Friday, May 30, 2008

Globalization and Terror: Fomenting Inflation to Pay for War

Globalization and Terror: Fomenting Inflation to Pay for War

Western Bloc central banks and financial and investment corporations are locked into an inflationary dynamic in order to sustain their system's militarist imperialism. The Bloc's European and Pacific components offer supportive economic collaboration. In exchange, the US serves as the Bloc's global enforcer.

The US Treasury, Federal Reserve and corporate financial houses work together boosting dollar zone money supply, devaluing the dollar. Their partners take compensatory steps, intervening in G7 financial markets. They seek to keep their currencies in some kind of sustainable relationship for purposes of mutual trade and finance equilibrium so as to support US budget and current account deficits.

As the value of the dollar declines the oil price has to rise so producers can maintain operating and marketing margins. A comparison of the US-Euro price trend with the oil price trend through 2006 and 2008 shows a surprisingly uniform correlation between the two. Against the Euro the US$ fell from around 1.21 in January 2006 to around 1.45 in January 2008. The oil price fell on a similar trend from around US$60 to just under US$100. On average, for around every cent the dollar lost against the euro, the oil price rose a little under US$2.

If one looks at the oil price and US$-Euro figures through 2007 up to April 2008, one can see that the trend is even more uniform and continues more sharply. The US$ fell against the Euro from around 1.35 in April 2007 to around 1.57 a year later. During the same period the oil price rose from around US$63 to around US$132. Roughly, an average increase of US$3 for every one cent drop in the value of the dollar.

The US Federal Reserve and the US Treasury will carry on increasing the money supply, devaluing the dollar. They do so to fund US government military spending, other components of the US budget deficit and to prevent insolvent banks and financial corporations from going under. The European Central Bank will continue to set its money supply and accompanying policies to sustain recent trends in the Euro's relationship to the US dollar and bolster its own shaky corporate financial markets.

If there really is a straightforward correlation between the US$-Euro price and the oil price, then December 2008 will see the dollar at around US$1.70 to US$1.75 against the Euro and the oil price at around US$170 to US$180. A strike against Iran or a successful provocation against Venezuela would certainly intensify that 30 month trend. There seems no obvious reason for any significant short-term reversal.

If speculation is a significant component of the oil price why is the US$-Euro price trend so uniformly similar to the oil price trend? The rising oil price tracks the dollar's decline - not vice versa. Even if speculation is a factor, the price will most likely remain well over US$140-US$150 because the US budget and current account deficits are not going to change much in the short term and may well get worse. As inflation gathers pace over the medium term, interest rates will rise more or less sharply to counter the threat of hyper-inflation.

That may signal the end of the current apparent correlation between the oil price and the decline of the US dollar against the Euro. Whatever way such a medium-term reversal - perhaps by mid-2009 - pans out, one can be absolutely certain the Western Bloc ancien regime will sustain its militarism in support of corporate globalization. Both the US and the European financial systems seem hostage now to inflationary processes in response to the collapse of their long stretched out credit and asset booms.

The European Central Bank prattles on about fighting inflation the same way the US Treasury waffles on about a strong dollar. In fact, it looks as though the Western Bloc finance system is locked into an incestuous fatal inflationary embrace. The US authorities are incapable of dealing with the country's deficits by ending its wars and the grotesque military spending levels they promote. US allies string along, unwilling or unable to force a correction.

Since the US plutocrat elite cannot give up their wars, the likelihood is they will savage domestic social security and associated programmes to try and cap the budget deficit. Certainly, the corporate plutocrats will not pay. Whoever wins the US Presidency in November, the wars, the militarism, the in-your-face corporate welfare will continue. If they cannot continue boosting the money supply as before to sustain credit and asset bubbles, they will attack the poor and disadvantaged and shrink the middle classes winning compliance by means of the "war on terror" motif.

They will do that domestically and internationally. In Europe, people will be told they cannot have their accustomed pensions and social benefits any more. But funding will continue for NATO commitments, for troops and materiel in Afghanistan, for the UN Israeli-protection forces in Lebanon, for interventions under various pretexts In Africa. Money will be found to support any US intervention against Iran and Syria, against Hizbollah, perhaps against Venezuela.

It may be possible for individuals like Bernanke and Paulson and their mates in the US, Europe and Japan to avoid lurching at the controls of their dollar-euro-yen-vomiting moneyness engines into some dank deflationary slough of despond. It may also be possible they end up knocking back unprecedently enormous swigs of neoliberal hemlock. The impoverished majority will continue to be terrorised, starved and deprived by hypocritical, sadistic Western Bloc politicians, the corporate elites they front for and their regional proxies and puppets.

Their corporate media will continue telling us how well intentioned all those politicians are. But it seems clear from the suspiciously uniform correlation between the US-Euro price and the oil price, those politicians are deliberately fomenting the inflation that is destroying the economies of vulnerable countries around the world. Why are they doing that if not to maintain their ancient regime power and privilege by means of military backed corporate globalization?

They and their corporate media tell us we live in the best of all possible worlds because no other world order is possible. All this suffering and moral debris and economic chaos we're sorting through... where could it all have come from? The anarchy of the "free market"?

Ever since Bretton Woods, G7 governments have worked together ever more closely planning economic strategy. They rig outcomes so as to protect and promote the interests of their corporate elites. Their corporate propaganda media call this the "free market". They are talking only to themselves.

Incomes and spending both slow in April

Incomes and spending both slow in April


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Consumer spending barely budged in April and growth in personal income slowed sharply, even though the government started sending out billions of dollars in economic stimulus payments.

The Commerce Department reported Friday that consumer spending edged up a small 0.2 percent in April, just half the 0.4 percent rise in March. Excluding inflation, the performance was even weaker, showing no gain in spending after excluding price changes.

Incomes rose by just 0.2 percent in April, just half of the March increase. That performance would have been even weaker without the boost it got as the government began mailing the first of $106.7 billion in economic stimulus payments.

Consumer spending, which accounts for two-thirds of total economic activity, is being closely watched at present for signs that the economy could be slipping into a recession.

The weak increases in spending and incomes were in line with expectations. Some analysts said that with the economy so feeble at the moment, spending could falter further in coming months.

"With credit tightening, cash flow being squeezed and confidence near record lows, this will surely continue," said Ian Shepherdson, chief U.S. economist at High Frequency Economics.

The government reported Thursday that the overall economy, as measured by the gross domestic product, grew at an annual rate of 0.9 percent, slightly better than the 0.6 percent GDP growth originally estimated. However, growth at that level remained very anemic and some analysts are worried that the GDP could slip into negative territory in the current April-June quarter.

The Bush administration is hoping that a full-blown recession can be averted with the economic stimulus payments now being mailed out. The Commerce report said that those payments, which didn't start until the end of April, totaled $7.8 billion at an annual rate for that month.

The small 0.2 percent rise in personal incomes in April was the weakest gain since a 0.2 percent rise in January. Commerce analysts said it would have been an even weaker 0.1 percent without the boost received from the economic stimulus payments.

Incomes were depressed because private wages and salaries fell at an annual rate of $18.2 billion in April, the biggest setback in a year. This weakness comes in part from four straight months of job layoffs, starting in January.

The economy is being battered by a series of blows, from a prolonged slump in housing to a severe credit crisis and soaring energy prices. All of these factors have rattled consumer confidence, sending it to levels not seen in more than two decades.

For April, consumer prices, measured by an inflation gauge tied to consumer spending, rose by 0.2 percent, down from a 0.3 percent rise in March. However, the rise in inflation was a more modest 0.1 percent in April when volatile food and energy costs are excluded.

The personal savings rate, the amount of spending compared to after-tax incomes, held steady at 0.7 percent in April, the same level as in February and March.

US and European debt markets flash new warning signals

US and European debt markets flash new warning signals

By Ambrose Evans-Pritchard

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The debt markets in the US and Europe have begun to flash warning signals yet again, raising fears that the global credit crisis could be entering another turbulent phase.

The cost of insuring against default on the bonds of Lehman Brothers, Merrill Lynch and other big banks and brokerages has surged over the last two weeks, threatening to reach the stress levels seen before the Bear Stearns debacle. Spreads on inter-bank Libor and Euribor rates in Europe are back near record levels.

Credit default swaps (CDS) on Lehman debt have risen from around 130 in late April to 247, while Merrill debt has spiked to 196. Most analysts had thought the coast was clear for such broker dealers after the US Federal Reserve invoked an emergency clause in March to let them borrow directly from its lending window.

But there are now concerns that the Fed itself may be exhausting its $800bn (£399bn) stock of assets. It has swapped almost $300bn of 10-year Treasuries for questionable mortgage debt, and provided Term Auction Credit of $130bn.

"The steep rise in swap spreads this week is ominous," said John Hussman, head of the Hussman Funds. "The deterioration is in stark contrast to what investors have come to hope since March."

Lehman Brothers took writedowns of just $200m on its $6.5bn portfolio of sub-prime debt in the first quarter even though a quarter of the securities had "junk" ratings, typically worth a fraction of face value.

