Weekend Edition
September 27 / 28, 2008
How Israeli Backdoor Technology Penetrated the U.S. Government's Telecom System and Compromised National Security
An Israeli Trojan Horse
http://
www.counterpunch.org/ketcham09272008.html
By CHRISTOPHER KETCHAM
Since the late 1990s, federal agents have reported systemic communications security breaches at the Department of Justice, FBI, DEA, the State Department, and the White House. Several of the alleged breaches, these agents say, can be traced to two hi-tech communications companies, Verint Inc. (formerly Comverse Infosys), and Amdocs Ltd., that respectively provide major wiretap and phone billing/record-keeping software contracts for the U.S. government. Together, Verint and Amdocs form part of the backbone of the government’s domestic intelligence surveillance technology. Both companies are based in Israel – having arisen to prominence from that country’s cornering of the information technology market – and are heavily funded by the Israeli government, with connections to the Israeli military and Israeli intelligence (both companies have a long history of board memberships dominated by current and former Israeli military and intelligence officers). Verint is considered the world leader in “electronic interception” and hence an ideal private sector candidate for wiretap outsourcing. Amdocs is the world’s largest billing service for telecommunications, with some $2.8 billion in revenues in 2007, offices worldwide, and clients that include the top 25 phone companies in the United States that together handle 90 percent of all call traffic among U.S. residents. The companies’ operations, sources suggest, have been infiltrated by freelance spies exploiting encrypted trapdoors in Verint/Amdocs technology and gathering data on Americans for transfer to Israeli intelligence and other willing customers (particularly organized crime). “The fact of the vulnerability of our telecom backbone is indisputable,” says a high level U.S. intelligence officer who has monitored the fears among federal agents. “How it came to pass, why nothing has been done, who has done what – these are the incendiary questions.” If the allegations are true, the electronic communications gathered up by the NSA and other U.S. intelligence agencies might be falling into the hands of a foreign government. Reviewing the available evidence, Robert David Steele, a former CIA case officer and today one of the foremost international proponents for “public intelligence in the public interest,” tells me that “Israeli penetration of the entire US telecommunications system means that NSA's warrantless wiretapping actually means Israeli warrantless wiretapping.”
As early as 1999, the National Security Agency issued a warning that records of U.S. government telephone calls were ending up in foreign hands – Israel’s, in particular. In 2002, assistant U.S. Attorney General Robert F. Diegelman issued an eyes only memo on the matter to the chief information technology (IT) officers at the Department of Justice. IT officers oversee everything from the kind of cell phones agents carry to the wiretap equipment they use in the field; their defining purpose is secure communications. Diegelman’s memo was a reiteration, with overtones of reprimand, of a new IT policy instituted a year earlier, in July 2001, in an internal Justice order titled “2640.2D Information Technology Security.” Order 2640.2D stated that “Foreign Nationals shall not be authorized to access or assist in the development, operation, management or maintenance of Department IT systems.” This might not seem much to blink at in the post-9/11 intel and security overhaul. Yet 2640.2D was issued a full two months before the Sept. 11 attacks. What group or groups of foreign nationals had close access to IT systems at the Department of Justice? Israelis, according to officials in law enforcement. One former Justice Department computer crimes prosecutor tells me, speaking on background, “I’ve heard that the Israelis can listen in to our calls.”
Retired CIA counterterrorism and counterintelligence officer Philip Giraldi says this is par for the course in the history of Israeli penetrations in the U.S. He notes that Israel always features prominently in the annual FBI report called “Foreign Economic Collection and Industrial Espionage” – Israel is second only to China in stealing U.S. business secrets. The 2005 FBI report states, for example, “Israel has an active program to gather proprietary information within the United States. These collection activities are primarily directed at obtaining information on military systems and advanced computing applications that can be used in Israel’s sizable armaments industry.” A key Israeli method, warns the FBI report, is computer intrusion.
In the big picture of U.S. government spying on Americans, the story ties into 1994 legislation called the Communications Assistance for Law Enforcement Act, or CALEA, which effected a sea-change in methods of electronic surveillance. Gone are the days when wiretaps were conducted through on-site tinkering with copper switches. CALEA mandated sweeping new powers of surveillance for the digital age, by linking remote computers into the routers and hubs of telecom firms – a spyware apparatus linked in real-time, all the time, to American telephones and modems. CALEA made spy equipment an inextricable ligature in our telephonic life. Top officials at the FBI pushed for the legislation, claiming it would improve security, but many field agents have spoken up to complain that CALEA has done exactly the opposite. The data-mining techniques employed by NSA in its wiretapping exploits could not have succeeded without the technology mandated by CALEA. It could be argued that CALEA is the hidden heart of the NSA wiretap scandal.
THE VERINT CONNECTION
According to former CIA officer Giraldi and other US intelligence sources, software manufactured and maintained by Verint, Inc. handles most of American law enforcement’s wiretaps. Says Giraldi: “Phone calls are intercepted, recorded, and transmitted to U.S. investigators by Verint, which claims that it has to be ‘hands on’ with its equipment to maintain the system.” Giraldi also notes Verint is reimbursed for up to 50 percent of its R&D costs by the Israeli Ministry of Industry and Trade. According to Giraldi, the extent of the use of Verint technology “is considered classified,” but sources have spoken out and told Giraldi they are worried about the security of Verint wiretap systems. The key concern, says Giraldi, is the issue of a “trojan” embedded in the software.
A trojan in information security hardware/software is a backdoor that can be accessed remotely by parties who normally would not have access to the secure system. Allegations of massive trojan spying have rocked the Israeli business community in recent years. An AP article in 2005 noted, “Top Israeli blue chip companies…are suspected of using illicit surveillance software to steal information from their rivals and enemies.” Over 40 companies have come under scrutiny. “It is the largest cybercrime case in Israeli history,” Boaz Guttmann, a veteran cybercrimes investigator with the Israeli national police, tells me. “Trojan horse espionage is part of the way of life of companies in Israel. It’s a culture of spying.”
This is of course the culture on which the U.S. depends for much of its secure software for data encryption and telephonic security. “There’s been a lot discussion of how much we should trust security products by Israeli telecom firms,” says Philip Zimmerman, one of the legendary pioneers of encryption technology (Zimmerman invented the cryptographic and privacy authentication system known as Pretty Good Privacy, or PGP, now one of the basic modern standards for communications encryption). “Generally speaking, I wouldn’t trust stuff made overseas for data security,” says Zimmerman. “A guy at NSA InfoSec” – the information security division of the National Security Agency – “once told me, ‘Foreign-made crypto is our nightmare.’ But to be fair, as our domestic electronics industry becomes weaker and weaker, foreign-made becomes inevitable.” Look at where the expertise is, Zimmerman adds: Among the ranks of the International Association for Cryptological Research, which meets annually, there is a higher percentage of Israelis than any other nationality. The Israeli-run Verint is today the provider of telecom interception systems deployed in over 50 countries.
Carl Cameron, chief politics correspondent at Fox News Channel, is one of the few reporters to look into federal agents’ deepening distress over possible trojans embedded in Verint technology. In a wide-ranging four-part investigation into Israeli-linked espionage that aired in December 2001, Cameron made a number of startling discoveries regarding Verint, then known as Comverse Infosys. Sources told Cameron that “while various FBI inquiries into Comverse have been conducted over the years,” the inquiries had “been halted before the actual equipment has ever been thoroughly tested for leaks.” Cameron also noted a 1999 internal FCC document indicating that “several government agencies expressed deep concerns that too many unauthorized non-law enforcement personnel can access the wiretap system.” Much of this access was facilitated through “remote maintenance.”
Immediately following the Cameron report, Comverse Infosys changed its name to Verint, saying the company was “maturing.” (The company issued no response to Cameron’s allegations, nor did it threaten a lawsuit.) Meanwhile, security officers at DEA, an adjunct of the Justice Department, began examining the agency’s own relationship with Comverse/Verint. In 1997, DEA transformed its wiretap infrastructure with the $25 million procurement from Comverse/Verint of a technology called “T2S2” – “translation and transcription support services” – with Comverse/Verint contracted to provide the hardware and software, plus “support services, training, upgrades, enhancements and options throughout the life of the contract,” according to the “contracts and acquisitions” notice posted on the DEA’s website. This was unprecedented. Prior to 1997, DEA staff used equipment that was developed and maintained in-house.
But now Cameron’s report raised some ugly questions of vulnerability in T2S2.
The director of security programs at DEA, Heidi Raffanello, was rattled enough to issue an internal communiqué on the matter, dated Dec. 18, 2001, four days after the final installment in the Cameron series. Referencing the Fox News report, she worried that “Comverse remote maintenance” was “not addressed in the C&A [contracts and acquisitions] process.” She also cited the concerns in Justice Department order 2640.2D, and noted that the “Administrator” – meaning then DEA head Asa Hutchinson – had been briefed. Then there was this stunner: “It remains unclear if Comverse personnel are security cleared, and if so, who are they and what type of clearances are on record….Bottom line we should have caught it.” On its face, the Raffanello memo is a frightening glimpse into a bureaucracy caught with its pants down.
American law enforcement was not alone in suspecting T2S2 equipment purchased from Comverse/Verint. In November 2002, sources in the Dutch counterintelligence community began airing what they claimed was “strong evidence that the Israeli secret service has uncontrolled access to confidential tapping data collected by the Dutch police and intelligence services,” according to the Dutch broadcast radio station Evangelische Omroep (EO). In January 2003, the respected Dutch technology and computing magazine, c’t, ran a follow-up to the EO scoop, headlined “Dutch Tapping Room not Kosher.” The article began: “All tapping equipment of the Dutch intelligence services and half the tapping equipment of the national police force…is insecure and is leaking information to Israel.” The writer, Paul Wouters, goes on to discuss the T2S2 tap-ware “delivered to the government in the last few years by the Israeli company Verint,” and quoted several cryptography experts on the viability of remote monitoring of encrypted “blackbox” data. Wouters writes of this “blackbox cryptography”:
…a very important part of strong cryptography is a good random source. Without a proper random generator, or worse, with an intentionally crippled random generator, the resulting ciphertext becomes trivial to break. If there is one single unknown chip involved with the random generation, such as a hardware accelerator chip, all bets are off….If you can trust the hardware and you have access to the source code, then it should theoretically be possible to verify the system. This, however, can just not be done without the source code.
Yet, as Wouters was careful to add, “when the equipment was bought from the Israelis, it was agreed that no one except [Verint] personnel was authorized to touch the systems....Source code would never be available to anyone.”
