attacks. Although the new policy has been known for some time now after the conviction of Ahmed Ghailani in civilian court, the new openness emphasizes the Administration's rekindling of Bush-era detention policies. Bloomberg reports:
Attorney General Eric Holder blamed Congress for the administration’s decision to move the trial of Khalid Sheikh Mohammed and his four alleged co-conspirators to the military justice system. Lawmakers enacted legislation that blocked the administration from moving terror suspects from Guantanamo to the U.S. for trial, and the administration decided it couldn’t allow the case to be delayed while it worked to repeal the restrictions, Holder said.
“Members of Congress have intervened and imposed restrictions blocking the administration from bringing any Guantanamo detainees to trial in the United States, regardless of the venue,” Holder told a news conference in Washington yesterday. “Those unwise and unwarranted restrictions undermine our counterterrorism efforts and could harm our national security.”
This isn't the first time the Obama Administration has blamed Congress for its policies relating to Guantanamo Bay prisoners. Back in January, he signed a bill preventing Gitmo prisoners from arriving to the United States to stand trial.
President Obama then said, "My administration will work with the Congress to seek repeal of these restrictions, will seek to mitigate their effects, and will oppose any attempt to extend or expand them in the future." 
As Glenn Greenwald writes at, the notion that Congress forced the President to accept its restrictions barring funds for the transfers of Gitmo detainees is complete nonsense. Greenwald writes,
"Aside from the fact that the Obama administration long ago announced that it would retain the military commission system, the White House -- long before Congress acted to ban transfers of detainees to the U.S. -- removed decision-making power from the DOJ in the KSM case and made clear it would likely reverse Holder's decision." 
Nevertheless, Obama did not veto the bill or fight to have the provisions removed (the Guantanamo restrictions were placed in a defense authorization bill). This isn't the first time the President has broken a promise either. Before taking office, Obama vowed to close Guantanamo Bay within a on year period.  In November 2009, Attorney General Eric Holder announced that the Administration would prosecute Mohammed in a Manhattan federal courtroom.

Holder did make some interesting statements concerning the merit of federal court systems however. In his Monday speech on the Prosecution of the 9/11 Conspirators he said:
"As the indictment unsealed today reveals, we were prepared to bring a powerful case against Khalid Sheikh Mohammed and his four co-conspirators – one of the most well-researched and documented cases I have ever seen in my decades of experience as a prosecutor.   We had carefully evaluated the evidence and concluded that we could prove the defendants’ guilt while adhering to the bedrock traditions and values of our laws.   We had consulted extensively with the intelligence community and developed detailed plans for handling classified evidence.   Had this case proceeded in Manhattan or in an alternative venue in the United States, as I seriously explored in the past year, I am confident that our justice system would have performed with the same distinction that has been its hallmark for over two hundred years."
He went on,
"The fact is, federal courts have proven to be an unparalleled instrument for bringing terrorists to justice.   Our courts have convicted hundreds of terrorists since September 11, and our prisons safely and securely hold hundreds today, many of them serving long sentences.   There is no other tool that has demonstrated the ability to both incapacitate terrorists and collect intelligence from them over such a diverse range of circumstances as our traditional justice system. Our national security demands that we continue to prosecute terrorists in federal court, and we will do so.   Our heritage, our values, and our legacy to future generations also demand that we have full faith and confidence in a court system that has distinguished this nation throughout its history."
It might be good symbolism that Holder still holds some principles concerning civil liberties, but what is unsettling is that he obliges himself to ignore them.

The arguments in favor of trying the Guantanamo prisoners in military commissions is baseless. The first is that the prisoners are too dangerous to be tried in federal court because they are terrorists, or as the right-wing hawks like to refer to them, war criminals. The second is that civilian trials are incapable of properly prosecuting terrorists even though they are capable of properly prosecuting every other class of criminal that has ever existed.

As Rachel Maddow at MSNBC pointed out dramatically, there have been numerous cases of terrorists being tried in federal courts, on U.S. soil, without any substantiated physical threat to any person in the region surrounding the court. In fact, the only Guantanamo detainee to ever be transferred to the U.S. for a civilian trial received a life sentence. The hysteria surrounding his case lied in the Judge's refusal to allow evidence obtained through torture, and the fact that all but 285 counts against Ghailani were thrown out. And as Andy Worthington pointed out in an interview with Scott Horton of Antiwar Radio, the only reason the prosecution was allowed to proceed in federal court was because the Department of Justice knew it could secure a conviction. Otherwise, the current system of indefinite detention would and does remain in place. The material result of convicting Ghailani on a charge of conspiracy was the same as holding him in Cuba for the rest of his life.

