reboot the republic daily July 30, 2010 – Free Press Publications

Posted: 30 Jul 2010 08:25 AM PDT

The brick warehouse is not just a warehouse. Drive through the gate and around back, and there, hidden away, is someone’s personal security detail: a fleet of black SUVs that have been armored up to withstand explosions and gunfire.

Along the main street, the signs in the median aren’t advertising homes for sale; they’re inviting employees with top-secret security clearances to a job fair at Cafe Joe, which is anything but a typical lunch spot.

The new gunmetal-colored office building is really a kind of hotel where businesses can rent eavesdrop-proof rooms.

Even the manhole cover between two low-slung buildings is not just a manhole cover. Surrounded by concrete cylinders, it is an access point to a government cable. “TS/SCI,” whispers an official, the abbreviations for “top secret” and “sensitive compartmented information” – and that means few people are allowed to know what information the cable transmits.

All of these places exist just outside Washington in what amounts to the capital of an alternative geography of the United States, one defined by the concentration of top-secret government organizations and the companies that do work for them. This Fort Meade cluster is the largest of a dozen such clusters across the United States that are the nerve centers of Top Secret America and its 854,000 workers.

Other locations include Dulles-Chantilly, Denver-Aurora and Tampa. All of them are under-the-radar versions of traditional military towns: economically dependent on the federal budget and culturally defined by their unique work.

The difference, of course, is that the military is not a secret culture. In the clusters of Top Secret America, a company lanyard attached to a digital smart card is often the only clue to a job location. Work is not discussed. Neither are deployments. Debate about the role of intelligence in protecting the country occurs only when something goes wrong and the government investigates, or when an unauthorized disclosure of classified information turns into news.

The existence of these clusters is so little known that most people don’t realize when they’re nearing the epicenter of Fort Meade’s, even when the GPS on their car dashboard suddenly begins giving incorrect directions, trapping the driver in a series of U-turns, because the government is jamming all nearby signals.

Once this happens, it means that ground zero – the National Security Agency – is close by. But it’s not easy to tell where. Trees, walls and a sloping landscape obscure the NSA’s presence from most vantage points, and concrete barriers, fortified guard posts and warning signs stop those without authorization from entering the grounds of the largest intelligence agency in the United States.

Beyond all those obstacles loom huge buildings with row after row of opaque, blast-resistant windows, and behind those are an estimated 30,000 people, many of them reading, listening to and analyzing an endless flood of intercepted conversations 24 hours a day, seven days a week.

From the road, it’s impossible to tell how large the NSA has become, even though its buildings occupy 6.3 million square feet – about the size of the Pentagon – and are surrounded by 112 acres of parking spaces. As massive as that might seem, documents indicate that the NSA is only going to get bigger: 10,000 more workers over the next 15 years; $2 billion to pay for just the first phase of expansion; an overall increase in size that will bring its building space throughout the Fort Meade cluster to nearly 14 million square feet.

The NSA headquarters sits on the Fort Meade Army base, which hosts 80 government tenants in all, including several large intelligence organizations.

Together, they inject $10 billion from paychecks and contracts into the region’s economy every year – a figure that helps explain the rest of the Fort Meade cluster, which fans out about 10 miles in every direction.

—-

Just beyond the NSA perimeter, the companies that thrive off the agency and other nearby intelligence organizations begin. In some parts of the cluster, they occupy entire neighborhoods. In others, they make up mile-long business parks connected to the NSA campus by a private roadway guarded by forbidding yellow “Warning” signs.

The largest of these is the National Business Park – 285 tucked-away acres of wide, angular glass towers that go on for blocks. The occupants of these buildings are contractors, and in their more publicly known locations, they purposely understate their presence. But in the National Business Park, a place where only other contractors would have reason to go, their office signs are huge, glowing at night in bright red, yellow and blue: Booz Allen Hamilton, L-3 Communications, CSC, Northrop Grumman, General Dynamics, SAIC.

More than 250 companies – 13 percent of all the firms in Top Secret America – have a presence in the Fort Meade cluster. Some have multiple offices, such as Northrop Grumman, which has 19, and SAIC, which has 11. In all, there are 681 locations in the Fort Meade cluster where businesses conduct top-secret work.

