August 2012 archive

The LIBOR scandal continues to rattle the banking industry revealing the fraud that has gone unchecked by regulators in the US and Europe. The latest scandal that is now rocking international banking involves billions of dollars that were laundered by the British bank, Standard Charter, for Iran:

Standard Chartered bank ran a rogue unit that schemed with Iran’s government to hide more than $250bn (£160bn) in illegal transactions for nearly a decade, according to a scathing report by New York regulators that may put intense pressure on the management of the UK-based bank.

According to the report filed by the New York state department of financial services (NYSDFS), when warned by a US colleague about dealings with Iran, a Standard Chartered executive caustically replied: “You f—ing Americans. Who are you to tell us, the rest of the world, that we’re not going to deal with Iranians.” [..]

The 27-page report claims that Standard Chartered bankers helped Iranian clients skirt US financial sanctions against their country for nearly a decade.

Benjamin Lawsky, superintendent of the NYSDFS, said a Standard Chartered subsidiary in New York had also sought to do business with other US-sanctioned countries, including Libya, Burma and Sudan.

It is the latest blow to the reputation of the City, already criticised in Washington following the HSBC money-laundering debacle and JP Morgan’s multibillion-dollar trading losses at its London office. [..]

The New York regulator has provided emails between members of Standard Chartered staff. In one the head of the US operations warned, among others, the executive director of risk in London, that the dealings with Iran could cause “very serious or even catastrophic reputational damage” to the group.

The email, dated October 2006, warned: “There is equally importantly potential of risk of subjecting management in US and London (e.g. you and I) and elsewhere to personal reputational damages and/or serious criminal liability.” It was this memo that provoked the response about “you f—ing Americans”.

But it wasn’t the Treasury Department or the Federal Reserve that dropped the bomb with these charges, it was  Benjamin Lawsky, the New York Superintendent of Financial Services. Yves Smith at naked capitalism asked yesterday, “where were the Feds?”

The lack of action by everyone ex the lowly New York banking supervisor is mighty troubling. The evidence presented in Lawsky’s filing is compelling; he clearly has not gone off half cocked. Why has he pressed forward and announced this on his own? The Treasury Department’s Office of Terrorism and Financial Intelligence has supposedly been all over terrorist finance; the consultants to that effort typically have very high level security clearances and top level access (one colleague who worked on this effort in the Paulson Treasury could get the former ECB chief Trichet on the phone). For them not to have pursued it anywhere as aggressively as a vastly less well resourced state banking regulator, particularly when Iran is now the designated Foreign Enemy #1, does not pass the smell test.

At a minimum, this lack of sufficient inquisitiveness on behalf of the Feds would the bank snookered them by being terribly forthcoming (as in it was responding only to specific inquiries, and then as narrowly as possible). But it raises the more troubling specter that Federal regulators (oh, and the US Department of Justice) wanted to keep this all quiet so as not to lead to embarrassing headlines. Although there is nothing in the filing to point to failure to act by the New York Fed, which was presumably the lead party in the 2003 sanctions against SCB (indeed, it says specifically that SCB deceived Federal regulators), the flip side is there would be only downside to Lawsky in doing anything that would make Fed or Treasury think he was trying to make then look bad.

There was a huge furor in the UK over who among the banking regulators knew what when on the Libor scandal. If our Congresscritters are at all worth their salt, they ought to be putting Geithner and the relevant folks at the New York Fed under the hot lights. We’ll see soon enough how the Fed and Treasury play this. If they don’t launch parallel actions pronto, it will be a damning sign as to where they think their, and perhaps most importantly, Geithner’s, interests lie.

At emptywheel, Mary Wheeler, wondered as well why the Superintendent of Financial Services is policing our Iran sanctions?

Normally, we’d see accusations like SFS released today from Treasury’s OFAC (Office of Terrorism and Financial Intelligence), perhaps (for charges as scandalous as these) in conjunction with the NY DA and/or a US Attorney. And yet OFAC has had these materials in hand for 2 years, and has done nothing.

