Monday, January 04, 2010

Barack Obama is vulnerable on terror – and he knows it

Obama has downplayed the threat of terrorism -- even refusing to use the word. But when it keeps happening, he is revealed as a fool

In his weekly radio address yesterday, President Barack Obama patted himself on the back for having "refocused the fight - bringing to a responsible end the war in Iraq, which had nothing to do with the 9/11 attacks". He then told people to remember that "our adversaries are those who would attack our country, not our fellow Americans", before decrying "fear and cynicism" and "partisanship and division" - the code phrases for horrid Republicans used during his 2008 election campaign.

Complacency, faux moralising and partisan shots at Republicans. It was a neat summary of where Obama is going wrong after the Christmas Day debacle when the Nigerian knicker bomber managed to waltz onto a Detroit-bound flight. For a man who campaigned denouncing the politicisation of national security under President George W Bush, it is worth noting how intensely political Obama's treatment of what might henceforth be known as Underpantsgate has been.

His White House recognised its political vulnerability more readily than it comprehended the level of danger faced by Americans. Umar Farouk Abdulmutallab's father had courageously contacted the American Embassy in Abuja in November and met the CIA station chief to tell him that his son was involved with fundamentalist elements in Yemen. American intelligence had also intercepted discussions in Yemen about a possible attack by "the Nigerian".

The Obama administration knew most, if not all, of this by last Sunday, 48 hours after the attack was thwarted. But the priority in Obamaland was to play things down and take pot shots at the Bush administration. Janet Napolitano, the Homeland Security chief – who prefers the term "man-caused disasters" to "terrorism" - blithely stated that there was "no indication that it is part of anything larger". She then insisted that the "system is working".

Although Napolitano has taken a lot of flak for these comic utterances, she was not "misspeaking" but trotting out the agreed talking points of the day. Robert Gibbs, Obama's chief mouthpiece, also stated that "in many ways this system has worked" and would say nothing about a possible wider plot.

In Hawaii, where Obama was holidaying, Gibbs's deputy Bill Burton told the press that "we are winding down a war in Iraq that took our eye off of the terrorists that attacked us" and that Obama was reviewing "procedures that have been in place the last several years" (i.e. Bush instituted them). He added, without apparent irony, that "the President refuses to play politics with these issues".

Meanwhile, the White House was working overtime to build a case against Bush. A source in the White House counsel's office told The American Spectator of memos frantically seeking information that would "show that the Bush Administration had had far worse missteps than we ever could".

Republicans smell blood. There is a pattern in the Obama administration of dismissing Islamist terrorist attacks as regrettable random acts. In his radio address after Major Nidal Hassan's slaughtered 13 at Fort Hood, Texas, Obama made no mention of terrorism or militant Islam, instead blandly promising that the "ongoing investigation into this terrible tragedy" would "look at the motives of the alleged gunman".

Hassan was a committed Islamist who had corresponded with the fanatical Yemeni imam Anwar al-Awlaki. In June, Abdul Hakim Mujahid Muhammad, a Muslim convert being watched by the FBI and who had previously travelled to Yemen, murdered a US Army recruit in Arkansas. That rated only a tepid statement by Obama about a "senseless act of violence".

But the violence wasn't senseless, it had a calculated objective - just as Abdulmutallab was not, as Obama described him, an "isolated extremist". No wonder many Americans want to grab Obama by the lapels and scream: "It's the Jihad, stupid." Dick Cheney, the former vice-president, clearly struck a nerve when he charged last week that Obama was "trying to pretend we are not at war".

The White House communications director Dan Pfeiffer eagerly descended into the political fray, responding to Cheney with the obligatory jibe about Iraq and also a litany of examples of Obama's "public statements that explicitly state we are at war".

It's a sure sign that you're losing the argument when you have to research quotes from your boss's speeches to prove that he gets it that America is at war. The problem for Obama is that people are now judging him by his actions as well as his words.

