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How Much Are the NSA and CIA Front Running Markets?

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A 2008 paper by Arindrajit Dube, Ethan Kaplan, and Suresh Naidu (hat tip MS) found evidence that the CIA and/or members of the Executive branch either disclosed or acted on information about top-secret authorizations of coups. Stocks in “highly exposed” firms rose more in the pre-coup authorization phase than they did when the coup was actually launched.

Here’s how the dataset was developed:

We selected our sample of coups on the following basis: (1.) a CIA timeline of events or a secondary timeline based upon an original CIA document existed, (2.) the coup contained secret planning events including at least one covert authorization of a coup attempt by a national intelligence agency and/or a head of state, and (3.) the coup authorization was against a government which nationalized property of at least one sufficiently exposed multinational firm with publicly traded shares.

Out of this, the authors found four coup attempts that met their criteria: the ouster of Muhammed Mossadegh in Iran in 1953, two programs in Guatemala in 1952 and 1954 that eventually removed Jacobo Arbenz Guzman; the unsuccessful effort to topple Castro in 1961, and an operation that began in Chile in 1970 and culminated in overthrow of Salvador Allende. Then they chose companies:

We apply 3 criteria to select our sample of companies. First, a company must be publicly traded, so that we can observe a stock price. Secondly, the company must be “well-connected”, in terms of being linked to the CIA. Finally, the company should be highly exposed to political changes in the affected country, in the sense that a large fraction of a company’s assets are in that country.

They used these criteria to devise two samples (based on different definitions of “highly exposed”) and tested both.

Their conclusions:

Covert operations organized and abetted by foreign governments have played a sub- stantial role in the political and economic development of poorer countries around the world. We look at CIA-backed coups against governments which had nationalized a considerable amount of foreign investment. Using an event-study methodology, we find that private information regarding coup authorizations and planning by the U.S. government increased the stock prices of expropriated multinationals that stood to benefit from the regime change. The presence of these abnormal returns suggests that there were leaks from the CIA or others in the executive branch of government to asset traders or that government officials with access to this information themselves traded upon it. Consistent with theories of asset price determination under private information, this information took some time to be fully reflected in the stock price. Moreover, the evidence we find suggests that coup authorization information was only present in large, politically connected companies which were also highly exposed.

We find that coup authorizations, on net, contributed more to stock price rises of highly exposed and well connected companies than the coup events themselves. These price changes reflect sizeable shifts in beliefs about the probability of coup occurrence.

Our results are robust across countries, except Cuba, as well as to a variety of controls for alternate sources of information, including public events and newspaper articles. The anomalous results for Cuba are consistent with the information leaks and inad- equate organization that surrounded that particular coup attempt.

Now sports fans, given the fact that there’s reason to believe that people in the intelligence with access to privileged information weren’t above leaking it to people who could take advantage of it, why should we expect things to be different now? And given what has already been revealed about the NSA’s data gathering, if you were a clever trader and had access to this information, how would you mine it? How would you go about finding patterns or events to exploit?

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151 comments

  1. Hugo Stiglitz

    I’ve been hoping this topic would come up here. I’ve been wondering this for a long time, well before the Snowden “revelations” (if we can call confirmation of what we knew or suspected a revelation). The ability to intercept, store and data mine all electronic communications obviously would have a value – value that is unimaginably high – for anyone looking to manipulate markets and steal from the unsuspecting rubes who depend on them, which is pretty much everyone.
    What I find amazing when I’ve brought this up before is the level of disbelief. As if no one in the national “security” world could possibly be a thief. I cannot comprehend that level of naïveté.

    1. armchair

      How crazy does it sound to say that no one with access to this information would ever give in to the temptation to front run mergers, to sell it to insider traders, etc?

      1. ex-white shoe atty

        a sizeable chunk of big M&A are handled literally by a few handfuls of law firm partners and MS/GS/ML rainmakers.

        tap (metadata is all you need) the phone lines/email of these 40 people and their admin. assistants, you’ll have the info to make a fortune.

    2. diptherio

      On the “we already knew what Snowden leaked” meme: I don’t think this is accurate. Sure, many of us suspected that intel agencies were gathering vast amounts of information, but suspicion isn’t proof. Also, there’s been a good bit besides just the fact of NSA data-collection that Snowden’s released. Cyber attacks on over-seas civilian targets, for instance.

      1. Hugo Stiglitz

        That was not meant in anyway to diminish what Mr. Snowden has done. He has done his nation and the world a great service IMHO, and will pay dearly for his actions unless there is a paradigm shift in how the US operates – not bloody likely. But based on statements by Senators Udall and Wyden, the fact that they were building a massive data storage and data mining facility, and the hardware that was installed at key points in the telecom infrastructure not long after 911, with full cooperation from the corporations that owned, it was pretty easy to deduce what they were doing. That said, having confirmation is invaluable, as well as disclosures of the degree of cooperation given by other (non-telecom) companies was new, though again, in many corners that too was assumed.
        Plus there is plenty more to come, and I hope this has the intended effect, though I am not optimistic on that given how easy it is to manipulate opinion in the US (another confounding fact when one considers the mountains of evidence that Americans have been and are lied to all the time by media and a government with a decades long history of abuses of power).

      2. Banger

        The proof for malfeasance in the intel community is astonishingly large–anyone who did not assume NSA is doing what Snowden claims and much more is not aware of the character and history of the American intel community. What NSA is doing is almost trivial in comparison to what it has done in the past and is doing in many other areas and it’s not like they’ve done a great job at keeping it secret other than keeping it out of the mainstream media which acts as a virtual arm of the intel community.

          1. Susan the other

            And then there were those amazingly prescient traders who dumped all that airline stock just the day before 911. But hey, that could have been for other reasons so that is a conspiracy theory. Yes it is. I’m disappointed these guys only came up with 4 coups that fit their hypothesis. Did the stock market take off when JFK was killed?

    3. Gregg Barak

      Makes a lot of sense. I suspect many folks reading naked capitalism have read David Ignatius’s Bloodmoney (2011), if not do so. The price winning Washington Post jouralist who has covered the Middle East and the CIA for many years, spells these “fictional” realities out for all to comprehend the infinite possibilites.

      Also read my award winning book–http://www.amazon.com/Theft-Nation-Looting-Regulatory-Colluding/dp/1442207795

      Theft of a Nation: Wall Street Looting and Federal Regulatory Colluding (2012). Link above.

      1. nonclassical

        ..Susan-it was much, much more involved than “dumping stock”-there were “puts” placed on United and American Airlines to FAIL-follow Paul Tioxin’s further documentation on Alan “Buzzy” Krongard-and Krongard’s history, inside various banks-CIA-Deutche Bank where 911 “puts” were placed, and further involvement with Eric Prince-Blackwater…

        1. Klassy!

          I’ve always wondered about the shorting and more specifically, why there wasn’t too much said. In fact, the dearth of words on the subject led me to believe that it was just a rumour swirling around the events.
          Actually, my original thought was that OBL because I just always think war is about profiting and this fit my narrative. I was making facts fit my conclusion.

          1. rob

            Osama bin laden didn’t have to “steal” a couple of bucks from insider trading.His dad was a senior partner with george bush’s dad,george HW bush in “the carlyle group”. Among the many things they owned were many defense contractors and supply companies.So ,aside from his family being the rockefellers of saudi arabia, they were to make a lot of money from any new shift to a ‘war on terror’ spending levels.After news came out of bin ladens being a senior investor in carlyle, he supposedly stepped down… but what does that mean?his lawyers now run the shell companies and holding companies that are owned by the bin ladens….
            Back in the day of the savings and loan scandals, salem bin laden was business partners (through jim bath) with george W bush..If the bin ladens are making money, the bushes are making money…and visa versa

        2. Jack Parsons

          Gee I dunno. He grew up in a family of billionaires, not sure he knew that much about investing.

  2. from Mexico

    For those who buy into Adam Smith’s fairy tale about how markets operate independently of political power, the state’s instruments of violence (the police and the military), I have a nice piece of oceanfront property in Arizona I’m sure you interest you.

    1. Massinissa

      Mexico, I would go a step further and sell them the Lance of Longinius, a Battleship Yamato converted into a spaceship, the Roman Empire, and King Arthur’s ovaries. Only selling them oceanfront arizona property understates their naivete.

      Of course, most of the folks who actually peddle that kind of theory are basically hoping Toto doesnt pull away the curtain, but quite frankly its absolutely amazing so many people never even think of doing so, and take the nonsense at face value.

    2. ambrit

      Dear from Mexico;
      Wait, wait! Don’t be too hasty! When the main surge in world sea level change comes, and not too far in the future either, the upper Sea of Cortes will become El Golfo de Arizona. The Salton Sea will be South Californias go to place for water sports! (Also an arm of El Golfo de Arizona.)

    3. jrs

      There is unlikely to be any systems free of this, short perhaps of various anarchists utopias. I guess all we can ask is the system throw us a few crumbs at least?

