Wednesday, February 24, 2010

Debt Dynamite Dominoes: The Coming Financial Catastrophe

Marjah Offensive Aimed to Shape US Opinion on War

Marjah Offensive Aimed to Shape US Opinion on War

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Washington - Senior military officials decided to launch the current U.S.-British military campaign to seize Marjah in large part to influence domestic U.S. opinion on the war in Afghanistan, the Washington Post reported Monday.Marjahh

The Post report, by Greg Jaffe and Craig Whitlock, both of whom cover military affairs, said the town of Marjah would not have been chosen as a target for a U.S. military operation had the criterion been military significance instead of impact on domestic public opinion.

The primary goal of the offensive, they write, is to "convince Americans that a new era has arrived in the eight-year long war…." U.S. military officials in Afghanistan "hope a large and loud victory in Marjah will convince the American public that they deserve more time to demonstrate that extra troops and new tactics can yield better results on the battlefield," according to Jaffe and Whitlock.

A second aim is said to be to demonstrate to Afghans that U.S. forces can protect them from the Taliban.

Despite the far-reaching political implications of the story, the Post buried it on page A9, suggesting that it was not viewed by editors as a major revelation.

Jaffe and Whitlock cite no official sources for the report, but the evidence supporting the main conclusion of the article clearly came from information supplied by military or civilian Pentagon sources. That suggests that officials provided the information on condition that it could not be attributed to any official source.

Some advisers to Gen. Stanley A. McChrystal, the commander of the International Security Assistance Force, told him last June that Kandahar City is far more important strategically than Marjah, according to Jaffe and Whitlock.

Marjah is a town of less than 50,000 people, even including the surrounding villages, according to researcher Jeffrey Dressler of the Institute for the Study of War in Washington, D.C.

That makes it about one-tenth the population of Kandahar City. Marjah is only one of a number of logistical centres used by the Taliban in Helmand province, as Dressler observed in a study of Helmand province published by the Institute last September.

Kandahar, on the other hand, is regarded as symbolically important as the place where the Taliban first arose and the location of its leadership organs even during the period of Taliban rule.

Nevertheless, McChrystal decided to commit 15,000 U.S. troops and Afghan troops to get control of Marjah as the first major operation under the new strategy of the Barack Obama administration.

That decision has puzzled many supporters of the war, such as author Steve Coll, who wrote a definitive history of U.S. policy toward Afghanistan and is now executive director of the New America Foundation. Coll wrote in the New Yorker last week that he did not understand "why surging U.S. forces continue to invest their efforts and their numbers so heavily in Helmand."

Coll pointed to the much greater importance of Kandahar in the larger strategic picture.

The real reason for the decision to attack Marjah, according to Jaffe and Whitlock, was not the intrinsic importance of the objective, but the belief that an operation to seize control of it could "deliver a quick military and political win for McChrystal."

Choosing Kandahar as the objective of the first major operation under the new strategy would have meant waiting to resolve political rivalries in the province, according to the Post article.

In public comments in recent days, CENTCOM chief Gen. David Petraeus has put forward themes that may be used to frame the Marjah operation and further offensives to come in Kandahar later this year.

Last Thursday, an unnamed "senior military official" told reporters, "This is the start point of a new strategy," adding, "This is our first salvo."

On Sunday, Petraeus appeared on NBC's "Meet the Press" and said the flow of 30,000 new troops that President Obama recently ordered to the region is starting to produce "output". Marjah is "just the initial operation of what will be a 12-to-18-month campaign," he said, calling it the "initial salvo".

Petraeus suggested that Taliban resistance to the offensive in Marjah was intense, as if to underline the importance of Marjah to Taliban strategy. "When we go on the offensive," said Petraeus, "when we take away sanctuaries and safe havens from the Taliban and other extremist elements…they're going to fight back."

In fact, most of the Taliban fighters who had been in Marjah before the beginning of the operation apparently moved out of the town before the fighting started.

Petraeus seemed to be laying the basis for presenting Marjah as a pivotal battle as well as a successful model for the kind of operations to follow.

The Post article implies that Petraeus and McChrystal are concerned that the Obama administration is pushing for a rapid drawdown of U.S. forces after mid-2011. The military believes, according to Jaffe and Whitlock, that a public perception of U.S. military success "would almost certainly mean a slower drawdown."

As top commander in Iraq in 2007-2008, Petraeus established a new model for reestablishing public support for a war after it had declined precipitously. Through constant briefings to journalists and Congressional delegations, he and his staff convinced political elites and public opinion that his counterinsurgency plan had been responsible for the reduction in insurgent activities that occurred during this command.

Evidence from unofficial sources indicates, however, that the dynamics of Sunni-Shi'a sectarian conflict and Shi'a politics were far more important than U.S. military operations in producing that result.

McChrystal himself seemed to be hinting at the importance of the Marjah offensive's potential impact on the domestic politics of the war in remarks he made in Istanbul just before it began.

"This is all a war of perceptions," McChrystal said. "This is not a physical war in terms of how many people you kill or how much ground you capture, how many bridges you blow up. This is all in the minds of the participants."

McChrystal went on to include U.S. citizens as well as Afghans among those who needed to be convinced. "Part of what we've had to do is convince ourselves and our Afghan partners that we can do this," he said.

The decision to launch a military campaign primarily to shape public opinion is not unprecedented in U.S. military history.

When President Richard M. Nixon and his National Security Adviser Henry A. Kissinger launched a major bombing campaign against the North Vietnamese capital in late December 1972, they were consciously seeking to influence public opinion to view their policy as much tougher in the final phase of peace negotiations with Hanoi.

The combination of the heavy damage to Hanoi and the administration's heavy spin about its military pressure on the North Vietnamese contributed to broad acceptance of the later conclusion that Kissinger had gotten a better agreement in Paris in February 1973.

In fact, Kissinger had compromised on all the demands he had made before the bombing began. But the public perception was more important to the Nixon White House.

Obama Pressed to Release Identity of Telecom Lobbyists

Obama Pressed to Release Identity of Telecom Lobbyists

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Despite President Barack Obama's pledge in the State of the Union address to "require lobbyists to disclose each contact they make on behalf of a client with my administration or Congress," the Electronic Frontier Foundation (EFF) says the Obama administration has been "fighting hard to stop the release of the names of these representatives."

EFF urged, "While it's great to see Obama reverse his position in the State of the Union and acknowledge the strong public interest in disclosure of lobbying records, the administration must do more than give speeches in order to fulfill its commitment to transparency."

It said President Obama "must apply this policy to pending litigation, and release the identities of telecommunications representatives who lobbied for immunity for their telecommunications carrier clients."

For the past few years, the not-for-profit EFF has been litigating a Freedom of Information Act (FOIA) case against the government, seeking the identities of lobbyists who contacted the Department of Justice and the Office of the Director of National Intelligence on behalf of their telecommunications company clients in order to push for telecom immunity.

"With the help of lobbyists from AT&T, Verizon and Sprint, the FISA Amendments Act passed with an unconstitutional provision to retroactively grant immunity to the telecoms for collaborating with the warrantless wiretapping program," EFF contends.

The group says the administration "must do more than give speeches in order to fulfill its commitment to transparency. Instead, Obama must apply this policy to pending litigation, and release the identities of telecommunications representatives who lobbied for immunity for their telecommunications carrier clients."

Professor Peter Shane of the Ohio State University's law school is among many legal experts who agree with the EFF position. He told us, "On his first full day in office, President Obama issued a presidential memorandum that declared: 'The presumption of disclosure should be applied to all decisions involving FOIA.' Pursuant to the Obama directive, Attorney General Eric Holder two months later issued a new Justice Department FOIA policy that declared: 'The Department of Justice will defend a denial of a FOIA request only if (1) the agency reasonably foresees that disclosure would harm an interest protected by one of the statutory exemptions, or (2) disclosure is prohibited by law.' It's hard to see why the straightforward application of these principles would not lead to releasing the names of lobbyists."

Last week, a federal appeals court in San Francisco agreed with EFF, Professor Shane and other advocates for transparency. The judges rejected a government claim of "lobbyist privacy" to hide the identities of individuals who pressured Congress to grant immunity to telecommunications companies that participated in the government's warrantless electronic surveillance of millions of ordinary Americans.

The court observed, "There is a clear public interest in public knowledge of the methods through which well-connected corporate lobbyists wield their influence."

EFF has been seeking records detailing the telecoms' campaign for retroactive legal immunity under FOIA. Telecom immunity was enacted as part of the FISA Amendments Act of 2008. Then-Senator Obama voted in favor of immunity.