The incompetence of the US intelligence bureaucracy is not the only thing that makes Underpantsgate so damaging for Obama. More serious is his failure to understand or acknowledge the nature of the enemy - and to view war as mere politics.



Passenger profiling needed as well as scanners, airlines chief warns

Comment from Britain -- recommending what Israel has long used

Full body scanners will not eliminate the terrorist threat to flying, the world's leading airlines have warned, calling for security checks to be focused on groups of passengers perceived to present the greatest risk. Security can only be guaranteed by making a risk assessment of people before they are even board an aircraft, said Giovanni Bisignani, director general of the International Air Transport Association. "Instead of looking for bad things—nail clippers and rogue bottles of shampoo—security systems need to focus on finding bad people," he said.

Mr Bisignani's warning came as airlines face additional security demands following the unsuccessful attempt to blow up a transatlantic flight on Christmas day by Umar Farouk Abdulmutallab, a former London University student and known Muslim extremist. The intervention from one of aviation's most influential figures comes as passengers and airlines wait to hear the results of a comprehensive review of airport security announced by Gordon Brown.

Lord Adonis, the Transport Secretary, will unveil the Government's plans when he is expected to demand for the increased use of body scanners and order a swift increase in the use of explosive-detecting swabs at departure gates. Airlines fear that over-reliance of scanners and pat down searches of all passengers could bring airports grinding to a halt and "waste resources". Mr Bisignani added: “The air transport system cannot support 100% pat-down searches over the long term.”

Airlines have urged Governments to combine hi-tech screening with intelligence about terrorist threats and evaluation of the risk posed by individual passengers, to pick out potential terrorists who would be subjected to more detailed searches. "Adding new hardware to an old system will not deliver the results we need. It is time for governments to invest in a process built around a check point of the future that combines the best of screening technology with the best of intelligence gathering. Such a system would give screeners access to important passenger data to make effective risk assessments," Mr Bisignani said.

Targeting travellers seen as a potential threat - known as passenger profiling - remains controversial, with some critics arguing that it is potentially racist with Asian and Arab travellers more likely to be picked out than others. But supporters of profiling say that techniques are more sophisticated and would include taking into account how tickets were bought – a cash purchase would trigger concern – previous travel and even behaviour at the airport itself.

A number of measures are expected to follow the urgent security review. In addition to introducing extra machinery capable of detecting whether explosives have been handled, the Government is likely to call for the reactivation of four full body scanners which have been in storage at Heathrow for some time. The machines, which are now six years old, will have to be updated before they can be brought back into service - although industry insiders say this could be done within 24 hours. New scanners cost in the region of £100,000 each. One design entails a passenger walking slowly through an arch and turning, while another requires an individual to stand briefly between two wardrobe-sized cabinets. Should anything arouse concern the passenger is pulled aside for a further inspection.

In both cases the image is transmitted to a screen elswhere in the airport, where it is monitored by security staff. It is this which has led to some privacy fears. However software is being developed that could read the image and pick up suspect objects without the need for human inspection. BAA, Britain's largest airport operator, believes it could get machines in place swiftly once it was told to do so by the Government.

Theresa Villiers, the Tory transport spokesman, said the Government needed a better co-ordinated approach to airport security. "Gordon Brown is scrambling to catch up on this issue. Labour have serious questions to answer on their slow response to the security issues which were apparent long before the Christmas Day bomb plot. "Labour must also recognise that no matter how sophisticated scanning technology becomes, it cannot solve all airport security issues. An intelligence-led approach to security is vitally important if we are to do the best we can to keep people safe then they are flying."



2010 situation grows difficult for Dems

An already difficult situation for Democrats in Congress is worsening as the 2010 political season opens. To minimize expected losses in next fall's election, President Barack Obama's party is testing a line of attack that resurrects George W. Bush as a boogeyman and castigates Republicans as cozy with Wall Street.

