Frontrunning: March 31

  • Roller-coaster first quarter ends with shares, dollar under pressure (Reuters)
  • Oil prices slide as U.S. crude stocks hit record (Reuters)
  • GE Files to End Fed Oversight After Shrinking GE Capital (WSJ)
  • FDA Eases Rules for Abortion Pill, Making Access Simpler (BBG)
  • Kremlin denies report of Russia-U.S. deal on Assad’s future (Reuters)
  • Thirst for Gasoline Fuels Oil Rally (WSJ)
  • Landlords in last-minute rush to beat stamp duty rises (BBG)
  • CEO of SunEdison’s Spinoffs Leaves (WSJ)
  • Zuma Counts on ANC Protection After Court Says He Violated Law (BBG)
  • Hong Kong Retail Sales Plunge the Most in 17 Years (BBG)
  • U.K. Economy Shows More Momentum; Current-Account Gap Widens (BBG)
  • Hong Kong Appeal Tribunal Fines Moody’s $1.4 Million for Report (BBG)
  • Bank of Japan runs groupthink risk as board dissenters depart  (Reuters)
  • Distorted Markets: Why Banks Are Better Off Than You Think, And Real Estate Isn’t (WSJ)
  • Twitter Insiders Pitched Standalone Messaging App Idea (ReCode)
  • Why a Chatbot Creeped Out Microsoft’s AI-Focused CEO (BBG)
  • Students clash with police at protests against French labour reform (AFP)
  • U.S. May Let Govts, Banks Use USD for Business With Iran (AFP)
  • German Unemployment Unchanged as Refugees Bolster Labor Force (BBG)
  • China set to deploy world’s longest-range nuclear missile (FT)
  • BlackRock Is Said to Plan About 400 Job Cuts as Growth Slows (BBG)
  • The Investor Who’s Betting on Brazil’s Corruption Scandal (BBG)
  • Wage Surge in Hot U.S. Labor Markets Sending Hopeful Sign to Fed (BBG)
  • Deutsche Bank Says CIB Head Urwin May Be Worth More Than Cryan (BBG)

 

Overnight Media Digest

WSJ

– Argentina’s Senate early Thursday approved a plan to end a long-running legal dispute with U.S. hedge funds, handing President Mauricio Macri his first big victory in a Congress dominated by the opposition.(http://goo.gl/1iXUTa)

– Google has been repeatedly ordered to help federal agents open cellphones, according to court records in seven states that show Apple Inc isn’t the only company facing government demands at the center of a fierce debate over privacy and security. (http://goo.gl/DWQDCN)

– Cara Operations Ltd is in the final stages of negotiations to acquire Quebec-based restaurant chain Groupe St-Hubert for about 500 million Canadian dollars ($384.59 million), according to a person familiar with the deal. (http://goo.gl/TXtRil)

– A jury found a General Motors Co ignition switch installed in a car “unreasonably dangerous” but stopped short of awarding damages in a case arising from litigation consolidated in a New York federal court. (http://goo.gl/07Dsu6)

– Telecom Italia SpA said Wednesday it has appointed Flavio Cattaneo, currently chief executive of train operator NTV SpA-Nuovo Trasporto Viaggiatori, as the new CEO of Italy’s largest telecommunications operator. (http://goo.gl/TKW9tj)

 

FT

* Britain’s biggest lenders are set to replace passwords, pin numbers and lengthy branch visits by new technology in the manner of video meetings and voice-recognition to meet demand for faster banking services. (http://bit.ly/1Rz04PB)

* David Cameron has flown home from the Canary Islands after his Easter holiday to find himself in the midst of the critical steel industrial crisis that threatens up to 40,000 British workers’ livelihoods. (http://bit.ly/1Rz0BB9)

*Tata Steel Ltd’s board signalled that after nine years, several billion pounds of investment and consistent heavy losses, it was putting up its British steel operations for sale.(http://bit.ly/1Rz0Tru)

*In the past decade, burial costs have risen sharply while state subsidies have failed to keep up – making Britain risk a fall back into a system of “miserable pauper’s funerals”. (http://bit.ly/1RyZGka)

 

NYT

– Opponents of the Dodd-Frank financial overhaul won an important battle on Wednesday as a federal judge here stripped the “too big to fail” label from the insurance company MetLife Ltd. (http://nyti.ms/1onsjrY)

– General Motors Co won a second consecutive case in litigation over its defective ignition switches, when a New York jury found that a faulty switch was not responsible for a 2014 accident that injured two people. (http://nyti.ms/22QBJ2g)

– Foxconn Technology Co Ltd said it had struck a deal to acquire control of the Japanese screen maker Sharp Corp for $3.5 billion, after weeks of negotiations. (http://nyti.ms/1MCTdaQ)

– Prime Minister David Cameron faced a new economic and political challenge on Wednesday after Tata Steel Ltd said it could no longer swallow the large losses being generated by its plants and would try to sell them. (http://nyti.ms/1ont1Wo)

– Offering a billion-dollar tax cut and assurances that New York City would not be stuck with a $250 million Medicaid bill, Governor Andrew Cuomo inched closer on Wednesday to presenting an on-time budget with one major issue seemingly standing in his way – an increase in the minimum wage. (http://nyti.ms/1MCTP0i)

 

Canada

THE GLOBE AND MAIL

** The aftershocks of the commodities price collapse, already plucking C$1,800 a year out of Canadians’ pockets, could persist for more than two years and permanently impair the economy, according to the Bank of Canada. (http://bit.ly/1PHh6J2)

** As Dollarama Inc prepares to raise its top prices to C$4 from C$3 amid steeper purchasing costs, the retailer has found new meaning in the lowly toothpick. (http://bit.ly/1SAGYL8)

NATIONAL POST

** Five oil-producing economies are on the verge of collapse if oil prices do not stabilize soon, according to RBC Capital Markets. (http://bit.ly/1RLZd0h)

** Kinross Gold Corp finally has a workable development plan for its long-troubled Tasiast mine. The Toronto-based miner greenlighted the first phase of a two-step expansion plan at Tasiast on Wednesday. (http://bit.ly/1ZMMv4c)

** Jeff Melanson, CEO of the Toronto Symphony Orchestra, has resigned – mired in a messy courtroom battle with his estranged wife, Eleanor McCain, that involves sordid allegations of deception and sexual improprieties. (http://bit.ly/1UV8573)

 

Britain

The Times

– The failure of HSBC Holdings Plc to clean up its act after an anti-money-laundering deal with America’s Justice Department has raised the possibility that U.S. authorities may continue to monitor Britain’s biggest bank. (http://thetim.es/1MUcpvw)

– The Dutch headquarters of Royal Dutch Shell Plc have been raided as part of a corruption investigation into the company’s acquisition of a vast oilfield in Nigeria. (http://thetim.es/1MUcCis)

The Guardian

– Prime Minister David Cameron has flown back to Britain for emergency talks with ministers over the financial crisis engulfing Tata Steel Ltd’s British operation amid warnings that the firm has just weeks to secure a rescue deal on which up to 40,000 jobs could depend. (http://bit.ly/1MUcO12)

– The number of London city financiers who took home more than 1 million euros ($1.13 million) per year jumped to nearly 3,000 in 2014, with one earning up to 25 million euros. The European Banking Authority said the UK, with London home to Europe’s biggest financial centre, had more than three times as many high-earning bankers as the rest of the EU combined. (http://bit.ly/1MUcQ9p)

The Telegraph

– The backers of an independent proposal to lengthen one of Heathrow’s existing runways have become the latest group to warn that the government risks a legal challenge if it backs rival plans to build a third landing strip. (http://bit.ly/1MUd8wR)

– An alliance of taxi drivers in London have abandoned a bid to have Uber’s licence in London declared illegal, in a blow for the black cab industry’s attempts to stamp out the ride-hailing app. (http://bit.ly/1MUdl3c)

Sky News

– Stephen Jones, who stepped down as Santander UK’s chief financial officer several months ago, has been tapped by the Co-operative Bank Plc’s board as a potential successor to Niall Booker. (http://bit.ly/1MUeiIK)

– Ofcom says there were 32 complaints about Vodafone Group Plc made per 100,000 customers in the last three months of 2015 – an increase from the 20 in the previous three months. (http://bit.ly/1MUenfD)

The Independent

– U.S. spice company McCormick & Company Inc raised its takeover proposal for Premier Foods Plc on Wednesday for the second time, calling on the British company’s board to engage in talks that could lead to a deal. (http://ind.pn/1MUeFTx)

– Aldi biscuits, including cheese thins, ginger nuts and Oddbites, are being recalled by the manufacturer after they were found to have been made in dirty factories. (http://ind.pn/1MUeRSX)

 


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China Sees First Offshore Default By State-Owned Firm In Two Decades

“[It] contains exaggerations.”

That’s what Guosen Securities (China’s eighth-largest investment bank) had to say when asked about FT’s assertion that the investment bank’s Hong Kong affiliate has defaulted on a dim sum bond. Apparently, an affiliated SPV issued the debt back in 2014 and according to Bank of New York Mellon (the offering’s trustee), Guosen HK is in violation of some part of the bond’s keepwell agreement.

One of the provisions “is not in full force and effect, which constitutes an Event of Default”, reads a document seen by FT, who notes that this would mark “the first debt breach by a state-owned enterprise in China’s offshore market in nearly two decades.”

“The technical default by Guosen’s Hong Kong affiliate puts at risk a Rmb38m ($5.9m) coupon payment due April 24 on Rmb1.2bn in dim sum bonds sold in 2014,” FT continues. “Missing that payment would set a precedent for the offshore units of Chinese SOEs, whose creditors widely assume the onshore parent will always stand behind its affiliates.”

Needless to say, this comes at a particularly sensitive time. Defaults in China have been mounting over the past 12 months as the decelerating economy conspires with the country’s massive debt burden to push all but the healthiest companies towards the precipice. SOEs are especially problematic and how Beijing handles a sweeping effort to restructure insolvent state-owned firms will ultimately determine whether investors’ previously unshakable faith in China’s unwillingness to allow SOE defaults was misplaced.

“After years in which investors reliably assumed that China’s government would not permit any corporate default, missed payments have become more common in both the onshore and offshore bond markets, but SOE defaults remain rare,” FT goes on to note, before adding that “neither an SOE nor any Chinese financial institution has defaulted since the collapse of Guangdong International Trust and Investment in 1999.”

On a technical level at least, that appears to have changed this month.

“The keepwell deed says that the onshore parent company and the unit will undertake to have a consolidated net worth of at least $1 at all times and ‘have sufficient liquidity to ensure timely payment’ on any amounts payable on the securities, according to the offering circular,” Bloomberg wrote today.

Although keepwells on dim sum bonds were a notoriously shaky setup from the very beginning, investors still viewed the agreements as tantamount to guarantees – that, frankly, was “dim” dumb (if you will). “Given the strategic importance of the guarantor to the parent, we believe Guosen Securities (onshore) will try its best to ensure the guarantor’s (offshore) liquidity to service its outstanding bond and compliance to the bond’s terms and conditions,” Ross Lee, credit analyst at Bank of China Hong Kong Ltd., said in a report out earlier this week.

In any event, Guosen has released a statement that reads like any other denial you’d expect out of China when something bad happens. “Guosen Securities (Overseas) says the keepwell deed attached to the 1.2b yuan 6.4% bonds due 2017 continues to be in full force and effect.”

Or, as the CSRC said in January when asked about reports that then-chief Xiao Gang tried to resign:”this information does not conform to the facts.”

We’ll see, on April 24 when the coupon comes due, what the “facts” here really are. “As trustee, BNY Mellon has received a clarification notice from Guosen which has been distributed to bondholders,” BNY Mellon would later say. “That notice seeks to correct statements set out in earlier communications from Guosen.”

We can only hope that no one at Guosen decides to go the way of Dongbei Special Steel Group Chairman Yang Hua who hung himself just days before the company was set to miss a principal and interest payment.

*  *  *

Bonus: Moody’s on dim sum keepwells, ca. 2014

Moody’s Investors Service says that the over $12 billion of bonds issued by the offshore subsidiaries of China-incorporated companies and supported by keepwell deeds require careful consideration on a case-by-case basis.

“Bonds with keepwell agreements used to enhance their credit quality carry different risks that need to be individually assessed because of their considerable structural complexity,” says Gary Lau, a Managing Director for Moody’s Corporate Finance Group.

“Keepwell deeds are not guarantees and are subject to much greater legal and regulatory uncertainty than compared to guarantees. In particular, capital control laws in China heighten the risk that timely payments will not be made, even if keepwell deeds exist,” adds Lau.

“As a result, a one-size-fits-all approach to analyzing such structures does not offer sufficient insights to risk.”

Moody’s analysis of keepwell agreements in China is contained in its just-released report titled “Chinese Corporates: FAQs on Credit-Support Structures in China Using Keepwell Agreements: An Update”.

“Treating all keepwell structures as having similar effect, for example, by automatically rating debt at or near the support provider’s rating is certainly a simpler approach than our careful analysis of each transaction,” says Lau.

“However, such an approach does not properly reflect the structural and other risks involved and therefore does not provide adequate insights to investors,” adds Lau.

“Consequently, our analysis focuses on understanding the standalone credit profile of the debt issuer, the benefits of the credit-support structure and the economic and other incentives of the support provider to ensure full and timely payment to bondholders if required.”

Nonetheless, Moody’s report says because keepwell agreements are an important signal of a parent’s willingness to provide support to its offshore subsidiary, the debt issuer’s rating is likely to be higher than it would be if its parent company did not provide a keepwell deed.

Moody’s has provided ratings to bonds supported by keepwell deeds from 11 China-related issuers, totaling $12.5 billion. Of the 11, 10 have been rated one notch below the ultimate parent and support provider .


