Tag: ek Politics

On Reports of Compliance Violations Made Under NSA Collection Programs

Friday, August 16, 2013

The executive branch has now confirmed that the ‘rules, regulations and court-imposed standards for protecting the privacy of Americans’ have been violated thousands of times each year.  We have previously said that the violations of these laws and rules were more serious than had been acknowledged, and we believe Americans should know that this confirmation is just the tip of a larger iceberg.  

While Senate rules prohibit us from confirming or denying some of the details in today’s press reports, the American people have a right to know more details about of these violations. We hope that the executive branch will take steps to publicly provide more information as part of the honest, public debate of surveillance authorities that the Administration has said it is interested in having.

In particular, we believe the public deserves to know more about the violations of the secret court orders that have authorized the bulk collection of Americans’ phone and email records under the USA PATRIOT Act.  The public should also be told more about why the Foreign Intelligence Surveillance Court has said that the executive branch’s implementation of section 702 of the Foreign Intelligence Surveillance Act has circumvented the spirit of the law, particularly since the executive branch has declined to address this concern.  

We appreciate the candor of the Chief Judge of the Foreign Intelligence Surveillance Court regarding the Court’s inability to independently verify statements made by the executive branch.  We believe that the Court is not currently structured in a way that makes it an effective check on the power of the executive branch.  This highlights the need for a robust and well-staffed public advocate who could participate in significant cases before the Court and evaluate and counter government assertions.  Without such an advocate on the court, and without greater transparency regarding the Court’s rulings, the checks and balances on executive branch authority enshrined in the Constitution cannot be adequately upheld.

Transcript

NSA broke privacy rules thousands of times per year, audit finds

By Barton Gellman, Washington Post

Published: August 15

The documents, provided earlier this summer to The Washington Post by former NSA contractor Edward Snowden, include a level of detail and analysis that is not routinely shared with Congress or the special court that oversees surveillance. In one of the documents, agency personnel are instructed to remove details and substitute more generic language in reports to the Justice Department and the Office of the Director of National Intelligence.

In one instance, the NSA decided that it need not report the unintended surveillance of Americans. A notable example in 2008 was the interception of a “large number” of calls placed from Washington when a programming error confused the U.S. area code 202 for 20, the international dialing code for Egypt, according to a “quality assurance” review that was not distributed to the NSA’s oversight staff.

In another case, the Foreign Intelligence Surveillance Court, which has authority over some NSA operations, did not learn about a new collection method until it had been in operation for many months. The court ruled it unconstitutional.

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The May 2012 audit, intended for the agency’s top leaders, counts only incidents at the NSA’s Fort Meade headquarters and other ­facilities in the Washington area. Three government officials, speak­ing on the condition of anonymity to discuss classified matters, said the number would be substantially higher if it included other NSA operating units and regional collection centers.

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In October 2011, months after the program got underway, the Foreign Intelligence Surveillance Court ruled that the collection effort was unconstitutional. The court said that the methods used were “deficient on statutory and constitutional grounds,” according to a top-secret summary of the opinion, and it ordered the NSA to comply with standard privacy protections or stop the program.

James R. Clapper Jr., the director of national intelligence, has acknowledged that the court found the NSA in breach of the Fourth Amendment, which prohibits unreasonable searches and seizures, but the Obama administration has fought a Freedom of Information lawsuit that seeks the opinion.

Generally, the NSA reveals nothing in public about its errors and infractions. The unclassified versions of the administration’s semiannual reports to Congress feature blacked-out pages under the headline “Statistical Data Relating to Compliance Incidents.”

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Under NSA auditing guidelines, the incident count does not usually disclose the number of Americans affected.

Court: Ability to police U.S. spying program limited

By Carol D. Leonnig, Washington Post

Published: August 15

The chief judge of the Foreign Intelligence Surveillance Court said the court lacks the tools to independently verify how often the government’s surveillance breaks the court’s rules that aim to protect Americans’ privacy. Without taking drastic steps, it also cannot check the veracity of the government’s assertions that the violations its staff members report are unintentional mistakes.

“The FISC is forced to rely upon the accuracy of the information that is provided to the Court,” its chief, U.S. District Judge Reggie B. Walton, said in a written statement to The Washington Post. “The FISC does not have the capacity to investigate issues of noncompliance, and in that respect the FISC is in the same position as any other court when it comes to enforcing [government] compliance with its orders.”

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The court’s description of its practical limitations contrasts with repeated assurances from the Obama administration and intelligence agency leaders that the court provides central checks and balances on the government’s broad spying efforts. They have said that Americans should feel comfortable that the secret intelligence court provides robust oversight of government surveillance and protects their privacy from rogue intrusions.

President Obama and other government leaders have emphasized the court’s oversight role in the wake of revelations this year that the government is vacuuming up “metadata” on Americans’ telephone and Internet communications.

“We also have federal judges that we’ve put in place who are not subject to political pressure,” Obama said at a news conference in June. “They’ve got lifetime tenure as federal judges, and they’re empowered to look over our shoulder at the executive branch to make sure that these programs aren’t being abused.”

