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[digg-reddit-me]When I first started this blog, I told the story of two different interrogations at the beginning of Bush’s War on Terror – one using traditional methods which yielded actionable intelligence; and one using “enhanced” techniques which yielded false information. Now – in the past few weeks with Obama referencing Winston Churchill in defense of his administration’s anti-torture stance, a battle has broken out over torture in World War II. Keith Olbermann and Bill O’Reilly engaged in a skirmish earlier this week – but at the same time, two academics have written pieces about the broader historical context – both of which purport to demonstrate how torture helped the Allies win the war.
N.B. Keep in mind while reading these stories that the justification for using torture that American proponents utilize is that it is an essential intelligence tool that is necessary to produce actionable intelligence quickly.
Julian Sanchez told the first story about how torture helped win “the Good War.” The Japanese tortured an American airman in the immediate aftermath of the bombings of Hiroshima and Nagasaki trying to get information about this bomb program. The airman “confessed” that America had hundreds of atom bombs ready to drop on Japanese cities. In turns out, the airman knew nothing of the program – and America has just used the only one left in it’s stock. It’s unclear what effect this information had – but this false information gleaned from torture had to have had an effect on Japan’s leadership as they debated whether or not to surrender. Sanchez doesn’t lay out the lesson – but based on his presentation, it is clear: Torture produces false information.
Andrew Roberts, who claims to be an historian, tells a different story in The Daily Beast. He starts out explaining what the lessons he wants to convey is – the “crucial truth” about torture during World War II that he makes clear will support the right-wing defense of torture. Roberts writes:
When troops need information about enemy capabilities and intentions—and they usually need it fast—moral and ethical conventions…have repeatedly been ignored in the bid to save lives.
So far, a relatively uncontroversial reading of history. But the next sentence is a doozy:
In the conflict generally regarded today as the most ethical in history, World War II, enhanced interrogation techniques were regularly used by the Allies…[my emphases]
Google records 0 instances of anyone calling World War II the most ethical anything in history. For good reason – first, Roberts entirely mis-states what he means to say – that the Allies conduct in World War II was the most ethical in history; secondly, from the firebombings of Dresden and Tokyo to the atom bombs dropped on Hiroshima and Nagasaki to the interment of hundreds of thousands of Japanese-Americans there are quite a few barbaric acts associated with the Allies in the war. What Roberts should know – as an historian – is that World War II is widely regarded as a “good war” – one of the few – not because our conduct was exemplary – but because the war was against evil forces that left no choice but for the Allies to violently oppose them. Roberts only uses this as a throwaway phrase – more important is his second point – that “enhanced interrogation techniques were regularly used by the Allies.”
Roberts spends the rest of his piece not backing up this assertion – except by innuendo. The story Roberts chooses to tell is of Operation Fortitude – Britain’s program that used German intelligence agents to feed misinformation to keep the bulk of the German army away from Normandy on D-Day. But in terms of “enhanced interrogation techniques” being used on these agents, he literally offers no proof. This is the closest he gets:
If anyone believes that SIS persuaded each of these 19 hard-bitten Nazi spies to fall in with Operation Fortitude by merely offering them tea, biscuits, and lectures in democracy, they’re being profoundly naïve.
Once again – a Google search for “Operation Fortitude” and torture yielded no results backing up Roberts’s history. Roberts himself cites not sources or records or accounts – and for what it’s worthy, torture is hardly the traditional method of turning a double agent.
What you find instead are accounts that explicitly reject Roberts’s innuendo. Colonel Robin “Tin-Eye” Stephens who ran the interrogation center that turned these German spies into double agents for the same Operation Fortitude banned violence saying:
Never strike a man. It is unintelligent, for the spy will give an answer to please, an answer to escape punishment.
Stephens was manipulative – and held the threat of lawful execution over the German spies’ heads – but he understood that it was idiotic to torture them for information. Roberts gives no source for his rejection of the historical facts – but instead accuses those who accept them of being “profoundly naïve.”
Still – even if we are to grant Roberts his premise – that these agents were recruited as doubles by means of torture – his story still wouldn’t demonstrate that torture was “regularly used by the Allies” or capable of getting accurate “information about enemy capabilities and intentions.”
The story Roberts tells – if anything – undermines the idea of torture as an interrogation tool. Time and again – even in Roberts telling – history demonstrates that torture is an exceptionally effective tool to break an individual, to get them to confess to something regardless of it’s truth. Unfortunately, it is substantially documented that our intelligence agencies adopted a program of torture without knowing it’s history. What is almost inexplicable is how an historian such as Roberts can today still try to justify this program when the history of the methods used has been dragged out into the open.
