James Clapper’s Financial War on the World
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Yesterday, TV Globo published details of NSA spying on Brazil’s oil company, Petrobras, SWIFT, and financial organizations. Besides revealing that man-in-the-middle attacks are sometimes used, the report didn’t offer details of what the NSA was actually collecting. Its sources suggest NSA might be seeking Brazil’s leading deep sea drilling technology or geological information that would be useful in drilling auctions, but it is also conceivable the NSA is just trying to anticipate what the oil market will look like in upcoming years (this is one area where we probably even spy on our allies the Saudis, since they have been accused of lying about their reserves).
To some degree, then, I await more details about precisely what we’re collecting and why.
But what I am interested in is James Clapper’s response. He released this statement on the I Con site.
It is not a secret that the Intelligence Community collects information about economic and financial matters, and terrorist financing.
We collect this information for many important reasons: for one, it could provide the United States and our allies early warning of international financial crises which could negatively impact the global economy. It also could provide insight into other countries’ economic policy or behavior which could affect global markets.
Our collection of information regarding terrorist financing saves lives. Since 9/11, the Intelligence Community has found success in disrupting terror networks by following their money as it moves around the globe. International criminal organizations, proliferators of weapons of mass destruction, illicit arms dealers, or nations that attempt to avoid international sanctions can also be targeted in an effort to aid America’s and our allies’ interests.
What we do not do, as we have said many times, is use our foreign intelligence capabilities to steal the trade secrets of foreign companies on behalf of – or give intelligence we collect to – US companies to enhance their international competitiveness or increase their bottom line.
As we have said previously, the United States collects foreign intelligence – just as many other governments do – to enhance the security of our citizens and protect our interests and those of our allies around the world. The intelligence Community’s efforts to understand economic systems and policies and monitor anomalous economic activities is critical to providing policy makers with the information they need to make informed decisions that are in the best interest of our national security.
Let me take this extraordinary statement in reverse order.
In the fourth paragraph, Clapper reiterates the final defense that NSA defenders use: that we’re better than, say, China and France, because we don’t engage in industrial espionage, stealing technology with our spying. That may be true, but I suspect at the end of the day the economic spying we do might be more appalling.
In the third paragraph, he retreats to the terror terror terror strategy the Administration has used throughout this crisis. And sure, no one really complains that the government is using financial tracking to break up terrorist networks (though the government is awfully selective about whom it prosecutes, and it almost certainly has used a broad definition of “terrorism” to spy on the financial transactions of individuals for geopolitical reasons). But note, while the Globo report provided no details, it did seem to describe that NSA spies on SWIFT.
That would presumably be in addition to whatever access Treasury gets directly from SWIFT, through agreements that have become public.
That is, the Globo piece at least seems to suggest that we’re getting information from SWIFT via two means, via the now public access through the consortium, but also via NSA spying. That would seem to suggest we’re using it for things that go beyond the terrorist purpose the consortium has granted us access for. Past reporting on SWIFT has made it clear we threatened to do just that. The Globo report may support that we have in fact done that.
Now the second paragraph. James Clapper, too cute by half, asserts, spying on financial information,
could provide the United States and our allies early warning of international financial crises which could negatively impact the global economy
Hahahahahaha! Oh my word! Hahahaha. I mean, sure, the US needs to know of pending financial crises, in the same way it wants to know what the actual versus claimed petroleum reserves in the world are (and those are, of course, closely related issues). But with this claim, Clapper suggests the US would actually recognize a financial crisis and do something about it.
Hahahahaha. Didn’t — still doesn’t — work out that way.
Note, though, I suspect getting a meaningful understanding of the economy would require getting so far in the books of entities like JP Morgan, crisis-causer extraordinaire, that you’d finally see the kleptocrats object to the level of spying we’re doing. Effective spying on this front would require an all-out assault on the privacy of the world’s most powerful companies, and the US is probably not conducting that kind of spying (though NSA’s assault on encryption would allow just that).
Which brings us, finally, to Clapper’s initial response.
It is not a secret that the Intelligence Community collects information about economic and financial matters
In support for this statement, ODNI tweeted out links to two documents, the Global Threat Assessment from earlier this year, and the Global Trends 2030. They do show the kinds of financial information the Intelligence Community collects and why.