In fact, we have a pretty good idea what OFAC’s action would look like, because earlier this year it sanctioned ING for actions that were similar in type, albeit larger in number (20,000 versus 60,000) and far larger in dollar amount ($1.6 billion involving Cuba versus $250 billion involving Iran). Both banks were doctoring fields in SWIFT forms to hide the source or destination of their transfers. [..]

My wildarsed guess, in this case, is that we have an understanding with our allies that they’ll allow us to require the rest of the world to comply with our sanctions so long as it doesn’t affect that country’s businesses. That is, I suspect countries like Britain are happy to comply with our sanctions so long as British banks don’t lose competitive advantages as a result. Of course, these sanctions are different that-say-our stupid Cuba sanctions in that the UK is as enthusiastic about sanctioning Iran into docility as the US is, and this scheme is all about retaining lucrative business with Iran.

But we may never learn what reason that is, because that would make things uncomfortable for the entities that claim there is rule of law for banks while they ensure that usually is not the case.

But no matter, the Feds are now upset with Lawsky who had the cajones to do what they were obviously trying to cover up. Barry Ritholtz at Economonitor points out that Lawsky has virtually declared the Treasury and Federal reserve as “too corrupt” to handle this:

   “Pursuant to the statutory powers vested in him by the People of the State of New York . . . [and] extensive investigation included the review of more than 30,000 pages of documents, including internal SCB (Standard Chartered Bank) e-mails that describe willful and egregious violations of law.

  For almost ten years, SCB schemed with the Government of Iran and hid from regulators roughly 60,000 secret transactions, involving at least $250 billion, and reaping SCB hundreds of millions of dollars in fees. SCB’s actions left the U.S. financial system vulnerable to terrorists, weapons dealers, drug kingpins and corrupt regimes, and deprived law enforcement investigators of crucial information used to track all manner of criminal activity.

   –NYS Department of Financial Services

Benjamin Lawsky, head of the New York State Department of Financial Services, has declared that the Treasury Department and the Federal Reserve is “too corrupt” to be involved in NY’s actions against money launderers and Iran sponsors at Standard Chartered bank.

At least, that corruption is what was implied by his actions (note those are my words, not his). Lawsky refused to give Tim Geithner or Ben Bernanke or anyone else at Treasury or the Fed any advance notice of pending legal/regulatory actions. Sorry, Treasury, he seemed to be saying, but your track records preceded you. [..]

This Treasury Department, like the one that preceded it, along with Congress and the White House, have proven themselves to be utterly incapable of overseeing the banking industry. Rather than adhere to this betrayal of the public trust, Mr. Lawsky decided to do something amazing: He actually followed the law. The rest of the regulatory sector should take note.

Have a read of the paragraph at the top of this page to see how prosecution of banking felons and their crony capitalist allies is supposed to be done.

We live in the Banana Republic formerly known as the United States. Its time to turn this nation back into a Democracy . . .

Let’s hope that Mr. Lawsky doesn’t cave to pressure like NY State Attorney General Eric Scneiderman did.

“Punting the Pundits” is an Open Thread. It is a selection of editorials and opinions from around the news medium and the internet blogs. The intent is to provide a forum for your reactions and opinions, not just to the opinions presented, but to what ever you find important.

Thanks to ek hornbeck, click on the link and you can access all the past “Punting the Pundits”.

Wednesday is Ladies’ Day

Follow us on Twitter @StarsHollowGzt

Jeanne Mirer and Marjorie Cohn: The Toxic Effects of Agent Orange Persist 51 Years After the Vietnam War

From the beginning of the spraying 51 years ago, and even today, millions of Vietnamese have died from, or been completely incapacitated by, diseases which the US government recognizes are related to Agent Orange for purposes of granting compensation to Vietnam veterans in the United States. The Vietnamese, who were the intended victims of this spraying, experienced the most intense, horrible impact on human health and environmental devastation. Second and third generations of children, born to parents exposed during the war and in areas of heavy spraying hot spots, suffer unspeakable deformities that medical authorities attribute to the dioxin in Agent Orange. [..]

