Many of you who kept linking to the news on the cable cuts in CA’s South Bay were pointing in this direction. (h/t Susie)

This week in the San Francisco Bay Area, the fiber-optic cable network was purposely sliced at four distinct locations. Where a hacker cannot succeed, bolt cutters will do. Read more in The Wall Street Journal’s Digits blog. Once the cables were cut, Internet service was flaky for the region and completely out for 50,000 customers. On top of that, the landlines would not work and the cell-phone towers in the area went dead.  [snip] How much work would it take to find some choke points that you could cut for the purposes of disrupting data communications in an area? How would this affect the so-called smart grid? The peculiar nature of the four cuts around the Bay Area indicated to me that someone was mapping how they would affect the region, keeping in mind that by cutting the cable in key areas you might be able to take down half the country. If more cuts are made in the future, then someone is trying to reverse-engineer the network to find the most vulnerable points of disruption.

The MarketWatch article speculates that the intentional cuts were an attempt to map how to shut off parts of the system. But what it doesn’t question–but a lot of you already had–was whether these intentional cuts had anything to do with the cable cuts made in the Middle East last year, which took down Egypt and Pakistan, and much of the rest of the Middle East.

We know whoever cut the cables last year (intentionally or not or some combination thereof) demonstrated clear choke points in international internet traffic. Now is someone trying to do the same within the US?

There’s an aspect of the Louis Freeh interview on Frontline I find fascinating.

In defense of his client, Saudi Prince Bandar, on allegations that Bandar received billions in bribes associated with a huge BAE defense contract, Freeh mostly tries to pretend there’s a meaningful distinction between the Saudi family and high government officials in it. Thus, the plane and estate that Bandar got in connection with the BAE deal are actually government-owned facilities he has use of.

And conveniently, Freeh hasn’t looked at the Swiss Bank Accounts or the Yamamah contract, so he can’t comment on their legality.

But I’m also fascinated by a more subtle tactic Freeh uses–to implicate high ranking Americans (and Brits) in the use of the funds. 

He explains away that structure of the al Yamamah contract to Congressional intransigence during the Reagan Administration. Congress wouldn’t let the Administration sell planes to Saudi Arabia, so what was Reagan to do except encourage Margaret Thatcher to set up a big corrupt contract to bypass this restriction?

Freeh: In other words, the United States, was not able to sell the Saudis F15s, and I think you understand the origin to this contract. The King sent Prince Bandar, my client, to President Reagan with very specific instructions, “Buy F15s.” And of course the United States had armed the Saudi armed forces for the last 20 years before that.

President Reagan said to my client, “Congress will never approve the sale of F15s.” My client then went up to the hill, spoke to senior leadership on both sides of the aisle, and they said, “We can’t authorize the purchase of F15s by the King of Saudi Arabia.” He went back to President Reagan who said, “Go talk to Maggie Thatcher,” which my client did. That’s how Tornados and the treaty, not the contract but the treaty between the two countries, was originated.

He wanted to buy the planes in the United States.

[snip]

So there was only one bidder here by default and that was the British Aerospace Systems and the Toranado, at least as the contract began. So the way the treaty was set up, if the Ministry of Defense and Aviation wanted to purchase U.S. arms, U.S. arms could be purchased through BAE and DESO, which was the U.K. Ministry that did the purchasing, and that was sort of a way to purchase arms, transparent way to purchase arms, but in a way that did not deal with the objection of the U.S. Congress to the selling of American equipment to the Saudis.

While we knew that was the purpose of the contract, I still find it galling that Freeh dismisses Reagan’s effort to bypass Congressional restrictions so easily.

And then Freeh makes a point of listing the Presidents who flew on Bandar’s plane the plane the Saudi government allowed Bandar to paint and use almost exclusively. 

Louis Freeh: No, absolutely not, absolutely not. The plane was assigned to him. He traveled more than the Minister of Foreign Affairs because of the intricate relationship he had between three United States presidents, Lowell, and the King of Saudi Arabia. But the king used the plane, three of our U.S. presidents used the plane, prime ministers used the plane. The fact of the matter is, you know, whatever arguments and inferences you want to make, he did not own the plane.

I’m assuming the three Presidents were Bush I, Clinton, and Bush II. But is this news? I mean, last I checked, the President–whichever one you’re talking about–has his own plane, Air Force One. But apparently all our presidents make a habit of flying around on Bandar’s own plane.

Why?

In any case, I find Freeh’s inclusion of those two details rather curious. At one level, he spends a lot of time excusing the Brits for dismissing the investigation after Bandar threatened to stop cooperating on terrorism.

