…The first or second week I asked a few questions of the U.S. Attorney and once of the FBI agent…it was pretty clear that this wasn’t cool. I don’t remember a single other juror ever once asking any questions. At the end of the six-month term, the government had batted 1.000. Every single case led to an indictment, and every indictment was unanimous. There were 23 of us, and I think a quorum was 15-16 people. After a month or so, it was clear that they never had a problem having a quorum and since it was a rubber-stamp farce, I figured they’d do just fine without me and I stopped coming.”, Anonymous Banking and Mortgage Banking Consultant

Banking and Mortgage Banking Consultant, Excerpt from December 2014 Newsletter:

“Everyone has an opinion on what happened in the Ferguson Grand Jury, but my view is about grand juries in general, and it’s based on having served on one about twenty years ago. It was a Federal Grand Jury, and we met every Wednesday for six months. We met in a windowless room in the San Francisco Federal Building, and each case followed the same routine. The U.S. Attorney would lay out his case, he’d usually have a FBI agent go over some parts of the investigation, and then we’d sit around a table. Our foreman was a young guy, maybe 29, and he’d say, “Well, it sure looks like he’s guilty,” and everyone would nod and that would be it.  The U.S. Attorney would then pass out a form which we’d all sign, and we’d move onto the next case.

We’d usually go through 3-4 cases by noon and then get to leave.  The first or second week I asked a few questions of the U.S. Attorney and once of the FBI agent, and while they were polite in their answers, it was pretty clear that this wasn’t cool. I don’t remember a single other juror ever once asking any questions. At the end of the six-month term, the government had batted 1.000. Every single case led to an indictment, and every indictment was unanimous.

There were 23 of us, and I think a quorum was 15-16 people. After a month or so, it was clear that they never had a problem having a quorum and since it was a rubber-stamp farce, I figured they’d do just fine without me and I stopped coming. We had just bought a CAMELS-5 bank, and I really couldn’t spare that half day every Wednesday. After three or four weeks of missing the sessions, I got a Tuesday afternoon call from a U.S. Marshall who told me, “Either you show up on your own tomorrow morning, or we’ll come and get you and bring you there in handcuffs.”

Twenty years later, I still don’t see what purpose a Criminal Grand Jury serves. We might as well have been a Jury for one of Stalin’s show trials. So my view is this: If the State wants to put someone on trial, they should just arrest that person and put him on trial. The preliminary first step of an indictment by a Grand Jury adds nothing to the process.

Finally, I suspect that the D.A. in Ferguson didn’t want the Grand Jury to indict. If my experience was at all typical, I just can’t see him presenting his best case and having a jury going against him. The D.A. always gets the indictments he wants.”

…5 from State A and 5 from State B, without a single violation.  But he was tiring of the expense of the audits and of 25 year old examiners coming into his office treating him as a criminal, of his wife calling him repeatedly during a snow storm while an auditor refused to let him go home and continue the audit on another day. State A came in for their 6th audit and again did not find a single violation. Then they asked my friend to produce loan files from previous years and my friend told them those files had already been audited. They insisted so he complied (at his expense for the prolonged audit) and again not a single violation was found. That was the last straw for my friend, even though he had the energy of a man half his age and wanted to continue working, he finished out his pipeline and turned in his licenses. Shortly thereafter he received a letter from the senior auditor from State A, saying that he was sorry to see my friend retire, that State A needed more brokers like him. I’d recommend a young person to go to law school and volunteer on one of his State’s Congressional campaigns and parlay that into a job at the CFPB.”, Anonymous, Mortgage Industry Newsletter, December 2014

…You can argue that my success proves the ROEs worked. But I feel that I could have been more effective, probably protected more people and helped bring the war to a quicker conclusion without them.”, U.S. Navy Seal Chris Kyle, “American Sniper”

“Chris followed the ROE because he had to. Some of the more broad-spectrum ROEs are fine. The problem with the ROEs covering minutiae is that terrorists really don’t give a shit about the Geneva Convention. So picking apart a soldier’s every move against a dark, twisted, rule-free enemy is more than ridiculous; it’s despicable. I care about my husband and other Americans coming home alive.”, Taya Kyle, “American Sniper” 

Key Excerpts from American Sniper Where Author Chris Kyle Opines that CYA Rules of Engagement (ROE) are Endangering the Lives of American Warriors on the Battlefield, Destroying Morale, and Risking Self-Defeat (Mr. Kyle implies that his opinion is widely shared by our combat veterans and their loved ones. Furthermore, Mr. Kyle’s opinion is almost identical to that of fellow, highly-decorated Navy SEAL Marcus Luttrell, as expressed in his book Lone Survivor.):

Page 97 (paperback edition):

“Our top command wanted us to achieve 100 percent success, and to do it with 0 casualties. That may sound admirable…who doesn’t want to succeed, and who wants anyone to get hurt? But in war those are incompatible and unrealistic. If 100 percent success and 0 casualties are your goal, you’re going to conduct very few operations. You will never take risks realistic or otherwise.”

Pages 178/179:

“You cannot be afraid to take your shot. When you see someone with an IED or a rifle maneuvering toward your men, you have clear reason to fire. (The fact that an Iraqi had a gun would not necessarily mean he could be shot.) The ROEs were specific, and in most cases the danger was obvious. But there were times when it wasn’t exactly clear, when a person almost surely was an insurgent, probably was doing evil, but there was still some doubt because of the circumstances or the surroundings….the way he moved, for example, wasn’t toward an area where troops were. A lot of times a guy seemed to be acting macho for friends, completely unaware I was watching him, or that there were American troops nearby. Those were shots I did not take. You couldn’t…you had to worry about your own ass. Make an unjustified shot and you could be charged with murder. I often would sit there and think, “I know this motherfucker is bad; I saw him doing such and such down the street the other day, but here he’s not doing anything, and if I shoot him, I won’t be able to justify it for the lawyers. I’ll fry.” Like I said, there is paperwork for everything. Every confirmed kill had documentation, supporting evidence, and a witness. So I wouldn’t shoot. There weren’t a lot of those, especially in Fallujah, but I was always extremely aware of the fact that every killing might have to be justified to the lawyers. My attitude was: if my justification is I thought my target would do something bad, then I wasn’t justified. He had to be doing something bad. Even with this standard, there were plenty of targets.”

Page 179 (Taya: Chris Kyle’s wife):

“I told him I really, truly did not care what he did in wartime. He had my unconditional support. Still, he needed to go slow, to test the waters. I think he needed to know I wouldn’t look at him differently, and perhaps more than that, he knew he would deploy again and he didn’t want to scare me. As far as I can see it, anyone who has a problem with what guys do over there is incapable of empathy. People want America to have a certain image when we fight. Yet I would guess if someone were shooting at them and they had to hold their family members while they bled out against an enemy who hid behind their children, played dead only to throw a grenade as they got closer, and who had no qualms sending their toddler to die from a grenade from which they personally pulled the pin…..they would be less concerned with playing nicely. Chris followed the ROE because he had to. Some of the more broad-spectrum ROEs are fine. The problem with the ROEs covering minutiae is that terrorists really don’t give a shit about the Geneva Convention. So picking apart a soldier’s every move against a dark, twisted, rule-free enemy is more than ridiculous; it’s despicable. I care about my husband and other Americans coming home alive.”

Page 227:

“We were recalled to base and the entire platoon put in stand down….We were all pissed. The ROEs had been followed; I had plenty of witnesses. It was the Army “investigators” who had screwed up. I had trouble holding my tongue. At one point, I told the Army colonel, “I don’t shoot people with Korans…I’d like to, but I don’t.” I guess I was a little hot. Well, after three days and God only knows how much other “investigation”, he finally realized it had been a good kill and dropped the matter. But when the regiment asked for more overwatches, we told them to fuck off. “Any time I shoot someone, you’re just going to try and have me executed,” I said. “No way.””