For the past 51 years, the Vietnamese people have been attempting to address this legacy of war by trying to get the United States and the chemical companies to accept responsibility for this ongoing nightmare. An unsuccessful legal action by Vietnamese victims of Agent Orange against the chemical companies in US federal court, begun in 2004, has nonetheless spawned a movement to hold the United States accountable for using such dangerous chemicals on civilian populations. The movement has resulted in pending legislation HR 2634 hot spots, lawsuit to compensate them, as the unintended victims, for their Agent-Orange-related illnesses. But the Vietnamese continue to suffer from these violations with almost no recognition, as do the offspring of Agent-Orange-exposed US veterans and Vietnamese-Americans.

Ruth Coniff: Tragedy in Wisconsin and Our Out-of-Control Gun Policies

The shooting rampage Sunday at the Wisconsin Sikh Temple outside Milwaukee has got to prompt serious soul-searching about our out-of-control gun policies in this country.

Although President Obama’s timely words of condolence strike the right note, once again the President did not seriously address the main problem: that the floridly psychotic, violent racists, and anyone else who attends a gun show or chooses to order thousands of rounds of ammunition online, has easy access to weapons like the two semiautomatic handguns the temple gunman apparently used.

This is not a hunting issue. It is not an issue of self defense. It is a question, as the President himself put it after the horrible massacre in a Colorado movie theater, of whether automatic weapons belong in the hands of soldiers, or of anyone who cares to use them.

Here’s a pretty good summary of Bankster crime.

This summer.

In London.

String of summer scandals tarnishes reputation of London’s financial industry

By Associated Press

Published: August 7

First came U.K. bank Barclays. Its chief executive, Bob Diamond, was forced to step down last month after U.S. and British authorities fined the bank $453 million for manipulating a key market interest rate. Other banks are being investigated for their part in the scandal.

Then there was HSBC, another big London-based bank. It faces fines of up to $1 billion after the U.S. Senate issued a damming report last month alleging it had failed to stop the laundering of Mexican drug money.

Back in May, JPMorgan Chase & Co. disclosed a surprise $2 billion trading loss – later upgraded to $5.8 billion – racked up by its London office in a portfolio designed to hedge against risks the company takes with its own money.

…

And now Standard Chartered, that most predictably profitable of British banks, has been accused by a regulator in New York of laundering Iranian oil money for years.

And what is the problem with this?

“We will get out of it, but it is a blow that means regulators will have a greater say in life, which means that economic growth will be slower.”

This is your morning Open Thread. Pour your favorite beverage and review the past and comment on the future.

Find the past “On This Day in History” here.

Click on images to enlarge

August 8 is the 220th day of the year (221st in leap years) in the Gregorian calendar. There are 145 days remaining until the end of the year.

On this day in 1974, Richard M. Nixon becomes the first President to resign.

In an evening televised address, President Richard M. Nixon announces his intention to become the first president in American history to resign. With impeachment proceedings underway against him for his involvement in the Watergate affair, Nixon was finally bowing to pressure from the public and Congress to leave the White House. “By taking this action,” he said in a solemn address from the Oval Office, “I hope that I will have hastened the start of the process of healing which is so desperately needed in America.”

Just before noon the next day, Nixon officially ended his term as the 37th president of the United States. Before departing with his family in a helicopter from the White House lawn, he smiled farewell and enigmatically raised his arms in a victory or peace salute. The helicopter door was then closed, and the Nixon family began their journey home to San Clemente, California. Minutes later, Vice President Gerald R. Ford was sworn in as the 38th president of the United States in the East Room of the White House. After taking the oath of office, President Ford spoke to the nation in a television address, declaring, “My fellow Americans, our long national nightmare is over.” He later pardoned Nixon for any crimes he may have committed while in office, explaining that he wanted to end the national divisions created by the Watergate scandal.

Jon Stewart’s extended interview with Fred Guterl.

Well the Olympics is winding down to Closing Ceremonies on Sunday which you can tell from the length and breadth of the coverage.  I wonder if we’ll have another unlisted Greco-Roman Final Monday and if so will anyone notice?