Louis Freeh: No, not necessarily. If the President of the United States told the FBI, maybe this former supervisor’s equivalent, “Look, I know this is an important criminal investigation but for political reasons and for foreign policy reasons, we don’t want the Department of Justice to continue the investigation because there are very dangerous and impactful consequences that will flow from that investigation” the prosecutor is required to close that investigation.

The prosecutor can’t conduct totally unrestricted inquiries particularly if it impacts on the national security or the foreign relations of a country. So I think that’s what happened in England, not in the United States by the way, and I don’t find that to be unusual, given my experience and given the sensitive issues that were involved in this case. 

At the same time, neither Lowell Bergman nor Freeh mentions the allegations that this contract created a slush fund used to fund covert operations.

Freeh seems intent in raising details of those ops–and implicating all our recent presidents in them–along with his more general defense of Prince Bandar.

Image by isiria/Melange

Pirates! Arrrr, they’re teh new sharks matey. Scary! And we should rightly be worried about this pirate problem, because CNN, MSNBC and the print have been relentlessly telling us so. First it was the seizure of the quasi American flagged cargo ship Maersk Alabama, and now the pesky pirates have snared an Italian tugboat too.

Sara related some fascinating background on Maersk and its business:

…. part of Public Law 480 requires that food relief from US Agricultural surpluses, be carried in “American Bottoms” — and US Flagged and owned ships, all have union crews. This ship is owned by Moller/Maersk, which is a vast international Danish Company, but which bought an American Shipping Company, and thus is a bi-national corporation. When it carries American Humanitarian Relief Supplies, they must use a ship chartered in the US, US Flagged, and American Crew. Moller/Maersk is perfectly capable of changing the charter, flag, and crew if it is hired to deliver a non-restricted cargo. For instance, this is the Danish Shipping Company that “sold” Ollie North his ship for shipping the anti-tank weapons to Iran back in the middle of Iran Contra — the ship he took back to Denmark and parked once the story broke, and left the crew without paying their wages. Not covered in the US Press at all — the Danes had a nice little trial in a public court on the Island of Fyn, and took public testimony of all the seamen (all Danes) who were unpaid, and out spilled all the cargo’s they had hauled, and all their ports of Call. Not sure whether North ever paid his fines and got right with the Danish Seaman’s court. Moller/Maersk also was the primary contractor hauling arms to Central America back in the Reagan Days. They’ve done covert stuff for CIA for years.

Shipping, even through troubled waters like those near Somalia, is big business. Isn’t everything these days? Which brings me to the knee jerk question, one I am sure many have asked, of why these big global business ships do not simply arm themselves sufficiently to repel the rag tag Somali pirates? Seriously, the Maersk Alabama is 508 feet long and staffed by a trained and unionized crew, why can’t they fight off these pirates with AK-47s in rinky dink junks and skiffs? Insurance and regulatory liability concerns; and, it turns out, that appears to be a pretty valid explanation.

The Maersk Alabama is, as previously described, a 508 foot vessel, yet it is manned by a crew of only twenty. Between standing watch, operating the ship, and rotating downtime, there is not much capacity for defensive prowess. Even if the crew members were trained for armed confrontation, which they are not, there are not enough of them. Above and beyond that, however, are a broad range of issues militating against allowing a ship’s crew to fight back with arms:

…most companies fear crew arguments that turn heated would end in gunshot deaths. Furthermore, captured ships would yield more arms and ammunition for the pirates. Most crews would realize that deaths suffered by the pirates as they took a ship would cause retribution once the merchant ship was boarded. Moreover, port authorities do not want weapons aboard while in their territorial waters. If weapons are permitted on board (and that is extremely rare) then not just ammunition but also the firing pins have to be kept in three separate and locked locations. Thus reassembling and loading such weapons at sea would take so much time, the pirates might well have already taken the ship anyway.

All good points, but you know the international shipping business isn’t really worried about the health of its seamen. It is a risk management decision. When you take a look at the numbers, that is pretty defensible actually. Such was the basis of my use of the "sharks" analogy at the top of the post. It all sounds so alarming, and it is nice and shiny for news networks, Larry King and the like; but, all told, there is not that much "there" there. As an article from the US Naval Institute, discussing both piracy and terrorism, cogently states:

It is a nasty headache where it occurs, but its real effects on world trade and the movement of people are negligible.