Pages 336-338:

“As I pulled up my scope, I spotted two guys coming down the street toward me on a moped. The guy on the back had a backpack. As I was watching, he dropped the backpack in a pot hole. He wasn’t dropping the mail; he was setting an IED….I let them get to about 150 yards away before I fired my .300 Win Mag. Dauber, watching through the binos, said it was like a scene from Dumb and Dumber. The bullet went through the first guy and into the second. The moped wobbled, then veered into a wall. Two guys with one shot. The taxpayer got a good bang for his buck on that one. The shot ended up being controversial. Because of the IED, the Army sent some people over to the scene. But it took them something like six hours to get there. Traffic backed up, and it was impossible for me, or anyone else, to watch the pothole for the entire time. Further complicating things, the Marines took down a dump truck suspected of being a mobile IED on the same road. Traffic back up all over the place, and naturally the IED disappeared. Ordinarily, that wouldn’t have been a problem. But a few days earlier we had noticed a pattern: mopeds would ride past COP a few minutes before and after an attack, obviously scouting the place and then getting intel on the attack. We requested to be cleared hot to shoot anyone on a moped. The request was denied. The lawyers or someone in the chain of command probably thought I was blowing them off when they heard about my double shot. The JAG….Judge Advocate General, kind of like a military version of a prosecuting attorney…came out and investigated. Fortunately, there were plenty of witnesses to what had happened. But I still had to answer all the JAG’s questions. Meanwhile, the insurgents kept using mopeds and gathering intelligence. We watched them closely, and destroyed every parked moped we came across in houses and yards, but that was the most we could do. Maybe legal expected us to wave and smile for the cameras.

Pages 337/338:

“It would have been tough to go and just blatantly shoot people in Iraq. For one thing, there were always plenty of witnesses around. For another, every time I killed someone in Ramadi I had to write a shooter’s statement on it. No joke. This was a report, separate from after-action reports, related only to the shots I took and the kills I recorded. The information had to be very specific. I had a little notebook with me, and I’d record the day, the time, details about the person, what he was doing, the round I used, how many shots I took, how far away the target was, and who witnessed the shot. All that went into the report, along with any other special circumstances. The head shed claimed it was to protect me in case there was ever an investigation for an unjustified kill, but I think what I was really doing was covering the butts of people much further up the chain of command. We kept a running tally of how many insurgents we shot, even during the worst firefights. One of our officers was always tasked with getting his own details on the shooting; he, in turn, would relay it back by radio. There were plenty of times when I was still engaging insurgents and giving details to LT or another officer at the same time. It got to be such a pain in the ass that one time when the officer came to ask the details on my shot, I told him it was a kid waving at me. It was just a sick joke I made. It was my way of saying, “Fuck off.” The red tape war.

I am not sure how widespread the shooter statements were. For me, the process began during my second deployment when I was working on Haifa Street. In that case, someone else filled them out for me. I’m pretty sure it was all CYA….cover your ass, or, in this case, cover the top guy’s ass. We were slaughtering the enemy. In Ramadi, with our kill total becoming astronomical, the statement became mandatory and elaborate. I’d guess that the CO or someone on his staff saw the numbers and said that the lawyers might question what was going on, so let’s protect ourselves. Great way to fight a war….be prepared to defend yourself for winning. What a pain in the ass.”

Page 340:

“I put my eye near the sight, scanning. Not ten seconds later, an insurgent walked fat into the crosshairs, AK out. I watched him move tactically toward an American position for a few seconds, confirming that he was within the ROEs. The I shot him…….I never had any doubts about the people I shot. My guys would tease me: Yeah, I know Chris. He got a little gun cut on the end of his scope. Everybody he sees is in the ROEs. But the truth was, my targets were always obvious, and I, of course, had plenty of witnesses every time I shot. The way things were, you couldn’t chance making a mistake. You’d be crucified if you didn’t strictly obey the ROEs.”

Pages 341/342:

“The way I figure it, if you send us to do a job, let us do it. That’s why you have admirals and generals….let them supervise us, not some fat-ass congressman sitting in a leather chair smoking a cigar back in DC in an air-conditioned office, telling me when and where I can and cannot shoot someone. How would they know? They’ve never even been in a combat situation. And once you decide to send us, let me do my job. War is war. Tell me: Do you want us to conquer our enemy? Annihilate them? Or are we heading over to serve them tea and cookies? Tell the military the end result you want, and you’ll get it. But don’t try and tell us how to do it. All those rules about when and under what circumstances an enemy combatant could be killed didn’t just make our jobs harder, they put our lives in danger.

The ROEs got so convoluted and fucked-up because the politicians were interfering in the process. The rules  are drawn up by lawyers who are trying to protect the admirals and the generals from the politicians, they’re not written by the people who are worried about the guys on the ground getting shot.

For some reason, a lot of people back home…not all people…didn’t accept that we were at war. They didn’t accept that war means death, violent death most times. A lot of people, not just politicians, wanted to impose ridiculous fantasies on us, hold us to some standard of behavior that no human being could maintain.

I’m not saying that war crimes should be committed. I am saying that warriors need to be let loose to fight war without their hands tied behind their backs.

According to the ROEs I followed in Iraq, if someone came into my house, shot my wife, my kids, and then threw his gun down, I was supposed to NOT shoot him. I was supposed to take him gently into custody. Would you?

You can argue that my success proves the ROEs worked. But I feel that I could have been more effective, probably protected more people and helped bring the war to a quicker conclusion without them.”

Page 343:

“It seemed the only news stories we read were about atrocities or how impossible it was going to be to pacify Ramadi. Guess what? We killed all those bad guys, and what happened? The Iraqi tribal leaders finally realized we meant business, and they finally banded together not just to govern themselves, but to kick the insurgents out. It took force, it took violence of action, to create a situation where there could be peace.”

Pages 362/363:

“You know how Ramadi was won? We went in and killed all the bad people we could find. When we started, the decent (or potentially decent) Iraqis didn’t fear the United States; they did fear the terrorists. The U.S. told them, “We’ll make it better for you.” The terrorists said, “We’ll cut your head off.” Who would you fear? Who would you listen to? When we came into Ramadi, we told the terrorists, “We’ll cut your head off. We will do whatever we have to and eliminate you.” Not only did we get the terrorists’ attention….we got everyone’s attention. We showed we were the force to be reckoned with. That’s where the so-called Great Awakening came. It wasn’t from kissing up to the Iraqis. It was from kicking butt. The tribal leaders saw that we were bad-asses, and they’d better get their act together, work together, and stop accommodating the insurgents. Force moved that battle. We killed the bad guys and brought the leaders to the peace table. That is how the world works.”

Page 390:

“Victory: It took about a month to get the barriers up (in Sadr City/Bagdahd). As the Army reached its objective, the insurgents started to give up. It was probably a combination of them realizing the wall was going to be finished whether they liked it or not, and the fact that we had killed so many of the bastards that they couldn’t mount much of an attack. Where thirty or forty insurgents would gather with AKs and RPGs to fire on a single fence crew at the beginning of the op, toward the end the bad guys were putting together attacks with two or three men. Gradually, they faded into the slums around us. Muqtada-al-Sadr, meanwhile, decided it was time for him to try and negotiate peace with the Iraqi government. He declared a ceasefire and started talking to the government. Imagine that.”

Page 417:

“In April 2009, after Somali pirates had taken over a ship and were threatening the captain with death, SEAL snipers killed them from a nearby destroyer. Someone from the local media asked Ryan what he thought. “Despite what your mama told you,” he quipped, “violence does solve problems.”

That seemed a pretty appropriate slogan for snipers, so it became ours.

Page 424:

“I’d like us to remember the suffering of those Americans who were injured serving this country…..Look at the homeless: a lot are vets. I think we owe them more than just our gratitude. They were willing to sign a blank check for America, with the cost right up to their life. If they were willing to do that, why shouldn’t we be taking care of them? I’m not suggesting we give vets handouts; what people need are hand-ups….a little opportunity and strategic help…..There’s no reason someone who has fought for their country should be homeless or jobless.”

Page 430:

“But in that backroom or whatever it is when God confronts me with my sins, I do not believe any of the kills I had during the war will be among them. Everyone I shot was evil. I had good cause on every shot. They all deserved to die.

My regrets are about the people I couldn’t save….Marines, soldiers, my buddies. I still feel their loss. I still ache for my failure to protect them.

I am not naïve and I’m beyond romanticizing war and what I had to do there. The worst moments of my life have come as a SEAL. Losing my buddies. Having a kid die on me.

When people ask me how the war changed me, I tell them that biggest thing has to do with my perspective. You know all the everyday things that stress you here? I don’t give a shit about them. There are bigger and worse things that could happen than to have this tiny little problem wreck your life, or even your day. I’ve seen them. More: I lived them.”

…According to research for the British Parliament, prices rose by around 118 times from 1750 to 1998.”, Stephen Castle, “That Debt From 1720? Britain’s Payment Is Coming”, New York Times

Europe

That Debt From 1720? Britain’s Payment Is Coming

By STEPHEN CASTLE

George Osborne, the chancellor of the Exchequer, wants to pay off bonds for debt from the 18th and 19th centuries. Credit Oli Scarff/Agence France-Presse — Getty Images

LONDON — Share prices went through the roof, speculation ran wild and money poured into ill-fated ventures before the boom turned, inevitably and catastrophically, to bust.