      1. from Mexico

        Don’t get me wrong. I’m not at all suggesting surrender or defeat. What I’m suggesting is what Reinhold Niebuhr explained in The Irony of American History:

        In fairly honest democracies they [the industrial classes] saw the possibility of organizing both economic and political power to match that of the more privileged classes…

        The American labor movement…was a pragmatic movement, born of the necessity of setting organized power against organized power in a technical society. Gradually it became conscious of the fact that economic power does try to bend government to its own ends [as opposed to what Adam Smith's fairy tales would have us believe]. It has, therefore, decided to challenge a combination of political and economic power with a like combination of its own…

        If we’ve passed the Rubicon and the “fairly honest democracy” which Niebuhr spoke of no longer exists, then what other option is there besides revolution? As Sydney Smith so eloquently put it:

        From what motive but fear, I should like to know, have all the improvements in our constitution proceeded? If I say, Give this people what they ask because it is just, do you think I should get ten people to listen to me? The only way to make the mass of humanity see the beauty of justice is by showing them in pretty plain terms the consequences of injustice.

    4. Nathanael

      Don’t be unfair to Adam Smith; he wrote in a period when businessmen were often also noblemen who hired their own oath-bound thugs.

      Most right-wingers have never actually read Adam Smith. Among other things, he says that whenever two businessmen get together, they conspire to abuse the public.

    1. Banger

      Sounds like a joke but it may have some truth in it. The CIA’s origins are from the intel services of banks and has kept its connections with Wall Street since then as would make sense since the CIA is part of the power structure. For some in the RE and financial community the bubble was planned.

      1. Hugo Stiglitz

        People laughed at the tinfoil hat theory about selling cocaine to fund the Contras too. There are plenty of sociopaths in the intelligence world.

      2. Systemic Disorder

        The financial bubble was not “planned” — to suppose so is to assume that capitalism is a stable system built around rational planning, and we’ve had more than enough crashes to tell us otherwise.

        Insiders can certainly take advantage of the ups and downs, and do so, but that is not the same as planning all of it ahead of time. Capitalism is far too unstable for anybody to “plan” a boom or a bust ahead of time. Rather, these are the natural cycles of an unstable system.

        But it does make sense for the CIA to be acting on inside information. After all, the reigning neoliberal mantra is that government should be run like a business…

        1. Banger

          Well I know for certain that “some” market insiders knew they were in a bubble and did plan on feeding that bubble until it burst–hoping to get out of it what the could–by “planning” I don’t mean a bunch of them sat down and said let’s crash the market in 08 what they did plan was how to feed the bubble and when not to feed it and the timing thereof. Conspiracy is now a much more interesting art than it once was–it is accomplished often through signals not words or written documents. The insiders knew the market would crash and there are stories around that some knew it was close and pushed the market out a window just in time (for them) which may or may not be true.

          The stakes on WS are way, way, way too high for things to be left entirely to chance–everyone wants to manipulate the market, particularly then when regulators did not care at all.

          1. jake chase

            I always found it amusing that a large number of people believed in the ‘honesty’ of the financial markets. Of course they are manipulated, and gamed, but stocks, for example, have to go either up or down, so anyone choosing to play even without inside information still has a chance to get things right, and one of the best reasons to watch chart patterns and volume is to get a sense of what those having inside information may be doing.

            Meanwhile, those doing conventional research and worrying about earnings would probably get more out of tracking baseball scores.

          2. Carla

            My god, a lot of ordinary people in Cleveland, OH, knew it was a real estate bubble. House prices here went up from super-low to double or triple super-low.

            This “nobody knew” talk never fails to amaze regular people with common sense.

        2. They didn't leave me a choice

          >implying capitalism is a force of nature
          >implying booms and busts are not meticulously designed, built and then performed by banksters
          There is absolutely nothing “natural” about booms and busts, it’s all built into the system, and can easily be controlled from the top. Need a boom? Give easy credit. Need a bust? Withdraw said easy credit.

          Great depressions (like the one we have now) are what happens when the boom-bust mechanism can no longer perform like it did. When private debt grows too big to sustain.

          In any case, claiming these are just “natural cycles” or somesuch implies that it’s out of human control. Out of control of individuals perhaps, but not the banking cabal.

          1. bdy

            It seemed timed for the election. Remember the crash was predicated by that crazy surge in oil prices in the summer of ’08. Commodities were through the roof and all the back and forth was “peak oil!” no, “speculators!”

            A guy on NPR (just as NPR was going right wing) said that a gallon of gas in my tank had exchanged hands fifty-something times before I bought it, and that over half of oil transactions were made on the International Commodities Exchange – a dark market where a handful big, big players play.

            Overleveraged folks miss a couple house payments so they can keep driving to work. Boom, Paulson is threatening martial law to senators (who hear from the same suits that put them in the “pornographic return” portfolios that Hank knows his shit). They cut him a check for $700B when that still seemed like a lot of money, and a structure for funnelling umpteen trillion into god knows where hits the Bushies in the ass on their way out the door. CT rules.

          2. zadoofka

            Reply to Carla: “and no body knew”. I knew in 2003 when I stood on a hillside in Claremont, Florida and as far as I could see, housing was being built. Construction on homes was going CRAZY. You could drive down a street with 12 new homes, eight were “for sale by owner”. Every house had 10-15 cars in the driveway with 10-12 people living there as renters. All of them working at entertainment parks in Orlando, for minimum wage, pouring cokes or scraping gum off sidewalks.

            “And no body knew”. These were the days of no money down on homes, interest only loans and variable interest rate mortgages. I knew. Who couldn’t?

            “And no body knew”. Those who make financial policy are not in touch with the real world. They have personal assistants, cooks, limo service, the gulfstream, etc. etc.
            “AND NO BODY KNEW”

            I KNEW.

  3. Stella Doem

    Then there’s Tom Donilon, whose work at Fanny Mayhem helped make people homeless and broke while making a smaller number of other people enourmously wealthy, he’s the Nat’l Security Advisor.

  4. Tokai Tuna

    Brookings supports imperial war, by virtue of aggression. It was no surprise to see this NGOs role in housing, as much as in state security affairs. DeMarco’s mouse like twitching before the purveyors of real estate violence says it all to the serfs: “You don’t matter. We set you up to fail, we’ll do it again”

  5. Schofield

    As Darwin might say if he was alive today:-

    “There goes that group selection again!”

  6. rob

    In Mike Ruppert’s book”Crossing the Rubicon”.He had highlighted the insider trading scenerios for 9-11.
    There were several. involving “shorting” american airlines,and other air services, as well as some insurance companies.The most memorable was dealing with Deutsche Banks A.B. Brown unit.They seemed to have taken advantage of 9-11.By stock trades that morning. The head of the unit at the time was “buzzy” Krongard. An ex,high ranking CIA executive.

    1. harposox

      Ruppert also detailed the deep historical connections between the CIA and Wall Street, and explained exactly how the insiders front-run the stock market via a computerized system called “ECHELON.”

      Rubicon really was a monumental piece of journalism, certainly opened my eyes to how the real world functions…

  7. Paul Tioxon

    BETHESDA, Md., Aug. 9 /PRNewswire/ — Iridium Satellite is pleased to
    announce that Alvin B. (“Buzzy”) Krongard has joined its Board of
    Directors. Buzzy Krongard is the former Chief Executive Officer and
    Chairman of the Board of Alex.Brown Incorporated, the nation’s oldest
    investment banking firm. In addition, Krongard served as Vice Chairman of
    the Board of Bankers Trust, in addition to holding other financial industry
    posts. He also served as Counselor to the Director of the U.S. Central
    Intelligence Agency (CIA), then as Executive Director of the CIA from 2001
    to 2004.
    Iridium, as the only provider of truly global satellite voice and data
    communications, helps government organizations and businesses around the
    world communicate where there are no other forms of communication
    available. Iridium is the only mobile satellite communications service that
    provides complete pole-to-pole coverage of the earth, making it ideal for
    remote and backup communications. As such, Iridium has experienced
    substantial business growth in providing services for mission critical
    communications, as well as for response to natural and manmade disasters.
    Iridium is tapping top-level counsel as it expands its Board. The company
    announced its appointment of Tom Ridge, Former Director of the U.S.
    Department of Homeland Security, to its Board in June.
    “Iridium is at a pivotal point in growing its business and expanding
    its services,” said Dan A. Colussy, CEO and Chairman, Iridium Satellite.
    “With Buzzy’s deep knowledge base in investment banking and his unmatched
    experience with the intelligence community, we look forward to his
    direction as we expand our financial resources and further serve our
    important customer base.”
    The Iridium network is designed for communications typical in sectors
    including intelligence, homeland security, defense, government, emergency
    response, maritime and aviation. Only Iridium allows for switching and
    routing of mobile satellite communications in space, making it independent
    of land-based infrastructure, as well as making it secure, unlike other
    satellite communications networks. As such, Iridium enables primary and
    backup communications for mission-critical operations as well as manmade
    and natural disasters, where terrestrial, cell and radio towers can be
    decimated.
    “I look forward to sharing my investment banking background, as well as
    my insight into the communications needs of the intelligence community, as
    an Iridium Board member,” said Mr. Krongard. “I am impressed with the
    unique aspects of the Iridium network and the power it brings to bear on
    the Global War On Terrorism (GWOT), homeland defense and other related
    operations. Iridium has an important customer base to serve and I am
    pleased to assist.”
    During Mr. Krongard’s 29-year private sector career, he served as Chief
    Executive Officer and Chairman of the Board of Alex.Brown Incorporated, as
    well as Vice Chairman of the Board of Bankers Trust. Mr. Krongard also
    served as Counselor to the Director of the CIA, then Executive Director of
    the CIA. The Executive Director is the third ranking position within the
    CIA and functions as the chief operating officer of the Agency. Krongard
    received an A.B. degree with honors from Princeton University and a Juris
    Doctor degree with honors from the University of Maryland School of Law. He
    served three years of active duty as an infantry officer with the U.S.
    Marine Corps.
    About Iridium Satellite
    Iridium Satellite LLC (http://www.iridium.com) is the only provider of
    truly global satellite voice and data solutions with complete coverage of
    the earth (including oceans, airways and Polar Regions). Iridium delivers
    essential communications services to and from remote areas where no other
    form of communication is available. The Iridium constellation consists of
    66 low- earth orbiting (LEO), cross-linked satellites and has multiple
    in-orbit spares. The constellation operates as a fully meshed network and
    is the largest commercial satellite constellation in the world. The Iridium
    service is ideally suited for industries such as maritime, aviation,
    government/military, emergency/humanitarian services, mining, forestry, oil
    and gas, heavy equipment, transportation and utilities. Iridium provides
    service to the U.S. Department of Defense. The company also designs, builds
    and sells its services, products and solutions through a worldwide network
    of more than 100 partners.

