Thursday, June 19, 2008

Arrests for War Resistance Increase Again

Arrests for War Resistance Increase Again

by: Bill Quigley

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"We can never forget that everything that Hitler did in Germany was 'legal,' and everything the Hungarian freedom fighters did was 'illegal.' It was 'illegal' to aid and comfort a Jew in Hitler's Germany, but I am sure that if I lived in Germany during that time I would have comforted my Jewish brothers even though it was illegal ... we who engage in nonviolent direct action are not the creators of tension. We merely bring to the surface the hidden tension that is already alive." Martin Luther King Jr.

There have been over 15,000 arrests for resistance to war since 2002. There were large numbers right after the runup to and invasion of Iraq. Recently, arrests have begun climbing again. Though arrests are a small part of antiwar organizing, their rise is an indicator of increasing resistance.

The information comes from the Nuclear Resister, a newsletter that has been reporting detailed arrest information on peace activists and other social justice campaigns since 1980. Felice and Jack Cohen-Joppa, publishers of the Nuclear Resister, document arrests by name and date, based on information collected from newspapers across the country and from defense lawyers and peace activists.

Since 2002, the Nuclear Resister has documented antiwar arrests for protesters each year:

2002 - 1,800 arrests
2003 - 6,072 arrests
2004 - 2,440 arrests
2005 - 975 arrests
2006 - 950 arrests
2007 - 2,272 arrests
2008 - 810 as of May 1

"Arrests for resistance to war are far more widespread geographically than most people think," according to Cohen-Joppa of the Nuclear Resister. "Yes, there are many arrests in DC and traditional big cities of antiwar activity - like San Francisco, NYC and Chicago, but there have also been antiwar arrests in Albany, Ann Arbor, Atlanta, Bangor, Bath, Bend, Brentwood, Burlington, Campbell, Cedar Rapids, Chapel Hill, Charlottesville, Chicopee, Colorado Springs, Denver, Des Moines, East Hampton, Erie, Eugene, Eureka, Fairbanks, Fairport, Fort Bragg, Fort Wayne, Grand Rapids, Great Dismal Swamp, Hammond, Huntsville, Joliet, Juneau, Kennebunkport, La Crosse, Los Angeles, Madison, Manchester, Memphis, Newark, Northbrook, Olympia, Omaha, Pittsburgh, Portland, Portsmouth, Providence, Richmond, Sacramento, San Diego, Santa Fe, Smithfield, Springfield, St. Louis, St. Paul, Staten Island, Superior, Syracuse, Tacoma, Toledo, Tucson, Tulsa, Vandenberg, Virginia Beach, Wausau, Wheaton and Wilmington, just to name a few."

"In fact," notes Cohen-Joppa, "in 2007, antiwar arrests were reported during 250 distinct events in 105 cities in 35 states and the District of Columbia. So far in 2008, arrests have been reported at 65 events in 43 different cities in 19 states and DC."

An example of the scope of resistance can be found in the Chicago-based Voices for Creative Nonviolence. They joined with other major peace groups like Codepink, Veterans for Peace and the National Campaign for Nonviolent Resistance in early 2007 to launch The Occupation Project, a campaign of resistance aimed at ending the Iraq War. Theirs was a campaign of sustained nonviolent civil disobedience to end funding for the US war in and occupation of Iraq. The Occupation Project resulted in over 320 arrests in spring of 2007 in the offices of 39 US Representatives and Senators in 25 states.

"I am energized by the dedication of so many conscientious activists across the country willing to take the risks of peace and speak truth to power," says Max Obuszewski of the National Campaign for Nonviolent Resistance. "We have been unsuccessful so far in stopping this awful war and occupation of Iraq, but it is not for the lack of direct action. We are taking on the greatest empire in world history, but we will continue to act."

"There are large numbers of new people being arrested," notes Cohen-Joppa, "most typically saying, 'I have tried everything else from writing to voting, but I have to do more to stop this war.' The profile of people arrested includes high school teenagers to senior citizens, mostly people under 30 and over 50."

Antiwar arrests are significantly underreported by mainstream media. For example, around the fifth anniversary of the invasion of Iraq in March 2008, most news stories wrote that there were 150 to 200 arrests nationwide. Cohen-Joppa and the Nuclear Resister report there were over double that number, well over 400, many outside the cities where regular media traditionally look.

Though arrests typically drop off in election years, as people's hopes are raised that a new president or Congress will make a difference and stop the war, this year looks like arrests are likely to continue to rise. In part, that will depend on the attitude of authorities in Denver and Minneapolis, where the political conventions are being held. In 2004, New York City authorities overreacted so much to protesters at the Republican convention that they arrested historic numbers of protesters - including hundreds who had no intention to risk arrest. If Senator McCain is elected, antiwar resistance activities are expected to rise much higher.

Why do people risk arrest in their resistance to war? Perhaps Daniel Berrigan, on trial for resistance to the Vietnam War, said it best:

"The time is past when good people may be silent
when obedience
can segregate us from public risk
when the poor can die without defense.
How many indeed must die
before our voices are heard
how many must be tortured dislocated
starved maddened?
How long must the world(s resources
be raped in the service of legalized murder?
When at what point will you say no to this war?
We have chosen to say
with the gift of our liberty
if necessary our lives:
the violence stops here.
The death stops here.
The suppression of truth stops here.
This war stops here."

Though war resistance activities and arrests have not stopped the war in Iraq, those struggling for peace remain committed. "None of us know what will happen if we continue to work for peace and human rights," says a handmade poster of one involved in the resistance, "But we all know what will happen if we don't."


The Nuclear Resister is published five to six times a year. They can be contacted at

Bill is a human rights lawyer and law professor at Loyola University New Orleans.

Paulson Calls for Clear Procedures to Shut Down Failing Investment Banks

Paulson Urges Clear Process to Close Investment Banks

By Rebecca Christie

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U.S. Treasury Secretary Henry Paulson joined Federal Deposit Insurance Corp. Chairman Sheila Bair in calling for bank regulators to have clear procedures for dealing with a failing investment bank.

Paulson said it needs to be clear what happens to financial firms that aren't part of the commercial banking system and don't have access to the same safety net. The Treasury chief also reiterated in a speech in Washington today that the U.S. economy is in a ‘‘rough period'' and that rising energy prices may prolong the slowdown.

Regulators are seeking to contain the danger that firms will make riskier bets in the aftermath of the Fed's rescue of Bear Stearns Cos. and introduction of direct loans to investment banks. Paulson said market ‘‘discipline'' must be strengthened, with firms not expecting that central bank aid will be ‘‘readily available.''

‘‘There still seems to be uncertainty surrounding the process by which a large complex institution is wound down and what impact it would have on the overall financial system,'' Paulson said. Regulators should determine whether to assign a specific agency to oversee resolutions, he said.

Bair Proposal

Bair, whose agency insures deposits at 8,534 commercial banks, told reporters yesterday the FDIC ‘‘would not turn it down'' if Congress gave it the authority to shut down failing investment banks. She said last month the FDIC's authority to set up bridge banks to take over and sell assets of failed banks offered a ‘‘good model'' for what's needed for investment banks.

Responding to questions after his speech, Paulson said Bair's idea for a resolution plan for troubled financial firms was ‘‘dead on.''

‘‘We must limit the perception that some institutions are either too big or too interconnected to fail,'' Paulson said at the Women in Housing and Finance annual luncheon. ‘‘If we are to do that credibly, we must address the reality that some are.''

