Friday, December 18, 2009

Copenhagen climate conference: Hillary Clinton backs idea for $100bn global fund

Hillary Clinton has given US backing to proposals for a $100 billion-a-year international fund to tackle global warming in developing countries in a boost for deadlocked talks at the climate change summit in Copenhagen.

Hillary Clinton, the secretary of state, offered $100 billion from the US for the countries most affected by climate change

The US Secretary of State said the science for climate change is now “undeniable” and the world must agree a deal in the next 48 hours.

In a move that will widely be seen as a grand gesture to force developing countries to sign up to a deal, she said the US would be willing to pay into a global fund of $100 billion (£60bn) per year by 2020 to help the “most vulnerable” adapt to floods and droughts.

But she said the money would only be offered on the condition that major developing nations such as China and India agree to “transparent” actions on cutting emission.

“In the context of a strong accord in which all major economies stand by meaningful mitigation actions and provide full transparency as to their implementation, the US is prepared to work with other countries to mobilise $100 billion by 2020 to address climate change needs in developing countries,” she said.

The $100 billion fund was first suggested by Gordon Brown in June this year and America’s offer will boost the UK Prime Minister's credentials abroad.

Are Americans a Broken People? Why We’ve Stopped Fighting Back Against the Forces of Oppression

Are Americans a Broken People? Why We’ve Stopped Fighting Back Against the Forces of Oppression

Bruce E. Levine
Thursday, Dec 17th, 2009

A psychologist asks: Have consumerism, suburbanization and a malevolent corporate-government partnership so beaten us down that we no longer have the will to save ourselves?

Can people become so broken that truths of how they are being screwed do not “set them free” but instead further demoralize them? Has such a demoralization happened in the United States?

Do some totalitarians actually want us to hear how we have been screwed because they know that humiliating passivity in the face of obvious oppression will demoralize us even further?

What forces have created a demoralized, passive, dis-couraged U.S. population?

Can anything be done to turn this around?

Can people become so broken that truths of how they are being screwed do not “set them free” but instead further demoralize them?

Yes. It is called the “abuse syndrome.” How do abusive pimps, spouses, bosses, corporations, and governments stay in control? They shove lies, emotional and physical abuses, and injustices in their victims’ faces, and when victims are afraid to exit from these relationships, they get weaker. So the abuser then makes their victims eat even more lies, abuses, and injustices, resulting in victims even weaker as they remain in these relationships.

Does knowing the truth of their abuse set people free when they are deep in these abuse syndromes?

No. For victims of the abuse syndrome, the truth of their passive submission to humiliating oppression is more than embarrassing; it can feel shameful — and there is nothing more painful than shame. When one already feels beaten down and demoralized, the likely response to the pain of shame is not constructive action, but more attempts to shut down or divert oneself from this pain. It is not likely that the truth of one’s humiliating oppression is going to energize one to constructive actions.

Has such a demoralization happened in the U.S.?

In the United States, 47 million people are without health insurance, and many millions more are underinsured or a job layoff away from losing their coverage. But despite the current sellout by their elected officials to the insurance industry, there is no outpouring of millions of U.S. citizens on the streets of Washington, D.C., protesting this betrayal.

Polls show that the majority of Americans oppose U.S. wars in Afghanistan and Iraq as well as the taxpayer bailout of the financial industry, yet only a handful of U.S. citizens have protested these circumstances.

Remember the 2000 U.S. presidential election? That’s the one in which Al Gore received 500,000 more votes than George W. Bush. That’s also the one that the Florida Supreme Court’s order for a recount of the disputed Florida vote was overruled by the U.S. Supreme Court in a politicized 5-4 decision, of which dissenting Justice John Paul Stevens remarked: “Although we may never know with complete certainty the identity of the winner of this year’s presidential election, the identity of the loser is perfectly clear. It is the nation’s confidence in the judge as an impartial guardian of the rule of law.” Yet, even this provoked few demonstrators.

Are Americans a Broken People? Why Weve Stopped Fighting Back Against the Forces of Oppression 031209banner2

When people become broken, they cannot act on truths of injustice. Furthermore, when people have become broken, more truths about how they have been victimized can lead to shame about how they have allowed it. And shame, like fear, is one more way we become even more psychologically broken.

U.S. citizens do not actively protest obvious injustices for the same reasons that people cannot leave their abusive spouses: They feel helpless to effect change. The more we don’t act, the weaker we get. And ultimately to deal with the painful humiliation over inaction in the face of an oppressor, we move to shut-down mode and use escape strategies such as depression, substance abuse, and other diversions, which further keep us from acting. This is the vicious cycle of all abuse syndromes.

Do some totalitarians actually want us to hear how we have been screwed because they know that humiliating passivity in the face of obvious oppression will demoralize us even further?


Shortly before the 2000 U.S. presidential election, millions of Americans saw a clip of George W. Bush joking to a wealthy group of people, “What a crowd tonight: the haves and the haves-more. Some people call you the elite; I call you my base.” Yet, even with these kind of inflammatory remarks, the tens of millions of U.S. citizens who had come to despise Bush and his arrogance remained passive in the face of the 2000 non-democratic presidential elections.

Perhaps the “political genius” of the Bush-Cheney regime was in their full realization that Americans were so broken that the regime could get away with damn near anything. And the more people did nothing about the boot slamming on their faces, the weaker people became.

What forces have created a demoralized, passive, dis-couraged U.S. population?

The U.S. government-corporate partnership has used its share of guns and terror to break Native Americans, labor union organizers, and other dissidents and activists. But today, most U.S. citizens are broken by financial fears. There is potential legal debt if we speak out against a powerful authority, and all kinds of other debt if we do not comply on the job. Young people are broken by college-loan debts and fear of having no health insurance.

The U.S. population is increasingly broken by the social isolation created by corporate-governmental policies. A 2006 American Sociological Review study (”Social Isolation in America: Changes in Core Discussion Networks over Two Decades”) reported that, in 2004, 25 percent of Americans did not have a single confidant. (In 1985, 10 percent of Americans reported not having a single confidant.) Sociologist Robert Putnam, in his 2000 book, Bowling Alone, describes how social connectedness is disappearing in virtually every aspect of U.S. life. For example, there has been a significant decrease in face-to-face contact with neighbors and friends due to suburbanization, commuting, electronic entertainment, time and money pressures and other variables created by governmental-corporate policies. And union activities and other formal or informal ways that people give each other the support necessary to resist oppression have also decreased.

We are also broken by a corporate-government partnership that has rendered most of us out of control when it comes to the basic necessities of life, including our food supply. And we, like many other people in the world, are broken by socializing institutions that alienate us from our basic humanity. A few examples:

Schools and Universities: Do most schools teach young people to be action-oriented — or to be passive? Do most schools teach young people that they can affect their surroundings — or not to bother? Do schools provide examples of democratic institutions — or examples of authoritarian ones?

