The other day I dismissed US disdain for Mexico at its inability to keep Chapo Guzmán jailed. After all, I pointed out, we don’t even try to imprison our Transnational Crime Organization bosses.
At the Intercept yesterday, DDay pointed out another example. After JP Morgan Chase and Citigroup pled guilty to forex fraud, the Department of Housing and Urban Development “changed their form” for FHA insurance, so as to permit those TCOs to continue to have taxpayers insure their customers’ loans.
On May 20 of this year, JPMorgan Chase and Citigroup both entered a guilty plea on one felony count of conspiring to rig foreign currency exchange trades, the largest market on the globe.
Five days earlier, on May 15, HUD slipped a notice into the Federal Register, seeking to alter its standard loan-level certification form, known as HUD-92900-A. This form must be filled out for lenders to receive FHA insurance, which reimburses them if the homeowner falls into foreclosure.
On the current HUD-92900-A form, lenders must certify that their firm and its principals “have not, within a three-year period … been convicted of or had a civil judgment rendered against them” for a variety of crimes, including “commission of fraud … violation of Federal or State antitrust statutes or commission of embezzlement, theft, forgery, bribery, falsification or destruction of records, making false statements or receiving stolen property.”
JPMorgan and Citi’s guilty plea would fall under the antitrust statute, and according to Brown, Warren and Waters’ reading of the certification, that would make them ineligible to obtain FHA insurance on their loans.
On the updated form, this language has been excised.
As Senators Sherrod Brown and Elizabeth Warren and Congresswoman Maxine Waters read it, this will eliminate what should have been one of the biggest impacts of the TCOs’ guilty plea.
Again, Jamie Dimon’s tunnel may not be so spectacular as Guzmán’s. But that’s partly because even more parts of government are helping him to escape any punishment for his TCO’s crimes.
Now that I’ve finally got around to reading the so-called transparency provisions in Patrick Leahy’s USA Freedom Act, I understand that one purpose of the bill, from James Clapper’s perspective, is to get Congress to ratify some kind of financial dragnet conducted under Section 215.
As I’ve laid out in detail before, there’s absolutely no reason to believe USA Freedom Act does anything to affect non-communications collection programs.
That’s because the definition of “specific selection term” permits (corporate) persons to be used as a selector, so long as they aren’t communications companies. So Visa, Western Union, and Bank of America could all be used as the selector; Amazon could be for anything not cloud or communications-related. Even if the government obtained all the records from these companies — as reports say it does with Western Union, at least — that would not be considered “bulk” because the government defines “bulk” as collection without a selector. Here, the selector would be the company.
And as I just figured out yesterday, the bill requires absolutely no individualized reporting on traditional Section 215 orders that don’t obtain communications. Here’s what the bill requires DNI to report on traditional 215 collection.
(D) the total number of orders issued pursuant to applications made under section 501(b)(2)(B) and a good faith estimate of—
(i) the number of targets of such orders;
(ii) the number of individuals whose communications were collected pursuant to such orders; and
(iii) the number of individuals whose communications were collected pursuant to such orders who are reasonably believed to have been located in the United States at the time of collection;
(3) INDIVIDUAL WHOSE COMMUNICATIONS WERE COLLECTED.—The term ‘individual whose communications were collected’ means any individual—
(A) who was a party to an electronic communication or a wire communication the contents or noncontents of which was collected; or
(B)(i) who was a subscriber or customer of an electronic communication service or remote computing service; and
(ii) whose records, as described in subparagraph (A), (B), (D), (E), or (F) of section 2703(c)(2) of title 18, United States Code, were collected.
Thus, the 215 reporting only requires the DNI to provide individualized reporting on communications related orders. It requires no individualized reporting at all on actual tangible things (in the tangible things provision!). A dragnet order collecting every American’s Visa bill would be reported as 1 order targeting the 4 or so terrorist groups specifically named in the primary order. It would not show that the order produced the records of 310 million Americans.
I’m guessing this is not a mistake, which is why I’m so certain there’s a financial dragnet the government is trying to hide.
Under the bill, of course, Visa and Western Union could decide they wanted to issue a privacy report. But I’m guessing if it would show 310 million to 310,000,500 of its customers’ privacy was being compromised, they would be unlikely to do that.
