Monday, February 18, 2013

USA VS China:A Graphical Comparison

Click The Photo To Enarge

Don’t Blink, or You’ll Miss Another Bailout

MANY people became rightfully upset about bailouts given to big banks during the mortgage crisis. But it turns out that they are still going on, if more quietly, through the back door.

The existence of one such secret deal, struck in July between the Federal Reserve Bank of New York and Bank of America, came to light just last week in court filings.
That the New York Fed would shower favors on a big financial institution may not surprise. It has long shielded large banks from assertive regulation and increased capital requirements.
Still, last week’s details of the undisclosed settlement between the New York Fed and Bank of America are remarkable. Not only do the filings show the New York Fed helping to thwart another institution’s fraud case against the bank, they also reveal that the New York Fed agreed to give away what may be billions of dollars in potential legal claims.
Here’s the skinny: Late last Wednesday, the New York Fed said in a court filing that in July it had released Bank of America from all legal claims arising from losses in some mortgage-backed securities the Fed received when the government bailed out the American International Group in 2008. One surprise in the filing, which was part of a case brought by A.I.G., was that the New York Fed let Bank of America off the hook even as A.I.G. was seeking to recover $7 billion in losses on those very mortgage securities.
It gets better.
What did the New York Fed get from Bank of America in this settlement? Some $43 million, it seems, from a small dispute the New York Fed had with the bank on two of the mortgage securities. At the same time, and for no compensation, it released Bank of America from all other legal claims.
When I asked the Fed to discuss this gift to the bank, it declined. To understand how the settlement happened, we must go back to the dark days of September 2008. With the giant insurer A.I.G. teetering, the government stepped in. As part of the rescue, A.I.G. sold mortgage securities to an investment vehicle called Maiden Lane II overseen by the New York Fed. A.I.G. was bleeding from its toxic mortgage holdings, many of which were issued by Bank of America, and it received $20.8 billion for securities with a face value of $39.2 billion.
In 2011, aiming to recover some of that $18 billion loss, the insurer sued Bank of America for fraud. The case, filed in New York state court, sought $10 billion in damages from the bank, $7 billion of that related to securities that A.I.G. sold to Maiden Lane II. Bank of America, for its part, argued that A.I.G. had no standing to sue for fraud on the Maiden Lane securities. With the sale, Bank of America contended, the right to bring a legal claim against the bank for fraud passed to Maiden Lane II. That entity, controlled by the New York Fed, never brought fraud claims against the bank.
Not so fast, said A.I.G. Under New York law, which governs Maiden Lane II, an entity has to explicitly transfer the right to sue for fraud, it said. The original agreement between the New York Fed and A.I.G. never specified such a transfer, the insurer contended.
To settle this question, A.I.G. filed a separate lawsuit against Maiden Lane II in a New York court last month.
A.I.G.’s $10 billion fraud case against Bank of America, meanwhile, was moved to federal court. For pretrial purposes, the bank asked that Mariana R. Pfaelzer, a federal judge in the central district of California, oversee aspects of the case involving the bank’s Countrywide unit, which was in California. Its request was granted. On Jan. 30, Judge Pfaelzer said she would rule on the issue of who owns the legal claims.
Initially, in an October 2011 letter to A.I.G., the New York Fed agreed that the insurer had the right to seek damages under securities laws on instruments it sold to Maiden Lane II.
But more recently, the New York Fed began helping Bank of America battle A.I.G. In late December, the New York Fed provided two declarations to the bank. One stated that Maiden Lane II had “intended” to receive all litigation claims relating to the mortgage securities, meaning that it alone would have had the right to sue. Another said that the October letter was not an interpretation of the Maiden Lane agreement.
But Jon Diat, an A.I.G. spokesman, said in a statement that “A.I.G. and the Federal Reserve Bank of New York never discussed or agreed on any transfer of A.I.G.’s residential mortgage-backed securities fraud claims to Maiden Lane II.” He added that A.I.G. believes “it is the rightful owner of these claims and remains committed to holding Bank of America and other counterparties responsible for the harm caused.” 
LAST week, the New York Fed opposed A.I.G.’s efforts to have the question of who owns the legal rights decided in New York, whose law governs the Maiden Lane II agreement, rather than in California. It was in this filing that the New York Fed disclosed its confidential July 2012 deal with Bank of America, releasing it of any liability arising from fraud in the Maiden Lane II securities.
Let’s recap: For zero compensation, the New York Fed released Bank of America from what may be sizable legal claims, knowing that A.I.G. was trying to recover on those claims.

Retail Apocalypse: Why Are Major Retail Chains All Over America Collapsing? Sears, J.C. Penney, Best Buy and RadioShack Are All Going To Close Hundreds of Stores Before The End of 2013!

by Michael
Why Are Major Retail Chains All Over America Collapsing? -  Photo by Gars129
If the economy is improving, then why are many of the largest retail chains in America closing hundreds of stores?  When I was growing up, Sears, J.C. Penney, Best Buy and RadioShack were all considered to be unstoppable retail powerhouses.  But now it is being projected that all of them will close hundreds of stores before the end of 2013.  Even Wal-Mart is running into problems.  A recent internal Wal-Mart memo that was leaked to Bloombergdescribed February sales as a “total disaster”.  So why is this happening?  Why are major retail chains all over America collapsing?  Is the “retail apocalypse” upon us?  Well, the truth is that this is just another sign that the U.S. economy is falling apart right in front of our eyes.  Incomes are declining, taxes are going up, government dependence is at an all-time high, and according to the Bureau of Labor Statistics the percentage of the U.S. labor force that is employed has been steadily falling since 2006.  The top 10% of all income earners in the U.S. are still doing very well, but most U.S. consumers are either flat broke or are drowning in debt.  The large disposable incomes that the big retail chains have depended upon in the past simply are not there anymore.  So retail chains all over the United States are now closing up unprofitable stores.  This is especially true in low income areas.
When you step back and take a look at the bigger picture, the rapid decline of some of our largest retail chains really is stunning.
It is happening already in some areas, but soon half empty malls and boarded up storefronts will litter the landscapes of cities all over America.
Just check out some of these store closing numbers for 2013.  These numbers are from a recent Yahoo Finance article
Best Buy
Forecast store closings: 200 to 250
Sears Holding Corp.
Forecast store closings: Kmart 175 to 225, Sears 100 to 125
J.C. Penney
Forecast store closings: 300 to 350
Office Depot
Forecast store closings: 125 to 150
Barnes & Noble
Forecast store closings: 190 to 240, per company comments
Forecast store closings: 500 to 600
Forecast store closings: 150 to 175
Forecast store closings: 450 to 550
The RadioShack in a nearby town just closed up where I live.  This is all happening so fast that it is hard to believe.
But the truth is that those store closings are not the entire story.  When you dig deeper you find a lot more retailers that are in trouble.
For example, Blockbuster recently announced that this year they will be closing about 300 stores and eliminating about 3,000 jobs.
Toy manufacturer Hasbro recently announced that they will be reducing the size of their workforce by about 10 percent.
Even Wal-Mart is going through a tough stretch right now.  According to documents that were leaked to Bloomberg, Wal-Mart is having an absolutely disastrous February…
Wal-Mart Stores Inc. had the worst sales start to a month in seven years as payroll-tax increases hit shoppers already battling a slow economy, according to internal e-mails obtained by Bloomberg News.
“In case you haven’t seen a sales report these days, February MTD sales are a total disaster,” Jerry Murray, Wal- Mart’s vice president of finance and logistics, said in a Feb. 12 e-mail to other executives, referring to month-to-date sales. “The worst start to a month I have seen in my ~7 years with the company.”
So what in the world is going on here?
The mainstream media continues to proclaim that we are experiencing a robust “economic recovery”, but at the same time there are a whole host of indications that things are continually getting worse.
Even global cell phone sales actually declined slightly in 2012.  That was the first time that has happened since the last recession.
Perhaps it is time that we faced the truth.  The middle class is shrinking, incomes are declining and there are not nearly as many jobs as there used to be.
Mort Zuckerman pointed this out in a recent article in the Wall Street Journal

