Friday, May 10, 2013

Israel exploited loophole to take 1,000 DNA samples from African refugees

Israeli police have admitted to collecting some 1,000 DNA samples from African refugees who have arrived in the country since 2012, after using a security-related clause to open criminal cases against some of the immigrants.
The news was comfirmed by Commander Eran Kamin of the Investigations Division, who reported on the issue to a Knesset committee on Tuesday.
The issue was first revealed in an article in Haaretz, which said that police officials had earlier had their request for collecting refugees DNA samples rejected by Knesset Committees. To bypass this rejection, the police opened criminal cases against the African migrants they had technically entered the country illegally, which the police then classified as a security-related crime.
"We are aware that those entering Israel have had unpleasant experiences, to say the least, but still, we're aware of the fact that they broke the law. The law defines them as infiltrators," Kamin said, according to Haaretz.
In 2012, Israeli police collected more than 600 samples. However, they have not solved any reported crimes as a result of this DNA collection practice, Haaretz said.

Police officials claim they are not creating a refugee database, and that the personal data they receive from migrants are placed in a general pool. African immigrants are nevertheless reportedly angered by the procedure, which they have slammed as discriminatory.
Human rights activists in Israel strongly oppose the practice: The criminal process is meant to reach the truth and punish offenders who have been legally convicted. But in terms of asylum-seekers, police are making a different use entirely of the criminal proceeding, said attorney Asaf Weitzen of the Hotline for Migrant Workers. He added that police were creating a new law and suiting it to a regime in which there is no longer a need for courts, legislators or public opinion.
Alva Kolan of the Association for Civil Rights in Israel said this is "a cynical use of the Prevention of Infiltration Law, and squarely contradicts the International Convention Relating to the Status of Refugees, which explicitly states that infiltration, in itself, cannot be considered a criminal offense.
The DNA collection is another facet of the Israeli governments crackdown on immigrants coming from such African nations as Libya, Sudan, South Sudan, Ethiopia and Eritrea. After being dubbed infiltrators and a threat to state security, they are encouraged to return to their native countries. Many of those unwilling to return home face indefinite jail terms.

Israel has regularly been accused of deporting Sudanese migrants back to their homeland, where visiting or living in Israel is a crime. In February, Israel reportedly forced at least 1,000 Sudanese to return home.
Israel described the deportations as voluntary leave, which the UN Refugee agency dismissed as unlikely. "Deporting Sudanese to Sudan would be the gravest violation possible of the refugee convention that Israel has signed a crime never before committed," the UN representative to Israel Michael Bavli said.
In August 2012, a report by the London-based Bureau of Investigative Journalism revealed that Israel deported Sudanese asylum seekers by issuing documents with intentionally incorrect nationalities. Having no repatriation agreement with Sudan, Israel gave more than 100 Sudanese nationals passports or birth certificates labeling them citizens of South Sudan, which seceded from Sudan in 2011, the report stated.

Source: http://rt.com/news/israel-african-refugees-dna-999/

Like 1984, only worse: UK may resurrect snoopers charter

The controversial bill dubbed as a snoopers charter, which would allow the government to track everyones email, Internet and cell phone texts usage, might have new life, todays Queenss speech revealed.
Proposals published as a part of the Queen's speech, which kicks off the start of the new parliamentary year in the UK, confirmed that the government has been in contact with Internet providers and is still considering passing new legislation which bears similarity to the draft Communications Data Bill (CDB) published last year.
"The Government is committed to ensuring that law enforcement and intelligence agencies have the powers they need to protect the public and ensure national security, Downing Street stated in a briefing note published alongside the speech.
"Communications data helps to keep the public safe: it is used by the police to investigate crimes, bring offenders to justice and save lives."
The speech noted that the problem of matching Internet Protocol (IP) addresses to people would be met with government proposals which would both enable the protection of the public and the investigation of crime in cyberspace.
"The government is looking at ways of addressing this issue with computer service providers. It may involve legislation, the proposals state.
The issue at hand refers to collating any given IP address with a specific individual using it, or in the case of Internet service providers who use the same IP address for more than one customer, identifying the correct user, Ben Woods from ZDNet reports.
Currently, British security services have the power to both identify and locate who has made a telephone call or sent a text message. However, Internet communications such as emails, instant messages, and Skype are identified and stored by their IP address as opposed to individual users.
The draft CDB would have required Internet service providers to store web browsing history, details of messages sent over social media sites, like Facebook and Twitter and voice calls made over the web. The legislation stipulated that this information would be retained for a year, with police being empowered to access it without first asking permission if they are currently investigating a crime.
Downing Street was quick to assuage public fears, claiming the new proposal is not about indiscriminately accessing internet data of innocent members of the public, it is about ensuring that police and other law enforcement agencies have the powers they need to investigate the activities of criminals that take place online as well as offline."
In April, Deputy Prime Minister Nick Clegg claimed the snoopers charter would not pass as long as his party was a part of the coalition government.
"In other words the idea that the government will pass a law which means there will be a record kept of every website you visit, who you communicate with on social media sites, that's not going to happen."
"It's certainly not going to happen with Liberal Democrats in government," Clegg vowed.
However, Clegg has already shown a willingness to accept a watered down version of the initial draft, having agreed to the language in the Downing Street briefing note published alongside the Queens speech along with Prime Minister David Cameron.
Home Secretary Theresa May for her part still hopes to revive the bill in its totality, having long insisted the measures are necessary for police to keep pace with terrorists, major criminals and paedophiles in the digital age.
While May has long insisted that CDB proposals did not amount to snooping, Rick Falkvinge, the founder of the Swedish Pirate Party, said the law by its very definition is about tracking innocent citizens.
"It doesn't matter what they intend to use the law for. Tracking the conversations of people who are not under suspicion of a crime is itself criminal, end of story. It doesn't matter how noble your goals are," Falkvinge argues.
He believes the mass degradation of civil liberties is a matter of utility, as UK authorities would rather take a shotgun approach to surveillance rather than systematically identify and target those suspected of crimes.
We have observed the surveillance state remove the requirements for a warrant to wiretap people. Apparently, it's now too inefficient to violate people's privacy one by one, so legislators would rather violate everybody's privacy all the time instead. It's like 1984, only worse," Falkvinge continued.
Source: http://rt.com/news/uk-snooper-charter-revived-023/

Israel approves new settlement as US pledges renewed peace talks

Israel has given the green light to build almost 300 homes in the West Bank amid US pledges to restart peace talks with Palestine. The move comes two days after Israeli Prime Minister Benjamin Netanyahu pledged to halt the settlement program.
The new homes will be constructed at the settlement of Beit El near Ramallah in the West Bank.
"The Civil Administration has given the green light for 296 housing units at Beit El, but this is only the first stage of a process before actual construction can begin," a spokesperson for the Israeli government told reporters.
Palestinian negotiator Saeb Erakat slammed the settlement plans as an attempt to sabotage fresh efforts to encourage peace talks.
The announcement comes just two days after Prime Minister Netanyahu vowed to halt the settlement program and give the Obama Administration a chance to kick-start peace talks.
This initiative proves Netanyahu is deceiving the world, Hagit Ofran of Israeli watchdog Peace Now told AFP. On the one hand, he lets us believe that he is putting the brakes on settlement and on the other, he gives the go-ahead for an enormous building project.
Negotiations hit a brick wall in 2010 when the Palestinians refused to pursue talks if Israel carried on with its settlement program, which is widely perceived to be in breach of international law.
'Fresh life