EFF called the ruling "an important one for government and corporate accountability." EFF staff attorney Marcia Hofmann said, "The court recognized that paid lobbyists trying to influence the government to advance their clients' interests can't hide behind privacy claims to keep their efforts secret."

But a number of legal authorities believe there is an even broader issue at play: The Obama administration's continuance of its predecessor's court positions, including its view on this case. For example, Francis Boyle, a professor at the University of Illinois law school, told us, "US Solicitor General Elena Kagan is quarterbacking the continuation of the Bush administration's illegal and unconstitutional positions in US federal court."

He called Kagan "a closet neoconservative," adding, "She has supported at all levels of litigation in US federal courts up to and including the US Supreme Court every hideous atrocity that the Bush administration inflicted upon the United States Constitution, our Bill of Rights, Civil Rights, Civil Liberties and Human Rights for the eight years of that benighted administration."

Another civil liberties leader, Chip Pitts, president of the Bill of Rights Defense Committee, also weighed in. He told us, "Like President Obama's reversals and actions against accountability in other areas - including his support of the Patriot Act, FISA Amendments Act, telecom immunity and his failure to prosecute Bush officials and release the photos that evidence torture - the president's continuing to invoke national security and the state secret privilege to shield lobbyists' actions emboldens the burgeoning military/industrial/surveillance complex while diminishing hopes for real change."

He stressed that "It's vital to see where the true equities are here: greater transparency from government and corporations can and should exist in harmony and not in tension with better governance and greater individual privacy, liberty and freedom from infringements by powerful actors. Unwarranted 'privacy' claims by those special interests should not be used as an excuse to block the public's legitimate right to know how decisions affecting fundamental rights are made."

The appeals court sent part of the case back to the district court for further consideration, including whether disclosure of the lobbyists' identities would reveal intelligence sources and methods and whether communications between the agencies and the White House can be withheld under the presidential communications privilege or other grounds.

After the decision was announced, EFF Attorney Kevin Bankston noted that "Attorney General Eric Holder took the rare step of putting out a press release to defend the Friday filing, which was immediately picked up by the press. Luckily, we were standing by to express our disappointment and inject a dose of reality into the Justice Department's spin."

EFF Legal Director Cindy Cohn similarly pointed out what she called the Obama administration's hypocrisy. "Considering that Obama "campaigned for a return to the rule of law, it's disappointing ... to have them turn around and say that courts can't even look at these cases."

EFF's Kevin Bankston also finds the government's position "in stark contrast to candidate Obama's criticism of Bush-era abuse of the state secrets privilege. For example, in June 2008 Eric Holder, now attorney general, said in a speech that: 'Steps taken in the aftermath of 9/11 were both excessive and unlawful. Our government ... approved secret electronic surveillance of American citizens.... These steps were wrong when they were initiated and they are wrong today.'"

Similarly, he says, "The Obama-Biden campaign Web site includes state secrets as part of 'The Problem' that President Obama would address, complaining that the Bush administration invoked a legal tool known as the 'state secrets' privilege more than any other previous administration to get cases thrown out of court."

Legislative efforts to reform the use of the state secrets privilege are now moving slowly through the Congress.

With social crisis mounting: Record demand for heating assistance in US

Record demand for heating assistance in US

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With the number of US households requesting home heating assistance reaching a record for the third consecutive year, state officials have warned that they may begin to refuse further applications unless Congress allocates more money for the Low Income Home Energy Assistance Program, or LIHEAP.

Over 8.8 million households will have received heating assistance by winter’s end, up from 7.7 million last year and 5.7 million in 2008, according to a new report from the National Energy Assistance Directors’ Association (NEADA). About 4.3 million households had utilities disconnected in 2009, up from 4.1 million the previous year.

In spite of mounting unemployment, Congress this year approved the same amount of money as it did last year for heating assistance, allocating $5.1 billion for the states to administer LIHEAP—a figure substantially less than several Wall Street banks paid their executives in 2009.

The difficulties families face in procuring heat and other utilities lead to tragic deaths each year. “This is more than an energy issue and needs to be acknowledged for what it is: a serious public health matter,” said Jerry McKim, LIHEAP director for Iowa.

“In an effort to better afford their utility bills, many elderly households cut back on prescribed medicine and/or set their thermostats too low risking their already insecure health and families with young children sacrifice their children’s nutritional needs,” McKim explained. “Disconnected households use unsafe methods of heating that increase the risk of carbon monoxide poisoning, and those who live by candlelight increase the likelihood of a house fire tragedy.”

LIHEAP grants are about $500 on average, but vary by state, and mostly go to the elderly and families with young children. Grants are typically awarded to households that subsist below the official poverty level—about $22,000 for a family of four—but some states provide assistance to households at 150 percent of the official poverty threshold.

As demand has soared, a few states have already cut back on the amount of money they give to households in need. Now state energy directors warn that they may soon cut off further applications.

At least 35 states have seen an increase in home heating cases of more than 10 percent, and in ten states the increase has been over 25 percent. The states with the largest increases are scattered across the country, indicating the breadth of the social crisis: Mississippi (68 percent), Washington (42 percent), Michigan (38 percent), Nebraska (34 percent), New Jersey (31 percent), West Virginia (28 percent), Colorado (26 percent), and Kansas (25 percent), New Hampshire (25 percent), and Wisconsin (25 percent).

New York, which saw a 10 percent increase in applications, by itself accounts for 15 percent of all home heating assistance cases in the US. It is followed by Michigan, a cold-weather state with the highest jobless rate in the country, with about 10 percent of all cases.

Demand is likely to increase next year again. Because a number of states prohibit utilities to suspend service in the winter, many households forgo paying bills. A sharp increase in shut-offs is therefore anticipated for the spring. In order to get their utilities back before next winter, these households will be required to pay off their backlog in bills.

The sharp increase in LIHEAP applications this year came in spite of a modest decline in energy prices.

Behind the record numbers of those seeking home heating assistance is the unemployment crisis. Mark Wolfe, director of NEADA, told the New York Times the increase is at least partly attributable to steady growth in long-term joblessness.

Chronic mass unemployment differentiates the current economic crisis from every other downturn since the Great Depression. More workers have been without a job for six months or longer than at any time since record-keeping began in 1948—6.3 million in all. The average duration of unemployment also surpassed 6 months late last year, another record.

From the 1950s through the 1970s, the US economy added private sector jobs at a rate of 3.5 percent per year, according to an analysis by the Economic Cycle Research Institute. In the 1980s and 1990s, annual private sector expansion was 2.4 percent. But since 2000, it has declined .9 percent annually.

“The pace of job growth has been getting weaker in each expansion,” said study author Lakshman Achuthan. “There is no indication that this pattern is about to change.”

To have kept pace with population growth, the economy would have had to generate between 12 and 15 million jobs since 2000. Instead the economy has shed 8.7 million jobs since December 2007, and there are officially 15 million jobless Americans.

There is no expectation that joblessness will subside significantly in the near future. Janet Yellen, head of the San Francisco Federal Reserve Bank, said in a Monday speech she expects “unemployment to remain painfully high for years.” Even if the current crisis follows the patterns of recovery charted by recent recessions, unemployment will be about 8 percent in 2014, according to Heidi Shierholz of the Economic Policy Institute.

“We haven’t seen anything like this before: a really deep recession combined with a really extended period, maybe as much as eight years, all told, of highly elevated unemployment,” Shierholz told Don Peck of the Atlantic. “We’re about to see a big national experiment on stress.”

“There is unemployment, a brief and relatively routine transitional state that results from the rise and fall of companies in any economy, and there is unemployment—chronic, all-consuming,” Peck warns. “The latter is a pestilence that slowly eats away at people, families, and, if it spreads widely enough, the fabric of society. Indeed, history suggests that it is perhaps society’s most noxious ill... Ultimately, it is likely to warp our politics, our culture, and the character of our society for years.”

Layoffs and job cuts continue, an increasing number coming in the public sector.

New York City’s Metropolitan Transportation Authority (MTA) announced on Tuesday that it will cut more than 1,100 jobs, including as many as 500 subway station agents and more than 600 administrative positions.

The San Francisco Public Schools system is expected to announce it will lay off 900 teachers and staff this week. The Los Angeles city council just approved a plan to eliminate 3,000 jobs this year. Detroit Public Schools announced that it will privatize the remainder of its student transportation system. All 345 drivers will be dismissed and forced to apply for the newly privatized positions at sharply reduced wages and benefits.

Airplane manufacturer Boeing announced this week that it will lay off 527 workers in Washington state, and ABC News is expected to announce large scale job cuts and buyouts on Wednesday.

