Go to Original
By Rob Lever
Troubled Wall Street giant Lehman Brothers sought bankruptcy protection Monday after a frantic weekend of talks failed to find a buyer for the firm ravaged by credit and real estate woes in a shaken financial system.
In a surprise for some analysts, Lehman said it was seeking reorganization under Chapter 11 of the bankruptcy code, a sign that it was still holding out hope for survival in some form.
The massive bankruptcy filing in US federal court in New York listed 639 billion dollars in assets at 613 billion in debts.
The news of Lehman's collapse prompted a bloodbath in global financial markets as traders flocked to safer Treasury bonds on fears of more dominoes falling in the banking system.
Some analysts said the Federal Reserve, which took a series of steps Sunday and Monday to boost liquidity available to the financial system may need to cut interest rates at its Tuesday policy meeting.
"The sudden bankruptcy of Lehman Brothers over the weekend has led to another dangerous escalation of the crisis in the US financial markets," said Brian Bethune, economist at Global Insight.
"The economy is very weak, the recession wolves are pounding down the door and the financial system faces new deflationary threats from the bankruptcy of Lehman Brothers. This is an emergency situation and an aggressive response from the Fed is needed."
Lehman shares plunged 94 percent to 21 cents after the news. Meanwhile American International Group, one of the world's biggest insurance companies, slid 60 percent to 4.76 dollars on fears it may too face a cash crunch and credit downgrade.
Merrill Lynch, another white-shoe Wall Street firm, managed to get a lifeline over the weekend with a deal to sell itself for 50 billion dollars to Bank of America. Merrill shares rose 0.06 percent to 17.06 dollars.
The news came after a weekend of crisis talks involving US Treasury and Federal Reserve officials failed to head off a collapse of Lehman Brothers which some say could send shockwaves through the global financial system.
"The remaining Wall Street firms are scrambling to match as many of Lehman's offsetting positions as possible to avoid a complete liquidation wipeout," said Ed Yardeni at Yardeni Research.
"Another potential calamity would be a fire sale of Lehman's distressed assets -- such as commercial real estate. This would push prices even lower and potentially force other firms to mark down once again the value of their own holdings."
Lehman Brothers said its filing was to exclude the broker-dealer operations, the company, said, adding that operations of the brokerage arm and its Neuberger Berman asset management division would continue to trade.
The statement said Lehman was "exploring the sale of its broker-dealer operations and, as previously announced, is in advanced discussions with a number of potential purchasers to sell its investment management division."
Lehman Brothers was the fourth-biggest US investment bank, dating back to 1850 with a staff of some 27,000 people but that counted for naught, after writedowns of 13.8 billion dollars on the US subprime or higher risk home loan crisis.
Under steadily mounting pressure, especially after rival Bear Stearns was bailed out earlier in the year, Lehman Brothers tried to find a savior too but a quarterly loss of 3.9 billion dollars and planned radical asset sales made buyers reluctant to step in without US government backing.
Yet some said that despite the turmoil, Lehman's failure may serve to purge the financial system of its troubles and set the stage for recovery.
"The darker view is that this will be the catalyst for a chain of failures or bankruptcies throughout the financial system, exacerbating the credit crunch and the recession," said Mark Zandi, chief economist at Economy.com.
"A more upbeat perspective sees these events as a catharsis that will make the financial system more resilient. Bank of America's acquisition of Merrill Lynch testifies to this more optimistic view."
Tuesday, September 16, 2008
The American War Moves to Pakistan
Go to Original
By Tariq Ali
Bush's War Widens Dangerously
By Tariq Ali
Bush's War Widens Dangerously
The decision to make public a presidential order of last July authorizing American strikes inside Pakistan without seeking the approval of the Pakistani government ends a long debate within, and on the periphery of, the Bush administration. Senator Barack Obama, aware of this ongoing debate during his own long battle with Hillary Clinton, tried to outflank her by supporting a policy of U.S. strikes into Pakistan. Senator John McCain and Vice Presidential candidate Sarah Palin have now echoed this view and so it has become, by consensus, official U.S. policy.
Its effects on Pakistan could be catastrophic, creating a severe crisis within the army and in the country at large. The overwhelming majority of Pakistanis are opposed to the U.S. presence in the region, viewing it as the most serious threat to peace.
Why, then, has the U.S. decided to destabilize a crucial ally? Within Pakistan, some analysts argue that this is a carefully coordinated move to weaken the Pakistani state yet further by creating a crisis that extends way beyond the badlands on the frontier with Afghanistan. Its ultimate aim, they claim, would be the extraction of the Pakistani military’s nuclear fangs. If this were the case, it would imply that Washington was indeed determined to break up the Pakistani state, since the country would very simply not survive a disaster on that scale.
In my view, however, the expansion of the war relates far more to the Bush administration’s disastrous occupation in Afghanistan. It is hardly a secret that the regime of President Hamid Karzai is becoming more isolated with each passing day, as Taliban guerrillas move ever closer to Kabul.
When in doubt, escalate the war is an old imperial motto. The strikes against Pakistan represent -- like the decisions of President Richard Nixon and his National Security Adviser Henry Kissinger to bomb and then invade Cambodia (acts that, in the end, empowered Pol Pot and his monsters) -- a desperate bid to salvage a war that was never good, but has now gone badly wrong.
It is true that those resisting the NATO occupation cross the Pakistan-Afghan border with ease. However, the U.S. has often engaged in quiet negotiations with them. Several feelers have been put out to the Taliban in Pakistan, while U.S. intelligence experts regularly check into the Serena Hotel in Swat to discuss possibilities with Mullah Fazlullah, a local pro-Taliban leader. The same is true inside Afghanistan.
After the U.S. invasion of Afghanistan in 2001, a whole layer of the Taliban’s middle-level leadership crossed the border into Pakistan to regroup and plan for what lay ahead. By 2003, their guerrilla factions were starting to harass the occupying forces in Afghanistan and, during 2004, they began to be joined by a new generation of local recruits, by no means all jihadists, who were being radicalized by the occupation itself.
Though, in the world of the Western media, the Taliban has been entirely conflated with al-Qaeda, most of their supporters are, in fact, driven by quite local concerns. If NATO and the U.S. were to leave Afghanistan, their political evolution would most likely parallel that of Pakistan’s domesticated Islamists.
The neo-Taliban now control at least twenty Afghan districts in Kandahar, Helmand, and Uruzgan provinces. It is hardly a secret that many officials in these zones are closet supporters of the guerrilla fighters. Though often characterized as a rural jacquerie they have won significant support in southern towns and they even led a Tet-style offensive in Kandahar in 2006. Elsewhere, mullahs who had initially supported President Karzai’s allies are now railing against the foreigners and the government in Kabul. For the first time, calls for jihad against the occupation are even being heard in the non-Pashtun northeast border provinces of Takhar and Badakhshan.
The neo-Taliban have said that they will not join any government until "the foreigners" have left their country, which raises the question of the strategic aims of the United States. Is it the case, as NATO Secretary-General Jaap de Hoop Scheffer suggested to an audience at the Brookings Institution earlier this year, that the war in Afghanistan has little to do with spreading good governance in Afghanistan or even destroying the remnants of al-Qaeda? Is it part of a master plan, as outlined by a strategist in NATO Review in the Winter of 2005, to expand the focus of NATO from the Euro-Atlantic zone, because "in the 21st century NATO must become an alliance… designed to project systemic stability beyond its borders"?
As that strategist went on to write:
"The centre of gravity of power on this planet is moving inexorably eastward. As it does, the nature of power itself is changing. The Asia-Pacific region brings much that is dynamic and positive to this world, but as yet the rapid change therein is neither stable nor embedded in stable institutions. Until this is achieved, it is the strategic responsibility of Europeans and North Americans, and the institutions they have built, to lead the way… [S]ecurity effectiveness in such a world is impossible without both legitimacy and capability."
Such a strategy implies a permanent military presence on the borders of both China and Iran. Given that this is unacceptable to most Pakistanis and Afghans, it will only create a state of permanent mayhem in the region, resulting in ever more violence and terror, as well as heightened support for jihadi extremism, which, in turn, will but further stretch an already over-extended empire.
Globalizers often speak as though U.S. hegemony and the spread of capitalism were the same thing. This was certainly the case during the Cold War, but the twin aims of yesteryear now stand in something closer to an inverse relationship. For, in certain ways, it is the very spread of capitalism that is gradually eroding U.S. hegemony in the world. Russian Prime Minister Vladimir Putin’s triumph in Georgia was a dramatic signal of this fact. The American push into the Greater Middle East in recent years, designed to demonstrate Washington’s primacy over the Eurasian powers, has descended into remarkable chaos, necessitating support from the very powers it was meant to put on notice.
Pakistan’s new, indirectly elected President, Asif Zardari, the husband of the assassinated Benazir Bhutto and a Pakistani "godfather" of the first order, indicated his support for U.S. strategy by inviting Afghanistan’s Hamid Karzai to attend his inauguration, the only foreign leader to do so. Twinning himself with a discredited satrap in Kabul may have impressed some in Washington, but it only further decreased support for the widower Bhutto in his own country.
The key in Pakistan, as always, is the army. If the already heightened U.S. raids inside the country continue to escalate, the much-vaunted unity of the military High Command might come under real strain. At a meeting of corps commanders in Rawalpindi on September 12th, Pakistani Chief of Staff General Ashfaq Kayani received unanimous support for his relatively mild public denunciation of the recent U.S. strikes inside Pakistan in which he said the country’s borders and sovereignty would be defended "at all cost."
Saying, however, that the Army will safeguard the country’s sovereignty is different from doing so in practice. This is the heart of the contradiction. Perhaps the attacks will cease on November 4th. Perhaps pigs (with or without lipstick) will fly. What is really required in the region is an American/NATO exit strategy from Afghanistan, which should entail a regional solution involving Pakistan, Iran, India, and Russia. These four states could guarantee a national government and massive social reconstruction in that country. No matter what, NATO and the Americans have failed abysmally.
Is Sarah Palin’s God a Liar and a War Criminal?
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By Ed Ciaccio
In June, 2008, Alaska Governor Sarah Palin, now Republican Senator John McCain’s choice for his running mate as vice-president, spoke to a group of ministry students at her Wasilla, Alaska Assembly of God Church. Palin asked these church leaders to pray for soldiers, including her own son, who would soon be deployed to Iraq, in these words: "that our leaders, our national leaders, are sending [U.S. soldiers] out on a task that is from God. That’s what we have to make sure that we’re praying for, that there is a plan and that that plan is God’s plan."
By Ed Ciaccio
In June, 2008, Alaska Governor Sarah Palin, now Republican Senator John McCain’s choice for his running mate as vice-president, spoke to a group of ministry students at her Wasilla, Alaska Assembly of God Church. Palin asked these church leaders to pray for soldiers, including her own son, who would soon be deployed to Iraq, in these words: "that our leaders, our national leaders, are sending [U.S. soldiers] out on a task that is from God. That’s what we have to make sure that we’re praying for, that there is a plan and that that plan is God’s plan."
Would God’s plan include lying about, and misrepresenting crucial information about, the alleged reasons for going to war against Iraq? Would it include commission of the “supreme international crime” of waging an unprovoked, unnecessary war of aggression against a nation and its people who never threatened the United States? What kind of God would have such a plan?
Or is it that Sarah Palin is so poorly informed that, three years after the first confirmation of George W. Bush’s intention to attack Iraq, whether or not there was any threat from Iraq, was revealed, she is unaware of this revelation? Is she so out of touch with facts that she still believes the long-ago discredited lies told by the Bush administration? Or was she just pandering to neoconservatives who still want to pervert the foreign policy of our country? And why drag God into it?
We have known, from the U.K. Sunday Times of May 1, 2005 story “The secret Downing Street memo” (http://www.timesonline.co.uk/tol/news/uk/article387374.ece) which leaked the July 23, 2002 “Downing Street Minutes,” that George W. Bush was “fixing the intelligence” to support his unsupportable assertions that Iraq had weapons of mass destruction which threatened Iraq’s neighbors as well as the United States:
Bush wanted to remove Saddam, through military action, justified by the conjunction of terrorism and WMD. But the intelligence and facts were being fixed around the policy. The NSC had no patience with the UN route, and no enthusiasm for publishing material on the Iraqi regime’s record. There was little discussion in Washington of the aftermath after military action.
Bush, himself, knew these assertions were unsupportable, especially after he received the CIA’s National Intelligence Estimate (NIE) of October, 1, 2002 which concluded that it was NOT certain that Saddam Hussein still had weapons of mass destruction at all, let alone was threatening to use them. But Bush was so intent about attacking Iraq that he ordered critical sections of this NIE kept from most members of Congress in addition to the press and the American people, as W. Patrick Lang, a retired U.S. Army colonel and Middle East intelligence specialist, wrote in 2004:
There was also the subtle hiding of the objections of the Department of Energy and the State Department’s Bureau of Intelligence and Research (INR) in the NIE of October 2002. One congressional source explained that the classified NIE was made available in its entirety to only a select few members of Congress. There were verbal briefings and an elaborate process to access the document in a secure location. But it was never clear that the 27-page unclassified version that was available to every office was missing any crucial information. (“Drinking the Kool-Aid” by W. Patrick Lang http://www.mepc.org/journal_vol11/0406_lang.asp)
In addition,
on September 17, 2005, in “Powell’s Widening Credibility Gap” (http://www.consortiumnews.com/2005/091605.html), investigative journalist Robert Parry wrote,:
At the CIA, doubts grew about WMD claims from Iraqi defectors, including one codenamed “Curveball” who had asserted that Iraq had mobile WMD labs, but who was suspected of fabrication.
Tyler Drumheller, former chief of the CIA’s European Division, said his office had issued repeated warnings about Curveball’s accounts. “Everyone in the chain of command knew exactly what was happening,” said Drumheller, who scoffed at claims by Tenet and McLaughlin that they didn’t know about Curveball’s credibility problems. [Los Angeles Times, April 2, 2005]
As veteran Los Angeles County prosecuting attorney Vincent Bugliosi makes clear in his recent book, The Prosecution of George W. Bush for Murder (May, 2008), Bush received the classified CIA NIE on October 1, 2002, and its conclusion was that there was no solid case for suspecting Saddam Hussein and Iraq of possessing weapons of mass destruction which posed an imminent threat. Yet, six days later, Bush intentionally released an unclassified version of this NIE to the press and public which deleted that significant conclusion, so that he could mislead us to believe there were grounds to fear Saddam Hussein.
Coupled with former Ambassador Joseph Wilson’s July, 2003 exposure of the Iraq-Niger “yellowcake” hoax, which resulted in his wife, CIA officer Valerie Plame, being outed in retaliation, thus ending her CIA career as well as, possibly, the lives of many overseas agents in her network, all of the preceding information has been known for at least three years.
Then, in a March 7, 2006 broadcast of “Democracy Now!” (http://www.democracynow.org/2006/3/7/lawless_world_bush_considered_flying_us), host Amy Goodman interviewed British international law professor Philippe Sands, who revealed yet another piece of evidence revealing how Bush was so desperate to attack Iraq that he considered resorting to a type of “false flag” provocation:
New evidence has emerged that President Bush and British Prime Minister Tony Blair agreed in January 2003 to attack Iraq regardless of whether diplomatic efforts succeeded. The revelation comes in a newly updated version of the book “Lawless World” by British international law professor Philippe Sands. According to the book, Blair offered Bush his full support of the war during a meeting at the White House in January 2003. Sands says his account is based on a summary of the meeting prepared by one of the participants.
Bush also reportedly said the “diplomatic strategy had to be arranged around the military planning”. In addition the book reveals President Bush told Blair that the United States was considering flying U2 spy planes disguised as United Nations planes over Iraq in an attempt to provoke Saddam Hussein. If Iraq fired on the planes, it would help justify a U.S.-led invasion.
As Sands asked, “Why would the British prime minister and the American president be talking about the possibility of provoking a material breach if they had clear and compelling evidence?”
So, years before Sarah Palin told ministry students in her Alaska church congregation that our war on, and occupation of, Iraq was “a task that is from God,” George W. Bush was lying and misrepresenting information about the need to attack Iraq.
Therefore the war on Iraq was illegal, as then United Nations Secretary-General Kofi Annan stated in a BBC interview on September 16, 2004 (see “Iraq war illegal, says Annan” http://news.bbc.co.uk/2/hi/middle_east/3661134.stm). It was an unprovoked, unnecessary war of aggression against a sovereign nation which did not threaten the United States. As such, it is the “supreme international crime, differing only from other war crimes in that it contains within itself the accumulated evil of the whole," according to Justice Robert H. Jackson, Chief of Counsel for the United States at the International Military Tribunal in Nuremberg, Germany, immediately following World War II.