Four House Democrats from swing districts have recently chosen not to seek re-election, bringing to 11 the number of retirements that could leave Democratic-held seats vulnerable to Republicans. More Democratic retirements are expected. Over the holiday break, another Democrat, freshman Rep. Parker Griffith of Alabama, defected to the GOP. "I can no longer align myself with a party that continues to pursue legislation that is bad for our country, hurts our economy, and drives us further and further into debt," said Griffith, who voted against Democrats' three biggest initiatives in 2009: health care, financial regulation and reducing global warming.

In the Senate, at least four Democrats -- including Majority Leader Harry Reid of Nevada and five-term Connecticut Sen. Chris Dodd -- are in serious trouble. The party could also lose its grip on seats Obama held in Illinois and Vice President Joe Biden long occupied in Delaware.

Going into 2010, Democrats held a 257-178 majority in the House and an effective 60-40 majority in the Senate, including two independents who align themselves with Democrats. But they face an incumbent-hostile electorate worried about a 10 percent unemployment rate, weary of wars and angry at politicians of all stripes. Many independents who backed Democrats in 2006 and 2008 have turned away. Republicans, meanwhile, are energized and united in opposing Obama's policies.

More here


The Price for Fannie and Freddie Keeps Going Up

Barney Frank's decision to 'roll the dice' on subsidized housing is becoming an epic disaster for taxpayers

On Christmas Eve, when most Americans' minds were on other things, the Treasury Department announced that it was removing the $400 billion cap from what the administration believes will be necessary to keep Fannie Mae and Freddie Mac solvent. This action confirms that the decade-long congressional failure to more closely regulate these two government-sponsored enterprises (GSEs) will rank for U.S. taxpayers as one of the worst policy disasters in our history.

Fannie and Freddie's congressional sponsors—some of whom are now leading the administration's effort to "reform" the financial system—have a lot to answer for. Rep. Barney Frank (D., Mass.), chairman of the House Financial Services Committee, sponsored legislation adopted in 2008 that established a new regulatory structure for the GSEs. But by then it was far too late. The GSEs had begun buying risky loans in 1993 to meet the "affordable housing" requirements established under congressional direction by the Department of Housing and Urban Development (HUD).

Most of the damage was done from 2005 through 2007, when Fannie and Freddie were binging on risky mortgages. Back then, Mr. Frank was the bartender, denying that there was any cause for concern, and claiming that he wanted to "roll the dice" on subsidized housing support.

In 2005, the Senate Banking Committee, then controlled by Republicans, adopted tough regulatory legislation that would have established more auditing and oversight of the two agencies. But it was passed out of committee on a partisan vote, and with no Democratic support it never came to a vote.

By the end of 2008, Fannie and Freddie held or guaranteed approximately 10 million subprime and Alt-A mortgages and mortgage-backed securities (MBS)—risky loans with a total principal balance of $1.6 trillion. These are now defaulting at unprecedented rates, accounting for both their 2008 insolvency and their growing losses today. Since 2008, under government control, the two agencies have continued to buy dicey mortgages in order to stabilize housing prices.

There is more to this ugly situation. New research by Edward Pinto, a former chief credit officer for Fannie Mae and a housing expert, has found that from the time Fannie and Freddie began buying risky loans as early as 1993, they routinely misrepresented the mortgages they were acquiring, reporting them as prime when they had characteristics that made them clearly subprime or Alt-A.

In general, a subprime mortgage refers to the credit of the borrower. A FICO score of less than 660 is the dividing line between prime and subprime, but Fannie and Freddie were reporting these mortgages as prime, according to Mr. Pinto. Fannie has admitted this in a third-quarter 10-Q report in 2008. An Alt-A mortgage is one in which the quality of the mortgage or the underwriting was deficient; it might lack adequate documentation, have a low or no down payment, or in some other way be more likely than a prime mortgage to default. Fannie and Freddie were also reporting these mortgages as prime, according to Mr. Pinto. It is easy to see how this misrepresentation was a principal cause of the financial crisis.

