On The Brink Part II

Today, I will continue with Mike Shedlock's list of reasons why the US banking system is on the brink of collapse, starting with #14.

14. Bernanke openly solicits private equity firms to invest in banks. Is this even close to a remotely normal action for Fed chairman to take?

15. Bear Stearns was taken over by JPMorgan (JPM) days after insuring investors it had plenty of capital. Fears are high that Lehman will suffer the same fate. Worse yet, the Fed had to guarantee the shotgun marriage between Bear Stearns and JP Morgan by providing as much as $30 billion in capital. JPMorgan is responsible for only the first 1/2 billion. Taxpayers are on the hook for all the rest. Was this a legal action for the Fed to take? Does the Fed care?

16. Citigroup needed a cash injection from Abu Dhabi and a second one elsewhere. Then after announcing it would not need more capital is raising still more. The latest news is Citigroup will sell $500 billion in assets. To who? At what price?

17. Merrill Lynch raised $6.6 billion in capital from Kuwait Mizuho, announced it did not need to raise more capital, then raised more capital a few week later.

18. Morgan Stanley sold a 9.9% equity stake to China International Corp. CEO John Mack compensated by not taking his bonus. How generous. Morgan Stanley fell from $72 to $37. Did CEO John Mack deserve a paycheck at all?

19. Bank of America (BAC) agreed to take over Countywide Financial (CFC) and twice announced Countrywide will add profits to B of A. Inquiring minds were asking "How the hell can Countrywide add to Bank of America earnings?" Here's how. Bank of America just announced it will not guarantee $38.1 billion in Countrywide debt. Questions over "Fraudulent Conveyance" are now surfacing.

20. Washington Mutual agreed to a death spiral cash infusion of $7 billion accepting an offer at $8.75 when the stock was over $13 at the time. Washington Mutual has since fallen in waterfall fashion from $40 and is now trading near $5.00 after a huge rally.

21. Shares of Ambac (ABK) fell from $90 to $2.50. Shares of MBIA (MBI) fell from $70 to $5. Sadly, the top three rating agencies kept their rating on the pair at AAA nearly all the way down. No one can believe anything the government sponsored rating agencies say.

22. In a panic set of moves, the Fed slashed interest rates from 5.25% to 2%. This was the fastest, steepest drop on record. Ironically, the Fed chairman spoke of inflation concerns the entire drop down. Bernanke clearly cannot tell the truth. He does not have to. Actions speak louder than words.

23. FDIC Chairman Sheila Bair said the FDIC is looking for ways to shore up its depleted deposit fund, including charging higher premiums on riskier brokered deposits.

24. There is roughly $6.84 Trillion in bank deposits. $2.60 Trillion of that is uninsured. There is only $53 billion in FDIC insurance to cover $6.84 Trillion in bank deposits. IndyMac will eat up roughly $8 billion of that.

25. Of the $6.84 Trillion in bank deposits, the total cash on hand at banks is a mere $273.7 Billion. Where is the rest of the loot? The answer is in off balance sheet SIVs, imploding commercial real estate deals, Alt-A liar loans, Fannie Mae and Freddie Mac bonds, toggle bonds where debt is amazingly paid back with more debt, and all sorts of other silly (and arguably fraudulent) financial wizardry schemes that have bank and brokerage firms leveraged at 30-1 or more. Those loans cannot be paid back.

What cannot be paid back will be defaulted on. If you did not know it before, you do now. The entire US banking system is insolvent.

By Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

Wow! Do you still think that I've been crying "Wolf!" all this time? This is fact. This is clear evidence from a variety of angles that the banking system is severe trouble. As usual, this is just the tip of the iceberg.

Tomorrow, there will be more on the government's role in this demise. Stay tuned ...

The following scripture talks about the demise of the city of Tyre. Substitute the United States and the current times, and you have a good picture of what will happen.

"This is what the Sovereign LORD says to Tyre: Will not the coastlands tremble at the sound of your fall, when the wounded groan and the slaughter takes place in you? Then all the princes of the coast will step down from their thrones and lay aside their robes and take off their embroidered garments. Clothed with terror, they will sit on the ground, trembling every moment, appalled at you.

Then they will take up a lament concerning you and say to you:
" 'How you are destroyed, O city of renown,
peopled by men of the sea!
You were a power on the seas,
you and your citizens;
you put your terror
on all who lived there.

Now the coastlands tremble
on the day of your fall;
the islands in the sea
are terrified at your collapse.'

"This is what the Sovereign LORD says: When I make you a desolate city, like cities no longer inhabited, and when I bring the ocean depths over you and its vast waters cover you, then I will bring you down with those who go down to the pit, to the people of long ago. I will make you dwell in the earth below, as in ancient ruins, with those who go down to the pit, and you will not return or take your place in the land of the living. I will bring you to a horrible end and you will be no more. You will be sought, but you will never again be found, declares the Sovereign LORD." Ezekiel 26:15-21 (NIV)

If you have questions or comments, please feel free to contact me at the address below.
Email: DeltaInspire@panama-vo.com

On The Brink

Over the past couple weeks, the topics have gone from bank failures to illegal government spying on our citizens. The rest of the week we will look further at problems in the banking industry and the government's role in the matter.

Today, I will share the first part of a blog post from Mike Shedlock from July 24, 2008 titled "Evidence of the US Banking System Teetering on the Brink of Collapse". In it, Mike lists 25 reasons why we are on the brink of collapse in the banking world.

Here is Mike's list of reasons:

1. Paulson (US Treasury Secretary Henry Paulson) appears on Face The Nation and says "Our banking system is a safe and a sound one." If the banking system was safe and sound, everyone would know it (or at least think it). There would be no need to say it.

2. Paulson says the list of troubled banks "is a very manageable situation". The reality is there are 90 banks on the list of problem banks. IndyMac was not one of them until a month before it collapsed. How many other banks will magically appear on the list a month before they collapse?

3. In a Northern Rock moment, depositors at IndyMac pull out their cash. Police had to be called in to ensure order.

4. Washington Mutual (WM), another troubled bank, refused to honor IndyMac cashier's checks. The irony is it makes no sense for customers to pull insured deposits out of IndyMac after it went into receivership. The second irony is the last place one would want to put those funds would be Washington Mutual. Eventually Washington Mutual decided it would take those checks but with an 8 week hold. Will Washington Mutual even be around 8 weeks from now?

5. Paulson asked for "Congressional authority to buy unlimited stakes in and lend to Fannie Mae (FNM) and Freddie Mac (FRE)" just days after he said "Financial Institutions Must Be Allowed To Fail". Obviously Paulson is reporting from the 5th dimension. In some alternate universe, his statements just might make sense.

6. Former Fed Governor William Poole says "Fannie Mae, Freddie Losses Makes Them Insolvent".

7. Paulson says Fannie Mae and Freddie Mac are "essential" because they represent the only "functioning" part of the home loan market. The firms own or guarantee about half of the $12 trillion in U.S. mortgages. Is it possible to have a sound banking system when the only "functioning" part of the mortgage market is insolvent?

8. Bernanke testified before Congress on monetary policy but did not comment on either money supply or interest rates. The word "money" did not appear at all in his testimony. The only time "interest rate" appeared in his testimony was in relation to consumer credit card rates. How can you have any reasonable economic policy when the Fed chairman is scared half to death to discuss interest rates and money supply?

9. The SEC issued a protective order to protect those most responsible for naked short selling. As long as the investment banks and brokers were making money engaging in naked shorting of stocks, there was no problem. However, when the bears began using the tactic against the big financials, it became time to selectively enforce the existing regulation.

10. The Fed takes emergency actions twice during options expirations week in regards to the discount window and rate cuts.

11. The SEC takes emergency action during options expirations week regarding short sales.

12. The Fed has implemented an alphabet soup of pawn shop lending facilities whereby the Fed accepts garbage as collateral in exchange for treasuries. Those new Fed lending facilities are called the Term Auction Facility (TAF), the Term Security Lending Facility (TSLF), and the Primary Dealer Credit Facility (PDCF).