Cryptography pioneer Philip Zimmerman warns that “you should never trust crypto if the source code isn’t published. Open source code means two things: if there are deliberate backdoors in the crypto, peer review will reveal those backdoors. If there are inadvertent bugs in the crypto, they too will be discovered. Whether the weaknesses are by accident or design, they will be found. If the weakness is by design, they will not want to publish the source code. Some of the best products we know have been subject to open source review: Linux; Apache. The most respected crypto products have been tested through open source. The little padlock in the corner when you visit a browser? You’re going through a protocol called Secure Socket Layer. Open source tested and an Internet standard. FireFox, the popular and highly secure browser, is all open source.”
THE CALEA CONNECTION
None of U.S. law enforcement’s problems with Amdocs and Verint could have come to pass without the changes mandated by the Communications Assistance for Law Enforcement Act of 1994, which, as noted, sought to lock spyware into telecom networks. CALEA, to cite the literature, requires that terrestrial carriers, cellular phone services and other telecom entities enable the government to intercept “all wire and oral communications carried by the carrier concurrently with their transmission.” T2S2 technology fit the bill perfectly: Tied into the network, T2S2 bifurcates the line without interrupting the data-stream (a T2S2 bifurcation is considered virtually undetectable). One half of the bifurcated line is recorded and stored in a remote tapping room; the other half continues on its way from your mouth or keyboard to your friend’s. (What is “T2S2”? To simplify: The S2 computer collects and encrypts the data; the T2 receives and decrypts.)
CALEA was touted as a law enforcement triumph, the work of decades of lobbying by FBI. Director Louis Freeh went so far as to call it the bureau’s “highest legislative priority.” Indeed, CALEA was the widest expansion of the government’s electronic surveillance powers since the Crime Control and Safe Streets Act of 1968, which mandated carefully limited conditions for wiretaps. Now the government could use coercive powers in ordering telecom providers to “devise solutions” to law enforcement’s “emerging technology-generated problems” (imposing a $10,000 per day penalty on non-compliant carriers). The government’s hand would be permanently inserted into the design of the nation's telecom infrastructure. Law professor Lillian BeVier, of the University of Virginia, writes extensively of the problems inherent to CALEA. “The rosy scenario imagined by the drafters cannot survive a moment's reflection,” BeVier observes. “While it is conventionally portrayed as ‘but the latest chapter in the thirty year history of the federal wiretap laws,’ CALEA is not simply the next installment of a technologically impelled statutory evolution. Instead, in terms of the nature and magnitude of the interests it purports to ‘compromise’ and the industry it seeks to regulate, in terms of the extent to which it purports to coerce private sector solutions to public sector problems, and in terms of the foothold it gives government to control the design of telecommunications networks, the Act is a paradigm shift. On close and disinterested inspection, moreover, CALEA appears to embody potentially wrong-headed sacrifices of privacy principles, flawed and incomplete conceptions of law enforcement's ends and means, and an imperfect appreciation of the incompatible incentives of the players in the game that would inevitably be played in the process of its implementation.”(emphasis mine)
The real novelty – and the danger – of CALEA is that telecom networks are today configured so that they are vulnerable to surveillance. “We’ve deliberately weakened the computer and phone networks, making them much less secure, much more vulnerable both to legal surveillance and illegal hacking,” says former DOJ cybercrimes prosecutor Mark Rasch. “Everybody is much less secure in their communications since the adopting of CALEA. So how are you going to have secure communications? You have to secure the communications themselves, because you cannot have a secure network. To do this, you need encryption. What CALEA forced businesses and individuals to do is go to third parties to purchase encryption technology. What is the major country that the U.S. purchases IT encryption from overseas? I would say it’s a small Middle Eastern democracy. What we’ve done is the worst of all worlds. We’ve made sure that most communications are subject to hacking and interception by bad guys. At the same time, the bad guys – organized crime, terrorist operations – can very easily encrypt their communications.” It is notable that the first CALEA-compliant telecom systems installed in the U.S. were courtesy of Verint Inc.
THE AMDOCS CONNECTION
If a phone is dialed in the U.S., Amdocs Ltd. likely has a record of it, which includes who you dialed and how long you spoke. This is known as transactional call data. Amdocs’ biggest customers in the U.S. are AT&T and Verizon, which have collaborated widely with the Bush Administration’s warrantless wiretapping programs. Transactional call data has been identified as a key element in NSA data mining to look for “suspicious” patterns in communications.
Over the last decade, Amdocs has been the target of several investigations looking into whether individuals within the company shared sensitive U.S. government data with organized crime elements and Israeli intelligence services. Beginning in 1997, the FBI conducted a far-flung inquiry into alleged spying by an Israeli employee of Amdocs, who worked on a telephone billing program purchased by the CIA. According to Paul Rodriguez and J. Michael Waller, of Insight Magazine, which broke the story in May of 2000, the targeted Israeli had apparently also facilitated the tapping of telephone lines at the Clinton White House (recall Monica Lewinsky’s testimony before Ken Starr: the president, she claimed, had warned her that “a foreign embassy” was listening to their phone sex, though Clinton under oath later denied saying this). More than two dozen intelligence, counterintelligence, law-enforcement and other officials told Insight that a “daring operation,” run by Israeli intelligence, had “intercepted telephone and modem communications on some of the most sensitive lines of the U.S. government on an ongoing basis.” Insight’s chief investigative reporter, Paul Rodriguez, told me in an e-mail that the May 2000 spy probe story “was (and is) one of the strangest I've ever worked on, considering the state of alert, concern and puzzlement” among federal agents. According to the Insight report, FBI investigators were particularly unnerved over discovering the targeted Israeli subcontractor had somehow gotten his hands on the FBI’s “most sensitive telephone numbers, including the Bureau's ‘black’ lines used for wiretapping.” “Some of the listed numbers,” the Insight article added, “were lines that FBI counterintelligence used to keep track of the suspected Israeli spy operation. The hunted were tracking the hunters.” Rodriguez confirmed the panic this caused in American intel. “It's a huge security nightmare,” one senior U.S. official told him. “The implications are severe,” said a second official. “All I can tell you is that we think we know how it was done,” a third intelligence executive told Rodriguez. “That alone is serious enough, but it's the unknown that has such deep consequences.” No charges, however, were made public in the case. (What happened behind the scenes depends on who you talk to in law enforcement: When FBI counterintelligence sought a warrant for the Israeli subcontractor, the Justice Department strangely refused to cooperate, and in the end no warrant was issued. FBI investigators were baffled.)
London Sunday Times reporter Uzi Mahnaimi quotes sources in Tel Aviv saying that during this period e-mails from President Clinton had also been intercepted by Israeli intelligence. Mahnaimi’s May 2000 article reveals that the operation involved “hacking into White House computer systems during intense speculation about the direction of the peace process.” Israeli intelligence had allegedly infiltrated a company called Telrad, subcontracted by Nortel, to develop a communications system for the White House. According to the Sunday Times, “Company managers were said to have been unaware that virtually undetectable chips installed during manufacture made it possible for outside agents to tap into the flow of data from the White House.”
In 1997, detectives with the Los Angeles Police Department, working in tandem with the Secret Service, FBI, and DEA, found themselves suffering a similar inexplicable collapse in communications security. LAPD was investigating Israeli organized crime: drug runners and credit card thieves based in Israel and L.A., with tentacles in New York, Miami, Las Vegas, and Egypt. The name of the crime group and its members remains classified in “threat assessment” papers this reporter obtained from LAPD, but the documents list in some detail the colorful scope of the group’s operations: $1.4 million stolen from Fidelity Investments in Boston through sophisticated computer fraud; extortion and kidnapping of Israelis in L.A. and New York; cocaine distribution in connection with Italian, Russian, Armenian and Mexican organized crime; money laundering; and murder. The group also had access to extremely sophisticated counter-surveillance technology and data, which was a disaster for LAPD. According to LAPD internal documents, the Israeli crime group obtained the unlisted home phone, cell phone, and pager numbers of some 500 of LAPD’s narcotics investigators, as well as the contact information for scores of federal agents – black info, numbers unknown even to the investigators’ kin. The Israelis even set up wiretaps of LAPD investigators, grabbing from cell-phones and landlines conversations with other agents – FBI and DEA, mostly – whose names and phone numbers were also traced and grabbed.
LAPD was horrified, and as the word got out of the seeming total breakdown in security, the shock spread to agents at DEA, FBI and even CIA, who together spearheaded an investigation. It turned out that the source of much of this black intel could be traced to a company called J&J Beepers, which was getting its phone numbers from a billing service that happened to be a subsidiary of Amdocs.
A source familiar with the inquiries into Amdocs put to me several theories regarding the allegations of espionage against the company. “Back in the early 1970s, when it became clear that AT&T was going to be broken up and that there was an imminent information and technology revolution, Israel understood that it had a highly-educated and highly-worldly population and it made a few calculated economic and diplomatic discoveries,” the source says. “One was that telecommunications was something they could do: because it doesn’t require natural resources, but just intellect, training and cash. They became highly involved in telecommunications. Per capita, Israel is probably the strongest telecommunications nation in the world. AT&T break-up occurs in 1984; Internet technology explodes; and Israel has all of these companies aggressively buying up contracts in the form of companies like Amdocs. Amdocs started out as a tiny company and now it’s the biggest billing service for telecommunications in the world. They get this massive telecommunications network underway. Like just about everything in Israel, it’s a government sponsored undertaking.
“So it’s been argued that Amdocs was using its billing records as an intelligence-gathering exercise because its executive board over the years has been heavily peopled by retired and current members of the Israeli government and military. They used this as an opportunity to collect information about worldwide telephone calls. As an intelligence-gathering phenomenon, an analyst with an MIT degree in algorithms would rather have 50 pages of who called who than 50 hours of actual conversation. Think about conversations with friends, husbands, wives. That raw information doesn’t mean anything. But if there’s a pattern of 30 phone calls over the course of a day, that can mean a lot. It’s a much simpler algorithm.”
Another anonymous source – a former CIA operative – tells me that U.S. intelligence agents who have aired their concerns about Verint and Amdocs have found themselves attacked from all sides. “Once it’s learned that an individual is doing footwork on this [the Verint/Amdocs question], he or she is typically identified somehow as a troublemaker, an instigator, and is hammered mercilessly,” says the former CIA operative. “Typically, what happens is the individual finds him or herself in a scenario where their retirement is jeopardized – and worse. The fact that if you simply take a look at this question, all of a sudden you’re an Arabist or anti-Semitic – it’s pure baloney, because I will tell you first-hand that people whose heritage lies back in that country have heavily worked this matter. You can’t buy that kind of dedication.”