The U.S. labor market, which peaked in November 2007 when there were 139,143,000 jobs, now encompasses only 132,705,000 workers, a drop of 6.4 million jobs from the peak. The only work that has increased is part-time, and that is because it allows employers to reduce costs through a diminished benefit package or none at all.
So how can the mainstream media be talking about how “good” things are if we still have 6.4 million fewer jobs than we had back in November 2007?
And sadly, things may soon be getting a lot worse.  If Congress does not do anything about the “sequester”, millions of federal workers may shortly be facing some very painful furloughs according to CNN
Federal workers could start facing furloughs as early as April, according to federal agencies trying to prepare for the worst.
Unless Congress steps in, some $85 billion in massive spending reductions will hit the federal government, doling out furloughs to much of the nation’s 2.1 million federal workforce, experts say.
If you still live in an area of the country where the stores and the restaurants are booming, you should be very thankful because that is not the reality for most of the country.
I often write about the stunning economic decline of major cities such as Detroit, but there are huge sections of rural America that are in even worse shape than Detroit in many ways.
For example, many Indian reservations all over America have been shamefully neglected by the federal government and have become hotbeds for crime, drugs and poverty.
Business Insider recently profiled the Wind River Indian reservation in western Wyoming.  The following is a brief excerpt from thatoutstanding article
The Wind River Indian Reservation is not an easy place to get to, but I had to see it for myself.
Thirty-five-hundred square miles of prairie and mountains in western Wyoming, the reservation is home to bitter ancestral enemies: the Eastern Shoshone and Northern Arapaho tribes.
Even among reservations, it’s renowned for brutal crime, widespread drug use, and legal dumping of toxic waste.
You can see some amazing photos of the Wind River Indian reservationright here.
It is hard to believe that there are places like that in America, but the truth is that conditions like that are spreading to more U.S. communities with each passing day.
We are a nation that is in an advanced state of decline.  But as long as the financial markets are okay, our leaders don’t seem too concerned about the suffering that everyone else is going through.
In fact, former Federal Reserve Chairman Alan Greenspan essentially admitted as much during a recent interview with CNBC.  The following is how a Zero Hedge article summarized that interview…
Starting at around 1:50, Greenspan states the odds of sequester occurring are very high – in fact, the playdough-faced ex-Chair-head notes, “I find it very difficult to find a scenario in which [the sequester] doesn’t happen” But when asked how this will affect the economy, Awkward Alan is unusually clearly spoken - “the issue is how does it affect the stock market.”
While not so many of our leaders have taken the path to direct truthiness, Greenspan somewhat shocks a Botox’d and babbling Bartiromo when he admits “the stock market is the key player in the game of economic growth.”
Bartiromo shifts uncomfortably in her seat, strokes her imaginary beard and stares blankly as Greenspan explains that while the sequester will have a real effect on the real economy, “if the stock market can hold up through this, then the effect will be rather minor.”
Do you see?
As long as the stock market is moving higher they think that everything is just fine and dandy.
And the Obama administration?
They continue to pursue the same policies that got us into this mess.
Their idea of “economic reform” is to threaten to sue businessesthat do not hire ex-convicts.
And of course now that Obama has been re-elected he is putting a tremendous amount of effort into “stimulating the economy”.
For example, he spent this weekend golfing in Florida, and the Obamas recently spent about 20 million taxpayer dollars vacationing in Hawaii.
Meanwhile, the U.S. economy is getting worse with each passing day.
If you doubt that economic conditions are getting worse, please read this article: “Show This To Anyone That Believes That ‘Things Are Getting Better’ In America“.
When you look at the cold, hard numbers, it is undeniable what is happening to America.
And our leaders are not doing anything to fix our problems.  In fact, most of the time they are just making things worse.
So buckle up and get prepared.  We are in for very bumpy ride, and this is only just the beginning.
Store Closed Until Further Notice - Photo by Gryllida

Glenn Greenwald: 'HSBC Is The Too Big To Jail Poster Child'