For example, the Global Trends has a long section on financial crises and the rise of the emerging world (one reason they spy on Brazil closely, because it is one of the rising markets that can directly challenge us in many areas). The two documents make it clear some of this financial spying supports of this kind of trend analysis.
But it’s the Threat Assessment I’m more interested in. That’s because (as I’ve referenced in passing a number of times since) it included this very remarkable admission, with zero elaboration.
This environment is demanding reevaluations of the way we do business, expanding our analytic envelope, and altering the vocabulary of intelligence. Threats are more diverse, interconnected, and viral than at any time in history. Attacks, which might involve cyber and financial weapons, can be deniable and unattributable. [my emphasis]
While I presume the reference to financial weapons is not the first public mention that such things exist and our IC concerns itself with them (in his book Currency Wars, for example, James Rickards talks about conducting war games with the Pentagon on such issues), its inclusion in the Global Threat Assessment struck me at the time.
Because once you’re considering the deployment and defense against financial weapons, then all this generalized spying becomes far more ominous.
Consider: a number of observers argued that our Quantitative Easing over the last several years was entirely designed to depress the dollar and make the US more competitive against those who were benefitting from our crash. Brazil’s Dilma Rousseff has complained about QE explicitly, because it undercut Brazil’s exports at a time when the country was finally booming. Again, that’s probably one reason we’d spy closely on Brazil.
An even better financial attack (not one I’m saying we launched, but it would have been shrewd according to some arguments) would be to crash the Euro, thereby eliminating the one potential currency that could threaten the dollar as the international reserve currency, even while turning the citizens of a series of European countries into debt servants in the process. Certainly, the kind of intelligence the NSA collects from top EU officials would support such a strategy. And it would explain why Germany would be a key target. Again, I’m not saying we and our allies have done that, just that it is the kind of thing you might do if wielding financial weapons.
But if we were collecting all this financial data — ostensibly to have advance warning of the next global crisis we’ll do nothing to prevent — in the name of wielding financial weapons, crashing others’ economies for America’s relative benefit, it would seem to be just as or even more pernicious than stealing technology via our spying. Sure, our individual companies wouldn’t benefit, but all companies that still aligned with the US would. It’s one thing to steal a plane design to replicate at home; it’s another thing to play at crashing other economies not by competing better, but by using our spying advantage to do so.
Clapper may assert that it is not a secret that the IC collects all this information. But what is a secret is the degree to which we have offensively waged financial war. If we’re doing so, it makes the collection of such data, in the guise of trend analysis, far more ominous.
“We collect this information for many important reasons: for one, it could provide the United States and our allies early warning of international financial crises which could negatively impact the global economy.”
I’d like to know the last time the NSA provided stock and bond market advice. I’d really like to see where the NSA was on this in 2007 and I don’t think this has ever been brought up before. If the NSA did warn about the crash beforehand and this has been kept out of public view ever since that should be made public but if Clapper is just making up stories about what the NSA does then he should be called out on that too.
the list of “threats” that nsa tackles, as recited by clapper, makes one think of the technical definition of paranoia – the projection to others of thoughts that originate in the troubled mind of the paranoid individual.
of course, we are talking about govt institutions here, so the question is how many of these actions have we taken or do we have war plans to take?
my concern, human decency and constitutional issues aside, is that these foolish, ignorant-of-systems-behaviour, self-serving politicians and security bureaucrats are taking enormous, poorly understood risks in planning to intervene in global systems.
just look at how poorly we performed intervening in the social systems in iraq and afghanistan while engaging in an activity – war – that humans have had thousands of years to perfect and that the u.s. military has studied intensively since vietnam.
This sentence stood out to me:
“It also could provide insight into other countries’ economic policy or behavior which could affect global markets.”
Perhaps I’m reading into this statement much more than is actually there, and perhaps he doesn’t mean nefarious policy or behaviors (or that we would interpret as nefarious, nefarious = anything we don’t like), but the unsaid continuation of that statement, to me, seemed to be “in which case, we assert out right to take action against policies and behaviors that threaten the national security interests of the United States.”