The jobs crisis goes far beyond unemployment as traditionally understood. According to a new Gallup Poll, 19.9 percent of the US workforce reports being “underemployed.” One in five, or about 30 million Americans, are jobless or are working fewer hours than they would like, according to the survey, which interviewed a sample of over 20,000 people in the US workforce.

Only a quarter of the underemployed say they can afford “a major purchase,” and just over half, 56 percent, say they can “buy the things they need.” Among underemployed respondents, 37 percent said that within the last year they had to forgo health care or medicine, 36 percent said there were times when they could not buy food, and 19 percent said they were unable to provide themselves shelter within the past year.

The data from the Gallup polls was substantiated by Tuesday’s release of the Conference Board’s Consumer Price Index (CPI), which plummeted to 46.0 in January from 56.5 in February, its lowest reading since April, 2009. Economists had anticipated only a slight decline. A reading of 90 or above indicates economic stability.

The Conference Board’s present situation index for February produced an even worse reading. It fell to a 27-year low of 19.4, meaning “consumers feel things are worse now than they were during the throes of the financial crisis in the fall of 2008,” according to And the expectation index, which measures consumers’ views on the near future, also fell. The number of those who expect job availability to decline rose to nearly 25 percent in February, and those expecting to see an increase in their incomes fell to 11 percent.

“While other indicators are showing that the recession is over, to the consumer it still feels like we’re still mired in the recession,” said Lynn Franco of the Conference Board. “This recovery has been driven more by business than by the consumer. The fact that we’re not adding jobs but are still shedding them is doing very little to comfort consumers.”

The fall in the CPI caused a sell-off on Wall Street. The Dow Jones Industrial Average fell by .97 percent to close the day at 10,282, the NASDAQ fell by 1.29 percent and the S&P 500 declined by 1.21 percent. Investors flocked to the “safe haven” of US government debt, driving down yields on Treasury bonds to their lowest level in two months.

Home values, the major source of wealth for most US families, also continued their fall in 2009, according to a new Case-Shiller index of 20 leading metropolitan areas released on Tuesday. Home prices were down 3.1 percent in 2009 from 2008, and have fallen 29 percent since their peak in 2006.

It is likely that home values will continue to fall in 2010. Economists anticipate a flood of 2.4 million foreclosed homes onto the market in the coming months, and the Federal Reserve will next month end its purchases of mortgage-backed securities—which has cost $1.25 trillion since the end of 2008—a move that will likely increase mortgage interest rates.

AIG Document New York Fed Kept Secret Shows Goldman Minted Most Toxic CDOs

Secret AIG Document Shows Goldman Sachs Minted Most Toxic CDOs

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When a congressional panel convened a hearing on the government rescue of American International Group Inc. in January, the public scolding of Treasury Secretary Timothy F. Geithner got the most attention.

Lawmakers said the former head of the New York Federal Reserve Bank had presided over a backdoor bailout of Wall Street firms and a coverup. Geithner countered that he had acted properly to avert the collapse of the financial system.

A potentially more important development slipped by with less notice, Bloomberg Markets reports in its April issue. Representative Darrell Issa, the ranking Republican on the House Committee on Oversight and Government Reform, placed into the hearing record a five-page document itemizing the mortgage securities on which banks such as Goldman Sachs Group Inc. and Societe Generale SA had bought $62.1 billion in credit-default swaps from AIG.

These were the deals that pushed the insurer to the brink of insolvency -- and were eventually paid in full at taxpayer expense. The New York Fed, which secretly engineered the bailout, prevented the full publication of the document for more than a year, even when AIG wanted it released.

That lack of disclosure shows how the government has obstructed a proper accounting of what went wrong in the financial crisis, author and former investment banker William Cohan says. “This secrecy is one more example of how the whole bailout has been done in such a slithering manner,” says Cohan, who wrote “House of Cards” (Doubleday, 2009), about the unraveling of Bear Stearns Cos. “There’s been no accountability.”

CDOs Identified

The document Issa made public cuts to the heart of the controversy over the September 2008 AIG rescue by identifying specific securities, known as collateralized-debt obligations, that had been insured with the company. The banks holding the credit-default swaps, a type of derivative, collected collateral as the insurer was downgraded and the CDOs tumbled in value.

The public can now see for the first time how poorly the securities performed, with losses exceeding 75 percent of their notional value in some cases. Compounding this, the document and Bloomberg data demonstrate that the banks that bought the swaps from AIG are mostly the same firms that underwrote the CDOs in the first place.

The banks should have to explain how they managed to buy protection from AIG primarily on securities that fell so sharply in value, says Daniel Calacci, a former swaps trader and marketer who’s now a structured-finance consultant in Warren, New Jersey. In some cases, banks also owned mortgage lenders, and they should be challenged to explain whether they gained any insider knowledge about the quality of the loans bundled into the CDOs, he says.

‘Too Uncanny’

“It’s almost too uncanny,” Calacci says. “If these banks had insight into the underlying loans because they had relationships with banks, originators or servicers, that’s at the least unethical.”

The identification of securities in the document, known as Schedule A, and data compiled by Bloomberg show that Goldman Sachs underwrote $17.2 billion of the $62.1 billion in CDOs that AIG insured -- more than any other investment bank. Merrill Lynch & Co., now part of Bank of America Corp., created $13.2 billion of the CDOs, and Deutsche Bank AG underwrote $9.5 billion.

These tallies suggest a possible reason why the New York Fed kept so much under wraps, Professor James Cox of Duke University School of Law says: “They may have been trying to shield Goldman -- for Goldman’s sake or out of macro concerns that another investment bank would be at risk.”

Poor Performers

Goldman Sachs spokesman Michael DuVally declined to comment.

Schedule A also makes possible a more complete examination of why AIG collapsed. Joseph Cassano, the former president of the AIG Financial Products unit that sold the swaps, said on a December 2007 conference call that his firm pulled back from selling swaps on U.S. subprime residential CDOs in late 2005. The list shows that the $21.2 billion in CDOs minted after 2005, mostly based on prime and commercial mortgages, performed as badly as or worse than the earlier subprime vintages.

A lawyer for Cassano declined to comment.

As details of the coverup emerge, so does anger at the perceived conflicts. Philip Angelides, chairman of the Financial Crisis Inquiry Commission, at a hearing held by his panel on Jan. 13, questioned how banks could underwrite poisonous securities and then bet against them. “It sounds to me a little bit like selling a car with faulty brakes and then buying an insurance policy on the buyer of those cars,” he said.

‘Part of the Coverup’

Janet Tavakoli, founder of Tavakoli Structured Finance Inc., a Chicago-based consulting firm, says the New York Fed’s secrecy has helped hide who’s responsible for the worst of the disaster. “The suppression of the details in the list of counterparties was part of the coverup,” she says.

E-mails between Fed and AIG officials that Issa released in January show that the efforts to keep Schedule A under wraps came from the New York Fed. Revelation of the messages contributed to the heated atmosphere at the House hearing.

“What date did you know there was a coverup?” Republican Congressman Brian Bilbray of California demanded of Geithner. Lawmakers used the word coverup more than a dozen times as they peppered Geithner with questions.

Geithner said that he wasn’t involved in matters of disclosure and that his former colleagues did the best they could. In a Jan. 19 statement, the New York Fed said, “AIG at all times remained responsible for complying with its disclosure requirements under the securities laws.”

The government has committed more than $182 billion to AIG and owns almost 80 percent of the company.

Document Withheld

In late November 2008, the insurer was planning to include Schedule A in a regulatory filing -- until a lawyer for the Fed said it wasn’t necessary, according to the e-mails. The document was an attachment to the agreement between AIG and Maiden Lane III, the fund that the Fed established in November 2008 to hold the CDOs after the swap contracts were settled.

AIG paid its counter­parties -- the banks -- the full value of the contracts, after accounting for any collateral that had been posted, and took the devalued CDOs in exchange. As requested by the New York Fed, AIG kept the bank names out of the Dec. 24 filing and edited out a sentence that said they got full payment.

The New York Fed’s January 2010 statement said the sentence was deleted because AIG technically paid slightly less than 100 cents on the dollar.

Paid in Full

Before the New York Fed ordered AIG to pay the banks in full, the company was trying to negotiate to pay off the credit- default swaps at a discount or “haircut.”

By March 2009, responding to a request from Christopher Dodd, chairman of the Senate Committee on Banking, Housing and Urban Affairs, AIG released the names of the counterparty banks. In a filing later that month, AIG included Schedule A, showing bank names while withholding all identification of the underlying CDOs and the amounts of collateral each bank had collected. The document had more than 800 redactions.

