We are told constantly that government can play a beneficial role in the marketplace by taking steps to make sure consumers are more fully informed about the risks of the goods and services they use. But what happens when the government itself helps spread health and safety information that is false or misleading? That question came up recently in the controversy over New York City’s misleading nutrition-scare ad campaign, and it now comes up again in a controversy over a new database of complaints about consumer products sponsored by the federal Consumer Product Safety Commission (CPSC).

As part of the Consumer Product Safety Improvement Act of 2008 (CPSIA), Congress mandated that the CPSC create a “publicly available consumer product safety information database” compiling consumer complaints about the safety of products. Last week, by a 3-2 majority, the commission voted to adopt regulations that have dismayed many in the business community by ensuring that the database will needlessly include a wide range of secondhand, false, unfounded or tactical reports. The Washington Times editorializes:

…[Under the regulations as adopted last week] anybody who wants to trash a product, for whatever reason, can do so. The commission can leave a complaint on the database indefinitely without investigating its merits “even if a manufacturer has already provided evidence the claim is inaccurate,” as noted by Carter Wood of the National Association of Manufacturers’ “Shopfloor” blog….

Trial lawyers pushing class-action suits could gin up hundreds of anonymous complaints, then point the jurors to those complaints at the “official” CPSC website as [support for] their theories that a product in question caused vast harm. “The agency does not appear to be concerned about fairness and does not care that unfounded complaints could damage the reputation of a company,” said [Commissioner Nancy] Nord.

Commissioners Nord and Anne Northup introduced an alternative proposal (PDF) aimed at making the contents of the database more reliable and accurate but were outvoted by the Democratic commission majority led by Chairman Inez Tenenbaum. Nord: “under the majority’s approach, the database will not differentiate between complaints entered by lawyers, competitors, labor unions and advocacy groups who may have their own reasons to ‘salt’ the database, from those of actual consumers with firsthand experience with a product.” Commissioner Northup has published posts criticizing the regulations for their definitions of who can submit a report, who counts as a consumer, and who counts as a public safety entity.

For those interested in reading further, Rick Woldenberg, a leading private critic of the law who blogs at AmendTheCPSIA.com, has critically commented on the politics of the proposal here, here, here, here, and here. More coverage: ShopFloor with followups here and here, New York Times, Sean Wajert/Mass Tort Defense. I’ve been blogging for the past two years at my website Overlawyered about the wider problems with the CPSIA law, including its effects on books published before 1985, thrift stores, natural wooden toys, ballpoint pens, bicycles, plush animals, Irish dance costumes, rocks used in science class and many more. Most of these problems remain unresolved thanks to the inflexible wording of the law as well as, sometimes, the unsympathetic attitude of the commission majority. I’ve heard that bringing overdue investigative oversight to the ongoing CPSIA disaster is shaping up as a priority for many incoming lawmakers on the (newly Republican-led) House Energy and Commerce Committee, whose outgoing chair, California Democrat Henry Waxman, is closely identified with the law and its consumer-group backers.

The CPSC’s Defective New Complaints Database is a post from Cato @ Liberty - Cato Institute Blog

The Department of Health and Human Services’ Child Care and Development Fund is a state aid program that subsidizes child care expenses for low-income working families with children. The federal government largely leaves it to the states to provide oversight for the CCDF program, which HHS estimates loses more than 10 percent of its funding in improper payments.

A new report from the Government Accountability Office shows widespread fraud by CCDF recipients in the sampling of states that it investigated:

Our proactive testing revealed that CCDF programs in the 5 states we tested were vulnerable to fraud because states did not adequately verify the information of children, parents, and providers and lacked adequate controls to prevent fraudulent billing. In 7 of 10 cases in four states, our fictitious parents and children were admitted into the CCDF program because states did not verify the personal and employment information provided by the applicants. Three of those states paid $11,702 in childcare subsidies to our fraudulent providers, and two states allowed the providers to over bill for services beyond their approved limit. Only one state successfully prevented our fictitious applicants from being admitted into the program, but officials from that state told us they perform only limited background checks on providers and cannot immediately detect over billing.

The GAO’s findings can be summarized as follows:

• States lack effective controls to verify parent and child information, such as a parent’s income eligibility.
• States do a poor job of checking the backgrounds of providers, which mean subsidized child care could be being provided by sex offenders.
• States have weak controls to prevent fraudulent billing. Nonetheless, the GAO found numerous instances of delays in processing applications.

None of these findings are particularly surprising considering that government bureaucracies have little incentive to make sure funds are appropriately spent. The reason is simple: bureaucracies play with other people’s money and aren’t subject to competitive market forces.

When the government engages in “charitable” activities, it does so with money that it involuntarily obtains from taxpayers. In contrast, those who voluntarily donate to charities have an incentive to make sure their donations are properly used. If a charity does a poor job, donors have the freedom to turn to a different charity.

See this essay for more on the problems with subsidy programs administered by HHS, including the CCDF.

Child Care Subsidies Fraud is a post from Cato @ Liberty - Cato Institute Blog

There are too few periodical venues for good short fiction these days, so I’d normally be enthusiastic about the Wall Street Journal‘s decision to print works of fantasy. Unfortunately, they’ve opted to do so on their editorial page—starting with a long farrago of hypotheticals concerning the putative role of the Foreign Intelligence Surveillance Court in hindering the detection and apprehension of failed Times Square bomber Faisal Shahzad. In fairness to the editors, they acknowledge near the end of the piece that much of it is unvarnished speculation, but their flights of creative fancy extend to many claims presented as fact.

Let’s begin with the acknowledged fiction. The Journal editors wonder whether Shahzad might have been under surveillance before his botched Times Square attack, and posit that the NSA might have intercepted communications from “Waziristan Taliban talking about ‘our American brother Faisal,’ which could have been cross-referenced against Karachi flight manifests,” or “maybe Shahzad traded seemingly innocuous emails with Pakistani terrorists, and minimization precluded analysts from detecting a pattern.”  Anything is possible. But it’s a leap to make this inference merely because investigators appear to have had fairly specific knowledge about his contacts with terrorists after he had already been identified.  They would not have needed to “retroactively to reconstruct his activities from other already-gathered foreign wiretaps:” Once they had zeroed in on Shahzad, his calling patterns could have been reconstructed from phone company calling records whether or not he or his confederates were being targeted at the time the communications occurred, and indeed, those records could have been obtained by means of a National Security Letter without any oversight from the FISA Court.

This is part of a more general strategy we often see deployed by advocates of expanded surveillance powers. After the fact, one can always tell a story about how a known terrorist might have been detected by means of more unfettered spying authority, just as one can always tell a story about how any particular calamity would have been averted if the right sort of regulation were in place. Sometimes the story is even plausible. But if we look at the history of recent intelligence failures, it’s almost invariably the case that the real problem was the inability to connect the right set of data points from the flood of data already obtained, not insufficient ability to collect. The problem is that it’s easy and satisfying to call for legislation lifting the restraints on surveillance—and lifting still more when intelligence agencies fail to exhibit perfect clairvoyance—but difficult if not impossible, certainly for those of us without high-level clearances, to say anything useful about the internal process reforms that might help make better use of existing data. The pundit in me empathizes, but these just-so stories are a poor rationale for further diluting civil liberties protections.