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The Clinton Investigation Enters a Dangerous Phase (New at Reason)

Just as Hillary Clinton seems likely to confirm Hillary Clintonher long-held status as the presumptive Democratic presidential nominee, the FBI investigation into her use of a private email server for official State Department business is reaching its penultimate phase. 

The former Secretary of State has repeatedly insisted she can’t wait to speak with federal investigators, but Andrew Napolitano argues, Clinton faces a potential “perjury trap” if she agrees to be interviewed by the FBI without knowing what potentially incriminating evidence they have amassed. As Martha Stewart can attest, lying to federal investigators is a crime, and even an unwitting misstep can be prosecuted.

But, if Clinton declines to be interviewed, which Napoltiano describes as “a prudent legal but treacherous political decision,” the fallout could be disastrous for her presidential campaign prospects. 

View this article.

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On Final Day Of Extremely Volatile Quarter, Futures Trade Modestly Lower

On the last day of an extremely volatile first quarter, following the latest torrid push higher in risk assets over the past two days following Yellen’s dovish Tuesday comments, today has seen a modest pull back in risk, whether because the market is massively overbought, because someone finally looked at what record multiple expansion that has taken place in Q1 as earnings are set to collapse by nearly 10%, or simply due to fears that tomorrow’s payrolls number will show an abnormal amount of minimum wage waiters and bartenders added.

Whatever the reason, stocks slipped and have unwound some of the March rebound that had the MSCI All-Country World Index on the brink of erasing its losses for 2016. Crude oil retreated with base metals. As Bloomberg notes, the Stoxx Europe 600 Index fell for the first time in three days, declining with shares in Tokyo and Hong Kong. Crude slid back to $38 a barrel after OPEC reported that March output rose to 32.52MM b/d from 32.44MM b/d in February, making a mockery of any “production freeze.”

 

As a reminder, this is where we stood as of last night: by the close of play yesterday the S&P 500 (+0.44%) had extended its winning streak to three consecutive sessions and in the process reached the highest level since December 29th. In fact yesterday’s move means the index has rallied over 14% off the intraday low midway through last month and is just 3% off the 2015 high set back in May.

S&P 500 futures fell 0.1 percent, suggesting US stocks could snap a three-day winning streak that pushed the measure to its highest level this year. Among the key events today, investors will look to today’s initial jobless claims report for indications of the health of the labor market before Friday’s key non-farm payroll data.

After beating U.S. equities last year by the most in a decade, European stocks are now trailing them by the most since 2003. This quarter, analysts have slashed profit estimates, now forecasting declines for the year. Fund managers have withdrawn money for seven straight weeks, the longest streak since 2014, according to a Bank of America Corp. note last week.

The MSCI Asia Pacific Index pared gains to 0.1 percent, and is poised for an 8.2 percent jump in March. The Topix index fell 0.7 percent in Tokyo.

As reported before, we close off the quarter with the Bloomberg Dollar Spot Index headed for its worst month since 2010 and Treasury yields were on course for their largest quarterly drop since 2012 after Federal Reserve Chair Janet Yellen reiterated that weaker global growth called for a gradual approach to raising rates. Copper and zinc pared their first quarterly increases since 2014, while gold headed for its biggest three-month gain since 1986.

European stocks are heading for their first monthly gain since November, although progress hasn’t been sufficient to avoid a third quarterly drop in four. Global equities are up more than 7 percent in March, their first increase since October, but are still down 0.3 percent for the first three months of 2016.

“A lot of the recent rebound has been down to the Fed back-tracking on rate hikes,” Mark Lister, head of private wealth research at Craigs Investment Partners in Wellington, which manages about $7.2 billion, said by phone. “We’ve seen a big rally but there are still some genuine worries out there. Markets had been overpricing some of the risks, whereas now they’re probably underpricing them.”

Futures now show no chance of the U.S. central bank altering monetary policy at its April meeting and only 20 percent odds of a rate increase in June.

Top Global News:

  • Google Objects to Oracle’s $8.8 Billion Claim for Java Trial
  • BlackRock Is Said to Plan About 400 Job Cuts as Growth Slows
  • Mallinckrodt Said to Work With Bank to Seek Nuclear Unit Bidders
  • Oil Declines as Rising U.S. Crude Stockpiles Expand Global Glut
  • Chinese Stocks in Hong Kong Enter Bull Market; Shanghai Rebounds
  • IBM Said to Buy Cloud Consulting Co. for About $200m: Re/code
  • U.K. GDP Grows More Than Estimated; Current-Account Gap Widens
  • German Unemployment Unchanged as Refugees Bolster Labor Force
  • Bidder for Mideast KFC Operator Said to Get $1.5 Billion Funding
  • Buffett’s Energy Unit Sees Tax Benefits Double to $1.8 Billion
  • World’s Biggest Shipping Company Pours Billions Into Market Rout
  • Twitter Insiders Pitched Standalone Messaging App Idea: Re/code
  • FDA Eases Rules for Abortion Pill, Making Access Simpler
  • Westinghouse Sees India Reactor Deal Signed in June: Reuters
  • U.S. May Let Govts, Banks Use USD for Business With Iran: AP
  • Eurazeo to Buy Brands From Mondelez for EU250m, Les Echos Says
  • Tesla to unveil Model 3 at 8:30pm PT in Calif; Tesla Model 3 Electric Car Seen Getting 225 Miles Per Charge
  • Medivation Said to Work With Advisers to Defend Against Takeover

Looking at regional markets, Asia stocks traded indecisive amid fiscal year-end and as the recent dovish-Fed euphoria began to wane. ASX 200 (+1.29%) took the impetus from Wall St.’s gains as commodity names outperformed led by strength in blue chips BHP Billiton and Rio Tinto, while Nikkei 225 (-0.7%) saw choppy trade with price-action subdued by a firmer JPY and fiscal-end rebalancing. Elsewhere, Shanghai Comp (+0.1 %) also fluctuated between gains and losses following several large named earnings including big-4 banks ICBC and Bank of China which both surpassed estimates but announced a reduction in dividend pay-outs amid sluggish profit growth, while the PBoC also upped their liquidity injection. S&P revised China sovereign rating outlook to AA- negative from AA- stable.

Asia Top News

  • A $2 Billion Fund Says Good Riddance as ‘Dumb Money’ Flees Japan
  • Barclays’s Japan Chief Nakai to Resign Later in Year, Memos Say
  • Chief of Malaysia’s Embattled 1MDB Says My Job Is Done Here
  • Najib’s Brother Disbursed Funds Before Malaysian Polls, WSJ Says
  • Guosen Securities Unit Said in Default Event on Dim Sum Debt
  • The Giant of Southeast Asian Markets Is Getting Trounced in IPOs

In Europe, Yellen inspired sentiment entered a pause mode today as market participants took an opportunity to book profits ahead of the release of the latest US jobs report due out on Friday. As a result, the more defensive sectors outperformed, with energy and materials names under pressure amid lower energy prices. S&P’s move to revise Chinese sovereign rating outlook to negative from stable and firmer than expected EU CPI data only underpinned the cautious sentiment, while an upward revision to UK GDP report also failed to result in any meaningful upside in EU based equity indices.

In FX, much to Draghi’s embarrassment, the stand-out performer this morning has been the EUR, with the lead spot rate pushing up towards the highs to suggest a move on the Feb highs at 1.1375. This is pushing the USD index back to the lows, after some early weakness in the commodity currencies suggested a modest turnaround was in the making — perhaps justified ahead of US payrolls Friday. EUR/GBP buying month end saw the cross rate through .7900, pushing Cable lows around 1.4325, but after some steady support at the lows, an upward revision in Q4 GDP gave the Pound a fresh bid. Strong offers ahead of 1.4400, while a resilient EUR (vs GBP) will always win out these days.

Any JPY strength on Japanese fiscal year end has yet to materialise, but yesterday’s highs remain intact, with USD/JPY holding steady above 112.00. EUR/JPY buoyant, and looking to better the 127.81 high from Tuesday. Limited impact from the S&P outlook change on China from stable to negative. CNH and CNY both at lows on the week.

Bloomberg’s dollar gauge, which tracks the greenback against 10 major peers, slipped 0.1 percent, for a fourth day of declines. The index has lost 3.9 percent this month, its steepest drop since September 2010.

“The dollar is overvalued, particularly against the major currencies, euro and yen,” said Steven Saywell, BNP Paribas SA’s global head of foreign-exchange strategy in London, in an interview on Bloomberg TV.

In commodities, West Texas Intermediate crude declined 1.3 percent to $37.83 a barrel, dropping for the fifth time in six days as the increase in U.S. stockpiles reinforced concern over a global glut in the commodity. Brent lost 0.5 percent to $39.07. Both are still heading for their first quarterly increases since 2015.Inventories expanded for a seventh week to 534.8 million barrels, according to a report from the Energy Information Administration Wednesday, while imports and production dropped. Ecuador and Venezuela will support a cut to output at a meeting between major exporters in Doha next month, Ecuador’s Oil Minister Carlos Pareja said in a post on the ministry’s Twitter account.

Gold for immediate delivery added 0.7 percent to $1,233.73 an ounce, after sliding 1.4 percent last session. Silver has managed to stay above the upward trendline on the daily chart maintaining its higher lows, currently above USD 15.24 with the next support level down at USD 15.06, while gold is still on course for its best quarter in 25 years due to safe-haven demand. Elsewhere, copper declined for a 5th consecutive day while iron ore prices fell over 1.5% alongside broad-based weakness across the commodities complex.

On the calendar today we get the Chicago PMI print for March (expected to improve over 3pts to 50.7) given the improvement in several regional PMI series, and of course ahead of tomorrow’s ISM manufacturing print. Away from this there’s more employment market data with last week’s initial jobless claims data. As well as the data, the latest Fedspeak is due to come from NY Fed President Dudley (due at 10pm BST), while Chicago Fed President Evans will speak again this afternoon (2.45pm BST).

 

Bulletin Headline Summary from RanSquawk and Bloomberg

  • Caution prevailed ahead of NFP release due on Friday, with defensive sectors outperforming in early European trade
  • Brexit concerns and month-end EUR/GBP demand failed to weigh on GBP, with GBP/USD advancing to 1.4400 level following better than expected UK GDP report
  • Going forward, the focus will be on the release of the latest US Challenger Jobs and Chicago PM! reports ahead of NFP tomorrow
  • Treasuries little changed, global equities drop and commodities mixed in overnight trading; today’s economic data includes jobless claims, ISM Milwaukee and Chicago PMI.
  • Standard & Poor’s has cut the outlook for China’s credit rating to negative from stable, saying the nation’s economic rebalancing is likely to proceed more slowly than the ratings firm had expected. The nation’s credit rating is AA-
  • The nation’s largest state-controlled lenders cut their dividend payouts for last year amid rising bad loans, underscoring what Bank of China Ltd.’s president described as a “new normal” of low profit growth for the lenders
  • Euro-area inflation fell 0.1% from a year earlier after a 0.2% drop in February, in data released on the eve of the European Central Bank’s first day of expanded debt purchasing to fight deflation
  • German joblessness was unchanged in March, snapping a run of five consecutive declines, in a sign that Europe’s largest economy may be struggling to absorb a wave of refugees
  • Wall Street is used to getting the opportunity to influence bank rules before they are unveiled. Now financial firms are getting the chance to argue that a key capital requirement should be softened even after it was supposed to be finished
  • Recession worries and central-bank stimulus in Europe and Japan have given fresh life to a three-decade-long rally in global debt. Bonds worldwide are off to the best annual start since at least 1996. They’ve earned about 3.2% this quarter and added $2.1 trillion of market value
  • $4.7b IG credit priced yesterday, weekly volume to $15.8b, March $160.605b, YTD $454.855b; $5.225b HY priced yesterday, WTD 6 deals $7.8b, MTD 28 deals for $21.66b, YTD 53 deals for $36.52b
  • Sovereign 10Y bond yields mixed; European and Asian equity markets lower; U.S. equity-index futures drop. WTI crude oil and copper drop, gold moves higher

US Event Calendar

  • 7:30am: Challenger Job Cuts y/y, March (prior 21.8%)
  • 8:30am: Initial Jobless Claims, est. 265k March 26 (prior 265k)
  • Continuing Claims, March 19, est. 2.2m (prior 2.179m)
  • 9:00am: ISM Milwaukee, March (prior 55.22)
  • 9:45am: Chicago Purchasing Manager, March, est, 50.7 (prior 47.6)
  • 9:45am: Bloomberg Consumer Comfort, March 27 (prior 43.6)
  • 9:45am: Fed’s Evans speaks in New York
  • 10:00am: Wholesale Trade, benchmark revisions
  • 5:00pm: Fed’s Dudley speaks in Lexington, Virginia
  • 11:00am: U.S. to announce plans for auction of 3M/6M bills

DB’s Jim Reid concludes the overnight wrap

For the most part the past 24 hours or so markets have seen a continuation of the decent performance for risk assets ignited in the wake of Yellen’s cautious comments. Yesterday, despite the usually dovish Chicago Fed President Evans offering his view that he still expects two rate hikes this year, futures markets continued to push the probability of a tightening lower and we’re now down to just a 20% probability of a hike in June based on pricing this morning (from 38% pre-Yellen) and 54% by December (from 73%). With one eye on the other big event of the week – that being tomorrow’s payrolls number – yesterday’s ADP employment change reading was fairly supportive after printing a tad ahead of expectations at 200k (vs. 195k expected) which has the early chatter looking for a similar 2-handle NFP number.