Inside the locations are employees who must submit to strict, intrusive rules. They take lie-detector tests routinely, sign nondisclosure forms and file lengthy reports whenever they travel overseas. They are coached on how to deal with nosy neighbors and curious friends. Some are trained to assume false identities.

If they drink too much, borrow too much money or socialize with citizens from certain countries, they can lose their security clearances, and a clearance is the passport to a job for life at the NSA and its sister intelligence organizations.

Chances are they excel at math: To do what it does, the NSA relies on the largest number of mathematicians in the world. It needs linguists and technology experts, as well as cryptologists, known as “crippies.” Many know themselves as ISTJ, which stands for “Introverted with Sensing, Thinking and Judging,” a basket of personality traits identified on the Myers-Briggs personality test and prevalent in the Fort Meade cluster.

The old joke: “How can you tell the extrovert at NSA? He’s the one looking at someone else’s shoes.”

“These are some of the most brilliant people in the world,” said Ken Ulman, executive of Howard County, one of six counties in NSA’s geographic sphere of influence. “They demand good schools and a high quality of life.”

The schools, indeed, are among the best, and some are adopting a curriculum this fall that will teach students as young as 10 what kind of lifestyle it takes to get a security clearance and what kind of behavior would disqualify them.

Outside one school is the jarring sight of yellow school buses lined up across from a building where personnel from the “Five Eye” allies – the United States, Britain, Canada, Australia and New Zealand – share top-secret information about the entire world.

The buses deliver children to neighborhoods that are among the wealthiest in the country; affluence is another attribute of Top Secret America. Six of the 10 richest counties in the United States, according to Census Bureau data, are in these clusters.

Loudoun County, ranked as the wealthiest county in the country, helps supply the workforce of the nearby National Reconnaissance Office headquarters, which manages spy satellites. Fairfax County, the second-wealthiest, is home to the NRO, the CIA and the Office of the Director of National Intelligence. Arlington County, ranked ninth, hosts the Pentagon and major intelligence agencies. Montgomery County, ranked 10th, is home to the National Geospatial-Intelligence Agency. And Howard County, ranked third, is home to 8,000 NSA employees.

“If this were a Chrysler plant, we’d be talking Chrysler in the bowling alley, Chrysler in the council meetings, Chrysler, Chrysler, Chrysler,” said Kent Menser, a Defense Department employee helping Howard County adjust to the growth of nearby Fort Meade. “People who are not in the workforce of NSA don’t fully appreciate the impact of it on their lives.”

—-

The impact of the NSA and other secretive organizations in this cluster is not just monetary. It shades even the flow of traffic one particular day as a white van pulls out of a parking lot and into midday traffic.

That white van is followed by five others just like it.

Inside each one, two government agents in training at the secretive Joint Counterintelligence Training Academy are trying not to get lost as they careen around local roads practicing “discreet surveillance” – in this case, following a teacher in the role of a spy. The real job of these agents from the Army, U.S. Customs and other government agencies is to identify foreign spies and terrorists targeting their organizations, to locate the spies within and to gather evidence to take action against them.

But on this day, they are trainees connected to one another by radios and specially labeled street maps. Some 4,000 federal and military agents attend counterintelligence classes in the Fort Meade cluster every year, moving, as these agents are, past unsuspecting residents going about their business.

The agent riding shotgun in one white van holds the maps on her lap as she frantically moves yellow stickies around, trying to keep tabs on the other vans and the suspect, or “rabbit,” as he is called.

Other agents gun their engines and race 60 mph, trying to keep up with the rabbit while alerting one another to the presence of local police, who don’t know that the vans weaving in and out of traffic are driven by federal agents.

Suddenly, the rabbit moves a full block ahead of the closest van, passes through a yellow light, then drives out of sight as the agents get stuck at a red light.

Green light.

“Go!” an agent yells in vain through the windshield as the light changes and the car in front of her pokes along. “Move! Move! Move!”

“We lost him,” her partner groans as they do their best to catch up.

Finally, the agents end their surveillance on foot at a Borders bookstore in Columbia where the rabbit has reappeared. Six men in polo shirts and various shades of khaki pants scan the magazine racks and slowly walk the aisles.

Their instructor cringes. “The hardest part is the demeanor,” he confides, watching as the agents follow the rabbit in the store, filled with women in shifts and children in flip-flops. “Some of them just can’t relax enough to get the demeanor right. . . . They should be acting like they’re browsing, but they are looking over the top of a book and never move.”