Let’s move on to the unacknowledged fictions, of which there are many.  Perhaps most stunning is the claim that “U.S. intelligence-gathering capability has been substantially curtailed in stages over the last decade.” They mean, one supposes, that Congress ultimately imposed a patina of judicial oversight on the lawless program of warrantless wiretapping and data program authorized by the Bush administration in the aftermath of the 9/11 attacks. But the claim that somehow intelligence gathering is more constrained now than it was in 2000 just doesn’t pass the straight face test. In addition to the radical expansion of the aforementioned National Security Letter authorities, Congress approved roving wiretaps for domestic intelligence, broad FISA orders for the production of “any tangible thing,” so-called “sneak and peek” searches, looser restraints on existing FISA wiretap powers, and finally, with the FISA Amendments Act of 2008, executive power to authorize broad “programs” of surveillance without specified targets. In a handful of cases, legislators have rolled back slightly their initial grants of power or imposed some restraints on powers the executive arrogated to itself, but it is ludicrous to deny that the net trend over the decade has been toward more, rather than less, intelligence-gathering capability.

Speaking of executive arrogation of power, here’s how the Journal describes Bush’s warrantless Stellar Wind program:

Via executive order after 9/11, the Bush Administration created the covert Terrorist Surveillance Program. TSP allowed the National Security Agency to monitor the traffic and content of terrorist electronic communications overseas, unencumbered by FISA warrants even if one of the parties was in the U.S.

This is misleading.  There was no such thing as the “Terrorist Surveillance Program.”  That was a marketing term concocted after the fact to allow administration officials to narrowly discuss the components of Stellar Wind initially disclosed by the New York Times.  It allowed Alberto Gonzales to claim that there had been no serious internal dissent about the legality of “the program” by arbitrarily redefining it to exclude the parts that had caused the most controversy, such as the vast data mining effort that went far beyond suspected terrorists. It was this aspect of Stellar Wind, and not the monitoring of overseas communication, that occasioned the now-infamous confrontation at Attorney General John Ashcroft’s hospital bed described in the editorial’s subsequent paragraph. We continue:

In addition to excessive delays, the anonymous FISA judges demanded warrants even for foreign-to-foreign calls that were routed through U.S. switching networks. FISA was written in an analog era and meant to apply to domestic wiretaps in the context of the Cold War, not to limit what wiretaps were ever allowed.

Forgive me if I’m a broken record on this, but the persistence of the claim in that first sentence above is truly maddening.  It is false that “FISA judges demanded warrants even for foreign-to-foreign calls that were routed through U.S. switching networks.”  Anyone remotely familiar with the FISA law would have known it was false when it was first bandied about, and a Justice Department official confirmed that it was false two years ago. FISA has never required a warrant for foreign-to-foreign wire communications, wherever intercepted, though there was a narrower problem with some e-mail traffic.  To repeat the canard at this late date betrays either dishonesty or disqualifying ignorance of elementary facts. Further, while it’s true that a great deal of surveillance has always, by design, remained beyond the scope of FISA, it is clearly false that it was “meant to apply to domestic wiretaps” if by this we mean only “wiretaps where all parties to the communication are within the United States.” The plain text and legislative history of the law make it clear beyond any possible doubt that Congress meant to impose restraints on the acquisition of all U.S.-to-foreign wire communications, as well as radio communications targeting U.S. persons. (The legislative history further suggests that they had hoped to tighten up the restraints on radio communications, though technical considerations made it difficult to craft functional rules.) We continue:

The 2008 FISA law mandates “minimization” procedures to avoid targeting the communications of U.S. citizens or those that take place entirely within the U.S. As the NSA dragnet searches emails, mobile phone calls and the like, often it will pick up domestic information. Intelligence officials can analyze, retain and act on true smoking guns. But domestic intercepts must be effectively destroyed within 72 hours unless they indicate “a threat of death or serious bodily harm to any person” or constitute “evidence of a crime which has been, is being, or is about to be committed and that is to be retained or disseminated for law enforcement purposes.”

This means that potentially useful information must be discarded if it is too vague to obtain a traditional judicial warrant. Minimization is the FISA equivalent of a fishing license that requires throwing back catches that don’t meet the legal limit. Yet the nature of intelligence analysis is connecting small, suggestive and often scattered clues.

The kernel of truth here is that the FISA Amendments Act did impose some new constraints on the surveillance of Americans abroad. But the implication that “minimization” is some novel invention is just false. Minimization rules have always been part of FISA, and they exist precisely because the initial scope of FISA acquisition is so incredibly broad. And those minimization rules give investigators enormous latitude.  As the FISA Court itself explained in a rare published ruling:

Minimization is required only if the information “could not be” foreign intelligence. Thus, it is obvious that the standard for retention of FISA-acquired information is weighted heavily in favor of the government.

Similarly, the redaction of identifying information about U.S. persons is not required when that information is needed to properly interpret the intelligence, so the idea that analysts would have scrubbed mention of “our American brother Faisal” from an intercept of Taliban communications cannot be taken too seriously.  It’s not entirely clear what the editors are referring to when they say “domestic intercepts must be effectively destroyed within 72 hours:” Do they mean “inadvertent” intercepts of entirely domestic communications, or one-end domestic communications legitimately acquired under the FAA, or what? Either way, that’s not really consistent with what we know about FISA minimization in practice: At least as of 2005, it appears that “minimized” communications were at least sometimes retained in ultimately retrievable form, though not logged.  In any event, if I’m reading them correctly, the Journal is suggesting that NSA should be broadly sweeping up and retaining even the apparently innocent domestic communications of Americans, on the off chance that they might later prove useful? I can imagine being that consumed by terror, but I think I would be ashamed to admit it in public.  Moving on:

Meanwhile, the FISA court reported in April that the number of warrant applications fell to 1,376 in 2009, the lowest level since 2003. A change in quantity doesn’t necessarily mean a change in intelligence quality—though it might.

As it happens, I covered this in a post just the other day.  As a Justice Department official explained to the bloggers at Main Justice, the numerical decline is “due to significant changes in the legal authorities that govern FISA surveillance — specifically, the enactment of the FISA Amendments Act in 2008 — and shifting operational demands, but the fluctuation in the number of applications does not in any way reflect a change in coverage.”  Finally:

These constraints are being imposed at the same time that domestic terror plots linked to, or inspired by, foreigners are increasing. Our spooks did manage to pre-empt Najibullah Zazi and his co-conspirators in a plot to bomb New York subways, but they missed Shahzad and Nidal Hasan, as well as Umar Farouk Abdulmutallab’s attempt to bring down Flight 253 on Christmas Day.

Abdulmutallab was a non-U.S. person who didn’t set foot in the country until after setting his underpants aflame; there is no reason whatever to believe that FISA restrictions would have posed an obstacle to monitoring him. As for Nidal Hasan, investigators did intercept his e-mails with radical cleric Anwar al Awlaki. While it seems clear in retrospect that the decision not to investigate further was an error in judgment, they were obviously not destroyed after the fact, since they were later quoted in various press accounts. Maybe those exchanges really did seem legitimately related to Hasan’s research at the time, or maybe investigators missed some red flags. Either way, the part of the process the Journal is wringing its hands about worked: The intercepts were retained and disseminated to the Joint Terrorism Task Force, which concluded that Hasan was “not involved in terrorist activities or terrorist planning” and, along with Army officials, declined to open an investigation. Rending already gossamer-thin minimization requirements is not going to avoid errors of that sort.

The Journal closes out their fantasy by melodramatically asking “whether FISA is in practice giving jihadists a license to kill.” But the only “license” I see here is of the “creative” variety; should they revisit the topic in the future, the editors might consider taking less of it.