By the close of play yesterday the S&P 500 (+0.44%) had extended its winning streak to three consecutive sessions and in the process reached the highest level since December 29th. In fact yesterday’s move means the index has rallied over 14% off the intraday low midway through last month and is in fact just 3% off the 2015 high set back in May. It was US credit indices which were the relative outperformer yesterday though with CDX IG eventually finishing 4bps tighter on the day with the index closing back in again on the YTD tights made earlier this month. Cash markets had a decent day too with US HY spreads finishing 8bps tighter. The US Dollar continues to struggle post Yellen and despite attempting to rebound on yesterday’s employment data (and Evans’ comments to some degree), the Dollar index still closed with a -0.34% loss to take its post-Yellen move lower to -1.14%. Emerging market currencies were the main beneficiary of that move while in rates markets 2y Treasury yields dipped another 3bps lower yesterday to 0.759% which means the bonds are now nearly 21bps lower in yield since the FOMC meeting of two weeks or so ago. The curve did however steepen with 10y and 30y yields up 2bps and 5bps respectively.

This morning, while trading has been a bit choppy the bulk of bourses have followed Wall Street’s lead and are posting gains. The CSI 300 (+0.32%), Shanghai Comp (+0.36%), Nikkei (+0.44%) and ASX (+1.35%) in particular are all currently up, while the Hang Seng (-0.17%) and Kospi (-0.55%) are lagging a bit. A leg lower for WTI (-1.23%) perhaps contributing to some of that. Asia credit is flat but the Aus iTraxx has rallied to the tune of nearly 4bps. Meanwhile, reports of further corporate bond defaults in China are also gaining some attention. On Tuesday Dongbei Special Steel announced that it had missed a principal and interest repayment, notable given its status as state-owned. This follows the news of a creditor committee being set up to help restructure Bohai Steel’s debt load, while this morning the FT is reporting that a unit of Guosen Securities (China’s 8th largest IB) is said to have technically defaulted on a HK traded-RMB bond. All this a reminder that default risk and idiosyncratic stories in China seems to be on the rise this year and the broader economic slowdown is certainly not helping what has been generally viewed as an overleveraged corporate sector in China.

Back to those comments from the Fed’s Evans yesterday. Despite mentioning that he expects the US economy to be strong enough to justify raising rates twice this year, Evans did come across as a little more cautious with regards to his views on inflation saying specifically that he was a ‘bit uneasy’ on hitting the 2% target. The Fed President also said that ‘it is too early to tell whether the recent firmer readings in the inflation data will last or prove to be temporary volatility and reverse in coming months’, while also signaling that is important for the Fed to take the recent decline in inflation expectations, as perceived by the market, seriously.

Playing catch up, European equities had a strong session yesterday with the Stoxx 600 in particular gaining +1.30% to trim further its YTD loss (which has now dipped under 7% although at one stage was as much as -17% on the year at the February lows). It was actually energy sensitive names which had driven much of that performance after Oil at one stage rallied close to 4% and to a shade under $40/bbl (boosted seemingly by the weaker USD). That move was completely eliminated come the close of play in the US however as the market digested more bearish US crude inventory numbers and its proving hard to ignore the fact that inventories are still near record highs. Interestingly Gold was in reversal mode yesterday after tumbling -1.38% which in turn has taken it into negative territory for the month. That said the precious metal is still on course to close out the quarter with a gain of 15% or so as things stand.

European credit indices had a decent session also with the iTraxx Crossover and Main closing 12bps and 4bps tighter respectively. The primary market in Europe is still yet to get going post the holiday break but one deal which caught the eye earlier this week was that of French corporate Sanofi who managed to get a 3-year bond deal away at a yield of just 5bps and a coupon of 0%. It’s clearly not the first zero-coupon bond we’ve seen but what’s telling is that in the past such zero-coupon bonds have typically priced with a large discount and so offering a more tempting yield. Clearly this is not the case here and perhaps won’t be the last such is the influence of the latest ECB measures (including of course buying corporate bonds). An incredible stat that stood out is Bloomberg reporting that about €14bn of corporate bonds are now trading with a negative yield.

Before we take a look at the day ahead, wrapping up the data yesterday in Europe the main release of note was a better than expected inflation report out of Germany. The March CPI number came in at +0.8% mom (vs. +0.6% expected) which had the effect of lifting the YoY rate up three-tenths to +0.3%. Much of the commentary suggesting that this helps support upside risks to today’s wider Euro area inflation report. With regards to the remainder of the data, the Euro area confidence indicators for this month were a bit of a mixed bag. The headline economic confidence reading fell 0.9pts to 103.0 (vs. 103.8 expected) which is the lowest print since February last year. Industrial confidence was little changed, services confidence dipped but the business climate indicator was a smidgen higher.
Taking a look at today’s calendar, this morning in Europe the early data comes from Germany where we will see the February retail sales numbers. This is quickly followed by the first print for the March CPI report in France, along with consumer spending numbers while Italy and Spain will also report their latest inflation numbers. The Euro area CPI report for March follows this where current expectations are for a modest one-tenth improvement in the headline rate to -0.1% yoy. In the UK we’ll get the final reading of Q4 GDP (expected to stay unchanged at +0.5% qoq) along with the February money and credit aggregate data. Turning to the US, expect there to be a fair bit of attention paid to the Chicago PMI print for March (expected to improve over 3pts to 50.7) given the improvement in several regional PMI series, and of course ahead of tomorrow’s ISM manufacturing print. Away from this there’s more employment market data with last week’s initial jobless claims data. As well as the data, the latest Fedspeak is due to come from NY Fed President Dudley

(due at 10pm BST), while Chicago Fed President Evans will speak again this afternoon (2.45pm BST).


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Obama’s Mercy Still Pales Next to Richard Nixon’s

The 61 commutations that President Obama announced yesterday bring his total so far to 248, which the White House emphasizes is “more than the previous six Presidents combined.” Yet those commutations represent just 1.3 percent of the nearly 20,000 petitions he has received.

By that measure, Obama is more merciful than Ronald Reagan or either of the Bushes, about as merciful as Bill Clinton, and substantially less merciful than Jimmy Carter or Gerald Ford, who granted, respectively, 2.8 percent and 4 percent of the commutation petitions they received. And Obama’s mercy still pales compared to Richard Nixon’s. Tricky Dick, whom the White House omitted from its comparison, granted shorter sentences to 6.7 percent of the federal prisoners who sought them—not bad for a law-and-order Republican who, according to senior Nixon adviser John Ehrlichman, saw his war on drugs as a way to attack “the antiwar left and black people.”

Largely because of the war on drugs and the draconian sentences associated with it, Obama has received a lot more commutation petitions than his predecessors—twice as many as George W. Bush, 22 times as many as Nixon. To say that Obama has struggled to keep up would be both an exaggeration and an understatement. During his first term, when he granted just one commutation, he showed almost no interest in using his clemency powers to ameliorate the injustices inflicted by a criminal justice system he had long criticized as excessively harsh. A couple of years after he was re-elected, he picked up the pace, but not enough to put much of a dent in what is now a 9,000-petition backlog at the Justice Department’s Office of the Pardon Attorney—and that’s not counting another 9,000 or so cases that volunteer lawyers at Clemency Project 2014 are reviewing at the administration’s behest.

“At his current pace,” The New York Times notes, “Mr. Obama will free a small fraction of those prisoners by the time his term ends next year.” Even if he managed to grant 61 commutations every month, which would represent a big increase from his recent pattern (the last batch of commutations, which freed 95 prisoners, was in December), he would not hit the “thousands” foreseen when the DOJ signaled a new receptiveness to clemency petitions in 2014. Or even 1,000.

Congress could accomplish more by approving sentencing reform (which Obama supports). As with previous batches, most of the commutations announced yesterday involved prisoners convicted of crack cocaine offenses who would have received shorter sentences under current law. Retroactively applying the lighter crack penalties that Congress approved in 2010, as the Sentencing Reform and Corrections Act would do, could by itself free 5,800 drug war prisoners.

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S&P Revises China’s Credit Outlook To Negative On Growth, Debt Concerns – Full Text

Ripley’s believe it or not world continues. Earlier today, Hong Kong’s Hang Seng market entered a bull market, rising 20% from its February lows, just as Hong Kong retail sales plunged 20.6%, the bigest drop since 1999…

… and then moments ago, in a move that pushed the Chinese Yuan stronger at least initially, S&P revised its Chinese outlook to negative, saying , the economic rebalancing is likely to proceed more slowly than had expected over next 5 years.

Among the report highlights:

  • The economic and financial risks to the Chinese govt’s creditworthiness are gradually increasing and could lead to a downgrade this year or next
  • Forecasts China’s economic growth over next 3 years will remain at or above 6% annually, but government and corporate leverage ratios are likely to deteriorate, and the investment rate could be well above what S&P calculates to be sustainable levels of 30%-35% of GDP
  • These trends could weaken the Chinese economy’s resilience to shocks, limit the govt’s policy options, and increase the likelihood of a sharper decline in trend growth rate
  • May downgrade if China looks to be increasing credit at a significantly faster rate than the nominal GDP growth in a bid to stabilize growth at or above 6.5%, such that the investment ratio is above 40%
  • The negative outlook also partly reflects S&P’s opinion that the pace and depth of State Owned Enterprise reform may be insufficient to attenuate the risks of credit-fueled growth
  • China’s monetary policy is largely credible and effective, as demonstrated by its track record of low inflation and its pursuit of financial sector reform
  • The nation’s credit rating is AA- with a negative outlook, S&P said in a statement

Full note:

S&P Revises China Outlook To Negative; Afrms ‘AA-/A-1+’ Rtgs

OVERVIEW

  • Following China’s legislative meetings in March 2016, we believe the country’s reform agenda is on track.
  • However, we are revising the rating outlook on China to negative from stable because economic rebalancing is likely to proceed more slowly than we had expected.
  • We are also affirming our ‘AA-/A-1+’ sovereign credit ratings and ‘cnAAA/cnA-1+’ Greater China regional scale ratings on China.

RATING ACTION

On March 31, 2016, Standard & Poor’s Ratings Services revised the outlook on the People’s Republic of China to negative from stable. At the same time, we affirmed our ‘AA-‘ long-term and ‘A-1+’ short-term sovereign credit ratings on China. We also affirmed the ‘cnAAA’ long-term and ‘cnA-1+’ short-term Greater China regional scale ratings on China. Our transfer and convertibility risk assessment on China is ‘AA-‘.

RATIONALE

We revised the outlook to reflect our expectation that the economic and financial risks to the Chinese government’s creditworthiness are gradually increasing. This follows from our belief that, over the next five years, China will show modest progress in economic rebalancing and credit growth deceleration.

We project that China’s economic growth over the next three years will remain at or above 6% annually. However, government and corporate leverage ratios are likely to deteriorate, in our view, and the investment rate could be well above what we believe to be sustainable levels of 30%-35% of GDP and among the highest ratios of rated sovereigns. In our opinion, these expected trends could weaken the Chinese economy’s resilience to shocks, limit the government’s policy options, and increase the likelihood of a sharper decline in trend growth rate.

The ratings on China reflect our view of the government’s reform agenda as reaffirmed by the recently concluded National People’s Congress as well as the country’s growth prospects and strong external metrics. We weigh these strengths against certain credit factors that are weaker than what is typical for similarly rated peers. For example, China has lower average income, less transparency, and a more restricted flow of information.

The Chinese government is taking steps to bolster its economic and fiscal resilience. Most importantly, we view the government’s anti-corruption campaign as a significant move to improve governance at state agencies and state-owned enterprises (SOEs). Over time, this could translate into greater confidence in the rule of law, improvements in the private-sector business environment, more efficient resource allocation, and a stronger social contract.

The government continues to make significant reforms to its budgetary framework and to the financial sector. These changes could yield long-term benefits for China’s economic development. The government also appears to be signaling that it will allow SOEs with lesser policy importance to exit the market either through merger, closure, or default in order to allocate resources more efficiently. However, our negative outlook is partly motivated by our opinion that the pace and depth of SOE reform may be insufficient to attenuate the risks of credit-fueled growth.

China’s policymaking has helped it maintain consistently strong economic performances since the late 1970s. However, coordination issues between the line ministries and the State Council sometimes lead to unpredictable and abrupt policy implementation. The authorities also have yet to develop an effective communication channel with the market to convey policy intent, heightening financial volatility. Moreover, China does not benefit from the checks and balances usually coming from the free flow of information. These characteristics can lead to the misallocation of resources and foster discontent over time.

We expect China’s economic growth to remain strong at 6% or more annually through at least 2019, corresponding to per capita real GDP growth of above 5.5% each year. By 2019, we project per capita GDP to rise to more than US$10,000 from a projected US$8,200 for 2016, given our assumptions about growth and the relative strength of the renminbi versus the dollar. Over the next three years, we expect final consumption’s contribution to economic growth to increase. However, we believe the gross domestic investment rate is likely to remain above 40% of GDP. We also expect credit in China to outpace nominal GDP over this period. Thus we expect domestic credit to rise from below 165% of GDP in 2016 to close to 180% by 2019.

These projections reflect our view that the Chinese government will seek to boost public investment that are financed by strong credit growth to support the economy. Although some officials have voiced concerns over rising leverage in China, the latest Chinese five-year plan calls for average growth of about 6.5% annually in the 2016-2020 period. We believe that achieving this rate of growth will require credit growth to outpace nominal GDP growth in the period.

China’s external profile remains a key credit strength despite the decline of China’s foreign exchange reserves. We partly attribute the fall of reserves to increased expectations of renminbi depreciation. This reflected the uncertainties following a change in the authorities’ management of the currency introduced last year. As a consequence, some private sector firms reduced or hedged their dollar debt and exporters kept a greater share of their proceeds in foreign exchange. This source of financial account outflows should dissipate as expectations adjust with clearer policy signals regarding the exchange rate policy.

China remains a large external creditor. We expect financial assets held by the public and financial sectors to exceed total external debt by a little more than 100% of current account receipts (CAR) at the end of 2016. At the same time, we estimate that the country’s total external assets exceeded its external liabilities by approximately 65% of its CAR. China’s external liquidity position is equally robust. We expect its current account surplus to be sustained at more than 2.5% of GDP in 2016-2019. We project annual gross external financing needs in 2016-2018 to total less than 60% of CAR plus usable reserves.