Securities and Exchange Commission Chairman Christopher Cox indicated his agency warrants additional authority over investment banks, in an opinion piece in the Wall Street Journal today. It's ‘‘vital'' for Congress to give authorization for the SEC's current voluntary program of supervising securities' firms capital and leverage ratios, he wrote.

Paulson said the Fed's role should be broadened, repeating his call in a March ‘‘blueprint'' for a regulatory overhaul.

Fed's Role

‘‘Our nation has come to expect the Federal Reserve to step in to avert events that pose unacceptable systemic risk. But, as we noted in our Blueprint, the IND' ))">Fed has neither the clear statutory authority nor the mandate to anticipate and deal with risks across our entire financial system,'' Paulson said.

As an interim step, the Fed and Securities and Exchange Commission are discussing a ‘‘memorandum of understanding'' to address what information and access the central bank needs in return for loans to investment banks.

Paulson, Cox and Fed Chairman Ben S. Bernanke and their staffs are in almost daily discussions about the future of the so-called Primary Dealer Credit Facility, according to an official who spoke on condition of anonymity.

The Treasury and SEC want the program, designed to be in place until at least September, to be temporary. The discussions with the Fed center in part on what precautions might need to be in place in case a large securities company with hundreds of trading counterparties faces failure, as was the case with Bear Stearns.

Derivatives Markets

Paulson also today called for improvements in the derivatives and repurchase markets to prevent bottlenecks that could roil the financial system.

‘‘Given the massive scale of the over-the-counter derivatives market, we need to enhance trade processing with more automation, clear the backlog and create utilities and protocols that will make the process more efficient,'' Paulson said.

Repos are one of Wall Street's main financing channels. The Fed uses repos for its open market operations to keep the rate on overnight loans between banks close to the target set by policy makers.

The Treasury chief said ‘‘we must address risks associated with a potential counterparty failure and the risk associated with the potential disruption of a clearing bank'' in the repo market.

Paulson said he was ‘‘very hopeful'' that Congress would pass legislation to strengthen the regulation of government- chartered companies including Fannie Mae and Freddie Mac, the two largest sources of U.S. house financing. Still, some of the provisions in the Senate's version of the housing bill are ‘‘objectionable,'' he said.

-- With reporting by Craig Torres and Jesse Westbrook. Editors: Chris Anstey, Brendan Murray

Citigroup CFO Crittenden Sees More Subprime Writedowns

Citigroup's Crittenden Sees More Subprime Writedowns

By Josh Fineman and Bradley Keoun

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Citigroup Inc., the biggest U.S. bank, will have ‘‘substantial'' additional writedowns on its holdings of debt linked to the subprime mortgage market, Chief Financial Officer Gary Crittenden said.

The second-quarter markdowns related to subprime mortgages won't be as large as the $6 billion recorded for the first quarter, Crittenden said today on a conference call with investors hosted by Deutsche Bank AG.

‘‘We will continue to have substantial additional marks on our subprime exposure this quarter,'' Crittenden said. ‘‘We may continue to see the magnitude of the marks decline, as the exposures that we have have declined.''

Citigroup has booked more than $40 billion of credit losses and writedowns since the subprime mortgage market collapsed last year. Chief Executive Officer Vikram Pandit, who took over as CEO in December, outlined plans last month for the company to reduce assets by $400 billion over the next two to three years.

The company's subprime holdings include collateralized debt obligations, or CDOs, which are securities packaged from pools of loans and bonds.

Crittenden said on the call that Citigroup may also have to write down the value of assets backed by so-called monoline insurance companies such as Ambac Financial Group Inc., after they were stripped of their AAA credit ratings.

Citigroup last quarter recorded a cost of $1.5 billion to account for the reduced likelihood that the insurers will be able to pay. The company may record a ‘‘similar'' cost in the second quarter, Crittenden said.

Citigroup fell as much as 4.9 percent on the New York Stock Exchange after the comments. The shares dropped 71 cents to $19.69 at 12:27 p.m., after reaching $19.41.

Kucinich: Impeachment Not "Off the Table"

Kucinich: Impeachment Not "Off the Table"

by: Christopher Kuttruff

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While Congressional leaders silently opt to table impeachment articles against President Bush, Congressman Dennis Kucinich (D-Ohio) vows to speak out and keep the articles alive and in the public conscience. Kucinich spoke on Tuesday to Truthout about his resolution.

Last week the House voted 251-166 to refer Kucinich's articles of impeachment to committee - an action that most political analysts view as a desire by the Congressional leadership to bury the resolution. Kucinich, however, promised to keep impeachment from being swept "off the table" in order to provide a historical record of the Bush administration's policies.

The 35 articles of impeachment include charges of violating domestic and international laws against torture, misrepresenting intelligence in the lead-up to the war, illegally spying on American citizens, obstructing justice and governmental oversight, and many other violations.

When asked why impeachment has not bee seriously considered, Kucinich recalled to Truthout:

"Back in October of 2006 ... the Democratic leaders, expecting that they would be in a position of being in charge of the Congress, when asked about impeachment, said no. So, what happened is the tone was set early on that impeachment would be off the table even before the Democrats took over.

The problem is that such an approach unwittingly licensed misconduct and violations of US and international law. This was not very well thought out by Congressional leaders. Because the inaction has nullified the historical role - the constitutionally mandated role - of separation of powers and checks and balances. Two years ago it was too early ... now it's too late. The only question that should be asked is did he violate the law? The answer to that question is yes."

On MSNBC's Keith Olbermann on June 10, Jonathan Turley, professor of constitutional law at George Washington University, commented on the articles of impeachment. "The framers, I think, would have been astonished by the absolute passivity, if not the collusion, of the Democrats in protecting President Bush from impeachment," Turley stated.

"Frankly some of these claims are not really impeachable offenses. For example, it's not impeachable to be negligent. But there are plenty of crimes there. What's really disturbing for many of us, is that it takes a real effort for Democrats to walk from the floor to their offices and not trip over crimes. They are all over the record. What's amazing is that the president is hiding in plain view. He hasn't really denied the elements of these offenses. So, all that is lacking is political will," Turley noted.

"Speaker Pelosi will continue to lead legislative efforts to find a new direction in Iraq but believes that impeachment would create a divisive battle, be a distraction from Congress' efforts to chart a new course for America's working families and would ultimately fail," Nadeam Elshami, spokesman for Congresswoman Nancy Pelosi, said in a statement.

House Majority Leader Steny Hoyer has questioned the effectiveness of challenging President Bush in the "waning months of this administration's tenure."

With elections approaching, many Congress members dismiss the impeachment resolution as implausible and politically unwise, but few have attempted to dispute the substance of the articles. Sending the resolution to committee, a tactic frequently used to block debate on an issue or piece of legislation, reflects the Congressional leadership's unwillingness to debate the articles.

But while most legislation can go to committee and not be heard from again, impeachment is a privileged resolution, meaning that it has to be initially voted on in a timely manner, and it can be brought up again. Kucinich vowed to do exactly that. He stressed that if the resolution is not acted on by the House Judiciary committee, he will reintroduce the articles. "I'll bring it back," Kucinich emphasized. "The minute I introduced it, someone from the media said 'Well the leadership says this is dead'; and I said 'well, then, I hope they believe in life after death' because I'm bringing this back. And it'll be brought back within about 30 days of when I introduced it. And there'll be more. There'll be 60 items. And I'll read them. And people need to hear exactly what's happened in this government."

Congressman Robert Wexler (D-Florida), Congresswoman Barbara Lee (D-California) and Lynn Woolsey (D-California) have come out in support of the resolution, but most Congress members have avoided the issue completely, trying not to marginalize themselves before the 2008 election. Kucinich said that he is talking to other House members to try to get them on board, and that he was also going to speak to Judiciary Chairman John Conyers this week, and provide Conyers more information and evidence supporting the articles.

