Monday, March 31, 2008
The Bear Stearns meltdown and subsequent acquisition by JPMorgan (facilitated by the Federal Reserve) is in the news and hit the front pages recently. The following is a quick overview:
Bear Stearns (referred to as Bear in the rest of this write-up) is a diversified financial services holding company, and (from the company web site) “a leading global investment banking, securities trading and brokerage firm.” With approximately fourteen thousand employees, revenues of $5.95 billion (down from 2006’s $9.2 billion), net income of $233 million (down from 2006’s over $2 billion), and a profit margin of 3.2% (down from 2006’s 34.1%), the fate of Bear Stearns shows that perhaps every so often investors should pay close attention to the “Risk Factors” section of the 10-K filing, e.g. “…Our businesses could be adversely affected by market fluctuations. Our businesses are materially affected by conditions in the financial markets and economic conditions generally, both in the U.S. and elsewhere…”; “…Market fluctuations and volatility may cause us to incur significant losses in our trading and investment activities…”; “…Our businesses may be adversely affected by fluctuations in interest rates, foreign exchange rates, and equity and commodity prices. In connection with our dealer and arbitrage activities, including market-making in OTC derivative contracts, we may be adversely affected by changes in the level or volatility of interest rates, mortgage prepayment speeds or the level and shape of the yield curve…”; etc., etc. Bear has been very heavily involved in mortgage-backed securities (MBS), being a major player in the creating, underwriting, trading, and investing in these financial instruments.
- In June 2007 two of Bear’s hedge funds that had a lot of exposure to MBS and subprime mortgages began to loose money. Bear put approximately $1.6 billion into these funds before winding them down.
- In October Bear obtained an investment in it of $1 billion by Citic Securities (owned by the Chinese government).
- Investors did not seem convinced (the stock gained 1.2% in value when the deal was announced, but then slipped back 2.2% the next day).
- In Q4 of 2007 Bear reported a quarterly loss of $859 million, the first ever quarterly loss in the firm’s storied 85-year history.
- Bear continued to hemorrhage… In March 2008 rumors began to circulate that some European financial institutions had stopped transacting fixed income trades with Bear, and as a result U.S. traders started pulling back, including other hedge funds, investment banks, money market funds, etc. Bear started to run out of liquid reserves.
- By March 13th Bear, unable to find a white knight, was in a very serious position, and was running out of liquidity. The SEC and Federal Reserve became involved. The Federal Reserve agreed to extend a short-term (28 day) discount window loan.
- Two days later JPMorgan (the second largest bank in the U.S. as measure by stock market capitalization; also intimately familiar with Bear’s business since they were the clearing agent for Bear’s trading activity) agreed to acquire Bear. The cost, 0.05473 of a JP share for each Bear share i.e. approximately $2 a share, thus valuing Bear at $236 million.
- The buyout offer was amended to 0.21753 of a JPMorgan share i.e. approximately $10 a share, now valuing Bear at approximately $1.2 billion. The Fed’s loan was also “tweaked.”
- The deal was approved by the boards of the two companies, the Federal Reserve, and the Office of the Comptroller of the Currency.
Some questions & answers:
- How unusual was the Federal Reserve’s action in extending the discount window loan? Very, the Fed usually only makes direct loans to commercial banks. However, the Fed’s rules do allow lending to non-banks if five of the total seven Fed governors give approval, although this hadn’t been done since the Great Depression in the ‘30’s and early ‘40s. In addition, the Federal Reserve also had to use a special clause allowing it to approve the loan to Bear on an emergency basis with the approval of only four Fed governors (since currently 2 seats are empty, and one governor was outside the U.S.)
- Why did JPMorgan’s offer increase from $2/share to $10/share? Well, one has to say that the initial and subsequent valuations only had a little to do with the “market.” After the initial $2 per share offer there was significant pushback by the shareholders that would have to approve the deal, so JPMorgan “sweetened” the deal slightly. As it is the shareholders are taking a massive “haircut.” To ensure approval of the deal, it is structured so that Bear will sell 95 million new shares to JPMorgan. This number was carefully chosen, a) since 95 million shares is approximately 39.5% of new total outstanding Bear shares (Bear is a Delaware firm, and Delaware law requires a shareholder vote prior to any company selling 40% or higher of its holdings), and, b) with this 39.5% of shares plus an approximately 5% of Bear shares held by its board they are “stacking the deck” to ensure that they get the required Bear shareholder approval. Stricter NYSE rules require that a company issuing new shares greater than 20% of a listed companies stock get shareholder approval. Here, Bear has exercised a clause that allows an exception if sticking with the normal process would seriously jeopardize the listed company’s viability.
- Is the Fed on the hook? Yes, in theory. The Fed is making a ten year, renewable, variable rate, $29 billion loan to JPMorgan at the discount rate (currently 2.25%). The collateral that backs this loan is $30 billion of assets, of which approximately 2/3rds are MBSs. However, these assets have been “marked to market” and the Fed will only loose if the collateral ends up being worth less than that value over the length of the loan. Also, JPMorgan has agreed to bear the first $1 billion of losses, if there are any, so the Fed has a small cushion. Conceivably the Fed could come out ahead if the collateral holds and regains value over the term of the loan. . Ditto for JPMorgan, that only has a worst case scenario total potential liability of $1 billion no matter what happens, and plenty of upside opportunity.
