How the FBI Wants to Penalize Internet Companies for Providing “Too Much” Security

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Remember my recent post titled: Former FBI Agent: All Phone Conversations are Recorded and Stored?  Well now they now want to ensure doing the same on the internet is as easy as possible.  The latest proposal by the FBI, which would require companies to provide a backdoor for the feds to spy on American citizens on the internet, has been covered extensively in the mainstream media over the past couple of weeks, first in the Washington Post and then later in the New York Times.  It centers around this push to make communications on the internet “wiretap capable” and would impose fines of $25,000 per day for companies that do not comply with Big Brother.  Julian Sanchez of Wired has written and excellent article explaining how this proposal would not only crush privacy rights of law abiding citizens, but would also help cyber criminals, enable totalitarian governments, make the internet less secure and stifle the remnants of innovation that remain in the economy.  Oh, and unsurprisingly, Obama backs the proposal.  My favorite excerpts:

The FBI has some strange ideas about how to “update” federal surveillance laws: They’re calling for legislation to penalize online services that provide users with too much security.

I’m not kidding. The proposal was revealed in The Washington Post last week — and a couple days ago, a front-page story in The New York Times reported the Obama administration is preparing to back it.

While it’s not yet clear how dire the going-dark scenario really is, the statutory “cure” proposed by the FBI — with fines starting at $25,000 a day for companies that aren’t wiretap capable — would surely be worse than the disease.

The FBI’s misguided proposal would impose costly burdens on thousands of companies (and threaten to entirely kill those whose business model centers on providing highly secure encrypted communications), while making cloud solutions less attractive to businesses and users. It would aid totalitarian governments eager to spy on their citizens while distorting business decisions about software design. Perhaps worst of all, it would treat millions of law-abiding users with legitimate security needs as presumed criminals — while doing little to hamper actual criminals.

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Denver Public Schools Pay $216 Million to Wall Street Banks to Unwind Swaps

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You can move from New York City to Colorado, but it seems you can never escape the all encompassing tentacles of Wall Street parasitism and theft.  I recently covered a similar situation back in March in my piece Wall Street: $474 Million, Detroit: 0.  In both cases it seems clear that public officials had no idea what they were getting into and there was a great deal of irresponsibility, but that is beside the point.  It’d be one thing to say these communities should suffer the consequences of their actions if Wall Street had to as well, but we all know that isn’t the case.  So it is highly immoral and culturally destructive to say it’s ok that Wall Street gets bailed out from all their mistakes and then is able to turn around and impose austerity on everyone else.  That’s the way America works today and we can thank Ben Bernanke and Barack Obama for that reality.  We must never forget the enablers in chief of all of this.  Oh, and did I mention that the $216 million paid by Denver represents two-thirds of annual teaching expenses?  USA! USA!

From Bloomberg:

Wall Street banks collected $215.6 million that Denver’s public schools paid to unwind swaps and sell bonds since the district began borrowing to cut pension costs in 2008. That sum is about two-thirds of annual teaching expenses.

The district paid $146.6 million last month to banks, including RBC Capital Markets LLC, Wells Fargo Securities LLC and Bank of America Corp., to end interest-rate swaps as part of a second attempt to restructure a 2008 borrowing, bond documents show. The April 17 deal sold as the district’s property-tax rate has risen 26 percent in two years to fund education.

Municipal borrowers from Detroit’s utilities to Harvard University in Cambridge, Massachusetts, have paid billions of dollars to banks to end privately negotiated interest-rate bets sold as hedges. The Federal Reserve’s policy of holding its benchmark borrowing rate near zero since 2008 has turned many of the swaps into wrong-way bets.

The Federal Reserve works for Wall Street.  Period, end of story.

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Guest Post: Why Policy Has Failed

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The essay below is courtesy of Doug Rudisch, a friend and former fund manager, who I have known and respected since my days on Wall Street.  I am extremely grateful that he took the time and effort to so insightfully write on some of the greatest issues facing our nation today and to provide this content to my readers.  What follows below are some of the most powerful passages from his piece and the entire thing is embedded at the end. The whole thing is simply excellent.

What I can say with absolute certainty is that I have lost a lot of faith and trust in the system. And I am not the only one. This sentiment is running at all-time highs amongst business leaders (their collective in-actions prove it) and guys on the street. It is both sides of the barbell and middle that are upset. Often it’s one or the other, but not all three. This time it’s not at an external state, it’s directed inwards. That is a tough problem to solve. Jingoism is not the answer either as we already tried that.

