Justice Dept. Finds Many Flaws in FBI Terror Watch List

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Eric Lichtblau
May 6, 2009 - The New York Times

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The Federal Bureau of Investigation has improperly kept nearly 24,000 people on a terrorist watch list based on outdated or sometimes irrelevant information, while it missed others with legitimate terror ties who should have been on the list, according to a Justice Department report released Wednesday.

The report said the mistakes posed a risk to national security, because of the failure to flag actual suspected terrorists, as well as an unnecessary nuisance for non-suspects who may be questioned at a traffic stops or stopped from boarding an airplane.

By the beginning of 2009, the report said, the government's terrorist watch lists included about 400,000 people, listed as 1.1 million names and aliases, an exponential growth from the days before the attacks of Sept. 11, 2001, when it included fewer than two dozen people.

Intelligence officials say the watch lists have allowed different agencies to work together in an effort to prevent the type of breakdown that allowed two of the Sept. 11 hijackers to enter the United States even though they were known to the Central Intelligence Agencies for their terrorist ties.

The new Justice Department report provided the most authoritative statistical account to date of the problems connected with the watch lists and confirmed some assertions made by critics of the process. An earlier report by the inspector general, released in March 2008, looked mainly at flaws in the system.

The list has long been a target of public criticism, particularly after well-publicized incidents in which politicians including Senator Edward M. Kennedy of Massachusetts and Representative John Lewis of Georgia accidentally showed up on the lists. People with names similar to actual terrorists have complained that it can take months to remove their names from the list, and civil rights advocates charge that anti-war protesters, Muslim activists and others have been put on the lists and stopped at airports for political reasons.

The report, by the Justice Department inspector general's office, looked mainly at the F.B.I., which took the lead in 2004 for maintaining a consolidated terrorist watch list for all agencies throughout the federal government.

One of the biggest problems identified in the report was the use of outdated information, or material unconnected to terrorism, to keep people on the F.B.I.'s own terror watch list. The report examined nearly 69,000 watch lists referrals brought or processed by the F.B.I. and found that 35 percent of the people, both Americans and foreigners, remained on the list despite inadequate justification.

"Many of these watch-listed records were associated with outdated terrorism case classifications or case classifications unrelated to terrorism," the report said. In some cases, the people on the watch lists were the subjects of F.B.I. investigations that had been closed years earlier without action, yet their names had either never been removed, or not in a timely fashion.

Potentially even more problematic were the cases of people who were not on the watch lists despite evidence of terrorist ties.

The inspector general looked at a sampling of 216 F.B.I. terrorism investigations, and found that in 15 percent of those cases, a total of 35 subjects were not referred to the terror watch list even though they should have been.

In one case, for instance, a United States Army Special Forces soldier was investigated and ultimately convicted for stealing some 16,500 round of ammunition, C-4 explosives and other material from Afghanistan and shipping them to the United States in what investigators suspected might be the makings of a domestic terror plot. Yet the suspect was not placed on the watch list for nearly five months after the investigation was opened against him.

"We believe that the FBI's failure to consistently nominate subjects of international and domestic terrorism investigations to the terrorist watch list could pose a risk to national security," the inspector general said. The director of the Washington office of the American Civil Liberties Union, Caroline Fredrickson, said her group's monitoring of the watch lists indicates that the problems identified at the F.B.I. are endemic to entire system.

"What this report really shows is that on both ends, the lists are really over-inclusive and under-inclusive," she said in an interview. "With 1.1 million names, there's all sorts of problems that have larded it up, and the whole thing just really needs to be torn down and start a new system."

The F.B.I. adopted all 16 of the inspector general's recommendations for improving watch list operations, including better training and faster processing of referrals. The agency said in a statement that "we remain committed to improving our watch list policy and practices to ensure the proper balance between national security protection and the need for accurate, efficient and streamlined watch-listing processes."

Young Americans Losing Their Religion

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New Research Finds Number Who Claim No Church Has Risen Sharply

Dan Harris
May 6, 2009 - ABC News

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New research shows young Americans are dramatically less likely to go to church -- or to participate in any form of organized religion -- than their parents and grandparents.

"It's a huge change," says Harvard University professor Robert Putnam, who conducted the research.

Historically, the percentage of Americans who said they had no religious affiliation (pollsters refer to this group as the "nones") has been very small -- hovering between 5 percent and 10 percent. However, Putnam says the percentage of "nones" has now skyrocketed to between 30 percent and 40 percent among younger Americans.