So we know that Bush, Cheney, and all the other architects of the Iraq War are war criminals and that this “supreme international crime” was definitely their task. But how does that make it God’s task? If it is, then God must surely be not only a serial liar, but a war criminal as well.
But I doubt any Christian, or any believer in God, for that matter, would claim that the supreme international war crime of waging aggressive war, especially one based on lies, was “a task that is from God.” So is Sarah Palin deluded, ignorant, or just pandering to the worst, most extreme elements in our country?
Finally, on Thursday, Sept. 11, 2008, speaking before soldiers in Alaska, including her own son, who were about to be deployed to Iraq, Gov. Palin actually told them they were being sent there to, "defend the innocent from the enemies who planned and carried out and rejoiced in the death of thousands of Americans" (see “Palin Links Iraq to Sept. 11 In Talk to Troops in Alaska” http://www.washingtonpost.com/wp-dyn/content/article/2008/09/11/AR2008091103789_pf.html).
But, on September 18, 2003, Bush himself had said there was no evidence linking Saddam Hussein to the September 11, 2001 attacks (see "Bush rejects Saddam 9/11 link" http://news.bbc.co.uk/2/hi/americas/3118262.stm).
And on June 17, 2004, the Washington Post had reported that "The Sept. 11 commission reported yesterday that it has found no ‘collaborative relationship’ between Iraq and al Qaeda, challenging one of the Bush administration’s main justifications for the war in Iraq." (see "Al Qaeda-Hussein Link Is Dismissed" http://www.washingtonpost.com/wp-dyn/articles/A47812-2004Jun16.html).
So where has Sarah Palin been during all these revelations which clearly debunk Bush’s reasons for attacking and occupying Iraq? Aside from being deeply offending believers by claiming the Bush lies and supreme international war crime were “a task from God,” these claims made by Palin in June, 2008 and then in September, 2008 prove how completely unqualified she is to be considered as a vice-presidential candidate when she clearly knows nothing of the truth about the most important historical events of our time.
Worse still, if she does, indeed, know these vitally important basic facts which are a prerequisite for national office, but is continuing to perpetuate the Bush lies and justifying his war crime by calling it all “a task from God,” who would want someone of that despicable character to be only a heartbeat away from the U.S. presidency, especially given John McCain’s advanced age and history of multiple occurrences of potentially fatal skin cancer?
Much worse than her repeated lies about opposing “the bridge to nowhere” and always fighting against earmarks and not firing her Commissioner for failing to fire her ex-brother-in-law, and visiting Iraq, these inaccuracies or, perhaps, lies, about the Iraq war and her attempts to cloak them in religious justifications reveal a desperately ambitious person whose extreme ideas present a danger to our republic.
Iraq: Violence is down – but not because of America's 'surge'
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By Patrick Cockburn
If fewer US troops and Iraqis are being killed, it is only because the Shia community and Iran now dominate
As he leaves Iraq this week, the outgoing US commander, General David Petraeus, is sounding far less optimistic than the Republican presidential candidate, John McCain, about the American situation in Iraq. General Petraeus says that it remains "fragile", recent security gains are "not irreversible" and "this is not the sort of struggle where you take a hill, plant the flag and go home to a victory parade... it's not a war with a simple slogan."
Compare this with Sarah Palin's belief that "victory in Iraq is wholly in sight" and her criticism of Barack Obama for not using the word "victory". The Republican contenders have made these claims of success for the "surge" – the American reinforcements sent last year – although they are demonstrably contradicted by the fact that the US has to keep more troops, some 138,000, in Iraq today than beforehand. Another barometer of the true state of security in Iraq is the inability of the 4.7 million refugees, one in six of the population, who fled for their lives inside and outside Iraq, to return to their homes.
Ongoing violence is down, but Iraq is still the most dangerous country in the world. On Friday a car bomb exploded in the Shia market town of Dujail, north of Baghdad, killing 32 people and wounding 43 others. "The smoke filled my house and the shrapnel broke some of the windows," said Hussein al-Dujaili. "I went outside the house and saw two dead bodies at the gate which had been thrown there by the explosion. Some people were in panic and others were crying."
Playing down such killings, the Iraqi government and the US have launched a largely successful propaganda campaign to convince the world that "things are better" in Iraq and that life is returning to normal. One Iraqi journalist recorded his fury at watching newspapers around the world pick up a story that the world's largest Ferris wheel was to be built in Baghdad, a city where there is usually only two hours of electricity a day.
Life in Baghdad certainly is better than it was 18 months ago, when some 60 to 100 bodies were being found beside the roads every morning, the victims of Sunni-Shia sectarian slaughter. The main reason this ended was that the battle for Baghdad in 2006-07 was won by the Shia, who now control three-quarters of the capital. These demographic changes appear permanent; Sunni who try to get their houses back face assassination.
In Mosul, Iraq's northern capital and third largest city, with a population of 1.8 million, the government was trumpeting its success only a few months ago. It said it had succeeded in driving al-Qa'ida from the city, while the US said the number of attacks had fallen from 130 a week to 30 a week in July. But today they are back up to between 60 and 70 a week. Two weeks ago, insurgents came close to killing Major-General Riyadh Jalal Tawfiq in Nineveh province, of which Mosul is the capital, with a roadside bomb.
The perception in the US that the tide has turned in Iraq is in part because of a change in the attitude of the foreign, largely American, media. The war in Iraq has now been going on for five years, longer than the First World War, and the world is bored with it. US television networks maintain expensive bureaux in Baghdad, but little of what they produce gets on the air. When it does, viewers turn off. US newspaper bureaux are being cut in size. The result of all this is that the American voter hears less of violence in Iraq and can suppose that America's military adventure there is finally coming good.
An important reason for this optimism is the fall in the number of American soldiers killed. (The 30,000 US soldiers wounded in Iraq are seldom mentioned.) This has happened because the war that was being waged against the American occupation by the Sunni community, the 20 per cent of Iraqis who were in control under Saddam Hussein, has largely ended. It did so because the Sunni were being defeated, not so much by the US army as by the Shia government and the Shia militias.
Sunni insurgent leaders who were nationalists or Baathists realised that they had too many enemies. Not only was al-Qa'ida trying to take over from traditional tribal leaders, it was also killing Sunni who took minor jobs with the government. The Awakening, or al-Sahwa, movement of Sunni fighters was first formed in Anbar province at the end of 2006, but it was allied to the US, not the Iraqi government. This is why, despite pressure from General Petraeus, the government is so determined not to give the 99,000 al-Sahwa members significant jobs in the security forces when it takes control of – and supposedly begins to pay – these Sunni militiamen from 1 October. The Shia government may be prepared to accommodate the Sunni, but not at the cost of diluting Shia dominance.
If McCain wins the presidential election in November, his lack of understanding of what is happening in Iraq could ignite a fresh conflict. In so far as the surge has achieved military success, it is because it implicitly recognises America's political defeat in Iraq. Whatever the reason for President George Bush's decision to invade Iraq and overthrow Saddam Hussein in 2003, it was not to place the Shia Islamic parties in power and increase the influence of Iran in the country; yet that is exactly what has happened.
The surge only achieved the degree of success it did because Iran, which played a central role in getting Nouri al-Maliki appointed Prime Minister in 2006, decided to back his government fully. It negotiated a ceasefire between the Iraqi government and the powerful movement of Muqtada al-Sadr in Basra, persuading the cleric to call his militiamen off the streets there, in March and again two months later in the Sadrist stronghold of Sadr City. It is very noticeable that in recent weeks the US has largely ceased its criticism of Iran. This is partly because of American preoccupation with Russia since the fighting began in Georgia in August, but it is also an implicit recognition that US security in Iraq is highly dependant on Iranian actions.
General Petraeus has had a measure of success in Iraq less because of his military skills than because he was one of the few American leaders to have some understanding of Iraqi politics. In January 2004, when he was commander of the 101st Airborne Division in Mosul, I asked him what was the most important piece of advice he could give to his successor. He said it was "not to align too closely with one ethnic group, political party, tribe, religious group or social element". But today the US has no alternative but to support Mr Maliki and his Shia government, and to wink at the role of Iran in Iraq. If McCain supposes the US has won a military victory, and as president acts as if this were true, then he is laying the groundwork for a new war.
By Patrick Cockburn
If fewer US troops and Iraqis are being killed, it is only because the Shia community and Iran now dominate
As he leaves Iraq this week, the outgoing US commander, General David Petraeus, is sounding far less optimistic than the Republican presidential candidate, John McCain, about the American situation in Iraq. General Petraeus says that it remains "fragile", recent security gains are "not irreversible" and "this is not the sort of struggle where you take a hill, plant the flag and go home to a victory parade... it's not a war with a simple slogan."
Compare this with Sarah Palin's belief that "victory in Iraq is wholly in sight" and her criticism of Barack Obama for not using the word "victory". The Republican contenders have made these claims of success for the "surge" – the American reinforcements sent last year – although they are demonstrably contradicted by the fact that the US has to keep more troops, some 138,000, in Iraq today than beforehand. Another barometer of the true state of security in Iraq is the inability of the 4.7 million refugees, one in six of the population, who fled for their lives inside and outside Iraq, to return to their homes.
Ongoing violence is down, but Iraq is still the most dangerous country in the world. On Friday a car bomb exploded in the Shia market town of Dujail, north of Baghdad, killing 32 people and wounding 43 others. "The smoke filled my house and the shrapnel broke some of the windows," said Hussein al-Dujaili. "I went outside the house and saw two dead bodies at the gate which had been thrown there by the explosion. Some people were in panic and others were crying."
Playing down such killings, the Iraqi government and the US have launched a largely successful propaganda campaign to convince the world that "things are better" in Iraq and that life is returning to normal. One Iraqi journalist recorded his fury at watching newspapers around the world pick up a story that the world's largest Ferris wheel was to be built in Baghdad, a city where there is usually only two hours of electricity a day.
Life in Baghdad certainly is better than it was 18 months ago, when some 60 to 100 bodies were being found beside the roads every morning, the victims of Sunni-Shia sectarian slaughter. The main reason this ended was that the battle for Baghdad in 2006-07 was won by the Shia, who now control three-quarters of the capital. These demographic changes appear permanent; Sunni who try to get their houses back face assassination.
In Mosul, Iraq's northern capital and third largest city, with a population of 1.8 million, the government was trumpeting its success only a few months ago. It said it had succeeded in driving al-Qa'ida from the city, while the US said the number of attacks had fallen from 130 a week to 30 a week in July. But today they are back up to between 60 and 70 a week. Two weeks ago, insurgents came close to killing Major-General Riyadh Jalal Tawfiq in Nineveh province, of which Mosul is the capital, with a roadside bomb.
The perception in the US that the tide has turned in Iraq is in part because of a change in the attitude of the foreign, largely American, media. The war in Iraq has now been going on for five years, longer than the First World War, and the world is bored with it. US television networks maintain expensive bureaux in Baghdad, but little of what they produce gets on the air. When it does, viewers turn off. US newspaper bureaux are being cut in size. The result of all this is that the American voter hears less of violence in Iraq and can suppose that America's military adventure there is finally coming good.
An important reason for this optimism is the fall in the number of American soldiers killed. (The 30,000 US soldiers wounded in Iraq are seldom mentioned.) This has happened because the war that was being waged against the American occupation by the Sunni community, the 20 per cent of Iraqis who were in control under Saddam Hussein, has largely ended. It did so because the Sunni were being defeated, not so much by the US army as by the Shia government and the Shia militias.
Sunni insurgent leaders who were nationalists or Baathists realised that they had too many enemies. Not only was al-Qa'ida trying to take over from traditional tribal leaders, it was also killing Sunni who took minor jobs with the government. The Awakening, or al-Sahwa, movement of Sunni fighters was first formed in Anbar province at the end of 2006, but it was allied to the US, not the Iraqi government. This is why, despite pressure from General Petraeus, the government is so determined not to give the 99,000 al-Sahwa members significant jobs in the security forces when it takes control of – and supposedly begins to pay – these Sunni militiamen from 1 October. The Shia government may be prepared to accommodate the Sunni, but not at the cost of diluting Shia dominance.
If McCain wins the presidential election in November, his lack of understanding of what is happening in Iraq could ignite a fresh conflict. In so far as the surge has achieved military success, it is because it implicitly recognises America's political defeat in Iraq. Whatever the reason for President George Bush's decision to invade Iraq and overthrow Saddam Hussein in 2003, it was not to place the Shia Islamic parties in power and increase the influence of Iran in the country; yet that is exactly what has happened.
The surge only achieved the degree of success it did because Iran, which played a central role in getting Nouri al-Maliki appointed Prime Minister in 2006, decided to back his government fully. It negotiated a ceasefire between the Iraqi government and the powerful movement of Muqtada al-Sadr in Basra, persuading the cleric to call his militiamen off the streets there, in March and again two months later in the Sadrist stronghold of Sadr City. It is very noticeable that in recent weeks the US has largely ceased its criticism of Iran. This is partly because of American preoccupation with Russia since the fighting began in Georgia in August, but it is also an implicit recognition that US security in Iraq is highly dependant on Iranian actions.
General Petraeus has had a measure of success in Iraq less because of his military skills than because he was one of the few American leaders to have some understanding of Iraqi politics. In January 2004, when he was commander of the 101st Airborne Division in Mosul, I asked him what was the most important piece of advice he could give to his successor. He said it was "not to align too closely with one ethnic group, political party, tribe, religious group or social element". But today the US has no alternative but to support Mr Maliki and his Shia government, and to wink at the role of Iran in Iraq. If McCain supposes the US has won a military victory, and as president acts as if this were true, then he is laying the groundwork for a new war.
Lehman Files for Bankruptcy; Merrill Is Sold
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By ANDREW ROSS SORKIN
In one of the most dramatic days in Wall Street’s history, Merrill Lynch agreed to sell itself on Sunday to Bank of America for roughly $50 billion to avert a deepening financial crisis, while another prominent securities firm, Lehman Brothers, filed for bankruptcy protection and hurtled toward liquidation after it failed to find a buyer.
The humbling moves, which reshape the landscape of American finance, mark the latest chapter in a tumultuous year in which once-proud financial institutions have been brought to their knees as a result of hundreds of billions of dollars in losses because of bad mortgage finance and real estate investments.
But even as the fates of Lehman and Merrill hung in the balance, another crisis loomed as the insurance giant American International Group appeared to teeter. Staggered by losses stemming from the credit crisis, A.I.G. sought a $40 billion lifeline from the Federal Reserve, without which the company may have only days to survive.
The stunning series of events culminated a weekend of frantic around-the-clock negotiations, as Wall Street bankers huddled in meetings at the behest of Bush administration officials to try to avoid a downward spiral in the markets stemming from a crisis of confidence.
“My goodness. I’ve been in the business 35 years, and these are the most extraordinary events I’ve ever seen,” said Peter G. Peterson, co-founder of the private equity firm the Blackstone Group, who was head of Lehman in the 1970s and a secretary of commerce in the Nixon administration.
It remains to be seen whether the sale of Merrill, which was worth more than $100 billion during the last year, and the controlled demise of Lehman will be enough to finally turn the tide in the yearlong financial crisis that has crippled Wall Street and threatened the broader economy.
Early Monday morning, Lehman said it would file for Chapter 11 bankruptcy protection in New York for its holding company in what would be the largest failure of an investment bank since the collapse of Drexel Burnham Lambert 18 years ago, the Associated Press reported.
Questions remain about how the market will react Monday, particularly to Lehman’s plan to wind down its trading operations, and whether other companies, like A.I.G. and Washington Mutual, the nation’s largest savings and loan, might falter.
Indeed, in a move that echoed Wall Street’s rescue of a big hedge fund a decade ago this week, 10 major banks agreed to create an emergency fund of $70 billion to $100 billion that financial institutions can use to protect themselves from the fallout of Lehman’s failure.
The Fed, meantime, broadened the terms of its emergency loan program for Wall Street banks, a move that could ultimately put taxpayers’ money at risk.
Though the government took control of the troubled mortgage finance companies Fannie Mae and Freddie Mac only a week ago, investors have become increasingly nervous about whether major financial institutions can recover from their losses.
How things play out could affect the broader economy, which has been weakening steadily as the financial crisis has deepened over the last year, with unemployment increasing as the nation’s growth rate has slowed.
What will happen to Merrill’s 60,000 employees or Lehman’s 25,000 employees remains unclear. Worried about the unfolding crisis and its potential impact on New York City’s economy, Mayor Michael R. Bloomberg canceled a trip to California to meet with Gov. Arnold Schwarzenegger. Instead, aides said, Mr. Bloomberg spent much of the weekend working the phones, talking to federal officials and bank executives in an effort to gauge the severity of the crisis.