If there is no faith in the system, it has a really hard time working. And I mean real underlying faith and trust in the system, as opposed to the confidence born from economic steroid injections or entitlements. These are valid notions, but as a point of clarity I am talking about a something different. There also is a subtle but important distinction between faith and trust versus confidence. Faith and trust are longer term and more powerful concepts.

There is more going on than a temporary lull in animal spirits that current fiscal and monetary policy will cure. If that was the case, it would be working already.

dougpic

However as the above chart shows, things clearly changed in the 2003 and 2009 profit cycles as corporate profits surged while employment did not. My explanations:

Starting with the 2009 cycle first. In the 2008 downturn companies eliminated a lot of jobs. The depth of the downturn forced them to make the tough decision. Normally that kills consumer spend due to wage loss. But the government plugged the revenue gap with transfer payments and direct investment. See the green line go nearly vertical and it is fascinating how profit growth has mirrored the trajectory of debt growth. The consumer has started to dis-save again as well. Thus corporations kept the revenue, lost the labor, and voila record margins. You could argue unemployment is being subsidized. Like anything else, when something is subsidized, you tend to get a lot of it.

For example, see the recent new investor activity in single family homes and farmland of all things, including equity hedge funds who apparently think homes are like stocks. Maybe it’s a sign that other asset categories (equities and credit) are getting toppy or inflation expectations are increasing when hedge funds begin to foray into the single family housing market and farmland (some having little or no prior experience in these markets). At any rate, it seems odd and not good to me when policy results in hedge funds buying single family homes and farms.

Sorry Mr. Greenspan we have seen where valuing assets solely on the basis of current rates got us. If we should do that, baseball cards and chewing gum would also be great investments today. My suspicion is from here baseball cards and chewing gum will hold their value over time better than the typical company trading at 15x earnings derived from profit margins that are twice its average levels. And in point of fact according to the CPI the price of candy and chewing gum increased 31% between the years 2000-2012, while the S&P index including this year’s rip is only up 6% since 2000. Yes it matters what the price is that one pays for an asset!

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How the Boston Police Were Too Busy Monitoring “Occupy Boston” to Notice Tamerlan

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After reading the article below, it’s almost impossible to think that the never-ending “war on terror” has anything to do with foreign radicals that “hate us for our freedoms.”  As I and many others have noted for years, the surveillance state being put in place is intended to deal with domestic unrest.  Unrest the oligarchs know is coming as a result of their unprecedented reign of theft and corruption. So now we discover that the Boston Police counter-terror intelligence unit was too busy monitoring anti-Wall Street demonstrations to notice Tamerlan Tsarnaev right under their noses.  From NBC:

In the fall of 2011, a key Boston police counterterror intelligence unit — funded with millions of dollars in U.S. homeland security grants — was closely monitoring anti-Wall Street demonstrations, including tracking the Facebook pages and websites of the protesters and writing reports on the potential impact on “commercial and financial sector assets” in downtown areas, according to internal police documents.

The police monitoring of the activities of Occupy Boston — an off-shoot of the Occupy Wall Street protests that swept the country in 2011 — came during a period after the U.S. government received the second of two warnings from the Russian government about the radical Islamic ties of alleged Boston Marathon bomber Tamerlan Tsarnaev.

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Guess What’s Hidden in the Immigration Bill? A National Biometric Database for Citizens

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Oh just another eight hundred page “bipartisan” bill that nobody will read,  mainstream media will refuse to cover, and that will merely further destroy any remnants of freedom left in these United States.  Never forget the George Carlin quote on bipartisanship:

“Bipartisan usually means that a larger-than-usual deception is being carried out.”

From Wired:

The immigration reform measure the Senate began debating yesterday would create a national biometric database of virtually every adult in the U.S., in what privacy groups fear could be the first step to a ubiquitous national identification system.

Buried in the more than 800 pages of the bipartisan legislation (.pdf)  is language mandating the creation of the innocuously-named “photo tool,” a massive federal database administered by the Department of Homeland Security and containing names, ages, Social Security numbers and photographs of everyone in the country with a driver’s license or other state-issued photo ID.

This piece of the Border Security, Economic Opportunity, and Immigration Modernization Act is aimed at curbing employment of undocumented immigrants. But privacy advocates fear the inevitable mission creep, ending with the proof of self being required at polling places, to rent a house, buy a gun, open a bank account, acquire credit, board a plane or even attend a sporting event or log on the internet. Think of it as a government version of Foursquare, with Big Brother cataloging every check-in.