13. Citigroup (C), Lehman (LEH), Morgan Stanley(MS), Goldman Sachs (GS) and Merrill Lynch (MER) all have a huge percentage of level 3 assets. Level 3 assets are commonly known as "marked to fantasy" assets. In other words, the value of those assets is significantly if not ridiculously overvalued in comparison to what those assets would fetch on the open market. It is debatable if any of the above firms survive in their present form. Some may not survive in any form.

by Mike Shedlock
http://globaleconomicanalysis.blogspot.com

Tomorrow, we will get into the rest of Mike's list of reasons our banking system is in dire straits and on the brink of collapse. Stay tuned ...

" 'Because they lead my people astray, saying, "Peace," when there is no peace, and because, when a flimsy wall is built, they cover it with whitewash, therefore tell those who cover it with whitewash that it is going to fall. Rain will come in torrents, and I will send hailstones hurtling down, and violent winds will burst forth. When the wall collapses, will people not ask you, "Where is the whitewash you covered it with?" Ezekiel 13:10-12 (NIV)

If you have questions or comments, please feel free to contact me at the address below.
Email: DeltaInspire@panama-vo.com

More on NSA Spying

Today, I will share another article from the ACLU (American Civil Liberties Union) after the House of Representatives passed the unconstitutional surveillance legislation. This legislation will allow phone companies to have immunity from lawsuits for their participation in turning over personal records to the government.

Washingon DC. Following a vote in the House of Representatives
sanctioning warrantless wiretapping and handing immunity to
telecommunications companies for their role in domestic spying, the
American Civil Liberties Union expressed outrage at representatives
who voted for the unconstitutional legislation. The bill, H.R. 6304,
or The FISA Amendments Act of 2008, passed the chamber by a vote of
293 (yes) -129 (no), and is expected to be voted on in the Senate next
week.

Caroline Fredrickson, director of the ACLU's Washington Legislative
Office said: "It's Christmas morning at the White House thanks to this
vote. The House just wrapped up some expensive gifts for the
administration and their buddies at the phone companies.

Watching the House fall to scare tactics and political maneuvering is
especially infuriating given the way it stood up to pressure from the
president on this same issue just months ago. In March we thought the
House leadership had finally grown a backbone by rejecting the
Senate's FISA bill. Now we know they will not stand up for the Constitution.

"No matter how often the opposition calls this bill a 'compromise,' it
is not a meaningful compromise, except of our constitutional rights.
The bill allows for mass, untargeted and unwarranted surveillance of
all communications coming in to and out of the United States.

The courts' role is superficial at best, as the government can
continue spying on our communications even after the FISA court has
objected. Democratic leaders turned what should have been an easy
FISA fix into the wholesale giveaway of our Fourth Amendment rights.

"More than two years after the president's domestic spying was
revealed in the pages of the New York Times, Congress' fury and shock
has dissipated to an obedient whimper. After scrambling for years to
cover their tracks, the phone companies and the administration are
almost there. This immunity provision will effectively destroy
Americans' chance to have their deserved day in court and will kill
any possibility of learning the extent of the administration's lawless
actions."

"The House should be ashamed of itself. The fate of the Fourth
Amendment is now in the Senate's hands. We can only hope senators
will show more courage than their colleagues in the House."

by the American Civil Liberties Union, www.aclu.org

Since this was covered extensively last week, we now know that the Senate did approve the same bill. Now they are just waiting for President Bush to sign this into law.

This is just reprehensible that we have let our country be effectively ruled by special interests groups and big business of corporate America. It's bad enough that the President gets to do whatever he wants, but now the government is giving immunity to companies for going along with his actions. It looks as though democracy really is "mob rule".

When will we demand these actions to stop?

As always, the choice is yours.

The following scripture is very appropriate to the last couple posts. It describes the Jewish leaders looking to place Jesus in prison.

Finally the temple guards went back to the chief priests and Pharisees, who asked them, "Why didn't you bring him in?"

"No one ever spoke the way this man does," the guards declared.

"You mean he has deceived you also?" the Pharisees retorted. "Has any of the rulers or of the Pharisees believed in him? No! But this mob that knows nothing of the law—there is a curse on them."

Nicodemus, who had gone to Jesus earlier and who was one of their own number, asked, "Does our law condemn anyone without first hearing him to find out what he is doing?" John 7:45-51 (NIV)

If you have comments or questions, please feel free to contact me at the address below.
Email: DeltaInspire@panama-vo.com

Disturbing Legal Victory

Last week, I hit on some very disconcerting facts about our government. More specifically, that the President can do whatever he wants without virtually any recourse by Congress or the Supreme Court. I will continue on that topic with the following article from the International Herald Tribune, the global edition of the New York Times. The article is titled "White House Wins a Disturbing Legal Victory", published on July 20, 2008.

The Bush administration has been a waging a fierce battle for the power to lock people up indefinitely simply on the president's say-so. It scored a disturbing victory last week when a federal appeals court ruled that it could continue to detain Ali al-Marri, who has been held for more than five years as an enemy combatant. The decision gives the president sweeping power to deprive anyone - citizens as well as noncitizens - of their freedom. The Supreme Court should reverse this terrible ruling.

Al-Marri, a citizen of Qatar legally residing in the United States, was initially arrested in his home in Peoria, Illinois, on ordinary criminal charges, then imprisoned by military authorities.

The government, which says he has ties to Al Qaeda, designated him an enemy combatant, even though it never alleged that he was in an army or carried arms on a battlefield. He was held on the basis of extremely thin hearsay evidence.

Last year, a three-judge panel of the U.S. Court of Appeals for the 4th Circuit, based in Richmond, Virginia, declared that the government could not hold al-Marri, or any other civilian, simply on the president's orders. If it wanted to prosecute him, the court ruled, it could do so in the civilian court system.

That was the right answer. Unfortunately, last week the full 4th Circuit reversed the decision, and with a tangle of difficult-to-decipher opinions, upheld the government's right to hold al-Marri indefinitely. The court ruled that al-Marri must be given greater rights to challenge his detention. But this part of the decision is weak, and he is unlikely to get the sort of procedural protections necessary to ensure that justice is done.

The implications are breathtaking. The designation "enemy combatant," which should apply only to people captured on a battlefield, can now be applied to people detained inside the United States. Even though al-Marri is not a U.S. citizen, the court's reasoning appears to apply equally to citizens.

Equally troubling, the ruling supports President George W. Bush's ludicrous argument that when Congress authorized the use of force against those responsible for the Sept. 11 attacks, it gave the president essentially unlimited powers. If a president ever wants to round up Americans on vague charges and detain them indefinitely, this ruling gives him a dangerous green light.

Al-Marri's lawyers say they will ask the Supreme Court to review the ruling. Without doubt, it should. The case raises critically important issues for a free society, and the 4th Circuit's convoluted set of opinions is too confusing to give proper guidance to other courts, the executive branch, or the people.

The jumble reflects how badly the administration has butchered the law in this area. People accused of bad deeds should be tried in court - not in sham proceedings. They should be put in jail - not in secret detention. If they are not proved guilty, they should be set free. It is up to the Supreme Court to restore these principles of American justice.

International Herald Tribune, July 20, 2008

This is a sad state of affairs when the courts are acquiescing to the power of the presidency. Regardless of the legality of the detaining of citizens and non-citizens, the courts go through the motions and do nothing to stop the President from doing whatever he wants. King George rules again. The last time this happened, we fought the Revolutionary War and won our freedom. What will happen this time?

What happened to our freedom? What happened to rule by the people? Our founding fathers set up a republic with a weak central (federal) government. That is a far cry away from the government that exist today. Nonetheless, our government including the judicial branch are mere puppets of the manipulators.