In May 2009, AIG again filed Schedule A, this time with about 400 redactions. It revealed that Paris-based Societe Generale got the biggest payout from AIG, or $16.5 billion, followed by Goldman Sachs, which got $14 billion, and then Deutsche Bank and Merrill Lynch. It still kept secret the CDOs’ identification and information that would show performance.

‘Right to Know’

“This is something that belongs in the public domain because it was done with public money,” Issa says. “The public has the right to know what was done with their money and who benefited from it.” Now, thanks to Issa, the list is out, and specific information about AIG’s unraveling can be learned from it.

At the Jan. 27 hearing, the New York Fed was still arguing that the contents of Schedule A shouldn’t be fully disclosed. Thomas Baxter, the New York Fed’s general counsel, testified that divulging the names of the CDOs could erode their value: “We will be hurt because traders in the market will know what we’re holding.”

Tavakoli calls that wrong. With many CDOs, providing more information to the market will give the manager a greater chance of fetching a realistic price, she says.

Jack Gutt, a spokesman for the New York Fed, declined to comment, as did AIG’s Mark Herr.

Bad to Worse

Tavakoli also says that the poor performance of the underlying securities (which are actually specific slices or tranches of CDOs) shows they were toxic in the first place and were probably replenished with bundles of mortgages that were particularly troubled. Managers who oversee CDOs after they are created have discretion in choosing the mortgage bonds used to replenish them.

“The original CDO deals were bad enough,” Tavakoli says. “For some that allow reinvesting or substitution, any reasonable professional would ask why these assets were being traded into the portfolio. The Schedule A shows that we should be investigating these deals.”

Among the CDOs on Schedule A with notional values of more than $1 billion, the worst performer was a tranche identified as Davis Square Funding Ltd.’s DVSQ 2006-6A CP. It was held by Societe Generale, underwritten by Goldman Sachs and managed by TCW Group Inc., a Los Angeles-based unit of SocGen, according to Bloomberg data. It lost 77.7 percent of its value -- though it isn’t in default and continues to pay.

SocGen spokesman James Galvin and TCW spokeswoman Erin Freeman declined to comment.

Documentation Needed

Ed Grebeck, CEO of Tempus Advisors, a global debt market strategy firm in Stamford, Connecticut, agrees that more digging is necessary. “You need all the documentation and more than that, all the e-mails,” he says. “That would allow us to understand what went wrong and how to fix it going forward.”

Neil Barofsky, the special inspector general for the Troubled Asset Relief Program, who delivered a report on the AIG bailout in November, says he’s not finished. He has begun a probe of why his office wasn’t provided all of the 250,000 pages of documents, including e-mails and phone logs, that Issa’s committee received from the New York Fed.

Schedule A provides some answers -- and raises questions that need to be tackled to avoid the next expensive bailout.

Payday-Style Loans Offered by U.S. Banks to Replace Lost Overdraft Revenue

Banks May Use Payday-Style Loans to Replace Lost Overdraft Fees

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U.S. banks may expand their short- term lending at interest rates of 120 percent or more as they seek to replace more than $15 billion in lost revenue because of regulations limiting overdraft fees.

“The smarter banks are trying to resell overdraft protection to consumers as a different product,” said Elizabeth Rowe, group director of banking advisory services at Mercator Advisory Group in Maynard, Massachusetts.

Banks including Cincinnati-based Fifth Third Bancorp, San Francisco-based Wells Fargo & Co., the fourth-largest U.S. bank, and U.S. Bancorp, based in Minneapolis, are already making such loans, usually from $100 to $500, at annual rates of 120 percent if repaid in 30 days. They’re known as “checking advance products.” That puts them in competition with so-called payday loan stores, which make loans with similar terms to customers who generally don’t have credit cards to bridge the gap until the check comes, according to Rowe, whose firm advises banks.

The banks don’t call the advances payday loans because it’s a “very tarnished, negative brand,” said Rowe, who estimates U.S. banks may lose from $15 billion to $20 billion in revenue when Federal Reserve rules take effect July 1. The rules will prohibit banks from charging overdraft fees at automated teller machines or on debit cards unless a customer has agreed to pay for exceeding account balances.

For consumers, getting a short-term, high-interest loan from a bank might be worse than going to a payday store, said Lauren Saunders, managing attorney with the National Consumer Law Center in Washington. A bank has direct access to consumer accounts, meaning its loans will be paid off first, ahead of food, housing or utilities, she said.

Replacing Income

“They’re looking for ways of replacing their overdraft income,” Saunders said. “Instead of pricing their products openly and up-front, they seem addicted to back-end ways of making profits.” The Center has represented plaintiffs in lawsuits against banks and hasn’t filed any lawsuits over the loan programs, Saunders said.

Banks caution customers that the loans are an expensive form of credit. Alternatives “may be more suitable to your long-term needs,” says a statement on Fifth Third’s Web site.

At U.S. Bancorp, customers using “Checking Account Advance” may borrow from $20 up to a preset limit. The fee is $10 for each $100 borrowed. Loans are repaid from the account’s next direct deposit. Wells Fargo’s “Direct Deposit Advance Service” works the same way and allows a line of credit of up to $500. The bank, one of the two biggest U.S. home lenders in 2009, has been offering the loans since 1994.

Less Expensive

The advance is less expensive than a payday loan, and the bank’s policies ensure customers don’t use it as a long-term solution, said Wells Fargo spokeswoman Richele Messick.

“Wells Fargo encourages all our customers to properly manage their accounts,” Messick said. “Emergencies do arise, and our Direct Deposit Advance Service can help customers when they’re in a financial bind.”

Fifth Third, Ohio’s largest lender, began offering “Early Access” loans in September 2008, before the current debate on overdraft fees and the Fed announced its opt-in rules, bank spokeswoman Stephanie Honan said. The bank offers the advances only to existing customers with checking accounts in good standing. “Our product fully complies with all applicable state and federal banking regulations,” said Honan.

U.S. Bancorp spokeswoman Teri Charest declined to comment.

Unfair Competition

National banks making payday-type loans unfairly compete with payday loan stores because they’re exempt from state laws limiting interest rates, said Steven Schlein, spokesman for the Community Financial Services Association of America, an Alexandria, Virginia-based trade association, which represents payday lenders. National banks like Wells Fargo, U.S. Bancorp and Fifth Third are federally regulated, while payday lenders are overseen by the states.

“What the banks are doing are payday loans,” Schlein said. “Let’s have everybody operate under the same system.”

The Federal Deposit Insurance Corp. has made banking access for low-income consumers a priority, agency spokesman David Barr said. A December FDIC survey found there were 17 million U.S. adults with no bank accounts and 43 million “underbanked,” meaning they may have a checking or savings account yet rely on financial services such as payday loans.

The FDIC launched a pilot program in 2008 to encourage banks to make loans up to $1,000 with interest rates at 36 percent or less, the agency said. Thirty-one banks participated in the first year, making 16,000 loans for a total of $18.5 million.

State Restrictions

Payday stores and Internet lenders make about $42.1 billion in loans a year, according to Stephens Inc., a Little Rock, Arkansas-based investment bank and financial research firm. Lenders earned about $7.3 billion on fees from those loans, according to the company.

Large banks are looking at the payday loan market because several states have restricted or banned the loans, said Mike Moebs, an industry analyst based in Lake Bluff, Illinois. Ohio passed a law in 2008 limiting payday loan interest to 28 percent.

“If you step in and eliminate the payday lender, someone has to fill that void,” Moebs said.

Consumer groups oppose payday loans whether they’re being made by a bank or a payday lender, said Jean Ann Fox of the Washington-based Consumer Federation of America. Wells Fargo, U.S. Bancorp and Fifth Third’s cash advance products are structured exactly like payday loans, she said.

“If you have a balloon-payment loan for more money than people can pay at one time, at triple-digit interest rates, secured by direct access to your bank account, that’s a recipe for a debt trap,” Fox said.

Pending Legislation

Legislation pending in Congress would exceed the Fed’s rules, limiting banks to one overdraft fee a month or six a year. Banks collected about $38 billion in overdraft fees last year, said Michael Flores, a management consultant whose clients include Citigroup Inc. and Wachovia Corp. He said the loss of revenue from the rules may be from $10 billion to $15 billion a year.

Banks trying to get into the payday loan business face high overhead costs, said Flores, the management consultant. It’s difficult for banks to make money on loans under $500, he said. Regulatory requirements may mean waiting a day or two for the loan, when a payday lender in a neighborhood store may give out the money in 30 minutes, Flores said.

