Senate bill rewrite lets feds read your e-mail without warrants

Proposed law scheduled for a vote next week originally increased Americans' e-mail privacy. Then law enforcement complained. Now it increases government access to e-mail and other digital files.


A Senate proposal touted as protecting Americans' e-mail privacy has been quietly rewritten, giving government agencies more surveillance power than they possess under current law.

CNET has learned that Patrick Leahy, the influential Democratic chairman of the Senate Judiciary committee, has dramatically reshaped his legislation in response to law enforcement concerns. A vote on his bill, which now authorizes warrantless access to Americans' e-mail, is scheduled for next week.

Leahy's rewritten bill would allow more than 22 agencies -- including the Securities and Exchange Commission and the Federal Communications Commission -- to access Americans' e-mail, Google Docs files, Facebook wall posts, and Twitter direct messages without a search warrant. It also would give the FBI and Homeland Security more authority, in some circumstances, to gain full access to Internet accounts without notifying either the owner or a judge. Read more >>

Bangladesh suspends trading as stock market plunged

Image by Getty Images via @daylifeBangladesh suspended trading at its main stock exchange Monday and security officials used batons to disperse thousands of angry investors upset over a market plunge.

The benchmark Dhaka Stock Exchange general index (DGEN) rose 80 percent in 2010 but has fallen several times over the last few weeks. It tumbled 7.8 percent Sunday and 9 percent in early trading Monday, prompting an indefinite suspension on trading.

After the protesters began gathering Monday morning, authorities used batons to try to keep the demonstrations from spreading, police official Mohammad Shohidullah said.

But protesters continued to demonstrate at several busy intersections in Dhaka's Motijheel commercial district, where the stock exchange is located, smashing vehicles, burning tires and chanting anti-government slogans, Shohidullah said. More...

The Business of America Is Kleptocracy

Tomgram: William Astore, The Business of America Is Kleptocracy

It’s hard to miss these days. The headlines tell the story -- repetitively. Everyone, it seems, is on the take. The Securities and Exchange Commission has charged Goldman Sachs with securities fraud for creating and selling “a mortgage investment that was secretly intended to fail” -- and then betting against its own customers. JPMorgan Chase which, in a pinch in 2008, happily took taxpayer dough, just reported $3.3 billion in profits for the first quarter of 2010, a jump of 55% over the previous quarter. The bank set aside $9.3 billion in what’s called “compensation and benefits” for its employees in 2009.

Even when they lose, they win. According to James Kwak of the Baseline Scenario website, on a deal in which JPMorgan swallowed $880 million in losses, its bankers still managed to walk away with up to $10 million in compensation. As he wrote, “JPMorgan’s bankers did just fine, despite having placed a ticking time bomb on their own bank’s balance sheet.” Meanwhile, Robert Rubin, who helped create the world that led to the 2008 financial meltdown as Treasury Secretary under Bill Clinton, then took a top position at Citibank and made more than $100 million before it tanked on his watch. As economist Dean Baker puts it, “In the fall of 2008, when Citigroup was saved from bankruptcy with a taxpayer bailout, Rubin quietly slipped out the back door (with his money), resigning from his position at Citigroup.” Only recently Rubin made the headlines for offering the least apologetic (non-)apology imaginable for taking the American people to the cleaners.

And when it comes to taking, according to Eric Lichtblau of the New York Times, “more than 125 former Congressional aides and lawmakers are now working for financial firms as part of a multibillion-dollar effort to shape, and often scale back, federal regulatory power.” In other words, the regulators and their aides legislate the rules and then simply step through that infamous revolving door and pick up a handsome check on the other side. There are, in fact, at least 11,000 well-employed registered lobbyists in Washington today. A $3.4 billion “industry” in 2009, lobbying is definitely a field to get into, even in bad times, and according to the Christian Science Monitor, “when the cost of grass-roots efforts and of strategic advisers are all counted, total spending on influencing policy in Washington approaches $9.6 billion a year.”