The weekend that humbled Lehman and Merrill Lynch and rewarded Bank of America, based in Charlotte, N.C., began at 6 p.m. Friday in the first of a series of emergency meetings at the Federal Reserve building in Lower Manhattan.
The meeting was called by Fed officials, with Treasury Secretary Henry M. Paulson Jr. in attendance, and it included top bankers. The Treasury and Federal Reserve had already stepped in on several occasions to rescue the financial system, forcing a shotgun marriage between Bear Stearns and JPMorgan Chase this year and backstopping $29 billion worth of troubled assets — and then agreeing to bail out Fannie Mae and Freddie Mac.
The bankers were told that the government would not bail out Lehman and that it was up to Wall Street to solve its problems. Lehman’s stock tumbled sharply last week as concerns about its financial condition grew and other firms started to pull back from doing business with it, threatening its viability.
Without government backing, Lehman began trying to find a buyer, focusing on Barclays, the big British bank, and Bank of America. At the same time, other Wall Street executives grew more concerned about their own precarious situation.
The fates of Merrill Lynch and Lehman Brothers would not seem to be linked; Merrill has the nation’s largest brokerage force and its name is known in towns across America, while Lehman’s main customers are big institutions. But during the credit boom both firms piled into risky real estate and ended up severely weakened, with inadequate capital and toxic assets.
Knowing that investors were worried about Merrill, John A. Thain, its chief executive and an alumnus of Goldman Sachs and the New York Stock Exchange, and Kenneth D. Lewis, Bank of America’s chief executive, began negotiations. One person briefed on the negotiations said Bank of America had approached Merrill earlier in the summer but Mr. Thain had rebuffed the offer. Now, prompted by the reality that a Lehman bankruptcy would ripple through Wall Street and further cripple Merrill Lynch, the two parties proceeded with discussions.
On Sunday morning, Mr. Thain and Mr. Lewis cemented the deal. It could not be determined if Mr. Thain would play a role in the new company, but two people briefed on the negotiations said they did not expect him to stay. Merrill’s “thundering herd” of 17,000 brokers will be combined with Bank of America’s smaller group of wealth advisers and called Merrill Lynch Wealth Management.
For Bank of America, which this year bought Countrywide Financial, the troubled mortgage lender, the purchase of Merrill puts it at the pinnacle of American finance, making it the biggest brokerage house and consumer banking franchise.
Bank of America eventually pulled out of its talks with Lehman after the government refused to take responsibility for losses on some of Lehman’s most troubled real-estate assets, something it agreed to do when JP Morgan Chase bought Bear Stearns to save it from a bankruptcy filing in March.
A leading proposal to rescue Lehman would have divided the bank into two entities, a “good bank” and a “bad bank.” Under that scenario, Barclays would have bought the parts of Lehman that have been performing well, while a group of 10 to 15 Wall Street companies would have agreed to absorb losses from the bank’s troubled assets, to two people briefed on the proposal said. Taxpayer money would not have been included in such a deal, they said.
Other Wall Street banks also balked at the deal, unhappy at facing potential losses while Bank of America or Barclays walked away with the potentially profitable part of Lehman at a cheap price.
For Lehman, the end essentially came Sunday morning when its last potential suitor, Barclays, pulled out from a deal, saying it could not obtain a shareholder vote to approve a transaction before Monday morning, something required under London Stock Exchange listing rules, one person close to the matter said. Other people involved in the talks said the Financial Services Authority, the British securities regulator, had discouraged Barclays from pursuing a deal. Peter Truell, a spokesman for Barclays, declined to comment. Lehman’s subsidiaries were expected to remain solvent while the firm liquidates its holdings, these people said. Herbert H. McDade III, Lehman’s president, was at the Federal Reserve Bank in New York late Sunday, discussing terms of Lehman’s fate with government officials.
Lehman’s filing is unlikely to resemble those of other companies that seek bankruptcy protection. Because of the harsher treatment that federal bankruptcy law applies to financial-services firms, Lehman cannot hope to reorganize and survive. It was not clear whether the government would appoint a trustee to supervise Lehman’s liquidation or how big the financial backstop would be.
Lehman has retained the law firm Weil, Gotshal & Manges as its bankruptcy counsel.
The collapse of Lehman is a devastating end for Richard S. Fuld Jr., the chief executive, who has led the bank since it emerged from American Express as a public company in 1994. Mr. Fuld, who steered Lehman through near-death experiences in the past, spent the last several days in his 31st floor office in Lehman’s midtown headquarters on the phone from 6 a.m. until well past midnight trying to save the firm, a person close to the matter said.
A.I.G. will be the next test. Ratings agencies threatened to downgrade A.I.G.’s credit rating if it does not raise $40 billion by Monday morning, a step that would cripple the company. A.I.G. had hoped to shore itself up, in party by selling certain businesses, but potential bidders, including the private investment firms Kohlberg Kravis Roberts and TPG, withdrew at the last minute because the government refused to provide a financial guarantee for the purchase. A.I.G. rejected an offer by another investor, J. C. Flowers & Company.
The weekend’s events indicate that top officials at the Federal Reserve and the Treasury are taking a harder line on providing government support of troubled financial institutions.
While offering to help Wall Street organize a shotgun marriage for Lehman, both the Fed chairman, Ben S. Bernanke, and Mr. Paulson had warned that they would not put taxpayer money at risk simply to prevent a Lehman collapse.
The message marked a major change in strategy but it remained unclear until at least Friday what would happen. “They were faced after Bear Stearns with the problem of where to draw the line,” said Laurence H. Meyer, a former Fed governor who is now vice chairman of Macroeconomic Advisors, a forecasting firm. “It became clear that this piecemeal, patchwork, case-by-case approach might not get the job done.”
Both Mr. Paulson and Mr. Bernanke worried that they had already gone much further than they had ever wanted, first by underwriting the takeover of Bear Stearns in March and by the far bigger bailout of Fannie Mae and Freddie Mac.
Outside the public eye, Fed officials had acquired much more information since March about the interconnections and cross-exposure to risk among Wall Street investment banks, hedge funds and traders in the vast market for credit-default swaps and other derivatives. In the end, both Wall Street and the Fed blinked.
By ANDREW ROSS SORKIN
In one of the most dramatic days in Wall Street’s history, Merrill Lynch agreed to sell itself on Sunday to Bank of America for roughly $50 billion to avert a deepening financial crisis, while another prominent securities firm, Lehman Brothers, filed for bankruptcy protection and hurtled toward liquidation after it failed to find a buyer.
The humbling moves, which reshape the landscape of American finance, mark the latest chapter in a tumultuous year in which once-proud financial institutions have been brought to their knees as a result of hundreds of billions of dollars in losses because of bad mortgage finance and real estate investments.
But even as the fates of Lehman and Merrill hung in the balance, another crisis loomed as the insurance giant American International Group appeared to teeter. Staggered by losses stemming from the credit crisis, A.I.G. sought a $40 billion lifeline from the Federal Reserve, without which the company may have only days to survive.
The stunning series of events culminated a weekend of frantic around-the-clock negotiations, as Wall Street bankers huddled in meetings at the behest of Bush administration officials to try to avoid a downward spiral in the markets stemming from a crisis of confidence.
“My goodness. I’ve been in the business 35 years, and these are the most extraordinary events I’ve ever seen,” said Peter G. Peterson, co-founder of the private equity firm the Blackstone Group, who was head of Lehman in the 1970s and a secretary of commerce in the Nixon administration.
It remains to be seen whether the sale of Merrill, which was worth more than $100 billion during the last year, and the controlled demise of Lehman will be enough to finally turn the tide in the yearlong financial crisis that has crippled Wall Street and threatened the broader economy.
Early Monday morning, Lehman said it would file for Chapter 11 bankruptcy protection in New York for its holding company in what would be the largest failure of an investment bank since the collapse of Drexel Burnham Lambert 18 years ago, the Associated Press reported.
Questions remain about how the market will react Monday, particularly to Lehman’s plan to wind down its trading operations, and whether other companies, like A.I.G. and Washington Mutual, the nation’s largest savings and loan, might falter.
Indeed, in a move that echoed Wall Street’s rescue of a big hedge fund a decade ago this week, 10 major banks agreed to create an emergency fund of $70 billion to $100 billion that financial institutions can use to protect themselves from the fallout of Lehman’s failure.
The Fed, meantime, broadened the terms of its emergency loan program for Wall Street banks, a move that could ultimately put taxpayers’ money at risk.
Though the government took control of the troubled mortgage finance companies Fannie Mae and Freddie Mac only a week ago, investors have become increasingly nervous about whether major financial institutions can recover from their losses.
How things play out could affect the broader economy, which has been weakening steadily as the financial crisis has deepened over the last year, with unemployment increasing as the nation’s growth rate has slowed.
What will happen to Merrill’s 60,000 employees or Lehman’s 25,000 employees remains unclear. Worried about the unfolding crisis and its potential impact on New York City’s economy, Mayor Michael R. Bloomberg canceled a trip to California to meet with Gov. Arnold Schwarzenegger. Instead, aides said, Mr. Bloomberg spent much of the weekend working the phones, talking to federal officials and bank executives in an effort to gauge the severity of the crisis.
The weekend that humbled Lehman and Merrill Lynch and rewarded Bank of America, based in Charlotte, N.C., began at 6 p.m. Friday in the first of a series of emergency meetings at the Federal Reserve building in Lower Manhattan.
The meeting was called by Fed officials, with Treasury Secretary Henry M. Paulson Jr. in attendance, and it included top bankers. The Treasury and Federal Reserve had already stepped in on several occasions to rescue the financial system, forcing a shotgun marriage between Bear Stearns and JPMorgan Chase this year and backstopping $29 billion worth of troubled assets — and then agreeing to bail out Fannie Mae and Freddie Mac.
The bankers were told that the government would not bail out Lehman and that it was up to Wall Street to solve its problems. Lehman’s stock tumbled sharply last week as concerns about its financial condition grew and other firms started to pull back from doing business with it, threatening its viability.
Without government backing, Lehman began trying to find a buyer, focusing on Barclays, the big British bank, and Bank of America. At the same time, other Wall Street executives grew more concerned about their own precarious situation.
The fates of Merrill Lynch and Lehman Brothers would not seem to be linked; Merrill has the nation’s largest brokerage force and its name is known in towns across America, while Lehman’s main customers are big institutions. But during the credit boom both firms piled into risky real estate and ended up severely weakened, with inadequate capital and toxic assets.
Knowing that investors were worried about Merrill, John A. Thain, its chief executive and an alumnus of Goldman Sachs and the New York Stock Exchange, and Kenneth D. Lewis, Bank of America’s chief executive, began negotiations. One person briefed on the negotiations said Bank of America had approached Merrill earlier in the summer but Mr. Thain had rebuffed the offer. Now, prompted by the reality that a Lehman bankruptcy would ripple through Wall Street and further cripple Merrill Lynch, the two parties proceeded with discussions.
On Sunday morning, Mr. Thain and Mr. Lewis cemented the deal. It could not be determined if Mr. Thain would play a role in the new company, but two people briefed on the negotiations said they did not expect him to stay. Merrill’s “thundering herd” of 17,000 brokers will be combined with Bank of America’s smaller group of wealth advisers and called Merrill Lynch Wealth Management.
For Bank of America, which this year bought Countrywide Financial, the troubled mortgage lender, the purchase of Merrill puts it at the pinnacle of American finance, making it the biggest brokerage house and consumer banking franchise.
Bank of America eventually pulled out of its talks with Lehman after the government refused to take responsibility for losses on some of Lehman’s most troubled real-estate assets, something it agreed to do when JP Morgan Chase bought Bear Stearns to save it from a bankruptcy filing in March.
A leading proposal to rescue Lehman would have divided the bank into two entities, a “good bank” and a “bad bank.” Under that scenario, Barclays would have bought the parts of Lehman that have been performing well, while a group of 10 to 15 Wall Street companies would have agreed to absorb losses from the bank’s troubled assets, to two people briefed on the proposal said. Taxpayer money would not have been included in such a deal, they said.
Other Wall Street banks also balked at the deal, unhappy at facing potential losses while Bank of America or Barclays walked away with the potentially profitable part of Lehman at a cheap price.
For Lehman, the end essentially came Sunday morning when its last potential suitor, Barclays, pulled out from a deal, saying it could not obtain a shareholder vote to approve a transaction before Monday morning, something required under London Stock Exchange listing rules, one person close to the matter said. Other people involved in the talks said the Financial Services Authority, the British securities regulator, had discouraged Barclays from pursuing a deal. Peter Truell, a spokesman for Barclays, declined to comment. Lehman’s subsidiaries were expected to remain solvent while the firm liquidates its holdings, these people said. Herbert H. McDade III, Lehman’s president, was at the Federal Reserve Bank in New York late Sunday, discussing terms of Lehman’s fate with government officials.
Lehman’s filing is unlikely to resemble those of other companies that seek bankruptcy protection. Because of the harsher treatment that federal bankruptcy law applies to financial-services firms, Lehman cannot hope to reorganize and survive. It was not clear whether the government would appoint a trustee to supervise Lehman’s liquidation or how big the financial backstop would be.
Lehman has retained the law firm Weil, Gotshal & Manges as its bankruptcy counsel.
The collapse of Lehman is a devastating end for Richard S. Fuld Jr., the chief executive, who has led the bank since it emerged from American Express as a public company in 1994. Mr. Fuld, who steered Lehman through near-death experiences in the past, spent the last several days in his 31st floor office in Lehman’s midtown headquarters on the phone from 6 a.m. until well past midnight trying to save the firm, a person close to the matter said.
A.I.G. will be the next test. Ratings agencies threatened to downgrade A.I.G.’s credit rating if it does not raise $40 billion by Monday morning, a step that would cripple the company. A.I.G. had hoped to shore itself up, in party by selling certain businesses, but potential bidders, including the private investment firms Kohlberg Kravis Roberts and TPG, withdrew at the last minute because the government refused to provide a financial guarantee for the purchase. A.I.G. rejected an offer by another investor, J. C. Flowers & Company.
The weekend’s events indicate that top officials at the Federal Reserve and the Treasury are taking a harder line on providing government support of troubled financial institutions.
While offering to help Wall Street organize a shotgun marriage for Lehman, both the Fed chairman, Ben S. Bernanke, and Mr. Paulson had warned that they would not put taxpayer money at risk simply to prevent a Lehman collapse.
The message marked a major change in strategy but it remained unclear until at least Friday what would happen. “They were faced after Bear Stearns with the problem of where to draw the line,” said Laurence H. Meyer, a former Fed governor who is now vice chairman of Macroeconomic Advisors, a forecasting firm. “It became clear that this piecemeal, patchwork, case-by-case approach might not get the job done.”
Both Mr. Paulson and Mr. Bernanke worried that they had already gone much further than they had ever wanted, first by underwriting the takeover of Bear Stearns in March and by the far bigger bailout of Fannie Mae and Freddie Mac.
Outside the public eye, Fed officials had acquired much more information since March about the interconnections and cross-exposure to risk among Wall Street investment banks, hedge funds and traders in the vast market for credit-default swaps and other derivatives. In the end, both Wall Street and the Fed blinked.
Newspapers Deliver Millions of 'Terror' DVDs to Subscribers -- In 'Swing States'
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By Greg Mitchell and Joe Strupp
The arrival of tens of millions of DVDs of a controversial film on doorsteps around the nation -- but almost exclusively in election "swing states" -- via newspaper home delivery continues this weekend, with explanatory articles and subscriber feedback appearing on some of the papers’ Web sites.
The DVDs of the 60-minute film, made in 2005, and titled "Obsession: Radical Islam’s War Against the West," arrived Saturday with, among other papers, the Charlotte Observer and the News & Observer in Raleigh, with delivery with the Miami Herald and other papers set for Sunday. (To watch a clip see link below.)
Other Florida papers to distribute it on Sunday included the major dailies in St. Petersburg, Tampa, Fort Myers and Orlando. But it also showed up in the Milwaukee Journal Sentinel, among others.
Despite some protests from Muslim and liberal activists, the newspapers -- all hard hit by drops in ad revenue in recent months -- have explained that the DVD does not violate their usual standards; see our exchange with The New York Times below. A spokesperson there said the Times last Sunday inserted 145,000 DVDs in its papers delivered in the following markets: Denver, Miami/Palm Beach, Tampa, Orlando, Detroit, Kansas City, St Louis, Cincinnati, Philadelphia, Pittsburgh, Milwaukee/Madison. Note: These are all in swing states.
The documentary showcases scenes of Muslim children being encouraged to become suicide bombers, interspersed with shots of Nazi rallies. ’The threat of Radical Islam is the most important issue facing us today,’’ reads the sleeve of the DVD. ’’But it’s a topic that neither the presidential candidates nor the media are discussing openly. It’s our responsibility to ensure we can all make an informed vote in November.’’