    http://www.prnewswire.com/news-releases/alvin-b-buzzy-krongard-former-investment-banking-and-cia-veteran-joins-iridium-satellite-board-of-directors-56055042.html

    IRIDIUM RE-ENTER RUSSIAN MARKET

    To attract new customers, Iridium will register users who have purchased satellite phones abroad and now use them in Russia illegally. According to Glushko, there are about 20,000 to 30,000 such users in the country.

    Iridium officially ceased operations in Russia in 2000 after it went bankrupt.

    Until recently, Globalstar has been the only provider of satellite phone services in Russia, Izvestiya reported.

    The main consumers of satellite phone services in the country are currently insurgents in the North Caucasus, according to law enforcement agencies and the Defense Ministry. Satellite phones have traditionally been used in Russia by those who wanted to avoid being tracked.

    Iridium will have to either register or block illegal subscribers in Russia by July, according to Izvestiya.

    http://www.themoscowtimes.com/business/article/iridium-satellite-network-comes-back-to-russia/480081.html

        1. Tokai Tuna

          Private Equity | Revolving Door May 30, 2013, 7:23 am
          Petraeus Back in Spotlight, via Wall St.
          By MARK MAZZETTI

          Kohlberg Kravis Roberts announced on Thursday that it had hired David H. Petraeus, a retired four-star general and former director of the Central Intelligence Agency, as chairman of the new KKR Global Institute.

          The institute will focus on economic forecasts, communications, public policy and emerging markets.

        2. Paul Tioxon

          Thank you for taking the time to read the material. This is an instance of the 3rd ranking CIA Exec, with investment banking background, going onto the board of directors of a significant global satellite telecom in 2009. By 2013, Russia, which had outlawed such satcom phone service, invites this particular company to legally operate within its territory. The majority of the existing Russian customer based, 20-30k, are “insurgents in the North Caucasus, according to law enforcement agencies and the Defense Ministry. Satellite phones have traditionally been used in Russia by those who wanted to avoid being tracked”.

          The Russians have invited what is a thinly disguised CIA front to operate the only legit satcom phone service. So, if you have nothing to hide, sign up. If u r caught with an illegal phone it’s gulag time for Vladimir.

      1. Paul Tioxon

        The background on Iridium is that a $6Bil set of 66 satellites offering state of the art global phone service that is unhackable goes belly up. It is bought up for $25Mil by some obscure company with oblique ties to you know who, the agency that shall remain nameless. Fast forward to today and the board of directors includes the above mentioned from 3rd in charge of the CIA. If you go to the link, you will see the primary users are DoD and extraction industries that operate in remote areas e.g. oil platforms at sea, timber stands in the Amazon, rare earth mines in Afghanistan. Not to mention many exploration of said extractables. So, if you have thousands of biz customers all over the world who find diamond or gold mines in a secret location, yr satellite phone system with GPS will know all and hear all, from people who are being sold a secure line that only physically exists in outer space beyond the reach of wire taps or hackers. Unless the company running it is backdoored right into the you know who. You do know who you know who is, don’t you?

        Oh Gee, another Banker, General, White House Fellow and wanna be US Senator at Iridium.
        ___________________________________________________________

        Iridium Communications Adds Retired Gen. to Board
        By SpaceNews Staff | Nov. 9, 2009

        “Retired U.S. Army Brig. Gen. Peter M. Dawkins, a paratrooper, Rhodes Scholar and Heisman Trophy-winning football player turned investment banker, joins the board of directors of Iridium Communications Inc., the Bethesda, Md.-based mobile satellite communications firm announced Nov. 2.

        Iridium Chief Executive Officer Matt Desch said Dawkins is a “proven leader in business and the military” who “brings outstanding credentials to Iridium.”

        A 1959 graduate of West Point Military Academy, Dawkins served 24 years in the Army, commanding a company in the 82nd Airborne Division, leading a battalion in Korea, and commanding a brigade in the 101st Airborne Division. Following his retirement from the military, he launched his career in investment banking at Lehman Brothers.

        Prior to founding his current firm, Shining Star Capital LLC, Dawkins was the vice chairman of Citigroup Private Bank.

        Dawkins is no stranger to politics. He has been a White House fellow, served as military assistant to the U.S. deputy secretary of defense, and in 1988 ran for the U.S. Senate from New Jersey, losing to incumbent Frank Lautenberg, a Democrat, in the general election. He was also Vice-Chairman of Bain and Company.”

        ____________________________________________________________

        With direct ties to the CIA and Pentagon and the White House, do you think that would be useful to investment bankers who seem to hire him after absolutely no finance experience but only tons of information that is closely held by the military and White House?

        The relevance of this reply was to provide an instance that corroborates the coupling of the intelligence community and Wall St. High level government employees with no banking experience get into finance at the highest levels upon retiring and are strategically placed, such as these 2 are, at a critical communication choke point. Such advantageous positioning to know what and with whom others are communicating, at the highest level of business places you at the proverbial commanding heights of capitalism.

        1. jake chase

          He was one heck of a running back in 1959, and nothing hit him in 24 years in the army, either. I’d like to see Reggie Bush pull that off.

      2. nonclassical

        ..you need to know the history of Alan “Buzzy” Krongard:

        http://www.fromthewilderness.com/free/ww3/10_09_01_krongard.html

        FTW, October 9, 2001 – Although uniformly ignored by the mainstream U.S. media, there is abundant and clear evidence that a number of transactions in financial markets indicated specific (criminal) foreknowledge of the September 11 attacks on the World Trade Center and the Pentagon. In the case of at least one of these trades — which has left a $2.5 million prize unclaimed — the firm used to place the “put options” on United Airlines stock was, until 1998, managed by the man who is now in the number three Executive Director position at the Central Intelligence Agency. Until 1997 A.B. “Buzzy” Krongard had been Chairman of the investment bank A.B. Brown. A.B. Brown was acquired by Banker’s Trust in 1997. Krongard then became, as part of the merger, Vice Chairman of Banker’s Trust-AB Brown, one of 20 major U.S. banks named by Senator Carl Levin this year as being connected to money laundering. Krongard’s last position at Banker’s Trust (BT) was to oversee “private client relations.” In this capacity he had direct hands-on relations with some of the wealthiest people in the world in a kind of specialized banking operation that has been identified by the U.S. Senate and other investigators as being closely connected to the laundering of drug money.

        Krongard (re?) joined the CIA in 1998 as counsel to CIA Director George Tenet. He was promoted to CIA Executive Director by President Bush in March of this year. BT was acquired by Deutsche Bank in 1999. The combined firm is the single largest bank in Europe. And, as we shall see, Deutsche Bank played several key roles in events connected to the September 11 attacks.

        THE SCOPE OF KNOWN INSIDER TRADING

        Before looking further into these relationships it is necessary to look at the insider trading information that is being ignored by Reuters, The New York Times and other mass media. It is well documented that the CIA has long monitored such trades – in real time – as potential warnings of terrorist attacks and other economic moves contrary to U.S. interests. Previous stories in FTW have specifically highlighted the use of Promis software to monitor such trades.

        It is necessary to understand only two key financial terms to understand the significance of these trades, “selling short” and “put options”.

        “Selling Short” is the borrowing of stock, selling it at current market prices, but not being required to actually produce the stock for some time. If the stock falls precipitously after the short contract is entered, the seller can then fulfill the contract by buying the stock after the price has fallen and complete the contract at the pre-crash price. These contracts often have a window of as long as four months.