There are consumers who just don’t like banks, said Rowe of Mercator, whose clients include the largest U.S. banks, such as Bank of America Corp., Citigroup and JPMorgan Chase & Co. Consumers don’t like to ask bank tellers behind a glass screen for personal help, she said.

“There’s an awful moment when they have to come to a teller,” Rowe said. “It’s the most unwelcoming moment. It’s absolutely terrifying.”

Consumer Confidence in U.S. Falls to 10-Month Low as Outlook for Jobs Dims

U.S. Economy: Confidence Falls to Lowest Since April

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Confidence among U.S. consumers fell in February to the lowest level in 10 months, a sign that concern about job prospects may hold back the spending needed to sustain the recovery.

The Conference Board’s confidence index slumped to 46, below the lowest forecast in a Bloomberg News survey of economists, from 56.5 in January, a report from the New York- based private research group showed today. A separate report showed home prices rose for a seventh month.

Stocks fell and Treasuries gained after the confidence report also showed attitudes about current conditions fell to the lowest level in 27 years and the outlook for wages dimmed. The survey reinforces expectations Federal Reserve Chairman Ben S. Bernanke will repeat the central bank’s pledge to keep interest rates low for “an extended period” in testimony to Congress tomorrow.

“Consumer spending is going to disappoint throughout most of the year,” said Steven Ricchiuto, chief economist at Mizuho Securities USA Inc. in New York. The economy “may not be out of the woods.”

Economists forecast the confidence index would decrease to 55 from a previously reported 55.9 January reading, according to the median of 68 projections in the Bloomberg survey. Estimates ranged from 50.9 to 59.

The Standard & Poor’s 500 Index declined 1.2 percent to 1,094.6 at 4:05 p.m. in New York. The 10-year Treasury note rose, pushing down the yield 11 basis points to 3.69 percent.

Stock Prices

Chris Low, chief economist at FTN Financial in New York, said in an e-mail to clients that the larger-than-anticipated decline may have also reflected a drop in stock values. The S&P 500 fell 8 percent to a closing low this month of 1,056.74 on Feb. 8 from a January high of 1,150.23.

The S&P/Case-Shiller home-price index of 20 U.S. cities increased 0.3 percent. Compared with December 2008, prices fell 3.1 percent, the smallest year-over-year decline since May 2007.

“There’s no precedent for such a sharp turnaround in the data that we have going back to 1987,” Robert Shiller, co- founder of the index, said today on a conference call with reporters. He said the eventual end to the Fed’s purchase of mortgage-backed securities and expectations for a higher federal funds rate make it difficult to forecast home prices.

The Conference Board’s measure of present conditions decreased to 19.4, the lowest since February 1983, from 25.2.

Jobs Hard to Get

The share of consumers who said jobs are plentiful fell to 3.6 percent from 4.4 percent, according to the Conference Board. The proportion of people who said jobs are hard to get increased to 47.7 percent from 46.5 percent.

“The vicissitudes of the political situation in Washington cannot be helping,” said Brian Bethune, chief financial economist at IHS Global Insight in Lexington, Massachusetts. “There has been a lot of sizzle on job stimulus proposals but no meat is coming out of the sausage factory. Now the focus seems to be moving back to the health-care reform issue.”

The gauge of expectations for the next six months decreased to 63.8, the lowest since July 2009, from 77.3 the prior month.

The proportion of people who expect their incomes to increase over the next six months declined to 9.5 percent from 11 percent. The share expecting more jobs in the next six months fell to 13.4 percent from 15.8 percent.

The report also showed the Middle and South Atlantic were among regions with declines in confidence, which sustained two blizzards this month. Sentiment also waned in areas not affected, such as the Mountain and Pacific regions.

Unemployment Outlook

The unemployment rate is expected to average 9.8 percent this year, according to the median forecast of a Bloomberg survey taken early this month.

An increase in initial jobless claims so far this year signals the labor market isn’t improving, said Ricchiuto. Claims rose to 473,000 in the week ended Feb. 13, compared with 432,000 at the end of 2009, the lowest since July 2008.

Consumer spending will grow 2 percent this year, according to the median estimate of economists surveyed by Bloomberg this month. That would follow last year’s 0.6 percent decline, the worst showing since 1974.

The world’s largest economy will expand 3 percent this year after shrinking 2.4 percent in 2009, according to the median forecast of economists.

Some retailers are turning more optimistic. Lowe’s Cos., the second-largest U.S. home-improvement chain, posted fourth- quarter profit that exceeded analysts’ estimates after better- than-forecast sales signaled a recovery in the housing market.

“While the psychological impact of falling home prices and an uncertain employment picture continue to weigh” on consumers, Americans are “gaining the confidence to take on more discretionary projects.” Robert Niblock, Lowe’s chief executive officer, said in a statement Feb. 22. “The worst of the economic cycle is likely behind us.”

The Austin airplane suicide and the political crisis in the US

The Austin airplane suicide and the political crisis in the US

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The suicide of software engineer Andrew Joseph Stack, who last Thursday flew his small airplane into the seven-story building in Austin, Texas that houses the local offices of the Internal Revenue Service, was both shocking and tragic. Stack perished, as did an IRS employee, and numerous others were injured.

Stack’s action has generated a volume of commentary in the media, as well as widespread popular reaction. The media response is predictably shallow and misleading. Defensively, the various pundits dismiss Stack as a “lunatic,” a “terrorist,” and “anti-government,” and the lengthy statement he left behind as “hate-filled,” and a mere “rant.”

His action was deeply disoriented and misguided, and resulted in the death of an innocent government worker, 68-year-old Vernon Hunter, the father of six. It remains a fact, however, that Stack’s anger and murderous frustration clearly speak to a much wider social reality.

The outrage against the government and against the rich that Stack expresses in his statement is shared by far more people than the political establishment cares to admit, probably even to itself. That is no doubt why media commentators in the aftermath of the incident hastened to insist that Stack was simply a criminal, and nothing more, and why the government quickly took down his Internet posting.

The destructiveness of his action does not alter the fact that Stack was a victim of a foul and reactionary political climate, enforced by every official institution of American society, that is indifferent and hostile to the needs and aspirations of the vast majority of the population and utterly subservient to the interests of a rapacious financial elite.

Stack’s commentary is not a right-wing screed. He is not another Timothy McVeigh—the 1995 Oklahoma City bomber. The latter’s misanthropic, racist and fascistic conceptions were shaped during a period in which both political parties attempted, with some success—due above all to the complicity of the AFL-CIO unions—to pit sections of the middle class and workers against the very poor, the “welfare cheats,” and so on, as the government carried out an assault on the social safety net.

What Stack’s statement reveals is that he, a self-employed engineer, identified himself—in however confused a fashion—with the working population and recognized a common enemy in the capitalist state and the giant corporations. His frustration over the absence of any avenue within official society to redress his grievances reflects the feelings of many others.

In his statement, while recognizing “blacks and poor immigrants” as fellow victims, Stack rages against big business and its political mouthpieces in Washington. He denounces, for example, the “handful of thugs and plunderers [who] can commit unthinkable atrocities (and in the case of the GM executives, for scores of years) and when it’s time for their gravy train to crash under the weight of their gluttony and overwhelming stupidity, the force of the full federal government has no difficulty coming to their aid within days if not hours…”

He refers to the criminality of “the drug and insurance companies” and notes that “this country’s leaders don’t see this as important as bailing out a few of their vile, rich cronies.”

Stack repeatedly refers to awakening from illusions about the nature of American democracy. He notes at one point, “this is where I learned that there are two ‘interpretations’ for every law; one for the very rich, and one for the rest of us.” He comments that one of his painful encounters with the Internal Revenue Service (the US tax agency), “made me realize for the first time that I live in a country with an ideology that is based on a total and complete lie.”

Stack refers to his time as a student, living in Harrisburg, Pennsylvania in the 1970s, when his next-door neighbor was the elderly widow of a retired steelworker. “Her husband had worked all his life in the steel mills of central Pennsylvania with promises from big business and the union that, for his 30 years of service, he would have a pension and medical care to look forward to in his retirement. Instead he was one of the thousands who got nothing because the incompetent mill management and corrupt union (not to mention the government) raided their pension funds and stole their retirement. All she had was social security to live on.” As he notes, the woman was surviving financially by eating cat food.