It was shown on Fox News just before the 2006 mid-term elections, and conservative activist David Horowitz screened the film on college campuses during 2007. An article at the group’s site, www.radicalislam.org, all but endorsed John McCain this past week, then was pulled down. The DVD carries on-screen text near the outset that it is not indicting most Muslims.
An article at the site of the Morning-Call in Allentown, Pa. today reveals that it will be inserted in the Sunday paper there tomorrow. It continues: "A call to Clarion wasn’t returned, but the nonprofit’s spokesman, Gregory Ross, told the Harrisburg Patriot-News this week that 28 million copies of the DVD are being distributed nationwide throughout September. He said the intent is not to sway voters’ opinions about the presidential candidates."
It has already been packaged with dozens of large papers, such as the Denver Post and Columbus Dispatch. Another article explaining the delivery runs online at the News & Observer.
E&P asked New York Times Co. spokeswoman Diane McNulty about the policy on this insert. She replied:
"We believe the broad principles of freedom of the press confer on us an obligation to keep our advertising columns as open as possible. Therefore our acceptance or rejection of an advertisement does not depend on whether it coincides with our editorial positions. In fact, there are many instances when we have published opinion advertisements that run counter to the stance we take on our own editorial pages.
"We do require that opinion advertisements include the name of the sponsoring organization and a mailing address or a telephone number. This enables our readers to communicate directly with the sponsor should they seek additional information or wish to express agreement or disagreement with the advertised message. This advertisement complied with these requirements. The address on the advertisement was The Clarion Fund, 255 West 36th Street Suite 800 New York, NY 10018."
Asked about the rate paid, she answered: "We do not disclose the rate any one advertiser pays."
To watch a clip from the DVD, go to the new E&P blog:
The E&P Pub
To read more:
column
By Greg Mitchell and Joe Strupp
The arrival of tens of millions of DVDs of a controversial film on doorsteps around the nation -- but almost exclusively in election "swing states" -- via newspaper home delivery continues this weekend, with explanatory articles and subscriber feedback appearing on some of the papers’ Web sites.
The DVDs of the 60-minute film, made in 2005, and titled "Obsession: Radical Islam’s War Against the West," arrived Saturday with, among other papers, the Charlotte Observer and the News & Observer in Raleigh, with delivery with the Miami Herald and other papers set for Sunday. (To watch a clip see link below.)
Other Florida papers to distribute it on Sunday included the major dailies in St. Petersburg, Tampa, Fort Myers and Orlando. But it also showed up in the Milwaukee Journal Sentinel, among others.
Despite some protests from Muslim and liberal activists, the newspapers -- all hard hit by drops in ad revenue in recent months -- have explained that the DVD does not violate their usual standards; see our exchange with The New York Times below. A spokesperson there said the Times last Sunday inserted 145,000 DVDs in its papers delivered in the following markets: Denver, Miami/Palm Beach, Tampa, Orlando, Detroit, Kansas City, St Louis, Cincinnati, Philadelphia, Pittsburgh, Milwaukee/Madison. Note: These are all in swing states.
The documentary showcases scenes of Muslim children being encouraged to become suicide bombers, interspersed with shots of Nazi rallies. ’The threat of Radical Islam is the most important issue facing us today,’’ reads the sleeve of the DVD. ’’But it’s a topic that neither the presidential candidates nor the media are discussing openly. It’s our responsibility to ensure we can all make an informed vote in November.’’
It was shown on Fox News just before the 2006 mid-term elections, and conservative activist David Horowitz screened the film on college campuses during 2007. An article at the group’s site, www.radicalislam.org, all but endorsed John McCain this past week, then was pulled down. The DVD carries on-screen text near the outset that it is not indicting most Muslims.
An article at the site of the Morning-Call in Allentown, Pa. today reveals that it will be inserted in the Sunday paper there tomorrow. It continues: "A call to Clarion wasn’t returned, but the nonprofit’s spokesman, Gregory Ross, told the Harrisburg Patriot-News this week that 28 million copies of the DVD are being distributed nationwide throughout September. He said the intent is not to sway voters’ opinions about the presidential candidates."
It has already been packaged with dozens of large papers, such as the Denver Post and Columbus Dispatch. Another article explaining the delivery runs online at the News & Observer.
E&P asked New York Times Co. spokeswoman Diane McNulty about the policy on this insert. She replied:
"We believe the broad principles of freedom of the press confer on us an obligation to keep our advertising columns as open as possible. Therefore our acceptance or rejection of an advertisement does not depend on whether it coincides with our editorial positions. In fact, there are many instances when we have published opinion advertisements that run counter to the stance we take on our own editorial pages.
"We do require that opinion advertisements include the name of the sponsoring organization and a mailing address or a telephone number. This enables our readers to communicate directly with the sponsor should they seek additional information or wish to express agreement or disagreement with the advertised message. This advertisement complied with these requirements. The address on the advertisement was The Clarion Fund, 255 West 36th Street Suite 800 New York, NY 10018."
Asked about the rate paid, she answered: "We do not disclose the rate any one advertiser pays."
To watch a clip from the DVD, go to the new E&P blog:
The E&P Pub
To read more:
column
With White House Push, U.S. Arms Sales Jump
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By ERIC LIPTON
The Bush administration is pushing through a broad array of foreign weapons deals as it seeks to rearm Iraq and Afghanistan, contain North Korea and Iran, and solidify ties with onetime Russian allies.
From tanks, helicopters and fighter jets to missiles, remotely piloted aircraft and even warships, the Department of Defense has agreed so far this fiscal year to sell or transfer more than $32 billion in weapons and other military equipment to foreign governments, compared with $12 billion in 2005.
The trend, which started in 2006, is most pronounced in the Middle East, but it reaches into northern Africa, Asia, Latin America, Europe and even Canada, through dozens of deals that senior Bush administration officials say they are confident will both tighten military alliances and combat terrorism.
“This is not about being gunrunners,” said Bruce S. Lemkin, the Air Force deputy under secretary who is helping to coordinate many of the biggest sales. “This is about building a more secure world.”
The surging American arms sales reflect the foreign policy tides, including the wars in Iraq and Afghanistan and the broader campaign against international terrorism, that have dominated the Bush administration. Deliveries on orders now being placed will continue for several years, perhaps as one of President Bush’s most lasting legacies.
The United States is far from the only country pushing sophisticated weapons systems: it is facing intense competition from Russia and elsewhere in Europe, including continuing contests for multibillion-dollar deals to sell fighter jets to India and Brazil.
In that booming market, American military contractors are working closely with the Pentagon, which acts as a broker and procures arms for foreign customers through its Foreign Military Sales program.
Less sophisticated weapons, and services to maintain these weapons systems, are often bought directly by foreign governments. That category of direct commercial sales has seen an enormous surge as well, as measured by export licenses issued this fiscal year covering an estimated $96 billion, up from $58 billion in 2005, according to the State Department, which must approve the licenses.
About 60 countries get annual military aid from the United States, $4.5 billion a year, to help them buy American weapons. Israel and Egypt receive more than 80 percent of that aid. The United States has also recently given Iraq and Afghanistan large amounts of weapons and other equipment and has begun to train fledgling military units at no charge; this assistance is included in the tally of foreign sales. But most arms exports are paid for by the purchasers without United States financing.
The growing tally of international weapon deals, which started to surge in 2006, is now provoking questions among some advocates of arms control and some members of Congress.
“Sure, this is a quick and easy way to cement alliances,” said William D. Hartung, an arms control specialist at the New America Foundation, a public policy institute. “But this is getting out of hand.”
Congress is notified before major arms sales deals are completed between foreign governments and the Pentagon. While lawmakers have the power to object formally and block any individual sale, they rarely use it.
Representative Howard L. Berman of California, chairman of the House Committee on Foreign Affairs, said he supported many of the individual weapons sales, like helping Iraq build the capacity to defend itself, but he worried that the sales blitz could have some negative effects. “This could turn into a spiraling arms race that in the end could decrease stability,” he said.
The United States has long been the top arms supplier to the world. In the past several years, however, the list of nations that rely on the United States as a primary source of major weapons systems has greatly expanded. Among the recent additions are Argentina, Azerbaijan, Brazil, Georgia, India, Iraq, Morocco and Pakistan, according to sales data through the end of last month provided by the Department of Defense. Cumulatively, these countries signed $870 million worth of arms deals with the United States from 2001 to 2004. For the past four fiscal years, that total has been $13.8 billion.
In many cases, these sales represent a cultural shift, as nations like Romania, Poland and Morocco, which have long relied on Russian-made MIG-17 fighter jets, are now buying new F-16s, built by Lockheed Martin.
At Lockheed Martin, one of the largest American military contractors, international sales last year brought in about $6.3 billion, or 15 percent of the company’s total sales, up from $4.8 billion in 2001. The foreign sales by Lockheed and other American military contractors are credited with helping keep alive some production lines, like those of the F-16 fighter jet and Boeing’s C-17 transport plane.
Fighter jets made in America will now be flying in other countries for years to come, meaning continued profits for American contractors that maintain them, and in many cases regular interaction between the United States military and foreign air forces, Mr. Lemkin, the Air Force official, said.
Sales are also being driven by the push by many foreign nations to join the once-exclusive club of countries whose arsenals include precise, laser-guided missiles, high-priced American technology that the United States displayed during its invasions of Iraq and Afghanistan.
In the Persian Gulf region, much of the rearmament is driven by fears of Iran.
The United Arab Emirates, for example, are considering spending as much as $16 billion on American-made missile defense systems, according to recent notifications sent to Congress by the Department of Defense.
The Emirates also have announced an intention to order offensive weapons, including up to 26 Black Hawk helicopters and 900 Longbow Hellfire II missiles, which can knock out enemy tanks.
Saudi Arabia, this fiscal year alone, has signed at least $6 billion worth of agreements to buy weapons from the United States government — the highest figure for that country since 1993, which was another peak year in American weapons sales, after the first Persian Gulf war.
Israel, long a major buyer of United States military equipment, is also increasing its orders, including planned purchases of perhaps as many as four American-made coastal warships, worth $1.9 billion.
In Asia, as North Korea has conducted tests of a long-range missile, American allies have been buying more United States equipment. One ally, South Korea, has signed sales agreements with the Pentagon this year worth $1.1 billion.
So far, the value of foreign arms deliveries completed by the United States has increased only modestly, reaching $13 billion last year compared with an average of $12 billion over the previous three years. Because complex weapons systems take a long time to produce, it is expected that the increase in sales agreements will result in much greater arms deliveries in the coming years. (All dollar amounts for previous years cited in this article have been adjusted to reflect the impact of inflation.)
The flood of sophisticated American military equipment pouring into the Middle East has evoked concern among some members of Congress, who fear that the Bush administration may be compromising the military edge Israel has long maintained in the region.
Not surprisingly, two of the biggest new American arms customers are Iraq and Afghanistan.
Just in the past two years, Iraq has signed more than $3 billion of sales agreements — and announced plans to buy perhaps as much as $7 billion more in American equipment, financed by its rising oil revenues.
Lt. Col. Almarah Belk, a Pentagon spokeswoman, said that making these sales served the interests of both Iraq and the United States because “it reduces the risk of corruption and assists the Iraqis in getting around bottlenecks in their acquisition processes.”
Over the past three years, the United States government, separately, has agreed to buy more than $10 billion in military equipment and weapons on behalf of Afghanistan, according to Defense Department records, including M-16 rifles and C-27 military transport aircraft.
Even tiny countries like Estonia and Latvia are getting into the mix, playing a part in a collaborative effort by 15 countries, mostly in Europe, to buy two C-17 Boeing transport planes, which are used in moving military supplies as well as conducting relief missions.
Boeing has delivered 176 of these $200 million planes to the United States. But until 2006, Britain was the only foreign country that flew them. Now, in addition to the European consortium, Canada, Australia and Qatar have put in orders, and Boeing is competing to sell the plane to six other countries, said Tommy Dunehew, Boeing’s C-17 international sales manager.
In the last year, foreign sales have made up nearly half of the production at the California plant where C-17s are made. “It has been filling up the factory in the last couple of years,” Mr. Dunehew said.
Even before this new round of sales got under way, the United States’ share of the world arms trade was rising, from 40 percent of arms deliveries in 2000 to nearly 52 percent in 2006, the latest year for which the Congressional Research Service has compiled data. The next-largest seller was Russia, which in 2006 accounted for 21 percent of global deliveries.
Representative Berman, who sponsored a bill passed in May to overhaul the arms export process, said American military sales, while often well intended, were sometimes misguided. He cited military sales to Pakistan, which he said he feared were doing more to stoke tensions with India than combat terrorism in the region.
Travis Sharp, a military policy analyst at the Center for Arms Control and Nonproliferation, a Washington research group, said one of his biggest worries was that if alliances shifted, the United States might eventually be in combat against an enemy equipped with American-made weapons. Arms sales have had unintended consequences before, as when the United States armed militants fighting the Soviets in Afghanistan, only to eventually confront hostile Taliban fighters armed with the same weapons there.
“Once you sell arms to another country, you lose control over how they are used,” Mr. Sharp said. “And the weapons, unfortunately, don’t have an expiration date.”
But Mr. Lemkin, of the Pentagon, said that with so many nations now willing to sell advanced weapons systems, the United States could not afford to be too restrictive in its own sales.
“Would you rather they bought the weapons and aircraft from other countries?” he said. “Because they will.”
By ERIC LIPTON
The Bush administration is pushing through a broad array of foreign weapons deals as it seeks to rearm Iraq and Afghanistan, contain North Korea and Iran, and solidify ties with onetime Russian allies.
From tanks, helicopters and fighter jets to missiles, remotely piloted aircraft and even warships, the Department of Defense has agreed so far this fiscal year to sell or transfer more than $32 billion in weapons and other military equipment to foreign governments, compared with $12 billion in 2005.
The trend, which started in 2006, is most pronounced in the Middle East, but it reaches into northern Africa, Asia, Latin America, Europe and even Canada, through dozens of deals that senior Bush administration officials say they are confident will both tighten military alliances and combat terrorism.
“This is not about being gunrunners,” said Bruce S. Lemkin, the Air Force deputy under secretary who is helping to coordinate many of the biggest sales. “This is about building a more secure world.”
The surging American arms sales reflect the foreign policy tides, including the wars in Iraq and Afghanistan and the broader campaign against international terrorism, that have dominated the Bush administration. Deliveries on orders now being placed will continue for several years, perhaps as one of President Bush’s most lasting legacies.
The United States is far from the only country pushing sophisticated weapons systems: it is facing intense competition from Russia and elsewhere in Europe, including continuing contests for multibillion-dollar deals to sell fighter jets to India and Brazil.
In that booming market, American military contractors are working closely with the Pentagon, which acts as a broker and procures arms for foreign customers through its Foreign Military Sales program.
Less sophisticated weapons, and services to maintain these weapons systems, are often bought directly by foreign governments. That category of direct commercial sales has seen an enormous surge as well, as measured by export licenses issued this fiscal year covering an estimated $96 billion, up from $58 billion in 2005, according to the State Department, which must approve the licenses.
About 60 countries get annual military aid from the United States, $4.5 billion a year, to help them buy American weapons. Israel and Egypt receive more than 80 percent of that aid. The United States has also recently given Iraq and Afghanistan large amounts of weapons and other equipment and has begun to train fledgling military units at no charge; this assistance is included in the tally of foreign sales. But most arms exports are paid for by the purchasers without United States financing.
The growing tally of international weapon deals, which started to surge in 2006, is now provoking questions among some advocates of arms control and some members of Congress.
“Sure, this is a quick and easy way to cement alliances,” said William D. Hartung, an arms control specialist at the New America Foundation, a public policy institute. “But this is getting out of hand.”
Congress is notified before major arms sales deals are completed between foreign governments and the Pentagon. While lawmakers have the power to object formally and block any individual sale, they rarely use it.
Representative Howard L. Berman of California, chairman of the House Committee on Foreign Affairs, said he supported many of the individual weapons sales, like helping Iraq build the capacity to defend itself, but he worried that the sales blitz could have some negative effects. “This could turn into a spiraling arms race that in the end could decrease stability,” he said.
The United States has long been the top arms supplier to the world. In the past several years, however, the list of nations that rely on the United States as a primary source of major weapons systems has greatly expanded. Among the recent additions are Argentina, Azerbaijan, Brazil, Georgia, India, Iraq, Morocco and Pakistan, according to sales data through the end of last month provided by the Department of Defense. Cumulatively, these countries signed $870 million worth of arms deals with the United States from 2001 to 2004. For the past four fiscal years, that total has been $13.8 billion.
