Friday, February 13, 2009

Framing the bank bailout debate

I'm not sure how often Scooter thinks Arianna Huffington is seeing things accurately, but I think she has framed the bank mess exactly right:

What needs to be done is hard but straightforward. As Martin Wolf of the Financial Times sums it up: "Admit reality, restructure banks and, above all, slay zombie institutions at once."

This tough love for bankers is being promoted by everyone from Nouriel Roubini, Paul Krugman, and Ann Pettifor to Niall Ferguson, the Wall Street Journal, and Milton Friedman's old partner, Anna Schwartz, the co-author of his seminal work, A Monetary History of the United States, 1867-1960. "They should not be recapitalizing firms that should be shut down," says Schwartz. "Firms that made wrong decisions should fail."

The plan laid out -- or, more accurately, sketched out -- this week by Tim Geithner makes it very clear that he is on the wrong side of the issue, more worried about the banking industry than the American people. ...

The big problem is Geithner is acting as if the crisis we are facing is a crisis of liquidity when, in fact, it's a crisis of insolvency. As Ann Pettifor puts it on HuffPost: "Much of Wall Street is effectively insolvent. It's not that these banks lack cash or capital -- it's just that they're never going to meet all their financial liabilities -- i.e. repay their debts. Ever."

And Josh Marshall at TPM is featuring a guy (Joseph Stiglitz, Nobel Prize-winning economist, former Chief Economist of the World Bank) saying the same thing here. Tapped/American Prospect similarly has posts/articles that are panning TARP II.

That's a survey of the typically-left-leaning blogs that I read on TARP II. If we don't want it and Scooter and his ilk don't want it, Obama will be spending huge political capital and good will to get it done.

Fayetteville Shale

Anybody know what mineral owners are getting for natural gas in the Fayetteville Shale?

Thursday, February 12, 2009

Hezbollah's Revenge

Stratfor's Security Report:

This report may be forwarded or republished on your website with attribution to http://www.stratfor.com/

By Fred Burton and Scott Stewart

Feb. 12 will mark the one-year anniversary of the assassination of Imad Mughniyah, one of Hezbollah’s top military commanders. The anniversary certainly will be met with rejoicing in Tel Aviv and Washington — in addition to all the Israelis he killed, Mughniyah also had a significant amount of American blood on his hands. But the date will be met with anger and renewed cries for revenge from Hezbollah’s militants, many of whom were recruited, trained or inspired by Mughniyah.

Because of Hezbollah’s history of conducting retaliatory attacks after the assassination of its leaders, and the frequent and very vocal calls for retribution for the Mughniyah assassination, many observers (including Stratfor) have been waiting for Hezbollah to exact its revenge. While the attack has not yet happened, threats continue. For example, in a Jan. 29 news conference, Hezbollah General Secretary Sheikh Hassan Nasrallah left no doubt about the group’s intention. “The Israelis live in fear of our revenge,” he said. “The decision to respond to the killing is still on. We decide the time and the place.”

Initially, given the force of the anger and outcry over the assassination, we anticipated that the strike would come soon after the 30-day mourning period for Mughniyah had passed. Clearly, that did not happen. Now a year has passed since the killing, but the anger and outcry have not died down. Indeed, as reflected by Nasrallah’s recent statement, the leadership of Hezbollah remains under a considerable amount of internal pressure to retaliate. Because any retaliation would likely be tempered by concerns over provoking a full-on Israeli attack against Hezbollah infrastructure (similar to the attack in the summer of 2006), any Hezbollah strike would be conducted in a manner that could provide some degree of plausible deniability.

It is important to remember that Hezbollah retains a considerable capacity to conduct terrorist attacks abroad should it choose to do so. In fact, we believe that, due to its high degree of training, vast experience and close ties to the Iranian government, Hezbollah retains a more proficient and dangerous terrorism capability than al Qaeda.

Repeated calls for revenge and Hezbollah’s capabilities have combined to ensure that the Israeli government maintains a high state of awareness. Even though a year has passed, Israelis, too, are waiting for the other shoe to drop. On Feb. 1, Elkana Harnof of the Counterterrorism Bureau in the Israeli Prime Minister’s Office told The Jerusalem Post that, “Based on our information, we believe the organization is planning one large revenge attack close to the anniversary of [Mughniyah’s] death.” Harnof added, “All we can say publicly is that [Hezbollah] has gone to enormous effort to prepare various kinds of terror attacks, and the big one is likely going to take place soon.” Like Stratfor, the Israelis also believe that the attack will be directed against Israeli or Jewish targets outside of Israel.