Privacy advocates and others in government have voiced concerns about the ability of overseers to police secret programs of immense legal and technological complexity. Several members of the House and Senate intelligence committees told The Post last week that they face numerous obstacles and constraints in questioning spy agency officials about their work.

N.S.A. Often Broke Rules on Privacy, Audit Shows

By CHARLIE SAVAGE, The New York Times

Published: August 16, 2013

Another newly disclosed document included instructions for how N.S.A. analysts should record their rationales for eavesdropping under the FISA Amendments Act, or F.A.A., which allows wiretapping without warrants on domestic networks if the target is a noncitizen abroad. The document said analysts should keep descriptions of why the people they are targeting merit wiretapping to “one short sentence” and avoid details like their names and supporting information.

“While we do want to provide our F.A.A. overseers with the information they need, we DO NOT want to give them any extraneous information,” it said.

A brief article in an internal N.S.A. newsletter offered hints about a known but little-understood episode in which the Foreign Intelligence Surveillance Court found in 2011 that the N.S.A. had violated the Fourth Amendment. The newsletter said the court issued an 80-page ruling on Oct. 3, 2011, finding that something the N.S.A. was collecting involving “Multiple Communications Transactions” on data flowing through fiber-optic networks on domestic soil was “deficient on statutory and constitutional grounds.”

NSA under renewed fire after report finds it violated its own privacy rules

Spencer Ackerman, The Guardian

Friday 16 August 2013 11.09 EDT

The Washington Post reported, with information provided by whistleblower Edward Snowden, that internal NSA audits found thousands of instances where the powerful surveillance agency collected, stored and possibly searched through vast swaths of information it is not permitted to acquire.

The revelations contradict repeated assurances this summer from senior Obama administration and intelligence officials that the NSA’s programs to collect Americans’ phone records and foreigners’ communications in bulk contain adequate privacy protections.

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On the few occasions when intelligence officials have publicly discussed the impact their broad surveillance powers have on Americans, they have affirmed that all problems are mere accidents and are often promptly corrected.

A July 26 letter by James Clapper, the director of US national intelligence, to senator Ron Wyden, a member of the Senate intelligence committee, discussing the NSA’s bulk collection of Americans phone records assured that “safeguards and controls” provide “reasonable assurance that NSA’s activities are consistent with law and policy and help detect when mistakes do occur, as they inevitably do in activities this complex.”

Those mistakes, Clapper continued, amounted to “a number of compliance problems that have been previously identified and detailed in reports to the court and briefings to Congress as a result of Department of Justice reviews and internal oversight. However, there have been no findings of any intentional or bad-faith violations.”

Numerous intelligence and administration officials have made similar statements in congressional testimony and public speeches.

Wyden, a persistent critic of the bulk phone records collection, responded on the Senate floor that “these violations are more serious than those stated by the intelligence community, and are troubling.” Wyden did not specify what he meant, citing classification restrictions, but urged senators to read NSA’s secret compliance reports in designated congressional chambers.

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In an earlier speech, to the Center for American Progress, Wyden said a “culture of misinformation” exists inside the US intelligence agencies – directed not just at US adversaries, but the US legislators that are designed to oversee them and the US public in whose name they act.

“When did it become all right for government officials’ public statements and private statements to differ so fundamentally?” Wyden asked. “The answer is that it is not all right, and it is indicative of a much larger culture of misinformation that goes beyond the congressional hearing room and into the public conversation writ large.”

Clapper is perhaps the most prominent public example of that culture.

In March, the director of national intelligence testified to Wyden that the NSA does “not wittingly” collect any type of data on millions of Americans, a statement proven untrue by the Guardian’s June publication of a Fisa court order for ongoing, bulk surveillance of Americans’ phone records.

Clapper has since apologized to Wyden, saying first that it was the “least untruthful answer” he could give publicly and later that he made a good-faith error, having “forgotten” momentarily the NSA program, conducted ostensibly under the Patriot Act, that collected precisely such data.

Civil liberties organizations reacted with outrage to the latest disclosure.

“The number of ‘compliance incidents’ is jaw-dropping. The rules around government surveillance are so permissive that it is difficult to comprehend how the intelligence community could possibly have managed to violate them so often,” Jameel Jaffer, the ACLU’s deputy legal director, said in a statement.

“Obviously it’s important to know what precisely these compliance incidents involved, and some are more troubling than others. But at least some of these incidents seem to have implicated the privacy of thousands or millions of innocent people.”

‘Jaw-Dropping’ Record of Violations Reveals Perils of NSA Self-Policing

Jon Queally, Common Dreams

Published on Friday, August 16, 2013

Jameel Jaffer, deputy legal director for the ACLU, called the scale of the violations “jaw-droppping.”

“The rules around government surveillance are so permissive that it is difficult to comprehend how the intelligence community could possibly have managed to violate them so often,” said Jaffer in a statement. “Obviously it’s important to know what precisely these compliance incidents involved, and some are more troubling than others. But at least some of these incidents seem to have implicated the privacy of thousands or millions of innocent people.”