The former CIA operative adds, “There is no defined policy, at this time, for how to deal with this [security issues involving Israel] – other than wall it off, contain it. It’s not cutting it. Not after 9/11. The funeral pyre that burned on for months at the bottom of the rubble told a lot of people they did not need to be ‘politically correct.’ The communications nexuses [i.e. Amdocs/Verint] didn’t occur yesterday; they started many years ago. And that’s a major embarrassment to organizations that would like to say they’re on top of things and not co-opted or compromised. As you start to work this, you soon learn that many people have either looked the other way or have been co-opted along the way. Some people, when they figure out what has occurred, are highly embarrassed to realize that they’ve been duped. Because many of them are bureaucrats, they don’t want to be made to look as stupid as they are. So they just go along with it. Sometimes, it’s just that simple.”
Christopher Ketcham writes for Vanity Fair, GQ, Harper’s, Salon and many other magazines and websites. You can reach him at cketcham99@mindspring.com.
Saturday, November 22, 2008
Friday, November 21, 2008
Raw Story: Georgia election at risk -- after 2002 Election Stolen
Allegations about 2002 Georgia election raise doubts on current voting
11/21/2008 @ 1:59 pm
Filed by Muriel Kane
As the state of Georgia prepares to conduct a runoff between incumbent Senator Saxby Chambliss and his Democratic challenger, Jim Martin, old doubts about the election in which Chambliss took the Senate seat from Max Cleland six years ago are attracting fresh notice.
Chambliss was the victor in the 2002 election by seven percentage points, despite polls which showed him trailing by five points just a week earlier. That unexpected turnaround, combined with the exclusive control over the voting machines by Diebold Election Systems, raised suspicions of electronic vote-tampering from the start.
According to cyber-security expert Stephen Spoonamore, "If you look at the case of Saxby Chambliss, that's ridiculous. The man was not elected. He lost that election by five points. Max Cleland won. They flipped the votes, clear as day."
Spoonamore has been speaking out since last summer about the problems with the 2002 election, drawing on his examination of a software patch which the president of Diebold's election unit personally brought to Georgia to be installed prior to the voting.
Spoonamore received the patch from Diebold whistleblower Chris Hood, who first came forward two years ago and spoke with Robert F. Kennedy, Jr. for an article in Rolling Stone.
"We ran the election," Hood told Kennedy. "We had 356 people that Diebold brought into the state. Diebold opened and closed the polls and tabulated the votes. Diebold convinced [Georgia Secretary of State Cathy] Cox that it would be best if the company ran everything due to the time constraints, and in the interest of a trouble-free election, she let us do it."
Hood has now repeated his doubts about the 2002 Georgia election, as well as about voting problems in Maryland in 2004, in an interview with former ABC News producer Rebecca Abrahams. "I have come to believe that these errors are now permanently embedded into the system," Hood told Abrahams.
Abrahams states, "Jim Martin should be concerned about the veracity and validity of the November election results after anomalies in the last election and the statement by Chris Hood. In fact, voters should demand to know if Chambliss had any knowledge that the 2002 election was rigged and whether he knew that Georgia citizens voted on electronic voting machines that had been patched with uncertified software days before the election in clear violation of Georgia law."
Chambliss, meanwhile, may be growing testy as the runoff election approaches. He was recently asked about his refusal to testify in a case involving Imperial Sugar and responded by putting his hand over the camera lens and saying, "You can take it away now."
This video was posted by Velvet Revolution on YouTube on November 21, 2008.
11/21/2008 @ 1:59 pm
Filed by Muriel Kane
As the state of Georgia prepares to conduct a runoff between incumbent Senator Saxby Chambliss and his Democratic challenger, Jim Martin, old doubts about the election in which Chambliss took the Senate seat from Max Cleland six years ago are attracting fresh notice.
Chambliss was the victor in the 2002 election by seven percentage points, despite polls which showed him trailing by five points just a week earlier. That unexpected turnaround, combined with the exclusive control over the voting machines by Diebold Election Systems, raised suspicions of electronic vote-tampering from the start.
According to cyber-security expert Stephen Spoonamore, "If you look at the case of Saxby Chambliss, that's ridiculous. The man was not elected. He lost that election by five points. Max Cleland won. They flipped the votes, clear as day."
Spoonamore has been speaking out since last summer about the problems with the 2002 election, drawing on his examination of a software patch which the president of Diebold's election unit personally brought to Georgia to be installed prior to the voting.
Spoonamore received the patch from Diebold whistleblower Chris Hood, who first came forward two years ago and spoke with Robert F. Kennedy, Jr. for an article in Rolling Stone.
"We ran the election," Hood told Kennedy. "We had 356 people that Diebold brought into the state. Diebold opened and closed the polls and tabulated the votes. Diebold convinced [Georgia Secretary of State Cathy] Cox that it would be best if the company ran everything due to the time constraints, and in the interest of a trouble-free election, she let us do it."
Hood has now repeated his doubts about the 2002 Georgia election, as well as about voting problems in Maryland in 2004, in an interview with former ABC News producer Rebecca Abrahams. "I have come to believe that these errors are now permanently embedded into the system," Hood told Abrahams.
Abrahams states, "Jim Martin should be concerned about the veracity and validity of the November election results after anomalies in the last election and the statement by Chris Hood. In fact, voters should demand to know if Chambliss had any knowledge that the 2002 election was rigged and whether he knew that Georgia citizens voted on electronic voting machines that had been patched with uncertified software days before the election in clear violation of Georgia law."
Chambliss, meanwhile, may be growing testy as the runoff election approaches. He was recently asked about his refusal to testify in a case involving Imperial Sugar and responded by putting his hand over the camera lens and saying, "You can take it away now."
This video was posted by Velvet Revolution on YouTube on November 21, 2008.
Sunday, November 16, 2008
Mike Whitney: Secretary Paulson Is Simply Prolonging the Scam
Weekend Edition
November 14 / 16, 2008
The Self-Inflicted Crisis
Paulson the Bungler
http://counterpunch.org/whitney11142008.html
By MIKE WHITNEY
Henry Paulson's time at Treasury has been one pratfall after another. Even so, on Tuesday he managed to outdo himself. Paulson held a "surprise" press conference where he announced that the $700 billion Troubled Asset Relief Program (TARP) wouldn't be used to buy troubled assets after all. Instead, the money will used to bail out insurance giant AIG, provide extra capital for the banks to hoard, and now (this is the new part) give money to "nonbank financial institutions, like insurers and specialty-finance companies" so they can lend to credit-worthy consumers. Isn't that why we gave money to the banks?
Paulson's announcement was like tossing a hand-grenade in a San-i-can; it blew the stock market to Kingdom come. Just minutes after the opening bell on the New York Stock Exchange (NYSE) stocks plummeted to new lows ending the session in a 400 point death-spiral. Wall Street doesn't like uncertainty and Paulson's sudden about-face sent jittery investors running for cover. The message to investors is clear, the government doesn't have the foggiest idea of what it's doing and is just grasping at straws.
But Paulson's no fool; he knew exactly what the reaction would be on Wall Street. He simply decided that blowing up the equities market was worth the price of reviving "securitization"--the transformation of loans into securities. You see, securitization is Wall Street's Golden Goose. It's the foundation block upon which structured finance and all its complex credit-enhancing derivatives rests. Keep in mind, that all these exotic, financially-engineered products--the CDOs, MBS, and CDS--were all created with one goal in mind; to maximize leverage with minimum capital so that profits can be skimmed off the top. That's how Paulson managed to walk away from Goldman Sachs with hundreds of millions of dollars in his pockets. It's a racket.
There's a myth that credit is contracting because the banks won't lend. But, in truth, total bank credit expanded by $575 billion over the past 10 weeks. The real problem is that the securitzation market remains frozen.
So now Paulson wants to breathe new life into securitization by providing liquidity for nonbank financial institutions who get their money from the wholesale market. Of course, no one really knows how this will work since these operations are completely unregulated by the federal government. No worries; the charade will persist behind the dodgy claim that "it's needed to get credit to the consumer". Baloney. What the consumer needs job security and a pay-raise, not more debt. This is just more Paulson flim-flam.
It was clear that the Treasury Secretary was concocting a new swindle a couple weeks ago when Fed chief Bernanke defended "securitzation” in a speech where he said:
"The ability of financial intermediaries to sell the mortgages they originate into the broader capital market by means of the securitization process serves two important purposes: First, it provides originators much wider sources of funding than they could obtain through conventional sources, such as retail deposits; second, it substantially reduces the originator's exposure to interest rate, credit, prepayment, and other risks associated with holding mortgages to maturity, thereby reducing the overall costs of providing mortgage credit."
This is nonsense. What it does is create the optimal environment for speculative leveraging, debt-pyramiding and massive profit-taking. But, that's beside the point. The real issue is that securitization is dead already because Paulson and his ilk poisoned the well by adding subprime garbage and Alt As to the mix. Now investors are steering clear of any securities that bundle debt. It's a confidence issue.
According to the Wall Street Journal:
"Banks and other finance companies making loans for autos, credit cards and college tuition are having virtually no success in selling those loans to other investors, a potent sign of just how tight credit markets remain.
“The market for selling such loans — by packaging, or securitizing, them into bonds — had just one $500 million deal for all of October, according to Barclays Capital. That compares with $50.7 billion worth of deals made one year earlier, according to market-research firm Dealogic. The overall market for so-called asset-backed securitization is estimated at $2.5 trillion.” (Bond Woes Choke off some Credit to Consumers, Wall Street Journal, Robin Sidel)
$500 million is just 1 percent of $50 billion! Securitization will be dead for a decade or so; it was destroyed by lax lending standards and easy credit. Paulson and his fellows will have to find a new way to fleece gulible investors.
The TARP is most expensive boondoggle in history. No one even knows what the banks are doing with the money. There's neither accountability nor transparency. As a result, investor confidence has deteriorated and stocks have continued to fall. No one trusts Paulson to do the right thing anymore; it's that simple.
The Treasury's new Financial Stability Oversight Board has met four times, but they still can't say how the banks are using the money. It's a joke. Congress has been missing in action, too. They promised to create their own oversight board, but five weeks have passed and still nothing has happened. Apparently, the idea throwing $700 billion down rathole isn't enough to prod Ms. Pelosi and her congressional cohorts into action. All that really matters to them is getting reelected and nuzzling ever-closer to the public trough.
The TARP fiasco is not taking place in a vacuum either; the country is at the beginning of the deepest consumer-led recession in the last half century. Retail spending and automobile sales have been following the same grim flightpath as housing, while unemployment is at a 7 year high soaring to nearly 4 million. Household debt is at record levels of $14 trillion. The job market is steadily weakening while the consumer is more vulnerable than ever. Meanwhile, Paulson has dragged his feet on rewriting mortgages to slow foreclosures, stalled on providing another stimulus package, and diverted all the money from the $700 billion bailout to his friends in the financial industry. Not one dime has gone to a working man or woman. Paulson continues to play games while Rome burns even though, according to his colleague, former G-Sax chairman John Whitehead, the current downturn will be worse than the Great Depression.