- Why did the Fed intervene? This is something that is being hotly debated. As mentioned above the Fed normally does not make loans to non-banks. However, the “pro” argument is that the Fed intervened to prevent Bear’s failure, which could have caused losses to cascade through its trading partners and through the wider market. The Fed is also trying to staunch the credit crisis and prevent it from spiraling into a full-blown banking crisis. The “con” argument is that by this action the Fed has taken credit risk onto its portfolio and increased the risk of “moral hazard” (i.e. the risk that by bailing out someone who has engaged in risky behavior you're likely to encourage similar risky behavior in the future.)
Some questions without answers:
Yet to be determined is if the Fed’s action actually increases “moral hazard”, and if the Fed would intervene if another “too big to fail” institution finds itself in the same position. The “moral hazard” question will undoubtedly be argued for some time…
The Biggest Bailout in History: And Why American Taxpayers Should Get Some of the Upside
JPMorgan Agrees to Buy Bear Stearns for $240 Million (Update2)
JP Morgan Raises Offer to Buy Bear Stearns
JP Morgan Raises Its Offer For Bear Stearns
Sunday, March 30, 2008
Reverend Jeremiah A. Wright, Jr., Senior Pastor (retired), Trinity United Church of Christ, describing Senator Obama - see Wright's letter to NYT about Obama
Saturday, March 29, 2008
Began to check the ‘net to find the answer, with little luck. Most reactions & discussion seemed to fall into four main groups:
1. Good, Medellin is scum for raping and murdering two young girls, he deserves to fry…
2. The U.S. shouldn’t be subject to the jurisdiction of the International Court of Justice (highbrow version); we don’t need to listen to no stinkin’ furriners (lowbrow version),
3. Yay, states’ rights prevail over an over-reaching federal government, and,
4. Finally some smackdown, the Supreme Court puts President Bush in his place and rejects his claim of unlimited executive power.
All possible opinions, but not particularly cogent explanations of the Supremes’ legal reasoning in this case. Next stop: Docket 06-984 Medellin v. Texas at the Supreme Court web site.
Jose Ernesto Medellin is a Mexican national. In 1993 he, along with other members of a gang, raped and then murdered two girls, fourteen and sixteen, and dumped their bodies. He was arrested within a week, confessed, and subsequently convicted of murder and given the death sentence. When Medellin was arrested the police did not inform him of his right (pursuant to the Vienna Convention) to have the Mexican consulate notified of his arrest. When appealing his conviction and sentence he raised this as an issue, but the trial court rejected this on the basis that a) he had not raised this issue at his trial, and b) he had not shown that this error had a negative effect on his trial. This was then affirmed by the Texas Court of Appeals. Next Medellin filed a petition in Federal District Court, with the same results.
While all this was in progress, the Mexican government sued the U.S. government before the ICJ on behalf of 51 of its nationals, for breach of the Vienna Convention in not notifying each of these defendants of their right to contact the relevant Mexican consulate. The ICJ ruled against the U.S., holding that she had violated the Vienna Convention (article 36(1)(b)), and directed the U.S. to “provide, by means of its own choosing, review and reconsideration of the convictions and sentences of the effected Mexican nationals.” In reaction to the ICJ decision President Bush withdrew the U.S. from the Optional Protocol to the Vienna Convention on Consular Relations. (which had been proposed by the U.S. in 1963 and ratified in 1969). However, he also issued a Memorandum to the Attorney General instructing him to have “… State courts give effect to the decision in accordance with general principles of comity in cases filed by the 51 Mexican nationals addressed in that decision.”
Relying on the ICJ decision and the President’s memorandum, Medellin filed a second round of appeals in Texas. The Texas Court of Appeals rejected this on the grounds that neither the ICJ decision nor the President’s memorandum was “binding federal law” that over-ruled Texas state law limiting death penalty appeals. Medellin appealed to the Supreme Court and his case was granted certiorari (i.e. the Supreme Court agreed to hear his case).
Medellin’s lawyer argued that the ICJ’s judgment bound the federal government and states by virtue of the constitution’s supremacy clause, and that since he was named in the case he became a party to the ICJ’s decision. He also argued that the ICJ judgment was binding on state courts by virtue of the President’s memorandum.
The position of the U.S. government:
The government filed an amicus brief in this case. It argued that The President’s constitutional role “uniquely qualifies” him to resolve foreign policy decisions related to compliance with ICJ decisions, and that the President was defending U.S. interests and protecting relations with foreign countries. Also, that relevant treaties give the President the authority to implement the judgment, and that Congress has “acquiesced” in the past.
The Supreme Court ruling:
In a 6-3 ruling the Supremes ruled against Medellin and in favor of the State of Texas - rejecting the arguments marshaled by Medellin, and those of the President.
- The majority agreed that the ICJ judgment/decision re the Vienna Convention creates “an international law obligation” on the part of the U.S. However, the question re if this obligation constitutes binding federal law enforceable in U.S. (federal/state) courts, apparently is a separate issue.
