> PENTAGON INSIDER HAS DIRE WARNING <

Daniel Ellsberg, the former Defense Department analyst who leaked the secret Pentagon Papers history of the Vietnam War, offered insights into the looming attack on Iran and the loss of liberty in the United States at a recent American University symposium. What follow are his comments from that speech. They have been edited only for space.

By Daniel Ellsberg

Let me simplify . . . and not just to be rhetorical: A coup has occurred. I woke up the other day realizing, coming out of sleep, that a coup has occurred. It’s not just a question that a coup lies ahead with the next 9-11. That’s the next coup that completes the first.

The last five years have seen a steady assault on every fundamental of our Constitution . . . what the rest of the world looked at for the last 200 years as a model and experiment to the rest of the world—in checks and balances, limited government, Bill of Rights, individual rights protected from majority infringement by the Congress, an independent judiciary, the possibility of impeachment.

There have been violations of these principles by many presidents before. Most of the specific things that Bush has done in the way of illegal surveillance and other matters were done under my boss Lyndon Johnson in the Vietnam War: the use of CIA, FBI, NSA against Americans.

All these violations were impeachable had they been found out at the time but in nearly every case the violations were not found out until [the president was] out of office so we didn’t have the exact challenge that we have today.

That was true with the first term of Nixon and certainly of Johnson, Kennedy and others. They were impeachable. They weren’t found out in time. But I think it was not their intention, in the crisis situations that they felt justified their actions, to change our form of government.

It is increasingly clear with each new book and each new leak that comes out, that Richard Cheney and his now chief of staff David Addington have had precisely that in mind since at least the early 1970s. Not just since 1992, not since 2001, but [they] have believed in executive government, single-branch government under an executive president—elected or not—with unrestrained powers. They did not believe in restraint.

When I say this, I’m not saying they are traitors. I don’t think they have in mind allegiance to some foreign power or have a desire to help a foreign power. I believe they have in their own minds a love of this country and what they think is best for this country—but what they think is best is directly and consciously at odds with what the Founders of this country [and the Framers of the Constitution] thought.

They believe we need a different kind of government now, an executive government essentially, rule by decree, which is what we’re getting with ‘signing statements.’

Signing statements are talked about as line-item vetoes which is one [way] of describing them which are unconstitutional in themselves, but in other ways are just saying the president says: ‘I decide what I enforce. I decide what the law is. I legislate.’

It’s [the same] with the military commissions, courts that are under the entire control of the executive branch, essentially of the president—a concentration of legislative, judicial, and executive powers in one branch, which is precisely what the founders meant to avert, and tried to avert and did avert to the best of their ability in the Constitution.”

Now I’m appealing to that as a crisis right now not just because it is a break in tradition but because I believe in my heart and from my experience that on this point the Founders had it right. It’s not just ‘our way of doing things’— it was a crucial perception on the corruption of power to anybody, including Americans.

On procedures and institutions that might possibly keep that power under control because the alternative was what we have just seen, wars like Vietnam, wars like Iraq, wars like the one coming.

That brings me to the second point. This executive branch, under specifically Bush and Cheney, despite opposition [even] from most of the rest of the branch, even of the cabinet, clearly intends a war against Iran, which, even by imperialist standards, [violates] standards in other words which were accepted not only by nearly everyone in the executive branch but most of the leaders in Congress.

The interests of the empire, the need for hegemony, our right to control and our need to control the oil of the Middle East and many other places. That is consensual in our establishment. …

But even by those standards, an attack on Iran is insane. And I say that quietly, I don’t mean it to be heard as rhetoric. Of course it’s not only aggression and a violation of international law, a supreme international crime, but it is by imperial standards, insane in terms of the consequences.

Does that make it impossible? No, it obviously doesn’t; it doesn’t even make it unlikely.

That is because two things come together that with the acceptance for various reasons of the Congress—Democrats and Republicans—and the public and the media, we have freed the White House — the president and the vice president—from virtually any restraint by Congress, courts, media, public, whatever.

And on the other hand, the people who have this unrestrained power are crazy. Not entirely, but they have crazy beliefs.

And the question is what then, can we do about this?

We are heading toward an insane operation. It is not certain. [But it] is likely.… I want to try to be realistic myself here, to encourage us to do what we must do, what is needed to be done with the full recognition of the reality. Nothing is impossible.

What I’m talking about in the way of a police state, in the way of an attack on Iran, is not certain. Nothing is certain, actually. However, I think it is probable, more likely than not, that in the next 15, 16 months of this administration we will see an attack on Iran. Probably. Whatever we do.

