03/13/2013 archive

Given that it’s stupid from a macro-economic sense, one silver lining in the sequester is that the cuts fall equally on the military budget.

Of course the likelihood is that the Pentagon will take it out of soldiers’ and veterans’ wages and benefits, but here are two programs from Lockheed that are absolute boondoggles.

The first is the C-130 program.  Over 2,300 of these planes have been built, far in excess of any operational need.  Good airframes are mothballed in the desert because National Guard units can’t find any useful purpose for them.  The latest upgrade, the C-130J has been plagued with counterfeit parts and propeller cracks.

C-130 Math and a Cargo of Pork

Posted by Jeremiah Goulka, TomDispatch and Mother Jones

8:54am, March 10, 2013

After 25 years, the Pentagon decided that it was well stocked with C-130s, so President Jimmy Carter’s administration stopped asking Congress for more of them.

Lockheed was in trouble.  A few years earlier, the Air Force had started looking into replacing the Hercules with a new medium-sized transport plane that could handle really short runways, and Lockheed wasn’t selected as one of the finalists.  Facing bankruptcy due to cost overruns and cancellations of programs, the company squeezed Uncle Sam for a bailout of around $1 billion in loan guarantees and other relief.

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Then a scandal exploded when it was revealed that Lockheed had proceeded to spend some $22 million of those funds in bribes to foreign officials to persuade them to buy its aircraft.  This helped prompt Congress to pass the Foreign Corrupt Practices Act.

So what did Lockheed do about the fate of the C-130?  It bypassed the Pentagon and went straight to Congress.  Using a procedure known as a congressional “add-on” — that is, an earmark — Lockheed was able to sell the military another fleet of C-130s that it didn’t want.

To be fair, the Air Force did request some C-130s.  Thanks to Senator John McCain, the Government Accountability Office (GAO) did a study of how many more C-130s the Air Force requested between 1978 and 1998.  The answer: Five.

How many did Congress add on?  Two hundred and fifty-six.

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According to its 2011 annual report, “82% of our $46.5 billion in net sales were from the U.S. Government, including 61% from the Department of Defense.”  And don’t forget that a significant part of the 17% of its sales that went to international customers in 2011 were actually paid for by Uncle Sam under the rubric of foreign military aid.  Only 1% of its sales that year were to “U.S. commercial and other customers.”  Its CEO made $20,538,981, while the company paid only $722 million in net federal and foreign taxes in that same year.

When it came to the C-130, the process worked like a dream. “By following this strategy from year to year,” writes a team of scholars of lobbying, “Lockheed has been able to turn what was to be the C-130’s doom in the 1970s into a regularly funded military spending program, all without a single request having been sent by the administration to Congress.” Lockheed was so successful on Capitol Hill that its work even garnered a name in honor of the 50 planes bought for every one requested: “C-130 math.”

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So what happened to those extra planes?  The Air Force didn’t have the space for them, so they retired some older models that still had plenty of life in them and shunted most of the rest off to the Air Force Reserves and Air National Guard.

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The C-130J has been plagued by problems.  In 2004, after the military had acquired 50 of the planes, the Pentagon’s Inspector General found that, even while the Air Force and Congress kept ordering more of the planes, they didn’t meet contracted standards.  The weather chasers couldn’t chase storms because propellers would crack in bad weather.  The military wouldn’t use C-130Js for air drops in Iraq or Afghanistan because they didn’t think they were safe.  “The design of the C-130J is not stable and the C-130J aircraft has not passed operational testing,” the Inspector General concluded.  It “is not operationally effective or suitable.”

Then there is the F-35.

F-35’s ability to evade budget cuts illustrates challenge of paring defense spending

By Rajiv Chandrasekaran, Washington Post

Published: March 9

The biggest barrier to cutting the F-35 program, however, is rooted in the way in which it was developed: The fighter jet is being mass-produced and placed in the hands of military aviators such as Walsh, who are not test pilots, while the aircraft remains a work in progress. Millions more lines of software code have to be written, vital parts need to be redesigned, and the plane has yet to complete 80 percent of its required flight tests. By the time all that is finished – in 2017, by the Pentagon’s estimates – it will be too late to pull the plug. The military will own 365 of them.

