Friday, December 27, 2013

Banker's Notes 2013: Top 10 Best, Worst and Lessons Learned

In its inaugural year, Banker's Notes experienced the bliss of briefly going viral as well as the bust of boring posts. Below is the Banker's Notes Top 10 Best, Worst and Lesson Learned from 2013.

1) Most Insightful Commentary: Thank you +David Rider

BNer David Rider blessed Banker's Notes this year by not only reading the posts, but thoughtfully commenting, as in this one after the Panic of 1907 article:


2) Most Fun Email Received in Response to a Post: +Julie Kinloch and JP Morgan Jr Fights for his Life with the Help of His Powerful Wife, posted Sep 8

This post, detailing the failed assassination attempt on banker JP Morgan Jr, inspired the most interesting emails, such as this one from Julie Kinloch: "that one was fuckin fabulous and i love how he was wielding a pistol and a PhD from Cornell."


3) Most Supportive Parents: +Bill and Julie Wick

I want to give a shout out to my parents who not only signed up to receive (and consistently read!) Banker's Notes, but also recruited several of you to join as well. Thank you Mom and Dad!

4) Oldest Friend Reconnection: +Christine Cadrecha

Through Banker's Notes, I was able to reconnect with perhaps my oldest friend in the world, my one-time neighbor Christine Cadrecha. When we lived down the street from each other in Burlington, Vermont, we used to play pool in her basement and then swim in the pool in her backyard. Now we wade in the pool of the healthcare debate, thanks to the Banker's Notes post about the birthday of economist Kenneth Arrow, who said "There's really no logical relation whatever between employment and health care..."


5) Most Corrected Post: Federal Credit Union Act is Passed, posted Jun 25

In this post, I think I let my personal feeling that credit unions should be taxed just like banks cloud my reporting. Thankfully, I received this corrective comment from a careful reader who randomly found Banker's Notes. Our exchange is below:





6) Most Google+ Recommendations: Panic of 1907 vs. Crisis of 2008, posted Nov 18


This essay was inspired by a speech by +Ben Bernanke, and it not only received the most recommendations, it was also re-posted on the website StrategyDriven.com. One of the longer BN posts, it showed me that telling how we got to where we are, even on the dry topic of central banking, can be interesting and not just to me!

This post also benefited from a retweet from New Jersey banker +Jeff Marsico.



7) Most Community Building: Wilmington Coup D'Etat, posted Nov 10

While this post did not receive many pageviews, it demonstrated the power of the internet to build community. Through it, I was introduced to Wilmington filmmaker Chris Everett who is creating a documentary on the Wilmington Coup D'Etat. You can learn more about his film "Wilmington on Fire" and his kickstarter campaign here.

8) The Best: The Alaska Appropriations Affair, posted Oct 20



This story about the House of Representatives' refusal in the 1860s to pay Russia for our purchase of Alaska (even after we celebrated its inclusion as a US territory) received the most pageviews.

I think what made this post the most popular was the strong link between historical and current events. When it posted, our government had just shutdown because Congress had similarly refused to pay for ObamaCare even after the law's blessing by the Supreme Court.

This post also benefited from a retweet from +Alex Tabarrok, an economics professor at George Mason University and founder of the blog Marginal Revolution.




9) The Worst: Ad Man Bell Bernach: "The truth isn't the truth until people believe you", posted Aug 17

With three piddly pageviews (most likely all from me!), this story commemorating the birth of the inventor of the "Mikey" Life Cereal commercials was the least popular post. From this experience, I came to appreciate the wisdom of the ancient adage "embedded video does not an interesting post make." There are no shortcuts in blogging!

10) My Favorite Banker's Notes Post of 2013: Ship of Gold, posted Aug 24


I think my most favorite post of 2013 was the "Ship of Gold." This story delighted because when it came to a choice between life and money, survivors of this sinking ship chose life.

Did you have a favorite post this year?

If you have any thoughts on Banker's Notes--what worked well and especially what could work better in 2014--I hope that you will comment on this post, or email me!  Cara@bankersnotes.com

As always thanks for reading!

Banker's Notes will be back Sunday Jan 12 (I'm on a 10-day meditation retreat Dec 27-Jan 7). Until then, Happy New Year to you!