As for the money flowing into politics from corporate deep pockets, 2008 not only saw the first billion-dollar presidential campaign, but at $1.7 billion, more than doubled the 2004 campaign’s costs, and no one expects 2012 to be anything but more expensive. All this is, of course, known to anyone who glances at the front page of a daily newspaper, but what exactly do we make of it all? What does it add up to? William Astore, historian and TomDispatch regular, has a suggestion, but before you start his piece, you might want to close your purse or button that back pocket with your wallet in it. Otherwise, they could be picked bare by the time you’re done. Tom

American Kleptocracy
How Fears of Socialism and Fascism Hide Naked Theft
By William J. Astore

Kleptocracy -- now, there’s a word I was taught to associate with corrupt and exploitative governments that steal ruthlessly and relentlessly from the people. It’s a word, in fact, that’s usually applied to flawed or failed governments in Africa, Latin America, or the nether regions of Asia. Such governments are typically led by autocratic strong men who shower themselves and their cronies with all the fruits of extracted wealth, whether stolen from the people or squeezed from their country’s natural resources. It’s not a word you’re likely to see associated with a mature republic like the United States led by disinterested public servants and regulated by more-or-less transparent principles and processes.

In fact, when Americans today wish to critique or condemn their government, the typical epithets used are “socialism” or “fascism.” When my conservative friends are upset, they send me emails with links to material about “ObamaCare” and the like. These generally warn of a future socialist takeover of the private realm by an intrusive, power-hungry government. When my progressive friends are upset, they send me emails with links pointing to an incipient fascist takeover of our public and private realms, led by that same intrusive, power-hungry government (and, I admit it, I’m hardly innocent when it comes to such “what if” scenarios).

What if, however, instead of looking at where our government might be headed, we took a closer look at where we are -- at the power-brokers who run or influence our government, at those who are profiting and prospering from it? These are, after all, the “winners” in our American world in terms of the power they wield and the wealth they acquire. And shouldn’t we be looking as well at those Americans who are losing -- their jobs, their money, their homes, their healthcare, their access to a better way of life -- and asking why?

If we were to take an honest look at America’s blasted landscape of “losers” and the far shinier, spiffier world of “winners,” we’d have to admit that it wasn’t signs of onrushing socialism or fascism that stood out, but of staggeringly self-aggrandizing greed and theft right in the here and now. We’d notice our public coffers being emptied to benefit major corporations and financial institutions working in close alliance with, and passing on remarkable sums of money to, the representatives of “the people.” We’d see, in a word, kleptocracy on a scale to dazzle. We would suddenly see an almost magical disappearing act being performed, largely without comment, right before our eyes.

Of Red Herrings and Missing Pallets of Money

Think of socialism and fascism as the red herrings of this moment or, if you’re an old time movie fan, as Hitchcockian MacGuffins -- in other words, riveting distractions. Conservatives and tea partiers fear invasive government regulation and excessive taxation, while railing against government takeovers -- even as corporate lobbyists write our public healthcare bills to favor private interests. Similarly, progressives rail against an emergent proto-fascist corps of private guns-for-hire, warrantless wiretapping, and the potential government-approved assassination of U.S. citizens, all sanctioned by a perpetual, and apparently open-ended, state of war.

Yet, if this is socialism, why are private health insurers the government’s go-to guys for healthcare coverage? If this is fascism, why haven’t the secret police rounded up tea partiers and progressive critics as well and sent them to the lager or the gulag?

Consider this: America is not now, nor has it often been, a hotbed of political radicalism. We have no substantial socialist or workers’ party. (Unless you’re deluded, please don’t count the corporate-friendly “Democrat” party here.) We have no substantial fascist party. (Unless you’re deluded, please don’t count the cartoonish “tea partiers” here; these predominantly white, graying, and fairly affluent Americans seem most worried that the jackbooted thugs will be coming for them.)

