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March 10, 2009

Breaking the Taboo on Israel's Spying Efforts on the United States | ForeignPolicy | AlterNet

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Scratch a counterintelligence officer in the US government and they'll tell you that Israel is not a friend to the United States.
This is because Israel runs one of the most aggressive and damaging espionage networks targeting the US. The fact of Israeli penetration into the country is not a subject oft-discussed in the media or in the circles of governance, due to the extreme sensitivity of the US-Israel relationship coupled with the burden of the Israel lobby, which punishes legislators who dare to criticize the Jewish state. The void where the facts should sit is filled instead with the hallucinations of conspiracy theory - the kind in which, for example, agents of the Mossad, Israel's top intelligence agency, engineer the 9/11 attacks, while 4,000 Israelis in the Twin Towers somehow all get word to escape before the planes hit. The effect, as disturbing as it is ironic, is that the less the truth is addressed, the more noxious the falsity that spreads.
Israel's spying on the US, however, is a matter of public record, and neither conspiracy nor theory is needed to present the evidence. When the FBI produces its annual report to Congress concerning "Foreign Economic Collection and Industrial Espionage," Israel and its intelligence services often feature prominently as a threat second only to China. In 2005 the FBI noted, for example, that Israel maintains "an active program to gather proprietary information within the United States." A key Israeli method, said the FBI report, is computer intrusion. In 1996, the Defense Intelligence Service, a branch of the Pentagon, issued a warning that "the collection of scientific intelligence in the United States [is] the third highest priority of Israeli Intelligence after information on its Arab neighbors and information on secret US policies or decisions relating to Israel." In 1979, the Central Intelligence Agency produced a scathing survey of Israeli intelligence activities that targeted the US government. Like any worthy spy service, Israeli intelligence early on employed wiretaps as an effective tool, according to the CIA report. In 1954, the US Ambassador in Tel Aviv discovered in his office a hidden microphone "planted by the Israelis," and two years later telephone taps were found in the residence of the US military attaché. In a telegram to Washington, the ambassador at the time cabled a warning: "Department must assume that all conversations [in] my office are known to the Israelis." The former ambassador to Qatar, Andrew Killgore, who also served as a foreign officer in Jerusalem and Beirut, told me Israeli taps of US missions and embassies in the Middle East were part of a "standard operating procedure."
According to the 1979 CIA report, the Israelis, while targeting political secrets, also devote "a considerable portion of their covert operations to obtaining scientific and technical intelligence." These operations involved, among other machinations, "attempts to penetrate certain classified defense projects in the United States." The penetrations, according to the CIA report, were effected using "deep cover enterprises," which the report described as "firms and organizations, some specifically created for, or adaptable to, a specific objective." At the time, the CIA singled out government-subsidized companies such as El Al airlines and Zim, the Israeli shipping firm, as deep cover enterprises. Other deep cover operations included the penetration of a US company that provided weapons-grade uranium to the Department of Defense during the 1960s; Israeli agents eventually spirited home an estimated 200 pounds of uranium as the bulwark in Israel's secret nuclear weapons program. Moles have burrowed on Israel's behalf throughout the US intelligence services. Perhaps most infamous was the case of Jonathan Pollard, a Jewish-American employed as a civilian analyst with the US Navy who purloined an estimated 800,000 code-word protected documents from inside the CIA, the Defense Intelligence Agency, and numerous other US agencies. While Pollard was sentenced to life in prison, counterintelligence investigators at the FBI suspected he was linked to a mole far higher in the food chain, ensconced somewhere in the DIA, but this suspected Israeli operative, nicknamed "Mr. X," was never found. Following the embarrassment of the Pollard affair - and its devastating effects on US national security, as testified by then Defense Secretary Caspar Weinberger (who allegedly stated that Pollard "should have been shot") - the Israeli government vowed never again to pursue espionage against its ally and chief benefactor.
Fast-forward a quarter century, and the vow has proven empty. In 2004, the authoritative Jane's Intelligence Group noted that Israel's intelligence organizations "have been spying on the US and running clandestine operations since Israel was established." The former deputy director of counterintelligence at FBI, Harry B. Brandon, last year told Congressional Quarterly magazine that "the Israelis are interested in commercial as much as military secrets. They have a muscular technology sector themselves." According to CQ, "One effective espionage tool is forming joint partnerships with U.S. companies to supply software and other technology products to U.S. government agencies."
Best-selling author James Bamford now adds another twist in this history of infiltration in a book published last October, "The Shadow Factory," which forms the latest installment in his trilogy of investigations into the super-secret National Security Agency. Bamford is regarded among journalists and intelligence officers as the nation's expert on the workings of the NSA, whose inner sanctums he first exposed to the public in 1982. (So precise is his reporting that NSA officers once threw him a book party, despite the fact that he continually reveals their secrets.) The agency has come a long way in the half-century since its founding in 1952. Armed with digital technology and handed vast new funding and an almost limitless mandate in the wake of the 9/11 attacks, Bamford writes, the NSA has today "become the largest, most costly, and most technologically sophisticated spy organization the world has ever known." The NSA touches on every facet of US communications, its mega-computers secretly filtering "millions of phone calls and e-mails" every hour of operation. For those who have followed the revelations of the NSA's "warrantless wiretapping" program in the New York Times in 2005 and the Wall Street Journal last year, what Bamford unveils in "The Shadow Factory" is only confirmation of the worst fears: "There is now the capacity," he writes of the NSA's tentacular reach into the private lives of Americans, "to make tyranny total."
Much less has been reported about the high-tech Israeli wiretapping firms that service US telecommunications companies, primarily AT&T and Verizon, whose networks serve as the chief conduits for NSA surveillance. Even less is known about the links between those Israeli companies and the Israeli intelligence services. But what Bamford suggests in his book accords with the history of Israeli spying in the US: Through joint partnerships with US telecoms, Israel may be a shadow arm of surveillance among the tentacles of the NSA. In other words, when the NSA violates constitutional protections against unlawful search and seizure to vacuum up the contents of your telephone conversations and e-mail traffic, the Israeli intelligence services may be gathering it up too - a kind of mirror tap that is effectively a two-government-in-one violation.
[section break]
On its face, the overseas outsourcing of high-tech services would seem de rigueur in a competitive globalized marketplace. Equipment and services from Israel's telecom sector are among the country's prime exports, courtesy of Israeli entrepreneurs who have helped pioneer wireless telephony, voicemail and voice recognition software, instant messaging, phone billing software, and, not least, "communications interception solutions." Israeli telecom interception hardware and software is appraised as some of the best in the world.
By the mid-1990s, Israeli wiretap firms would arrive in the US in a big way. The key to the kingdom was the 1994 Communications Assistance for Law Enforcement Act (CALEA), which was Congress' solution for wiretapping in the digital age. Gone are the days when wiretaps were conducted through on-site tinkering with copper switches. CALEA mandated that telephonic surveillance operate through computers linked directly into the routers and hubs of telecom companies - a spyware apparatus matched in real-time, all the time, to American telephones and modems. CALEA effectively made spy equipment an inextricable ligature in telephonic life. Without CALEA, the NSA in its spectacular surveillance exploits could not have succeeded.
AT&T and Verizon, which together manage as much as 90 percent of the nation's communications traffic, contracted with Israeli firms in order to comply with CALEA. AT&T employed the services of Narus Inc., which was founded in Israel in 1997. It was Narus technology that AT&T whistleblower Mark Klein, a 22-year technician with the company, famously unveiled in a 2006 affidavit that described the operations in AT&T's secret tapping room at its San Francisco facilities. (Klein's affidavit formed the gravamen of a lawsuit against AT&T mounted by the Electronic Freedom Foundation, but the lawsuit died when Congress passed the telecom immunity bill last year.) According to Klein, the Narus supercomputer, the STA 6400, was "known to be used particularly by government intelligence agencies because of its ability to sift through large amounts of data looking for preprogrammed targets." The Narus system, which was maintained by Narus technicans, also provided a real-time mirror image of all data streaming through AT&T routers, an image to be rerouted into the computers of the NSA.
According to Jim Bamford, who cites knowledgeable sources, Verizon's eavesdropping program is run by a competing Israeli firm called Verint, a subsidiary of Comverse Technology, which was founded by a former Israeli intelligence officer in 1984. Incorporated in New York and Tel Aviv, Comverse is effectively an arm of the Israeli government: 50 percent of its R&D costs are reimbursed by the Israeli Ministry of Industry and Trade. The Verint technology deployed throughout Verizon's network, known as STAR-GATE, boasts an array of Orwellian capabilities. "With STAR-GATE, service providers can access communications on virtually any type of network," according to the company's literature. "Designed to manage vast numbers of targets, concurrent sessions, call data records, and communications, STAR-GATE transparently accesses targeted communications without alerting subscribers or disrupting service." As with the Narus system, the point is to be able to tap into communications unobtrusively, in real time, all the time. A Verint spinoff firm, PerSay, takes the tap to the next stage, deploying "advanced voice mining," which singles out "a target's voice within a large volume of intercepted calls, regardless of the conversation content or method of communication." Verint's interception systems have gone global since the late 1990s, and sales in 2006 reached $374 million (a doubling of its revenues over 2003). More than 5,000 organizations - mostly intelligence services and police units - in at least 100 countries today use Verint technology.