After that financial crash in 1720, called the South Sea Bubble, the British government was forced to undertake a bailout that eventually left several million pounds of debt on its books. Almost three centuries later, Britons are still paying interest on a small part of that obligation.

Now, prompted by record low interest rates, the British government is planning to pay off some of the debts it racked up over hundreds of years, dating as far back as the South Sea Bubble.

George Osborne, the chancellor of the Exchequer, said this month that in 2015 Britain would repay part of the country’s debt from World War I, and that he wanted to pay off other bonds for debt incurred in the 18th and 19th centuries.

That includes borrowing that may have been used to compensate slave owners when slavery was abolished, to relieve the famine in 19th-century Ireland and to bail out the infamous South Sea Company, which caused the bubble in 1720.

Economically, the move is no different from a homeowner’s decision to refinance a mortgage at a lower rate. In an era when the government can borrow at 1.5 percent or less, paying out to holders of historic debt anything from 2.5 to 4 percent per year, as it is now, makes little sense.

But the maneuver is also a reminder of how debts incurred by governments are passed down through generations.

In many cases, the underlying debt has already been refinanced, sometimes multiple times, since being incurred. The bonds paying interest on the debt have been bought and sold and passed down through generations, still paying interest indefinitely, until the government decides to pay them off. So old are some of the bonds that closing the books on them may require an act of Parliament in some cases.

Gary Shea, head of the school of economics and finance at the University of St. Andrews, said historic debt is “real,” even if the vast majority of public borrowing is fairly recent. “The taxpayer is still financing the interest payments on it,” he said.

One of the bonds Mr. Osborne plans to pay back next year is a 3.5 percent war loan issued in 1932 in exchange for earlier bonds. It still has more than 120,000 holders, including 38,000 who own bonds with a face value of less than £100, or about $155. In March, those who still own the bonds will get the original stake back at a cost to the government of £1.9 billion.

Also set for repayment are “4 percent consols,” or securities, issued in 1927 by Winston Churchill, then chancellor of the Exchequer, partly to refinance National War Bonds originating from World War I. Now worth £218 million, they will be repaid in February.

Reissuing bonds was a big administrative endeavor in earlier eras. In 1932, the conversion of an earlier war loan to one paying lower interest required so many temporary clerks that 700 lambs were prepared to feed them one evening, according to a history of Britain’s debt by Jeremy Wormell. Now, in the computer age, the task is relatively straightforward, officials say.

Within a total debt of around £1.4 trillion, the historic liability accounts for a small portion — about £2.5 billion, or less than two-tenths of 1 percent of the total outstanding.

But over the centuries, Britain’s borrowing has at times been huge and has come in different forms, sometimes including loans from other governments.

It was not until 2006, for example, that Britain fully repaid its lend-lease debts to the United States from World War II.

Some international loans from the aftermath of World War I were never fully paid and were effectively put aside in 1934, though Britain also failed to recoup debts it was owed by other nations.

The recent eurozone debt crisis is creating a similar legacy in countries that took bailout loans. Ireland is not scheduled to make its final repayment to international creditors until 2042. Greece is scheduled to do the same in 2054.

Britain’s current stock of open-ended historical debts does not include international loans but is made up of a variety of bonds known as gilts, a name that comes from the original British government certificates that had gilded edges.

Of course, much of the original debt has been eroded by inflation. According to research for the British Parliament, prices rose by around 118 times from 1750 to 1998.

The debt originating in part from the South Sea Bubble, the oldest still on the books, was consolidated into bonds issued in 1853, and those who now own them receive an annual payout of 2.5 percent.

According to the Bank of England, that original debt of around £4 million was probably incurred around 1722, though other sources suggested it might date from a few years later.

Experts say that some of the government bonds issued in the years after 1720 were created to replace earlier ones that had paid higher interest — a principle that Mr. Osborne is following three centuries later.

“We are now in a period,” said Mr. Shea of the University of St. Andrews, “in which interest rates are even lower than they were in the 18th century.”

A version of this article appears in print on December 28, 2014, on page A14 of the New York edition with the headline: That Debt From 1720? Britain’s Payment Is Coming.

…The trade deficit is money continuously flowing out of the U.S., and much of the wealth production inherent in manufacturing is now enjoyed by China instead of the U.S. It is not a coincidence that the U.S. government has to borrow billions of dollars per week to pay for entitlement programs that prop up our standard of living…The U.S. needs a free-market agreement with China. Free trade is only half of the total transaction. A free-market agreement would incorporate the free trade of goods, but would also ensure that the currencies used in the corresponding transaction have their valuations set by the free market…”, Walter Rothschild, Textile Manufacturer Reidsville, N.C., “China Trade Should Be Free-Market”, Letters to the Editor, Wall Street Journal

Letters

China Trade Should Be Free-Market

A free-market agreement with China would help solve America’s multifaceted economic problems, such as a growing national debt and a stagnant standard of living.

Maurice R. Greenberg and C. Fred Bergsten ’s Dec. 19 op-ed “The U.S. Needs a Free-Trade Deal with China” is only looking at half of the picture. The flip-side of every international sale of goods is a currency transaction.

The U.S. needs a free-market agreement with China. Free trade is only half of the total transaction. A free-market agreement would incorporate the free trade of goods, but would also ensure that the currencies used in the corresponding transaction have their valuations set by the free market.

China sets the value of its currency (the RMB) unilaterally by government decree, unlike the rest of the major economies of the world that participate in free currency markets. There is no real market, and certainly no free market, that determines the value of the RMB versus the dollar.

The U.S. has a large trade deficit of billions of dollars per week with China because they undervalue their currency. The undervalued RMB makes Chinese-manufactured goods inexpensive to Americans, and it makes American goods expensive to Chinese.

The trade deficit is money continuously flowing out of the U.S., and much of the wealth production inherent in manufacturing is now enjoyed by China instead of the U.S. It is not a coincidence that the U.S. government has to borrow billions of dollars per week to pay for entitlement programs that prop up our standard of living.

Messrs. Greenberg and Bergsten say that American exports would increase to China if we had a free-trade agreement. This is very unlikely unless the Chinese currency is fairly valued.

China naturally wants the U.S. to have free trade of goods flowing into our country, but they do not want free markets for the subsequent currency transaction. The U.S. should insist on a free market to set the value of the RMB as a precondition for selling goods to the U.S with low, or no tariffs. China will never change its winning strategy unless it has the proper incentive: access to American consumers.

A free-market agreement with China would help solve America’s multifaceted economic problems, such as a growing national debt and a stagnant standard of living.

Walter Rothschild

Reidsville, N.C.

(Mr. Rothschild is a textile manufacturer.)

…“This could never have happened if the narrative about the financial crisis had properly located the problem in the reduction of mortgage underwriting standards brought on by the government’s housing policies and implemented largely through the affordable-housing goals,” former Financial Crisis Inquiry Commission member Peter Wallison says……From 1997-2007, Fannie and Freddie acquired a combined $1.5 trillion in loans with subprime credit scores, and another $2.2 trillion in subprime securities…..When the housing bubble burst, these loans were the first to default. When the music stopped, over three-quarters of all the bad loans ended up on the books of Fannie and Freddie and other federal agencies — not Wall Street banks…..The evidence of government guilt in the crisis is overwhelming. Yet Wallison says it was covered up by the Nancy Pelosi-appointed commission on which he served as a minority Republican voice. He says the Democrat chairman of the panel even censored his dissenting opinion in the final report sold in bookstores.”, Paul Sperry, “Government fuels next housing collapse with unstable mortgages”, New York Post

Government fuels next housing collapse with unstable mortgages

By Paul Sperry

Photo: Shutterstock

Nobody wants to return to the kind of risky home loans that spurred 2008’s banking collapse. Sliding back toward lax lending would be nuts.

Yet Washington officially endorsed such loans this month.

Federally controlled mortgage giants Fannie Mae and Freddie Mac announced they’ll back loans to low-income Americans who put just 3% down, even though such loans have a high default rate.

The risky mortgage program has the blessing of Federal Housing Finance Agency chief Mel Watt, the former Congressional Black Caucus leader whom President Obama recently appointed to regulate Fannie and Freddie.

Watt also backs home loans for borrowers with “less-than-perfect credit scores.”

Since Fannie and Freddie guarantee 90% of US mortgages, private lenders will match their weaker standards. Many of these weak loans will, in turn, be securitized and traded on Wall Street.

This is the hazardous cycle that led to the financial crisis. So why are we repeating it?