Willem Sels, a credit analyst at Dresdner Kleinwort, said the banks are beginning to face waves of defaults on credit cards, car loans, and now corporate loans. "We believe we're entering Phase II. The liquidity crisis has eased a little, but the real credit losses are accelerating. The worst is yet to come," he said.

The jump in corporate bankruptcies has not yet been picked up by the usual indicators, which tend to lag the market, lulling investors into a false sense of security. The true losses are already known to specialists in the business, said Mr Sels.

U.S. Bank Failures Loom

U.S. Bank Failures Loom

Daily Times

SAN FRANCISCO: By April, Gary Holloway was almost three years into retirement. He’d built a new home by a lake in Texas, bought a boat and was working on his golf game. While taking on some part-time work, Holloway also travelled for months across the US with his wife, from Seattle to Washington DC, catching up with old friends and family.

That life of leisure abruptly changed about six weeks ago when Holloway got a phone call from his former employer, the Federal Deposit Insurance Corp, or FDIC, which regulates US banks and insures deposits.

Earlier this year, the FDIC began trying to lure roughly 25 retirees like Holloway back to prepare for an increase in bank failures. It’s also hiring about 75 new staff. Holloway quickly went back to work. ANB Financial NA, a bank in Bentonville, Ark with $2.1 billion in assets and $1.8 billion in customer deposits, was failing and an expert like Holloway was needed to value the assets and find a stronger institution to take them on.

On May 9, life for ANB ended when the FDIC and the Office of the Comptroller of the Currency, another bank regulator, announced that the lender was closing. Only three banks have failed so far in 2008. But that number is set to surge as the credit crunch slows economic growth and hammers some lenders that grew too fast during the recent real-estate boom, experts say.

Things may get worse before they get better: At least 150 banks will fail in the US during the next two to three years, according to a projection by Gerard Cassidy and his colleagues at RBC Capital Markets.

If the current economic slowdown deteriorates into a recession on the scale of those from the 1980s and early 1990’s, the number of failures will be much higher this time around — probably as high as 300 of them, by RBC’s reckoning. That’s a massive surge compared to the recent boom years of the credit and real estate markets. From the second half of 2004 through end of 2006 there were 10 consecutive quarters without a bank failure in the US — a record length of time, Cassidy notes.

Texas Ratio: Cassidy and his colleagues have developed an early-warning system for spotting future trouble at banks called the Texas Ratio. The ratio is calculated by dividing a bank’s non-performing loans, including those 90 days delinquent, by the company’s tangible equity capital plus money set aside for future loan losses. The number basically measures credit problems as a percentage of the capital a lender has available to deal with them.

Cassidy came up with the idea after covering Texas banks in the 1980s. Until the recession hit that decade, many banks in the state were considered some of the best in the country. But as problem assets climbed, that view was cruelly challenged, Cassidy recalls. Along with his colleagues, Cassidy applied the same ratio to commercial banks at the end of this year’s first quarter and found some disturbing trends.

UCBH Holdings Inc, a San Francisco-based bank, saw its Texas Ratio jump to 31% at the end of the first quarter from 4.7% in 2006, according to RBC. The Texas Ratio of Colonial BancGroup, based in Montgomery, Ala., jumped from 1.5% in 2006 to 25% at the end of March.Sterling Financial Corp., headquartered in Spokane, Wash., had a Texas ratio of 1.9% in 2006. It was nearly 24% at the end of the first quarter, RBC data show.

These banks are nowhere near RBC’s 100% critical threshold, and several lenders have raised new capital since the first quarter. For instance, National City Corp. topped RBC’s list with a Texas Ratio of 40% at the end of March, though the bank did raise $7 billion in new capital in April.

CD signs of stress: Other lenders are already in more dire straits. IndyMac Bancorp a large savings and loan institution and a leading mortgage lender, is one of Cassidy’s biggest concerns, with a whopping Texas Ratio around 140%.

IndyMac is currently offering the highest rates on one-year CDs, according to Others in the top 10 include Corus Bankshares, Imperial Capital Bancorp and GMAC bank.

When Countrywide Financial was struggling last year, its federal savings bank unit began offering some of the highest CD rates in the US to build deposits. Bank of America has since agreed to acquire Countrywide and it didn’t make it onto’s list of top 10 CD rates this week.

Construction loan destruction: Construction and development, or C&D, loans made up 83% of the Chicago-based bank’s total loans at the end of 2007, according to RiskMetrics Group. This type of loans helps to pay for things like the building of real-estate development projects and the construction of office buildings.

Small and medium-sized banks found it difficult to compete with large lenders in the national markets for mortgages and other consumer loans. So many focused on C&D loans because this type of financing relies more on local, personal connections, said Zach Gast, financial sector analyst at RiskMetrics. As the real estate market boomed, C&D loans did too. A decade ago, bank holding companies had $60 billion of these loans. That number is now $480 billion, according to Gast, who also notes that C&D loans are almost never securitized, so they’re held on banks’ balance sheets.

Such rapid loan growth usually creates trouble later. Indeed, delinquencies represented 7.1% of total C&D loans at the end of the first quarter, up from 0.9% at the end of 2005, Gast said. Colonial BancGroup had 37% of its loans in C&D loans at the end of last year, while Sterling Financial had 33% and UCBH had 20%. East West Bancorp a rival to UCBH, is also exposed, with 25% of total loans in C&D assets at the end of 2007, RiskMetrics data show.

Regulators: Where were regulators when these banks built up such large exposures? That’s a question RBC’s Cassidy has been asking himself, noting that “they dropped the ball in a big way.” Officials at the FDIC declined to comment.

Efforts by the Securities and Exchange Commission to make sure banks report accurate earnings may have made the situation worse, Cassidy says. Bank regulators try to encourage institutions to build reserves in good times, so they’re ready for downturns. But the SEC has been worried that banks might use reserves to smooth reported earnings, so it advised some lenders that they couldn’t set aside reserves if they weren’t experiencing commensurate credit losses, Cassidy explained.

Crisis redux? The FDIC had highlighted 76 banks that it considered troubled at the end of 2007. That’s up from 50 at the end of 2006, which was the lowest level for at least 25 years. Once identified by regulators, troubled banks are often required to limit or halt loan growth and shrink their balance sheets by selling some assets, Cassidy said. Resolution and receivership specialists at the FDIC, like Gary Holloway, value troubled banks’ assets as quickly as possible and try to find a stronger bank to absorb the weaker entity through an acquisition.

The current crisis hasn’t reached the scale of the savings and loan crisis. In 1990, more than 1,500 banks were on the FDIC’s troubled watch list, out of a total of roughly 15,000. More than 1,000 banks failed in 1988 and 1989, FDIC data show. But it’s possible for such comparisons to understate the scope of the coming wave of insolvencies.

Former high-ranking Bush officials enjoy war profits

Former high-ranking Bush officials enjoy war profits

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Richard L. Armitage, who served from 2001 to 2005 as Deputy Secretary of State, was a rarity in the Bush administration: an official who delighted in talking to the press. Reporters loved him for his withering criticism of the neoconservative zealots around President George W. Bush and in part because he fed them tidbits about the White House they could obtain nowhere else. His accidental disclosure to conservative columnist Robert Novak that Valerie Plame, the wife of Iraq war critic Joseph Wilson, was working undercover for the Central Intelligence Agency remains one of the most notorious leaks of the Bush era.

But perhaps because of his cozy ties to the Washington press corps and the media's obsession with Plamegate, very little has been written about Armitage's extensive business dealings. In fact, Armitage is one of the most successful capitalists in Washington. He has successfully parlayed his experience in covert operations and secret diplomacy into a thriving career as a consultant and adviser to some of the biggest players in America's Intelligence Industrial Complex -- corporations that are working at the heart of U.S. national security and profiting handsomely from it.

Armitage, currently an adviser to presidential candidate John McCain, had once been Colin Powell's closest ally during the bitter disputes inside the Bush administration over the invasion and occupation of Iraq. According to the Washington Post's Bob Woodward, Armitage advised Powell on more than one occasion to tell the neocons to "go fuck themselves," and, at one point, even refused to deliver a speech about Iraq drafted for him by Vice President Dick Cheney's office.

Yet, three years after those epic battles, Armitage is enjoying life as a stakeholder in a dozen private companies that are making money directly from the war started by his former nemeses.

Over the past decade, contracting for America's spy agencies has grown into a $50 billion industry that eats up seven of every 10 dollars spent by the U.S. government on its intelligence services. Today, unbeknownst to most Americans, agencies once renowned for their prowess in analysis, covert operations, electronic surveillance and overhead reconnaissance outsource many of their core tasks to the private sector. The bulk of this market is serviced by about 100 companies, ranging in size from multibillion dollar defense behemoths to small technology shops funded by venture capitalists.