The Wall Street Journal’s Surveillance Fantasies is a post from Cato @ Liberty - Cato Institute Blog

Recently, the Federal Reserve has significantly altered the procedures and goals that it had followed for decades. Rep. Ron Paul (R-TX) has introduced a bill calling for an audit of the Fed.

Remarkably, there is significant opposition to such oversight, and the political prospects for undertaking such an audit are relatively bleak. In a new paper, Cato scholar Arnold Kling examines the processes and outcomes on which an audit should focus, and looks at opposition to the audit:

We should document why the Fed took each step, what the expected results were, and whether those results were achieved. …The profit or loss of the Fed’s investments would provide a very helpful indicator of whether the Fed’s actions served the economy as a whole or merely transferred wealth from ordinary taxpayers to bank shareholders.

Read the whole thing.

The Case for Auditing the Fed is a post from Cato @ Liberty - Cato Institute Blog

It is more than three years since the Office of the Inspector General first brought public attention to the FBI’s systematic misuse of the National Security Letter statutes to issue fictitious “exigent letters” and obtain telecommunications records without due process. Nobody at the Bureau has been fined, or even disciplined, for  this systematic lawbreaking and the efforts to conceal it. But the bipartisan outrage expressed at a subcommittee hearing of the House Judiciary Committee this morning hints that Congress may be running out of patience—and looking for some highly-placed heads to roll. Just to refresh, Committee Chairman John Conyers summarized the main abuses in an opening statement:

The IG found that more than 700 times, such information was obtained about more than 2,000 phone numbers by so-called“exigent letters” from FBI personnel. In some cases, the IG concluded, FBI agents sent the letters even though they believed that factual information in the letters was false. For more than 3,500 phone numbers, the call information was extracted without even a letter, but instead by e‐mail, requests on a post‐it note, or “sneak peaks” of telephone company computer screens or other records…. In one case, the FBI actually obtained phone records of Washington Post and New York Times reporters and kept them in a database, leading to an IG conclusion of “serious abuse” of FBI authority and an FBI public apology.

It’s probably actually worse than that: Since these letters often requested a “community of interest” analysis for targeted numbers, the privacy of many people beyond the nominal targets may have been implicated—though it’s hard to be sure, since the IG report redacts almost all details about this CoI mapping.

And as Rep. Jerry Nadler pointed out, the IG report suggests a “clear pattern here of deliberate evasion,” rather than the innocent oversight the Bureau keeps pleading.  Both Nadler and the Republican ex-chair of the committee, Rep. James Sensenbrenner, expressed frustration at their sense that, when the FBI had failed to win legislative approval for all the powers on its wish list, it had simply ignored lawful process, seizing by fiat what Congress had refused to grant. Sensenbrenner, one of the authors of the Patriot Act, even declared that he felt “betrayed.” But we’ve heard similar rhetoric before. It was the following suggestion from Conyers (from my notes, but pretty near verbatim) that really raised an eyebrow:

There must be further investigation as to who and why and how somebody in the Federal Bureau of Investigation could invent a practice and have allowed it to have gone on for three consecutive years.  I propose and hope that this committee and its leadership will join me, because I think there may be grounds for removal of the general counsel of the FBI.

That would be Valerie Caproni, one of the hearing’s two witnesses, and an executive-level official whose dismissal would be the first hint of an administration response commensurate with the gravity of the violations that occurred. Caproni’s testimony, consistent with previous performances, was an awkward effort to simultaneously minimize the seriousness of FBI’s abuses—she is fond of saying “flawed” when le mot juste is “illegal”—and also to assure legislators that the Bureau was treating it with the utmost seriousness already. Sensenbrenner appeared unpersuaded, at one point barking in obvious irritation: “I don’t think you’re getting the message; will you get the message today?” The Republican also seemed to indirectly echo Conyers’ warning, declaring himself “not unsympathetic” to the incredulous chairman’s indictment of her office. Of course, the FBI has it’s own Office of Professional Responsibility which is supposed to be in charge of holding agents and officials accountable for malfeasance, but apparently the wheels there are still grinding along.

It’s also worth noting that Inspector General Glenn Fine, who also testified, specifically urged Congress to look into a secret memo issued in January by the Office of Legal Counsel, apparently deploying some novel legal theory to conclude that many of the call records obtained by the FBI were not covered by federal privacy statutes after all. This stood out just because my impression is that OIG usually limits itself to straight reporting and leaves it to Congress to judge what merits investigation, suggesting heightened concern about the potential scope of the ruling, despite FBI’s pledge not to avail itself of this novel legal logic without apprising its oversight committees. Alas, the details here are classified, but Caproni did at one point in her testimony conclude that “disclosure of approximately half of the records at issue was not forbidden by ECPA and/or was
connected to a clear emergency situation.”  There were 4,400 improperly obtained “records at issue” in the FBI’s internal review, of which about 150 were ultimately retained on the grounds that they would have qualified for the emergency exception in the Electronic Communications Privacy Act.  Since that tally didn’t include qualifying records for which legitimate process had nevertheless been issued at some point, the number of “real” emergencies is probably slightly higher, but that still suggests that the “half” Caproni alludes to are mostly in the “disclosure…not forbidden by ECPA” category.  Since ECPA is fairly comprehensive when it comes to telecom subscriber records—or at least, so we all thought until recently—we have to assume she means that these are the types of records the OLC opinion has removed from FISA’s protection. If those inferences are correct, and the new OLC exception covers nearly half of the call detail records FBI obtains, that would not constitute a “loophole” in federal electronic privacy law so much as its evisceration.

Of course, it’s possible that the specific nature of the exception would allay civil libertarian fears. What’s really intolerable in a democratic society is that we don’t know. Operational facts about specific investigations, and even specific investigatory techniques, are rightly classified. But an interpretation of a public statute so significant as to potentially halve its apparent protections cannot be kept secret without making a farce of the rule of law.

Accountability for ‘Exigent Letter’ Abuse At Last? is a post from Cato @ Liberty - Cato Institute Blog

• John McCain channels Dick Cheney: On March 4, McCain introduced a bill that  “would require that anyone anywhere in the world, including American citizens, suspected of involvement in terrorism — including ‘material support’ (otherwise undefined) — can be imprisoned by the military on the authority of the president as commander in chief.”

• President Obama declared passage of a major student-aid reform law yesterday. Will it help? Cato education expert Neal McCluskey calls it a mixed bag.

• Thought experiment: Let’s say for a moment that Congress could actually repeal the health care overhaul. What should they put in its place?

• Should Congress pursue a constitutional amendment that would limit federal spending to one-fifth of the economy?

• Podcast: “Obama’s Intelligence Gathering Needs Oversight” featuring Julian Sanchez.

Wednesday Links is a post from Cato @ Liberty - Cato Institute Blog

Last year, when the issue of defunding ACORN was a hot-button issue, I told countless radio talk show audiences that the focus should be on eliminating the underlying fuel that created the organization—the flow of federal subsidies.

Chris Edwards pointed this out in September. If Congress simply stops subsidizing ACORN, its activists will reincorporate under new names and again become eligible for funds. Alas, that’s precisely what ACORN is currently doing.

From FoxNews.com:

One of the latest groups to adopt a new name is ACORN Housing, long one of the best-funded affiliates. Now, the group is calling itself the Affordable Housing Centers of America.

Others changing their names include what were among the largest affiliates: California ACORN is now Alliance of Californians for Community Empowerment, and New York ACORN has become New York Communities for Change. More are expected to follow suit.