A long list of school critics from Henry David Thoreau to John Dewey, John Holt, Paul Goodman, Jonathan Kozol, Alfie Kohn, Ivan Illich, and John Taylor Gatto have pointed out that a school is nothing less than a miniature society: what young people experience in schools is the chief means of creating our future society. Schools are routinely places where kids — through fear — learn to comply to authorities for whom they often have no respect, and to regurgitate material they often find meaningless. These are great ways of breaking someone.

Today, U.S. colleges and universities have increasingly become places where young people are merely acquiring degree credentials — badges of compliance for corporate employers — in exchange for learning to accept bureaucratic domination and enslaving debt.

Mental Health Institutions: Aldous Huxley predicted today’s pharmaceutical societyl “[I]t seems to me perfectly in the cards,” he said, “that there will be within the next generation or so a pharmacological method of making people love their servitude.”

Today, increasing numbers of people in the U.S. who do not comply with authority are being diagnosed with mental illnesses and medicated with psychiatric drugs that make them less pained about their boredom, resentments, and other negative emotions, thus rendering them more compliant and manageable.

Oppositional defiant disorder (ODD) is an increasingly popular diagnosis for children and teenagers. The official symptoms of ODD include, “often actively defies or refuses to comply with adult requests or rules,” and “often argues with adults.” An even more common reaction to oppressive authorities than the overt defiance of ODD is some type of passive defiance — for example, attention deficit hyperactivity disorder (ADHD). Studies show that virtually all children diagnosed with ADHD will pay attention to activities that they actually enjoy or that they have chosen. In other words, when ADHD-labeled kids are having a good time and in control, the “disease” goes away.

When human beings feel too terrified and broken to actively protest, they may stage a “passive-aggressive revolution” by simply getting depressed, staying drunk, and not doing anything — this is one reason why the Soviet empire crumbled. However, the diseasing/medicalizing of rebellion and drug “treatments” have weakened the power of even this passive-aggressive revolution.

Television: In his book Four Arguments for the Elimination of Television (1978), Jerry Mander (after reviewing totalitarian critics such as George Orwell, Aldous Huxley, Jacques Ellul, and Ivan Illich) compiled a list of the “Eight Ideal Conditions for the Flowering of Autocracy.”

Mander claimed that television helps create all eight conditions for breaking a population. Television, he explained, (1) occupies people so that they don’t know themselves — and what a human being is; (2) separates people from one another; (3) creates sensory deprivation; (4) occupies the mind and fills the brain with prearranged experience and thought; (5) encourages drug use to dampen dissatisfaction (while TV itself produces a drug-like effect, this was compounded in 1997 the U.S. Food and Drug Administration relaxing the rules of prescription-drug advertising); (6) centralizes knowledge and information; (7) eliminates or “museumize” other cultures to eliminate comparisons; and (8) redefines happiness and the meaning of life.

Commericalism of Damn Near Everything: While spirituality, music, and cinema can be revolutionary forces, the gross commercialization of all of these has deadened their capacity to energize rebellion. So now, damn near everything – not just organized religion — has become “opiates of the masses.”

The primary societal role of U.S. citizens is no longer that of “citizen” but that of “consumer.” While citizens know that buying and selling within community strengthens that community and that this strengthens democracy, consumers care only about the best deal. While citizens understand that dependency on an impersonal creditor is a kind of slavery, consumers get excited with credit cards that offer a temporarily low APR.

Consumerism breaks people by devaluing human connectedness, socializing self-absorption, obliterating self-reliance, alienating people from normal human emotional reactions, and by selling the idea that purchased products — not themselves and their community — are their salvation.

Can anything be done to turn this around?

When people get caught up in humiliating abuse syndromes, more truths about their oppressive humiliations don’t set them free. What sets them free is morale.

What gives people morale? Encouragement. Small victories. Models of courageous behaviors. And anything that helps them break out of the vicious cycle of pain, shut down, immobilization, shame over immobilization, more pain, and more shut down.

The last people I would turn to for help in remobilizing a demoralized population are mental health professionals — at least those who have not rebelled against their professional socialization. Much of the craft of relighting the pilot light requires talents that mental health professionals simply are not selected for nor are they trained in. Specifically, the talents required are a fearlessness around image, spontaneity, and definitely anti-authoritarianism. But these are not the traits that medical schools or graduate schools select for or encourage.

Mental health professionals’ focus on symptoms and feelings often create patients who take themselves and their moods far too seriously. In contrast, people talented in the craft of maintaining morale resist this kind of self-absorption. For example, in the question-and-answer session that followed a Noam Chomsky talk (reported in Understanding Power: The Indispensable Chomsky, 2002), a somewhat demoralized man in the audience asked Chomsky if he too ever went through a phase of hopelessness. Chomsky responded, “Yeah, every evening . . .”

If you want to feel hopeless, there are a lot of things you could feel hopeless about. If you want to sort of work out objectively what’s the chance that the human species will survive for another century, probably not very high. But I mean, what’s the point? . . . First of all, those predictions don’t mean anything — they’re more just a reflection of your mood or your personality than anything else. And if you act on that assumption, then you’re guaranteeing that’ll happen. If you act on the assumption that things can change, well, maybe they will. Okay, the only rational choice, given those alternatives, is to forget pessimism.”

A major component of the craft of maintaining morale is not taking the advertised reality too seriously. In the early 1960s, when the overwhelming majority in the U.S. supported military intervention in Vietnam, Chomsky was one of a minority of U.S. citizens actively opposing it. Looking back at this era, Chomsky reflected, “When I got involved in the anti-Vietnam War movement, it seemed to me impossible that we would ever have any effect. . . So looking back, I think my evaluation of the ‘hope’ was much too pessimistic: it was based on a complete misunderstanding. I was sort of believing what I read.”

An elitist assumption is that people don’t change because they are either ignorant of their problems or ignorant of solutions. Elitist “helpers” think they have done something useful by informing overweight people that they are obese and that they must reduce their caloric intake and increase exercise. An elitist who has never been broken by his or her circumstances does not know that people who have become demoralized do not need analyses and pontifications. Rather the immobilized need a shot of morale.