One aspect that the ACLU finds particularly worrying is the degree to which the FISA Court, designed to oversee these surveillance programs, is at the mercy of the spy agency itself when it comes to garnering information.

“That the FISA court is so reliant on the representations of intelligence officials is a real problem. In recent months, intelligence officials have made misleading and even false statements about the government’s surveillance activities,” Jaffer said. “It makes no sense at all to let the intelligence community police itself.”

Sen. Leahy calls new hearing on NSA, wants ‘straight answers’

By Jennifer Martinez, The Hill

08/16/13 11:22 AM ET

Leahy’s announcement about the additional hearing comes a day after an internal NSA audit published by The Washington Post revealed that the spy agency had repeatedly broken privacy rules or overstepped its authority.

“The American people rely on the intelligence community to provide forthright and complete information so that Congress and the courts can properly conduct oversight. I remain concerned that we are still not getting straightforward answers from the NSA,” Leahy said in a statement.

“I plan to hold another hearing on these matters in the Judiciary Committee and will continue to demand honest and forthright answers from the intelligence community.”

…

Leahy has been critical of the surveillance programs and introduced a bill that aims to rein in the NSA’s phone data collection program.

“Using advanced surveillance technologies in secret demands close oversight and appropriate checks and balances, and the American people deserve no less than that,” Leahy said.

Pelosi: NSA report ‘extremely disturbing’

By Brendan Sasso, The Hill

08/16/13 09:40 AM ET

House Democratic Leader Nancy Pelosi (Calif.) said on Friday that a report that the National Security Agency broke privacy rules thousands of times per year is “extremely disturbing.”

She argued that under the law, the NSA should have reported the violations to Congress and the Foreign Intelligence Surveillance Act Court.

“Congress must conduct rigorous oversight to ensure that all incidents of non-compliance are reported to the oversight committees and the FISA court in a timely and comprehensive manner, and that appropriate steps are taken to ensure violations are not repeated,” she said in the statement.

Pelosi’s comment represents some of her harshest criticism of the NSA since leaks earlier this summer publicized the scope of the agency’s surveillance.

She voted against a House measure last month that would have curbed the NSA’s phone data collection program, but has called for greater transparency and expressed concern that there are insufficient privacy protections.

The Snowden Effect, Continued

By Charles P. Pierce, Esquire

10:05AM 8/16

It’s well past time for another Church Committee — or, if you will, another Pecora Commission — dedicated to a full exposition of the surveillance state and its place in our lives and in our democracy. No half-truths. No hedging. No James Clappers, slow-dancing with perjury and obstruction of Congress. Put people under oath and compel their testimony as to what is being done in our name, especially what is being done to us in our name. If we’re going to have a “national conversation,” then let’s have a by-god national conversation, and let it be held in the place where we are supposed to have our national conversations on issues like this — in the Congress, among our elected representative, out in the open and in the light of day. Let us at least have all the information so we can decide for ourselves how to keep ourselves safe. We are not fragile children. We’re the world’s oldest democracy. We should damned well begin to raise hell and act like it.

Absent that, here’s what now should be taken as an operating procedure in any discussion of the NSA and/or the surveillance state. First, everything they say is a lie, or, at best, a quarter-truth. Second, any argument based on the fundamental premise of “Trust us,” should cause the person making the argument to be laughed out of government service forever. Third, any defense based on the alleged safeguards of either the FISA Court, or the responsible committees of the Congress is prima facie worthless, whether it comes from your favorite pundit, your favorite congresscritter, or, especially, your favorite President of the United States.

Leno Part 2

Part 1, Part 3, Part 4

Aug 9, 2013

ProPublica

You remember this-

Canada suspends railroad’s operations after disaster

AFP

8/13/13

The Montreal, Maine & Atlantic Railway train, carrying crude oil from the Bakken shale fields of North Dakota, was parked overnight at a nearby town when it slipped away, derailed and exploded in the center of Lac-Megantic.

The railway’s chairman has said the disaster appeared to have been caused by an engineer’s failure to set hand brakes on the train properly.

Forty seven dead.

Quebec targets CP Railway for Lac-Mégantic cleanup costs

The Canadian Press

Published Wednesday, Aug. 14 2013, 5:22 PM EDT

The Quebec government added the Canadian Pacific Railway to its list of legal targets Wednesday, casting a wider net to recover millions of dollars in cleanup costs from the Lac-Mégantic disaster.

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CPR was included as one of the defendants because, the government said Wednesday, it was the main contractor responsible for the fateful shipment that was supposed to send the cargo from North Dakota to a New Brunswick oil refinery.

It handed off the train in Montreal to the smaller Montreal, Maine & Atlantic Railway Ltd., which then operated the tanker train that jumped the tracks in Lac-Mégantic on July 6.

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In one court filing, MM&A said its insurance coverage was $25-million and estimated the cleanup cost would climb past $200-million.

By adding the CPR to its legal notice, the Quebec government locked in on a bigger target than MM&A – one with much deeper pockets.

