Holder and Powell Ain't Misbehavin'

Ray Nails It!


By Ray McGovern

 

I used to take a certain pride by association with prominent Bronxites who have "made it."  Cancel that for Attorney General Eric Holder and former secretary of state Colin Powell.
Why would they want to whitewash torture, given what blacks have suffered at the hands of torturers in this country and abroad?

And why is it that they seem to value more their entrée into a privileged white-dominated ruling class than doing the right thing?  How else to explain their stunning reluctance to hold torturers accountable and thus remove the stain of torture from our nation's soul and reputation?

What's Holding Holder?

One might say that Attorney General Eric Holder is proving himself to be part of that "nation of cowards" that he called the United States in a different context; i.e., our unwillingness to address the issue of race.  What about when the victims of torture are Muslims?  Where's Holder's courage then?

Surely, I was not the only one stunned by former vice president Dick Cheney's public admission that he helped authorize waterboarding of detainees.  But, on reflection, there seems to have been a method to his madness; and, so far at least, the method seems to be working.

Have Holder and Colin Powell forgotten from their days growing up in the Bronx the typical reaction of bullies when caught in the act?  "Okay, so waddaya gonna do 'bout it!"  It was an attempt at intimidation, and it was generally effective with those who felt not quite up to the challenge.

Looks very much as if Cheney sized up Holder correctly.  During his confirmation hearings, Holder manfully agreed with Sen. Patrick Leahy that waterboarding, which subjects a person to the panicked gag reflex of drowning, is torture.

But Holder has been out to lunch since then, no doubt leaving Cheney and his torture-friendly friends smirking at having been correct in taking the measure of the new attorney general.  Call it chutzpah, intimidation, bullying-whatever; it does seem to be working.

Cheney endorsing waterboarding; Holder labeling it torture; and-Hello?  Anyone home?  Deafening silence.

Never mind that Holder, like President Barack Obama, took a solemn oath to faithfully execute the laws of the land.  Why are they still afraid of Dick Cheney, whom even the neo-con editors of the Washington Post three and a half years ago branded "Vice President for Torture?"

Profile in Cowardice

Holder seems to be taking his cue from the pitiable Colin Powell, now traversing the country giving lucrative speeches on leadership.  Powell knew he was welcome in the club, or in this case the White House, only as long as he toed the line and was willing to offer up what was left of his reputation to the Bush/Cheney war effort.

True, in one brief spurt of behind-the-scenes assertiveness, Powell insisted that arch-prevaricator (and former CIA director) George Tenet sit behind him during Powell's unforgettable/unforgivable speech at the UN on February 5, 2003.  Could he have been so unaware as to think this might somehow shame the shameless Tenet into coming clean about the cooked intelligence?
No way.  And he knew it.  Powell had already confided to then-British Foreign Secretary Jack Straw that the case against Iraq was what in the Bronx is called a "crock."

I know Powell.  In the early 80's, when he wore but one star as military assistant to the Secretary of Defense-and I was a CIA intelligence briefer-I used to do him the courtesy of pre-briefing him, to the extent I could, on what I was about to discuss during my early-morning one-on-ones with his boss, Casper Weinberger.  I found Powell to be anything but naïve.

He and I had a good bit in common-growing up at about the same time a mile from each other in the Bronx, "Distinguished Military Graduates" commissioned via Army R.O.T.C.-he from City College in 1958, I from Fordham in 1961.  Initially, I was blissfully unaware of the many times he had compromised himself-in doing Weinberger's bidding on Iran-Contra, for example.  And so in 1989 I took a certain pride by association when Powell made it to the very top as chairman of the Joint Chiefs of Staff.

That pride quickly dissipated as I watched Powell kowtow to those bent on launching a war of aggression on Iraq.  Republican elder statesman James Baker, who was secretary of state under George H.W. Bush, has referred to Powell as the one person who could have stopped that war.  Baker is right.

Caving on Torture

More to the point, Colin Powell betrayed the US Army and the nation on the iconic issue of torture.
When he got a whiff of the tortured prose being served up to the president by the likes of Alberto Gonzales and David Addington to somehow make torture "legal," Powell took the coward's way out.  He had his lawyer get in touch with the Mafia-style lawyers in the White House to ask them please, could they please ask the president to reconsider his decision to exempt al-Qaeda and the Taliban from the protections of the Geneva Convention on the Treatment of Prisoners of War.
Powell's gentle demurral appears in a MEMORANUM FOR THE PRESIDENT, dated January 25, 2002, drafted by Addington but signed by Gonzales.  They did include Powell's argument in a paragraph at the bottom of a list of "negative" consequences of ignoring Geneva:

"A determination that Geneva does not apply to al Qaeda and the Taliban could undermine U.S. military culture which emphasizes maintaining the highest standards of conduct in combat, and could introduce an element of uncertainty in the status of adversaries."

Powell got that right.  Too bad he did not have the courage of his convictions.  Too bad he lacked the guts to confront the president directly.

Too bad, for he is perhaps the one person who could have stopped the torture and the debasement of the army to which he owed so much.  Powell was unwilling to put into play the wide respect he still enjoyed, in order to stop a war of aggression and what the post-WWII Nuremberg Tribunal called the accumulated evil inevitably springing from such a war (like, say, torture).  

Instead, he opted to trade in that respect for the equivalent of 30 pieces of silver.

As the Executive Summary of the Senate Armed Services Committee report on torture, released on December 11, 2008, indicates, President George W. Bush threw in his lot with the early opinions of Addington and Gonzales.  (What most folks don't realize is that this was before everyone's favorite bête noir John Yoo and associates served up their ex post facto "justifications.")

Incorporating Addington's language of January 25, 2002, the president signed an executive order on February 7, 2002 that, in the words of the Senate committee, "opened the door" to torture.  I invite you to download both documents in their original format from the web.  (Don't do it, though, unless you are prepared to feel deep shame for our country.)

Powell, one of the addressees of the Feb. 7 executive order, not only acquiesced but also let himself be sucked into a series of discussions in the White House situation room regarding which torture techniques might be most appropriate to apply to which "high-value" detainee.  Those are the sessions that one of the participants, then-Attorney General John Ashcroft, referred to in commenting that "history will not be kind" to us.

What brings this painful flashback to mind is Rachel Maddow's interview with Colin Powell on April 2.  Not surprisingly, he danced around her questions about the White House seminars on torture.  Most telling of all, however, Powell could not bring himself to admit, even now, that waterboarding is torture.

Chutzpah Squared

On Friday former undersecretary of defense for policy, Douglas Feith, fabulous fabricator of the fabled Saddam Hussein-al-Qaeda connection, upped the ante in the "so-wattaya-gonna-do-'bout-it" stakes, and held up to ridicule the timidity of Holder and the president.