What troubles Bamford is that executives and directors at companies like Narus and Verint formerly worked at or maintain close connections with the Israeli intelligence services, including Mossad; the internal security agency Shin Bet; and the Israeli version of the NSA, Unit 8200, an arm of the Israeli Defense Forces Intelligence Corps. Unit 8200, which Bamford describes as "hypersecret," is a key player in the eavesdropping industrial complex in Israel, its retired personnel dispersed throughout dozens of companies. According to Ha'aretz, the Israeli daily, "Many of the [eavesdropping] technologies in use around the world and developed in Israel were originally military technologies and were developed and improved by [Unit 8200] veterans." A former commander of Unit 8200, cited by Bamford, states that Verint technology was "directly influenced by 8200 technology....[Verint parent company] Comverse's main product, the Logger, is based on the Unit's technology." The implications for US national security, writes Bamford, are "unnerving." "Virtually the entire American telecommunications system," he avers, "is bugged by [Israeli-formed] companies with possible ties to Israel's eavesdropping agency." Congress, he says, maintains no oversight of these companies' operations, and even their contracts with US telecoms - contracts pivotal to NSA surveillance - are considered trade secrets and go undisclosed in company statements.
US intelligence officers have not been quiet in their concerns about Verint (I reported on this matter in CounterPunch.org last September). "Phone calls are intercepted, recorded, and transmitted to U.S. investigators by Verint, which claims that it has to be 'hands on' with its equipment to maintain the system," says former CIA counterterrorism officer Philip Giraldi. The "hands on" factor is what bothers Giraldi, specifically because of the possibility of a "trojan" embedded in Verint wiretap software. A trojan in information security hardware/software is a backdoor that can be accessed remotely by parties who normally would not have access to the secure system. Allegations of widespread trojan spying have rocked the Israeli business community in recent years. "Top Israeli blue chip companies," reported the AP in 2005, "are suspected of using illicit surveillance software to steal information from their rivals and enemies." Over 40 companies have come under scrutiny. "It is the largest cybercrime case in Israeli history," Boaz Guttmann, a veteran cybercrimes investigator with the Israeli national police, told me. "Trojan horse espionage is part of the way of life of companies in Israel. It's a culture of spying."
In a wide-ranging four-part investigation into Israel-linked espionage that aired in December 2001, Carl Cameron, a correspondent at Fox News Channel, reported the distress among US intelligence officials warning about possible trojans cached in Verint technology. Sources told Cameron that "while various FBI inquiries into [Verint] have been conducted over the years," the inquiries had "been halted before the actual equipment has ever been thoroughly tested for leaks." Cameron also cited a 1999 internal FCC document indicating that "several government agencies expressed deep concerns that too many unauthorized non-law enforcement personnel can access the wiretap system." Much of this access was facilitated through "remote maintenance."
The Fox News report reverberated throughout US law enforcement, particularly at the Drug Enforcement Agency, which makes extensive use of wiretaps for narcotics interdiction. Security officers at DEA, an adjunct of the Justice Department, began examining the agency's own relationship with Comverse/Verint. In 1997, DEA had transformed its wiretap infrastructure with the $25 million procurement from Comverse/Verint of a technology called "T2S2" - "translation and transcription support services" - with Comverse/Verint contracted to provide the hardware and software. The company was also tasked with "support services, training, upgrades, enhancements and options throughout the life of the contract," according to the DEA's "contracts and acquisitions" notice. In the wake of the Fox News investigation, however, the director of security programs at DEA, Heidi Raffanello, was rattled enough to issue an internal communiqué on the matter, dated Dec. 18, 2001. Directly referencing Fox News, she worried that "Comverse remote maintenance" was "not addressed in the C&A [contracts and acquisitions] process....It remains unclear if Comverse personnel are security cleared, and if so, who are they and what type of clearances are on record....Bottom line we should have caught it." It is not known what resulted from DEA's review of the issue of remote maintenance and access by Comverse/Verint.
Bamford devotes a portion of his argument to the detailing of the operations of a third Israeli wiretap company, NICE Systems, which he describes as "a major eavesdropper in the U.S." that "keeps its government and commercial client list very secret." Formed in 1986 by seven veterans of Unit 8200, NICE software "captures voice, email, chat, screen activity, and essential call details," while offering "audio compression technology that performs continuous recordings of up to thousands of analog and digital telephone lines and radio channels." NICE Systems has on at least one occasion shown up on the radar of US counterintelligence. During 2000-2001, when agents at the FBI and the CIA began investigating allegations that Israeli nationals posing as "art students" were in fact conducting espionage on US soil, one of the Israeli "art students" was discovered to be an employee with NICE Systems. Among the targets of the art students were facilities and offices of the Drug Enforcement Agency nationwide. The same Israeli employee of NICE Systems, who was identified as a former operative in the Israeli intelligence services, was carrying a disk that contained a file labeled "DEA Groups." US counterintelligence officers concluded it was a highly suspicious nexus: An Israeli national and alleged spy was working for an Israeli wiretap company while carrying in his possession computer information regarding the Drug Enforcement Agency - at the same time this Israeli was conducting what the DEA described as "intelligence gathering" about DEA facilities.
[section break]
A former senior counterintelligence official in the Bush administration told me that as early as 1999, "CIA was very concerned about [Israeli wiretapping companies]" - Verint in particular. "I know that CIA has tried to monitor what the Israelis were doing - technically watch what they were doing on the networks in terms of remote access. Other countries were concerned as well," said the intelligence official. Jim Bamford, who notes that Verint "can automatically access the mega-terabytes of stored and real-time data secretly and remotely from anywhere," reports that Australian lawmakers in 2004 held hearings on this remote monitoring capability. "[Y]ou can access data from overseas," the lawmakers told a Verint representative during the hearings, "but [the legislature] seems restricted to access data within that system." The Australians found this astonishing. In 2000, the Canadian intelligence service, the Royal Canadian Mounted Police, conducted "a probe related to allegations that [Israeli] spies used rigged software to hack into Canada's top secret intelligence files," according to an article in the Toronto Star. Several sources in the US intelligence community told me the Canadians liaised with their American counterparts to try to understand the problem. According to the Bush administration official who spoke with me, "the Dutch also had come to the CIA very concerned about what the Israelis were doing with this." The Dutch intelligence service, under contract with Verint, "had discovered strange things were going on - there was activity on the network, the Israelis uploading and downloading stuff out of the switches, remotely, and apparently using it for their own wiretap purposes. The CIA was very embarrassed to say, 'We have the same problem.' But the CIA didn't have an answer for them. 'We hear you, we're surprised, and we understand your concern.'" Indeed, sources in the Dutch counterintelligence community in 2002 claimed there was "strong evidence that the Israeli secret service has uncontrolled access to confidential tapping data collected by the Dutch police and intelligence services," according to the Dutch broadcast radio station Evangelische Omroep (EO). In January 2003, the respected Dutch technology and computing magazine, C'T, ran a follow-up to the EO story, headlined "Dutch Tapping Room not Kosher." The article states: "All tapping equipment of the Dutch intelligence services and half the tapping equipment of the national police force [is] insecure and is leaking information to Israel."
"The key to this whole thing is that Australian meeting," Bamford told me in a recent interview. "They accused Verint of remote access and Verint said they won't do it again - which implies they were doing it in the past. It's a matter of a backdoor into the system, and those backdoors should not be allowed to exist. You can tell by the Australian example that it was certainly a concern of Australian lawmakers."
Congress doesn't seem to share the concern. "Part of the responsibility of Congress," says Bamford, "is not just to oversee the intelligence community but to look into the companies with which the intelligence community contracts. They're just very sloppy about this." According to the Bush administration intelligence official who spoke with me, "Frustratingly, I did not get the sense that our government was stepping up to this and grasping the bull by the horns." Another former high level US intelligence official told me, "The fact of the vulnerability of our telecom backbone is indisputable. How it came to pass, why nothing has been done, who has done what - these are the incendiary questions." There is also the fundamental fact that the wiretap technologies implemented by Verint, Narus and other Israeli companies are fully in place and no alternative is on the horizon. "There is a technical path dependence problem," says the Bush administration official. "I have been told nobody else makes software like this for the big digital switches, so that is part of the problem. Other issues," he adds, "compound the problem" - referring to the sensitivity of the US-Israel relationship.
And that, of course, is the elephant in the room. "Whether it's a Democratic or Republican administration, you don't bad-mouth Israel if you want to get ahead," says former CIA counterterrorism officer Philip Giraldi. "Most of the people in the agency were very concerned about Israeli espionage and Israeli actions against U.S. interests. Everybody was aware of it. Everybody hated it. But they wouldn't get promoted if they spoke out. Israel has a privileged position and that's the way things are. It's crazy. And everybody knows it's crazy."
Christopher Ketcham writes for Vanity Fair, Harper's, GQ and many other magazines. He is working on a book about the history of Israeli espionage in the United States. He can be reached at cketcham99@mindspring.com.
© 2009 Independent Media Institute. All rights reserved.
View this story online at: http://www.alternet.org/story/130891/
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Breaking the Taboo on Israel's Spying Efforts on the United States | ForeignPolicy | AlterNet

The Dome of the Rock and the Western Wall/ Zap...