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On Wednesday, the province also added another firm to the notice: World Fuel Services Inc., which is a subsidiary of the petroleum-logistics firm World Fuel Services Corp. The parent company and another subsidiary, Western Petroleum Company, were listed in the initial demand from the government.

The Miami-based World Fuel Services had bought the crude oil that was to be shipped to the Irving refinery in St. John, N.B.

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World Fuel Services, Western Petroleum Company and MM&A are among 10 defendants listed in several wrongful-death lawsuits filed last month in an Illinois court. Both World Fuel Services and MM&A have also been named in a proposed class-action suit in Quebec.

Lac-Megantic Disaster: Canadian Pacific Railroad Rejects Quebec’s Demand For Money

By The Canadian Press

Posted: 08/15/2013 1:28 pm EDT

Canadian Pacific says it holds no financial responsibility for the Lac-Megantic disaster and is rejecting a legal demand by the provincial government that it help fund the cleanup of the devastated Quebec town.

Transcript

UK wages fall among sharpest in EU

Press Association

Sunday 11 August 2013 09.12 EDT

The value of UK workers’ wages has suffered one of the sharpest falls in the EU, House of Commons library figures show.

The 5.5% reduction in average hourly wages since mid-2010, adjusted for inflation, means British workers have felt the squeeze more than those in countries hit by the eurozone crisis. Spanish workers’s wages dropped by 3.3% over the same period and in Cyprus salaries fell by 3% in real terms.

Only Greek, Portuguese and Dutch wages suffered a steeper decline than the UK, the analysis showed, while they rose by 2.7% in Germany and 0.4% in France.

Across the EU as a whole the average fall in wages, adjusted for the European Central Bank’ s harmonised index of consumer prices, was 0.7% and in eurozone area 0.1%.

The shadow Treasury minister, Cathy Jamieson, said: “These figures show the full scale of David Cameron’s cost of living crisis. Working people are not only worse off under the Tories, we’re also doing much worse than almost all other EU countries.

Despite out of touch claims by ministers, life is getting harder for ordinary families as prices continue rising faster than wages. People on middle and low incomes have also seen tax rises and cuts to tax credits, while millionaires have been given a huge tax cut.”

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Cameron has overseen 35 consecutive months of falling real wages, more than any other prime minister on record, and spending power has dropped in every month but one under coalition rule as price rises outstrip wage increases

Meanwhile in Greece-

Contraction Shows Signs of Slowing for Greece

By DAVID JOLLY, The New York Times

Published: August 12, 2013

The Greek economy posted its 20th consecutive quarterly decline in the three months through June, government data showed on Monday, but a slower pace of contraction provided a glimmer of hope for beleaguered Greeks.

Gross domestic product shrank by 4.6 percent in the second quarter compared with the same three months a year earlier, the official Hellenic Statistical Authority said. That was an improvement from the first quarter of 2013, when the economy contracted 5.6 percent compared with a year earlier.

…

“The troika’s forecast for a 4.2 percent annual decline in 2013 looks achievable,” Mr. May (an economist in London with Capital Economics) said.

But it remains “plausible,” he said, that the Greek economy will continue shrinking into 2015. He forecast a 2 percent decline in G.D.P. for next year, followed by a 0.5 percent contraction in 2015.

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Many economists argue that the austerity approach favored by the troika is itself part of the problem, pushing Greek unemployment to depression levels. The jobless rate reached a new peak of 27.6 percent in May, according to the statistical agency, with youth unemployment around 65 percent.

Austerity has in practice largely meant laying off civil servants and cutting social spending, because raising taxes generates little revenue in a collapsing economy.

The URL title for this piece is- Greek Economy Shrinks for 20th Straight Quarter.

Rajan Calls Krugman "Paranoid" for Criticizing Reinhart and Rogoff’s Research

By William K. Black, New Economic Perspectives

Posted on August 13, 2013

The original feud was most famously between Stiglitz and Rogoff.  Stiglitz, who led the movement at the World Bank to throw off its support for austerity, memorably claimed that IMF was staffed with “third rate” economists.  Rogoff famously blasted Stiglitz in a July 2, 2002, “open letter” (only months after Stiglitz was made a Laureate) that, inter alia, referred to him as a “loose cannon” who had “slandered” the IMF staff, slammed him for refusing to “admit to having been even slightly wrong about a major real world problem,” suggested he was so arrogant that he doubted that Paul Volcker was “really smart,” admitted that Stiglitz had a few ideas with which the IMF would “generally agree” because most of them were “old hat,” described Stiglitz’s most recent book as “long on innuendo and short on footnotes,” derided him as pretending to see himself “as a heroic whistleblower” when he was actually peddling “snake oil,” described Stiglitz views as being most analogous to Arthur Laffer’s “voodoo economics” (cleverly and deeply insulting on multiple levels), accused Stiglitz of lacking faith in markets and having faith in increasingly democratic governments (“you betray an unrelenting belief in the pervasiveness of market failures, and a staunch conviction that governments can and will make things better”), and ended with a wonderfully nasty “compliment” that compared Stiglitz to a famous scholar who suffers from often disabling mental illness (“Like your fellow Nobel Prize winner, John Nash, you have a ‘beautiful mind.’ As a policymaker, however, you were just a bit less impressive.”)  To top off this list, Rogoff told Stiglitz that he should pull his book from publication because it “slandered” a senior IMF official.