Again, I may be reading into it.
@SpanishInquisition:
Yeah, if they had that kind of information then there are a lot of people walking around who should have been put in prison four years ago.
Does anyone in DC realize just how angry people outside the Beltway are?
@P J Evans:
Yes and no. Yes they know people are angry in a general sense but surveys of officials and aides (don’t have the links right now check Huffpo) suggest that they consistently assume that the anger is: (a) About the deficit or deficit related; and (b) is against or can be turned against the other party.
That is they know that anger exists but they are unable to view it directly only through the prism of their partisan experience.
@SpanishInquisition: Agreed. That is one case they should definitely throw down about or, if they cannot, they should explain how they would use that informetion to protect us without revealing the spying. How would we all benefit from this?
This line is fun: “you’d finally see the kleptocrats object to the level of spying we’re doing. Effective spying on this front would require an all-out assault on the privacy of the world’s most powerful companies.” It is going to be interesting to see what happens if and when one of the MOU institutions gets pilloried because somebody paid attention to the illegality of the “economic” communications being collected hourly under these programs. You know — information saved because it reflected what is plainly “otherwise evidence of a crime.” When the “dirty hippies worried about ‘privacy'” start including armies of $1,000+/hr Big Law partners (you know, Holder’s peers) being bankrolled by JP Morgan looking at a billion or twenty of exposure. It is, ultimately, going to involve how one spells “princi[ple/pal]”. When Booz Allen perceives a need to square off against Wall Street over spending $52 billion a year of government/taxpayer money that ultimately threatens Wall Street’s golden geese….
You will recall that American companies no longer need to follow GAAP when it comes to national security. Companies need not, and in some cases must not report on the size, leverage and risk of programs involving national security, and are given leave of the requirements for public companies to publish truthful information on their finances. Reporting requirements are waived, and woe be to the naive investor who believes US companies are required to provide true reporting on their financial status.
“…But with this claim, Clapper suggests the US would actually recognize a financial crisis and do something about it. Hahahahaha. Didn’t — still doesn’t — work out that way.”
I’ll see your Haha…ha and raise you a bwahahaha. The buffoon should be laughed out of town, on a rail, with tar and feathers. Put Alexander, Summers, all the “Best and brightest” on it with him. Bwahahaha.
Marcy,
The SWIFT portion of this story is, IMHO by far and away, the much more significant aspect of it (as opposed to the Petrobras angle). I’ve been researching and drafting a piece on this for publication on my blog (at Daily Kos) since I first read about it, late yesterday.
We live in a country where 36-year-old, Somali-born, San Diego cabbie Basaaly Moalin faces countless years of hard time for making an $8,000 tribal donation to al Shabaab in the country of his birth. Then he’s held-up as the poster boy for all that’s “true and just” when it comes to the NSA’s Orwellian invasion of our privacy. Meanwhile, that same NSA looked the other way knowing–to the Nth detail–full, damn well what Standard Chartered, Wachovia/Wells Fargo and HSBC were doing as they laundered more than $1.5 TRILLION on behalf of Hezbollah, al Qaeda, South American drug cartels and organized crime entities around the world. And, the people that engaged in that travesty ended up with what, exactly? Raises and promotions!
The stark contrast here is nothing less than STUNNING!
Kudos to you for nailing it first (as always)!
A big fan here! Thanks, for all you do!
–Bob Swern
One point in EW’s post stands out to me: “It’s one thing to steal a plane design to replicate at home; it’s another thing to play at crashing other economies not by competing better, but by using our spying advantage to do so.”
How can one describe “shorting” (in the stock market) as anything other than the same thing as the above? Thus, if crashing someone else’s economy (instead of just making better mousetraps and capturing the market “honestly”) is an act of war or terrorism, then is not shorting a competitor to get their stock to fall, so they can’t borrow at good rates, so they end up failing – even though they make better mousetraps than you do – not also an act of war or terrorism?
Why the heck do we allow financial “products” [sic … as in: sick] like shorting to exist? It is not part of the capitalism that we need in an industrial society. It is merely a way to make certain people rich. And, most of all, it allows the powerful to attack and/or terrorize the weak.