What drives America today is, in fact, business -- just as was true in the days of Calvin Coolidge. But it’s not the fair-minded “free enterprise” system touted in those freshly revised Texas guidelines for American history textbooks; rather, it’s a rigged system of crony capitalism that increasingly ends in what, if we were looking at some other country, we would recognize as an unabashed kleptocracy.

Recall, if you care to, those pallets stacked with hundreds of millions of dollars that the Bush administration sent to Iraq and which, Houdini-like, simply disappeared. Think of the ever-rising cost of our wars in Iraq and Afghanistan, now in excess of a trillion dollars, and just whose pockets are full, thanks to them.

If you want to know the true state of our government and where it’s heading, follow the money (if you can) and remain vigilant: our kleptocratic Houdinis are hard at work, seeking to make yet more money vanish from your pockets -- and reappear in theirs.

From Each According to His Gullibility -- To Each According to His Greed

Never has the old adage my father used to repeat to me -- “the rich get richer and the poor poorer” -- seemed fresher or truer. If you want confirmation of just where we are today, for instance, consider this passage from a recent piece by Tony Judt:

In 2005, 21.2 percent of U.S. national income accrued to just 1 percent of earners. Contrast 1968, when the CEO of General Motors took home, in pay and benefits, about sixty-six times the amount paid to a typical GM worker. Today the CEO of Wal-Mart earns nine hundred times the wages of his average employee. Indeed, the wealth of the Wal-Mart founder’s family in 2005 was estimated at about the same ($90 billion) as that of the bottom 40 percent of the U.S. population: 120 million people.

Wealth concentration is only one aspect of our increasingly kleptocratic system. War profiteering by corporations (however well disguised as heartfelt support for our heroic warfighters) is another. Meanwhile, retired senior military officers typically line up to cash in on the kleptocratic equivalent of welfare, peddling their “expertise” in return for impressive corporate and Pentagon payouts that supplement their six-figure pensions. Even that putative champion of the Carhartt-wearing common folk, Sarah Palin, pocketed a cool $12 million last year without putting the slightest dent in her populist bona fides.

Based on such stories, now legion, perhaps we should rewrite George Orwell’s famous tagline from Animal Farm as: All animals are equal, but a few are so much more equal than others.

And who are those “more equal” citizens? Certainly, major corporations, which now enjoy a kind of political citizenship and the largesse of a federal government eager to rescue them from their financial mistakes, especially when they’re judged “too big to fail.” In raiding the U.S. Treasury, big banks and investment firms, shamelessly ready to jack up executive pay and bonuses even after accepting billions in taxpayer-funded bailouts, arguably outgun militarized multinationals in the conquest of the public realm and the extraction of our wealth for their benefit.

Such kleptocratic outfits are, of course, abetted by thousands of lobbyists and by politicians who thrive off corporate campaign contributions. Indeed, many of our more prominent public servants have proved expert at spinning through the revolving door into the private sector. Even ex-politicians who prefer to be seen as sympathetic to the little guy like former House Majority Leader Dick Gephardt eagerly cash in.

I’m Shocked, Shocked, to Find Profiteering Going on Here

An old Roman maxim enjoins us to “let justice be done, though the heavens fall.” Within our kleptocracy, the prevailing attitude is an insouciant “We’ll get ours, though the heavens fall.” This mindset marks the decline of our polity. A spirit of shared sacrifice, dismissed as hopelessly naïve, has been replaced by a form of tribalized privatization in which insiders find ways to profit no matter what.

Is it any surprise then that, in seeking to export our form of government to Iraq and Afghanistan, we’ve produced not two model democracies, but two emerging kleptocracies, fueled respectively by oil and opium?

When we confront corruption in Iraq or Afghanistan, are we not like the police chief in the classic movie Casablanca who is shocked, shocked to find gambling going on at Rick’s Café, even as he accepts his winnings?