That strikes me as about right. Of course, the flip side of that coin is that the insurance industry, which as we know is tethered to the Master Of The Universe financial industry, is likely getting rich off this. Of course they are:

Munich Reinsurance Co. expects insurance premiums against high sea piracy to rise, as well as the risk of piracy spreading in the world, the German company’s head of marine insurance Dieter Berg said.
…
At the moment the need from shipping companies for hijacking insurance is mainly because of the exposure to Somalia and Nigeria, he said.

Redirecting ships to pass by the Cape of Good Hope could cost a big container ship about $1 million more in costs compared with going through the Suez Canal, he said. The additional premium for every voyage though the Gulf of Aden is worth a couple of hundred thousand dollars, he said.

A U.N. source, speaking to Reuters before the conference, said the increase in the costs of ship insurance could reach 0.5% of ship values, which are typically between $10 million and $100 million.

Insurance has yet to show any sign of falling despite January’s easing in hijacking numbers, Mr. Mukandan said.

No. I don’t suspect the insurance is going down. It never does. Hmmmm, pirates or the bottom scraping scavengers that run the insurance and international risk conglomerates? Man, that is a tough call. Almost makes you want to sympathize with the pirates.

Michael Moore–who’s utterly swamped doing his next film on the Wall Street meltdown–did take time away from his campaign to endorse FireDogLake’s and Progress Michigan‘s boycott of Chase. 

I guess Moore is yet another Michigander who recognizes how a Chrysler bankruptcy will devastate the state and country. 

JP Morgan Chase wants to push Chrysler into bankruptcy so it can jump the line ahead of retirees and US taxpayers to get paid back.

If JP Morgan Chase does that, 300,000 people will lose their jobs.

That’s sorry thanks we get from a company that has gotten $25 billion in TARP funds from American taxpayers–plus billions more in other benefits from the Wall Street bailout.

My husband and I decided the only way to pressure JP Morgan Chase to negotiate in good faith with Chrysler was to close our Chase accounts. We want our money to go to a bank that is investing in rebuilding Michigan–not bankrupting it.

Now, FDL and Progress Michigan are calling on others to join our Chase boycott.

Sign the petition

Join the FaceBook group

Find your Michigan Chase branch and close your account

Explain why you’re closing your account

Update: Progressive radio host Nancy Skinner–who drives a Chrysler and lives in MI–is joining the boycott.

She’ll have Jane on her show today at 3PM to talk about the boycott. Listen in. 

The Blago indictment describes a previously unreported failed extortion attempt of Congressman A. Congressman A seems to be Rahm Emanuel. If that’s true, then it means Rahm will be dragged into the trial (and discovery) of this case. But it also shows that he resisted Blago’s advances even before it became clear Blago was under suspicion for corruption.

Extorting Congressman A

The indictment describes this extortion attempt in 2006.

22. It was further part of the scheme that in or about 2006, after United States Congressman A inquired about the status of a $2 million grant for the benefit of a publicly-supported school, defendant ROD BLAGOJEVICH instructed defendant HARRIS not to release the grant until further direction from ROD BLAGOJEVICH, even though ROD BLAGOJEVICH previously had agreed to support the grant and funding for the grant had been included in the state’s budget.

23. It was further part of the scheme that, in response to inquiries by a high-ranking state official as to whether the grant money could be released, defendant ROD BLAGOJEVICH informed the official that ROD BLAGOJEVICH wanted it communicated to United States Congressman A that United States Congressman A’s brother needed to have a fundraiser for ROD BLAGOJEVICH.

24. It was further part of the scheme that defendant ROD BLAGOJEVICH told Lobbyist A that ROD BLAGOJEVICH was giving a $2 million grant to a school in United States Congressman A’s district and instructed Lobbyist A to approach United States Congressman A for a fundraiser.

25. It was further part of the scheme that after defendant ROD BLAGOJEVICH learned from defendant HARRIS that the school had started to incur expenses that were to be paid with the grant funds, ROD BLAGOJEVICH initially resisted the release of the grant money, and then ultimately agreed to the release of certain of the grant funds to cover incurred expenses, but only on a delayed basis, even though no fundraiser had been held.

Note, it’s clear from the last paragraph that Congressman A did not hold a fundraiser for Blago, and that at least some funds were provided to the school in any case. So Congressman A definitely blew off Blago’s attempt at extortion.

Jesse Jackson Jr is Senate Candidate A

Congressman A does not appear to be Jesse Jackson Jr, another of the male Congressmen who got pitched during the Senate sale this year.  We know JJJ had worked with Fitzgerald to expose two earlier attempted corruption schemes from Blago–a $25,000 scheme involving JJJ"s wife, and an attempt to open a third airport in Peotone, IL. But if JJJ had been a target of this third extortion attempt, why wouldn’t it have come out earlier when he revealed the earlier contacts?