US Secretary of State John Kerry announced that Washington intends to rekindle peace talks between Israel and Palestine ahead of his trip to the Middle East in two weeks.
Kerry told reporters at the US ambassadors residence in Rome that the US has "with a seriousness of purpose that has not been present in a while and we all believe that we are working with a short time span."
Israeli Justice Minister and Chief Negotiator Tzipi Liivni praised Kerry for his initiative, stating that the US approach had the potential to change realities.
Following the UN vote recognizing Palestine as a non-member observer state last November, Israel announced plans to construct another 3,000 homes on the disputed settlement sites. After President Obama visited Israel in March, no new tenders or building plans for the settlements have been reported.
Peace Now called the Israeli policy of restraint a way of avoiding allegations that they were undermining Kerrys efforts to restart the Israeli-Palestinian peace process.
Source: http://rt.com/news/pledging-talks-peace-renew-048/

US wants 9 permanent bases in Afghanistan after 2014 ISAF withdrawal

Afghan President Hamid Karzai vowed Thursday to wring concessions out of the United States in negotiations for a security pact for the country, as Washington wants to maintain nine military bases in Afghanistan after ISAF troops withdraw in 2014.
As US and other NATO troops begin to withdraw from the country by 2014, Washington is in talks with Karzais government to allow the US Military to retain a residual presence. The size of the force has not yet been determined, but could number between 2,500 and 12,000, according to US officials.
The stated aim of the plan is that soldiers would continue to train the Afghan army and police, and carry out attacks on Al-Qaeda militants.
Our conditions are that the US intensify its efforts in the peace process, strengthen Afghanistans security forces, provide concrete support for the economy power, roads, dams and provide assistance in governance, Karzai said at a ceremony at Kabul University. "When they do this, we are ready to sign [a partnership agreement].
Previously, the US said that if 6,000 troops were kept behind in Afghanistan only the bases in Kabul and Bagram airfield would be maintained.
As the US-led International Security Assistance Force (ISAF) draws down troop deployments in Afghanistan, security in the country is still in a perilous state, with the Taliban able to operate largely with impunity.

While addressing a meeting of the Russian Security Council on Wednesday, Russian President Vladimir Putin said that the ISAF has not achieved significant improvements in security and has done nothing to eliminate heroin production in the country, which is now at record levels.
There are all grounds to believe that we may face an escalation of the situation in Afghanistan in the short term, Putin said.
The foreign military contingent, whose backbone is American forces, has not achieved a breakthrough in the fight against terrorist and radical groups as yet. On the contrary, their activity has been particularly increasing lately, Putin explained.
Putins comments come after an embarrassing revelation earlier this week that British intelligence agency MI6 regularly provided Karzais government with ghost money in order to buy influence through bribes.
The money from MI6 is a fraction of what the CIA paid to Karzais government, and although the exact figures have been withheld for reason of national security they are estimated to run in the tens of millions of dollars.
Karzais government is deeply unpopular with many Afghans, and is widely seen as corrupt. There was significant overlap between the corrupt Afghan political establishment and the countrys illegal heroin trade, including the presidents brother Ahmed Wali Karzai, who was assassinated in 2011.
A UN report released last month showed that Afghan poppy production was rapidly expanding, and that the country was expected to produce 90 percent of the worlds opium this year.
Source: http://rt.com/news/afghanistan-us-withdrawl-bases-053/

Famed physicist Stephen Hawking joins Israel boycott

World renowned physicist Stephen Hawking has found himself in the midst of a media-fueled misunderstanding over his recent decision to boycott an international conference hosted by Israel in protest of that countrys treatment of Palestinians.
Professor Hawkings announcement that he has declined an invitation to headline the fifth annual Presidential Conference, hosted by Israeli President Shimon Peres, comes on the occasion of Peress 90th birthday.
Initially the theoretical physicist and Lucasian Professor of Mathematics at the University of Cambridge had accepted the invitation, but came to reconsider once campaigners for Palestinian rights, who make up a vocal segment of the Cambridge academic community, pressured Hawking to skip the event.
Cambridge University first claimed that Hawkings decision to avoid the conference was due to his ill health - he has lived with motor neuron disease for 50 years, a condition which confines him to a wheelchair and requires him to communicate with the use of a computer terminal.
On Wednesday, though, Cambridge conceded that the professors decision was based on his politics, rather than his medical condition, once it was presented by The Guardian with the text of a letter sent by Hawking to organizers of the conference in Jerusalem.
The British university issued a statement, saying: We have now received confirmation from Prof Hawkings office that a letter was sent on Friday to the Israeli presidents office regarding his decision not to attend ... based on advice from Palestinian academics that he should respect the boycott.
Palestinian academics such as Samia al-Botmeh of Birzeit University in the West Bank welcomed the news.
"We tried to communicate two points to him. First, that Israel is a colonial entity that involves violations of the rights of the Palestinians, including academic freedom, and then asking him to stand in solidarity with Palestinian academic colleagues who have called for solidarity from international academics in the form of boycotting Israeli academia and academic institutions," al-Botmeh told The Guardian.

Daniel Taub, Israelis Ambassador to London, unsurprisingly expressed dissapointment with Hawkings decision.
"It is a great shame that Professor Hawking has withdrawn from the president's conference Rather than caving into pressure from political extremists, active participation in such events is a far more constructive way to promote progress and peace."
This year's Presidential Conference is expected to attract 5,000 attendees from around the world, including academics, artists and former heads of state. Former US president Bill Clinton, former UK prime minister Tony Blair, former Soviet premier Mikhail Gorbachev, Prince Albert of Monaco and Barbra Streisand have accepted invitations, according to organizers.
In April the Teachers Union of Ireland became the first lecturers association in Europe to join in the boycott, following actions by several individual universities and students' associations around the world. A wider Boycott, Divestment and Sanctions movement has seen general success in recent years with the academic world, actors like Bruce Willis and Jean-Claude Van Damme and touring musicians including Stevie Wonder and Roger Waters.
Hawking has visited Israel several times in the past, though he became critical of the countrys treatment of the Palestinians during the 2008-2009 Gaza Massacre, known in Israel as IDF Operation Cast Lead.
Source: http://rt.com/news/conference-hawking-israel-boycott-029/