Love,
Cara

Sunday, December 22, 2013

'Tis the Season for Opinons: Jefferson's Embargo Act of 1807

President Jefferson addressing a group of disgruntled men, as he defends the policy of his Embargo which, combined with the Non-Intercourse Act, was intended to bring about a suspension of foreign commerce. Circa 1808, from LOC.gov

In a December 20 op-ed posted on Forbes.com, commentators Mieke Eoyang and Gabriel Horwitz proclaimed our founding fathers would be "horrified" by the NSA's collection efforts. Specifically, that our third President would be "dismayed" that our government "was doing things that could hurt our competitiveness and our ability to set the terms of global trade."

Perhaps in hindsight, yes. But with the Embargo Act, signed into law on December 22, 1807, Thomas Jefferson did his part to both expand government and limit our global competitiveness.

A ban on trade between the United Kingdom and France was intended as a diplomatic response to these militarily-superior nation's flagrant refusal to honor US neutrality during the Napoleonic Wars. Instead of economic harm to our enemies, however, the policy inflicted a devastating burden on the U.S. economy, while managing only to postpone the war until 1812.

According to historian Leonard Levy, Jefferson's doctrinaire approach to enforcing the embargo violated his own commitment to limited government. It also had the pernicious effect of undermining American citizens' faith that their government could execute its own laws fairly, and strengthened the conviction among America's dissenters that her republican form of government was inept and ineffectual.

After just 15 months, the embargo was revoked on March 1, 1809, in the last days of Jefferson's presidency.

An opinion piece from the time, taken from the Library of Congress, reveals that expanded government--even when enacted by a cherished founding father!--is an idea whose unpopularity stands the test of time. Below one citizen expressed his frustration in an aa bb rhyming pattern. (Oh that all op-eds could be written in verse.)

A Poem about General Washington with Some Remarks on Jeffersonian Policy
Reprinted by Nathaniel Coverly, Boston 1807

But we must all forbear to sigh
Since WASHINGTON was born to die,
He ever was his country's friend
But Washington must have an end
And must it be since he is dead,
That all our happiness is fled;
Behold the dismal change of late,
See JEFFERSON in chair of state.

He took to presidential chair,
And then soon after we did hear,
Of his great doings, and his fame
He sent to France and fetch'd Tom Paine,
To give him counsel and advice
To buy Louisiana with great price,
For want of money sold our ships
I'm sure we all know how he nips

Gunboats--he then went and built
To save men's blood from being spilt
Poor things indeed we all do know,
That ne'er defend us from the foe,
He then exerted all his wits
And laid an embargo on our ships,
And for fear that we should trade
'Gainst Canada embargoes laid.

Great Washington our friend is dead
And Jefferson reigns in his stead,
Much reason then to mourn and sigh,
But Jefferson must die
A man he is a frail one too
At sad experience now doth shew
Then will forsake out present head
And chase a better in his stead.

Banker's Notes would like to wish all of you a very Happy Holidays, and say a big THANK YOU for blessing me by joining the Banker's Notes family this year.

With gratitude,
Cara

Sunday, December 8, 2013

The Dakota

The Dakota, circa 1890, from wikipedia.
The Dakota, circa 1890
In the music world, December 8, 1980 is a truly infamous day. Beatles founder and writer of "Imagine," John Lennon was fatally shot by Mark David Chapman in front of Lennon's New York City apartment complex known as the The Dakota.

A born-again Christian, and former Beatles devotee,  Chapman came to view Lennon as a "phony" for imagining a world without possessions, but still having them. "There he was with millions of dollars and yachts and farms and country estates, [who] laughed at people like me who had believed the lies and bought the records and built a big part of their lives around his music," Chapman told his biographer Jack Jones.

Most people who live in the Dakota, however, have possessions. Completed in 1884, the Dakota was the first high-end apartment complex in the city. Its name was derived from its location, at the time a rural north west corner of Manhattan, "bound on the north and south by humble cottagers," considered as remote as the Dakota territory.

In the second half of the twentieth century, it was a haven for famous artists. Lately, though, they've let in a banker or two like Morgan Stanley CFO Ruth Porat.

Earlier this year, President Barack Obama considered nominating Porat as the next Deputy Secretary of the Treasury. It could be said that her possessions killed her nomination.

In March, the New York Times reported that Porat withdrew because she did not want to face questions about her finances, and suffer the kind of acrimonious confirmation process inflicted upon then Treasury Secretary-nominee Jack Lew. (Lew was scrutinized for receiving a bonus from Citigroup at the time the bank was receiving government bailout funds, according to Bloomberg news).