The engineer points to the recession in California in the early 1990s and “all of the young families who lost their homes” on “street after street of boarded up houses abandoned to the wealthy loan companies who received government funds to ‘shore up’ their windfall.” And, further, to the dot-com bust and the 9/11 attacks, after which “the Government came to the aid of the airlines with billions of our tax dollars … as usual they left me to rot and die while they bailed out their rich, incompetent cronies WITH MY MONEY!”

Stack darkly jests that the financial powers-that-be learned a lesson from the Crash of 1929, when “wealthy bankers and businessmen jump[ed] out of windows when they realized they screwed up and lost everything … [T]hey now know how to fix that little economic problem; they just steal from the middle class (who doesn’t have any say in it, elections are a joke) to cover their asses and it’s ‘business-as-usual.’ Now when the wealthy f__k up, the poor get to die for the mistakes …”

He concludes with a reference to the Communist Manifesto: “The communist creed: From each according to his ability, to each according to his need. The capitalist creed: From each according to his gullibility, to each according to his greed.”

Several issues stand out. Stack’s bitter reference to “presidential puppet GW Bush and his cronies” would lead one to conclude that Stack voted for or otherwise supported the candidacy of Barack Obama in 2008. Although he doesn’t say so, one would also assume that he, like many, many others, had illusions that an Obama administration would place restraints on what he calls “the wealthy sows at the government trough.”

In its own fashion, Stack’s tragically misguided action says something about a popular mood characterized by increasing disappointment and disillusionment with the new administration.

One might put it another way, making use of a historical analogy: Is it likely that an individual in his situation would make such comments and take such mad action in the face of a government seen to be carrying out measures genuinely in the interests of the broad mass of the population? Would such a confused, violent public protest, for example, have been likely to occur in early April 1934, 13 months after the inauguration of Franklin D. Roosevelt, whose New Deal policies, aimed at rescuing American capitalism, nonetheless held out some prospect of relief from the worst effects of the Great Depression?

In its own way, Stack’s statement and action make clear that wide layers of the US population now take for granted that, all the campaign promises and hype notwithstanding, nothing has changed for them under Obama. The government, he says, making no distinction between Republicans and Democrats, Bush and Obama, is “full of hypocrites from top to bottom, life is as cheap as their lies and their self-serving laws.”

Stack’s action also represents an indictment of the so-called labor movement in the US, and, at the same time, a serious warning. The embittered engineer quite correctly notes the complicity of the “corrupt” unions in the immiseration of the American population.

Individuals like Stack, with complete legitimacy, have no reason to look to the AFL-CIO officialdom and their local representatives, a venal crowd of well-heeled parasites, for any way out of the present crisis. The absence of a genuine labor movement conducting mass struggles against unemployment, wage-cutting and attacks on social programs was no doubt a factor in leading him to the futile belief that the only answer to his economic distress was an individual one.

The radicalization of that section of the population to which Stack belongs is not an insignificant development. It is a serious error, as Leon Trotsky pointed out in the 1930s in regard to the political situation in France, to imagine that the middle classes by their nature “do not like extremes.” The small businessman, he noted, “prefers order so long as business is going well and so long as he hopes that tomorrow it will go better. But when this hope is lost, he is easily enraged and is ready to give himself over to the most extreme measures.”

Trotsky noted that in periods of great crisis, “the despairing petty bourgeois” understands “that one cannot forgo the use of force.” He might have been speaking of Stack, who writes: “Sadly, though I spent my entire life trying to believe it wasn’t so, but violence not only is the answer, it is the only answer.”

Although anti-social and even homicidal attacks are relatively frequent in the US, they still represent a statistically insignificant response to the present situation. Masses of people will respond to their growing economic plight, not with individual acts of despair, but by drawing political conclusions and taking political action.

The continued subordination of the working population to the Democratic Party, with the complicity of the trade unions, is the most dangerous factor in contemporary American political life. It creates the risk that masses of “despairing petty bourgeois,” seeing no help coming from the “labor movement” and the official “left” in the Democratic Party, will be driven into the arms of extreme right-wing forces. Politics, like nature, abhors a vacuum.

Impending Explosion: U.S. Intensifies Threats To Russia And Iran

Impending Explosion: U.S. Intensifies Threats To Russia And Iran

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Washington and its NATO allies launched two of the three major wars in the world over the past eleven years in March – against Yugoslavia in 1999 and against Iraq in 2003. The war drums are being pounded anew and the world may be headed for a catastrophe far worse than those in Yugoslavia, Afghanistan and Iraq.

The United States, separately and through the military bloc it controls, the North Atlantic Treaty Organization, is accelerating military deployments and provocations throughout Eurasia and the Middle East.

Embroiled with fellow NATO members in the largest-scale military offensive of the joint war in Afghanistan launched eight years ago last October and well on the way to both extending and replicating the Afghan aggression in the Horn of Africa and the Arabian Peninsula [1], Washington and its allies are also taunting and threatening Russia as well as surrounding Iran with military forces and hardware preparatory to a potential attack on that nation.

The rapid pace of the escalation – almost daily reports of missile shield expansion in Eastern Europe, the Caucasus, the Persian Gulf and Turkey; heightened and progressively more bellicose words and actions directed against Iran – is occurring at a breakneck and almost dizzying speed, drawing in larger and larger tracts of Europe and Asia.

On January 12 new U.S. ambassador to Bulgaria James Warlick, speaking “at his first public event in the country,” announced that Washington is entering into negotiations with the Bulgarian government to station interceptor missile facilities, most likely at one of the three new military bases the Pentagon has acquired there in the past four years. “The US military already has bases in Romania and Bulgaria that were created some years ago for delivering troops and cargo to Iraq and Afghanistan….” [2]

“The United States is planning to expand its European missile shield to other parts of Europe” and “will consult closely with Bulgaria and other NATO allies on the specific options to deploy elements of the defense system in those regions,” according to the American envoy. [3]

During the same speech Warlick also “called on Bulgaria to find other alternatives to stop its dependence on Russian gas,” [4] a reference to sabotaging the Russian South Stream project to transport natural gas from the eastern end of the Black Sea to Bulgaria and from there to Austria and Italy.

An analyst at a pro-NATO think tank in Bulgaria said of the proposed missile shield components that “They can be deployed virtually anywhere. Naturally they will need special infrastructure that provides logistical processes, and technically everything should be enforced by NATO standards.” [5]

The news of including Bulgaria in U.S. and NATO missile shield plans came eight days after a comparable announcement was made by Romanian President Traian Basescu that his country, where the U.S. has four new military bases, will host land-based U.S. interceptor missiles. The news from Romania in turn came only two weeks after Poland disclosed that a U.S. Patriot Advanced Capability-3 anti-ballistic missile battery will be stationed 35 miles from Russian territory as early as March. [6]

The head of the Russian lower house of parliament’s Committee on International Affairs, Konstantin Kosachev, responded to the latest news by saying it is “not in line with the ‘reset’ of US-Russia relations,” [7] an almost unintentionally comic understatement, and other Russian officials have pointed out that the Bulgarian report, as with those relating to Poland and Romania, came to their attention by reading of it in the press. Moscow’s American friend doesn’t feel constrained to notify Russia of its intention to base missile shield installations near the latter’s borders or across the Black Sea from it.

Former Joint Chief of Staff of the Russian Armed Forces retired general Leonid Ivashov was less restrained in his reaction. He recently told a major Russian radio station that U.S. missile strategy “remains unchanged” vis-a-vis that of the former George W. Bush administration and missiles in Romania are an integral component of Washington’s plan to “neutralize Russia as a geopolitical competitor” [8] in the Black Sea and in general. In fact Washington’s plans are to destroy the strategic balance in the European continent two and a half months after the expiration of the Strategic Arms Reduction Treaty (START). Recent announcements concerning U.S. missile deployments near Russia have been interpreted by some observers as intentionally designed to bury START negotiations and any hope for a treaty for the limitation and reduction of strategic offensive arms.

A Russian military analyst, Alexander Pikayev, said of the above dynamic that “US/Russia relations were improving but these proposals really don’t help the situation. This situation is a time bomb. If these plans go ahead it could cause big problems in five to ten years time.” [9]

The White House and Pentagon explain the drive to deploy a solid wall of interceptor missile bases along Russia’s western borders as an alleged defense against Iranian, North Korean and even Syrian missile threats, the argument used by the last American administration in furtherance of plans to place ground-based midcourse missiles in Poland and an X-band missile radar site in the Czech Republic.

The rationale was false then and remains so now. How short-to-medium-range missiles in Poland can in any manner be a response to Iran is unexplained – because it is unexplainable.