        “Put Options,” are contracts giving the buyer the option to sell stocks at a later date. Purchased at nominal prices of, for example, $1.00 per share, they are sold in blocks of 100 shares. If exercised, they give the holder the option of selling selected stocks at a future date at a price set when the contract is issued. Thus, for an investment of $10,000 it might be possible to tie up 10,000 shares of United or American Airlines at $100 per share, and the seller of the option is then obligated to buy them if the option is executed. If the stock has fallen to $50 when the contract matures, the holder of the option can purchase the shares for $50 and immediately sell them for $100 – regardless of where the market then stands. A call option is the reverse of a put option, which is, in effect, a derivatives bet that the stock price will go up.

        A September 21 story by the Israeli Herzliyya International Policy Institute for Counterterrorism, entitled “Black Tuesday: The World’s Largest Insider Trading Scam?” documented the following trades connected to the September 11 attacks:

        - Between September 6 and 7, the Chicago Board Options Exchange saw purchases of 4,744 put options on United Airlines, but only 396 call options. Assuming that 4,000 of the options were bought by people with advance knowledge of the imminent attacks, these “insiders” would have profited by almost $5 million.

        - On September 10, 4,516 put options on American Airlines were bought on the Chicago exchange, compared to only 748 calls. Again, there was no news at that point to justify this imbalance; Again, assuming that 4,000 of these options trades represent “insiders,” they would represent a gain of about $4 million.

        - [The levels of put options purchased above were more than six times higher than normal.]

        - No similar trading in other airlines occurred on the Chicago exchange in the days immediately preceding Black Tuesday.

        1. jake chase

          Well, for every buyer there’s a seller. Before swallowing this hook, line and sinker, you just might want to look at the stock’s trading history leading up to 9-11. Just saying.

          1. nonclassical

            ..no, Jake, you’re not “just saying”..are you in ANY way denying the DOCUMENTATION included, regarding Alan “Buzzy” Krongard, OR documentation of stock market gambles, specifically dated-quoted?? This information-documentation has never been disproven, and has been in evidence for over 10 years:

            ..you need to know the history of Alan “Buzzy” Krongard:

            http://www.fromthewilderness.com/free/ww3/10_09_01_krongard.html

            FTW, October 9, 2001 – Although uniformly ignored by the mainstream U.S. media, there is abundant and clear evidence that a number of transactions in financial markets indicated specific (criminal) foreknowledge of the September 11 attacks on the World Trade Center and the Pentagon. In the case of at least one of these trades — which has left a $2.5 million prize unclaimed — the firm used to place the “put options” on United Airlines stock was, until 1998, managed by the man who is now in the number three Executive Director position at the Central Intelligence Agency. Until 1997 A.B. “Buzzy” Krongard had been Chairman of the investment bank A.B. Brown. A.B. Brown was acquired by Banker’s Trust in 1997. Krongard then became, as part of the merger, Vice Chairman of Banker’s Trust-AB Brown, one of 20 major U.S. banks named by Senator Carl Levin this year as being connected to money laundering. Krongard’s last position at Banker’s Trust (BT) was to oversee “private client relations.” In this capacity he had direct hands-on relations with some of the wealthiest people in the world in a kind of specialized banking operation that has been identified by the U.S. Senate and other investigators as being closely connected to the laundering of drug money.

            Krongard (re?) joined the CIA in 1998 as counsel to CIA Director George Tenet. He was promoted to CIA Executive Director by President Bush in March of this year. BT was acquired by Deutsche Bank in 1999. The combined firm is the single largest bank in Europe. And, as we shall see, Deutsche Bank played several key roles in events connected to the September 11 attacks.

            THE SCOPE OF KNOWN INSIDER TRADING

            Before looking further into these relationships it is necessary to look at the insider trading information that is being ignored by Reuters, The New York Times and other mass media. It is well documented that the CIA has long monitored such trades – in real time – as potential warnings of terrorist attacks and other economic moves contrary to U.S. interests. Previous stories in FTW have specifically highlighted the use of Promis software to monitor such trades.

            It is necessary to understand only two key financial terms to understand the significance of these trades, “selling short” and “put options”.

            “Selling Short” is the borrowing of stock, selling it at current market prices, but not being required to actually produce the stock for some time. If the stock falls precipitously after the short contract is entered, the seller can then fulfill the contract by buying the stock after the price has fallen and complete the contract at the pre-crash price. These contracts often have a window of as long as four months.

            “Put Options,” are contracts giving the buyer the option to sell stocks at a later date. Purchased at nominal prices of, for example, $1.00 per share, they are sold in blocks of 100 shares. If exercised, they give the holder the option of selling selected stocks at a future date at a price set when the contract is issued. Thus, for an investment of $10,000 it might be possible to tie up 10,000 shares of United or American Airlines at $100 per share, and the seller of the option is then obligated to buy them if the option is executed. If the stock has fallen to $50 when the contract matures, the holder of the option can purchase the shares for $50 and immediately sell them for $100 – regardless of where the market then stands. A call option is the reverse of a put option, which is, in effect, a derivatives bet that the stock price will go up.

            A September 21 story by the Israeli Herzliyya International Policy Institute for Counterterrorism, entitled “Black Tuesday: The World’s Largest Insider Trading Scam?” documented the following trades connected to the September 11 attacks:

            - Between September 6 and 7, the Chicago Board Options Exchange saw purchases of 4,744 put options on United Airlines, but only 396 call options. Assuming that 4,000 of the options were bought by people with advance knowledge of the imminent attacks, these “insiders” would have profited by almost $5 million.

            - On September 10, 4,516 put options on American Airlines were bought on the Chicago exchange, compared to only 748 calls. Again, there was no news at that point to justify this imbalance; Again, assuming that 4,000 of these options trades represent “insiders,” they would represent a gain of about $4 million.

            - [The levels of put options purchased above were more than six times higher than normal.]

            - No similar trading in other airlines occurred on the Chicago exchange in the days immediately preceding Black Tuesday.
            ………………….

            Jake-please state your specific documentation to which you are obliquely referring?

  8. Jackson Bane

    The NSA and CIAs retail fronts can be considered TBTF Banks. In 2010, HBGary Federal and Berico Technologies (basically companies that are contracted to do spook work) outlined a plan to attack Wikileaks. They acted upon a request from Hunton and Williams, a law firm working for Bank of America, as suggested by the DOJ. So yes, controlling markets includes front running them.

    1. Banger

      History of American intel shows it’s origins are, in part, in the intel operations of Wall Street banks. It is entirely logical that the covert ops people are connected to Wall Street and have been since the beginning.

  9. rob

    There was also an interesting 60 minutes program that aired in the nineties about the “echelon” program.As well as the FBI’s “carnivore” program.Back then these were both doing what the hooplah is talking about now.One person they spoke to(Who was a whistleblower at the time) specifically said that the system was rife with abuse in the sense of corporate espionage.One corporation spying on another.As well as domestic spying,except that he said any instance of domestic spying just needed counterparties in other countries, so as to provide cover,legally.Considering the five participating countries,that was no problem.”escelon”, was built to collect all electronic data in the world.
    Todays revalations are its grandkids,no doubt.

    Historically, the CIA is run by “wall st”. Not in a legal sense. But the cia was created by and run by people who themselves,their families, and or partners families have perennially been scions of wall st.It is safe to say, the cia works for wall st. first. America after that…

    1. Banger

      That’s the point I’ve been making. We need to understand the full reach of the American security services which are all very closely linked in the power-relations of this country. I suggest that one of the reasons Wall Street is immune from prosecution has something to do with those who are not just pointing money at politicians but also those who are pointing guns at them. That’s why I have said for a long time that true reform is impossible in this country and that we do not live in a republic or a democracy but an oligarchy that is unassailable–this has been the case since 1963.

        1. schemp

          Likely referring to the assassination of JFK, when the financial/intelligence/military state asserted their full control.

          Not that things weren’t well underway before then. Eisenhower’s Military-Industrial complex speech was in 1961, just for starters.

    2. nonclassical

      …which is exactly what twice decorated Congressional Medal of Honor General
      Smedley Butler revealed, as documented here:

      http://www.amazon.com/Plot-Seize-White-House-Conspiracy/dp/1602390363/ref=sr_1_1?s=books&ie=UTF8&qid=1372479740&sr=1-1&keywords=the+plot+to+seize+the+white+house+by+jules+archer

      and here:

      http://www.amazon.com/Racket-Profit-That-Fuels-Warfare/dp/1481978551/ref=sr_1_1?s=books&ie=UTF8&qid=1372479777&sr=1-1&keywords=war+is+a+racket+smedley+butler

      …………………

      …there are many, many parallels with 30′s depression era…

  10. Massinissa

    Considering that the ENTIRE PURPOSE on both Mossadeq’s and Arbenz’s overthrow was to benefit very specific businesses (a couple oil companies in Mossadeq’s case, and the United Fruit Company, now known as Chiquita, in Arbenz’s), its not really surprising that some insiders were able to act on information.