Covington & Burling's Lanny Breuer sees no reason for HSBC jail time.
Somewhat long piece but worth reading in full.  Updated at the bottom.
By Glenn Greenwald
HSBC, too big to jail, is the new poster child for US two-tiered justice system
Reprinted with permission.
The US is the world's largest prison state, imprisoning more of its citizens than any nation on earth, both in absolute numbers and proportionally. It imprisons people for longer periods of time, more mercilessly, and for more trivial transgressions than any nation in the west. This sprawling penal state has been constructed over decades, by both political parties, and it punishes the poor and racial minorities at overwhelmingly disproportionate rates.
But not everyone is subjected to that system of penal harshness. It all changes radically when the nation's most powerful actors are caught breaking the law. With few exceptions, they are gifted not merely with leniency, but full-scale immunity from criminal punishment. Thus have the most egregious crimes of the last decade been fully shielded from prosecution when committed by those with the greatest political and economic power: the construction of a worldwide torture regime, spying on Americans' communications without the warrants required by criminal law by government agencies and the telecom industry, an aggressive war launched on false pretenses, and massive, systemic financial fraud in the banking and credit industry that triggered the 2008 financial crisis.
This two-tiered justice system was the subject of my last book, "With Liberty and Justice for Some", and what was most striking to me as I traced the recent history of this phenomenon is how explicit it has become. Obviously, those with money and power always enjoyed substantial advantages in the US justice system, but lip service was at least always paid to the core precept of the rule of law: that - regardless of power, position and prestige - all stand equal before the blindness of Lady Justice.
It really is the case that this principle is now not only routinely violated, as was always true, but explicitly repudiated, right out in the open. It is commonplace to hear US elites unblinkingly insisting that those who become sufficiently important and influential are - and should be - immunized from the system of criminal punishment to which everyone else is subjected.
Worse, we are constantly told that immunizing those with the greatest power is not for their good, but for our good, for our collective good: because it's better for all of us if society is free of the disruptions that come from trying to punish the most powerful, if we're free of the deprivations that we would collectively experience if we lose their extraordinary value and contributions by prosecuting them.
This rationale was popularized in 1974 when Gerald Ford explained why Richard Nixon - who built his career as a "law-and-order" politician demanding harsh punishments and unforgiving prosecutions for ordinary criminals - would never see the inside of a courtroom after being caught committing multiple felonies; his pardon was for the good not of Nixon, but of all of us. That was the same reasoning hauled out to justify immunity for officials of the National Security State who tortured and telecom giants who illegally spied on Americans (we need them to keep us safe and can't disrupt them with prosecutions), as well as the refusal to prosecute any Wall Street criminals for their fraud (prosecutions for these financial crimes would disrupt our collective economic recovery).
A new episode unveiled on Tuesday is one of the most vivid examples yet of this mentality. Over the last year, federal investigators found that one of the world's largest banks, HSBCspent years committing serious crimes, involving money laundering for terrorists; "facilitat[ing] money laundering by Mexican drug cartels"; and "mov[ing] tainted money for Saudi banks tied to terrorist groups". Those investigations uncovered substantial evidence "that senior bank officials were complicit in the illegal activity." As but one example, "an HSBC executive at one point argued that the bank should continue working with the Saudi Al Rajhi bank, which has supported Al Qaeda."
Needless to say, these are the kinds of crimes for which ordinary and powerless people are prosecuted and imprisoned with the greatest aggression possible. If you're Muslim and your conduct gets anywhere near helping a terrorist group, even by accident, you're going to prison for a long, long time. In fact, powerless, obscure, low-level employees areroutinely sentenced to long prison terms for engaging in relatively petty money laundering schemes, unrelated to terrorism, and on a scale that is a tiny fraction of what HSBC and its senior officials are alleged to have done.
But not HSBC. On Tuesday, not only did the US Justice Department announce that HSBC would not be criminally prosecuted, but outright claimed that the reason is that they are too important, too instrumental to subject them to such disruptions. In other words, shielding them from the system of criminal sanction to which the rest of us are subject is not for their good, but for our common good. We should not be angry, but grateful, for the extraordinary gift bestowed on the global banking giant:
"US authorities defended their decision not to prosecute HSBC for accepting the tainted money of rogue states and drug lords on Tuesday, insisting that a $1.9bn fine for a litany of offences was preferable to the 'collateral consequences' of taking the bank to court. . . .
"Announcing the record fine at a press conference in New York, assistant attorney general Lanny Breuer said that despite HSBC"s 'blatant failure' to implement anti-money laundering controls and its wilful flouting of US sanctions, the consequences of a criminal prosecution would have been dire.
"Had the US authorities decided to press criminal charges, HSBC would almost certainly have lost its banking licence in the US, the future of the institution would have been under threat and the entire banking system would have been destabilised.
"HSBC, Britain's biggest bank, said it was 'profoundly sorry' for what it called 'past mistakes' that allowed terrorists and narcotics traffickers to move billions around the financial system and circumvent US banking laws. . . .
"As part of the deal, HSBC has undertaken a five-year agreement with the US department of justice under which it will install an independent monitor to assess reformed internal controls. The bank's top executives will defer part of their bonuses for the whole of the five-year period, while bonuses have been clawed back from a number of former and current executives, including those in the US directly involved at the time.
"John Coffee, a professor of law at Columbia Law School in New York, said the fine was consistent with how US regulators have been treating bank infractions in recent years. 'These days they rarely sue individuals in any meaningful way when the entity will settle. This is largely a function of resource constraints, but also risk aversion, and a willingness to take the course of least resistance,' he said."
DOJ officials touted the $1.9 billion fine HSBC would pay, the largest ever for such a case. As the Guardian's Nils Pratley noted, "the sum represents about four weeks' earnings given the bank's pre-tax profits of $21.9bn last year." Unsurprisingly, "the steady upward progress of HSBC's share price since the scandal exploded in July was unaffected on Tuesday morning."
The New York Times Editors this morning announced: "It is a dark day for the rule of law." There is, said the NYT editors, "no doubt that the wrongdoing at HSBC was serious and pervasive." But the bank is simply too big, too powerful, too important to prosecute.
That's not merely a dark day for the rule of law. It's a wholesale repudiation of it. The US government is expressly saying that banking giants reside outside of - above - the rule of law, that they will not be punished when they get caught red-handed committing criminal offenses for which ordinary people are imprisoned for decades. Aside from the grotesque injustice, the signal it sends is as clear as it is destructive: you are free to commit whatever crimes you want without fear of prosecution. And obviously, if the US government would not prosecute these banks on the ground that they're too big and important, it would - yet again, or rather still - never let them fail.
But this case is the opposite of an anomaly. That the most powerful actors should be immunized from the rule of law - not merely treated better, but fully immunized - is a constant, widely affirmed precept in US justice. It's applied to powerful political and private sector actors alike. Over the past four years, the CIA and NSA have received the same gift, as have top Executive Branch officials, as has the telecom industry, as has most of the banking industry. This is how I described it in "With Liberty and Justice for Some":
"To hear our politicians and our press tell it, the conclusion is inescapable: we're far better off when political and financial elites - and they alone - are shielded from criminal accountability.
"It has become a virtual consensus among the elites that their members are so indispensable to the running of American society that vesting them with immunity from prosecution - even for the most egregious crimes - is not only in their interest but in our interest, too. Prosecutions, courtrooms, and prisons, it's hinted - and sometimes even explicitly stated - are for the rabble, like the street-side drug peddlers we occasionally glimpse from our car windows, not for the political and financial leaders who manage our nation and fuel our prosperity.
"It is simply too disruptive, distracting, and unjust, we are told, to subject them to the burden of legal consequences."
That is precisely the rationale explicitly invoked by DOJ officials to justify their decision to protect HSBC from criminal accountability. These are the same officials who previously immunized Bush-era torturers and warrantless eavesdroppers, telecom giants, and Wall Street executives, even as they continue to persecute whistleblowers at record rates and prosecute ordinary citizens - particularly poor and minorities - with extreme harshness even for trivial offenses. The administration that now offers the excuse that HSBC is too big to prosecute is the same one that quite consciously refused to attempt to break up these banks in the aftermath of the "too-big-to-fail" crisis of 2008, as former TARP overseer Neil Barofsky, among others, has spent years arguing.
And, of course, these HSBC-protectors in the Obama DOJ are the same officials responsible for maintaining and expanding what NYT Editorial Page editor Andrew Rosenthal has accurately described as "essentially a separate justice system for Muslims," one in which "the principle of due process is twisted and selectively applied, if it is applied at all." What has been created is not so much a "two-tiered justice system" as a multi-tiered one, entirely dependent on the identity of the alleged offender rather than the crimes of which they are accused.
Having different "justice systems" for citizens based on their status, wealth, power and prestige is exactly what the US founders argued most strenuously had to be avoided (even as they themselves maintained exactly such a system). But here we have in undeniable clarity not merely proof of exactly how this system functions, but also the rotted and fundamentally corrupt precept on which it's based: that some actors are simply too important and too powerful to punish criminally. As the Nobel Prize-winning economist Joseph Stiglitz warned in 2010, exempting the largest banks from criminal prosecution has meant that lawlessness and "venality" is now "at a higher level" in the US even than that which prevailed in the pervasively corrupt and lawless privatizing era in Russia.
Having the US government act specially to protect the most powerful factions, particularly banks, was a major impetus that sent people into the streets protesting both as part of the early Tea Party movement as well as the Occupy movement. As well as it should: it is truly difficult to imagine corruption and lawlessness more extreme than having the government explicitly place the most powerful factions above the rule of law even as it continues to subject everyone else to disgracefully harsh "justice". If this HSBC gift makes more manifest this radical corruption, then it will at least have achieved some good.
By coincidence, on the very same day that the DOJ announced that HSBC would not be indicted for its multiple money-laundering felonies, the New York Times published a story featuring the harrowing story of an African-American single mother of three who was sentenced to life imprisonment at the age of 27 for a minor drug offense:
"Stephanie George and Judge Roger Vinson had quite different opinions about the lockbox seized by the police from her home in Pensacola. She insisted she had no idea that a former boyfriend had hidden it in her attic. Judge Vinson considered the lockbox, containing a half-kilogram of cocaine, to be evidence of her guilt.
"But the defendant and the judge fully agreed about the fairness of the sentence he imposed in federal court.
"'Even though you have been involved in drugs and drug dealing,' Judge Vinson told Ms. George, 'your role has basically been as a girlfriend and bag holder and money holder but not actively involved in the drug dealing, so certainly in my judgment it does not warrant a life sentence.'
"Yet the judge had no other option on that morning 15 years ago. As her stunned family watched, Ms. George, then 27, who had never been accused of violence, was led from the courtroom to serve a sentence of life without parole.
"'I remember my mom crying out and asking the Lord why,' said Ms. George, now 42, in an interview at the Federal Correctional Institution in Tallahassee. 'Sometimes I still can't believe myself it could happen in America.'"
As the NYT notes - and read her whole story to get the full flavor of it - this is commonplace for the poor and for minorities in the US justice system. Contrast that deeply oppressive, merciless punishment system with the full-scale immunity bestowed on HSBC - along with virtually every powerful and rich lawbreaking faction in America over the last decade - and that is the living, breathing two-tiered US justice system. How this glaringly disparate, and explicitly status-based, treatment under the criminal law does not produce serious social unrest is mystifying.