Because the administration, with help from the media, has convinced the public that greedy Wall Street banks were to blame for the disaster, not Fannie and Freddie and their “mission” regulators in Washington.

“This could never have happened if the narrative about the financial crisis had properly located the problem in the reduction of mortgage underwriting standards brought on by the government’s housing policies and implemented largely through the affordable-housing goals,” former Financial Crisis Inquiry Commission member Peter Wallison says.

In a forthcoming book — “Hidden In Plain Sight: What Really Caused the World’s Worst Financial Crisis and Why It Could Happen Again” (Encounter Books) — Wallison reveals fresh evidence that ever-higher affordable loan quotas fueled the unprecedented and massive accumulation of subprime and other high-risk debt in the financial system.

Starting in 2000, HUD announced it was jacking up the quotas for low-income borrowers to 50% in the interest of diversity, meaning Fannie and Freddie had to find a non-prime loan for every prime loan it acquired. HUD explained it wanted Fannie and Freddie to “become more comfortable with subprime lending.”

Fannie complained to HUD that the “higher goals force us deeper in subprime” and weren’t feasible due to losses. But HUD just raised them higher — up to 56% by 2008.

The only way Fannie and Freddie could comply was to keep lowering their underwriting standards. Over the period HUD was enforcing the quotas, down payments plunged.

In 1992, neither Fannie nor Freddie had any loans with down payments under 5%, Wallison notes. But by 2007, on the eve of the crisis, 26% of Fannie’s loans and 19% of Freddie’s had down payments that low.

“Loans with no down payment are very risky,” he explained. “And when combined with low credit scores, they have extremely high levels of default…because the buyer has virtually no investment in the home.”

From 1997-2007, Fannie and Freddie acquired a combined $1.5 trillion in loans with subprime credit scores, and another $2.2 trillion in subprime securities.

As Freddie’s chief economist observed, losses were “inevitable,” but mortgage-backed securities were a key way for the mortgage giants to meet the HUD-mandated quotas.

Trying to avoid responsibility, HUD now argues Fannie and Freddie only bought these assets to compete for market share or profit from higher-yield investments. Nice try.

Based on new data and contemporaneous documents unveiled in Wallison’s book, which is scheduled for release Jan. 13, it appears beyond question that Fannie and Freddie purchased risky private-label securities in order to meet the affordable-housing goals.

A 2006 Fannie staff memo is eye-opening. “Everybody understood that we were now buying loans that we would have previously rejected but our mandate was to serve low-income borrowers,” it said.

“So that’s what we did.”

Greed was the last thing on their minds. In fact, Fannie was suffering serious credit and financial problems from acquiring subprime mortgages to meet the affordable housing goals.

In a 2007 memo to HUD, the company complained its 2006 “cash flow cost” from risky goals-compliant deals had climbed to $140 million while its “opportunity cost” was $470 million in foregone revenue.

‘Loans with no down payment are very risky. And when combined with low credit scores, they have extremely high levels of default.’

 – Peter Wallison

Fannie kept buying subprime loans, even though “these efforts to acquire goals-rich loans are partially responsible for increasing credit losses,” then-CEO Daniel Mudd said in a December 2007 letter to a senior HUD official, adding that Fannie had “relaxed certain underwriting standards in an effort to meet the housing goals.”

Freddie executives, meanwhile, complained that over half the loans they acquired to meet HUD’s affordable targets had “higher expected default probabilities.”

When the housing bubble burst, these loans were the first to default. When the music stopped, over three-quarters of all the bad loans ended up on the books of Fannie and Freddie and other federal agencies — not Wall Street banks.

The evidence of government guilt in the crisis is overwhelming. Yet Wallison says it was covered up by the Nancy Pelosi-appointed commission on which he served as a minority Republican voice.

He says the Democrat chairman of the panel even censored his dissenting opinion in the final report sold in bookstores.

Because the government’s role was hidden from the public, he charges, the Obama administration is getting away with doubling down on reckless housing policies.

Wallison notes that last year, after meeting with the president, bank regulators suddenly reversed course and agreed to let securitizers pool and sell to Fannie and Freddie low-quality mortgages of 3% down and subprime credit without covering any of the risk — even though such loans experienced double-digit default rates during the crisis, and even though the Dodd-Frank financial reform law required such risk retention. His explosive book can’t come soon enough.

Paul Sperry is a Hoover Institution media fellow and author of “The Great American Bank Robbery: The Unauthorized Report About What Really Caused the Great Recession.”

…Farming out the police powers of the state to a private firm with a profit incentive is a very, very bad thing,” said Attorney General John Suthers of Colorado, a Republican and a former United States attorney. Judge William Alsup of Federal District Court for the Northern District of California, who was appointed by President Bill Clinton, wrote last year that cases filed by attorneys general should not become “a vehicle for keeping elected officials in office by allowing them to extract campaign contributions from lawyers selected to serve as class counsel.”….The partnership is part of a flourishing industry that pairs plaintiffs’ lawyers with state attorneys general to sue companies, a collaboration that has set off a furious competition between trial lawyers and corporate lobbyists to influence these officials. Much as big industries have found natural allies in Republican attorneys general to combat federal regulations, plaintiffs’ lawyers working on a contingency-fee basis have teamed up mostly with Democratic state attorneys general to file hundreds of lawsuits against businesses that make anything from pharmaceuticals to snack foods.” Eric Lipton, “Lawyers Create Big Paydays by Coaxing Attorneys General to Sue”, New York Times

Politics | Courting Favor: The Pitch

Lawyers Create Big Paydays by Coaxing Attorneys General to Sue

By ERIC LIPTON

PITCH Attorney General Gary King of New Mexico was asked by Linda Singer, a former District of Columbia attorney general, to consider suing the owner of a Gallup nursing home, but then her target shifted. Credit Craig Fritz/Associated Press

WASHINGTON — When they met at the J. W. Marriott Hotel two blocks from the White House, Linda Singer, a former attorney general turned plaintiffs’ lawyer, approached Attorney General Gary King of New Mexico with an unusual proposition.

Ms. Singer wanted him to sue the owner of a nursing home in rural New Mexico that Mr. King had never heard of and Ms. Singer had never set foot in. She later presented him with a proposed lawsuit that did not cite any specific complaints about care. What she shared with him were numbers on staffing levels gleaned from records suggesting that residents were being mistreated there and at other facilities.

“Do you have 10 minutes at any point today?” Ms. Singer, who had served as attorney general in the District of Columbia, wrote to to Mr. King in a March 2012 email, to set up a meeting. “I finally got the numbers on the nursing home case and would love to discuss it with you briefly.”

“I’m in the lobby, near the reception desk,” Mr. King later replied, signing the message “GK.”

The casual nature of the exchange between the two Democrats, which was among thousands of pages of emails obtained by The New York Times, belied the enormous potential payoff for Ms. Singer’s firm if she could persuade Mr. King to hire her and use his state powers to investigate and sue, which he did.

The partnership is part of a flourishing industry that pairs plaintiffs’ lawyers with state attorneys general to sue companies, a collaboration that has set off a furious competition between trial lawyers and corporate lobbyists to influence these officials.

Much as big industries have found natural allies in Republican attorneys general to combat federal regulations, plaintiffs’ lawyers working on a contingency-fee basis have teamed up mostly with Democratic state attorneys general to file hundreds of lawsuits against businesses that make anything from pharmaceuticals to snack foods.

The lawsuits follow a pattern: Private lawyers, who scour the news media and public records looking for potential cases in which a state or its consumers have been harmed, approach attorneys general. The attorneys general hire the private firms to do the necessary work, with the understanding that the firms will front most of the cost of the investigation and the litigation. The firms take a fee, typically 20 percent, and the state takes the rest of any money won from the defendants.

While prospecting for contracts, the private lawyers have also donated tens of thousands of dollars to campaigns of individual attorneys general, as well as party-backed organizations that they run. The donations often come in large chunks just before or after the firms sign contracts to represent the state, campaign finance records and more than 240 contracts examined by The Times show.

“This has gotten out of hand,” said Scott Harshbarger, a Democrat who was the attorney general of Massachusetts in the 1990s, when this practice first burst into prominence as a result of the litigation against tobacco companies. “And it seriously threatens the perception of integrity and professionalism of the office, as it raises the question of whether attorneys are taking up these cases because they are important public matters, or they are being driven more by potential for private financial gain.”

Emails and contingency lawyer contract documents obtained by The Times from attorneys general in 15 states show how these alliances have scrambled roles in the legal profession.