- Although the word “all” in Article 6 would seem fairly clear, it seems (this was certainly unknown to this blogger as a non-lawyer, but probably is known to people that work in this field) that historically there has been a long string of precedents (going back to 1829 & 1833) that distinguish between “self-executing” and “non-self-executing” treaties. The former are those that constitute international law commitments along with automatic binding authority as domestic law, while the latter constitute international law commitments but ONLY have binding authority as domestic law IF the Congress passes enabling legislation.
- The Supremes held that the ICJ decision/judgment is not binding because the underlying treaties are not “self-executing.”
- The Supremes argued that by signing the Optional Protocol the U.S. agreed to the ICJ jurisdiction, but did not agree to be bound by the results, since the Optional Protocol only requires that signatories submit to the jurisdiction of the ICJ but says nothing re judgments and/or enforcement mechanisms. The obligation to comply with ICJ judgments comes not from the Optional Protocol or Vienna Convention, but from Article 94(1) of the United Nations Charter that says “… each Member of the U.N. undertakes to comply with the decision of the ICJ in any case to which it is a party.” The majority argued that since the language said “undertakes to comply” (e.g. as opposed to “shall comply”) the charter/treaty constituted a commitment and envisaged that members would take political actions to ensure compliance with ICJ decisions i.e. it is non self-executing. This decision was arrived at by examining the language of the appropriate documents, as well as the historical record (e.g. the Senate record of discussion when ratification took place). The majority also supplied some other reasons to support the non self-executing scenario e.g. none of the other signatories treats ICJ judgments as binding in their domestic courts, a lack of specific language in any of the treaties stating an intent to have judgments have binding effect, etc.
- Re the President’s memorandum the Supremes agreed that the President’s constitutional role “uniquely qualifies” him to resolve sensitive foreign policy decisions, but that this did not displace “first principles” i.e. that the President’s authority to act “must stem from an act of Congress or from the Constitution.” Given the decision that the underlying treaties are “non self-executing” the President does not have the authority to make them so, that responsibility belongs to the Congress (per the U.S. constitution).
- Also, there were additional arguments against Presidential authority e.g. the Supremes said that the record did not indicate Congressional acquiescence related to the issue under consideration; that while Congress has authorized the President to represent the U.S. before the U.N. and ICJ, this is in regard to international and not domestic issues, etc.
- Re the President’s claim that the memorandum is a valid exercise of the President’s foreign affairs authority to resolve claims disputes with foreign nations, as upheld by a series of court cases, the Supremes said that was mostly in reference to civil issues, and does not extend to criminal judgments in state courts.
Texas Wins Medellin & many otherarticles/discussion on Medellin at Opinio Juris
Friday, March 28, 2008
1. October 2002 this blogger observed that there seemed to be some confusion re what the President’s duty is (see the Quotes page – 3rd bullet from the bottom, reprinted below):
A Wall Street Journal article dated 11/26/2002 "Gonzales Rewrites Laws of War" discusses the role of White House Counsel Alberto Gonzales in the evolving legal strategy of the 'war on terrorism.' It argues he has "developed the underpinning for presidential orders creating military commissions, defining enemy combatants and dictating the status and rights of prisoners held from Afghanistan battles..." The WSJ has this passage: Mr. Gonzales readily admits the White House may lose some ground in court cases. While "being respectful" of constitutional rights, the administration's job ".. at the end of the day is to protect the country.", Gonzales is quoted as saying. This sentiment is often heard in our political discourse. However Gonzales, as a lawyer in a prominent role in the administration and as one whose name has been mooted as a possible Supreme Court nominee, certainly should know better.... the President of the United States does not take an oath to defend the United States, he takes an oath to defend the constitution of the United States. See the Presidential Oath of Office.
2. Another manifestation of this was noted in August 2003 (see the Quotes Page Update #1 entry on the Oped Updates page, reprinted below):
On the Quotes page (third quote from the bottom) I discuss how White House Counsel Alberto Gonzalez seems mistakenly to believe that the President of the United States takes an oath to defend the United States (when in reality he takes an oath to defend the constitution of the United States). Well, apparently the President also does not seem to realize the difference. In an August interview with the Armed Forces Radio and Television Service President Bush the following exchange took place:
AFRTS: "One final question, Mr. President. The families of America's fighting forces, they make huge sacrifices in the name of freedom, just like the service members. You touched on it earlier. You touched on it in your speech today. For months at a time, they give up their service members, they don't know where they are, they don't hear from them; they don't know if they're safe; they don't know if they're dead or alive. What message do you have for these families today?"
President Bush: "Well my messages is that what your loved one is doing is the right thing for the country. We are called upon to defend the United States of America. I take that oath, and every soldier takes that oath. And on 9/11 our world changed and we realized the country was vulnerable and we better do something about it. And the best way to secure the homeland is to get the enemy before he gets us. At least that's my attitude. And so I — first of all, the commitment that their loved ones have made, the families of the service members have made, is in line with this business about winning and fighting war. Every person is a volunteer in our military. They've chosen to defend the United States of America. And therefore they need to get the best — if that's their attitude, and they made up their mind that's what they want to do, then my job is to get them the best equipment, the best pay, the best training possible, so if we ever have to send them in, they'll be able to do the job."