But those are only the gratuitous insults that Rogoff launched at Stiglitz.  His real attack was that Stiglitz had done incalculable damage to the developing world by criticizing the IMF and by opposing austerity as “battlefield medicine” for nations thrown into severe recessions.

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Rogoff’s claim is that the “impulsive” Stiglitz’s criticism of the IMF during the Asian crisis endangered the economic recovery essential to “indigent people in Asia” because it could have reduced “confidence” in the IMF’s policy of imposing austerity as “battlefield medicine” for Nations that were in sharp recessions.

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Having analogized Stiglitz to a murderous war criminal, Rogoff returns to his subthemes that Stiglitz is arrogant, a terrible economist, and personally responsible for the IMF’s failed austerity programs because Stiglitz “ignominiously sabotaged” those programs by criticizing them.  Rogoff asserts that the key to economic recovery from a recession is the appearance of what many economists now refer to as the “confidence fairy” and that austerity is the sole elixir that can summon the confidence fairy.  The confidence fairy only appears if one believes, really believes, in fairies so Stiglitz’s criticism of austerity was an act of sabotage that prevented the IMF from summoning the fairy.

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Rogoff’s criticisms of Stiglitz and his (and the IMF’s) embrace of Greenspan, Rubin, and Summers’ assaults on financial regulation produced the criminogenic environments that led to the epidemics of control fraud that drove the global financial crisis and the Great Recession.  Reinhart and Rogoff (R&R) published a book claiming that government stimulus programs were counterproductive and that austerity should be the response.  They asserted in policy recommendations that there was a cliff when a nation’s debt reached 90% of its GDP that led to untenable interest expense burdens that served as a long-term brake on economic growth.  Their book was widely and favorably cited by proponents of austerity.  The proponents were able to restrict the size of the U.S. stimulus program, remove its vital “revenue sharing” component that could have prevented so much harm to states and communities and speeded the recovery, and force much of the stimulus to be in the form of relatively ineffective tax cuts for the wealthy.  The impact of R&R in the Eurozone was far worse.  It led to austerity programs that forced the Eurozone into a gratuitous recession and much of the periphery into a second Great Depression that continues.

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There were strong, immediate criticisms of R&R’s claims about austerity and the asserted debt cliff, including those of my colleague Randy Wray that proved correct.  R&R failed to distinguish between nations with fully sovereign currencies and other nations and engaged in selective data that excluded nations and years that ran counter to their claimed findings.  Graduate students from two of the Nation’s few remaining heterodox economics departments (University of Massachusetts, Amherst and the University of Missouri-Kansas City) devastated the R&R book by examining its data – and the data R&R excluded.  The U. Mass graduate student won deserved fame for finding that R&R had made serious data entry errors that when corrected revealed that the purported 90% cliff was fictional and greatly reduced the relationship that R&R reported between increased debt and reduced growth.  Our graduate students demonstrated that if one were to infer causality from the data the direction of causality ran the opposite of what R&R claimed in their policy arguments.  Recessions led to high levels of debt, not the other way around.

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For reasons that pass all understanding, Reinhart and Rogoff decided to claim that the U. Mass study had confirmed the R&R study that higher debt was associated with lower growth and to claim that they had never argued that there was a cliff or that high debt led to lower growth.  This was a strategy that had to fail in the modern era, which retained records of their statements and statements of policy makers about the cliff and about their claim that high debt led to low growth.  (Note that Rogoff’s 2002 letter lambasting Stiglitz made that same claim.)

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Reinhart and Rogoff’s disingenuous response to the revelation of their many errors prompted Krugman to call them out on their claims.  Note that Reinhart and Rogoff’s response (immediately above) did not complain of Krugman’s (quite mild) comments one week before they wrote their April 26, 2013 response.

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Reinhart and Rogoff reprised some of the tactics of Rogoff’s 2002 open letter attacking Stiglitz with an open letter (May 25, 2013) attacking Krugman for criticizing R&R.  The famous line in this iteration was: “it has been with deep disappointment that we have experienced your spectacularly uncivil behavior the past few weeks. You have attacked us in very personal terms, virtually non-stop….”

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Just when one might have hoped that R&R’s flawed study, their disastrous support for austerity, and the feud would become a bit of arcane economic history, Rajan, on the way to India to lead its central bank, decided to rally around his IMF colleagues and to (by innuendo) accuse Krugman of being “paranoid.”

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There are three obvious things to say in response to Rajan’s title and claim.  First, having read Rogoff’s open letter to Stiglitz, if Rajan wants to criticize a “paranoid,” “spectacularly uncivil” style of discourse containing myriad ad hominem attacks he has aimed his pen at the wrong economist.