I’ll put it to you this way: You give me a waterboard, Dick Cheney and one hour, and I’ll have him confess to the Sharon Tate murders.
Former Governor Jesse Ventura explaining how effective torture is…at some things…
[digg-reddit-me]I’ve written about FBI interrogator and one-time undercover agent in Al Qaeda, Ali Soufan, several times on this blog (here and here) – including in my first post that got some traction comparing the interrogations of Ibn al-Libi and Abu Zandel. Since Obama took office – as memos have been declassified, Soufan has been finally able to speak out about his experiences interrogating Al Qaeda members – as in the past few weeks he wrote an op-ed piece for the New York Times and was interviewed by Michael Isikoff of Newsweek. Today, he is testifying before the Senate on American torture. I haven’t seen his actual appearance, but his written statement is a powerful piece which describes both why torture should not be done – and tells the story of how America took the fateful step.
As this is a public statement, I am reproducing it in full here:
Ali Soufan’s Written Statement to the Senate
Mr. Chairman, Committee members, thank you for inviting me to appear before you today. I know that each one of you cares deeply about our nation’s security. It was always a comfort to me during the most dangerous of situations that I faced, from going undercover as an al Qaeda operative, to unraveling terrorist cells, to tracking down the killers of the 17 U.S. sailors murdered in the USS Cole bombing, that those of us on the frontline had your support and the backing of the American people. So I thank you.
The issue that I am here to discuss today – interrogation methods used to question terrorists – is not, and should not be, a partisan matter. We all share a commitment to using the best interrogation method possible that serves our national security interests and fits squarely within the framework of our nation’s principles.
From my experience – and I speak as someone who has personally interrogated many terrorists and elicited important actionable intelligence– I strongly believe that it is a mistake to use what has become known as the “enhanced interrogation techniques,” a position shared by many professional operatives, including the CIA officers who were present at the initial phases of the Abu Zubaydah interrogation.
These techniques, from an operational perspective, are ineffective, slow and unreliable, and as a result harmful to our efforts to defeat al Qaeda. (This is aside from the important additional considerations that they are un-American and harmful to our reputation and cause.)
My interest in speaking about this issue is not to advocate the prosecution of anyone. People were given misinformation, half-truths, and false claims of successes; and reluctant intelligence officers were given instructions and assurances from higher authorities. Examining a past we cannot change is only worthwhile when it helps guide us towards claiming a better future that is yet within our reach.
And my focus is on the future. I wish to do my part to ensure that we never again use these harmful, slow, ineffective, and unreliable techniques instead of the tried, tested, and successful ones – the ones that are also in sync with our values and moral character. Only by doing this will we defeat the terrorists as effectively and quickly as possible.
Most of my professional career has been spent investigating, studying, and interrogating terrorists. I have had the privilege of working alongside, and learning from, some of the most dedicated and talented men and women our nation has– individuals from the FBI, and other law enforcement, military, and intelligence agencies.
In my capacity as a FBI Agent, I investigated and supervised highly sensitive and complex international terrorism cases, including the East Africa bombings, the USS Cole bombing, and the events surrounding the attacks of 9/11. I also coordinated both domestic and international counter-terrorism operations on the Joint Terrorist Task Force, FBI New York Office.
I personally interrogated many terrorists we have in our custody and elsewhere, and gained confessions, identified terror operatives, their funding, details of potential plots, and information on how al Qaeda operates, along with other actionable intelligence. Because of these successes, I was the government’s main witness in both of the trials we have had so far in Guantanamo Bay – the trial of Salim Ahmed Hamdan, a driver and bodyguard for Osama Bin Laden, and Ali Hamza Al Bahlul, Bin Laden’s propagandist. In addition I am currently helping the prosecution prepare for upcoming trials of other detainees held in Guantanamo Bay.
There are many examples of successful interrogations of terrorists that have taken place before and after 9/11. Many of them are classified, but one that is already public and mirrors the other cases, is the interrogation of al Qaeda terrorist Nasser Ahmad Nasser al-Bahri, known as Abu Jandal. In the immediate aftermath of 9/11, together with my partner Special Agent Robert McFadden, a first-class intelligence operative from the Naval Criminal Investigative Service (NCIS), (which, from my experience, is one of the classiest agencies I encountered in the intelligence community), I interrogated Abu Jandal.
Through our interrogation, which was done completely by the book (including advising him of his rights), we obtained a treasure trove of highly significant actionable intelligence. For example, Abu Jandal gave us extensive information on Osama Bin Laden’s terror network, structure, leadership, membership, security details, facilities, family, communication methods, travels, training, ammunitions, and weaponry, including a breakdown of what machine guns, rifles, rocket launchers, and anti-tank missiles they used. He also provided explicit details of the 9/11plot operatives, and identified many terrorists who we later successfully apprehended.