Image via Wikipedia

AlterNet
Scratch a counterintelligence officer in the US government and they'll tell you that Israel is not a friend to the United States.
This is because Israel runs one of the most aggressive and damaging espionage networks targeting the US. The fact of Israeli penetration into the country is not a subject oft-discussed in the media or in the circles of governance, due to the extreme sensitivity of the US-Israel relationship coupled with the burden of the Israel lobby, which punishes legislators who dare to criticize the Jewish state. The void where the facts should sit is filled instead with the hallucinations of conspiracy theory - the kind in which, for example, agents of the Mossad, Israel's top intelligence agency, engineer the 9/11 attacks, while 4,000 Israelis in the Twin Towers somehow all get word to escape before the planes hit. The effect, as disturbing as it is ironic, is that the less the truth is addressed, the more noxious the falsity that spreads.
Israel's spying on the US, however, is a matter of public record, and neither conspiracy nor theory is needed to present the evidence. When the FBI produces its annual report to Congress concerning "Foreign Economic Collection and Industrial Espionage," Israel and its intelligence services often feature prominently as a threat second only to China. In 2005 the FBI noted, for example, that Israel maintains "an active program to gather proprietary information within the United States." A key Israeli method, said the FBI report, is computer intrusion. In 1996, the Defense Intelligence Service, a branch of the Pentagon, issued a warning that "the collection of scientific intelligence in the United States [is] the third highest priority of Israeli Intelligence after information on its Arab neighbors and information on secret US policies or decisions relating to Israel." In 1979, the Central Intelligence Agency produced a scathing survey of Israeli intelligence activities that targeted the US government. Like any worthy spy service, Israeli intelligence early on employed wiretaps as an effective tool, according to the CIA report. In 1954, the US Ambassador in Tel Aviv discovered in his office a hidden microphone "planted by the Israelis," and two years later telephone taps were found in the residence of the US military attaché. In a telegram to Washington, the ambassador at the time cabled a warning: "Department must assume that all conversations [in] my office are known to the Israelis." The former ambassador to Qatar, Andrew Killgore, who also served as a foreign officer in Jerusalem and Beirut, told me Israeli taps of US missions and embassies in the Middle East were part of a "standard operating procedure."
According to the 1979 CIA report, the Israelis, while targeting political secrets, also devote "a considerable portion of their covert operations to obtaining scientific and technical intelligence." These operations involved, among other machinations, "attempts to penetrate certain classified defense projects in the United States." The penetrations, according to the CIA report, were effected using "deep cover enterprises," which the report described as "firms and organizations, some specifically created for, or adaptable to, a specific objective." At the time, the CIA singled out government-subsidized companies such as El Al airlines and Zim, the Israeli shipping firm, as deep cover enterprises. Other deep cover operations included the penetration of a US company that provided weapons-grade uranium to the Department of Defense during the 1960s; Israeli agents eventually spirited home an estimated 200 pounds of uranium as the bulwark in Israel's secret nuclear weapons program. Moles have burrowed on Israel's behalf throughout the US intelligence services. Perhaps most infamous was the case of Jonathan Pollard, a Jewish-American employed as a civilian analyst with the US Navy who purloined an estimated 800,000 code-word protected documents from inside the CIA, the Defense Intelligence Agency, and numerous other US agencies. While Pollard was sentenced to life in prison, counterintelligence investigators at the FBI suspected he was linked to a mole far higher in the food chain, ensconced somewhere in the DIA, but this suspected Israeli operative, nicknamed "Mr. X," was never found. Following the embarrassment of the Pollard affair - and its devastating effects on US national security, as testified by then Defense Secretary Caspar Weinberger (who allegedly stated that Pollard "should have been shot") - the Israeli government vowed never again to pursue espionage against its ally and chief benefactor.
Fast-forward a quarter century, and the vow has proven empty. In 2004, the authoritative Jane's Intelligence Group noted that Israel's intelligence organizations "have been spying on the US and running clandestine operations since Israel was established." The former deputy director of counterintelligence at FBI, Harry B. Brandon, last year told Congressional Quarterly magazine that "the Israelis are interested in commercial as much as military secrets. They have a muscular technology sector themselves." According to CQ, "One effective espionage tool is forming joint partnerships with U.S. companies to supply software and other technology products to U.S. government agencies."
Best-selling author James Bamford now adds another twist in this history of infiltration in a book published last October, "The Shadow Factory," which forms the latest installment in his trilogy of investigations into the super-secret National Security Agency. Bamford is regarded among journalists and intelligence officers as the nation's expert on the workings of the NSA, whose inner sanctums he first exposed to the public in 1982. (So precise is his reporting that NSA officers once threw him a book party, despite the fact that he continually reveals their secrets.) The agency has come a long way in the half-century since its founding in 1952. Armed with digital technology and handed vast new funding and an almost limitless mandate in the wake of the 9/11 attacks, Bamford writes, the NSA has today "become the largest, most costly, and most technologically sophisticated spy organization the world has ever known." The NSA touches on every facet of US communications, its mega-computers secretly filtering "millions of phone calls and e-mails" every hour of operation. For those who have followed the revelations of the NSA's "warrantless wiretapping" program in the New York Times in 2005 and the Wall Street Journal last year, what Bamford unveils in "The Shadow Factory" is only confirmation of the worst fears: "There is now the capacity," he writes of the NSA's tentacular reach into the private lives of Americans, "to make tyranny total."
Much less has been reported about the high-tech Israeli wiretapping firms that service US telecommunications companies, primarily AT&T and Verizon, whose networks serve as the chief conduits for NSA surveillance. Even less is known about the links between those Israeli companies and the Israeli intelligence services. But what Bamford suggests in his book accords with the history of Israeli spying in the US: Through joint partnerships with US telecoms, Israel may be a shadow arm of surveillance among the tentacles of the NSA. In other words, when the NSA violates constitutional protections against unlawful search and seizure to vacuum up the contents of your telephone conversations and e-mail traffic, the Israeli intelligence services may be gathering it up too - a kind of mirror tap that is effectively a two-government-in-one violation.
[section break]
On its face, the overseas outsourcing of high-tech services would seem de rigueur in a competitive globalized marketplace. Equipment and services from Israel's telecom sector are among the country's prime exports, courtesy of Israeli entrepreneurs who have helped pioneer wireless telephony, voicemail and voice recognition software, instant messaging, phone billing software, and, not least, "communications interception solutions." Israeli telecom interception hardware and software is appraised as some of the best in the world.
By the mid-1990s, Israeli wiretap firms would arrive in the US in a big way. The key to the kingdom was the 1994 Communications Assistance for Law Enforcement Act (CALEA), which was Congress' solution for wiretapping in the digital age. Gone are the days when wiretaps were conducted through on-site tinkering with copper switches. CALEA mandated that telephonic surveillance operate through computers linked directly into the routers and hubs of telecom companies - a spyware apparatus matched in real-time, all the time, to American telephones and modems. CALEA effectively made spy equipment an inextricable ligature in telephonic life. Without CALEA, the NSA in its spectacular surveillance exploits could not have succeeded.
AT&T and Verizon, which together manage as much as 90 percent of the nation's communications traffic, contracted with Israeli firms in order to comply with CALEA. AT&T employed the services of Narus Inc., which was founded in Israel in 1997. It was Narus technology that AT&T whistleblower Mark Klein, a 22-year technician with the company, famously unveiled in a 2006 affidavit that described the operations in AT&T's secret tapping room at its San Francisco facilities. (Klein's affidavit formed the gravamen of a lawsuit against AT&T mounted by the Electronic Freedom Foundation, but the lawsuit died when Congress passed the telecom immunity bill last year.) According to Klein, the Narus supercomputer, the STA 6400, was "known to be used particularly by government intelligence agencies because of its ability to sift through large amounts of data looking for preprogrammed targets." The Narus system, which was maintained by Narus technicans, also provided a real-time mirror image of all data streaming through AT&T routers, an image to be rerouted into the computers of the NSA.
According to Jim Bamford, who cites knowledgeable sources, Verizon's eavesdropping program is run by a competing Israeli firm called Verint, a subsidiary of Comverse Technology, which was founded by a former Israeli intelligence officer in 1984. Incorporated in New York and Tel Aviv, Comverse is effectively an arm of the Israeli government: 50 percent of its R&D costs are reimbursed by the Israeli Ministry of Industry and Trade. The Verint technology deployed throughout Verizon's network, known as STAR-GATE, boasts an array of Orwellian capabilities. "With STAR-GATE, service providers can access communications on virtually any type of network," according to the company's literature. "Designed to manage vast numbers of targets, concurrent sessions, call data records, and communications, STAR-GATE transparently accesses targeted communications without alerting subscribers or disrupting service." As with the Narus system, the point is to be able to tap into communications unobtrusively, in real time, all the time. A Verint spinoff firm, PerSay, takes the tap to the next stage, deploying "advanced voice mining," which singles out "a target's voice within a large volume of intercepted calls, regardless of the conversation content or method of communication." Verint's interception systems have gone global since the late 1990s, and sales in 2006 reached $374 million (a doubling of its revenues over 2003). More than 5,000 organizations - mostly intelligence services and police units - in at least 100 countries today use Verint technology.