Rangel Introduces Mutual Fund Tax and Regulation Bill

House Ways & Means Committee Chair Charles Rangel (D-NY) and Subcommittee on Select Revenue Measures Chair Richard Neal (D-MA) yesterday introduced H.R. 4337, the Regulated Investment Company Modernization Act of 2009. The press release outlined the three goals of the legislation:

  1. Modernization: The tax rules that relate to RICs date back more than a half century. Although these rules have been updated from time to time, it has been over twenty years since these rules were last revisited. In that time many changes have occurred that eliminate the need for certain rules, including rules that prevent mutual funds from earning income from commodities, rules that relate to preferential dividends, and rules that require mutual funds to send separate annual dividend designation requirements to shareholders.
  2. Excise tax interactions: In 1986, Congress enacted an excise tax on the undistributed income of RICs. Over the past twenty years, mutual funds have identified a number of instances in which interactions between this excise tax and other tax rules can create problems for mutual funds and their shareholders. The bill would make a number of technical changes that would seek to remedy these interactions.
  3. Corporate tax interactions: Mutual funds are subject to special tax rules that only apply to regulated investment companies under the tax code. However, mutual funds are also subject to the general corporate tax rules that apply to redemptions and dividends. Sometimes, the interaction between these two sets of rules can create problems for mutual funds and their shareholders. The bill would make a number of technical changes that would seek to remedy the adverse effects of these interactions.

Prior TaxProf Blog coverage: Reforming the Taxation and Regulation of Mutual Funds (Oct. 14, 2009)

S&P downgrades Greece while concerns mount over secret defence budget

Standard & Poor’s has become the second rating agency to downgrade Greek sovereign debt to near junk levels of BBB+, issuing a withering verdict on Spartan plans unveiled this week by premier George Papandreou.

Greece has refused to release key information about its large defence budget
Greece has refused to release key information about its large defence budget

“The downgrade reflects our opinion that the measures to reduce the high fiscal deficit are unlikely, on their own, to lead to a sustainable reduction in the public debt burden. If political considerations and social pressures hamper progress, we could lower the ratings further,” it said.

The move came as Spyros Papanikolaou, head of Greece’s Public Debt Management Agency, held back-to-back meetings with bankers in London in a bid to stop the crisis spiralling out of control.

Yields on 10-year Greek bonds surged to 5.75pc, a spread of 254 basis points over German Bunds. Borrowing costs are nearing levels that risk setting off an interest compound spiral. The public debt is already 113pc of GDP. S&P said it is likely to reach 138pc by 2012. “The increasing debt-service burden narrows the scope for debt stabilization,” it said.

Fitch Ratings precipitated the Greek crisis earlier this month with a surprisingly harsh downgrade to BBB+, accompanied by a “negative outlook”.

It emerged yesterday that Greece had raised €2bn (£1.77bn) at a premium of 30 basis points in a private placement shortly after the Fitch move, avoiding the public glare of an auction.

To make matters worse, there were fresh concerns yesterday about the true scale of Greek military spending, which is kept off the books of the debt agency.

“Greek military accounts seem to be regarded as a state secret,” said Chris Pryce, Fitch’s director of sovereign ratings.

“In every other EU country we can find out how much they spend on defence, but we don’t know for Greece. All we know is that their military spending is very large, around 5pc of GDP,” he said.

Analysts who have probed deeply into Greek accounts have been astonished to discover that parts of the public sector lack double-entry book-keeping, 700 years after it was invented by the Venetians.

Given Greece has misled the bond markets and Brussels in the past over its deficits, analysts suspect that Athens may try to hide problems behind a military veil. Mr Papandreou admits that Greece has lost “every shred of credibility”.

Greece has already cut defence this year. It announced in September that it would not take delivery of four submarines built by ThyssenKrupp, alleging technical faults. This has led to accusations Athens is effectively defaulting on a €520m contract. Last week it cancelled tenders for a flight of maritime aircraft worth up to €250m.

The Greek military, especially the air force, is highly regarded by NATO, but its size is increasingly hard to justify as tensions ease with rival Turkey.

Mr Pryce said that the austerity measures promised this week by Mr Papandreou were too vague to reassure the markets, even though they were enough to set off a wave of strikes, kicked off by teachers yesterday.

The refusal to reduce the wages of most public employees contrasts sharply with Ireland, where public pay was cut 7pc in April and will be cut 6pc more in January, the most wrenching adjustment in a modern economy since the 1930s.

“There is a lack of substance. The danger for the Greek government is that public pay becomes an icon for the market. The contrast with Ireland is something that all traders have noticed,” Mr Pryce said.

As Goldman Thrives, Some Say an Ethos Has Faded

Just over a week ago, on the evening of Dec. 7, Lloyd C. Blankfein hosted a reunion of one of the most elite clubs in American finance: former partners of Goldman Sachs, the Wall Street giant he has led, with remarkable and controversial success, since 2006.

The gathering, held at the venerable New York Athletic Club, both celebrated Goldman’s past and looked toward its future. What, Mr. Blankfein was asked, did he want his legacy to be?

Mr. Blankfein replied that like his predecessors, he hoped to position Goldman Sachs to capitalize on whatever opportunities might arise during his tenure. As bland as that might sound, few on or off Wall Street have seized opportunities in these troubled economic times as skillfully as Mr. Blankfein.

But as President Obama prods the financial industry to do more to help ordinary Americans — he chided “fat cat bankers” on Sunday for increasing their pay — some current and former Goldman executives say Mr. Blankfein has built a money machine that, while it still values its customers, culture and reputation, puts profits above all.

Interviews with nearly 20 current and former Goldman partners paint a portrait of a bank driven by hard-charging traders like Mr. Blankfein, who wager vast sums in world markets in hopes of quick profits. Discreet bankers who give advice to corporate clients and help them raise capital — once a major source of earnings for Goldman — have been eclipsed, these people said.

Mr. Blankfein has surrounded himself with a tight circle of executives drawn from Goldman’s trading operation. Many of these executives, like Mr. Blankfein, cut their teeth in the commodities division, J. Aron & Company. Gary D. Cohn, Goldman’s president, as well as the heads of the bank’s asset management division, are J. Aron alumni. So is the head of human resources.

With the traders ascendant, Goldman’s bankers are being urged to generate bigger profits. In what former partners called a significant shift, Goldman now uses “profiles” to track how much money its bankers are bringing in.

Granted, money is what makes Wall Street run, and Goldman Sachs is no exception.

“I don’t buy the argument that the old Goldman was more principled and less greedy,” said Arthur Levitt, a Goldman adviser and former chairman of the Securities and Exchange Commission.

But even Goldman concedes it is changing with the times. “This business is all about serving clients, and if you don’t evolve, you die,” said Lucas van Praag, a Goldman spokesman.

After first guiding Goldman through the near collapse of the nation’s financial system and then deftly extricating his bank from a federal bailout, Mr. Blankfein is now presiding over one of the richest periods in the bank’s 140-year history. Mr. Blankfein has accelerated a decade-long decline of Goldman’s old partnership ethos, which was built around the principle that its bankers and traders can do well — indeed, very well — while putting their customers first, former partners said.