The information was important for the preparation of the war in Afghanistan in 2001. It also provided an important background to the 9/11 Commission report; it provided a foundation for the trials so far held in Guantanamo Bay; and it also has been invaluable in helping to capture and identify top al Qaeda operatives and thus disrupt plots.
The approach used in these successful interrogations can be called the Informed Interrogation Approach. Until the introduction of the “enhanced” technique, it was the sole approach used by our military, intelligence, and law enforcement community.
It is an approach rooted in experiences and lessons learned during World War II and from our Counter-insurgency experience in Vietnam – experiences and lessons that generated the Army Field Manual. This was then refined over the decades to include how to interrogate terrorism suspects specifically, as experience was gained from interrogations following the first World Trade Center bombing, the East Africa Embassy bombings, and the USS Cole bombing. To sum up, it is an approach derived from the cumulative experiences, wisdom, and successes of the most effective operational people our country has produced.
Before I joined the Bureau, for example, traditional investigative strategies along with intelligence derived from human sources successfully thwarted the 1993 New York City Landmark Bomb Plot (TERRSTOP), a plot by the Blind Sheikh Omar Abdel-Rahman, to attack the UN Headquarters, the FBI’s New York office, and tunnels and bridges across New York City, — as a follow-up to the 1993 World Trade Center bombings. That remains to this day the largest thwarted attack on our homeland. I had the privilege of working with, and learning from, those who conducted this successful operation.
The Informed Interrogation Approach is based on leveraging our knowledge of the detainee’s culture and mindset, together with using information we already know about him.
The interrogator knows that there are three primary points of influence on the detainee:
First, there is the fear that the detainee feels as a result of his capture and isolation from his support base. People crave human contact, and this is especially true in some cultures more than others. The interrogator turns this knowledge into an advantage by becoming the one person the detainee can talk to and who listens to what he has to say, and uses this to encourage the detainee to open up.
In addition, acting in a non-threatening way isn’t how the detainee is trained to expect a U.S. interrogator to act. This adds to the detainee’s confusion and makes him more likely to cooperate.
Second, and connected, there is the need the detainee feels to sustain a position of respect and value to interrogator. As the interrogator is the one person speaking to and listening to the detainee, a relationship is built – and the detainee doesn’t want to jeopardize it. The interrogator capitalizes on this and compels the detainee to give up more information.
And third, there is the impression the detainee has of the evidence against him. The interrogator has to do his or her homework and become an expert in every detail known to the intelligence community about the detainee. The interrogator then uses that knowledge to impress upon the detainee that everything about him is known and that any lie will be easily caught.
For example, in my first interrogation of the terrorist Abu Zubaydah, who had strong links to al Qaeda’s leaders and who knew the details of the 9/11 plot before it happened, I asked him his name. He replied with his alias. I then asked him, “how about if I call you Hani?” That was the name his mother nicknamed him as a child. He looked at me in shock, said “ok,” and we started talking.
The Army Field Manual is not about being nice or soft. It is a knowledge-based approach. It is about outwitting the detainee by using a combination of interpersonal, cognitive, and emotional strategies to get the information needed. If done correctly it’s an approach that works quickly and effectively because it outwits the detainee using a method that he is not trained, or able, to resist.
This Informed Interrogation Approach is in sharp contrast with the harsh interrogation approach introduced by outside contractors and forced upon CIA officials to use.
The harsh technique method doesn’t use the knowledge we have of the detainee’s history, mindset, vulnerabilities, or culture, and instead tries to subjugate the detainee into submission through humiliation and cruelty. The approach applies a force continuum, each time using harsher and harsher techniques until the detainee submits.
The idea behind the technique is to force the detainee to see the interrogator as the master who controls his pain. It is an exercise in trying to gain compliance rather than eliciting cooperation. A theoretical application of this technique is a situation where the detainee is stripped naked and told: “Tell us what you know.”
If the detainee doesn’t immediately respond by giving information, for example he asks: “what do you want to know?” the interviewer will reply: “you know,” and walk out of the interrogation room. Then the next step on the force continuum is introduced, for example sleep deprivation, and the process will continue until the detainee’s will is broken and he automatically gives up all information he is presumed to know.
There are many problems with this technique.
A major problem is that it is ineffective. Al Qaeda terrorists are trained to resist torture. As shocking as these techniques are to us, the al Qaeda training prepares them for much worse – the torture they would expect to receive if caught by dictatorships for example.