3. Then in January 2005 this blogger contrasted the fuss made over President Bush’s “sixteen words” kept in his state of the union speech, as contrasted to the three words he seemed to always leave out (see the January 20th, 2005 entry on the Brief(er) Observations page, reprinted below):
Three small words.... - "My most solemn duty is to protect this nation and its people against further attacks and emerging threats." - President George Bush at his Inaugural Address given Jan 20th, 2005. As previously observed on the Quotes page (third bullet from the bottom) and on the Oped Updates page (see Quotes page update) the President does not seem to make a distinction between an oath to 'defend the United States' and an oath to "defend the Constitution of the United States" (see the Presidential Oath of Office) This is not a small matter of words, it is a significant difference - and President Bush seems willing to do violence to the second in his efforts to achieve the first.. A lot of ink has been spilled about the "sixteen words" in the 2003 State of the Union (i.e. the yellowcake from Niger error..), but no one seems to worry about these "three words"..
4. May 2006 this blogger noted that the Cato Institute seemed finally to have come to the same realization (see the May 11th, 2006 entry on the Brief(er) Quotes page, reprinted below):
Three small words... (redux) In November 2002 this web site commented on a WSJ article that showed the White House Counsel saying that the administration's job ".. at the end of the day is to protect the country", a fundamental misunderstanding of the duty of the POTUS (see the Quotes page). Then in January 2005 this web site noted that the President seemed willing to do violence to the constitution to "preserve, protect, and defend" the country (see below). Now, sixteen months later, CATO Institute comes to a similar conclusion... May 1st, 2006 they came out with Power Surge: The Constitutional Record of George W. Bush (though they do go beyond the "war"-related issues) Quote from the Executive Summary - "President Bush's constitutional vision is, in short, sharply at odds with the text, history, and structure of our Constitution, which authorizes a government of limited powers."
And now, lo and behold, the Republican nominee seems to have the same misunderstanding. In a speech this Wednesday, March 26th, 2008, Senator McCain said "Any president who does not regard this threat as transcending all others does not deserve to sit in the White House, for he or she does not take seriously enough the first and most basic duty a president has — to protect the lives of the American people," see McCain: Collaborate more with allies.
Re the recent break out of fighting in Basra between the "Iraqi authorities" and "militias" and "gangs", looks like we're at step 4 in this location... See slide 41 at this link
Counterinsurgency in Iraq: Theory and Practice, 2007 - David Kilcullen
Thursday, March 27, 2008
Back in October 2003 the news from Iraq was increasingly dominated by mounting casualties, and opinion polls in the United States showed that a majority of the public had begun to question President Bush's handling of the aftermath of the war. The Congress was considering the White House’s $87 billion request for Iraq. And President Bush announced the formation of the Iraq Stabilization Group, putting Rice in charge of the ISG (along with its subcommittees on counterterrorism, economic development, political affairs and media messages) with the goal of managing Iraq and Afghanistan… And that was practically the last that was heard of that group… Not an example of a shining success… However Rice seems to have a free pass on this one.
Rice will manage Iraq's 'new phase' – “President Bush is giving his national security adviser, Condoleezza Rice, the authority to manage postwar Iraq and the rebuilding of Afghanistan”
White House to Overhaul Iraq and Afghan Missions - “The creation of the stabilization group appears to give more direct control to Ms. Rice, one of the president's closest confidantes, who signed the memorandum announcing it.”
Wednesday, March 26, 2008
- After Israel withdrew from the Chouf Mountains 1982 Jumblatt's militia attacked the Christian Phalange, overran an estimated 60 Maronite villages causing many casualties, and consolidating his control of the Chouf.
- For over a decade was a supporter of the Syrian military presence in Lebanon, from after the civil war to the death of former Syrian President Hafez al-Assad in 2000
- Often makes extravagant/outlandish statements, including, in the past, numerous anti-American diatribes. Some examples include:
- “We have come to Freedom Square to tell you, oh tyrant of Damascus, you ape unknown to nature, you snake from which even the snakes have fled, you whale vomited by the ocean, you wild desert beast, you creature that is only half-man, you Israeli product at the expense of the corpses of the South Lebanese, you liar and arch-killer in Iraq, you criminal blood-shedder in Syria and Lebanon” speaking of Syrian leader Bashir al-Assad, on Al-Jazeera TV, Feb 14th, 2007
- “We are all happy when U.S. soldiers are killed week in and week out. The killing of U.S. soldiers in Iraq is legitimate and obligatory.” - Al-Sharq Al-Awsat, February 12, 2004
- “Who invented Osama bin Laden?! The Americans, the CIA invented him so they could fight the Soviets in Afghanistan together with some of the Arab regimes. Osama bin Laden is like a ghost, popping up when needed. This is my opinion.” & when asked re 9-11 answered: “Even 9/11…Why didn’t the sirens go off when the four hijacked planes took off?…The U.S. always needs an enemy…According to this plan or ideology of the born-again Christians who formed an alliance with Zionism – Islam is the monster, Islam is the target.” - interview with UAE-based Al Arabiyya TV, April 28, 2004. In this case he apparently is in agreement with Lebanese Shiite leader Muhammad Hussein Fadhlallah, whom expressed similar sentiments in 2006.