Putnam calls this a "stunning development." He gave reporters a first glimpse of his data Tuesday at a conference on religion organized by the Pew Forum on Faith in Public Life.

The research will be included in a forthcoming book, called "American Grace."

US center names 25 lenders blamed for financial crisis

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Jitendra Joshi
May 6, 2009 - AFP

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US and foreign banks were not unwitting victims of circumstance but deliberately culpable in the financial meltdown that engulfed the United States last year, a campaign group said Wednesday.

The Center for Public Integrity named 25 "subprime" mortgage companies whose risky lending was blamed for the US property market collapse and the subsequent global economic crisis.

Many of the lenders were either controlled by US and European banks, or could not have indulged in their high-risk lending spree without the connivance of banks, the investigative journalism group said in a new study.

"The mega-banks that funded the subprime industry were not victims of an unforeseen financial collapse, as they have sometimes portrayed themselves," the center's executive director Bill Buzenberg said.

"These banks were deliberate enablers that bankrolled the type of lending that's now threatening the financial system," he said.

The study was released as the US House of Representatives was set Wednesday to vote on a Senate-approved bill that would set up a 9/11-style commission of experts to probe the root causes of the financial crisis.

The purpose is not "to point fingers and place blame," Republican Representative Darrell Issa said, "but rather to identify mistakes" to prevent a future recurrence.

The Center for Public Integrity said it had forwarded its report to leading members of Congress.

Lead author John Dunbar said the study highlighted "a catastrophic regulatory failure" that had required trillions of taxpayer dollars to rescue the banking industry.

"There was nobody watching the store all the way through this process," he told reporters.

The center analyzed US government data on more than seven million subprime loans made from 2005 to 2007, when the real estate bubble was at its peak.

It said the "Subprime 25" accounted for nearly one trillion dollars or about 72 percent of industry-reported loans extended to risky borrowers who would not normally have qualified for a mortgage.

At least 21 of the 25 were financed by banks that received US government bailout money, and 11 of them have made hefty payments to settle prosecution claims of widespread lending abuses, it said.

Four of them have received bailout funds, including collapsed insurer American International Group and banking behemoth Citigroup.

Top of the list with at least 97.2 billion dollars in subprime loans was Countrywide Financial, which was bought by Bank of America last year to avert bankruptcy for the giant mortgage company.

Second with 80.6 billion dollars in loans was Ameriquest Mortgage, now part of the Citigroup family. Third with 75.9 billion was New Century Financial Corp, which went bust in 2007 and now faces a federal investigation.

"The center found that US and European investment banks invested enormous sums in subprime lending due to unceasing demand for high-yield, high-risk bonds backed by home mortgages," Dunbar said.

"The banks made huge profits while their executives collected handsome bonuses until the bottom fell out of the real estate market."

Two of the subprime lenders have been seized by the US government: Washington Mutual, owner of Long Beach Mortgage (fifth on the list), and IndyMac Bank (number 14).

The top foreign-owned lender at number nine was HSBC Finance, part of the British-based banking giant HSBC. EquiFirst (16th on the list) was shut down by its British owner Barclays Bank in February.

Others such as RBS Greenwich Capital Investments -- part of the Royal Bank of Scotland -- and Swiss bank Credit Suisse First Boston were major backers of subprime lenders, the study said.

There are no geniuses in the outhouse

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Joe Bageant
May 5, 2009 - Smirking Chimp

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Sometimes you overhear a remark so wonderfully prescient you wish you'd said it yourself. Especially if you are a writer. Sitting in back of the Troubadour Club, a West Virginia honky tonk high in the Blue Ridge Mountains, I'm listening to Petie Yost, an auctioneer, talk to Bud Shanholtz, who lives on Social Security and drives a snowplow occasionally during the winter.

Now ole Petie uses exotic economic terms such as "investment return" and "percentage." He says things like, "I don't do household auctions 'cause there ain't no real percentage in it." Which makes him an economic expert in these beery circles. And right now he is telling Bud why our Social Security and the FDIC do not exist.

"Whadaya mean they don't exist?" asks Bud.

"Because they are both absolutely broke," replies Petie. "Tits up. Nada."
"How do ya mean?"

"Well, it's like this. If you only have $100, and no job, but you owe $15 on your phone bill, and $700 for your rent and $400 on your credit card, you're in deep shit. Right? You can't just pay one of those bills and figure you're OK. Right?"