Private lawyers whose traditional work has been filing class-action tort claims or securities fraud cases on behalf of individuals or groups are now often operating with the power of the state, substantially increasing their chance for success by bringing claims on behalf of “the people.”

State attorneys general defend the practice, saying that with tight budgets, hiring outside lawyers is often the only tool they have to achieve rough parity with the army of corporate lawyers who are aggressively trying to blunt the lawsuits — in court, through legislation and in elections in which they target certain attorneys general for defeat.

In no place has the contingency-fee practice flourished more than in Mississippi, where lawyers hired by Attorney General Jim Hood, a Democrat, have collected $57.5 million in fees during the last two years — three times as much as Mr. Hood has spent on running his state office during the same period.

Mr. Hood has taken in $395,000 in campaign contributions from trial law firms over the last decade, more than any other attorney general.

In one case, a senior partner at the Houston-based firm Bailey Peavy Bailey donated $125,000 to Mr. Hood after the firm filed a lawsuit on behalf of the state against Eli Lilly, the pharmaceutical company, litigation that in 2010 generated a $3.7 million payment to the outside lawyers. Mr. Hood has now signed a second contract with the firm, to sue the drug company Bristol-Myers Squibb.

Mr. Hood’s office rejected any suggestion that the contracts are given out in exchange for donations. “Whether or not an individual makes a campaign contribution during an election cycle has no bearing on any decisions made by the office of attorney general or its career attorneys who adhere to the highest standards of professionalism,” the office said in a statement.

Over all, plaintiffs’ firms have donated at least $9.8 million directly to state attorneys general and political groups related to attorneys general over the last decade, according to an analysis of campaign finance data by The Times, with more than 76 percent of that money going to Democrats.

The financial benefit to Mississippi’s treasury is also clear. Mr. Hood’s office has brought in $400 million over the last decade from lawsuits filed with the help of outside lawyers, state records show.

The boom in the contingency law business has been driven in part by former attorneys general like Ms. Singer who have capitalized on personal relationships with former colleagues that they have nurtured since leaving office, often at resort destination conferences where they pay to gain access.

Ms. Singer is shown with Markus Green, a top lawyer at the drug company Pfizer, as they made their way to a holiday party hosted by the Democratic Attorneys General Association in Washington this month. Credit Jabin Botsford/The New York Times

Ms. Singer herself has made dozens of pitches, presenting attorneys general with a shopping list of possible litigation topics, like defective highway guardrails and abuses by for-profit colleges, emails show.

“I fear that I’m now stalking you with my voice mail messages and thought I’d switch media,” Ms. Singer wrote in an email late last year to the Washington State attorney general’s office. “Do you have time to talk in the next few weeks? I’d love to pick up the thread of our conversation and get your reaction to the cases we suggested.”

Mr. King and other attorneys general say lawsuits against major corporations or industry sectors can require the hiring of expert witnesses and produce hundreds of thousands of pages of documents that must be reviewed. All of this comes at a high cost, and outside lawyers can foot the bills upfront.

“It’s one of the only tools I have to level the playing field on behalf of consumers, given the significant financial firepower that big pharma, big banking and any number of other industries have,” Mr. King said. “The attorney general is virtually the only protection the consumer has against abuse by those industries.”

But some of his colleagues remain sharply critical of the practice.

“Farming out the police powers of the state to a private firm with a profit incentive is a very, very bad thing,” said Attorney General John Suthers of Colorado, a Republican and a former United States attorney.

A Lawyer’s Plea

For Ellen F. Rosenblum, a Democrat who was the newly elected attorney general of Oregon, November 2012 had been a particularly busy month. She was investigating allegations of ballot tampering, and, on a personal level, her daughter’s wedding was approaching.

The Gallup nursing home. Credit Mark Holm for The New York Times

But Ms. Singer was determined to get on the attorney general’s calendar to pitch her cases.

“I am delighted to be able to write with congratulations on your election, as well as a more mundane follow-up,” Ms. Singer said in an email during the Thanksgiving holiday weekend in 2012. “I am eager to pick up our conversation at your convenience.”

The exchange echoed pleas that Ms. Singer sent to attorneys general — almost all Democrats — in Arizona, Connecticut, Nevada, New Mexico, New York and Washington State as she worked to team up with them on major civil cases with her firm, Cohen Milstein. Many of the pitches generated no new deals. Ms. Rosenblum, for example, has not given her a contract so far. But a single case can generate millions in payments to her firm.

Though Ms. Singer, 48, served just a year as attorney general in the District of Columbia, she had a long prior tenure in public service jobs, and she referred to her work at Cohen Milstein as an extension of her commitment to serving the public good.

“There is not a bit of shame about anything we do here,” she said in an interview in her Washington office.

Hers is an expansive portfolio of cases. Mississippi hired her to handle an investigation by the state of the credit ratings agencies Experian and TransUnion, which was based on an allegation that they knowingly included errors in their credit files. The relationship was made clear in a subpoena issued to TransUnion in July 2013.

“Please direct any questions regarding our requests or your production to our outside counsel,” said a cover letter on the subpoena, emblazoned with the state seal. It also listed Ms. Singer’s telephone number and address in Washington, in addition to information for a state official helping to supervise the case.

Nevada hired her firm in 2009, under a contract that had an exceptionally broad mandate: to seek compensation for anyone in the state who was harmed as a result of fraudulent mortgage lending practices. And Ms. Singer negotiated a settlement with Bank of America that generated an extra $38 million for Nevada, and $5.6 million for her firm — reflecting a 15 percent fee.

She was also successful in adding to her nursing home case in New Mexico by persuading the attorney general of Pennsylvania to sign a contingency-fee contract pressing similar claims.

In many of those cases, Ms. Singer’s legal theory, at least initially, had a generic quality. In New Mexico, she and the state ended up suing a different company altogether — one based in Texas, instead of the Pennsylvania-based chain that Ms. Singer had identified in a draft complaint she initially provided to Mr. King.

“We go where the evidence leads, and no place else,” Ms. Singer said, explaining the change.

The new case still relies primarily on a calculation suggesting that the 11 nursing homes did not have enough staff members. But the complaint, which named Preferred Care Partners Management Group of Plano, Tex., among others, is now backed up with specific allegations of mistreatment of patients, based on “confidential witnesses.”

Mr. King acknowledged that the lawsuit relied on a novel claim, developed through the use of a software program, that estimated resident harm based on the ratio between nurse’s aides and residents. But Mr. King said that because Cohen Milstein was covering most of the cost, there was little risk to the state, adding that he was receptive to this approach because of what he said had been a disturbing pattern of abuse in his state’s nursing homes.

“The court system in America is a good way to determine if that is a sufficient argument,” Mr. King said.

Ms. Singer’s firm does not have the field to itself. Former attorneys general, including Patricia A. Madrid of New Mexico, Walter W. Cohen of Pennsylvania, Grant Woods of Arizona, Patrick C. Lynch of Rhode Island, Steve Six of Kansas, Drew Edmondson of Oklahoma, Peg Lautenschlager of Wisconsin and Mike Moore of Mississippi, have also pursued or struck deals with states, documents obtained by The Times show. Several of them work simply as brokers, earning a commission just for helping to pitch a case.

Ms. Madrid has flown around the country with her husband (also a lawyer), acting as a broker to solicit business. They traveled early this year to Vermont on behalf of the Texas-based law firm Baron & Budd and successfully pitched the firm to the staff of the attorney general, an old friend, to represent the state in a lawsuit against oil companies over allegations that a fuel additive caused groundwater contamination. Ms. Madrid will earn a fee for helping to sell the job.

BROKER Patricia A. Madrid, a former New Mexico attorney general, with her husband, Mike Messina, helps law firms get state business. Credit Benjamin Rusnak for The New York Times

“It just gives credibility when you are dealing with someone that you know,” Mike Messina, Ms. Madrid’s husband, said this month while sitting on a couch in the lobby of the Ritz-Carlton hotel in Fort Lauderdale, Fla., where the couple were attending a dinner for newly elected attorneys general. “It gets you past a lot of difficult questions.”

Vermont’s attorney general, William H. Sorrell, said he first developed a friendship with Ms. Madrid when they traveled to Israel together as part of an official delegation of attorneys general. He acknowledged that Ms. Madrid played a role in pitching the case, but said he agreed to the deal only because it will help Vermont bring in the largest possible recovery.

“An office my size to take on a major company or a whole industry, like the oil industry, is David versus Goliath, times 10,” said Mr. Sorrell, who has a staff of about 80 lawyers.