Ivashov refuted this transparent lie by stating “Iran will never be first to deliver a military strike.” [10]

On January 12 the Polish parliament took the next step and approved the deployment of 100 U.S. troops, the first foreign forces to be based on its soil since the end of the Warsaw Pact almost twenty years ago, to staff the missile battery near Russia’s border.

Regarding the addition of Bulgaria to the expanding range of American missile shield sites – not the last as will be seen below – Konstantin Sivkov, First Vice President of the Russian Academy for Geopolitical Problems, said that the move “directly threatens Russia.” A news account of his comments added “that after Bulgaria, the next country to make a similar announcement may be Georgia, which has already expressed similar desires.” [11]

He also anticipated the statement of the former top Russian military commander cited above in asserting “the argument that the US missile defense in Europe will be directed against missiles from Iran and North Korea is ridiculous as neither of the two states has the capacity to carry out such strikes.”

In his owns words, Sivkov warned: “The US missile defense in Europe is being created in order to level down Russian operational and tactical missile weapons. The USA has started creating a military infrastructure for exerting military pressure on Russia.” [12]

Another geopolitical analyst, Maxim Minaev of the Russian Center for Political Affairs, said of the new and continent-wide European missile shield system planned by the U.S. and NATO that “In its scope it envisages a much stronger structure than the one that was supposed to be in located in the Czech Republic and Poland,” [13] one which logically will include Georgia and Azerbaijan on Russia’s southern border.

Poland became a full NATO member in 1999 and Bulgaria and Romania five years later. On the day U.S. ambassador Warlick first revealed plans to extend interceptor missile plans to Bulgaria, Prime Minister Boiko Borissov hastened to add “My opinion is that we have to show solidarity. When you are a member of NATO, you have to work towards the collective security.” [14]

To indicate the extent to which U.S. missile shield provocations in Eastern Europe are linked with NATO’s drive east into former Soviet space, fraught as that strategy is with heating up so-called frozen conflicts and the very real threat of hot wars, this year’s developments in Poland, Romania and Bulgaria immediately gave rise to dangerous military prospects east of the Black Sea.

The latest news from Romania was coupled with the announcement that “the Czech Republic is in discussions with the Obama administration to host a command center for the United States’ altered missile-defense plan,” [15] and on February 18 the Romanian government began bilateral discussions with neighboring Moldova “on U.S. missile defense plans in Europe….” [16]

The former Soviet republic of Moldova has been coveted by Romania since the breakup of the Soviet Union in 1991 and the current, Western-supported post-”Twitter Revolution” government is more than willing to oblige its patrons in Bucharest and Washington.

Recently Vladimir Voronin, president of Moldova until last September 11th, spoke of the Romanian president’s disclosure that he would allow the stationing of U.S. missiles in his country and, drawing a parallel with Romania’s World War II fascist dictator, said “The steps taken by Basescu are similar to the agreements to form an anti-Soviet coalition reached by Antonescu and Hitler.”

Voronin added, “Moldovan society is against basing U.S. anti-missile defense systems in Romania. Strained Moldovan-Romanian relations will become worse. We do not accuse Romania for this decision as we are aware of its unionist policy. [Absorbing Moldova into Romania.] Romania cannot accept that Moldova exists as an independent state.” [17]

“Though the Americans said the rockets are designed to prevent dangers from Iran, the essence is different. These events remind one of Europe’s return to the Cold War of the last century.” [18]

On February 11 Moldovan political analyst Bogdan Tsirdia warned that the U.S. “is very consistently moving NATO infrastructure in Russia’s direction,” specifically mentioning American bases in Romania and Kyrgyzstan, and added “the US wants to create another base in Georgia.”

He added in relation to the Black Sea in particular that “in the near future the US will have a conventional arms advantage over Moscow in the region….[T]he United States is turning the Black Sea into an American lake to control transit in the region.” [19]

On February 15 Transdniester, formerly part of the Moldovan Soviet Socialist Republic but independent since 1990 and a war with Moldova two years later – and which fears that Romanian incorporation of Moldova would be a prelude to armed attacks to subjugate it – offered to host a Russian missile defense system to counter the American one in Romania.

Transdniester’s president, Igor Smirnov, said “we could deploy what Russia needs” as the stationing of U.S. interceptor missiles “will not be a stabilizing factor.” [20]

His country is bordered by Ukraine to the east and has been blockaded by that nation after the U.S.-backed “orange revolution” in Ukraine in late 2004 and early 2005. The recent presidential election has rid the nation and its people of the “orange” duo of Viktor Yushchenko and Yulia Timoshenko, and incoming head of state Viktor Yanukovich pledged that “There is no question of Ukraine joining NATO,” [21], thereby renouncing one of the two major objectives of his pro-Washington opponents: Pulling Ukraine into the military bloc against the will of the overwhelming majority of its population and ousting the Russian Black Sea fleet from Sevastopol in Crimea.

The outgoing Yushchenko regime recently assigned Ukrainian troops to the global NATO Response Force and hosted NATO Military Committee Chairman Admiral Giampaolo Di Paola who presented a draft cooperation plan for 2010-2011.

A member of the new president’s Party of Regions, Vasil Hara, deputy chairman of the party’s parliamentary group, recently stated “that by offering to deploy U.S. anti-missile systems on its territory, Romania is turning Ukraine into a risk zone.”

He also affirmed that incoming President Yanukovich “will not leave Transdnestr without support.” [22]

NATO expansion not only allows nations increasingly closer to Russia and Iran to be used for global interceptor missile facilities. The eastward drive of the bloc is expressly intended to secure such bases and related sites for that purpose.

Recent developments, however, signal a new advance in U.S. and NATO strategy to neutralize potential adversaries’ ability to respond to military aggression from the West. The extension of missile shield deployments and technology to the Black Sea and from there further east and south marks the confluence of hostile intentions toward Russia and Iran simultaneously.

In the third public warning on NATO expansion since last month, Iranian President Mahmoud Ahmadinejad recently said “The West’s ultimate goal is not Iran, but India and China” and “named the recent concentration of NATO forces around India and unrest in Pakistan as an argument.” He added that NATO now “almost completely surrounded Russia” and advocated that “Russia should respond to the deployment of NATO forces along its borders.” [23]

Earlier this month former president Hashemi Rafsanjani issued a similar warning, saying “the deployment of NATO forces in Iraq, Afghanistan, and Azerbaijan will constitute a serious threat to Iran….” [24]

In discussing Western pressure not to provide Iran with S-300 surface-to-air missiles for defense against prospective U.S. and Israeli attacks, Russian Security Council Deputy Secretary Vladimir Nazarov recently said, “This deal is not restricted by any international sanctions, because these are merely defensive weapons,” and recalled earlier Russian concerns about the U.S. and its NATO allies arming Georgia on the eve of the August 2008 war with Russia.

But, Nazarov rued, “Our calls were ignored. It should be recalled that the Georgian aggression resulted in deaths among Russian servicemen and Russian civilians.” [25]

Russian concerns have not abated in the face of recent news.

The website of the U.S. Air Forces in Europe divulged that American airmen from the Ramstein Air Base in Germany have arrived at the modernized, massively upgraded Krtsanisi National Training Center in Georgia, “a forward operating base of sorts,” to join American Marines there training the Georgian armed forces on a “mission that involves providing a top-notch service to fellow warfighters.” [26] The Marines have been in the nation and at the Krtsanisi base since last August, and in October conducted the latest Immediate Response war games. Immediate Response 2008, which also included U.S. Marines, ended the day before Georgia invaded South Ossetia and triggered a five-day war with Russia.

U.S. Special Envoy for Afghanistan and Pakistan Richard Holbrooke will arrive in Georgia on February 22 on a visit “devoted to the Georgian military contingent’s participation in the peacekeeping mission in Afghanistan.” (Holbrooke was in the Persian Gulf on February 15 and while speaking in Qatar said of Afghanistan “We cannot make the disastrous mistake of 1989. The international community must stay in Afghanistan to help it,” [27] meaning 1992 presumably, when the U.S.’s Mujahideen clients took over the nation, and “The U.S. has led and won similar wars in Kosovo and Bosnia….” [28])

Georgia is to send another 700 troops trained by U.S. Marines to Afghanistan to serve under American command shortly. Leading Georgian officials have unapologetically acknowledged that the training and combat experience provided them by the U.S. can be used for subjugating South Ossetia and Abkhazia. Any such attempt would guarantee another and far larger war with Russia which has expanded its military presence in both nations since the 2008 war. [29]

Georgia can also be used by the U.S. for military strikes against Iran by providing surveillance radar, air bases and its Black Sea waters for cruise missile launches.