- Jumblatt described U.S. President Bush as someone who “considers himself God's deputy on Earth, threatening and classifying the world into different camps, and relying on his imperial power…How dangerous emperors are when they go mad… In the same axis we have the trustworthy servant, the imperial servant…pleased with himself and his idiotic laugh, his peacock appearance, none other than Tony Blair…Also joining this axis is the comprador Mussolini of the 21st century, the prime minister of Italy today, Silvio Berlusconi, who seems to want to renew the empire of the Caesars… To complete the picture, we have Spanish Prime Minister Jose Maria Aznar, the Spanish neo-rightist…Aznar and Blair spend a lot of time in front of the mirror every morning, it seems, so that their hair is parted perfectly…People who pay that much attention to their appearance are fascists by nature. Or they have psychological or sexual complexes.” – from Lebanese Daily Star article, February 3, 2003
- “The oil axis is present in most of the U.S. administration, beginning with its president, vice-president, and top advisers, including Rice, who is oil-colored, while the axis of Jews is present with Paul Wolfowitz.” – also from Lebanese Daily Star article, February 3, 2003
- In 1982/83 while leading the Lebanese Forces, fought with Walid Jumblat's PSP (Progressive Socialist Party) militia, the Palestinians, and the Syrians, before being expelled from the Chouf mountains…
- Fought and killed other Maronite Christian factions while consolidating power.
- Was convicted of the assassination of Rachid Karami (a former eight-time Lebanese Prime Minister, killed by a bomb); assassination of a fellow member of the Lebanese Forces Elias Zayek; the assassination of another anti-Syrian, Christian leader Dany Chamoun (murdered along with his wife and two of his children, aged 5 and 7) ; and the attempted assassination attempt of Deputy Prime Minister/Minister of the Interior Michel Murr. (Note: since Geagea was the only Lebanese leader ever held to account his supporters have always cried foul, and his trial also was deemed deficient by many, including international observers)
A Rasmussen poll of Democrats shows that
"Twenty-two percent (22%) of Democratic voters nationwide say that Hillary Clinton should drop out of the race for the Democratic Presidential nomination. However, the latest Rasmussen Reports national telephone survey found that an identical number—22%--say that Barack Obama should drop out. A solid majority of Democrats, 62%, aren’t ready for either candidate to leave the race."
This begs the question of why they created two categories of delegates in the first place (3,253 delegates and 794 "superdelegates). Did they never expect any close contests in the future? Was it not forseeable that a) having one of every five delegates (19.6% to be precise) be a "superdelegate", and, b) having no 'rules' to govern how they make their picks and cast their votes, made it likely that this would occur at some point? Having made their bed they now need to lie in it...
On a different topic, the "they broke the rules and were dropped so now it wouldn't be fair to change the rules to allow them back in" explanation of why Florida and Michigan voters should have no say in selecting the Democratic Party nominee is so much hogwash. Was it these voters that changed the primary/caucus dates for their states? No! It was the Florida Legislature and the Michigan Democratic party. And so over 2.2 million primary voters will have no say (approximately 1.7 million Floridians & approximately 600,000 Michiganders) through no fault of their own. The biggest goats here are Senators Clinton and Obama, for showing no leadership in this matter. If the DNC wanted to strip delegates it should only have been the Floria/Michigan superdelegates... And now they should also strip out all DNC leadership members that were a part of this fiasco - starting with Howard Dean, who should attend the convention without a vote.
Monday, March 24, 2008
From the site:
"Counter insurgency theory, once again fashionable, holds that the prize of modern warfare is not the territory but the minds of the population within. The battlespace is not solely defined by map lines or grid squares, but also in the areas of perception and illusion. In this shifting, human terrain, there are no facts or truths, only competing agendas. Messages are shaped and transmitted.... Unpleasant, complex, or off-message images are filtered by both sides, and war stories are recycled through the echo chamber..."
Sunday 03/23 Iraqi TV showed the bodies of a few dead American troops and then 5 American POWs, both part of a maintenance detail that apparently went off course and was ambushed and captured. This footage was rebroadcast by the Al Jazeera television station. The reaction to this development, by various administration officials and by the press, brought about ruminations on two topics:
- The Ugly Face (Truth) of War: The footage of the dead was uniformly denounced as 'disgusting.' On ABC Charlie Gibson said "showing dead bodies is disrespectful." This author would disagree... While showing dead bodies is unsettling and difficult (most especially for those that have loved ones at risk in the area of conflict), this is precisely why it is important to not hide this aspect of war. Death, especially before one's time and through violence, is ugly. But since death is an integral part and unavoidable consequence of every war, those who have the responsibility for making the decision to go to war as well as those who support them and the decision, must know and understand the consequences of what they call for. War is not antiseptic and showing it as such, like a 'shoot-em-up' computer game with nifty diagrams, cool equipment, great technology, etc. is to show disrespect to those who have to slog (and occasionally die) in the mud and the dirt.
Initially, at the start of the war many network correspondents seemed annoyed that the "shock and awe" they had been awaiting had not happened, and then when the heavier bombardment started the reaction was almost universally one of 'hey, cool, check out those big explosions'... From their hotel rooms they beamed pictures of bright flashes into our living rooms, studiously ignoring the fact that the result of those flashes was death for those on the receiving end. While unfortunate and necessary to free Iraq of Saddam Hussein and his regime, ignoring the reality of those deaths is doing no one any favors....