Nearly every one of them has sought out former high-ranking intelligence and national security officials as both managers and directors. Like Armitage, these are people who have served for decades in the upper echelons of national power. Their lives have been defined by secret briefings, classified documents, covert wars and sensitive intelligence missions. Many of them have kept their security clearances and maintain a hand in government by serving as advisers to high-level advisory bodies at the Pentagon, the Central Intelligence Agency, the National Security Agency and the White House. Now, with their government careers behind them, they make their living by rendering strategic advice to the dozens of information technology vendors and intelligence contractors headquartered along the banks of the Potomac River and the byways of Washington's Beltway.

Ever since the 1950s, with the rise of America's modern military-industrial complex, high-level U.S. officials and military men have moved between the government and private sectors. But what we have today with the intelligence business is something far more systemic: senior officials leaving their national security and counterterrorism jobs for positions where they are basically doing the same jobs they once held at the CIA, the NSA and other agencies -- but for double or triple the salary, and for profit. It's a privatization of the highest order, in which our collective memory and experience in intelligence -- our crown jewels of spying, so to speak -- are owned by corporate America. Yet, there is essentially no government oversight of this private sector at the heart of our intelligence empire. And the lines between public and private have become so blurred as to be nonexistent.

Shortly after leaving government in 2005, Armitage was recruited to the board of directors of ManTech International, a $1.7 billion corporation that does extensive work for the National Security Agency and other intelligence collection agencies. He's also since advised two private equity funds with significant holdings in intelligence enterprises. Veritas Capital, where Armitage served as a senior adviser from 2005 to 2007, owns intelligence consultant McNeil Technologies Inc. and DynCorp International, an important security contractor in Iraq. For a time, Veritas also owned MZM, Inc., the CIA and defense intelligence contractor that was caught -- before the Veritas acquisition -- bribing former Republican Congressman Randy "Duke" Cunningham.

In 2007, Armitage, along with several Veritas executives, moved over to DC Capital Partners, an intelligence-oriented buyout firm with some $200 million in assets. One of its first acquisitions after Armitage came on board was Omen Inc., a Maryland company that provides information technology and consulting services to the NSA. The fund has since combined Omen with two other intelligence contractors to form a new company called National Interests Security Company LLC, which has 850 employees, more than half of them holding top secret or higher security clearances.

Through his own eponymous consulting firm, Armitage has lobbied on behalf of L-3 Communications Inc., one of the nation's largest intelligence contractors, to help it sell anti-submarine surveillance systems to Taiwan. L-3, like ManTech, is also heavily involved in Iraq. (Further topping off Armitage's investment interests in the war: He sits on the board of directors of ConocoPhillips, which is aiming to become a major player in Iraq's energy industry through a joint venture with Russia's Lukoil.)

In these jobs, former high-level officials like Armitage continue to fight terrorist threats and protect the "homeland," as they once did while working in government. But by fusing their political careers with business, these former officials have brought money-making into the highest reaches of national security. They have created a new class of capitalist policy-makers that is bridging the gap between public policy and private business in ways that are unprecedented in American history.

Take the case of George Tenet, who retired in 2004 from his service as President Bush's CIA director. As he was writing his memoirs and preparing for a new career as a professor at Georgetown University, Tenet quietly began cutting deals with companies that earn much of their revenues from contracts with the intelligence community. And, as I was the first to report a year ago in Salon, Tenet began to make big money off of the Iraq war. By the end of 2007, he had made nearly $3 million in directors' fees and other compensation from his service as a director and adviser to four companies that provide the U.S. government with technology, equipment and personnel used for the war in Iraq, as well as in the broader war on terror.

Those companies include L-1 Identity Solutions Inc., an intelligence and biometric conglomerate that holds a near-monopoly on software that identifies people by their fingerprints and facial characteristics; Guidance Software, a Pasadena, Calif., supplier of investigation and forensic software to the FBI and the Intelligence Community; and the Analysis Corp., a Fairfax, Va., intelligence contractor founded by Tenet's former chief of staff, John Brennan. Brennan himself went into the spy business after serving as chairman of the National Counterterrorism Center -- which is one of the Analysis Corp.'s biggest clients.

In Tenet's most prestigious position, he was the only American director of QinetiQ, the British defense research company that was privatized in 2003 and acquired by the well-connected Carlyle Group. Earlier this year, Tenet left QinetiQ's UK parent to join the board of QinetiQ North America, the company's U.S. subsidiary and one of the fastest-growing contractors in the U.S. intelligence market. There, Tenet is working with CEO Duane P. Andrews, a former assistant secretary of defense who was the chief intelligence adviser to Dick Cheney when he was Secretary of Defense in the early 1990s. (Prior to joining QinetiQ, Andrews would have had plenty of contact with Tenet, as Andrews was a senior executive with Science Applications International Corp., a major CIA and NSA contractor.)

In January, QinetiQ North America expanded its intelligence network by hiring Stephen Cambone, who was the assistant secretary of defense for intelligence under Donald Rumsfeld, as its vice president for strategy. That appointment came just days after the company won a $30 million, five-year contract to provide unspecified "security services" to the Pentagon's Counter-Intelligence Field Activity office, a controversial domestic security agency that was created by Rumsfeld and Cambone in 2002 and later took heat from Congress for illegally spying on antiwar and religious activists.

One of the most spectacular transitions from intelligence to business took place at Blackwater USA, the security contractor infamous for its trigger-happy soldiers in Iraq. One of Blackwater's first major contracts, negotiated by founder Erik Prince, was a secret no-bid $5.4 million deal with the CIA signed shortly after the September 11 terrorist attacks. Shortly thereafter, Blackwater hired as its vice chairman Cofer Black, the CIA's former top counterterrorism official who was dispatched by Tenet in the days after 9/11 to brief President Bush and his advisers on the CIA's plans for overthrowing the Taliban in Afghanistan. Rob Richer, the CIA's former Associate Deputy Director of Operations and, before that, head of its Near East division, became Blackwater's Vice President of Intelligence, and later went to work for a private intelligence company.

Appointments like this, observes intelligence expert Steven Aftergood, reflect the "incestuous" relationships that exist between former officials and private intelligence contractors. "It's unseemly, and what's worse is that it has become normal," he told me after the news broke about Stephen Cambone's move to QinetiQ. "The problem is not so much a conflict of interest as it is a coincidence of interests -- the Intelligence Community and the contractors are so tightly intertwined at the leadership level that their interests, practically speaking, are identical."

Former high-ranking officials bring tremendous value to a government contractor seeking new work or a private equity fund looking for companies to buy. "You understand the decision-making process inside the Beltway, and that is liquid gold," says Roger Cressey, who worked in President Clinton's National Security Council as deputy director of counterterrorism and is now a partner in Good Harbor Consulting, a company he founded with his former boss at the NSC, Richard Clarke. Cressey, who is a terrorism consultant for NBC News, adds that the influence of a retired official lasts only a limited period of time after he or she leaves office. "You have 18 to 24 months to translate your rolodex into real services," he says.

But the value of a CIA director or national security official goes much further than a rolodex. Because high-ranking officials have been privy to classified and top-secret information for years -- and sometimes, in the cases of people like Armitage and Tenet, decades -- they have details about intelligence programs, classified operations and the internal affairs of other countries that few others can claim.

Armitage, who was a senior Pentagon official during the Reagan administration, was deeply involved in covert operations in Vietnam as a Navy officer and, shortly after September 11, flew to Pakistan on behalf of the Bush administration to deliver a stark message to its military president, Pervez Musharraf, that drastic measures would follow if Musharraf did not support the war on terror. He also led an influential group of U.S. officials who quietly pushed the Japanese government to adopt a more militaristic role in global affairs over the last seven years.

In all of these tasks, Armitage would have had access to the most classified intelligence available to U.S. officials, including telephone intercepts provided by the NSA. That kind of experience is extremely valuable to a company like ManTech, which sells and operates signals intelligence systems to the NSA and provides "cyber and physical security" for U.S. embassies and consulates around the world. According to ManTech CEO George J. Pedersen, who also employed Armitage as an adviser during the 1990s, Armitage was brought on as a director for his "enormous insight into our corporation's capabilities and operations." (Armitage did not respond to a written request for an interview.)

Tenet is even more connected: With the former CIA director on board, L-1's CEO Robert LaPenta told analysts last year, "a phone call gets us in to see whoever we want." Tenet, of course, has extensive knowledge about intelligence services in Saudi Arabia, the UK and Pakistan as well as secret operations in Iraq, Afghanistan and Somalia. His insights have already helped L-1 in its acquisition strategies. Shortly after Tenet joined L-1's board, the company acquired one of the CIA's hottest contractors, SpecTal, which has 300 employees with top-secret security clearances who work extensively in Afghanistan. Months before, during a 2006 meeting with L-1 executives about SpecTal's potential business in that country, Tenet urged company executives to "call the SpecTal guys" because "they know everybody in every one of these ministries that you need to go talk to," according to LaPenta. L-1 not only called them; it bought them out, and has since combined SpecTal with its latest acquisition, Advanced Concepts Inc., a systems engineering firm holding contracts at the NSA. Tenet, through a spokesman, declined to comment.