Busy Bodies

There are a number of indications that Hezbollah has not been idle in the year since Mughniyah’s death. First, there has been a good deal of preoperational activity by Hezbollah militants in several countries, including the United States. This activity has included surveillance and other intelligence-gathering for targeting purposes. At one point last fall, the activity was so intense inside the United States that law enforcement officials believed a strike was imminent — but it never came. Additionally, there are credible reports that Hezbollah plots to strike Israeli targets in Azerbaijan and the Netherlands have been thwarted. (Although, from information we have received, it does not appear that either of these plots was at an advanced stage of the attack cycle.)

We have no reason to doubt the reports of Hezbollah preoperational activity. It is simply what they do and what they are. Even though the group has not conducted a successful attack overseas since 1994, it does maintain a robust network of operatives who stay busily engaged in operational activities. While many of these operatives are involved primarily in financial and logistical activities, we believe it is worth noting that Hezbollah has never conducted or attempted an attack in a country where it did not have such a support network in place. They use these networks to assist their militant activities in a number of ways, but perhaps the most significant way is in the conduct of preoperational surveillance.

Hezbollah, a creature of the Iranian Islamic Revolution, also has a long history of receiving aid from Iranian embassies in its overseas operations, including its terrorist strikes. Almost inevitably, Hezbollah’s overseas attack plans are found to have murky links of some sort to the Iranian embassy in the country where the attack was to occur, and to the Iranian Ministry of Intelligence and Security or Islamic Revolutionary Guard Corps (IRGC) officers stationed there.

Hezbollah utilizes an “off the shelf” method of planning its terrorist attacks. This is very similar to the way major national military commands operate, where they make contingency war plans against potential adversaries in advance and then work to keep those plans updated. This style of sophisticated, advance planning provides Hezbollah’s senior decision makers with a wide array of tactical options, and allows them to assess a number of attack plans in various parts of the world and quickly select and update a particular attack plan when they make the decision to launch it. When they do decide to pull the trigger, they can strike hard and fast.

This type of planning requires a great deal of intelligence-gathering, not only to produce the initial plans but also to keep them updated. Because it requires a lot of collection activity, this effort likely accounts for much of the operational activity that has been observed over the past year in the United States and elsewhere. These ongoing surveillance operations are not just useful for planning purposes, but they are also good for sowing confusion, creating distractions and causing complacency. If Hezbollah operatives have been seen periodically conducting surveillance around a facility and no attack has followed that activity, over time it becomes very easy for security personnel to write off all such activity as harmless — even when it might not be this time.

Not Crying Wolf

There are some who argue that the lack of an attack by Hezbollah since the Mughniyah assassination, combined with the fact that the group has not used its terrorist capability to conduct an attack for many years, signifies that Hezbollah has abandoned its terrorist ways and instead focused on developing its conventional warfare capability.

We do not buy this argument. First, it ignores the existence and purpose of Hezbollah’s Unit 1800, which, among other things, recruits Palestinians for anti-Israeli terror operations inside Israel and the occupied territories. Second, if Hezbollah had abandoned its terrorist arm, there would be no need for the preoperational planning activity noted previously, and in our opinion, reports of such surveillance activity are too frequent and too widespread to be discounted as false sightings. Granted, such activities do cause jitters and have some effectiveness as a psychological warfare tool, but we do not believe that those limited benefits justify the time and effort being put into Hezbollah’s intelligence-collection program. There is also that pesky problem of explaining the thwarted attack plots in Azerbaijan and the Netherlands. Because of this, we do not believe that the U.S. and Israeli governments (among others) are crying wolf when they provide warnings of pe nding Hezbollah attacks.

We continue to believe that if there is an attack by Hezbollah, it will likely come in a country where there is an existing Hezbollah support apparatus and an Iranian embassy. (Although, in a confined geographic area, operations could be supported in a third country that lacked one or both of those elements.) We also believe that such an attack is more likely in a country where there is ready access to weapons or explosives, and where there are poor law enforcement and intelligence capabilities. We wrote an analysis discussing this in some detail during the 2006 conflict between Israel and Hezbollah. In that piece, we provided a matrix of the places we believed were most likely to be the site of a Hezbollah attack against Israeli targets, and one of the important criteria we considered was the presence of both an Iranian embassy and a local Hezbolla h support network. When we discuss these two elements, it is important to note that in past attacks, the attackers were brought in from the outside in order to provide plausible deniability — but they did receive important support and guidance from the network and embassy.

Since we wrote that analysis in July 2006, there has been a significant increase in Iranian influence in parts of Latin America, including Venezuela, Nicaragua and Bolivia, and Hezbollah has not been far behind. In addition to claims by the U.S. Treasury Department that Venezuelan nationals and organizations are supporting Hezbollah financially, there have been persistent rumors of Hezbollah militants and IRGC officers conducting training at camps in the Venezuelan jungles.