Throughout the cluster are examples of how the hidden world and the public one intersect. A Quiznos sandwich shop in the cluster has the familiarity of any other restaurant in the national chain, except for the line that begins forming at 11 a.m. Those waiting wear the Oakley sunglasses favored by people who have worked in Afghanistan or Iraq. Their shoes are boots, the color of desert sand. Forty percent of the NSA’s workforce is active-duty military, and this Quiznos is not far away from one of their work sites.

In another part of the cluster, Jerome James, one of its residents, is talking about the building that has sprung up just beyond his back yard. “It used to be all farmland, then they just started digging one day,” he says. “I don’t know what they do up there, but it doesn’t bother me. I don’t worry about it.”

The building, sealed off behind fencing and Jersey barriers, is larger than a football field. It has no identifying sign. It does have an address, but Google Maps doesn’t recognize it. Type it in, and another address is displayed, every time. “6700,” it says.

No street name.

Just 6700.

—-

Inside such a building might be Justin Walsh, who spends hours each day on a ladder, peering into the false ceilings of the largest companies in Top Secret America. Walsh is a Defense Department industrial security specialist, and every cluster has a version of him, whether it’s Fort Meade; or the underground maze of buildings at Crystal City in Arlington, near the Pentagon; or the high-tech business parks around the National Aerospace Intelligence Center in Dayton, Ohio.

When he’s not on his ladder, Walsh is tinkering with a copy machine to make sure it cannot reproduce the secrets stored in its memory. He’s testing the degausser, a giant magnet that erases data from classified hard drives. He’s dissecting the alarm system, its fiber-optic cable and the encryption it uses to send signals to the control room.

The government regulates everything in Top Secret America: the gauge of steel in a fence, the grade of paper bag to haul away classified documents, the thickness of walls and the height of raised soundproof floors.

In the Washington area, there are 4,000 corporate offices that handle classified information, 25 percent more than last year, according to Walsh’s supervisor, and on any given day Walsh’s team has 220 buildings in its inspection pipeline. All existing buildings have things that need to be checked, and the new buildings have to be gone over from top to bottom before the NSA will allow their occupants to even connect to the agency via telephone.

Soon, there will be one more in the Fort Meade cluster: a new, four-story building, going up near a quiet gated community of upscale townhouses, that its builder boasts can withstand a car bomb. Dennis Lane says his engineers have drilled more bolts into each steel beam than is the norm to make the structure less likely to buckle were the unthinkable to happen.

Lane, senior vice president of Ryan Commercial real estate, has become something of a snoop himself when it comes to the NSA. At 55, he has lived and worked in its shadow all his life and has schooled himself on its growing presence in his community. He collects business intelligence using his own network of informants, executives like himself hoping to making a killing off an organization many of his neighbors don’t know a thing about.

He notices when the NSA or a different secretive government organization leases another building, hires more contractors and expands its outreach to the local business community. He’s been following construction projects, job migrations, corporate moves. He knows that local planners are estimating that 10,000 more jobs will come with an expanded NSA and an additional 52,000 from other intelligence units moving to the Fort Meade post.

Lane was up on all the gossip months before it was announced that the next giant military command, U.S. Cyber Command, would be run by the same four-star general who heads the NSA. “This whole cyber thing is going to be big,” he says. “A cyber command could eat up all the building inventory out there.”

Lane knows this because he has witnessed the post-9/11 growth of the NSA, which now ingests 1.7 billion pieces of intercepted communications every 24 hours: e-mails, bulletin board postings, instant messages, IP addresses, phone numbers, telephone calls and cellphone conversations.

In her own way, Jeani Burns has witnessed this, too.

Burns, a businesswoman in the Fort Meade cluster, is having a drink one night after work and gesturing toward some men standing in another part of the bar.

“I can spot them,” she says. The suit. The haircut. The demeanor. “They have a haunted look, like they’re afraid someone is going to ask them something about themselves.”

Undercover agents come in here, too, she whispers, to watch the same people, “to make sure no one is saying too much.”

Burns would know – she’s been living with one of those secretive men for 20 years. He used to work at the NSA. Now he’s one of its contractors. He’s been to war. She doesn’t know where. He does something important. She doesn’t know what.