Power also flows out of a former high-ranking official's presence as a policy-maker. During the 1990s, when Armitage was building his reputation as a private consultant and defense industry adviser, he was a member of President Clinton's Defense Policy Board. Although Armitage, like any board member, was prohibited from divulging contents of meetings with his clients, the internal discussions and access to classified documents helped shape the advice he gave his clients. That's certainly the impression one gets from officials at CACI International, a key intelligence contractor where Armitage served on the board of directors during that time. During his tenure as a director in the 1990s, CACI officials wrote in 2001, Armitage provided "valuable guidance on CACI's strategic growth plans and the federal government and Defense Department markets."

The same can be said of many of Armitage's contemporaries in the defense and intelligence industries who advise their clients while holding positions in government advisory boards at the Pentagon, the CIA and the NSA. One of Armitage's fellow directors at ManTech, for example, is Retired Admiral David E. Jeremiah. He is a member of President Bush's Foreign Intelligence Advisory Board and a paid adviser to the National Reconnaissance Office, the super-secret agency that manages the nation's spy satellites. A third ManTech director, Richard J. Kerr, a 32-year veteran of the CIA, led a 2005 study for the CIA into the agency's prewar assessments of Iraq and its weapons of mass destruction.

One of the most representative figures in America's new private intelligence elite is Joan A. Dempsey. She is currently a vice president of Booz Allen Hamilton, where for the last three years she has worked alongside former CIA director Jim Woolsey and more than 1,000 other former intelligence officers. Dempsey, a steely-looking blonde, began her career as a naval technician listening to Soviet bomber and submarine traffic at Misawa Air Base in Japan, a key NSA listening post. Over the years, she slowly worked her way up the intelligence chain of command at the Pentagon, from Naval Intelligence to the Defense Intelligence Agency. In 1997, she was appointed deputy assistant secretary of defense for intelligence and security in the Clinton administration, the highest civilian intelligence position in the Department of Defense at the time. There, she had responsibility over the NSA, the NGA and the NRO, the three national collection agencies controlled by the Pentagon, as well as the DoD's tactical command, control, communications and intelligence (C3I) efforts.

By 1999, Dempsey had become George Tenet's representative to the rest of the Intelligence Community as the CIA's director of community management. In that position in 1999 she won the everlasting support of the Intelligence Community -- and its growing army of contractors -- when she led negotiations with the Republican-led Congress that added $1.2 billion to the intelligence budget. That figure still remains one of the largest single-year increases in the history of the National Foreign Intelligence Program. Five years later, partly in recognition of this feat, Dempsey was given the William O. Baker award for meritorious intelligence service by the Security Affairs Support Association (SASA), which from 1979 to 2005 represented the largest prime contractors at the NSA and the CIA. Her remarks at that ceremony serve as a kind of leitmotif for the outsourcing phenomenon in intelligence.

In her acceptance speech, Dempsey paid effusive praise to the corporations she had known over the years, many of whom had purchased tables for the event: General Dynamics, Essex Corporation, Oracle Corporation, Computer Sciences Corporation, AT&T Government Solutions, ManTech and Lockheed Martin. She thanked her "Pentagon friends" from L-3 Communications, with whom she had worked "on my favorite program of all time, the U-2" spy plane. She spoke of her pride in working with the Boeing Company on the Future Imagery Architecture, a $4 billion project by the NRO and the NGA to build and operate the next generation of imagery satellites (the project was cancelled in 2005). At the CIA, Dempsey said, she had "benefited enormously" from her work with Booz Allen Hamilton and SAIC.

Then she went slightly off-script: "I like to call Booz Allen the shadow IC," she said, using the common acronym for the intelligence community, because it has "more former secretaries of this and directors of that" than the entire government. That must have caused some chuckles at the lead table, where Woolsey was sitting. But Dempsey, of course, got the last laugh. Fifteen months later, she joined the "shadow IC" herself as a vice president. In her job at Booz Allen, she "provides strategy consulting services to the US government, including the national security and civil sectors, as well as commercial industry," according to company spokesperson George Farrar. Then, in January 2007, Dempsey's joke came full circle when Mike McConnell, her boss at Booz Allen, was appointed Director of National Intelligence. In the space of a few years, Booz Allen had been transformed from a "shadow" intelligence community player into the real thing.

It was most intriguing, then, to hear what Dempsey is actually doing in her new job at Booz Allen. In the spring of 2006, Dempsey was invited to speak to a seminar on intelligence reform at Harvard University. In a remarkably candid speech, Dempsey disclosed that her office at Booz Allen was evaluating the entire decision-making process within the intelligence community. Under her supervision, she said, Booz Allen was "studying the implications of the many decisions that are being made on a daily basis right now all over the intelligence community," including by the staff of the Office of the Director of National Intelligence. "No one has thought through the implications of those decisions in a strategic or aggregate sense for the future," she added. So Booz Allen is helping out by "trying to forecast" what these decisions "mean for the intelligence community of the future -- what it's going to look like, how it's going to operate -- along a trend line."

It was a remarkable circumstance: Booz Allen was conducting a study for the DNI, a position that was about to be filled by one of the company's own -- Mike McConnell. The shadow IC was now helping the real IC prepare for an immediate future when the real IC would be led by the shadow IC. This was more than a revolving door: The private and the public sides of intelligence were now sharing the same room.

FCC proposes free Internet... as long as it's censored

FCC proposes free Internet... as long as it's censored

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WASHINGTON (Reuters) - U.S. communications regulators are considering auctioning a piece of the airwaves to buyers willing to provide free broadband Internet service without pornography.

Federal Communications Commission Chairman Kevin Martin is proposing to auction an unused piece of 25 megahertz wireless spectrum, with the condition that the winning bidder offer free Internet access and filter out obscene content on part of those airwaves, a spokesman for the FCC said on Thursday.

"We're hoping there will be increased interest in the proposal; and because this will provide wireless broadband services to more Americans, it is certainly something we want to see," said FCC spokesman Rob Kenny.

Under Martin's proposal, the winner would be allowed to use the rest of the airwaves for commercial services.

The plan would address criticism from some consumer advocates, who say the government has not done enough to get broadband service into more households. It also could win praise from anti-obscenity watchdog groups.

"I think there are a number of features of the plan that would be attractive to various constituencies," said Stifel Nicolaus analyst Blair Levin.

But the plan got a lukewarm response from existing wireless carriers. The industry's chief trade group, called CTIA, said auction provisions such as the free-service requirement were too rigid.

"CTIA supports flexible auction rules that allow any and all entities to participate," the group said in a statement.

The winning bidder also would have to build out the system to serve 50 percent of the U.S. population within four years and 95 percent within 10 years.

Further details of the plan have yet to be worked out, but Martin's plan is expected to come up at the FCC's next meeting on June 12.

Martin's proposal is similar to a plan put forth previously by a start-up company called M2Z. Under that plan, which was not approved by the FCC, M2Z would have been given the spectrum at no up-front cost. It would have provided free service, generating revenue partly through advertising.

The 25 MHz spectrum at issue is not viewed as highly attractive to wireless carriers, unlike the 700 MHz spectrum auctioned by the FCC earlier this year. There has been little previous interest in it, aside from the M2Z proposal.

Police State America: Yassin Aref's Struggle for Justice

Police State America: Yassin Aref's Struggle for Justice

By Stephen Lendman

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Yassin Aref is an Iraqi Kurd and political prisoner in Police State America. A full account of his ordeal can be found at the following link:

In the post-9/11 climate of fear, Aref was targeted for his faith and ethnicity and victimized by a willful FBI frame. It began as a sting to entrap him. Charges against him were baseless. No evidence supports them. Yet he was falsely arrested, accused, indicted, tried and convicted in October 2006. It was on 10 of 30 fraudulent counts in a kangaroo court proceeding. They included money laundering, conspiracy to provide material support for a terrorist plot, terrorism, and making false statements in February 2002 and August 2004.

Aref was then sentenced in March 2007 and is now serving 15 years hard time at Terre Haute, Indiana's secret federal prison Communications Management Unit (CMU). It's for "high-security risk" Muslim and Middle Eastern prisoners and was established to limit or cut them off entirely from outside contact. The unit violates federal law as well as Prison Bureau regulations. They stipulate that "staff shall not discriminate against inmates on the basis of race, religion, national origin, sex, disability, or political belief (including) administrative decisions (involving) access to work, housing and programs." The Federal Administrative Procedures Act requires that all prison regulations comply with this law.

In addition, the Supreme Court ruled in Johnson v. California (May 3, 2004) that segregating prisoners by race, ethnicity or language is illegal. Bush administration officials disdain the law and ignore whatever High or other court rulings go against them. There aren't many. Congress is complicit. It makes no effort to stop them, so nothing deters them from mocking the rule of law and erasing the last remnants of democracy in America. The result is victims like Aref and many others like him.