Read more columns from Glenn Greenwald here...

Crumbling Global Economy Passes Point of No Return

World economic crisis
As bad as the global economy is right now, it is unfortunately going to get far worse. Many central banks around the world are now racing to devalue their currencies through the implementation of debt monetization programs and low interest rates. Despite statements coming out of the G20 saying otherwise, many insiders and former insiders are fully admitting that there is an on-going global currency war and that this war is accelerating. The Bank of Japan’s recent announcement of a massive bond purchase program is the latest episode in an already sorry state of affairs. It is a historical fact that prosperity has never been obtained by devaluing a nation’s money which makes it all the more insane that the central planners are actually trying to sell the general public on these policies. In fact if monetary devaluation resulted in economic growth, Zimbabwe which recently experienced a period of rampant hyperinflation would easily be the wealthiest nation in the world instead of one of the poorest. Ancient Rome had a strong monetary unit when the nation rose to prominence but degenerated after the ruling powers decided to devalue its coinage. In more recent times both the British Empire and the United States reached great heights when they maintained a sound money system. With this said, you really don’t need to be an economics guru to figure out that the result of today’s monetary policies will eventually result in a complete disaster for the global economy.
Despite all of the absurd propaganda from the major news networks, there is no question that much of the world is in a depression. The only reason there has not been a total collapse of the system is because of the fact that central banks have maintained artificially low interest rates and propped up sovereign bond markets by purchasing bonds with money that they created out of nothing. Taxpayer bailouts, stimulus programs and other nonsense haven’t helped matters either. These policies which were implemented following the crash of 2008 have simply set the world up for a much larger collapse in the future. There would have at least been an outside chance to fix the system had the central planners not intervened but now the situation is becoming increasingly hopeless. Take for example what happened in Iceland immediately following the 2008 financial crisis. The Icelandic people voted against using taxpayer money to prop up failed Icelandic banks. Even though there was a great deal of short term economic pain with foreign depositors and foreign bond holders losing billions, the country is now on the road to recovery.
On the other hand, Ireland which decided to bailout its banking system with taxpayer money is still dealing with the after effects of the crisis. In 2010, Ireland actually had to accept a bailout from the European Union and the International Monetary Fund because the government could no longer afford the burden. Just weeks ago thousands of people rightfully filled the streets of Irish cities protesting against the bank bailouts. Before the bailouts, Ireland had one of the stronger economies in the European Union with one of the lowest debt-to-GDP ratios in Europe. After the bailouts, the Irish economy has struggled even being mentioned in the same breath as Spain and Greece.
Sadly even with all of these monetary stimulus programs, the United States economy is barely treading water. It was recently reported that the U.S. economy shrunk 0.1 percent in Q4 of 2012 according to official numbers from the U.S. Commerce Department. Considering economic statistics from the government are questionable at best, it is quite possible that the real numbers are far worse. If the U.S. economy is actually shrinking with these types of monetary policies in place, it is painfully obvious that the Federal Reserve has no exit strategy from the status quo. Any attempt to defend the value of the U.S. Dollar by suspending debt purchases and raising interest rates would send the economy into a tailspin. Ben Bernanke the Federal Reserve Chairman once famously said that he would throw money out of a helicopter to keep the economy going so we should fully expect him to continue these activities. In fact, we already know through the Federal Reserve’s own policy statements that they will be continuing near zero interest rate policies well into the future. At this point that’s really all they can do since it is politically infeasible for them to tighten the purse strings so they just continue to print more and more money out of nothing.
The Federal Reserve’s bond purchasing programs have effectively fueled a rally in bonds pushing yields of various U.S. government debt instruments towards historical lows. This has fooled people into believing that U.S. government debt is a safe haven play which is astounding on so many levels. The rate of return on these debt instruments is actually negative when factoring in the real rate of inflation. The government and establishment media love to tout the Consumer Price Index or CPI as the ultimate gauge of inflation. However, the CPI doesn’t even include food and energy in its calculation thus making it a completely worthless indicator of true inflation. Maybe if people didn’t eat, didn’t use oil to heat their homes and didn’t fill their automobiles with gasoline the CPI might have some relevance.
In reality, there’s little question that that the CPI is a purposely manipulated figure designed to mislead people into believing that inflation is lower than it actually is. The CPI also provides the basis for cost of living adjustments that directly affects how much money Social Security recipients receive. This allows the government to get away with paying far less than if real inflation was used as the benchmark to calculate these adjustments. The true measure of inflation calculated using the same statistical models used by the U.S. government during the 1970s has inflation closer to 10% on an annual basis. Even if we were to assume that inflation is half of that figure, U.S. Treasury bond holders would still be getting a negative rate of return on their investment.
Cleary, this is a dangerous game that is being played by the world's central banks. Looking specifically at the Fed they announced late last year that they would be purchasing $85 billion worth of securities on a monthly basis for an indefinite period of time until unemployment is substantially reduced. This adds up to roughly $1 trillion worth of bond purchases per year which is approximately what the federal government’s annual budget deficit has been under the Obama regime. The Fed is essentially monetizing enough debt for the federal government to finance its $1 trillion annual budget deficit. In other words they are creating close to $1 trillion new dollars out of nothing and dumping it into the system. The end result is that you have a larger supply of dollars chasing the same goods and services which ultimately means there will be higher prices because each dollar will be worth less.
This policy is essentially an invisible tax on the average person because it robs them of their purchasing power. Combine this with the fact that the Obama regime actually raised taxes on poor and middle class Americans as part of the recent fiscal cliff deal and the additional burden Obama’s universal healthcare plan has placed on businesses and it is no wonder why the economy is sputtering. Not only is the currency being devalued but they are financially damaging the base from which they collect taxes. Evidence of this economic reality can be seen from a leaked internal e-mail from a Wal-Mart Vice President who stated that sales were a total disaster and that February 2013 sales were off to its slowest start in the 7 years he’s been with the company. Since average people now have less purchasing power to buy things with, it shouldn’t be any surprise that we see reports like this.
One would think sanity would prevail and the Obama regime would at least end the costly foreign wars and make a few domestic spending cuts. Since we live in a world where insanity seems to be the prevailing thought process, we are not going to see this happen. At the recent State of the Union speech Obama actually proposed more spending programs including a ridiculous multi-billion dollar universal preschool initiative. With a debt over $16 trillion, unfunded liabilities that some have argued approach $100 trillion or higher and $1 trillion annual budget deficits where do they think they’ll get the money to pay for these new programs? Either this is pure stupidity of the most epic magnitude or they are intentionally trying to destroy what’s left of the economy. Regardless of what you believe, these policies are leading us towards disaster.
As a result of these crazy policies, huge bubbles are being created in the U.S. Treasury bond market, the U.S. stock market and most importantly in the U.S. Dollar itself. Since the Fed is buying an increasing amount of bonds it has artificially propped up the market causing investors to venture into the stock market for greater returns on investment which has resulted in the Dow Jones Industrial Average hitting the 14,000 level. Contrary to what the talking head clowns on CNBC say, this is not the sign of a healthy economy but instead an indicator of gross manipulations by the Fed which has forced investors to take on more risk to achieve any real rate of return. At some point the market is going to reject these policies when fewer and fewer market participants are willing to purchase U.S. Treasury bonds at historically low yields while the U.S. Dollar is simultaneously devalued. This alone will cause the bond bubble to burst, yields to skyrocket and force the U.S. government to pay even more money to service the interest on the debt. Considering that the U.S. government is already having a difficult time making payments to service the debt with historically low yields, any reversal would be extremely problematic.
It is comical that there are still ratings agencies that rate U.S. sovereign debt with a Triple-A status considering the train wreck we are witnessing. S&P which was the one ratings agency that actually downgraded U.S. sovereign debt is now being sued by the U.S. government over inaccurate securities ratings leading up to the 2008 financial crisis. This is not an attempt to defend S&P by any means, but there are a number of questions as to why they are the only ratings agency being sued. All of the big ratings agencies were guilty of grossly exaggerating the quality of different types of securities in the years leading up to the 2008 financial crash. The only thing that differentiates S&P from the other ratings agencies is that they had the nerve to downgrade U.S. sovereign debt. This lawsuit appears to be retaliation against them for that downgrade and nothing else. If this isn’t the case, than why haven’t lawsuits been filed against all of the major ratings agencies? Clearly, each one of them was involved in some sort of chicanery leading up to the crash. With this said, there is no reason to trust what any of these major ratings firms are saying about U.S. sovereign debt. It is highly probable that their ratings of U.S. sovereign debt are being affected by the possibility that the U.S. government would threaten legal action against them if they fail to provide a favorable analysis.
It is also becoming more apparent that the central planners have been suppressing the gold and silver price as part of an effort to maintain the illusion that these debt based currencies still have value. The German Bundesbank recently announced its intention to take delivery of over half of its gold reserves by 2020 from the Fed and other central banks. The main question here is why would it take 7 years to complete this process? China has been buying huge sums of physical gold on the open market and so far have had no logistical problems receiving prompt delivery of their gold. This gives additional credence to the accusations that central banks have been leasing out physical gold as part of a scam to suppress the price. In other words, the gold that Germany is requesting delivery of is no longer available which is why the gold cannot be immediately delivered. In all likelihood, this is why an agreement was struck to deliver the gold over 7 years so the central banks could save face without having to transparently expose the gold manipulation fraud they are engaged in.
Either way, it is quite obvious that the gold and silver markets have both been manipulated for some time now. If you study the daily charts of gold and silver there are often huge price disruptions to the down side that have no fundamental explanation. If other countries follow suit and request physical delivery of their gold, this could put an end to these suppression schemes resulting in a massive upswing in the price of gold.
It is often said that gold goes where wealth is being generated. If we use that as a measuring stick it is clear that wealth is being transferred from the west over to Asia. Specifically of interest is the fact that gold is being purchased in large sums by both the Chinese and Russian governments. There is even speculation that the Chinese are preparing to officially back the Yuan with gold. We also see huge gold demand from India whose gold imports surged 23% this past January. In fact gold demand has been so strong that India just raised taxes on gold imports to try to reduce demand. Unfortunately for the west, these countries that are net buyers of gold are going to be in a very good financial position once the full effect of these debt monetization and low interest policies are felt. Gold is real money and stores value unlike the debt based garbage that these central banks are creating by typing digits into a computer.
There is very little question that the global financial system is at a point where it cannot be repaired. The policies of unlimited money creation that are currently being implemented by the Fed and other central banks are unfortunately going to continue until the entire system collapses. It is now inevitable that there will be a huge crash in the U.S. stock market, the U.S. bond market and eventually the U.S. Dollar. Gold, silver and other precious metals should perform very well as this scenario unfolds so there are safe havens available for people wishing to preserve their wealth. It is unfortunate that the only question remaining now is not if this collapse is going to happen but when this collapse is going to happen.