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When the F-35 finishes testing, “there will be no yes-or-no, up-or-down decision point,” said Pierre Sprey, who was a chief architect of the Air Force’s F-16 Fighting Falcon. “That’s totally deliberate. It was all in the name of ensuring it couldn’t be canceled.”

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Initial tests already have yielded serious problems that are forcing significant engineering modifications. The entire fleet was grounded earlier this year because of a crack in the fan blade in one jet’s engine. The Marine Corps’ version has been prohibited from its signature maneuver – taking off and landing vertically – because of a design flaw. And the Navy model has not been able to land on an aircraft carrier because its tailhook, an essential feature to alight aboard a ship, needs to be redesigned. The Pentagon’s top weapons tester issued a scathing report on the F-35 this year that questioned the plane’s reliability and warned of a “lack of maturity” in performance.

When the F-35 program was first approved by the Pentagon, Lockheed Martin said it could develop and manufacture 2,852 planes for $233 billion. The Pentagon now estimates the total price tag at $397.1 billion. And that is for 409 fewer planes.

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A bigger problem was the fundamental concept of building one plane, with stealth technology, that could fly as far and fast as the Air Force wanted while also being able to land on the Navy’s carriers and take off vertically from Marine amphibious assault ships.

Instead of meeting the original plan of being about 70 percent similar, the three versions now are 70 percent distinct, which has increased costs by tens of billions and led to years-long delays. “We have three airplane programs running in parallel,” Bogdan said. “They are very, very different airplanes.”

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An electrical engineer who worked as a manager at Lockheed’s F-35 program headquarters in Fort Worth beginning in 2001 said the development effort was beset with “tremendous organizational inadequacies” and “schedule and cost expectations that never were achievable.” In his unit, he said, there were no firm development timetables and no budgets. “It was all on autopilot,” he said. “It was doomed from the beginning.”

In 2005, the engineer, who spoke on the condition of anonymity because of concerns he will risk job opportunities in the close-knit aviation industry, participated in a two-week-long assessment of the program.”There were reds and yellows across the board,” he recalled. But when he briefed his superiors, “nobody was interested,” he said. And when he gave a copy of the assessment to those at the Pentagon office responsible for the plane, he said, “they didn’t want to hear it.”

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The Pentagon’s latest five-year budget plan, released last year, calls for a smaller volume of annual purchases to save money. Sequestration-related cuts this year also will defer a few more planes. But the overall purchase of 2,443 jets remains unchanged.

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Although Air Force and Marine leaders have held fast, an unofficial reexamination is occurring within the Navy, which is not as desperate for the F-35 because it possesses a relatively new fleet of F/A-18 Super Hornets. While toeing a public line of support for the F-35, some Navy experts are looking at whether it makes sense to reduce its planned order and plow some of the savings into high-speed drones that can operate off aircraft carriers, according to senior military officials.

Should that occur, or should Defense Secretary Chuck Hagel decide to shrink the overall purchase, it could prompt howls from key U.S. allies, including Britain, Italy and Norway, which all have contributed to the development of the aircraft. Their purchase price has been based on a U.S. order of about 2,500 jets. If that number drops, the per-plane cost will rise for the allies, possibly leading them to buy fewer then planned.

For some of them, cost increases and delays over the past decade have been significant enough to prompt a reexamination. Australia is deciding whether to halve its 100-plane order and Canada is reconsidering its plan to buy 65.

A smaller total purchase, of course, further increases unit costs for the United States, which likely would increase pressure to cut more. Procurement officers have a term for the phenomenon, borrowed from the world of aviation: a death spiral.

These are not the only examples of waste, fraud, and graft in the U.S. military inventory (the M1 Tank, Osprey VTOL, and Littoral Combat Ship spring to mind) but when you consider that the U.S. spends as much as the next 20 countries combined you have to ask yourself “Why?”