She says she fell for him two decades ago and has had a life of adjustments ever since. When they go out with other people, she says, she calls ahead with cautions: “Don’t ask him stuff.” Sometimes people get it, but when they don’t, “it’s a pain. We just didn’t go out with them again.”

She describes him as “an observer. I’m the interloper,” she says. “It bothers me he never takes me traveling, never thinks of anything exciting to do. . . . I feel cheated.”

But she also says: “I really respect him for what’s he’s done. He’s spent his whole life so we can keep our way of living, and he doesn’t get any public recognition.”

Outside the bar, meanwhile, the cluster hums along. At night, in the confines of the National Business Park, office lights remain on here and there. The 140-room Marriott Courtyard is sold out, as usual, with guests such as the man checking in who says only that he’s “with the military.”

And inside the NSA, the mathematicians, the linguists, the techies and the crippies are flowing in and out. The ones leaving descend in elevators to the first floor. Each is carrying a plastic bar-coded box. Inside is a door key that rattles as they walk. To those who work here, it’s the sound of a shift change.

As employees just starting their shifts push the turnstiles forward, those who are leaving push their identity badges into the mouth of the key machine. A door opens. They drop their key box in, then go out through the turnstiles. They drive out slowly through the barriers and gates protecting the NSA, passing a steady stream of cars headed in. It’s almost midnight in the Fort Meade cluster, the capital of Top Secret America, a sleepless place growing larger every day.

Suppose There Were Food Insurance

Posted: 30 Jul 2010 08:07 AM PDT

From The Mises Institute

Suppose there were food insurance. Rather than everyone paying for food with their own money, people would pay a certain fee to their insurance company every month, and in return the insurance company would pay for all of its clients’ groceries.

Sound like a good idea? Perhaps, but what do you suppose would happen if we had this kind of food insurance?

One thing we should expect is that there would be a general increase in food consumption, with a particular increase in more-expensive foods. As of today, who can afford a Kobe porterhouse steak with white truffles and saffron, La Bonnotte potatoes and Almas Iranian caviar on the side, a Perrier Jouet Belle Epoque Blanc de Blanc to wash it down with, and a Chocopologie by Knipschildt and Kopi Luwak coffee for dessert? But if you’re paying the same whether you get this or a hamburger with fries and a soft drink, why not give the steak dinner a try?

As more expensive foodstuffs become popular, cheaper food will become repackaged and given higher prices. Which would you pay more for: a can of green beans, or a can of hand-picked, hand-selected haricots verts? The French term for “green beans” just makes you want to spend a few dollars more on it, doesn’t it?

Thus, consumers will drive up the overall cost of food. Indeed, insurance or not, it is always the consumer who is responsible for upward pressure on prices. This is kept in check by the fact that consumers have to spend their own, limited funds. Remove that check, and the check on prices will be removed as well.

Naturally, farmers will begin to make huge profits from this increased demand. There will be an expansion of the agricultural sector. More exotic foods will be introduced, and well-known food will, again, be repackaged and sold as more exotic in order to compete.

Since demagogues are always on the lookout for situations to exploit, farmers would then be cast as villains, unfairly profiting off the consumer. People do have to eat, after all. How can one profit off something people need to survive? One could expect several decades of demand that the government do something about rising food prices.

In the meantime, insurance companies will begin trying to figure out how to cut costs. Premiums will go up, making it harder for poorer people to afford food insurance. The government will likely step in to offer FoodCare and FoodAid for the elderly and the poor. Grocery stores will build up huge bureaucracies to deal with the private and government insurance, driving up prices still further as they cover those employees’ wages.

Both private and government insurance will try rationing, negotiating prices with stores, and dictating what stores consumers can go to and what those consumers can buy. Demagogues will start complaining about the insurance companies, how they are charging high premiums but not allowing consumers to get what they want.

Eventually, people will begin to think that it’s just awful that anyone has to pay for their own groceries at all. Stores won’t display their prices, and store managers will act offended if you even ask about cost. And as people pay more to the insurance companies while getting less and less — people will of course have forgotten what it was like before insurance, when food was cheap and abundant — they will demand that someone do something about it.

And someone will. Regulations on agriculture, grocery stores, and insurance companies will increase, typically exacerbating problems in such a way that the companies will further be blamed for continued problems. The same problems will be used to justify more control over each industry. Finally, socialized food will be proposed.

With socialized food production and distribution come long food lines and limited rations among limited choices. (That is, when there’s even food available.)