Second, Krugman did not make ad hominem attacks on Rajan’s IMF colleagues.  Krugman made substantive criticisms of Reinhart and Rogoff’s arguments and practices.  One can debate the accuracy of his criticisms, but they were addressed to the merits of their research.

Third, Rajan makes an ad hominem attack on Krugman in this article.  Worse, he does it by innuendo, implying that Krugman is “paranoid.”  Rajan and Rogoff have reason to be personally upset with Krugman.  Krugman wrote a June 9, 2011 (2010) column that explained that Rajan and Rogoff gave spectacularly bad advice not only in favor of fiscal austerity, but raising interest rates, at a time when doing so would have been disastrous and was unsupported by any economic model.  Krugman quoted Keynes’ famous passage in which he noted that many economists viewed the willingness to inflict misery on others as the hallmark of a real economist.

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Readers will likely ignore Rajan’s column because they will consider his attack on Krugman as an understandable, but disingenuous, payback for Krugman criticisms of the three former IMF economists.  That would be a shame, for Rajan’s article contains two enormously important admissions that my colleagues who specialize in macroeconomics have long emphasized.

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Theoclassical economists did not simply assume away finance and money.  By assuming finance and money away they implicitly assumed away fraud and the essential regulatory cops on the beat.  Theoclassical economists pushed to eviscerate the institutional protections such as effective financial regulation and regulators that had helped ensure “that the financial plumbing worked in the background” and created the criminogenic environments that led to the epidemics of control fraud that drive our recurrent, intensifying crises.  Economists ignored the warnings and the policies recommended by another Laureate, George Akerlof.  Akerlof and Paul Romer wrote a classic article in 1993 entitled “Looting: The Economic Underworld of Bankruptcy for Profit.”

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Neoclassical economists overwhelmingly continue to ignore Akerlof, Romer, and their former colleague Jim Pierce’s findings about control fraud and the findings of criminologists.  Rajan’s book about the crisis, for example, asserts that fraud played no material role in the crisis and describes a hypothetical scam that he says illustrates the (lawful) causes of the crisis.  The scam, however, requires two felonies and would fail as a scam.  Rajan does not understand the law or fraud.  The accounting control fraud “recipe,” by contrast, works and has great explanatory power.

NSA cites case as success of phone data-collection program

By Ellen Nakashima, Washington Post

Published: August 8

He was a San Diego cab driver who fled Somalia as a teenager, winning asylum in the United States after he was wounded during fighting among warring tribes. Today, Basaaly Moalin, 36, is awaiting sentencing following his conviction on charges that he sent $8,500 to Somalia in support of the terrorist group al-Shabab.

Moalin’s prosecution, barely noticed when the case was in court, has suddenly come to the fore of a national debate about U.S. surveillance. Under pressure from Congress, senior intelligence officials have offered it as their primary example of the unique value of a National Security Agency program that collects tens of millions of phone records from Americans.

Officials have said that NSA surveillance tools have helped disrupt terrorist plots or identify suspects in 54 cases in the United States and overseas. In many of those cases, an agency program that targets the communication of foreigners, including e-mails, has proved critical.

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(I)n 2007, the NSA came up with a number in Somalia that it believed was linked to al-Shabab. It ran the number against its database.

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The NSA found that the San Diego number had had “indirect” contact with “an extremist outside the United States,” FBI Deputy Director Sean Joyce told the Senate last week. The agency passed the number to the FBI, which used an administrative subpoena to identify it as Moalin’s. Then, according to court records, in late 2007, the bureau obtained a wiretap order and over the course of a year listened to Moalin’s conversations. About 2,000 calls were intercepted.

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In 2009, an FBI field intelligence group assessed that Moalin’s support for al-Shabab was not ideological. Rather, according to an FBI document provided to his defense team, Moalin probably sent money to an al-Shabab leader out of “tribal affiliation” and to “promote his own status” with tribal elders.

In 2010, three years after the bureau opened an investigation, it arrested Moalin as he was about to board a flight to Somalia to visit his wife and children.

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U.S. officials argue that Moalin’s number probably would not have surfaced – at least not in a timely fashion – had it not been for the database.

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Such arguments do not persuade critics, even when the government asserts that the database helped break another case involving a co-conspirator in a plot to bomb the New York City subway system. “In both cases,” Sen. Ron Wyden (D-Ore.) said recently on the Senate floor, “the government had all the information it needed to go to the phone company and get an individual court order.”

If time was of the essence, he said, a different court order or administrative subpoena would allow for an emergency request for the records. Wyden noted that both Moalin and the subway plot co-conspirator were arrested “months or years after they were first identified” by mining the phone logs.

The bottom line, said Rep. Adam Schiff (D-Calif.), a House Intelligence Committee member, is that even if the program is “only occasionally successful, there’s still no justification that I can see for obtaining that amount of data in the first place.”

I have a uncle who lives there.

No, I’m talking about taxes, money, dollars.

That’s where he lives.  Dollars, Taxes.