This is why, as we see from the recently released Department of Justice memos on interrogation, the contractors had to keep getting authorization to use harsher and harsher methods, until they reached waterboarding and then there was nothing they could do but use that technique again and again. Abu Zubaydah had to be waterboarded 83 times and Khalid Shaikh Mohammed 183 times. In a democracy there is a glass ceiling of harsh techniques the interrogator cannot breach, and a detainee can eventually call the interrogator’s bluff.
In addition the harsh techniques only serves to reinforce what the detainee has been prepared to expect if captured. This gives him a greater sense of control and predictability about his experience, and strengthens his will to resist.
A second major problem with this technique is that evidence gained from it is unreliable. There is no way to know whether the detainee is being truthful, or just speaking to either mitigate his discomfort or to deliberately provide false information. As the interrogator isn’t an expert on the detainee or the subject matter, nor has he spent time going over the details of the case, the interrogator cannot easily know if the detainee is telling the truth. This unfortunately has happened and we have had problems ranging from agents chasing false leads to the disastrous case of Ibn Sheikh al-Libby who gave false information on Iraq, al Qaeda, and WMD.
A third major problem with this technique is that it is slow. It takes place over a long period of time, for example preventing the detainee from sleeping for 180 hours as the memos detail, or waterboarding 183 times in the case of KSM. When we have an alleged “ticking timebomb” scenario and need to get information quickly, we can’t afford to wait that long.
A fourth problem with this technique is that ignores the end game. In our country we have due process, which requires evidence to be collected in a certain way. The CIA, because of the sensitivity of its operations, by necessity, operates secretly. These two factors mean that by putting the CIA in charge of interrogations, either secrecy is sacrificed for justice and the CIA’s operations are hampered, or justice is not served. Neither is a desirable outcome.
Another disastrous consequence of the use of the harsh techniques was that it reintroduced the “Chinese Wall” between the CIA and FBI – similar to the wall that prevented us from working together to stop 9/11. In addition, the FBI and the CIA officers on the ground during the Abu Zubaydah interrogation were working together closely and effectively, until the contractors’ interferences. Because we in the FBI would not be a part of the harsh techniques, the agents who knew the most about the terrorists could have no part in the investigation. An FBI colleague of mine, for example, who had tracked KSM and knew more about him than anyone in the government, was not allowed to speak to him.
Furthermore, the CIA specializes in collecting, analyzing, and interpreting intelligence. The FBI, on the other hand, has a trained investigative branch. Until that point, we were complimenting each other’s expertise, until the imposition of the “enhanced methods.” As a result people ended doing what they were not trained to do.
It is also important to realize that those behind this technique are outside contractors with no expertise in intelligence operations, investigations, terrorism, or al Qaeda. Nor did the contractors have any experience in the art of interview and interrogation. One of the contractors told me this at the time, and this lack of experience has also now been recently reported on by sources familiar with their backgrounds.
The case of the terrorist Abu Zubaydah is a good example of where the success of the Informed Interrogation Approach can be contrasted with the failure of the harsh technique approach. I have to restrict my remarks to what has been unclassified. (I will note that there is documented evidence supporting everything I will tell you today.)
Immediately after Abu Zubaydah was captured, a fellow FBI agent and I were flown to meet him at an undisclosed location. We were both very familiar with Abu Zubaydah and have successfully interrogated al-Qaeda terrorists. We started interrogating him, supported by CIA officials who were stationed at the location, and within the first hour of the interrogation, using the Informed Interrogation Approach, we gained important actionable intelligence.
The information was so important that, as I later learned from open sources, it went to CIA Director George Tennet who was so impressed that he initially ordered us to be congratulated. That was apparently quickly withdrawn as soon as Mr. Tennet was told that it was FBI agents, who were responsible. He then immediately ordered a CIA CTC interrogation team to leave DC and head to the location to take over from us.
During his capture Abu Zubaydah had been injured. After seeing the extent of his injuries, the CIA medical team supporting us decided they were not equipped to treat him and we had to take him to a hospital or he would die. At the hospital, we continued our questioning as much as possible, while taking into account his medical condition and the need to know all information he might have on existing threats.
We were once again very successful and elicited information regarding the role of KSM as the mastermind of the 9/11 attacks, and lots of other information that remains classified. (It is important to remember that before this we had no idea of KSM’s role in 9/11 or his importance in the al Qaeda leadership structure.) All this happened before the CTC team arrived.
A few days after we started questioning Abu Zubaydah, the CTC interrogation team finally arrived from DC with a contractor who was instructing them on how they should conduct the interrogations, and we were removed. Immediately, on the instructions of the contractor, harsh techniques were introduced, starting with nudity. (The harsher techniques mentioned in the memos were not introduced or even discussed at this point.)