In July, Obama nominated Federal Reserve Board Governor Sarah Bloom Raskin to the deputy post.

Back on December 8, 1980, in breaking the Lennon news, Monday Night Football announcers Howard Cosell and Frank Gifford reminded us things are just things, football just a game.

Gifford: (whistle blows) John Smith is on the line. And I don't care what's on the line, Howard, you have got to say what we know in the booth.

Cosell: Yes, we have to say it. Football is just a game, no matter who wins or loses. An unspeakable tragedy confirmed to us by ABC News in New York City: John Lennon, outside of his apartment building on the West Side of New York City, the most famous perhaps, of all of The Beatles, shot twice in the back, rushed to Roosevelt Hospital, dead on arrival. Hard to go back to the game after that news flash, which, in duty bound, we have to take. Frank?

Gifford: (after a pause) Indeed, it is.

Sunday, November 24, 2013

Kennedy and Lincoln, Oswald and Booth

Washington, D.C. Spectators at side of the Capitol, which is hung with crepe and has flag at half-mast
Washington, D.C., May 1865. Spectators at side of the Capitol, which is hung with mourning crepe and has flag at half-mast.
From LOC.gov

In commemoration of the Kennedy assassination, the New York Times put together a wonderful interactive spread of their coverage following the events of November 22, 1963. It included remembrances of past assassinations (four total) including another time a slain President was replaced by a Johnson, on April 15, 1865.

The first President assassinated in office, Lincoln's murder was part of a conspiracy to depose all the leaders of the US government. There were six conspirators, but only two fulfilled their duties, and only two were killed as a result: Lincoln and Frederick William Seward, the son of the Secretary of State.

The country was devastated by the news. Headlines ran "The Great Calamity!" The New York Tribune reported, "every city was draped in mourning, every hotel and almost every house displaying crepe from the doors and windows."

While Lincoln was killed in a theater, Kennedy's assassin, Lee Harvey Oswald, was captured in one just hours after the act. It took eleven days, however, to capture Lincoln's assassin, John Wilkes Booth, who escaped on horseback.

Relying on word of mouth sitings, primarily from disbanded rebels, Booth was eventually tracked down on April 26, 1865 in Bowling Green, VA.

As the New York Daily Tribune reported, Booth was with his accomplice David C. Herold when they were surrounded in a barn.  Ordered to surrender, Booth declared that we would not be taken alive. So, the police decided to burn down the barn.

Once the first match was lit, Herold came out hands raised (he would later be hung for his crimes). Booth remained in the barn "for some time" but when he finally did exit, he was shot in the neck by a police sergeant.

According to the Tribune's recounting, Booth stayed alive for a couple of hours "whispering blasphemies about the government and messages to his mother desiring her to be informed that he died for his country."

Oswald appears to have been similarly motivated. Studying Marxist economic theories, "I could see the impoverishment of the masses in my own mother,"  Oswald told a United Press International correspondent in an interview. His fervor for Marxist ideology was so strong that he attempted to exchange his US citizenship for a Soviet one, spending two years in Russia, and marrying a Russian woman (the USSR denied his citizenship request).

But if Oswald's actions were designed to help his mother, his plan backfired. Upon learning that her son assassinated Kennedy, she told the Star-Telegram that his defection to the Soviet Union made her life lonely, "and now they will turn their backs on me again."

Only Booth admitted to his crime. After firing the fatal shoot he leaped onto the stage and declared with a dramatic flair "sic semper tyrannis" ("thus, always, to tyrants"). On the afternoon of November 22, despite vast evidence to the contrary, Oswald told reporters "I haven't shot anybody."

Fifty years after Lincoln's death, on April 15, 1915, President Wilson declared a national holiday (the Federal Reserve Bank, however, remained open). To honor the Great Emancipator, flags across the country and the world flew at half-mast. The New York Tribune reprinted a poem written for Lincoln by Vermonter and federal judge Wendell Phillips Stafford. Excerpted below.

Look back upon thy people now! 
Behold the world thy hands have wrought--
The conquest of thy bleeding brow, 
The harvest of thy sleepless thought

From sea to sea from palm to pine
The day of lord and slave is done.
The wind will float no flag but thine
The long divided house is one.