Some Goldman alumni worry that Mr. Blankfein is jeopardizing the culture of success that defined the bank for much of its modern history. They wonder if Goldman will become, as one former partner put it, “just like every other bank on Wall Street” — that is, focused on short-term profits rather than long-term gains.

Publicly, Mr. Blankfein espouses the Goldman Sachs way. But privately, current and former partners say that he has fundamentally changed the way Goldman views its customers and the broader marketplace. The changes began when Goldman went public in the late 1990s, but have accelerated under Mr. Blankfein, they say.

None of these people were willing to speak out publicly about Goldman, which, for most of them, has been the source of sizable fortunes.

Bowing to pressure from shareholders and the public to rein in runaway pay on Wall Street, Goldman announced last week that its top executives, including Mr. Blankfein, would forgo cash bonuses this year. Instead, the executives will be paid in the form of special stock — an arrangement that, while eliminating big paydays this year, nonetheless may turn out to be enormously lucrative if Goldman’s share prices rises in the future.

Even so, many Goldman employees are stunned by the public resentment directed at the bank in general and Mr. Blankfein in particular, who, after first steadfastly defending Goldman’s profits and pay, recently offered a vague apology for “mistakes” that led to the financial crisis.

“Would John Weinberg ever be in this situation?” asked one former partner, referring to the legendary senior partner who ran Goldman for many years. “No way. He would have thought about the firm over 50, 100 years, not what people will get paid this year.”

Since the modern Goldman emerged during the Depression, its executives have cultivated a ruthless professionalism tempered by what might best be described as Goldman Sachs Exceptionalism: a sense that Goldman stands apart from, if not above, Wall Street rivals.

This sense, strengthened by a tradition of government service among senior executives, runs deep inside the bank’s headquarters at 85 Broad Street in Lower Manhattan. Indeed, from the day they arrive, employees are steeped in the firm’s 14 principles. No. 1 is: “Our clients’ interests always come first. Our experience shows that if we serve our clients well, our own success will follow.”

Almost from the start, however, two camps inside Goldman competed for profits and power: investment bankers and traders.

Today, the traders — Mr. Blankfein’s camp — are firmly in power. While Goldman employs nearly 31,000 people, in business ranging from money management to traditional investment banking, the bank makes the bulk of its money from trading. Mr. van Praag said 50 percent of Goldman’s revenue came from fees that it charged for services like investment banking. The other half is generated by Goldman, using its capital for itself and its clients. While Mr. Blankfein’s traders are minting money, his investment bankers are being pressed to keep a closer eye on the bottom line. Bankers who once spent years cultivating corporate clients in hopes of one day landing lucrative work like advising on a big merger, are now being urged to squeeze more revenue from their customers.

In 2006, Jon Winkelried, a Blankfein lieutenant who was then Goldman’s co-president, stunned some bankers by suggesting that the bank make more money from its powerful corporate customers. One goal was to have Goldman wear several hats in deals, for example, by advising on a merger, financing it and investing in the transaction.

Mr. Winkelried and executives under Mr. Blankfein changed the way investment bankers were measured. Goldman instituted banker “profiles,” a sort of daily profit and loss statement, to see how much business its employees and clients were doing. While such assessments have long been common elsewhere on Wall Street, Goldman disdained them until Mr. Blankfein became chairman and chief executive.

Mr. Winkelried, who has since left Goldman, declined to comment for this article.

The shift had two effects, Goldman bankers said: It focused employees on the customers who might generate the most money for Goldman, and it prompted bankers to fight more aggressively for credit for their deals.

“It was more efficient,” one former partner said. “But it changed the way we ran the business.”

Mr. van Praag, the Goldman spokesman, said that banker scorecards were traditionally used only for so-called relationship bankers, who cultivate customers over time. But starting in 2001, investment bankers became responsible for a wider array of products — debt, complicated securitized products, and other types of financing — and the new system kept a tally on all their activities, not just advisory work with clients.

The profiles update automatically with revenue tallies. Bankers may review them at any time.

Former partners said that while Goldman had always sought to maximize profits, the bank used to take a longer-term view. For instance, if a corporation that Goldman was advising decided against a merger, the bank would not necessarily drop the customer, figuring that it might reap profits from a deal in the future.

“You probably had a little more tolerance for longer-term perspective,” one former partner said.

Given Goldman’s plans to pay out billions of dollars in bonuses this year, many outsiders might think the bank pays little attention to its public image. In fact, current and former executives say, Goldman is acutely aware of its diminished public standing.

But even people close to Goldman acknowledge that as long as the bank is making a lot of money, public opinion does not matter all that much.

“Their reputation has suffered,” Mr. Levitt said. “So has every other financial institution. And I’d rather suffer the way Goldman suffers.”

Still, Goldman’s tarnished reputation has become a hot topic inside the bank. A few months ago, at a meeting of Goldman’s in-house leadership program, known as the Pine Street Group, the bank’s image came up. The group of 30-odd people wrestled with questions like how to talk to family members about Goldman and its role in the financial world.

Another question that came up was what to do if someone at a cocktail party started criticizing Goldman. Mr. van Praag, who ran the meeting, suggested that the executives should explain how Goldman made its money. But another Goldman executive offered a different answer: change the subject.


Former Managing Director of Goldman Sachs: Accounting Fraud of the Too Big to Fails May Be Worse Than Enron

Nomi Prins - former managing director of Goldman Sachs and head of the international analytics group at Bear Stearns in London - is saying the same thing that financial bloggers have been saying: The giant banks are manipulating their books to make themselves look profitable.

In fact, Prins says that this might be worse than the fraud which occurred at Enron:

Enron was the financial scandal that kicked off the decade: a giant energy trading company that appeared to be doing brilliantly—until we finally noticed that it wasn’t. It’s largely been forgotten given the wreckage that followed, and that’s too bad: we may be repeating those mistakes, on a far larger scale.

Specifically, as the largest Wall Street banks return to profitability—in some cases, breaking records—they say everything is rosy. They’re lining up to pay back their TARP money and asking Washington to back off. But why are they doing so well? Remember that Enron got away with their illegalities so long because their financials were so complicated that not even the analysts paid to monitor the Houston-based trading giant could cogently explain how they were making so much money.

Surely someone with Prins' financial background can sort out the accounting of the TBTFs?

In fact, no:

After two weeks sifting through over one thousand pages of SEC filings for the largest banks, I have the same concerns. While Washington ponders what to do, or not do, about reforming Wall Street, the nation’s biggest banks, plumped up on government capital and risk-infused trading profits, have been moving stuff around their balance sheets like a multi-billion dollar musical chairs game.