Contrast this with the fool proof military commission system. As Jim Lobe reports at Inter Press Service,
"At the same time, military commissions, whose operations were suspended by Obama after taking office, have obtained only six convictions—four by plea bargain—that actually resulted in much lighter sentences due to doubts about whether the commissions’ procedures could withstand scrutiny once they were appealed to federal courts."
Moreover, Ramzi Yousef, who received two life sentences in a U.S. district court in Manhattan, is now sitting in a supermax facility in Colorado for his role in the 1993 bombing of the World Trade Center and the Bojinka plot. Where was the intense climate of fear and concern for proper justice when he was being convicted? Where is the fear and concern for America's safety in the case of Farouk Abdulmutallab or Faisal Shahzad? These are individuals who attempted to attack the U.S. through destructive capabilities and they were both tried and convicted in federal court. As terrorists who tried harming the U.S. within the first two years of the Obama Administration, there was little public outcry concerning their actions and fates. Most of the 174 prisoners still at Guantanamo Bay have been there for years and most Americans are unable to name a single prisoner and describe the crime he is accused of.

Since the decision to prosecute Gitmo detainees in a civilian trial or a military tribunal rests on whether or not there is enough evidence to get a conviction, it is worth noting that Khalid Sheikh Mohammed admitted to an al Jazeera reporter that he, along with Ramzi bin al-Shibh were responsible for orchestrating the 9/11 attacks. It's unclear that Obama is pandering to the Right, but if he is it is extremely pathetic for the President to defer this prosecution for purely political reasons.

The existence of military commissions remains dangerous for a nation that is supposed to be a free society. When the government is engaged in a state of permanent war, it is nearly impossible to return to the precedent where the rule of law is respected. Worse yet, is that we are engaged in a war on terrorism which is a strategic tactic. This means that any person accused of using this tactic becomes an enemy combatant and loses all constitutional rights including habeas corpus. Unfortunately for those of us who care for civil liberties, it is doubtful that Guantanamo Bay will close within the next ten years and habeas corpus restored.

Friday, April 1, 2011

On the Edge of Libyan Mission Creep

As the Libyan civil war approaches its eighth week, and as involvement by Western powers continues into its third week, the future of the Qaddafi regime remains obscure. After two weeks of airstrikes from coalition forces, the Libyan army and mercenary forces remain intact and the fighting rages on in a ground war. While the Obama Administration insists that regime change is off the table, it is difficult to interpret all of our military operations in a manner consistent with UN Resolution 1973's mandate of "protecting civilians". As Glenn Greenwald writes at Salon, 
"The no-fly zone was established long ago; the focus is now on attacking Qadaffi's ground forces, enabling rebel advancements, and regime change."
After classified briefings on Wednesday by the secretaries of State and Defense on Libya, Senator Jimm Webb of Virginia said at a Senate Foreign Relations Committee hearing, 
“We are clearly involved in regime change.  It is definitely a diplomatic reality.”
Opposition fighters were locked in combat with pro-
Gaddafi forces near Brega on Friday [Reuters]
Two days ago, the NY Times reported "The Obama administration was engaged in a fierce debate over whether to supply weapons to the rebels in Libya, according to senior officials." Of course if Qaddafi isn't shot in the head by a defector in a miraculous situation, and if the rebels are to stand any chance in overthrowing the regime, they are bound to require arms supplies from third parties. There are consequences we should embrace however. The NY Times reports:
But some administration officials argue that supplying arms would further entangle the United States in a drawn-out civil war because the rebels would need to be trained to use any weapons, even relatively simple rifles and shoulder-fired anti-armor weapons. This could mean sending trainers. One official said the United States might simply let others supply the weapons.  
The question of whether to arm the rebels underscores the difficult choices the United States faces as it tries to move from being the leader of the military operation to a member of a NATO-led coalition, with no clear political endgame. It also carries echoes of previous American efforts to arm rebels, in Angola, Nicaragua, Afghanistan and elsewhere, many of which backfired. The United States has a deep, often unsuccessful, history of arming insurgencies.
Senator Carl Levin, chairman of the Armed Services Committee, raised a crucial point. After speaking with two senior administration officials about the issue, Mr. Levin raised the question of what the weapons would be used for after a ceasefire:
“Would they stop fighting if they had momentum, or would they be continuing to use those weapons?” he asked. 
We should keep in mind that after arming the mujahedeen against the Soviets in the 1980's, many of our former allies turned against the United States and the NATO-backed Northern Alliance. This includes Osama bin Laden, who was not hostile to American intervention in Afghanistan's fight against its former occupier. The legality of arming the rebels is not certain as well; many legal experts argue that the action will be in violation of the UN arms embargo. And it is very likely that the U.N. along with NATO allies are already arming the rebels and providing material assistance.
According to the latest article from Al Jazeera, Forces loyal to Libya's leader of nearly 42 years spent much of this week pushing the rebels back about 160km along the coast. Attempting to regroup, the rebels hit back with mortars on Friday - weapons they previously appeared to have lacked. The previous night, they drove in a convoy with at least eight rocket launchers - more artillery than usual.
The rebels also appeared to have more communication equipment such as radios and satellite phones, and were working in more organized units, in which military defectors were each leading six or seven volunteers.
Reuters also recently reported that President Obama authorized a secret order authorizing covert U.S. government support for rebel forces. The order is known as a "presidential finding" which authorizes secret operations by the CIA. According to The Nation's Jeremy Scahill, it is normal for U.S. Presidents to order the CIA in foreign countries covertly for intelligence gathering purposes. CNN sheds some light on the history and implications of presidential findings:
A former senior intelligence official said covert action is seeking to change such things as the political future of a country, the attitudes of the populace, and/or the economic conditions within a nation.
 For instance, in the case of the rebels, the former official suggested some of the things the CIA operatives are doing on the ground are "finding out who they (the rebels) are, what they are doing and what they need" to be successful. The official went on to say the officers "might be advising on how to target the adversary, how to use the weapons they have, reconnaissance and counter surveillance."
In addition, McClatchy published an article detailing the profile of a new Libyan rebel leader who traveled back to Libya two weeks ago from the U.S., his home for the past twenty years. It's curious that he lived in suburban Virginia, remarkably close to Langley which happens to be the home of CIA headquarters.