What troubles Bamford is that executives and directors at companies like Narus and Verint formerly worked at or maintain close connections with the Israeli intelligence services, including Mossad; the internal security agency Shin Bet; and the Israeli version of the NSA, Unit 8200, an arm of the Israeli Defense Forces Intelligence Corps. Unit 8200, which Bamford describes as "hypersecret," is a key player in the eavesdropping industrial complex in Israel, its retired personnel dispersed throughout dozens of companies. According to Ha'aretz, the Israeli daily, "Many of the [eavesdropping] technologies in use around the world and developed in Israel were originally military technologies and were developed and improved by [Unit 8200] veterans." A former commander of Unit 8200, cited by Bamford, states that Verint technology was "directly influenced by 8200 technology....[Verint parent company] Comverse's main product, the Logger, is based on the Unit's technology." The implications for US national security, writes Bamford, are "unnerving." "Virtually the entire American telecommunications system," he avers, "is bugged by [Israeli-formed] companies with possible ties to Israel's eavesdropping agency." Congress, he says, maintains no oversight of these companies' operations, and even their contracts with US telecoms - contracts pivotal to NSA surveillance - are considered trade secrets and go undisclosed in company statements.
US intelligence officers have not been quiet in their concerns about Verint (I reported on this matter in CounterPunch.org last September). "Phone calls are intercepted, recorded, and transmitted to U.S. investigators by Verint, which claims that it has to be 'hands on' with its equipment to maintain the system," says former CIA counterterrorism officer Philip Giraldi. The "hands on" factor is what bothers Giraldi, specifically because of the possibility of a "trojan" embedded in Verint wiretap software. A trojan in information security hardware/software is a backdoor that can be accessed remotely by parties who normally would not have access to the secure system. Allegations of widespread trojan spying have rocked the Israeli business community in recent years. "Top Israeli blue chip companies," reported the AP in 2005, "are suspected of using illicit surveillance software to steal information from their rivals and enemies." Over 40 companies have come under scrutiny. "It is the largest cybercrime case in Israeli history," Boaz Guttmann, a veteran cybercrimes investigator with the Israeli national police, told me. "Trojan horse espionage is part of the way of life of companies in Israel. It's a culture of spying."
In a wide-ranging four-part investigation into Israel-linked espionage that aired in December 2001, Carl Cameron, a correspondent at Fox News Channel, reported the distress among US intelligence officials warning about possible trojans cached in Verint technology. Sources told Cameron that "while various FBI inquiries into [Verint] have been conducted over the years," the inquiries had "been halted before the actual equipment has ever been thoroughly tested for leaks." Cameron also cited a 1999 internal FCC document indicating that "several government agencies expressed deep concerns that too many unauthorized non-law enforcement personnel can access the wiretap system." Much of this access was facilitated through "remote maintenance."
The Fox News report reverberated throughout US law enforcement, particularly at the Drug Enforcement Agency, which makes extensive use of wiretaps for narcotics interdiction. Security officers at DEA, an adjunct of the Justice Department, began examining the agency's own relationship with Comverse/Verint. In 1997, DEA had transformed its wiretap infrastructure with the $25 million procurement from Comverse/Verint of a technology called "T2S2" - "translation and transcription support services" - with Comverse/Verint contracted to provide the hardware and software. The company was also tasked with "support services, training, upgrades, enhancements and options throughout the life of the contract," according to the DEA's "contracts and acquisitions" notice. In the wake of the Fox News investigation, however, the director of security programs at DEA, Heidi Raffanello, was rattled enough to issue an internal communiqué on the matter, dated Dec. 18, 2001. Directly referencing Fox News, she worried that "Comverse remote maintenance" was "not addressed in the C&A [contracts and acquisitions] process....It remains unclear if Comverse personnel are security cleared, and if so, who are they and what type of clearances are on record....Bottom line we should have caught it." It is not known what resulted from DEA's review of the issue of remote maintenance and access by Comverse/Verint.
Bamford devotes a portion of his argument to the detailing of the operations of a third Israeli wiretap company, NICE Systems, which he describes as "a major eavesdropper in the U.S." that "keeps its government and commercial client list very secret." Formed in 1986 by seven veterans of Unit 8200, NICE software "captures voice, email, chat, screen activity, and essential call details," while offering "audio compression technology that performs continuous recordings of up to thousands of analog and digital telephone lines and radio channels." NICE Systems has on at least one occasion shown up on the radar of US counterintelligence. During 2000-2001, when agents at the FBI and the CIA began investigating allegations that Israeli nationals posing as "art students" were in fact conducting espionage on US soil, one of the Israeli "art students" was discovered to be an employee with NICE Systems. Among the targets of the art students were facilities and offices of the Drug Enforcement Agency nationwide. The same Israeli employee of NICE Systems, who was identified as a former operative in the Israeli intelligence services, was carrying a disk that contained a file labeled "DEA Groups." US counterintelligence officers concluded it was a highly suspicious nexus: An Israeli national and alleged spy was working for an Israeli wiretap company while carrying in his possession computer information regarding the Drug Enforcement Agency - at the same time this Israeli was conducting what the DEA described as "intelligence gathering" about DEA facilities.
[section break]
A former senior counterintelligence official in the Bush administration told me that as early as 1999, "CIA was very concerned about [Israeli wiretapping companies]" - Verint in particular. "I know that CIA has tried to monitor what the Israelis were doing - technically watch what they were doing on the networks in terms of remote access. Other countries were concerned as well," said the intelligence official. Jim Bamford, who notes that Verint "can automatically access the mega-terabytes of stored and real-time data secretly and remotely from anywhere," reports that Australian lawmakers in 2004 held hearings on this remote monitoring capability. "[Y]ou can access data from overseas," the lawmakers told a Verint representative during the hearings, "but [the legislature] seems restricted to access data within that system." The Australians found this astonishing. In 2000, the Canadian intelligence service, the Royal Canadian Mounted Police, conducted "a probe related to allegations that [Israeli] spies used rigged software to hack into Canada's top secret intelligence files," according to an article in the Toronto Star. Several sources in the US intelligence community told me the Canadians liaised with their American counterparts to try to understand the problem. According to the Bush administration official who spoke with me, "the Dutch also had come to the CIA very concerned about what the Israelis were doing with this." The Dutch intelligence service, under contract with Verint, "had discovered strange things were going on - there was activity on the network, the Israelis uploading and downloading stuff out of the switches, remotely, and apparently using it for their own wiretap purposes. The CIA was very embarrassed to say, 'We have the same problem.' But the CIA didn't have an answer for them. 'We hear you, we're surprised, and we understand your concern.'" Indeed, sources in the Dutch counterintelligence community in 2002 claimed there was "strong evidence that the Israeli secret service has uncontrolled access to confidential tapping data collected by the Dutch police and intelligence services," according to the Dutch broadcast radio station Evangelische Omroep (EO). In January 2003, the respected Dutch technology and computing magazine, C'T, ran a follow-up to the EO story, headlined "Dutch Tapping Room not Kosher." The article states: "All tapping equipment of the Dutch intelligence services and half the tapping equipment of the national police force [is] insecure and is leaking information to Israel."
"The key to this whole thing is that Australian meeting," Bamford told me in a recent interview. "They accused Verint of remote access and Verint said they won't do it again - which implies they were doing it in the past. It's a matter of a backdoor into the system, and those backdoors should not be allowed to exist. You can tell by the Australian example that it was certainly a concern of Australian lawmakers."
Congress doesn't seem to share the concern. "Part of the responsibility of Congress," says Bamford, "is not just to oversee the intelligence community but to look into the companies with which the intelligence community contracts. They're just very sloppy about this." According to the Bush administration intelligence official who spoke with me, "Frustratingly, I did not get the sense that our government was stepping up to this and grasping the bull by the horns." Another former high level US intelligence official told me, "The fact of the vulnerability of our telecom backbone is indisputable. How it came to pass, why nothing has been done, who has done what - these are the incendiary questions." There is also the fundamental fact that the wiretap technologies implemented by Verint, Narus and other Israeli companies are fully in place and no alternative is on the horizon. "There is a technical path dependence problem," says the Bush administration official. "I have been told nobody else makes software like this for the big digital switches, so that is part of the problem. Other issues," he adds, "compound the problem" - referring to the sensitivity of the US-Israel relationship.
And that, of course, is the elephant in the room. "Whether it's a Democratic or Republican administration, you don't bad-mouth Israel if you want to get ahead," says former CIA counterterrorism officer Philip Giraldi. "Most of the people in the agency were very concerned about Israeli espionage and Israeli actions against U.S. interests. Everybody was aware of it. Everybody hated it. But they wouldn't get promoted if they spoke out. Israel has a privileged position and that's the way things are. It's crazy. And everybody knows it's crazy."
Christopher Ketcham writes for Vanity Fair, Harper's, GQ and many other magazines. He is working on a book about the history of Israeli espionage in the United States. He can be reached at cketcham99@mindspring.com.
© 2009 Independent Media Institute. All rights reserved.
View this story online at: http://www.alternet.org/story/130891/
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Russian advice: More troops won't help in Afghanistan

Soviet troops withdrawing from Afghanistan in ...