The pictures above have been 'borrowed'. The first is a recent, horrible, photo of a small girl killed in her home in Basra (in the southern no-fly zone) by an errant missile. This is what is swept under the rug, antisepticised as "collateral damage." The second picture is from the first Gulf War. Every one who supports the war needs to go to The Unseen Gulf War by Peter Turnley to view the reality of war. While it may not change one's mind about the need for the present action (e.g. as with this author) at least one knows more directly some of the true costs....
- The Role of the Media: Many TV anchors and war correspondents have not distinguished themselves by their reporting or understanding of the war, content to regurgitate official communiques and listen in awe to the retired generals they have lined up as experts, rather than do real reporting... Some examples:
- With reference to the above-mentioned Iraqi / Al Jazeera footage of U.S. prisoners, the very showing of pictures was denounced by the administration as a violation of the Geneva conventions.
- SecDef Rumsfeld said that showing photographs of prisoners of war is against the Geneva Convention and termed it as "..a grotesque and sick display..", General Myers termed it "..just one more crime by the Iraqi regime.."
- The TV anchors went beyond reporting the news to vying with each other to express their outrage - a Fox commentator said that "..this proves this is an evil regime..", another said "... what can you do about the Geneva Convention, Iraq doesn't follow it...", Tony Snow denounced it as ".. a grotesque violation of the Geneva Convention..", ABC's Charlie Gibson expressed his shock, etc.
- With reference to the above-mentioned Iraqi / Al Jazeera footage of U.S. prisoners, the very showing of pictures was denounced by the administration as a violation of the Geneva conventions.
Their 'shock', 'shock' was curious, given that these same channels had broadcast footage of Iraqi POWs. While following coverage on ABC, MSNBC, Fox, CNN, etc. this author had seen at least four TV reports dealing with Iraqi POWs. In one the embedded reporter showed four Iraqi POWs - they were on the ground approximately six feet apart and the reporter and camera went from one to the next filming them. A running commentary from the reporter pointed out that the first had a bottle of water he had been given, that the second had taken off his shoes and put them on the ground behind him as he attempted to sleep, that the third was seated under a blanket, etc. As the reporter squatted and pointed out a packet of MREs that the third POW had been given (even picking it up for the camera to show) the POW's face was clearly visible. In another the embedded reporter showed a number of POWs being processed - a line of them were lying face down on the ground, the reporter pointed out their arms restrained behind them, tied at the wrists with plastic restraints.. They were being processed, searched, and then put on a truck to be taken to a holding area. While clearly the motivations were different - the Iraqis cynically seeking propaganda value in the Arab "street," the embedded reporters just reporting how things are going with 'their' units - if merely showing the POWs is a violation of the Geneva Convention then the "outrage," "shock," and "disgust" expressed by the TV anchors is strange given the film they have shown. Less excited than the TV anchors, when asked about this President Bush was on the money, insisting that any POWs should be humanely treated.
With many in the United States and across the world seemingly unconvinced of the evil of the Saddam Hussein regime and the need to end it, ABC's Charlie Gibson felt compelled to say ".. in the pantheon of dreadful things done by this regime, showing the faces of American dead ranks right up there..." With this fatuous statement he successfully trivialized Saddam's evil - as if some TV footage is as bad as Saddam impoverishing his country through a decade of war, using chemical weapons against the Iranians and the Kurds, having tens or hundreds of thousands of his countrymen killed, invading his neighbors, having the southern marshes drained, having people tortured with electric shocks and vats of acids, supporting international terrorism, and seeking to develop chemical, biological, and nuclear weapons!!
A reporter in Baghdad breathlessly marveled at the fact that the power was still on and the city lit up... While OPED30 had called for the civilian infrastructure to be spared as much as possible, the electricity could be left on at the moment not just out of a concern with the civilians, but also because it can help with ongoing bomb damage assessment...
One reporter who has done a great job of reporting has been ABC's Ted Koppel... Besides his insightful reporting, when Charlie Gibson was in the midst of his paroxysm of horror at the showing of dead bodies, Koppel felt compelled to remind him that ABC had shown dead (both American and foreign....) on multiple occasions. Later in the evening Koppel interviewed an officer about an engagement in which U.S. troops had evaded an ambush and destroyed the attacking force. At the end of this reportage Koppel showed a close up of two of the dead Iraqi soldiers, close enough to see the flies on the body..... No sugar-coating or pap here...
Oh, no, it's something waaaay more important to this country, the fact that someone accessed the passport applications of Senators McCain, Obama, and Clinton. Said Senator Arlen Specter (R-Pennsylvania) on CNN Tonight "That kind of breach of privacy is just despicable. I think that ought to be a very intense investigation." And, amazingly and apparently without intentional irony, "I think privacy is a very fundamental matter. And if you can't have privacy for Senator Clinton and Senator Obama, so what's the average person facing?"
Sunday, March 23, 2008
Saturday, March 22, 2008
In defense of Baghdad's 'walls'
Why Walls Don't Work in Baghdad
Baghdad Walls Key to Baqubah Push?
Baghdad Walls Divide Neighbors, Friends
In pictures: Baghdad murals
Given this it would seem that a clear understanding of how much oil is estimated to be present, and recoverable, in the ANWR would be of some use. This OPED will look at the numbers in an effort to clarify the issue. It does NOT argue for or against drilling, nor does it look at the other factors that play into deciding for or against drilling, but ONLY considers the amount of oil present. For the other pros and cons visit these web sites or do a Google search on ANWR.