Also, JJJ is mentioned elsewhere as Senate Candidate A.

It was further part of the scheme that on or about December 4, 2008, defendant ROD BLAGOJEVICH instructed defendant ROBERT BLAGOJEVICH to contact a representative of Senate Candidate A, and advise the representative that if Senate Candidate A was going to be chosen to fill the Senate seat, some of the promised fundraising had to occur before the appointment.

It’s unlikely they would refer to  JJJ as both Senate Candidate A and Congressman A.

Congressman A matches details on Rahm in the complaint

In addition to the attempted extortion in 2006, Congressman A is also described in context of the attempt to sell the Senate seat last year, specifically in regards to a demand to set up a 401(c)4 in exchange for the appointment of a Senate candidate.

On or about November 13, 2008, at Chicago, in the Northern District of Illinois, Eastern Division, and elsewhere,

ROD BLAGOJEVICH,

defendant herein, for the purpose of executing the above-described scheme, did knowingly cause to be transmitted by means of wire and radio communication in interstate commerce signals and sounds, namely a phone call between ROD BLAGOJEVICH in Chicago, Illinois, and Advisor B in Michigan (Session 624), in which they discussed presenting to United States Congressman A a proposal by ROD BLAGOJEVICH that a not-for-profit organization be set up and that the connection between setting up this organization and the awarding of the U.S. Senate seat would be "unsaid”;

[snip]

On or about November 13, 2008, at Chicago, in the Northern District of Illinois, Eastern Division, and elsewhere,

ROD BLAGOJEVICH,

defendant herein, for the purpose of executing the above-described scheme, did knowingly cause to be transmitted by means of wire and radio communication
in interstate commerce signals and sounds, namely a phone call between ROD BLAGOJEVICH in Chicago, Illinois, and Advisor B in Michigan (Session 627), in which ROD BLAGOJEVICH asked Advisor B to call Lobbyist A and ask Lobbyist A to present to United States Congressman A ROD BLAGOJEVICH’s proposal that a not-for-profit organization be set up and that, while it would be unsaid, this would be a "play” to obtain a benefit for ROD BLAGOJEVICH in return for the awarding of the United States Senate seat; [my emphasis]

Note, neither of these passages say the Senate appointment would go to Congressman A (which would make it more likely it was one of the other Congressmen, like Danny Davis, who were in the running for the seat). 

While the described events are slightly different, the complaint describes the following discussions about pitching a non-profit in the context of Blago’s larger pitch to Obama, and then a specific conversation (indirectly, through John Wyma) to Rahm.

ROD BLAGOJEVICH raised the issue of the 501(c)(4) organization and that contributors and others can put “10 to 15 million in it so I can advocate health care and other issues I care about and help them, while I stay as Governor, she’s (believed to be Senate Candidate 1) a Senator.” ROD BLAGOJEVICH noted that the President-elect can ask Warren Buffett, Bill Gates, and others for money for the organization. ROD BLAGOJEVICH states he will ask “[Senate Candidate 6]” to help fund it as well. HARRIS said that funding the 501(c)(4) would be a lot easier for the President-elect than appointing ROD BLAGOJEVICH to a position. ROD
BLAGOJEVICH said, “They could say ‘hey, we get [Senate Candidate 1]. Let’s help this guy have a 501(c)(4) issue advocacy organization. Let’s fund it to the level that he’s asked for and then we’ll get [Senate Candidate 1].’” ROD BLAGOJEVICH said that he will control the 501(c)(4) organization through a board of directors while he is Governor, and then a position in the 501(c)(4) would be waiting for him when he was no longer Governor.

[snip]

On November 12, 2008, ROD BLAGOJEVICH talked with one of his Washington D.C.-based advisors. ROD BLAGOJEVICH explained the 501(c)(4) organization idea to the advisor, and that “[the President-elect] gets these Warren Buffett types to [fund it].” The advisor asked ROD BLAGOJEVICH if the 501(c)(4) is a real effort or just a vehicle to help ROD BLAGOJEVICH. ROD BLAGOJEVICH stated that it is a real effort but also a place for ROD BLAGOJEVICH to go when he is no longer Governor.