Corporate sell-outs exploit a secret new gimmick

By David Sirota, Salon

Wednesday, Jul 31, 2013 4:33 PM UTC

As The Hill reports, the U.S. Senate’s “top tax writers have promised their colleagues 50 years worth of secrecy in exchange for suggestions on what deductions and credits to preserve” in a tax “reform” bill that aims to overhaul the tax code from scratch. The system, reports the newspaper, allows only 10 congressional staff members to have “direct access to a senator’s written suggestions” and “each submission will be given its own ID number and be kept on password-protected servers, with printed versions kept in locked safes” in the National Archives until the end of 2064.

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(C)onsider the career of one of the architects of this scheme, Max Baucus.

The retiring Montana senator is the senior Democrat on the tax-writing Senate Finance Committee. In that position, he hasn’t used his power to rid the tax code of corporate-written loopholes, subsidies and handouts – the public record shows that he has used his power to riddle the tax code with those expensive giveaways. In exchange for embedding those handouts in the tax code, Baucus has been rewarded handsomely with campaign cash to the point where he has been famously labeled “K Street’s Favorite Senator.” That label is particularly appropriate considering a recent dispatch from the New York Times showing that “no other lawmaker on Capitol Hill has such a sizable constellation of former aides working as tax lobbyists.”

In light of such a record, the notion that Baucus has built the anonymous submission system in order to help challenge K Street is, in a word, absurd. Having spent so much political capital enriching his corporate donors and lobbyists at the expense of taxpayers, he is retiring with one last gift to those benefactors – a secrecy system designed to let them rewrite the tax code from scratch in a way that most serves their interests.

The numbering kind of falls apart at 6 and 7.  You have my best guess.

Or you could ignore his system altogether and come up with a dozen or two “epic fails.”

Is B of A the Most Embarrassing Department of Justice Suit Ever?

By William K. Black, New Economic Perspectives

Posted on August 8, 2013

The Department of Justice’s (DOJ) latest civil suit against Bank of America (B of A) is an embarrassment of tragic proportions on multiple dimensions.  In this version I explore “only” seven of its epic fails.

The two most obvious fails (except to the most of the media, which failed to mention either) are that the DOJ has once again refused to prosecute either the elite bankers or bank that committed what the DOJ describes as massive frauds and that the DOJ has refused to bring even a civil suit against the senior officers of the banks despite filing a complaint that alleges facts showing that those officers committed multiple felonies that made them wealthy by causing massive harm to others.  Those two fails should have been the lead in every article about the civil suit.

The next most obvious DOJ fail, also ignored, was that the DOJ compounded the first two fails by congratulating itself for holding the frauds “accountable” for their crimes.  One can only imagine the hilarity with which B of A senior officers in their mansions they bought with the proceeds of their frauds must have greeted the DOJ’s latest pratfall.  If DOJ’s leadership cannot find the intestinal fortitude to renounce their infamous “too big to prosecute” doctrine they can at least have the decency to stop praising themselves for violating their oath of office and their duty to the Nation.

The fourth fail adds a new means by which DOJ has caused long-term harm to the Nation.

…

The complaint alleges that the Federal Home Loan Bank of San Francisco (FHLBSF) and Wachovia were prudent purchasers of B of A’s mortgage backed securities (MBS) – unlike the normal, imprudent MBS purchasers whose numbers are so large as to be “countless.”  Any competent defense counsel for the banks and bankers, credit rating agencies, etc. being sued for fraud will be eagerly quoting DOJ and demanding that the courts dismiss the lawsuits of investors that purchased MBS sold with the aid of fraudulent “representations (reps) and warranties” on the grounds that the investors were imprudent because they were “chas[ing] … higher rates of return.”

…

Fifth, it is hilarious for DOJ to claim that (in 2008) Wachovia, one of the Nation’s most notorious originators of fraudulent loans; was a victim of unique purity when it bought MBS from B of A.  Of course, it was equally hilarious when B of A responded to the complaint by claiming that it could not have engaged in fraud because Wachovia and the FHLBSF were financially “sophisticated.”  Criminologists have long observed how vulnerable the allegedly sophisticated are to being defrauded.

…

(Sixth) Why does DOJ Pretend that B of A’s Fraud Only Occurred in 2008 in One Deal?

The Complaint demonstrates that B of A engaged in widespread fraud, yet it sues only against one of the B of A’s officers’ relatively smaller frauds (though even it, at $885 million, is huge).

…

Again, it becomes clear that DOJ does not understand the most basic facts about the actual B of A fraud schemes and is unwilling to bring even a civil action large enough to recover a substantial amount of the losses caused by B of A’s vastly larger fraudulent sales of fraudulent mortgages.  I have explained that no honest lender would take the actions B of A’s officers took to ensure that its underwriting was pathetic.  In the home mortgage lending context this will produce widespread mortgage origination fraud.  Fraudulent loans can only be sold to the secondary market through further fraud.

…

DOJ is focused on a false assumption that the secondary market is the key rather than the ability to borrow and grow by reporting record (albeit fictional) profits in the near term by following the fraud recipe.  DOJ also fails to ask the obvious question – if the secondary market caused such a drastic and perverse change in home lenders’ economic incentives why didn’t the secondary market purchasers realize that fact and take steps to protect themselves from the lenders’ perverse incentives?  Nobody had a gun to Wachovia and the FHLBSF’s heads and required them to buy B of A’s fraudulent MBS.