Yesterday I watched two really extraordinary contests and if they both happened to involve the USA team I must admit I’m not immune to the kind of jingoistic nationalism that pervades the Olympics (and international sporting in general, let’s talk Formula One).  However it’s also my philosophy that sports are more understandable and enjoyable if you have a rooting interest in the result.  Thus my scramble around Series time to find the team I hate least, goodness knows I’ll never see my Mets on that field but I’m not above picking based on cute mascots and jersey color.

And in my defense they are both distaff teams.  Men’s Basketball doesn’t need my help, their heads can fill a stadium.

In Water Polo the women advance after double overtime (it’s always a double overtime).  They scored 2 in the first overtime that went unanswered but the critical moment was a literal last second time out (which was idiotic and they didn’t need) called by USA and without clear possession.  The resulting penalty shot tied the game.

It’s the first time the USA Women’s Water Polo team will be in the finals in ages.

In Basketball it was Lady Huskies 2000 as Geno and the UConn All-Stars doubled down on Team Canada.  I’d pay good money to see them play the men, bet they’d kick their ass.

Back to the Women’s Football ‘victory’.  Canada is very depressed.  The game was sent into overtime on a penalty kick from a 6 second goalie holding violation.  Well, Team USA had been holding all day and it was never called.  Of course it’s Canada that’s being investigated for letting this slip to the public.

Finally from the halls of bad officiating.  It seems that despite getting his loss over turned, Spence fails to advance and the USA is sent home medal less for the first time ever.  Women’s team has two guaranteed.

Team USA Dressage was only able to muster a 6th place finish yesterday and Rafalca’s performance wasn’t good enough to qualify for individual competition.  This means they can strap her to the roof of the Gulfstream and have her back for the announcement of Consul any time.

Broadcast Schedule

All this is sourced through the NBC Olympics broadcast schedule.  Competition starts again at 8 am tomorrow.  

Competitions designated by (Medal) will award winners that day.  ‘all’ means not specified.  Sometimes NBC especially does mashups and doesn’t include event or competitor information.  Elimination means no round robin, one and done.

These schedules are a place for you to make sure you don’t miss a sport you like and share your observations.  Have fun today!

Coalition deadlock as Nick Clegg and David Cameron veto each other

Patrick Wintour, The Guardian

Monday 6 August 2012

Nick Clegg’s plan for constitutional reform and David Cameron’s scheme to shift parliamentary boundaries in the Conservatives’ favour both lay in ruins on Monday as victims of the prime minister’s inability to persuade his backbenchers to support an elected House of Lords.

A subdued and depressed Clegg announced he was abandoning all plans to reform the Lords in this parliament, adding as a result he will also be instructing his MPs to vote down revised parliamentary boundaries designed to reduce the number of MPs to 600.

…

The announcement represents a personal blow to Clegg, who had championed widescale political reform as a distinctive Liberal Democrat contribution to the coalition but has been thwarted at virtually every turn.

It leaves the deputy prime minister increasingly reliant on an upturn in the economy, progress on social mobility and a broader liberal agenda to justify the original decision to form the coalition with Cameron.

…

Clegg was eager on Monday to limit the damage from the collapse of Lords reform – insisting the government would still be anchored in the centre ground, and focused on delivering a revival of the economy, the reason the coalition agreement was made in the first place. He said a relationship of mutual trust and respect could be maintained with his partners.

Sucker or Liar?

UK coalition in crisis over parliamentary reform

By Tim Castle and Mohammed Abbas, Reuters

Mon Aug 6, 2012 2:56pm

The scuppering of Lords reform, a key plank of the coalition agreement struck in May 2010 with Cameron’s Conservatives, is particularly damaging for Clegg as it fuels the perception that the Liberal Democrats have gained little from going into government with a party that was not their ideological ally.

…

However, neither governing party is eager to sink the coalition and spark an election during a recession, and while polls show both parties are unpopular.

…

Dropping Lords reform is especially difficult for his party because he backed an unpopular proposal to increase university tuition fees as part of the coalition deal, a move that saw the Liberal Democrats hemorrhage support in opinion polls.