"I've talked to Republicans who support the resolution, but they're not prepared to come out. There are Democrats who support it, and hopefully they'll put their names to it. But whether they do or not, I feel that this needs to be on the record," Kucinich said.

Asked why the conflicting principles of the Democratic Party and the Bush administration have not resulted in a more defined impasse between the two branches, Kucinich stated, "The Bush administration has promulgated this concept of a unitary executive, which essentially nullifies, again, the Congress. And if the Congress goes along with that, it's essentially engaging in self-negation. We don't have any right to destroy the Constitution any more than the president does. And we have to look at the consequences of our failure to act here."

Kucinich refused to accept the notion that articles of impeachment were an exercise in partisanship that would not result in any action.

"There are hearings that take place, but of what consequence. There are letters being written, but where do they lead? If there's no accountability, hearings and letters are for naught. This impeachment resolution is a document, which should be the basis for hearings.

I am not going to relent in my determination to protect this Constitution and to show the American people that the government that they have had for the last two terms has been based on lies - lies that have separated us from the world..."

Pandering To Big Oil

Pandering To Big Oil

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President Bush, "reversing a longstanding position," called yesterday for an end to the federal ban on offshore oil drilling and reaffirmed his call to drill in the Arctic National Wildlife Refuge in Alaska. Bush's flip-flop followed an even more egregious policy shift by Sen. John McCain (R-AZ), who pushed for offshore drilling in a speech before oil executives in Houston on Tuesday, though he had campaigned against it as recently as three weeks ago. Following Bush and McCain's lead, a number of conservatives reversed their former opposition to offshore drilling, including Florida's Gov. Charlie Crist (R), Sen. Mel Martinez (R) and Rep. Connie Mack (R). Former House Speaker Newt Gingrich has been leading the charge to expand domestic drilling, with his "Drill Here, Drill Now, Pay Less" campaign. Yet the election-year gimmick of expanding offshore drilling does nothing to solve America's energy crisis, nor will it have an ameliorating effect on soaring gas prices. Under McCain's assumption of 21 billion barrels of oil in the banned areas -- higher than the Department of Energy's estimation of 18 billion barrels -- there is still only enough to support America's total consumption, at 7.5 billion barrels per year, for three years. The bottom line is that America consumes 25 percent of the world's oil but has just 3 percent of the world's reserves, as Senate Majority Leader Harry Reid (D-NV) pointed out. "We cannot drill our way out of this problem," he said. David Sandalow, a Brookings Institution energy expert, said of offshore drilling, "It's like walking an extra 20 feet a day to lose weight. It's just not enough to make a difference."

ACCOMPLISHES NOTHING: Over two years ago, Bush declared, "America is addicted to oil." But the latest Bush-McCain proposal will do nothing to solve that problem. "Feeding that addiction by tapping another vein just drills us into a deeper hole," said Sen. Bob Menendez (D-NJ). Bush declared that expanded drilling would "bring enormous benefits to the American people." In his Tuesday speech, McCain explained his flip-flop by saying he wanted to "address the concerns of Americans, who are struggling right now to pay for gasoline." Yet as the New York Times writes today of expanding offshore drilling, "This is worse than a dumb idea. It is cruelly misleading." The Energy Information Administration (EIA) predicted that "access to the Pacific, Atlantic, and eastern Gulf regions would not have a significant impact on domestic crude oil and natural gas production or prices before 2030." Even McCain's own top economic adviser Douglas Holtz-Eakin said offshore drilling would have "no immediate effect" on gas prices. Just yesterday, McCain seemed to reverse his long-standing opposition to drilling in the Arctic National Wildlife Refuge -- something Bush continued to push for in his speech -- even as he declared Tuesday that the "next president must be willing to break with the energy policies...of the current Administration." Bush's own Department of Energy estimated that drilling in the Arctic refuge would cut oil prices by only about 75 cents a barrel. What's more, even if the refuge were opened this year, its extracted oil would not reach the market for 10 years.

FALSE ARGUMENTS: Bush blamed "Democrats on Capitol Hill" who he said "have rejected virtually every proposal" to increase oil production, adding "now Americans are paying the price at the pump for this obstruction." Congress is not blocking domestic drilling. In fact, the number of drilling permits both on- and off-shore has exploded from 3,802 five years ago to 7,561 in 2007. Congress and the Bush administration have opened up so much land to drilling that oil companies can't keep up: In the last four years, the government has issued 28,776 permits to drill on public land, yet only 18,954 wells were actually drilled. Congressional obstruction is just one of the false arguments conservatives are peddling. Another is the idea that we can drill and still "ensure that our environment is protected." McCain declared drilling is so "safe" that "not even Hurricane Katrina and Rita could cause significant spillage from battered rigs off the coasts of New Orleans and Houston." This is patently false. Hurricane Katrina caused 44 oil spills, resulting in more than seven million gallons of oil spilled, according to the Coast Guard., nearing the nine million gallons spilled in the 1989 Exxon-Valdez disaster.

BOON FOR BIG OIL: "The only real beneficiaries will be the oil companies that are trying to lock up every last acre of public land before their friends in power -- Mr. Bush and Vice President Dick Cheney -- exit the political stage," the New York Times writes today. It is not surprising that oil executives praised the idea when McCain presented it to them on Tuesday. Houston-based Anadarko Petroleum Corp. CEO Jim Hackett called McCain's drilling plan "a positive development for American consumers," adding, "We need to get serious about producing our own resources for the benefit of Americans." Larry Nichols, CEO of Oklahoma City-based Devon Energy, called McCain's proposals a "truly honest assessment of what our energy policies have been and need to be." Big Oil has also vigorously backed McCain's campaign. McCain ranks second in the Senate for donations from the energy industry and has raised over $700,000 from oil and gas this election season alone.

Nearly Half of Wall St. Bank Profits Are Gone

Nearly Half of Wall St. Bank Profits Are Gone

Only a year ago, Wall Street reveled in an era of superlatives: record deals, record profit, record pay. But a mere 12 months later, nearly half of the profits that major banks reaped during that age of riches have vanished.

The numbers are staggering. Between early 2004 and mid-2007, a period of unprecedented wealth on Wall Street, seven of the nation’s largest financial companies earned a combined $254 billion in profits.

But since last July, those same banks — Bank of America, Citigroup, JPMorgan Chase, Lehman Brothers, Merrill Lynch, Goldman Sachs and Morgan Stanley — have written down the value of the assets they hold by $107.2 billion, gutting their earnings and share prices. Worldwide, the reckoning totals $380 billion, much of which reflects a plunge in the value of tricky mortgage investments.

More downbeat news is expected this week, when several big banks, including the ailing Lehman Brothers, are scheduled to report results for the latest quarter. As the tally of losses keeps growing, many bank executives — and their shareholders — keep asking the same question: When will the pain end?

But the finish line just seems to keep moving further away. Even when the losses end, bank executives are looking toward a new era of lower returns, thinner profits and fewer jobs. Greater scrutiny from regulators is forcing Wall Street firms to reduce their use of leverage, or borrowed money, which had fueled profits in good times but backfired when the credit crisis struck last summer. Nearly every finance company is cutting jobs and battening down.

“They are going to have to build a new business model,” Richard X. Bove, a financial services analyst at Ladenburg Thalmann & Co., said of investment banks. “I do not believe those businesses have the ability to generate the kind of profit they did in recent years without all the leverage.”