The Russian Itar-Tass news agency revealed on February 12 that in addition to supplying Georgia with aerial drones, Israel is delivering a large consignment of arms and ammunition to the nation.

Citing sources in the Russian secret services, the report revealed: “Under an effective contract Israel’s Ropadia company, registered in Cyprus, plans to supply through Bulgaria’s Arsenal firm 50,000 AKS-74 automatic rifles, about 1,000 grenade launchers RPG-7 and nearly 20,000 40-millimeter shells for them, as well as about 15,000 5.56-millimeter assault rifles….The hardware and ammunition was ready for shipment back several days ago.” [30]

In line with recent announcements that Washington is building up both land-based and sea-based interceptor missile capabilities in the Persian Gulf, the same combination as will be deployed along Russia’s western frontier from the Baltic Sea to the Black Sea and from the latter into the South Caucasus, Georgia and neighboring Azerbaijan are key components in the strategy to prevent Iranian retaliation in the event of U.S. and Israeli attacks. American and NATO bases in Bulgaria and Romania were used for the 2003 war against Iraq and are for the war in Afghanistan to the current day.

Azerbaijan, which has consolidated military ties with the U.S., NATO and Israel, is on Iran’s northwest border. [31]

Recently an official with the Azerbaijan president’s Academy of Public Administration spoke at a conference titled Azerbaijan’s Integration into Europe: Problems and Prospects, organized by the NATO International School in Azerbaijan. He advocated NATO intervening in the Nagorno Karabakh conflict with Armenia as the military bloc had “in the early 1990s in the Balkans, Bosnia,” when NATO deployed 400 warplanes in a bombing campaign against Bosnian Serb positions.

According to the official, Elman Nasirov, “the main aim of Azerbaijan in integrating into NATO and European structures is to provide security and restore its territorial integrity,” [32] meaning the military conquest of Karabakh.

Azerbaijan can be a major base for operations against Iran, where ethnic Azeris comprise as much as a quarter of the population. The Bosnia model has been alluded to above on two occasions.

On February 16 NATO Secretary General Anders Fogh Rasmussen hosted Major General Yaylym Berdiyev, the defense minister of Turkmenistan, Iran’s northeastern neighbor, at the Alliance’s headquarters in Brussels. As the French Voltaire Network wrote five days before, “NATO has encircled Iran almost entirely: it has a foothold in Afghanistan, Pakistan, Abu Dhabi, Saudi Arabia, Kuwait, Iraq, Turkey, Armenia and Azerbaijan. It just needs one in Turkmenistan for the siege to be complete.” [33]

To Iran’s west, Turkey’s Zaman newspaper wrote on February 17 that U.S. Secretary of State Hillary Clinton spoke in the Persian Gulf state of Qatar and while identifying Iran as a “long-term threat” because of its “nuclear weapons,” said that the U.S. interceptor missile system being steadily expanded from Eastern Europe to locations east and south “would protect into the Caucasus and down to Turkey, would provide some additional guarantee against threatening behavior.” (NATO Deputy Secretary General Claudio Bisogniero was in Qatar on February 8 and 9 to consolidate military partnerships with members of the Istanbul Cooperation Initiative and the Mediterranean Dialogue: Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, the United Arab Emirates, Algeria, Egypt, Israel, Jordan, Mauritania, Morocco and Tunisia. [34])

The same Turkish source quoted U.S. Defense Secretary Robert Gates: “The dialogue on what Turkey could do within NATO to counter the proliferation of ballistic missiles via a missile defense system continues. We have discussed the possibility of erecting two radar systems in Turkey.” [35]

The Pentagon is simultaneously deploying land-based and ship-based interceptor missiles throughout the Persian Gulf to render Iran incapable of retaliation against massive missile attacks and bombing runs from the U.S. and its allies. [36]

After a five-day tour to Afghanistan and Pakistan to oversee the escalation of the wars in both nations, U.S. National Security Adviser James Jones – former Marine Commandant and NATO Supreme Allied Commander – said that Washington was pursuing tighter sanctions against Iran and revealed what the true purpose of such economic warfare is: “We are about to add to that regime’s difficulties by engineering, participating in very tough sanctions,” which “could trigger regime change.” [37]

On February 14 Chairman of the U.S. Joint Chiefs of Staff Admiral Michael Mullen arrived in Israel to meet with Israeli Defense Minister Ehud Barak and military Chief of the General Staff Lieutenant-General Gabi Ashkenazi, and stated that the option of war against Iran “is still on the table.” [38]

During his trip it was reported that “Mullen’s visit follows a visit last month by U.S. National Security Adviser James Jones and a leaked secret visit two weeks ago by Central Intelligence Agency director Leon Panetta.” [39]

In a masterful analysis of the current crisis in Yemen, American professor Robert Prince examined that nation’s role in American plans for armed hostilities against Iran.

In addition to “countering Chinese access to Middle East and African oil and gas moves, in the long run Yemen offers the United States strategic access to the Horn of Africa – Somalia, Sudan, Kenya – all of which are in varying degrees of turmoil and opens the door for expanding the roles of either AFRICOM or NATO – not only in the Middle East, but in Africa.

“There is another possible strategic consequence to US bases in Yemen, hypothetical but not out of the range of possibility: a US air base in Yemen could be used as a launching pad for an air attack on Iran, not only for US planes but for the Israelis as well.” [40]

On February 15 the earlier-cited Vladimir Nazarov, deputy secretary of Russia’s Security Council, warned that “Any military action against Iran will explode the situation, will have extremely negative consequences for the entire world, including for Russia, which is a neighbor of Iran.” [41]

On the 17th Chief of the General Staff of the Russian Armed Forces General Nikolai Makarov was quoted by his nation’s Interfax news agency as stating, “The U.S. is currently conducting two military operations – in Afghanistan and in Iraq. A third one would be a disaster for them. So, as they’re tackling their tasks in Iraq and Afghanistan, they could deliver a strike against Iran.” [42]

Washington and its NATO allies launched two of the three major wars in the world over the past eleven years in March – against Yugoslavia in 1999 and against Iraq in 2003. The war drums are being pounded anew and the world may be headed for a catastrophe far worse than those in Yugoslavia, Afghanistan and Iraq.


1) U.S., NATO Expand Afghan War To Horn Of Africa And Indian Ocean Stop NATO, January 8, 2010
2) Russia Today, February 15, 2010
3) RTT News, February 12, 2010
4) Ibid
5) Focus News Agency, February 16, 2010
6) With Nuclear, Conventional Arms Pacts Stalled, U.S. Moves Missiles And Troops To Russian Border Stop NATO, January 22, 2010
7) Voice of Russia, February 16, 2010
8) Russia Today, February 15, 2010
9) Sky News, February 17, 2010
10) Ibid
11) Sofia News Agency, February 13, 2010
12) Ibid
13) Ibid
14) Sofia Echo, February 12, 2010
15) Prague Post, February 10, 2010
16) Russian Information Agency Novosti, February 18, 2010
17) Info-Prim Neo (Moldova), February 13, 2010
18) Ibid
19) The Messenger (Georgia), February 15, 2010
20) Russian Information Agency Novosti, February 15, 2010
21) Russian Information Agency Novosti, February 12, 2010
22) Nezavisimaya Gazeta/, February 15, 2010
23) Trend News Agency, February 16, 2010
24) Jomhouri-e Eslami, February 10, 2010
25) Interfax, February 14, 2010
26) U.S. Air Forces in Europe, February 16, 2010
27) Reuters, February 15, 2010
28) Tanjug News Agency, February 17, 2010
29) U.S. Marines In The Caucasus As West Widens Afghan War Stop NATO, September 3, 2009
30) Itar-Tass, February 12, 2010
31) U.S. Marines In The Caucasus As West Widens Afghan War, Stop NATO, September 3, 2009
Azerbaijan And The Caspian: NATO’s War For The World’s Heartland Stop NATO, June 10, 2009
32) News.AZ, February 16, 2010
33) Voltaire Network, February 11, 2010
34) NATO’s Role In The Military Encirclement Of Iran, Stop NATO, February 10, 2010
35)Today’s Zaman, February 17, 2010
36) U.S. Extends Missile Buildup From Poland And Taiwan To Persian Gulf, Stop NATO, February 3, 2010
37) Deutsche Presse-Agentur, February 15, 2010
38) Jewish Telegraphic Agency, February 14, 2010
39) Ibid
40) Robert Prince, Houthi Rebellion in Yemen has the Saudis Nervous
February 11, 2010
41), February 15, 2010
42) Interfax-Military, February 17, 2010