According to Reuters:
"The economy faces a slump deeper than the Great Depression and a growing deficit threatens the credit of the United States itself, former Goldman Sachs chairman John Whitehead ...
"I think it would be worse than the depression," Whitehead said. "We're talking about reducing the credit of the United States of America, which is the backbone of the economic system. ... I see nothing but large increases in the deficit, all of which are serving to decrease the credit standing of America. ... I just want to get people thinking about this, and to realize this is a road to disaster. I've always been a positive person and optimistic, but I don't see a solution here."
The first thing to realize is that it is not a matter of "fixing" the economy. The economy is fixing itself by purging the unsustainable debt from the system. That's how markets work. Greenspan's low interest rates created a subsidy for debt which--along with the alphabet soup of leveraged derivatives--buoyed the economy along on the biggest wave of speculative financing the world has ever seen. The distortions that were caused by the unprecedented credit expansion stimulated artificial demand that created the appearance of growth and prosperity but, in truth, was nothing more than an equity bubble. Now the bubble has popped and the financial system is returning to the mean. That means that credit will probably contract by 30 to 40 per cent putting us on the path to another Great Depression. Unless the government takes preventative action to get money into the hands of consumers and restore confidence, the nation will face widespread panic. That's probably why all the voting machines and exit polls finally matched up with the election results in the 2008 presidential balloting for the first time in 8 years; because the ruling elites know that they need a popular executive to put in front of the cameras when they try to calm the crowds and keep the country from disintegrating into anarchy. It also explains the nervous smiles on the faces of the money-lenders and graybeards assembled on the stage behind Obama at his first press conference. The American establishment is placing all its hopes for economic survival on the narrow shoulders of their newest posterboy, Barak Obama.
There's more pain to come, but the suffering can be mitigated by sound decision-making and Keynesian policies. That means public work programs, bankruptcy reform, and extensions on unemployment. Paul Krugman recommends a stimulus package of $600 billion. That's a good start, but it will take much more than that. And foreign investors will have to be confident in our choices or the sale of Treasurys will slip and the US will face a funding crisis. The Fed's lending facilities have already loaned $2 trillion while the Treasury's bailout is $700 billion. By the end of 2010, fiscal deficits will be nearly $2 trillion and the total cost to the US taxpayer will be at least $5 trillion. That means rising interest rates, flagging growth and hard times ahead.
The present financial crisis is a self-inflicted wound. It started at the Federal Reserve with their cynical neoliberal monetary policies. Any solution, that does not involve the dismantling of the Fed, is unacceptable.
Mike Whitney lives in Washington state. He can be reached at fergiewhitney@msn.comh
November 14 / 16, 2008
The Self-Inflicted Crisis
Paulson the Bungler
http://counterpunch.org/whitney11142008.html
By MIKE WHITNEY
Henry Paulson's time at Treasury has been one pratfall after another. Even so, on Tuesday he managed to outdo himself. Paulson held a "surprise" press conference where he announced that the $700 billion Troubled Asset Relief Program (TARP) wouldn't be used to buy troubled assets after all. Instead, the money will used to bail out insurance giant AIG, provide extra capital for the banks to hoard, and now (this is the new part) give money to "nonbank financial institutions, like insurers and specialty-finance companies" so they can lend to credit-worthy consumers. Isn't that why we gave money to the banks?
Paulson's announcement was like tossing a hand-grenade in a San-i-can; it blew the stock market to Kingdom come. Just minutes after the opening bell on the New York Stock Exchange (NYSE) stocks plummeted to new lows ending the session in a 400 point death-spiral. Wall Street doesn't like uncertainty and Paulson's sudden about-face sent jittery investors running for cover. The message to investors is clear, the government doesn't have the foggiest idea of what it's doing and is just grasping at straws.
But Paulson's no fool; he knew exactly what the reaction would be on Wall Street. He simply decided that blowing up the equities market was worth the price of reviving "securitization"--the transformation of loans into securities. You see, securitization is Wall Street's Golden Goose. It's the foundation block upon which structured finance and all its complex credit-enhancing derivatives rests. Keep in mind, that all these exotic, financially-engineered products--the CDOs, MBS, and CDS--were all created with one goal in mind; to maximize leverage with minimum capital so that profits can be skimmed off the top. That's how Paulson managed to walk away from Goldman Sachs with hundreds of millions of dollars in his pockets. It's a racket.
There's a myth that credit is contracting because the banks won't lend. But, in truth, total bank credit expanded by $575 billion over the past 10 weeks. The real problem is that the securitzation market remains frozen.
So now Paulson wants to breathe new life into securitization by providing liquidity for nonbank financial institutions who get their money from the wholesale market. Of course, no one really knows how this will work since these operations are completely unregulated by the federal government. No worries; the charade will persist behind the dodgy claim that "it's needed to get credit to the consumer". Baloney. What the consumer needs job security and a pay-raise, not more debt. This is just more Paulson flim-flam.
It was clear that the Treasury Secretary was concocting a new swindle a couple weeks ago when Fed chief Bernanke defended "securitzation” in a speech where he said:
"The ability of financial intermediaries to sell the mortgages they originate into the broader capital market by means of the securitization process serves two important purposes: First, it provides originators much wider sources of funding than they could obtain through conventional sources, such as retail deposits; second, it substantially reduces the originator's exposure to interest rate, credit, prepayment, and other risks associated with holding mortgages to maturity, thereby reducing the overall costs of providing mortgage credit."
This is nonsense. What it does is create the optimal environment for speculative leveraging, debt-pyramiding and massive profit-taking. But, that's beside the point. The real issue is that securitization is dead already because Paulson and his ilk poisoned the well by adding subprime garbage and Alt As to the mix. Now investors are steering clear of any securities that bundle debt. It's a confidence issue.
According to the Wall Street Journal:
"Banks and other finance companies making loans for autos, credit cards and college tuition are having virtually no success in selling those loans to other investors, a potent sign of just how tight credit markets remain.
“The market for selling such loans — by packaging, or securitizing, them into bonds — had just one $500 million deal for all of October, according to Barclays Capital. That compares with $50.7 billion worth of deals made one year earlier, according to market-research firm Dealogic. The overall market for so-called asset-backed securitization is estimated at $2.5 trillion.” (Bond Woes Choke off some Credit to Consumers, Wall Street Journal, Robin Sidel)
$500 million is just 1 percent of $50 billion! Securitization will be dead for a decade or so; it was destroyed by lax lending standards and easy credit. Paulson and his fellows will have to find a new way to fleece gulible investors.
The TARP is most expensive boondoggle in history. No one even knows what the banks are doing with the money. There's neither accountability nor transparency. As a result, investor confidence has deteriorated and stocks have continued to fall. No one trusts Paulson to do the right thing anymore; it's that simple.
The Treasury's new Financial Stability Oversight Board has met four times, but they still can't say how the banks are using the money. It's a joke. Congress has been missing in action, too. They promised to create their own oversight board, but five weeks have passed and still nothing has happened. Apparently, the idea throwing $700 billion down rathole isn't enough to prod Ms. Pelosi and her congressional cohorts into action. All that really matters to them is getting reelected and nuzzling ever-closer to the public trough.
The TARP fiasco is not taking place in a vacuum either; the country is at the beginning of the deepest consumer-led recession in the last half century. Retail spending and automobile sales have been following the same grim flightpath as housing, while unemployment is at a 7 year high soaring to nearly 4 million. Household debt is at record levels of $14 trillion. The job market is steadily weakening while the consumer is more vulnerable than ever. Meanwhile, Paulson has dragged his feet on rewriting mortgages to slow foreclosures, stalled on providing another stimulus package, and diverted all the money from the $700 billion bailout to his friends in the financial industry. Not one dime has gone to a working man or woman. Paulson continues to play games while Rome burns even though, according to his colleague, former G-Sax chairman John Whitehead, the current downturn will be worse than the Great Depression.
According to Reuters:
"The economy faces a slump deeper than the Great Depression and a growing deficit threatens the credit of the United States itself, former Goldman Sachs chairman John Whitehead ...
"I think it would be worse than the depression," Whitehead said. "We're talking about reducing the credit of the United States of America, which is the backbone of the economic system. ... I see nothing but large increases in the deficit, all of which are serving to decrease the credit standing of America. ... I just want to get people thinking about this, and to realize this is a road to disaster. I've always been a positive person and optimistic, but I don't see a solution here."
The first thing to realize is that it is not a matter of "fixing" the economy. The economy is fixing itself by purging the unsustainable debt from the system. That's how markets work. Greenspan's low interest rates created a subsidy for debt which--along with the alphabet soup of leveraged derivatives--buoyed the economy along on the biggest wave of speculative financing the world has ever seen. The distortions that were caused by the unprecedented credit expansion stimulated artificial demand that created the appearance of growth and prosperity but, in truth, was nothing more than an equity bubble. Now the bubble has popped and the financial system is returning to the mean. That means that credit will probably contract by 30 to 40 per cent putting us on the path to another Great Depression. Unless the government takes preventative action to get money into the hands of consumers and restore confidence, the nation will face widespread panic. That's probably why all the voting machines and exit polls finally matched up with the election results in the 2008 presidential balloting for the first time in 8 years; because the ruling elites know that they need a popular executive to put in front of the cameras when they try to calm the crowds and keep the country from disintegrating into anarchy. It also explains the nervous smiles on the faces of the money-lenders and graybeards assembled on the stage behind Obama at his first press conference. The American establishment is placing all its hopes for economic survival on the narrow shoulders of their newest posterboy, Barak Obama.
There's more pain to come, but the suffering can be mitigated by sound decision-making and Keynesian policies. That means public work programs, bankruptcy reform, and extensions on unemployment. Paul Krugman recommends a stimulus package of $600 billion. That's a good start, but it will take much more than that. And foreign investors will have to be confident in our choices or the sale of Treasurys will slip and the US will face a funding crisis. The Fed's lending facilities have already loaned $2 trillion while the Treasury's bailout is $700 billion. By the end of 2010, fiscal deficits will be nearly $2 trillion and the total cost to the US taxpayer will be at least $5 trillion. That means rising interest rates, flagging growth and hard times ahead.
The present financial crisis is a self-inflicted wound. It started at the Federal Reserve with their cynical neoliberal monetary policies. Any solution, that does not involve the dismantling of the Fed, is unacceptable.