The threats to the broader financial system have receded in large part because of the extraordinary government-led effort to rescue Bear Stearns. And Wall Street seems to have the ability to come back from just about any downturn with new ways to churn even greater riches. That new, new thing may already be brewing across Bloomberg terminals and trading desks.

For now, investors are not holding out hope. They have dumped bank stocks with each round of bad news, and recently the financial sector lost its perch atop the nation’s stock market. The combined value of technology shares, those darlings of yesteryear, has eclipsed that of financial stocks. And the energy sector is not far behind.

Lehman Brothers sent shock waves across Wall Street last week, when the bank disclosed that it expected to post a quarterly loss of $2.8 billion. The bank, which has been struggling to win back investors’ confidence, is scheduled to provide more details of those results on Monday.

Lehman executives gathered at the bank’s Manhattan headquarters over the weekend, fueling speculation that the bank might try to raise capital from investors or even seek a buyer. A Lehman spokeswoman declined to comment.

Lehman, which for months had assured investors that it was managing its risks well, said last week that the loss reflected $4.1 billion in write-downs of its investments.

Goldman Sachs is scheduled to report results on Tuesday, followed by Morgan Stanley on Wednesday. Bank of America, Citigroup, JPMorgan and Merrill Lynch release results in July.

Goldman Sachs and Morgan Stanley are expected to have fared better than Lehman did in the latest quarter. They are more diversified than Lehman, which has traditionally focused on fixed income. And the two banks’ commodities traders may have profited handsomely in recent months as the prices for oil and foodstuffs have soared. Even so, many investors are anxious to see whether Goldman, which made money last year even as many of its rivals lost big, has continued to dodge trouble.

The latest round of results is likely to draw special scrutiny because Wall Street firms are disclosing capital levels under new international banking standards known as Basel II. And Merrill Lynch, Citigroup and UBS are also expected to suffer from the ratings downgrades recently issued for MBIA and Ambac, two bond reinsurers.

The more that banks take write-downs, the more they are, in a sense, shredding through the record profits they made when times were good. Citigroup, for example, has written down its mortgage and other loan investments by $37.3 billion or a full half of the handsome profits the global giant pulled in during the boom years.

Merrill Lynch, much smaller in size, has taken write-downs of $32.6 billion — or a whopping 153 percent of its profits from 2004 through last summer. Even if Merrill is given credit for the money it earned in the past year, the bank still had write-downs that translated into losses of $14 billion, and that is two-thirds of its profits in those three and a half years that ended with a pop last July.

“It’s a fairly unique situation, that you would give so much back,” said Alec Young, global equity strategist for Standard & Poor’s Equity Research. “The industry did enjoy real salad days over that period, but now the write-downs and losses have been so huge. It’s a significant percentage of the money generated.”

Even the winners in this cycle — JPMorgan Chase and Goldman Sachs — have had to pull out giant erasers to work through their loan books. JPMorgan, which had the financial heft to buy Bear Stearns, wiped out 15 percent of recent profits by lowering the values of its loan and mortgage assets. At Goldman, the cost of such write-downs is so far 12 percent of recent profits.

The banks are supposed to be especially good at valuing all the lumps of loans and assets they own. That is why many a Wall Street bonus is based on estimates of hard-to-value dealings in arcane assets. The very mortgage bonds that are now being written down, in fact, led to hefty bonuses for bank employees before the good times ended.

Some analysts predict that independent brokerage houses will merge with commercial banks, if the government begins regulating them. That uncertainty leaves executives at these companies unsure of how to plan for the future, said David Trone, an analyst at Fox-Pitt Kelton Cochran Caronia Waller, who is predicting bank consolidation.

“We’re in a weird limbo now,” Mr. Trone said.

Morgan Stanley warns of 'catastrophic event' as ECB fights Federal Reserve

Morgan Stanley warns of 'catastrophic event' as ECB fights Federal Reserve

By Ambrose Evans-Pritchard

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The clash between the European Central Bank and the US Federal Reserve over monetary strategy is causing serious strains in the global financial system and could lead to a replay of Europe's exchange rate crisis in the 1990s, a team of bankers has warned.

"We see striking similarities between the transatlantic tensions that built up in the early 1990s and those that are accumulating again today. The outcome of the 1992 deadlock was a major currency crisis and a recession in Europe," said a report by Morgan Stanley's European experts.

Just as then, Washington has slashed rates to bail out the banks and prevent an economic hard-landing, while Frankfurt has stuck to its hawkish line - ignoring angry protests from politicians and squeals of pain from Europe's export industry.

Indeed, the ECB has let the de facto interest rate - Euribor - rise by over 100 basis points since the credit crisis began.

Just as then, the dollar has plummeted far enough to cause worldwide alarm. In August 1992 it fell to 1.35 against the Deutsche Mark: this time it has fallen even further to the equivalent of 1.25. It is potentially worse for Europe this time because the yen and yuan have also fallen to near record lows. So has sterling.

Morgan Stanley doubts that Europe's monetary union will break up under pressure, but it warns that corked pressures will have to find release one way or another.

This will most likely occur through property slumps and banking purges in the vulnerable countries of the Club Med region and the euro-satellite states of Eastern Europe.

"The tensions will not disappear into thin air. They will find fault lines on the periphery of Europe. Painful macro adjustments are likely to take place. Pegs to the euro could be questioned," said the report, written by Eric Chaney, Carlos Caceres, and Pasquale Diana.

The point of maximum stress could occur in coming months if the ECB carries out the threat this month by Jean-Claude Trichet to raise rates. It will be worse yet - for Europe - if the Fed backs away from expected tightening. "This could trigger another 'catastrophic' event," warned Morgan Stanley.

The markets have priced in two US rates rises later this year following a series of "hawkish" comments by Fed chief Ben Bernanke and other US officials, but this may have been a misjudgment.

An article in the Washington Post by veteran columnist Robert Novak suggested that Mr Bernanke is concerned that runaway oil costs will cause a slump in growth, viewing inflation as the lesser threat. He is irked by the ECB's talk of further monetary tightening at such a dangerous juncture.

The contrasting approaches in Washington and Frankfurt make some sense. America's flexible structure allows it to adjust quickly to shocks. Europe's more rigid system leaves it with "sticky" prices that take longer to fall back as growth slows.

Morgan Stanley says the current account deficits of Spain (10.5pc of GDP), Portugal (10.5pc), and Greece (14pc) would never have been able to reach such extreme levels before the launch of the euro.

EMU has shielded them from punishment by the markets, but this has allowed them to store up serious trouble. By contrast, Germany now has a huge surplus of 7.7pc of GDP.

The imbalances appear to be getting worse. The latest food and oil spike has pushed eurozone inflation to a record 3.7pc, with big variations by country. Spanish inflation is rising at 4.7pc even though the country is now in the grip of a full-blown property crash. It is still falling further behind Germany. The squeeze required to claw back lost competitiveness will be "politically unpalatable".

Morgan Stanley said the biggest risk lies in the arc of countries from the Baltics to the Black Sea where credit growth has been roaring at 40pc to 50pc a year. Current account deficits have reached 23pc of GDP in Latvia, and 22pc in Bulgaria. In Hungary and Romania, over 55pc of household debt is in euros or Swiss francs.

Swedish, Austrian, Greek and Italian banks have provided much of the funding for the credit booms. A crunch is looming in 2009 when a wave of maturities fall due. "Could the funding dry up? We think it could," said the bank.

RBS issues global stock and credit crash alert

RBS issues global stock and credit crash alert

By Ambrose Evans-Pritchard

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The Royal Bank of Scotland has advised clients to brace for a full-fledged crash in global stock and credit markets over the next three months as inflation paralyses the major central banks.