‘Like a Family Party’

One night last week at the restaurant Rosa Mexicano in Washington, as margaritas flowed and trays of shrimp and chicken skewers were passed, the network between contingency-fee lawyers and Democratic attorneys general was on vivid display.

The restaurant was closed for a private holiday party hosted by the Democratic Attorneys General Association. These plaintiffs’ firms have donated more than $3.8 million to the group over the last decade, money that has been passed on in chunks to Democrats to help them with their re-election bids.

Ms. Singer, along with lawyers from at least nine other firms, worked the crowd, chatting up the attorneys general from Vermont, Virginia and other states, while Marlon E. Kimpson, a lawyer from Motley Rice, which focuses on securities litigation, introduced himself to the new attorneys general from Maryland and New Mexico. The event was co-sponsored by the law firm Kaplan Fox, which just secured a multimillion-dollar payout after suing the mortgage giant Fannie Mae on behalf of the State of Tennessee.

“It was like a family party,” said one lawyer who attended and who requested anonymity because it was a private event.

CROWDED FIELD From left, former Attorneys General Peg Lautenschlager of Wisconsin, Mike Moore of Mississippi and Steve Six of Kansas, who have helped pursue or strike deals with states on suits. Credit Left to right: Morry Gash/Associated Press; Rogelio V. Solis/Associated Press; Orlin Wagner/Associated Press.

That is precisely the kind of coziness that has driven corporations to marshal a counteroffensive by challenging on multiple fronts attorneys general who hire contingency lawyers.

Darrell McGraw, who collected more than $2 billion worth of settlements in partnership with contingency-fee lawyers during his tenure as West Virginia’s attorney general, was one of the early targets.

“McGraw diverted millions to pet projects and to campaign donors he hired,” said one 2012 television advertisement during his re-election campaign, a reference to a settlement his office had negotiated with Purdue Pharma over its sale of painkillers. That deal included a $2 million payment to contingency-fee law firms whose partners were past campaign donors.

His campaign bought its own advertisement defending his efforts, as did an independent group called the Mountaineer Committee for Justice and Fairness that is funded in part by plaintiffs’ lawyers.

But Mr. McGraw said the assault was overwhelming, and he was defeated after two decades in office.

“They are simply able to eliminate people,” Mr. McGraw said.

The attempts to push back have come in federal and state courts as well. Companies as diverse as Diamond Foods, the snack food maker, and Merck, the pharmaceutical giant, have filed lawsuits or counterclaims arguing that the attorneys general improperly turned over state law enforcement powers to private parties, citing their financial incentive to push ahead with cases against them, even if the facts did not support the claims.

The court challenges have yet to be successful, but some federal judges have at least been receptive to the argument.

OUTSIDE COUNSEL The office of Attorney General Jim Hood of Mississippi hired Ms. Singer to handle an investigation of credit ratings agencies. Credit Rogelio V. Solis/Associated Press

Judge William Alsup of Federal District Court for the Northern District of California, who was appointed by President Bill Clinton, wrote last year that cases filed by attorneys general should not become “a vehicle for keeping elected officials in office by allowing them to extract campaign contributions from lawyers selected to serve as class counsel.”

The appeal to state legislatures is the most intensive part of the campaign. Since 2012, at least 14 states have adopted new rules that generally require attorneys general to make a specific “finding of need for outside counsel” and often to have an open competition for the work. In several states, limits have also been placed on fees.

Perhaps the most important victory for the corporate lawyers came this year in Louisiana, where Attorney General Buddy Caldwell, a Republican, has collected $294 million in settlements since 2011 against pharmaceutical companies with the help of outside law firms, which in turn have earned $54 million in fees. The legislation, Mr. Caldwell said in a statement, was devised by the companies to “restrict and destroy the attorney general’s ability to hold them accountable.”

As Gov. Bobby Jindal signed the legislation in June, Pete Martinez, the senior director for state government affairs at Pharmaceutical Research and Manufacturers of America, stood directly behind the governor, with a slight smile.

“The way these issues really get done is a result of the grass-roots effort,” Lisa A. Rickard, the head of the U.S. Chamber of Commerce’s Institute for Legal Reform, said in October as she presented an award to the business leaders from Louisiana who led the fight.

But the grass roots had high-powered allies. Mr. Martinez was there again as the award — a small glass gavel that Ms. Rickard referred to as the chamber’s version of the Oscar — was bestowed.

Plaintiffs’ lawyers said they were not surprised by the onslaught.

“You look at the results, and I can see why the business community is organizing to fight this,” said Blair A. Nicholas, managing partner at the firm Bernstein Litowitz. “The attorneys general are getting significant results. They speak for themselves.”

The plaintiffs’ bar — and its allies in the offices of attorneys general — have tried to fight back.

Mr. Lynch, the former Rhode Island attorney general, who represents three of the nation’s largest plaintiffs’ firms, sent a confidential appeal to half a dozen state attorneys general in January, asking them to intervene in the matter with the United States Supreme Court to protect their ability to file federal securities fraud cases, typically handled by outside lawyers.

“Based on our conversation last night, I write to get confirmation that you will sign this brief today,” Mr. Lynch wrote to Ms. Rosenblum, the Oregon attorney general. He added that he already had a tentative commitment from Mr. Hood, as well as from Attorney General Bob Ferguson of Washington State and Attorney General Kathleen G. Kane of Pennsylvania, all Democrats who have taken contributions from the contingency-fee lawyers.

A spokeswoman for Ms. Rosenblum said the contributions played no role in the decision. Instead, her staff agreed to adopt the brief as its own, after making some editing changes, because it agreed with it.

Still, the counterattack by big business has had its impact. Ms. Madrid said some newly elected Democrats were reluctant to hire outside firms, fearful that they were going to be targeted for defeat in elections.

But the sales pitches are still taking place, with Ms. Singer, in particular, urging attorneys general to join her firm for a new round of possible cases, including ones against makers of furniture that has a chemical additive that some consider harmful, and drug companies that sell certain painkillers. In fact, at least three former attorneys general are pitching painkiller abuse cases to states nationwide, although no state has yet publicly signed up.

“The chamber has made the bar so high, attorneys general understand there is a cost politically to hiring outside counsel,” she said. “So it is not something they do lightly or freely.”

Kitty Bennett contributed research.

A version of this article appears in print on December 19, 2014, on page A1 of the New York edition with the headline: Lawyers Create Big Paydays by Coaxing Attorneys General to Sue.

…In 2008 the Senate passed a measure that would have limited interrogators, including those working for the CIA, to the techniques set forth in the Army Field Manual, and thus would have outlawed waterboarding. That bill was vetoed by President George W. Bush ….Consider also Sen. Feinstein’s language. Dismissing the conclusion by the Justice Department’s Office of Legal Counsel that the CIA techniques were not torture, she says it “is my personal conclusion that, under any common meaning of the term, CIA detainees were tortured. I also believe that the conditions of confinement and the use of authorized and unauthorized interrogation and conditioning techniques were cruel, inhuman, and degrading.” Which is to say, Sen. Feinstein wins the argument only by defining herself as both the standard setter and the winner…..As for the views of Sens. Feinstein and McCain and others about what is legal or illegal, this nation of laws is governed by what is in those laws, not by what at any given moment is in the minds and mouths of those who enact them.”, Michael B. Mukasey, “The CIA Interrogations Followed the Law”, Wall Street Journal. Mr. Mukasey served as U.S. attorney general (2007-09) and as a U.S. district judge for the Southern District of New York (1988-2006).

Opinion

The CIA Interrogations Followed the Law

Some of those now criticizing the program as illegal seem oddly uninterested in the laws they themselves helped write.

Sen. Dianne Feinstein discusses the Senate Intelligence Committee’s report on the CIA interrogation program, at the Newseum in Washington, D.C., Dec. 10. Getty Images

by Michael B. Mukasey

Considering that the now-abolished Central Intelligence Agency interrogation program adopted in the wake of 9/11 was intended to protect the U.S. from another deadly attack, it is stunning to hear those now criticizing the program issue the solemn reminder that “we are a nation of laws”—while devoting little attention to what was actually in those laws. Odder still, among the critics those who wrote the laws seem to devote the least attention to them.

Take, for example, Sen. Dianne Feinstein, the prime mover behind last week’s release of a more than 500-page “ Executive Summary ” of the report by Democrats on the Senate Select Committee on Intelligence. She attaches her own six-page foreword, beginning with the dutiful assurance on the first page that the “horror” of the television footage of the 9/11 attacks “will remain with me for the rest of my life.” Thus credentialed, Sen. Feinstein proceeds to the task at hand: CIA personnel “decided to initiate a program” of “brutal interrogation techniques in violation of U.S. law, treaty obligations, and our values.” Setting aside for a moment the reference to “our values,” that statement is demonstrably false.