So the bill would permit the collection of all of Visa’s records (assuming the government could or has convinced the FISC to rubber stamp that, of course), and it would hide the extent of that collection because DNI is not required to report individualized collection numbers.
But it’s not just the language in the bill that amounts to ratification of such a dragnet.
As the government has argued over and over and over, every time Congress passes Section 215’s “relevant to” language unchanged, it serves as a ratification of the FISA Court’s crazy interpretation of it to mean “all.” That argument was pretty dodgy for reauthorizations that happened before Edward Snowden came along (though its dodginess did not prevent Clare Eagan, Mary McLaughlin, and William Pauley from buying it). But it is not dodgy now: Senators need to know that after they pass this bill, the government will argue to courts that it ratifies the legal interpretations publicly known about the program.
While the bill changes a great deal of language in Section 215, it still includes the “relevant to” language that now means “all.” So every Senator who votes for USAF will make it clear to judges that it is the intent of Congress for “relevant to” to mean “all.”
And it’s not just that! In voting for USAF, Senators would be ratifying all the other legal interpretations about dragnets that have been publicly released since Snowden’s leaks started.
That includes the horrible John Bates opinion from February 19, 2013 that authorized the government to use Section 215 to investigate Americans for their First Amendment protected activities so long as the larger investigation is targeted at people whose activities aren’t protected under the First Amendment. So Senators would be making it clear to judges their intent is to allow the government to conduct investigations into Americans for their speech or politics or religion in some cases (which cases those are is not entirely clear).
That also includes the John Bates opinion from November 23, 2010 that concluded that, “the Right to Financial Privacy Act, … does not preclude the issuance of an order requiring the production of financial records to the Federal Bureau of Investigation (FBI) pursuant to the FISA business records provision.” Given that Senators know (or should — and certainly have the ability to — know) about this before they support USAF, judges would be correct in concluding that it was the intent of Congress to permit the government to collect financial records under Section 215.
So Senators supporting this bill must realize that supporting the bill means they are supporting the following:
That is, Senators supporting this bill are not only supporting a possible financial dragnet, but they are helping the government hide the existence of it.
I can’t tell you what the dragnet entails. Perhaps it’s “only” the Western Union tracking reported by both the NYT and WSJ. Perhaps James Cole’s two discussions of being able to collect credit card records under this provision means they are. Though when Leahy asked him if they could collect credit card records to track fertilizer purchases, Cole suggested they might not need everyone’s credit cards to do that.
Leahy: But if our phone records are relevant, why wouldn’t our credit card records? Wouldn’t you like to know if somebody’s buying, um, what is the fertilizer used in bombs?
Cole: I may not need to collect everybody’s credit card records in order to do that.
If somebody’s buying things that could be used to make bombs of course we would like to know that but we may not need to do it in this fashion.
We don’t know what the financial dragnet is. But we know that it is permitted — and deliberately hidden — under this bill.
Below the rule I’ve put the names of the 18 Senators who have thus far co-sponsored this bill. If one happens to be your Senator, it might be a good time to urge them to reconsider that support.
Patrick Leahy (202) 224-4242
Mike Lee (202) 224-5444
Dick Durbin (202) 224-2152
Dean Heller (202) 224-6244
Al Franken (202) 224-5641
Ted Cruz (202) 224-5922
Richard Blumenthal (202) 224-2823
Tom Udall (202) 224-6621
Chris Coons (202) 224-5042
Martin Heinrich (202) 224-5521
Ed Markey (202) 224-2742
Mazie Hirono (202) 224-6361
Amy Klobuchar (202) 224-3244
Sheldon Whitehouse (202) 224-2921
Chuck Schumer (202) 224-6542
Bernie Sanders (202) 224-5141
Cory Booker (202) 224-3224
Bob Menendez (202) 224-4744
Sherrod Brown (202) 224-2315
Citing this line from Lanny Breuer in last week’s Frontline program,
I think I and prosecutors around the country, being responsible, should speak to regulators, should speak to experts, because if I bring a case against institution, and as a result of bringing that case, there’s some huge economic effect — if it creates a ripple effect so that suddenly, counterparties and other financial institutions or other companies that had nothing to do with this are affected badly — it’s a factor we need to know and understand.