    But I say, this is an absolutely completely wonderful study.

    I left out Chile, because it was more about scaring the living daylights out of other countries/giving a testing ground to Milton Friedman than really about any specific economic interests, so the revelation that insiders were aware of that one as well is in my mind particularly juicy.

    1. nobody

      “Chile…was more about scaring the living daylights out of other countries/giving a testing ground to Milton Friedman than really about any specific economic interests.”

      Some have suggested otherwise:

      “According to CIA head William Colby’s testimony, the CIA tried — with $8 million-to change the election results in Chile when it seemed a Marxist, Allende, would win. American corporations didn’t like Allende because he stood for nationalization of Anaconda Copper and other businesses. Anaconda Copper owed a quarter of a billion dollars to a group of banks led by Chase Manhattan, whose chairman is David Rockefeller, Nelson’s brother. Now we are catching on to the meaning of ‘national interest’.”

      http://www.thirdworldtraveler.com/Zinn/Rockefeller_BoysClub.html

      1. Massinissa

        Ah, my bad… Very interesting.

        Ah, the ‘N’ word, Nationalization. Amazing that all three of these great men were deposed for that same sin against American empire.

      2. nonclassical

        Nobody…..(“Smoke Signals”); “Who is your favorite Indian?” answer: “Nobody”..
        refers to same Native American actor in Jonny Depp’s, “Dead Man”…

        and Nobody is absolutely accurate-there was once a 10 hour video documentation of Chilean CIA overthrow of Alliende’…called, “Bloody September”, but in Spanish…wonder if “From Mejico” has any info on this long vanished video??

        1. nobody

          I’m nobody, though (lowercase n), not Nobody. (I’ve been commenting here as nobody for a couple of years now; at least once that I’ve seen some other person has commented as Nobody, but I’m always nobody.) The Nobody of Dead Man — traveling companion to Johnny Depp’s William Blake in Jim Jarmusch’s Dead Man — was played by Gary Farmer.

          And it’s not me who’s absolutely accurate. If the claim that’s implied is absolutely accurate, it’s Howard Zinn’s. I don’t know much about 9/11/73, I just remembered having read something about copper and Rockefeller interests in connection with the coup, and went with the first thing I saw in the google results that came from a credible source. All I said is that “some have suggested.”

          Regarding “Bloody September,” is it possible that you were thinking of “The Battle of Chile” (“La batalla de Chile”)?:

          http://en.wikipedia.org/wiki/The_Battle_of_Chile

          It’s on YouTube, but this version doesn’t have English subtitles:

          http://www.youtube.com/watch?v=hNEFjXTe6Vk

          1. nonclassical

            nobody-some of us learned from doing Poly-Sci, U.W., 1970′s….when “Bloody September” (actual name-10 hours of video) came out, we jumped on it-at movie theater-45th street, up from “ave”…911-1973, indeed….

  11. citizendave

    This is probably going to sound foily.

    They could use insider trading info to enhance a black ops investment portfolio. They would accept funding from Congress to hide the fact that they don’t need funding from Congress.

    True or not, it would make a good plot for a speculative fiction novel.

    NSA has an R&D and manufacturing campus adjacent to Fort Meade. By mutual agreement the high profits paid to the defense contractors could in reality be creative accounting to disguise equity shares. Or a portion of profits could be set aside so that the agency could fund off-book R&D. Or some other scenario of defenestration of government oversight.

    1. EricT

      Not really, they tried drug selling before with the contras, insider trading wouldn’t involve as many people and would be easier to keep hidden, considering that most people couldn’t even tell you what the actual insider trading law is nor have a good understanding on how it impacts the overall markets.

  12. Roger Bigod

    Unconvincing. There’s too any other sources for leaks — briefing papers for the President, possibly the State Department, the coup plotters in the target country;

    The NSA data is a bonanza for trading. M&A activity would show up in emails involving law firms and investment banks, physical locations of executives, working hours of staffs. It’s interesting that the Brits have data collection similar to NSA and exchange information. For every idealist like Snowden, there’s probably several industrious nerds with better judgment and thriving offshore accounts.

    There’s a great glossy Grade B flick here. Sort of a “Chinatown” or “LA Confidential” for our times.

    1. Sluggeaux

      C’mon, people! Connect the dots. Booz, Allen, Hamilton rakes in close to 6 Billion dollars in congressionally-mandated (and often no-bid) revenue every year, banking profits on that revenue of a quarter Billion dollars, gathering your information on behalf of the NSA.

      Booz, a private company with access to all that information, is a division of the Carlyle Group, the third largest private equity leveraged buyout player in the world. You don’t think that they’re using all that information for their own purposes?

      “Forget it Jake. It’s Chinatown.”

    2. Yves Smith Post author

      You really aren’t engaging adequately with the study findings and methodology. There are a lot of coup plots underway at any point in time, and you can bet they all claim and to a degree do have US backing.

      If someone invested in every one, they would not show the kind of excess returns shown in this study. The authors found the trigger date, which was the classified authorization of the coup. There’s a hell of a lot of planning before and after coups, both ones that don’t get backing and ones that do. This shows a significant appreciation around a critical trigger date.

      1. Roger Bigod

        My mistake. I thought their claim was that the CIA leaked to the traders, but they do mention the possibility of other channels for the leak.

        They were careful to get the exact ate of the formal decision, which is about the best they could do with only 3 or 4 examples.

  13. Alxschn

    I think it’s important to not be too attached to greed or profit motive as an explanation for these and other similar findings. Of course they’re involved, but in general I think the primary driver is a desire to expand influence and control through hegemonic means. The profit-maximizing transnational corporation is a primary “weapon” of hegemonic war, and when it’s used in these cases and in others, it will seem as though the pursuit of profits will have been the primary driver of events but in reality it’s a second-order effect of a strategic geopolitical decision to destabilize a country, install a leader who will play ball and privatize, and then send in these extremely connected corporations to gain control of key resources and infrastructure – things that in previous ages could only have been accomplished through costly military campaigns and occupations. Focusing only on the profits and the greed aspect distracts from being able to find the signal in the noise. There is no separation of economic and foreign policy at the highest levels. In fact modern economic policy is almost certainly born from early- to mid- century foreign/military strategy (with the ascent of certain economic ideologies being a second-order consequence to justify/cover for the them.)

    1. Banger

      Great points! Indeed there is also no separation between economics and politics–we aren’t arguing about economic philosophies in this country at all but who gets what privileges.

    2. Hugo Stiglitz

      Very good point. But as Snowden pointed out, individuals could initiate data grabs. So there are certainly people taking advantage.

    3. from Mexico

      But you don’t explain the process by which the thirst for power comes to trump material interests. Where does this insatiable appetite for power come from?

      There are various theories and explanations. Here’s Hannah Arendt’s:

      [I]n backward regions without industries and political organization, the so-called laws of capitalism were actually allowed to create realities. The bourgeoisie’s empty desire to have money beget money as men beget men had remained an ugly dream so long as money had to go the long way of investment in production; not money had begotten money, but men had made things and money. The secret of the new happy fulfillment was precisely that economic laws no longer stood in the way of the greed of the owning classes. Money could finally beget money because power, with complete disregard for all laws – economic as well as ethical – could appropriate wealth. …

      The state-employed administrators of violence soon formed a new class within the nations and, although their field of activity was far away from the mother country, wielded an important influence on the body politic at home. Since they were actually nothing but functionaries of violence they could only think in terms of power politics. They were the first who, as a class and supported by their everyday experience, would claim that power is the essence of every political structure.

      The new feature of this imperialist political philosophy is not the predominant place it gave violence, nor the discovery that power is one of the basic political realities. Violence has always been the ultima ratio in political action and power has always been the visible expression of rule and government. But neither had ever before been the conscious aim of the body politic or the ultimate goal of any definite policy. For power left to itself can achieve nothing but more power, and violence administered for power’s (and not for law’s) sake turns into a destructive principle that will not stop until there is nothing left to violate.

      –HANNAH ARENDT, The Origins of Totalitarianism

      1. Banger

        Not sure what Arendt is saying here–but the idea that power can get nothing but more power is not right in my view. Power brings status and the ability, in men, to attract what a man might thing is a better class of trophy wife or mistress. In my experience, power is very much about status and the ability to attract sexual partners an amazingly broad spectrum, ideologically, of women are attracted to powerful men. Also, power buys you, to an extent, security for you and yours–with power you can command people with guns and other equipment to assure youre little empire and those of your friends are protected.

        1. from Mexico

          Banger said:

          Power brings status and the ability, in men, to attract what a man might thing is a better class of trophy wife or mistress.

          There are no more basic material drives — drives of the body or of the flesh — than food and sex.

          So you’ve just circled back around to what is known as the cultural-materialist theory. But as Azar Gatt notes in War in Human Civilization,

          At a more fundamental level, as with other theoretical ‘systems’…the cultural materialists never seriously explained, never felt that there was a need to explain, their central argument: why was it that the quest for material gains was the overriding motive of human action? This was simply postulated as a fact of life, the way things were… Furthermore, the predominance of the materialist argument necessitated that all other possible motives would be somehow explained away as secondary, derivative, or disguises for the material motive… [T]he materialist argument often called for elaborate intellectual acrobatics, which in extreme cases made cultural materialism famous for the most contrived explanatory stories.