Mike Whitney lives in Washington state. He can be reached at fergiewhitney@msn.comh
Eliot Spitzer: How to Keep Financial Markets in Check
How to Ground The Street
The Former 'Enforcer' On the Best Way to Keep Financial Markets in Check.
By Eliot L. Spitzer
Sunday, November 16, 2008; B01
President-elect Barack Obama will soon face the extraordinary task of saving capitalism from its own excesses, much as Franklin D. Roosevelt had to do 76 years ago. Up until this point in the crisis, policymakers have appropriately applied the rules of triage -- Band-Aids and tourniquets, then radical surgery -- to keep the global financial system alive. Capital infusions, bailouts, mega-mergers, government guarantees of unimaginable proportions -- all have been sought and supported by officials and corporate chief executives who had until now opposed any government participation in the marketplace. But put aside for the moment the ideological cartwheel we have seen and look at the big picture: The rules of modern capitalism have been re-written before our eyes.
The new president's team must soon get to the root causes of the mistakes that have brought us to the economic precipice. Yes, we have all derided the explosion of leverage, the failure to regulate derivatives, the flood of subprime lending that was bound to default and the excesses of CEO compensation. But these are all mere manifestations of three deeper structural problems that require greater attention: misconceptions about what a "free market" really is, a continuing breakdown in corporate governance and an antiquated and incoherent federal financial regulatory framework.
First, we must confront head-on the pervasive misunderstanding of what constitutes a "free market." For long stretches of the past 30 years, too many Americans fell prey to the ideology that a free market requires nearly complete deregulation of banks and other financial institutions and a government with a hands-off approach to enforcement. "We can regulate ourselves," the mantra went.
Those of us who raised red flags about this were scoffed at for failing to understand or even believe in "the market." During my tenure as New York state attorney general, my colleagues and I sought to require investment banking analysts to provide their clients with unbiased recommendations, devoid of undisclosed and structural conflicts. But powerful voices with heavily vested interests accused us of meddling in the market.
When my office, along with the Department of Justice, warned that some of American International Group's reinsurance transactions were little more than efforts to create the false impression of extra capital on the company's balance sheet, we were jeered at for attacking one of the nation's great insurance companies, which surely knew how to balance risk and reward.
And when the attorneys general of all 50 states sought to investigate subprime lending, believing that some lending practices might be toxic, we were blocked by a coalition of the major banks and the Bush administration, which invoked a rarely used statute to preempt the states' ability to probe. The administration claimed that it had the situation under control and that our inquiry was unnecessary.
Time and again, whether at the state level, in Congress or at the Securities and Exchange Commission under Bill Donaldson, those who tried to enforce the basic principles that would allow the market to survive were told that the "invisible hand" of the market and self-regulation could handle the task alone.
The reality is that unregulated competition drives corporate behavior and risk-taking to unacceptable levels. This is simply one of the ways in which some market participants try to gain a competitive advantage. As one lawyer for a company charged with malfeasance stated in a meeting in my office (amazingly, this was intended as a winning defense): "You're right about our behavior, but we're not as bad as our competitors."
No major market problem has been resolved through self-regulation, because individual competitive behavior doesn't concern itself with the larger market. Individual actors care only about performing better than the next guy, doing whatever is permitted -- or will go undetected. Look at the major bubbles and market crises. Long-Term Capital Management, Enron, the subprime lending scandals: All are classic demonstrations of the bitter reality that greed, not self-discipline, rules where unfettered behavior is allowed.
Those who truly understand economics, as did Adam Smith, do not preach an absence of government participation. A market doesn't exist in a vacuum. Rather, a market is a product of laws, rules and enforcement. It needs transparency, capital requirements and fidelity to fiduciary duty. The alternative, as we are seeing, is anarchy.
One of the great advantages U.S. capital markets have enjoyed over the decades has been the view -- held worldwide -- that there was an underlying integrity to the representations market participants made, because the regulatory framework in which they were made was believed to provide genuine oversight. But as we all know, the laws requiring such integrity are meaningless without a government dedicated to enforcing them.
Second, our corporate governance system has failed. We need to reexamine each of the links in its chain. Boards of directors, compensation and audit committees, the trio of facilitators (lawyers, investment bankers and auditors) whose job it is to create the impression of legal compliance, and shareholders themselves -- all abdicated their responsibilities.
Institutional shareholders, in particular mutual funds, pension funds and endowments, must reengage in corporate governance. Over the past decade, arguably the sole challenge to corporate mismanagement and poor corporate strategies has come from private-equity firms or activist hedge funds. These firms were among the few shareholders or pools of capital willing to purchase and revamp encrusted corporate machines. So it shouldn't be surprising that the corporate world has taken a skeptical view of them -- especially short-selling hedge funds, which have often been a rare voice raising the alarm.
Boards of directors were also missing in action over the past decade; not only did they not provide answers, they all too often failed even to ask the appropriate questions. And the roles of compensation committees, of course, must be totally rethought. No longer can Garrison Keillor's brilliant observation about our kids -- that they are all above average -- apply to CEOs and propel failed leaders' paychecks through the roof. Today's momentary public oversight and outrage over executive compensation, while long overdue, is no substitute over the long term for firm standards set by compensation committees and boards of directors.
Finally, we need to completely overhaul the federal financial regulatory framework.
Let's leave aside the ideological hesitancy that has long hamstrung regulatory agencies. Today's balkanized regulatory framework for financial services no longer matches in any way the needs of a fully integrated global financial system. The divisions of the past -- commercial banking vs. investment banking vs. insurance vs. hedge funds vs. private equity -- have become distinctions without a difference. But these old boxes and formalities still determine how entities are viewed and regulated. It should surprise nobody that capital found the crevices in the regulatory framework. That is what capital is paid to do. But we failed to respond with a regulatory framework flexible enough to plug the leaks.
We do not need additional fragmented areas of federal regulation to handle hedge funds, sovereign wealth funds or derivatives. We need a unified approach that addresses the underlying issues: what kinds of leverage we wish to tolerate, how to measure risk, how much disclosure various trading products should provide. We cannot survive with the current system: the SEC, the Office of the Comptroller of the Currency, the Federal Deposit Insurance Corporation, the Fed, the Office of Thrift Supervision and on and on. We must go from the Rube Goldberg structure we now have to a sleek iPod design that is cleaner, has better operating software and may even look good.
We began to try to craft such a unified model in New York, as did Treasury Secretary Henry M. Paulson Jr. in Washington last year. But it is urgent that we finish the job. Having flooded the market with cash and seen the government take a chunk of many of our largest financial institutions, we now need to craft the rules that will apply to all market participants.
Three overarching priorities should guide government actions in the new structure. First, we need better control of systemic risk. The currently splintered federal regulatory authority, the continued presence of off-balance-sheet transactions for financial entities (even post-Enron) and the failure to subject major players to any government oversight means that nobody can really understand the full risk facing the financial system.
Second, investors must be protected with adequate, accurate information. Firms must offer transparency both to individual investors and to government regulators.
And third, as Eric R. Dinallo, the superintendent of the New York State Insurance Department, has wisely pointed out, we will have to step back from the current environment in which government has become a guarantor of all major risk. The so-called moral hazard will serve to devalue risk in the market, and this too will have a debilitating long-term effect on capital flows. Only if private actors have to bear the real risks they incur will the market function properly. We are now perilously close to nationalizing risk.
As the rules of modern capitalism are rewritten over the next year, those who benefit from the enormous flow of cash being spread throughout the U.S. economy must be expected to compete within a system of rules that creates a true market -- based on sound, skilled regulation, vigorous corporate governance and transparency.
Although mistakes I made in my private life now prevent me from participating in these issues as I have in the past, I very much hope and expect that President Obama and his new administration will have the strength and wisdom to do again what FDR did.
Eliot L. Spitzer was governor of New York from 2007-08 and state attorney general from 1999-2006.
The Former 'Enforcer' On the Best Way to Keep Financial Markets in Check.
By Eliot L. Spitzer
Sunday, November 16, 2008; B01
President-elect Barack Obama will soon face the extraordinary task of saving capitalism from its own excesses, much as Franklin D. Roosevelt had to do 76 years ago. Up until this point in the crisis, policymakers have appropriately applied the rules of triage -- Band-Aids and tourniquets, then radical surgery -- to keep the global financial system alive. Capital infusions, bailouts, mega-mergers, government guarantees of unimaginable proportions -- all have been sought and supported by officials and corporate chief executives who had until now opposed any government participation in the marketplace. But put aside for the moment the ideological cartwheel we have seen and look at the big picture: The rules of modern capitalism have been re-written before our eyes.
The new president's team must soon get to the root causes of the mistakes that have brought us to the economic precipice. Yes, we have all derided the explosion of leverage, the failure to regulate derivatives, the flood of subprime lending that was bound to default and the excesses of CEO compensation. But these are all mere manifestations of three deeper structural problems that require greater attention: misconceptions about what a "free market" really is, a continuing breakdown in corporate governance and an antiquated and incoherent federal financial regulatory framework.
First, we must confront head-on the pervasive misunderstanding of what constitutes a "free market." For long stretches of the past 30 years, too many Americans fell prey to the ideology that a free market requires nearly complete deregulation of banks and other financial institutions and a government with a hands-off approach to enforcement. "We can regulate ourselves," the mantra went.
Those of us who raised red flags about this were scoffed at for failing to understand or even believe in "the market." During my tenure as New York state attorney general, my colleagues and I sought to require investment banking analysts to provide their clients with unbiased recommendations, devoid of undisclosed and structural conflicts. But powerful voices with heavily vested interests accused us of meddling in the market.
When my office, along with the Department of Justice, warned that some of American International Group's reinsurance transactions were little more than efforts to create the false impression of extra capital on the company's balance sheet, we were jeered at for attacking one of the nation's great insurance companies, which surely knew how to balance risk and reward.
And when the attorneys general of all 50 states sought to investigate subprime lending, believing that some lending practices might be toxic, we were blocked by a coalition of the major banks and the Bush administration, which invoked a rarely used statute to preempt the states' ability to probe. The administration claimed that it had the situation under control and that our inquiry was unnecessary.
Time and again, whether at the state level, in Congress or at the Securities and Exchange Commission under Bill Donaldson, those who tried to enforce the basic principles that would allow the market to survive were told that the "invisible hand" of the market and self-regulation could handle the task alone.
The reality is that unregulated competition drives corporate behavior and risk-taking to unacceptable levels. This is simply one of the ways in which some market participants try to gain a competitive advantage. As one lawyer for a company charged with malfeasance stated in a meeting in my office (amazingly, this was intended as a winning defense): "You're right about our behavior, but we're not as bad as our competitors."