- In 1987 the Alaska Bureau of Land Management estimated a 19% probability of finding a commercially viable oil field in the ANWR. If any oil was found, recoverable reserves of 3.2 billion barrels of oil were estimated.
In 1991 The Alaska Bureau of Land Management modified this estimate to a 46% probability (based on new seismic data).
- In 1991 the American Association of Petroleum Geologists examined the ABLM's numbers. They determined that the ABLM was too conservative, and made an estimate of 7 billion barrels of recoverable oil.
- In 1995 the General Accounting Office examined the numbers and, based on lower world oil prices, estimated that the chances of finding a commercially viable field at 27%.
- In 1995 the US Geological Survey conducted another review that gave a mean estimate of 0.9 billion barrels of recoverable oil.
- Finally, in 1998 the USGS completed a new survey to clarify the numbers. 40+ geologists mapped the area, conducted experiments, took seismic readings, and obtained test data to produce the ANWR, 1002 Area, Petroleum Assessment, 1998, Including Economic Analysis
Thus the final result of the 1998 USGS analysis is a set of estimates at various probabilities of the in-place, technically recoverable, and economically recoverable oil in the 1002 area, as well as in the coastal plain and the entire ANWR area. These wide ranges of numbers at different probabilities are what allow proponents and opponents of drilling in the ANWR to pick and choose their numbers to back up their political preferences.....
The estimates of the technically-recoverable oil (i.e. ignoring the market price) in the 1002 area are as follows: There is a 95% probability of being able to technically recover 4.254 billion barrels of oil, and a 5% probability of recovering 11.8 billion barrels of oil. The mean expected estimate is of being able to technically recover 7.7 billion barrels of oil. Using the second graph we see that at an oil price of below $13/barrel no oil is commercially recoverable, while at an oil price of $30/barrel the 95% probability estimate is 3.2 billion barrels of oil, the 5% probability is 10.4 billion barrels of oil, and the mean expected estimate is 6.4 billion barrels of oil. At an oil price of $24/barrel the mean expected estimate comes in at 5.2 billion barrels of oil.
The Energy Information Administration (EIA) estimates that if the green light is given it would take 7 to 12 years to sell leases, do permitting, environmental reviews, etc. and that initial production could start in 2010 at the earliest. Assuming an optimistic scenario in which the mean expected technically recoverable oil in the entire coastal plain (not just the 1002 area) - 10.3 billion barrels - could be completely recovered (i.e. ignoring market pricing) the EIA estimates production of 600 million barrels a year. In comparison, US daily consumption is 18.5 million barrels a day, or 6,752 million barrels a year. Thus in this scenario ANWR, once on tap, would provide less than 9% of US annual usage (given that usage is trending upward..). Assuming a less positive scenario, at a market price of $24/barrel the mean estimated commercially recoverable oil is 5.2 billion barrels, and since the oil is in multiple plays rather than one large play the costs of exploiting the oil will be higher.
In conclusion, the amount of economically recoverable oil reserves in the ANWR, even if the numbers pan out exactly as estimated by the USGS, is dependent on the market price of crude. The graph above shows the US cost of a barrel of oil from 1970 to the present. This together with the estimates above provide an informed basis upon which to determine the possible recoverable oil from the 1002 area and make a decision regarding the desirability of drilling in the ANWR.
Friday, March 21, 2008
A very few minutes later during each takeoff I (only fleetingly) considered objecting to the person sitting in the exit row... since each time the person had his seat reclined, despite clear flight attendant instructions to passengers to make sure their seats were upright! Note: on each flight the flight attendant said nothing...
Tick, tock, tick, tock...
Then on the way back, in Cincinnati the monitor said our flight's bags would be on carousel #2 when they ended up on carousel #3.
Sunday, March 16, 2008
Linking to the exact same story The Drudge Report had the headline "Hospital to fire workers in Spears case" while The Huffington Post had "Britney Spears Gets Hospital Workers Fired." Drudge-1, HuffPo-0
According to "Cyber Weapons and E-Bombs" making an EMP weapon would be easy, costing "... between $500 and $1,000..." and requiring only "... basic wiring and mechanical skills...", while "... multiple websites had fairly detailed design plans..." Oh, come on.. If it is that easy then these attacks would have happened by now.
Reading this article on an incident in Warren County during the 2004 elections “Story behind the 2004 lockdown” the reason given for closing the count is patently nonsensical. So, al-Qaida was plotting and there was a risk that “al-Qaida might attempt terrorist attacks on polling places.” Well, duh, presumably this would be to a) cause mass casualties among the masses of people lined up to vote, and/or, b) influence the vote by depressing turnout or by influencing how folks voted. Waiting until after the polls closed to attack the members of the local board of elections… nah! Priceless...