"I'd say so" agrees Bud.

"Well, that's the fix the U.S. Government is in. If you ask if the government has enough money to fund the FDIC during a bank run, and sure as Nellie's goat eats cans there's gonna be one, the government says yes. And if you ask if the Social Security checks will keep coming and never bounce, it says yes. But it's one set of bills that comes out of one government pocket. Ain't no special safe in Fort Knox where they keep the Social Security money or the FDIC money. So the government pays the $15 light bill and hope people never ask for their bank savings to be covered by the FDIC. Lucky for them, ain't many people even got savings anyway."

Bud nods and Petie continues.

"Meanwhile, they pay out the Social Security money as it dribbles in from kids flippimg hamburgers, and pay the $15 light bill, and pray to hell the Ay-rabs keep loaning them some dough now and then, until they can pawn off the rest of the country and maybe break even in the long haul. That is, if the bailouts keep the bankers' shell game going long enough so nobody can figure out what's up. Of course the bankers ain't gonna squeal on the whole deal because they're the only ones getting richer in this thing. But still the government is working out of one pocket where the hundred bucks used to be."

Bud makes a sour face, and says, "Well, that stinks like a country outhouse in July, don't it?"

"Worse, I'd say. Nobody expects a whole country to be run out of a shithouse. But everybody figures the shithouse in Washington is full of geniuses."

I bought them both a round just for the pleasure of hearing some common sense for a change.

More than one in five homeowners underwater: Zillow

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May 6, 2009 - Reuters

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Home values in the United States extended their fall in the first quarter, with more than one in five homeowners now owing more on their mortgages than their homes are worth, real estate website Zillow.com said on Wednesday.

U.S. home values posted a year-over-year decline of 14.2 percent to a Zillow Home Value Index of $182,378, resulting in a total 21.8 percent drop since the market peaked in 2006, according to Zillow's first-quarter Real Estate Market Reports, which encompass 161 metropolitan areas and cover the value changes in all homes, not just homes that have recently sold.

U.S. homes lost $704 billion in value during the first quarter and have depreciated $3.8 trillion in the past 12 months, according to analysis of the reports.

Declining home values left 21.9 percent of all American homeowners with negative equity by the end of the first quarter, Zillow said.

By comparison, 17.6 percent of all homeowners owed more on their mortgage than their property was worth in the fourth quarter of 2008, and 14.3 percent were underwater in the third quarter of last year, the reports showed.

Nine consecutive quarters of declines have left eight regions -- including the Modesto, California, Stockton, California, and Fort Myers, Florida regions -- with median value declines of more than 50 percent since those markets peaked.

In 85 of the 161 markets covered in the report, the annualized change over the past five years is negative or flat, the reports showed.

But in an early sign of improvement, 17 metropolitan areas across the country -- notably several hard-hit markets in California, including Los Angeles, San Diego and Modesto -- have seen two or more consecutive quarters of smaller year-over-year declines in home values, the reports showed.

Meanwhile, potential sellers appear to be holding back until evidence of an improved housing market. In a separate survey of homeowner sentiment, nearly one-third, or 31 percent, of homeowners said they would be at least somewhat likely to put their homes on the market in the next 12 months if they saw signs of a recovering real estate market, the reports showed.

"Slowing declines in select markets are a bright spot or, at least, what passes for one given current market conditions," Dr. Stan Humphries, Zillow vice president of data and analytics, said in a statement.

"Unfortunately, given the magnitude of the current rates of decline, we're still many months away from a bottom even as depreciation slows," he said. "Moreover, the additional information we have this quarter on 'shadow inventory,' with one-third of homeowners indicating they would like to put their home on the market if conditions improve, confirms our earlier fears that a bottom in home values could be quite protracted."

"By our calculations, this could translate into as many as 20 million homes that could seep into the market as prices stabilize, maintaining a constant stream of supply that far outpaces demand, thus keeping prices flat. I'm doubtful that we'll see the bottom until 2010, and thereafter it's increasingly clear that we're likely to have a long bottom before we see meaningful recovery in home values," Humphries said.

Of all transactions is the past 12 months, 20.4 percent were foreclosures, up slightly from 19.9 percent in the fourth quarter, while 11.9 percent of homes sold were short sales, also up slightly from 10.9 percent in the fourth quarter, the reports showed.