A reader of Saturday’s statement by General Clapper might get the impression that NSA’s Follow-the-Money Signal Intelligence (SIGINT) tracking of bank transfers began after the September 11, 2001 terrorist attacks. NSA’s intercepts of wire transfers in the banking sector began in 1981 when NSA had the U.S. Department of Justice misappropriate the PROMIS legal case management software from INSLAW, Inc. for its new mission from the Reagan White House for real-time electronic surveillance of wire transfers, and NSA then installed PROMIS in 1981 in three major wire transfer clearing houses in the United States and Europe (CHIPS in New York City for dollar-denominated transfers, CHAPS in London for Sterling-denominated transfers, and SIC in Basel, Switzerland for Swiss Franc-denominated transfers).
A PBS television documentary on July 12, 1989, entitled “Follow the Money, documented most of these facts through interviews of the former Reagan National Security Council staff who were responsible for NSA’s new banking sector SIGINT mission, including Dr. Norman A. Bailey, the PHD economist who was then director of national security planning. Bailey referred to PROMIS in the documentary as “sophisticated computing mechanisms” installed in the computers of the three wire transfer clearing houses but stated in a Salon Magazine interview in 2008 that PROMIS was the principal software NSA used.
The version of PROMIS NSA installed in the wire transfer clearing houses in 1981 and, later on, in international financial institutions such as the World Bank nin Washington, D.C. and the Bank of International Settlements in Basel, Switzerland and in the approximately 400 major commercial banks that comprise the backbone of the inter-bank payment system, would presumably have produced real-time intelligence information on the bank transactions of both foreigners and Americans and others residing in the United States. Did NSA “minimize” the intercepts of Americans’ bank transfers by deleting their names before disseminating or storing the intercepts during the 20 years preceding the September 11, 2001 terrorist attacks? Can NSA assure that no one was able to access the PROMIS intelligence database of bank transfers to obtain leverage for insider trading profits? Can NSA assure that no one was able to use PROMIS to later bank records, thereby, calling into question the integrity of the banking system?
Two federal courts made fully litigated findings that the U.S. Department of Justice “took, converted, stole” PROMIS from INSLAW, Inc. “through trickery, fraud, and deceit,” and then attempted “unlawfully and without justification” to force INSLAW out of business so the Company would be incapacitated from seeking legal redress. Two weeks before the U.S. Court of Appeals for the District of Columbia set aside the rulings of the first two federal courts on a jurisdictional issue, the NSA General Counsel and two Associate General Counsel traveled from NSA Headquarters at Ft. Meade, Maryland to sttend my luncheon speech to the 20th Anniversary meeting of the intellectual property lawyers association in which I explained that we had finally begun to acquire affidavits about WHY the Department of Justice had stolen PROMIS, i.e., for NSA and other U.S. and foreign intelligence agencies.
Neither NSA nor any of its sister intelligence agencies has ever offered to compensate INSLAW for hundres of millions of dollars of unauthorized, copyright-infringing copies of PROMIS. Shouldn’t that raise questions of whether the American people should trust these agencies to do what is right?
@JTMinIA: “Play at crashing other economies” — HAH! Play? These guys are professionals at tanking economies, including their own if it achieves their aims.
The 2008 crash achieved multiple goals — hurt other economies with which the US competes, enriched their key demographic, created a diaspora of economically disadvantaged by forcing them out of their portion of the American dream.
NSA maybe the sidekick to CIA in supportive efforts, but I’m sure over time they’ve managed to hide a lot of CIA’s efforts under NSA’s purview. Just a generational refresh, same story a la John Perkins’ “Confessions of an Economic Hitman.” Now scaled up from nation-state to global scale, and rejiggering to attempt to meet China’s asymmetric warfare model.
@Bob Swern: Precisely. Though if they’re HACKING SWIFT in additional to their negotiated access, it means they likely have the evidence of that fraud. They’re just using it for means other than prosecution.
@William A. Hamilton: Outstanding info and summary. Thank you!