Thursday, May 02, 2013

Obama's Plan To Seize Control Of Our Economy And Our Lives


Forbes  |  April 29, 2013
President Obama has made clear that he’s determined to continue pushing his “progressive” agenda, regardless of constitutional limitations on his power.  He aims to have his way by issuing more and more executive orders.
The most ominous sign of possible things to come appeared on March 16, 2012, when President Obama signed executive order 13603 about “National Defense Resources Preparedness.”
This 10-page document is a blueprint for a federal takeover of the economy that would dwarf the looming Obamacare takeover of the health insurance business.  Specifically, Obama’s plan involves seizing control of:
*  “All commodities and products that are capable of being ingested by either human beings or animals”
*  “All forms of energy”
*  “All forms of civil transportation”
*  “All usable water from all sources”
*  “Health resources –  drugs, biological products, medical devices, materials, facilities, health supplies, services and equipment”
*  Forced labor ( or “induction” as the executive order delicately refers to military conscription)
Moreover, federal officials would “issue regulations to prioritize and allocate resources.”
Each government bureaucracy “shall act as necessary and appropriate.”
To be sure, much of this language has appeared in national security executive orders that previous presidents have issued periodically since the beginning of the Cold War.
But more than previous national security executive orders, Obama’s 13603 seems to describe a potentially totalitarian regime obsessed with control over everything.  Obama’s executive order makes no effort to justify the destruction of liberty, no effort to explain how amassing totalitarian control would enable government to deal effectively with cyber sabotage, suicide bombings, chemical warfare, nuclear missiles or other possible threats.  It’s quite likely there would be greater difficulty responding to threats, since totalitarian regimes suffer from economic chaos, colossal waste, massive corruption and bureaucratic infighting that are inevitable consequences of extreme centralization. Such problems plagued fascist Italy, Nazi Germany, the Soviet Union, communist China and other regimes.  Totalitarian control would probably trigger resistance movements and underground networks like those that developed in Western Europe during the Nazi occupation.  Totalitarian control could provoke more political turmoil than there was in the Vietnam War era of the 1960s.  There would probably be a serious brain drain as talented people with critical skills escaped to freedom wherever that might be.  Canada?
There’s nothing in executive order 13603 about upholding the Constitution or protecting civil liberties.
Obama’s executive order seems to assume that the next war will be like World War II or World War I, where vast armies of unskilled conscripts went at each other.  But current trends suggest that future conflicts are more likely to involve smaller numbers of military personnel – highly-trained professionals, perhaps thousands of miles away from a battlefield, who remotely-control drones, pilotless combat helicopters, unmanned ground vehicles, unmanned ships, mobile security robots and related military technologies.
Even if Obama’s 13603 were no different than previous national security executive orders, it’s more worrisome because it was issued by the president who rammed Obamacare and runaway spending bills through Congress, who racked up $5 trillion of debt and surrounded himself with hardcore “progressives” hostile to the private sector and America as we have known it.
In what circumstances, one might ask, would a president try to carry out this audacious plan?
Executive order 13603 says with ominous ambiguity: during “the full spectrum of emergencies.”
Well, the United States is already in a state of national emergency declared by President George W. Bush on September 14, 2001 and extended last year by President Obama.
To better understand the potentially explosive impact of his plan, let’s take a tour through the dark world of executive orders, a type of presidential power that most people know little, if anything, about.
Many presidents have pushed to expand their power beyond constitutional limits, particularly during crises.  Issuing executive orders is the easiest way to do it.  A president doesn’t have to propose an executive order, debate the issues, endure hearings or solicit votes.  An executive order can be issued in a few minutes — behind closed doors and away from bright lights.
An executive order may be about all sorts of things large and small.
Paul Begala, who was an advisor to President Bill Clinton, reportedly remarked, “Stroke of the pen, law of the land, kinda cool.”
What about the Constitution?  It describes presidential power broadly.  There isn’t anything in the Constitution that authorizes an executive order or limits what a president can do with it.
Executive orders arise from “implied constitutional and statutory authority,” the Congressional Research Service reported.  “If issued under a valid claim of authority and published in the Federal Register, executive orders may have the force and effect of law.”
The Supreme Court tried to establish some limitations.  It asserted the principle that an executive order (1) “must stem either from an act of Congress or from the Constitution itself” and (2) “an executive order must not be “incompatible with the express or implied will of Congress.”
But many executive orders are in a twilight zone of dubious constitutional legitimacy if not open defiance of the Constitution, especially when they amount to lawmaking without congressional approval.
Very few of the thousands of executive orders have ever been challenged legally.
Members of Congress don’t always seem to know much about them.  At one point, for example, they were shocked to discover that there were executive orders providing the president with enormous standby powers that could be implemented on a moment’s notice.
Sometimes a president issued executive orders to bypass Congress when his party didn’t control it.  But Franklin Delano Roosevelt issued more executive orders than any other president, starting in his early years when he was most popular.  Often executive orders seemed to have been issued because a president was in a hurry – and often there were unfortunate consequences.  An executive order isn’t a reliable cure for any serious problem.
Executive orders go back to the beginning of our country, although they weren’t called that. Usually they were referred to as proclamations.
Until the early 20th century, executive orders were generally undocumented.  They were addressed to a particular government agency which had the only copy.  Nobody seemed to know how many executive orders there were.  As late as the 1930s, there was an account, published in the New York Times, claiming that “there are no readily available means of ascertaining the true texts and history of the thousand or more executive orders issued since March 4, 1933.”
In 1907, the State Department began compiling and numbering executive orders going back to one that Abraham Lincoln issued on October 20, 1862.  That became known as executive order 1.  As I write, the most recent is Obama’s executive order 13603.
President George Washington’s first proclamation was on October 3, 1789.  He said, “Both Houses of Congress have by their joint Committee requested me to recommend to the People of the United States a day of public thanksgiving.”  So, this was authorized by Congress.
Washington’s Neutrality Proclamation wasn’t authorized by Congress.  Issued on April 22, 1793, it declared that the United States would be neutral in the war between France and Great Britain, which had begun two months before.  Members of Washington’s cabinet, including Secretary of State Thomas Jefferson, agreed that the United States was too fragile to become involved in another war.
Abraham Lincoln expanded presidential powers via proclamations and executive orders.  He did this in the name of suppressing rebellion rather than waging war, since the Constitution gave Congress the power to declare war.
Lincoln famously suspended habeas corpus, the legal action that requires a prisoner to be set free if authorities don’t file charges promptly and proceed to a jury trial, so the accused can have an opportunity to prove innocence.
In April 1861, a Maryland militia officer named John Merryman was arrested and detained at Fort McHenry in Baltimore.  He was said to have damaged Union facilities and trained Confederate soldiers.  His lawyer obtained a writ of habeas corpus from Chief Justice Roger B. Tawney who directed George Cadwalader, the commander at Fort McHenry, to produce Merryman and explain the facts and the legal basis for detention.  Cadwalader refused, saying that Lincoln had suspended habeas corpus.  Tawney cited him for contempt, but a marshal couldn’t enter the fort to deliver the contempt citation.  Tawney wrote what became known as the Ex Parte Merryman opinion, saying, in part, that “If the authority which the Constitution has confided to the judiciary department may upon any pretext be usurped by the military power, the people of the United States are no longer living under a government of laws.”
Lincoln went to Congress, offered an uncertain defense of his action and expressed the hope that Congress would “ratify” his action.  Pulitzer Prize winning historian Mark E. Neely, Jr. noted that “the president seemed to agree that the legislative branch was the proper body to suspend the writ of habeas corpus.”  On September 24, 1862, Lincoln issued a proclamation officially suspending habeas corpus, which meant that the government could detain people indefinitely.  Lincoln “managed the home front, in part,” Neely wrote, “by means of military arrests of civilians – thousands and thousands of them.”