Thousands of Opposition Protesters Rally in Bahrain

Thousands of opposition supporters held demonstrations in Bahrain's capital Friday, leading to clashes for a second day.

Anti-government protesters jammed a major highway that links several Shi'ite-populated areas to the capital, Manama, to mark the second anniversary of an uprising against the country's Sunni rulers.

The march along the main highway was largely peaceful, however breakaway groups clashed with riot police in nearby neighborhoods. Witnesses say demonstrators threw stones and police fired tear gas.

Friday's demonstrations began early in the morning and lasted almost all day.

During protests on Thursday, a teenage boy was killed by police gunfire on the outskirts of the capital. And overnight Thursday to Friday, a policeman in Manama died after being hit by a homemade explosive.

The majority Shi'ite opposition called for the nationwide demonstrations to mark the anniversary of the 2011 uprising amid the wave of pro-democracy movements in other Arab countries.

Protesters are demanding democratic reforms in Bahrain and an end to the Sunni monarchy's perceived discrimination against Shi'ites.

Bahrain's government crushed the demonstrations in March 2011, sending security forces to clear a protest encampment in Manama and bringing in troops from neighboring Sunni-led Gulf states to restore order.

Street battles between Bahraini security forces and Shi'ite demonstrators have continued, mostly outside of Manama. At least 55 people have been killed since the uprising began.

WRIST SLAP: Justice Dept Settles Robo-Signing Fraud Case

Criminal foreclosure costs LPS just $30 per fraud.
Mortgage servicing company Lender Processing Services agreed to pay $35 million to resolve a federal criminal investigation into foreclosure fraud, the Justice Department said on Friday.
The settlement resolves allegations over the company’s involvement in what the government called a six-year scheme to prepare and file more than 1 million fraudulently signed and notarized mortgage documents in property recorders’ offices nationwide from 2003 to 2009.  The practice became known as robo-signing.
Lorraine Brown, the former CEO of DocX LLC, was found guilty, November 20, 2012, for conspiracy to commit mail and wire fraud.  Sentencing for Brown is scheduled April 23.  She faces a possible sentence of a maximum of five years in prison and a $250,000 fine, or twice the gross gain or loss from the offense.
LPS entered into a two-year non-prosecution agreement that requires it to meet many conditions, including cooperating in federal probes, and alert the government to any abuses in mortgage or foreclosure documentation services at the company.
The $35 million payment includes criminal penalties and forfeiture and must be made within 10 days to the U.S. Marshals Service and the U.S. Treasury, the Justice Department said.  The company said on Friday that it has a $223 million reserve that covers the Justice Department accord and prior settlements.
Continue reading...

U.S. Foreclosure Map

Photos by William Banzai7...

Now A Vast Political Espionage Scandal To Top Off The Sordid Corruption Scandal In Spain