Laws are a technical business in which both terminology and chronology play a part. So if the law that criminalizes torture defines it in a certain way, that definition—and no more—is what it is, punditry and cocktail-party figures of speech notwithstanding.

In September 2001, there was but one law that defined torture, making it a crime to act with the intent to cause “severe physical or mental pain or suffering.” Severe physical pain or suffering is not defined. Severe mental pain or suffering is defined as “prolonged mental harm” resulting from any of four causes, including causing severe physical pain or suffering.

So, to take the harshest of the techniques used in the CIA program, and the one that has therefore become emblematic of them all, the central question is whether waterboarding as applied by the CIA to the three terrorists who underwent it would have caused severe physical or mental pain or suffering. The procedure used by the CIA involved placing a detainee on a flat surface with his feet slightly elevated, placing a towel over his face, and pouring water over his nose and mouth repeatedly for periods that did not exceed 40 seconds. If that does not cause severe physical or mental pain or suffering, it is not torture, and those who applied it cannot reasonably be said to have acted with intent to cause such pain or suffering.

It was not torture, for at least two reasons. First, Navy SEALs for years have undergone waterboarding of that sort as part of their training, and they report that the procedure does not cause much physical pain at all; their splendid careers show that it also does not cause severe mental pain or suffering as defined in the law.

Second, 9/11 mastermind Khalid Sheikh Mohammed, perhaps the worst of the three waterboarded terrorists, eventually came to know the precise limits of the procedure and was seen to count the seconds by tapping his fingers until it was over. Some torture. Arguably, what broke him was sleep deprivation, but in any event he disclosed reams of valuable information. At last report, he is doing just fine.

Our treaty commitments in those post-9/11 days—agreements that also have the force of law—were expressed in a statute that criminalized any “grave breach” of the Geneva Conventions. Because of a later Supreme Court ruling, Article 3 of the Geneva Conventions could be read to protect even unlawful combatants who adhere to no rules of combat and who were never intended to be protected by treaties drafted to promote adherence to the accepted rules of combat. The definitional sections of that law, as amended by the Military Commissions Act of 2006, show that what it makes criminal are egregious acts similar to those already made criminal by the domestic torture statute.

Restrictions imposed by the Detainee Treatment Act of 2005 are framed in opaquely general terms—e.g., “cruel, inhuman or degrading treatment or punishment.” Those provisions at their broadest are read to impose limitations on the federal government no broader than those contained in the Due Process Clause of the Fifth Amendment and in the ban on Cruel and Unusual Punishments in the Eighth. The latter is read to apply to treatment imposed as “punishment” on the convicted, and therefore wouldn’t apply to interrogations of detainees for investigative purposes.

As to the Fifth Amendment, the Supreme Court has said that the treatment barred by the Due Process Clause is an abuse of power that “shocks the conscience,” and that “what shocks in the one case is less egregious in the other.” Which is to say that it matters what is at stake—like, say, national security.

Was all this dry and abstruse stuff known to Sen. Feinstein at the time that she presented the CIA report and wrote the six-page aria that constitutes her foreword? Consider that in 2006 she co-sponsored an amendment to the Military Commissions Act that would have classified waterboarding as torture; the amendment was voted down. In 2008 the Senate passed a measure that would have limited interrogators, including those working for the CIA, to the techniques set forth in the Army Field Manual, and thus would have outlawed waterboarding. That bill was vetoed by President George W. Bush .

Insofar as she damns conduct that occurred before the formal CIA program was in place in the summer of 2002, or was otherwise outside the program, that conduct was reviewed in multiple investigations and no criminality found, save for one prosecutable case in which the defendant received a 12-year sentence.

Consider also Sen. Feinstein’s language. Dismissing the conclusion by the Justice Department’s Office of Legal Counsel that the CIA techniques were not torture, she says it “is my personal conclusion that, under any common meaning of the term, CIA detainees were tortured. I also believe that the conditions of confinement and the use of authorized and unauthorized interrogation and conditioning techniques were cruel, inhuman, and degrading.”

Which is to say, Sen. Feinstein wins the argument only by defining herself as both the standard setter and the winner. Also, if she is looking for a “common meaning” of torture, how about something like a procedure to which no rational person would submit voluntarily? More journalists have tried the experience of being waterboarded than terrorists were subjected to it. That wouldn’t be the case if, for example, we were talking about needles under the fingernails.

And what of “our values,” which not only she but also Sen. John McCain —a man whose fortitude in the face of real torture by the North Vietnamese gives him nearly unique moral stature—have claimed were violated by the CIA program? Others with credentials similar to Sen. McCain’s, including Medal of Honor recipients and fellow Vietnam prisoners of war Leo Thorsness and Bud Day, believe in the efficacy and morality of waterboarding.

Moreover, and particularly at a time like this, I think it is important that we resist the New Age conceit of seeing each act of our government as an expression of who we are, and each act by its officials as an expression of who they are.

Brave and serious men and women, faced with the most terrifying attack in American history, and—along with the rest of us—fearful of more, devised and executed a program to get intelligence from captured terrorists who refused to cooperate. Former CIA directors and deputy directors have recently described in these pages how that program succeeded. Theirs was an act of national self-preservation, not of national self-expression.

As for the views of Sens. Feinstein and McCain and others about what is legal or illegal, this nation of laws is governed by what is in those laws, not by what at any given moment is in the minds and mouths of those who enact them.

Mr. Mukasey served as U.S. attorney general (2007-09) and as a U.S. district judge for the Southern District of New York (1988-2006).

…The Senate Intelligence Committee took the unprecedented step of proceeding without Republicans even though previous investigations have always been bipartisan. It cherry-picked from millions of CIA documents and, unbelievably, refused to interview any witnesses.”, John Yoo, “Dianne Feinstein’s flawed torture report”, Los Angeles Times.  John Yoo is a law professor at UC Berkeley and a visiting scholar at the American Enterprise Institute. When he served in the Justice Department from 2001 to 2003, he co-wrote memos supporting the legality of enhanced interrogation.

“Sounds similar to the Democratic majority’s flawed (and largely incorrect) report on The Financial Crisis. It wasn’t bipartisan either. Not a single Republican signed on and in fact the minority Republicans on the Financial Crisis Inquiry Commission issued two strong, formal rebuttals to the majority report; the Democrats largely blamed greedy and reckless bankers, mortgage lenders, and Wall Street. (Don’t forget, the Democratic party’s two main financial sponsors these days are public employee unions and the “plaintiff’s bar”…who needs deep pockets to blame so they can sue.) Since that time, as far as I am aware, none of the key allegations made by the Democratic majority (of the Financial Crisis Commission) have been proved in a court of law. And since that time, many economists (and financial experts) have come forward with much more plausible explanations for the root causes of U.S. housing bubble/bust and the global financial crisis (which I discuss at length on this blog, see Statements #296-#299 for one Nobel Laureate’s views). Let’s just mention a few: well-intended government housing and mortgage policies, persistent U.S. trade and balance of payment deficits, and monetary policies. Newly Confirmed Fed Chairwoman Janet Yellen (who no longer had to defend Fed policy of her predecessors, Greenspan and Bernanke) testified under oath before the Senate Banking committee on February 27, 2014 that Fed monetary policies, which resulted in lower rates, “may have ignited a housing bubble” (blog posting March 12, 2014, Statement #153). Finally, there were housing bubbles and busts and financial (and banking) crises around the world, all around the same time. U.S. mortgage lenders didn’t cause those and it doesn’t make any sense that all the world’s bankers were greedy and reckless at exactly the same time. Let’s get back to the facts and the truth in America, before we destroy our Country from within. Don’t believe me? See Nobel Laureate F.A. Hayek’s, “The Road to Serfdom”, Chapter 11: “The End of Truth” (blog Statement #539).”, Mike Perry, former Chairman and CEO, IndyMac Bank

Op-Ed

Dianne Feinstein’s flawed torture report

A REPORT ON enhanced interrogations released by Sen. Dianne Feinstein was done without bipartisan support. (Jim Lo Scalzo / EPA)

By John Yoo

Sen. Dianne Feinstein’s report last week on enhanced interrogations under the George W. Bush administration suffers from fundamental flaws. The Senate Intelligence Committee took the unprecedented step of proceeding without Republicans even though previous investigations have always been bipartisan. It cherry-picked from millions of CIA documents and, unbelievably, refused to interview any witnesses.