These reports are especially noteworthy when combined with a recent rise in anti-Semitism in Venezuela and an outright hostility toward Jews demonstrated by pro-Chavez militia groups. A pro-Chavez militia is believed to have been involved in the vandalism of the main synagogue in Caracas on the night of Jan. 30-31, 2008. We are among many who don’t buy the government’s official explanation that the vandalism was motivated by robbery. To us, the fact that the intruders remained in the building for several hours, made the effort to scrawl anti-Israeli graffiti inside the building and stole databases containing personal information on congregational members seems very unusual for a simple burglary. Our suspicion is magnified by the extensive anti-Semitic statements made on the Web sites of some of the pro-Chavez militia l eaders. All of this raises serious concerns that the Venezuelan government could turn a blind eye to Hezbollah efforts to conduct an attack on Israeli or Jewish interests in that country.

There are many who believe that the anti-Semitic attitudes of the Argentine government in the early 1990s helped embolden Mughniyah and his followers to attack Israeli and Jewish targets there. The anti-Semitic environment in Venezuela today is even more overt and hostile than it was in Argentina.

In keeping with Hezbollah’s history, if an attack is launched, we anticipate that it will have to be fairly spectacular, given the fact that Mughniyah was very important to Hezbollah and its Iranian sponsors — although the attack must not be so spectacular as to cause a full-on Israeli attack in Lebanon. Hezbollah can weather a few airstrikes, but it does not want to provoke an extended conflict — especially as Hezbollah’s political leadership is extremely focused on doing well in the upcoming elections in Lebanon.

Given Hezbollah’s proclivity toward using a hidden hand, we suspect the attack will be conducted by a stealthy and ambiguous cell or cells that will likely have no direct connection to the organization. For example, in July 1994, the group used Palestinian operatives to conduct attacks against the Israeli Embassy and a Jewish nongovernmental organization office in London. Also, as we have seen in prior attacks, if a hardened target such as an Israeli embassy or VIP is not vulnerable, a secondary soft target might be selected. The July 1994 bombing of the Argentine Israelite Mutual Association in Buenos Aires is a prime example of this type of attack. It should serve as a warning to Jewish community centers and other non-Israeli government targets everywhere that even non-Israeli Jewish targets are considered fair game.

This report may be forwarded or republished on your website with attribution to http://www.stratfor.com/

Wednesday, February 11, 2009

Bank bailout

I'm probably just naive and dangerously uninformed, but I can't help wishing we'd stop TARP II in its tracks and let all the banks fail who are at risk.

I'm bolstered by this WaPo story that describes a little bank that did things right, missed out on big returns on risky investments, and now is not in need of bailing out (but does see a way to make good use of bailout money):

Citizens [a bank] is among the stronger and more conservative banks in the Charlotte market. Despite setting aside $3.2 million last year for expected loan losses, the bank managed to post a profit of $3.1 million, down from $5.7 million the year before. Citizens never got into subprime lending or 100 percent loans, and for its caution lost a lot of business during the go-go years. Now, however, its reward is that its nonperforming loans are less than half of 1 percent of all its loans.

Fitzgerald may be asked to stay on

MSNBC is reporting that it's looking likely that Patrick Fitzgerald will be asked to stay on as a U.S. attorney. The story is pretty speculative, so it's too soon to give the Obama administration credit for keeping Fitzgerald. But it's worth keeping an eye on it, if for no other reason than to follow-up on the story that Michael posted regarding Fitzgerald heading up a RICO investigation of ACORN and Obama.

Tuesday, February 10, 2009

Another unemployment chart

Dshort.com has this graph showing unemployment percentage along with the S&P through history:
It's harder to compare different periods since they're not stacked on top of each other as they are in graphs we've posted today. But it provides a good sense of perspective.

More charts

Time.

William Polley.

7B? That is 23 per person

Per the Orlando Sentinel:

American gun owners buy about 7 billion rounds of ammunition yearly, according to the National Rifle Association.

It boggles.

Re: Job Loss Chart

Is this what you’re looking for?

Job loss chart

This chart is everywhere lately:
I'd love to see this same graph normalized for total employment (i.e. so we'd see a percentage of jobs lost instead of numbers of jobs lost); that should make the drop look a little less severe. Also, I'd like to see job losses from earlier recessions/depressions on the same chart.