[snip]

Later on November 13, 2008, ROD BLAGOJEVICH spoke with Advisor A. ROD BLAGOJEVICH asked Advisor A to call Individual A and have Individual A pitch the idea of the 501(c)(4) to “[President-elect Advisor].” Advisor A said that, “while it’s not said this is a play to put in play other things.” ROD BLAGOJEVICH responded, “correct.” Advisor A asked if this is “because we think there’s still some life in [Senate Candidate 1] potentially?” ROD BLAGOJEVICH said, “not so much her, but possibly her. But others.” [my emphasis]

The conversation on November 13 appears to be the same conversation, though Advisor A from the complaint is named Advisor B in the indictment, and Individual A named Lobbyist A. Nevertheless, the key details–a November 13 call to an advisor to have a lobbyist pitch the non-profit to an Obama associate–are the same. The role of Lobbyist A in the Children’s Hospital scheme in the indictment–to which Wyma, Individual A in the complaint, was central–supports this argument.

Rahm refused Blago’s extortion

So why should we care? After all, if Rahm is, in fact, Congressman A, then it would mean he had totally refused Blago’s extortion attempt in 2006.

First, it would mean that Rahm would be dragged into the trial and–more importantly–discovery process of this trial. Blago at least tried to have conversations with Rahm about his House seat, he has already tried to blame Rahm for one of the charges in his impeachment, so Blago would be sure to try to embarrass Rahm going forward. 

But it would also demonstrate that Rahm–at a time when it was much less clear that Blago was under investigation (and probably before John Wyma was cooperating)–blew off Blago’s attempt at extortion.

Big surprise … not. Rod Blagojevich indicted for corruption, including trying to sell the Senate seat.

Here is the indictment.

In addition to Blago and Harris (who were arrested in December), RobBlago, Lon Monk, Christopher Kelly, and William Cellini were indicted. I’m looking for the document now, will update later. 

Former Gov. Rod Blagojevich, his brother Rob and Christopher Kelly, a former top fundraiser for Blagojevich, were all indicted today on corruption charges, the U.S. attorney’s office in Chicago announced.

Also charged in the indictment were Lon Monk, a lobbyist and former Blagojevich chief of staff; John Harris, also a former chief of staff to Blagojevich; and William Cellini, a Springfield insider for decades.

From the press release:

Since 2002, even before he was first elected governor that November, and continuing until he was arrested on Dec. 9, 2008, former Illinois Gov. Rod R. Blagojevich and a circle of his closest aides and advisors allegedly engaged in a wide-ranging scheme to deprive the people of Illinois of honest government, according to a 19-count indictment returned today by a federal grand jury. Blagojevich, 52, of Chicago, was charged with 16 felony counts, including racketeering conspiracy, wire fraud, extortion conspiracy, attempted extortion and making false statements to federal agents. He allegedly used his office in numerous matters involving state appointments, business, legislation and pension fund investments to seek or obtain such financial benefits as money, campaign contributions, and employment for himself and others, in exchange for official actions, including trying to leverage his authority to appoint a United States Senator, announced Patrick J. Fitzgerald, United States Attorney for the Northern District of Illinois.

Also charged as co-defendants in the same indictment are:

John Harris, 47, of Chicago, Blagojevich’s chief of staff from late 2005 until last December after he was arrested along with Blagojevich. Through his attorney, Harris, disclose that he has agreed to cooperate with the United States Attorney’s Office in the prosecution of this case;

Alonzo Monk, 50, of Park Ridge, a lobbyist doing business as AM3 Consulting, Ltd., and a long-time Blagojevich associate who served as his general counsel when Blagojevich represented Illinois’ Fifth Congressional District, and later managed his 2002 and 2006 gubernatorial campaigns, was his first gubernatorial chief of staff from 2003 through 2005, and later chairman of his campaign fund;

Robert Blagojevich, 53, of Nashville, Tenn., Blagojevich’s brother, who became chairman of his campaign fund in August 2008;

Christopher Kelly, 50, of Burr Ridge, a businessman and a principal campaign fundraiser who also served as chairman of Blagojevich’s campaign fund from early 2004 until August 2005. The indictment alleges that with Blagojevich’s knowledge and permission, Kelly at times exercised substantial influence over certain activities of the governor’s office; and

William F. Cellini, Sr., 74, of Springfield, a businessman who also raised significant funds for Blagojevich, in part through his role as the executive director of the Illinois Asphalt Pavement Association. Cellini had longstanding relationships and influence with trustees and staff members of the Teachers Retirement System of Illinois (TRS), and he was associated with Commonwealth Realty Advisors, a real estate asset management firm that invested hundreds of millions of dollars on behalf of TRS, the indictment alleges.

Hank Greenberg will testify before the House Oversight Committee about the AIG collapse today at 10 AM.