A comment from Frederick Hill, a spokesman for Republicans on the U.S. House oversight and government reform committee, doesn’t indicate that the GOP has quite received the message:

To credibly claim a clean break, argued Hill, the new groups should at least have hired directors from outside ACORN.

It appears that for many Republicans, attacking ACORN represented political opportunism, not a statement about the proper role of the federal government.

Further rendering the GOP’s ACORN agenda moot was last week’s ruling by a U.S. District judge that singling out ACORN for defunding is unconstitutional. It truly boggles the mind what passes for constitutional and unconstitutional in this country.

Tuesday was the birthday of James Madison, the “Father of the Constitution.” Reflecting upon Madison’s wise words, it’s hard to understand how the federal “community development” programs that have funded ACORN could pass constitutional muster:

“The government of the United States is a definite government, confined to specified objects. It is not like state governments, whose powers are more general. Charity is no part of the legislative duty of the government.”

“[T]he powers of the federal government are enumerated; it can only operate in certain cases; it has legislative powers on defined and limited objects, beyond which it cannot extend its jurisdiction.”

“With respect to the two words “general welfare,” I have always regarded them as qualified by the detail of powers connected with them. To take them in a literal and unlimited sense would be a metamorphosis of the Constitution into a character which there is a host of proofs was not contemplated by its creators.”

“If Congress can do whatever in their discretion can be done by money, and will promote the general welfare, the government is no longer a limited one possessing enumerated powers, but an indefinite one subject to particular exceptions.”

See this essay for reasons why these HUD community development programs should be abolished.

To Kill ACORN, Kill the Programs is a post from Cato @ Liberty - Cato Institute Blog

• Well, so much for the peace presidency…

• Patrick Michaels on Copenhagen: “Expect a lot of heat, not much light, and a punt right into our next election.”

• Why the Supreme Court should strike down the Public Company Accounting Oversight Board: “Imagine a government agency with the authority to create and enforce laws, prosecute and adjudicate violations, and impose criminal penalties. Then throw in the power to levy taxes to pay for all the above. And for good measure, make the agency independent of political oversight.”

• Discussing Hayek over at Cato Unbound: Four problems with spontaneous order.

• Podcast: “Obama’s Patriot Act Duplicity.”

Tuesday Links is a post from Cato @ Liberty - Cato Institute Blog

I’ve been poring over the trove of documents the Electronic Frontier Foundation has obtained detailing the long process by which the FISA Amendments Act—which substantially expanded executive power to conduct sweeping surveillance with little oversight—was hammered out between Hill staffers and lawyers at the Department of Justice and intelligence agencies. The really interesting stuff, of course, is mostly redacted, and I’m only partway though the stacks, but there are a few interesting tidbits so far.

As Wired has already reported, one e-mail shows Bush officials feared that if the attorney general was given too much discretion over retroactive immunity for telecoms that aided in warrantless wiretapping, the next administration might refuse to provide it.

A couple other things stuck out for me. First, while it’s possible they’ve been released before and simply not crossed my desk, there are a series of position papers — so rife with  underlining that they look like some breathless magazine subscription pitch — circulated to Congress explaining the Bush administration’s opposition to various proposed amendments to the FAA. Among these was a proposal by Sen. Russ Feingold (D-WI) that would have barred “bulk collection” of international traffic and required that the broad new intelligence authorizations specify (though not necessarily by name) individual targets. The idea here was that if there were particular suspected terrorists (for instance) being monitored overseas, it would be fine to keep monitoring their communications if they began talking with Americans without pausing to get a full-blown warrant — but you didn’t want to give NSA carte blanche to just indiscriminately sweep in traffic between the U.S. and anyone abroad. The position paper included in these documents is more explicit than the others that I’ve seen about the motive for objecting to the bulk collection amendment. Which was, predictably, that they wanted to do bulk collection:

• It also would prevent the intelligence community from conducting the types of intelligence collection necessary to track terrorits and develop new targets.
• For example, this amendment could prevent the intelligence community from targeting a particular group of buildings or a geographic area abroad to collect foreign intelligence prior to operations by our armed forces.

So to be clear: Contra the rhetoric we heard at the time, the concern was not simply that NSA would be able to keep monitoring a suspected terrorist when he began calling up Americans. It was to permit the “targeting” of entire regions, scooping all communications between the United States and the chosen area.

One other exchange at least raises an eyebrow.  If you were following the battle in Congress at the time, you may recall that there was a period when the stopgap Protect America Act had expired — though surveillance authorized pursuant to the law could continue for many months — and before Congress approved the FAA. A week into that period, on February 22, 2008, the attorney general and director of national intelligence sent a letter warning Congress that they were now losing intelligence because providers were refusing to comply with new requests under existing PAA authorizations. A day later, they had to roll that back, and some of the correspondence from the EFF FOIA record makes clear that there was an issue with a single recalcitrant provider who decided to go along shortly after the letter was sent.

But there’s another wrinkle. A week prior to this, just before the PAA was set to expire, Jeremy Bash, the chief counsel for the House Permanent Select Committee on Intelligence, sent an email to “Ken and Ben,” about a recent press conference call. It’s clear from context that he’s writing to Assistant Attorney General Kenneth Wainstein and General Counsel for the Director of National Intelligence Ben Powell about this press call, where both men fairly clearly suggest that telecoms are balking for fear that they’ll no longer be immune from liability for participation in PAA surveillance after the statute lapses. Bash wants to confirm whether they really said that “private sector entities have refused to comply with PAA certifications because they were concerned that the law was temporary.” In particular, he wants to know whether this is actually true, because “the briefs I read provided a very different rationale.”  In other words, Bash — who we know was cleared for the most sensitive information about NSA surveillance — was aware of some service providers being reluctant to comply with “new taskings” under the law, but not because of the looming expiration of the statute. One of his correspondents — whether Wainstein or Powell is unclear — shoots back denying having said any such thing (read the transcript yourself) and concluding with a terse:

Not addressing what is in fact the situation on both those issues (compliance and threat to halt) on this email.

In other words, the actual compliance issues they were encountering would have to be discussed over a more secure channel. If the issue wasn’t the expiration, though, what would the issue have been? The obvious alternative possibility is that NSA (or another agency) was attempting to get them to carry out surveillance that they thought might fall outside the scope of either the PAA or a particular authorization. Given how sweeping these were, that should certainly give us pause. It should also raise some questions as to whether, even before that one holdout fell into compliance, the warning letter from the AG and the DNI was misleading. Was there really ever a “gap” resulting from the statute’s sunset, or was it a matter of telecoms balking at an attempt by the intelligence community to stretch the bounds of their legal authority? The latter would certainly fit a pattern we saw again and again under the Bush administration: break the law, inducing a legal crisis, then threaten bloody mayhem if the unlawful program is forced to abruptly halt — at which point a nervous Congress grants its blessing.

The FISA Amendments: Behind the Scenes is a post from Cato @ Liberty - Cato Institute Blog

The HUD Inspector General’s Office released an audit earlier this week on the department’s progress in making sure local public housing agencies aren’t subsidizing the deceased. According to the report, local “agencies made an estimated $15.2 million in payments on behalf of deceased tenants that they should have identified and corrected.”

The audit found the following “significant weaknesses:”

• HUD and local agencies did not have effective policies related to deceased tenants.
• Local agencies did not provide accurate and reliable information to HUD.
• HUD and local agencies did not safeguard assets to ensure correct assistance payments.