Without bipartisanship and testimony, the report’s claims cannot be trusted. CIA directors from both parties, including George Tenet (who served under Presidents Clinton and Bush) and John Brennan (who serves under President Obama), have rejected many of the report’s factual findings and its central claim that the CIA systematically misled the White House and the president and covered up the abuse of terrorists.

But the Feinstein report has one positive virtue: It has moved the debate beyond legality to effectiveness. To be sure, the senator takes a stab at claiming the interrogation methods amounted to illegal torture. The CIA, she writes, “decided to initiate a program of indefinite secret detention and the use of brutal interrogation techniques in violation of U.S. law, treaty obligations, and our values.” But the report does not analyze the federal anti-torture law, which in 2001 prohibited interrogation methods with “the specific intent” to cause “severe physical or mental pain and suffering.”

Attorneys in the Bush Justice Department, including me, reviewed whether the CIA’s proposed interrogation of Abu Zubaydah, an Al Qaeda planner captured in March 2002 in Pakistan, met that law. The brief statute provided neither further definitions nor examples of prohibited methods (in 2005, Congress passed a detailed law, the Detainee Treatment Act, because the earlier law was vague). For us, as I think for most reasonable Americans, almost all the CIA’s proposed interrogation methods did not constitute torture — the only one close to the line was waterboarding.

Three reasons persuaded us to approve waterboarding. First, Al Qaeda terrorists were not POWs under the Geneva Conventions, because they fought for no nation and flouted the laws of war by killing civilians and beheading prisoners (such as Daniel Pearl). Second, the U.S. armed forces had used it in training tens of thousands of officers and soldiers, without any physical injury or long-term mental harm. Finally, the United States had suffered the deaths of 3,000 civilians and billions of dollars in damage; we knew little about Al Qaeda, and intelligence indicated that more attacks were coming, perhaps using weapons of mass destruction.

There has been a suggestion in recent days that now is not a good time to release a review prepared by the Senate Intelligence Committee of the CIA’s detention and interrogation program. But is there ever a good time to admit our country tortured people? ( Dianne Feinstein )

Even under these extraordinary circumstances, the CIA would use harsh interrogation on only Al Qaeda leaders thought to have information about pending attacks — in the end the CIA approved the waterboarding of only three Al Qaeda leaders. If some CIA interrogators went beyond these methods, they would not have received Justice Department approval; they could have been disciplined, even prosecuted. Two sets of Justice Department prosecutors, however, investigated the same claims of abuse in the Feinstein report and ultimately brought no charges.

Feinstein implies that the CIA should have chosen standard interrogation methods, which depend on developing a relationship with the detainee. This may work for law enforcement, but not for any reasonable American president in 2001 and 2002. Building rapport with Al Qaeda leaders could take weeks, months, years — or never. Our prisons still hold convicted terrorists, such as those tied to the 1993 World Trade Center bombing, who have never cooperated with authorities.

In the end, Feinstein makes her case against the CIA on effectiveness, not law. And yet, the report cannot quarrel with the ultimate fact: Contrary to the expectations of terrorism experts inside and outside of government, the United States has succeeded in preventing a second large-scale terrorist attack for the last 13 years.

Feinstein and other Senate Democrats can only attack this record by arguing that the interrogations yielded nothing new. But a central element of the CIA’s success — killing Osama bin Laden and destroying Al Qaeda’s leadership — belies her claim. The U.S. found Bin Laden by tracking a courier to his location. Feinstein’s staff discovered the courier’s name in CIA files before interrogations began, and so claims that they added nothing to the effort. This ignores the fact that the names of hundreds, if not thousands, of Al Qaeda suspects sat in CIA files. Only the interrogation of Al Qaeda leaders singled out that individual as the courier.

As a former prisoner of war who experienced torture at the hands of the North Vietnamese, John McCain has more standing, by far, than any of his colleagues in the U.S. Senate when it comes to rendering judgment about the CIA’s Bush-era “enhanced interrogation” program. So, his… ( David Horsey )

The report’s fatal flaws continue with the capture of Al Qaeda leaders, such as Khalid Sheikh Mohammed and Ramzi Binalshibh, the planners of the 9/11 attacks, or Indonesian terrorist Hambali, who was working on airplane strikes on the West Coast. As the responses of the CIA and the Republican minority make clear, interrogations led the U.S. to one leader and then the next in succession. The Feinstein report cannot explain how the CIA brought down Al Qaeda’s leadership.

If the interrogations were effective, all that is left of the Feinstein report is an appeal to “our values.” Even if she were to admit that intelligence was gained, Feinstein clearly believes it would not justify the harm inflicted on terrorists. She appears to believe that the U.S. should never interrogate beyond standard relationship-building, no matter the threat to American lives.

But Americans are a practical people, nowhere more so than in war. In the Civil War, Gen. William T. Sherman marched through the South to destroy civilian support for the Confederacy. In World War II, U.S. bombs killed hundreds of thousands of civilians in Germany and Japan. President Truman used nuclear weapons to end that war. Obama has deployed drone strikes that have not only killed terrorists, but also hundreds of innocent civilians. Feinstein is not accusing Obama of war crimes, despite the far greater loss of life.

War forces us to confront tough decisions and trade-offs. Current polls indicate that a large majority of Americans support tough interrogation measures, including waterboarding, to get information from terrorists. They could have turned Bush out of office in 2004, after details of the interrogation program came to light. And as the 2014 midterm elections show, Americans remain worried about national security and terrorist threats, especially Islamic State.

Americans rely — where the Feinstein report and Senate Democrats will not — on the men and women of the CIA to protect the nation as foreign dangers and disorder rise around us.

John Yoo is a law professor at UC Berkeley and a visiting scholar at the American Enterprise Institute. When he served in the Justice Department from 2001 to 2003, he co-wrote memos supporting the legality of enhanced interrogation.

…now they are disenchanted by our industry. What is going to happen in 10 years when a huge number of originators are retiring?”, December 2014, Mortgage Industry Newsletter

 

“In my opinion, these young people are making a very rational decision. If you read this daily mortgage industry newsletter (as I do most days), you would find that it is filled with information about bullshit, form-over-substance government regulations, compliance tips, and government enforcement actions. What young person in their right mind would want to be in an insanely (and unfairly) regulated industry like this? Recently, I have read article after article noting material errors and fraud being found (at very higher percentage rates) in NEWLY originated mortgage loans. If this is going on (even if it’s not true and I suspect it is not), how in the world can any mortgage originator, meeting its fiduciary duties to its shareholders (and if a bank the FDIC), safely originate mortgages and get them guaranteed or insured by Fannie, Freddie, and FHA, when these government entities recently made lenders pay them tens of billions (and buy back billions more in mortgages) alleging mortgage errors and fraud? How can that possibly be prudent, given we now know how they act when they suffer unexpected losses on their guarantee/insurance books of business?”, Mike Perry, former Chairman and CEO, IndyMac Bank

 

Another Excerpt from that same December 2014 Mortgage Industry Newsletter (to help make my point):

“SP writes, “Hi Tom: You can’t make this stuff up. A client was paying mostly cash (proceeds from sale) towards her new home. She was approved (by a large wholesale lender who recently jumped ahead of B of A in volume) for a $200,000 loan but requested to reduce the loan amount to $140,000 a few days before closing after re-calculating what she would want to have left in the bank after closing. We submitted a change in circumstance (“CIC”) form to request reduction in the loan amount and, at the same time, we submitted another CIC to reduce our borrower-paid origination charge accordingly. The lender dutifully reduced the loan amount and origination charge but said that the loan now failed QM because the origination charge was ‘fixed’ when it was disclosed and that the original amount had to be used to calculate QM because there was no change in “terms” on the loan (as we know, reduced loan amount is not a change in term). According to the lender, our only options were to change the interest rate, loan program or loan term if we wanted the reduced origination charge to be used in the QM calculation. No amount of foot stomping or table banging would change the lender’s mind (not really – but you get the point).We reduced the interest rate from 4.125% to 4.050% (yes, you read that correctly) which saved the client $6.09 per month in payment but cost her .46% ($644) in premium.  It would have taken her over 8 years for the meager monthly savings to recoup the lost premium.  I fail to see how this is in the client’s best interest. But all’s well that ends well. Shortly after the interest rate was changed and re-disclosed the client came by and we had her sign a new CIC form to change the interest rate back to 4.125%. We didn’t know how the lender would react to this but they dutifully changed the interest rate back to 4.125%, re-disclosed again and closed the loan on that basis. It used to concern me that young people are not entering the mortgage business but now I take solace in the fact that if I ever wanted to go back to being a wholesale account executive, my advancing age would not be an impediment.”