(h/t Susie Madrak @ Crooks & Liars)

Sheila Bair, FDIC Chair June 2006 – July 2011.

In major policy shift, scores of FDIC settlements go unannounced

By E. Scott Reckard, Los Angeles Times

March 11, 2013, 4:05 a.m.

Three years ago, the Federal Deposit Insurance Corp. collected $54 million from Deutsche Bank in a settlement over unsound loans that contributed to a spectacular California bank failure.

The deal might have made big headlines, given that the bad loans contributed to the largest payout in FDIC history, $13 billion. But the government cut a deal with the bank’s lawyers to keep it quiet: a “no press release” clause that required the FDIC never to mention the deal “except in response to a specific inquiry.”

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Deutsche Bank, now the world’s largest, settled to resolve claims that subsidiary MortgageIT sold shaky loans to Pasadena-based IndyMac Bank, which imploded under the weight of risky mortgages and construction loans. The IndyMac failure – considered one of the early events that helped usher in the 2008 financial meltdown – caused a scene reminiscent of the grim bank failures of the 1930s, with panicked depositors lining up outside branches trying to reclaim their money.

Overall, the FDIC collected $787 million in settlements by pressing civil claims related to bank failures from 2007 through 2012 – a fraction of its total losses.

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“In the old days, the regulators made it a point to embarrass everyone, to call attention to their role in bank failures,” said former bank examiner Richard Newsom, who specialized in insider-abuse cases for the FDIC in the aftermath of the S&L debacle. The goal was simple: “to make other bankers scared.”

Newsom said he couldn’t understand the shift, unless the agency doesn’t “want people to know how little they are settling for.”

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(FDIC spokesman David) Barr says attorneys representing the FDIC make clear to the defendants that, although it will not publicize settlements, it also cannot legally keep them secret.

The ban on secret settlements was a provision in one of the laws passed after the S&L crisis. Although the measure doesn’t require the FDIC to call attention to settlements, nondisclosure agreements like that with Deutsche Bank violate “the spirit of the law,” said Sausalito, Calif., attorney Bart Dzivi, a former Senate Banking Committee aide who drafted the provision.

FDIC Under Scrutiny For Not Announcing Settlements

By: DSWright, Firedog Lake

Tuesday March 12, 2013 8:06 am

The clause is added to keep the regulator quiet on reputation damaging legal settlements. Typically settlements are announced by regulators in hopes of deterring would be law breakers but the FDIC has changed its previous policy without explicitly stating why.

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What an odd game. During the Savings and Loan Crisis a law was passed banning secret settlements which means no matter how poorly the FDIC is negotiating with criminal bankers they can not agree to keep the settlement secret. Instead the FDIC merely agrees not to announce the deals in hopes that no one looks for the information.

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But why not announce it? Isn’t the point of settling in the first place to punish the guilty but avoid costly trials? Sending a press release is practically free and lets everyone know that certain practices will not be tolerated by regulators. Secret deterrence is a contradiction in terms and an open invitation to continue treating crime as a business expense.

FDIC Hides "Scores" of Bank Settlements Since 2007

Yves Smith, Naked Capitalism

Tuesday, March 12, 2013

The FDIC’s excuse is unpersuasive. It amounts to, “well, we publicize big settlements, why bother with these?”

In fact, this practice is yet another gimmie for banks. First, by not publicizing the settlement, it saves the target embarrassment. But far more important, it also helps them escape private litigation. A claimant has a much more persuasive suit if he can tell a judge or jury, “Look, XYZ bank engaged in this conduct, we have proof in the form of an FDIC settlement.” Mind you, it doesn’t mean for every settlement you have private litigants lurking in the wings, but given how many investors lost money in a big way during the crisis, you’d have to think that in a meaningful percentage of cases, hard evidence that a bank engaged in a particular form of prohibited behavior would be very useful to private parties.

The worst is that these secret settlements look to have become institutionalized. The only rationale I can think of (and it’s not great) is that the FDIC became overly concerned about exposing weak banks to litigation, and once it established the new pattern, it’s been unwilling or unable to roll it back. But in the S&L crisis, when the FDIC had so many dead banks drop in its lap that it had to go to Congress for additional funding, it didn’t hold back.