And . . . we will not succeed in moving Congress, probably, and Congress probably will not stop the president from doing this. And that’s where we’re heading. That’s a very ugly, ugly prospect.

However, I think it’s up to us to work to increase that small, perhaps—anyway not large—possibility and probability to avert this within the next 15 months, aside from the effort that we have to make for the rest of our lives.

* * *

Getting back the constitutional government and improving it will take a long time. And I think if we don’t get started now, it won’t be started under the next administration.

Getting out of Iraq will take a long time. Averting Iran and averting a further coup in the face of a 9-11, another attack, is for right now, it can’t be put off. It will take a kind of political and moral courage of which we have seen very little.

We have a really unusual concentration here and in this audience, of people who have in fact changed their lives, changed their position, lost their friends to a large extent, risked and experienced being called terrible names, ‘traitor,’ ‘weak on terrorism’—names that politicians will do anything to avoid being called.

How do we get more people in the government and in the public at large to change their lives now in a crisis in a critical way? How do we get Nancy Pelosi and Harry Reid for example? What kinds of pressures, what kinds of influences can be brought to bear to get Congress to do their jobs? It isn’t just doing their jobs. Getting them to obey their oaths of office.

I took an oath many times, an oath of office as a Marine lieutenant, as an official in the Defense Department, as an official in the State Department as a Foreign Service officer. A number of times I took an oath of office which is the same oath of office taken by every member of Congress and every official in the United States and every officer in the armed services.

And that oath is not to a commander in chief, which is not [even] mentioned. It is not to a Fuehrer. It is not even to superior officers. The oath is precisely to protect and uphold the Constitution of the United States.

Now that is an oath I violated every day for years in the Defense Department without realizing it when I kept my mouth shut when I knew the public was being lied into a war as they were lied into Iraq, as they are being lied into war in Iran.

I knew that I had the documents that proved it, and I did not put it out then. I was not obeying my oath, which I eventually came to do.

I’ve often said that Lt. Ehren Watada—who still faces trial for refusing to obey orders to deploy to Iraq which he correctly perceives to be an unconstitutional and aggressive war—is the single officer in the United States armed services who is taking seriously [the matter of] upholding his oath.

The president is clearly violating that oath, of course. [All the personnel] under him who understand what is going on — and there are myriad — are violating their oaths. And that’s the standard that I think we should be asking of people.

On the Democratic side, on the political side, I think we should be demanding of our Democratic leaders in the House and Senate—and frankly of the Republicans —that it is not their highest single absolute priority to be reelected or to maintain a Democratic majority so that Pelosi can still be speaker of the House and Reid can be in the Senate, or to increase that majority.

I’m not going to say that for politicians they should ignore that, or that they should do something else entirely, or that they should not worry about that.
Of course that will be and should be a major concern of theirs, but they’re acting like it’s their sole concern. Which is business as usual. “We have a majority, let’s not lose it, let’s keep it. Let’s keep those chairmanships.”

Exactly what have those chairmanships done for us to save the Constitution in the last couple of years?

I am shocked by the Republicans today that I read [about] in The Washington Post who threatened a filibuster if we … get back habeas corpus. The ruling out of habeas corpus with the help of the Democrats did not get us back to George the First it got us back to before King John 700 years ago in terms of counter-revolution.

I think we’ve got to somehow get home to them [in Congress] that this is the time for them to uphold the oath, to preserve the Constitution, which is worth struggling for in part because it’s only with the power that the Constitution gives Congress responding to the public, only with that can we protect the world from madmen in power in the White House who intend an attack on Iran.

And the current generation of American generals and others who realize that this will be a catastrophe have not shown themselves —they might be people who in their past lives risked their bodies and their lives in Vietnam or elsewhere, like [Colin] Powell, and would not risk their career or their relations with the president to the slightest degree.

That has to change. And it’s the example of people like those up here who somehow brought home to our representatives that they as humans and as citizens have the power to do likewise and find in themselves the courage to protect this country and protect the world. Thank you.”

(Issue #47, November 19, 2007)

Reason to get agitated or AFRAID No. 10 million: Hank's accounting "rules"
Gotta just "love" the rich, eh??