Lincoln had issued executive orders expanding the amount of Union territory subject to military control, particularly southern Illinois, Indiana and Ohio where “copperheads” were operating.  In 1864, the Union army arrested Lambdin Milligan and four others in southern Indiana.  They were charged with plotting to free Confederate prisoners-of-war.  A military court sentenced the men to death, but they appealed for their constitutional right to habeas corpus.  After the Civil War, in 1866, the Supreme Court noted that Indiana wasn’t under attack, and civilian courts were functioning, so Milligan and the others were entitled to a jury trial there.  Justice David Davis wrote: “The Constitution of the United States is a law for rulers and people, equally in war and in peace, and covers with the shield of protection all classes of men, at all times, in all circumstances.”
Historian James G. Randall reflected, “No president has carried the power of presidential edict and executive order – independently of Congress – so far as [Lincoln] did.  It would not be easy to state what Lincoln conceived to be the limit of his powers.”
Lincoln’s best-known executive order was the Emancipation Proclamation.  He hoped to provoke a slave revolt in the Confederacy and make it easier for the Union to win the Civil War.  Accordingly, on September 22, 1862, he issued a preliminary Emancipation Proclamation.  It applied to any state that didn’t return to the Union by January 1, 1863.  No states returned.  At that point, Lincoln issued the historic Emancipation Proclamation.  It applied to slaves in the Confederacy – territory that the Union didn’t control.  It neither abolished slavery nor extended citizenship to former slaves, but it did make the abolition of slavery a war aim.
The peacetime expansion of federal power began with Theodore Roosevelt who issued 1,006 executive orders, more than any previous president.  They performed a wide range of administrative functions, especially the disposition of government-owned land.
TR emphatically rejected the view that “what was necessary for the nation could not be done by the President unless he could find some specific authorization to do it…it was not only [the president’s] right but his duty to do anything that the needs of the nation demanded unless such action was forbidden by the Constitution or by the laws.”
TR also said: “I think [the presidency] should be a very powerful office, and I think the President should be a very strong man who uses without hesitation every power the position yields.”  He continued, “I believe in a strong executive.  I believe in power.”
According to biographer Henry Pringle, “It seldom occurred to Roosevelt that the duty of the executive was to carry out the mandates of the legislative.  In so far as he was able, he reversed the theory.  Congress, he felt, must obey the president.”  He wanted the Supreme Court to obey him, too.  Roosevelt acknowledged, “I did greatly broaden the use of executive power.”
At times, TR seemed drunk with power, as when he remarked: “I don’t think that any harm comes from the concentration of power in one man’s hands.”
Woodrow Wilson issued 1,791 executive orders.  For instance, executive order 1810 (August 7, 1913) prohibited anyone from operating a flying machine or balloon across the Panama Canal Zone.   Wilson issued executive order 1860 (November 11, 1913) to dictate interest rates for the Canal Zone – a surprising number of Wilson’s executive orders had to do with administering that little territory.
Most of Wilson’s executive orders were issued during World War I.  For instance, on April 14, 1917, he issued executive order 2594 to establish the Committee on Public Information – war propaganda.  On April 28th, he issued executive order 2604 for censorship of messages sent via the trans-Atlantic cables.  Executive order 2679-A (August 10, 1917) established the Food Administration.  Executive order 2697 (September 7, 1917) required that anyone wishing to export coins, bullion or currency must file an application in triplicate with the nearest Federal Reserve bank.  Executive order 2736 (October 23, 1917) authorized Food Administrator Herbert Hoover to requisition food.  Executive order 2953 (September 12, 1918) authorized the sale of property seized in accordance with the Trading with the Enemy Act.
Franklin D. Roosevelt issued 3,723 executive orders.  In his Inaugural Address, he said: “I shall ask the Congress for the one remaining instrument to meet the [depression] crisis – broad executive power to wage a war against the emergency, as great as the power that would be given me if we were in fact invaded by a foreign foe.”
On March 6, 1933, FDR issued Proclamation 2029 that cited Wilson’s Trading with the Enemy Act to justify ordering banks closed for a National Bank Holiday.
FDR sent his Emergency Banking bill to the House of Representatives, and it was passed after only 38 minutes of debate – apparently without members reading it.
In 1933, FDR issued executive order 6102 that made it illegal for Americans to own gold bullion or gold certificates, even though historically gold provided the best protection against inflation and monetary crises.  Violators faced the prospect of a fine up to $10,000 or up to 10 years in prison.
Since economic fascism was popular during the early 1930s, FDR issued executive orders to suspend antitrust laws and establish German-style cartels in dozens of industries, restricting total industry output, allocating market shares and fixing above‑market wages and prices.  Above‑market wages discouraged employers from hiring, and above-market prices discouraged consumers from buying.  Among these executive orders:
*  6204-A, for the rayon weaving industry
*  6205-C, for the silk manufacturing industry
*  6216, for the ship building and ship repairing industries
*  6242-B, for electrical manufacturing
*  6248, for the corset and brassiere industries
*  6250, for theaters
*  6253, for the fishing tackle industry
*  6254, for the iron and steel industries
*  6255, was for the forest products industry
*  6256, was for the petroleum industry
*  6543-A, for the drapery and upholstery industries
With executive orders, FDR multiplied the number of government bureaucracies.  He established the Civilian Conservation Corps by issuing executive order 6101.  The Public Works Administration followed with executive order 6174.  Then came these executive orders:
*  6225, the Central Statistical Board
*  6340, the Commodity Credit Corporation
*  6420-B, the Civil Works Administration
*  6433-A, the National Emergency Council
*  6470, the Public Works Emergency Housing Corporation
*  6474, the Federal Alcohol Control Administration
*  6514, the Electric Home and Farm Authority
*  6581, the Export-Import Bank of Washington
*  6623, the Federal Employment Stabilization Office
*  6632, the National Recovery Review Board
*  6770, the Industrial Emergency Committee
*  6777, the National Resources Board
*  7027, the Resettlement Administration
*  7034, the Works Progress Administration
As one reflects on FDR’s New Deal executive orders, one thing seems clear: while some of the programs provided relief for desperate people, they failed to achieve a sustained revival of private sector job creation.  Indeed, relief spending was the main reason government spending doubled and taxes tripled during the New Deal era (1933-1940).  Where did the tax revenue come from?  The biggest source of federal revenue was the federal excise tax on cigarettes, beer, soda, chewing gum and other cheap pleasures consumed disproportionately by poor and middle income people.  This means the cost of relief programs for poor and middle income people was borne mainly by poor and middle income people.  In May 1939, FDR’s Secretary of the Treasury Henry Morgenthau lamented, “We are spending more than we have ever spent before, and it does not work.  After eight years of this administration, we have just as much unemployment as when he started.”
New Deal unemployment averaged 17 percent, and it didn’t go down significantly until the government began removing more than 10 million men from the civilian work force via military conscription for World War II.
In 1974, the Senate Committee on National Emergencies and Delegated Emergency Powers revealed that “Since March 9, 1933, the United States has been in a state of declared national emergency.  There are now in effect four presidentially-proclaimed states of national emergency.  In addition to the national emergency declared by President Roosevelt [during the Great Depression], there are also the national emergency proclaimed by President Truman on December 16, 1950, during the Korean conflict, and the states of national emergency declared by President Nixon on March 23, 1970 and August 15, 1971.
“These proclamations give force to 470 provisions of Federal law, delegating to the President extraordinary powers, ordinarily exercised by the Congress, which effect the lives of American citizens in a host of all-encompassing manners…The President may seize property, organize and control the means of production, seize commodities, assign military forces abroad, institute martial law, seize and control all transportation and communication, regulate the operation of private enterprise, restrict travel, and in a plethora of particular ways, control the lives of all Americans.”
As a result of these revelations, in 1976 Congress passed the National Emergencies Act.  It limited a president’s declared emergency to two years, which may be extended.