Market observers, rating agencies and investors were unaware of the number of subprime and Alt-A mortgages infecting the financial system in late 2006 and early 2007. Of the 26 million subprime and Alt-A loans outstanding in 2008, 10 million were held or guaranteed by Fannie and Freddie, 5.2 million by other government agencies, and 1.4 million were on the books of the four largest U.S. banks.

In addition, about 7.7 million subprime and Alt-A housing loans were in mortgage pools supporting MBS issued by Wall Street banks—which had long before been driven out of the prime market by Fannie and Freddie's government-backed, low-cost funding. The vast majority of these MBS were rated AAA, because the rating agencies' models assumed that the losses that are incurred by subprime and Alt-A loans would be within the historical range for the number of high-risk loans known to be outstanding.

But because of Fannie and Freddie's mislabeling, there were millions more high-risk loans outstanding. That meant default rates as well as the actual losses after foreclosure were going to be outside all prior experience. When these rates began to show up early in 2007, it was apparent something was seriously wrong with assumptions on which AAA ratings had been based. Losses, it was now certain, would invade the AAA tranches of the mortgage-backed securities outstanding. Investors, having lost confidence in the ratings, fled the MBS market and ultimately the market for all asset-backed securities. They have not yet returned.

By the end of 2007, the MBS market collapsed entirely. Assets once carried at par on financial institutions' balance sheets could not be sold except at distress prices. This raised questions about the stability and even the solvency of most of the world's largest financial institutions.

The first major victim was Bear Stearns, the smallest of the five major Wall Street investment banks but one invested heavily in risky MBS. The government rescue of Bear Stearns in March 2008 signaled that the U.S. government, and perhaps others, would stand behind other large financial institutions. The moral hazard this engendered was deadly when Lehman Brothers' solvency came under challenge. Spreads in the credit default swap market for Lehman, despite massive short-selling, showed very little alarm by investors until just before the fateful weekend of Sept. 13 and 14, when they blew out on fears that the firm might not be rescued.

By that time it was too late for Lehman's counterparties to take the protective action that might have cushioned the shock. As it turned out, however, none of Lehman's largest counterparties failed—so much for the idea that the financial market is "interconnected"—but all market participants now realized they had to know the true financial condition of their counterparties. The result was a freeze-up in interbank lending.

For most people, that freeze-up is the beginning of the financial crisis. But its roots go back to 1993, when Fannie and Freddie began stocking up on subprime and other risky loans while reporting them as prime. Why Fannie and Freddie did this is still to be determined. But the leading candidate is certainly HUD's affordable housing regulations, which by 2007 required that 55% of all the loans the agencies acquired had to be made to borrowers at or below the median income, with almost half of these required to be low-income borrowers.

Another likely reason for Fannie and Freddie's mislabeling of mortgages was their desire to retain congressional support by "rolling the dice" while making believe they weren't betting. With the Federal Housing Administration, Wall Street investment banks, and Fannie and Freddie all competing for these loans, the bottom of the barrel had long before been scraped and the financial system set up for a crisis.



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randian said...

It looks to me like Umar's father was doing damage control, or testing our defenses in conjunction with his son's attack, rather than giving a genuine warning. His father appears to be a major player in jihad activity in Yemen.

Robert said...

Barney Frank, Fannie Mae, and Freddie Mac rolled the dice all right - and the dice came up snake eyes. Gambling with other people's money like they did should be a major no-no. I do hope Barney Frank gets voted out like he deserves this November and faces prosecution for his rolling the dice with taxpayer money, the same as any other fiduciary who acted irresponsibly with other people's money would. Big, bald, Bubba in cell block C wants his poon-tang. I hear Barney Frank is used to such arrangements, so he would be a great fit.