I’m uncertain that it’ll be useful in unpacking what happened with AIG at all. If Greenberg’s planned testimony from last fall is any indication (he called in sick for an October 7 AIG hearing, but had already submitted his testimony), he will say that the CDS before he left were hedged properly, not in subprime mortgages, and watched closely by management (that is, by him); but all that changed after he was forced out.  

AIG’s strategy, accordingly, was to look for opportunities in businesses that benefitted from its AAA rating, strong capital base, risk management skills, as well as the intellectual capital needed to manage such diversification.

That led to the creation of AIGFP in 1987. At that time, the derivative market was small and growing. From the beginning, AIG’s policy was that AIGFP conduct its business on a "hedged" basis – that is, its net profit should stem from the differences between the profit earned from the client and the cost of offsetting or hedging the risk in the market. AIGFP would therefore not be exposed to directional changes in the fixed income, foreign exchange or equity markets.

AIGFP, at that time, reported directly to me and Ed Matthews, Senior Vice Chairman, and later to William Dooley, Senior Vice President, supported by AIG’s credit risk and market risk departments. When I was AIG’s CEO, AIG management closely monitored AIGFP and its risk portfolio. AIGFP was subject to numerous internal risk controls, including credit risk monitoring by several independent units of AIG, review of AIGFP transactions by outside auditors and consultants, and scrutiny by AIGFP’s and AIG’s Boards of Directors. Every new type of transaction or any transaction of size, including most credit default swaps, had to pass review by AIG’s Chief Credit Officer.

[snip]

AIGFP reportedly wrote as many credit default swaps on collateralized debt obligations, or CDOs, in the nine months following my departure as it had written in the entire previous seven years combined.

Moreover, unlike what had been true during my tenure, the majority of the credit default swaps that AIGFP wrote in the nine months after I retired were reportedly exposed to sub-prime mortgages. By contrast, only a handful of the credit default swaps written over the entire prior seven years had any sub-prime exposure at all.

What I am interested in the hearing for is the squabble it has elicited both between Greengerg and AIG, and between Ed Towns (the Chair of the Committee) and Ranking member Darrell Issa.

AIG has already released a statement rebutting some of Greenberg’s claims–notably about whether or not the CDS were hedged properly before he left.

In a statement, AIG said that when Mr. Greenberg left in March 2005, the unit had already sold about half of the swaps that caused the biggest problems. AIG added that AIG’s exposure under the contracts wasn’t hedged.

To which Greenberg seems to backing off his earlier statement that everything was hedged properly.

Mr. Greenberg said the amount of exposure AIG faced under the contracts when he left was beside the point. When AIG lost its triple-A credit rating, which came after his departure as CEO, he would have hedged the exposure and tried to modify the collateral requirements, he said in the interview.

Which has led Darrell Issa to try to get Towns to cancel the hearing–or challenge Greenberg’s statement ahead of time.

The committee’s ranking minority member, Rep. Darrell Issa (R-Calif.), urged Rep. Towns in a letter late Wednesday to "reconsider" allowing Mr. Greenberg to testify, "or at the very least, join me in publicly acknowledging the veracity of his testimony is questionable."

Though Issa may be just as anxious to prevent Towns’ questions about why AIG got multiple deferred prosecution agreements rather than real criminal investigations.

In November 2004, the Bush Justice Department and the Securities and Exchange Commission agreed not to prosecute AIG for allegedly helping companies fudge their books. In exchange, AIG agreed to host a government-appointed auditor in company meetings. At the time, Greenberg said it brought "finality to the claims raised by the SEC and the Department of Justice."

Towns said that Greenberg should be able to identify Bush administration officials involved in the decision-making around the settlement. Towns added the committee wants to know what Bush administration regulators knew about AIG’s credit default swaps and other highly risky positions that brought the company down.

Asked if he would be directly pursuing Bush administration officials, Towns said: "No doubt about it. That’s the reason I want to talk to Greenberg first. He might even point some folks out. That’s of great interest to us."

I always get kind of woozy when I sort of agree with Issa. But it sure seems like Greenberg plans to use his appearance today to pitch schemes that will increase the value of AIG stock (he remains a big stock-holder) by going after the CDS counterparties.

There’s a lot of bad reporting on the auto announcement from yesterday, most focusing mistakenly (IMO) on Wagoner’s ouster and not the plan to move forward and/or the double standard with banksters.

But the worst take, IMO, is that one that claims the auto industry was being forced to adapt to a new business model but the banksters’ business model was still fundamentally sound. 