It is not up to our government to govern us. It is up to the people. When will we resume our rights specified in the Declaration of Independence that we are sovereigns giving consent to the government to be governed. If we give up those rights, then we are mere vassals to be sold at the whim of the masters. Is this what you want?

As always, the choice is yours.

A ruler who oppresses the poor
is like a driving rain that leaves no crops.

Those who forsake the law praise the wicked,
but those who keep the law resist them.

Evil men do not understand justice,
but those who seek the LORD understand it fully. Proverbs 28:3-5 (NIV)

If you have comments or questions, please feel free to contact me at the address below.
Email: DeltaInspire@panama-vo.com

The Challenge to Illegal Spying

To continue on with this week's theme of illegal spying on Americans by the government, today's post will delve into what response the ACLU (American Civil Liberties Union) did to fight for our rights after the initial story broke in the New York Times. The following is taken directly from the ALCU website www.aclu.org.

It's been nearly two years since we first found out that our own government has been tapping our phones and reading our e-mails. In 2005, the nation learned that President Bush has repeatedly authorized the National Security Agency to monitor the phone calls and emails of people inside the United States, without a warrant and in violation of the Constitution. Authorized days after September 11, 2001, this warrantless wiretapping program is part of a broad pattern of the executive branch using "national security" as an excuse for encroaching on the privacy and free speech rights of Americans without adequate oversight.

The ACLU won the first round of its legal challenge in August 2006, when U.S. District Court Judge Anna Diggs Taylor ruled the NSA program violates the First Amendment, the Fourth Amendment, and the Foreign Intelligence Surveillance Act in her ACLU v. NSA decision. "It was never the intent of the Framers to give the President such unfettered control," Taylor wrote in the decision, "particularly where his actions blatantly disregard the parameters clearly enumerated in the Bill of Rights."

After this initial victory, the ACLU returned to court on January 31, 2007, where the Sixth Circuit Court of Appeals heard arguments from both sides. Despite the Bush administration's January announcement that wiretapping warrants are now subject to FISA court approval, the president is still claiming the "inherent authority" to engage in warrantless eavesdropping - even his own attorneys acknowledged that nothing would stop him from resuming warrantless surveillance at any time. Then ACLU Associate Legal Director Ann Beeson urged the court to exercise its proper authority and require the president to follow the law.

In July 2007, the Sixth Circuit Court of Appeals dismissed the case, ruling the plaintiffs in the case - which includes scholars, journalists, and national nonprofit organizations - had no standing to sue because they could not state with certainty that they have been wiretapped by the NSA.

The decision "insulates the Bush administration's warrantless surveillance activities from judicial review and deprives Americans of any ability to challenge the illegal surveillance of their telephone calls and e-mails," said ACLU Legal Director Steve Shapiro. He added the ruling "did not uphold the legality of the government's warrantless surveillance activity. Indeed, the only judge to discuss the merits clearly and unequivocally declared that the warrantless surveillance was unlawful."

Because the appeals court refused to rule on the legality of the program, Americans were denied the chance to contest the warrantless surveillance of their telephone calls and e-mails. In October 2007, the ACLU appealed the ruling to the Supreme Court of the United States. The Court declined the case in February 2008.

In August 2007, following the passage of the so-called Protect America Act - a law that vastly expands the Bush administration's authority to conduct warrantless wiretapping of Americans' international phone calls and emails - the ACLU filed a request with the Foreign Intelligence Surveillance Court for court orders and legal papers pertaining to the government's authority to secretly wiretap Americans.

In December 2007 the FISC ruled that, despite the fact that release of the orders would inform the public about the government's surveillance powers, the court would not conduct a review to determine whether the legal rulings were properly determined to be classified.

The Senate Judiciary Committee has asked the Bush Administration no less than nine times for information about the NSA's illegal spying. On June 27, 2007, the Senate Judiciary Committee issued subpoenas to the White House, Vice President and the Justice Department for documents about this warrantless surveillance program. After missing a second deadline in August, Committee Chairman Patrick Leahy (D-VT) declared he would move towards holding the adminstration in contempt. In October, after nearly four months without meaningful reply, the ACLU once again asked the Committee to go forward with contempt proceedings against White House officials for refusing to cooperate with the subpoenas and reminded Congress of its constitutional authority to do so.

www.aclu.org

This is just further confirmation that the manipulators have total control of the government at all levels, including the judicial branch. Thus, having faith in our democracy, separation of powers, checks and balances, etc. are all mute when considering we are a bankrupted country. The receivership of that bankruptcy, the Federal Reserve (operating on behalf of the shareholders of the World Bank), gets to make the decisions on how things are done. This includes the President, Congress, and the Supreme Court. This has been the case since 1933 when Roosevelt signed the bankruptcy agreement.

Notice above in red that the Supreme Court denied hearing the case. They didn't want to have egg on their face by exposing that they are not in control of the law and that the President can do whatever he wants, or more accurately, what he is directed to do. They know that the President is in violation of the FISA law when he ordered the eavesdropping on American citizens. And despite all the raucous raised by the ACLU and other government watchdogs, none of that matters. The slaves can not rule the plantation. The slaves have to be freed before they can make the rules.

Did I just blow your mind? Unless you are already aware of all of this information, I should have. Go back and read the History of Money series in this blog beginning on January 28th, 2008 for more of the details. Do a little research on these topics and you will find that it is all true. That is of course, unless you want to live in a state of ignorant bliss and think that all of the present anomalies in the markets are normal.

The greatest transfer of wealth in the history of the world will happen in the next few years and most people are not even aware that this is all being planned and executed by very smart individuals. Their simple plan - control everything. When that happens (if it hasn't already), everyone on the planet will answer to their every whim. Think on these things for a minute. Is this the kind of world you want to live in? Is this what you want for your children and grandchildren? If it is, do nothing.

As always, the choice is yours.

As with all Saturdays, I will recap key financial indicators that provide many clues as to what is happening in the financial world and the overall plan of what lies ahead. The US dollar strengthened for the second week in a row mainly due to the fall of the price of oil. That drove precious metal prices down again, but not significantly. Gold closed Friday afternoon at $929.20 per ounce. Silver also closed lower at $17.37 per ounce. The price of oil as mentioned, went down for the second straight week closing at $123.43 per barrel. This strengthened the US dollar index, a measure of stability against the other major world currencies. It closed on Friday at 72.81.

With the decrease in the price of oil, the manipulators are stalling the markets until the conditions are right for execution of their plan. Since the dollar has been falling for most of the year, this was accelerating the demise of the economy too fast. By this stalling action, it allows for the victims to get comfortable with the market actions before the rug is swept out from beneath their feet. This is just normal, or that is what they want you to believe. Believe me, the conditions down the road are anything but normal. As I said above, the greatest transfer of wealth in the history of the world will happen in the next several years. Are you ready for that?

Ignore this warning at your peril.

To repeat the consequence from yesterday's scripture passage:
The Israelites persisted in all the sins of Jeroboam and did not turn away from them until the LORD removed them from his presence, as he had warned through all his servants the prophets. So the people of Israel were taken from their homeland into exile in Assyria, and they are still there. II Kings 17:22-23 (NIV)

If you have comments or questions, please feel free to contact me at the address below.
Email: DeltaInspire@panama-vo.com

The Legality of Spying

This week the topics have focused on the illegal eavesdropping the government does on its citizens. For a minute, let's entertain the thought that the law actually matters when the President is concerned. Today, I will share excerpts from an article in response to this issue when the story broke in December, 2005 from the ALCU (American Civil Liberties Union).

NSA Spying on Americans Is Illegal (12/29/2005)

What if it emerged that the President of the United States was flagrantly violating the Constitution and a law passed by the Congress to protect Americans against abuses by a super-secret spy agency? What if, instead of apologizing, he said, in essence, "I have the power to do that, because I say I can." That frightening scenario is exactly what we are now witnessing in the case of the warrantless NSA spying ordered by President Bush that was reported December 16, 2005 by the New York Times.