The increasing global use of the renminbi also bolsters China’s external financial resilience, in our view. According to the Bank for International Settlement’s (BIS’) “Triennial Central Bank Survey,” published September 2013, the Chinese currency is one leg of 1.7% of global spot foreign exchange transactions. Demand for renminbi-denominated assets from both official and private-sector creditors could rise with the inclusion of the renminbi in the IMF’s Special Drawing Rights basket of currencies.

Over time, we expect the share of renminbi-denominated official reserves to rise to its share of foreign exchange transactions. Although the People’s Bank of China (the central bank) does not operate a fully floating foreign exchange regime, over the past decade it has allowed greater flexibility in the nominal exchange rate. Based on estimates from the BIS, we compute that the real effective exchange rate has also appreciated by close to 21% since 2011.

China is implementing its most ambitious fiscal reforms since 1994 to improve fiscal transparency, budgetary planning and execution, and subnational debt management. The speed of implementation is relatively gradual, owing to the weak economic environment. Nevertheless, as these reforms are pushed ahead, they could help the government to manage slower growth of fiscal revenue and lower its reliance on revenues related to land sales that will accompany slower economic growth.

In 2016-2019, we expect the government to keep the reported general government deficit to within 3% of GDP. However, off-balance-sheet borrowing could continue for the next two to three years. This reflects both the financing needs of projects started before 2015 as well as some new projects that the central government is willing to authorize to support growth. Consequently, we project the increase in general government debt in each of these years to be 3%-4% of GDP.

Due to these projected increases over the next few years, the government’s debt as a share of GDP could rise moderately. We have already included the entire sum of RMB16 trillion (US$2.5 trillion, 23.6% of 2015 GDP) of direct debt owed by local governments in general government debt from 2015. This step-rise in debt followed the finance minister’s announcement that the provincial-level governments will issue bonds to redeem debts largely owed by local government financing vehicles to banks over the next three years. Given our assumptions regarding growth and the moderate financing costs (less than 5% of revenues) arising from sizable domestic liquidity, we project that net general government debt will plateau at 43% of GDP through the forecast horizon.

Although the fiscalization of the local government financing vehicles has raised our figure for government debt, it has simultaneously decreased our estimates for contingent liabilities to the government from this sector. The financing vehicle loans that are being redeemed through government bonds issuances are largely owed by companies with weak financial metrics. By putting these loans on its balance sheet, we believe that the government has significantly reduced the banks’ credit risks.

We believe that China’s monetary policy is largely credible and effective, as demonstrated by its track record of low inflation and its pursuit of financial sector reform. Consumer price index (CPI) inflation is likely to remain at 1%-3% annually over 2016-2019. Although the central government–through the

State Council–has the final say in setting rates, the central bank has significant operational independence, in our view, especially regarding open-market operations. These operations affect the economy through a largely responsive interbank market and a sizable and fast-expanding domestic bond market. Last year’s liberalization of deposit rates at banks is an important reform that could further improve monetary transmission in China, in our view.

OUTLOOK

The negative outlook reflects our view of gradually increasing economic and financial risks to the government’s creditworthiness, which could result in a downgrade this year or next.

A downgrade could ensue if we see a higher likelihood that China will seek to stabilize growth at or above 6.5% by increasing credit at a significantly faster rate than the nominal GDP growth, such that the investment ratio is above 40%. Such trends could weaken the Chinese economy’s resilience to shocks, limit the government’s policy options, and increase the likelihood of a sharper decline in the trend growth rate.

The ratings could stabilize at this level if the central government adopts policies to moderate credit growth at levels more in line with nominal GDP growth, accompanied by signs that rebalancing will progress more quickly than we currently expect. This could allow the investment ratio to come down to levels that we believe to be more sustainable.

We would also see a higher likelihood that credit metrics will stabilize at the current rating level if the government continues to implement reforms that lead to much greater reliance on market-based macroeconomic management tools. Better transparency, improved information availability, deeper liberalization of the financial market, and greater official use of renminbi for reserve management would support such reforms.


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Brickbat: Loose Lips

TwitterIvar Mol tweeted that Muslim children cheered when they heard about bombings in Belgium carried out by Islamic militants. Shortly after he posted that tweet, he got a visit at his home in Breda, Netherlands, from three police officers who warned him against making such posts. After media reported on the police visit, Breda mayor Paul Depla apologized to Mol.

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Governments Admit that Much of Modern History Has Been Manipulated By False Flag Attacks

Presidents, Prime Ministers, Congressmen, Generals, Spooks, Soldiers and Police ADMIT to False Flag Terror

In the following instances, officials in the government which carried out the attack (or seriously proposed an attack) admit to it, either orally, in writing, or through photographs or videos:

(1) As admitted by secret Russian police files that are part of the Hoover Institution’s archives, the Russian Tsar’s secret police set off bombs and killed people in order to blame and arrest labor agitators. And see this.

(2) Japanese troops set off a small explosion on a train track in 1931, and falsely blamed it on China in order to justify an invasion of Manchuria. This is known as the “Mukden Incident” or the “Manchurian Incident”. The Tokyo International Military Tribunal found: “Several of the participators in the plan, including Hashimoto [a high-ranking Japanese army officer], have on various occasions admitted their part in the plot and have stated that the object of the ‘Incident’ was to afford an excuse for the occupation of Manchuria by the Kwantung Army ….” And see this.

(3) A major with the Nazi SS admitted at the Nuremberg trials that – under orders from the chief of the Gestapo – he and some other Nazi operatives faked attacks on their own people and resources which they blamed on the Poles, to justify the invasion of Poland.

(4) Nazi general Franz Halder also testified at the Nuremberg trials that Nazi leader Hermann Goering admitted to setting fire to the German parliament building in 1933, and then falsely blaming the communists for the arson.

(5) Soviet leader Nikita Khrushchev admitted in writing that the Soviet Union’s Red Army shelled the Russian village of Mainila in 1939 – while blaming the attack on Finland – as a basis for launching the “Winter War” against Finland. Russian president Boris Yeltsin agreed that Russia had been the aggressor in the Winter War.

(6) The Russian Parliament, current Russian president Putin and former Soviet leader Gorbachev all admit that Soviet leader Joseph Stalin ordered his secret police to execute 22,000 Polish army officers and civilians in 1940, and then falsely blamed it on the Nazis.

(7) The British government admits that – between 1946 and 1948 – it bombed 5 ships carrying Jews attempting to flee the Holocaust to seek safety in Palestine, set up a fake group called “Defenders of Arab Palestine”, and then had the psuedo-group falsely claim responsibility for the bombings (and see this, this and this).

(8) Israel admits that in 1954, an Israeli terrorist cell operating in Egypt planted bombs in several buildings, including U.S. diplomatic facilities, then left behind “evidence” implicating the Arabs as the culprits (one of the bombs detonated prematurely, allowing the Egyptians to identify the bombers, and several of the Israelis later confessed) (and see this and this).

The U.S. Army does not believe this is an isolated incident.  For example, the U.S. Army’s School of Advanced Military Studies said of Mossad (Israel’s intelligence service):

“Ruthless and cunning. Has capability to target U.S. forces and make it look like a Palestinian/Arab act.”

(9) The CIA admits that it hired Iranians in the 1950′s to pose as Communists and stage bombings in Iran in order to turn the country against its democratically-elected prime minister.

(10) The Turkish Prime Minister admitted that the Turkish government carried out the 1955 bombing on a Turkish consulate in Greece – also damaging the nearby birthplace of the founder of modern Turkey – and blamed it on Greece, for the purpose of inciting and justifying anti-Greek violence.

(11) The British Prime Minister admitted to his defense secretary that he and American president Dwight Eisenhower approved a plan in 1957 to carry out attacks in Syria and blame it on the Syrian government as a way to effect regime change.

(12) The former Italian Prime Minister, an Italian judge, and the former head of Italian counterintelligence admit that NATO, with the help of the Pentagon and CIA, carried out terror bombings in Italy and other European countries in the 1950s through the 1980s and blamed the communists, in order to rally people’s support for their governments in Europe in their fight against communism.

As one participant in this formerly-secret program stated: “You had to attack civilians, people, women, children, innocent people, unknown people far removed from any political game. The reason was quite simple. They were supposed to force these people, the Italian public, to turn to the state to ask for greater security”so that “a state of emergency could be declared, so people would willingly trade part of their freedom for the security” (and see this) (Italy and other European countries subject to the terror campaign had joined NATO before the bombings occurred). And watch this BBC special. They also allegedly carried out terror attacks in France, Belgium, Denmark, Germany, Greece, the Netherlands, Norway, Portugal, the UK, and other countries.

The CIA also stressed to the head of the Italian program that Italy needed to use the program to control internal uprisings.

False flag attacks carried out pursuant to this program include – by way of example only:

(13) In 1960, American Senator George Smathers suggested that the U.S. launch “a false attack made on Guantanamo Bay which would give us the excuse of actually fomenting a fight which would then give us the excuse to go in and [overthrow Castro]”.

(14) Official State Department documents show that, in 1961, the head of the Joint Chiefs and other high-level officials discussed blowing up a consulate in the Dominican Republic in order to justify an invasion of that country. The plans were not carried out, but they were all discussed as serious proposals.

(15) As admitted by the U.S. government, recently declassified documents show that in 1962, the American Joint Chiefs of Staff signed off on a plan to blow up AMERICAN airplanes (using an elaborate plan involving the switching of airplanes), and also to commit terrorist acts on American soil, and then to blame it on the Cubans in order to justify an invasion of Cuba. See the following ABC news report; the official documents; and watch this interview with the former Washington Investigative Producer for ABC’s World News Tonight with Peter Jennings.

(16) In 1963, the U.S. Department of Defense wrote a paper promoting attacks on nations within the Organization of American States – such as Trinidad-Tobago or Jamaica – and then falsely blaming them on Cuba.

(17) The U.S. Department of Defense also suggested covertly paying a person in the Castro government to attack the United States: “The only area remaining for consideration then would be to bribe one of Castro’s subordinate commanders to initiate an attack on Guantanamo.”

(18) A U.S. Congressional committee admitted that – as part of its “Cointelpro” campaign – the FBI had used many provocateurs in the 1950s through 1970s to carry out violent acts and falsely blame them on political activists.

(19) A top Turkish general admitted that Turkish forces burned down a mosque on Cyprus in the 1970s and blamed it on their enemy. He explained: “In Special War, certain acts of sabotage are staged and blamed on the enemy to increase public resistance. We did this on Cyprus; we even burnt down a mosque.” In response to the surprised correspondent’s incredulous look the general said, “I am giving an example”.

(20) A declassified 1973 CIA document reveals a program to train foreign police and troops on how to make booby traps, pretending that they were training them on how to investigate terrorist acts:

The Agency maintains liaison in varying degrees with foreign police/security organizations through its field stations ….

 

[CIA provides training sessions as follows:]

 

a. Providing trainees with basic knowledge in the uses of commercial and military demolitions and incendiaries as they may be applied in terrorism and industrial sabotage operations.

 

b. Introducing the trainees to commercially available materials and home laboratory techniques, likely to he used in the manufacture of explosives and incendiaries by terrorists or saboteurs.

 

c. Familiarizing the trainees with the concept of target analysis and operational planning that a saboteur or terrorist must employ.

 

d. Introducing the trainees to booby trapping devices and techniques giving practical experience with both manufactured and improvised devices through actual fabrication.

 

***

 

The program provides the trainees with ample opportunity to develop basic familiarity and use proficiently through handling, preparing and applying the various explosive charges, incendiary agents, terrorist devices and sabotage techniques.

(21) The German government admitted (and see this) that, in 1978, the German secret service detonated a bomb in the outer wall of a prison and planted “escape tools” on a prisoner – a member of the Red Army Faction – which the secret service wished to frame the bombing on.

(22) A Mossad agent admits that, in 1984, Mossad planted a radio transmitter in Gaddaffi’s compound in Tripoli, Libya which broadcast fake terrorist transmissions recorded by Mossad, in order to frame Gaddaffi as a terrorist supporter. Ronald Reagan bombed Libya immediately thereafter.

(23) The South African Truth and Reconciliation Council found that, in 1989, the Civil Cooperation Bureau (a covert branch of the South African Defense Force) approached an explosives expert and asked him “to participate in an operation aimed at discrediting the ANC [the African National Congress] by bombing the police vehicle of the investigating officer into the murder incident”, thus framing the ANC for the bombing.

(24) An Algerian diplomat and several officers in the Algerian army admit that, in the 1990s, the Algerian army frequently massacred Algerian civilians and then blamed Islamic militants for the killings (and see this video; and Agence France-Presse, 9/27/2002, French Court Dismisses Algerian Defamation Suit Against Author).

(25) In 1993, a bomb in Northern Ireland killed 9 civilians. Official documents from the Royal Ulster Constabulary (i.e. the British government) show that the mastermind of the bombing was a British agent, and that the bombing was designed to inflame sectarian tensions. And see this and this.

(26) The United States Army’s 1994 publication Special Forces Foreign Internal Defense Tactics Techniques and Procedures for Special Forces – updated in 2004 – recommends employing terrorists and using false flag operations to destabilize leftist regimes in Latin America. False flag terrorist attacks were carried out in Latin America and other regions as part of the CIA’s “Dirty Wars“. And see this.

(27) Similarly, a CIA “psychological operations” manual prepared by a CIA contractor for the Nicaraguan Contra rebels noted the value of assassinating someone on your own side to create a “martyr” for the cause. The manual was authenticated by the U.S. government. The manual received so much publicity from Associated Press, Washington Post and other news coverage that – during the 1984 presidential debate – President Reagan was confronted with the following question on national television:

At this moment, we are confronted with the extraordinary story of a CIA guerrilla manual for the anti-Sandinista contras whom we are backing, which advocates not only assassinations of Sandinistas but the hiring of criminals to assassinate the guerrillas we are supporting in order to create martyrs.