Here’s one of Josh’s readers (a view Josh challenges):

One reader writes: "One easy answer to this question is that the banks have a viable business model. They simply need to stop taking so much risk, and they’ll be immensely profitable given the current interests rates they’re borrowing at."

And here’s a bankster quoted in a WaPo article.

Bert Ely, a banking industry analyst in Alexandria, said the administration will likely exercise its powers in only a limited number of a cases, if at all. Even banks that have received repeated injections of government funds, analysts said, appear to be making some progress, and more importantly, are showing more willingness to respond to new economic realities than the automakers were. 

"There is a key difference between GM and Chrysler and the large banks going forward," Ely said. "Those two companies have major questions about their [future] profitability. Whereas the large banks by and large have good business models going forward. The problem is that they’ve got to pay for the sins of the past." 

Now, I find these takes infuriating for two reasons. 

First, it’s not clear these people know WTF they’re talking about, in terms of business model. Are they suggesting that the Big 2.5 focus on larger cars was the failed business model, in spite of the fact that Honda and Toyota–the favorite poster child for "successful" business model–have now embraced the love of big (and in spite of the fact that Obama’s own auto task force demonstrates that middle class buyers favor big)? Or are they suggesting that GM–which has aggressively and successfully expanded into growing markets like China and India–is failing because they’re successful overseas? Or are they saying that GM and Chrysler have failed because they have chosen to stay home and do business in a climate that–because they’re competing against cars assembled with subsidized health care and pensions–penalize them for remaining in their home country? Or are they saying Chrysler failed because it got looted and discarded by Daimler?

It’s easy to say GM and Chrysler have failed–and they definitely made some crappy decisions, particularly in the 1990s (though some of those were perfectly logical, from a business perspective, given the reality of the market and the cost structure of these companies). But these complaints display zero awareness of what the business model in the auto industry really is, or how GM and Ford had already started making changes when events of the last year devastated them.

And then there’s the claim, with little reflection, that the banking industry has a successful model.

Now, frankly, I think there are a lot of market pressures that brought us to the collapse that have gotten little attention. For example, banking regulators in the US have embraced deregulation not just because of Phil Gramm’s ideology, but also because the US’ leadership position in finance has been under threat internationally and we’ve deregulated to remain competitive internationally. And while Fannie and Freddie did stupid things, they did them out of competitive pressure. I suspect the same is true of the brokerage houses. The big publicly held finance companies have to engage in the latest scam or lose business and margins to their competitors. But that deregulation and those scams are precisely the things that brought down the finance industry.

And then there are the presumptions such claims make–such as Josh’s reader, who assumes banks will continue to have access to virtually free money. Many of the assumptions the banksters make when they claim they’ve got a viable business model assume the the federal government will continue to coddle them–and will continue to have the ability to. That may not be the case.

One of the better takes on yesterday’s auto announcement pointed out that the banksters are denial largely because the Obama Administration is, too.

First, the Obama Administration suffers from cognitive regulatory capture. Former denizens of Wall Street are so ensconced in the Administration that they cannot but see events from a ‘Wall Street perspective.’ In effect, they operate like a horse with blinders. Their view takes as axiomatic the importance and needed continued existence of the big banks that they dismiss alternative workout solutions out of hand.

I argued last week that the banksters need someone like Steven Rattner who doesn’t know shit about their industry to assess their business model. 

But as this graphic makes clear (the graphic for 2009 is above, but click through to see how this list has changed over the last decade–you will be fascinated) US banks have lost a great deal of their dominant position (h/t Tom Ricks). At least by market capitalization–one of the measures people focus on to claim GM a failure–US banks’ business model is failing just as spectacularly as is GM. I’m not convinced that means we ought to do more deregulation. But it is high time we stop assuming the banks are healthy but for a few crummy decisions. 

graphic by PirateCat

Marcy earlier noted the article in today’s Washington Post by Peter Finn and Joby Warrick detailing the story surrounding abu-Zubaydah’s capture and torture. I want to pick up with Marcy’s last line:

Yet more reason they destroyed the torture tapes showing Abu Zubaydah’s interrogation.

Well, yes, because it was crystal clear at the outset the explanation initially given by the Bush/Cheney Administration – that they had researched the matter completely and the tapes had no evidentiary value in any possible proceeding whatsoever and they were concerned about privacy of hard working investigators – was totally bogus.