"A very nasty period is soon to be upon us - be prepared," said Bob Janjuah, the bank's credit strategist.

A report by the bank's research team warns that the S&P 500 index of Wall Street equities is likely to fall by more than 300 points to around 1050 by September as "all the chickens come home to roost" from the excesses of the global boom, with contagion spreading across Europe and emerging markets.

Such a slide on world bourses would amount to one of the worst bear markets over the last century.

RBS said the iTraxx index of high-grade corporate bonds could soar to 130/150 while the "Crossover" index of lower grade corporate bonds could reach 650/700 in a renewed bout of panic on the debt markets.

"I do not think I can be much blunter. If you have to be in credit, focus on quality, short durations, non-cyclical defensive names.

"Cash is the key safe haven. This is about not losing your money, and not losing your job," said Mr Janjuah, who became a City star after his grim warnings last year about the credit crisis proved all too accurate.

RBS expects Wall Street to rally a little further into early July before short-lived momentum from America's fiscal boost begins to fizzle out, and the delayed effects of the oil spike inflict their damage.

"Globalisation was always going to risk putting G7 bankers into a dangerous corner at some point. We have got to that point," he said.

US Federal Reserve and the European Central Bank both face a Hobson's choice as workers start to lose their jobs in earnest and lenders cut off credit.

The authorities cannot respond with easy money because oil and food costs continue to push headline inflation to levels that are unsettling the markets. "The ugly spoiler is that we may need to see much lower global growth in order to get lower inflation," he said.

"The Fed is in panic mode. The massive credibility chasms down which the Fed and maybe even the ECB will plummet when they fail to hike rates in the face of higher inflation will combine to give us a big sell-off in risky assets," he said.

Kit Jukes, RBS's head of debt markets, said Europe would not be immune. "Economic weakness is spreading and the latest data on consumer demand and confidence are dire. The ECB is hell-bent on raising rates.

"The political fall-out could be substantial as finance ministers from the weaker economies rail at the ECB. Wider spreads between the German Bunds and peripheral markets seem assured," he said.

Ultimately, the bank expects the oil price spike to subside as the more powerful force of debt deflation takes hold next year.



By: Devvy

Go To Original

The American people continue to suffer the failed policies of Congress and sitting presidents. There can be no clinging to the illusion any longer that the economy is merely "soft." The financial picture for most Americans continues to be bleak with no end in sight. As Dominic Frisby said in a recent column, "Central bankers can't talk down inflation." Eighteen years ago, I fell into the issue of the privately owned Federal Reserve Banking System and my journey began. I educated myself about inflation, fiat currency, what happens when the dollar falls, why gold goes up. Oh, yeah, it can be dry and it can be confusing, but without knowledge, we can't solve problems. Here's one example: How many Americans know anything about derivatives? Oh, boy, this one is a killer:

Total Notional Value Of Derivatives Outstanding Surpasses One Quadrillion. "This means that no OTC derivative house can be allowed to go broke. This means that whatever funds are required to rescue failing international investment banks, banks and financial entities will be provided. Keep this economic law in mind. Monetary inflation proceeds price inflation and is its primary cause in economic history from Rome to present. Nothing can stop the juggernaut of price inflation heading towards every nation like a runaway freight train down a mountain." Jim Sinclair would know he because he's an expert in this field and he's always on target.

How many of the 170 million adult aged Americans in this country understand our monetary system, fiat currency and the federal income tax scheme? Ten, twenty million, tops? Right now, many millions continue juggling credit and too little cash to put food on the table and gas in the tank. Little do they know what is still to come: the equivalent of a Category 5 hurricane:

June 4, 2008. Staring Into The Abyss With Wide Open Eyes: "Millions must have seen this report. The presidential candidates had nothing to say. The White House had nothing to say. Congress had nothing to say. Economically, this much is certain. The debt is unpayable, even if Americans who still have any are stripped of all their assets to pay for it."
June 8, 2008. Credit crisis expands, hitting all kinds of consumer loans
June 12, 2008. "When Bush invaded Iraq in 2003, the average price of oil that year was about $27 per barrel, or about $31 in inflation adjusted 2007 dollars. The price rose another $10 in 2004 to an average annual price of $42 (in 2007 dollars), another $12 in 2005, $7 in 2006, and $4 in 2007 to $65. But in the last few months the price has more than doubled to about $135. It is difficult to explain a $70 jump in price in terms other than speculation...Of course, Americans don't get real inflation numbers from their government and have not since the Consumer Price Index was rigged during the Clinton administration to hold down Social Security payments by denying retirees their full cost of living adjustments."

June 10, 2008. Mortgage Delinquencies Rise Nearly 62 Percent in First Quarter
June 13, 2008. Biggest Inflation Jump in 6 Months
June 13, 2008. Foreclosures Rise 48% in May as Repossessions Double. "One in every 483 U.S. households either lost the home to foreclosure, received a default notice or was warned of a pending auction, RealtyTrac said. That was the highest rate since the Irvine, California-based company began reporting in January 2005 and the 29th consecutive month of year-over-year increases." Do people realize what this does to the local economy and how it affects the ability of someone to save for their golden years so they won't be a burden on society?

36 Retail Stores Closing Their Doors

Credit Default Swaps The Next Crisis. Sub Prime is Just 'Vorspeise'. "While attention has been focussed on the relatively tiny U.S. "sub-prime" home mortgage default crisis as the center of the current financial and credit crisis impacting the Anglo-Saxon banking world, a far larger problem is now coming into focus. Sub-prime or high-risk Collateralized Mortgage Obligations, CMOs as they are called, are only the tip of a colossal iceberg of dodgy credits which are beginning to go sour. The next crisis is already beginning in the $62 TRILLION market for Credit Default Swaps. You never heard of them? It's time to take a look, then.

June 6, 2008. Pet owners fear tough economic choices. Franklin, Massachusetts (AP) -- "Diana Bardsley wiped tears from her eyes as she recalled taking food off her plate to feed her beloved spaniel Hunter and two Siamese cats. Doreen Kazijian said she delayed buying her own medication so she could afford to treat her cats' ailments. Her greatest fear: that she could be forced to surrender the animals as she struggled to stretch her food stamps and Social Security income to meet the escalating cost of living."

January 30, 2008. Pets Abandoned by Owners After Foreclosure. "The house was ravaged -- its floors ripped, walls busted and lights smashed by owners who trashed their home before a bank foreclosed on it. Hidden in the wreckage was an abandoned member of the family: a starving pit bull. The dog found by workers was too far gone to save -- another example of how pets are becoming the newest victims of the nation's mortgage crisis as homeowners leave animals behind when they can no longer afford their property.

I feel very bad for Americans who have lost their homes and the millions more who will over the next year or two. Sadly, millions bought into mortgages they should never have qualified for and are now paying the price of a contract between them and the lender, not between them and Congress. While that body of fools continue their attempt to divert the people's attention away from THEIR massive failures (blame the oil companies) and the banking system, the same hypocrites have benefited from disaster: June 14 (Bloomberg) -- "Senator Kent Conrad said he was given preferential treatment on a mortgage from Countrywide Financial Corp. and will write a $10,500 check to charity." How big of him. Had he not got caught, there would be no check to charity. Let's not forget how many of these crooks in Congress (and the ones who have jumped ship the past few years) are raking in the bucks from the sweat of your labor via earmarks. Let's not forget the 151 members of the U.S. Congress who directly profit from these grotesque, unconstitutional "wars of liberation" over in Iraq and Afghanistan:

"Who profits from the Iraq war? More than a quarter of senators and congressmen have invested at least $196 million of their own money in companies doing business with the Department of Defense (DoD) that profit from the death and destruction in Iraq. According to the latest reports, 151 members of Congress invested close to a quarter-billion in companies that received defense contracts of at least $5 million in 2006. These companies got more than $275.6 billion from the government in 2006, or $755 million per day, according to, a web site of the watchdog group OMBWatch." The rest of the column with all the numbers and names of these thieves can be found here.