According to the Times, Bush signed a presidential order in 2002 allowing the National Security Agency to monitor without a warrant the international (and sometimes domestic) telephone calls and e-mail messages of hundreds or thousands of citizens and legal residents inside the United States. The program eventually came to include some purely internal controls - but no requirement that warrants be obtained from the Foreign Intelligence Surveillance Court as the 4th Amendment to the Constitution and the foreign intelligence surveillance laws require.

In other words, no independent review or judicial oversight.

That kind of surveillance is illegal. Period.

The day after this shocking abuse of power became public, President Bush admitted that he had authorized it, but argued that he had the authority to do so. But the law governing government eavesdropping on American citizens is well-established and crystal clear. President Bush's claim that he is not bound by that law is simply astounding. It is a Presidential power grab that poses a challenge in the deepest sense to the integrity of the American system of government - the separation of powers between the legislative and executive branches, the concept of checks and balances on executive power, the notion that the president is subject to the law like everyone else, and the general respect for the "rule of law" on which our democratic system depends.

Flouting a long history
The tensions between the need for intelligence agencies to protect the nation and the danger that they would become a domestic spy agency have been explicitly and repeatedly fought out in American history. The National Security Act of 1947 contained a specific ban on intelligence operatives from operating domestically. In the 1970s, America learned about the extensive domestic political spying carried out by the FBI, the military, the CIA, and the NSA, and Congress passed new laws to prevent a repeat of those abuses. Surveillance laws were debated and modified under presidents Ford, Carter, Reagan, Bush Sr. and Clinton.

But, President Bush would sweep aside this entire body of democratically debated and painstakingly crafted restrictions on domestic surveillance by the executive branch with his extraordinary assertion that he can simply ignore this law because he is the Commander-in-Chief. In a December 17 radio address, for example, Bush asserted that the spying was "fully consistent with my constitutional responsibilities and authorities." But his constitutional duty is to "take care that the laws be faithfully executed" (Article II, Section 3); the law here clearly establishes well-defined procedures for eavesdropping on U.S. persons, and the fact is, Bush ordered that those procedures not be followed.

Government eavesdropping on Americans is an extremely serious matter; the ability to intrude on the private realm is a tremendous power that can be used to monitor, embarass, control, disgrace, or ruin an individual. Because it is so invasive, the technology of wiretapping has been subject to carefully crafted statutory controls almost since it was invented. Ignoring those controls and wiretapping without a court order is a crime that carries a significant prison sentence (in fact, criminal violations of the wiretap statute were among the articles of impeachment that were drafted against President Nixon shortly before his resignation).

Clearly Illegal
Unfortunately, although the law in this matter is crystal clear, many Americans, faced with President Bush's bold assertions of "inherent" authority for these actions, will not know what to believe. There are only 5 points they need to understand:

Point #1: Electronic surveillance by the Government is strictly limited by the Constitution and Federal Law

The law on surveillance begins with the Fourth Amendment to the Constitution, which states clearly that Americans' privacy may not be invaded without a warrant based on probable cause.

United States Constitution
Fourth Amendment

The right of the people to be secure in their persons, houses, papers, and effects, against unreasonable searches and seizures, shall not be violated, and no warrants shall issue, but upon probable cause, supported by oath or affirmation, and particularly describing the place to be searched, and the persons or things to be seized. (emphasis added)


The US Supreme Court (US v. Katz 389 US 347) has made it clear that this core privacy protection does cover government eavesdropping. As a result, all electronic surveillance by the government in the United States is illegal, unless it falls under one of a small number of precise exceptions specifically carved out in the law.

United States Code Title 50, Chapter 36, Subchapter 1
Section 1809. Criminal sanctions

(a) Prohibited activities
A person is guilty of an offense if he intentionally-

(1) engages in electronic surveillance under color of law except as authorized by statute

In other words, the NSA can only spy where it is explicitly granted permission to do so by statute. Citizens concerned about surveillance do not have to answer the question, "what law restricts the NSA's spying?" Rather, the government is required to supply an answer to the question "what law permits the NSA to spy?"

Point #2: There are only three laws that permit the government to spy
There are only three laws that authorize any exceptions to the ban on electronic eavesdropping by the government. Congress has explicitly stated that these three laws are the exclusive means by which domestic electronic surveillance can be carried out (18 USC, Section 2511(2)(f)). They are:

• Title III and ECPA. Title III and the Electronic Commnunications Privacy Act make up the statutes that govern criminal wiretaps in the United States.
• FISA. The Foreign Intelligence Surveillance Act is the law that governs eavesdropping on agents of "foreign powers" within the United States, including suspected foreign terrorists.

Point #3: The Bush-NSA spying was not authorized by any of these laws
Title III and ECPA govern domestic criminal wiretaps and are not relevant to the NSA's spying. FISA is the law under which the NSA should have operated. It authorizes the government to conduct surveillance in certain situations without meeting all of the requirements of the Fourth Amendment that apply under criminal law, but requires that an independent Foreign Intelligence Surveillance Court oversee that surveillance to make sure that Americans who have no ties to foreign terrorist organizations or other "foreign powers" are not spied upon.

FISA was significantly loosened by the Patriot Act (which, for example, allowed it to be used for some criminal investigations), and parts of it now stand in clear violation of the Constitution's Fourth Amendment in the view of the ACLU and many others. However, even the post-Patriot Act version of FISA does not authorize the president to conduct warrantless eavesdropping on U.S. citizens or permanent legal residents in the U.S. without an order from the FISA Court. Yet it is that very court order requirement - imposed to protect innocent Americans - that the President has ignored.

In fact, one member of the FISA Court, Judge James Roberston, has apparently resigned from the court in protest of President Bush's secret authorization of this program. And the New York Times reported that the court's chief judge complained about the program when she was (belatedly) notified of it, and refused to allow information gathered under the program to be used as the basis for FISA wiretap orders.

Point #4: Congress's post-9/11 use-of-force resolution does not legitimize the Bush-NSA spying
Congress after 9/11 approved an Authorization to Use Military Force against those responsible for the attacks in order to authorize the president to conduct foreign military operations such as the invasion of Afghanistan.

But that resolution contains no language changing, overriding or repealing any laws passed by Congress. Congress does not repeal legislation through hints and innuendos, and the Authorization to Use Military Force does not authorize the president to violate the law against surveillance without a warrant any more than it authorizes him to carry out an armed robbery or seize control of Citibank in order to pay for operations against terrorists. In fact, when President Truman tried to seize control of steel mills that were gripped by strikes in 1952, the Supreme Court decisively rejected his authority to make such a seizure, even in the face of arguments that the strike would interfere with the supply of weapons and ammunition to American troops then under fire on the battlefields of the Korean War.

U.S. Supreme Court
YOUNGSTOWN CO. v. SAWYER, 343 U.S. 579 (1952)

"The order cannot properly be sustained as an exercise of the President's military power as Commander in Chief of the Armed Forces. . . .

"Nor can the seizure order be sustained because of the several constitutional provisions that grant executive power to the President. . . . The Constitution limits his functions in the lawmaking process to the recommending of laws he thinks wise and the vetoing of laws he thinks bad. And the Constitution is neither silent nor equivocal about who shall make laws which the President is to execute. . . .

"The Founders of this Nation entrusted the lawmaking power to the Congress alone in both good and bad times."

The Supreme Court also rejected similar assertions of inherent executive power by Richard Nixon.

In fact, FISA contains explicit language describing the president's powers "during time of war" and provides that "the President, through the Attorney General, may authorize electronic surveillance without a court order under this title to acquire foreign intelligence information ." for a period not to exceed fifteen days following a declaration of war by the Congress 50 U.S.C. §1811 (emphasis added). So even if we accept the argument that the use-of-force resolution places us on a war footing, warrantless surveillance would have been legal for only 15 days after the resolution was passed on September 18, 2001.