The new techniques did not produce results as Abu Zubaydah shut down and stopped talking. At that time nudity and low-level sleep deprivation (between 24 and 48 hours) was being used. After a few days of getting no information, and after repeated inquiries from DC asking why all of sudden no information was being transmitted (when before there had been a steady stream), we again were given control of the interrogation.
We then returned to using the Informed Interrogation Approach. Within a few hours, Abu Zubaydah again started talking and gave us important actionable intelligence.
This included the details of Jose Padilla, the so-called “dirty bomber.” To remind you of how important this information was viewed at the time, the then-Attorney General, John Ashcroft, held a press conference from Moscow to discuss the news. Other important actionable intelligence was also gained that remains classified.
After a few days, the contractor attempted to once again try his untested theory and he started to re-implementing the harsh techniques. He moved this time further along the force continuum, introducing loud noise and then temperature manipulation.
Throughout this time, my fellow FBI agent and I, along with a top CIA interrogator who was working with us, protested, but we were overruled. I should also note that another colleague, an operational psychologist for the CIA, had left the location because he objected to what was being done.
Again, however, the technique wasn’t working and Abu Zubaydah wasn’t revealing any information, so we were once again brought back in to interrogate him. We found it harder to reengage him this time, because of how the techniques had affected him, but eventually, we succeeded, and he re-engaged again.
Once again the contractor insisted on stepping up the notches of his experiment, and this time he requested the authorization to place Abu Zubaydah in a confinement box, as the next stage in the force continuum. While everything I saw to this point were nowhere near the severity later listed in the memos, the evolution of the contractor’s theory, along with what I had seen till then, struck me as “borderline torture.”
As the Department of Justice IG report released last year states, I protested to my superiors in the FBI and refused to be a part of what was happening. The Director of the FBI, Robert Mueller, a man I deeply respect, agreed passing the message that “we don’t do that,” and I was pulled out.
As you can see from this timeline, many of the claims made in the memos about the success of the enhanced techniques are inaccurate. For example, it is untrue to claim Abu Zubaydah wasn’t cooperating before August 1, 2002. The truth is that we got actionable intelligence from him in the first hour of interrogating him.
In addition, simply by putting together dates cited in the memos with claims made, falsehoods are obvious. For example, it has been claimed that waterboarding got Abu Zubaydah to give up information leading to the capture of Jose Padilla. But that doesn’t add up: Waterboarding wasn’t approved until 1August 2002 (verbally it was authorized around mid July 2002), and Padilla was arrested in May 2002.
The same goes for KSM’s involvement in 9/11: That was discovered in April 2002, while waterboarding was not introduced until almost three months later. It speaks volumes that the quoted instances of harsh interrogation methods being a success are false.
Nor can it be said that the harsh techniques were effective, which is why we had to be called back in repeatedly. As we know from the memos, the techniques that were apparently introduced after I left did not appear to work either, which is why the memos granted authorization for harsher techniques. That continued for several months right till waterboarding was introduced, which had to be used 83 times – an indication that Abu Zubaydah had called the interrogator’s bluff knowing the glass ceiling that existed.
Authoritative CIA, FBI, and military sources have also questioned the claims made by the advocates of the techniques. For example, in one of the recently released Justice Department memos, the author, Stephen Bradbury, acknowledged a (still classified) internal CIA Inspector General report that had found it “difficult to determine conclusively whether interrogations have provided information critical to interdicting specific imminent attacks.”
In summary, the Informed Interrogation Approach outlined in the Army Field Manual is the most effective, reliable, and speedy approach we have for interrogating terrorists. It is legal and has worked time and again.
It was a mistake to abandon it in favor of harsh interrogation methods that are harmful, shameful, slower, unreliable, ineffective, and play directly into the enemy’s handbook. It was a mistake to abandon an approach that was working and naively replace it with an untested method. It was a mistake to abandon an approach that is based on the cumulative wisdom and successful tradition of our military, intelligence, and law enforcement community, in favor of techniques advocated by contractors with no relevant experience.
The mistake was so costly precisely because the situation was, and remains, too risky to allow someone to experiment with amateurish, Hollywood style interrogation methods- that in reality- taints sources, risks outcomes, ignores the end game, and diminishes our moral high ground in a battle that is impossible to win without first capturing the hearts and minds around the world. It was one of the worst and most harmful decisions made in our efforts against al Qaeda.
For the last seven years, it was not easy objecting to these methods when they had powerful backers. I stood up then for the same reason I’m willing to take on critics now, because I took an oath swearing to protect this great nation. I could not stand by quietly while our country’s safety was endangered and our moral standing damaged.