          1. Banger

            Good thoughts–actually if we are looking at real motivation human being’s default setting is compassion as social and neuro-science seems to be telling us. We want to connect and love and celebrate joyfully–that’s who we really are. At some point fear overcame that our natural tendency to be cool and be hip.

          2. from Mexico

            Humans seem to have all sorts of drives and motivations that do not enhance fitness. On one end of the spectrum, as Gat explains, some humans are willing to engage in the extremely high-risk activities of violence and war for nothing more than rank, status, prestige, honour and esteem, things which convey precious little material benefit in many social circumstances.

            On the other end of the spectrum are compassion and empathy, and the “deep sense of fairness and concern for justice that is extended even toward strangers” that Joan B. Silk speaks of. And just as with much of violence and war-making, it is difficult to see how these are adaptive.

            If one is to hew to a purely materialist or naturalist position, then one must develop theories to explain how these sentiments came about by purely material mechanisms, and cannot fall back on “the will of man” or “the will of God” explanations invoked by the humanists and religionists.

        2. jake chase

          I don’t think Arendt knows what she is saying either. Her books remind me of what Truman Capote said about Jack Kerouac: that isn’t writing, it’s typing!

      2. Nathanael

        “But you don’t explain the process by which the thirst for power comes to trump material interests. Where does this insatiable appetite for power come from?”

        Psychological defects. It appears to be one of the genetically occurring mental illnesses.

        Now, it’s a pretty rare one, but the people who have this are often extremely charismatic and convince hundreds of other people to copy their behavior.

    4. citizendave

      Good points. The money is not the end, it is a means to an end. Despite our opinions about the hyper-inflated defense budget, the defense intelligence agencies believe the cause of national defense is noble. It’s easy to imagine being frustrated with Congressional intransigence. The fate of the nation is at stake (in their PoV). If you can’t persuade Congress to fund your bleeding-edge machinery R&D, then maybe you can go into business for yourself, to do what you believe needs to be done. Breaking the law for a good cause! After all, the Founders were law-breakers — they constituted a new government, with a new set of laws. Of course, those who preferred the rule of the British Monarch were out of luck under the new regime. Perhaps we will learn to stop worrying and love the new security state.

    5. Phrase

      … ” “The real money is elsewhere — in, for instance, foreign policy itself. You probably thought foreign policy was about dealing with threats to “national security,” spreading democracy, ensuring peace, and whatever other lying slogans they throw around like a moldy, decaying, putrid corpse. The State’s foreign policy efforts are unquestionably devoted to maintaining the U.S.’s advantages — but the advantages they are most concerned about are access to markets and, that’s right, making huge amounts of money. Despite the unending propaganda to the contrary, they aren’t terribly concerned with dire threats to our national well-being, for the simple reason that there aren’t any:” … Arthur Silber … from “Follow the Money: The Secret Heart of the Secret State. The Deeper Revelations of the Snowden Revelations” by Chris Floyd …

      1. from Mexico

        Phrase says:

        The State’s foreign policy efforts are unquestionably devoted to maintaining the U.S.’s advantages.

        Here, let me fix that for you:

        The State’s foreign policy efforts are unquestionably devoted to maintaining the transnational 0.01%’s advantages.

        1. Phrase

          @ from Mexico: … Your correction is appreciated and hopefully also the author of the quote, … Arthur Silber would indorse fully. … I was not familiar with his writing or his blog (powerofnarrative.blogspot.co.uk) until Paul Craig Roberts referenced the Global Research Article mentioned above. … Mr. Silber’s words take exception to Snowden’s revelations being further vetted by The Guardian’s investigative journalism liability guidelines. His blog articulates his nuances for such concerns in a refreshingly blunt honest manner. IMHO … There is certainly much to consider ! … best regards … phrase … http://www.globalresearch.ca/follow-the-money-the-secret-heart-of-the-secret-state-the-deeper-implications-of-the-snowden-revelations/5340132

  14. Yonatan

    Were the strange share deals that took place around 9/11 (the justification for the coup against US democracy) ever satisfactorily explained?

    1. Generalfeldmarschall von Hindenburg

      This is where trolls post apoplectic rants about how dare you propagate your kooky theories here. After all, the …intelligence agencies…proved it was some lone nuts with box knives? Upright clean thinking people shouldn’t entertain such notions. It’s a disservice to the sainted 3000 &c

    2. Hugo Stiglitz

      I’ve never read a satisfactory explanation of that and have never heard of any real investigation. But that does not mean there wasn’t one.

    3. Banger

      Frankly, nothing about 9/11 has been explained. We were given a story which we had to accept and we were told that the details and loose threads cannot be discussed and even wondering about them makes you a “conspiracy theorist” and therefor mentally unstable. This mentality is current across the political spectrum, to be sure, but it focused mainly on the left–where in Daily Kos and many other places discussion on evidence that calls into question any of the government assertions was banned. As I’ve said many times, without confronting the issue of the 60s assassination and 9/11 the left is no better than being the official opposition left run by the Stasi in East Germany.

    4. nonclassical

      Yes-there’s been a COVER-UP…towit-building 7, 5 excuses for destruction of,
      5 Pentagon cameras and one convenience store, removed-video available of Pentagon strike shortly after strike, before facade fell….testimony of “families of 911 victims” and all other testimony at “911 Commission” completely secret….Sibel Edmonds, FBI translator, gag order…..Colleen Rowley, Minnesota FBI who quit when computer linking terrorist cells-U.S. was disallowed access till after 911…..”Able-Danger”…..Alan “Buzzy” Krongard-”put options” placed upon United-American Airlines…..etc, etc….

      what is being covered up???

      1. nonclassical

        Snopes is accurate, but intentionally oblique-the “puts” were placed…but never PAID…which is Snopes’ claim only..

  15. Jim

    I appreciate this article and the discussion thread. But can someone here explain the status of the Dube, Kaplan, Naidu article. Has it been published somewhere after an anonymous peer review?

    1. Yves Smith Post author

      Could you try using Google?

      It’s been cited 36 times, which is vastly higher than most financial economics papers.

      I used that version linked to because it’s otherwise paywalled. It ran in the Quarterly Journal, an Oxford publication. I infer it was released pre its formal publication, which I’ve seen more than occasionally.

      http://www.oxfordjournals.org/news/2011/08/12/coups.html

  16. JerseyJeffersonian

    This sounds so very, very plausible to me. The NSA and the CIA have all of this information that will push stock prices around, and can actually be the instruments of the events that push stock prices around, particularly in the case of the CIA whose actions influencing events in foreign lands and involvement in regime changes directly affect policies in those lands that impact the fortunes of US corporations. (It’s a very old game: consult Major General Smedley Butler’s War Is A Racket for some earlier episodes, as well as an overview of the game as she was played back in the day. Well worth the read: http://www.ratical.org/ratville/CAH/warisaracket.html For more info on the man and his deeds, see the wiki entry: http://en.wikipedia.org/wiki/Smedley_Butler ). Oh, and despite the pooh poohing, the Business Plot was the real deal. The 1%ers learned from that debacle, and refined their approach.

    On top of the obvious connections between these arbiters of information and events and Wall Street and banks, they themselves may have lots and lots of skin in the game in the form of massive, unaccountable black funds that can be invested to make them substantially independent at need from appropriations from Congress when they have something they want to do with complete impunity and secrecy. Money under the mattress, so to speak. Recall the long suspected role of the CIA in illicit drugs, which are a fabulous source of revenue in their own right. (As a minor example, remember the drug running operations of the Contras to fund operations, coupled with the sales of weaponry to Iran to serve the same goal, all run with the connivance of Oliver North, Caspar Weinberger, and George Bush (the Vice-President at the time, but formerly Director of the CIA).

    The possibilities are endless. In general terms, those things that can generate fabulous amounts of money are twofold: 1) Information asymmetry – when some group is in possession of knowledge not available to the average Joe; 2) The ability to shape events secretly – with the knowledge of the actions being taken confined to a small group – in a direction favorable to those positioned to take advantage of these developments through foreknowledge. These two things are found, in spades, in the intelligence community and in the action wing of this same community. No, they don’t always get it right, nor do their ventures always go as planned; but the margins on which they operate make these little setbacks mere trifles by way of comparison to the number of times things go their way, and the ROI is very favorable.