Point #5: The need for quick action does not justify an end-run around the courts
The FISA law takes account of the need for emergency surveillance, and the need for quick action cannot be used as a rationale for going outside the law. FISA allows wiretapping without a court order in an emergency; the court must simply be notified within 72 hours. The government is aware of this emergency power and has used it repeatedly. In addition, the Foreign Intelligence court is physically located in the Justice Department building, and the FISA law requires that at least two of the FISA judges reside in the Washington, DC area, for precisely the reason that rapid action is sometimes needed.

If President Bush still for some reason finds these provisions to be inadequate, he must take his case to Congress and ask for the law to be changed, not simply ignore it.

The president is bound by the rule of law
President Bush's claim that he has "inherent authority" as Commander-in-Chief to use our spy agencies to eavesdrop on Americans is astonishing, and such spying is clearly illegal. It must be halted immediately, and its origins must be thoroughly investigated by Congress and by a special counsel.

Given the extensive (indeed, excessive) surveillance powers that the government already possesses, the Administration's blatantly illegal use of warrantless surveillance raises an important question: why? One possibility, raised by the New York Times in a Dec. 24, 2005 story ("Spy Agency Mined Vast Data Trove, Officials Report"), is that the NSA is relying on assistance from several unnamed telecommunications companies to "trace and analyze large volumes of communications" and is "much larger than the White House has acknowledged."

This, as security expert Bruce Schneier has noted, suggests the Bush Administration has developed a "a whole new surveillance paradigm" - exploiting the NSA's well known capabilities to spy on individuals not one at a time, as FISA permits, but to run communications en masse through computers in the search for suspicious individuals or patterns. This "new paradigm" may well be connected to the NSA program sometimes known as "Echelon," which carries out just that kind of mass collection of communications (see www.nsawatch.org). This "wholesale" surveillance, as Schneier calls it, would constitute an illegal invasion of Americans' privacy on a scale that has never before been seen. (See Schneier, "NSA and Bush's Illegal Eavesdropping," Salon.com)

According to the Times, several telecommunications companies provided the NSA with direct access to streams of communications over their networks. In other words, the NSA appears to have direct access to a large volume of Americans' communications - with not simply the assent, but the cooperation of the companies handling those communications.

We do not know from the report which companies are involved or precisely how or what the NSA can access. But this revelation raises questions about both the legal authority of the NSA to request and receive this data, and whether these companies may have violated either the Federal laws protecting these communications or their own stated privacy polices (which may, for example, provide that they will only turn over their customers' data with their consent or in response to a proper order).

Regardless of the scale of this spying, we are facing a historic moment: the President of the United States has claimed a sweeping wartime power to brush aside the clear limits on his power set by our Constitution and laws - a chilling assertion of presidential power that has not been seen since Richard Nixon.

www.aclu.org

If anyone had any doubt of the legality of this spying by the NSA, this should resolve those doubts. Now you can see why this has developed such as controversy. But, since its involves the President, there are little or no consequences on his actions.

The Israelites secretly did things against the LORD their God that were not right. From watchtower to fortified city they built themselves high places in all their towns.

They set up sacred stones and Asherah poles on every high hill and under every spreading tree. At every high place they burned incense, as the nations whom the LORD had driven out before them had done. They did wicked things that provoked the LORD to anger. They worshiped idols, though the LORD had said, "You shall not do this."

The LORD warned Israel and Judah through all his prophets and seers: "Turn from your evil ways. Observe my commands and decrees, in accordance with the entire Law that I commanded your fathers to obey and that I delivered to you through my servants the prophets."

The Israelites persisted in all the sins of Jeroboam and did not turn away from them until the LORD removed them from his presence, as he had warned through all his servants the prophets. So the people of Israel were taken from their homeland into exile in Assyria, and they are still there.

II Kings 17:9-13, 22-23 (NIV)

If you have comments or questions, please feel free to contact me at the address below.
Email: DeltaInspire@panama-vo.com

NSA Spying on Americans

Yesterday, I shared an article about the US Senate passing a bill to grant immunity from lawsuits to telecom companies that participated in illegal monitoring of emails, internet usage, text messaging, and phone calls of Americans. Today, we will get further into this issue and how it became a big issue.

On December 16, 2005, the New York Times broke the story after they learned that the Bush administration was considering seeking a court injunction to block its publication. In the story, Americans learned that the President authorized the National Security Agency (NSA) to wiretap phone and email communications involving United States persons within the U.S. without obtaining a warrant or court order pursuant to the Foreign Intelligence Surveillance Act of 1978 (FISA). FISA prohibits unauthorized electronic surveillance. Shortly afterwards Americans also learned that the major telecoms participated in warrantless surveillance, handing over billions of their customers private communications and communications records.

The controversy that ensued has lasted years all the way to the present month as reflected in yesterday's post. This concerns surveillance of persons within the United States incident to the collection of foreign intelligence by the NSA as part of the war on terror. The legality of surveillance involving US persons and extent of this authorization is at the core of this controversy which has steadily grown to include:

• Constitutional issues concerning the separation of powers and the Fourth Amendment immunities.
• The effectiveness and scope of the program.
• The legality of the leaking and publication of classified information and the implications for U.S. national security arising from the disclosure.
• Adequacy of FISA as a tool in the war on terror

Under this program, referred to by the Bush administration as the "terrorist surveillance program", the NSA is authorized by executive order to monitor, without warrants, phone calls, emails, Internet activity, and text messaging, and other communication involving any party believed by the NSA to be outside the U.S., even if the other end of the communication lies within the U.S. The exact scope of the program is not known, but the NSA is or was provided total, unsupervised access to all fiber-optic communications going between some of the nation's major telecommunication companies' major interconnect locations, including phone conversations, email, web browsing, and corporate "private network" traffic.

Shortly before Congress passed a new law in August of 2007 that legalized warrantless surveillance, the Protect America Act of 2007, critics stated that such "domestic" intercepts required FISC authorization under the Foreign Intelligence Surveillance Act of 1978. The Bush administration maintains that the authorized intercepts are not domestic but rather "foreign intelligence" integral to the conduct of war and that the warrant requirements of FISA were implicitly superseded by the subsequent passage of the Authorization for Use of Military Force Against Terrorists (AUMF).

FISA, on the other hand, makes it illegal to intentionally engage in electronic surveillance under appearance of an official act or to disclose or use information obtained by electronic surveillance under appearance of an official act knowing that it was not authorized by statute; this is punishable with a fine of up to $10,000 or up to five years in prison, or both. In addition, the Wiretap Act prohibits any person from illegally intercepting, disclosing, using or divulging phone calls or electronic communications; this is punishable with a fine or up to five years in prison, or both.

The 1978 Foreign Intelligence Surveillance Act regulates U.S. government agencies' carrying out of physical searches, and electronic surveillance, wherein the main purpose is the gathering of foreign intelligence information. "Foreign intelligence information" is defined in 50 U.S.C. § 1801 as information necessary to protect the U.S. or its allies against actual or potential attack from a foreign power, sabotage, or international terrorism. FISA defines a "foreign power" as a foreign government or any faction(s) of a foreign government not substantially composed of US persons, or any entity directed or controlled by a foreign government. FISA provides for both criminal and civil liability for intentional electronic surveillance under color of law except as authorized by statute.

FISA provides two documents for the authorization of surveillance. First, FISA allows the Justice Department to obtain warrants from the Foreign Intelligence Surveillance Court (FISC) before or up to 72 hours after the beginning of the surveillance. FISA authorizes a FISC judge to issue a warrant for the electronic cameras if "there is probable cause to believe that… the target of the electronic surveillance is a foreign power or an agent of a foreign power." 50 U.S.C. §1805(a)(3). Second, FISA permits the President or his delegate to authorize warrantless surveillance for the collection of foreign intelligence if "there is no substantial likelihood that the surveillance will acquire the contents of any communication to which a United States person is a party". 50 U.S.C. §1802(a)(1).