Spain just can’t catch a break—a horrid economy with dizzying unemployment, collapsing banks, a prime minister and ruling party tarred by corruption.... Now a political espionage scandal blew up, scattering debris and money laundering allegations far and wide.
Unemployment in Spain was 26% in December, youth unemployment 55%. GDP last quarter dropped for the fifth month in a row (-0.7%), the steepest decline since the financial crisis. Consumer spending plunged 10% in December from prior year—following a hike in the value-added tax. And the budget deficit target of 6.3% (not counting the billions plowed into bailing out the banks) is skidding out of reach.
This leitmotif is accompanied by an elegantly escalating corruption scandal that broke in early February. A classic cash-for-contracts arrangement, where senior politicians received secret payments from business folks who in return were awarded juicy government contracts.
It was documented in handwritten ledgers, involved a €22 million slush fund in Switzerland, and was allegedly run by Luis Bárcenas, the ex-treasurer of the conservative People’s Party (PP), the party of Prime Minister Mariano Rajoy, whose name appears repeatedly and very inconveniently on the ledgers as recipient [which put him and Chancellor Merkel on the corruption hot seat in Berlin.... The Confidence Crisis In Spain Sends Out Shock Waves].
Add a political espionage scandal. The case blew up in a peculiar manner. According to sources—everything in this case is “according to sources”—Método 3, a detective agency, went out of business not long ago. One of its laid-off employees was an ex-cop, in charge of the data department. When Método 3 couldn’t pay him what it owed him, he appropriated the computers, video and audio recordings, and a bunch of sensitive files. And they’ve shown up at the technical division of the police in Barcelona.
Now “sources” are talking about what’s in this treasure-trove. Apparently Método 3 had been commissioned by a long list of clients to spy on Catalan party leaders, politicians of national parties, judges, prosecutors, executives, and other prominent figures, sources told La Vanguardia. One of the recordings was of a lunch meeting at a restaurant in Barcelona in July 2010 between Alicia Sánchez-Camacho, President of the PP in Catalonia, and a woman named María Victoria Álvarez.
Álvarez was desperate and scared. She told Sánchez-Camacho that she’d gone on a road trip to Andorra with her then boyfriend, Pujol Ferrusola. The trunk was loaded with packets of 500-euro notes, which he deposited in a bank account there.
She outlined how Pujol Ferrusola—son of powerbroker Jordi Pujol, leader of the Democratic Convergence of Catalonia (CDC) from 1974 to 2003 and President of Catalonia from 1980 to 2003—was doing his family’s money laundering. She wanted to report him but feared for her life. So she asked Sánchez-Camacho for help.
The Pujol-Ferrusola family has been fingered in a police report that seeped to the surface in 2012. While Jordi Pujol was in power, companies associated with his sons were awarded lucrative contracts allegedly through false bidding. These cases had been investigated at the time, but nothing happened.... Until the recording of a conversation about a trunk full of euros popped up.
On Thursday, Álvarez finally testified before the High Court about what she’d witnessed.
Also on Thursday, Sánchez-Camacho pressed charges with the police and filed a complaint in court against Método 3. She’d found out by reading the papers that her lunch conversation had been recorded—and that the top official of the Catalan Socialist Party (PSC), José Zaragoza, at the time party secretary, had allegedly commissioned Método 3 to do the dirty work.
Interior Minister Jorge Fernández announced an “exhaustive” investigation. “We have a lot of information,” he said ominously. Zaragoza and others accused of anything whatsoever have denied everything.
Sources have told La Vanguardia that the materials are so massive that the police have formed a special team, supported by police units from Madrid, to investigate them. The lunch episode uncovered a web of “unpredictable scope.” The investigation is still in an early stage, sources said, but the client list of Método 3 is long and “delicate,” and includes officials of various political parties and institutions, and the number of people tangled up in it is vast. “This is about top politicians,” said the sources.
These revelations are driving the political elite ever deeper into a malodorous morass just when that same elite is forcefully tightening the belts of the people. Workers have taken pay cuts, social benefits have been trimmed, families have lost their homes, the VAT, which hits everyone, has been jacked up, all to squeeze the maximum from those who still have any juice left. Yet, Spain’s legal system wasn’t designed to root out corruption; and Rajoy, among others, may be thinking that this too shall pass.
Corruption of spectacular proportions is dogging another Eurozone country waiting for a bailout. Buried deep inside a report on Russia’s booming underground economy and illicit oil money is a gem: the flows and amounts of Russian “black money” into and out of Cyprus. They’re huge. Read.... Cyprus, ‘A Money Laundering Machine For Russian Criminals’.

Push For Tougher Gun Control May Cost New York State LOTS Of Jobs!

Barack Obama's Warfare State

WASHINGTON, DC - FEBRUARY 12: U.S. President Barack Obama, flanked by Vice President Joe Biden and House Speaker John Boehner (R-OH), delivers his State of the Union speech before a joint session of Congress at the U.S. Capitol February 12, 2013 in Washington, DC. Facing a divided Congress, Obama focused his speech on new initiatives designed to stimulate the U.S. economy.
Malou Innocent is a foreign policy analyst at the Cato Institute.
In his fifth State of the Union address, President Barack Obama hit all the main talking points that everyone expected he would. What he did not say, though, should concern many Americans. Numerous polls show that the majority of Americans want U.S. troops to out of Afghanistan "as soon as possible." Americans also say that their country does not have a responsibility to get involved in Syria and the broader Middle East, and they favor substantial cuts to record high military spending. On all three of these issues, however, Obama did not go far enough and even went in the opposite direction. Certainly, foreign policy should not always fluctuate with the prevailing political winds. But the interests of the American people undoubtedly deserve to be heard.
On Afghanistan, Obama pledged to cut America's presence in half by bringing 34,000 troops home by this time next year. Of course, he failed to specify how many troops will remain thereafter. Last May, he and President Hamid Karzai signed a long-term strategic partnership agreement that committed America to Afghanistan's military and economic security—until 2024. Absent a status of forces agreement, and a resolution to the issue of whether U.S. troops will be immune from the Afghan judicial system, the exact size of America's residual presence remains murky.
[See a collection of political cartoons on Afghanistan.]
Nevertheless, the commander-in-chief could have clarified why the United States should dwell in Central Asia for another decade. He should have explained what vital American interests are being served and what aspect of America's national security would be at stake once we leave. With foreign-policy planners continuing to press for an open-ended commitment, claiming the war will end in 2014 was flagrantly disingenuous.
On future U.S. military interventions, the president was correct to state that "We don't need to send tens of thousands of our sons and daughters abroad or occupy other nations." But his following promise to "help countries like Yemen, Libya, and Somalia provide for their own security" was ill-defined and dangerous. The reason: Obama failed to lay out what set of conditions would warrant America's "help," at a time when the country should be more selective about where it chooses to intervene.
[Check out our editorial cartoons on President Obama.]
Put simply, if Yemen, why not Pakistan? If Somalia, why not Haiti? If Libya, why not Zimbabwe, or the dozens of other countries across Africa? What Obama did not articulate was a limiting principle for when and where America would not commit its scarce resources. Americans deserve to know what conditions would merit U.S. assistance, and what the president is prepared to sacrifice to provide it.
Finally, with sequestration just a few weeks away, the president failed to propose a substantive alternative to across the board cuts. Indeed, he largely avoided any criticism of military spending, and claimed that "sudden, harsh, arbitrary cuts would jeopardize our military readiness." The reality, though, is that even with sequestration, the Pentagon's base budget will remain well above the post-Cold War average, and merely sink to 2007 spending levels. Furthermore, if Obama had his way, we would see either fewer cuts to the Pentagon than called for under sequestration, or added taxation to cover the difference. With the military accounting for nearly 20 percent of total federal spending, Americans are right to demand that such figures be reduced. The United States accounts for about half of global military spending and spends more on its military than all other advanced industrial economies. Last year alone, Americans spent $729 billion on military and international security, and nearly $930 billion including the Departments of Veterans Affairs and Homeland Security. Spending close to a trillion dollars a year will not help safeguard our country's financial security, ostensibly a main thrust of Obama's address.
[See a collection of political cartoons on defense spending.]
Unfortunately, politicians on both sides of the aisle seem to believe that spending reflects an accurate measure of military effectiveness, whereas Americans intuitively understand that strength is not a function of how much we spend. It is time for politicians to revisit how America engages with the world, and recognize that there are more peaceful, more effective, and less costly ways to project America's power and influence abroad and meet our security objectives.
Commentators praised Obama for waxing eloquent on everything from combating climate change and reducing gun violence to creating jobs and raising the minimum wage. What they neglected was the warfare state—the elephant in the room. Americans seek to restrain their leaders' boundless ambition to resolve every foreign civil conflict and maintain historically high military spending levels. Having endured over a decade of permanent war and near financial collapse, Americans have time and again voiced their opposition to the status quo. They deserve to be heard.