…

Jeremy Hunt, a Conservative minister, said Clegg’s announcement was disappointing but said the coalition would remain focused on its economic program.

“There isn’t a cigarette paper between us on that. That is what we are focused on getting the gold medal for. Nothing is going to change that focus,” he told Sky television.

Electoral Victory?  Hah, hah, hah, hah, hah.  They don’t care about that any more over there than they do over here.

Here’s what Nick Clegg sold his soul and his party for that he’s not going to get-

Cracks in British Governing Coalition as House of Lords Overhaul Falls Apart

By JOHN F. BURNS, The New York Times

Published: August 6, 2012

As the perennial third party in British politics, the Liberal Democrats have long regarded an elected upper chamber as a potential steppingstone beyond the marginal role the party and its historical progenitor, the Liberals, have played in British politics since the 1930s.

…

(T)he Conservatives’ push to change the electoral rules to bring parliamentary constituencies closer to a nationwide norm in terms of overall voter numbers, from the present system that requires many more votes to win a Conservative seat, on average, than a Labour one.

The change was one that political experts saw as capable of delivering 20 or more seats to the Conservatives at the cost of the opposition Labour Party, a potentially decisive margin in a close contest.

The proposed changes in the House of Lords would have nearly cut in half the size of the upper chamber, from its present membership of 826 to 450, and made 80 percent of the body elective by 2025, with one-third of its elected membership chosen at each of three successive general elections beginning in 2015.

Instead of the current practice of peers gaining appointment on the recommendation of the prime minister or other political leaders, 360 of the 450 House of Lords’ members would have to compete for seats in regional elections. Proportional voting rules for the contests would have favored smaller parties like the Liberal Democrats more than the current system used in elections to the House of Commons.

…

The abandonment of the reform package has been a deep personal blow to Mr. Clegg, exposing him ever more starkly as a man caught between a strong commitment to sustaining the coalition until the election and a gathering revolt among a powerful bloc of Liberal Democrats who have come to regard the partnership with the Conservatives as dragging them away from their core political beliefs on social issues like education, health, immigration and justice.

Exceptional.

“Punting the Pundits” is an Open Thread. It is a selection of editorials and opinions from around the news medium and the internet blogs. The intent is to provide a forum for your reactions and opinions, not just to the opinions presented, but to what ever you find important.

Thanks to ek hornbeck, click on the link and you can access all the past “Punting the Pundits”.

Follow us on Twitter @StarsHollowGzt

New York Times Editorial: Business Fears the Fiscal Cliff

So it turns out that federal spending is important to the economy after all.

As Nelson Schwartz reported in The Times on Monday, a number of manufacturers say they are canceling plans for investing and hiring, in part, because they fear that some $100 billion in budget cuts will take effect in 2013. In all, the law currently calls for $1.2 trillion in automatic spending cuts over 10 years, starting Jan. 1, divided between nondefense programs and defense projects.

Republican lawmakers demanded the cuts last year as part of their brinkmanship over the debt ceiling, and business lobbies have generally supported slashing the deficit. But now that the cuts are imminent, corporate executives seem to have realized that the last thing the economy needs is a large budget cut across the board.

Gore Vidal: Gore Vidal Speaks Seriously Ill of the Dead

The following was first published March 20, 2008 at Truthdig

I can recall that day in the 1930s when a “news” (sic) magazine appeared in Washington, D.C.; it was called Newsweek: meant to be a counterbalance to Time Magazine’s uncontrollable malice. In due course the two became sadly alike as Vincent Astor morphed into Henry Luce: Was it something in the water? I once asked Henry Luce why he called Time a news magazine when it was simply Uncle Harry’s means of venting his rage (this was 1960 or so) at liberals, and “degenerate art” like the plays of Tennessee Williams-he had no answer. At Newsweek Vincent Astor was far too stupid to answer any such complaint. Now here we are in the Newsweek of 2008, and it’s still lousy. There have been a few decent writers in between that were less nutty than today’s Newsweek hacks. [..]