Why then do we bother to feign shock when Iraqi and Afghan elites, a tiny minority, seek to enrich themselves at the expense of the majority?

Shouldn’t we be flattered? Imitation, after all, is the sincerest form of flattery. Isn’t it?

William J. Astore is a TomDispatch regular; he teaches History at the Pennsylvania College of Technology and served in the Air Force for 20 years, retiring as a lieutenant colonel. He may be reached at wjastore@gmail.com.

Bank Runs May Now Become Illegal

In addition to the current administration proposal to authorize "Federal Reserve banks to provide as much as $4 trillion in emergency funding the next time Wall Street crashes", note the more chilling reaction to Huffington's Move Your Money campaign:

New regulations proposed by the administration, and specifically by the ever-incompetent Securities and Exchange Commission, seek to...[change] the primary assumptions of the key Money Market Rule 2a-7. A key proposal in the overhaul of money market regulation suggests that money market fund managers will have the option to "suspend redemptions to allow for the orderly liquidation of fund assets."

The next time there is a market crash, and you try to withdraw what you thought was "absolutely" safe money, a back office person will get back to you saying, "Sorry - your money is now frozen.

Bank runs have become illegal.

"This is precisely the regulation now proposed by the administration. In essence, the entire US capital market is now a hedge fund, where even presumably the safest investment tranche can be locked out from within your control when the ubiquitous "extraordinary circumstances" arise. The second the game of constant offer-lifting ends, and money markets are exposed for the ponzi investment proxies they are, courtesy of their massive holdings of Treasury Bills, Reverse Repos, Commercial Paper, Agency Paper, CD, finance company MTNs and, of course, other money markets, and you decide to take your money out, well - sorry, you are out of luck. It's the law."

Read more...

Goldman Sachs and Others Investigated for Betting Against Securities They Created

Image via CrunchBase

Noel Brinkerhoff
Betting against their own securities has prompted numerous investigations of Goldman Sachs and other Wall Street institutions. Prior to the financial collapse, Goldman and others figured out a way to package risky securities, such as subprime mortgages, and sell them to investors who were told they were buying sound investments. Little did the investors know that the firms selling the synthetic collateralized debt obligations (or CDOs) turned around and bet that the CDOs would fail—costing pension funds and insurance companies billions of dollars.

“The simultaneous selling of securities to customers and shorting them because they believed they were going to default is the most cynical use of credit information that I have ever seen,” Sylvain Raynes, an expert in structured finance at R & R Consulting in New York, told The New York Times. “When you buy protection against an event that you have a hand in causing, you are buying fire insurance on someone else’s house and then committing arson.”

In addition to Goldman, CDOs were sold and bet against by Deutsche Bank, Morgan Stanley and Tricadia Inc.—an investment company whose parent firm’s CDO management committee was overseen by Lee Sachs. Sachs is now a special counselor to Treasury Secretary Timothy Geithner. The schemes are now being investigated by Congress, the Securities and Exchange Commission and Wall Street’s Financial Industry Regulatory Authority.

Documents reveal SEC complicity in Madoff Ponzi scheme

Image via Wikipedia

Andre Damon
Documents relating to the investigation of Bernard Madoff released last Friday by the Securities and Exchange Commission (SEC) highlight the complicity of the US regulatory agencies in one of the biggest financial frauds in history.

Madoff pleaded guilty on March to 11 felonies, for which he was sentenced to 150 years in jail. From the late 1980s or early 1990s, Madoff turned his well-connected investment firm into the largest pyramid scheme in history. When the fraud collapsed in December 2008, it wiped out $61 billion in investments. Prominent and wealthy investors, induced to invest with Madoff because of his stature as a major figure on Wall Street and his phenomenal record of providing healthy returns of 12 percent of more in good times and bad, lost millions.