Writing in the Wall Street Journal, Feith pretended to be shocked at the temerity of a Spanish court that seems on the verge of bringing criminal charges against Feith, Gonzales, Addington, John Yoo, and two other lawyers who served up the desired opinions on how the White House could make an end run around domestic and international law and approve the systematic torture of detainees.

Disregarding the provisions of international law that clearly do apply, Feith makes liberal use of reduction ad absurdum to "prove" that Spain has no jurisdiction to put Americans on trial for torture.

More important, Feith is so cocksure of himself that he throws down the gauntlet at the feet of the new administration:  "If President Barack Obama and the prosecutors see a crime to be prosecuted, they can act."

What, I wonder, gives Feith such confidence that he will not one day rue having said that?  Has it been his watching of a long line of timid officials-both Democrats and Republicans-who lack the courage of their convictions?  Is it sheer contempt for the clear majority of American citizens who, polls show, support efforts to hold the Bush/Cheney administration accountable?

(Does no one recognize that holding the war criminals accountable through due process might be what saves them all from something much worse?)


Clearly, the Cheneys and Feiths of this world are betting on Obama being cut of the same cloth as Powell and Holder.  The president will prove them right if it turns out that his oft-repeated "No one is above the law" proves to be just rhetoric.

And it will remain just rhetoric, if Obama delays much longer in ordering the reluctant Holder to appoint a nonpartisan, independent special prosecutor to bring the torturers to justice and end this shameful chapter in American history once and for all.


Ray McGovern works with Tell the Word, the publishing arm of the ecumenical Church of the Saviour in inner-city Washington.  He was a CIA analyst for many years and now serves on the Steering Group of Veteran Intelligence Professionals for Sanity (VIPS).
This article first appeared on Consortiumnews.com.


Author's Bio: Ray McGovern works with Tell the Word, the publishing arm of the ecumenical Church of the Saviour in inner-city Washington. He was an Army infantry/intelligence officer and then a CIA analyst for 27 years, and is now on the Steering Group of Veteran Intelligence Professionals for Sanity (VIPS).

Let The Sun Shine In......

End Nixon's Drug War Quagmire: Will Obama Have the Courage?

I could not agree more!

The Drug War was lost before it was even declared, but who could have possibly guessed the true harm it would cause, it's expense and the many innocent people who lave had their lives ruined or who have been killed. I'm afraid that the war on drugs is a lot like the war on terror. It has been a causus belli for every foreign policy crime that administrations want to commit against other nations.

It has done far more harm than good. It is expensive and we can tax Cannabis, right after we start taxing the hell out of greed. That ought to help with the deficit. 

I wouldn't count on the Democrats for this, however. Their base likes to control "self-destructive" behavior and they get to decide what is and what isn't self-destructive. 

If you make a substance or, even more laughable, a plant illegal, you have lost all control over it.

Legalize cannabis, tax it. Hemp should be legalized as well.

Stop the Insanity!

April 6, 2009


By Kevin Zeese

Reform of the Rockefeller Drug Laws Brings Up Another Drug War Republican – Richard Nixon and the Drug War Trap He Put America In   

The passage of major reforms in the Rockefeller drug laws last week – the notorious 1973 mandatory sentencing laws that filled New York’s prisons but have not prevented long-term growing drug-related problems – demonstrates the challenge the United States faces in getting out of the drug war trap.

 

Nelson Rockefeller served as governor of New York from 1959 to 1973. He spent millions in attempts to win the Republican presidential nomination in 1960, 1964, and 1968 and became Vice President in 1974.  Rockefeller was known as a liberal Republican in a party led by people like Barry Goldwater and Richard Nixon. 

 

The Rockefeller drug laws – the toughest drug laws in the United States – allowed him to be a tough on drugs politician and respond to Nixon’s call for a “war on drugs.”  The mandatory minimum sentences, which covered all illegal drugs from marijuana to heroin, treated possession of over 56 grams as the equivalent of second degree murder. 

There are nearly 12,000 people in New York’s prisons incarcerated under the drug laws, most of them minor offenders with no history of violent behavior. It costs New York $520 million a year to imprison them.  Almost 90% of those locked up in New York for drug offenses are African American or Latino, despite research showing that the vast majority of people who use and sell drugs are white.

Over thirty-five years the laws cost the state billions of dollars and ruined tens of thousands of lives.  And, throughout the time New York saw one drug crisis after another – the cocaine-crack era, multi-generational heroin addiction, a wave of HIV/AIDS-related to drug use, drug-trafficking related crime waves and consistent high levels of overdose deaths.  The Rockefeller drug laws were a costly failure but it took decades to even make modest reforms.

 

Indeed, full repeal of the laws is still opposed, especially by upstate legislators who profit from the prison-industrial complex.  The reforms enacted still leave mandatory sentences on the books, but give judges discretion in some cases to require treatment instead of incarceration.  Only 1,800 people will be affected by the change because of compromises between the New York State Senate and House.

 

Rockefeller recalls another drug war Republican – Richard Nixon who set the modern drug war trap.  When he was president the National Commission on Marihuana and Drug Abuse recommended an alternative path: treat hard drugs as a public health issue and do not treat possession, personal cultivation and non-profit transfer of marijuana as crimes.  White House tapes reveal Nixon reacting negatively to the suggestions based on racism, anti-Semitism and hatred for the educated (Nixon to Bob Haldeman: “. . .every one of the bastards that are out for legalizing marijuana is Jewish. What the Christ is the matter with the Jews, Bob, what is the matter with them? I suppose it's because most of them are psychiatrists . . .”)

 

In response to the unanimous recommendations, Nixon upped the drug war ante, with a special focus on marijuana.  Marijuana arrests increased by 100,000 the year after the Commission recommended such offenses not be a crime.  And, now, the FBI reports that in 2007 there were 872,720 marijuana arrests – more than for rape, robbery and murder combined – and 90% of those are for mere possession.  This for a substance that nearly half the country believes should be legal. 

 

How is their any legitimacy in a law that is so widely opposed resulting in hundreds of thousands of arrests annually?  No wonder the United States has the embarrassment of incarcerating 25% of the world’s prisoners while having only 5% of the world’s population.

 

An interesting parallel with the American experience is the experience of another country that in the same year had a national commission report which made very similar recommendations.  The difference, at the outset, unlike Nixon their leaders put in place the recommendations of the commission.  Today, the Netherlands has one half the marijuana use rate per capita, one-third the heroin use and one-quarter the cocaine use.  In addition, their prison population is one-seventh that of the United States.