Their profits are stolen from you, from your labor every day via the federal income tax. Because there is NO money in the U.S. Treasury, the trillion dollars blown over in the Middle East has to be borrowed from the banking cartel. You, me, our children and grand children, little better than oxen to the yoke, are forced to pay the massive interest so these crooks in Congress can continue to borrow "money" for their wars from which they profit. Because there is no more bling to scratch from the weary American worker to pay for their folly and endless wars, where will the voracious appetite for money by Congress come from? More our of debt sold off to our enemies like Communist China?

One of the most dangerous ideas thrown out there (besides Richard C. Cook) comes from William Glynn, the founder and Managing Director of Collective IQ, ranked the #1 Corporate Venture Capital Platform in the world:

"Right now, China, Russia, India and Saudi Arabia basically own the United States. Our economy is the real target of terrorists and this is our potential downfall," says Glynn. His solution is transparent and uncomplicated... a 10% solution. "If we are to prevent another Great Depression we need to pass one simple law: All pension plans, endowments, 401(k)s and the like will be required to allocate 10% of their portfolios to buy back U.S. debt and currency."

"Right now, China, Russia, India and Saudi Arabia basically own the United States. Our economy is the real target of terrorists and this is our potential downfall
With more than 40 trillion dollars currently invested in these types of accounts, Glynn asserts that some four trillion dollars could be freed up in a matter of days to wipe out the national debt, buy back the $1.6 trillion in U.S. debt currently owned by China and more. He suggests that approximately one trillion dollars go into a 10-year Zero Coupon Bond with the proceeds ultimately going back to the endowments and pension plans. "Rather than seeing this as simply giving money back to the government, it's really a 10-year interest-free loan that has incredible benefits," he explains."

Andy Jackson would have taken Mr. Glynn to the nearest oak tree. Americans had better pray the looters in Congress don't pick up on this lunacy: Steal 10% of your 401(k) to pay down the "national debt" to the banking cartel for the massive fraud Congress has perpetrated on us? Is he that naive to think these buzzards in Congress would ever stick to the game plan? Oh, please. All you would be doing is handing them a new credit card. Don't look to Comrade Barack Hussein Obama to cure this hemorrhaging. He has never so much as whispered the real and only solutions to our monetary and banking crisis and neither did Comrade Hillary Clinton during her 17 month ego trip. Just where in the U.S. Constitution does it give Congress the authority to steal the fruits of your labor to give to others for any reason? Congressman Davy Crockett said it best; click here.

Juan McCain by his own admission: ‘The Issue Of Economics Is Not Something I've Understood As Well As I Should’ is completely unqualified to sign spending bills and legislation dealing with our monetary system. Those committed to the Obama-McCain Titanic should get their affairs in order because they have sealed their fate.

Inflation is killing the middle class and the poor. As my friend, constitutional attorney and expert on fiat currency, Larry Becraft, recently said, "When hyper-inflation hits and gold is one million dollars an ounce, no one will part with their gold." This short, concise column by Derry Brownfield will give you a good understanding of what Larry means: Silver, Gold and the IRS. Federal Reserve Chairman Bernanke says: "Risk of 'Substantial Downturn' Lessens, Vows Inflation Fight." Old Ben's had his head stuck in rectal darkness for so long, he couldn't tell you how to solve a ten piece puzzle much less "fight inflation." Inflation and deflation is caused by his central bank. It is the cancer eating this nation alive. The power brokers controlling our lives know they've screwed things up royally, now it's time for the solution! NY Fed chief in push for global bank framework. This is another gigantic step in cementing one world government and enslaving all of us under foreign dictatorship.

Back to the original question: Will you out live your money? If we don't get rid of as many incumbents in Congress as possible and put a man in the White House who knows the central bank and monetary issue and who will appoint brilliant individuals like Dr. Edwin Vieira as Secretary of the Treasury, no amount of hand wringing by these deceivers in Congress is going to return America to a prosperous nation. We will only continue to sink further into national poverty and yes, TENS of MILLIONS of Americans will find they have nothing but social security and perhaps a small pension to eke out their "golden years," while the fat cats in Congress enjoy their millions from the sweat off your back.

Have people forgotten what happened to our fellow Americans who worked for ENRON? Everything they worked for all their lives, poof! Gone. Americans seem oblivious to the fact that these crooks and just plain ignorant members of Congress are playing with their future. Look at where we are now and while I wish I could say different, it is going to get much worse.

Do Americans have any idea the numbers we're talking here when tens of millions of Americans out live their money and must depend on the state for food, lodging and medical treatment? Too many Americans have forgotten what I was taught by my parents who were taught by theirs (they all lived through the manufactured "Great Depression): Save for a rainy day. Save for your old age. Don't spend more than you make. Tens of millions are guilty of this and they don't seem to give a damn, but they will.

Those who do know their personal obligations for their golden years can't get ahead because we are being raped by the federal and state governments to pay for their complete and total mismanagement of our money and lives. People send me email all the time asking me, when will people wake up? When will the reality and the numbers finally sink in? My reply: hungry bellies make for angry mobs. Wait until the grocery stores have little to choose from and people still don't have enough coin to purchase that loaf of bread because diesel is $5.75/gallon and the truckers have to pass along the cost to the consumer. Is it any wonder so many incumbents in Congress are taking their ill gotten gains and will not seek reelection? (5 Democrats, 27 Republicans as of February 10, 2008.) Rats jumping ship.

If you would like to learn more about gold and why it is imperative you own some, you might check out El Dorado Gold's web site. They have a substantial amount of educational information to help better understand the issue of gold.

Change cannot and will not happen with the same players. Congress has refused to abolish the central bank, get rid of the unnecessary federal income tax and take swift, decisive action on other issues like withholding and a sane energy policy. These same players (with the exception of Congressman Ron Paul) will NOT do it next January because they didn't do it last January or the ten January's before that. The solutions have always been there, but until you put individuals in office who fully understand the U.S. Constitution (or State Constitution for your legislature), things will remain the same. Is that what you want?

Educational Links:

1 - How HUD Mortgage Policy Fed The Crisis
2 - Clueless: Bernanke Blames Saving Glut For Housing Bubble
3 - Long View: Fall in US house prices heralds problems for all
4 - Economist challenges government data
5 - Pelosi & her Brassiere Brigade
6 - Minimum Wage and Fascism
7 - How to Create Jobs and Cut Medical Care Costs
8 - The Next Big Spending Spree

Comrade Obama

1 - Hike Social Security tax, says Obama
2 - Obama Would Tax Wealthy to Pay for Universal Health Care (how very communist of him)
3 - Obama's Energy Stance as Capricious as the Wind
4 - Hike Social Security tax, says Obama
5 - Obama Funder Soros Is Bush War Profiteer
6 - Obama wants higher payroll tax on incomes above $250,000

Juan McCain

1 - Foreclosure Phil
2 - McCain, Obama Trade Fire on Tax Plans
3 - McCain Lies About Social Security Privatization
4 - McCain promises billions in spending
5 - McCain temper boiled over in '92 tirade, called wife a 'c**t'
6 - The wife U.S. Republican John McCain callously left behind

Truth and solutions

1 - March 17, 2005: Are Monetary & Banking Crises Inevitable
in the Near Future?
2 - March 21, 2005. Will The Coming Monetary Crisis Provide Opportunity For Reform?
3 - 6:06 video: Ron Paul grills Bernanke on monetary deception
4 - The Federal Reserve Monopoly Over Money
5 - The Federal Reserve System: A Fatal Parasite on the American Body Politic
6 - Short treatise: A Caveat Against Injustice, written in 1752 by Roger Sherman, author of Art. 1, § 10, cl. 1, of the U.S. Constitution

Ahmadinejad Says Oil Prices Are Faked

Market Full Of Oil, Price Trend "Fake": Ahmadinejad

Go To Original

The market is full of oil and the rising price trend is "fake and imposed," Iran's president said on Tuesday, partly blaming a weak U.S. dollar which he said was being pushed lower on purpose.