In many cases, these sales represent a cultural shift, as nations like Romania, Poland and Morocco, which have long relied on Russian-made MIG-17 fighter jets, are now buying new F-16s, built by Lockheed Martin.
At Lockheed Martin, one of the largest American military contractors, international sales last year brought in about $6.3 billion, or 15 percent of the company’s total sales, up from $4.8 billion in 2001. The foreign sales by Lockheed and other American military contractors are credited with helping keep alive some production lines, like those of the F-16 fighter jet and Boeing’s C-17 transport plane.
Fighter jets made in America will now be flying in other countries for years to come, meaning continued profits for American contractors that maintain them, and in many cases regular interaction between the United States military and foreign air forces, Mr. Lemkin, the Air Force official, said.
Sales are also being driven by the push by many foreign nations to join the once-exclusive club of countries whose arsenals include precise, laser-guided missiles, high-priced American technology that the United States displayed during its invasions of Iraq and Afghanistan.
In the Persian Gulf region, much of the rearmament is driven by fears of Iran.
The United Arab Emirates, for example, are considering spending as much as $16 billion on American-made missile defense systems, according to recent notifications sent to Congress by the Department of Defense.
The Emirates also have announced an intention to order offensive weapons, including up to 26 Black Hawk helicopters and 900 Longbow Hellfire II missiles, which can knock out enemy tanks.
Saudi Arabia, this fiscal year alone, has signed at least $6 billion worth of agreements to buy weapons from the United States government — the highest figure for that country since 1993, which was another peak year in American weapons sales, after the first Persian Gulf war.
Israel, long a major buyer of United States military equipment, is also increasing its orders, including planned purchases of perhaps as many as four American-made coastal warships, worth $1.9 billion.
In Asia, as North Korea has conducted tests of a long-range missile, American allies have been buying more United States equipment. One ally, South Korea, has signed sales agreements with the Pentagon this year worth $1.1 billion.
So far, the value of foreign arms deliveries completed by the United States has increased only modestly, reaching $13 billion last year compared with an average of $12 billion over the previous three years. Because complex weapons systems take a long time to produce, it is expected that the increase in sales agreements will result in much greater arms deliveries in the coming years. (All dollar amounts for previous years cited in this article have been adjusted to reflect the impact of inflation.)
The flood of sophisticated American military equipment pouring into the Middle East has evoked concern among some members of Congress, who fear that the Bush administration may be compromising the military edge Israel has long maintained in the region.
Not surprisingly, two of the biggest new American arms customers are Iraq and Afghanistan.
Just in the past two years, Iraq has signed more than $3 billion of sales agreements — and announced plans to buy perhaps as much as $7 billion more in American equipment, financed by its rising oil revenues.
Lt. Col. Almarah Belk, a Pentagon spokeswoman, said that making these sales served the interests of both Iraq and the United States because “it reduces the risk of corruption and assists the Iraqis in getting around bottlenecks in their acquisition processes.”
Over the past three years, the United States government, separately, has agreed to buy more than $10 billion in military equipment and weapons on behalf of Afghanistan, according to Defense Department records, including M-16 rifles and C-27 military transport aircraft.
Even tiny countries like Estonia and Latvia are getting into the mix, playing a part in a collaborative effort by 15 countries, mostly in Europe, to buy two C-17 Boeing transport planes, which are used in moving military supplies as well as conducting relief missions.
Boeing has delivered 176 of these $200 million planes to the United States. But until 2006, Britain was the only foreign country that flew them. Now, in addition to the European consortium, Canada, Australia and Qatar have put in orders, and Boeing is competing to sell the plane to six other countries, said Tommy Dunehew, Boeing’s C-17 international sales manager.
In the last year, foreign sales have made up nearly half of the production at the California plant where C-17s are made. “It has been filling up the factory in the last couple of years,” Mr. Dunehew said.
Even before this new round of sales got under way, the United States’ share of the world arms trade was rising, from 40 percent of arms deliveries in 2000 to nearly 52 percent in 2006, the latest year for which the Congressional Research Service has compiled data. The next-largest seller was Russia, which in 2006 accounted for 21 percent of global deliveries.
Representative Berman, who sponsored a bill passed in May to overhaul the arms export process, said American military sales, while often well intended, were sometimes misguided. He cited military sales to Pakistan, which he said he feared were doing more to stoke tensions with India than combat terrorism in the region.
Travis Sharp, a military policy analyst at the Center for Arms Control and Nonproliferation, a Washington research group, said one of his biggest worries was that if alliances shifted, the United States might eventually be in combat against an enemy equipped with American-made weapons. Arms sales have had unintended consequences before, as when the United States armed militants fighting the Soviets in Afghanistan, only to eventually confront hostile Taliban fighters armed with the same weapons there.
“Once you sell arms to another country, you lose control over how they are used,” Mr. Sharp said. “And the weapons, unfortunately, don’t have an expiration date.”
But Mr. Lemkin, of the Pentagon, said that with so many nations now willing to sell advanced weapons systems, the United States could not afford to be too restrictive in its own sales.
“Would you rather they bought the weapons and aircraft from other countries?” he said. “Because they will.”
Conflict Over Spying Led White House to Brink
Go to Original
By Barton Gellman
A burst of ferocity stunned the room into silence. No other word for it: The vice president's attorney was shouting.
"The president doesn't want this! [1] You are not going to see the opinions. You are out . . . of . . . your . . . lane!"
Five government lawyers had gathered around a small conference table in the Justice Department command center. Four were expected. David S. Addington, counsel to Vice President Cheney, got wind of the meeting and invited himself.
If Addington smelled revolt, he was not far wrong. Unwelcome questions about warrantless domestic surveillance had begun to find their voice.
Cheney and his counsel would struggle for months to quash the legal insurgency. By the time President Bush became aware of it, his No. 2 had stoked dissent into flat-out rebellion. The president would face a dilemma, and the presidency itself a historic test. Cheney would come close to leading them off a cliff, man and office both [2].
On this second Monday in December 2003, Addington's targets were a pair of would-be auditors from the National Security Agency. He had displeasure to spare for their Justice Department hosts.
Perfect example, right here. A couple of NSA bureaucrats breeze in and ask for the most sensitive documents in the building. And Justice wants to tell them, Help yourselves? This was going to be a very short meeting.
Joel Brenner and Vito Potenza, the two men wilting under Addington's wrath, had driven 26 miles from Fort Meade, the NSA's eavesdropping headquarters in Maryland. They were conducting a review of their agency's two-year-old special surveillance operation. They already knew the really secret stuff [3]: The NSA and other services had been unleashed to turn their machinery inward, collecting signals intelligence inside the United States. What the two men didn't know was why the Bush administration believed the program was legal.
It was an awkward question. Potenza, the NSA's acting general counsel, and Brenner, its inspector general, were supposed to be the ones who kept their agency on the straight and narrow. That's what Cheney and their boss, Lt. Gen. Michael V. Hayden, told doubters among the very few people who knew what was going on. Cheney, who chaired briefings for select members of Congress, said repeatedly that the NSA's top law and ethics officers -- career public servants -- approved and supervised the surveillance program.
That was not exactly true, not without one of those silent asterisks that secretly flip a sentence on its tail. Every 45 days, after Justice Department review, Bush renewed his military order for warrantless eavesdropping. Brenner and Potenza told Hayden that the agency was entitled to rely on those orders [4]. The United States was at war with al-Qaeda, intelligence-gathering is inherent in war, and the Constitution appoints the president commander in chief.
But they had not been asked to give their own written assessments of the legality of domestic espionage. They based their answer in part on the attorney general's certification of the "form and legality" of the president's orders. Yet neither man had been allowed to see the program's codeword-classified legal analyses [5], which were prepared by John C. Yoo, Addington's close ally in the Justice Department's Office of Legal Counsel. Now they wanted to read Yoo's opinions for themselves [6].
"This is none of your business!" Addington exploded.
He was massive in his swivel chair, taut and still, potential energy amping up the menace. Addington's pugnacity was not an act. Nothing mattered more, as the vice president and his lawyer saw the world, than these new surveillance tools. Bush had made a decision. Debate could only blow the secret, slow down vital work, or call the president's constitutional prerogatives into question.
The NSA lawyers returned to their car empty-handed.
* * *
The command center of "the president's program," as Addington usually called it, was not in the White House. Its controlling documents, which gave strategic direction to the nation's largest spy agency, lived in a vault across an alley from the West Wing [7] -- in the Eisenhower Executive Office Building, on the east side of the second floor, where the vice president headquartered his staff.
The vault was in EEOB 268, Addington's office. Cheney's lawyer held the documents, physical and electronic, because he was the one who wrote them. New forms of domestic espionage were created and developed over time in presidential authorizations that Addington typed on a Tempest-shielded computer across from his desk [8].
It is unlikely that the history of U.S. intelligence includes another operation conceived and supervised by the office of the vice president. White House Chief of Staff Andrew H. Card Jr. had "no idea," he said, that the presidential orders were held in a vice presidential safe. An authoritative source said the staff secretariat, which kept a comprehensive inventory of presidential papers, classified and unclassified, possessed no record of these.
In an interview, Card said the Executive Office of the President, a formal term that encompassed Bush's staff but not Cheney's, followed strict procedures for handling and securing presidential papers.
"If there were exceptions to that, I'm not aware of them," he said. "If these documents weren't stored the right way or put in the right places or maintained by the right people, I'm not aware of it."
Asked why Addington would write presidential directives, Card said, "David Addington is a very competent lawyer." After a moment he added, "I would consider him a drafter, not the drafter [9]. I'm sure there were a lot of smart people who were involved in helping to look at the language and the law."
Not many, it turned out. Though the president had the formal say over who was "read in" to the domestic surveillance program, Addington controlled the list in practice, according to three officials with personal knowledge. White House counsel Alberto R. Gonzales was aware of the program, but was not a careful student of the complex legal questions it raised. In its first 18 months, the only other lawyer who reviewed the program was John Yoo.
By the time the NSA auditors came calling, a new man, Jack L. Goldsmith, was chief of the Justice Department's Office of Legal Counsel. Soon after he arrived on Oct. 6, 2003, the vice president's lawyer invited him to EEOB 268. Addington pulled out a folder with classification markings that Goldsmith had never seen [10].
"David Addington was doing all the legal work. All the important documents were kept in his safe [11]," Goldsmith recalled. "He was the one who first briefed me."
Goldsmith's new assignment gave him final word in the executive branch on what was legal and what was not. Addington had cleared him for the post -- "the biggest presence in the room," Goldsmith said, during a job interview ostensibly run by Gonzales.
Goldsmith did not have the looks of a guy who posed a threat to the Bush administration's alpha lawyer. A mild-mannered law professor from the University of Chicago, he was rumpled and self-conscious, easy to underestimate. On first impression, he gave off a misleading aura of softness. Goldsmith had lettered in football, baseball and soccer at the Pine Crest School in Fort Lauderdale, Fla., [12] spending his formative years with a mob-connected Teamster who married his mother [13]. He was not a bare-knuckled brawler in Addington's mold, but Goldsmith arrived at Justice with no less confidence and strength of will.
Addington's behavior with the NSA auditors was "a wake-up call for me," Goldsmith said. Cheney and Addington, he came to believe, were gaming the system, using secrecy and intimidation to prevent potential dissenters from conducting an independent review.
"They were geniuses at this," Goldsmith said. "They could divide up all these problems in the bureaucracy, ask different people to decide things in their lanes, control the facts they gave them, and then put the answers together to get the result they want."
Dec. 9, 2003, the day of the visit from Brenner and Potenza, was the beginning of the end of that strategy. The years of easy victory were winding down for Cheney and his staff.
* * *
Goldsmith began a top-to-bottom review of the domestic surveillance program, taking up the work begun by a lawyer named Patrick F. Philbin after John Yoo left the department. Like Yoo and Goldsmith, Philbin had walked the stations of the conservative legal establishment: Federalist Society, a clerkship with U.S. Circuit Judge Laurence H. Silberman, another with Supreme Court Justice Clarence Thomas.
The more questions they asked, the less Goldsmith and Philbin liked the answers. Parts of the program fell easily within the constitutional powers of the commander in chief. Others looked dicier.
The two lawyers worked at the intersection of three complex systems: telecommunications, spy technology, and the statutory regimes that governed surveillance. After a few weeks, Goldsmith said, he decided the program "was the biggest legal mess I'd seen in my life."
He asked for permission to read in Attorney General John D. Ashcroft's new deputy, James B. Comey [14]. As always, he found Addington waiting with Gonzales in the White House counsel's corner office, one floor up from the chief of staff. They sat in parallel wing chairs, much as Bush and Cheney did in the Oval Office.
"The attorney general and I think the deputy attorney general should be read in," Goldsmith said.
Addington replied first.
"Forget it," he said.
"The president insists on strict limitations on access to the program," Gonzales agreed.
Weeks passed. Goldsmith kept asking. Addington kept saying no.
"He always invoked the president, not the vice president," Goldsmith said [15].
Comey was not exactly Mr. Popular at 1600 Pennsylvania Ave. He had arrived at Justice as a 6-foot-8 golden boy, smooth and polished, with top chops as a federal terrorism prosecutor in Northern Virginia and New York City. Then came Dec. 30, 2003. Comey did something unforgivable: He appointed an independent counsel to investigate the leak of Valerie Plame's identity as a clandestine CIA officer, a move that would bring no end of grief for Cheney.
In late January, Goldsmith and Addington cut a deal. Comey would get his read-in. Goldsmith would get off the fence about the program, giving his definitive answer by the March 11 deadline.
"You're the head of the Office of Legal Counsel, and if you say we cannot do this thing legally, we'll shut it off," Addington told him [16].
Feel free to tell the president that his most important intelligence operation has to stop.
Your call, Jack.
Goldsmith wanted to fix the thing, not stop it. He and Philbin traveled again and again to Fort Meade, each time delving deeper. They were in and out of Gonzales's office, looking for adjustments in the program that would bring it into compliance with the law. The issues were complex and remain classified. Addington bent on nothing, swatting back every idea. Gonzales listened placidly, sipping Diet Cokes from his little refrigerator, encouraging the antagonists to keep things civil.
There would be no easy out, no middle ground. Addington made clear that he did not believe for a moment that Justice would pull the plug.
* * *
Mike Hayden and Vito Potenza drove down from NSA headquarters after lunch on Feb. 19, 2004, to give Jim Comey his first briefing on the program. In the Justice Department's vault-like SCIF, a sensitive compartmented information facility, Hayden got Comey's attention fast.
"I'm so glad you're getting read in, because now I won't be alone at the table when John Kerry is elected president," the NSA director said [17].
The witness table, Hayden meant. Congressional hearing, investigation of some kind. Nothing good. Kerry had the Democratic nomination just about locked up and was leading Bush in national polls. Hardly anyone in the intelligence field believed the next administration would climb as far out on a legal limb as this one had.
"Hayden was all dog-and-pony, and this is probably what happened to those poor folks in Congress, too," Comey told his chief of staff after the briefing. "You think for a second, 'Wow, that's great,' and then if you try actually to explain it back to yourself, you don't get it. You scratch your head afterward and you think, 'What the hell did that guy just tell me?' "
The NSA chief insisted on limiting surveillance to e-mails, phone calls and faxes in which one party was overseas, deflecting arguments from Cheney and Addington that he could just as well collect communications inside the United States.
That was one reason Hayden hated when reporters referred to "domestic surveillance." He made his point with a folksy analogy: He had taken "literally hundreds of domestic flights," he said, and never "landed in Waziristan." That sounded good. But the surveillance statutes said a warrant was required if either end of the conversation was in U.S. territory. The American side of the program -- the domestic surveillance -- was its distinguishing feature.
By the end of February, Goldsmith and Philbin had reached their conclusion: Parts of the surveillance operation had no support in law. Comey was so disturbed that he drove to Langley one evening to compare notes with Scott W. Muller, the general counsel at the CIA. Muller "got it immediately," agreeing with the Goldsmith-Philbin analysis, Comey said.
"At the end of the day, I concluded something I didn't ever think I would conclude, and that is that Pat Philbin and Jack Goldsmith understood this activity much better than Michael Hayden did," he said.
On Thursday, March 4, Comey brought the findings to Ashcroft, conferring for an hour one-on-one. Three senior Justice Department officials said in interviews that Ashcroft gave his full backing. He was not going to sign the next presidential order -- due in one week, March 11 -- unless the White House agreed to a list of required changes.
* * *
A few hours later, Ashcroft was reviewing notes for a news conference in Alexandria when his color changed and he sat down heavily. An aide, Mark Corallo, ducked out and returned to find the attorney general laid out on his back. By nightfall, Ashcroft was taken to George Washington University Medical Center in severe pain, suffering acute gallstone pancreatitis. Comey became acting attorney general on Friday.