A comment about two of Nixon’s major executive orders.
On August 15, 1971, he announced his New Economic Policy, which happened to be what Bolshevik firebrand Vladimir Lenin called one of his misadventures.  Nixon issued executive order 11615 that declared: “to stabilize the economy, reduce inflation, and minimize unemployment, it is necessary to stabilize prices, rents, wages, and salaries.”  These controls failed to stop inflation which hit double-digits during the 1970s, and they caused chronic shortages, rationing and business disruption – making it harder to create private sector jobs.  By maintaining below-market prices, controls simultaneously encouraged producers to provide less, while encouraging consumers to demand more.  Hence, the shortages.
Although this experience with price controls had been a flop, Nixon decided to try again.  On June 13, 1973, he signed executive order 11723 that called for a freeze on prices, while he continued to control wages, salaries and rents.
Nixon’s executive orders made a bad situation worse.  For instance, his price control administrator C. Jackson Grayson confessed: “lumber controls were beginning to lead to artificial middlemen, black markets and sawmill shutdowns.  Companies trapped with low base‑period profit margins were beginning to consider selling out those with higher base periods, sending their capital overseas, or reducing their efforts.  Instances of false job upgrading – which were actually ‘raises’ in disguise – were reported.  To keep away from profit-margin controls, companies were considering dropping products where costs, and thus prices, had increased.  And shortages of certain products (like molasses and fertilizer) were appearing because artificially suppressed domestic prices had allowed higher world prices to pull domestic supplies abroad.”
In 1999, Bill Clinton waged war with executive orders.  He issued executive order 13088 that declared the governments of the Federal Republic of Yugoslavia (Serbia and Montenegro) and the Republic of Serbia posed “an extraordinary threat to the national security and foreign policy of the United States.”  Therefore, Clinton proclaimed a “national emergency.”  He ordered the seizure of property belonging to the named governments in the United States, and he prohibited Americans from conducting commercial transactions with those governments.  Clinton’s executive order 13119 declared that the region was a war zone.  Executive order 13120 summoned military reserve units for active duty.
None of this was authorized by Congress.  On the contrary, Congress voted down a resolution to declare war.  Congress wouldn’t “authorize” the air war.  Clinton ignored Congress and kept America in the war.  When, on June 10, 1999, NATO announced it was over, Clinton ordered American soldiers to serve in the Kosovo Force.  There are still some American soldiers in harm’s way.
Once again, we find ourselves in an open-ended national emergency, declared on September 14, 2001 and extended since then.  President Obama notified Congress that he was extending it again.  This means the president has still has standby powers from hundreds of statutes.
Okay, how can an executive order be revoked?
First, an executive order can be revoked by another executive order.  Probably all presidents revoke some executive orders by their predecessors.
For example, Bill Clinton’s executive order 12919, issued on June 3, 1994, was about national security.  It revoked all or part of more than a dozen executive orders issued between 1939 and 1991.
President Obama revoked executive orders 13258 (2002) and 13422 (2007), both of which were issued by George W. Bush and amended executive order 12866 (1993) which had been issued by Bill Clinton.  These executive orders had to do with regulatory processes.
While executive orders seem irresistible to presidents because they can be issued quickly, they can be revoked quickly, too.
Second, an executive order can be revoked by legislation.  A 1999 congressional hearing on executive orders, before the House Rules Committee, the Subcommittee on Legislative and Budget Process, indicated that every president since Grover Cleveland has had some of his executive orders modified or revoked by legislation.
The Congressional Research Service cited a number of recent examples: “in 2006, Congress revoked part of an executive order from November 12, 1838, which reserved certain public land for lighthouse purposes.  Congress has also explicitly revoked executive orders in their entirety, such as the Energy Policy Act of 2005, which revoked a December 13, 1912 executive order that created Naval Petroleum Reserve Number 2.”  A executive order by President George H.W. Bush, to establish a human fetal tissue bank for research purposes, was revoked when Congress declared that ‘the provisions of Executive Order 12806 shall not have any legal effect.’”
In addition, Congress has denied funding needed to implement various executive orders.
If a president’s adversaries have a veto-proof majority in Congress, the threat of passing a law can deter a president from issuing a controversial executive order.  For instance, Christopher J. Deering and Forrest Maltzman, at Washington University, pointed out: “In 1993 President Clinton swiftly backed away from an executive order prohibiting the military from excluding gays from service once it became clear that Congress was likely to overturn such an order by legislative action.”
In recent decades, however, Congress has acquiesced to the expansion of arbitrary presidential power.  For example, Congress hasn’t used its power to declare war since the Japanese bombed Pearl Harbor more than seven decades ago, although the United States has been drawn into a number of wars during this period.
Congress adopted the War Powers Resolution (1973) in the aftermath of the undeclared Vietnam War.  The law required that the president obtain Congressional authorization before entering a war and that he keep Congress informed about what was going on.  Presidents have continued to enter undeclared, unauthorized wars.
Third, an executive order can be revoked by a federal appeals court or the Supreme Court.
However, courts as well as Congress commonly have acquiesced to expanded presidential power.
For instance, during World War II, FDR issued executive order 9102 (1942) that established the War Relocation Authority to forcibly move Japanese-Americans away from the Pacific Coast into “relocation camps” for the duration of World War II.  This was upheld by the Supreme Court, 6-3, in Korematsu v. United States, 323 U.S. 214 (1944).  Justice Hugo Black wrote the majority opinion.  He asserted that protecting against potential Japanese espionage was more important than protecting Fred Korematsu’s individual rights.
In recent times, too, the Supreme Court generally has deferred to the president in cases involving executive orders.  In 1979, Iranian revolutionaries seized 52 Americans working at the U.S. Embassy in Teheran and held them as hostages for more than a year.  President Jimmy Carter issued an executive order that declared a national emergency and blocked Iranian assets in the U.S.  Dames & Moore, a U.S. contractor owed more than $3 million for work performed in Iran, filed a lawsuit seeking payment.  After Ronald Reagan was sworn in as president, he entered into an executive agreement with Iran, bypassing the Senate which had the constitutional power to ratify treaties.  The executive agreement provided that hostages would be released if legal proceedings in U.S. courts against Iran were suspended.  On February 24, 1981, Reagan signed executive order 12294 to suspend such legal proceedings.
Dames & Moore filed another lawsuit claiming that the president lacked the power to do that.  In Dames & Moore v. Regan, 453 U.S. 654 (1981), the Supreme Court implicitly upheld the president’s authority to negotiate executive agreements and explicitly affirmed his power to issue an executive order that suspended court proceedings.  Chief Justice William Rehnquist cited statutes “indicating congressional acceptance of a broad scope for executive action in circumstances such as those presented in this case…we can conclude that Congress acquiesced in the President’s action… [Since] Congress has acquiesced in the President’s action, it cannot be said that the President lacks the power to settle such claims.”
There seem to have been only two cases of an executive order being overturned by a court.
This happened with Harry Truman’s 1952 executive order 10340 that ordered the Secretary of Commerce to stop a steelworkers strike by seizing privately-owned steel mills.   Truman insisted that a prolonged strike would impair the government’s ability to fight an undeclared “police action” as the Korean War has been called.
The steel mill seizures were contested in Youngstown Sheet & Tube v. Sawyer, 343 U.S. 579 (1952).
The U.S. Solicitor General claimed that Article II, Section 2 of the Constitution “constitutes a grant of all the executive powers of which the Government is capable.”
Supreme Court Justice Robert Jackson was incredulous.  He said, “The example of such unlimited executive power that must have most impressed the forefathers was the prerogative exercised by King George III.  The description of its evils in the Declaration of Independence leads me to doubt that they were creating their new Executive in his image. Continental European examples were no more appealing.  And, if we seek instruction from our own times, we can match it only from the executive powers in those governments we disparagingly describe as totalitarian.  I cannot accept the view that the clause is a grant in bulk of all conceivable executive power.”