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(Seventh) An excerpt from paragraph 50 of the complaint illustrates DOJ’s factual and analytical incoherence and indicates why its incoherence has been fatal to any prosecution of the credit rating agencies for their role in aiding and abetting fraud in the secondary market.

…

These statements are, at best, disingenuous.  The credit rating agencies could have required that they be provided with the loan types on all the underlying mortgage files.  The investors could have refused to purchase the MBS unless B of A gave them the right to review a sample of the loan files.  The credit rating agencies and the purchaser deliberately refused to review even a sample of the files of the loans sold in the secondary market.  Had they reviewed a sample of the B of A’s loan files (and been honest) they would have never have purchased the loans because the quality of B of A’s portfolio was awful – and rapidly falling.

Fast-Food Fight

By The New York Times EDITORIAL BOARD

Published: August 7, 2013

As measured by the federal minimum wage, currently $7.25 an hour, low-paid work in America is lower paid today than at any time in modern memory. If the minimum wage had kept pace with inflation or average wages over the past nearly 50 years, it would be about $10 an hour; if it had kept pace with the growth in average labor productivity, it would be about $17 an hour.

In contrast, the median hourly pay of fast-food workers – most of whom are in their 20s or older and many of whom are parents – is less than $9 for front-line workers and just above $9 when shift supervisors are included. Not surprising, the strikers demanded better pay – $15 an hour – and the right to organize without retaliation.

Also not surprising, they have been motivated to act by the inaction of the nation’s leaders. Republicans are against a higher minimum wage, and Democrats are too timid. Legislation proposed by Congressional Democrats would raise the hourly minimum to $10.10 over nearly two-and-a-half years from the date of enactment. President Obama has proposed a similarly gradual increase to $9 an hour. Congress and the White House also squandered a chance to try to improve workers’ earnings prospects when they let right-to-organize legislation die years ago.

Stephen Colbert and Mary Kay Henry (SEUI) below (autoplay).

Exclusive: U.S. directs agents to cover up program used to investigate Americans

By John Shiffman and Kristina Cooke, Reuters

Mon Aug 5, 2013 3:25pm EDT

The undated documents show that federal agents are trained to “recreate” the investigative trail to effectively cover up where the information originated, a practice that some experts say violates a defendant’s Constitutional right to a fair trial. If defendants don’t know how an investigation began, they cannot know to ask to review potential sources of exculpatory evidence – information that could reveal entrapment, mistakes or biased witnesses.

“I have never heard of anything like this at all,” said Nancy Gertner, a Harvard Law School professor who served as a federal judge from 1994 to 2011. Gertner and other legal experts said the program sounds more troubling than recent disclosures that the National Security Agency has been collecting domestic phone records. The NSA effort is geared toward stopping terrorists; the DEA program targets common criminals, primarily drug dealers.

“It is one thing to create special rules for national security,” Gertner said. “Ordinary crime is entirely different. It sounds like they are phonying up investigations.”

…

“Remember that the utilization of SOD cannot be revealed or discussed in any investigative function,” a document presented to agents reads. The document specifically directs agents to omit the SOD’s involvement from investigative reports, affidavits, discussions with prosecutors and courtroom testimony. Agents are instructed to then use “normal investigative techniques to recreate the information provided by SOD.”

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A former federal agent in the northeastern United States who received such tips from SOD described the process. “You’d be told only, ‘Be at a certain truck stop at a certain time and look for a certain vehicle.’ And so we’d alert the state police to find an excuse to stop that vehicle, and then have a drug dog search it,” the agent said.

After an arrest was made, agents then pretended that their investigation began with the traffic stop, not with the SOD tip, the former agent said. The training document reviewed by Reuters refers to this process as “parallel construction.”

The two senior DEA officials, who spoke on behalf of the agency but only on condition of anonymity, said the process is kept secret to protect sources and investigative methods. “Parallel construction is a law enforcement technique we use every day,” one official said. “It’s decades old, a bedrock concept.”

…

One current federal prosecutor learned how agents were using SOD tips after a drug agent misled him, the prosecutor told Reuters. In a Florida drug case he was handling, the prosecutor said, a DEA agent told him the investigation of a U.S. citizen began with a tip from an informant. When the prosecutor pressed for more information, he said, a DEA supervisor intervened and revealed that the tip had actually come through the SOD and from an NSA intercept.

“I was pissed,” the prosecutor said. “Lying about where the information came from is a bad start if you’re trying to comply with the law because it can lead to all kinds of problems with discovery and candor to the court.” The prosecutor never filed charges in the case because he lost confidence in the investigation, he said.

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As a practical matter, law enforcement agents said they usually don’t worry that SOD’s involvement will be exposed in court. That’s because most drug-trafficking defendants plead guilty before trial and therefore never request to see the evidence against them. If cases did go to trial, current and former agents said, charges were sometimes dropped to avoid the risk of exposing SOD involvement.