The next day -- Saturday, March 6, five days before the March 11 deadline -- Goldsmith brought the Justice Department verdict to the White House. He told Gonzales and Addington for the first time that Justice would not certify the program.
A long silence fell. It lasted three full days.
Gonzales phoned Goldsmith at home before sunrise on Tuesday, March 9, with two days left before the program expired. Obviously there was bad chemistry with Addington. Why not come in and talk, he asked, just the two of us?
Goldsmith arrived at the White House in morning twilight. Alone in his office, Gonzales begged the OLC chief to reconsider. Gonzales tried to dispute Goldsmith's analysis, but he was in over his head. At least let us have more time, he said. Goldsmith said he couldn't do that.
The time had come for the vice president to step in. Proxies were not getting the job done. Cheney was going to have to take hold of this thing himself.
Even now, after months of debate, Cheney did not enlist the president. Bush was across the river in Arlington, commending the winners of the Malcolm Baldrige awards for quality improvement in private industry [18]. Campaign season had come already, and the president was doing a lot of that kind of thing. That week he had a fundraiser in Dallas, a "Bush-Cheney 2004 event" in Santa Clara, Calif., and a meet-and-greet at a rodeo in Houston.
Soon after hearing what had happened between Goldsmith and Gonzales, the vice president asked Andy Card to set up a meeting at noon with Mike Hayden, FBI Director Robert S. Mueller III, and John McLaughlin from the CIA (substituting for his boss, George J. Tenet). Cheney spoke to them in Card's office, the door closed.
Four hours later, at 4 p.m., the same cast reconvened. This time the Justice contingent was invited. Comey, Goldsmith and Philbin found the titans of the intelligence establishment lined up, a bunch of grave-faced analysts behind them for added mass. The spy chiefs brought no lawyers. The law was not the point. This meeting, described by officials with access to two sets of contemporaneous notes, was about telling Justice to set its qualms aside.
The staging had been arranged for maximum impact. Cheney sat at the head of Card's rectangular table, pivoting left to face the acting attorney general. The two men were close enough to touch. Card sat grimly at Cheney's right, directly across from Comey. There was plenty of eye contact all around.
This program, Cheney said, was vital. Turning it off would leave us blind. Hayden, the NSA chief, pitched in: Even if the program had yet to produce blockbuster results, it was the only real hope of discovering sleeper agents before they could act.
"How can you possibly be reversing course on something of this importance after all this time?" Cheney asked [19].
Comey held his ground. The program had to operate within the law. The Justice Department knew a lot more now than it had before, and Ashcroft and Comey had reached this decision together.
"I will accept for purposes of discussion that it is as valuable as you say it is," Comey said. "That only makes this more painful. It doesn't change the analysis. If I can't find a lawful basis for something, your telling me you really, really need to do it doesn't help me."
"Others see it differently," Cheney said.
There was only one of those, really. John Yoo had been out of the picture for nearly a year. It was all Addington.
"The analysis is flawed, in fact facially flawed," Comey said. "No lawyer reading that could reasonably rely on it."
Gonzales said nothing. Addington stood by the window, over Cheney's shoulder. He had heard a bellyful.
"Well, I'm a lawyer and I did," Addington said, glaring at Comey.
"No good lawyer," Comey said [20].
In for a dime, in for a dollar.
Addington started disputing the particulars. Now he was on Jack Goldsmith's turf. From across the room the head of the Office of Legal Counsel jumped in. And right there in front of the big guys, the two of them bickered in the snarly tones of a couple who knew all of each other's lines.
* * *
As the sun went down on Tuesday, March 9, the president of the United States had yet to learn that his Justice Department was heading off the rails. A train wreck was coming, but Cheney wanted to handle it. Neither Card nor Gonzales was in the habit of telling him no.
"I don't think it would be appropriate for the president to be engaged in the to-and-fro until it is, you know, penultimate," Card said in a recent interview [21]. "I guess the definition of 'penultimate' could vary from four steps to three steps to two steps to one step. That's why you have White House counsel and people who do the legal work."
Participants in the afternoon meeting, including some of Cheney's recruits, left the room shaken. Mueller worked for the attorney general, and the FBI's central mission was to "uphold and enforce the criminal laws of the United States." Hayden's neck, and his agency, were on the line. The NSA director believed in the program, believed he was doing the right thing. But keep on going when the Justice Department said no?
Early the next morning -- Wednesday, March 10, with 24 hours to deadline -- Hayden was back in the White House. One colleague saw him conferring in worried whispers with Homeland Security adviser John A. Gordon, a mentor and fellow Air Force general, much the senior of the two. They huddled in the West Wing lobby, Hayden on a love seat and Gordon in a chair [22].
Jim Comey was in the White House that morning, too, arriving early for the president's regular 8:30 terrorism brief. He had heard nothing since the discouraging meeting the day before.
Comey found Frances Fragos Townsend, an old friend, waiting just outside the Oval Office, standing by the appointment secretary's desk. She was Bush's deputy national security adviser for combating terrorism. Comey had known her since their days as New York mob prosecutors in the 1980s. Since then, Townsend had run the Justice Department's intelligence office. She lived and breathed surveillance law.
Comey took a chance. He pulled her back out to the hallway between the Roosevelt Room and the Cabinet Room.
"If I say a word, would you tell me whether you recognize it?" he asked quietly.
He did. She didn't. The program's classified code name left her blank. Comey tried to talk around the subject.
"I think this is something I am not a part of," Townsend said [23]. "I can't have this conversation." Like John Gordon and deputy national security adviser Steven J. Hadley and Homeland Security Secretary Tom Ridge, she was out of the loop [24].
Oh, God, Comey remembers thinking. They've held this so tight. Even Fran Townsend. The president's counterterrorism adviser is not read in? Comey towered over his diminutive friend. He chose his words carefully.
"I need to know," he said, "whether your boss recognizes that word, and whether she's read in on a particular program. Because we had a meeting here yesterday on that topic that I would have expected her to be at."
He meant national security adviser Condoleezza Rice. Comey was hoping for an ally, or maybe rescue.
"I felt very alone, with some justification," Comey recalled. "The attorney general is in intensive care. There's a train coming down the tracks that's about to run me and my career and the Department of Justice over. I was exploring every way to get off the tracks I could."
Townsend had a pretty good guess about what was on Comey's mind. Cheney had kept her out of the loop, but it was hard to hide a warrantless domestic surveillance program completely from the president's chief terrorism adviser.
"I'm not the right person to talk to," she told her friend, her voice close to a whisper. Comey ought to go see Rice.
"I'm going to tell her you've got concerns," Townsend said.
Comey's concerns no longer interested Cheney. The vice president had tried to back him down. That didn't work.
Only one day remained before the surveillance program expired. Time for Cheney to take the fight somewhere else.
By Barton Gellman
A burst of ferocity stunned the room into silence. No other word for it: The vice president's attorney was shouting.
"The president doesn't want this! [1] You are not going to see the opinions. You are out . . . of . . . your . . . lane!"
Five government lawyers had gathered around a small conference table in the Justice Department command center. Four were expected. David S. Addington, counsel to Vice President Cheney, got wind of the meeting and invited himself.
If Addington smelled revolt, he was not far wrong. Unwelcome questions about warrantless domestic surveillance had begun to find their voice.
Cheney and his counsel would struggle for months to quash the legal insurgency. By the time President Bush became aware of it, his No. 2 had stoked dissent into flat-out rebellion. The president would face a dilemma, and the presidency itself a historic test. Cheney would come close to leading them off a cliff, man and office both [2].
On this second Monday in December 2003, Addington's targets were a pair of would-be auditors from the National Security Agency. He had displeasure to spare for their Justice Department hosts.
Perfect example, right here. A couple of NSA bureaucrats breeze in and ask for the most sensitive documents in the building. And Justice wants to tell them, Help yourselves? This was going to be a very short meeting.
Joel Brenner and Vito Potenza, the two men wilting under Addington's wrath, had driven 26 miles from Fort Meade, the NSA's eavesdropping headquarters in Maryland. They were conducting a review of their agency's two-year-old special surveillance operation. They already knew the really secret stuff [3]: The NSA and other services had been unleashed to turn their machinery inward, collecting signals intelligence inside the United States. What the two men didn't know was why the Bush administration believed the program was legal.
It was an awkward question. Potenza, the NSA's acting general counsel, and Brenner, its inspector general, were supposed to be the ones who kept their agency on the straight and narrow. That's what Cheney and their boss, Lt. Gen. Michael V. Hayden, told doubters among the very few people who knew what was going on. Cheney, who chaired briefings for select members of Congress, said repeatedly that the NSA's top law and ethics officers -- career public servants -- approved and supervised the surveillance program.
That was not exactly true, not without one of those silent asterisks that secretly flip a sentence on its tail. Every 45 days, after Justice Department review, Bush renewed his military order for warrantless eavesdropping. Brenner and Potenza told Hayden that the agency was entitled to rely on those orders [4]. The United States was at war with al-Qaeda, intelligence-gathering is inherent in war, and the Constitution appoints the president commander in chief.
But they had not been asked to give their own written assessments of the legality of domestic espionage. They based their answer in part on the attorney general's certification of the "form and legality" of the president's orders. Yet neither man had been allowed to see the program's codeword-classified legal analyses [5], which were prepared by John C. Yoo, Addington's close ally in the Justice Department's Office of Legal Counsel. Now they wanted to read Yoo's opinions for themselves [6].
"This is none of your business!" Addington exploded.
He was massive in his swivel chair, taut and still, potential energy amping up the menace. Addington's pugnacity was not an act. Nothing mattered more, as the vice president and his lawyer saw the world, than these new surveillance tools. Bush had made a decision. Debate could only blow the secret, slow down vital work, or call the president's constitutional prerogatives into question.
The NSA lawyers returned to their car empty-handed.
* * *
The command center of "the president's program," as Addington usually called it, was not in the White House. Its controlling documents, which gave strategic direction to the nation's largest spy agency, lived in a vault across an alley from the West Wing [7] -- in the Eisenhower Executive Office Building, on the east side of the second floor, where the vice president headquartered his staff.
The vault was in EEOB 268, Addington's office. Cheney's lawyer held the documents, physical and electronic, because he was the one who wrote them. New forms of domestic espionage were created and developed over time in presidential authorizations that Addington typed on a Tempest-shielded computer across from his desk [8].
It is unlikely that the history of U.S. intelligence includes another operation conceived and supervised by the office of the vice president. White House Chief of Staff Andrew H. Card Jr. had "no idea," he said, that the presidential orders were held in a vice presidential safe. An authoritative source said the staff secretariat, which kept a comprehensive inventory of presidential papers, classified and unclassified, possessed no record of these.
In an interview, Card said the Executive Office of the President, a formal term that encompassed Bush's staff but not Cheney's, followed strict procedures for handling and securing presidential papers.
"If there were exceptions to that, I'm not aware of them," he said. "If these documents weren't stored the right way or put in the right places or maintained by the right people, I'm not aware of it."
Asked why Addington would write presidential directives, Card said, "David Addington is a very competent lawyer." After a moment he added, "I would consider him a drafter, not the drafter [9]. I'm sure there were a lot of smart people who were involved in helping to look at the language and the law."
Not many, it turned out. Though the president had the formal say over who was "read in" to the domestic surveillance program, Addington controlled the list in practice, according to three officials with personal knowledge. White House counsel Alberto R. Gonzales was aware of the program, but was not a careful student of the complex legal questions it raised. In its first 18 months, the only other lawyer who reviewed the program was John Yoo.
By the time the NSA auditors came calling, a new man, Jack L. Goldsmith, was chief of the Justice Department's Office of Legal Counsel. Soon after he arrived on Oct. 6, 2003, the vice president's lawyer invited him to EEOB 268. Addington pulled out a folder with classification markings that Goldsmith had never seen [10].
"David Addington was doing all the legal work. All the important documents were kept in his safe [11]," Goldsmith recalled. "He was the one who first briefed me."
Goldsmith's new assignment gave him final word in the executive branch on what was legal and what was not. Addington had cleared him for the post -- "the biggest presence in the room," Goldsmith said, during a job interview ostensibly run by Gonzales.
Goldsmith did not have the looks of a guy who posed a threat to the Bush administration's alpha lawyer. A mild-mannered law professor from the University of Chicago, he was rumpled and self-conscious, easy to underestimate. On first impression, he gave off a misleading aura of softness. Goldsmith had lettered in football, baseball and soccer at the Pine Crest School in Fort Lauderdale, Fla., [12] spending his formative years with a mob-connected Teamster who married his mother [13]. He was not a bare-knuckled brawler in Addington's mold, but Goldsmith arrived at Justice with no less confidence and strength of will.
Addington's behavior with the NSA auditors was "a wake-up call for me," Goldsmith said. Cheney and Addington, he came to believe, were gaming the system, using secrecy and intimidation to prevent potential dissenters from conducting an independent review.
"They were geniuses at this," Goldsmith said. "They could divide up all these problems in the bureaucracy, ask different people to decide things in their lanes, control the facts they gave them, and then put the answers together to get the result they want."
Dec. 9, 2003, the day of the visit from Brenner and Potenza, was the beginning of the end of that strategy. The years of easy victory were winding down for Cheney and his staff.
* * *
Goldsmith began a top-to-bottom review of the domestic surveillance program, taking up the work begun by a lawyer named Patrick F. Philbin after John Yoo left the department. Like Yoo and Goldsmith, Philbin had walked the stations of the conservative legal establishment: Federalist Society, a clerkship with U.S. Circuit Judge Laurence H. Silberman, another with Supreme Court Justice Clarence Thomas.
The more questions they asked, the less Goldsmith and Philbin liked the answers. Parts of the program fell easily within the constitutional powers of the commander in chief. Others looked dicier.
The two lawyers worked at the intersection of three complex systems: telecommunications, spy technology, and the statutory regimes that governed surveillance. After a few weeks, Goldsmith said, he decided the program "was the biggest legal mess I'd seen in my life."
He asked for permission to read in Attorney General John D. Ashcroft's new deputy, James B. Comey [14]. As always, he found Addington waiting with Gonzales in the White House counsel's corner office, one floor up from the chief of staff. They sat in parallel wing chairs, much as Bush and Cheney did in the Oval Office.
"The attorney general and I think the deputy attorney general should be read in," Goldsmith said.
Addington replied first.
"Forget it," he said.
"The president insists on strict limitations on access to the program," Gonzales agreed.
Weeks passed. Goldsmith kept asking. Addington kept saying no.
"He always invoked the president, not the vice president," Goldsmith said [15].
Comey was not exactly Mr. Popular at 1600 Pennsylvania Ave. He had arrived at Justice as a 6-foot-8 golden boy, smooth and polished, with top chops as a federal terrorism prosecutor in Northern Virginia and New York City. Then came Dec. 30, 2003. Comey did something unforgivable: He appointed an independent counsel to investigate the leak of Valerie Plame's identity as a clandestine CIA officer, a move that would bring no end of grief for Cheney.
In late January, Goldsmith and Addington cut a deal. Comey would get his read-in. Goldsmith would get off the fence about the program, giving his definitive answer by the March 11 deadline.
"You're the head of the Office of Legal Counsel, and if you say we cannot do this thing legally, we'll shut it off," Addington told him [16].
Feel free to tell the president that his most important intelligence operation has to stop.
Your call, Jack.
Goldsmith wanted to fix the thing, not stop it. He and Philbin traveled again and again to Fort Meade, each time delving deeper. They were in and out of Gonzales's office, looking for adjustments in the program that would bring it into compliance with the law. The issues were complex and remain classified. Addington bent on nothing, swatting back every idea. Gonzales listened placidly, sipping Diet Cokes from his little refrigerator, encouraging the antagonists to keep things civil.
There would be no easy out, no middle ground. Addington made clear that he did not believe for a moment that Justice would pull the plug.
* * *
Mike Hayden and Vito Potenza drove down from NSA headquarters after lunch on Feb. 19, 2004, to give Jim Comey his first briefing on the program. In the Justice Department's vault-like SCIF, a sensitive compartmented information facility, Hayden got Comey's attention fast.
"I'm so glad you're getting read in, because now I won't be alone at the table when John Kerry is elected president," the NSA director said [17].
The witness table, Hayden meant. Congressional hearing, investigation of some kind. Nothing good. Kerry had the Democratic nomination just about locked up and was leading Bush in national polls. Hardly anyone in the intelligence field believed the next administration would climb as far out on a legal limb as this one had.