Banks and hedge funds around the world lost hundreds of millions and even billions. University endowments, charities and other institutions that entrusted their money to Madoff or to hedge funds that invested in Madoff’s firm suffered massive losses. Numerous charities were forced to close. Thousands of retirees of modest means whose life savings were tied to Madoff’s operations lost everything.

The first chairman of the NASDAQ Stock Exchange and a member of the board of governors of the National Association of Securities Dealers, Madoff was something of a Wall Street legend. In 2000, he was appointed by then-SEC Chairman Arthur Levitt to a committee of academics, regulators and executives formed to advise the SEC on new stock market rules in response to the growth of electronic trading.

The documents released last week show that Madoff’s firm was investigated at least five times by the SEC, but that each time the commission failed to take rudimentary steps that would have revealed his Ponzi scheme. The SEC repeatedly gave Madoff’s firm a clean bill of health, which he used to reassure his clients that his operation was legitimate.

Had regulators made an even minimal effort, they would have found that Madoff made no trades with his clients’ money over a period of decades. Rather, in a classic Ponzi scheme, he used money from new investors to pay dividends to his previous clients.

SEC investigators relied solely on Madoff’s own records, and did not check either with Madoff’s counterparties or with Wall Street’s major clearing house, which kept records of his transactions, or lack thereof.

In one of the documents, a jailhouse interview between Madoff and David Kotz, inspector-general of the SEC, Madoff said that finding a Ponzi scheme of his type is “very easy if you want. You must do a third-party check. It’s absolutely a must.” He added, “It’s Accounting 101.”

Madoff told Kotz that after being interviewed by SEC investigators, he fully expected to be arrested within days, and was “amazed” when nothing happened.

The regulators merely went through the motions, despite suspicions about Madoff’s operation among professional investors and dealers. In 1999, Harry Markopolos, a securities industry executive, wrote to the SEC, saying, “Madoff Securities is the world’s largest Ponzi Scheme.” Markopolos repeatedly pressed the SEC to expose Madoff, but to no avail.

Internal records show that Madoff lied to the SEC about whether he gave investment advice to clients. Even though lying to investigators is a prosecutable offense, the SEC took no action. As one SEC investigator wrote in a 2006 e-mail, “I don’t think we should worry about Bernie finding out to whom we speak…. [W]e are not telling anybody that we have found anything improper (except for his lies to us, of course).”

These documents confirm that the SEC instigations were merely pro-forma operations that did not aim to find or prosecute any wrongdoing. “When potential investors expressed hesitation about investing with Madoff, he cited the prior SEC examinations to establish credibility and allay suspicions on investor doubts,” Kotz told the Senate Banking Committee two months ago.

During his interview with Kotz, Madoff said that Mary Shapiro, the current head of the SEC, is his “dear friend.” Madoff also said that he knew Arthur Levitt, head of the SEC from 1993 to 2001, “very well” and had lunched with him.

Madoff on a number of occasions prior to the collapse of his scam boasted of his influence in regulatory circles. He told Kotz that he “wrote good portions of the rules when it comes to trading.”

The entire episode is an example of the corruption that pervades Wall Street and the relations between major Wall Street players and the government. In his interview, Madoff admitted that he did not know how to properly record a credit default swap. He said he called a number of major banks, and none of them knew either. They had just been keeping their transactions off their official records. Madoff said that “today, lots of trades are done off the books because people don’t know what to do with them.”

Such practices are common and are protected by the government agencies that supposedly regulate the banks and financial institutions.

In an op-ed piece published Tuesday, Washington Post columnist Richard Cohen sets out to whitewash the role of the government in the Madoff fraud by attributing the complicity of financial regulators to the incompetence of individual investigators. He writes: “It would be reassuring if the IG [inspector-general] discovered that some of the investigators were on the take or that Madoff had offered them Wall Street jobs when they grew up. But this was not the case. The investigators were honest—just blazingly incompetent.”