 

The facts are on the side of those who advocate ending the drug war but breaking free of this failed policy has been extremely challenging.  Democrats, who many hope would be the alternative to the Just Say No Republican Party, have consistently been afraid to tackle the issue.  President Clinton out flanked the Republicans by putting a general in charge of drug policy. 

President Obama, who supported decriminalization while in the Illinois State Senate, mocked a question about ending the marijuana war at a recent web-town hall meeting. Obama fielded the most popular questions sent to the White House website where 3.5 million people voted.  Marijuana legalization was No. 1 on the list.  Obama said:

“I have to say that there was one question that was voted on that ranked fairly high, and that was whether legalizing marijuana would improve the economy and job creation... I don't know what that says about the online audience," he joked.  “We want to make sure that it was answered. The answer is, no, I don't think that is a good strategy to grow our economy.”

Jack Cole, the executive director of Law Enforcement Against Prohibition, a group representing thousands of former law enforcement officers opposed to the drug war, said: "Despite the president's flippant comments today, the grievous harms of marijuana prohibition are no laughing matter. It would be an enormous economic stimulus if we stopped wasting so much money arresting and locking people up for non-violent drug offenses and instead brought in new tax revenue from legal sales, just as we did when we ended alcohol prohibition 75 years ago during the Great Depression."

Obama picked as vice president, Joe Biden, who as Chairman of the Judiciary Committee put in place mandatory minimum sentences, the harsh disparity between crack and powder cocaine sentencing and the drug czar’s office among other drug war measures.  His chief of staff, Rahm Emanuel, also favors a tough on drugs approach.  However, the president did announce he is stopping the waste of federal resources on medical marijuana prosecutions and supports needle exchange to prevent HIV/AIDS.  In addition, he has appointed the police chief of Seattle, a city that has put in significant drug policy reforms, as his drug czar.

And, President Obama is facing an aggressive drug war in Mexico where more than 7,000 have been killed in the last 18 months.  This would be a good opportunity for the president to point out how violence is one of the side effects of prohibiting drugs.  Many cities in the U.S. have seen more prohibition-related violence then Chicago saw during alcohol prohibition. But, instead Obama is mocking the issue and calling out National Guard troops.

Militarization of the drug war on the Mexican border is something that previous presidents have tried and it has always backfired.  President Nixon put in place Operation Intercept, searching one out of three cars and trucks crossing the border.  The result, marijuana and heroin traffickers switched to air, sea and commerce causing a heroin and marijuana glut.  President Reagan used the military to intercept boats and planes bringing marijuana into the United States.  The result, traffickers switched to the more profitable and easier to smuggle cocaine causing the cocaine decade of the 1980s.  President Clinton used the Marines on the border until they shot and killed a high school student in his backyard while he was herding goats for the town’s cheese co-operative. 

What disaster will Obama bring by failing to confront the root cause questions: should drug prohibition continue, does the drug war work, are its costs greater than its benefits and is there a better way forward?

  

For More:

Nixon Tapes Reveal Twisted Roots of Marijuana Prohibition, http://www.csdp.org/news/news/nixon.htm

 

Law Enforcement Against Prohibition, http://www.leap.cc/cms/index.php?name=Content&pid=4 Drug War Facts, www.DrugWarFacts.org
Kevin Zeese is President of Common Sense for Drug Policy,www.csdp.org.
 

Let The Sun Shine In......

The Quiet Coup

If there was any doubt left, surely this will remove it; we are a fascist state, where the corporate psychopaths, crony capitalism and worse run the country and we get to pretend to have a Democracy. 

While I hope not, the only answer, in the final analysis, may well be for the people to step back and let the whole rotten, corrupt system to collapse and start all over.

 

The crash has laid bare many unpleasant truths about the United States. One of the most alarming, says a former chief economist of the International Monetary Fund, is that the finance industry has effectively captured our government—a state of affairs that more typically describes emerging markets, and is at the center of many emerging-market crises. If the IMF’s staff could speak freely about the U.S., it would tell us what it tells all countries in this situation: recovery will fail unless we break the financial oligarchy that is blocking essential reform. And if we are to prevent a true depression, we’re running out of time.

by Simon Johnson

Image credit: Jim Bourg/Reuters/Corbis

One thing you learn rather quickly when working at the International Monetary Fund is that no one is ever very happy to see you. Typically, your “clients” come in only after private capital has abandoned them, after regional trading-bloc partners have been unable to throw a strong enough lifeline, after last-ditch attempts to borrow from powerful friends like China or the European Union have fallen through. You’re never at the top of anyone’s dance card.

The reason, of course, is that the IMF specializes in telling its clients what they don’t want to hear. I should know; I pressed painful changes on many foreign officials during my time there as chief economist in 2007 and 2008. And I felt the effects of IMF pressure, at least indirectly, when I worked with governments in Eastern Europe as they struggled after 1989, and with the private sector in Asia and Latin America during the crises of the late 1990s and early 2000s. Over that time, from every vantage point, I saw firsthand the steady flow of officials—from Ukraine, Russia, Thailand, Indonesia, South Korea, and elsewhere—trudging to the fund when circumstances were dire and all else had failed.

Every crisis is different, of course. Ukraine faced hyperinflation in 1994; Russia desperately needed help when its short-term-debt rollover scheme exploded in the summer of 1998; the Indonesian rupiah plunged in 1997, nearly leveling the corporate economy; that same year, South Korea’s 30-year economic miracle ground to a halt when foreign banks suddenly refused to extend new credit.

But I must tell you, to IMF officials, all of these crises looked depressingly similar. Each country, of course, needed a loan, but more than that, each needed to make big changes so that the loan could really work. Almost always, countries in crisis need to learn to live within their means after a period of excess—exports must be increased, and imports cut—and the goal is to do this without the most horrible of recessions. Naturally, the fund’s economists spend time figuring out the policies—budget, money supply, and the like—that make sense in this context. Yet the economic solution is seldom very hard to work out.
No, the real concern of the fund’s senior staff, and the biggest obstacle to recovery, is almost invariably the politics of countries in crisis.

Typically, these countries are in a desperate economic situation for one simple reason—the powerful elites within them overreached in good times and took too many risks. Emerging-market governments and their private-sector allies commonly form a tight-knit—and, most of the time, genteel—oligarchy, running the country rather like a profit-seeking company in which they are the controlling shareholders. When a country like Indonesia or South Korea or Russia grows, so do the ambitions of its captains of industry. As masters of their mini-universe, these people make some investments that clearly benefit the broader economy, but they also start making bigger and riskier bets. They reckon—correctly, in most cases—that their political connections will allow them to push onto the government any substantial problems that arise.