I know you are motivated by the same considerations, and I hope you help ensure that these grave mistakes are never made again.
Thank you.
I laughed harder at this clip than I have at something in quite a while:
Ian Bremmer’s most recent article in Foreign Affairs on state capitalism was rather interesting and analytical regarding the role of the government in an economy – until this sentence cropped up:
Deeper state intervention in an economy means that bureaucratic waste, inefficiency, and corruption are more likely to hold back growth.
Bremmer articles has gotten more than the usual amount of attention – George Will for example made it the basis for a column. Will rejects one of Bremmer’s basic premises though – that in the developed world, the recent forays into state capitalism are temporary:
[Bremmer] probably is wrong because he underestimates the pleasure politicians derive from using their nation’s wealth as a slush fund for purchasing political advantage.
Will implicitly accepts Bremmer’s above point here – pointing to a reason why government is less efficient than the market – because politics begins to affect it and detract from the bottom line.
Last night, I was at a discussion hosted by the Council on Foreign Relations with Bremmer and Felix Rohatyn on “the state’s growing influence on liberal market economics” – and this question came up a few times. Several people commented on this – and the questioned what I took to be the conventional wisdom on this subject. One, a banker or economist of some sort who assisted Eastern European countries by aiding their government entities (such as phone companies, etc.) transition from a Communist to a capitalist economy. He made it clear from his experience that these government entities were inefficient and wasteful. Rohatyn though made the point that this occurred in a closed, non-transparent economy – and these factors contributed to waste more than government involvement. Rohatyn also made the point – which had Bremmer nodding – that as we could see thanks to our insights into GM and the financial companies – that they seemed rather wasteful and inefficient as well. Rohatyn seemed to think efficiency was only possible if the right person was leading an organization – whether it be GM or the DMV. But I think it may be more a matter of transparency and competition. These are the essence of a free market – which for me should not be defined as the absence of the state from a market, but the presence of choice, of transparency, of competition. The state can engage in practices which destroy or undermine a free market – subsidizing certain companies and declaring monopolies by the state for example. The state must be mindful of how it affects the market if it chooses to compete with private companies.
All of this would be moot though if government is less efficient than private companies. But I wonder – and this is a question – if there is any proof that government is more inefficient than the private market. I mean – I can tell you from my own experience that government can be inefficient. But I can also tell you that private companies also can. In terms of health care, at least some studies have found that Medicare is more efficient at providing health care than private insurers – as they eliminate the first step of illegally rejecting all payments on claims as a matter of course.
Of course – the many examples of government efficiency are legendary – but wasn’t it one of our bastions of capitalism that spent millions on his own personal bathroom. Of course, waste is less galling if it isn’t done with our own money. But I’m hoping someone out there has a study proving this – or disproving it.
It seems to be one of those ideas that are just accepted – conventional wisdom.
[digg-reddit-me]nex·us n., pl. nexus or -us·es.
- A means of connection; a link or tie: “this nexus between New York’s . . . real-estate investors and its . . . politicians” (Wall Street Journal).
- A connected series or group.
- The core or center: “The real nexus of the money culture [was] Wall Street” (Bill Barol).
[Latin, from past participle of nectere, to bind.]
This Sunday, America witnessed Pakistani President Zardari’s disgraceful performance on Meet the Press. He pandered; he obfuscated; he shirked any responsibility or blame; he turned briefly eloquent – and then outrageously self-righteous. It was clear that he is not one tenth the politician his wife was – and it seems not one tenth the leader. She may have been corrupt (as it seems was he) – but he appears to lack her communicative gifts or her aptitude for politics. On top of it, his management style seems be Bush-level incompetence. The most ridiculous point Zardari tried was to invoke AIG’s bailout as an argument to give more money to Pakistan.
David Gregory – to his credit – asks the tough question – the question that needs to be asked of Pakistan’s leader (especially given stories like this) although Gregory does manage to shift responsibility for the criticism of Zardari off to another reporter:
The question a lot of people ask is are you – is Pakistan really committed to that war? In The New York Times Dexter Filkins, who, who’s reported from Afghanistan and Pakistan, writes this: “Whose side is Pakistan really on? … Little in Pakistan is what it appears. For years, the survival of Pakistan’s military and civilian leaders has depended on a double game: assuring the United States that they were vigorously repressing Islamic militants–and in some cases actually doing so–while simultaneously tolerating and assisting the same militants. From the anti-Soviet fighters of the 1980s and the Taliban of the 1990s to the homegrown militants of today, Pakistan’s leaders have been both public enemies and private friends. When the game works, it reaps great rewards: billions in aid to boost the Pakistani economy and military and Islamist proxies to extend the government’s reach into Afghanistan and India.”