I was trying to answer the simple question that you'd think regulators should want to know: how much of each bank’s revenue is derived from trading (taking risk) vs. other businesses? And how can you compare it across the industry—so you can contain all that systemic risk?
The giant banks have played so many games of massaging numbers (see this), hiding losses off the books (see this) and - as Prins documents - failing to report core data and shuffling things around so that it is impossible to tell what they are doing.

Indeed, financial writers (like Reggie Middleton, Mike Shedlock, Tyler Durden, Karl Denninger and others) who have dug deep and analyzed the underlying data say that the giant banks are totally insolvent. This wouldn't be the first time that the biggest banks went bust and then covered it up over a period of many years.

Prins offers a solution:

The long-term solution is bringing back Glass-Steagall. Being big doesn’t just risk bringing down a financial system—it means you can also more easily hide things. Remember the lesson from the Enron saga: when things look too good to be true, they usually are.

Yes, and break up the too big to fails.

In addition, Congresswoman Marcy Kaptur, Tarp overseer Elizabeth Warren, prominent economists such as James Galbraith, Simon Johnson, Max Wolff and William Black, and financial experts such as Janet Tavakoli have all said that fraud was a primary cause of the financial crisis.

Galbraith and others say that unless past fraud is prosecuted so that Americans trust that the system is fair, the economy will not stabilize.

By allowing the giant banks' shenanigans to continue, the government is guaranteeing that the economy cannot truly recover.

Alistair Darling in cover-up scandal as he is accused of not revealing full extent of Britain's debt

Alistair Darling has been accused of covering up horrifying figures showing interest payments alone on Britain's vast national debt will soon be twice the defence budget.

The Chancellor told MPs that the Treasury had made 'estimates' of increases to the debt interest bill - which experts predict will hit £70billion to £80billion a year within five years - but refused to release them to Parliament.

The Institute for Fiscal Studies, Britain's most respected economic forecaster, has given projections to MPs suggesting the debt interest bill will hit £60billion by 2012/13, £66billion by 2013/14 and £71billion by 2014/15.

Mr Darling also declined to reveal Treasury 'assumptions' showing deep cuts to public spending outside of Labour's protected areas of schools, hospitals and police numbers, despite demands to do so from the Treasury select committee.

The Chancellor caused surprise by saying the Government would speed up its debt reduction plans if growth proved stronger than forecast.

That was seen as a clear signal of steeper tax rises and deeper spending cuts to come if the party wins the next election.

Mr Darling, in an attempt to reassure the international markets a week after his Pre-Budget Report was widely attacked for ducking difficult decisions on spending, said several times in an appearance before MPs that he would cut the deficit faster if his 'cautious' forecasts for an economic recovery were bettered.

'If things are better than I expect - if it looks like growth is taking place more strongly - then we will want to do more to reduce the structural deficit,' the Chancellor said.

Last week Mr Darling said he would reduce the UK's soaring budget deficit to 5.5 per cent of gross domestic product in the 2013 financial year from 12.6 per cent in the current year.

Though it put a spending squeeze off until 2011, the Treasury also said it wanted to eliminate the structural deficit - the black hole that will not go away when the economy bounces back - by 2017-18. The structural deficit is estimated to make up 9.2 per cent of the 12.6 per cent deficit.

Challenged over the forecasts for debt interest and spending, Mr Darling admitted: 'Of course within the Treasury we have estimates.

'The Treasury does have forecasts and estimates for thousands of different bits of information. What we don't do is publish every assumption, every estimate.

'The Government has not yet decided on what expenditure will be in any department. We have not done a spending review.

'I want to strike a balance. There probably are areas where we need to go further. I know full well that you have asked for more information. I'm reflecting on how best we can do that.'

George Osborne

Shadow Chancellor George Osborne has written to Mr Darling asking him, 'What are you trying to hide?'

Shadow Chancellor George Osborne has written to Mr Darling saying the 'only logical conclusion' was Treasury projections contained information about Government forecasts for departmental spending that he did not wish to be made public.

Mr Osborne pointed out that Treasury documents leaked after the Budget earlier this year suggested spending would be cut by 9.3 per cent in real terms.

Following the Pre-Budget Report, the Institute for Fiscal Studies has estimated that Mr Darling's decision to protect the NHS and schools spending imply massive cuts in other departments of up to 19 per cent over three years.

Mr Osborne wrote: 'The lack of detail that you provided in the PBR has resulted in an overwhelmingly negative reaction from international investors that puts Britain's economic stability at risk and threatens the recovery.

'So I am writing to ask you to publish immediately the projections for overall departmental spending that your officials agreed to provide to Parliament. What are you trying to hide?'

Conservative MP Michael Fallon, the committee's deputy chair, told the Chancellor: 'The real reason you are not sharing these figures with us is they show you are going to cut public spending.'

He said afterwards: 'They are deliberately concealing firm estimates of debt interest.

'Given the levels of debt, and the fact that we have semi-official estimates from the IFS, it's in the Treasury's own interests to come clean.

'It makes me wonder if their own estimates are in fact even worse.'

Tory MP Andrew Tyrie said: 'The Chancellor went much further than the PBR in saying that he would be prepared to reduce the structural deficit faster if growth allows.

'That's almost certainly what he wanted all along - a quicker reduction in the deficit - but he was thwarted by Gordon Brown. It appears the Chancellor knows that's what the country needs.'

Mr Darling also told the committee his 'super-tax' on bankers' bonuses was not designed to raise large amounts of revenue.

The Chancellor told MPs the 50 per cent levy would 'not actually raise that much' and was meant instead to discourage massive bonus payouts altogether.

He warned some bankers needed to show they 'live on the same planet as the rest of us'.

By James Chapman

Commercial Mortgage Defaults Now at 16 Year High. 3.4 Percent of all Commercial Real Estate Loans in Default.

What has been lost in the housing talk recovery is the grim statistics that commercial real estate has fallen 37 percent in value in the last year. This wouldn’t be such a big problem aside from the tiny detail that some $3 trillion in commercial real estate loans are still outstanding. The commercial real estate debacle is already happening with defaults reaching 16 year highs. This is already occurring before many of the commercial real estate loans reach their refinance dates. In some instances banks are simply ignoring non-payment and giving borrowers a few more months or even years. Why? Because they can still claim the note is current and claim the asset at inflated values.