In Russia, for instance, the private sector is now in serious trouble because, over the past five years or so, it borrowed at least $490 billion from global banks and investors on the assumption that the country’s energy sector could support a permanent increase in consumption throughout the economy. As Russia’s oligarchs spent this capital, acquiring other companies and embarking on ambitious investment plans that generated jobs, their importance to the political elite increased. Growing political support meant better access to lucrative contracts, tax breaks, and subsidies. And foreign investors could not have been more pleased; all other things being equal, they prefer to lend money to people who have the implicit backing of their national governments, even if that backing gives off the faint whiff of corruption.

But inevitably, emerging-market oligarchs get carried away; they waste money and build massive business empires on a mountain of debt. Local banks, sometimes pressured by the government, become too willing to extend credit to the elite and to those who depend on them. Overborrowing always ends badly, whether for an individual, a company, or a country. Sooner or later, credit conditions become tighter and no one will lend you money on anything close to affordable terms.

The downward spiral that follows is remarkably steep. Enormous companies teeter on the brink of default, and the local banks that have lent to them collapse. Yesterday’s “public-private partnerships” are relabeled “crony capitalism.” With credit unavailable, economic paralysis ensues, and conditions just get worse and worse. The government is forced to draw down its foreign-currency reserves to pay for imports, service debt, and cover private losses. But these reserves will eventually run out. If the country cannot right itself before that happens, it will default on its sovereign debt and become an economic pariah. The government, in its race to stop the bleeding, will typically need to wipe out some of the national champions—now hemorrhaging cash—and usually restructure a banking system that’s gone badly out of balance. It will, in other words, need to squeeze at least some of its oligarchs.

Squeezing the oligarchs, though, is seldom the strategy of choice among emerging-market governments. Quite the contrary: at the outset of the crisis, the oligarchs are usually among the first to get extra help from the government, such as preferential access to foreign currency, or maybe a nice tax break, or—here’s a classic Kremlin bailout technique—the assumption of private debt obligations by the government. Under duress, generosity toward old friends takes many innovative forms. Meanwhile, needing to squeeze someone, most emerging-market governments look first to ordinary working folk—at least until the riots grow too large.
Eventually, as the oligarchs in Putin’s Russia now realize, some within the elite have to lose out before recovery can begin. It’s a game of musical chairs: there just aren’t enough currency reserves to take care of everyone, and the government cannot afford to take over private-sector debt completely.

So the IMF staff looks into the eyes of the minister of finance and decides whether the government is serious yet. The fund will give even a country like Russia a loan eventually, but first it wants to make sure Prime Minister Putin is ready, willing, and able to be tough on some of his friends. If he is not ready to throw former pals to the wolves, the fund can wait. And when he is ready, the fund is happy to make helpful suggestions—particularly with regard to wresting control of the banking system from the hands of the most incompetent and avaricious “entrepreneurs.”

Of course, Putin’s ex-friends will fight back. They’ll mobilize allies, work the system, and put pressure on other parts of the government to get additional subsidies. In extreme cases, they’ll even try subversion—including calling up their contacts in the American foreign-policy establishment, as the Ukrainians did with some success in the late 1990s.

Many IMF programs “go off track” (a euphemism) precisely because the government can’t stay tough on erstwhile cronies, and the consequences are massive inflation or other disasters. A program “goes back on track” once the government prevails or powerful oligarchs sort out among themselves who will govern—and thus win or lose—under the IMF-supported plan. The real fight in Thailand and Indonesia in 1997 was about which powerful families would lose their banks. In Thailand, it was handled relatively smoothly. In Indonesia, it led to the fall of President Suharto and economic chaos.

From long years of experience, the IMF staff knows its program will succeed—stabilizing the economy and enabling growth—only if at least some of the powerful oligarchs who did so much to create the underlying problems take a hit. This is the problem of all emerging markets.

 

Becoming a Banana Republic

In its depth and suddenness, the U.S. economic and financial crisis is shockingly reminiscent of moments we have recently seen in emerging markets (and only in emerging markets): South Korea (1997), Malaysia (1998), Russia and Argentina (time and again). In each of those cases, global investors, afraid that the country or its financial sector wouldn’t be able to pay off mountainous debt, suddenly stopped lending. And in each case, that fear became self-fulfilling, as banks that couldn’t roll over their debt did, in fact, become unable to pay. This is precisely what drove Lehman Brothers into bankruptcy on September 15, causing all sources of funding to the U.S. financial sector to dry up overnight. Just as in emerging-market crises, the weakness in the banking system has quickly rippled out into the rest of the economy, causing a severe economic contraction and hardship for millions of people.

But there’s a deeper and more disturbing similarity: elite business interests—financiers, in the case of the U.S.—played a central role in creating the crisis, making ever-larger gambles, with the implicit backing of the government, until the inevitable collapse. More alarming, they are now using their influence to prevent precisely the sorts of reforms that are needed, and fast, to pull the economy out of its nosedive. The government seems helpless, or unwilling, to act against them.

Top investment bankers and government officials like to lay the blame for the current crisis on the lowering of U.S. interest rates after the dotcom bust or, even better—in a “buck stops somewhere else” sort of way—on the flow of savings out of China. Some on the right like to complain about Fannie Mae or Freddie Mac, or even about longer-standing efforts to promote broader homeownership. And, of course, it is axiomatic to everyone that the regulators responsible for “safety and soundness” were fast asleep at the wheel.

But these various policies—lightweight regulation, cheap money, the unwritten Chinese-American economic alliance, the promotion of homeownership—had something in common. Even though some are traditionally associated with Democrats and some with Republicans, they all benefited the financial sector. Policy changes that might have forestalled the crisis but would have limited the financial sector’s profits—such as Brooksley Born’s now-famous attempts to regulate credit-default swaps at the Commodity Futures Trading Commission, in 1998—were ignored or swept aside.

The financial industry has not always enjoyed such favored treatment. But for the past 25 years or so, finance has boomed, becoming ever more powerful. The boom began with the Reagan years, and it only gained strength with the deregulatory policies of the Clinton and George W. Bush administrations. Several other factors helped fuel the financial industry’s ascent. Paul Volcker’s monetary policy in the 1980s, and the increased volatility in interest rates that accompanied it, made bond trading much more lucrative. The invention of securitization, interest-rate swaps, and credit-default swaps greatly increased the volume of transactions that bankers could make money on. And an aging and increasingly wealthy population invested more and more money in securities, helped by the invention of the IRA and the 401(k) plan. Together, these developments vastly increased the profit opportunities in financial services.