Monday, November 18, 2013

Panic of 1907 vs. Great Recession of 2008

Illustration shows a gigantic J. Pierpont Morgan clutching to his chest with his right arm large New York City buildings labeled "Billion Dollar Bank Merger"; in the foreground, a young child puts a coin in a "Toy Bank" as Morgan's left arm reaches around the buildings to grab the toy bank for himself. From LOC.gov
  • Caption: Why should Uncle Sam create a central bank when Uncle Pierpont is already on the job?
This year, 2013, marks the 100th anniversary of the Federal Reserve System, and central bankers are taking a historical perspective. That is "good advice in general," Fed Chairman Ben Bernanke told attendees at the Fourteenth Jacques Polak Annual Research Conference, in Washington, D.C earlier this month.

"An appreciation of the parallels between recent and historical events greatly influenced how I and many of my colleagues around the world responded to the crisis," Mr. Bernanke said.

He went on to describe the similarities between the banking crisis of 1907--the one that inspired the formation of the Federal Reserve--and the more recent 2008 financial crisis.

Both fit the archetype of a classic financial panic, Bernanke said. Both crises started in an economy in recession and both suffered from a sudden lack of liquidity.

In 1907, money was tight in part due to the rebuilding of San Francisco. After the Bank of England raised its discount rate, causing more gold to flow out of the US, New York was left with unusually low monetary reserves just as it entered the cash-intensive harvest season, explained Ellis Tallman and Jon Moen in a 1990 article about the Panic in the Atlanta Fed's Economic Review.

In the more recent crises, Bernanke explained, liquidity started to dry up when housing prices declined, and subprime mortgage defaults rose in 2007. As the underwriting weaknesses of subprime portfolios became known, banks stopped lending to each other, paralyzing credit markets. By 2008, losses from these portfolios were causing banks to fail.

In both crises, a tinder-dry credit environment made them vulnerable to sparks. In 1907, the fire started when F. Augustus Heinze and C.F. Morse tried and failed to corner the stock of the United Copper Company. The investigation into the scam revealed an intricate web of corrupt bankers and brokers. (Heinze was president of Mercantile National Bank, and Morse served on seven New York City bank boards.) When the president of the second largest trust in the country was implicated in the copper cornering con, depositors started a run on Knickerbocker Trust.

Without a central bank, the availability of liquidity depended on the discretion of firms and private individuals, Bernanke explained. The Lehman Brothers moment of 1907 came when New York's financiers, led by J.P. Morgan, were unable to value the trusts, and refused to "bail out" Knickerbocker.  (Unregulated and a relatively new innovation, trusts were the "toxic assets" of the 1907 crises.)

Their refusal prevented other institutions from offering aid, and depositors started a massive run on banks and trusts, exacerbating the liquidity crises. (In 2008 a loss of confidence in the banking system did not turn into a consumer run on banks primarily because of FDIC deposit insurance.)

Morgan et al realized that a failure of the trusts could spread to the entire financial system, and they ultimately convinced John D. Rockefeller and others to pony up enough cash to stabilize the markets.

Similarly, American lawmakers eventually agreed that failure of the nation's largest financial institutions was not an option, and passed the $700 billion Trouble Asset Relief Program in October 2008 (reduced to $475 billion by the Dodd-Frank Act). This program was designed "to strengthen market stability, improve the strength of financial institutions, and enhance market liquidity," according to the Federal Reserve.

A major difference between the two crises, that I can see, is the popular perception of these liquidity liberators. In 1907, Senator Nelson Aldrich called the actions of JP Morgan and crew heroic. In his arguments for centralized banking reprinted in the New York Tribune, he warned that without it "men may not be found in another emergency with the patriotism, courage and capacity of those who in this crisis rendered such inconspicuous and invaluable service to the financial interests of this country."

But in the 2008 crisis, when taxpayers rendered this very same "invaluable service," people stormed the streets in protest. From the tea party conservative to the Wall Street occupier, hatred of the bailouts was met with bipartisan vehemence.

So why is it that when a handful of wealthy individuals restore liquidity to a broken system they are courageous patriots, but when it's taxpayer's, lawmakers are voted out of office? Perhaps the vehemence comes from how the money was used. In 1907, it was to save consumer's retail deposits, in 2008 corporate wholesale funds.

As Bernanke explains in his speech, seeking to stem the panic in wholesale funding markets, in 2008 the Fed "extended its lender-of-last-resort facilities to support nonbank institutions such as investment banks." This had little direct impact on consumers. As Fed governor Daniel Tarullo recently said "the savings of most U.S. households are generally not directly at risk in short-term wholesale funding arrangements."