Stratfor on Munich

By George Friedman (Stratfor link at bottom of post)

While the Munich Security Conference brought together senior leaders from most major countries and many minor ones last weekend, none was more significant than U.S. Vice President Joe Biden. This is because Biden provided the first glimpse of U.S. foreign policy under President Barack Obama. Most conference attendees were looking forward to a dramatic shift in U.S. foreign policy under the Obama administration. What was interesting about Biden’s speech was how little change there has been in the U.S. position and how much the attendees and the media were cheered by it.

After Biden’s speech, there was much talk about a change in the tone of U.S. policy. But it is not clear to us whether this was because the tone has changed, or because the attendees’ hearing has. They seemed delighted to be addressed by Biden rather than by former Vice President Dick Cheney — delighted to the extent that this itself represented a change in policy. Thus, in everything Biden said, the conference attendees saw rays of a new policy.

Policy Continuity: Iran and Russia

Consider Iran. The Obama administration’s position, as staked out by Biden, is that the United States is prepared to speak directly to Iran provided that the Iranians do two things. First, Tehran must end its nuclear weapons program. Second, Tehran must stop supporting terrorists, by which Biden meant Hamas and Hezbollah. Once the Iranians do that, the Americans will talk to them. The Bush administration was equally prepared to talk to Iran given those preconditions. The Iranians make the point that such concessions come after talks, not before, and that the United States must change its attitude toward Iran before there can be talks, something Iranian Majlis Speaker Ali Larijani emphasized after the meeting. Apart from the emphasis on a willingness to talk, the terms Biden laid out for such talks are identical to the terms under the Bush administration.

Now consider Russia. Officially, the Russians were delighted to hear that the United States was prepared to hit the “reset button” on U.S.-Russian relations. But Moscow cannot have been pleased when it turned out that hitting the reset button did not involve ruling out NATO expansion, ending American missile defense system efforts in Central Europe or publicly acknowledging the existence of a Russian sphere of influence. Biden said, “It will remain our view that sovereign states have the right to make their own decisions and choose their own alliances.” In translation, this means the United States has the right to enter any relationship it wants with independent states, and that independent states have the right to enter any relationship they want. In other words, the Bush administratio n’s commitment to the principle of NATO expansion has not changed.

Nor could the Russians have been pleased with the announcement just prior to the conference that the United States would continue developing a ballistic missile defense (BMD) system in Poland and the Czech Republic. The BMD program has been an issue of tremendous importance for Russians, and it is something Obama indicated he would end, or change in some way that might please the Russians. But not only was there no commitment to end the program, there also was no backing away from long-standing U.S. interest in it, or even any indication of the terms under which it might end.

Given that the United States has asked Russia for a supply route through the former Soviet Union to Afghanistan, and that the Russians have agreed to this in principle, it would seem that that there might be an opening for a deal with the Russians. But just before the Munich conference opened, Kyrgyzstan announced that Manas Air Base, the last air base open to the United States in Central Asia, would no longer be available to American aircraft. This was a tidy little victory for the Russians, who had used political and financial levers to pressure Kyrgyzstan to eject the Americans. The Russians, of course, deny that any such pressure was ever brought to be ar, and that the closure of the base one day before Munich could have been anything more than coincidence.

But the message to the United States was clear: While Russia agrees in principle to the U.S. supply line, the Americans will have to pay a price for it. In case Washington was under the impression it could get other countries in the former Soviet Union to provide passage, the Russians let the Americans know how much leverage Moscow has in these situations. The U.S. assertion of a right to bilateral relations won’t happen in Russia’s near abroad without Russian help, and that help won’t come without strategic concessions from the United States. In short, the American position on Russia hasn’t changed, and neither has the Russian position.

The Europeans

The most interesting — and for us, the most anticipated — part of Biden’s speech had to do with the Europeans, of whom the French and Germans were the most enthusiastic about Bush’s departure and Obama’s arrival. Biden’s speech addressed the core question of the U.S.-European relationship.

If the Europeans were not prepared to increase their participation in American foreign policy initiatives during the Bush administration, it was assumed that they would be during the Obama administration. The first issue on the table under the new U.S. administration is the plan to increase forces in Afghanistan. Biden called for more NATO involvement in that conflict, which would mean an increase in European forces deployed to Afghanistan. Some countries, along with the head of NATO, support this. But German Chancellor Angela Merkel made it clear that Germany is not prepared to send more troops.

Over the past year or so, Germany has become somewhat estranged from the United States. Dependent on Russian energy, Germany has been unwilling to confront Russia on issues of concern to Washington. Merkel has made it particularly clear that while she does not oppose NATO expansion in principle, she certainly opposes expansion to states that Russian considers deeply within its sphere of influence (primarily Georgia and Ukraine). The Germans have made it abundantly clear that they do not want to see European-Russian relations deteriorate under U.S. prodding. Moreover, Germany has no appetite for continuing its presence in Afghanistan, let alone increasing it.