Click the chart above for a larger view

Not surprisingly, Wall Street ran with these opportunities. From 1973 to 1985, the financial sector never earned more than 16 percent of domestic corporate profits. In 1986, that figure reached 19 percent. In the 1990s, it oscillated between 21 percent and 30 percent, higher than it had ever been in the postwar period. This decade, it reached 41 percent. Pay rose just as dramatically. From 1948 to 1982, average compensation in the financial sector ranged between 99 percent and 108 percent of the average for all domestic private industries. From 1983, it shot upward, reaching 181 percent in 2007.

The great wealth that the financial sector created and concentrated gave bankers enormous political weight—a weight not seen in the U.S. since the era of J.P. Morgan (the man). In that period, the banking panic of 1907 could be stopped only by coordination among private-sector bankers: no government entity was able to offer an effective response. But that first age of banking oligarchs came to an end with the passage of significant banking regulation in response to the Great Depression; the reemergence of an American financial oligarchy is quite recent.

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Let The Sun Shine In......

The Quiet Coup

The crash has laid bare many unpleasant truths about the United States. One of the most alarming, says a former chief economist of the International Monetary Fund, is that the finance industry has effectively captured our government—a state of affairs that more typically describes emerging markets, and is at the center of many emerging-market crises. If the IMF’s staff could speak freely about the U.S., it would tell us what it tells all countries in this situation: recovery will fail unless we break the financial oligarchy that is blocking essential reform. And if we are to prevent a true depression, we’re running out of time.

by Simon Johnson

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Image credit: Jim Bourg/Reuters/Corbis

The reason, of course, is that the IMF specialize

One thing you learn rather quickly when working at the International Monetary Fund is that no one is ever very happy to see you. Typically, your “clients” come in only after private capital has abandoned them, after regional trading-bloc partners have been unable to throw a strong enough lifeline, after last-ditch attempts to borrow from powerful friends like China or the European Union have fallen through. You’re never at the top of anyone’s dance card. 

s in telling its clients what they don’t want to hear. I should know; I pressed painful changes on many foreign officials during my time there as chief economist in 2007 and 2008. And I felt the effects of IMF pressure, at least indirectly, when I worked with governments in Eastern Europe as they struggled after 1989, and with the private sector in Asia and Latin America during the crises of the late 1990s and early 2000s. Over that time, from every vantage point, I saw firsthand the steady flow of officials—from Ukraine, Russia, Thailand, Indonesia, South Korea, and elsewhere—trudging to the fund when circumstances were dire and all else had failed.
Every crisis is different, of course. Ukraine faced hyperinflation in 1994; Russia desperately needed help when its short-term-debt rollover scheme exploded in the summer of 1998; the Indonesian rupiah plunged in 1997, nearly leveling the corporate economy; that same year, South Korea’s 30-year economic miracle ground to a halt when foreign banks suddenly refused to extend new credit.
But I must tell you, to IMF officials, all of these crises looked depressingly similar. Each country, of course, needed a loan, but more than that, each needed to make big changes so that the loan could really work. Almost always, countries in crisis need to learn to live within their means after a period of excess—exports must be increased, and imports cut—and the goal is to do this without the most horrible of recessions. Naturally, the fund’s economists spend time figuring out the policies—budget, money supply, and the like—that make sense in this context. Yet the economic solution is seldom very hard to work out.
No, the real concern of the fund’s senior staff, and the biggest obstacle to recovery, is almost invariably the politics of countries in crisis.
Typically, these countries are in a desperate economic situation for one simple reason—the powerful elites within them overreached in good times and took too many risks. Emerging-market governments and their private-sector allies commonly form a tight-knit—and, most of the time, genteel—oligarchy, running the country rather like a profit-seeking company in which they are the controlling shareholders. When a country like Indonesia or South Korea or Russia grows, so do the ambitions of its captains of industry. As masters of their mini-universe, these people make some investments that clearly benefit the broader economy, but they also start making bigger and riskier bets. They reckon—correctly, in most cases—that their political connections will allow them to push onto the government any substantial problems that arise.
In Russia, for instance, the private sector is now in serious trouble because, over the past five years or so, it borrowed at least $490 billion from global banks and investors on the assumption that the country’s energy sector could support a permanent increase in consumption throughout the economy. As Russia’s oligarchs spent this capital, acquiring other companies and embarking on ambitious investment plans that generated jobs, their importance to the political elite increased. Growing political support meant better access to lucrative contracts, tax breaks, and subsidies. And foreign investors could not have been more pleased; all other things being equal, they prefer to lend money to people who have the implicit backing of their national governments, even if that backing gives off the faint whiff of corruption.
But inevitably, emerging-market oligarchs get carried away; they waste money and build massive business empires on a mountain of debt. Local banks, sometimes pressured by the government, become too willing to extend credit to the elite and to those who depend on them. Overborrowing always ends badly, whether for an individual, a company, or a country. Sooner or later, credit conditions become tighter and no one will lend you money on anything close to affordable terms.
The downward spiral that follows is remarkably steep. Enormous companies teeter on the brink of default, and the local banks that have lent to them collapse. Yesterday’s “public-private partnerships” are relabeled “crony capitalism.” With credit unavailable, economic paralysis ensues, and conditions just get worse and worse. The government is forced to draw down its foreign-currency reserves to pay for imports, service debt, and cover private losses. But these reserves will eventually run out. If the country cannot right itself before that happens, it will default on its sovereign debt and become an economic pariah. The government, in its race to stop the bleeding, will typically need to wipe out some of the national champions—now hemorrhaging cash—and usually restructure a banking system that’s gone badly out of balance. It will, in other words, need to squeeze at least some of its oligarchs.
Squeezing the oligarchs, though, is seldom the strategy of choice among emerging-market governments. Quite the contrary: at the outset of the crisis, the oligarchs are usually among the first to get extra help from the government, such as preferential access to foreign currency, or maybe a nice tax break, or—here’s a classic Kremlin bailout technique—the assumption of private debt obligations by the government. Under duress, generosity toward old friends takes many innovative forms. Meanwhile, needing to squeeze someone, most emerging-market governments look first to ordinary working folk—at least until the riots grow too large.
Eventually, as the oligarchs in Putin’s Russia now realize, some within the elite have to lose out before recovery can begin. It’s a game of musical chairs: there just aren’t enough currency reserves to take care of everyone, and the government cannot afford to take over private-sector debt completely.
So the IMF staff looks into the eyes of the minister of finance and decides whether the government is serious yet. The fund will give even a country like Russia a loan eventually, but first it wants to make sure Prime Minister Putin is ready, willing, and able to be tough on some of his friends. If he is not ready to throw former pals to the wolves, the fund can wait. And when he is ready, the fund is happy to make helpful suggestions—particularly with regard to wresting control of the banking system from the hands of the most incompetent and avaricious “entrepreneurs.”
Of course, Putin’s ex-friends will fight back. They’ll mobilize allies, work the system, and put pressure on other parts of the government to get additional subsidies. In extreme cases, they’ll even try subversion—including calling up their contacts in the American foreign-policy establishment, as the Ukrainians did with some success in the late 1990s.
Many IMF programs “go off track” (a euphemism) precisely because the government can’t stay tough on erstwhile cronies, and the consequences are massive inflation or other disasters. A program “goes back on track” once the government prevails or powerful oligarchs sort out among themselves who will govern—and thus win or lose—under the IMF-supported plan. The real fight in Thailand and Indonesia in 1997 was about which powerful families would lose their banks. In Thailand, it was handled relatively smoothly. In Indonesia, it led to the fall of President Suharto and economic chaos.
From long years of experience, the IMF staff knows its program will succeed—stabilizing the economy and enabling growth—only if at least some of the powerful oligarchs who did so much to create the underlying problems take a hit. This is the problem of all emerging markets.