    1. Banger

      Markets and insider training is a very fertile area of speculation. I think that when the stakes are as high as they are today–when we see the extraordinary riches that accrue to those that are the biggest speculators we have to wonder about the information they are acting on. I suggest to you that the major players are allowed to trade based on insider information exchanged in informal settings by “made men” and/or conveyed through signals that resemble contract bridge. Whatever it is I’m 100% certain that insider trading is a central component of the today’s market system. Those who get caught are players who have stepped on somebodies toes. I say this as someone familiar with smaller scale criminal behavior–the cops and DA have favorite drug dealers who are allowed to survive in exchange for favors of one kind or another–those that are ultimately busted by the cops or the DEA are people who, politically, have not accumulated enough force–cops usually know what’s what on the street through informants–they choose to act against those who are easy to nail and who are not paying them off in whatever currency the authorities are looking for whether it is information or valuables or favors—it’s a very complex world whose laws, in my view, apply on the larger scale world. I know very little about that world but it seems to operate along similar lines as the old “street” I had accidentally landed in long ago and was fortunate to get out of fairly quickly.

      1. Hugo Stiglitz

        You echo what many small investors think, everything is rigged in favor of the big players, so why bother. If I’m going to piss away my salary it might as well be at a decent pub.

        1. Banger

          Some day traders do very well–they train themselves to look for patterns and often find, through trial and error, opportunities to exploit the market in a certain niche. So a smart investor can win in the markets–you can see the patterns of buy and sell and recognize a strategy by a big player or group of players that day–you ride with it and guess, from past performance, when that group of traders bails and you bail too. I’ve seen guys do that–I think it’s kind of a waste of time and boring but other fairly smart people seem to make a small living doing it.

          1. jake chase

            Boring and anxiety provoking too. Did it for several years and made a small fortune. Of course, I started with a large fortune.

      2. nobody

        Ultimately, the lines all connect, and the game is the game, whether on the “street” or the Street.

        David Simon seems to have a fairly good grasp on these truths, and The Wire does pretty well at showing how things really work, and how the laws that are actually operative scale across institutions, from the gang on the corner, to the gang in blue, to the gangs running the ports, to the gangs in City Hall, to the gangs in the law offices.

        Dave Chappelle understands these truths pretty well, too:

        http://www.youtube.com/watch?v=lsciKEXtrmI

    2. Lambert Strether

      The information asymmetries and the secrecy — hence the opportunity for profit — persist, whether the operations are a “success” or not.

      One might wonder where the true incentives lie.

  17. Hugo Stiglitz

    I’ve wondered also about individuals at Google, and for that matter, Bloomberg. These are companies situated where a clever individual might devise some real time data mining algorithms to time trades and so forth. Just access to Google Finance search data would be valuable.

  18. annie

    snowden is essentially saying that if he had such access it follows that hundreds/thousands of (paid) informers/spies have/have had such access.

  19. allcoppedout

    There doesn’t seem to be much written directly on this topic. It is clear our intelligence services are involved in finance and markets – Mitchell’s ‘Carbon Democracy’ is a good introduction on the control of oil’s supply networks and keeping the price and margins up historically and under current McJihad (hence the Iraq War may have been about keeping prices up not securing supply).

    Finance has long links with conquest and piracy – think of the prices Cortez and his men had to pay for supplies in their plunder, and the Enigma machine was invented to transmit commercial information from Asia to Europe in code. Over half the CIA’s current activity is now ‘private’, so there is plenty of opportunity for leaks or inside use of information before we need to think of intelligence operatives as other than rather decent coves like James Bond.
    Given our captured politicians all now act on the basis that votes are delivered ‘on the economy stupid’ it is hard to imagine any of them resisting the use of our agencies to make money or determine which cronies get it. Indeed, if markets were free and fair, having the massive costs of US military and covert intelligence services would surely put one at a huge commercial disadvantage unless … simples!

    Lots of former intelligence operatives end up working for banksters or establishment companies suggesting a back-scratching network.

    One can easily imagine how direct dealing in the market knowing details of a coup, or, say, a mining company able to operate where others can’t because you are covertly paying local troops would be very lucrative in funding more covert action or personal bank accounts. The article has a clever methodology, but I suspect most of the money ‘made’ by our covert services and people networked to them is made off market in coerced fire-sales, arms and construction contracts, drugs and minerals.

    I have written a (bad) novel on this topic. Perhaps the most interesting aspect of the writing process was the discovery of how much that I invented had already happened. Ivy League alumni fund, Mayfair hedge fund, Rwandan army involvement via CIA/MI6 in the Tivus, dead Africans … all true before the last page was typed.

  20. EricT

    I find it interesting that no one has looked into the existence of connections between K-street and the private intelligence establishment. When you are mining all communications, including those of government officials, the knowledge to a lobbyist would be invaluable in trying to affect legislation.

    1. NotTimothyGeithner

      But retired baseball player, Roger Clemens, may have lied to Congress about steroid usage. What is more important? The integrity of baseball stats or the well being of the American financial system?

    2. Banger

      Well, there are all kinds of connections in all kinds of places I can name but “no one” who can get published in the mainstream media can afford to look into it if they value their careers (or their lives). Only people off the mainstream grid (off the reservation as we use to say in Washington) look into such things deeply.

      This I’m sure of: the intelligence community is into everything from Wall Street, K Street to organized crime–they are part of the power-elite and play the power game that the mainstream media does not cover.

  21. Butch In Waukegan

    Generals go from the military to the boardroom to appearing as analysts on TV; congressmen go from their elected jobs to K street; business people go from corporations to regulatory agencies and back around to the corporate world.

    This is the age of “grab yours while you can.” What makes anyone believe that spooks, high and low, are any different?

    1. nonclassical

      you mean THESE “generals”, all tied to defense industries??:

      http://www.nytimes.com/2008/04/20/us/20generals.html?pagewanted=all&_r=0

      “Hidden behind appearance of objectivity, is a Pentagon information apparatus that has used those analysts in a campaign to generate favorable news coverage of the administration’s wartime performance, an examination by The New York Times has found.

      The effort, which began with the buildup to the Iraq war and continues to this day, has sought to exploit ideological and military allegiances, and also a powerful financial dynamic: Most of the analysts have ties to military contractors vested in the very war policies they are asked to assess on air.

      Those business relationships are hardly ever disclosed to the viewers, and sometimes not even to the networks themselves. But collectively, the men on the plane and several dozen other military analysts represent more than 150 military contractors either as lobbyists, senior executives, board members or consultants. The companies include defense heavyweights, but also scores of smaller companies, all part of a vast assemblage of contractors scrambling for hundreds of billions in military business generated by the administration’s war on terror. It is a furious competition, one in which inside information and easy access to senior officials are highly prized.

      Records and interviews show how the Bush administration has used its control over access and information in an effort to transform the analysts into a kind of media Trojan horse — an instrument intended to shape terrorism coverage from inside the major TV and radio networks.

      Analysts have been wooed in hundreds of private briefings with senior military leaders, including officials with significant influence over contracting and budget matters, records show. They have been taken on tours of Iraq and given access to classified intelligence. They have been briefed by officials from the White House, State Department and Justice Department, including Mr. Cheney, Alberto R. Gonzales and Stephen J. Hadley.

      In turn, members of this group have echoed administration talking points, sometimes even when they suspected the information was false or inflated. Some analysts acknowledge they suppressed doubts because they feared jeopardizing their access.

      A few expressed regret for participating in what they regarded as an effort to dupe the American public with propaganda dressed as independent military analysis.

      “It was them saying, ‘We need to stick our hands up your back and move your mouth for you,’ ” Robert S. Bevelacqua, a retired Green Beret and former Fox News analyst, said.

      Kenneth Allard, a former NBC military analyst who has taught information warfare at the National Defense University, said the campaign amounted to a sophisticated information operation. “This was a coherent, active policy,” he said.

      As conditions in Iraq deteriorated, Mr. Allard recalled, he saw a yawning gap between what analysts were told in private briefings and what subsequent inquiries and books later revealed…”

  22. Lambert Strether

    Front-running the market is an improvement over dealing coke wholesale, I suppose, if one must have a black budget.

    Any speculation about what the NSA’s financial “Air America” might look like? The corporate structure? Off-shore or on-shore? Principals? Deniability? A public-private partnership?

    And so forth.

    1. nonclassical

      …not “pubic-private”, but “surveillance”, as private industry rushes to create miniaturized drone surveillance before public awareness of…

  23. Butch In Waukegan

    See Eavesdropping on the Planet (CounterPunch) on the related issue of spooks and industrial espionage.

    German security experts discovered several years ago that ECHELON was engaged in heavy commercial spying in Europe. Victims included such German firms as the wind generator manufacturer Enercon. In 1998, Enercon developed what it thought was a secret invention, enabling it to generate electricity from wind power at a far cheaper rate than before. However, when the company tried to market its invention in the United States, it was confronted by its American rival, Kenetech, which announced that it had already patented a near-identical development. Kenetech then brought a court order against Enercon to ban the sale of its equipment in the US. In a rare public disclosure, an NSA employee, who refused to be named, agreed to appear in silhouette on German television to reveal how he had stolen Enercon’s secrets by tapping the telephone and computer link lines that ran between Enercon’s research laboratory and its production unit some 12 miles away. Detailed plans of the company’s invention were then passed on to Kenetech.

    1. Lambert Strether

      That’s odd. We have an IP case in links today about a wind company (Sinovel) except Chinese not German. One might wonder whether there is an intel subtext here as well.