Which Aspect of the FDIC’s Litigation Failures is the Most Embarrassing and Damaging?

By William K. Black, New Economic Perspectives

Posted on March 12, 2013

The article contains four key facts we did not know about the FDIC’s leadership and its litigation director.  The only question is which of these … facts provides the most revealing insight into the disgrace that the FDIC has become.  The first fact is that the banks and bank officers can now cut deals with the FDIC designed to keep their settlements secret.  What that tells us is that the FDIC’s leaders are indifferent or clueless about deterrence and earning public respect for the integrity of the FDIC’s efforts to hold the officers who drove the crisis accountable.

The second key fact that we learned from the article is that the size of the settlements, for some of the most culpable fraudulent mortgage lenders, is so embarrassingly low that the FDIC’s litigators and investigators have proven to be an embarrassing failure.

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The third fact that emerges is that the FDIC’s real purpose in entering into these settlements crafted to try to keep the public from learning about them is not to secure a higher settlement but to protect the FDIC leadership from embarrassment for their failures of nerve, competence, and any understanding of the overriding need to ensure that no executive walks away making a profit from fraudulent lending.

The fourth fact that emerges is that the FDIC does not understand how a banking regulator and its litigators must deal with control fraud.  It is fine for the FDIC to lose half its litigated cases against the senior officers who run control frauds where its wins lead to large awards that remove any gains the controlling officers received from the bank.  What the “C-suite” defendants need to understand is the moral certainty that the FDIC will, as a matter of principle, never agree to a settlement that leaves a non-judgment proof controlling officer with wealth he gained by leading the bank to make fraudulent liar’s loans.  When elite defendants engage in fraud the banking regulators’ paramount task is not to maximize the expected value of the recovery – it is to deter future frauds because control fraud causes catastrophic losses and drives our recurrent, intensifying financial crises.  The defendants need to know that the FDIC will be remorseless in litigating against the senior officers running control frauds.

Bank Shots

By Charles P. Pierce, Esquire

March 13, 2013 at 9:00AM

I’m not sure what’s more breathtakingly arrogant — that there are members of the government who look the people straight in the eye and tell them that, no, nothing’s going to be done, despite the fact that you and I and the streetlamp know precisely who the crooks are, and what they did, and what should happen to them, or that there are members of government who insist that doing nothing about any of it is to act in the public good. It is one the little tin drums at this place that, too often, our elected leaders seem to believe that The American People are made of ribbon candy. Don’t prosecute Nixon. The country needs “closure.” Don’t chase Iran-Contra too hard. The country “can’t afford” another failed presidency. Don’t arraign the liars and fantasts who brought on the ruin that is the Iraq war. Look forward. Not back. Self-government gets infantilized and the crooks skate.

Call me crazy, but if some operation gets so big that it renders its crimes untouchable by the civil authorities, when power immunizes the criminals, then something’s too big to be allowed to exist. And if the institutions that are supposed to protect us from those crimes, through the customary mechanism of punishing the criminals in such a sway as to discourage other people from becoming criminals, are so worried that protecting us will do us more harm than good, then we’ve fallen through the looking glass to a place where self-government is rendered subject to a simple protection racket. I’d consider most of these guys more respectable if they threw firebombs or broke people’s kneecaps.

This piece is my most viral piece to date and appeared on Daily Kos on December 15, 2011. It's an ironic diary coming from myself given all the economic pieces I write but I do have range on other issues, too. It's about the NDAA and is still relevant because the US can still indefinitely detain American citizens, and the White House has never been able to properly define the terms "associated forces" among others things with regard to Al Qaeda. Section 1021 can still be used to indefinitely detain American citizens.

You may recognize my illustration about the NDAA as well which is also still relevant.