Don’t think this could happen? All we need is a wartime excuse to cap wages on the average worker, giving employers an incentive to come up with nonsalary compensations — such as insurance — to attract workers. Something like the incentives adopted during the wage controls imposed during World War II.

Still think it couldn’t happen? Change “food” into “healthcare,” “grocery stores” into “hospitals,” and “farms” into “pharmaceutical companies,” and the above narrative can explain why the healthcare industry is in the situation it is in — and why we have moved more and more toward a socialized healthcare system in this country.

The bottom line here is that insurance of this kind — as opposed to catastrophic insurance like car insurance, which pays for accidents and not for oil changes and general repairs — creates moral hazard. Prices help provide accurate information, but when you are insulated from the real costs of something, you receive bad information about that product — and no one can make good decisions with bad information.

The less expensive something is, the more we are likely to consume. For example, my wife tells me she once had great insurance — a ten-dollar copay for anything. So she went to the doctor over the tiniest sniffle. Today she is a public school teacher, and as such her insurance is nowhere near as generous, so seasonal colds are waited out and treated with over-the-counter medicines that are cheaper (and work just as well).

I have no insurance, so I don’t go to the doctor at all. Of course, if the US healthcare-insurance model had not been driving up prices for the better part of a century, I could afford to see the doctor anyway. But don’t worry about me. The current federal health-insurance legislation will soon force me to buy insurance even though I can’t afford it — and I, as well as those like me, will contribute to the next mortgage crisis when we are forced by law to buy insurance rather than choose, as I have done, to pay my mortgage instead.

IMF Says U.S. Financial System May Need $76 Billion in Capital

Posted: 30 Jul 2010 07:37 AM PDT

From Bloomberg

The U.S. financial system remains fragile and banks subjected to additional economic stress might need as much as $76 billion in capital, according to the results of International Monetary Fund stress tests.

The findings, released today as part of a broader IMF report on the U.S. financial system, suggested that while the nation’s banking system is stable, it remains vulnerable. Home prices, commercial real estate loans and economic growth have the potential to cause shocks that could expose banks to more losses.

Under one scenario, small and regional banks as well as subsidiaries of foreign banks would need $40.5 billion in additional capital to meet a benchmark capital ratio of 6 percent Tier 1 common equity from 2010 to 2014. Under the adverse scenario, those needs rise to $76.3 billion, according to the report.

“Pockets of vulnerabilities linger,” the fund said in the report. The U.S. is recovering from what the IMF called “one of the most devastating financial crises in a century.”

Because the economic recovery is proceeding slowly, regulators must be especially vigilant in guarding against risks and weak spots, the report said.

The IMF also renewed its call for the Obama administration to push ahead with changes to Fannie Mae and Freddie Mac, the government-sponsored enterprise housing companies. The report suggested a partial privatization strategy, in which the government would take over the GSEs’ public housing mission while privatizing investment operations.

Regulators’ Role

The IMF stopped short of recommending recapitalizing the banks it studied in the report. Instead, it urged regulators to monitor conditions, especially for smaller institutions with less market access.

The numbers “are not frightening,” said Christopher Towe, the IMF’s deputy director of monetary and capital markets who directed the assessment. The review process was created in the wake of the Asian crisis, and the U.S. is the first major economy to undergo it since the global financial turmoil.

“We are particularly concerned about the situation among the small and medium-sized banks, which are most heavily exposed to the commercial real estate sector,” he told reporters in a press briefing yesterday.

The IMF said second-quarter results underscore the balance- sheet risks identified by the stress tests. “Initial releases of second-quarter earnings results have been disappointing,” the IMF report said.

Real Estate

The IMF said about $1.4 trillion of commercial real estate loans will mature from 2010 to 2014, almost half of which are already “seriously delinquent,” with payments 90 days or more past due, or “underwater,” with loan values exceeding property values. Home prices are another concern, as are the spillover effects if problems intensify as they spread among institutions.

U.S. regulators will need to step up their efforts to coordinate oversight after the Dodd-Frank legislation that President Barack Obama signed this month, the IMF said. The report generally praised the new law, while also flagging ongoing concerns.

“In some areas we were a little bit disappointed,” Towe said. “We see the system of regulatory agencies as still remaining exceptionally complex with a very large number of agencies involved and we would have preferred to have seen a much more bold streamlining.”