Yet this is a game we are all familiar with. Suspending mark to market has always been a method for the U.S. Treasury and Federal Reserve to skirt any real accounting from Wall Street. If we look at the current FDIC insured bank balance sheet, we can see that many more problems lie ahead for commercial real estate:


Of the $3 trillion in CRE loans $1.3 trillion is directly with commercial and industrial loans. These are loans for retail properties but also for businesses. Well with few employers hiring and people cutting back it is clear that many businesses will have very little need in expanding in the next few years. Another $535 billion is in construction and development loans and many of these are in horrible shape. CRE projects take years from start to finish. Can you imagine how many CRE projects took off in 2006 and 2007 at the peak of the bubble only to go live in 2009 and 2010? It is a case of the worst timing in the world.

We are entering a phase where commercial loans will need to be refinanced for nearly a decade:


Source: Zero Hedge

In reality, the CRE implosion is going to take down hundreds of banks in the next few years. Residential lending became a key part of the too big to fail banking model and smaller regional banks simply were unable to keep up. So instead they funded local CRE projects that are now ticking financial bombs on the balance sheet of hundreds of banks.

We’ve discussed before that 70 percent of the banking assets sit with approximately 100 banks. So 7,900 banks can fail and the bulk of the system is intact. That is the dictionary definition of too big to fail. With so many people out of work and companies not hiring, how will borrowers pay back the CRE loans?

Commercial real estate is a big game and much of the problems are yet to come:


Source: McClatchy

This is an enormous market and people are going to be less agreeable to a commercial real estate bailout especially with bailout fatigue setting in. The U.S. Treasury has already planned a preemptive bailout for the industry with Plan C but much of this has been stuffed deep into page 10 of the mainstream media reporting.

How quickly are things spiraling out of control? Exponentially:


Source: MBA

So gear up. It looks like 2010 is going to be another banner year for bailouts.

India: Was Mumbai suspect a double agent for US?

The Indian press is abuzz with news that Indian Home Ministry officials are investigating whether a terror suspect in the Mumbai attacks, David Headley from Chicago, was working as a 'double agent' with the US.

In this courtroom drawing David Coleman Headley, left, pleads not guilty before U.S. District Judge Harry Leinenweber on December 9 in Chicago to charges that accuse him of conspiring in the deadly 2008 terrorist attacks in Mumbai.

Verna Sadock/AP

The Indian press is abuzz with news that Indian Home Ministry officials have said they are investigating whether Pakistani-American terror suspect David Coleman Headley was working as a "double agent."

Indian officials reportedly raised questions about Mr. Headley’s links with US intelligence agencies – even as another terror suspect accused of involvement in the 2008 Mumbai attacks was denied bail by a US federal court. These latest and widely-publicized accusations against Headley are expected to put pressure on India’s ruling Congress Party, which has emphasized closer ties with the US as part of its foreign policy.

The US has not allowed Indian authorities to interrogate Headley over the Mumbai attacks, much to India's consternation.

According to the Hindustan Times, Indian Home Ministry officials raised questions about Headley’s involvement with the American intelligence agency.

India is investigating whether a Chicago man accused of helping plan the deadly 2008 Mumbai siege was a double agent working for the United States and a Pakistan-based militant group, an official said on Wednesday.
"India is looking into whether Headley worked as a double agent. That is one of the many angles we are probing," a home ministry official said ….
Indian media reported that New Delhi was suspicious because the United States had not shared vital information about Headley's movements prior to his arrest….
Headley could have been a member of the US Drug Enforcement Agency which allowed him to make frequent trips to Pakistan and gain access to the Lashkar-e-Taiba (LeT) militant group.

The Times of India reports that Indian officials suspect that the CIA knew about Headley’s link with the banned Pakistani militant outfit, Lashkar-e-Taiba, one year before the Mumbai attacks, but did not alert Indian agencies.

The [Indian] investigators believe that the US agencies kept away the information from India and never allowed the Pakistani-origin Headley to get "exposed".
The 39-year old terror suspect, arrested by FBI for his role in Mumbai attacks, had visited India in March 2009 – four months after Mumbai attack carried out by LeT – but FBI still did not inform India that Headley is a LeT operative, apparently fearing he could be arrested in India.

According to the Times of India, Indian officials will also be investigating how Headley’s credit card bills were settled in American banks while the suspect was traveling through India.

The Hindu, an Indian daily, reports that “highly placed government sources said if [Headley] was given lesser punishment in a U.S. court, it would only strengthen India’s suspicion that he was a 'double agent'."

As Indian officials debate the role played by Headley in carrying out terror attacks in Mumbai in November 2008, a federal US court has ruled that Headley’s alleged accomplice, Tahawwur Rana, is to remain in detention, reports The New York Times. A judge denied Pakistani-Canadian Mr. Rana bail on the ground that he is a ‘flight risk’ with substantial resources and immigration expertise.

According to the Hindustan Times, Rana is to be charged with a direct link to a terror conspiracy, and, if convicted, could face life imprisonment. But Indian analysts fear that US agencies will want to tap Rana for more intelligence on terrorist movement rather than allowing him to go to jail in Mumbai, which many Indians want.

Some are speculating that having trapped Headley and turned him approver, the prosecution will use the 26/11 link in Monday's memorandum to do the same with Rana. He clearly dealt with retired Pakistani army officer Abdur Rehman Hasim Syed, alias "Pasha", a conduit to Ilyas Kashmiri, one of Pakistan's most-wanted terrorists. US may be more interested in forcing Rana, who ran an immigration service, to tell them if he used it to facilitate the movements of terrorists, and who and where they are.

Headley's alleged involvement in the Mumbai attacks has recently strained US-India relations, a cornerstone of the ruling Congress Party's foreign policy. Last week, Indian authorities announced that they would be changing visa regulations for American tourists, requiring them to take a 60-day break between each exit and re-entry to India, reported the Hindustan Times.

Is THIS how the bank bailout money is being used?

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House OKs $634 Billion Defense Bill, Doesn’t Include Surge

On Thursday the House passed an “Omnibus spending bill” worth $1.1 trillion, a hotly contested bill brimming with every pet project Congress could imagine. Today, less than a week later, the House has rushed through another $634 billion in spending.

The bill, voted on with almost no debate on the last day before the Congress goes into recess, was ostensibly a bill to fund the Pentagon and America’s assorted wars for the next nine months.

But as with every spending bill Congress passes (with alarming frequency) it was filled to the brim with unrelated spending, spending nearly a million dollars on a sprinkler system in Brooklyn and thousands of other projects totaling billions of dollars.

Though Republicans expressed annoyance at the large amount of such projects slipped into the “defense” bill, few dared to vote against war spending, and the bill passed 395-34.