As putative leaders of their party going for the top spot you would expect them to show more leadership on the issue and in devising a solution…. In matter of fact, it would have been far preferable if they had shown some leadership when the problem first manifested itself… But apparently that was asking too much…
Saturday, March 15, 2008
Abu Muqawama has a neat post - COIN Analogy of the Day: The Staircase, which has the following analogy from a British Lieutenant General:
An insurgency is like a staircase. At the top of that staircase, you have the insurgent leadership. Below them, you have the actual bomb-throwers or gunmen. On the step below, you have the primary enablers -- the people who provide the bombs or the rifles. Below them, you have secondary enablers -- like look-outs. Below the enablers, you have the neutral population. And below the neutrals, at the bottom of the staircase, you have the openly friendly elements of the population.
Bad counter-insurgency strategy and tactics have the effect of turning the staircase into an escalator. If you wage a counter-insurgency campaign by kicking down doors and smashing heads against the wall, you move everyone up on the staircase: primary enablers become actual insurgents, secondary enablers become primary enablers, neutrals become enablers, and the friendly population either gets killed or becomes neutral.
Sunday, March 9, 2008
There are wide extremes of opinion. At one end are those that "pushed" the war, who now claim vindication and that ultimate success is at hand. This is exemplified by Charles Krauthammer. In an editorial entitled Democrat's bullheadedness on Iraq victory confounding, he states "... the sectarian civil strife that the Democrats insisted was the reason for us to leave dwindles to the point of near disappearance....", and "... Democrats ... would deny their own country a now achievable victory…"
On the other hand we have some Democrats who, while agreeing that the surge is working, point out that it was not a goal unto itself, but instead intended to buy sufficient "breathing room" for the Government of Iraq to achieve political reconciliation… and this is not happening, rendering the success of the surge moot.
The truth is more nuanced - consideration of all the surrounding circumstances indicate that there have been significant reductions in the level of violence. However, a) the actual success of the surge in reducing violence is insufficient (despite what seems to be the prevailing opinion in the U.S.), b) it is very difficult to isolate the effects of the surge from other factors occurring at the same time, to really determine its exact effect and sustainability, and finally, c) it is even harder to predict whether its successes can be maintained as time passes and troop levels decrease.
First, concerning the reduction in violence, a little mathematics is in order to put things in perspective. Given the approximate levels of violence before the surge started (approximately 2,000 civilian casualties per month and 2 VBIED/IEDs per day) a 90% reduction in violence would still leave Iraq one of the most violent places in the world, with 200 civilian deaths and 5 IEDs a month. The 60% to 75% reduction in violence that has been achieved is indeed welcome, but given the calculations above still far short of what is needed. While sixty percent, seventy percent, and eighty percent are very impressive sounding numbers, reductions of ninety, ninety five percent, and higher are what is needed. In point of fact, the last full month, February 2008, showed a significant uptick in the numbers of attacks, civilian casualties, etc. The incidents during February included the kidnapping of an archbishop, the deaths of several senior army and police officers (colonels, Brigadier Generals, etc.), the murders of professors, students, lawyers, a provincial governor, senior clerics, and local sheikhs. By what stretch of the imagination can this be considered even close to acceptable for a society? Characterizing this level of violence as "near disappearance" is pathological.
Second, preceding and concurrent with the surge there has been a massive displacement of the population. An estimated two million internal and two million externally-displaced persons has left many areas cleansed, which has also contributed to the reductions in violence. As part of the effort to reduce violence extreme measures have been taken. For example, to pacify Samarra, an earthen berm was built around the town and the entrances and exits to the town reduced to a small number of checkpoints, severely curtailing the movements of the population. The population has shrunk drastically, unemployment is very high, conditions bleak. Many areas of Baghdad have also been walled off and checkpoints have proliferated… However, this is not tenable in the long run, what will the effect be when these measures are relaxed? If/when refugees return to their homes and want them back? Will the level of violence stay where it is or simply go back up? It is almost impossible to forecast, but claiming victory is very premature…
Of Interest - An Alternative (Economic) Perspective:
An alternative methodology comes to us in the form of a September 2007 paper 'Is the Surge Working? Some New Facts', by Michael Greenstone. This paper attempts to evaluate if the surge is working by examining the trends in a number of indices ranging from military and civilian casualties, to the availability of electricity, to oil production, and the performance of Iraqi bonds (which should reflect the international financial markets' overall assessment of Iraq's future). The analysis reveals mixed success as measured by these indicators, and in fact a decline in the bonds' values shows that there has been a 40% increase in the markets' expectation that Iraq will default on its bonds i.e. fail in the long run...
UPDATE 03/12/2008. Some recent updates on the violence levels:
And for the positive side, see:
Thursday, March 6, 2008
Chair: John P. Murtha (PA)
Norman D. Dicks (WA)
Peter J. Visclosky (IN)
James P. Moran (VA)
Marcy Kaptur (OH)
Robert E. "Bud" Cramer, Jr. (AL)
Allen Boyd (FL)
Steven R. Rothman (NJ)
Sanford Bishop (GA)
Dave Obey (WI), Ex Officio
C.W. Bill Young (FL)
David L. Hobson (OH)
Rodney P. Frelinghuysen (NJ)
Todd Tiahrt (KS)
Jack Kingston (GA)
Kay Granger (TX)
Jerry Lewis (CA), Ex Officio
Air Force changed tanker-bid criteria, lawmaker charges
Tanker Competition: Northrop Won By a Wide Margin
The Air Force Tanker Decision is an Interesting Study in the Politics of Decision Making
All Tanker All The Time