Bangladesh’s PM hints at backing ban of Islamic party

Mourners gather and carry the casket bearing Ahmed Rajib Haider, 26, in Dhaka on Feb. 16, 2013. Image via AFP.
Bangladeshi Prime Minister Sheikh Hasina indicated Saturday she would back a ban on the country’s largest Islamic party, as tens of thousands of people joined the funeral of an anti-Islamist blogger.
Hasina said after a meeting with the mourning relatives of Ahmed Rajib Haider that the Jamaat-e-Islami party, whose members are suspected in the blogger’s murder, had “no right to be in politics in free Bangladesh”.
Demonstrations championed by the country’s online activists have seen thousands take to the streets for the last two weeks demanding the execution of leaders of the Jamaat-e-Islami party who are on trial for war crimes.

Rival protests by Islamists demanding a halt to the trials of Jamaat leaders including its chief and deputy chief over their role in the 1971 independence war have turned violent across the country, leaving 13 people dead.
Late on Friday Haider, an organiser of the anti-Islamist protests, was hacked to death with a machete near his Dhaka home.
Police have yet to comment on a possible motive, but his brother said Haider was targeted by Jamaat’s student wing for his online activities. Fellow blogger Shakil Ahmed said a pro-Jamaat website had last week named Haider as a target.
Hasina visited Haider’s home on Saturday and hinted in comments to reporters that she would back a ban for Jamaat.
“Anyone can assume who were behind this,” she said, alluding to Jamaat.
“Many claim they are a democratic political party, a democratic force. Now it is proved that they believe in terrorism not democracy, she said.
“We will do to them what is necessary. They have absolutely no right to be in politics in free Bangladesh.”
Thousands of people including war veterans joined the funeral late Saturday at Dhaka’s Shahbag intersection, where protests have been staged against Islamist groups since February 5.
Local police chief Sirajul Islam told AFP at least 50,000 people attended the funeral.
“We touched his coffin and vowed that we won’t leave the protests until the government finds his killers, and bans Jamaat and its student wing Islami Chhatra Shibir,” said blogger and protester Mahbubur Rahman.
Clashes between police and Islamists have intensified since last week after a senior Jamaat leader was sentenced to life imprisonment for mass murder.
Jamaat and the main opposition Bangladesh Nationalist Party have said the trials are based on bogus charges and are part of a wider political vendetta.
The government rejects the accusations and says the trials are needed to heal wounds of the nine-month war in which it says three million people were killed, many by pro-Pakistani militia whose members allegedly included Jamaat officials.
The killing on Friday was the second attack in Dhaka against a blogger critical of Islamist groups in less than a month, after the stabbing of a self-styled online “militant atheist” by three unidentified men.
[Image via Agence France-Presse]