Here's a brief account of his ordeal and how events unfolded in his case:

-- he's from Iraqi Kurdistan;

-- he came to America in 1999, worked as a hospital janitor, ambulance driver and later became the Masjid As Salam Mosque's imam;

-- the FBI targeted him and his friend, Mohammed Mosharref Hossain (a Bangladesh immigrant); it was in a 2003 sting that became a frame; it involved Aref's courtesy for Hossain - agreeing to witness his loan transaction according to Muslim custom; it was at a time he spoke poor English, believed the transaction was legitimate, was unaware of any law violations, let alone a scheme to frame him;

-- he was arrested in August 2004 and convicted in October 2006; charges against him were baseless and were from illegally obtained NSA warrantless wiretaps;

-- he's now at Terre Haute's CMU, a victim of police state justice, separated from his wife and small children, and hoping for an appeals court verdict in his favor.

On March 24, 2008, Aref's appeal was held before the Second Circuit Court of Appeals in New York. His status now awaits the outcome from a court that may be sympathetic. In an all too familiar post-9/11 pattern, they're hearing other cases like his. It's hoped that may arouse their judicial outrage over such extreme injustice to a growing number of Bush administration victims.

Aref's Trial Lawyer's Assessment of the Appeals Court Hearing

Here's an account of the proceedings from one of his pro bono trial lawyers, Stephen Downs. He attended the hearing and recounted what happened. Forty-seven supporters were there from Aref's home city of Albany. They filled a bus, traveled to Manhattan, split evenly between Muslims and other faiths, and were all united for Aref.

Downs begins by explaining that predicting the appeals outcome is uncertain at best and perhaps foolish at worst. Separate attorneys represented Aref and Hossain and each used "very different legal arguments."

Kevin Luibrand argued for Hossain on illegal entrapment. In addition, he claimed that "since the transaction was always presented as a loan, there was no attempt to conceal the source of the money, and hence no crime of Money Laundering occurred...." If the court agrees with either claim, Hossain's charges may be dismissed. Further, if it accepts the Money Laundering argument, some or all of Aref's counts may also be dropped.

Downs strikes a hopeful note that: "The Court seemed most interested in these two strong sharply focused arguments, and (assistant US attorney William Pericak) seemed to have the most difficulty with them."

Terry Kindlon argued for Aref. He mainly claimed that insufficient evidence was presented at trial to justify his conviction. In addition, there were numerous erroneous "evidence" claims to the jury.

Downs is less upbeat about this strategy. While the argument may be strong, it's hard to present orally "because it is impossible in just (the few minutes alloted) to go through all of the evidence" to show adequate proof. As a result, the Court seemed disinclined to spend a lot of time on this, even though one justice "seemed to have a very detailed understanding of the evidence (and) seemed to understand what the defense was saying." But he didn't indicate either way if he agreed or disagreed.

In Down's opinion, however, the lack of time spent doesn't indicate how the court will rule. It chose instead to review all evidence in briefs rather than discuss them in detail in open court.

The remainder of Aref's case involved procedural errors. If they're accepted, it would result in a new trial but not dismissal of charges against him.

Cory Stoughton of the New York Civil Liberties Union also argued briefly for Aref and Hossain. He focused on how the trial judge handled classified material but withheld it from the defense. He also addressed the illegal NSA wiretapping issue. Downs again thinks this tact is "awkward" because the DOJ kept information secret so defense has no idea what it is or if it's relevant. Even so, the short amount of time on this matter is no indication of its importance to the Court.

In a separate March 21 pre-hearing press release, the ACLU commented on the case. Executive Director Donna Lieberman said: "The courts must not be complicit in President Bush's campaign of secrecy. NSA spying is unconstitutional, and secret opinions only aid the government's effort to keep the illegal campaign hidden away from public scrutiny and outrage."

Before the March 24 hearing, Cory Stoughton added: "Secret court opinions are antithetical to the American system of justice. Especially when there are allegations of unlawful government surveillance and abuse of executive power at play, the public has a right to understand the government's arguments and the courts' justifications for their decisions." The ACLU firmly supports the public's First Amendment right to understand what happens in the judicial process and abhors the government's use of secret information.

Finally, Downs above noted how hard it is predicting the appeal's outcome, but he tries anyway and is upbeat. He felt "listening to oral argument that the defense, the Court and the prosecution were all quietly agreeing that Hossain was simply the patsy here." He (and Aref) were part of an FBI sting cum frame, "but nobody ever believed that he (or Aref were) a danger to anyone."

It means there's a good chance the Court will rule favorably on the entrapment defense. The justices spent a lot of time on this argument. The DOJ had a lot of trouble explaining its side, and Downs thinks attorney Pericak did a poor job of it. His conclusion leaves this writer breathless and likely Aref and Hossain supporters as well: "The facts are there," in Downs judgment, "to support a dismissal and so is the legal theory, and so is the sense that this man (and Aref are) not dangerous." The Court may agree and either dismiss Hossain's charges or grant him a new trial.

As for Aref, Downs thinks the outcome is harder to predict based on his lawyer's oral argument. Questions posed centered on evidentiary issues and a detailed knowledge of the record. The Court seemed to be looking for procedural errors that would justify a new trial as the "best way to clear the air."

Down's also believes the Court's view of Aref's character is important. If it thinks the DOJ unfairly targeted him as a "jihadist, at least he may get a new trial. His lawyer stressed the "character" issue so it may be key to the outcome.

On the issue of so-called "classified evidence," Downs has no idea how the Court will view it or if it will affect the decision. Without knowing what it is, it's impossible to gauge its importance, or, in the current climate, how the Court will react.

The New York Times on Aref's Appeal

On March 25, the NYT wrote about the previous day's hearing in an article titled "Convicted Imam Seeks Evidence of Wiretapping." The article's tone was racist by emphasizing the term "imam" to highlight Aref's Islamic faith. In addition, it stressed use of NSA wiretaps, ignored the more important defense arguments, and also left out the most pertinent facts about Aref's case. Nonetheless, Times writer Alan Feuer included some key ones:

-- that Aref was "convicted of supporting terrorism in an FBI sting operation;" (no mention was made of a willful frame);

-- that he may have been "spied on improperly by the National Security Agency;" (in fact, he was);

-- that if the Court agrees, his conviction may be "reverse(d);"

-- that the FBI's "sting" involved a "fictitious plot involving shoulder-launched missiles (to be used for) the assassination of a Pakistani diplomat in New York;" (the idea on its face is preposterous, and the Court may see it that way);

-- that secret DOJ evidence was withheld from defense lawyers with security clearances to see it; (it casts doubt on its relevance, authenticity or even existence);

-- that the New York Civil Liberties Union testified on behalf of the defense for both men; and The Times concluded by saying:

"As it now stands, the case may be the best chance to obtain an appellate ruling on the (NSA's wiretapping) program (that persists) without court approval." Aref's case (and Hossain's draw) "directly on the substantial constitutional protections afforded to criminal defendants."

The Times continued that last year a Cincinnati federal appeals court "dismissed a case challenging the agency's program, saying that the plaintiffs did not have standing to sue." However, in November, "a federal district judge in Virginia told the government that if it did not allow lawyers for an Islamic scholar sentenced to life in prison for inciting followers to commit acts of terrorism to review classified material on possible wiretapping, she might order a new trial."

A Personal Note

I first learned about Aref last March, wrote about him on March 13, and was encouraged that many web editors picked up the article. I also wrote to Aref, and he responded with a considerable delay because of the difficulty communicating with a federal prisoner, especially one called a "terrorist."

Aref's letter was glorious. He wanted me to have his book, and I now do. It's a poignant memoir/autobiography titled "Son of Mountains: My Life as a Kurd and a Terror Suspect." It was written at Troy, New York's Rensselaer County Jail after his wrongful October 2006 conviction and before his transfer to Terre Haute's CMU. It's a courageous man's story, and imagine his achievement. He wrote it in jail, barely spoke English when he arrived, has now improved it measurably, but he's still learning.

I don't think he'll mind if I share some of his comments. He began hoping I'm fine, in good health, and then said: "Thank you very much for all you (did) and what you are doing to bring peace and justice for this nation and all over.

I read your article about my case (and) wanted to send you a letter and say thank you....I am glad you have (my) book, this means I will going to hear from you what you think of it, and I will be happy to receive many notes and advices from you....feel free to 'critisice' any part of any thing in the book."

Aref's book is glorious. It deserves praise and admiration, not criticism, and it's strongly recommended to readers. It's also easily available through Amazon, the site has three 5-star reviews on it, it's going into second printing after a limited first run, and book proceeds are for Aref's four young children through his Children's Fund.