(28) An Indonesian government fact-finding team investigated violent riots which occurred in 1998, and determined that “elements of the military had been involved in the riots, some of which were deliberately provoked”.

(29) Senior Russian Senior military and intelligence officers admit that the KGB blew up Russian apartment buildings in 1999 and falsely blamed it on Chechens, in order to justify an invasion of Chechnya (and see this report and this discussion).

(30) As reported by the New York Times, BBC and Associated Press, Macedonian officials admit that in 2001, the government murdered 7 innocent immigrants in cold blood and pretended that they were Al Qaeda soldiers attempting to assassinate Macedonian police, in order to join the “war on terror”. luring foreign migrants into the country, executing them in a staged gun battle, and then claiming they were a unit backed by Al Qaeda intent on attacking Western embassies”.  Macedonian authorities had lured the immigrants into the country, and then – after killing them – posed the victims with planted evidence – “bags of uniforms and semiautomatic weapons at their side” – to show Western diplomats.

(31) At the July 2001 G8 Summit in Genoa, Italy, black-clad thugs were videotaped getting out of police cars, and were seen by an Italian MP carrying “iron bars inside the police station”. Subsequently, senior police officials in Genoa subsequently admitted that police planted two Molotov cocktails and faked the stabbing of a police officer at the G8 Summit, in order to justify a violent crackdown against protesters.

(32) The U.S. falsely blamed Iraq for playing a role in the 9/11 attacks – as shown by a memo from the defense secretary – as one of the main justifications for launching the Iraq war.

Even after the 9/11 Commission admitted that there was no connection, Dick Cheney said that the evidence is “overwhelming” that al Qaeda had a relationship with Saddam Hussein’s regime, that Cheney “probably” had information unavailable to the Commission, and that the media was not ‘doing their homework’ in reporting such ties. Top U.S. government officials now admit that the Iraq war was really launched for oil … not 9/11 or weapons of mass destruction.

Despite previous “lone wolf” claims, many U.S. government officials now say that 9/11 was state-sponsored terror; but Iraq was not the state which backed the hijackers. (Many U.S. officials have alleged that 9/11 was a false flag operation by rogue elements of the U.S. government; but such a claim is beyond the scope of this discussion. The key point is that the U.S. falsely blamed it on Iraq, when it knew Iraq had nothing to do with it.).

(Additionally, the same judge who has shielded the Saudis for any liability for funding 9/11 has awarded a default judgment against Iran for $10.5 billion for carrying out 9/11 … even though no one seriously believes that Iran had any part in 9/11.)

(33) Although the FBI now admits that the 2001 anthrax attacks were carried out by one or more U.S. government scientists, a senior FBI official says that the FBI was actually told to blame the Anthrax attacks on Al Qaeda by White House officials (remember what the anthrax letters looked like). Government officials also confirm that the white House tried to link the anthrax to Iraq as a justification for regime change in that country. And see this.

(34) According to the Washington Post, Indonesian police admit that the Indonesian military killed American teachers in Papua in 2002 and blamed the murders on a Papuan separatist group in order to get that group listed as a terrorist organization.

(35) The well-respected former Indonesian president also admits that the government probably had a role in the Bali bombings.

(36) Police outside of a 2003 European Union summit in Greece were filmed planting Molotov cocktails on a peaceful protester.

(37) Former Department of Justice lawyer John Yoo suggested in 2005 that the US should go on the offensive against al-Qaeda, having “our intelligence agencies create a false terrorist organization. It could have its own websites, recruitment centers, training camps, and fundraising operations. It could launch fake terrorist operations and claim credit for real terrorist strikes, helping to sow confusion within al-Qaeda’s ranks, causing operatives to doubt others’ identities and to question the validity of communications.”

(38) Similarly, in 2005, Professor John Arquilla of the Naval Postgraduate School – a renowned US defense analyst credited with developing the concept of ‘netwar’ – called for western intelligence services to create new “pseudo gang” terrorist groups, as a way of undermining “real” terror networks. According to Pulitzer-Prize winning journalist Seymour Hersh, Arquilla’s ‘pseudo-gang’ strategy was, Hersh reported, already being implemented by the Pentagon:

“Under Rumsfeld’s new approach, I was told, US military operatives would be permitted to pose abroad as corrupt foreign businessmen seeking to buy contraband items that could be used in nuclear-weapons systems. In some cases, according to the Pentagon advisers, local citizens could be recruited and asked to join up with guerrillas or terrorists

The new rules will enable the Special Forces community to set up what it calls ‘action teams’ in the target countries overseas which can be used to find and eliminate terrorist organizations. ‘Do you remember the right-wing execution squads in El Salvador?’ the former high-level intelligence official asked me, referring to the military-led gangs that committed atrocities in the early nineteen-eighties. ‘We founded them and we financed them,’ he said. ‘The objective now is to recruit locals in any area we want. And we aren’t going to tell Congress about it.’ A former military officer, who has knowledge of the Pentagon’s commando capabilities, said, ‘We’re going to be riding with the bad boys.’”

(39) United Press International reported in June 2005:

U.S. intelligence officers are reporting that some of the insurgents in Iraq are using recent-model Beretta 92 pistols, but the pistols seem to have had their serial numbers erased. The numbers do not appear to have been physically removed; the pistols seem to have come off a production line without any serial numbers. Analysts suggest the lack of serial numbers indicates that the weapons were intended for intelligence operations or terrorist cells with substantial government backing. Analysts speculate that these guns are probably from either Mossad or the CIA. Analysts speculate that agent provocateurs may be using the untraceable weapons even as U.S. authorities use insurgent attacks against civilians as evidence of the illegitimacy of the resistance.

(40) In 2005, British soldiers dressed as Arabs were caught by Iraqi police after a shootout against the police. The soldiers apparently possessed explosives, and were accused of attempting to set off bombs.  While none of the soldiers admitted that they were carrying out attacks, British soldiers and a column of British tanks stormed the jail they were held in, broke down a wall of the jail, and busted them out.  The extreme measures used to free the soldiers – rather than have them face questions and potentially stand trial – could be considered an admission.

(41) Undercover Israeli soldiers admitted in 2005 to throwing stones at other Israeli soldiers so they could blame it on Palestinians, as an excuse to crack down on peaceful protests by the Palestinians.

(42) Quebec police admitted that, in 2007, thugs carrying rocks to a peaceful protest were actually undercover Quebec police officers (and see this).

(43) A 2008 US Army special operations field manual recommends that the U.S. military use surrogate non-state groups such as “paramilitary forces, individuals, businesses, foreign political organizations, resistant or insurgent organizations, expatriates, transnational terrorism adversaries, disillusioned transnational terrorism members, black marketers, and other social or political ‘undesirables.’” The manual specifically acknowledged that U.S. special operations can involve both counterterrorism and “Terrorism” (as well as “transnational criminal activities, including narco-trafficking, illicit arms-dealing, and illegal financial transactions.”)

(44) The former Italian Prime Minister, President, and head of Secret Services (Francesco Cossiga) advised the 2008 minister in charge of the police, on how to deal with protests from teachers and students:

He should do what I did when I was Minister of the Interior … infiltrate the movement with agents provocateurs inclined to do anything …. And after that, with the strength of the gained population consent, … beat them for blood and beat for blood also those teachers that incite them. Especially the teachers. Not the elderly, of course, but the girl teachers yes.

(45) At the G20 protests in London in 2009, a British member of parliament saw plain clothes police officers attempting to incite the crowd to violence.

(46) Egyptian politicians admitted (and see this) that government employees looted priceless museum artifacts  2011 to try to discredit the protesters.

(47) In 2011, a Colombian colonel admitted that he and his soldiers had lured 57 innocent civilians and killed them – after dressing many of them in uniforms – as part of a scheme to claim that Columbia was eradicating left-wing terrorists. And see this.

(48) Rioters who discredited the peaceful protests against the swearing in of the Mexican president in 2012 admitted that they were paid 300 pesos each to destroy everything in their path. According to Wikipedia, photos also show the vandals waiting in groups behind police lines prior to the violence.

(49) In 2012, NBC News’ chief foreign correspondent, Richard Engel, was kidnapped in Syria. NBC News said that Engel and his reporting team had been abducted by forces affiliated with the Syrian government. He reported that they only escaped when some anti-Syrian government rebels killed some of the pro-government kidnappers.

However,  it turns out that they were really kidnapped by U.S. backed rebels fighting the Syrian government … who wore the clothes of, faked the accent of, scrawled the slogans of, and otherwise falsely impersonated the mannerisms of people associated with the Syrian government. In reality, the group that kidnapped Engel and his crew were affiliated with the U.S.-supported Free Syrian Army, and NBC should have known that it was blaming the wrong party. See New York Times and the Nation’s reporting.

(50) A Colombian army colonel has admitted that his unit murdered 57 civilians, then dressed them in uniforms and claimed they were rebels killed in combat.

(51) On November 20, 2014, Mexican agent provocateurs were transported by army vehicles to participate in the 2014 Iguala mass kidnapping protests, as was shown by videos and pictures distributed via social networks.

(52) The highly-respected writer for the Telegraph Ambrose Evans-Pritchard says that the head of Saudi intelligence – Prince Bandar – recently admitted that the Saudi government controls “Chechen” terrorists.

(53) Two members of the Turkish parliament, high-level American sources and others admitted that the Turkish government – a NATO country – carried out the chemical weapons attacks in Syria and falsely blamed them on the Syrian government; and high-ranking Turkish government admitted on tape plans to carry out attacks and blame it on the Syrian government.

(54) The Ukrainian security chief admits that the sniper attacks which started the Ukrainian coup were carried out in order to frame others. Ukrainian officials admit that the Ukrainian snipers fired on both sides, to create maximum chaos.

(55) Burmese government officials admitted that Burma (renamed Myanmar) used false flag attacks against Muslim and Buddhist groups within the country to stir up hatred between the two groups, to prevent democracy from spreading.

(56) Israeli police were again filmed in 2015 dressing up as Arabs and throwing stones, then turning over Palestinian protesters to Israeli soldiers.

(57) Britain’s spy agency has admitted (and see this) that it carries out “digital false flag” attacks on targets, framing people by writing offensive or unlawful material … and blaming it on the target.

(58) U.S. soldiers have admitted that if they kill innocent Iraqis and Afghanis, they then “drop” automatic weapons near their body so they can pretend they were militants

(59) Similarly, police frame innocent people for crimes they didn’t commit. The practice is so well-known that the New York Times noted in 1981:

In police jargon, a throwdown is a weapon planted on a victim.

Newsweek reported in 1999:

Perez, himself a former [Los Angeles Police Department] cop, was caught stealing eight pounds of cocaine from police evidence lockers. After pleading guilty in September, he bargained for a lighter sentence by telling an appalling story of attempted murder and a “throwdown”–police slang for a weapon planted by cops to make a shooting legally justifiable. Perez said he and his partner, Officer Nino Durden, shot an unarmed 18th Street Gang member named Javier Ovando, then planted a semiautomatic rifle on the unconscious suspect and claimed that Ovando had tried to shoot them during a stakeout.

Wikipedia notes:

As part of his plea bargain, Pérez implicated scores of officers from the Rampart Division’s anti-gang unit, describing routinely beating gang members, planting evidence on suspects, falsifying reports and covering up unprovoked shootings.

(As a side note – and while not technically false flag attacks – police have been busted framing innocent people in many other ways, as well.)

(60) A former U.S. intelligence officer recently alleged:

Most terrorists are false flag terrorists or are created by our own security services.

(61) The head and special agent in charge of the FBI’s Los Angeles office said that most terror attacks are committed by the CIA and FBI as false flags. Similarly, the director of the National Security Agency under Ronald Reagan – Lt. General William Odom said:

By any measure the US has long used terrorism. In ‘78-79 the Senate was trying to pass a law against international terrorism – in every version they produced, the lawyers said the US would be in violation.

(audio here).

(62) Leaders throughout history have acknowledged the “benefits” of of false flags to justify their political agenda:

Terrorism is the best political weapon for nothing drives people harder than a fear of sudden death”.
– Adolph Hitler

 

“Why of course the people don’t want war … But after all it is the leaders of the country who determine the policy, and it is always a simple matter to drag the people along, whether it is a democracy, or a fascist dictatorship, or a parliament, or a communist dictatorship … Voice or no voice, the people can always be brought to the bidding of the leaders. That is easy. All you have to do is to tell them they are being attacked, and denounce the pacifists for lack of patriotism and exposing the country to danger. It works the same in any country.”
– Hermann Goering, Nazi leader.

 

“The easiest way to gain control of a population is to carry out acts of terror. [The public] will clamor for such laws if their personal security is threatened”.
– Josef Stalin

Postscript:   Of course, sometimes atrocities or warmongering are falsely blamed on the enemy as a justification for war … when no such event ever occurred. This is sort of like false flag terror … without the terror.

For example:

  • The NSA admits that it lied about what really happened in the Gulf of Tonkin incident in 1964 … manipulating data to make it look like North Vietnamese boats fired on a U.S. ship so as to create a false justification for the Vietnam war
  • One of the central lies used to justify the 1991 Gulf War against Iraq after Iraq invaded Kuwait was the false statement by a young Kuwaiti girl that Iraqis murdered Kuwaiti babies in hospitals.  Her statement was arranged by a Congressman who knew that she was actually the daughter of the Kuwaiti Ambassador to the U.S. – who was desperately trying to lobby the U.S. to enter the war – but the Congressman hid that fact from the public and from Congress
  • Pulitzer prize-winning journalist Ron Suskind reported that the White House ordered the CIA to forge and backdate a document falsely linking Iraq with Muslim terrorists and 9/11 … and that the CIA complied with those instructions and in fact created the forgery, which was then used to justify war against Iraq. And see this and this
  • Time magazine points out that the claim by President Bush that Iraq was attempting to buy “yellow cake” Uranium from Niger:

had been checked out — and debunked — by U.S. intelligence a year before the President repeated it.