“It starts to change the relationship between the citizen and state, you do have to get permission to do things,” said Chris Calabrese, a congressional lobbyist with the American Civil Liberties Union. “More fundamentally, it could be the start of keeping a record of all things.”

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Robin Williams on Wall Street Junkies…Absolutely Hilarious!

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The new Geithner $20 bill will be instead of “In God We Trust,” it’ll just say “Trust Me!” and it will have a picture of the monopoly man on it. – Robin Williams in the priceless interview with Charlie Rose embedded below This is from late 2009, but I had never seen it and it … Read more

NYPD States you are Guilty Until Proven Innocent

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Thanks to a crazed overemphasis on financial parasitism as it’s number one economic export, NYC has already lost much of its heart and soul and no longer resembles the city I once knew and loved.  Unfortunately, this is still not enough for the authoritarians running the city, led by the increasingly insane oligarch Mayor Michael Bloomberg.  The spiritual death of NYC is one of many reasons I decided to leave it for Colorado in late 2010, an emotional move I described in my post:  The Biggest Trade of My Life.

The most recent exploiter of the Boston tragedy is a Sergeant Ed Mullins of the NYPD who stated:

Using a zero tolerance approach to track domestic terrorists online is the only reasonable way to analyze online threats these days, especially after the Boston Marathon bombing and news that the suspects had subsequently planned to target Times Square in Manhattan, Mullins says. The way law enforcement agencies approach online activity that appears sinister is this: “If you’re not a terrorist, if you’re not a threat, prove it,” he says.

Wait, what was that?  I’m pretty sure the most basic tenet of our rule of law is you are assumed innocent until proven guilty.  Apparently not in New York City.  Tim Cushing at Techdirt does a great job reporting on this frightening statement.  He writes:

“Zero tolerance” is never “reasonable.” It never has been and it never will be. In fact, it’s the polar opposite. Zero tolerance policies simply absolve the enforcers of any responsibility for the outcome and grant them the privilege of ignoring mitigating factors. It allows them to bypass applying any sort of critical thinking skills (the “reason” part of “reasonable”) and view every infractions as nothing more than a binary IF THEN equation. 

Believe it or not, Mullins is not done talking. What he says next doubles up on the “dangerous” and “stupid.  “This is the price you pay to live in free society right now. It’s just the way it is,” Mullins adds.

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No Joke…This is What the ACLU Received from the Government on Text Surveillance Policy

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Fifteen pages of black squares.  How’s that freedom tasting?  Take that terrorists! Most. Transparent. Ever. Like this post? Donate bitcoins: 35DBUbbAQHTqbDaAc5mAaN6BqwA2AxuE7G Follow me on Twitter.

Rasmussen: 81% of Americans are Paying More for Groceries

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What?!  Someone get the Bernanke on the line ASAP!  Apparently the remaining 19% of Americans work at TBTF banks and the Federal Reserve.  From Rasmussen: Most adults continue to say they are paying more for groceries than they were a year ago, and they expect that amount to be even higher next year. A new … Read more

Bitcoin Startup Coinbase Raises $5 Million…Major Venture Capital Players Getting Involved

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Yesterday, the Wall Street Journal reported that Coinbase has raised $5 million, which represents the largest funding round to date for a Bitcoin startup.  The funding is being led by the highly respected Union Square Ventures, and despite the fact that 90% of financial “journalists” and mainstream “economists” continue to bash Bitcoin as a bubble and a ponzi scheme, some of the brightest minds in venture capital are getting involved.  From the Wall Street Journal:

Eleven-month-old startup Coinbase announced Tuesday the largest funding round to date for a Bitcoin startup, a $5 million investment led by Union Square Ventures.

Coinbase is an online platform that allows users to buy Bitcoin, the virtual currency taking the tech world by storm. Users can also store Bitcoin in a digital wallet and pay merchants for goods or services with it. About 300 merchants have signed up with Coinbase so far, including content-aggregation site Reddit.com and dating siteOKCupid.com.

In April, Coinbase’s co-founders said the company claimed about 116,000 members who converted $15 million of real money into Bitcoin, up from $1 million in January. Ehrsam said the volume of dollars it’s converting to Bitcoin is increasing at a rate of about 15% a week, and its user base is growing at a weekly rate of about 12%.

Bubble!  Stay away!

He added that he thinks Bitcoin is poised to be a true game-changer for the business world, and the tech community in particular. “Hackers are the animals that can detect a storm coming or an earthquake,” he said. “They just know, even though they don’t know why, and there are two big things hackers are excited about now and can’t articulate why–Bitcoin and 3D printing.”

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