America’s atomic arsenal is stuck in the Cold War era

These days superpower nuclear-weapons controversies hardly elicit the excitement that once inspired such bumper-sticker slogans as, “you can’t hug children with nuclear arms.” The “no nukes!” movement has gone the way of the Cold War and MTV playing music videos, right?
In the 21st century, the 2002 Treaty of Moscow and 2010’s New START (Strategic Arms Reduction Treaty) were supposed set the clock on bilateral warhead reduction, and there are no plans for the production of more nuclear weapons. Pretty cut and dried, one would think. But like everything radiating out of Washington, the atomic drawdown is not what it seems.
Despite a deficit reduction plan to cut $1.2 trillion in federal spending over 10 years and ongoing negotiations by the so-called supercommittee to identify cuts of $1.5 trillion more, members of Congress are pushing an expanded plutonium storage and production assistance facility at Los Alamos National Laboratory in New Mexico. Critics say the facility is unnecessary, poorly designed, and dangerous—there are fault lines throughout the Los Alamos property—and its cost has ballooned from $375 million in 2001 to an estimated $5.5 billion today.
It hasn’t been built yet—in fact, the designs aren’t even finished after 10 years. But the Chemistry and Metallurgy Research Replacement Nuclear Facility (CMRR-NF) has been soaking up taxpayer money all the same as the scope of the project has metastasized.
“The country doesn’t have money to pour into an unnecessary, giant boondoggle that has grown beyond all original expectations,” charges Greg Mello, executive director of the Los Alamos Study Group, probably the toughest grassroots opposition the CMRR-NF project faces right now. “When the cost of a facility increases by more than a factor of ten, even as the fundamental purposes are evaporating, it’s important to stop, to pause and to question whether this is the right thing to do.”
There is no doubt that the budget-cutting imperative is clashing with the old way of doing business on Capitol Hill, as pet projects and earmarks come under more scrutiny than ever. Bureaucratic institutions used to getting their way by easing expensive, potentially controversial programs under the radar are finding themselves squarely in critics’ sights.
That includes CMRR-NF, which has never been the subject of a public congressional hearing or passionate floor speech—much less a heated debate on cable TV or talk radio—but has been controversial nonetheless.
“I think the key is, it appears to be a huge waste of money and particularly in our current fiscal situation there is no need to hurry this thing at all,” says Peter Stockton, senior investigator for the Project on Government Oversight, which is currently working on its own CMRR-NF report.
•    •    •
The mission of National Nuclear Security Administration (NNSA), which is a semi-autonomous agency of the U.S. Department of Energy, is to “improve national security through the military application of nuclear energy.” It oversees Los Alamos and is in charge of the CMRR project.
Initially, the NNSA was merely focused on renovating the parts of Los Alamos’s old Chemistry and Metallurgy Research (CMR) building that were outmoded and deteriorating by the late 1990s. Tests had found faults running under the property that could cause dangerous earthquakes.
After President George W. Bush was elected, plans to improve and upgrade salvageable portions of the nearly 60-year-old CMR were scrapped, and NNSA set about designing a “simple” replacement facility with two buildings about a mile away. One, the Radiological Laboratory Utility Office Building, is not controversial and almost complete. The other—the NF in CMRR-NF—is a new nuclear facility that would support Los Alamos’s nuclear-weapons mission, including plutonium storage, and assist in the production of plutonium-based “pits,” the fissile cores of nuclear weapons. This currently takes place at the existing TA-55/PF-4 nuclear facility next to the proposed site.
The nuclear facility, according to its critics, has become a monster. Aside from the runaway cost estimates, according to Mello the envisioned facility would give TA-55/PF-4 the capacity to double the number of pits Los Alamos produces each year and could store up to six metric tons of plutonium, “enough to rebuild the entire U.S. strategic arsenal.” This when there are thousands of pits already in storage and a treaty with the Russians sharply limits the nuclear arsenal.
Even if the increase in pit production were necessary—and as Mello and others point out, with much of the information classified or otherwise unavailable to the public, it is hard to know—the existing lab could be upgraded to carry out Los Alamos’s publicly stated mission to refurbish the current stockpile. NNSA, critics complain, has so far refused to seriously consider any alternative.
“We think there are simpler, cheaper, faster alternatives to accomplishing their stated mission, though their stated missions are aggrandized to begin with,” says Los Alamos Study Group President Peter Neils, who was on Capitol Hill in late October to get the word out about CMRR-NF. He blames the out-of-control designs and spiraling cost on a mix of Cold War ideology, over-reliance on contractors, and the self-sustaining mentality of all bureaucracies.
Simply put, says Mello, “the warhead establishment and the Cold War hawks cannot let go of designing and building new kinds of warheads, to create what they call ‘end-to-end’ work for the weapons complex.”
•    •    •
As of June, the Federation of American Scientists reports, the U.S. had 1,950 operational strategic nuclear warheads, plus approximately 200 deployed on behalf of allied countries—Belgium, Turkey, Netherlands, Italy and Germany—and 2,850 in reserve. In addition, some 3,500 retired warheads are awaiting dismantlement. This all jibes with numbers issued by the State Department in 2010. START demands that the U.S. bring those deployed numbers down closer to 1,550 by 2018.
At its peak in 1967 during the Cold War, the nuclear stockpile was at 31,225 warheads. America had 22,217 when the Berlin Wall fell in 1989. If the Cold War were still on, say critics, we might need additional capacity to build pits. But as it is there are thousands of usable pits already in reserve, and the scientific consensus says the plutonium parts of the pits have a lifespan of at least 100 years. The U.S. arsenal is well stocked in this regard.
The new CMRR-NF would help Los Alamos’s TA-55/PF4 site boost production to a conservative estimate of 125 pits a year on a double shift, according to observers. 
This is as outrageous as it is unnecessary, claims Frank von Hippel, a professor and principal investigator at Princeton University’s Program on Science and Global Security, in an affidavit for the Los Alamos Study Group, which is trying to force NNSA’s hand in court.
“There is no anticipated need to produce new pits for U.S. nuclear weapons for several decades,” he writes. The oldest pit produced in the U.S. is 32 years old, he added, noting the current TA-55/PF-4’s production rate of 10 pits per year would be adequate for any replacements necessary during the modernization and maintenance that is already going on under the auspices of NNSA.
Critics say the entire landscape of nuclear-weapons production has changed since CMRR-NF was conceived—all in the direction of reducing the nuclear stockpile—yet every adjustment in the facility’s blueprints has resulted in more capacity to store plutonium and build additional pits.
Most notably, the Reliable Replacement Warhead, a new family of warheads conceived in 2004 and used as a chief justification for modernizing Los Alamos’s nuclear-weapons complex, was defunded by Congress and cancelled by the Obama Administration in 2009.
CMRR-NF “is being built to increase capacity for pit production, even though pit production is not what we need,” the Project on Government Oversight’s Stockton charges. NNSA did not respond to several phone calls for comment on these and other charges lobbed by the opposition.
A three-page “Questions and Answers Regarding the CMRR Project” issued by NNSA before the Reliable Replacement Warhead was canceled maintains that the “primary mission of CMRR will be to support the current nuclear weapons stockpile through surveillance and life-extension programs necessary for the nuclear weapons complex” and “the size of CMRR remains the same.” It blames the soaring expense on poor initial estimates, cost increases in “the construction industry worldwide,” and requirements relating to the seismic risks, nuclear quality assurance, and security. The words “fissile core” or “pit” are never mentioned.
NNSA also contends it has put alternatives up for public comment, most recently when it amended the plans under its Final Supplemental Environmental Impact Statement, which the agency says has incorporated “updated seismic safety design information.” (The Los Alamos Study Group disagrees and has filed a second lawsuit against NNSA, contending that it’s relying on outdated feasibility and impact studies, among other charges.)
Critics say that if the new facility’s mission is merely to help maintain the stockpile, the job could be handled at an improved and upgraded TF-22/P4 facility or elsewhere at a fraction of the cost. As for size, Mello says NNSA can longer say the facility is “the same”—the square footage might be, but the installation’s scope has certainly grown since 2001.
•    •    •
CMRR-NF is not without detractors on Capitol Hill. Over the years, its budget and plans have been questioned for all of the reasons already cited and more. Indeed, today’s fiscal environment has bolstered the criticism, with results that can be seen in competing House and Senate appropriations bills. (Some $450 million has been appropriated to CMRR since 2002.)
Calling it a “cost reduction strategy,” the House in July cut $100 million from NNSA’s $300 million request for CMRR-NF as part of the overall $30.6 billion Fiscal Year 2012 Water and Energy Appropriations package. “The [House and Water and Energy Subcommittee] fully supports the Administration’s plans to modernize the infrastructure, but intends to closely review the funding request for new investment to ensure those plans adhere to good project management practices,” the final bill reads.
By trimming the agency’s request by a third, the House is refusing to provide “the additional funding to support early construction” and would not do so until NNSA resolves “major seismic issues with design” and tames CMRR’s cost.
The Senate subcommittee, too, has expressed concerns. Pointing to the growing expense, its FY 2012 appropriations bill demands NNSA submit a contingency plan that would identify the cost and consequences of delaying the implementation of CMRR, as well as a planned Uranium Processing Facility at Oak Ridge, Tennessee—another project that has gone from an estimated $1.5 billion to upwards of $6.5 billion in the last five years. The committee also proposes to cut $60 million from the NNSA’s $300 million request for CMRR, but allows for preliminary “site preparation”—in other words, construction may begin on a project whose designs are not yet finished.
Mello and Neils have tried to convince lawmakers to put a permanent stop to CMRR-NF. It’s a difficult task, they say. Many legislators are hearing about the issue for the first time and might not be willing to plough through intimidating scientific and technical jargon to get at why this project is bad news.
And CMRR-NF already has momentum. Mike Lofgren, who spent 28 years on Capitol Hill as an aide on defense issues for the House and Senate Budget Committees, says this is bureaucracy in action, and anything relating to weapons systems is going to be expensive.
“It doesn’t surprise me that after a requirement has gone away, or the need has been severely curtailed, they would just continue on with this thing,” Lofgren tells TAC. “These projects get front-loaded by optimistic projections of their cost and overstatements of, ‘hey, we really need this thing,’ so you front-load them and politically engineer them by getting the local congressmen all hyped up by saying it’s going to create new jobs.”
When lawmakers start asking whether a particular project is really worth it, the response, Lofgren says, is always, “it’s too early to tell or too late to stop” and the effort will go on until the money is gone, mission accomplished or not. One need look no further than the $65 billion fleet of F-22 Raptors, which was grounded from May to August because of operational problems and has never seen a day of combat.
It’s hard to get a firm handle on how CMRR-NF has come to be apparently unstoppable because no wants to talk—neither the detractors on the Energy and Water Development Subcommittees, nor the project’s proponents, who have long been led by figures like Sen. John Kyl (R-Ariz.). In fact, reports at the time of Senate negotiations over New START indicate that as Republican Senate whip, Kyl was successful in obtaining additional funds for CMRR-NF in exchange for Senate GOP support for Obama’s treaty with the Russians. Kyl’s office did not return calls for comment.
A spokeswoman for Sen. Jeff Bingaman (D-NM), known as a longtime supporter of the CMRR project, responded with a statement from the senator that hardly sounded like a ringing endorsement.
“The CMRR is an important project for [Los Alamos National Laboratory] and for New Mexico, but it is also important to be sure environmental and cost issues are fully addressed,” Bingaman said. “My top concern as the project has been developed continues to be safety and security of the proposed facility.”
Contractors, post-Cold War ideologues, and bureaucracy may keep the CMRR-NF project going, but those interests appear to be clashing directly with the forces of fiscal restraint and new environmental concerns. After the earthquake-spawned Fukushima nuclear power plant disaster in Japan last spring, fears over seismic hazards at Los Alamos have only grown.
Meanwhile, the Los Alamos Study Group insists its goal is not to stop the U.S. nuclear program, but to make it safer, more efficient and less expensive.
The nuclear-weapons establishment “could do their job more efficiently and more cheaply if they didn’t infuse their work with so much ideology and were just more practical and straightforward,” says Mello. And CMRR-NF is not the only program that might demand additional scrutiny. According to the New York Times, the facility is just one of a host of modernization projects that could cost taxpayers over $600 billion in the next decade.