In a 6-3 decision, the Supreme Court rejected every argument made on behalf of  Truman’s seizure: “The Executive Order was not authorized by the Constitution or laws of the United States, and it cannot stand…There is no statute which expressly or impliedly authorizes the President to take possession of this property as he did here… In its consideration of the Taft‑Hartley Act in 1947, Congress refused to authorize governmental seizures of property as a method of preventing work stoppages and settling labor disputes… Authority of the President to issue such an order in the circumstances of this case cannot be implied from the aggregate of his powers under Article II of the Constitution…The Order cannot properly be sustained as an exercise of the President’s military power as Commander in Chief of the Armed Forces…Nor can the Order be sustained because of the several provisions of Article II which grant executive power to the President… The power here sought to be exercised is the lawmaking power, which the Constitution vests in the Congress alone, in both good and bad times…the President’s power to see that laws are faithfully executed refutes the idea that he is to be a lawmaker.”
President Clinton’s 12954 was the other case of an executive order known to have been revoked by a court.  Clinton banned the federal government from hiring contractors who replaced strikers.  He argued that strikers can become violent when they’re replaced, so it would be better to appease strikers and support union workplace monopolies by banning replacements.  Attorney Charles T. Kimmett, writing in the Yale Law Journal, defended the president’s position while acknowledging union violence.  “When striking Greyhound workers were permanently replaced,” he wrote, “replacement bus drivers and bus riders became targets of sniper fire.  Similarly, the Hormel Company’s decision to hire permanent striker replacements was accompanied by such violence that Minnesota’s governor called in the National Guard.”
The U.S. Court of Appeals for the D.C. Circuit revoked Clinton’s executive order in Chamber of Commerce v. Reich, 74 F.3d 1322 (D.C. Cir. 1996).  This was an important case, because during the past seven decades, there have been more than a hundred executive orders regulating private employment, and legal challenges have been rare.
Clinton’s executive order 12954 conflicted with a 7-0 U.S. Supreme Court decision in NLRB v. Mackay Radio & Telegraph Company, 304 U.S. 333 (1938),.  In part, that court decided “[The employer] is not bound to discharge those hired to fill the places of strikers.”
D.C. Circuit Judge Laurence Silberman said, “We think it untenable to conclude that there are no judicially enforceable limitations on presidential actions [enabling] the President to bypass scores of statutory limitations on governmental authority.”
As all this experience suggests, executive orders make it easy for presidents to consolidate more power and difficult for anyone to stop them.  People acquiesce with the hope that a president will do good, but if he or she does harm – remember, there’s no reliable way of keeping bad or incompetent people out of power – then Americans will find themselves in a very bad place.
Hopefully, President Obama will never try to implement his executive order 13603 – the plan for seizing control of our economy and our lives.  But the plan is ready-to-go, awaiting the right moment.  One morning, Americans could wake up to the news that suddenly Obama is activating the plan because of cyber sabotage, a terrorist incident, a crisis in nuclear Pakistan, a war with Iran or some other state of emergency, perhaps the state of emergency he extended last year.  Or perhaps the president might simply decide that to win the fall election he needs an “October surprise.”
Jim Powell, a Senior Fellow at the Cato Institute, is the author of FDR’s Folly, Bully Boy, Wilson’s War, Greatest Emancipations, Gnomes of Tokyo, The Triumph of Liberty and other books.