        October 19, 2007

Enron Accounting at Citigroup

by Mike Shedlock
          In the aftermath of the collapse at Enron, new rules were
put in place to prevent corporations from holding assets off the books.
However, anyone reading about massive SIV problem knows Citigroup and
other banks are Still Operating in the Shadows of Post-Enron Rules.
  Changes enacted after Enron Corp.'s collapse were supposed to
prevent companies from burying risks in off-balance-sheet vehicles. One
lesson of Enron was that the idea that companies could make profits without
taking any risk proved to be as ridiculous as it sounds.
Regulators made a great show of slamming closed that loophole. But as
the current situation makes clear, they not only didn't close it all
the way, but the new rules in some ways made it even harder for
investors to figure out what was going on.
My comment: Banks never want anyone to know what they are doing for
the simple reason no one would trust the system if they did. In addition
it allows them to operate in the shadows making huge profits when all
goes well, and requesting bailouts from the Fed when they do not.
  SIVs, along with vehicles called conduits, don't get recorded on
banks' books because regulators and accounting-rule makers gave banks a
pass when crafting post-Enron rule changes meant to curtail
off-balance-sheet activity.
No one is saying, of course, that the big banks are literally shams
like Enron.
My comment: Although the initial setup was greed and stupidity at
Citigroup vs. greed and fraud at Enron, the latest master liquidity
enhancement conduit (M-LEC) proposal is every bit the cover-up that was
happening in the latter stages at Enron. The worst aspect of this bailout is
that it is sponsored by the Treasury.
  A spokesman for the Financial Accounting Standards Board, which
drafted the current rules, declined to comment.
Citigroup, for example, has nearly $160 billion in SIVs and conduits,
but its shareholders wouldn't get a clear view of this from reading
the bank's balance sheet. Instead, footnotes only disclose that the bank
provides "liquidity facilities" to conduits that had, as of June 30,
$77 billion in assets and liabilities.
My comment: That's one problem right off the bat with this mess. No
one really knows how big the problem is. So far I have seen three
figures for Citigroup: $80 billion, $100 billion, and now $160 million. To be
fair the latter includes both SIVs and "conduits". However, I suspect
most thought that $80 billion figure was all inclusive. Now we see the
all inclusive number is twice that.
Are more disclosures coming? I think we can count on that. In
addition, many hedge funds have executed the same fatal strategies as
Citigroup (borrowing short and lending long) on mortgage related assets outside
of SIVs and banking relationships. For more on the follies of
borrowing short and lending long please see Duration Mismatch Causing Severe
Stress Everywhere
That lends the question: how many hedge funds have held off marking
these assets to market? Potentially massive future writeoffs are hidden
by both banks and hedge funds playing shell games, or Don't Ask - Don't
Sell strategies which are nothing more than fraudulent attempts at
concealment. Is the total amount of money bet on such strategies double,
triple, or quadruple what has been disclosed? No one knows. No one wants
us to know either.
  "Generally, the company has no ownership interest in the conduits,"
the bank's second-quarter filing, the latest available, states. The
Citigroup filing makes no mention of SIVs. In a letter to investors in
August, Citigroup disclosed that it had about $100 billion in SIV assets,
although that has since declined to about $80 billion.
My comment: Therein lies the problem. That problem is called
ownership. Apparently the post-Enron rule for banks was that if you did not own
it, you did not have to put it on the balance sheet. So sham
corporations were created, banks lent money at short-term rates to those
corporations at a markup. Those corporations in turn invested in long term
securities like mortgages.
With "borrow short lend long" strategies everything is fine as long
as asset prices rise. However, all hell breaks loose when the value of
those long term assets sinks.
In adverse conditions, banks are no longer willing to provide short
term financing, and instead want their money back. Unfortunately there
is no money to give back because the borrowers bet it all on mortgages
or other asset backed securities that are now dropping like a rock.
Such strategies caused the complete destruction of two hedge funds at
Bear Stearns. See The Redemption Trap & Merrill Lynch Cover-Up for
more on Bear Stearns.
  Banks typically agree to acquire the assets of their affiliated
conduits if they can't roll over their IOUs. But they only backstop a
portion of SIV assets. That might make it seem like the banks have some
liability, and indeed some have had to step in. But backstops aren't a
sign of ownership under accounting rules, though. In fact, most
off-balance-sheet vehicles, conduits and SIVs included, don't have "owners" in
the traditional sense. Rather they are like corporate zombies and are
typically set up in offshore tax havens.
My comment: This is indeed how banks ducked the ownership rule. And
now that Citigroup has bent every rule under the sun to avoid Post-Enron
Rules, it now is seeking a bailout that will allow it to do exactly
what Enron was doing: hide a horrendous balance sheet and in effect keep
two sets of books. Paulson calls this a "market based solution". It is
anything but a market based solution. The true definition would be
called Enron Accounting at Citigroup Sponsored by the Treasury.
How Big is the Problem at Citigroup?
With a hat tip to Polecolaw for the idea, let's compare net tangible
assets at Citigroup to the amount at risk at SIVs and conduits. Let's
use $160 billion figure for the combined SIV and conduit numbers and see
what comparisons we can find.
Citigroup Net tangible assets as of June 30 2007 are $65.5 billion.
That's kind of interesting isn't it? Citigroup has $65.5 billion in net
tangible assets but $160 billion invested in off balance sheet SIVs and
conduits.
If a fire sale of those SIVs and conduits resulted in a 25% loss,
Citigroup would have net tangible assets of $25.5 billion. If a fire sale
of SIVs and conduits resulted in a 41% loss in those SIVs and conduits,
Citigroup would have zero net tangible assets.
Does Paulson, the Fed, or Citigroup want to find out what those
assets are worth? Of course not. That is the reason for a Don't Ask - Don't
Sell policy and approval of Enron Style Accounting by Paulson.