Not that it should only be a worry if it happens to American citizens. This war on terror George W. Bush league crap that the Obama administration is still peddling, even with its signing statement claiming it won't matter while they are in the White House, assuming, of course, no Republican will ever win an election again. That is ridiculous, insulting, and a major assault on the Bill of Rights. This is further compounded with the White Paper and the Rand Paul filibuster in which he didn't get an answer to his simple question really on how they define the term "engaged in combat" when it comes to whether they can order a drone strike on an American citizen on American soil. This one is still relevant so enjoy.

Processing the President's Disdain for Due Process

That’s right. You know what’s going on.

This administration never threatened to veto the NDAA because of civil liberties concerns. This administration is using the same fear mongering that the Bush administration has used concerning Al Qaeda to codify the unchecked executive power it has claimed erroneously for itself in the exact same way.

“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

Katrina vanden Heuvel: Our ‘Government of Laws’ Is Now Above the Law

“The government of the United States,” wrote Chief Justice John Marshall in his famous decision in Marbury v. Madison, “has been emphatically termed a government of laws, and not of men.” This principle-grounded in the Constitution, enforced by an independent judiciary-is central to the American creed. Citizens have rights, and fundamental to these is due process of the law.

This ideal, of course, has often been trampled in practice, particularly in times of war or national panic. But the standard remains, central to the legitimacy of the republic.

Yet last week Attorney General Eric Holder, speaking for the administration with an alarmingly casual nonchalance, traduced the whole notion of a nation of laws. [..]

If the national security state has the power of life or death above the law, and Wall Street has the power to plunder beyond the law, in what way does this remain a nation of laws?

Ruth Coniff: Paul Ryan Keeps Up the Bad Work

The deficit hawks just won’t quit. Never mind that the deficit is actually shrinking steadily as a share of GDP.

“Debt Threat!” screamed a typical banner on CNBC this morning, where a full-employment program for the pundits of economic doom is under way, with constant warnings about the debt and deficits.

No wonder cable viewers don’t know that the deficit is actually decreasing. [..]

Even as Paul Ryan gets his moment in the spotlight this week for a plan that will go nowhere, what we should really be worried about is what the President is doing to strike a deal with the deficit hawks to solve a nonexistent problem and exacerbate suffering for millions of Americans who can afford it the least.

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.

March 13 is the 72nd day of the year (73rd in leap years) in the Gregorian calendar. There are 293 days remaining until the end of the year.

On this day in 1881. Czar Alexander II, the ruler of Russia since 1855, is killed in the streets of St. Petersburg by a bomb thrown by a member of the revolutionary “People’s Will” group. The People’s Will, organized in 1879, employed terrorism and assassination in their attempt to overthrow Russia’s czarist autocracy. They murdered officials and made several attempts on the czar’s life before finally assassinating him on March 13, 1881.

Alexander II succeeded to the throne upon the death of his father in 1855. The first year of his reign was devoted to the prosecution of the Crimean War and, after the fall of Sevastopol, to negotiations for peace, led by his trusted counsellor Prince Gorchakov. The country had been exhausted and humiliated by the war. Bribe-taking, theft and corruption were everywhere. Encouraged by public opinion he began a period of radical reforms, including an attempt to not to depend on a landed aristocracy controlling the poor, a move to developing Russia’s natural resources and to thoroughly reform all branches of the administration.

Emancipation of the serfs

In spite of his obstinacy in playing the Russian autocrat, Alexander II acted willfully for several years, somewhat like a constitutional sovereign of the continental type. Soon after the conclusion of peace, important changes were made in legislation concerning industry and commerce, and the new freedom thus afforded produced a large number of limited liability companies. Plans were formed for building a great network of railways-partly for the purpose of developing the natural resources of the country, and partly for the purpose of increasing its power for defence and attack.

The existence of serfdom was tackled boldly, taking advantage of a petition presented by the Polish landed proprietors of the Lithuanian provinces and, hoping that their relations with the serfs might be regulated in a more satisfactory way (meaning in a way more satisfactory for the proprietors), he authorised the formation of committees “for ameliorating the condition of the peasants”, and laid down the principles on which the amelioration was to be effected.