Image via Wikipedia

McClatchy Washington Bureau
The old diplomat sighed as he recalled his years in Afghanistan, and then leaned forward and said in a booming voice that no escalation of troops would bring lasting peace.
As the Soviet ambassador to Afghanistan from 1979 to 1986, Fikryat Tabeyev saw the numbers rise to more than 100,000 troops without any possibility of victory against a growing insurgency.
Even with President Barack Obama's plan initially to send 17,000 more U.S. soldiers and Marines to that mountainous nation this year, the combined NATO-American force will be smaller than the Soviet contingent was. Moscow's failure to pacify Afghanistan, which broke the back of the Soviet Union, doesn't mean that the same fate awaits Obama's efforts, but ignoring a decade of experience there would be a mistake, former envoys and generals warn.
The Soviets rumbled into Afghanistan in 1979 to rescue a weak communist regime, a very different reason from the U.S.-led invasion of 2001, which sought to deny the 9-11 terrorists a haven. The seven years of war since the U.S. intervention, though, look familiar to the Russians.
Many challenges that bedeviled the Soviets confront the American operation today, the retired envoys and generals said. Among them are vicious tribal rivalries, a weak central government, radical Islamists, power-hungry warlords, incompetent or corrupt local military commanders, failing infrastructure and the complexity of fighting guerrilla groups. The former officials also cautioned that trying to bring democracy to Afghanistan, or anything resembling it, will be as fruitless as their attempts to install communism.
"You may elect a parliament, you may invite parliamentary delegations from Afghanistan to visit Europe, but it means nothing," said Boris Pastukhov, whose service as Soviet ambassador began in 1989, the year the Red Army withdrew. "The decisions by parliament cannot be compared with the decisions of a jirga," a tribal council.
Among the experts, there was gloating that the U.S. military is battling some of the same insurgents whom the CIA once funded to fight Moscow. All skated over the details of the brutal Soviet campaign to stomp out the Afghan resistance.
However, they also seemed to voice genuine concern about the U.S. troop buildup.
The Soviets also were convinced that superior numbers, firepower and training would make it possible to avoid the mistakes that the British and others had committed stretching back to Alexander the Great, former Ambassador Tabeyev said.
"History didn't listen to us," said Tabeyev, who's now 81. "All our efforts to restore peace in the country . . . this was a flop in the end."
The fundamental problem in Afghanistan is that it isn't a country in the way the West thinks of countries, said retired Lt. Gen. Ruslan Aushev, who did two tours there and left as a regimental commander.
"There has never been any real centralized state in Afghanistan. There is no such nation as Afghanistan," said Aushev, who's a former president of the Russian Caucasus republic of Ingushetia and now heads a veterans group in Moscow. "There are (ethnic groups of) Pashtuns, Uzbeks and Tajiks, and they all have different tribal policies."
As a result, any occupation force will spend much of its time propping up a government that has little relevance outside Kabul and trying to corral disparate ethnic groups and tribes into a national army that's often unwilling to fight, Aushev said.
"We made the same mistake when we put the weak Babrak Karmal as the head of state," Aushev said of a former Afghan president. "He was so weak that no one obeyed him. He was hiding behind the backs of Soviet soldiers. . . . Today the situation is the same; (Afghan President Hamid) Karzai is being protected by U.S. special forces."
Retired Gen. Pavel Grachev, who spent two tours in Afghanistan, including commanding an airborne division, had a tone somewhere between disbelief and shock when he discussed the news of Obama's troop buildup.
"I believed as sincerely as American officers do now that we were fighting there to help make our country safer," said Grachev, who later became defense minister and sent in Russian units to quell Chechnya during the 1990s, a campaign that also ended in disaster. "After the war, as a politician, I could see this war had been pointless."
That said, Grachev offered some advice: Post soldiers to guard road projects and irrigation systems, and send in an army of engineers, doctors, mining experts and construction advisers.
Pouring billions of dollars into infrastructure would be a lot more productive than firefights in far-flung villages, he said.
"You have to understand that in the economic sphere, Afghanistan is now at a stage lower than the Middle Ages," Grachev said.
Unlike Iraq, which has relatively large cities and highways, much of the Afghan population is dispersed across small villages of mud houses connected by dirt paths and crumbling roads. In many regions, there are no jobs other than tending poppy fields. Health care and education levels are among the worst in the world.
That, Grachev said, is a commander's nightmare; it gives insurgents and terrorists a population that sees little reason to support the Kabul government or its Western backers. The hardened military man insisted that instead of bombs, "It is urgently necessary to create a comprehensive road network!"
Retired Gen. Viktor Yermakov agreed. He led the Soviet Union's 40th Army in Afghanistan during the early 1980s, and he said that his staff officers came to realize that they simply weren't going to win the war by military means.
"But unfortunately it was too late," Yermakov said, adding later that, "We had to answer fire. When we were attacked, we attacked with all of our might."
His soldiers were in a battlefield, caught in a cycle of attack and counterattack with an enemy that usually slipped away by the time the artillery shells rained down. There was no military solution, but he had a war to fight.
For the Americans, Yermakov said, it probably will become a familiar story.
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Russian advice: More troops won't help in Afghanistan

Soviet troops withdrawing from Afghanistan in ...

Image via Wikipedia

McClatchy Washington Bureau
The old diplomat sighed as he recalled his years in Afghanistan, and then leaned forward and said in a booming voice that no escalation of troops would bring lasting peace.
As the Soviet ambassador to Afghanistan from 1979 to 1986, Fikryat Tabeyev saw the numbers rise to more than 100,000 troops without any possibility of victory against a growing insurgency.
Even with President Barack Obama's plan initially to send 17,000 more U.S. soldiers and Marines to that mountainous nation this year, the combined NATO-American force will be smaller than the Soviet contingent was. Moscow's failure to pacify Afghanistan, which broke the back of the Soviet Union, doesn't mean that the same fate awaits Obama's efforts, but ignoring a decade of experience there would be a mistake, former envoys and generals warn.
The Soviets rumbled into Afghanistan in 1979 to rescue a weak communist regime, a very different reason from the U.S.-led invasion of 2001, which sought to deny the 9-11 terrorists a haven. The seven years of war since the U.S. intervention, though, look familiar to the Russians.
Many challenges that bedeviled the Soviets confront the American operation today, the retired envoys and generals said. Among them are vicious tribal rivalries, a weak central government, radical Islamists, power-hungry warlords, incompetent or corrupt local military commanders, failing infrastructure and the complexity of fighting guerrilla groups. The former officials also cautioned that trying to bring democracy to Afghanistan, or anything resembling it, will be as fruitless as their attempts to install communism.
"You may elect a parliament, you may invite parliamentary delegations from Afghanistan to visit Europe, but it means nothing," said Boris Pastukhov, whose service as Soviet ambassador began in 1989, the year the Red Army withdrew. "The decisions by parliament cannot be compared with the decisions of a jirga," a tribal council.
Among the experts, there was gloating that the U.S. military is battling some of the same insurgents whom the CIA once funded to fight Moscow. All skated over the details of the brutal Soviet campaign to stomp out the Afghan resistance.
However, they also seemed to voice genuine concern about the U.S. troop buildup.
The Soviets also were convinced that superior numbers, firepower and training would make it possible to avoid the mistakes that the British and others had committed stretching back to Alexander the Great, former Ambassador Tabeyev said.
"History didn't listen to us," said Tabeyev, who's now 81. "All our efforts to restore peace in the country . . . this was a flop in the end."
The fundamental problem in Afghanistan is that it isn't a country in the way the West thinks of countries, said retired Lt. Gen. Ruslan Aushev, who did two tours there and left as a regimental commander.
"There has never been any real centralized state in Afghanistan. There is no such nation as Afghanistan," said Aushev, who's a former president of the Russian Caucasus republic of Ingushetia and now heads a veterans group in Moscow. "There are (ethnic groups of) Pashtuns, Uzbeks and Tajiks, and they all have different tribal policies."
As a result, any occupation force will spend much of its time propping up a government that has little relevance outside Kabul and trying to corral disparate ethnic groups and tribes into a national army that's often unwilling to fight, Aushev said.
"We made the same mistake when we put the weak Babrak Karmal as the head of state," Aushev said of a former Afghan president. "He was so weak that no one obeyed him. He was hiding behind the backs of Soviet soldiers. . . . Today the situation is the same; (Afghan President Hamid) Karzai is being protected by U.S. special forces."
Retired Gen. Pavel Grachev, who spent two tours in Afghanistan, including commanding an airborne division, had a tone somewhere between disbelief and shock when he discussed the news of Obama's troop buildup.
"I believed as sincerely as American officers do now that we were fighting there to help make our country safer," said Grachev, who later became defense minister and sent in Russian units to quell Chechnya during the 1990s, a campaign that also ended in disaster. "After the war, as a politician, I could see this war had been pointless."
That said, Grachev offered some advice: Post soldiers to guard road projects and irrigation systems, and send in an army of engineers, doctors, mining experts and construction advisers.
Pouring billions of dollars into infrastructure would be a lot more productive than firefights in far-flung villages, he said.
"You have to understand that in the economic sphere, Afghanistan is now at a stage lower than the Middle Ages," Grachev said.
Unlike Iraq, which has relatively large cities and highways, much of the Afghan population is dispersed across small villages of mud houses connected by dirt paths and crumbling roads. In many regions, there are no jobs other than tending poppy fields. Health care and education levels are among the worst in the world.
That, Grachev said, is a commander's nightmare; it gives insurgents and terrorists a population that sees little reason to support the Kabul government or its Western backers. The hardened military man insisted that instead of bombs, "It is urgently necessary to create a comprehensive road network!"
Retired Gen. Viktor Yermakov agreed. He led the Soviet Union's 40th Army in Afghanistan during the early 1980s, and he said that his staff officers came to realize that they simply weren't going to win the war by military means.
"But unfortunately it was too late," Yermakov said, adding later that, "We had to answer fire. When we were attacked, we attacked with all of our might."
His soldiers were in a battlefield, caught in a cycle of attack and counterattack with an enemy that usually slipped away by the time the artillery shells rained down. There was no military solution, but he had a war to fight.
For the Americans, Yermakov said, it probably will become a familiar story.
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March 06, 2009