The unique mess that our republic is in can be, in part, attributed to a corrupt press whose roots are in mendacious news (sic) magazines like Time and Newsweek, aided by tabloids that manufacture fictional stories about actual people. This mingling of opinion and fiction has undone a media never devoted to truth. Hence, the ease with which the Republican smear-machine goes into action when they realize that yet again the party’s permanent unpopularity with the American people will cause them defeat unless they smear individually those who question the junk that the media has put into so many heads. Anyone who says “We gotta fight ’em over there or we’re gonna have to fight ’em over here.” This absurdity has been pronounced by every Republican seeking high office. The habit of lying is now a national style that started with “news” magazines that was further developed by pathological liars that proved to be “good” Entertainment on TV. But a diet of poison that has done none of us any good.

I speak ex cathedra now, ad urbe et orbe, with a warning that no society so marinated in falsity can long survive in a real world.

Leaving a sinking ship-

As Libor Fault-Finding Grows, It Is Now Every Bank for Itself

By AZAM AHMED and BEN PROTESS, The New York Times

August 5, 2012

Major banks, which often band together when facing government scrutiny, are now turning on one another as an international investigation into the manipulation of interest rates gains momentum.

With billions of dollars and their reputations on the line, financial institutions have been spreading the blame in recent meetings with authorities, according to government and bank officials with knowledge of the matter.

…

Authorities around the world are investigating more than 10 big banks for their roles in setting global interest rates like the London interbank offered rate, or Libor. Such benchmarks underpin trillions of dollars of financial products, including mortgages and student loans.

Regulators are examining whether banks colluded to move the rates up or down to get extra profits and limit losses on their trading positions. Some banks are also under investigation for reporting artificially low rates to make themselves appear financially healthier.

When banks first started conducting internal investigations at the behest of regulators two years ago, they figured the potential penalties would be manageable, according to bank officials.

But the size of the Barclays settlement and the growing public outcry have left banks scrambling to limit their culpability as the threat of criminal actions increases. Part of the banks’ problem is that their internal investigations have created a road map that authorities are using to pursue criminal and civil cases.

…

The financial industry often tries to negotiate a common deal to avoid getting singled out for bad behavior. This year, five banks collectively struck a multibillion-dollar agreement with federal authorities to address foreclosure abuses.

With the rate investigation, institutions are not sharing information or even discussing the case with rivals, according to lawyers involved in the matter. In part, they do not want to appear to have close ties with their rivals, since such cozy relationships are part of the government’s inquiry.

…

The Justice Department is aiming to file criminal actions against two banks before the end of the year and is preparing to arrest former traders at Barclays and other banks, according to government officials. In addition, state attorneys general and local district attorneys have approached the Justice Department in recent weeks, seeking a role in the case.

Coming home to roost-

Banks face valuation losses

Reuters

August 6, 2012

Global banks are delaying what will be an inevitable shift to valuing unsecured derivative positions at market rates because it could hit their bottom lines, but new global prudential regulations next year are set to force their hands.

Traders and accountants have known for some time what is only becoming apparent to the public now – the London Interbank Offered Rate or Libor, the interbank funding rate now at the centre of a rigging scandal, is not the appropriate price to value most derivative deals on banks’ books.

…

As of now, no one’s quite sure how entities with huge discrepancies in funding costs will arrive at a market standard for pricing unsecured trades.

FVA, or funding valuation adjustment, is a bitter pill to swallow. In the simplest terms, it means traders have to absorb the rise in borrowing costs over the past four years into the way they price a swap, pay for an option or discount future cash flows from long-term derivatives.

…

All that’s clear is the absence of collateral makes these trades riskier, and the economic case for revised valuations is strong.

The Basel III reforms, which kick in from next year, prescribe capital requirements for unfunded deals. The amount of margin banks will have to post with their clearing agents will likewise build as interest rate swaps, currency forwards and other over-the-counter derivatives are mandatorily cleared on exchanges.

Sharks in the water-

Libor, the New Asbestos

By Roben Farzad, Business Week

August 01, 2012

These are parched times for law firms. Clients just aren’t willing to pay what they used to for associates’ billable souls.