Aref wrote much more, enclosed portions of his other writings, and he ended his letter saying: "You honored me by writing to me. I am sorry this is my best in writing English. Take care my 'brother.' Peace, salam. Yassin"

Yassin is now my "brother," a political prisoner and victim of injustice. Yet, his spirit seems high, he dreams of reunion with his family, and he continues to write. A recent article was on April 19. He called it "Bread for the Baker and Meat for the Butcher (Nan Bo Nanawa Goshtish Bo Qasab)." It's five paragraphs long and says (from the Kurdish experience)

"there is no possibility (in Iraq) for development, and we won't see any stability til they let our bakers bake bread and our butchers prepare meat. If this doesn't happen, we will see more corruption and our lives will become more and more miserable. Especially when:

Fools are ruling. The blind are leading. The ignorant are teaching. The racists are preaching"

....and a brutal occupation continues its ugly oppression. At his article's end, Aref cites two proverbs and asks that they be understood to "have a better sense of (one's) self-respect and recognition of (one's) own capacity." He wishes this for "many of our leaders and politicians (and) will be glad to see many of them honoring themselves by resigning from office." Millions around the world share that view and then some. Many also know about Yassin and how a brutish regime mistreated him.

Stephen Lendman is a Research Associate of the Centre for Research on Globalization. He lives in Chicago and can be reached at

Also visit his blog site at and listen to The Global Research News Hour on Mondays from 11AM to 1PM US Central time for cutting-edge discussions with distinguished guests. Programs are also archived for easy listening.

U.S. Army suicides highest in 2007

U.S. Army suicides highest in 2007

By David Morgan

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The U.S. Army on Thursday said suicides among active duty troops in 2007 had reached the highest level on record, due partly to the stress caused by deployments to Iraq and Afghanistan.

The Army announced that 115 soldiers, including 22 National Guard and Army Reserve troops, killed themselves last year. That marked a 12.7 percent rise from the 102 suicides recorded in 2006. There were 85 Army suicides in 2005.

It was the highest number of actual suicides in the military force since record-keeping began in 1980 and Army officials said the rate has remained at about the same level since, with 38 confirmed suicides recorded for 2008 as of last Monday.

The Army also said there were 935 suicide attempts in 2007.

Preliminary figures released in January had suggested the number of suicides in 2007 could reach 121.

Thirty-two suicides, or more than one-quarter of the actual 2007 total, occurred in Iraq as President George W. Bush poured extra forces into the country in an effort to quell sectarian violence. Another four occurred in Afghanistan.

Army officials said statistics did not show a direct link between repeated deployments to Iraq and Afghanistan and the rise in suicides.

But officials acknowledged that stresses caused by wartime Army operations were taking their toll on soldiers including in their personal relationships, the breakup of which was cited as a catalyst in 50 percent of cases.

"We see a lot of things that are going on in the war which do contribute," said Army psychiatrist Col. Elspeth Ritchie.

She pointed specifically to long months away from home, the horrors of combat, the ready availability of loaded weapons and the high activity levels of current Army operations.

"All of those together we think are part of what may contribute, especially if somebody's having difficulties already," she said.

While 24 percent of cases occurred among soldiers sent to a combat theater for the first time, only 7 percent involved soldiers who had been deployed two or more times. Twenty-six percent had never been deployed.

Forty-three percent of suicides occurred after soldiers had returned to their home station.

But officials said the suicide rate for the Army remained below a civilian rate of 19.5 suicides per 100,000 people in the general population.

Army rate stood at 18.8 suicides per 100,000 regular active duty troops and at 16.8 per 100,000 when active duty National Guard and Reserve members were included in the total.

Not included in the statistics were 53 suicides last year among National Guardsmen and Reservists who were not on active duty.

Former prosecutors challenge White House immunity claim

Former prosecutors challenge White House immunity claim

By Marisa Taylor

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Twenty former U.S. attorneys, both Republicans and Democrats, urged a federal judge Thursday to intervene in a constitutional battle over whether two White House officials should be forced to testify before Congress about the firings of nine U.S. attorneys.

The former top prosecutors, including two who served under President Bush, argue in court papers that the judge should reject the Bush administration's assertion of blanket immunity for presidential chief of staff Joshua Bolten and former White House counsel Harriet Miers in the congressional investigation.

Democrats in the House of Representatives say they were forced to sue in March, more than a year after they launched the probe, because the administration has refused to allow Miers and Bolten to provide crucial information about the reasons the prosecutors were fired. The case also could determine how former presidential adviser Karl Rove responds to a subpoena in a related congressional investigation.

The lawsuit accuses administration officials of injecting partisan considerations into the firing decisions and making "questionable or outright false statements" in subsequent explanations to Congress.

The prosecutors acknowledged that the administration could have legitimate legal reasons for not allowing Bolten and Miers to testify. However, they called on U.S. District Judge John D. Bates to weigh Congress' arguments carefully because of the serious nature of the allegations.

"This congressional inquiry involves the possible subversion of principles at the core of Constitutional government," they wrote. "It is a matter of the utmost importance for Congress to conduct a complete investigation to determine whether White House officials have injected, or attempted to inject, partisan considerations into a process that must be rigorously insulated from such considerations."

The administration has denied any wrongdoing and maintains that Congress has no compelling interest to review White House deliberations on the matter.

The prosecutors who voiced support for Congress' position include officials who served under presidents Johnson, Nixon, Carter, Reagan, Clinton and both President Bush and his father, former president George H.W. Bush.

Alan Bersin, a former U.S. attorney under Clinton, and William Braniff, a former U.S. attorney under George H.W. Bush, both served as the top federal prosecutor in San Diego, where the Bush administration later fired then-U.S. attorney Carol Lam. Former New Mexico U.S. Attorney David Iglesias, who was among the ousted prosecutors, and Matthew Orwig, a former U.S. attorney under Bush in Beaumont, Texas, also signed the brief.

"This brief is apolitical and legally sound," said Orwig, who was described in internal Justice Department documents that came out during the controversy as a "loyal Bushie." "It was clear as this controversy unfolded that the reasons given for the firings were fabricated. It also became clear that the congressional investigation was being impeded."

Four legal and watchdog organizations also filed briefs in support of Congress: the Brennan Center for Justice at New York University School of Law, the Rutherford Institute, Judicial Watch, and Citizens for Ethics and Responsibility in Washington.

The congressional investigation into the firings of the U.S. attorneys produced suspicions but no proof that the prosecutors were targeted because they'd rebuffed Republican demands that they bring weak voter-fraud cases against Democrats or because they'd mounted corruption investigations of Republicans.

Although White House and Justice Department officials have acknowledged the firings were handled badly, they've insisted the ousters weren't orchestrated to hinder or encourage certain prosecutions. A spokesman for the Justice Department declined to comment on the latest developments in the lawsuit.

Internet Attacked as Tool of Terror

Internet Attacked as Tool of Terror

Matt Renner

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A controversial plan to study and profile domestic terrorism was scrapped after popular push back, however, the spirit of the legislation lives on in Senator Joe Lieberman's office.

HR 1955, "The Violent Radicalization and Homegrown Terrorism Prevention Act of 2007" passed the House in October 2007 with almost unanimous support. The bill immediately came under fire from civil liberties watchdogs because of what many saw as a deliberate targeting of Muslims and Arabs and the possible chilling effect it might have on free speech.

The original bill intended to set up a government commission to investigate the supposed threat of domestically produced terrorists and the ideologies that underpin their radicalization. The ten-member commission was to be empowered to "hold hearings and sit and act at such times and places, take such testimony, receive such evidence, and administer such oaths as the Commission considers advisable to carry out its duties." The bill also singled out the Internet as a vehicle for terrorists to spread their ideology with the intention of recruiting and training new terrorists.

After significant public pressure, the bill stalled in the Senate. However, Senator Joe Lieberman (D-Connecticut), the current chairman of the Senate Homeland Security and Governmental Affairs Committee, has embraced the thrust of the legislation and has been working to push forward some of the goals of the original bill, including an attempt to weed out terrorist propaganda from the Internet.

Jim Dempsey, vice president for public policy at the non-profit Center for Democracy and Technology has spoken out against the assault on Internet speech. "I have more concern about what Senator Lieberman is doing than about HR 1955. [Lieberman] is no friend of civil liberties," Dempsey told Truthout, adding "there is concern that what he has planned will be worse than HR 1955."

Dempsey spoke out in favor of the spirit of HR 1955, calling the outpouring of criticism "hypothetical and hyperbolic." In his view, the study of radicalization and home grown ideologically based violence is worthwhile. However, he objects to recent actions taken by Lieberman.

On May 19, Lieberman sent a letter to Google Inc.'s CEO Eric Schmidt demanding that Google "immediately remove content produced by Islamist terrorist organizations from YouTube."

"By taking action to curtail the use of YouTube to disseminate the goals and methods of those who wish to kill innocent civilians, Google will make a singularly important contribution to this important national effort," Lieberman wrote.

Google fired back, refusing to take off material that did not violate its community guidelines. "While we respect and understand his views, YouTube encourages free speech and defends everyone's right to express unpopular points of view," Schmidt said in response, adding, "we believe that YouTube is a richer and more relevant platform for users precisely because it hosts a diverse range of views, and rather than stifle debate, we allow our users to view all acceptable content and make up their own minds."

Google removed some of the videos that violated their rules against posting violence and hate speech, but made a point to write, "most of the videos, which did not contain violent or hate speech content, were not removed because they do not violate our Community Guidelines."