  • The “humanitarian” wars in Syria, Libya and Yugoslavia were all justified by false reports that the leaders of those countries were committing atrocities against their people. And see this


via Zero Hedge http://ift.tt/1M253vb George Washington

Why Did the 9/11 Commission Not “Follow the Money?”, by Lars Schall

In the below article, independent investigative journalist Lars Schall explores the time-honored tradition of following the money in an attempt to discover answers to yet unanswered questions regarding the terrorist attacks of 9/11 in New York City. Here is his report below.

 


Why Did The 9/11 Commission Not “Follow the Money”?

 

Lars Schall has put some material together that brings him to the question why the time-proven approach to “follow the money” was dismissed when it came the funding of the biggest terror attack on US soil.

By Lars Schall

 


Bill:

Howdy! I am an investigative financial journalist from Germany, who’s in the process of finishing a book trilogy on the topic of the so-called “Deep State”. Related to that project, I examined the case of a software program called the Prosecutor’s Management Information System (PROMIS), a database system developed by INSLAW Inc., a U.S. information technology company, which was founded by William A. Hamilton, a former analyst with the National Security Agency (NSA). Indeed, in mid-2012, when he became aware of my research connected to PROMIS, Mr. Hamilton contacted me to ask me for help with investigating some certain aspects of the PROMIS case.’

 

Here’s a recent confirmation for this fact.

 

Lars:


I am pleased to confirm that I contacted you for help in investigating aspects of the INSLAW Affair in which the U.S. Department of Justice secretly misappropriated the PROMIS legal case management software from INSLAW, Inc., one of its software vendors, and disseminated stolen copies beyond the U.S. Department of Justice for U.S. and Israeli intelligence database projects, including NSA’s Follow the Money Project for real-time electronic surveillance of wire transfers of money and letters of credit through the banking system; Israel’s sale of a version of PROMIS equipped with a special data retrieval capability to foreign intelligence and law enforcement agencies of both friendly and adversarial governments worldwide to facilitate the theft of their intelligence secrets while producing profits for intelligence insiders; the CIA’s deployment of PROMIS to virtually every component of the U.S intelligence community as ’compatible database software’ for the gathering and dissemination of U.S. intelligence information between and among the entities that ’produce’ the intelligence information and the entities that ’consume’ the intelligence product; the CIA’s deployment of PROMIS to the leading semi-conductor manufacturers in the world so NSA could exercise real-time electronic surveillance of the manufacturing and illicit sale of integrated circuits engineered for advanced defense and military applications; and the sale by a Drug Enforcement Administration (DEA) proprietary company in Cyprus to the drug interdiction entities of Middle Eastern governments of a back-door version of PROMIS so DEA could augment its own drug trafficking intelligence information with the intelligence information stolen from these Middle Eastern governments.

Bill Hamilton

Founder and President INSLAW, Inc.

Washington, D.C.

 

The Prosecutor’s Management Information System (PROMIS) was originally developed by INSLAW for the US Justice Department. However, according to Guy Lawson’s book entitled Octopus, that sophisticated piece of software “had been so successful that the American intelligence agency apparatus had secretly stolen the software to put it to use covertly. The CIA had reconfigured the code and installed it in 32-bit Digital Equipment Corporation VAX minicomputers. The agency had used front companies to sell the new technology to banks and leading financial institutions like the Federal Reserve. Hidden inside the computer was a ‘trapdoor’ that enabled intelligence agencies to covertly monitor financial transactions digitally for the first time. (…) In Bob Woodward’s book Veil, former CIA director William Casey said the secret money-tracking system had been one of his proudest achievements. (1)

 

In May 1998, Dr. Norman Bailey published a monograph entitled The Strategic Plan That Won The Cold War, which references the importance of NSA’s Follow the Money Signals Intelligence (SIGINT) mission and also includes a Foreword written by William P. Clark, President Reagan’s National Security Advisor in 1982 and 1983, extolling the role of Reagan’s NSC staff in “bringing about the end of the cold war.” (2) Dr. Bailey also acknowledged several years before on the public record while being interviewed by the Public Broadcasting System (PBS) that NSA undertook its so called Follow the Money Program.

 

While being interviewed by PBS for a July 12, 1989 television documentary entitled Follow the Money, he stated that the Reagan White House tasked the NSA in 1981 with implanting “powerful computing mechanisms” in three major wire transfer clearinghouses: CHIPS (the Clearing House Interbank Payment System) in New York City, which reportedly records payments and settlements for foreign trade, foreign exchange, and syndicated loans for its 139 member banks in 35 countries; CHAPS in London, which reportedly performs similar functions for Sterling-denominated transactions; and SIC in Basel, Switzerland, which reportedly records the same types of transactions when they involve Swiss Francs. Dr. Bailey described the new NSA SIGINT penetration of the banking sector as giving the United States the capability to follow the money flowing from foreign governments to international terrorists through the international banking system, intercepting the fund transfer messages from one bank to another as they occurred in real time. (3)

 

When he was interviewed for a July 23, 2008 article by Tim Shorrock in Salon Magazine, Dr. Bailey was quoted as stating that INSLAW’s “PROMIS was the principal software element used by the NSA” for its real-time surveillance of bank transfers. (4)

 

In a personal message that I received in June 2013, Dr. Bailey told me:

“I was appointed Director of Planning and Evaluation on the staff of the National Security Council at the White House in early 1981, when Ronald Reagan took over the presidency. In that capacity I coordinated national security planning throughout the government and evaluated the results of operations undertaken as a result. One of the projects I personally initiated was the tracing of the funding of activities contrary to the national security interests of the United States back to their sources. This activity was given the nickname ’follow the money’. I worked especially with the Treasury Department, the Federal Reserve Board and the National Security Agency in carrying out this project (which is very much ongoing today). During this period I visited the NSA twice, and during my visits was told that the principal software utilized for the purpose of tracing money movements was PROMIS. At that time this meant nothing to me, as I was not a computer specialist, but rather a financial and monetary economist. Only much later did I realize that the NSA must have been given this software by the Department of Justice, which had originally utilized it to track cases. I had little to do with the Justice Department in my position, and even if I had known that such a transaction had taken place I would have found nothing wrong with it in principle, assuming the laws regarding patent protection and payment for patented products had been processed normally. That is absolutely all I know from personal experience: the NSA began to use PROMIS software sometime in 1981.”


As mentioned before, in his book, Veil: The Secret Wars of the CIA 1981-1987, Bob Woodward quotes CIA Director William Casey as claiming that one of his proudest achievements as President Reagan’s CIA Director was the “penetration of the international banking system, allowing a steady flow of data from the real, secret set of books kept by many foreign banks …” (5)

 

Moreover, a June 5, 1986 email message from David Wigg to Colonel Oliver North, originally classified SECRET/CODE WORD but later partially declassified and released in redacted form as a result of the Iran-Contra investigations, discusses a Reagan National Security Council (NSC) staff proposal to expand NSA’s SIGINT penetration of the banking sector to add another approximately 400 major commercial banks. The email message reported on a meeting that same day with the two top officials of the Justice Department’s Office of Legal Counsel to obtain a legal opinion, binding on the Executive Branch and authorizing the planned expansion. David Wigg, who had served as CIA Director Casey’s liaison from the CIA to the NSC staff before transferring to the NSC staff, (6) described its objective as helping to “track financial flows through Syria, Libya, Iran, etc. through the 400 or so principal banks that make up the interbank market; to notify and work with European Govs. To fill gaps in our coverage and to cooperate with us in freezing/seizing assets as appropriate (all on a confidential basis).” (7)

 

The use of NSA’s bank surveillance project in the fight against international terrorism led to the decision by President Ronald Reagan to bomb Libya. That decision was based on precise Follow the Money SIGINT evidence that Libya had financed a terrorist attack in Germany that killed an American soldier. “The highly classified initiative, known as ‘Follow the Money,’ had allowed the Reagan administration to trace the Libyan government’s secret funding of a terrorist group that had bombed a disco in Berlin in 1986, killing an American soldier and wounding two hundred civilians.“ (8)

 

In the Preface of The 9/11 Commission Report, released in 2004, the 9/11 Commission writes near the very beginning:

“Our aim has not been to assign individual blame. Our aim has been to provide the fullest possible account of the events surrounding 9/11 and to identify lessons learned.“


It looks as if the lesson learned is that you can ignore the funding of a terror attack that kills more than 3.000 people on American soil, while during the presidency of Ronald Reagan the U.S. Government took the funding issue of a terror attack in Berlin extremely serious. Why do I say so? Because in Chapter 5, the 9/11 Commission states with respect to the funding issue of the 9/11 attacks:

“Ultimately the question is of little practical significance.”


However, ask yourself, if you do not really investigate this question, is “the fullest account of the events surrounding 9/11” still possible? Interestingly enough, NSA’s Follow the Money mission exists until today and was expended in recent years. According to the German magazine Der Spiegel in 2013:

“Indeed, secret documents reveal that the main NSA financial database Tracfin, which collects the ’Follow the Money’ surveillance results on bank transfers, credit card transactions and money transfers, already had 180 million datasets by 2011. The corresponding figure in 2008 was merely 20 million. According to these documents, most Tracfin data is stored for five years.” (9)

 

Furthermore, Der Spiegel reported:


“Classified documents compiled by the US intelligence agency NSA (…) show how comprehensively and effectively the intelligence agency can track global flows of money and store the information in a powerful database developed for this purpose.
’Follow the Money’ is the name of the NSA branch that handles these matters. (…) Financial transfers are the ‘Achilles’ heel’ of terrorists, as NSA analysts note in an internal report. Additional fields of activity for their ’financial intelligence’ include tracking down illegal arms deliveries and keeping tabs on the increasingly lucrative domain of cybercrime. Tracing international flows of money could help reveal political crimes, expose acts of genocide and monitor whether sanctions are being respected. (…) The classified documents show that the intelligence agency has several means of accessing the internal data traffic of the Society for Worldwide Interbank Financial Telecommunication (SWIFT), a cooperative used by more than 8,000 banks worldwide for their international transactions. The NSA specifically targets other institutes on an individual basis. Furthermore, the agency apparently has in-depth knowledge of the internal processes of credit card companies like Visa and MasterCard. (…) The collected information often provides a complete picture of individuals, including their movements, contacts and communication behavior. The success stories mentioned by the intelligence agency include operations that resulted in banks in the Arab world being placed on the US Treasury’s blacklist. (…) [T]he documents reveal the close involvement of the US Treasury in selecting the program’s spying targets. Indeed, according to the documents, there is an exchange of personnel in which NSA analysts are transferred for a number of months to the relevant department in the US Treasury.“
(10)

 

This report by Der Spiegel certainly documents that the NSA and the US Treasury are still interested in the financial activities related to terrorism. This is underlined by the fact that the US Treasury established in 2004 – the same year in which the 9/11 Commission Report was released – a special branch called the Office of Terrorism and Financial Intelligence (TFI), which oversees the Office of Terrorist Financing and Financial Crimes (TFFC). Its mission: “to combat terrorist financing domestically and internationally”. (11)

 

CNN stated in a detailed 2010 report that the US Treasury is:

“…one of the key players in the war on terrorism and smack in the middle of nearly every major international conflict in which the United States is involved. (…) Inside Treasury, the work is done by a low-profile but high-impact unit known as the Office of Terrorism and Financial Intelligence. (…) Treasury is the world’s only government finance agency with its own in-house intelligence unit. It has offices as far flung as Riyadh, Islamabad, Kabul and Abu Dhabi. They’re the ones seizing or freezing assets of suspected bad guys — from terrorists to drug runners. They’re a part of the U.S. intelligence apparatus, sharing information with the CIA and the FBI, among others.

‘Treasury is the only finance ministry in the world to have an intel shop that is very much focused on financial intelligence, getting access to information about the networks that support terrorists, weapons proliferation or narcotics traffickers,’ said David Cohen, assistant secretary for terrorist financing. (…) The Office of Terrorism and Financial Intelligence was put together six years ago following the big federal agency shuffle that created the Department of Homeland Security.
The office has more than 700 attorneys, investigators, analysts and financial experts. And the financial intelligence unit is housed with other Treasury teams, such as the financial crimes unit, that need intel on alleged dirty money transactions. (…) Sometimes the office’s work has drawn controversy. For example, since the Sept. 11 terrorist attacks, Treasury has had access to a database of intra-European financial transactions, despite protests about privacy violations.” (12)

 

Obviously, the U.S. Government disagrees with the 9/11 Commission in a substantial way when it comes to the “practical significance” of this specific issue, i.e. the financing of terrorism. In the 9/11 Commission Report, they tell you not a single thing about the “Follow the Money” program and its capabilities. Moreover, they give you no clue what the U.S. intelligence agencies actually did to track down the financial activities of the alleged 9/11 hijackers and their handlers. And they even made a false statement when they wrote “that the National Money-laundering Strategy Report for 2001 ’didn’t mention terrorist financing in any of its 50 pages’, when in fact that report “mentions it 17 times”. (13)

When you see it through the prism of 9/11, isn’t it justified to ask why the U.S. Government has a “Follow the Money” program at all, if the funding of 9/11 was “of little practical significance”?

 

Maybe the answer to this question depends on which kind of story the 9/11 Commission had in mind that it wanted to tell the public. An account as the following written by British investigative journalist Nafeez Ahmed is for sure at odds with the “mythical historical narrative” that 9/11 has become. He writes:
“In his book Intelligence Matters (2004), Senator Bob Graham, co-chair of the
Congressional Inquiry into 9/11, discusses the contents of a top secret CIA memo dated 2nd August 2002 about two 9/11 hijackers, Khalid Almihdhar and Nawaf Alhazmi. The CIA memo concluded that there is ’incontrovertible evidence that there is support for these terrorists within the Saudi government.’