Everything Is Rigged: The Biggest Price-Fixing Scandal Ever


The Illuminati were amateurs. The second huge financial scandal of the year reveals the real international conspiracy: There's no price the big banks can't fix

Rolling Stone  |  May 2013
Conspiracy theorists of the world, believers in the hidden hands of the Rothschilds and the Masons and the Illuminati, we skeptics owe you an apology. You were right. The players may be a little different, but your basic premise is correct: The world is a rigged game. We found this out in recent months, when a series of related corruption stories spilled out of the financial sector, suggesting the world's largest banks may be fixing the prices of, well, just about everything.
You may have heard of the Libor scandal, in which at least three – and perhaps as many as 16 – of the name-brand too-big-to-fail banks have been manipulating global interest rates, in the process messing around with the prices of upward of $500 trillion (that's trillion, with a "t") worth of financial instruments. When that sprawling con burst into public view last year, it was easily the biggest financial scandal in history – MIT professor Andrew Lo even said it "dwarfs by orders of magnitude any financial scam in the history of markets."
That was bad enough, but now Libor may have a twin brother. Word has leaked out that the London-based firm ICAP, the world's largest broker of interest-rate swaps, is being investigated by American authorities for behavior that sounds eerily reminiscent of the Libor mess. Regulators are looking into whether or not a small group of brokers at ICAP may have worked with up to 15 of the world's largest banks to manipulate ISDAfix, a benchmark number used around the world to calculate the prices of interest-rate swaps.
Interest-rate swaps are a tool used by big cities, major corporations and sovereign governments to manage their debt, and the scale of their use is almost unimaginably massive. It's about a $379 trillion market, meaning that any manipulation would affect a pile of assets about 100 times the size of the United States federal budget.
It should surprise no one that among the players implicated in this scheme to fix the prices of interest-rate swaps are the same megabanks – including Barclays, UBS, Bank of America, JPMorgan Chase and the Royal Bank of Scotland – that serve on the Libor panel that sets global interest rates. In fact, in recent years many of these banks have already paid multimillion-dollar settlements for anti-competitive manipulation of one form or another (in addition to Libor, some were caught up in an anti-competitive scheme, detailed inRolling Stone last year, to rig municipal-debt service auctions). Though the jumble of financial acronyms sounds like gibberish to the layperson, the fact that there may now be price-fixing scandals involving both Libor and ISDA fix suggests a single, giant mushrooming conspiracy of collusion and price-fixing hovering under the ostensibly competitive veneer of Wall Street culture.
Why? Because Libor already affects the prices of interest-rate swaps, making this a manipulation-on-manipulation situation. If the allegations prove to be right, that will mean that swap customers have been paying for two different layers of price-fixing corruption. If you can imagine paying 20 bucks for a crappy PB&J because some evil cabal of agribusiness companies colluded to fix the prices of both peanuts and peanut butter, you come close to grasping the lunacy of financial markets where both interest rates and interest-rate swaps are being manipulated at the same time, often by the same banks.
"It's a double conspiracy," says an amazed Michael Greenberger, a former director of the trading and markets division at the Commodity Futures Trading Commission and now a professor at the University of Maryland. "It's the height of criminality."
The bad news didn't stop with swaps and interest rates. In March, it also came out that two regulators – the CFTC here in the U.S. and the Madrid-based International Organization of Securities Commissions – were spurred by the Libor revelations to investigate the possibility of collusive manipulation of gold and silver prices. "Given the clubby manipulation efforts we saw in Libor benchmarks, I assume other benchmarks – many other benchmarks – are legit areas of inquiry," CFTC Commissioner Bart Chilton said.
But the biggest shock came out of a federal courtroom at the end of March – though if you follow these matters closely, it may not have been so shocking at all – when a landmark class-action civil lawsuit against the banks for Libor-related offenses was dismissed. In that case, a federal judge accepted the banker-defendants' incredible argument: If cities and towns and other investors lost money because of Libor manipulation, that was their own fault for ever thinking the banks were competing in the first place.
"A farce," was one antitrust lawyer's response to the eyebrow-raising dismissal.
"Incredible," says Sylvia Sokol, an attorney for Constantine Cannon, a firm that specializes in antitrust cases.
All of these stories collectively pointed to the same thing: These banks, which already possess enormous power just by virtue of their financial holdings – in the United States, the top six banks, many of them the same names you see on the Libor and ISDAfix panels, own assets equivalent to 60 percent of the nation's GDP – are beginning to realize the awesome possibilities for increased profit and political might that would come with colluding instead of competing. Moreover, it's increasingly clear that both the criminal justice system and the civil courts may be impotent to stop them, even when they do get caught working together to game the system.
If true, that would leave us living in an era of undisguised, real-world conspiracy, in which the prices of currencies, commodities like gold and silver, even interest rates and the value of money itself, can be and may already have been dictated from above. And those who are doing it can get away with it. Forget the Illuminati – this is the real thing, and it's no secret. You can stare right at it, anytime you want.
The banks found a loophole, a basic flaw in the machine. Across the financial system, there are places where prices or official indices are set based upon unverified data sent in by private banks and financial companies. In other words, we gave the players with incentives to game the system institutional roles in the economic infrastructure.
Libor, which measures the prices banks charge one another to borrow money, is a perfect example, not only of this basic flaw in the price-setting system but of the weakness in the regulatory framework supposedly policing it. Couple a voluntary reporting scheme with too-big-to-fail status and a revolving-door legal system, and what you get is unstoppable corruption.
Every morning, 18 of the world's biggest banks submit data to an office in London about how much they believe they would have to pay to borrow from other banks. The 18 banks together are called the "Libor panel," and when all of these data from all 18 panelist banks are collected, the numbers are averaged out. What emerges, every morning at 11:30 London time, are the daily Libor figures.
Banks submit numbers about borrowing in 10 different currencies across 15 different time periods, e.g., loans as short as one day and as long as one year. This mountain of bank-submitted data is used every day to create benchmark rates that affect the prices of everything from credit cards to mortgages to currencies to commercial loans (both short- and long-term) to swaps.
Dating back perhaps as far as the early Nineties, traders and others inside these banks were sometimes calling up the company geeks responsible for submitting the daily Libor numbers (the "Libor submitters") and asking them to fudge the numbers. Usually, the gimmick was the trader had made a bet on something – a swap, currencies, something – and he wanted the Libor submitter to make the numbers look lower (or, occasionally, higher) to help his bet pay off.
Famously, one Barclays trader monkeyed with Libor submissions in exchange for a bottle of Bollinger champagne, but in some cases, it was even lamer than that. This is from an exchange between a trader and a Libor submitter at the Royal Bank of Scotland:
SWISS FRANC TRADER: can u put 6m swiss libor in low pls?...
PRIMARY SUBMITTER: Whats it worth
SWSISS FRANC TRADER: ive got some sushi rolls from yesterday?...
PRIMARY SUBMITTER: ok low 6m, just for u
SWISS FRANC TRADER: wooooooohooooooo. . . thatd be awesome
Screwing around with world interest rates that affect billions of people in exchange for day-old sushi – it's hard to imagine an image that better captures the moral insanity of the modern financial-services sector.
Hundreds of similar exchanges were uncovered when regulators like Britain's Financial Services Authority and the U.S. Justice Department started burrowing into the befouled entrails of Libor. The documentary evidence of anti-competitive manipulation they found was so overwhelming that, to read it, one almost becomes embarrassed for the banks. "It's just amazing how Libor fixing can make you that much money," chirped one yen trader. "Pure manipulation going on," wrote another.
Yet despite so many instances of at least attempted manipulation, the banks mostly skated. Barclays got off with a relatively minor fine in the $450 million range, UBS was stuck with $1.5 billion in penalties, and RBS was forced to give up $615 million. Apart from a few low-level flunkies overseas, no individual involved in this scam that impacted nearly everyone in the industrialized world was even threatened with criminal prosecution.
Two of America's top law-enforcement officials, Attorney General Eric Holder and former Justice Department Criminal Division chief Lanny Breuer, confessed that it's dangerous to prosecute offending banks because they are simply too big. Making arrests, they say, might lead to "collateral consequences" in the economy.
The relatively small sums of money extracted in these settlements did not go toward reparations for the cities, towns and other victims who lost money due to Libor manipulation. Instead, it flowed mindlessly into government coffers. So it was left to towns and cities like Baltimore (which lost money due to fluctuations in their municipal investments caused by Libor movements), pensions like the New Britain, Connecticut, Firefighters' and Police Benefit Fund, and other foundations – and even individuals (billionaire real-estate developer Sheldon Solow, who filed his own suit in February, claims that his company lost $450 million because of Libor manipulation) – to sue the banks for damages.
One of the biggest Libor suits was proceeding on schedule when, early in March, an army of superstar lawyers working on behalf of the banks descended upon federal judge Naomi Buchwald in the Southern District of New York to argue an extraordinary motion to dismiss. The banks' legal dream team drew from heavyweight Beltway-connected firms like Boies Schiller (you remember David Boies represented Al Gore), Davis Polk (home of top ex-regulators like former SEC enforcement chief Linda Thomsen) and Covington & Burling, the onetime private-practice home of both Holder and Breuer.
The presence of Covington & Burling in the suit – representing, of all companies, Citigroup, the former employer of current Treasury Secretary Jack Lew – was particularly galling. Right as the Libor case was being dismissed, the firm had hired none other than Lanny Breuer, the same Lanny Breuer who, just a few months before, was the assistant attorney general who had balked at criminally prosecuting UBS over Libor because, he said, "Our goal here is not to destroy a major financial institution."