"Hayden was all dog-and-pony, and this is probably what happened to those poor folks in Congress, too," Comey told his chief of staff after the briefing. "You think for a second, 'Wow, that's great,' and then if you try actually to explain it back to yourself, you don't get it. You scratch your head afterward and you think, 'What the hell did that guy just tell me?' "
The NSA chief insisted on limiting surveillance to e-mails, phone calls and faxes in which one party was overseas, deflecting arguments from Cheney and Addington that he could just as well collect communications inside the United States.
That was one reason Hayden hated when reporters referred to "domestic surveillance." He made his point with a folksy analogy: He had taken "literally hundreds of domestic flights," he said, and never "landed in Waziristan." That sounded good. But the surveillance statutes said a warrant was required if either end of the conversation was in U.S. territory. The American side of the program -- the domestic surveillance -- was its distinguishing feature.
By the end of February, Goldsmith and Philbin had reached their conclusion: Parts of the surveillance operation had no support in law. Comey was so disturbed that he drove to Langley one evening to compare notes with Scott W. Muller, the general counsel at the CIA. Muller "got it immediately," agreeing with the Goldsmith-Philbin analysis, Comey said.
"At the end of the day, I concluded something I didn't ever think I would conclude, and that is that Pat Philbin and Jack Goldsmith understood this activity much better than Michael Hayden did," he said.
On Thursday, March 4, Comey brought the findings to Ashcroft, conferring for an hour one-on-one. Three senior Justice Department officials said in interviews that Ashcroft gave his full backing. He was not going to sign the next presidential order -- due in one week, March 11 -- unless the White House agreed to a list of required changes.
* * *
A few hours later, Ashcroft was reviewing notes for a news conference in Alexandria when his color changed and he sat down heavily. An aide, Mark Corallo, ducked out and returned to find the attorney general laid out on his back. By nightfall, Ashcroft was taken to George Washington University Medical Center in severe pain, suffering acute gallstone pancreatitis. Comey became acting attorney general on Friday.
The next day -- Saturday, March 6, five days before the March 11 deadline -- Goldsmith brought the Justice Department verdict to the White House. He told Gonzales and Addington for the first time that Justice would not certify the program.
A long silence fell. It lasted three full days.
Gonzales phoned Goldsmith at home before sunrise on Tuesday, March 9, with two days left before the program expired. Obviously there was bad chemistry with Addington. Why not come in and talk, he asked, just the two of us?
Goldsmith arrived at the White House in morning twilight. Alone in his office, Gonzales begged the OLC chief to reconsider. Gonzales tried to dispute Goldsmith's analysis, but he was in over his head. At least let us have more time, he said. Goldsmith said he couldn't do that.
The time had come for the vice president to step in. Proxies were not getting the job done. Cheney was going to have to take hold of this thing himself.
Even now, after months of debate, Cheney did not enlist the president. Bush was across the river in Arlington, commending the winners of the Malcolm Baldrige awards for quality improvement in private industry [18]. Campaign season had come already, and the president was doing a lot of that kind of thing. That week he had a fundraiser in Dallas, a "Bush-Cheney 2004 event" in Santa Clara, Calif., and a meet-and-greet at a rodeo in Houston.
Soon after hearing what had happened between Goldsmith and Gonzales, the vice president asked Andy Card to set up a meeting at noon with Mike Hayden, FBI Director Robert S. Mueller III, and John McLaughlin from the CIA (substituting for his boss, George J. Tenet). Cheney spoke to them in Card's office, the door closed.
Four hours later, at 4 p.m., the same cast reconvened. This time the Justice contingent was invited. Comey, Goldsmith and Philbin found the titans of the intelligence establishment lined up, a bunch of grave-faced analysts behind them for added mass. The spy chiefs brought no lawyers. The law was not the point. This meeting, described by officials with access to two sets of contemporaneous notes, was about telling Justice to set its qualms aside.
The staging had been arranged for maximum impact. Cheney sat at the head of Card's rectangular table, pivoting left to face the acting attorney general. The two men were close enough to touch. Card sat grimly at Cheney's right, directly across from Comey. There was plenty of eye contact all around.
This program, Cheney said, was vital. Turning it off would leave us blind. Hayden, the NSA chief, pitched in: Even if the program had yet to produce blockbuster results, it was the only real hope of discovering sleeper agents before they could act.
"How can you possibly be reversing course on something of this importance after all this time?" Cheney asked [19].
Comey held his ground. The program had to operate within the law. The Justice Department knew a lot more now than it had before, and Ashcroft and Comey had reached this decision together.
"I will accept for purposes of discussion that it is as valuable as you say it is," Comey said. "That only makes this more painful. It doesn't change the analysis. If I can't find a lawful basis for something, your telling me you really, really need to do it doesn't help me."
"Others see it differently," Cheney said.
There was only one of those, really. John Yoo had been out of the picture for nearly a year. It was all Addington.
"The analysis is flawed, in fact facially flawed," Comey said. "No lawyer reading that could reasonably rely on it."
Gonzales said nothing. Addington stood by the window, over Cheney's shoulder. He had heard a bellyful.
"Well, I'm a lawyer and I did," Addington said, glaring at Comey.
"No good lawyer," Comey said [20].
In for a dime, in for a dollar.
Addington started disputing the particulars. Now he was on Jack Goldsmith's turf. From across the room the head of the Office of Legal Counsel jumped in. And right there in front of the big guys, the two of them bickered in the snarly tones of a couple who knew all of each other's lines.
* * *
As the sun went down on Tuesday, March 9, the president of the United States had yet to learn that his Justice Department was heading off the rails. A train wreck was coming, but Cheney wanted to handle it. Neither Card nor Gonzales was in the habit of telling him no.
"I don't think it would be appropriate for the president to be engaged in the to-and-fro until it is, you know, penultimate," Card said in a recent interview [21]. "I guess the definition of 'penultimate' could vary from four steps to three steps to two steps to one step. That's why you have White House counsel and people who do the legal work."
Participants in the afternoon meeting, including some of Cheney's recruits, left the room shaken. Mueller worked for the attorney general, and the FBI's central mission was to "uphold and enforce the criminal laws of the United States." Hayden's neck, and his agency, were on the line. The NSA director believed in the program, believed he was doing the right thing. But keep on going when the Justice Department said no?
Early the next morning -- Wednesday, March 10, with 24 hours to deadline -- Hayden was back in the White House. One colleague saw him conferring in worried whispers with Homeland Security adviser John A. Gordon, a mentor and fellow Air Force general, much the senior of the two. They huddled in the West Wing lobby, Hayden on a love seat and Gordon in a chair [22].
Jim Comey was in the White House that morning, too, arriving early for the president's regular 8:30 terrorism brief. He had heard nothing since the discouraging meeting the day before.
Comey found Frances Fragos Townsend, an old friend, waiting just outside the Oval Office, standing by the appointment secretary's desk. She was Bush's deputy national security adviser for combating terrorism. Comey had known her since their days as New York mob prosecutors in the 1980s. Since then, Townsend had run the Justice Department's intelligence office. She lived and breathed surveillance law.
Comey took a chance. He pulled her back out to the hallway between the Roosevelt Room and the Cabinet Room.
"If I say a word, would you tell me whether you recognize it?" he asked quietly.
He did. She didn't. The program's classified code name left her blank. Comey tried to talk around the subject.
"I think this is something I am not a part of," Townsend said [23]. "I can't have this conversation." Like John Gordon and deputy national security adviser Steven J. Hadley and Homeland Security Secretary Tom Ridge, she was out of the loop [24].
Oh, God, Comey remembers thinking. They've held this so tight. Even Fran Townsend. The president's counterterrorism adviser is not read in? Comey towered over his diminutive friend. He chose his words carefully.
"I need to know," he said, "whether your boss recognizes that word, and whether she's read in on a particular program. Because we had a meeting here yesterday on that topic that I would have expected her to be at."
He meant national security adviser Condoleezza Rice. Comey was hoping for an ally, or maybe rescue.
"I felt very alone, with some justification," Comey recalled. "The attorney general is in intensive care. There's a train coming down the tracks that's about to run me and my career and the Department of Justice over. I was exploring every way to get off the tracks I could."
Townsend had a pretty good guess about what was on Comey's mind. Cheney had kept her out of the loop, but it was hard to hide a warrantless domestic surveillance program completely from the president's chief terrorism adviser.
"I'm not the right person to talk to," she told her friend, her voice close to a whisper. Comey ought to go see Rice.
"I'm going to tell her you've got concerns," Townsend said.
Comey's concerns no longer interested Cheney. The vice president had tried to back him down. That didn't work.
Only one day remained before the surveillance program expired. Time for Cheney to take the fight somewhere else.
The Drug War's Latest Tally: 872,721 Pot Arrests, an All-Time High
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By Paul Armentano
By Paul Armentano
If denial is the first sign of addiction, then Drug Czar John Walters is hooked to the gills. He’s addicted to targeting and arresting marijuana consumers, and he’ll do and say anything to keep this irrational and punitive policy in place.
Speaking earlier this month on C-Span, the reigning Czar stretched his usual deceit to outrageous new heights. Responding to a question from the Marijuana Policy Project’s Dan Bernath, Walters flatly denied the charge that over 800,000 Americans are arrested annually for violating pot laws.
"We didn’t arrest 800,000 marijuana users," Walters proclaimed. "That’s [a] lie."
If only it were.
According to data released yesterday in the FBI’s annual Uniform Crime Report, police in 2007 arrested over 872,000 US citizens - that’s nearly one out of every two Americans busted for illicit drugs -- for weed. (The raw data is available from the US Federal Bureau of Investigation here and here.) That figure is a five percent increase over the total number of Americans busted in 2006. It’s more than three times the number of citizens charged with pot violations sixteen years ago.
Of those arrested in 2007, 89 percent - some 775,000 Americans -- were charged with simple pot possession, not trafficking, cultivation, or sale. (By comparison, 27 percent of those arrested for heroin and cocaine offenses were charged with sales.) Three out of four were under age 30; one in four were 18-years-old or younger.
The FBI’s tally is the highest marijuana arrest total ever-reported in law enforcement history. If this pace continues, annual arrests for pot will surpass one million per year by 2010.
But to hear America’s top drug cop tell it few, if any, citizens are ever arrested for pot possession, and absolutely no one goes to jail for breaking marijuana laws.
"The fact is today, people don’t go to jail for the possession of marijuana," Walters alleged on C-Span. "Finding somebody in jail or prison for possession of marijuana is like finding a unicorn. It doesn’t exist."
Not true says the U.S. Department of Justice’s Bureau of Justice Statistics, which reported last year in black and white -- perhaps the Drug Czar is reading impaired - that 12.7 percent of state inmates and 12.4 percent of federal inmates incarcerated for drug abuse violations are serving time for marijuana offenses. Combining these percentages with separate U.S. Department of Justice statistics on the total number of state and federal drug prisoners suggests that, at a minimum, there are now about 33,655 state inmates and 10,785 federal inmates behind bars for marijuana offenses. (The report failed to include estimates on the percentage of inmates incarcerated in county or local jails for pot-related offenses, nor did it take into account the number of inmates serving time for violating the terms of their marijuana-related probation, such as those who submitted a ’dirty’ urine to their parole officer.)
No matter how one slices it, that’s a lot of unicorns.
It also begs the question: Why does the Drug Czar feel the need to go to such absurd lengths to hide this overt outgrowth of American drug policy? After all, the US Drug Enforcement Administration and the White House Office of National Drug Control Policy typically issue chest-thumping press releases when they achieve record busts for offenses involving cocaine, heroin, and methamphetamine? Why then do they shy away from making similar proclamations for pot?
Perhaps it’s because, deep down, even the Drug Czar knows that the use of cannabis does not pose anywhere near the health and safety threat as does the use of other intoxicants, including alcohol, and that most Americans - rightly - would be outraged to learn that our nation’s so-called war on drugs is really just an assault on young adults caught with small bags of weed.
More US corporate bailouts on the way
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By Barry Grey
The US government, brushing aside its constant invocations of “private enterprise,” has dispensed hundreds of billions of dollars in cheap loans to prop up the banks. Last March, the Federal Reserve Board paid JP Morgan Chase $29 billion to take over the investment bank Bear Stearns when Bear was on the verge of declaring bankruptcy.
Only a week ago, the US Treasury committed at least $200 billion in taxpayer funds in the government takeover of Fannie Mae and Freddie Mac—a move that makes the government responsible for the two companies’ combined $5.3 trillion in mortgage liabilities.
The claims that the government, in allowing Lehman Brothers to collapse, has “drawn the line” on further taxpayer bailouts of failing corporations are false. The government decided to let Lehman fail, in part, to conserve the dwindling funds at the disposal of the Federal Reserve and calibrate hand-outs from the Treasury—which faces record budget and trade deficits and a soaring national debt—to be used to rescue more strategic companies.
The Fed has reportedly agreed to widen its bailout of Wall Street by accepting, in return for low-cost loans to both commercial and investment banks, even more dubious forms of collateral, including shares of stock whose value has collapsed and mortgage-backed securities that can be sold on the market only for pennies on the dollar.
There are growing calls on Wall Street and in the financial press for the government to directly buy the near-worthless subprime mortgage-backed securities and other collapsing credit instruments that are undermining the balance sheets of major financial companies. With the government takeover of Fannie Mae and Freddie Mac—which was sanctioned in advance by the Democratic Congress—the legal and structural framework is in place for this wholesale government bailout of the banking system.
By Barry Grey
The US government, brushing aside its constant invocations of “private enterprise,” has dispensed hundreds of billions of dollars in cheap loans to prop up the banks. Last March, the Federal Reserve Board paid JP Morgan Chase $29 billion to take over the investment bank Bear Stearns when Bear was on the verge of declaring bankruptcy.
Only a week ago, the US Treasury committed at least $200 billion in taxpayer funds in the government takeover of Fannie Mae and Freddie Mac—a move that makes the government responsible for the two companies’ combined $5.3 trillion in mortgage liabilities.
The claims that the government, in allowing Lehman Brothers to collapse, has “drawn the line” on further taxpayer bailouts of failing corporations are false. The government decided to let Lehman fail, in part, to conserve the dwindling funds at the disposal of the Federal Reserve and calibrate hand-outs from the Treasury—which faces record budget and trade deficits and a soaring national debt—to be used to rescue more strategic companies.
The Fed has reportedly agreed to widen its bailout of Wall Street by accepting, in return for low-cost loans to both commercial and investment banks, even more dubious forms of collateral, including shares of stock whose value has collapsed and mortgage-backed securities that can be sold on the market only for pennies on the dollar.
There are growing calls on Wall Street and in the financial press for the government to directly buy the near-worthless subprime mortgage-backed securities and other collapsing credit instruments that are undermining the balance sheets of major financial companies. With the government takeover of Fannie Mae and Freddie Mac—which was sanctioned in advance by the Democratic Congress—the legal and structural framework is in place for this wholesale government bailout of the banking system.
The Wall Street crisis and the failure of American capitalism
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By Barry Grey
The end of Lehman Brothers and Merrill Lynch, two of the largest Wall Street investment banks, one week after the government takeover of the mortgage finance giants Fannie Mae and Freddie Mac, marks a new stage in the convulsive crisis of American capitalism.
On Monday, global markets fell sharply in a sign of mounting panic and doubt over the stability of the entire US banking system. Throughout Europe stock markets plunged by as much as 4 percent.
The fall on Wall Street was even steeper, with the Dow Jones Industrial Average losing 504 points, or 4.42 percent. There is every indication that the sell-off will intensify, with the full implications of the collapse of the two Wall Street banks as yet far from clear.
The immediate concern is the fate of American International Group (AIG), the world’s largest insurance company, and Washington Mutual, the largest savings and loan bank in the US, both of which are teetering on bankruptcy.
The sudden demise of Lehman Brothers and Merrill Lynch has removed a huge amount of liquidity from the economy, as paper values built up over decades of speculation come crashing down. This is capital that is needed to finance business operations, and its elimination will inevitably depress economic activity, fueling unemployment and recession, further undermining home prices and consumer spending, and further weakening the balance sheets of already financially shaken banks.
A sea change is unfolding in the US and world economy that portends a catastrophe of dimensions not seen since the Great Depression of the 1930s.
The fall of icons of American capitalism such as 158-year-old Lehman Brothers and 94-year-old Merrill Lynch can only lead to the further discrediting of the “free market” ideology of the US ruling elite, as well as its political and economic system. The spectacle of giants of capitalism drowning in debt piled up over decades of reckless speculation must inevitably discredit the social class—the American capitalist class—which is responsible for the debacle.
The bromides that have been uttered by the official spokesmen for the government, the media, Wall Street and the political parties over the past year of mounting financial crisis have lost all credibility. The assurances that the latest government bailout will stabilize the situation, that the US banking system is “fundamentally sound,” that the housing and credit markets are about to “turn the corner,” etc., reassure no one.