Though President Obama had repeatedly taken the Bush Administration to task for not including the full cost of war in defense spending bills and promised not to repeat this, the bill included no money for the Afghan surge announced earlier this month, and will presumably set the stage for another “emergency” spending bill early in 2010 to pay for the war.















































Italy convicts 'U.S. agents' in CIA kidnap trial

ROME, Italy (CNN) -- Nearly two dozen Americans -- most thought to work for the CIA -- were sentenced to five years in prison Wednesday by an Italian court for their role in the seizing of a suspected terrorist in Italy in 2003, the prosecutor in the case told CNN.

The Americans did not appear for trial and are not in custody, but the ruling could effectively make them international fugitives.

The trial was the first to deal with a practice that human rights groups call "extraordinary rendition." They say the United States has often sent suspects to countries that practice torture.

Washington acknowledges making secret "rendition" transfers of terrorism suspects between countries but denies using torture or handing suspects over to countries that do.

The case centered on the extraordinary rendition of a Muslim cleric, Osama Mustafa Hassan Nasr, or Abu Omar.

He was seized on the streets of Milan, Italy, in 2003, transferred to Egypt and tortured, he said. He was suspected of recruiting men to fight in Iraq and Afghanistan and was under heavy surveillance by Italy's intelligence agency.

Prosecutors said he was nabbed by a CIA team working with Italian intelligence officials.

The verdict "shows governments and institutions that the fight against terrorism has to be carried out in accordance with the law. There are no shortcuts," Spataro told CNN.

Those who were found guilty were ordered to pay Abu Omar 1 million euros ($1.48 million) and his wife 500,000 euros.

A total of 22 Americans were each sentenced to five years in prison for their role in his abduction. Another -- Robert Seldon Lady, whom prosecutors said was the CIA station chief in Milan -- was sentenced to eight years in jail, prosecutor Armando Spataro told CNN.

Cases were dismissed against three other Americans, including Jeff Castelli, the man assumed to be the CIA station chief in Rome at the time, because they had diplomatic immunity from prosecution. Spataro said he may appeal that ruling.

Cases were also dismissed against the former head of Italy's intelligence service and his deputy because of state secrecy provisions.

Two other Italians were sentenced to three years in jail for aiding the plot.

Sabrina De Sousa, one of the American defendants, was "saddened, angered and dismayed" by the ruling, her lawyer told CNN.

She felt the U.S. government had "stabbed her in the back," Mark Zaid said. "We understand why the Italians did what they did. They were following their laws. But at the end of the day, representatives of our United States government abroad were let down and left alone by their own government."

De Sousa, a career diplomat, is suing the State Department over the case, Zaid confirmed. She has never said she worked for the CIA.

CIA spokesman George Little said Wednesday: "The CIA has not commented on any of the allegations surrounding Abu Omar."

But U.S. officials confirmed to CNN when the case first broke that the CIA was involved in the rendition of Abu Omar from Italy to Egypt. The officials never disclosed the number of Americans involved or their names.

Pentagon spokesman Geoff Morrell responded to the verdict as it applied to an Air Force officer, Lt. Col. Joseph Romano III, who was among the Americans sentenced.

The Pentagon had asserted jurisdiction over the incident under the NATO Status of Forces Agreement, a position that the Italian minister of justice supported, Morrell said.

"We are clearly disappointed by the court's ruling," Morrell said. "Our view is that the Italian court has no jurisdiction over Lt. Col. Romano and should have immediately dismissed the charges."

The American Civil Liberties Union, a persistent critic of Washington's extraordinary rendition program, demanded the United States match Italy's actions.

"The decision in Italy underscores the need for the United States to hold its own officials accountable for crimes committed under the 'extraordinary rendition' program. It is shameful that the first convictions of this kind came from a foreign justice system, where those convicted are not likely to serve their time," said Steven Watt, staff attorney for the ACLU Human Rights Program.

Italian authorities originally indicted 26 Americans and five Italians in 2007 for kidnapping in the matter.

The Italians included the former head of Italian intelligence, Nicolo Pollari, and one of his deputies. They testified in preliminary hearings that Italian intelligence played no role in the alleged abduction.

None of the Americans is in custody in Italy and the Italian government did not ask for their extradition; they were tried in absentia.

Former CIA analyst Michael Scheuer told CNN in the past that the Italian military secret service had approved the operation involving Hassan, and CIA sources who refused to be named told CNN in 2005 that the agency had briefed and sought approval from its Italian counterpart for such an abduction.

The Italian government of the day -- which was led by Silvio Berlusconi -- vigorously denied having authorized Hassan's kidnapping, which it called illegal. Berlusconi has since returned to power.

CNN's Hada Messia in Rome; Paula Newton in London, England; and Pam Benson and Jim Barnett in Washington contributed to this report.

'Headley was no low-level operative'

The extensive use of terrorist tradecraft by Pakistani American terror suspect David Headley makes it evident that he "was not merely a low-level cannon fodder-type operative", according to US strategic think tank Stratfor.

The December 7 indictment of Headley, charged with scouting targets for the 26/11 Mumbai terror attack, shows that he reportedly attended Lashkar-e-Taeba (LeT) training camps in Pakistan in February and August of 2002 and in April, August and December of 2003.

"This indicates that Headley progressed far beyond basic militant training, and it is likely that he was taught during his later training sessions the tradecraft required to conduct preoperational surveillance for terrorist attacks and to participate in the operational planning for such attacks," Stratfor said.

"One element of terrorist tradecraft that was evident in the indictment and the October 11 criminal complaint is Headley's careful use of language and of multiple methods of communications, including the use of cell phones and using long-distance calling cards, e-mail communication (using a variety of accounts) and face-to-face briefings," the global intelligence company said.

According to the December 7 indictment to conduct surveillance for the Mumbai attacks, Headley made five extended trips to Mumbai: one in September 2006, two in February and September of 2007 and two in April and July of 2008.

Referring to Headley's alleged work as a Drug Enforcement Administration (DEA) and FBI informant, Stratfor said: "Given the demonstrated - and considerable - nexus between heroin trafficking and terrorism funding for the jihadist groups operating in Pakistan and Afghanistan, such a crossover of an informant from narcotics to terrorism is no surprise."

If Headley were reporting to the FBI, it could also explain the very specific warnings that the US government gave to the government of India about plans to attack hotels in Mumbai in Sep 2008, it said.

Following the warning, the government of India initially increased security measures at these sites, but the measures were dropped before the attacks were launched in Nov 2008.

Stratfor said at present, it is very difficult to ascertain if Headley was a double agent who was really reporting to LeT and HUJI the entire time he was ostensibly working for the US government, or if he was merely a rogue informant who was playing both ends against the middle for his own personal benefit.

Noting that such rogue sources have been seen in jihadist cases before, Stratfor said: "If Headley was either a double agent or a rogue source, there may be some significant blowback for the US government as further revelations are made about the case."