@emptywheel: One would think, after a few hundred billion dollars’ worth of transactions, our gov’t would have ample evidence. But, letting it happen with three major banks, and for a total of at least $1.5 trillion? At that level, there’s a lot more than “following-the-money” intelligence-gathering going on, isn’t there? Or, were the banks put on notice, and all (at least 100 bank employees would be a very conservative number/guess, IMHO) of those bank personnel working “with” the NSA. And, that’s why there were virtually no prosecutions? (Then were the “fines” bogus, as well?) I recall a couple of public threats from regulators making it to the press; and some “harsh words;” but at the end of the day, there were fines levied to the tune of a few weeks’ worth of profits, as far as the actual pain that was inflicted upon those banks was concerned. Rinse. Repeat.
Speaking of the stock market, I wonder if selling all sorts of user data to the NSA is why Facebook stock has improved. It seems like if you’re a desperate company, all you have to do is go to the NSA and sell out your customers for fun and profit.
Doesn’t economic spying permit an opportunity for enormously profitable corruption? Doesn’t history tell us that it’s a near certainty that someone will take advantage of such an opportunity, with the probability of corruption increasing with the potential profit?
It really appears that we are in the last days of the American empire.
Doesn’t economic spying permit an opportunity for enormously profitable corruption? Doesn’t history tell us that it’s a near certainty that someone will take advantage of such an opportunity, with the probability of corruption increasing with the potential profit?
It really appears that we are in the last days of the American empire.
Juan Gonzalez, from April 2010:
http://www.nydailynews.com/news/money/whistleblower-bradley-birkenfeld-u-s-pols-off-shore-accounts-ubs-article-1.168792
“A former banker who blew the whistle on thousands of secret bank accounts rich Americans held at Swiss giant UBS claimed Thursday some U.S. politicians also kept off-shore accounts with the bank.
“We had an office in Washington that we all referred to as the PEP office – for ‘Politically Exposed People,'” Bradley Birkenfeld said. . . . “Only top managers from the bank knew the names of the political clients,” Birkenfeld said.
Executives from the bank’s U.S. subsidiary, UBS America, he added, helped promote those off-shore accounts through a New York “referral desk” that steered U.S. clients to their Swiss colleagues, and through dozens of high society events that the U.S. subsidiary often sponsored. . . .
The bank admitted that between 2000 and 2007 as many as 50 of its bankers traveled to this country from Switzerland every few months. None of them, including Birkenfeld, a U.S. citizen, was licensed to transact business in this country. They came with encrypted computers and met with each client to service accounts.
The bank even trained its bankers in avoiding detection by U.S. regulators.”
Do you suppose they were stopped at JFK and asked for their computer passwords? Held for 9 hours? Waved through the express lane?
Two years later, CNBC picked up the story:
http://www.cnbc.com/id/48291591
PEPs even have a Wikipedia page (perhaps just so you know it’s not a Kellogg’s breakfast cereal):
https://en.wikipedia.org/wiki/Politically_exposed_person
Of course it wants key data on where oil or other critical natural resources lay, how easy or hard it would be to get at them, and who is in the running to do so.
Of course the US engages in industrial espionage. Directly or indirectly, it does so to benefit the principal paymasters of US elections, America’s largest corporations, which act directly and through a myriad of lobbyists and “grass roots” front groups. A corollary to that would be that such information could well lead to the disadvantage of those corporations and governments with which US corporations compete.
The US collects global information to protect foreign, US, and hence, global, financial markets. That would include not just the markets per se, but principal players in those markets, including federal agencies that purportedly oversee them.
The collection of information may ultimately reveal useful or tangential information about terrorist activities, at least those we don’t already fund or support. That goal would be one of many. Collecting descriptions of all the hay stacks on earth would not be the best, let alone the most cost-effective, way to find a handful of needles.
Thanks for pointing out that the US is in the forefront of using financial and economic data to punish states that seek to be independent of US economic and foreign policy objectives. Ask any country in Latin America or West Africa. Gotta have bullets to load into that gund, dontchyaknow. Mr. Clapper is revealing himself to be an incessant liar. It is such bald lying that damages US credibility, not a reasonable hesitancy to start wars at the drop of a hat or someone else’s WMD’s. (Not when we have so many of our own).