On Monday, President Bush mouthed such phrases in a brief White House appearance. Treasury Secretary Henry Paulson at a White House press conference evaded questions about who was responsible for the financial disaster and instead declared that he was “focused on the future.”
The presidential candidates, Republican John McCain and Democrat Barack Obama, made perfunctory statements that were remarkable only for their brevity and vacuity. What is widely acknowledged, even in ruling class circles, as the greatest financial crisis since the Great Depression is unfolding in the midst of a presidential election. But it barely rates a mention by either the Republican or Democratic candidate.
Both parties and their candidates tip toe around a financial scandal of world historic proportions because they are equally implicated. They are both bound hand and foot to Wall Street and single-mindedly dedicated to the defense of American capitalism.
McCain issued a statement demanding “reform” in Washington and on Wall Street and pledging to bring “accountability” to Wall Street. This from a multi-millionaire whose campaign is being run by a bevy of lobbyists for Wall Street and other sections of big business.
His Democratic counterpart, Barack Obama, issued a predictably mealy-mouthed statement complaining that “too many folks in Washington and on Wall Street weren’t minding the store.” While attempting to pin the blame for the crisis entirely on the Bush administration—ignoring the “free market,” deregulatory policies of Democrats Jimmy Carter and Bill Clinton—he offered a mutual amnesty between himself and McCain, saying, “I certainly don’t fault Senator McCain for these problems...”
These events are signposts in the historic failure of American and world capitalism. For the working class, they mean a rapid growth of unemployment, poverty, homelessness and social misery. The government, Wall Street and both political parties will seek to place the burden for the consequences of their own greed and incompetence squarely on the backs of working people.
The collapse is devastating ever wider layers of the population, including those who have worked on Wall Street and received some of the financial benefits of the speculative boom. Some 26,000 Lehman employees are not only out of a job, with few prospects of finding similar employment elsewhere, but as owners of 25 percent of the company’s stock they have lost a combined $10 billion, wiping out their savings and retirement funds.
Tens of thousands of employees at Merrill Lynch and Bank of America will lose their jobs in the merger of the two firms, adding to the 110,000 jobs slashed in the US financial services industry over the past year.
The broader implications of the mounting financial crisis were signaled by Hewlett-Packard’s announcement Monday that it was cutting 25,000 jobs.
Many of those who precipitated this economic disaster, on the other hand, will profit handsomely from the debris they have left behind. Hedge funds and other short-sellers, who bet on the collapse of corporations, are even now speculating furiously on the demise of the remaining Wall Street firms, Morgan Stanley and Goldman Sachs, as well as big commercial banks such as Bank of America.
William Gross of the nation’s largest bond fund, Pimco, took in $1.7 billion last week by betting on—and publicly agitating for—a government takeover of Fannie Mae and Freddie Mac.
The emergency talks over the weekend, involving the heads of the major commercial and investment banks and led by Treasury Secretary Paulson and top Federal Reserve officials, centered on rescuing Merrill Lynch and orchestrating an orderly liquidation of Lehman. Under pressure from Paulson and the Fed, Merrill agreed to sell itself to Bank of America, the largest consumer commercial bank in the US.
At the same time, there were frantic negotiations over the fate of AIG, which faces bankruptcy unless it can raise tens of billions of dollars in capital. When US markets opened Monday, AIG was asking for emergency loans from the Fed to stave off collapse.
A failure of AIG threatens to bring down the entire credit system both in the US and internationally, because the company holds a large stake in the multi-trillion-dollar, unregulated market in so-called “credit default swaps.” AIG has sold CDS contracts to banks, hedge funds and big investors all over the world, under which it guarantees the mortgage-backed debt of a wide range of companies in the event that they default. If AIG should go under, the value of the debt which it insures would fall to an unknown level, destabilizing the credit markets and threatening a chain reaction of defaults and bankruptcies.
The events of the past two weeks demonstrate that the American financial aristocracy is plunging the entire country into bankruptcy. These events are themselves climatic moments in a protracted process.
For three decades, the “free market” has been elevated to the status of a secular religion in the US, with the capitalist market as its god and socialism as its devil. This period, under both Republican and Democratic administrations, has seen the wholesale dismantling of the productive base of the US economy, at the cost of millions of jobs and the living standards of the American working class.
In the name of the supposed infallibility of the market, the operations of big business have been deregulated, removing all legal restraints on corporate profit-making and fueling the accumulation of ever more obscene levels of wealth in the hands of a financial oligarchy. A vast process of social plunder has occurred, in which the wealth of the country has been redistributed from the bottom to the very top.
The scrapping of huge sections of industry and the immense growth of social inequality are the hallmarks of the historic decline of American capitalism. At the heart of this decay is the separation of the process of personal enrichment of the ruling elite from the material process of production.
The United States has become the world leader not in manufacturing technology or industrial power, but in financial speculation and parasitism. As Floyd Norris, the economics columnist of the New York Times, put it on Friday, “During recent years, Lehman—along with many competitors—went on a borrowing binge to buy assets with as little money down as possible.”
By its very nature, the parasitism of American capitalism has generated corruption and criminality on an unprecedented scale. Wall Street CEOs have awarded themselves tens of millions and even billions in compensation, in an utterly irrational and socially destructive squandering of social resources for the benefit of private greed.
At the end of 2007, for example, the Lehman board awarded CEO Richard S. Fuld a compensation package worth more than $40 million. According to Reda Associates, he can expect to collect $63.3 million if he is terminated. In 2004, he paid $13.75 million for an ocean-front home in Jupiter Island, Florida, adding to his other properties, including a home in Sun Valley, Idaho.
Joe Gregory, a former president of Lehman, used to travel to work in a helicopter. He recently put his 9,500-square-foot ocean-front home in Bridgehampton, New York on the market for $32.5 million.
The Financial Times recently reported that compensation for major executives of the seven largest US banks totaled $95 billion over the past three years, even as the banks recorded $500 billion in losses.
The question of precisely who and what is to blame for the greatest economic disaster in more than three quarters of a century is something that will not and cannot be raised by any section of the political or media establishment.
Since the eruption of the current crisis, there have no been serious congressional hearings, no public investigations, no attempt to hold anyone accountable. Massive government interventions into the supposedly sacrosanct precincts of the “free market,” for the purpose of bailing out giant Wall Street firms, including the biggest government takeover of corporate entities in US history, have been carried out without any public debate or significant opposition from either political party. This, while millions of Americans are losing their homes and their jobs as a result of predatory corporate practices!
Certain conclusions must be drawn from the crisis of the American economic and political system. There is no solution within the framework of the profit system. What is needed is a socialist program that places the needs of the people before the profits and personal fortunes of the ruling elite.
The entire financial system must be taken out of private hands and nationalized in the form of a public utility under the democratic control of the working class, with provisions taken to safeguard the holdings of small depositors and share-holders. It must be subordinated to the social needs of the people and dedicated to developing and expanding the productive forces in order to eliminate poverty and unemployment and vastly improve the living standards and cultural level of the entire population.
Those who are responsible for the economic catastrophe must be called to account. Criminal investigations should be undertaken with appropriate sanctions for those who have plundered the social wealth. A full public accounting should be made of the hundreds of billions that have been diverted to private bank accounts through fraud and criminality. Such gains should be seized and used for the public good.
The only social force that can carry this out is the working class. It requires a clean break with the Democratic Party and the two-party system and the mobilization of the immense social power of the working class in its own party, on the basis of a revolutionary socialist program.
This is the program fought for by the Socialist Equality Party.
By Barry Grey
The end of Lehman Brothers and Merrill Lynch, two of the largest Wall Street investment banks, one week after the government takeover of the mortgage finance giants Fannie Mae and Freddie Mac, marks a new stage in the convulsive crisis of American capitalism.
On Monday, global markets fell sharply in a sign of mounting panic and doubt over the stability of the entire US banking system. Throughout Europe stock markets plunged by as much as 4 percent.
The fall on Wall Street was even steeper, with the Dow Jones Industrial Average losing 504 points, or 4.42 percent. There is every indication that the sell-off will intensify, with the full implications of the collapse of the two Wall Street banks as yet far from clear.
The immediate concern is the fate of American International Group (AIG), the world’s largest insurance company, and Washington Mutual, the largest savings and loan bank in the US, both of which are teetering on bankruptcy.
The sudden demise of Lehman Brothers and Merrill Lynch has removed a huge amount of liquidity from the economy, as paper values built up over decades of speculation come crashing down. This is capital that is needed to finance business operations, and its elimination will inevitably depress economic activity, fueling unemployment and recession, further undermining home prices and consumer spending, and further weakening the balance sheets of already financially shaken banks.
A sea change is unfolding in the US and world economy that portends a catastrophe of dimensions not seen since the Great Depression of the 1930s.
The fall of icons of American capitalism such as 158-year-old Lehman Brothers and 94-year-old Merrill Lynch can only lead to the further discrediting of the “free market” ideology of the US ruling elite, as well as its political and economic system. The spectacle of giants of capitalism drowning in debt piled up over decades of reckless speculation must inevitably discredit the social class—the American capitalist class—which is responsible for the debacle.
The bromides that have been uttered by the official spokesmen for the government, the media, Wall Street and the political parties over the past year of mounting financial crisis have lost all credibility. The assurances that the latest government bailout will stabilize the situation, that the US banking system is “fundamentally sound,” that the housing and credit markets are about to “turn the corner,” etc., reassure no one.
On Monday, President Bush mouthed such phrases in a brief White House appearance. Treasury Secretary Henry Paulson at a White House press conference evaded questions about who was responsible for the financial disaster and instead declared that he was “focused on the future.”
The presidential candidates, Republican John McCain and Democrat Barack Obama, made perfunctory statements that were remarkable only for their brevity and vacuity. What is widely acknowledged, even in ruling class circles, as the greatest financial crisis since the Great Depression is unfolding in the midst of a presidential election. But it barely rates a mention by either the Republican or Democratic candidate.
Both parties and their candidates tip toe around a financial scandal of world historic proportions because they are equally implicated. They are both bound hand and foot to Wall Street and single-mindedly dedicated to the defense of American capitalism.
McCain issued a statement demanding “reform” in Washington and on Wall Street and pledging to bring “accountability” to Wall Street. This from a multi-millionaire whose campaign is being run by a bevy of lobbyists for Wall Street and other sections of big business.
His Democratic counterpart, Barack Obama, issued a predictably mealy-mouthed statement complaining that “too many folks in Washington and on Wall Street weren’t minding the store.” While attempting to pin the blame for the crisis entirely on the Bush administration—ignoring the “free market,” deregulatory policies of Democrats Jimmy Carter and Bill Clinton—he offered a mutual amnesty between himself and McCain, saying, “I certainly don’t fault Senator McCain for these problems...”
These events are signposts in the historic failure of American and world capitalism. For the working class, they mean a rapid growth of unemployment, poverty, homelessness and social misery. The government, Wall Street and both political parties will seek to place the burden for the consequences of their own greed and incompetence squarely on the backs of working people.
The collapse is devastating ever wider layers of the population, including those who have worked on Wall Street and received some of the financial benefits of the speculative boom. Some 26,000 Lehman employees are not only out of a job, with few prospects of finding similar employment elsewhere, but as owners of 25 percent of the company’s stock they have lost a combined $10 billion, wiping out their savings and retirement funds.
Tens of thousands of employees at Merrill Lynch and Bank of America will lose their jobs in the merger of the two firms, adding to the 110,000 jobs slashed in the US financial services industry over the past year.
The broader implications of the mounting financial crisis were signaled by Hewlett-Packard’s announcement Monday that it was cutting 25,000 jobs.
Many of those who precipitated this economic disaster, on the other hand, will profit handsomely from the debris they have left behind. Hedge funds and other short-sellers, who bet on the collapse of corporations, are even now speculating furiously on the demise of the remaining Wall Street firms, Morgan Stanley and Goldman Sachs, as well as big commercial banks such as Bank of America.
William Gross of the nation’s largest bond fund, Pimco, took in $1.7 billion last week by betting on—and publicly agitating for—a government takeover of Fannie Mae and Freddie Mac.
The emergency talks over the weekend, involving the heads of the major commercial and investment banks and led by Treasury Secretary Paulson and top Federal Reserve officials, centered on rescuing Merrill Lynch and orchestrating an orderly liquidation of Lehman. Under pressure from Paulson and the Fed, Merrill agreed to sell itself to Bank of America, the largest consumer commercial bank in the US.
At the same time, there were frantic negotiations over the fate of AIG, which faces bankruptcy unless it can raise tens of billions of dollars in capital. When US markets opened Monday, AIG was asking for emergency loans from the Fed to stave off collapse.
A failure of AIG threatens to bring down the entire credit system both in the US and internationally, because the company holds a large stake in the multi-trillion-dollar, unregulated market in so-called “credit default swaps.” AIG has sold CDS contracts to banks, hedge funds and big investors all over the world, under which it guarantees the mortgage-backed debt of a wide range of companies in the event that they default. If AIG should go under, the value of the debt which it insures would fall to an unknown level, destabilizing the credit markets and threatening a chain reaction of defaults and bankruptcies.
The events of the past two weeks demonstrate that the American financial aristocracy is plunging the entire country into bankruptcy. These events are themselves climatic moments in a protracted process.
For three decades, the “free market” has been elevated to the status of a secular religion in the US, with the capitalist market as its god and socialism as its devil. This period, under both Republican and Democratic administrations, has seen the wholesale dismantling of the productive base of the US economy, at the cost of millions of jobs and the living standards of the American working class.
In the name of the supposed infallibility of the market, the operations of big business have been deregulated, removing all legal restraints on corporate profit-making and fueling the accumulation of ever more obscene levels of wealth in the hands of a financial oligarchy. A vast process of social plunder has occurred, in which the wealth of the country has been redistributed from the bottom to the very top.
The scrapping of huge sections of industry and the immense growth of social inequality are the hallmarks of the historic decline of American capitalism. At the heart of this decay is the separation of the process of personal enrichment of the ruling elite from the material process of production.
The United States has become the world leader not in manufacturing technology or industrial power, but in financial speculation and parasitism. As Floyd Norris, the economics columnist of the New York Times, put it on Friday, “During recent years, Lehman—along with many competitors—went on a borrowing binge to buy assets with as little money down as possible.”
By its very nature, the parasitism of American capitalism has generated corruption and criminality on an unprecedented scale. Wall Street CEOs have awarded themselves tens of millions and even billions in compensation, in an utterly irrational and socially destructive squandering of social resources for the benefit of private greed.
At the end of 2007, for example, the Lehman board awarded CEO Richard S. Fuld a compensation package worth more than $40 million. According to Reda Associates, he can expect to collect $63.3 million if he is terminated. In 2004, he paid $13.75 million for an ocean-front home in Jupiter Island, Florida, adding to his other properties, including a home in Sun Valley, Idaho.
Joe Gregory, a former president of Lehman, used to travel to work in a helicopter. He recently put his 9,500-square-foot ocean-front home in Bridgehampton, New York on the market for $32.5 million.
The Financial Times recently reported that compensation for major executives of the seven largest US banks totaled $95 billion over the past three years, even as the banks recorded $500 billion in losses.
The question of precisely who and what is to blame for the greatest economic disaster in more than three quarters of a century is something that will not and cannot be raised by any section of the political or media establishment.
Since the eruption of the current crisis, there have no been serious congressional hearings, no public investigations, no attempt to hold anyone accountable. Massive government interventions into the supposedly sacrosanct precincts of the “free market,” for the purpose of bailing out giant Wall Street firms, including the biggest government takeover of corporate entities in US history, have been carried out without any public debate or significant opposition from either political party. This, while millions of Americans are losing their homes and their jobs as a result of predatory corporate practices!
Certain conclusions must be drawn from the crisis of the American economic and political system. There is no solution within the framework of the profit system. What is needed is a socialist program that places the needs of the people before the profits and personal fortunes of the ruling elite.
The entire financial system must be taken out of private hands and nationalized in the form of a public utility under the democratic control of the working class, with provisions taken to safeguard the holdings of small depositors and share-holders. It must be subordinated to the social needs of the people and dedicated to developing and expanding the productive forces in order to eliminate poverty and unemployment and vastly improve the living standards and cultural level of the entire population.
Those who are responsible for the economic catastrophe must be called to account. Criminal investigations should be undertaken with appropriate sanctions for those who have plundered the social wealth. A full public accounting should be made of the hundreds of billions that have been diverted to private bank accounts through fraud and criminality. Such gains should be seized and used for the public good.
The only social force that can carry this out is the working class. It requires a clean break with the Democratic Party and the two-party system and the mobilization of the immense social power of the working class in its own party, on the basis of a revolutionary socialist program.
This is the program fought for by the Socialist Equality Party.
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