In 1907, on the other hand, ending bank runs meant "widows on the corner" could cash their checks, shop-owners could feed their families.

Another problem with the 2008 solution, from the popular perspective, was the moral hazard it created.

Senator Aldrich worried that courageous individuals might be hard to find in a financial emergency, and it appears he was right to worry. Senior executives in 2008 were not interested in rendering an inconspicuous service to the financial interests of the country. They didn't even want to forego their bonuses. But in trying to account for the rarity of courage, lawmakers in 1913 may have created a system that prevents it from emerging.

A July 2013 Congressional research report articulates a challenge for today's central bankers. "Although 'too big to fail' (TBTF) has been a perennial policy issue, it was highlighted by the near-collapse of several large financial firms in 2008...If a TBTF firm believes that the government will protect them from losses, they have less incentive to monitor the firm’s riskiness because they are shielded from the negative consequences of those risks."

In 1907, the wealthy elite pooled their resources to prevent the failure of banks and trusts, saving millions in consumer deposits. In so doing they bore the brunt of the consequences of their risks, and Americans considered them heroes for it.

Sunday, November 10, 2013

The Wilmington Riots and Coup D'Etat


Coup d'etat leader, A.M. Waddell

The "Fighting Editor" and
bank-owner John Mitchell, Jr. 



These days there's a lot going on in North Carolina politics. The Republican-dominated legislature has enacted a far-right agenda, "tearing down years of progress in public education, tax policy, racial equality in the courtroom and access to the ballot," wrote the New York Times in July 2013.

This is not the first time in North Carolina history that a regressive agenda has wiped out years of progressive reform.

In 1898, Wilmington was the largest city in North Carolina, with a population that was majority African-American. Black businessmen dominated the restaurant and barbershop trade, owned tailor shops and drug stores, and served as firemen, policemen, and civil servants. "A good feeling between the races existed as long as white Democrats controlled the state politically," according to PBS.org.

That started to changed in the early 1890s, when the Republican party formed a coalition with progressive Democrats and started to win on election day. Fusionists, as they were called, were committed to re-writing the state's election laws and increasing black participation in state and local politics. Fusionists elected Republican Daniel Lindsay Russell in 1896. (North Carolina wouldn't see another Republican governor until 1973.)

Overcoming widespread voter intimidation, in 1898 voters elected a biracial fusionist government to office in Wilmington. Though the mayor and two-thirds of the aldermen were white, calls of "negro domination" permeated the media. A violent mob, led by the former gubernatorial candidate Alfred Moore Wadell (who lost to Mr. Russell), swarmed the streets.

On November 10, Waddell and his mob indiscriminately killed dozens of unarmed black citizens, and forced the white Republican Mayor Silas P. Wright and other members of the city government (both black and white) to resign. They installed a new city council that elected Waddell to take over as mayor by 4 p.m. that day. Appeals to President William McKinley to intervene were ignored, letting stand the only successful coup d'etat in United States history.

Further north in Virginia, newspaperman and bank-owner John Mitchell Jr. -- aka "The Fighting Editor" -- was appalled by the the events in Wilmington. Born a slave in 1863, Mitchell was editor of the Richmond Planet for over 40 years, served on the Richmond City Council, and in 1902 founded the Merchant Savings Bank.

In an editorial in his paper after the Wilmington riots, Mitchell reminds us that not all perspectives deserve to be heard, but those standing for justice and peace must not be silent.

The outrageous happenings at Wilmington, NC almost surpasses comprehension. Never in the history of this country have we seen or heard anything like it before. A mob takes possession of the city, and without due cause murders twenty-five inoffensive and unarmed colored people, drives hundreds to the woods to starve and die, forces the city officials to leave the city and then duly installs themselves in their place without the shadow of an excuse of the sanction of the law.

A.M. Wadell has by treasonable practices declared himself mayor and this too in the face of the laws of the state of North Carolina. Who made him mayor? From whom did he secure his authority? Was it from the hands of the white lawyers, the doctors, the merchants and preachers, who while inciting the mobs to deeds of murderous violence, under our laws particep criminals--became murderers themselves?

This is the logical result of compromising with wrong. It is an object lesson to the thoughtful. All of the good white people are not dead, but in the neighborhood of Wilmington they are painfully silent.

It's comforting to know that in refusing to remain silent, today's Moral Mondays protesters have heeded the lessons of history. Like them on Facebook! https://www.facebook.com/MoralMondays :).