This step was followed by one still more significant. Without consulting his ordinary advisers, Alexander ordered the Minister of the Interior to send a circular to the provincial governors of European Russia, containing a copy of the instructions forwarded to the governor-general of Lithuania, praising the supposed generous, patriotic intentions of the Lithuanian landed proprietors, and suggesting that perhaps the landed proprietors of other provinces might express a similar desire. The hint was taken: in all provinces where serfdom existed, emancipation committees were formed.

But the emancipation was not merely a humanitarian question capable of being solved instantaneously by imperial ukase. It contained very complicated problems, deeply affecting the economic, social and political future of the nation.

Alexander had to choose between the different measures recommended to him. Should the serfs become agricultural labourers dependent economically and administratively on the landlords, or should they be transformed into a class of independent communal proprietors?

The emperor gave his support to the latter project, and the Russian peasantry became one of the last groups of peasants in Europe to shake off serfdom.

The architects of the emancipation manifesto were Alexander’s brother Konstantin, Yakov Rostovtsev, and Nikolay Milyutin.

On 3 March 1861, 6 years after his accession, the emancipation law was signed and published.

The Freedom of the Press Foundation Press, an organization “dedicated to press freedom and transparency in a digital age,” released an audio recording of Pvt. Bradley Manning reading a statement he made in military court at Fort Meade on February 28 about releasing United States government documents to WikiLeaks. Glenn Greenwald, one of the founders of FPF, had this to say at The Guardian about the audio tape:

The court-martial proceeding of Bradley Manning has, rather ironically, been shrouded in extreme secrecy, often exceeding even that which prevails at Guantanamo military commissions. This secrecy prompted the Center for Constitutional Rights to commence formal legal action on behalf of several journalists and activists, including myself, to compel greater transparency. One particularly oppressive rule governing the Manning trial has barred not only all video or audio recordings of the proceedings, but also any photographs being taken of Manning or even transcripts made of what is said in court. Combined with the prohibition on all press interviews with him, this extraordinary secrecy regime has meant that, in the two-and-a-half years since his arrest, the world has been prevented, literally, from hearing Manning’s voice. That changes today.

The Freedom of the Press Foundation (FPF), the group I recently helped found and on whose board I sit, has received a full, unedited audio recording of the one-hour statement Manning made in court two weeks ago, and this morning has published that recording in full.

The Guardian published the full text of the statement as it was transcribed bu independent journalist Alexa O’Brian who has been covering the pre-trial hearings. Here also is the unclassified redacted statement in a pdf file.

Daniel Ellsbreg, who leaked the Pentagon Papers to the New York Times, joined Amy Goodman on Democracy Now to discuss the audio of the statement:

“What we’ve heard are people like The New York Times who have consistently slandered him … that he was vague and couldn’t think of specific instances that had led him to inform the American people of injustices,” Ellsberg says. “The American people can now, for the first time, hear Bradley in his own words, emotionally and in the greatest specific detail, tell what it was that he felt that needed revelation.”

A Salute to Bradley Manning, Whistleblower, As We Hear His Words for the First Time

by Daniel Ellsberg

Today, the Freedom of the Press Foundation, an organization that I co-founded and of which I’m on the board, has published an audio recording of Bradley Manning’s speech to a military court from two weeks ago, in which he gives his reasons and motivations behind leaking over 700,000 government documents to WikiLeaks.

Whoever made this recording, and I don’t know who the person is, has done the American public a great service. This marks the first time the American public can hear Bradley Manning, in his own voice explain what he did and how he did it.

After listening to this recording and reading his testimony, I believe Bradley Manning is the personification of the word whistleblower. [..]

For the third straight year, Manning has been nominated for the Noble Peace Prize by, among others, Tunisian parliamentarians. Given the role the WikiLeaks cables played in the Arab Spring, and their role in speeding up the end of the Iraq War, I can think of no one more deserving who is deserving of the peace prize.

I see a hero in these wars whose example should inspire others. His name Bradley Manning.

I don’t normally watch, but you’ll want to see this before it gets taken down.

I’ll have some motherfucking iced tea now.

Coda: from Mediaite-