The 28 page section of the Congressional report including discussion of the CIA memo was classified, but some of its contents were leaked, and related issues revealed in press reports. Early in 2000, when Almidhar and Alhazmi arrived at Los Angeles airport, they were picked up by a fellow Saudi, Omar al-Bayoumi, who gave them $1,500 in cash, moved them into his apartment building, and helped them apply for flight school. Al-Bayoumi worked for Dallah Avco, a Saudi-based airline chaired by Prince Bandar’s father, Prince Sultan bin Abdulaziz. The firm is a major contractor for the Saudi Ministry of Defense and Aviation.

 

In the following months, al-Bayoumi and his associates received regular cashier’s cheques of around $2,000 a month, totaling tens of thousands of dollars. These came from Prince Bandar and his wife, Princess Haifa bin Faisal. Both Bandar and his wife claimed the money was donated for charitable purposes (one payment track was made after one of al-Bayoumi’s associates requested assistance from the Saudi embassy for thyroid treatment), and that they had no idea it was being diverted to fund the 9/11 hijackers.

After 9/11, British authorities questioned al-Bayoumi in London about the Saudi money trail to bin Laden’s hijackers. They had discovered secret papers with the private phone numbers of senior Saudi government officials concealed beneath the floorboards of his flat in London. The investigation went nowhere: al-Bayoumi was soon released, and disappeared into Saudi Arabia.” (14)

Fact is, you won’t find this addressed in any way in the final report of the 9/11 Commission. The same is true when it comes to the allegations against a man by the name of Omar Sheikh Saeed. Why should anybody bother about this man?

 

Well, Nafeez Ahmed writes:

“In his memoirs, In the Line of Fire, Gen. Musharraf revealed that Omar Sheikh Saeed was a MI6 agent who had executed certain missions on behalf of the British intelligence agency, before travelling to Pakistan and Afghanistan where he met Osama bin laden and Mullah Omar. Sheikh Saeed was first recruited by MI6 while at the London School of Economics, recounts Musharraf. The agency persuaded him to join anti-Serb demonstrations during the Bosnia conflict, and later sent him to Kosovo to join the jihad. Musharraf argues that at some point, Saeed likely became ’a rogue or double agent.’

Musharraf’s claims are no doubt self-serving, deflecting from the widely-reported fact that Sheikh Saeed was an ISI asset. But they chime with other facts in the public record. Former US Justice Department prosecutor John Loftus, for instance, who held top secret national security clearances, has confirmed that MI6 was working with leaders of the now banned British group al-Muhajiroun?—?Omar Bakri Mohammed, Abu Hamza and Haroon Rashid Aswat (who would later become bin Laden’s bodyguard)?—?to recruit British Muslims to fight in Kosovo in 1996.
Sheikh Saeed would have been part of that MI6-backed funnel. Others in Musharraf’s government were convinced that Sheikh Saeed was also a CIA asset. In a little-noted article on Saeed’s murky background in March 2002, the Pittsburgh Tribune-Review reported that: ’There are many in Musharraf’s government who believe that Saeed Sheikh’s power comes not from the ISI, but from his connections with our own CIA.’ Officials believe that ’Saeed Sheikh was bought and paid for.’” (15) At the Inter-Services Intelligence (ISI), Brigadier Ijaz Shah, the former Director-General of Intelligence Bureau of Pakistan, was “the handler for Omar Saeed Sheikh, who was involved in the kidnapping of Wall Street Journal journalist Daniel Pearl in 2002”, reported Pakistani security specialist Arif Jamal. “Omar Saeed Sheikh surrendered to Brigadier Shah who hid him for several weeks before turning him over to authorities.” (16)

 

As Nafeez Ahmed explains:

“Brig. Shah’s connection to Omar Sheikh Saeed is deeply troubling. Sheikh Saeed was not simply accused of murdering Daniel Pearl?—?he was al-Qaeda’s finance chief during the 9/11 attacks. After 9/11, Indian intelligence officials confirmed that then ISI director Gen. Mahmoud Ahmad had ordered Omar Saeed to wire at least $100,000 to the chief 9/11 hijacker, Mohammed Atta. As I documented in my books The War on Truth (2005) and The War on Freedom (2002), which was among 99 books selected for the 9/11 Commissioners to use as part of their inquiries, multiple US intelligence investigations corroborated the Indian allegations. US authorities had further confirmed that Sheikh Saeed had wired as much as $500,000 if not more to several of the 9/11 hijackers?—?all at the behest of the ISI. Despite this, US authorities took no measures to designate or extradite either Sheikh Saeed or his ISI boss, Mahmoud Ahmad. As former British Cabinet Minister Michael Meacher observed: ‘It is extraordinary that neither Ahmad nor Sheikh have been charged and brought to trial on this count [of financing 9/11]. Why not?’” (17) And John Newman, “a former executive assistant to the director of the NSA who spent 20 years in the US Army Intelligence and Security Command, pointed out that despite Sheikh Saeed’s kidnapping of British citizens and related terror offenses, he faced no indictments from the US or Britain, and was even able to travel back to London in January 2000. He had also kidnapped American citizens, but faced no indictments from the US until after 9/11.
‘Did the United States not indict Saeed Sheikh because he was a British informant? Did the agency [CIA] receive information provided by Saeed Sheikh from British or Pakistani intelligence?’ asked Newman rhetorically at a 2005 Congressional briefing on the findings of the 9/11 Commission Report.

‘This would help explain why Saeed Sheikh was not indicted and escaped justice for his crimes and traveled freely around England… If the foregoing analysis has any merit, Western intelligence agencies were receiving reports from a senior al-Qaeda source. Once again, however, al-Qaeda had used Western intelligence to accomplish its own mission. Saeed Sheikh was probably a triple agent.’ Ahmed Omar Sheikh Saeed’s role in the 9/11 attacks on behalf of the head of the ISI, Newman noted, was completely ignored by the 9/11 Commission Report.“ (18)

 

Another researcher is skeptical when it comes to the allegations that Nafeez Ahmed is talking about. His name: Peter Dale Scott. The former Professor for English at the University of California in Berkeley writes in his book, The Road to 9/11:

“In October 2001, shortly after the catastrophic events of 9/11, U.S. and British newspapers briefly alleged that the paymaster for the 9/11 attacks was a possible agent of the Pakistani intelligence service ISI, Ahmed Omar Saeed Sheikh (or Sheik Syed). There was even a brief period in which it was alleged that the money had been paid at the direction of the then ISI chief, Lieutenant-General Mahmoud Ahmad. (19) The London Guardian reported on October 1, 2001, that ’U.S. investigators believe they have found the ‘smoking gun’ linking Osama bin Laden to the September 11 terrorist attacks. . . . The man at the centre of the financial web is believed to be Sheikh Saeed, also known as Mustafa Mohamed Ahmad, who worked as a financial manager for Bin Laden when the Saudi exile was based in Sudan, and is still a trusted paymaster in Bin Laden’s alQaida organization.’ (20) This story was corroborated by CNN on October 6, citing a ’a senior-level U.S. government source’ who noted that ’Sheik Syed’ had been liberated from an Indian prison as a result of an airplane hijacking in December 1999.

The man liberated in this way was Ahmed Omar Saeed Sheikh, a notorious kidnapper raised in England and widely reported as a probable agent of the ISI. (21) One newspaper, the Pittsburgh Tribune-Review, suggested he may have been a double agent, recruited inside al Qaeda and the ISI by CIA. (22) Others have since argued that Saeed Sheikh worked for both the United States and Britain, since ’both American and British governments have studiously avoided taking any action against Sheikh despite the fact that he is a known terrorist who has targeted U.S. and UK citizens.’ (23)

Subsequent newspaper stories reported on the undoubted relationship of Saeed Sheikh to the ISI, to FBI claims that he wired $100,000 to 9/11 hijacker Mohamed Atta’s bank account, (24) to a CNN report that these funds came from Pakistan, (25) and to the uncontested statement that (as later stated in the indictment of the so-called twentieth hijacker Zacarias Moussaoui) ’on September 11, 2001, Mustafa Ahmed al-Hawsawi left the U.A.E. for Pakistan.’ (26)

The most sensational charge, alluded to earlier, came from Indian intelligence sources: that Saeed Sheikh had wired the money to Atta at the direction of Lieutenant-General Mahmoud Ahmad, then director of the ISI.” (27)

“All these important and alarming charges are ignored in the 9/11 Commission Report, in which the Saeed Sheikh born in London is not mentioned. (28) Instead, the report assured its readers in a carefully drafted comment that ’we have seen no evidence that any foreign government—or foreign government official—supplied any funding.’ (29) It was later reported, however, that ’the Pakistan foreign office had paid tens of thousands of dollars to lobbyists in the U.S. to get anti-Pakistan references dropped from the 9/11 inquiry commission report.’ (30) The U.S. government and the mainstream media’s decisions to drop the Saeed Sheikh story in October 2001 were clearly political. On September 20, 2001, President Bush delivered his memorable ultimatum to ’every nation, in every region. . . . Either you are with us, or you are with the terrorists.’ There was probably no leader for which the choice was more difficult, or the outcome more unpredictable, than General Pervez Musharraf in Pakistan. But on October 7, Musharraf fired his pro-Taliban ISI chief, General Mahmoud Ahmad, along with two other ISI leaders. (31) As the historian John Newman, a former U.S. Army Intelligence analyst, has commented: ’The stakes in Pakistan were very high. As Anthony Zinni explained to CBS on 60 Minutes, ‘Musharaf may be America’s last hope in Pakistan, and if he fails the fundamentalists will get hold of the Islamic bomb.’ Musharaf was also vital to the war effort, and was the key to neutralizing Islamists and rounding up Al Qaeda operatives in Pakistan.’ (32)

A number of books, in reporting the Saeed Sheikh story, have focused on the fact that General Ahmad was in Washington on 9/11, meeting with such senior U.S. officials as CIA director George Tenet. (33) In my opinion the mystery of 9/11 must be unraveled at a deeper level, the ongoing groups inside and outside governments, in both Pakistan and America, which have continued to use groups like al Qaeda and individuals like Ahmad, for their own policy purposes. (…) They [the relationships between these groups] are far too complex to be reduced to two or three individuals. The ongoing collaboration of the ISI and CIA in promoting terrorist violence has created a complex conspiratorial milieu, in which governments now have a huge stake in preventing the emergence of the truth.” (34)

 

The 9/11 Commission surely would have had the chance to address the issue. But again, it decided the question was “of little practical significance”.

Let me remind you on the idea of “follow the money”. Fred Shapiro, author of the book, The Yale Book of Quotations, wrote in 2011 for example: “The forthcoming Dictionary of Modern Proverbs, to be published by Yale University Press, quotes (…) a 1975 book by Clive Borrell and Brian Cashinella, Crime in Britain Today: ‘Mr. [James] Crane usually offers this piece of sound advice to all new officers joining his fraud department: ‘Always follow the money. Inevitably it will lead to an oak-paneled door and behind it will be Mr. Big.’ It is a tip that has paid off in scores of cases.’” (35)

 

The alternative catchphrase “Money trail” refers to the same idea of following the movement of money, e.g. from one person to another, from one organization to another, from one bank account to another, in order to find out what is really happening. So, why did the 9/11 Commission deem this tried and tested approach useless? Yours truly leaves the silent answer to the reader’s wisdom.

 

Best regards,

Lars Schall.

 

 

 

SOURCES:

(1) Guy Lawson: “Octopus – Sam Israel, The Secret Market, and Wall Street’s Wildest Con”, New York, Crown Publishers, 2012, page 144. On the PROMIS saga see also Cherie Seymour: “The Last Circle – Danny Casolaro’s Investigation into The Octopus and the PROMIS Software Scandal”, Walterville, TrineDay, 2011.

(2) See Norman A. Bailey: “The Strategic Plan that Won the Cold War – National Security Decision Directive 75”, published here: http://ift.tt/1TjOTPo

the-cold-war

(3) For the transcript of the PBS documentary “Follow the Money” see Lars Schall: “Follow the Money: The NSA’s real-time electronic surveillance of bank transactions”, published at LarsSchall.com on February 2nd, 2014 under: http://ift.tt/1ZMaHDX

the-nsas-real-time-electronic-surveillance-of-bank-transactions/

(4) See Tim Shorrock: “Exposing Bush’s historic abuse of power”, published at Salon on September 23, 2008 under: http://ift.tt/1v5sBUx

(5) Compare Elliot L. Richardson: “INSLAW’s ANALYSIS and REBUTTAL of the BUA REPORT:

Memorandum in Response to the March 1993 Report of Special Counsel Nicholas J. Bua to the Attorney General of the United States Responding to the Allegations of INSLAW, Inc.”, published here: http://ift.tt/1ZMaGzR

(6) David Wigg also earlier worked with William Casey when Casey headed the Export/Import Bank (1974-76).

(7) The National Security Archives at George Washington University published a collection of White House emails that Iran-Contra investigators had recovered from the Reagan National Security Council IBM mainframe computer after the NSC staff had deleted them as the Iran-Contra scandal began to unfold. See here: http://ift.tt/1TjOWus. The documents

were later also published as a book, see Tom Blanton (ed.):
“White House E-Mail: The Top Secret Computer Messages The Reagan/Bush White House Tried to Destroy”, New Press, New York, 1995. For an online reference to the email message from David Wigg to Oliver North see J. Orlin Grabbe: “Plot to Spy on Banks Outlined in White House Email”, January 2, 1997, published at Mem Research under: http://ift.tt/1ZMaGzV

(8) Guy Lawson: “Octopus”, loc. cit., page 144.

(9) See Laura Poitras, Marcel Rosenbach and Holger Stark: “’Follow the Money’: NSA Monitors Financial World”, published at Spiegel Online on September 16, 2013 under:

http://ift.tt/1ZMaHDZ…

(10) Ibid.