How fortuitous then that a multitrillion-dollar financial scandal promises to throw the lawsuit industry beaucoup fees, from both the alleged aggressors and their aggrieved. Thanks to the Barclays blowup, we now know that Libor, the most widely used and quoted benchmark for valuing about $360 trillion in financial products, has been rather rigged. Throw in the fact that this gauge is set by Wall Street, the villain à la mode, and a heretofore harmless interest rate could join the likes of asbestos and tobacco in one-word liability infamy.

…

Libor is so ubiquitously baked into the world of financial products that it is hard to get a sense of the extent of who exactly was done wrong and by how much. Libor-related litigation “has the potential to be the biggest single set of cases coming out of the financial crisis, because Libor is built into so many transactions and Libor is so central to so many contracts,” says Harvard Law School professor John Coates. “It’s like saying reports about the inflation rate were wrong.” Or like asbestos, which was built into everything from ships to cars to houses before blowing up into the most expensive mass tort action in history.

Seems Discovery is right on time.

I’ve been disappointed so often it’s hard to get enthusiastic, but facts are stubborn things and the current corrupt Merchantilist system is not going to be able to satisfy even its own ‘beneficiaries’.  It wasn’t the peasants who demanded the Magna Carta, it was the Barons.

Adam Smith, The Wealth of Nations, Book 4 Chapter 8–

But in the system of laws which has been established for the management of our American and West Indian colonies, the interest of the home-consumer has been sacrificed to that of the producer with a more extravagant profusion than in all our other commercial regulations. A great empire has been established for the sole purpose of raising up a nation of customers who should be obliged to buy from the shops of our different producers all the goods with which these could supply them. For the sake of that little enhancement of price which this monopoly might afford our producers, the home-consumers have been burdened with the whole expence of maintaining and defending that empire. For this purpose, and for this purpose only, in the two last wars, more than two hundred millions have been spent, and a new debt of more than a hundred and seventy millions has been contracted over and above all that had been expended for the same purpose in former wars. The interest of this debt alone is not only greater than the whole extraordinary profit which it ever could be pretended was made by the monopoly of the colony trade, but than the whole value of that trade, or than the whole value of the goods which at an average have been annually exported to the colonies.

It cannot be very difficult to determine who have been the contrivers of this whole mercantile system; not the consumers, we may believe, whose interest has been entirely neglected; but the producers, whose interest has been so carefully attended to; and among this latter class our merchants and manufacturers have been by far the principal architects. In the mercantile regulations, which have been taken notice of in this chapter, the interest of our manufacturers has been most peculiarly attended to; and the interest, not so much of the consumers, as that of some other sets of producers, has been sacrificed to it.

Here are some of the good guys in Congress who are trying to protect our freedoms under the Fourth Amendment:

Merkley Introduces Bill to Prevent Warrantless Surveillance of Americans

Under amendments to FISA passed during the Bush administration, the intelligence agencies may conduct warrantless wiretapping, potentially collecting vast amounts of communications and data, so long as they reasonably believe the communications involve individuals who are located outside of the United States and who are not U.S. citizens. However, there are loopholes in the current statute that could permit the intelligence community to intentionally or unintentionally collect and store the communications of American citizens and others living in the U.S. and to mine data collected from Americans without a warrant.  National security agencies have not even released estimates of how often Americans’ communications are swept up by the warrantless wiretapping program.  [..]

“Keeping Americans safe versus protecting American’s privacy is a false choice. We have a moral and Constitutional duty to do both,” Merkley said. “We can ensure our government has the tools to spy on our enemies without giving it a license to intrude into the private lives of American citizens.  This bill will establish new safeguards to respect the principles of the Fourth Amendment protections from government intrusion without a warrant while ensuring that the intelligence community has the tools it needs to combat terrorism.” [..]