This report is a small illustration of the fundamental problems with the federal government subsidizing local governments. The local public housing agencies are supposed to be monitoring how money is spent and reporting to HUD. HUD is supposed to be monitoring the local public housing agencies. But no one does a very good monitoring job, despite the piles of regulations and paperwork that every level of government has to deal with for such subsidies. The muddled web of responsibilities also makes it easy for fraud artists to take advantage.

Last week, HUD’s IG reported that the department is sending $220 million in stimulus funds to local agencies already known to misspend taxpayer dollars.

From USA Today:

The government is sending millions of dollars in stimulus aid to communities and housing agencies that federal watchdogs have concluded are unable to spend it appropriately, increasing the risk that the money will be wasted.

Since July, auditors working for the Department of Housing and Urban Development’s inspector general have scrutinized at least 22 cities, counties and housing authorities in 15 states and Puerto Rico to measure whether they can handle stimulus funds effectively. Only six, they found, could do so.

The rest — in line to receive more than $220 million in stimulus aid — had shortcomings ranging from poor management to inadequate staffing that threatened their ability to spend the money quickly and appropriately, a series of audit reports show.

According to a HUD spokesperson, the department is “spending millions of dollars to help local officials spend stimulus money effectively.” Maybe that’s true, but all monitoring help is a pure loss to taxpayers and the private sector economy.

Even when the federal oversight does find problems, the money often keeps flowing anyway. As the article notes:

USA TODAY reported in April that HUD planned to send $300 million in stimulus money to public housing authorities that had been repeatedly faulted by outside auditors for mishandling other forms of federal aid. Congress gave the Obama administration permission to withhold stimulus money from some of those agencies, but HUD opted earlier this year not to do so.

For more on fraud and abuse in federal programs, including housing subsidies, see this essay.

Public Housing for the Dead is a post from Cato @ Liberty - Cato Institute Blog

This is a reminder, citizen: Only cranks worry about vastly increased governmental power to gather transactional data about Americans’ online behavior. Why, just last week, Rep. Lamar Smith (R-TX) informed us that there has not been any “demonstrated or recent abuse” of such authority by means of National Security Letters, which permit the FBI to obtain many telecommunications records without court order. I mean, the last Inspector General report finding widespread and systemic abuse of those came out, like, over a year ago! And as defenders of expanded NSL powers often remind us, similar records can often be obtained by grand jury subpoena.

Subpoenas like, for instance, the one issued last year seeking the complete traffic logs of the left-wing site Indymedia for a particular day. According to tech journo Declan McCullah:

It instructed [System administrator Kristina] Clair to “include IP addresses, times, and any other identifying information,” including e-mail addresses, physical addresses, registered accounts, and Indymedia readers’ Social Security Numbers, bank account numbers, credit card numbers, and so on.

The sweeping request came with a gag order prohibiting Clair from talking about it. (As a constitutional matter, courts have found that recipients of such orders must at least be allowed to discuss them with attorneys in order to seek advise about their legality, but the subpoena contained no notice of that fact.) Justice Department officials tell McCullagh that the request was never reviewed directly by the Attorney General, as is normally required when information is sought from a press organization. Clair did tell attorneys at the Electronic Frontier Foundation, and  when they wrote to U.S. Attorney Timothy Morrison questioning the propriety of the request, it was promptly withdrawn. EFF’s Kevin Bankston explains the legal problems with the subpoena at length.

Perhaps ironically, the targeting of Indymedia, which is about as far left as news sites get, may finally hep the populist right to the perils of the burgeoning surveillance state. It seems to have piqued Glenn Beck’s interest, and McCullagh went on Lou Dobbs’ show to talk about the story. Thus far, the approved conservative position appears to have been that Barack Obama is some kind of ruthless Stalinist with a secret plan to turn the United States into a massive gulag—but under no circumstances should there be any additional checks on his administration’s domestic spying powers.  This always struck me as both incoherent and a tragic waste of paranoia. Now that we’ve had a rather public reminder that such powers can be used to compile databases of people with politically unorthodox browsing habits, perhaps Beck—who seems to be something of an amateur historian—will take some time to delve into the story of COINTELPRO and other related projects our intelligence community busied itself with before we established an architecture of surveillance oversight in the late ’70s.

You know, the one we’ve spent the past eight years dismantling.

Who Reads the Readers? is a post from Cato @ Liberty - Cato Institute Blog

Last night I spoke at “The Little Idea,” a mini-lecture series launched in New York by Ari Melber of The Nation and now starting up here in D.C., on the incredibly civilized premise that, instead of some interminable panel that culminates in a series of audience monologues-disguised-as-questions, it’s much more appealing to have a speaker give a ten-minute spiel, sort of as a prompt for discussion, and then chat with the crowd over drinks.

I’d sketched out a rather longer version of my remarks in advance just to make sure I had my main ideas clear, and so I’ll post them here, as a sort of preview of a rather longer and more formal paper on 21st century surveillance and privacy that I’m working on. Since ten-minute talks don’t accommodate footnotes very well, I should note that I’m drawing for a lot of these ideas on the excellent work of legal scholars Lawrence Lessig and Daniel Solove (relevant papers at the links). Anyway, the expanded version of my talk after the jump:

Since this is supposed to be an event where the drinking is at least as important as the talking, I want to begin with a story about booze—the story of a guy named Roy Olmstead.  Back in the days of Prohibition, Roy Olmstead was the youngest lieutenant on the Seattle police force. He spent a lot of his time busting liquor bootleggers, and in the course of his duties, he had two epiphanies. First, the local rum runners were disorganized—they needed a smart kingpin who’d run the operation like a business. Second, and more importantly, he realized liquor smuggling paid a lot better than police work.

So Roy Olmstead decided to change careers, and it turned out he was a natural. Within a few years he had remarried to a British debutante, bought a big white mansion, and even ran his own radio station—which he used to signal his ships, smuggling hooch down from Canada, via coded messages hidden in broadcasts of children’s bedtime stories. He did retain enough of his old ethos, though, that he forbade his men from carrying guns. The local press called him the Bootleg King of Puget Sound, and his parties were the hottest ticket in town.

Roy’s success did not go unnoticed, of course, and soon enough the feds were after him using their own clever high-tech method: wiretapping. It was so new that they didn’t think they needed to get a court warrant to listen in on phone conversations, and so when the hammer came down, Roy Olmstead challenged those wiretaps in a case that went all the way to the Supreme Court—Olmstead v. U.S.

The court had to decide whether these warrantless wiretaps had violated the Fourth Amendment “right of the people to be secure in their persons, houses, papers, and effects against unreasonable searches and seizures.” But when the court looked at how a “search” had traditionally been defined, they saw that it was tied to the common law tort of trespass. Originally, that was supposed to be your remedy if you thought your rights had been violated, and a warrant was a kind of shield against a trespass lawsuit. So the majority didn’t see any problem: “There was no search,” they wrote, “there was no seizure.” Because a search was when the cops came on to your property, and a seizure was when they took your stuff. This was no more a search than if the police had walked by on the sidewalk and seen Roy unpacking a crate of whiskey through his living room window: It was just another kind of non-invasive observation.

So Olmstead went to jail, and came out a dedicated evangelist for Christian Science. It wasn’t until the year after Olmstead died, in 1967, that the Court finally changed its mind in a case called Katz v. U.S.: No, they said, the Fourth Amendment protects people and not places, and so instead of looking at property we’re going to look at your reasonable expectation of privacy, and on that understanding, wiretaps are a problem after all.