"I think that Senator Lieberman's actions vis-a-vis Google were improper," Dempsey said. "A blame the messenger approach doesn't make sense as a response to radical violence. The notion that taking the videos off of YouTube will accomplish anything shows a fundamental misunderstanding of the nature of the Internet. Take the videos off of YouTube and they'll appear elsewhere."

Senator Lieberman's staff failed to return calls for comment.

A New York Times editorial called Lieberman's claims about the Internet "ludicrous," and warned of an attempt to censor the Internet. Lieberman defended himself in a response letter, saying, "the peril here is not to legitimate dissent but to our fundamental right of self-defense."

According to civil liberties activists, Chairman Lieberman has been spearheading an effort to censor speech on the Internet. His committee recently released a report titled "Violent Islamist Extremism, The Internet, And The Home Grown Terrorism Threat," (PDF) a report detailing the use of web sites and Internet tools to spread pro-terrorism propaganda.

The report repeatedly blames Internet web sites and chat rooms for "radicalization," calling the web sites "portals" through which potential terrorists can "participate in the global violent Islamist movement and recruit others to their cause." As civil liberties groups have pointed out, the report focuses solely on terrorism seen as associated with Islam.

Also, the report relies heavily on experts from inside the US national security apparatus, with only one research study cited. The study by the New York Police Department details a hypothetical four step "radicalization process". The report was criticized by a coalition of civil liberties groups as "statistically and methodologically flawed," in a letter they wrote in response to the report.

Caroline Fredrickson, director of the ACLU Washington, DC, legislative office, said that Lieberman "is trying to decide what he thinks should go on the Internet," which, she said, "reeks of an interest in censoring all sorts of different dialogs."

"If someone criticizes Israel's treatment of Palestinians and favors Hamas, should that be censored?" Fredrickson asked.

Dow Chemical announces massive price increase

Dow Chemical announces massive price increase

By Alex Lantier

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Dow Chemical announced it would charge up to 20 percent more for its products on May 28, citing spiraling price increases for oil and other petrochemical inputs. This decision by Dow—a behemoth with $54 billion in 2007 sales spread throughout numerous consumer industries—is expected to substantially increase inflation, which is already increasing rapidly in the US and throughout the world, cutting into workers’ purchasing power.

Dow’s action will affect a huge array of basic materials and consumer items, including: plastics used in automobile components and shopping bags; propylene glycols used in antifreeze, coolants, solvents, cosmetics and pharmaceuticals; and acrylic acid-based products used in detergents, wastewater-treatment and disposable diapers.

The Wall Street Journal commented: “Over the past months, Dow and other chemical companies have been raising product prices to pass on higher raw-material costs to their customers, but the increases have been usually confined to one product or one region. The company’s decision to increase prices for all its products world-wide is nearly unprecedented.”

Dow’s price increase comes on the heels of announcements of planned price increases of 4-8 percent on a variety of consumer goods produced by companies such as Procter & Gamble and Kimberly-Clark, which are among Dow’s main clients. It appears that Dow is trying to position itself to claim a significant portion of the new revenue that will be generated by retailers and consumer goods makers as they jack up their prices.

Other major chemical firms announced that they would also increase prices. Dutch firm LyondellBasell’s CEO Volker Trautz said, “This kind of volatile environment is not sustainable. We absolutely have to pass along price increases.” US firm DuPont also confirmed press inquiries that it would raise prices, but declined to make a more detailed comment.

The chemical industry relies on oil, natural gas, and various derivatives of petrochemicals as raw materials for the more complex chemical compounds it produces. It has had to substantially reorganize its operations as the price of a barrel of crude oil has risen from an average of approximately $24 in 2002 to $65 in mid-2007 and $130 per barrel this month.

Dow CEO Andrew Liveris issued a statement declaring, “Our first-quarter feedstock and energy bills leapt a staggering 42 percent year over year, and that trajectory has continued, with the cost of oil and natural gas climbing ever higher.” Dow paid $8 billion for hydrocarbon raw materials in 2002 and expects to pay $32 billion for these raw materials in 2008. According to figures provided by Dow to the Wall Street Journal, Dow’s hydrocarbon costs have jumped from under 30 percent of its total costs in 2002 to just under 50 percent in 2007.

Liveris continued with an attack on the Bush administration’s energy policy and a warning about the impact of the oil crisis on the slowing US economy: “For years, Washington has failed to address the issue of rising energy costs and, as a result, the country now faces a true energy crisis, one that is causing serious harm to America’s manufacturing sector and all consumers of energy. The government’s failure to develop a comprehensive energy policy is causing US industry to lose ground when it comes to global competitiveness, and our own domestic markets are now starting to see demand destruction throughout the US.”

The statement on “demand destruction” was widely interpreted in the financial press as referring to the fact that, as gas prices rise, consumers are cutting back on purchases of consumer goods produced by Dow’s clients. Dow’s profit margin has fallen from 9.8 percent in 2005 to 7.6 in 2006 and 5.4 percent last year.

Liveris’s press release is an indication of powerful forces building up inside the US bourgeoisie that view current US policy as a massive debacle. In this respect it is worth noting that Dow is hardly friendly to environmental or left-wing causes. It was a major manufacturer of Agent Orange and napalm for the US military during the Vietnam War. It also acquired Union Carbide, whose operations poisoned thousands in the 1984 Bhopal chemical disaster in India. Dow has since refused to accept any liability for the incident. Liveris has posted his criticisms of US policy on the far-right National Review web site.

Dow’s price increase comes on the heels of the company’s May 15 annual meeting with shareholders, at which Livernis read a prepared statement which was posted on Dow’s corporate web site. He discussed the pressures bearing down on US manufacturers, caught between surging input prices and cash-strapped consumers shopping at large, powerful discount retailers like Wal-Mart. His comments underline the combination of attacks on the workforce and political muscle abroad upon which US manufacturers rely today, in order to continue to deliver high profits to investors.

Describing the situation at the beginning of the decade, Liveris said: “Misguided energy policy here in the US was making natural gas—one of our key raw materials—even more expensive by the month. At the same time, we witnessed the rising power of the US retailer. Big box stores like Home Depot and Wal-Mart set new, low prices for high-quality goods. With their size and buying power, they began dictating pricing levels to their suppliers, who passed those dictates on to their supplies: companies like us. Caught between these two powerful forces, we lost $9 billion in pricing power between 1995 and 2002.”

The response was to embark on a large-scale attack on Dow’s workforce and productive capacity. Livernis boasted: “Many of the cost-control measures implemented as part of our survival in 2003 and 2004 are now institutionalized in our company. Financial discipline is a key strength at Dow and will remain so far into the future.... Since 2003, we have announced 92 plant shutdowns, 42 site exits, and 38 business divestitures.”

Despite falling profits, earnings per share have risen because of a massive stock buy-back program, in which Dow bought up much of its stock in order to prop up its stock price and reduce the number of shares over which Dow’s profits had to be distributed. Livernis noted: “The last chemical industry trough was in 2002 and our earnings at that time were 34 cents a share. When we look to the next expected trough sometime around 2010 ... we expect that number to be close to $3.50 per share, a ten-fold increase!”

Livernis noted that Dow’s dividend payments to stockholders had increased by 25 percent since January 2006.

One of the major factors underlying Livernis’s optimism on future earnings is his confidence that Dow will be able to use US imperialism’s substantial influence in the Middle East to boost revenues. Dow recently signed a joint venture agreement with Petrochemical Industries Company of Kuwait. It expects to receive below-market oil costs and $9.5 billion in cash from the Kuwaiti company.

The Iraq war’s “complicit enablers,” then and now

The Iraq war’s “complicit enablers,” then and now

By Bill Van Auken

Go To Original

Former White House press secretary Scott McClellan’s new book indicting the Bush administration for employing a “political propaganda campaign” and deception to drag the US into an “unnecessary war” in Iraq has unleashed a wave of bitter recriminations from the Republican right, while prompting opportunist attempts by Democrats to exploit the tell-all memoir for their own political purposes.

As McClellan began making the rounds of television news interviews, former White House counselor Dan Bartlett described the book, “What Happened: Inside the Bush White House and Washington’s Culture of Deception,” as “total crap” and called the ex-press secretary’s actions “beyond the pale.” Former White House counter-terror aide Frances Townsend told CNN that McClellan was “self-serving, disingenuous and unprofessional.”

Meanwhile, both Senators Barack Obama and Hillary Clinton worked McClellan’s book into their Democratic presidential campaigns.

Clinton lionized McClellan, declaring “this young man essentially apologizes for having been part of misleading America for three years. He talks about how difficult it was that our president and those working with him didn’t, either level with the American people, or didn’t change course when circumstances demanded it.”

Apparently anxious to shift the subject from the run-up to the Iraq war, when Clinton was one of the majority of Democrats in the Senate voting Bush a blank check to invade Iraq, she continued: “There isn’t any doubt that President Bush has misled us. The question now is, what kind of president do we need going forward.”