This last statement is the crux of the issue. FISA expressly allows warrantless surveillance only if there is no substantially likelihood that it is tied to a US person. All of President Bush's program involves communications tied to US persons. That is why Senator Feingold accused the President of breaking the law in yesterday's post. These are all illegal intrusion on our rights.

But, as I stated in yesterday's posts, the federal government does not have a good track record on preserving our rights. Once they can hear and read everything that we say and write on electronic media, where will it stop? Do we have any rights remaining? Not really. We are living in a Constitutional dictatorship. President Bush thinks and acts like he can do anything he wants through executive order even though it may violate existing laws as long as he thinks it is vital to the national interest or to fight the war on terror. This sounds like a dictatorship to me.

When do we stop this madness? When do we wake up to these atrocities and change things?

As always, the choice is yours.

This matter arose because some false brothers had infiltrated our ranks to spy on the freedom we have in Christ Jesus and to make us slaves. We did not give in to them for a moment, so that the truth of the gospel might remain with you. Galatians 2:4-5 (NIV)

If you have comments or questions, please feel free to contact me at the address below.
Email: DeltaInspire@panama-vo.com

Immunity for Eavesdroppers

Yesterday, I shared an article regarding the deal the US and the European Union is working on to share private personal information on its citizens among the governments. Today, I will show you what is going on back here in the states regarding our private data.

The following are excerpts from an article published on July 9, 2008 by the Associated Press titled "Senate Passes Eavesdropping Bill".

Bill Grants Immunity To Phone Companies That Listened In On Americans

The Senate sent the White House a bill overhauling bitterly disputed rules on secret U.S. government eavesdropping Wednesday, bowing to President George W. Bush's demand to shield telecommunications companies from lawsuits complaining they helped the U.S. spy on Americans.

The relatively one-sided vote, 69-28, came only after a lengthy and heated debate that pitted privacy and civil liberties concerns against the desire to prevent terrorist attacks. It ended almost a year of wrangling in the Democratic-led Congress over surveillance rules and the president's warrantless wiretapping program that was initiated after the Sept. 11, 2001, terrorist attacks.

The House of Representatives passed the same bill last month, and Bush said he would sign it soon.

Opponents assailed the eavesdropping program, asserting that it imperiled citizens' rights of privacy from government intrusion. But Bush said the legislation protects those rights as well as Americans' security.

"This bill will help our intelligence professionals learn who the terrorists are talking to, what they're saying and what they're planing," he said in a brief White House appearance after the Senate vote.

The long fight in Congress centered on one main question: whether to protect from civil lawsuits any telecommunications companies that helped the government eavesdrop on American phone and computer lines without the permission or knowledge of a secret court created by the Foreign Intelligence Surveillance Act.

The White House had threatened to veto the bill unless it immunized companies such as AT&T Inc. and Verizon Communications Inc. from wiretapping lawsuits.

Forty-six lawsuits now stand to be dismissed because of the new law, according to the American Civil Liberties Union. But the fight has not ended. Civil rights groups are already preparing lawsuits challenging the bill's constitutionality, and four suits, filed against government officials, will not be dismissed.

Numerous lawmakers had spoken out strongly against the no-warrants eavesdropping on Americans, but the Senate voted its approval after rejecting amendments that would have watered down, delayed or stripped away the immunity provision.

The lawsuits center on allegations that the White House circumvented U.S. law by going around the FISA court, which was created 30 years ago to prevent the government from abusing its surveillance powers for political purposes, as was done in the Vietnam War and Watergate eras. The court is meant to approve all wiretaps placed inside the U.S. for intelligence-gathering purposes. The law has been interpreted to include international e-mail records stored on servers inside the U.S.

"This president broke the law," declared Sen. Russell Feingold, a Democrat from Wisconsin.

The Bush administration brought the wiretapping back under the FISA court's authority only after The New York Times revealed the existence of the secret program. A handful of members of Congress knew about the program from top secret briefings. Most members are still forbidden to know the details of the classified effort, and some objected that they were being asked to grant immunity to the telecoms without first knowing what they did.

Just under a third of the Senate, including Democratic presidential candidate Barack Obama, supported an amendment that would have stripped immunity from the bill. They were defeated on a 66-32 vote. Republican rival John McCain did not attend the vote.

Obama ended up voting for the final bill. Feingold voted no.

The bill tries to address concerns about the legality of warrantless wiretapping by requiring inspectors general inside the government to conduct a yearlong investigation into the program.

The measure effectively dismisses about 40 lawsuits that have been bundled together. But at least three other lawsuits against government officials will go forward.

The Associated Press

On Monday, I commented that our federal government does not have a good record in protecting our rights. Here is just one of too many examples to list. Our rights exist only in the classroom or in the debate forums, but do not exist in the government or the courtrooms. Too often are country is listed as the Land of the Free. This is evidence to the contrary. We are actually living in a Constitutional dictatorship, where by the President's own admission admits that the Constitution is just a piece of paper.

When will we stand up and demand change? Why should companies get immunity for illegally eavesdropping on our conversations, text messages, and emails? This is just wrong. As for the ever convenient stop terrorism reason, when have you heard of any details that all these illegal spying activities on our citizens actually resulted in the arrest and conviction of anyone doing any terrorist type activities? Think on this question for a minute. Why are there no arrests? Because our citizens are not doing terrorist actions. They just want the excuse to exhibit more control over us and want us to live in fear.

If we do nothing, we condone these detestable policies and actions.

As always, the choice is yours.

Men cry out under a load of oppression;
they plead for relief from the arm of the powerful. Job 35:9 (NIV)

If you have comments or questions, please feel free to contact me at the address below.
Email: DeltaInspire@panama-vo.com

Goodbye Fourth Amendment

This week the topics center on privacy. Yesterday, I reported that the US and the European Union are getting close to a deal that will allow the countries to share personal data with the US. Although they cite that this is needed to crack down on terrorists activities, this is the reason they will use for almost anything that involves infringing on our rights as citizens.

Today, I will share another article by asset protection guru Mark Nestmann. This entry in his blog was published on June 23, 2008 titled "Warrantless Eavesdropping: Goodbye Fourth Amendment".

The Fourth Amendment to the U.S. Constitution reads:

"The right of the people to be secure in their persons, houses, papers, and effects, against unreasonable searches and seizures, shall not be violated, and no Warrants shall issue, but upon probable cause, supported by Oath or affirmation, and particularly describing the place to be searched, and the persons or things to be seized."

Contrast this language with the terms of the recent "compromise" legislation governing warrantless surveillance of Americans' electronic communications that Congress is set to approve. The bill amending the Foreign Intelligence Surveillance Act (FISA) gives the U.S. National Security Agency—the world's largest intelligence agency—carte blanche to engage in wholesale "data mining" of e-mail communications, telephone calls, faxes, etc. And there's absolutely no requirement that the government describe "the place to be searched, and the persons or things to be seized."

Instead, the NSA's "Terrorist Surveillance Program" (TSP) appears to rely on mining the data streams of U.S. telecommunications companies to analyze transactional records of telephone and e-mail traffic in search of patterns that might point to terrorist suspects. In other words, are you—or anyone else in the United States—acting in a way that merits eavesdropping?

If you match one of these profiles, the NSA apparently assigns a human analyst to listen in on your telephone calls and read your e-mail. Again, there's no warrant required. This apparently happens tens of thousands of times annually. Most of the time, the NSA doesn't find anything suspicious. Perhaps a few thousand times each year, the NSA passes on information to domestic law enforcement agencies, but most of inquiries drop out due to lack of evidence. Only a handful of inquiries—fewer than 10 annually—merit a full investigation.

What about a warrant backed by probable cause? Apparently, only in those 10 or so cases that merit a full investigation does the FBI obtain a search warrant or domestic wiretap warrant.