It may be a decade before Dow's back to 12,000, oracle says

US Whig poster showing unemployment in 1837

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McClatchy Washington Bureau
When Republicans and Democrats in the nation's capital want to make a point about the economy, they often cite Mark Zandi. A middle-of-the-road economic forecaster who speaks in plain English, Zandi increasingly has become the economic oracle of record.
The chief economist of Moody's Economy.com sat down Thursday with a small group of reporters and offered a sobering view of what he sees ahead for the U.S. and global economies.
The short version: It could be a decade before the Dow reaches 12,000 points again, the economy will grow much more slowly than the Obama administration envisions and larger, more controversial bailouts are likely to be coming soon.
Here are some of Zandi's thoughts, edited into a question-and-answer format.
Q: Will things get worse?
A: Yes, measurably worse.
Q: The administration sees strong growth from 2011 to 2015, and a solid 3.2 percent next year. Agree?
A: I think those are roughly reasonable, but they are much too optimistic for 2009 and 2010.
Q: How bad will the job market get?
A: I think the peak unemployment rate will be 9.5 percent in Q2 (second quarter) of 2010. That will be consistent with total job losses of almost 7 million from the peak in December 2007 to the trough, which will be sometime in early 2010. . . . That's a quarterly average, so there will be a month that we hit a double-digit number. That won't be outside the realm of possibility.
Q: Are there bright spots?
A: I think the hallmark of the current downturn is how broad-based it is across occupations, industries and regions. You know, by our accounting 42 states are in recession . . . that leaves you eight states that are not. And they are all weakening very rapidly and they are mostly in the central part of the country, Texas being the largest of the eight. They are energy, ag and other commodity-producing economies, and they are still benefiting a bit from the very high prices that prevailed through last fall. Obviously they are weakening now because prices are down and exports of these products are falling.
Q: Are the only bright spots dimming?
A: It's very possible, in fact I'd say likely, that all 50 states will be in recession at some point in the next year or two, and that would be unprecedented. Certainly you'd have to go back to the Depression to find something like that.
Q: Could there be an unanticipated bounce-back?
A: There is dark pessimism, and clearly the risks are decidedly to the downside. But there is a scenario where things turn out better than anticipated, because everything hinges on confidence, sentiment, of business, consumers and investors. And it's possible that the policy response (bank rescues and stimulus spending) shows some progress by the summer.
And it won't take a lot to make people feel a lot better. For example, if you go from losing three-quarters of a million people (joining the unemployment ranks) in February to, say, only a quarter of a million people in July, even though that's Armageddon in other times . . . that's progress. And everybody will start to forecast that there will be a zero job decline come early next year. And we'll start looking at GE at $9 a share or a Miami condo for $200,000. . . . You may decide there is a lot of value, and things could turn more quickly than anticipated.
Q: What's behind the steep drops in stock prices?
A: I think the principal factor is investors are marking down their growth in earnings expectations. They were hoping for a recovery by the end of the year or at least a stabilization by the end of the year, and now I think everyone feels that it's not going to happen until at least 2010, so they've marked down their growth expectations.
Q: How long before the Dow Jones Industrial Average gets back above 12,000?
A: It could be a decade.
Q: A decade?
A: If I'm an individual thinking about the size of my nest egg and what I would need for retirement, I think the appropriate assumption is that I am going to get a 5 percent annualized return on my assets: house, stocks, fixed income, the whole shooting match.
Q: Is another economic stimulus needed, given that conditions are quickly growing worse?
A: I think it is likely. I think the debate starts late this year. The only complicating factor is then people are going to say, "The one a year ago didn't work. This one didn't work. Why is this going to work (now)?"
MORE FROM MCCLATCHY
To ask a question about this story or any economic question, go to McClatchy's economy Q&A
Obama lends a little help to homeowners who face foreclosure
China plans another stimulus, but it won't say how much
Lewis must go, investor group tells Bank of America's board
McClatchy Newspapers 2009
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It may be a decade before Dow's back to 12,000, oracle says

US Whig poster showing unemployment in 1837

Image via Wikipedia

McClatchy Washington Bureau
When Republicans and Democrats in the nation's capital want to make a point about the economy, they often cite Mark Zandi. A middle-of-the-road economic forecaster who speaks in plain English, Zandi increasingly has become the economic oracle of record.
The chief economist of Moody's Economy.com sat down Thursday with a small group of reporters and offered a sobering view of what he sees ahead for the U.S. and global economies.
The short version: It could be a decade before the Dow reaches 12,000 points again, the economy will grow much more slowly than the Obama administration envisions and larger, more controversial bailouts are likely to be coming soon.
Here are some of Zandi's thoughts, edited into a question-and-answer format.
Q: Will things get worse?
A: Yes, measurably worse.
Q: The administration sees strong growth from 2011 to 2015, and a solid 3.2 percent next year. Agree?
A: I think those are roughly reasonable, but they are much too optimistic for 2009 and 2010.
Q: How bad will the job market get?
A: I think the peak unemployment rate will be 9.5 percent in Q2 (second quarter) of 2010. That will be consistent with total job losses of almost 7 million from the peak in December 2007 to the trough, which will be sometime in early 2010. . . . That's a quarterly average, so there will be a month that we hit a double-digit number. That won't be outside the realm of possibility.
Q: Are there bright spots?
A: I think the hallmark of the current downturn is how broad-based it is across occupations, industries and regions. You know, by our accounting 42 states are in recession . . . that leaves you eight states that are not. And they are all weakening very rapidly and they are mostly in the central part of the country, Texas being the largest of the eight. They are energy, ag and other commodity-producing economies, and they are still benefiting a bit from the very high prices that prevailed through last fall. Obviously they are weakening now because prices are down and exports of these products are falling.
Q: Are the only bright spots dimming?
A: It's very possible, in fact I'd say likely, that all 50 states will be in recession at some point in the next year or two, and that would be unprecedented. Certainly you'd have to go back to the Depression to find something like that.
Q: Could there be an unanticipated bounce-back?
A: There is dark pessimism, and clearly the risks are decidedly to the downside. But there is a scenario where things turn out better than anticipated, because everything hinges on confidence, sentiment, of business, consumers and investors. And it's possible that the policy response (bank rescues and stimulus spending) shows some progress by the summer.
And it won't take a lot to make people feel a lot better. For example, if you go from losing three-quarters of a million people (joining the unemployment ranks) in February to, say, only a quarter of a million people in July, even though that's Armageddon in other times . . . that's progress. And everybody will start to forecast that there will be a zero job decline come early next year. And we'll start looking at GE at $9 a share or a Miami condo for $200,000. . . . You may decide there is a lot of value, and things could turn more quickly than anticipated.
Q: What's behind the steep drops in stock prices?
A: I think the principal factor is investors are marking down their growth in earnings expectations. They were hoping for a recovery by the end of the year or at least a stabilization by the end of the year, and now I think everyone feels that it's not going to happen until at least 2010, so they've marked down their growth expectations.
Q: How long before the Dow Jones Industrial Average gets back above 12,000?
A: It could be a decade.
Q: A decade?
A: If I'm an individual thinking about the size of my nest egg and what I would need for retirement, I think the appropriate assumption is that I am going to get a 5 percent annualized return on my assets: house, stocks, fixed income, the whole shooting match.
Q: Is another economic stimulus needed, given that conditions are quickly growing worse?
A: I think it is likely. I think the debate starts late this year. The only complicating factor is then people are going to say, "The one a year ago didn't work. This one didn't work. Why is this going to work (now)?"
MORE FROM MCCLATCHY
To ask a question about this story or any economic question, go to McClatchy's economy Q&A
Obama lends a little help to homeowners who face foreclosure
China plans another stimulus, but it won't say how much
Lewis must go, investor group tells Bank of America's board
McClatchy Newspapers 2009
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March 05, 2009

AP Interview: Gorbachev criticizes Putin's party

{{de|Michail Gorbatschow, in Berlin bei der Ve...