The escalation of U.S. military involvement seems to provoking a lot of internal disagreement within the Administration. Secretary Gates for one seems hell-bent on getting himself fired before he retires from his post later this year. It is strangely reminiscent of former State Department spokesman P.J. Crowley’s comments earlier this month when he characterized Private Bradley Manning's confinement as "counterproductive" and "stupid". In testimony to the House Armed Services Committee, Secretary Gates said his own view was that any assistance to the Libyan opposition ought to come from another country. While not outright condemning U.S. intervention, he has strongly expressed his concerns over mission creep in recent days. McClatchy reports further:
Repeatedly pressed by members of both parties about whether there would be American “boots on the ground,” a euphemism for U.S. troops, Gates at one point replied, “Not as long as I’m in this job.”
In addition, we have some new reports highlighting civilian deaths as a result of coalition airstrikes. According to the Jerusalem Post, the top Vatican official in Tripoli has claimed he has received reliable witness accounts of civilian deaths inflicted as a result of "humanitarian raids". 
"I have collected several witness accounts from reliable people. In particular, in the Buslim neighborhood, due to the bombardments, a civilian building collapsed, causing the death of 40 people," he told Fides, the news agency of the Vatican missionary arm.
The BBC has a more detailed piece today reporting that 7 civilians were killed in a coalition airstrike and 25 were injured. The strike, which took place on Wednesday, hit a truck carrying ammunition, and the resulting explosion destroyed two nearby homes.
Four of the dead were female, including three children from the same family, aged between 12 and 16, the BBC's Ben Brown reports from Brega. Three boys, aged between 14 and 20, were also killed.
It's rather sickening to see the humanitarian interventionists content with the fact that coalition airstrikes and missiles are killing civilians. The justification for this is the claim that more civilians would have been killed by pro-Qaddafi forces otherwise. Even if that were true, and it is impossible to prove, the true humanitarian position is unwavering in its conviction that it is always unjust to kill civilians under any circumstances.  

Although calls for a ceasefire by the opposition was rejected earlier today, the movement of both pro-Qaddafi and opposition forces back and forth across the country suggests a stalemate may be declared. The growing number of defectors in Qaddafi's camp gives hope to all those who want to see him out of power. Whatever the situation on the ground may be, let's hope the U.S. moves closer to a policy of pure abstention. 

Thursday, March 31, 2011

29,000 Pages Under the Sea: The New Federal Reserve Loan Disclosures

After thwarting Freedom of Information Act requests by Bloomberg and Fox for over two years, the Federal Reserve today released over 29,000 pages of secret loan documents under court order. The release contains names of financial institutions that borrowed from the discount window during and after the financial crisis, establishing a new precedent in Fed history. 

Public interest in these disclosures is bound to be minimal as it was when details of the emergency lending programs were made public. It will be interesting to note however, if there are political consequences to the new information. I'm certainly not one to place much hope in Congress, but there is a plethora of "American Exceptionalism" floating around and the "China is a currency manipulator" narrative hasn't gotten old yet. Hopefully the reactionaries in Congress will be alarmed by the fact that foreign banks were the recipients of tax-payer-backed loans during the crisis, when credit was scarce for everybody. 
According to Bloomberg, "the New York branch of Bank of China Ltd. was the second-largest borrower from the discount window during a nine-day period in August 2007 as subprime-mortgage defaults first roiled broader markets. The unit of China’s oldest bank borrowed $198 million on Aug. 17 of that month as two Deutsche Bank AG divisions borrowed $1 billion each, according to a document released today, which covered outstanding credit in the period from Aug. 9 through Aug. 17. The firms were the largest borrowers listed." 
The Fed also lent to Arab Banking Corp., a lender part- owned by the Central Bank of Libya. In October 2008, the bank, which was then 29% owned by the Libyan state, borrowed $1.1 billion through the discount window. Curious that we often supply countries with money and arms before we bomb them.