Becoming a Banana Republic

In its depth and suddenness, the U.S. economic and financial crisis is shockingly reminiscent of moments we have recently seen in emerging markets (and only in emerging markets): South Korea (1997), Malaysia (1998), Russia and Argentina (time and again). In each of those cases, global investors, afraid that the country or its financial sector wouldn’t be able to pay off mountainous debt, suddenly stopped lending. And in each case, that fear became self-fulfilling, as banks that couldn’t roll over their debt did, in fact, become unable to pay. This is precisely what drove Lehman Brothers into bankruptcy on September 15, causing all sources of funding to the U.S. financial sector to dry up overnight. Just as in emerging-market crises, the weakness in the banking system has quickly rippled out into the rest of the economy, causing a severe economic contraction and hardship for millions of people.
But there’s a deeper and more disturbing similarity: elite business interests—financiers, in the case of the U.S.—played a central role in creating the crisis, making ever-larger gambles, with the implicit backing of the government, until the inevitable collapse. More alarming, they are now using their influence to prevent precisely the sorts of reforms that are needed, and fast, to pull the economy out of its nosedive. The government seems helpless, or unwilling, to act against them.
Top investment bankers and government officials like to lay the blame for the current crisis on the lowering of U.S. interest rates after the dotcom bust or, even better—in a “buck stops somewhere else” sort of way—on the flow of savings out of China. Some on the right like to complain about Fannie Mae or Freddie Mac, or even about longer-standing efforts to promote broader homeownership. And, of course, it is axiomatic to everyone that the regulators responsible for “safety and soundness” were fast asleep at the wheel.
But these various policies—lightweight regulation, cheap money, the unwritten Chinese-American economic alliance, the promotion of homeownership—had something in common. Even though some are traditionally associated with Democrats and some with Republicans, they all benefited the financial sector. Policy changes that might have forestalled the crisis but would have limited the financial sector’s profits—such as Brooksley Born’s now-famous attempts to regulate credit-default swaps at the Commodity Futures Trading Commission, in 1998—were ignored or swept aside.
The financial industry has not always enjoyed such favored treatment. But for the past 25 years or so, finance has boomed, becoming ever more powerful. The boom began with the Reagan years, and it only gained strength with the deregulatory policies of the Clinton and George W. Bush administrations. Several other factors helped fuel the financial industry’s ascent. Paul Volcker’s monetary policy in the 1980s, and the increased volatility in interest rates that accompanied it, made bond trading much more lucrative. The invention of securitization, interest-rate swaps, and credit-default swaps greatly increased the volume of transactions that bankers could make money on. And an aging and increasingly wealthy population invested more and more money in securities, helped by the invention of the IRA and the 401(k) plan. Together, these developments vastly increased the profit opportunities in financial services.

Click the chart above for a larger view

Not surprisingly, Wall Street ran with these opportunities. From 1973 to 1985, the financial sector never earned more than 16 percent of domestic corporate profits. In 1986, that figure reached 19 percent. In the 1990s, it oscillated between 21 percent and 30 percent, higher than it had ever been in the postwar period. This decade, it reached 41 percent. Pay rose just as dramatically. From 1948 to 1982, average compensation in the financial sector ranged between 99 percent and 108 percent of the average for all domestic private industries. From 1983, it shot upward, reaching 181 percent in 2007.
The great wealth that the financial sector created and concentrated gave bankers enormous political weight—a weight not seen in the U.S. since the era of J.P. Morgan (the man). In that period, the banking panic of 1907 could be stopped only by coordination among private-sector bankers: no government entity was able to offer an effective response. But that first age of banking oligarchs came to an end with the passage of significant banking regulation in response to the Great Depression; the reemergence of an American financial oligarchy is quite recent.

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Mexican president: US authorities 'complicit' in drug trafficking

So, what the hell else is new?

The President of Mexico has an unfortunate message for Americans still ignorant of the Drug War's cold realities: Some of your politicians are involved.

Yes folks, it is long-past time to start thinking about alternative strategies for combating both the harmful effects of drug addiction and the deadly effects of forcing an economy outside of the law.

"It is impossible to pass tons of drugs and cocaine to U.S. without some great complicity of some American authorities," said Mexican President Felipe Calderone.

"There is traffic in Mexico because there is corruption in Mexico. And that is true. But with the same argument, if there is traffic in United States, it is because there is some corruption in United States."


-- Stephen C. Webster

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Joseph Stiglitz: "It's going to be bad, very bad"

In an interview, the Nobel Prize-winner and former chief economist at the World Bank talks about the Great Depression, Obama's stimulus package and today's financial crisis. By Spiegel staff

Editor's note: This article originally appeared in Der Spiegel.

---

Apr. 03, 2009 |
 
Many people are comparing the financial crisis to the Great Depression. Will it really be that bad?

It's going to be bad, very bad. We're experiencing the worst downturn since the Great Depression, and we haven't reached the bottom yet. I'm very pessimistic. Governments are indeed reacting better today than during the global economic crisis. They're lowering interest rates and boosting the economy with economic stimulus plans. This is the right direction, but it's not enough.

 
The American government has committed over a trillion dollars to save the banks and $789 billion to boost the economy. Do you think this is too little?


I do. More than $700 billion sounds like a lot, but it's not. On the one hand, a large part of the money will first be given out next year, which is too late. On the other, a third of it is drained away by tax cuts. They don't really stimulate consumption, because people will save the majority of that money. I fear that the effect of the American economic stimulus plan won't be even half as big as expected.