The only role of the courts under the new FISA law is to approve the computer algorithms the NSA uses to decide which messages merit further investigation. That decision is in the hands of the secret court set up 30 years ago to oversee wiretaps in national security investigations. In its 30-year history, this "Foreign Intelligence Surveillance Court" has turned down only a handful of NSA surveillance requests. But now, its role will simply be to rubber-stamp the explanation by a NSA technician of what a particular algorithm purportedly accomplishes.

Nor is there any assurance that the program is limited to terrorist investigations. There's an obvious potential for politically motivated surveillance here. Already, evidence has emerged that the government uses the TSP to fight drug smuggling.

What stops the NSA from using this authority, e.g., to snoop on political opponents of the ruling party? (Can you say Watergate?) Only judges technically savvy enough to really understand the mathematical underpinnings of the NSA algorithms they're asked to approve. How many judges do you think have the technical background to do that?

The remainder of the law is a joke, although I'm not laughing. It grants retroactive immunity to the telecom companies that cooperated with NSA eavesdropping after the attacks of Sept. 11, 2001. It also stipulates that the government must use FISA and the criminal wiretap laws as the exclusive means to conduct electronic surveillance. Of course, this is the provision of the FISA law that President George W. Bush unilaterally decided to ignore when he approved the original Terrorist Surveillance Program shortly after Sept. 11, 2001.

The bottom line: the FISA amendments shift the decisions about which U.S. citizens to spy on from the courts to virtual priesthood of NSA technicians operating in secret and creating surveillance algorithms that only they understand.

It's hardly an oversight to state that this type of wholesale surveillance makes the Fourth Amendment a quaint anachronism.

Goodbye, Fourth Amendment.

Mark Nestmann

If you are a regular reader of this blog, this should not come as a shock to you. The Constitution is paid lip service only and is not be followed in our courts. UCC1 (Uniform Commercial Code) Contract Law rules and everything else is secondary.

Is this the country you want to live in? When will we demand change?

As always, the choice is yours.

If you see the poor oppressed in a district, and justice and rights denied, do not be surprised at such things; for one official is eyed by a higher one, and over them both are others higher still. The increase from the land is taken by all; the king himself profits from the fields. Ecclesiastes 5:8-9 (NIV)

If you have comments or questions, please feel free to contact me at the address below.
Email: DeltaInspire@panama-vo.com

Data Privacy Deal

This week the focus will be centered around privacy. One of the definitions of privacy is freedom from unauthorized intrusion. This of course can be done by individuals or even by governments. Today, we will get into how the US and the European Union (EU) have been in discussion for 18 months trying to nail down how the governments will share data of private individuals.

A senior EU official said on Tuesday, July 2 the European Union could strike a deal with the United States as early as next year to protect personal data collected on their citizens to bolster the fight against terrorism but warned that important questions still needed to be resolved.

The EU and the US have been in talks on the sensitive issue of data protection and sharing ever since US officials demanded access to passenger name records (PNR) on flights from the EU to the US in the wake of the terrorist attacks of September 11, 2001.

While both the EU and the US want to further push data sharing among police and counter-terrorism officials, there is acknowledgment the topic is a sensitive one and both sides say they need to cooperate on data privacy to build trust.

In recent years, privacy advocates and rights groups in Europe have strongly criticized deals with Washington including one giving it access to private data on air passengers traveling to the US and the right to keep the information for 15 years. Another allowed the US government to consult records of Swift, a consortium that tracks global bank transfers, including those of European customers in anti-terrorism investigations.

Reacting to criticism by European lawmakers and rights groups that data-sharing deals lacked privacy protection, a panel of EU and US justice officials set up more than a year ago has sought to assuage fears about privacy erosion.

In a report, the panel concluded that a binding deal on data privacy would be the best way to boost cooperation in fighting crime and terrorism.

The negotiators, meeting since February 2007, have mostly worked out draft language for 12 major issues at the heart of a "binding international agreement". This pact would make clear that European governments and companies could lawfully exchange personal information with the US.

They have already agreed on 12 principles, including security, what constitutes sensitive data, the purpose of its use and effective and independent oversight of exchanges. Among the principles agreed by the EU-US panel was that information revealing a person's racial or ethnic origins, political, religious or philosophical views and health or sexual orientation may not be processed unless domestic legislation provides appropriate safeguards.

They also agreed people should be told about use of their data, which must be supervised by an independent authority.

There are however some sticking points that are not resolved as of yet.

But the two sides are still at odds on several other matters, including whether European citizens should be able to sue the US government over its handling of their personal data. Europeans currently do not have the same legal rights in the United States as US citizens do in Europe. Currently, US law does not allow foreigners to sue the US government for damages resulting in improper handling of personal data.

Another concern that the EU does not appear willing to compromise on is whether Washington would eventually be able to access data contained in the vast computer system monitoring control border crossings in Europe's so-called Schengen passport-free zone.

Negotiators are trying to work out minimum privacy rights standards, such as limiting access to information to "authorized individuals with an identified purpose" for seeing it.

"I am very worried that once this will be adopted, it will serve as a pretext to freely share our personal data with anyone, so I want it to be very clear about exactly what it means and how it will work," said Sophia in't Veld, a Dutch member of the European Parliament and privacy rights advocate.

Our federal government does not have the best track record at respecting our right to privacy. So I personally am very skeptical at what the standards will be and how they will be used. We will get more into this later this week. Stay tuned ...

Speak up for those who cannot speak for themselves,
for the rights of all who are destitute.

Speak up and judge fairly;
defend the rights of the poor and needy. Proverbs 31:8-9 (NIV)

If you have comments or questions, please feel free to contact me at the address below.
Email: DeltaInspire@panama-vo.com

On The Edge

This week the focus has been on the overall weakening of the US economy that has triggered many problems including bank failures, rising inflation, a credit crunch, a dismal and declining real estate market, etc. These are just a few of the problems. All of this spells possible doom for the US dollar.

To illustrate my point, I will again share some insights from www.GoldMoney.com founder James Turk. The article is titled "On the Precipice" (precipice means a very steep or overhanging place).

On the Precipice

It has been my view expressed in these alerts and elsewhere over the past several months that there will be a currency crisis this summer caused by a plummeting US dollar. The US dollar is now standing on the edge of the precipice. In fact, it is already peering over the edge as we can see in the following chart of the US Dollar Index.



There are several important observations to make from this chart. First, the dollar is in a major bear market. It peaked at 120.97 on July 5, 2001 and has been declining ever since within the major downtrend channel delineated by the red parallel lines.

Trends do not change unless there is some solid fundamental reason for them to change. There is only one way to strengthen a currency - raise interest rates. The Federal Reserve again failed at its FOMC meeting this past week to raise rates. So the only logical and prudent assumption is that the downtrend in the dollar will continue.

The second observation from the above chart is that the Dollar Index has been in a steep decline since early 2006, and more to the point, that decline gathered momentum along the way. The arrow on the chart marks the dollar's descent over this period. Note particularly how the arrow curves downward. It highlights the building momentum that caused the Dollar Index to fall last year to a record low on September 29, 2007.

Third, after making that record low, the Dollar Index bounced for only a few days, and then reversed course and resumed its downtrend. That action signaled profound weakness in the dollar, and sure enough, from its reaction high of 78.67 on October 8, 2007, the path for the dollar was basically straight down. It fell to a new record low of 71.33 on April 22, 2008, which equates to a stunning 17.3% annualized rate of depreciation.

The fourth and final observation is that since making this record low the Dollar Index has bounced. It is correcting the previous decline within the narrow uptrend channel marked by the green parallel lines. It is truly a so-called 'dead-cat' bounce. The best the Dollar Index could do was bounce to 74.15, retracing only 38% of its previous decline. But that is an overstatement because the Dollar Index traded above 74 on only one day, and did so simply because of the jawboning from Bernanke, Paulson and everyone else they could enlist to talk up the dollar.