It has been my belief from the outset that the reason the "torture tapes" were destroyed was not simply because they depicted the brutal torture of detainee subjects but, just as importantly, if not more so, they demonstrated there was no credible/usable information produced as a result of that torture. Warrick and Finn confirm this. Even worse, they confirm what little good information the Bushies did extract from abu-Zubaydah was obtained through traditional interrogation prior to the onset of the torture program:

In the end, though, not a single significant plot was foiled as a result of Abu Zubaida’s tortured confessions, according to former senior government officials who closely followed the interrogations. Nearly all of the leads attained through the harsh measures quickly evaporated, while most of the useful information from Abu Zubaida — chiefly names of al-Qaeda members and associates — was obtained before waterboarding was introduced, they said.

Moreover, within weeks of his capture, U.S. officials had gained evidence that made clear they had misjudged Abu Zubaida. President George W. Bush had publicly described him as "al-Qaeda’s chief of operations," and other top officials called him a "trusted associate" of al-Qaeda leader Osama bin Laden and a major figure in the planning of the Sept. 11, 2001, terrorist attacks. None of that was accurate, the new evidence showed.

Abu Zubaida was not even an official member of al-Qaeda, according to a portrait of the man that emerges from court documents and interviews with current and former intelligence, law enforcement and military sources.

And there you have it. The Bushies made the conscious and criminal decision to go full tilt torture having direct reason to know both that abu-Zubaydah was cooperating through traditional interrogation and he was of very marginal use as an information source to start with.

Frustrated, the Bush administration ratcheted up the pressure — for the first time approving the use of increasingly harsh interrogations, including waterboarding.
…
The application of techniques such as waterboarding — a form of simulated drowning that U.S. officials had previously deemed a crime — prompted a sudden torrent of names and facts. Abu Zubaida began unspooling the details of various al-Qaeda plots, including plans to unleash weapons of mass destruction.
…
Abu Zubaida’s revelations triggered a series of alerts and sent hundreds of CIA and FBI investigators scurrying in pursuit of phantoms….Every other lead ultimately dissolved into smoke and shadow, according to high-ranking former U.S. officials with access to classified reports.

"We spent millions of dollars chasing false alarms," one former intelligence official said.

Such is the clincher as to why the torture tapes had to be destroyed. It wasn’t just that Bush/Cheney et. al wanted to keep evidence of their torture program secret, there was never any complete way to do that. But there was only one thing that could prove they tortured for nothing and got nothing – the tapes. Cheney and his coterie of fellow Torquemadas were fiends proud of their handiwork; if they had evidence that it worked, they would have kept it. They burn spies for fun, crow on television about their willingness to torture and what they have accomplished, do you really think for one second they wouldn’t retain proof if they had it?

And let us not forget just who we are talking about here – it is the White House Principals group:

The so-called Principals who participated in the meetings also approved the use of "combined" interrogation techniques — using different techniques during interrogations, instead of using one method at a time — on terrorist suspects who proved difficult to break, sources said.

Highly placed sources said a handful of top advisers signed off on how the CIA would interrogate top al Qaeda suspects — whether they would be slapped, pushed, deprived of sleep or subjected to simulated drowning, called waterboarding.

The high-level discussions about these "enhanced interrogation techniques" were so detailed, these sources said, some of the interrogation sessions were almost choreographed — down to the number of times CIA agents could use a specific tactic.

The advisers were members of the National Security Council’s Principals Committee, a select group of senior officials who met frequently to advise President Bush on issues of national security policy.

At the time, the Principals Committee included Vice President Cheney, former National Security Advisor Condoleezza Rice, Defense Secretary Donald Rumsfeld and Secretary of State Colin Powell, as well as CIA Director George Tenet and Attorney General John Ashcroft.

As the national security adviser, Rice chaired the meetings, which took place in the White House Situation Room and were typically attended by most of the principals or their deputies.

Cheney, Rice, Rumsfeld, Powell, Tenet and Ashcroft. Means, motive and opportunity. Who could have imagined?

This certainly explains why it was top White House lawyers including Gonzales, Addington, Bellinger and Miers, with "vigorous sentiment", assisted the CIA in the decision and process to destroy the torture tapes of abu-Zubaydah and others. There are definable offenses in their conduct: obstruction of justice, contempt of court, conspiracy, false statement/perjury, mishandling of classified material, and willful destruction of material evidence in federal investigations.

There exist patently clear crimes; where is the criminal justice system? We should not have to be humiliated by having to rely on other first world countries such as Spain, or international committees such as the Red Cross, to show us functioning justice and the rule of law.

I don’t want the Obama Administration to be partisan and spiteful, I want them to do their damn job. Is that too much to ask?