Further Reading:

Melton McLauren, UNC Wilmington professor, "Commemorating Wilmington's Racial Violence of 1898: From Individual to Collective Memory 

Ann Field Alexander's excellent biography of John Mitchell Jr. is available at Amazon! Race Man: The Rise and Fall of the Fighting Editor

Read PBS.org's recounting of the Wilmington Riots as part of their Jim Crow series.

Sunday, November 3, 2013

The Greensboro Massacre

This flyer announces the November 3, 1979 Death to the Klan march and conference to be held in Greensboro. The events were sponsored by the Workers Viewpoint Organization (later known as the Communist Workers Party) in response to recent overt Ku Klux Klan (KKK) activities held in China Grove, N.C. The march was violently confrontational between the Workers Viewpoint activists and KKK/Nazi members, resulting in the shooting deaths of five anti-Klan protestors. The event is known as the Greensboro Massacre. From Civil Rights Greensboro

Did you know this November is social justice month? "We live in a dangerous time," says the Revolutionary Poetry Brigade, the group that founded the event. The organizers hope to make November "an annual international event exposing the world’s injustices and pointing the way to a transformative future."

In the spirit of social justice month, let us remember the events of November 3, 1979, known today as the Greensboro Massacre. Five protesters from the Communist Workers Party were shot and killed by members of the Ku Klux Klan. Several of the KKK were charged with the murders, but then acquitted by an all white jury in 1981. Jurors agreed with the defense that the suspects shot in self-defense, according to a Frontline documentary aired in 1983.

The protest was the culmination of attempts by the Communist Workers Party to organize black industrial workers, and bring awareness to rising incidences of brown lung disease and other workplace injuries.

Several of the movement leaders were doctors who left their practices to fight for worker's rights in the textile mills. After failed attempts to dialogue with management, the Community Workers Party sought a new tactic, one that could unite black and white workers. To capitalize on growing animosity toward the Klan in Greensboro, they put out a poster announcing a "Death to the Klan" march on November 3.

"I think the Klan, historically, are cowards," said Nelson Johnson, the poster designer.

They're also cheap, according to former Klan-member turned FBI-informant Edward Dawson, who decided to help the FBI in retribution. Dawson was angry at the Klan for refusing to pay a fine he received in the course of performing Klan-related duties.

"We got five years, one year suspended for five and a $1,000 fine," Dawson told Frontline's James Reston. "And that's what helped irritate me something furious. They refused to pay the fine. We had to pay that out of our pocket."

As a double agent, Dawson made his own posters for the march, ones that had a vision of a lynching and read: "Notice to traitors, Communists, race mixers and Black rioters: Traitors beware! Even now the cross hairs are on the backs of your necks. It's time for old-time justice -- American justice."

Despite the violent nature of these posters, and the information that Dawson provided to law enforcement that the Klan intended to bring guns to the march, local police were absent.  Frontline reported that with the start of the march only a half an hour away, the two tactical squads assigned to the march were given permission to take their lunch break.

"I think that medicine and politics really start from the same place," Dr. Paul Bermazohn, who survived a bullet in his brain on November 3, told Frontline. "If you're concerned about people, it will lead you often into the fields like medicine. Brown lung is really not a disease caused by cotton dust. It's a disease caused by an economic system that puts a priority on profit over people."

The Orchestral Maneuvers in the Dark wrote a fabulous '80s-style song about the Greensboro Massacre entitled "88 Seconds." Hear it here!

Sunday, October 27, 2013

The NSA re: Soviet Union: "As a totalitarian society, they valued eavesdropping and developed ingenious methods to accomplish it"

United States Representative to the United Nations, Henry Cabot Lodge, points to the spot on the seal where it had been bugged by the Soviets, circa 1960

German Chancellor Angela Merkel was "livid" upon hearing that the United States has been eavesdropping on her conversations, according to a recent report  in the British news outlet The Guardian.

Merkel's mobile telephone had been listed by the National Security Agency's (NSA) Special Collection Service (SCS) since 2002 -- marked as "GE Chancellor Merkel" -- and was still on the list weeks before President Obama visited Berlin in June, German news weekly Der Spiegel said.

Claudia Roth, co-leader of the German Green Party, told SPIEGEL ONLINE that the alleged bugging of Merkel's cell phone is a "terrible, terrible scandal" that if proven, is a more extreme invasion of privacy than those imagined in George Orwell's 1984.