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Tri-City Herald
In some of his strongest criticism of his successors, Mikhail Gorbachev on Thursday likened Vladimir Putin's United Russia party to the worst of the communists he once led and helped bring down, and said Russia is today a country where the parliament and the judiciary are not fully free.
In an interview with The Associated Press some 20 years after the Soviet empire started its rapid collapse on his tumultuous watch, Gorbachev also said the global economic crisis showed capitalism should be tempered with elements of the socialist system he played such a critical role in sweeping away.
The last Soviet leader was interviewed in the offices of his Gorbachev Foundation, a think tank founded in 1992 to promote "democratic values and moral, humanistic principles" - as well as, some say, Gorbachev himself. A little aged and more heavyset perhaps, Gorbachev, 78, seemed feisty, friendly and often reminiscent of the man who once ruled one of two superpowers on Earth.
Gorbachev is a paradoxical figure even after all these years - widely credited around the world with a historic convulsion he admits he did not intend. He sought to fix communism, not destroy it, and in the interview said that while he was willing to let Eastern Europe go its own way he very much hoped the republics that formed the Soviet Union would stay united.
"I was a resolute opponent of the breakup of the union," said Gorbachev, who was forced to step down on Dec. 25, 1991, as the country he led ceased to exist.
He still holds out hope that one day Ukraine, Kazakhstan and Belarus will join with Russia in forming a new union.
He seemed to view the global meltdown as partly the result of years of Western hubris and excess.
"The American media trumpeted ... about the victory in the Cold War, that socialism is down. This disease of extreme self-confidence led to it - the (belief) that things would always go on this way. And it did last long ... I think that now everyone is learning a hard lesson."
"It is necessary to overcome these mistakes of super-consumerism, of super-profits." he said. "We have to think about finding - through the G20 or other institutions - new models of development (and) cooperation."
The world should look for a composite system, he said, which incorporates "the past experience of all that the capitalist system brings, like competitiveness, and what socialism gives - especially a social safety net."
Gorbachev also said the moment was right for improved U.S.-Russia relations, expressed skepticism about the wisdom of Ukraine joining NATO, and called on the world community to head off the prospect of an Iranian nuclear weapon not with confrontation but rather "a maximal dialogue."
"Let (Iran) integrate itself into the global community, build normal relations," he said.
Gorbachev had harsh words for the current Russian leadership, singling out United Russia, the party Prime Minister Vladimir Putin has built into a political juggernaut at the center of a tremendously centralized - albeit popular - power structure.
"I criticize United Russia a lot, and I do it directly," the last Soviet leader said. "It is a party of bureaucrats and the worst version of the CPSU" - the Communist Party of the Soviet Union. "Regarding our parliament, I cannot say that it is independent (and) also our judiciary does not fully comply with the provisions of the constitution."
Is the world waiting for such advice? If there are takers, most will be outside Russia, where he has become a rather marginal political figure: For every Russian who appreciates his role in ending communism there are certainly many more inclined to blame him for the privations of the process he unleashed: the impoverishment many suffered in the 1990s, the vastly unequal distribution of wealth that bedevils society even today, the failings of Russian democracy - and the humiliating loss of the once-vast empire ruled from the Kremlin.
Asked about the fateful Nov. 9, 1989, when the Berlin Wall fell, Gorbachev said that he never contemplated force to stop the process that within months saw most of the Warsaw Pact break free. He said it was inevitable that the states of that region would be free to do as they wished.
Yet even in Eastern Europe, as the region gears up to celebrate the 20th anniversary of the fall of communism, Gorbachev gets only the rarest of mentions and he is forced to share credit for the revolution with a slew of others - Poland's Lech Walesa, Vaclav Havel, Ronald Reagan and the late Pope John Paul II.
"We live more freely now than in the communist era because of what he did and achieved," said Peter Nagy, a 37-year-old public employee in Budapest. "However, he was still the leader of a dictatorial system, not a democrat. I would not accept him today as a leader."
Havel, the former Czech president, in his memoirs "To the Castle and Back" described Gorbachev as both a special and tragic case and said the collapse of communism would have been much more violent without him.
In Warsaw, former anti-communist dissident Adam Michnik said he feels "great gratitude" toward Gorbachev. "I don't have the slightest doubt that it was Gorbachev and his policy of glasnost and perestroika that opened the gates for the great changes that first took place in our country and then in this part of the continent," Michnik said.
In the interview, Gorbachev was philosophical about his declining political fortunes.
"Personally, as a politician, I lost. But the idea that I conveyed and the project that I carried out, it played a huge role in the world and the country. But now the situation is such that more and more people are starting to understand what Gorbachev did ...
"But anyway, we have gone far, and there's no return."
Gorbachev laughed when asked whether his recent appearance in Louis Vuitton ads might not cheapen such a momentous legacy, saying his foundation needed the money. He noted that he had also once appeared in Pizza Hut ads, and asked if any other offers might be forthcoming.


Monika Scislowska in Warsaw, Poland; Karel Janicek in Prague, Czech Republic; and Bernadette Tomsits in Budapest, Hungary, contributed to this report.

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AP Interview: Gorbachev criticizes Putin's party

{{de|Michail Gorbatschow, in Berlin bei der Ve...

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Tri-City Herald
In some of his strongest criticism of his successors, Mikhail Gorbachev on Thursday likened Vladimir Putin's United Russia party to the worst of the communists he once led and helped bring down, and said Russia is today a country where the parliament and the judiciary are not fully free.
In an interview with The Associated Press some 20 years after the Soviet empire started its rapid collapse on his tumultuous watch, Gorbachev also said the global economic crisis showed capitalism should be tempered with elements of the socialist system he played such a critical role in sweeping away.
The last Soviet leader was interviewed in the offices of his Gorbachev Foundation, a think tank founded in 1992 to promote "democratic values and moral, humanistic principles" - as well as, some say, Gorbachev himself. A little aged and more heavyset perhaps, Gorbachev, 78, seemed feisty, friendly and often reminiscent of the man who once ruled one of two superpowers on Earth.
Gorbachev is a paradoxical figure even after all these years - widely credited around the world with a historic convulsion he admits he did not intend. He sought to fix communism, not destroy it, and in the interview said that while he was willing to let Eastern Europe go its own way he very much hoped the republics that formed the Soviet Union would stay united.
"I was a resolute opponent of the breakup of the union," said Gorbachev, who was forced to step down on Dec. 25, 1991, as the country he led ceased to exist.
He still holds out hope that one day Ukraine, Kazakhstan and Belarus will join with Russia in forming a new union.
He seemed to view the global meltdown as partly the result of years of Western hubris and excess.
"The American media trumpeted ... about the victory in the Cold War, that socialism is down. This disease of extreme self-confidence led to it - the (belief) that things would always go on this way. And it did last long ... I think that now everyone is learning a hard lesson."
"It is necessary to overcome these mistakes of super-consumerism, of super-profits." he said. "We have to think about finding - through the G20 or other institutions - new models of development (and) cooperation."
The world should look for a composite system, he said, which incorporates "the past experience of all that the capitalist system brings, like competitiveness, and what socialism gives - especially a social safety net."
Gorbachev also said the moment was right for improved U.S.-Russia relations, expressed skepticism about the wisdom of Ukraine joining NATO, and called on the world community to head off the prospect of an Iranian nuclear weapon not with confrontation but rather "a maximal dialogue."
"Let (Iran) integrate itself into the global community, build normal relations," he said.
Gorbachev had harsh words for the current Russian leadership, singling out United Russia, the party Prime Minister Vladimir Putin has built into a political juggernaut at the center of a tremendously centralized - albeit popular - power structure.
"I criticize United Russia a lot, and I do it directly," the last Soviet leader said. "It is a party of bureaucrats and the worst version of the CPSU" - the Communist Party of the Soviet Union. "Regarding our parliament, I cannot say that it is independent (and) also our judiciary does not fully comply with the provisions of the constitution."
Is the world waiting for such advice? If there are takers, most will be outside Russia, where he has become a rather marginal political figure: For every Russian who appreciates his role in ending communism there are certainly many more inclined to blame him for the privations of the process he unleashed: the impoverishment many suffered in the 1990s, the vastly unequal distribution of wealth that bedevils society even today, the failings of Russian democracy - and the humiliating loss of the once-vast empire ruled from the Kremlin.
Asked about the fateful Nov. 9, 1989, when the Berlin Wall fell, Gorbachev said that he never contemplated force to stop the process that within months saw most of the Warsaw Pact break free. He said it was inevitable that the states of that region would be free to do as they wished.
Yet even in Eastern Europe, as the region gears up to celebrate the 20th anniversary of the fall of communism, Gorbachev gets only the rarest of mentions and he is forced to share credit for the revolution with a slew of others - Poland's Lech Walesa, Vaclav Havel, Ronald Reagan and the late Pope John Paul II.
"We live more freely now than in the communist era because of what he did and achieved," said Peter Nagy, a 37-year-old public employee in Budapest. "However, he was still the leader of a dictatorial system, not a democrat. I would not accept him today as a leader."
Havel, the former Czech president, in his memoirs "To the Castle and Back" described Gorbachev as both a special and tragic case and said the collapse of communism would have been much more violent without him.
In Warsaw, former anti-communist dissident Adam Michnik said he feels "great gratitude" toward Gorbachev. "I don't have the slightest doubt that it was Gorbachev and his policy of glasnost and perestroika that opened the gates for the great changes that first took place in our country and then in this part of the continent," Michnik said.
In the interview, Gorbachev was philosophical about his declining political fortunes.
"Personally, as a politician, I lost. But the idea that I conveyed and the project that I carried out, it played a huge role in the world and the country. But now the situation is such that more and more people are starting to understand what Gorbachev did ...
"But anyway, we have gone far, and there's no return."
Gorbachev laughed when asked whether his recent appearance in Louis Vuitton ads might not cheapen such a momentous legacy, saying his foundation needed the money. He noted that he had also once appeared in Pizza Hut ads, and asked if any other offers might be forthcoming.