No major market problem has been resolved through self-regulation, because individual competitive behavior doesn't concern itself with the larger market. Individual actors care only about performing better than the next guy, doing whatever is permitted -- or will go undetected. Look at the major bubbles and market crises. Long-Term Capital Management, Enron, the subprime lending scandals: All are classic demonstrations of the bitter reality that greed, not self-discipline, rules where unfettered behavior is allowed.
Those who truly understand economics, as did Adam Smith, do not preach an absence of government participation. A market doesn't exist in a vacuum. Rather, a market is a product of laws, rules and enforcement. It needs transparency, capital requirements and fidelity to fiduciary duty. The alternative, as we are seeing, is anarchy.
One of the great advantages U.S. capital markets have enjoyed over the decades has been the view -- held worldwide -- that there was an underlying integrity to the representations market participants made, because the regulatory framework in which they were made was believed to provide genuine oversight. But as we all know, the laws requiring such integrity are meaningless without a government dedicated to enforcing them.
Second, our corporate governance system has failed. We need to reexamine each of the links in its chain. Boards of directors, compensation and audit committees, the trio of facilitators (lawyers, investment bankers and auditors) whose job it is to create the impression of legal compliance, and shareholders themselves -- all abdicated their responsibilities.
Institutional shareholders, in particular mutual funds, pension funds and endowments, must reengage in corporate governance. Over the past decade, arguably the sole challenge to corporate mismanagement and poor corporate strategies has come from private-equity firms or activist hedge funds. These firms were among the few shareholders or pools of capital willing to purchase and revamp encrusted corporate machines. So it shouldn't be surprising that the corporate world has taken a skeptical view of them -- especially short-selling hedge funds, which have often been a rare voice raising the alarm.
Boards of directors were also missing in action over the past decade; not only did they not provide answers, they all too often failed even to ask the appropriate questions. And the roles of compensation committees, of course, must be totally rethought. No longer can Garrison Keillor's brilliant observation about our kids -- that they are all above average -- apply to CEOs and propel failed leaders' paychecks through the roof. Today's momentary public oversight and outrage over executive compensation, while long overdue, is no substitute over the long term for firm standards set by compensation committees and boards of directors.
Finally, we need to completely overhaul the federal financial regulatory framework.
Let's leave aside the ideological hesitancy that has long hamstrung regulatory agencies. Today's balkanized regulatory framework for financial services no longer matches in any way the needs of a fully integrated global financial system. The divisions of the past -- commercial banking vs. investment banking vs. insurance vs. hedge funds vs. private equity -- have become distinctions without a difference. But these old boxes and formalities still determine how entities are viewed and regulated. It should surprise nobody that capital found the crevices in the regulatory framework. That is what capital is paid to do. But we failed to respond with a regulatory framework flexible enough to plug the leaks.
We do not need additional fragmented areas of federal regulation to handle hedge funds, sovereign wealth funds or derivatives. We need a unified approach that addresses the underlying issues: what kinds of leverage we wish to tolerate, how to measure risk, how much disclosure various trading products should provide. We cannot survive with the current system: the SEC, the Office of the Comptroller of the Currency, the Federal Deposit Insurance Corporation, the Fed, the Office of Thrift Supervision and on and on. We must go from the Rube Goldberg structure we now have to a sleek iPod design that is cleaner, has better operating software and may even look good.
We began to try to craft such a unified model in New York, as did Treasury Secretary Henry M. Paulson Jr. in Washington last year. But it is urgent that we finish the job. Having flooded the market with cash and seen the government take a chunk of many of our largest financial institutions, we now need to craft the rules that will apply to all market participants.
Three overarching priorities should guide government actions in the new structure. First, we need better control of systemic risk. The currently splintered federal regulatory authority, the continued presence of off-balance-sheet transactions for financial entities (even post-Enron) and the failure to subject major players to any government oversight means that nobody can really understand the full risk facing the financial system.
Second, investors must be protected with adequate, accurate information. Firms must offer transparency both to individual investors and to government regulators.
And third, as Eric R. Dinallo, the superintendent of the New York State Insurance Department, has wisely pointed out, we will have to step back from the current environment in which government has become a guarantor of all major risk. The so-called moral hazard will serve to devalue risk in the market, and this too will have a debilitating long-term effect on capital flows. Only if private actors have to bear the real risks they incur will the market function properly. We are now perilously close to nationalizing risk.
As the rules of modern capitalism are rewritten over the next year, those who benefit from the enormous flow of cash being spread throughout the U.S. economy must be expected to compete within a system of rules that creates a true market -- based on sound, skilled regulation, vigorous corporate governance and transparency.
Although mistakes I made in my private life now prevent me from participating in these issues as I have in the past, I very much hope and expect that President Obama and his new administration will have the strength and wisdom to do again what FDR did.
Eliot L. Spitzer was governor of New York from 2007-08 and state attorney general from 1999-2006.
Saturday, November 15, 2008
Jeffrey St. Clair: How Clinton Doomed the Spotted Owl
Weekend Edition
November 14 / 16, 2008
A Cautionary Tale for Greens in the Age of Obama
How Clinton Doomed the Spotted Owl
By JEFFREY ST. CLAIR
When biologist Jack Ward Thomas handed President Bill Clinton the final copy of his plan for the ancient forests of the Pacific Northwest Forest, Clinton asked only one question: “How much timber will it cut?”
With this revealing query began the bizarre final chapter in the saga of Clinton’s adventure in the rainforests of the Northwest, the home of the salmon and the spotted owl.
In the final two weeks of April 1994, the Clinton administration saw its strategy to reinitiate timber sales in Northwest forests come to a shocking fruition, when most of the key environmental groups in the region agreed to lift the three-year old federal injunction prohibiting new timber sales in spotted owl habitat. At the same moment, one of the nation’s largest forest products companies announced its glowing support for Clinton’s forest plan.
Watch how neatly the pattern of events unfolded.
On April 14, 1994, the Clinton administration submitted the Record of Decision for its Northwest forest plan to federal Judge William Dwyer in Seattle. A disturbing codicil to the original plan (widely known as Option 9), the 200-page Record of Decision granted a series of last-minute concessions to timber interests that were designed to accelerate the preparation of new timber sales in old-growth and keep the plan’s annual timber sale above the one billion board foot mark—the psychological barrier demanded by the timber industry.
The animals pay the price. For example, in order to meet the politically-driven cut levels, the final document shrank protection of the rare Marbled Murrelet by 250,000 acres in southern Oregon alone. The Marbled Murrelet is a chunky sea-faring bird that nests only in old-growth forests near the Pacific Ocean. It is listed as a threatened species. The diminished Murrelet was specifically tailored to clear the way for several enormous timber sales slated for the Siskiyou National Forest. Some of these sales, including the hotly contested Sugarloaf sale, are located in roadless areas.
Despite the intense uproar from the public and the scientific community over the prospect of logging and roadbuilding inside these ancient forest reserves, the Clinton plan greenlights thinning and salvage logging inside these supposedly sacrosanct areas without being subject to a detailed environmental assessment. This change was geared toward accelerating logging in the Oregon Coast Range and the Olympic Peninsula, the two areas where the Spotted Owl is most vulnerable to local extinction.
Most seriously, the final document dramatically weakened the standards for watershed analysis in order to “fast-track” logging operations in key basins. Back in 1993, Clinton and Bruce Babbitt hailed these detailed environmental assessments as the analytical and procedural cornerstone of the new ecosystem management approach. The basin-wide reviews were supposed to force timber sale planners to closely scrutinize the effects of logging and roadbuilding on entire watersheds. In fact, the group of scientists that peer-reviewed the draft Clinton plan concluded that these watershed assessment were “critical to the eventual success of adaptive management.” But with a stroke of the pen, Thomas and Clinton wiped them away.
As Clinton was taking with one hand, he was giving with the other. On April 15, 1994, a band of timber executives announced that they would not oppose the implementation of the new Clinton plan in court, opting instead for a “congressional strategy.” This meant that the industry planned to beg their congressional clients—men like Senator Mark Hatfield and House Speaker Tom Foley—to simply inscribe into law higher timber sales levels for the region than are called for under the Option 9 scheme and to insure that, once the levels are set, they remain immune from judicial scrutiny.
Forest Service chief Jack Ward Thomas indicated that he “might have a personal preference for timber targets” set by congress. This is where the slippery nature of Clintonism turns opaque. Instead of fighting for the ecological integrity of their own forest plan, they sent up a smoke signal to congress begging them to subvert it.
But this was a tall order. For starters, Congress didn’t want to take the blame for Clinton’s failures. Sen. George Mitchell told Bruce Babbitt point blank that he would fight any effort by the administration to shield its plan from legal review. Even traditional architects of so-called sufficiency legislation (laws that set timber and road-building targets and free activities from compliance with environmental statutes) displayed a distinct lack of enthusiasm for this approach without having an explicit and public nod of support from Clinton himself—a commitment that the president was unwilling to make.
Meanwhile, the federal courts had already struck a blow to the legality of the approach used to craft Clinton’s logging plan. In March 1994, in a suit brought by the Native Forest Council, Federal Judge Thomas Jackson ruled that the secretive process used to develop Option 9 violated the Federal Advisory Committee Act, or FACA. Along with the Freedom of Information Act, FACA stands as one of the pillars of open government. It requires that all advisory panels to the federal government contain balanced representation, hold public hearings, and make their deliberative records open to public review. Judge Jackson ruled that the Clinton approach violated each of these requirements.
This case laid the legal groundwork for the substantive challenges to future timber sales offered under the Clinton plan. For example, FACA seems likely to be a fruitful angle of attack against the consensus-based planning processes that are proliferating under the Adaptive Management approach. The response of the Clinton administration was to test congressional sentiment for a repeal of FACA. Sound familiar?
On April 19, several of the environmental plaintiffs in the Spotted Owl lawsuits declared their dissatisfaction with the Clinton plan at a press conference in Washington, DC. “The plan has come a long way politically, but falls short ecologically,” charged Andy Kerr, conservation director of the Oregon Natural Resources Department. “It fails to protect hundreds of species identified as dependent on old-growth forests, placing many at risk of extinction. Clearly, this doesn’t meet President Clinton’s own standard that the plan be scientifically credible and legally responsible.”
Kerr and Julie Norman, director of Headwaters, a southern Oregon conservation group, vowed that the environmentalists would mount a full-blown legal assault on the Clinton forest plan. She said the legal challenge would focus on “salmon, economics, and some owl claims.”