Sherrod Brown and Chuck Grassley have sent a list of questions they want Eric Holder to answer by February 8.
The questions are:
I’m interested in their focus on contractors. Has someone like Promontory Financial Group been making these decisions too?
In any case I await Holder’s non-responsive answer with bated breath.
The news reports in the lead-up to this weekend’s announcement that Obama was ending the career of yet another prescient female bank regulator, this time even before it started, prepped the progressive community to champion an Elizabeth Warren run for Ted Kennedy’s MA Senate seat.
And so the usual suspects are out in force arguing that Warren would be better off running for Senate than she would be shaming Republicans for trying to kill off the CFPB.
Whoever is nominated to lead the CFPB is going to spend the next year of his life being filibustered by Republicans. The very best he can hope for is a recess appointment, in which case his tenure in the position would be relatively swift. So the question isn’t who you want leading the CFPB for the foreseeable future. It’s who you want spending his or her time being stopped from leading the CFPB for the foreseeable future. And it’s not clear that the answer to that question is “Elizabeth Warren.”
Warren, after all, has another option that she appears to be taking seriously: challenging Scott Brown in the 2012 election. For reasons I’ve outlined here and Bob Kuttner elaborates on here, there’s reason to think she would be a very effective candidate. But if she wants to do that, she can’t spend the next year being blocked from leading the Consumer Financial Protection Bureau. She has to spend at least part of it preparing for her candidacy.
Now, I don’t think there’s any doubt that Warren would prefer to lead the agency she’s built than launch a Senate campaign that may or may not succeed. But launching a Senate campaign that may or may not succeed seems like a clearly more effective way to protect her agency and further her ideas than being blocked from leading the agency she’s built.
Not only does this view not even consider whether Warren–or a relatively unknown midwestern politician–would be more effective making the public case for the bureau.
But it also seems to confuse the value of running for Senate with actually serving in the Senate.
What the people hailing a possible Warren run are arguing, effectively, is that the consolation prize for the banks having beat her on CFPB should be junior membership in a body that–as Dick Durbin has told us–the banks own.
Even putting aside the power of the banking lobby in the Senate, under what model would Senator Warren be effective championing progressive values, or even just “protect[ing] the agency she’s built”? Even assuming the Democrats kept the same number of seats they currently have on the Senate Banking Committee, even assuming Democratic leadership has already promised her the seat that Herb Kohl’s retirement will open up, that will still make her one of just three progressives (the other two being Jeff Merkley and Sherrod Brown) on a committee that has long been actively working against her CFPB candidacy. Even assuming Democrats keep the Senate, how amenable is Chairman Tim Johnson–a bank-owned hack–going to be to Warren’s ideas? If Richard Shelby were Chair, it’d be even worse.
And what about Warren’s effectiveness in the Senate as a whole–that body, under Democratic leadership, where good ideas go to die? Name a progressive Senator who has been able to do much to champion progressive ideas there? Sanders? Franken? Whitehouse? Sherrod Brown? I love all those guys, and like Sanders and especially Franken, Warren would presumably be able to leverage her public support to push some ideas through. But are any of them more effective at championing progressive values than Warren was before her White House gig, when she regularly appeared on the media and excoriated the banks in terms that made sense to real people? Just as an example, Byron Dorgan used to be effective before his progressive, deficit-cutting ideas were killed by the leader of his party. Similarly, Ted Kaufman turned out to be a surprisingly effective check on the banks, but that was partly because he came in knowing he’d never run for election (and he also knew, coming in, the tricks a lifetime of service as a Senate aide teaches).
Don’t get me wrong. I understand why the Democratic Party would like to have Warren in the Senate. I even understand how Warren might consider a Senate seat to be similar to her earlier public position, with the added benefit of having one vote to push progressive issues. I don’t dismiss the likelihood that Elizabeth Warren might be able to prevent a sixth corporatist judge from getting a lifetime seat on the Supreme Court.
I don’t think a Senator Elizabeth Warren would be a bad thing–I just think folks are far overselling what good it would bring.
It really seems the push for a Warren Senate candidacy ignores what a Booby Prize membership in the Senate has become of late.