(11) Compare “U.S. Treasury Department Announces New Executive Office for Terrorist Financing and Financial Crimes”, published at the website of the U.S. Treasury on March 3, 2003 under:

http://ift.tt/1TjOU5G

(12) Compare Jennifer Liberto: “Treasury’s quiet war”, published at CNN on February 16, 2010

under: http://ift.tt/1TjOU5I…

(13) Jim Hogue: “Follow the Money? God forbid”, published at Baltimore Chronicle on January 29, 2008 under: http://ift.tt/1ZMaHE1.
Hogue points in this article at “an unusual surge in the currency component of the M1 money supply” in the U.S. in July and August of 2001 that was “never investigated”. Related to this specific case see also Lars Schall:

“How does ’dirty money’ become ’clean money’?”, published at
LarsSchall.com on September 27, 2012 under: http://ift.tt/1ZMaGzY…,

and Lars Schall: “9/11: Currency joins insider trade claims”, published at Asia Times Online on September 13, 2013 under: http://ift.tt/1TjOWuz

130913.html

(14) Nafeez Ahmed: “The bin Laden death mythology”, published at Insurge Intelligence on July 3, 2015 under:

http://ift.tt/1TjOU5M…

(15) Ibid.

(16) Ibid. Ahmed writes: “Jamal refers to an interview in 2000 with a Pakistani security official, who disclosed Shah’s relationship with Ahmed Omar Sheikh Saeed on condition of anonymity.”

(17) Michael Meacher: “The Pakistan connection”, published at “The Guardian” on July 22, 2004

under: http://ift.tt/1U9H6jp

(18) Nafeez Ahmed: “The bin Laden death mythology”, loc. cit.

The following footnotes from 19 to 33 are taken from Peter Dale Scott: “The Road to 9/11 – Wealth, Empire, and the Future of America”, University of California Press, Berkeley, 2007, pp. 334-335:

(19) Griffin, 9/11 Commission Report: Omissions and Distortions, 104–7; Ahmed, War on Truth, 137–44; and Peter Dale Scott, “The CIA’s Secret Powers: Afghanistan, 9/11, and America’s Most Dangerous Enemy, Critical Asian Studies 35, no. 2 (2003): 233–58.

(20) Julian Borger and John Hooper, “Trail Links Bin Laden Aide to Hijackers,” Guardian, October 1, 2001, http://ift.tt/1TjOU5O. Griffin, 9/11

Commission Report: Omissions and Distortions, 109–10. The investigators were later identified as the FBI (Wall Street Journal, October 10, 2001; CNN, October 28, 2001; and Times [London], November 16, 2001).

(21) For example, Daniel Klaidman, “Federal Grand Jury Set to Indict Sheikh,” Newsweek, March 13, 2002: U.S. officials suspect “that Sheikh has been a ‘protected asset,’ of Pakistan’s shadowy spy service, the Inter-Services Intelligence, or ISI.” The story was enhanced by Indian intelligence sources with a more sensational claim: that Saeed Sheikh had wired the money to hijacker Mohamed Atta at the direction of Lieutenant-General Mahmoud Ahmad, the director of the ISI at the time (Wall Street Journal,October 10, 2001). Indian sources later downplayed this anti-Pakistani
allegation by suggesting that the money came instead from a ransom paid to another terrorist, Aftab Ansari in Dubai, when a Kolkata businessman, Partha Roy Burman, was kidnapped in July 2001 (B. Muralidhar Reddy, “Omar Sheikh Arrested, Says Pearl Is Alive,” The Hindu, February 13, 2002).

 

(22) “Did Pearl Die Because Pakistan Deceived CIA?” Pittsburgh Tribune-Review, March 3, 2002,

http://ift.tt/1ZMaHE4 “There are many in Musharraf’s government who believe that Saeed Sheikh’s power comes not from the ISI, but from his connections with our own CIA. The theory is that with such intense pressure to locate bin Laden, Saeed Sheikh was bought and paid for.”

(23) Ahmed, War on Truth, 142; cf. John Newman, “Omissions and Errors in the Commission’s Final Report: Rep. McKinney 9/11 Congressional Briefing,” August 18, 2005,

http://ift.tt/1TjOWuD; Musharraf, In the Line of Fire,

225: “It is believed in some quarters that while Omar Sheikh was at the LSE [London School of Economics] he was recruited by the British intelligence agency MI6. It is said that MI6 persuaded him to take an active part in demonstrations against Serbian aggression in Bosnia and even sent him to Kosovo to join the jihad. At some point he probably became a rogue or double
agent.”

(24) Maria A. Ressa, “India Wants Terror Spotlight on Kashmir,” CNN, October 8, 2001,

http://ift.tt/1ZMaGA2.

(25) “Sources: Suspected Terrorist Leader Was Wired Funds through Pakistan,” CNN, October 1, 2001, http://ift.tt/1TjOU5S: “As much as $100,000 was wired in the past year from Pakistan to Mohamed Atta.” Subsequent developments lent weight to the Pakistani connection, such as the arrest of Atta’s alleged controls, Ramzi Binalshibh and Khalid Shaikh Mohammed, in Pakistan.

(26) United States District Court for the Eastern District of Virginia, Alexandria Division. United States of America v. Zacarias Moussaoui, #108.

(27) “India Helped FBI Trace ISI-Terrorist Links,” Times of India, October 9, 2001; Wall Street Journal, October 10, 2001.

(28) The appendixes note, in a list of names, a “Sheikh Saeed al Masri” as an “Egyptian; head of al Qaeda finance committee.” Instead, following a previous reversal in the U.S. media, the financial role attributed earlier to Sheikh Saeed is now given to “Mustafa al Hawsawi,” the name (or pseudonym) used for the financial transactions (9/11 Commission Report, 436). The only
reference to any Sheikh Saeed in the text says that the Egyptian (or Kenyan) Sheikh Saeed “argued that al

Qaeda should defer to the Taliban’s wishes” and not attack the United States directly (9/11 Commission Report, 251). The report treats Sheikh Saeed and al-Hawsawi as two people, whereas earlier they had been identified in U.S. media reports as the same person.

(29) 9/11 Commission Report, 172.

(30) “Pakistan Weekly Spills 9/11 Beans,” Telegraph (Calcutta), March 13, 2006,

http://ift.tt/1ZMaGQg. The Telegraph story cited the Friday Times, a Pakistani weekly, which claimed the story was based on “disclosures made by foreign service officials to the Public Accounts Committee at a secret meeting in Islamabad.”

(31) Kamran Khan and Molly Moore, “Leader Purges Top Ranks of Military, Spy Services,” Washington Post, October 8, 2001; Thompson, Terror Timeline, 260–61. It was widely reported that Mahmoud was let go for being too sympathetic to the Taliban (for example, Alan Sipress and Vernon Loeb, “CIA’s Stealth War Centers on Eroding Taliban Loyalty and Aiding Opposition,” Washington
Post, October 10, 2001).

(32) Newman, “Omissions and Errors in the Commission’s Final Report.”

(33) For example, Ahmed, War on Truth, 137–46; Griffin, 9/11 Commission Report: Omissions and Distortions, 103–9.

(34) Peter Dale Scott: “The Road to 9/11”, loc. cit., pp. 132-134.

(35) See Fred Shapiro: “Follow the Money”, published at Freakonomics on September 23, 2011

under: http://ift.tt/1u2WYKO


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From Democracy To Pathocracy: The Rise Of The Political Psychopath

Submitted by John Whitehead via The Rutherford Institute,

Politicians are more likely than people in the general population to be sociopaths. I think you would find no expert in the field of sociopathy/psychopathy/antisocial personality disorder who would dispute this… That a small minority of human beings literally have no conscience was and is a bitter pill for our society to swallow — but it does explain a great many things, shamelessly deceitful political behavior being one.”—Dr. Martha Stout, clinical psychologist and former instructor at Harvard Medical School

Twenty years ago, a newspaper headline asked the question: What’s the difference between a politician and a psychopath?

The answer, then and now, remains the same: None.

There is no difference between psychopaths and politicians.

Nor is there much of a difference between the havoc wreaked on innocent lives by uncaring, unfeeling, selfish, irresponsible, parasitic criminals and elected officials who lie to their constituents, trade political favors for campaign contributions, turn a blind eye to the wishes of the electorate, cheat taxpayers out of hard-earned dollars, favor the corporate elite, entrench the military industrial complex, and spare little thought for the impact their thoughtless actions and hastily passed legislation might have on defenseless citizens.

Psychopaths and politicians both have a tendency to be selfish, callous, remorseless users of others, irresponsible, pathological liars, glib, con artists, lacking in remorse and shallow.

Charismatic politicians, like criminal psychopaths, exhibit a failure to accept responsibility for their actions, have a high sense of self-worth, are chronically unstable, have socially deviant lifestyle, need constant stimulation, have parasitic lifestyles and possess unrealistic goals.

It doesn’t matter whether you’re talking about Democrats or Republicans.

Political psychopaths are all largely cut from the same pathological cloth, brimming with seemingly easy charm and boasting calculating minds. Such leaders eventually create pathocracies—totalitarian societies bent on power, control, and destruction of both freedom in general and those who exercise their freedoms.

Once psychopaths gain power, the result is usually some form of totalitarian government or a pathocracy. “At that point, the government operates against the interests of its own people except for favoring certain groups,” author James G. Long notes. “We are currently witnessing deliberate polarizations of American citizens, illegal actions, and massive and needless acquisition of debt. This is typical of psychopathic systems, and very similar things happened in the Soviet Union as it overextended and collapsed.”

In other words, electing a psychopath to public office is tantamount to national hara-kiri, the ritualized act of self-annihilation, self-destruction and suicide. It signals the demise of democratic government and lays the groundwork for a totalitarian regime that is legalistic, militaristic, inflexible, intolerant and inhuman.

So why do we keep doing it over and over again?

There’s no shortage of dire warnings about the devastation that could be wrought if any one of the current crop of candidates running for the White House gets elected. Yet where the doomsayers go wrong is by ignoring the damage that has already been inflicted on our nation and its citizens by a psychopathic government.

According to investigative journalist Zack Beauchamp, “In 2012, a group of psychologists evaluated every President from Washington to Bush II using ‘psychopathy trait estimates derived from personality data completed by historical experts on each president.’ They found that presidents tended to have the psychopath’s characteristic fearlessness and low anxiety levels — traits that appear to help Presidents, but also might cause them to make reckless decisions that hurt other people’s lives.”

The willingness to prioritize power above all else, including the welfare of their fellow human beings, ruthlessness, callousness and an utter lack of conscience are among the defining traits of the sociopath.

When our own government no longer sees us as human beings with dignity and worth but as things to be manipulated, maneuvered, mined for data, manhandled by police, conned into believing it has our best interests at heart, mistreated, jailed if we dare step out of line, and then punished unjustly without remorse—all the while refusing to own up to its failings—we are no longer operating under a constitutional republic.

Instead, as I point out in my book Battlefield America: The War on the American People, what we are experiencing is a pathocracy: tyranny at the hands of a psychopathic government, which “operates against the interests of its own people except for favoring certain groups.”

Worse, psychopathology is not confined to those in high positions of government. It can spread like a virus among the populace. As an academic study into pathocracy concluded, “[T]yranny does not flourish because perpetuators are helpless and ignorant of their actions. It flourishes because they actively identify with those who promote vicious acts as virtuous.”

People don’t simply line up and salute. It is through one’s own personal identification with a given leader, party or social order that they become agents of good or evil.

Much depends on how leaders “cultivate a sense of identification with their followers,” says Professor Alex Haslam. “I mean one pretty obvious thing is that leaders talk about ‘we’ rather than ‘I,’ and actually what leadership is about is cultivating this sense of shared identity about ‘we-ness’ and then getting people to want to act in terms of that ‘we-ness,’ to promote our collective interests. . . . [We] is the single word that has increased in the inaugural addresses over the last century . . . and the other one is ‘America.’”

The goal of the modern corporate state is obvious: to promote, cultivate, and embed a sense of shared identification among its citizens. To this end, “we the people” have become “we the police state.”

We are fast becoming slaves in thrall to a faceless, nameless, bureaucratic totalitarian government machine that relentlessly erodes our freedoms through countless laws, statutes, and prohibitions.

Any resistance to such regimes depends on the strength of opinions in the minds of those who choose to fight back. What this means is that we the citizenry must be very careful that we are not manipulated into marching in lockstep with an oppressive regime.

Writing for ThinkProgress, Beauchamp suggests that “one of the best cures to bad leaders may very well be political democracy.” He advocates for the media holding politicians accountable for their actions and the actions of their staff. While psychopaths may not care about how their actions harm other people, notes Beauchamp, “they very much do care about being able to hold on to their positions of power. A system that actually holds people accountable to the broader conscience of society may be one of the best ways to keep conscienceless people in check.”

That said, if we allow the ballot box to become our only means of pushing back against the police state, the battle is already lost.

Resistance will require a citizenry willing to be active at the local level.

If you wait to act until the SWAT team is crashing through your door, until your name is placed on a terror watch list, until you are reported for such outlawed activities as collecting rainwater or letting your children play outside unsupervised, then it will be too late.

This much I know: we are not faceless numbers. We are not cogs in the machine. We are not slaves.

We are human beings, and for the moment, we have the opportunity to remain free—that is, if we tirelessly advocate for our rights and resist at every turn attempts by the government to place us in chains.

The Founders understood that our freedoms do not flow from the government. They were not given to us only to be taken away by the will of the State. They are inherently ours. In the same way, the government’s appointed purpose is not to threaten or undermine our freedoms, but to safeguard them.

Until we can get back to this way of thinking, until we can remind our fellow Americans what it really means to be a free American, and until we can learn to stand our ground in the face of threats to those freedoms and encourage our fellow citizens to stop being cogs in the machine, we will continue to be treated like slaves in thrall to a bureaucratic police state run by political psychopaths.


via Zero Hedge http://ift.tt/1Rz9rPk Tyler Durden