"The NSA's monitoring activities have gotten completely out of hand and evidently take place beyond all democratic controls," said Thomas Oppermann, the chairman of the Parliamentary Control Panel, which is responsible for monitoring Germany's federal intelligence services.

The United States can understand outrage over spying. We were pretty pissed when US intelligence --the NSA no less!-- revealed that the Soviet Union had bugged our nearly complete embassy in Moscow. (Not to mention the time they gifted us a bugged seal of the United States, pictured with Henry Cabot Lodge II above. I wonder if we re-gifted that.)

Construction on the badly needed embassy was abruptly halted in August 1985 when it was discovered that Soviet workers had been doing concealed work not called for in the building plans.

Using a CAT-scan machine, US officials "found an elaborate and far-reaching network of spying equipment concealed inside beams, walls and floor slabs," the Philadelphia Inquirer reported in October 1988.

According to a 2012 history of the Moscow embassy scandal, produced by the NSA, bugs were also placed in typewriters. "As a totalitarian society, the Soviet Union valued eavesdropping and thus developed ingenious methods to accomplish it," the NSA report explains.

President Reagan decided that the only way to prevent the KGB secret police from eavesdropping on the U.S. Embassy in Moscow was to tear down the new chancery and rebuild it from the ground up, the LA Times reported on Oct 27, 1988.

This would've cost US taxpayers hundreds of millions dollars, but the Cold War ended in 1991 and the building remained in tact. Construction on the embassy was finally completed in May 2000.

In a radio address to the nation in April 1987, President Reagan said:

Recent events have made it clear that the Soviets have gone beyond the bounds of reason in their efforts to compromise the security of our current Embassy in Moscow. Unfortunately, no one is suggesting that Soviet espionage is not a fact of life, but what seems to be emerging is the picture of an intense espionage strategy that reflects a callous disregard for the consequences of such actions.

Crow anyone?

Sunday, October 20, 2013

The Alaska Appropriations Affair

Photo shows Walter W. Johnson, a mining engineer and designer of gold and tin dredges, who traveled around the Seward Peninsula on the family "pupmobile" and on horseback. Johnson wrote on the back of his copy of the photo, "When it was time to coast, the dogs would jump aboard without command." (Source: Granddaughter Lynn Johnson, 2013)


Most people--including me--don't realize how big Alaska is, nor how controversial it was. Even after the Treaty for its purchase had been signed, and the land surrendered to us, the appropriation of money to pay Russia was delayed by more than a year due to opposition in the House of Representatives (sound familiar?).

"Russian America" was officially surrendered to the United States on October 18, 1867. Dubbed "Seward's folly" after its chief advocate Secretary of State William Seward, the $7.25 million price tag was thought by some to be a colossal waste of money.

Those opposed to the Alaska acquisition argued we couldn't afford it. Burdened with debt from the Civil War and with plenty of uninhabited land, the New York Tribune wrote in May 1867 that this country is "already possessed of more territory than it can decently govern."

Using its powers to control the nation's purse strings, the popular branch of the government sought to shield American taxpayers from the burden of paying for a "perfectly barren" piece of land.

In the end, their actions threatened the nation's reputation as well as its security. "The Alaska affair had assumed such a position that it would have been highly discreditable to longer withhold from Russia the purchase-money. The nation was committed not only by the ratification of the treaty but by the actual transfer of the new territory, and there was no honorable alternative but to make the best of the bargain," concluded the Telegraph.

The House finally approved the appropriation on July 14, 1868, by a vote of 113 to 48.

As to whether the $7.25 million purchase was a good investment, there continues to be some debate.

An 1871 article written by W.H. Dall and published in Harpers New Monthly Magazine, however, was already dismissing detractors. With a rich source of seal skins, furs, salt-cod fish, whale oil, and Alaskan cedar, Dall estimated the Alaska investment was returning 14% annually, versus: Texas 23%, Florida 5%, New Mexico and Arizona 1%.

Fifty years later, and after gold had been discovered there, Secretary of the Interior Frank Lane said: 

Alaska's period of trial is over. She has been weighed in the balance and found magnificently worthy. Actual financial statements show and prove conclusively that to have neglected that opportunity would have been a colossal blunder, a blunder future generations could never forgive.

Today, Alaska is taking an innovative approach to political leadership. Read about Mayor Stubbs, the cat mayor, at WSJ.com

Flannery O'Connor

You shall know the truth and the truth shall make you odd.