Here’s where things turn mysterious. One short day after these brawny pronouncements, Judge William Dwyer convened a status conference on the case in Seattle. At this hearing, the Forest Service officially requested that the injunction on new timber sales in Spotted Owl habitat be dissolved. The agency’s attorneys claimed that merely by filing the new plan with the court they had fully complied with the judge’s orders. At that point, Sierra Club Legal Defense Fund’s attorney shocked the court. True told Dwyer that the eleven environmental groups represented by his law firm would not oppose the Clinton administration’s request to lift the injunction and begin logging in old-growth again. He said that while the environmentalists might file an “amended complaint” to the old lawsuit, they were unlikely to seek a new injunction.
This was the second capitulation by the green lawyers to Clinton in less than a year. In September of 1993, in “a gesture of goodwill” to the Clinton administration, the environmentalists agreed to allow logging with fifty-four timber sales in old-growth forests vital to the survival of the Spotted Owl. It was at that point that the Forest Conservation Council, a Santa Fe-based group, split from the coalition and got new lawyers to press the fight.
And as the Sierra Club Legal Defense Fund offered to give up the entire injunction, only the Forest Conservation Council and the Native Forest Council of Eugene, Oregon demonstrated any resistance to the Clinton crowd’s political pressure to surrender the hard-won legal victory. The Native Forest Council was not a plaintiff in the original suit, but was granted amicus status by the court. Both organizations filed briefs with Judge Dwyer voicing strenuous objections to the release of the injunction. They argued that the burden of proof should lie with Clinton’s Forest Service to demonstrate that it is in compliance with the judge’s orders. But those suits were a long shot, a final protestation of a politically-driven sellout.
With the injunction lifted, the Forest Service began implementing the Clinton logging plan in June of 1994. The agency told the court it was ready to put forward 165 million board feet of timber in owl habitat during the summer—the first new timber sales since the Bush administration.
On April 21, Weyerhaeuser fulfilled its end of the bargain. The timber giant’s executive vice-president declared that the company was satisfied with the Clinton logging plan and pledged to defend it in Congress or the courts “by any means necessary.” You know you’re in deep trouble when corporate executives start quoting Malcolm X.
But Weyerhaeuser’s support for the Clinton plan shouldn’t have come as a surprise. The company, along with other industrial forest land owners, such as Plum Creek, ITT-Rayonier, Simpson and Georgia-Pacific, were the clear winners in the Option 9 sweepstakes. After all, these corporations had already been the financial beneficiaries of declining federal timber sales. As the price of lumber soared, so did their profits. The Clinton plan’s permanent restrictions on the rate of federal land logging substantially increases the long-term value of their own holdings.
More importantly for Weyerhaeuser, under the generous provisions of the Clinton administration’s new 4(d) Rule, industrial forest land owners were largely exempted from the Endangered Species Act’s strict prohibition against the “incidental taking” (that is, killing) of a listed species. This regressive rule punishes small landowners, but allows these multinational timber titans to continue clearcutting unabated in Spotted Owl habitat on their own lands, even when it ravages the owl’s already declining population.
Of course, the biggest victory for companies such as Weyerhaeuser and Plum Creek came when the Clinton administration stiff-armed environmentalists and labor leaders by refusing to stem the flow of raw log exports from private, corporate, and industrial lands in the Northwest. Even though the owl takes the rap, these exports are the leading cause of job loss in the timber sector.
For years, environmental strategists had plotted the ultimate crack-up of the timber monolith, pitting private landowners against public timber buyers (such as Louisiana-Pacific), domestic millers against log exporters. Well, the fissures finally came, but they didn’t unfold the way many expected—the most socially and environmentally deviant corporations emerged as unscathed victors.
What do we make of this odd accumulation of events, this carefully executed endgame to the Northwest forest crisis? Some grassroots environmentalists and labor organizers for the pulp and paper workers’ union charge that a three-way deal was cut between mainstream green groups, log exporters, and the Clinton administration. From a distance, the pattern to this rapid denouement seemed horribly prearranged. But the conspiracy falters on one salient point: the environmentalists received nothing for their gestures of goodwill, their reluctant dealmaking. Option 9 degenerated with every concession; it didn’t improve. In the end, only the lawyers made out. Trees for fees.
No, the bizarre and tragic conclusion to the Northwest forest fight simply revealed the fundamental nature of the Clinton approach and its abiding allegiance to corporate culture. If Clinton and Al Gore really shared an interest in protecting American timber workers and the ecology of the temperate rainforests of the Pacific Northwest, there was an obvious solution: end commercial logging on public lands and terminate the export of unprocessed logs to overseas ports. But Clinton didn’t align himself with the owl, the working stiffs, or the grassroots. He sided with the suits.
This essay is adapted from Born Under a Bad Sky: Notes From the Dark Side of the Earth by Jeffrey St. Clair (CounterPunch/AK Press).
Jeffrey St. Clair is the author of Been Brown So Long It Looked Like Green to Me: the Politics of Nature and Grand Theft Pentagon. His newest book, Born Under a Bad Sky, is just out from AK Press / CounterPunch books. He can be reached at: sitka@comcast.net.
November 14 / 16, 2008
A Cautionary Tale for Greens in the Age of Obama
How Clinton Doomed the Spotted Owl
By JEFFREY ST. CLAIR
When biologist Jack Ward Thomas handed President Bill Clinton the final copy of his plan for the ancient forests of the Pacific Northwest Forest, Clinton asked only one question: “How much timber will it cut?”
With this revealing query began the bizarre final chapter in the saga of Clinton’s adventure in the rainforests of the Northwest, the home of the salmon and the spotted owl.
In the final two weeks of April 1994, the Clinton administration saw its strategy to reinitiate timber sales in Northwest forests come to a shocking fruition, when most of the key environmental groups in the region agreed to lift the three-year old federal injunction prohibiting new timber sales in spotted owl habitat. At the same moment, one of the nation’s largest forest products companies announced its glowing support for Clinton’s forest plan.
Watch how neatly the pattern of events unfolded.
On April 14, 1994, the Clinton administration submitted the Record of Decision for its Northwest forest plan to federal Judge William Dwyer in Seattle. A disturbing codicil to the original plan (widely known as Option 9), the 200-page Record of Decision granted a series of last-minute concessions to timber interests that were designed to accelerate the preparation of new timber sales in old-growth and keep the plan’s annual timber sale above the one billion board foot mark—the psychological barrier demanded by the timber industry.
The animals pay the price. For example, in order to meet the politically-driven cut levels, the final document shrank protection of the rare Marbled Murrelet by 250,000 acres in southern Oregon alone. The Marbled Murrelet is a chunky sea-faring bird that nests only in old-growth forests near the Pacific Ocean. It is listed as a threatened species. The diminished Murrelet was specifically tailored to clear the way for several enormous timber sales slated for the Siskiyou National Forest. Some of these sales, including the hotly contested Sugarloaf sale, are located in roadless areas.
Despite the intense uproar from the public and the scientific community over the prospect of logging and roadbuilding inside these ancient forest reserves, the Clinton plan greenlights thinning and salvage logging inside these supposedly sacrosanct areas without being subject to a detailed environmental assessment. This change was geared toward accelerating logging in the Oregon Coast Range and the Olympic Peninsula, the two areas where the Spotted Owl is most vulnerable to local extinction.
Most seriously, the final document dramatically weakened the standards for watershed analysis in order to “fast-track” logging operations in key basins. Back in 1993, Clinton and Bruce Babbitt hailed these detailed environmental assessments as the analytical and procedural cornerstone of the new ecosystem management approach. The basin-wide reviews were supposed to force timber sale planners to closely scrutinize the effects of logging and roadbuilding on entire watersheds. In fact, the group of scientists that peer-reviewed the draft Clinton plan concluded that these watershed assessment were “critical to the eventual success of adaptive management.” But with a stroke of the pen, Thomas and Clinton wiped them away.
As Clinton was taking with one hand, he was giving with the other. On April 15, 1994, a band of timber executives announced that they would not oppose the implementation of the new Clinton plan in court, opting instead for a “congressional strategy.” This meant that the industry planned to beg their congressional clients—men like Senator Mark Hatfield and House Speaker Tom Foley—to simply inscribe into law higher timber sales levels for the region than are called for under the Option 9 scheme and to insure that, once the levels are set, they remain immune from judicial scrutiny.
Forest Service chief Jack Ward Thomas indicated that he “might have a personal preference for timber targets” set by congress. This is where the slippery nature of Clintonism turns opaque. Instead of fighting for the ecological integrity of their own forest plan, they sent up a smoke signal to congress begging them to subvert it.
But this was a tall order. For starters, Congress didn’t want to take the blame for Clinton’s failures. Sen. George Mitchell told Bruce Babbitt point blank that he would fight any effort by the administration to shield its plan from legal review. Even traditional architects of so-called sufficiency legislation (laws that set timber and road-building targets and free activities from compliance with environmental statutes) displayed a distinct lack of enthusiasm for this approach without having an explicit and public nod of support from Clinton himself—a commitment that the president was unwilling to make.
Meanwhile, the federal courts had already struck a blow to the legality of the approach used to craft Clinton’s logging plan. In March 1994, in a suit brought by the Native Forest Council, Federal Judge Thomas Jackson ruled that the secretive process used to develop Option 9 violated the Federal Advisory Committee Act, or FACA. Along with the Freedom of Information Act, FACA stands as one of the pillars of open government. It requires that all advisory panels to the federal government contain balanced representation, hold public hearings, and make their deliberative records open to public review. Judge Jackson ruled that the Clinton approach violated each of these requirements.
This case laid the legal groundwork for the substantive challenges to future timber sales offered under the Clinton plan. For example, FACA seems likely to be a fruitful angle of attack against the consensus-based planning processes that are proliferating under the Adaptive Management approach. The response of the Clinton administration was to test congressional sentiment for a repeal of FACA. Sound familiar?
On April 19, several of the environmental plaintiffs in the Spotted Owl lawsuits declared their dissatisfaction with the Clinton plan at a press conference in Washington, DC. “The plan has come a long way politically, but falls short ecologically,” charged Andy Kerr, conservation director of the Oregon Natural Resources Department. “It fails to protect hundreds of species identified as dependent on old-growth forests, placing many at risk of extinction. Clearly, this doesn’t meet President Clinton’s own standard that the plan be scientifically credible and legally responsible.”
Kerr and Julie Norman, director of Headwaters, a southern Oregon conservation group, vowed that the environmentalists would mount a full-blown legal assault on the Clinton forest plan. She said the legal challenge would focus on “salmon, economics, and some owl claims.”
Here’s where things turn mysterious. One short day after these brawny pronouncements, Judge William Dwyer convened a status conference on the case in Seattle. At this hearing, the Forest Service officially requested that the injunction on new timber sales in Spotted Owl habitat be dissolved. The agency’s attorneys claimed that merely by filing the new plan with the court they had fully complied with the judge’s orders. At that point, Sierra Club Legal Defense Fund’s attorney shocked the court. True told Dwyer that the eleven environmental groups represented by his law firm would not oppose the Clinton administration’s request to lift the injunction and begin logging in old-growth again. He said that while the environmentalists might file an “amended complaint” to the old lawsuit, they were unlikely to seek a new injunction.