This is an example of damage control by the media, including liberal pundits such as Cohen. The attempt to reduce the government’s role in the Madoff fraud to the mistakes of low-level operatives is absurd.

The issue is not whether individual SEC investigators were directly bribed by Madoff. They were carrying out a long-established policy emanating from the highest echelons of the regulatory system, at the direction of both Republican and Democratic administrations and Congress, to shield major players on Wall Street from prosecution for dubious and outright illegal practices that are standard operating procedure within the financial establishment. Madoff’s fraud was only a particularly crude form of the type of financial speculation and swindling that plays a major role in generating huge profits by banks and finance houses and sustaining the eight-digit bonuses awarded to top executives and traders.

Investigators and regulatory officials who “play ball” with the likes of Madoff are routinely rewarded with jobs on Wall Street that make them overnight multimillionaires.

One example of the direct role of the government in running interference for Wall Street was documented last month in an episode of the PBS series “Frontline.” Entitled “The Warning,” the program dealt with the brief career of Brooksley Born as head of the Commodities Futures Trading Commission during the Clinton administration. Born was forced out by then-Federal Reserve Chairman Alan Greenspan and top Clinton financial officials Robert Rubin and Lawrence Summers when she pressed for regulation of the derivatives market.

In the documentary, sources around Born describe her first meeting with Greenspan, during which the Fed chairman was said to have announced that the two of them were destined to disagree, particularly on the need to make rules against fraud. He was reported to tell Born “you feel that there need to be rules against it and I feel that the market will sort it out.”

In December 2008, after Madoff turned himself in, the World Socialist Web Site wrote, “Madoff’s scam could not have been carried out without the complicity of the highest echelons of the financial elite and the government…. The role of the SEC epitomizes the transformation of government regulatory agencies into the facilitators of financial fraud on a colossal scale. Its job has become running interference for the skullduggery of brokerage houses, hedge funds and banks.

“The removal of any regulatory restraint on the operations of the banks and finance houses over the past three decades is itself an expression of the crisis and decay of American capitalism. The hallmark of this process is the growth of financial parasitism. It is the other side of the coin of the systematic dismantling of large sections of industry and the relentless attack on the jobs and wages of the working class. This assault, in tandem with the unfolding economic crisis, is entering a new and even more brutal stage.”

The presence of figures such as SEC head Mary Shapiro, National Economic Council Director Lawrence Summers and former New York Federal Reserve Bank President Timothy Geithner at the summit of the Obama administration’s financial and regulatory apparatus makes clear that the government’s role in shielding Wall Street remains intact.

"American peasants have got to be the stupidest people in the world today"

Max: "It's not froth, it's fraud. This is an incredible case of accounting fraud and the American peasants have got to be the stupidest people in the world today: they don't mind becoming peasants, they don't mind living like peasants, and if that's the case, we should do nothing to stop them from sliding into a peasant class."

Barney Frank has proposed legislation on financial derivatives that essentially exempts what are called over-the-counter derivatives from most regulation, and it is over-the-counter derivatives that have been a major cause of this crisis. So that’s utterly insane. There’s no conceivable justification for it. And he stacked the hearing. There were nine witnesses; eight of them were from the industry and, of course, testified that they were vital to the world. The ninth witness was the only person who was in the least bit skeptical, and he was promptly gaveled down, unlike the others, by the chair. So it’s not only a farce; they’re willing to have us see that it’s a farce. They are so little afraid of public opinion and outrage that they’re not even taking steps to cover up the cover-up. - William Black, Former bank regulator at the Federal Savings and Loan Insurance Corporation.

Michael Pento Senior Market Strategist: End The FED

Michael Pento says abolish the FED. Michael Pento serves as Senior Market Strategist for the California-based investment firm, Delta Global Advisors, an S.E.C.-registered investment advisor. He is a well established specialist in the Austrian School of economic theory, and his commentaries are read on various forums across the Web.