The Obama campaign used the book to counter charges by Republican candidate Senator John McCain that the Democratic front-runner lacked experience in relation to Iraq. “On the day after the former White House press secretary conceded that the Bush administration used deception and propaganda to take us to war, it seems odd that Senator McCain, who bought the flawed rationale for war so readily, would be lecturing others on their depth of understanding about Iraq,” read a statement issued by the Obama campaign.

No attempt was made to draw out the staggering implications of the confirmation, from inside the White House, that a war that has cost over one million Iraqi lives and killed or wounded tens of thousands of US troops was launched through “deception and propaganda.” It was merely used as a talking point to promote Obama as a better candidate than his Republican rival.

One Democratic congressman, Robert Wexler of Florida, called for McClellan to testify under oath before the House Judiciary Committee. He focused on the section in the former presidential spokesman’s book dealing with the leaking of the identity of CIA operative Valerie Plame Wilson and the implication that Karl Rove, Lewis Scooter Libby and Vice President Dick Cheney participated in a conspiracy to obstruct justice.

In a letter to supporters, Wexler said that the statements in McClellan’s book justified impeachment hearings against Cheney. He quickly acknowledged, however, that the continuing revelations of outright criminality in the administration “have not been enough to convince even a majority of the liberal and progressive Members of Congress to support impeachment hearings. In addition, the leadership of the Democratic Party in Congress genuinely feels that pursuing impeachment will jeopardize our congressional agenda and threaten gains in the November elections.”

In other words, the Democratic leadership—which has repeatedly declared impeachment “off the table”—intends to do absolutely nothing about McClellan’s damning testimony, outside of milk it for a few cheap political points. It cannot follow the logical course of pursuing those responsible for a criminal war of aggression, because the Democrats are themselves wholly complicit. Indeed, the party’s leadership in the House and Senate are in the process of approving another $165 billion to continue a war that, as House Speaker Pelosi admitted yesterday, is based on lies.

Perhaps the most revealing reaction was that of the media itself to McClellan’s indictment of those whom he fed the false propaganda for war. He essentially accused them of serving as a willing accomplice of the Bush administration in deceiving the American people.

In his book, McClellan charges that the press was “too deferential to the White House and to the administration in relation to the most important decision facing the nation during my years in Washington, the choice over whether to go to war in Iraq.” The discrediting of the false pretexts used by the administration to launch the war, he added, “should never have come as such a surprise,” implying that the media was well aware that it was regurgitating false propaganda, but never told its viewers and readers.

He added that the “‘liberal media’ didn’t live up to its reputation,” and, most damning of all, referred to them—quite accurately—as “complicit enablers” of the Bush war drive.

In response, some members of the media made partial admissions that McClellan’s charges had merit. CNN’s correspondent Jessica Yellin, appearing on the cable news network Wednesday night, acknowledged that news executives—apparently at ABC news where she worked from 2003 to 2007—pressured her and others to “put on positive stories about the president.” She added that “they would edit my pieces...they would turn down stories that were more critical.”

Yellin explained, “The press corps was under enormous pressure from corporate executives, frankly, to make sure the war was presented in a way that was consistent with the patriotic fervor in the nation and the president’s high approval ratings.”

Appearing together on the “Today” show Wednesday, three news anchors—Brian Williams of NBC, Katie Couric of CBS and Charlie Gibson of ABC—were asked about McClellan’s indictment of the media.

The ex-press secretary’s assessment was “fairly accurate,” Couric acknowledged. “I know when we were covering it—and granted in the spirit of 9/11, people were unified and upset and angry and frustrated—I do think we were remiss in not asking some of the right questions.” She added, “There was such a significant march to war, and people who questioned it very early on, and really as the war progressed, were considered unpatriotic. And I think it did affect the way—the level of aggressiveness that was exercised by the media.”

Gibson denied that the media bore any blame for broadcasting administration lies, insisting, “It was just a drumbeat of support from the administration. It is not our job to debate them. It is our job to ask the questions.”

Williams said that the White House and the Pentagon exerted enormous pressure on the news media to stick to the propaganda line. “The tone of the time was quite extraordinary.”

While there was a significant element of intimidation involved—both Williams and Couric cited cases where the administration threatened to block access for reporters who asked critical questions—the corporate-controlled media was hardly a passive or unwilling collaborator in the march to war.

The news media did not capitulate to “patriotic fervor” and the “spirit of 9/11,” giving the people what they wanted to hear. It was the media that actively sought to whip up pro-war sentiment and to falsely link the impending unprovoked invasion of Iraq with the terrorist attacks of September 11, 2001.

In fact, the period leading up to the invasion saw the biggest demonstrations in history, in the US and around the world, with tens of millions taking to the streets to oppose a war against Iraq. Polls conducted at the time showed a majority opposed to the Bush administration’s drive to end weapons inspections in order to launch an immediate war. There was widespread skepticism about the pretexts given by the administration for invading—weapons of mass destruction and alleged ties between Saddam Hussein and Al Qaeda.

Virtually none of these sentiments found expression in the media, while the massive demonstrations themselves went virtually unreported. There was no doubt an element of cowardice in this phenomenon, fear of being branded “unpatriotic”—not by the public, but by the political right, which set the agenda.

Commenting on McClellan’s book Wednesday, NBC’s Washington bureau chief Tim Russert, noted that it indicted the Bush administration for war “propaganda” and taking the country to war on false pretenses. “This is not,” he declared. “This is someone who was serving in the White House for seven years.”

This distinction is telling. The mass media instinctively rejected—and continues to reject—any critique of the war from the left—even from a Democratic Party-oriented pressure group like There are no new revelations in McClellan’s book. That the Bush administration was using lies and propaganda to prepare a war of aggression was something that the World Socialist Web Site continuously reported and documented from 2001 onwards. But from the standpoint of the corporate-controlled media, anything coming from the left is not a legitimate part of public opinion or debate.

More fundamental than political cowardice in this process are social interests. The mass media is owned almost entirely by massive capitalist conglomerates. Viacom Inc.’s CBS, Walt Disney Co.’s ABC, AOL Time Warner’s CNN, General Electric Co.’s NBC and Fox, owned by Rupert Murdoch’s News Corp., did not merely bow to pressure from the White House and the right, they actively promoted the war, which was seen as furthering the profit interests of corporate owners and major shareholders whose holdings also extend to other sectors of the economy, including oil, arms and finance capital.

For its part, the New York Times published a cynical editorial on McClellan’s book entitled “I knew it all along,” suggesting that the ex-press secretary’s exposures of the Bush administration were motivated only by a lucrative book deal. The Times commented: “For all of its self serving, the book does serve one good purpose: It is a reminder that we still do not know precisely how far Mr. Bush, Mr. Cheney and the others were willing to wade into that ‘culture of deception.’”

That the Times itself was up to its neck in the campaign to deceive the American people and promote the agenda of a war against Iraq is nowhere acknowledged. It played perhaps the most influential and odious role in this operation, not only echoing but embellishing the administration’s phony charges about “weapons of mass destruction” in preparation for the invasion.

The Times and other sections of the media, meanwhile, are engaged once again in the same kind of operation, paving the way to yet another eruption of American militarism, this time against Iran.

Whatever McClellan’s intention, “culture of deception,” the provocative phrase included in the book’s title, describes not to the Bush administration or partisan politics in Washington, but the political establishment a whole—including the Congress, the Democratic Party, the media and the major banks and corporations—which has based its entire policy, both foreign and domestic, on systematic and increasingly blatant lying to the American people.

The lies about weapons of mass destruction were driven by the need of the American ruling establishment to hide from the American people the predatory class interests that underlay the war drive. The war was waged not to “protect” the American people, but to secure by means of aggressive war a key strategic objective of US imperialism, hegemony over the oil-rich Persian Gulf.

McClellan, it should be noted, continues this practice of lying, claiming in his book that the real motive for the war was not WMD and terrorism, but the desire of Bush and Co. to spread democracy in the Middle East, perhaps the most ludicrous pretext of them all.

Such lies have profound social roots. They become a necessity, and a political reflex, because the interests of the financial elite, represented by both political parties, stand in such sharp contradiction to those of American working people, the overwhelming majority of society.

The controversy surrounding the McClellan book has once again demonstrated that even when these lies, involving criminality and mass murder, are exposed, there are no real consequences. The same forces that McClellan refers to as Bush’s “complicit enablers” in launching the war in Iraq are still at work, allowing him to continue the bloodbath right to the day he leaves the White House.

It is thus a remarkable fact that despite all the efforts of administration propaganda, bolstered by the myriad “enablers” in the media and the Democratic Party, the vast majority of the American people have turned decisively against the war. They did so, not in response to criticism of the war within the political establishment or the media, but independently, out of their own bitter experiences with the war and the broader social crisis of American capitalism.

In the end, holding accountable those who told the lies and carried out a criminal war of aggression depends upon the emergence of a new, independent political movement of working people in struggle against both the war and the capitalist system that gave rise to it.