So that’s a little history lesson—great, so what? Well, we’re having our own debate about surveillance as Congress considers not just reauthorization of some expiring Patriot Act powers, but also reform of the larger post-9/11 surveillance state, including last year’s incredibly broad amendments to the Foreign Intelligence Surveillance Act. And I see legislators and pundits repeating two related types of mistakes—and these are really conceptual mistakes, not legal mistakes—that we can now, with the benefit of hindsight, more easily recognize in the logic of Olmstead: One is a mistake about technology; the other is a mistake about the value of privacy.

First, the technology mistake. The property rule they used in Olmstead was founded on an assumption about the technological constraints on observation. The goal of the Fourth Amendment was to preserve a certain kind of balance between individual autonomy and state power. The mechanism for achieving that goal was a rule that established a particular trigger or tripwire that would, in a sense, activate the courts when that boundary was crossed in order to maintain the balance. Establishing trespass as the trigger made sense when the sphere of intimate communication was coextensive with the boundaries of your private property. But when technology decoupled those two things, keeping the rule the same no longer preserved the balance, the underlying goal, in the same way, because suddenly you could gather information that once required trespass without hitting that property tripwire.

The second and less obvious error has to do with a conception of the value of privacy, and a corresponding idea of what a privacy harm looks like.  You could call the Olmstead court’s theory “Privacy as Seclusion,” where the paradigmatic violation is the jackboot busting down your door and disturbing the peace of your home. Wiretapping didn’t look like that, and so in one sense it was less intrusive—invisible, even. In another sense, it was more intrusive because it was invisible: Police could listen to your private conversations for months at a time, with you none the wiser. The Katz court finally understood this; you could call their theory Privacy as Secrecy, where the harm is not intrusion but disclosure.

But there’s an even less obvious potential harm here. If they didn’t need a warrant, everyone who made a phone call would know that they could whenever they felt like it. Wiretapping is expensive and labor intensive enough that realistically they can only be gathering information about a few people at a time.  But if further technological change were to remove that constraint, then the knowledge of the permanent possibility of surveillance starts having subtle effects on people’s behavior—if you’ve seen the movie The Lives of Others you can see an extreme case of an ecology of constant suspicion—and that persists whether or not you’re actually under surveillance.  To put it in terms familiar to Washingtonians: Imagine if your conversations had to be “on the record” all the time. Borrowing from Michel Foucault, we can say the privacy harm here is not (primarily) invasion or disclosure but discipline. This idea is even embedded in our language: When we say we want to control and discipline these police powers, we talk about the need for over-sight and super-vision, which are etymologically basically the same word as sur-veillance.

Move one more level from the individual and concrete to the abstract and social harms, and you’ve got the problem (or at least the mixed blessing) of what I’ll call legibility. The idea here is that the longer term possibilities of state control—the kinds of power that are even conceivable—are determined in the modern world by the kind and quantity of information the modern state has, not about discrete individuals, but about populations.  So again, to reach back a few decades, the idea that maybe it would be convenient to round up all the Americans of Japanese ancestry—or some other group—and put them in internment camps is just not even on the conceptual menu unless you have a preexisting informational capacity to rapidly filter and locate your population that way.

Now, when we talk about our First Amendment right to free speech, we understand it has a certain dual character: That there’s an individual right grounded in the equal dignity of free citizens that’s violated whenever I’m prohibited from expressing my views. But also a common or collective good that is an important structural precondition of democracy. As a citizen subject to democratic laws, I have a vested interest in the freedom of political discourse whether or not I personally want to say–or even listen to–controversial speech. Looking at the incredible scope of documented intelligence abuses from the 60s and 70s, we can add that I have an interest in knowing whether government officials are trying to silence or intimidate inconvenient journalists, activists, or even legislators. Censorship and arrest are blunt tactics I can see and protest; blackmail or a calculated leak that brings public disgrace are not so obvious. As legal scholar Bill Stuntz has argued, the Founders understood the structural value of the Fourth Amendment as a complement to the First, because it is very hard to make it a crime to pray the wrong way or to discuss radical politics if the police can’t arbitrarily see what people are doing or writing in their homes.

Now consider how we think about our own contemporary innovations in search technology. The marketing copy claims PATRIOT and its offspring “update” investigative powers for the information age—but what we’re trying to do is stretch our traditional rules and oversight mechanisms to accommodate search tools as radically novel now as wiretapping was in the 20s. On the traditional model, you want information about a target’s communications and conduct, so you ask a judge to approve a method of surveillance, using standards that depend on how intrusive the method is and how secret and sensitive the information is. Constrained by legal rulings from a very different technological environment, this model assumes that information held by third parties—like your phone or banking or credit card information—gets very little protection, since it’s not really “secret” anymore. And the sensitivity of all that information is evaluated in isolation, not in terms of the story that might emerge from linking together all the traces we now inevitable leave in the datasphere every day.

The new surveillance typically seeks to observe information about conduct and communications in order to identify targets. That may mean using voiceprint analysis to pull matches for a particular target’s voice or a sufficiently unusual regional dialect in a certain area. It may mean content analysis to flag e-mails or voice conversations containing known terrorist code phrases. It may mean social graph analysis to reidentify targets who have changed venues by their calling patterns.  If you’re on Facebook, and a you and bunch of your friends all decide to use fake names when you sign up for Twitter, I can still reidentify you given sufficient computing power and strong algorithms by mapping the shape of the connections between you—a kind of social fingerprinting. It can involve predictive analysis based on powerful electronic “classifiers” that extract subtle patterns of travel or communication or purchases common to past terrorists in order to write their own algorithms for detecting potential ones.

Bracket for the moment whether we think some or all of these methods are wise.  It should be crystal clear that a method of oversight designed for up front review and authorization of target-based surveillance is going to be totally inadequate as a safeguard for these new methods.  It will either forbid them completely or be absent from the parts of the process where the dangers to privacy exist. In practice what we’ve done is shift the burden of privacy protection to so-called “minimization” procedures that are meant to archive or at least anonymize data about innocent people. But those procedures have themselves been rendered obsolete by technologies of retrieval and reidentification: No sufficiently large data set is truly anonymous.

And realize the size of the data sets we’re talking about. The FBI’s Information Data Warehouse holds at least 1.5 billion records, and growing fast, from an array of private and government sector sources—some presumably obtained using National Security Letters and Patriot 215 orders, some by other means. Those NSLs are issued by the tens of thousands each year, mostly for information about Americans.  As of 2006, we know “some intelligence sources”—probably NSA’s—were  growing at a rate of 4 petabytes, that’s 4 million Gigabytes—each month.  Within about five years, NSA’s archive is expected to be measured in Yottabytes—if you want to picture one Yottabyte, take the sum total of all data on the Internet—every web page, audio file, and video—and multiply it by 2,000. At that point they will have to make up a new word for the next largest unit of data.  As J. Edgar Hoover understood all too well, just having that information is a form of power. He wasn’t the most feared man in Washington for decades because he necessarily had something on everyone—though he had a lot—but because he had so much that you really couldn’t be sure what he had on you.

There is, to be sure, a lot to be said against the expansion of surveillance powers over the past eight years from a more conventional civil liberties perspective.  But we also need to be aware that if we’re not attuned to the way new technologies may avoid our would tripwires, if we only think of privacy in terms of certain familiar, paradigmatic violations—the boot in the door—then like the Olmstead court, we may render ourselves blind to equally serious threats that don’t fit our mental picture of a privacy harm.