In any case, this all-star squad of white-shoe lawyers came before Buchwald and made the mother of all audacious arguments. Robert Wise of Davis Polk, representing Bank of America, told Buchwald that the banks could not possibly be guilty of anti- competitive collusion because nobody ever said that the creation of Libor was competitive. "It is essential to our argument that this is not a competitive process," he said. "The banks do not compete with one another in the submission of Libor."
If you squint incredibly hard and look at the issue through a mirror, maybe while standing on your head, you can sort of see what Wise is saying. In a very theoretical, technical sense, the actual process by which banks submit Libor data – 18 geeks sending numbers to the British Bankers' Association offices in London once every morning – is not competitive per se.
But these numbers are supposed to reflect interbank-loan prices derived in a real, competitive market. Saying the Libor submission process is not competitive is sort of like pointing out that bank robbers obeyed the speed limit on the way to the heist. It's the silliest kind of legal sophistry.
But Wise eventually outdid even that argument, essentially saying that while the banks may have lied to or cheated their customers, they weren't guilty of the particular crime of antitrust collusion. This is like the old joke about the lawyer who gets up in court and claims his client had to be innocent, because his client was committing a crime in a different state at the time of the offense.
"The plaintiffs, I believe, are confusing a claim of being perhaps deceived," he said, "with a claim for harm to competition."
Judge Buchwald swallowed this lunatic argument whole and dismissed most of the case. Libor, she said, was a "cooperative endeavor" that was "never intended to be competitive." Her decision "does not reflect the reality of this business, where all of these banks were acting as competitors throughout the process," said the antitrust lawyer Sokol. Buchwald made this ruling despite the fact that both the U.S. and British governments had already settled with three banks for billions of dollars for improper manipulation, manipulation that these companies admitted to in their settlements.
Michael Hausfeld of Hausfeld LLP, one of the lead lawyers for the plaintiffs in this Libor suit, declined to comment specifically on the dismissal. But he did talk about the significance of the Libor case and other manipulation cases now in the pipeline.
"It's now evident that there is a ubiquitous culture among the banks to collude and cheat their customers as many times as they can in as many forms as they can conceive," he said. "And that's not just surmising. This is just based upon what they've been caught at."
Greenberger says the lack of serious consequences for the Libor scandal has only made other kinds of manipulation more inevitable. "There's no therapy like sending those who are used to wearing Gucci shoes to jail," he says. "But when the attorney general says, 'I don't want to indict people,' it's the Wild West. There's no law."
The problem is, a number of markets feature the same infrastructural weakness that failed in the Libor mess. In the case of interest-rate swaps and the ISDAfix benchmark, the system is very similar to Libor, although the investigation into these markets reportedly focuses on some different types of improprieties.
Though interest-rate swaps are not widely understood outside the finance world, the root concept actually isn't that hard. If you can imagine taking out a variable-rate mortgage and then paying a bank to make your loan payments fixed, you've got the basic idea of an interest-rate swap.
In practice, it might be a country like Greece or a regional government like Jefferson County, Alabama, that borrows money at a variable rate of interest, then later goes to a bank to "swap" that loan to a more predictable fixed rate. In its simplest form, the customer in a swap deal is usually paying a premium for the safety and security of fixed interest rates, while the firm selling the swap is usually betting that it knows more about future movements in interest rates than its customers.
Prices for interest-rate swaps are often based on ISDAfix, which, like Libor, is yet another of these privately calculated benchmarks. ISDAfix's U.S. dollar rates are published every day, at 11:30 a.m. and 3:30 p.m., after a gang of the same usual-suspect megabanks (Bank of America, RBS, Deutsche, JPMorgan Chase, Barclays, etc.) submits information about bids and offers for swaps.
And here's what we know so far: The CFTC has sent subpoenas to ICAP and to as many as 15 of those member banks, and plans to interview about a dozen ICAP employees from the company's office in Jersey City, New Jersey. Moreover, the International Swaps and Derivatives Association, or ISDA, which works together with ICAP (for U.S. dollar transactions) and Thomson Reuters to compute the ISDAfix benchmark, has hired the consulting firm Oliver Wyman to review the process by which ISDAfix is calculated. Oliver Wyman is the same company that the British Bankers' Association hired to review the Libor submission process after that scandal broke last year. The upshot of all of this is that it looks very much like ISDAfix could be Libor all over again.
"It's obviously reminiscent of the Libor manipulation issue," Darrell Duffie, a finance professor at Stanford University, told reporters. "People may have been naive that simply reporting these rates was enough to avoid manipulation."
And just like in Libor, the potential losers in an interest-rate-swap manipulation scandal would be the same sad-sack collection of cities, towns, companies and other nonbank entities that have no way of knowing if they're paying the real price for swaps or a price being manipulated by bank insiders for profit. Moreover, ISDAfix is not only used to calculate prices for interest-rate swaps, it's also used to set values for about $550 billion worth of bonds tied to commercial real estate, and also affects the payouts on some state-pension annuities.
So although it's not quite as widespread as Libor, ISDAfix is sufficiently power-jammed into the world financial infrastructure that any manipulation of the rate would be catastrophic – and a huge class of victims that could include everyone from state pensioners to big cities to wealthy investors in structured notes would have no idea they were being robbed.
"How is some municipality in Cleveland or wherever going to know if it's getting ripped off?" asks Michael Masters of Masters Capital Management, a fund manager who has long been an advocate of greater transparency in the derivatives world. "The answer is, they won't know."
Worse still, the CFTC investigation apparently isn't limited to possible manipulation of swap prices by monkeying around with ISDAfix. According to reports, the commission is also looking at whether or not employees at ICAP may have intentionally delayed publication of swap prices, which in theory could give someone (bankers, cough, cough) a chance to trade ahead of the information.
Swap prices are published when ICAP employees manually enter the data on a computer screen called "19901." Some 6,000 customers subscribe to a service that allows them to access the data appearing on the 19901 screen.
The key here is that unlike a more transparent, regulated market like the New York Stock Exchange, where the results of stock trades are computed more or less instantly and everyone in theory can immediately see the impact of trading on the prices of stocks, in the swap market the whole world is dependent upon a handful of brokers quickly and honestly entering data about trades by hand into a computer terminal.
Any delay in entering price data would provide the banks involved in the transactions with a rare opportunity to trade ahead of the information. One way to imagine it would be to picture a racetrack where a giant curtain is pulled over the track as the horses come down the stretch – and the gallery is only told two minutes later which horse actually won. Anyone on the right side of the curtain could make a lot of smart bets before the audience saw the results of the race.
At ICAP, the interest-rate swap desk, and the 19901 screen, were reportedly controlled by a small group of 20 or so brokers, some of whom were making millions of dollars. These brokers made so much money for themselves the unit was nicknamed "Treasure Island."
Already, there are some reports that brokers of Treasure Island did create such intentional delays. Bloomberg interviewed a former broker who claims that he watched ICAP brokers delay the reporting of swap prices. "That allows dealers to tell the brokers to delay putting trades into the system instead of in real time," Bloomberg wrote, noting the former broker had "witnessed such activity firsthand." An ICAP spokesman has no comment on the story, though the company has released a statement saying that it is "cooperating" with the CFTC's inquiry and that it "maintains policies that prohibit" the improper behavior alleged in news reports.
The idea that prices in a $379 trillion market could be dependent on a desk of about 20 guys in New Jersey should tell you a lot about the absurdity of our financial infrastructure. The whole thing, in fact, has a darkly comic element to it. "It's almost hilarious in the irony," says David Frenk, director of research for Better Markets, a financial-reform advocacy group, "that they called it ISDAfix."
After scandals involving libor and, perhaps, ISDAfix, the question that should have everyone freaked out is this: What other markets out there carry the same potential for manipulation? The answer to that question is far from reassuring, because the potential is almost everywhere. From gold to gas to swaps to interest rates, prices all over the world are dependent upon little private cabals of cigar-chomping insiders we're forced to trust.
"In all the over-the-counter markets, you don't really have pricing except by a bunch of guys getting together," Masters notes glumly.
That includes the markets for gold (where prices are set by five banks in a Libor-ish teleconferencing process that, ironically, was created in part by N M Rothschild & Sons) and silver (whose price is set by just three banks), as well as benchmark rates in numerous other commodities – jet fuel, diesel, electric power, coal, you name it. The problem in each of these markets is the same: We all have to rely upon the honesty of companies like Barclays (already caught and fined $453 million for rigging Libor) or JPMorgan Chase (paid a $228 million settlement for rigging municipal-bond auctions) or UBS (fined a collective $1.66 billion for both muni-bond rigging and Libor manipulation) to faithfully report the real prices of things like interest rates, swaps, currencies and commodities.
All of these benchmarks based on voluntary reporting are now being looked at by regulators around the world, and God knows what they'll find. The European Federation of Financial Services Users wrote in an official EU survey last summer that all of these systems are ripe targets for manipulation. "In general," it wrote, "those markets which are based on non-attested, voluntary submission of data from agents whose benefits depend on such benchmarks are especially vulnerable of market abuse and distortion."
Translation: When prices are set by companies that can profit by manipulating them, we're fucked.
"You name it," says Frenk. "Any of these benchmarks is a possibility for corruption."
The only reason this problem has not received the attention it deserves is because the scale of it is so enormous that ordinary people simply cannot see it. It's not just stealing by reaching a hand into your pocket and taking out money, but stealing in which banks can hit a few keystrokes and magically make whatever's in your pocket worth less. This is corruption at the molecular level of the economy, Space Age stealing – and it's only just coming into view.
This story is from the May 9th, 2013 issue of Rolling Stone.