Missing from the release is the collateral the Fed accepted as it expanded the monetary base through discount window lending operations. This half of the equation is vital, revealing the risks involved in all loan activity. If the collateral posted is worth less than 100 cents on the dollar, in the case that a borrowing institution defaults, the loss on that loan is paid for by ordinary tax payers through price inflation. If the loans are backed by good collateral there is no legitimate reason for the public not to know about the details of the loan. The only institutions that care for such secrecy are the banks that like cheap free money and fear public knowledge of how close they are to insolvency, and the Fed that serves to "provide stability" and inflate the money supply. 

And we do indeed have an example of a zombie bank that was kept alive by the Fed.
One bank, Chicago-based Park National, owed the Fed $345 million before regulators shut it down in October 2009, according to data gleaned from a Freedom of Information Act request. Park National had been a constant customer at the window for more than 18 months before it failed, records show. “Solvency is the big issue,” said Arthur Wilmarth, a professor at George Washington University Law School in Washington. “Was the Fed keeping banks alive when they should have died?”
“The Fed really provided an inexpensive source of funding,” Daniel Watts, the former executive vice president at Park National in charge of all business lines, said in a telephone interview. The Federal Deposit Insurance Corp. estimates Park National’s closure cost its insurance fund $656 million. The FDIC typically repays discount window loans in the process of resolving a failed bank.
So it is actually confirmed that the Fed does take losses on loans made through the discount window. But instead the costs aren't passed on to taxpayers through price inflation: They're passed on through the FDIC. This means consumers are either paying higher premiums in fees for the banks to keep the FDIC solvent, or the taxpayers are paying for the FDIC fund through its direct line to the Treasury. 

And of the banks that have failed, eight of them had outstanding discount window loans according to Bloomberg. We also have some insight into the process of establishing a line of credit to the discount window:

First Bank of Idaho in Ketchum established its discount window borrowing program with the San Francisco Fed in May 2008, according to Peter Minford, the former chief financial officer. He said the program “was very easy to administer.”
“Basically, once the line was established, no questions were asked when draws were requested,” said Minford, now president of Data Informatics LLC, a Ketchum, Idaho-based firm that provides accounting software to community banks.
The fight for Fed transparency up until now has been a remarkable one. In 2009, Representative Ron Paul released H.R. 1207 in the House of Representatives and the bill went on to garner support from 320 cosponsors. This was later accompanied by a Rasmussen poll conducted in July of 2009 which showed 75% of Americans supported his proposal to Audit the Federal Reserve. The Fed, along with the Clearing House Association, a group of major U.S. and European banks, continually fought the FOIA requests in the courts. In the spring of 2010, when Dodd-Frank was on the verge of passage, Senator Sanders of Vermont caved in to pressure from the White House, the Fed, and Treasury. He subsequently watered down his proposed Fed audit to a one-time audit of the Fed's emergency lending programs. Resistance to pushes for further disclosure was halted at the request of the Obama Administration. Part of this was due to the fact that all discount window loans made after July 21, 2010 are to be made public after a two year time lag; another result of the Dodd-Frank law. And here we are, with over 29,000 pages of documents detailing loan operations with no idea how large the release would be if it included all transactions with foreign governments, foreign central banks, the IMF, the World Bank, monetary policy functions including open market operations, and all activity engaged in by the Federal Open Market Committee.

Fed apologists as always are at the ready when aiming to protect the secrecy of the central bank.
“The full monty may not be a good thing,” says Frederic Mishkin, a former Fed governor.
“I am concerned that in the next crisis it will be more difficult for the Federal Reserve to play the traditional role of lender of last resort,” said Donald Kohn, former Fed vice chairman and senior fellow at the Brookings Institution in Washington. “Having these names made public, or the threat of having them made public, could well impair the efficacy of a key central bank function in a crisis -- to provide liquidity to avoid fire sales of assets -- because banks will be reluctant to borrow.” 
But as Ron Paul says, independence is just a euphemism for secrecy.  
William Greider, author of the 1989 Fed history “Secrets of the Temple,” says the bank is losing the battle to maintain its mystique. “What has happened in the last three years is the mask has been torn away from the central bank,” he says. “And they can’t put it back on.” 
And there you have it. In July, the GAO is due to release the findings of an audit that is bound to release some further information. But it won't be enough. And we are losing momentum.