This was the second capitulation by the green lawyers to Clinton in less than a year. In September of 1993, in “a gesture of goodwill” to the Clinton administration, the environmentalists agreed to allow logging with fifty-four timber sales in old-growth forests vital to the survival of the Spotted Owl. It was at that point that the Forest Conservation Council, a Santa Fe-based group, split from the coalition and got new lawyers to press the fight.
And as the Sierra Club Legal Defense Fund offered to give up the entire injunction, only the Forest Conservation Council and the Native Forest Council of Eugene, Oregon demonstrated any resistance to the Clinton crowd’s political pressure to surrender the hard-won legal victory. The Native Forest Council was not a plaintiff in the original suit, but was granted amicus status by the court. Both organizations filed briefs with Judge Dwyer voicing strenuous objections to the release of the injunction. They argued that the burden of proof should lie with Clinton’s Forest Service to demonstrate that it is in compliance with the judge’s orders. But those suits were a long shot, a final protestation of a politically-driven sellout.
With the injunction lifted, the Forest Service began implementing the Clinton logging plan in June of 1994. The agency told the court it was ready to put forward 165 million board feet of timber in owl habitat during the summer—the first new timber sales since the Bush administration.
On April 21, Weyerhaeuser fulfilled its end of the bargain. The timber giant’s executive vice-president declared that the company was satisfied with the Clinton logging plan and pledged to defend it in Congress or the courts “by any means necessary.” You know you’re in deep trouble when corporate executives start quoting Malcolm X.
But Weyerhaeuser’s support for the Clinton plan shouldn’t have come as a surprise. The company, along with other industrial forest land owners, such as Plum Creek, ITT-Rayonier, Simpson and Georgia-Pacific, were the clear winners in the Option 9 sweepstakes. After all, these corporations had already been the financial beneficiaries of declining federal timber sales. As the price of lumber soared, so did their profits. The Clinton plan’s permanent restrictions on the rate of federal land logging substantially increases the long-term value of their own holdings.
More importantly for Weyerhaeuser, under the generous provisions of the Clinton administration’s new 4(d) Rule, industrial forest land owners were largely exempted from the Endangered Species Act’s strict prohibition against the “incidental taking” (that is, killing) of a listed species. This regressive rule punishes small landowners, but allows these multinational timber titans to continue clearcutting unabated in Spotted Owl habitat on their own lands, even when it ravages the owl’s already declining population.
Of course, the biggest victory for companies such as Weyerhaeuser and Plum Creek came when the Clinton administration stiff-armed environmentalists and labor leaders by refusing to stem the flow of raw log exports from private, corporate, and industrial lands in the Northwest. Even though the owl takes the rap, these exports are the leading cause of job loss in the timber sector.
For years, environmental strategists had plotted the ultimate crack-up of the timber monolith, pitting private landowners against public timber buyers (such as Louisiana-Pacific), domestic millers against log exporters. Well, the fissures finally came, but they didn’t unfold the way many expected—the most socially and environmentally deviant corporations emerged as unscathed victors.
What do we make of this odd accumulation of events, this carefully executed endgame to the Northwest forest crisis? Some grassroots environmentalists and labor organizers for the pulp and paper workers’ union charge that a three-way deal was cut between mainstream green groups, log exporters, and the Clinton administration. From a distance, the pattern to this rapid denouement seemed horribly prearranged. But the conspiracy falters on one salient point: the environmentalists received nothing for their gestures of goodwill, their reluctant dealmaking. Option 9 degenerated with every concession; it didn’t improve. In the end, only the lawyers made out. Trees for fees.
No, the bizarre and tragic conclusion to the Northwest forest fight simply revealed the fundamental nature of the Clinton approach and its abiding allegiance to corporate culture. If Clinton and Al Gore really shared an interest in protecting American timber workers and the ecology of the temperate rainforests of the Pacific Northwest, there was an obvious solution: end commercial logging on public lands and terminate the export of unprocessed logs to overseas ports. But Clinton didn’t align himself with the owl, the working stiffs, or the grassroots. He sided with the suits.
This essay is adapted from Born Under a Bad Sky: Notes From the Dark Side of the Earth by Jeffrey St. Clair (CounterPunch/AK Press).
Jeffrey St. Clair is the author of Been Brown So Long It Looked Like Green to Me: the Politics of Nature and Grand Theft Pentagon. His newest book, Born Under a Bad Sky, is just out from AK Press / CounterPunch books. He can be reached at: sitka@comcast.net.
Thursday, November 13, 2008
Kevin Drum//Andrew Sullivan: Palin:Unmoored from normal requirements of national office
What Just Happened
WHAT JUST HAPPENED....Despite all the grief she's gotten, I continue to think that the selection of Sarah Palin as John McCain's running mate represents the breaking of a consensual cultural barrier far more fundamental than most people realize. It's not just that she was inexperienced (Spiro Agnew and John Edwards weren't much more experienced than Palin when they ran for VP) but that she was — obviously, transparently, completely — uninterested in and uninformed about national policy at nearly every level. We've simply never seen someone so completely unmoored from the normal requirements of national office before. She was chosen purely at the level of celebrity, and an awful lot of people seemed to be just fine with that.
Unfortunately, I've never really been able to find the words to describe just how corrosive I think her choice was. The whole affair just left me gobsmacked. So instead I'll turn the floor briefly over to Andrew Sullivan:
Let's be real in a way the national media seems incapable of: this person should never have been placed on a national ticket in a mature democracy....The impulsive, unvetted selection of a total unknown, with no knowledge of or interest in the wider world, as a replacement president remains one of the most disturbing events in modern American history. That the press felt required to maintain a facade of normalcy for two months — and not to declare the whole thing a farce from start to finish — is a sign of their total loss of nerve.
....This deluded and delusional woman still doesn't understand what happened to her; still has no self-awareness; and has never been forced to accept her obvious limitations. She cannot keep even the most trivial story straight; she repeats untruths with a ferocity and calm that is reserved only to the clinically unhinged; she has the educational level of a high school drop-out; and regards ignorance as some kind of achievement. It is excruciating to watch her — but more excruciating to watch those who feel obliged to defend her.
Andrew's obsession with Palin was often hard to take, and I sometimes wished I could reach through the screen and strangle him whenever he started talking about Trig Palin again. Still, aside from the "clinically unhinged" crack, I agree with all of this. Disturbing hardly begins to describe what we've gone though with Palin over the past two months.
UPDATE: Via email, here's an excerpt from Wolf Blitzer's interview today with Palin:
BLITZER: Another question. What are your new ideas on how to take the Republican Party out of this rut that it’s in right now? Give me one or two new ideas that you’re going to propose to these governors who have gathered here in this hotel.
PALIN: Well, a lot of Republican governors have really good ideas for our nation because we’re the ones there on the front lines being held accountable every single day in service to the people whom have hired us in our own states and the planks in our platform are strong and they are good for America. It’s all about free enterprise and respecting the ...
BLITZER: Does that mean you want to come up with a new Sarah Palin initiative that you want to release right now.
PALIN: Gah! Nothing specific right now. Sitting here in these chairs that I’m going to be proposing but in working with these governors who again on the front lines are forced to and it’s our privileged obligation to find solutions to the challenges facing our own states every day being held accountable, not being just one of many just casting votes or voting present every once in a while, we don’t get away with that. We have to balance budgets and we’re dealing with multibillion dollar budgets and tens of thousands of employees in our organizations.
Should I laugh or should I cry? I think it depends on whether Palin disappears back into well-earned obscurity over the next few months.
WHAT JUST HAPPENED....Despite all the grief she's gotten, I continue to think that the selection of Sarah Palin as John McCain's running mate represents the breaking of a consensual cultural barrier far more fundamental than most people realize. It's not just that she was inexperienced (Spiro Agnew and John Edwards weren't much more experienced than Palin when they ran for VP) but that she was — obviously, transparently, completely — uninterested in and uninformed about national policy at nearly every level. We've simply never seen someone so completely unmoored from the normal requirements of national office before. She was chosen purely at the level of celebrity, and an awful lot of people seemed to be just fine with that.
Unfortunately, I've never really been able to find the words to describe just how corrosive I think her choice was. The whole affair just left me gobsmacked. So instead I'll turn the floor briefly over to Andrew Sullivan:
Let's be real in a way the national media seems incapable of: this person should never have been placed on a national ticket in a mature democracy....The impulsive, unvetted selection of a total unknown, with no knowledge of or interest in the wider world, as a replacement president remains one of the most disturbing events in modern American history. That the press felt required to maintain a facade of normalcy for two months — and not to declare the whole thing a farce from start to finish — is a sign of their total loss of nerve.
....This deluded and delusional woman still doesn't understand what happened to her; still has no self-awareness; and has never been forced to accept her obvious limitations. She cannot keep even the most trivial story straight; she repeats untruths with a ferocity and calm that is reserved only to the clinically unhinged; she has the educational level of a high school drop-out; and regards ignorance as some kind of achievement. It is excruciating to watch her — but more excruciating to watch those who feel obliged to defend her.
Andrew's obsession with Palin was often hard to take, and I sometimes wished I could reach through the screen and strangle him whenever he started talking about Trig Palin again. Still, aside from the "clinically unhinged" crack, I agree with all of this. Disturbing hardly begins to describe what we've gone though with Palin over the past two months.
UPDATE: Via email, here's an excerpt from Wolf Blitzer's interview today with Palin:
BLITZER: Another question. What are your new ideas on how to take the Republican Party out of this rut that it’s in right now? Give me one or two new ideas that you’re going to propose to these governors who have gathered here in this hotel.
PALIN: Well, a lot of Republican governors have really good ideas for our nation because we’re the ones there on the front lines being held accountable every single day in service to the people whom have hired us in our own states and the planks in our platform are strong and they are good for America. It’s all about free enterprise and respecting the ...
BLITZER: Does that mean you want to come up with a new Sarah Palin initiative that you want to release right now.
PALIN: Gah! Nothing specific right now. Sitting here in these chairs that I’m going to be proposing but in working with these governors who again on the front lines are forced to and it’s our privileged obligation to find solutions to the challenges facing our own states every day being held accountable, not being just one of many just casting votes or voting present every once in a while, we don’t get away with that. We have to balance budgets and we’re dealing with multibillion dollar budgets and tens of thousands of employees in our organizations.
Should I laugh or should I cry? I think it depends on whether Palin disappears back into well-earned obscurity over the next few months.
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