NATO faces a substantial split, conditioned partly by Germany’s dependence on Russian energy, but also by deep German unease about any possible resumption of a Cold War with Russia, however mild. The foundation of NATO during the Cold War was the U.S.-German-British relationship. With the Germans unwilling to align with the United States and other NATO members over Russia or Afghanistan, it is unclear whether NATO can continue to function. (Certainly, Merkel cannot be pleased that the United States has not laid the BMD issue in Poland and the Czech Republic to rest.)

The More Things Change …

Most interesting here is the continuity between the Bush and Obama administrations in regard to foreign policy. It is certainly reasonable to argue that after only three weeks in office, no major initiatives should be expected of the new president. But major initiatives were implied — such as ending the BMD deployment to Poland and the Czech Republic — and declaring the intention to withdraw BMD would not have required much preparation. But Biden offered no new initiatives beyond expressing a willingness to talk, without indicating any policy shifts regarding the things that have blocked talks. Willingness to talk with the Iranians, the Russians, the Europeans and others shifts the atmospherics — allowing the listener to think things have changed — but does not address the question of what is to be discussed and what is to be offered and accepted.

Ultimately, the issues dividing the world are not, in our view, subject to personalities, nor does goodwill (or bad will, for that matter) address the fundamental questions. Iran has strategic and ideological reasons for behaving the way it does. So does Russia. So does Germany, and so on. The tensions that exist between those countries and the United States might be mildly exacerbated by personalities, but nations are driven by interest, not personality.
Biden’s position did not materially shift the Obama administration away from Bush’s foreign policy, because Bush was the prisoner of that policy, not its creator. The Iranians will not make concessions on nuclear weapons prior to holding talks, and they do not regard their support for Hamas or Hezbollah as aiding terrorism. Being willing to talk to the Iranians provided they abandon these things is the same as being unwilling to talk to them.

There has been no misunderstanding between the United States and Russia that more open dialogue will cure. The Russians see no reason for NATO expansion unless NATO is planning to encircle Russia. It is possible for the West to have relations with Ukraine and Georgia without expanding NATO; Moscow sees the insistence on expansion as implying sinister motives. For its part, the United States refuses to concede that Russia has any interest in the decisions of the former Soviet Union states, something Biden reiterated. Therefore, either the Russians must accept NATO expansion, or the Americans must accept that Russia has an overriding interest in limiting American relations in the former Soviet Union. This is a fundamental issue that any U.S. administration would have to deal with — particularly an administr ation seeking Russian cooperation in Afghanistan.

As for Germany, NATO was an instrument of rehabilitation and stability after World War II. But Germany now has a complex relationship with Russia, as well as internal issues. It does not want NATO drawing it into adventures that are not in Germany’s primary interest, much less into a confrontation with Russia. No amount of charm, openness or dialogue is going to change this fundamental reality.

Dialogue does offer certain possibilities. The United States could choose to talk to Iran without preconditions. It could abandon NATO expansion and quietly reduce its influence in the former Soviet Union, or perhaps convince the Russians that they could benefit from this influence. The United States could abandon the BMD system (though this has been complicated by Iran’s recent successful satellite launch), or perhaps get the Russians to participate in the program. The United States could certainly get the Germans to send a small force to Afghanistan above and beyond the present German contingent. All of this is possible.

What can’t be achieved is a fundamental transformation of the geopolitical realities of the world. No matter how Obama campaigned, it is clear he knows that. Apart from his preoccupation with economic matters, Obama understands that foreign policy is governed by impersonal forces and is not amenable to rhetoric, although rhetoric might make things somewhat easier. No nation gives up its fundamental interests because someone is willing to talk.

Willingness to talk is important, but what is said is much more important. Obama’s first foray into foreign policy via Biden indicates that, generally speaking, he understands the constraints and pressures that drive American foreign policy, and he understands the limits of presidential power. Atmospherics aside, Biden’s positions — as opposed to his rhetoric — were strikingly similar to Cheney’s foreign policy positions.

We argued long ago that presidents don’t make history, but that history makes presidents. We see Biden’s speech as a classic example of this principle.

This report may be forwarded or republished on your website with attribution to www.stratfor.com

Monday, February 09, 2009

Great...

Last week, no internet. Tonight (tomorrow morning?); no water.

Sunday, February 08, 2009

Shakespeare, the Bard, on the owl

Here's a blog post by someone who has compiled a bunch of references Shakespeare made to owls.