Zardari’s responded:
[W]hat billions are you talking about? Like I said, a billion dollar a year? That’s not even – altogether, this aid package is not even one tenth of what you gave AIG. So let’s face it; we need, in fact, much more help.
This isn’t the first time Zardari has found it prudent to invoke AIG to justify giving more billions to Pakistan – he apparently disconcerted lawmakers a few days earlier this week – as the New York Times reported:
[W]hen he asked for financial assistance, he likened it to the government’s bailout of the troubled insurance giant, American International Group.
While it is probably true that Zardari needs more funds – his pique at being asked to justify these funds is galling – especially when so much of it was apparently spent preparing Pakistan’s military to fight India instead of the Taliban. Though this analogy is politically stupid – it does bring up an interesting parallel.
AIG has been the nexus of the financial crisis in much the same way that Pakistan is the center of the threat of strategic terrorism.
When synthetic CDOs were invented, they were structured in such a way as to create positions that were safer than AAA-rated debt. (An explanation of what this means here.) These positions were called super-senior. Yet the ever “cautious” bankers decided to hedge against even these supposedly risk-free positions – allowing them to free up more capital, so that for the purposes of regulation, it was treated as if they had not lent out any money at all. They decided to buy insurance, calling this insurance a credit default swap, hedging against the risk that even this super-safe investment would go bad. There was one big player in this, one firm that provided so much of this insurance which led to this boom in lending and enormous leveraged positions – AIG – who insured these super-safe debts with nary a plan to deal with defaults. After all – these debts were super-senior – there would only be defaults if historically unprecedented numbers of these mortgages went south. (Precedent only went back forty years or so with modern macroeconomic record-keeping.) AIG Financial – a small part of the AIG empire which spanned insurance across dozens of industries around the world – decided to leverage the entire company to insure these products – leading to enormous profits in the short-term – and systematic risk as soon as things went bad. If AIG had not been able to pay on its insurance to the big banks, things would likely have been worse.
Pakistan meanwhile is the land of Dick Cheney’s nightmares, where WMDs, nuclear weapons, terrorists, and a teetering state all exist. Pakistan combines all of the elements national security experts fear could have disasterous consequences if they come together. As Barton Gellman describes Pakistan’s importance in his excellent biography of Dick Cheney:
The nexus, if it was anywhere, was in Pakistan – a nuclear state whose national hero sold parts to the highest bidder, whose intelligence service backed the Taliban, and whose North-West Frontier Province became a refugre for al Qaeda.
What it comes down to is that both are too big – and too connected – to fail. Both have had billions of American dollars pumped into them to prop them up. Both have prompted outrage as they have seemed to use this money to benefit themselves and not for the purposes it was intended. Both are controlled by leaders whose hands were far from clean in creating the current crisis. Neither the leadership of Pakistan nor the leadership of AIG have taken responsibility for the crisis that occurred oin their watch – in their realm of control – blaming America and the world at large for their problems instead. Perhaps because of this, the leadership of both seem to believe that they deserve to be rewarded for their efforts rather than held accountable for their significant failures. Yet even so, the costs of the failure of either is likely catastrophic.
Maybe this is the point Zardari was trying to make – his way of taunting us with the fact that he knows we cannot allow him to fail – just like AIG.
[Image by cogito ergo imago licensed under Creative Commons.]
[digg-reddit-me]As a preview to this Keith Olberman video, here’s quick review of the background on this: Andrew Sullivan wrote a post comparing the adopted hero of the right-wing, Winston Churchill, and current creature of the right-wing, Dick Cheney – specifically on the issue of torture. Sullivan explained that Churchill refused to torture German prisoners even with Britain being bombed daily by the Germans. He cited one of Britain’s chief interrogators during World War II on torture:
[He] did not eschew torture out of mercy. This was no squishy liberal: the eye was made of tin, and the rest of him out of tungsten. (Indeed, he was disappointed that only 16 spies were executed during the war.) His motives were strictly practical. “Never strike a man. It is unintelligent, for the spy will give an answer to please, an answer to escape punishment. And having given a false answer, all else depends upon the false premise.”…
Barack Obama then cited Churchill’s refusal to torture during a press conference – and aides later confirmed he reads Andrew Sullivan’s blog and had come across this information shortly before he brought it up at the press conference.
Immediately, the right-wing press began to try to reclaim Churchill as their hero re-branding him as a torturer and war criminal.