If we’re going to avoid this, we need to attune ourselves to the ways modern surveillance is qualitatively different from past search tools, even if words like “wiretap” and “subpoena” remain the same. And we’re going to need to stop thinking only in terms of isolated violations of individual rights, but also consider the systemic and structural effects of the architectures of surveillance we’re constructing.

Some Thoughts on the New Surveillance is a post from Cato @ Liberty - Cato Institute Blog

With the House Financial Services Committee moving forward with a bill to increase the regulation of our consumer credit markets, particularly our mortgage market, it is worth asking the question:  what’s the best protection for consumers, regulation or competition?

Let’s take the example of mortgage brokers.  They’ve often been targeted as one  of the causes of the crisis.  The story goes that they just made the loans and passed it along to the lenders and/or Wall Street and so, didn’t care about the quality of the loan.

The response of government, first at the state then the federal level, has been to subject mortgage brokers to increased oversight and licensing, with the intent to keep the “bad actors” out of the marketplace.  How well did this all work out?

According to Professor Morris Kleiner and Minn Fed Economist Richard Todd, not exactly the way you’d want.  What the economists found was that tighter regulation on who can become a mortgage broker is actually associated ”with higher broker earnings, fewer brokers, fewer subprime mortgages, higher foreclosure rates, and a greater percentage of high-interest-rate mortgages.”

It seems the barrier to entry created by these licensing requirements reduced competition in a manner that caused far more harm to consumer than any protections provided by increasing the “quality” of mortgage brokers.

Regulation and Competition among Mortgage Brokers is a post from Cato @ Liberty - Cato Institute Blog

As Tim Lynch noted earlier this week, Barack Obama’s justice department has come out in favor of renewing three controversial PATRIOT Act provisions—on face another in a train of disappointments for anyone who’d hoped some of those broad executive branch surveillance powers might depart with the Bush administration.

But there is a potential silver lining: In the letter to Sen. Patrick Leahy (D-VT) making the case for renewal, the Justice Department also declares its openness to “modifications” of those provisions designed to provide checks and balances, provided they don’t undermine investigations. While the popular press has always framed the fight as being “supporters” and “opponents” of the PATRIOT Act, the problem with many of the law’s provisions is not that the powers they grant are inherently awful, but that they lack necessary constraints and oversight mechanisms.

Consider the much-contested “roving wiretap” provision allowing warrants under the Foreign Intelligence Surveillance Act to cover all the communications devices a target might use without specifying the facilities to be monitored in advance—at least in cases where there are specific facts supporting the belief that a target is likely to take measures to thwart traditional surveillance. The objection to this provision is not that intelligence officers should never be allowed to obtain roving warrants, which also exist in the law governing ordinary law enforcement wiretaps. The issue is that FISA is fairly loosey-goosey about the specification of “targets”—they can be described rather than identified. That flexibility may make some sense in the foreign intel context, but when you combine it with similar flexibility in the specification of the facility to be monitored, you get something that looks a heck of a lot like a general warrant. It’s one thing to say “we have evidence this particular phone line and e-mail account are being used by terrorists, though we don’t know who they are” or “we have evidence this person is a terrorist, but he keeps changing phones.” It’s another—and should not be possible—to mock traditional particularity requirements by obtaining a warrant to tap someone on some line, to be determined. FISA warrants should “rove” over persons or facilities, but never both.

The DOJ letter describes the so-called “Lone Wolf” amendment to FISA as simply allowing surveillance of targets who are agents of foreign powers without having identified which foreign power (i.e. which particular terrorist group) they’re working for. They say they’ve never invoked this ability, but want to keep it in reserve. If that description were accurate, I’d say let them. But as currently written, the “lone wolf” language potentially covers people who are really conventional domestic threats with only the most tenuous international ties—the DOJ letter alludes to people who “self-radicalize” by reading online propaganda, but are not actually agents of a foreign group at all.

Finally, there’s the “business records” provision, which actually covers the seizure of any “tangible thing.”  The problems with this one probably deserve their own post, and ideally you’d just go through the ordinary warrant procedure for this. But at the very, very least there should be some more specific nexus to a particular foreign target than “relevance” to a ongoing investigation before an order issues. The gag orders that automatically accompany these document requests also require more robust judicial scrutiny.

Some of these fixes—and quite a few other salutary reforms besides—appear to be part of the JUSTICE Act which I see that Sen. Russ Feingold (D-WI) introduced earlier this afternoon.  I’ll take a closer look at the provisions of that bill in a post tomorrow.

A Chance to Fix the PATRIOT Act? is a post from Cato @ Liberty - Cato Institute Blog

Anger about Obama’s many “czars” is rising, reports the Washington Post:

On paper, they are special advisers, chairmen of White House boards, special envoys and Cabinet agency deputies, asked by the president to guide high-priority initiatives. But critics call them “czars” whose powers are not subject to congressional oversight, and their increasing numbers have become a flash point for conservative anger at President Obama.

Critics of the proliferation of czars say the White House uses the appointments to circumvent the normal vetting process required for Senate confirmation and to avoid congressional oversight.

I have tended not to take concern over “czars” very seriously. After all, advisers to the president can’t exercise any power that the president doesn’t have (or assume without response from Congress or the courts). And I figured the White House doesn’t call people “czars,” that’s just a media term, so it’s not really fair to blame the White House for what reporters say.

But then, thanks to crack Cato intern Miles Pope, I discovered that the White House does call its czars czars, at least informally. A few examples:

In an interview on April 15, 2009 Obama said, “The goal of the border czar is to help coordinate all the various agencies that fall under the Department of Homeland Security…”

In a March 11, 2009, briefing, press secretary Robert Gibbs turned to “address the czar question for a minute, because I think I’ve been asked in this room any number of times if the czars in our White House to deal with energy and health care had too much power.”

On March 11, 2009 Vice President Biden said, “Today I’m pleased to announce that President Obama has nominated as Director of the Office of National Drug Control Policy — our nation’s drug czar — Gil Kerlikowske…”

More examples here.

So they do like czar imagery. So have at them, critics.

And while I said that the advisers have no real power, there’s at least one who does — a real czar — the “pay czar,” Kenneth Feinberg. He “has sole discretion to set compensation for the top 25 employees” of large companies receiving bailouts, and his “decisions won’t be subject to appeal.” Now that’s a czar.

Czar of All the Americans is a post from Cato @ Liberty - Cato Institute Blog

When Treasury Secretary Hank Paul proposed the bailout of Wall Street banks last September, I objected in part because the TARP meant that government connections, not economic merit, would come to determine how capital gets allocated in the economy. That prediction now looks dead on:

As financial firms navigate a life more closely connected to government aid and oversight than ever before, they increasingly turn to Washington, closing a chasm that was previously far greater than the 228 miles separating the nation’s political and financial capitals.

In the year since the investment bank Lehman Brothers collapsed, paralyzing global markets and triggering one of the biggest government forays into the economy in U.S. history, Wall Street has looked south to forge new business strategies, hew to new federal policies and find new talent.

“In the old days, Washington was refereeing from the sideline,” said Mohamed A. el-Erian, chief executive officer of Pimco. “In the new world we’re going toward, not only is Washington refereeing from the field, but it is also in some respects a player as well. . . . And that changes the dynamics significantly.”

Read the rest of the article; it is truly frightening. We have taken a huge leap toward crony capitalism, to our peril.