Homeland Security's Use of Contractors Is Questioned

By Spencer S. Hsu

Washington Post Staff Writer
Wednesday, October 17, 2007; Page A03

At the Department of Homeland Security, contract employees help write job descriptions for new headquarters workers. Private contractors also sign letters that officially offer employment. And they meet new government hires on their first day on the job.

About the only thing they do not do, a critical new congressional audit concludes, is swear in DHS employees.

Across several of DHS's most troubled projects, including delayed programs to replace the Coast Guard's fleet and to issue secure credentials to port workers, contractors are so enmeshed in DHS's work that they oversee other contractors. Some are assigned work that involves awarding future business, setting policy or drawing up plans and reorganizations, according to the Government Accountability Office, Congress's audit arm.

"Plainly put, we need to know who is in charge at DHS -- its managers and workers, or the contractors," Sen. Joseph I. Lieberman (I-Conn.) said in a written statement. "This heavy reliance on contractors raises the risk that DHS is not creating the institutional knowledge needed to be able to judge whether contractors are performing as they should, and at a fair price."

Lieberman plans to hold a hearing on the report's findings before the Senate homeland security committee today.

Independent analysts have increasingly warned in recent years that the government's growing reliance on private firms threatens to undermine agencies' decision-making, a risk the audit found was heightened in DHS's case by its complex 2003 start-up and the rapid expansion of its workload.

GAO investigators wrote that DHS's practices raise "the risk that government decisions may be influenced by, rather than independent from, contractor judgments," and that DHS could lose control over and accountability for its decisions.

DHS officials said the department began addressing GAO's concerns even before the report was done, plans staffing studies to set targets for the right mix of government and contractor workers, and is tightening acquisitions training and requirements on contractors. The last objective will be very difficult to achieve, DHS said, offering no timeline for completion. But spokesman Russ Knocke added, "There should be no uncertainty about our appreciation for and commitment to being good stewards of taxpayer dollars.

"This objective will be very difficult to achieve, and it is far too early to place . . . progress on a timeline for completion," he wrote.

While the Pentagon is by far the largest government buyer, DHS ranks third and has depended heavily on private companies. In 2006 alone, DHS spent $15.7 billion on goods and services, including more than $5 billion on management and professional support services.

In their study, GAO investigators found that of 117 contracts issued by three large DHS agencies, the Coast Guard, the Transportation Security Administration and the Office of Procurement Operations, more than half called for outside firms to support inherently governmental work.

For example, according to the GAO and the Senate committee, DHS's procurement office awarded $42.4 million to Booz Allen Hamilton to provide services to the department's intelligence unit, including formulating its budget and policies, managing its technology procurements and even providing analysis of intelligence threats.

Elsewhere, DHS paid $2.1 million to MicroSystems Integration to help plan and reorganize its $24 billion fleet management effort, which has yielded four major classes of ships with design flaws. TSA paid $7.9 million to BearingPoint to provide strategic planning and legislative support, among other things, for the Transportation Worker Identification Credential program, which, after five years, is now only beginning to produce secure IDs for 800,000 workers.

John Jaeger, president of Your Recruiting, of Fairfax, said his firm received a $4.9 million contract in 2006, part of nearly $20 million Your Recruiting has received for helping DHS fill an estimated 2,600 non-senior executive service headquarters positions. Jaeger estimated that his firm has helped DHS hire 5,000 workers since 2003.

But he said Your Recruiting was involved only in operations, not policy -- drafting job descriptions, for example, and sending initial offer letters to people in about half the 45-day period the federal government sets as a goal. The company never performed work that only government can do, he said.

"We did the orientation, but we didn't do the swearing-in," he said.

Citing decisions since the 1990s to shrink the federal workforce, Jaeger said, "Don't blame contractors for stepping in and filling a void that cannot be filled by government employees because there aren't enough of them."