Monika Scislowska in Warsaw, Poland; Karel Janicek in Prague, Czech Republic; and Bernadette Tomsits in Budapest, Hungary, contributed to this report.

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March 04, 2009

Clinton criticises Israeli breach of 'road map'

Hillary Rodham Clinton campaigning, 2007

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Reuters
U.S. Secretary of State Hillary Clinton criticised on Wednesday Israel's plans to demolish dozens of Palestinian homes in Arab East Jerusalem as a violation of its international obligations.
"Clearly this kind of activity is unhelpful and not in keeping with the obligations entered into under the 'road map'," Clinton said, referring to the long-stalled peace plan.
"It is an issue that we intend to raise with the government of Israel and the government at the municipal level in Jerusalem," she added at a joint news conference with Palestinian President Mahmoud Abbas.
Israel said more than 80 homes slated for demolition were built without permits. Palestinians say permits were nearly impossible to obtain.
Israel considers all of Jerusalem its "eternal and united capital" but has not won international recognition of its claim.
Abbas's Palestinian Authority says it wants East Jerusalem as the capital of the state it hopes to establish in the West Bank and Gaza Strip. (Writing by Adam Entous, Editing by Jeffrey Heller) (For blogs and links on Israeli politics and other Israeli and Palestinian news, go to blogs.reuters.com/axismundi)
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Clinton criticises Israeli breach of 'road map'

Hillary Rodham Clinton campaigning, 2007

Image via Wikipedia


Reuters
U.S. Secretary of State Hillary Clinton criticised on Wednesday Israel's plans to demolish dozens of Palestinian homes in Arab East Jerusalem as a violation of its international obligations.
"Clearly this kind of activity is unhelpful and not in keeping with the obligations entered into under the 'road map'," Clinton said, referring to the long-stalled peace plan.
"It is an issue that we intend to raise with the government of Israel and the government at the municipal level in Jerusalem," she added at a joint news conference with Palestinian President Mahmoud Abbas.
Israel said more than 80 homes slated for demolition were built without permits. Palestinians say permits were nearly impossible to obtain.
Israel considers all of Jerusalem its "eternal and united capital" but has not won international recognition of its claim.
Abbas's Palestinian Authority says it wants East Jerusalem as the capital of the state it hopes to establish in the West Bank and Gaza Strip. (Writing by Adam Entous, Editing by Jeffrey Heller) (For blogs and links on Israeli politics and other Israeli and Palestinian news, go to blogs.reuters.com/axismundi)
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March 03, 2009

Officials: Obama Letter to Moscow Floated Trade-Off on Missile Defense

A payload launch vehicle carrying a prototype ...

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Fox News
More details are emerging about a letter President Obama sent to Russian President Dmitry Medvedev discussing plans for a missile defense shield in Eastern Europe.
Though the Kremlin disputes the account, senior U.S. administration officials say Obama suggested in his letter that those plans might be unnecessary if Moscow helped in blocking Iran's progress toward building long-range missiles.
"President Obama sent a letter to Russian President Medvedev discussing a broad range of issues, including missile defense as it relates to Iran," a senior administration official told FOX News.
"The suggestion is that need for missile defense deployment could become unnecessary if, working together with Russia, the Iran missile threat is addressed," an official told The Associated Press.
Plans for deploying U.S. missile defenses in Poland and the Czech Republic, ostensibly to guard against Iranian attacks on U.S. allies in Europe, are among a host of issues that soured U.S.-Russia relations during the former Bush administration. There have been indications Obama, who has vowed to shake up American foreign policy, might be willing to set aside the missile defense system.
The senior official told FOX News that the U.S. will continue to "consult with Poles and Czechs as we move forward with decisions on missile defense."
Obama and Medvedev were expected to meet at the G-20 economic summit of advanced and developing nations in London next month, according to the officials.
The administration has previously hinted that the policy on the missile defense shield that former President George B. Bush fiercely advocated was open to reassessment.
In Moscow, a Kremlin source told FOX News there was no quid pro quo on Iran and missile defense in the letter, but said the correspondence was considered very positive and contained a number of initiatives.
On Monday, Russian Foreign Minister Sergey Lavrov urged the United States to restore diplomatic relations with Iran, Russian news agencies reported. "This would be an important element in stabilizing the situation in the region," he said.
Lavrov is scheduled to hold talks with Secretary of State Hillary Rodham Clinton in Geneva on Friday in the highest-level meeting between the two nations since Obama took office.
At a February gathering of NATO defense chiefs in Krakow, Poland, Defense Secretary Robert Gates said that Washington would review the missile plan "in the context of our relationship with both Poland and the Czech Republic" as well as with NATO and Russia. The language marked a departure from the tone of the Bush administration, which enthusiastically promoted the plan and signed deals last year with Warsaw and Prague.
Gates said that if Moscow really wants to stop the missile shield, it should help eliminate the threat of a missile attack from Iran.
The Obama administration has been vocal about its desire to repair rifts between the U.S. and Russia. In Munich last month, Vice President Joe Biden told a gathering of world leaders, "It's time to press the reset button and to revisit the many areas where we can and should be working together with Russia."
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Officials: Obama Letter to Moscow Floated Trade-Off on Missile Defense

A payload launch vehicle carrying a prototype ...

Image via Wikipedia

Fox News
More details are emerging about a letter President Obama sent to Russian President Dmitry Medvedev discussing plans for a missile defense shield in Eastern Europe.
Though the Kremlin disputes the account, senior U.S. administration officials say Obama suggested in his letter that those plans might be unnecessary if Moscow helped in blocking Iran's progress toward building long-range missiles.
"President Obama sent a letter to Russian President Medvedev discussing a broad range of issues, including missile defense as it relates to Iran," a senior administration official told FOX News.
"The suggestion is that need for missile defense deployment could become unnecessary if, working together with Russia, the Iran missile threat is addressed," an official told The Associated Press.
Plans for deploying U.S. missile defenses in Poland and the Czech Republic, ostensibly to guard against Iranian attacks on U.S. allies in Europe, are among a host of issues that soured U.S.-Russia relations during the former Bush administration. There have been indications Obama, who has vowed to shake up American foreign policy, might be willing to set aside the missile defense system.
The senior official told FOX News that the U.S. will continue to "consult with Poles and Czechs as we move forward with decisions on missile defense."
Obama and Medvedev were expected to meet at the G-20 economic summit of advanced and developing nations in London next month, according to the officials.
The administration has previously hinted that the policy on the missile defense shield that former President George B. Bush fiercely advocated was open to reassessment.
In Moscow, a Kremlin source told FOX News there was no quid pro quo on Iran and missile defense in the letter, but said the correspondence was considered very positive and contained a number of initiatives.
On Monday, Russian Foreign Minister Sergey Lavrov urged the United States to restore diplomatic relations with Iran, Russian news agencies reported. "This would be an important element in stabilizing the situation in the region," he said.
Lavrov is scheduled to hold talks with Secretary of State Hillary Rodham Clinton in Geneva on Friday in the highest-level meeting between the two nations since Obama took office.
At a February gathering of NATO defense chiefs in Krakow, Poland, Defense Secretary Robert Gates said that Washington would review the missile plan "in the context of our relationship with both Poland and the Czech Republic" as well as with NATO and Russia. The language marked a departure from the tone of the Bush administration, which enthusiastically promoted the plan and signed deals last year with Warsaw and Prague.
Gates said that if Moscow really wants to stop the missile shield, it should help eliminate the threat of a missile attack from Iran.
The Obama administration has been vocal about its desire to repair rifts between the U.S. and Russia. In Munich last month, Vice President Joe Biden told a gathering of world leaders, "It's time to press the reset button and to revisit the many areas where we can and should be working together with Russia."
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