"At a time when the growth of consumption is lower than the growth of production and the market is full of oil, prices are rising and this trend is completely fake and imposed," President Mahmoud Ahmadinejad said in a televised speech.

"It is very clear that visible and invisible hands are controlling prices in a fake way with political and economic aims," he said when opening a meeting of the OPEC Fund for International Development in the central Iranian city of Isfahan.

Iran, the world's fourth-largest oil exporter, has repeatedly said the market is well-supplied with crude and blames rising prices on speculation, a weak U.S. currency and geopolitical factors.

"As you know the decrease in the dollar's value and the increase in energy prices are two sides of the same coin which are being introduced as factors behind the recent instability," Ahmadinejad said.

Oil steadied on Tuesday after touching a record near $140 the previous day, with traders caught between a weaker dollar and expectations that top exporter Saudi Arabia will ramp up output to its highest rate in decades.

Iran has often said it sees no need for the Organization of the Petroleum Exporting Countries (OPEC) to boost output.


Ahmadinejad reiterated his view that oil should be sold in a basket of currencies rather than U.S. dollars, an idea which has failed to win over other OPEC members, except Venezuela.

"The ever-increasing decrease in the dollar's value is one of the world's major problems," he said.

"A combination of the world's valid currencies should become a basis for oil transactions or (OPEC) member countries should determine a new currency for oil transactions," he said.

Iran, embroiled in a standoff with the West over its nuclear program, has for more than two years been increasing its sales of oil for currencies other than the dollar, saying the weak U.S. currency is eroding its purchasing power.

Ahmadinejad, who in the past has called the dollar a "worthless piece of paper," suggested "some big powers" were driving it lower on purpose:

"The planners for some big powers are acting to decrease the dollar's value," he said. "For years they imposed inflation and their own economic problems to other nations by injecting the dollar without any support to the global economy."

Foes since Iran's 1979 Islamic revolution, Tehran and Washington are also at odds over Tehran's disputed nuclear activities as well as over policy in Iraq. Iran says its atomic work is peaceful.

Paving the Way for Torture in Secret

Easing of laws that led to detainee abuse hatched in secret

Tom Lasseter

Go To Original

The framework under which detainees were imprisoned for years without charges at Guantanamo and in many cases abused in Afghanistan wasn't the product of American military policy or the fault of a few rogue soldiers.

It was largely the work of five White House, Pentagon and Justice Department lawyers who, following the orders of President Bush and Vice President Dick Cheney, reinterpreted or tossed out the U.S. and international laws that govern the treatment of prisoners in wartime, according to former U.S. defense and Bush administration officials.

The Supreme Court now has struck down many of their legal interpretations. It ruled last Thursday that preventing detainees from challenging their detention in federal courts was unconstitutional.

The quintet of lawyers, who called themselves the “War Council," drafted legal opinions that circumvented the military's code of justice, the federal court system and America's international treaties in order to prevent anyone — from soldiers on the ground to the president — from being held accountable for activities that at other times have been considered war crimes.

Sen. Carl Levin, who's leading an investigation into the origins of the harsh interrogation techniques, said at a hearing Tuesday that the abuse wasn't the result of "a few bad apples" within the military, as the White House has claimed. "The truth is that senior officials in the United States government sought information on aggressive techniques, twisted the law to create the appearance of their legality and authorized their use against detainees," said Levin, a Michigan Democrat.

The international conventions that the United States helped draft, and to which it's a party, were abandoned in secret meetings among the five men in one another's offices. No one in the War Council has publicly described the group's activities in any detail, and only some of their opinions and memorandums have been made public.

Neither the White House nor the Department of Defense has taken responsibility, and the U.S. military's top uniformed leadership remained silent in public while its legal code was being discarded. It was left to lawyers in the military's legal system, the Judge Advocate General's Corps, to defend the rule of law. They never had a chance.

Only one of the five War Council lawyers remains in office: David Addington, the brilliant but abrasive longtime legal adviser and now chief of staff to Cheney. His primary motive, according to several former administration and defense officials, was to push for an expansion of presidential power that Congress or the courts couldn't check.

Alberto Gonzales, first the White House counsel and then the attorney general, resigned last August amid allegations of perjury related to congressional hearings about the firings of U.S. attorneys.

The Defense Department in February abruptly announced the resignation of William J. Haynes II, the former Pentagon general counsel, amid sharp public criticism by military lawyers that he failed to ensure a just system of detainee trials at Guantanamo.

Even some conservatives have condemned former Justice Department lawyer John Yoo for what many called sloppy legal work in drafting key memorandums about detention policy. He's now a law professor at the University of California at Berkeley.

The last and least known member of the group, Timothy E. Flanigan, a former deputy to Gonzales, withdrew his nomination to be deputy attorney general in 2005 amid mounting questions in the Senate about his role in drafting the administration's legal definition of torture and other issues.

All five refused to answer questions from McClatchy for this story. Only Flanigan gave a reason, saying that he doesn't discuss past clients, in this case the U.S. government. Yoo previously has denied any connection between his work and detainee abuse.

The quintet did more than condone harsh treatment, however. It created an environment in which it was nearly impossible to prosecute soldiers or officials for alleged crimes committed in U.S. detention facilities.

The Bush administration pursued a strategy from the beginning to exempt American soldiers and operatives from legal repercussions for their actions, said Nigel Rodley, a British lawyer and professor who was the United Nations' special rapporteur on torture from 1993 to 2001.

The U.S. said it was continuing to follow the rule of law but at the same time it sidestepped any international treaties that could create problems for soldiers or officials, said Rodley, a member of the U.N. Human Rights Committee.

The legal architecture, he said, hinged on the notion that "The treaties that were relevant to U.S. criminal law were not relevant. That was the trick."

The administration, in other words, set out to circumvent any law that might have restricted Bush's detainee and interrogation programs.