Copenhagen Climate Treaty scam: trillions in taxes with Enron-like trading rules

The UN and other agencies calling for a war on global warming say the price tag will be trillions.
But - according to top experts on climate and cap and trade - the regulatory framework being rammed through in America and internationally won't actually reduce carbon to any meaningful degree. See this, this, this and this.
Now, the Independent notes that the Copenhagen framework uses Enron-style accounting tricks to give the impression of cutting carbon, without really doing so:
The first week of this summit is being dominated by the representatives of the rich countries trying to lace the deal with Enron-style accounting tricks that will give the impression of cuts, without the reality. It's essential to understand these shenanigans this week, so we can understand the reality of the deal that will be announced with great razzmatazz next week ...
A study by the University of Stanford found that most of the projects that are being funded as "cuts" either don't exist, don't work, or would have happened anyway. Yet this isn't a small side-dish to the deal: it's the main course ...
Trick one: hot air. The nations of the world were allocated permits to release greenhouse gases back in 1990, when the Soviet Union was still a vast industrial power – so it was given a huge allocation. But the following year, it collapsed, and its industrial base went into freefall – along with its carbon emissions. It was never going to release those gases after all. But Russia and the eastern European countries have held on to them in all negotiations as "theirs". Now, they are selling them to rich countries who want to purchase "cuts". Under the current system, the US can buy them from Romania and say they have cut emissions – even though they are nothing but a legal fiction.
We aren't talking about climatic small change. This hot air represents 10 gigatonnes of CO2. By comparison, if the entire developed world cuts its emissions by 40 per cent by 2020, that will only take six gigatonnes out of the atmosphere.
Trick two: double-counting. This is best understood through an example. If Britain pays China to abandon a coal power station and construct a hydro-electric dam instead, Britain pockets the reduction in carbon emissions as part of our overall national cuts. In return, we are allowed to keep a coal power station open at home. But at the same time, China also counts this change as part of its overall cuts. So one tonne of carbon cuts is counted twice. This means the whole system is riddled with exaggeration – and the figure for overall global cuts is a con.
Trick three: the fake forests ... the Canadian, Swedish and Finnish logging companies have successfully pressured their governments into inserting an absurd clause into the rules. The new rules say you can, in the name of "sustainable forest management", cut down almost all the trees – without losing credits. It's Kafkaesque: a felled forest doesn't increase your official emissions... even though it increases your actual emissions.
There are dozens more examples like this, but you and I would lapse into a coma if I listed them. This is deliberate. This system has been made incomprehensible because if we understood, ordinary citizens would be outraged. If these were good faith negotiations, such loopholes would be dismissed in seconds. And the rich countries are flatly refusing to make even these enfeebled, leaky cuts legally binding. You can toss them in the bin the moment you leave the conference centre, and nobody will have any comeback.

Firefighters Trained To Spy

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Global Warming, Environmentalism, Genocide & Eugenics

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Mumbai terror suspect David Headley was ‘rogue US secret agent’

The Taj Hotel burns after being attacked

David Headley was allegedly involved in reconnoitring targets for the November 2008 Mumbai attacks, including the Taj Hotel

A key terror suspect who allegedly helped to plan last year’s attacks in Mumbai and plotted to strike Europe was an American secret agent who went rogue, Indian officials believe.

David Headley, 49, who was born in Washington to a Pakistan diplomat father and an American mother, was arrested in Chicago in October. He is accused of reconnoitring targets in India and Europe for Lashkar-e-Taiba (LeT), the Pakistan-based terror group behind the Mumbai attacks and of having links to al-Qaeda. He has denied the charges.

He came to the attention of the US security services in 1997 when he was arrested in New York for heroin smuggling. He earned a reduced sentence by working for the US Drug Enforcement Agency (DEA) infiltrating Pakistan-linked narcotics gangs.

Indian investigators, who have been denied access to Mr Headley, suspect that he remained on the payroll of the US security services — possibly working for the Central Intelligence Agency (CIA) — but switched his allegiance to LeT.

“India is looking into whether Headley worked as a double agent,” an Indian Home Ministry official said yesterday.

Mr Headley, who changed his name from Daood Gilani, was in Mumbai until two weeks before the attacks on the city, which claimed 166 lives last November. It is alleged that he spent months checking targets in India’s commercial capital, using his Western looks and anglicised name to move in elite social circles, hobnob with Bollywood actors and even to pass himself off as Jewish.

Despite being firmly on the radar of the US intelligence agencies, he was allowed to return to India as recently as March. Indian officials are furious that their American counterparts did not share details of that visit at the time. The Indian media has raised the possibility that Mr Headley was being protected by his American handlers — a theory that experts say is credible.

“The feeling in India is that the US has not been transparent,” said B. Raman, a former counter-terrorism chief in the Indian foreign intelligence service, the Research and Analysis Wing.

“That Headley was an agent for the DEA is known. Whether he was being used by the CIA as well is a matter of speculation, but it is almost certain that the CIA was aware of him and his movements across the subcontinent.”

According to Mr Raman, it is probable that Mr Headley, who was arrested when the US authorities learned that he was about to fly to Pakistan, was listed on the main database of the US National Counterterrorism Centre, a facility used by the CIA and several other American agencies to track terror suspects.

Indian officials suspect that US agencies declined to share intelligence to avoid compromising other secret operations and to to be able to deny any link with Mr Headley.

Analysts believe that the US may also have been anxious to avoid sharing information that could further raise tensions between India and Pakistan, nuclear-armed neighbours who have fought three wars.

According to documents put before a court in Chicago, Mr Headley had links with the Pakistan Army and, through it, with al-Qaeda.

As well as helping to co-ordinate the Mumbai atrocity, Mr Headley is accused of planning attacks on Mumbai’s Bollywood film industry, the Shiv Sena, a Hindu extremist group also based in Mumbai, a major Hindu temple, and a Danish newspaper that had published cartoons depicting the Prophet Muhammad.

The US authorities allege that he was close to Tahawwur Hussain Rana, a former Pakistani schoolmate and businessman who is also being charged with planning to attack the Danish newspaper, Jyllands-Posten. Mr Rana is accused of having known about the attack on Mumbai in advance.

The CIA denied that Headley had worked for the organisation.

“Any suggestion that Headley was working for the CIA is complete and utter nonsense. It’s flat-out false,” Paul Gimigliano, from the CIA’s Office of Public Affairs, said.

The Indian Home Secretary, Gopal Krishna Pillai, has said that his Government would seek the extradition of Mr Headley — a request that has so far been stonewalled by US officials.

Filmmaker Assaulted With Vegetable During Live Interview in Copenhagen

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