“This bill will give the FISA Amendments Act the overhaul it so desperately needs, restraining the government from unconstitutionally collecting and using vast amounts of data about innocent Americans,” said Michelle Richardson, ACLU Legislative Counsel. “These amendments would allow collection against foreigners to continue while better protecting Americans and should be considered a win-win for both the intelligence community and the Constitution.”  

Wyden Places Hold on FISA Amendments Act Extension

Warns that Loophole Gives Government the Ability to Circumvent Warrant Requirements to Spy on U.S. Citizens

Wyden identified two specific concerns that he believes Congress must address before agreeing to a long-term extension of FAA’s authorities.

The first pertains to the lack of information regarding the number of law-abiding American citizens who have had their communications collected and reviewed under the FISA Amendments Act authorities.  Last Summer, he and Senator Mark Udall asked the Administration for an estimate of the “number of people located in the United States whose communications were reviewed by the government pursuant to the FISA Amendments Act.”  The Office of the Director of National Intelligence responded that it was “not reasonably possible to identify the number of people located in the United States whose communications may have been reviewed under the authority of the FAA.”  Nearly a year later, Congress has yet to receive an estimate of the number of Americans who have had their communications collected under FAA.  

“The purpose of this 2008 legislation was to give the government new authorities to collect the communications of people who are believed to be foreigners outside the United States, while still preserving the privacy of people inside the United States,”  Wyden explains in his hold statement.  “Before Congress votes to renew these authorities it is important to understand how they are working in practice.  In particular, it is important for Congress to better understand how many people inside the United States have had their communications collected or reviewed under the authorities granted by the FISA Amendments Act.”

Wyden’s second concern pertains to what he describes as the law’s inadequate protections against warrantless “back door” searches of Americans.

“I am concerned, of course, that if no one has even estimated how many Americans have had their communications collected under the FISA Amendments Act,” Wyden writes. “Then it is possible that this number could be quite large.  Since all of the communications collected by the government under section 702 are collected without individual warrants, I believe that there should be clear rules prohibiting the government from searching through these communications in an effort to find the phone calls or emails of a particular American, unless the government has obtained a warrant or emergency authorization permitting surveillance of that American.“

David Kravets alerts us to a proposal (pdf) by Rep. Jerrold Nadler (D-NY) and  Rep. John Conyers Jr. (D-MI) that require the government to obtain a probable-cause warrant to access data stored in the cloud:

The law that the measure would amend is the Electronic Communications Privacy Act, which has seen few updates following President Ronald Reagan’s 1986 signature on the measure.

The proposal represents yet another attempt to rewrite legislation that generally grants the government wide powers to access Americans’ cloud-stored data without a probable-case showing. [..]

Adopted when CompuServe was king, ECPA allows the government to acquire a suspect’s e-mail or other stored content from an internet service provider without showing probable cause that a crime was committed, as long as the content had been stored on a third-party server for 180 days or more. E-mail and other cloud-stored data younger than six months is protected by the warrant requirement, as is all data stored on a personal computer drive.

ECPA was adopted at a time when e-mail, for example, wasn’t stored on servers for a long time. Instead it was held there briefly on its way to the recipient’s inbox. E-mail more than six months old on a server was assumed abandoned, and that’s why the law allowed the government to get it without a warrant. At the time there wasn’t much of any e-mail for the government to target because a consumer’s hard drive – not the cloud – was their inbox.

But technology has evolved, and e-mail often remains stored on cloud servers indefinitely, in gigabytes upon gigabytes – meaning the authorities may access it without warrants if it’s older than six months.

The same rule also applies to content stored in the cloud. That includes files saved in Dropbox, communications in Facebook, and Google’s cloud-storage accounts. Such personal storage capabilities were nearly inconceivable when President Reagan signed the bill.

The proposal will probably never be even heard in the radical right wing House committee. Kravets notes that a similar proposal in the Senate by Sen. Patrick Leahy (D-VT) never even got a hearing in the Judiciary Committees that Leahy chairs.

While the Obama administration continues to carry out and expand the Bush/Cheney regime agenda and the obstructionist Republicans and Right wing Democrats unwittingly (or not) help him, there are some people who recognize that security and freedom are not mutually exclusive.