 
At least governments worldwide are bracing themselves against the recession, as opposed to the global economic crisis where they accelerated the recession through their savings policy.


That's right. That's why I'm confident we'll get off lighter than during the Great Depression. On the other hand, there's a series of developments that make me very anxious. The state of our financial system, for example, is worse than it was 80 years ago.

 
Hundreds of banks collapsed in the U.S. at that time. Today most of them are being saved by the government. What's so bad about that?


The banks that survived 80 years ago continued to lend money. Today many banks aren't lending money anymore, above all the large investment banks. This will deepen the crisis.

 
The U.S. government's emergency plan is supposed to prevent this, though. The banks receive money from the state so they can continue to give loans.


That's the idea, but it doesn't work. We're just throwing money at them and they pay billions of it out in bonuses and dividends. We taxpayers are being robbed for all intents and purposes in order to reduce the losses that some wealthy people bear. This has to be changed.

 
What do you suggest?


We have to reorganize our bailout system for the financial sector. For one thing, any bank that actually lends should get money from the government; more money to small and medium-size banks in smaller towns and less to Wall Street institutions. The government must also accept the consequences when banks become insolvent ...

 
… and let them go bankrupt?


No, they have to be saved, because the consequences to the monetary system would be incalculable. But as a countermeasure, these institutions have to be nationalized, which even Alan Greenspan is now demanding. Then the government can close those business segments that have nothing to do with lending and make sure that the banks no longer organize esoteric stock deals that they themselves do not understand.

 
Today the world is much more intertwined than in the 1920s or 1930s. Does this make the fight against the economic crisis easier?


On the contrary, it's going to be more difficult. When a country introduces an economic stimulus plan, a large part of the stimulus goes abroad. For instance, a U.S. company receiving a road construction order from the state buys equipment from Germany, concrete from Mexico and engineering services from Great Britain. The incentive to profit from the economic situation of one's neighbor is correspondingly great, while doing as little as you yourself can do. There is only one solution for this: Economic stabilization policy has to be coordinated internationally in order to diminish the already dangerous global imbalances.

 
What do you mean by that?


For years the U.S. was the economic powerhouse of the world. It imported more goods from abroad than it exported, to the joy of manufacturers in Asia or Europe. But this model no longer works. The Americans are completely over-indebted. They can't increase their consumption, instead they have to save. This is why other global growth has to be increased.

 
Washington sees it that way, too. In particular, it wants countries with strong exports to offer further economic stimulus packages. Do you think that's justified?


Absolutely. Export surpluses are counterproductive in times of economic crisis. They have to be reduced through economic stimulus programs, for example. Economist John Maynard Keynes was even of the opinion that surplus countries should be taxed during times of economic crisis.

 
Which might not go over so well.


That's why we wouldn't go that far. I propose that countries with a positive trade balance should stream part of their surplus to the International Monetary Fund. This can then stimulate the economy in developing countries or prevent the economy from collapsing in Eastern Europe.

 
The global economic crisis following 1929 only really began when governments sealed off their respective countries from international trade. Is there still a danger of this?


I think it's unlikely that countries will again enter into open protectionism. What I do fear is indirect insulation measures like financial aid or subsidies. The consequences wouldn't be less serious. There is the threat of secret commercial obstacles that could similarly greatly restrain global exchange, like tariff increases.

 
The leaders of the 20 largest industrial nations are meeting in London this week to discuss the regulation of financial markets. Will the meeting be successful?


I'm skeptical. The American government does talk a lot about stricter regulation of financial markets. I doubt that it's serious, though. The Americans have always been masters at changing a supposed regulation measure into further deregulation.

 
Do you expect this of the new Obama administration as well?


Obama himself has made clear in many speeches that he wants to prevent prospecting in the American financial industry. But Obama is under pressure from Wall Street. Even within his own administration, there are a lot of officials who are only for cosmetic corrections.

 
The U.S. is against too much regulation in the financial markets, and Germany and Japan would prefer no further economic stimulus packages. Can much come out of the G20 summit?


The governments will find the words to put a positive spin on the conference. If they can do anything, they can do that. Everyone will say that more regulation is necessary and that balance is needed between national sovereignty and common action in a globalized world. But how much substance will lie behind their words? I'm skeptical.

 
The economic crisis has severely damaged the economic model of finance-driven turbo-capitalism. Will this lead to a renaissance in the state economy?


I don't think so. The fall of the Berlin Wall really was a strong message that communism does not work as an economic system. The collapse of Lehman Brothers on Sept. 15 again showed that unbridled capitalism doesn't work either.

 
Could authoritarian systems like China's be the future?


Besides the two extremes of communism and capitalism, there are alternatives, such as Scandinavia or Germany. The Chinese model has succeeded very well for their people, but at the price of democratic rights. The German social model, however, has worked very well. It could also be a model for the U.S. administration.

 
The crisis began in America, spread to other industrialized nations and now threatens the emerging and developing countries. Is the target of the community of states to halve global poverty by 2015 still achievable?


Because we don't know how long this crisis will last, it will become more difficult to keep to this promise. I'm also pessimistic, for example, now that the USA is discussing whether we can still afford development aid during the crisis. But there are countries like Japan and Germany that have raised their contributions to the IMF and World Bank to help the Third World.

 
Will Africa be the big loser in the crisis?


I'm fearful of that, because even the high growth of 6 percent in Africa in the last few years hasn't been enough to permanently fight poverty. A lot of the countries on the continent which inherited a low standard of education, and no infrastructure from colonialism, have solely focused on increasing commodity prices. That was a risky strategy. The IMF's structural development policies also contributed to deindustrialization. We haven't managed to create a stable foundation for the African economies.

 
World Bank president Robert Zoellick has said that the industrialized nations should direct 0.7 percent of their stimulus packages to the developing countries.


That's too little. Take the U.S. example. Each country would receive around $5.5 billion per year from $789 billion. It's a lot more than nothing, but only a drop when compared to what the countries require, namely up to $700 billion in this year alone.

 
Mr. Stiglitz, thank you for this interview.