Take it away, Keith…
[digg-reddit-me]David Brooks is a reliable barometer of the opinions and beliefs of the Washington establishment (and I don’t mean that as an insult.) The figure he cuts is a rather odd combination of an amateur (but insightful) anthropologist and a insider protecting the system. All of this makes it significant to note that David Brooks has on several occasions stated that the root of this financial crisis is a “loss of confidence.” He has stated this in several of his columns, including his one immediately following the September 15 freefall:
At its base, the turmoil wracking the world financial markets is a crisis of confidence.
Many of Geithner’s critics have said that he is treating the financial crisis primarily as a liquidity crisis – which is defined as “a ‘general feeling of mistrust in the banking system’ conducting to a temporary disappearance of credit.” This is a common form that a crisis of confidence in the financial system takes.
The Congressional Oversight Panel in their report [pdf] written to evaluate the TARP bailouts, for example, described what they saw as one of Geithner’s asusmptions :
One key assumption that underlies Treasury’s approach is its belief that the system-wide deleveraging resulting from the decline in asset values, leading to an accompanying drop in net wealth across the country, is in large part the product of temporary liquidity constraints resulting from nonfunctioning markets for troubled assets. The debate turns on whether current prices, particularly for mortgage-related assets, reflect fundamental values or whether prices are artificially depressed by a liquidity discount due to frozen markets – or some combination of the two.
Paul Krugman has also often made this point – stating that Geithner seems to be acting as if we were in a liquidity crisis – in which the loss of confidence is the cause of the problem – instead of a solvency crisis – in which the loss of confidence is a symptom of the problem.
Geithner, for his part, rejects this assertion that he is treating the problem as a liquidity crisis. When asked, he said it was, as all financial crises are, a combination of the two.
If this is primarily a crisis of confidence, there have been a number of historic examples of how these were contained. For example, this is a description of the resolution of the Panic of 1907 – in which J. P. Morgan’s timely intervention demonstrated how this could be done:
Shipments of gold were on the way from London to New York, and confidence had returned to the French Bourse, “owing,” reported one paper, “to the belief that the strong men in American finance would succeed in their efforts to check the spirit of the panic.” During a panic, confidence is almost as good as gold.
As politicans saw how these crises could be contained – and as they realized Morgan who had successfully beaten back several of these panics was getting near his end – they created the Federal Reserve to officially take on the role Morgan had been unofficially occupying, the lender of last resort and de facto regulator.
As panics are short, they generally do not affect the fundamentals of the economy – but in a liquidity crisis such as this, restoring confidence is a more delicate task. It involves restoring what John Maynard Keynes referred to as “animal spirits” – those positive energies that cause people to be trusting and optimistic that are essential to a thriving economy. As Keynes wrote in his seminal work, The General Theory of Employment, Interest, and Money:
Even apart from the instability due to speculation, there is the instability due to the characteristic of human nature that a large proportion of our positive activities depend on spontaneous optimism rather than mathematical expectations, whether moral or hedonistic or economic. Most, probably, of our decisions to do something positive, the full consequences of which will be drawn out over many days to come, can only be taken as the result of animal spirits – a spontaneous urge to action rather than inaction, and not as the outcome of a weighted average of quantitative benefits multiplied by quantitative probabilities. [my emphasis]
This idea of animal spirits has created an opening for what appears to be Obama’s favorite branch of economics – behavioral economics. While economics generally treats human beings as homo economics, rational, self-interested (indeed, selfish), individuals who act entirely to serve their best interest (and who know what their best interest is) – behavioral economics takes a more scientific view of human beings. They try to understand human behavior through testing and real-life examples rather than through theoretical models. Some of Obama’s top advsiors from Cass Sunstein to Austan Goolsbee are known to be proponents of behavioral economics. And a recent article by Chrystia Freeland in the Financial Times, suggests that Obama’s administration may be using behavioral economics to solve this crisis, describing how “emotions might yet save the economy“:
Judging by the upbeat economic message we have been hearing from the White House, the Treasury and even the Federal Reserve over the past six weeks, that is a shrewd guess. The authors argue that “we will never really understand important economic events unless we confront the fact that their causes are largely mental in nature”. Our “ideas and feelings” about the economy are not purely a rational reaction to data and experience; they themselves are an important driver of economic growth – and decline.
I don’t have the expertise to judge if this crisis is one of solvency or confidence or whatever else it may be. But at this point there is a feeling – almost of a wind at the back of the economy. (I certainly hope this is the case.) It does seem to me that the lack of confidence is a major cause (rather than merely a symptom) of this crisis; and Obama’s gradualist approach, with every move telegraphed and thus predictable – seems to be generating confidence.