As I stated in the last alert, which was posted just after the barrage of rhetoric, Bernanke and Paulson "are trying to change monetary history by ignoring this most basic principle of central banking. Rather than raise dollar interest rates, they are instead just jawboning" and "higher interest rates rather than more rhetoric are needed to save the dollar from a total collapse...[because]...the fundamentals for the dollar are horrific." In particular, as the rate of inflation worsens daily, inflation-adjusted interest rates become more negative. This condition is extremely bearish for the dollar. So will the dollar collapse this summer? Yes, I expect so.

The odds still favor a collapse. Nothing has happened - so far at least - that could cause the major long-term downtrend illustrated in the above chart to change. So assume this trend will continue, and more to the point, that the collapse in the dollar I have been expecting for this summer begins when the Dollar Index breaks down from its current uptrend channel marked by the green parallel lines.

Given that the Dollar Index is now sitting on the bottom line of that uptrend channel, it is peering over the precipice. The dollar may get pushed over the precipice this Thursday if the European Central Bank raises euro interest rates to fight the worsening inflation menace.

Get ready for whatever the central banks throw at us by their mismanagement of national currencies. Own gold and silver.

James Turk, June 28, 2008

Now, I've read in other sources that the Fed will start raising interest rates to combat the surge of inflation. This will fight inflation, but with the credit crunch already in place, raising interest rates will very likely stall the economy and send the US into the worse depression since the 1930's.

In November 1929, the Fed raised overnight federal funds rates of banks forcing them to close their doors because they could not meet the deposit requirements. This triggered many bank failures. If the Fed raises the interest rates too much now, the same thing will likely happen.

So, I sincerely endorse James Turk's recommendation to own silver and gold, as stated many times in this blog. This is one of the few defenses during uncertain economic times that everyone can agree on. There are of course, other alternatives, but not likely as safe.

I will disagree slightly with James Turk as to the timing of the imminent collapse of the US dollar. I do not think it will happen this summer, but I believe it will happen in September or October for a lot of reasons. First, the Fed is unlikely to shake things up by raising rates during the summer. Many traders and power brokers on Wall Street take vacations during the summer usually causing the markets to remain fairly stagnant. Once fall returns, all bets are off. Third, the earlier closed door session of Congress in March was rumored to prepare the legislature for financial collapse in the fall. The powder keg is prepared, all that is needed is a spark. Time will tell.

As with all Saturdays, I will recap several key indicators that provide insight into the financial markets and where they are likely to go. Precious metals went lower this week due to the fall in the price of oil. Gold closed slightly lower on Friday from last week at $955.40 per ounce. Silver also closed lower this week at $18.14 per ounce. The price of oil fell $16 per barrel the last four days closing at $128.50 per barrel. Despite these moves, the US dollar index still is languishing but rose slightly to close at 72.17.

These certainly are interesting times.

He will judge the world in righteousness;
he will govern the peoples with justice.

The LORD is a refuge for the oppressed,
a stronghold in times of trouble.

Those who know your name will trust in you,
for you, LORD, have never forsaken those who seek you. Psalm 9:8-10 (NIV)

If you have comments or questions, please feel free to contact me at the address below.
Email: DeltaInspire@panama-vo.com

The FDIC

Earlier this week, I posted an article about the second largest bank failure in American history. This of course was the closing of California based IndyMac, a bank that specialized in Alt-A loans. These loans are traditionally defined as loans that have less than full documentation (incomplete or no documentation) behind the application. Another way to describe these loans are ones that have a lower credit grading, usually with an A minus grade or lower.

Immediately, the FDIC was named conservator by the Office of Thrift Supervision, a department of the US Department of the Treasury. All non-brokered insured deposit accounts and substantially all of the assets of IndyMac Bank, F.S.B. have been transferred to IndyMac Federal Bank, F.S.B. (IndyMac Federal Bank), Pasadena, CA a newly chartered full-service FDIC-insured institution. So, they created a new bank name to continue operations and to facilitate depositors to get their federally insured funds.

So, who is the FDIC and what do they do?

This is directly from their website (www.fdic.gov/index.html):
The Federal Deposit Insurance Corporation (FDIC) preserves and promotes public confidence in the U.S. financial system by insuring deposits in banks and thrift institutions for at least $100,000; by identifying, monitoring and addressing risks to the deposit insurance funds; and by limiting the effect on the economy and the financial system when a bank or thrift institution fails.

An independent agency of the federal government, the FDIC was created in 1933 in response to the thousands of bank failures that occurred in the 1920s and early 1930s. Since the start of FDIC insurance on January 1, 1934, no depositor has lost a single cent of insured funds as a result of a failure.

The FDIC receives no Congressional appropriations – it is funded by premiums that banks and thrift institutions pay for deposit insurance coverage and from earnings on investments in U.S. Treasury securities. With an insurance fund totaling more than $49 billion, the FDIC insures more than $3 trillion of deposits in U.S. banks and thrifts – deposits in virtually every bank and thrift in the country.

The FDIC insures deposits only. It does not insure securities, mutual funds or similar types of investments that banks and thrift institutions may offer.

The FDIC directly examines and supervises about 5,250 banks and savings banks, more than half of the institutions in the banking system. Banks can be chartered by the states or by the federal government. Banks chartered by states also have the choice of whether to join the Federal Reserve System. The FDIC is the primary federal regulator of banks that are chartered by the states that do not join the Federal Reserve System. In addition, the FDIC is the back-up supervisor for the remaining insured banks and thrift institutions.

To protect insured depositors, the FDIC responds immediately when a bank or thrift institution fails. Institutions generally are closed by their chartering authority – the state regulator, the Office of the Comptroller of the Currency, or the Office of Thrift Supervision. The FDIC has several options for resolving institution failures, but the one most used is to sell deposits and loans of the failed institution to another institution. Customers of the failed institution automatically become customers of the assuming institution. Most of the time, the transition is seamless from the customer's point of view.

The FDIC is managed by a five-person Board of Directors, all of whom are appointed by the President and confirmed by the Senate, with no more than three being from the same political party.

So, let me translate this information and tell you how it fits in the grand scheme of fraction reserve banking and the Federal Reserve System. The Fed needs another agency to regulate those institutions not under its control. The have to protect this fraudulent system of fractional reserve banking to maintain credibility with the public. Since there is no real assets of gold or silver backing the currency, there has to be very tight control when any institution does fail or risk a leak in the massive dam of consolidated debt of Americans.

Note from above that the FDIC is an independent agency of the federal government. They are a separate corporation that is under control of the Federal Reserve. They have to step in to preserve the faith in the system to prevent bank runs (a situation in which numerous bank customers try to withdraw their bank deposits simultaneously and the bank's reserves are not sufficient to cover the withdrawals). They insure each depositor up to $100,000 of deposits, but not other financial products offered by banks such as mutual funds, annuities, stocks, bonds, insurance policies, and any other financial products. They only protect checking accounts including money market accounts, savings accounts, and CDs. These are all the financial vehicles that return the lowest rate of return. Thus, most people have their money in products that are not covered.

But, that prominent statement of being insured up to $100,000 gives people confidence that their money is secure. Yeah, right! Also note that the FDIC has an insurance fund of $49 billion, but insures deposits of more than $3 trillion. If there are a lot of bank failures in a short period of time, how long will the $49 billion last with more than $3 trillion of deposits out there. And, this is only deposits! What about the many trillions of other financial products out there that are not covered? In short, there is very little assurance that this insurance could really protect the public on massive bank failures.

Also note that the usual tactic for resolving institution failures is to sell the deposits and loans of the failed institution to another institution. If a loan is bad and not going to be repaid, why will another bank think it is good and that they will get their money? When will they realize that you can not continue to throw good money after bad? As long as they don't get stuck with the bill at the end, they don't care.

IndyMac is only the second casualty. There will be many more. The house of cards will eventually fall. The only hope that you have is to not have your assets in with the house of cards.

As always, the choice is yours.

The LORD detests differing weights,
and dishonest scales do not please him. Proverbs 20:23 (NIV)

If you have comments or questions, please feel free to contact me at the address below.
Email: DeltaInspire@panama-vo.com