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Active Thermitic Material Discovered in Dust from the 9/11 World Trade Center Catastrophe

Anyone surprised	by this? By now, I should hope not!
Global Research, April 3, 2009
Below is the Abstract, Introduction and Conclusions of this important and carefully researched article The complete article can be downloaded (pdf) Active Thermitic Material Discovered in Dust from the 9/11 World Trade Center Catastrophe pp.7-31 (25) Authors: Niels H. Harrit, Jeffrey Farrer, Steven E. Jones, Kevin R. Ryan, Frank M. Legge, Daniel Farnsworth, Gregg Roberts, James R. Gourley, Bradley R. Larsen The Open Chemical Physics Journal Volume 2 ISSN: 1874-4125 doi: 10.2174/1874412500902010007   Complete Article http://www.bentham-open.org/pages/content.php?TOCPJ/2009/00000002/00000001/7TOCPJ.SGM Abstract: We have discovered distinctive red/gray chips in all the samples we have studied of the dust produced by the destruction of the World Trade Center. Examination of four of these samples, collected from separate sites, is reported in this paper. These red/gray chips show marked similarities in all four samples. One sample was collected by a Manhattan resident about ten minutes after the collapse of the second WTC Tower, two the next day, and a fourth about a week later. The properties of these chips were analyzed using optical microscopy, scanning electron microscopy (SEM), X-ray energy dispersive spectroscopy (XEDS), and differential scanning calorimetry (DSC). The red material contains grains approximately 100 nm across which are largely iron oxide, while aluminum is contained in tiny plate-like structures. Separation of components using methyl ethyl ketone demonstrated that elemental aluminum is present. The iron oxide and aluminum are intimately mixed in the red material. When ignited in a DSC device the chips exhibit large but narrow exotherms occurring at approximately 430 °C, far below the normal ignition temperature for conventional thermite. Numerous iron-rich spheres are clearly observed in the residue following the ignition of these peculiar red/gray chips. The red portion of these chips is found to be an unreacted thermitic material and highly energetic. Global Research Editor's Note The definition of thermitic material: A trademark used for a welding and incendiary mixture of fine aluminum powder with a metallic oxide, usually iron, that when ignited yields an intense heat. The American Heritage® Dictionary of the English Language, Fourth Edition copyright ©2000 by Houghton Mifflin Company. Updated in 2003. Published by Houghton Mifflin Company. All rights reserved. Thermite is a pyrotechnic composition of a metal powder and a metal oxide, which produces an aluminothermic reaction known as a thermite reaction. (Wikipedia) What we are dealing with is the melting/ burning  of metal structures.   “Metals are capable of burning under the right conditions, similarly to the combustion process of wood or gasoline. ... A thermite reaction is a process in which the correct mixture of metallic fuels are combined and ignited. Ignition itself requires extremely high temperatures.” Readers can reach their own conclusions as to the far-reaching implications of these findings.  Although the authors do not address the broader issue of the 9/11 attacks, their findings have a direct bearing on the likely causes of the collapse of the WTC buildings on September 11, 2001. The findings also question the validity of the official report of the 911 Commission.  Below are selected excerpts of the article. Readers can also link to the complete text, by clicking the link   Complete Article http://www.bentham-open.org/pages/content.php?TOCPJ/2009/00000002/00000001/7TOCPJ.SGM EXCERPTS INTRODUCTION The destruction of three skyscrapers (WTC 1, 2 and 7) on September 11, 2001 was an immensely tragic catastrophe that not only impacted thousands of people and families directly, due to injury and loss of life, but also provided the motivation for numerous expensive and radical changes in domestic and foreign policy. For these and other reasons, knowing what really happened that fateful day is of grave importance. A great deal of effort has been put forth by various government-sponsored and -funded investigations, which led, in large part, to the reports released by FEMA [1] and NIST [2]. Other studies of the destruction have been less well publicized but are no less important to the outstanding obligation that remains to the victims of that tragedy, to determine the whole truth of the events of that day [3-10]. A number of  these studies have appropriately focused attention on the remaining physical material, and on available photographs and video footage, as sources of evidence still in public hands,  relating to the method of destruction of the three skyscrapers. CONCLUSIONS We have discovered distinctive red/gray chips in significant numbers in dust associated with the World Trade Center destruction. We have applied SEM/XEDS and other methods to characterize the small-scale structure and chemical signature of these chips, especially of their red component. The red material is most interesting and has the following characteristics: 1. It is composed of aluminum, iron, oxygen, silicon and carbon. Lesser amounts of other potentially reactive elements are sometimes present, such as potassium, sulfur, lead, barium and copper. 2. The primary elements (Al, Fe, O, Si, C) are typically all present in particles at the scale of tens to hundreds of nanometers, and detailed XEDS mapping shows intimate mixing. 3. On treatment with methyl ethyl ketone solvent, some segregation of components occurred. Elemental aluminum  became sufficiently concentrated to be clearly identified in the pre-ignition material. 4. Iron oxide appears in faceted grains roughly 100 nm across whereas the aluminum appears in thin platelike structures. The small size of the iron oxide particles qualifies the material to be characterized as nanothermite or super-thermite. 5. Analysis shows that iron and oxygen are present in a ratio consistent with Fe2O3. The red material in all four WTC dust samples was similar in this way. Iron oxide was found in the pre-ignition material whereas elemental iron was not. 6. From the presence of elemental aluminum and iron oxide in the red material, we conclude that it contains the ingredients of thermite. 7. As measured using DSC, the material ignites and reacts vigorously at a temperature of approximately 430 °C, with a rather narrow exotherm, matching fairly closely an independent observation on a known super-thermite sample. The low temperature of ignition and the presence of iron oxide grains less than 120 nm show that the material is not conventional  thermite (which ignites at temperatures above 900 °C) but very likely a form of super-thermite. 8. After igniting several red/gray chips in a DSC run to 700 °C, we found numerous iron-rich spheres and spheroids in the residue, indicating that a very high temperature reaction had occurred, since the iron-rich product clearly must have been molten to form these shapes. In several spheres, elemental iron was verified since the iron content significantly exceeded the oxygen content. We conclude that a high-temperature reduction-oxidation reaction has occurred in the heated chips, namely, the thermite reaction. 9. The spheroids produced by the DSC tests and by the flame test have an XEDS signature (Al, Fe, O, Si, C) which is depleted in carbon and aluminum relative to the original red material. This chemical signature strikingly matches the chemical signature of the spheroids produced by igniting commercial thermite, and also matches the signatures of many of the microspheres found in the WTC dust [5]. 10. The carbon content of the red material indicates that an organic substance is present. This would be expected for super-thermite formulations in order to produce high gas pressures upon ignition and thus make them explosive. The nature of the organic material in these chips merits further exploration. We note that it is likely also an energetic material, in that the total energy release sometimes observed in DSC tests exceeds the theoretical maximum energy of the classic thermite reaction. Based on these observations, we conclude that the red layer of the red/gray chips we have discovered in the WTC dust is active, unreacted thermitic material, incorporating nanotechnology, and is a highly energetic pyrotechnic or explosive material. (emphasis added) Complete Article http://www.bentham-open.org/pages/content.php?TOCPJ/2009/00000002/00000001/7TOCPJ.SGM

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