A handful of legal opinions opened the way to the abuses documented in McClatchy's investigation. Among them:

  • In a Jan. 9, 2002, memorandum for Haynes, co-author Yoo opined that basic Geneva Convention protections known as Common Article Three forbidding humiliating and degrading treatment and torture of prisoners didn't cover alleged al Qaida or Taliban detainees — the entire incoming population of detainees in Afghanistan and Guantanamo.
  • In a memorandum to Bush dated Jan. 25, 2002, Gonzales said that rescinding detainees' Geneva protections "substantially reduces the threat of domestic criminal prosecution under the War Crimes Act." Doing so, Gonzales wrote, also would create a solid defense against prosecutors or independent counsels who may in the future "decide to pursue unwarranted charges based on Section 2441," the U.S. War Crimes Act, which prohibits violations of the Geneva Conventions. Gonzales added that by withholding Geneva protections and prisoner-of-war status, Bush could avoid case-by-case reviews of detainees' status.
  • On Feb. 7, 2002, Bush issued a memorandum declaring that alleged al Qaida or Taliban members wouldn't be considered prisoners of war and, further, that they wouldn't be granted protection under Common Article Three. Most nations accept Article Three, common to all four Geneva Conventions, as customary law setting the minimum standard for conduct in any conflict, whether internal or international.
  • An Aug. 1, 2002, memorandum that Gonzales requested from the Justice Department defined torture as "injury such as death, organ failure or serious impairment of body functions," a high bar for ruling interrogation techniques or detainee treatment illegal. U.S. law, according to the memorandum's analysis, "prohibits only extreme acts."
  • A March 14, 2003, memorandum that Yoo prepared at Haynes' request concluded that even if an interrogation method violated U.S. criminal statutes — such as the one against war crimes — the interrogators involved most likely couldn't be prosecuted because they were operating within the scope of Bush's constitutional authority to wage war against al Qaida and other militant groups.

"In wartime, it is for the president alone to decide what methods to use to best prevail against the enemy," Yoo wrote.

Now it appears that reinterpreting the law to lift legal protections for detainees could backfire. On May 13, the Pentagon announced that it was dropping all charges against Mohammed al Qahtani, a Saudi man held in Guantanamo who's accused of planning to take part in the 9-11 attacks as the "20th hijacker."

The official overseeing the case, Susan J. Crawford, gave no reason for the move, which followed the leak of an interrogation log that detailed harsh attempts at Guantanamo to break Qahtani mentally. Among the methods used were forcing him to act like a dog, putting women's underwear on his head, keeping him in stress positions and accusing him of homosexuality.

In its decision last week, the Supreme Court restored the right of habeas corpus, that is, the detainees’ right to challenge the cause of their detention.

The five lawyers on the War Council met every few weeks behind closed doors in Gonzales' or Haynes' office to plot legal strategy, according to Jack Goldsmith, a former senior Justice Department lawyer.

Several other former U.S. officials confirmed that the group was the driving force for White House policy on detainees.

Fears of future prosecution motivated many officials in the administration, Goldsmith said in his book "The Terror Presidency," published last year. The five lawyers saw legal opinions drafted by Yoo and others in the Justice Department's Office of Legal Counsel as a shield, Goldsmith wrote, that would make it hard to convict someone of acting on legal advice from the premier legal office in the administration.

"In my two years in the government, I witnessed top officials and bureaucrats in the White House and throughout the administration openly worrying that investigators acting with the benefit of hindsight in a different political environment would impose criminal penalties on heat-of-battle judgment calls," wrote Goldsmith, who declined interview requests.

As the head of the Office of Legal Council from the fall of 2003 to the summer of 2004, Goldsmith reversed the August 2002 and March 2003 opinions.


The military's lawyers were among those who were most concerned about what the new policies would mean for soldiers in the field.

Though not well known to the public, the Judge Advocate General's corps prides itself on defending the Uniform Code of Military Justice, the military's law book, which demands strict discipline and moral behavior in wartime. The legal officers are fond of saying that military commanders can depend on two people for honest advice: their chaplains and their JAG lawyers.

The military legal community complained, to little avail, that the policies hatched with the consent of Bush, Cheney and then-Defense Secretary Donald H. Rumsfeld were replacing decades of U.S. military policy on handling detainees.

When they protested, the War Council shut them out.

"We were absolutely marginalized," said Donald J. Guter, a rear admiral who served as the Navy's judge advocate general from 2000 to 2002. "I think it was intentional, because so many military JAGs spoke up about the rule of law."

Thomas Romig, a major general who was the Army's judge advocate general from 2001 to 2005, agreed that the JAGs were pushed to the side: "It was a disaster," he said.

Trust between the uniformed military lawyers and the Bush administration collapsed in the months after 9-11.

Guter said he began to think that Haynes "was playing games" in late 2001, when the two met regularly to figure out how to handle detainees in Afghanistan.

Haynes, then the Pentagon's head lawyer, had asked whether hundreds of the prisoners could be detained on Navy warships. The security and logistics involved in operating a ship while maintaining a maximum-security prison onboard would have been impossible. Guter thought that Haynes was raising such ideas to push him toward establishing a prison at the Guantanamo Bay U.S. Naval Base.

Guter said "it became apparent pretty quickly" that Haynes wanted a place "outside of the courts," where no judge could consider whether detainees were being held lawfully or under appropriate conditions.

"What they were looking for was the minimum due process that we could get away with," said Guter, who's now the dean of Duquesne University's law school. "I felt like they knew the answer they wanted to hear."

Romig recalled tense discussions with Yoo in November and December 2001 about setting up military commissions to try detainees.

"John Yoo wanted to use military commissions in the manner they were used in the Indian wars," Romig said. "I looked at him and said, 'You know, that was 100-and-something years ago. You're out of your mind; we're talking about the law.' "

The military commissions that the U.S. used against Native Americans during the mid-19th century were often ad hoc and frequently resulted in natives being hanged or shot.

"As they viewed it, due process is legal mumbo jumbo," said Romig, who's now the dean of Washburn University's law school. "They wanted to get them, get the facts and convict them. ... If you're caught as a terrorist, you're presumed guilty and you have to prove you're innocent. It was crazy."

When Romig objected to pushing the boundaries of interrogation procedures during meetings in late 2002 or early 2003, he recalled that civilian defense officials replied that the time for law had passed.

"Guys, it's time to wake up and smell the coffee. It's time to take the gloves off," Romig said he was told by Marshall Billingslea, a deputy to Douglas Feith — who was then the undersecretary of defense for policy, the Pentagon's third-ranking official.

Romig said that he and other military officers asked, "Do you realize the implications of what you're saying?"

Like many in the military, Romig doubted the quality of intelligence gathered by physical coercion.

Haynes, who also was present, had no objections to what Billingslea had said, according to Romig. Billingslea and Haynes declined requests for comment.

In June 2006, over the objections of the White House, the Supreme Court ruled that Common Article Three of the Geneva Conventions was applicable to detainees at Guantanamo Bay.

Four months later, Bush signed the Military Commissions Act, which said that no foreign unlawful combatant subject to trial by military commission could invoke the Geneva Conventions as a source of rights, and that no U.S. court or judge has jurisdiction to hear cases in which such detainees contest their incarceration.

The bill also rewrote part of the U.S. legal code on war crimes, changing the definition of a war crime from conduct that "constitutes a violation of Common Article 3" to the much higher standard of "a grave breach of Common Article 3."

Within that new definition, it excluded "pain or suffering incidental to lawful sanctions," meaning harsh treatment that's allowed by the Bush administration's legal interpretations.

Among those whom Bush thanked at a bill-signing ceremony were Cheney — Addington's main backer in the White House — and Gonzales.

Two years later, the Supreme Court ruled that detainees have the right to challenge their detention before federal judges, striking down that section of the Military Commissions Act. The 5-4 decision said the law applied to everyone: "From an early date it was understood that the king, too, was subject to the law."

The policies hatched in the offices of Gonzales, Addington and Haynes muddied decades of U.S. military policy on handling detainees.

Changes to detainee law such as rescinding Common Article Three give a "dehumanizing message about the people (detainees) we're dealing with," said Lt. Col. Bryan Broyles, a defense attorney in the Office of Military Commissions, which was set up to try detainees at Guantanamo.

"The people who pursue that sort of academic, intellectual pursuit," said Broyles, who represents Qahtani, "don't understand the effect it has on the people (soldiers) who only see the end result."