The Legacy of TARP: Crony Capitalism is a post from Cato @ Liberty - Cato Institute Blog

ABC News reports:

“The total potential federal government support could reach up to $23.7 trillion,” says Neil Barofsky, the special inspector general for the Troubled Asset Relief Program, in a new report obtained Monday by ABC News on the government’s efforts to fix the financial system.

Yes, $23.7 trillion.

“The potential financial commitment the American taxpayers could be responsible for is of a size and scope that isn’t even imaginable,” said Rep. Darrell Issa, R-Calif., ranking member on the House Oversight and Government Reform Committee. “If you spent a million dollars a day going back to the birth of Christ, that wouldn’t even come close to just $1 trillion — $23.7 trillion is a staggering figure.”

Granted, Barofsky is not saying that the government will definitely spend that much money. He is saying that potentially, it could.

At present, the government has about 50 different programs to fight the current recession, including programs to bail out ailing banks and automakers, boost lending and beat back the housing crisis.

We used to complain that George W. Bush had increased spending by ONE TRILLION DOLLARS in seven years. Who could have even imagined new government commitments of $24 trillion in mere months? These promises could make the implosion of Fannie Mae and Freddie Mac look like a lemonade stand closing.

Bailouts Could Hit $24 Trillion? is a post from Cato @ Liberty - Cato Institute Blog

Rep. Ron Paul now has a majority of the House of Representatives supporting his bill for an independent audit of the Federal Reserve System. He presented his case at a Cato Policy Forum recently, with vigorous responses from Bert Ely and Gilbert Schwartz.

Now more than 200 economists have signed a petition calling on Congress to “defend the independence of the Federal Reserve System as a foundation of U.S. economic stability.” The petition seems implicitly a rebuttal to Paul’s bill.

Allan Meltzer, a leading monetary scholar and frequent participant in Cato’s annual monetary conferences, declined to sign the petition and explained why: “I wrote them back and said, ‘the Fed has rarely been independent and it strikes me that being independent is very unlikely’” in the current environment.

Cato senior fellow Gerald O’Driscoll adds:

it is not the critics of the Fed who threaten its independence, but the Fed’s own actions.  Its intervention in the economy is unprecedented in size and scope. It is inevitable that those actions would lead to calls for further Congressional oversight and control. 

One of the lessons here is that once you create powerful government agencies, from tax-funded schools to central banks, there are no perfect libertarian rules for how they should be run. The way to protect freedom is to let people make their own decisions in civil society.  Schools have to decide what to teach, offending the values of some parents and taxpayers. The Fed can be independent and unaccountable and undemocratic, or it can be subject to the political whims of elected officials; neither is a very attractive prospect.

Is an Independent Fed Better? is a post from Cato @ Liberty - Cato Institute Blog

Last week was an interesting week for transparency, with some good news and some bad news.

On the “good” side of the ledger, the administration rolled out “Data.gov,” a growing set of data feeds provided by U.S. government agencies. These will permit the public to do direct oversight of the kind I discussed at our “Just Give Us the Data!” policy forum back in December.

My metric of whether Data.gov is a success will be when independent users and Web sites use government data to produce new and interesting information and applications. The Sunlight Foundation has a contest underway to promote just that. Get ready for really interesting, cool, direct public oversight of the government.

Also under the White House’s new “Open Government Initiative,” an Open Government Dialogue “brainstorming session” began last week. The public can submit ideas for making the government more transparent, participatory, and collaborative. This is important stuff, an outgrowth of President Obama’s open government directive, issued on his first full day in office.

That directive called for the Office of Management and Budget to require specific actions of agencies “within 120 days,” which meant the final product was due last week. And that missed deadline is where we start to slide into the “bad” on the transparency ledger.

Last week, President Obama gave an important speech on national security (which I blogged about here and here). But you couldn’t find the speech in the “Speeches” section of the Whitehouse.gov Web site. It’s buried elsewhere. That’s “basic Web site malpractice,” I told NextGov.com. And I cautioned my friends in the transparency community not to forget Government 1.0 for all the whiz-bang Gov 2.0 projects flashing before our eyes. Whitehouse.gov should be a useful, informative resource for average Americans.

The current top proposal on the “brainstorming” site referred to above is to require a 72-hour mandatory public review period on major spending bills. This is reminiscent of President Obama’s promise to hold bills five days before signing them. But, as Stephen Dinan reports in the Washington Times, the president signed several more bills last week without holding them the requisite time.

The White House protests that they posted links to bills on the Thomas Web site at the Whitehouse.gov blog. But that does not give the public meaningful review of the bills in their final form, as they have come to the president from Congress. “Posting a link from WhiteHouse.gov to THOMAS of a conference report that is expected to pass doesn’t cut it,” says John Wonderlich at Sunlight.

President Obama signed nine new laws since we last reviewed his record on the “Sunlight Before Signing” promise. Alas, it’s been a case study in pulling defeat from the jaws of victory.

Five of the bills were held by the White House more than five days before the president signed them, but they weren’t posted! Simply posting them on Whitehouse.gov in final form would have satisfied “Sunlight Before Signing.”

President Obama’s average drops to .043, and that’s crediting him one win for the DTV Delay Act, which was posted at Whitehouse.gov in its final form for five days after Congress passed it, but before presentment, which is the logical time to start the five-day clock.

Here is the latest tally of bills passed by Congress, including the date presented, date signed, whether they’ve been posted or linked to at Whitehouse.gov, and whether they’ve been posted for the full five days after presentment. (Corrections welcome – there is no uniform way that the White House is posting bills or links, so I may have missed something.)

Transparency: Good News / Bad News is a post from Cato @ Liberty - Cato Institute Blog

Unlike with wiretaps, law enforcement agents are not required by federal statutes to obtain search warrants before employing pen registers or trap and trace devices. These devices record non-content information regarding telephone calls and Internet communications. (Of course, “non-content information” has quite a bit of content – who is talking to whom, how often, and for how long.)

The Electronic Privacy Information Center points out in a letter to Senate Judiciary Committee Chairman Patrick Leahy (D-VT) that the Department of Justice has consistently failed to report on the use of pen registers and trap and trace devices as required by law:

The Electronic Communications Privacy Act requires the Attorney General to “annually report to Congress on the number of pen register orders and orders for trap and trace devices applied for by law enforcement agencies of the Department of Justice.” However, between 1999 and 2003, the Department of Justice failed to comply with this requirement. Instead, 1999-2003 data was provided to Congress in a single “document dump,” which submitted five years of reports in November 2004. In addition, when the 1999-2003 reports were finally provided to Congress, the documents failed to include all of the information that the Pen Register Act requires to be shared with lawmakers. The documents do not detail the offenses for which the pen register and trap and trace orders were obtained, as required by 18 U.S.C. § 3126(2). Furthermore, the documents do not identify the district or branch office of the agencies that submitted the pen register requests, information required by 18 U.S.C. § 3126(8).

EPIC has found no evidence that the Department of Justice provided annual pen register reports to Congress for 2004, 2005, 2006, 2007, or 2008. “This failure would demonstrate ongoing, repeated breaches of the DOJ’s statutory obligations to inform the public and the Congress about the use of electronic surveillance authority,” they say.

It’s a good bet, when government powers are used without oversight, that they will be abused. Kudos to EPIC for pressing this issue. Senator Leahy’s Judiciary Committee should ensure that DoJ completes reporting on past years and that it reports regularly, in full, from here forward.

DoJ Fails to Report Electronic Surveillance Activities is a post from Cato @ Liberty - Cato Institute Blog