  24. papicek

    Since 70% of those working in NSA programs are contractors, the pertinent question is probably more like: How much is Booz Allen frontrunning markets?

    Which is what happens when you ditch the public ethic, people.

  25. citizendave

    I see odd phenomena of posts appearing and then disappearing. I haven’t felt paranoid for a long time, but now I’m getting wild ideas about National Cyber Security managing technical glitches that coincidentally manage commentary on popular blogs, ha.

    There is an old joke about a poster inside The Building at Fort Meade depicting a back-hoe as the ultimate heroic machine — every time a back-hoe operator cuts a fiber optic cable, it gets repaired by an NSA team that places an interceptor “T” in the line, making it more convenient to intercept the data stream on that particular cable.

    1. Lambert Strether

      That’s what will happen with spam that isn’t caught automagically and so is killed manually, or dupes that slip past WP’s “dupe detection” algorithm. I killed a dupe an hour so ago. Without more information, I’m going with “sometimes a cigar is just a cigar.” In any case, I think our masters in the intel community probably have more important things to do than mess about with NC’s comment section.

      1. citizendave

        I understand how it works, it was a lame attempt at humor.

        For the reason you cite, I am persuaded that No Such Agency looks at only a small subset of what is intercepted and stored, for a relatively few pre-existing targets of interest. My instinct tells me we are a long way from developing the machinery and human resources that could effectively analyze the entire daily data-set to develop new targets of interest. The AI is easily distracted by keywords found in ordinary speech, while subtle plain language battle codes cannot be distinguished from ordinary speech. (And as for NSA de-cryption of our communications, “impossible” just takes a bit longer.)

        While I’m at it, we should not require any more whistle blowers to risk their lives and livelihoods by spilling the beans. The central question for our society is whether or not we can tolerate total intercept of all electronic communications, without violation of our Constitutional right to be secure in our persons and papers. The new definition of “collection”, according to Director of Nat’l Intel Clapper, is the point at which they look at the recorded data. That currently makes sense to me. By their requirements, it is unreasonable to force them to wait to get a warrant before putting the technology in place to do the intercept (think “wiretap”: aligator clips on the telephone relay at the phone company Central Office). And it would be helpful if they could look at past communications of a target of interest, rather than to begin to record after getting the warrant. They want to be able to use the warrant to look at the data. I’m thinking about equating un-examined intercepted communications data with stored video security camera info. The problem will be to insure arms-length isolation of the stored data from unauthorized access.

        Eventually we will need to think about AI machinery sophisticated enough to pull together all available information about every individual, like consumer purchase history, browser history, mailing lists, etc., which will begin to suggest that “the flowers should bloom next Tuesday” is an indication of an as-yet undetected plot to do criminal mischief. And won’t that put a chill on free speech!

      2. Butch in Waukegan

        On the other hand, they have to keep their 30,000+ employees busy, and “terrorists” are a scarce commodity.

        1. citizendave

          Remember that their reach and primary mission is global, so they would naturally want to be able to intercept and store all electronic communications world wide. The US daily data-set is doubtless very big, but the global bit haul must be considerably larger. At this stage of evolution of the machinery and work force, I’m betting that paying any attention to ordinary Americans is like ‘squirrel!’

          1. reslez

            No one disputes this style of wide-net surveillance is basically worthless at detecting actual terrorism.

            The issue is the establishment of a mind-boggling cache of data on every single person. As soon as you get on their radar, they have instant access to everything on you. And if you think you have no dirt, they can just smear some into existence with all they know. Don’t step out of line, don’t draw their attention, don’t speak out on anything. Or you’re next.

  26. leveymg

    This has been going on as long as there have been markets, particularly for public debt and bonds.

    Here’s an article on the use of dirty-tricks and false flag terrorist operations by the Czar’s secret police during the period from the Prusso-Russian War until the outbreak of World War One. The Okhrana pioneered the manipulation of values for state bonds on the Paris Bourse: http://www.dailykos.com/story/2006/11/15/271437/-The-History-of-Political-Dirty-Tricks-Pt-1-The-Okhrana-and-the-Paris-Bourse

  27. frosty zoom

    this is very reminiscent of the business dealings of the Army of the Guardians of the Islamic Revolution in iran.

    (how about a special shout out to the folks at the nsa etc! hi guys!)

    1. Lambert Strether

      Or Mubarak’s army. I like that similarity. Of course, since the powers that be destroyed manufacturing, our Willy Suttons in the intel and military community would seek out the FIRE sector.

    1. Lambert Strether

      Hmm. I have a vague memory of “counter-parties” being shouted rather a lot when AIG was going pear-shaped. And of course the NSA’s fake storefront would have to be somebody’s counter-party, I would think. Then there’s the idea that for a brief period in the GFC the only liquidity that existed was provided by organized crime (granted, for a restrictive definition of “organized crime,” but you see what I mean).

    2. harposox

      Michael Ruppert discussed AIG on his website “From the Wilderness” during his pre-”Rubicon” days. His take was that AIG has been an integral player in the intelligence game, sort of a pre-cursor to what we now know as the CIA, and that they played a major role in intelligence operations during WWII: (“The seemingly mundane insurance business is, in fact, one of the primary weapons of intelligence gathering around the world.”) He also wrote that AIG was a major operator in the global drug trade, in two important ways: first, in transport (AIG-insured affiliates owned a large fleet of C-130 transport aircraft); and secondly, in the money laundering game (using “reinsurance” as a vehicle for funnelling dirty money around the globe). Skip to the section labeled “Deconstructing AIG” (the rest of the article is, unfortunately, a bit of a mess):

      http://www.fromthewilderness.com/free/ciadrugs/part_2.html

    3. bob

      AIG was a spook shop from day number 1-

      http://en.wikipedia.org/wiki/Cornelius_Vander_Starr

      One of his favorite hangouts was Stowe, VT. The town and mountain are still majority owned by AIG execs and AIG itself. They were in the middle of a large project in 2008 when the USG stepped in to allow construction to continue.

      To me, it’s much more likely that AIG started as a brit spook op and then either A) taken over by US intel, or B) AIG itself took over USG intel.

      Most of the founding period pre-dates the US national security state.

      Which came first, AIG or CIA? Chicken or egg?

  28. Everythings Jake

    Wasn’t that sort of a key point of the CIA, insider access for Wall Street and the Corporatocracy from which Dulles and others emerged to essentially found and run the agency?

    The Power Principle

  29. scraping_by

    And from an entirely different direction, in the late 1990′s and early 2000′s Tom Clancy’s Jack Ryan universe novels had a private CIA/NSA/Black Ops company, the Campus, funded by Hendley Associates, investment bankers who financed their operations from frontrunning on captured intelligence. Clancy’s fictional spooks ran around thwarting Islamic terrorism, Asian imperialism, doing ‘reconnaissance by fire’ and all the other dering-do that so captures the imagination of the innocent cowards and bombastic weaklings in the Administration, Congress, and the Chamber of Commerce. See The Teeth of the Tiger (2003).

    Or, from Tom Clancy is not really a different direction, is it?

  30. Jack Parsons

    This is an interesting line that the govt. has not crossed, to my knowledge: military organizations owning and operating businesses. In China the Army does this to fund its operations, and I certainly wouldn’t want to own a competing shop. In Iran the Revolutionary Guard has grabbed control of some of the major industry that the religious orgs nationalized.

    The Snowden leaks mention the NSA and its hoover companies swapping information, rather than a one-way flow.

    1. nonclassical

      Jack,

      ..for the “Catch 22″ updated version of your theme, John Cusack-the U.S. first 100% privatized war: “War Inc.”…..and for good measure, “Max” (Weimar Republic historical)

      1. Mikhail Kropotkin

        Indonesia’s army has long held very large economic interests. They are involved in significant amounts of activity that is shady as well, eg illegal logging.

  31. Lars Schall

    If one looks at the National Security Act and the creation of the CIA, one will see that most of the key figures of the latter organization have a background in high finance and investment banking. Take a look at the professional background of, for example, Clark Clifford, James V. Forrestal, Ferdinand Eberstadt, William J. Donovan, Allen Dulles, William H. Jackson, Frank Wisner, William Casey, Stanley Sporkin, David Doherty, John Deutch, and A.B. “Buzzy” Krongard. Moreover, it is of interest that “(i)n its first two decades, CIA, like its intellectual parent the Council on Foreign Relations, was dominated internally and externally by the aristocratic elements of the New York overworld. All seven of the known deputy directors of CIA during this period came from the same New York legal and financial circles; and six of them were listed in the New York Social Register as well.” Peter Dale Scott: “The Road To 9/11: Wealth, Empire, and the Future of America”, University of California Press, 2007, page 12. Compare also Peter Dale Scott: “Drugs, Oil, and War: The United States in Afghanistan, Colombia, and Indochina”, Rowman & Littlefield Publishers, 2003, page 187, 200-201.

    Re the informed 9/11 trading:

    a) http://www.atimes.com/atimes/Global_Economy/NC21Dj05.html

    b) http://www.atimes.com/atimes/Global_Economy/ND27Dj02.html

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