By Cathy O’Neil, a data scientist and member of the Occupy Wall Street Alternative Banking group. Cross posted from mathbabe
It’s unusual that I find myself in the position of defending Wall Street activities, but here goes.
I just don’t think HFT is that big of a deal relative to other Wall Street evils. I have written a couple of times about HFT and I’m not a huge fan, and I don’t buy the “liquidity is good and more liquidity is better” argument: at some point enough is enough. I do think that day-to-day investors have largely benefitted from it but that people whose money is in massive funds which are regularly traded have seen their money get skimmed every month. Overall it’s a smallish negative tax on the average person, I’d expect.
Here’s why HFT deserves some of our hatred: there’s way too much human resources going into this stuff and it’s embarrassing, what with the laying of cables and blasting through mountains and such. And it’s a great sociological look into the absolutely greed-led mindset of the Wall Street trader, but honestly I think we already had that. It’s really business as usual at a microscopic scale, and nobody should really be surprised to learn that people will do anything to make money that’s technically possible and technically legal, and that they will brag about how they’re making the world a better place while they do it. Same old same old.
So I’m not saying HFT is awesome and we should encourage more of it. I’m all for thinking about how to slow down trading to once a second and make it “more fair” for more players (although that’s hard to do even as a thought experiment), or taxing transaction to make things slow down by themselves, which would be easy.
But here’s the thing, it’s not some huge awful thing we should focus on, even though Michael Lewis is a really good and engaging writer.
You wanna focus on something? Let’s talk about money laundering in HSBC and now Citi that is not under control. Let’s talk about ongoing mortgage fraud and robo-signing and the ongoing bailout/ taxpayer subsidy and people still losing their homes, and the poor still being the targets of illegal and predatory loans, and Too-Big-To-Fail getting worse, and the direct line between the bailout and the broken pension promises for civil servants and the overall price list for fraud that has been built.
Let’s talk about the people who created the underlying fraud still at work in places like Bank of America, and how few masterminds have gone to jail and how the SEC and the Obama administration has made that happen through inaction and passivity and how Congress is sitting on its hands because of the money coming in from lobbyists. Let’s talk about the increasing distance between the justice system for the poor and the justice system for the rich in this country.
Dear patient readers,
Your humble blogger is up to her eyeballs in competing responsibilities, so forgive the lack of my own posts today.
ScienceTake: Those Clever Crows New York Times
9 blue whales die after getting trapped off Newfoundland’s coast CTV News (Chuck L). :-(
‘Collision Course’ in the Science of Consciousness NewsWise. Lambert: “But for the sourcing and funding, I’d say this was interestingly textured bullshit.”
The Death Toll Comparison Breakdown Wait But Why. Lambert: “World’s most chilling infographic.”
“American Blogger?” Yeah Right. Gawker. Looks like an overcorrection after Steven Soderbergh’s Contagion had a blogger as his chief baddie.
GMO labeling bill heads for full Senate vote VTDigger (furzy mouse)
Bitcoin Is Getting Smashed Right Now Business Insider
Inside the UberPITCH ‘Cash Cab’ engadget
Sydney housing speculation goes bananas MacroBusiness
China slowdown concerns reinforced by falling prices Financial Times
China should not be too quick to ease capital controls, economist says South China Morning Post
Euro-Zone Economies Have ‘Failed to Converge’ Wall Street Journal
Turkey’s Hot-Money Problem Triple Crisis
The New American Reality CounterPunch
Big Brother is Watching You Watch
Researchers find thousands of potential targets for Heartbleed OpenSSL bug ars technica (Chuck L)
Banks urged to act over ‘Heartbleed’ bug Financial Times
Greenwald, Poitras to return to U.S. Politico (Deontos)
More fallout: Gender pay gap at Obama White House (12%) is more than twice the pay gap for the DC area (5.2%) American Enterprise Institute. Ouch, when the AEI manages to make a genuine point, as opposed to artfully packaged distortions, you know it’s bad.
Hoping for Asylum, Migrants Strain U.S. Border New York Times
Cuomo Caught Up in Rare Conflict With Prosecutor New York Times
LAPD officers tampered with in-car recording equipment, records show Los Angeles Times
Justice Department: Routine Use of Deadly Force by Albuquerque Police Result of ‘Culture of Aggression’ Kevin Gosztola, Firedoglake
General Motors recall crisis widens with second faulty part Financial Times
Boeing plans to increase workforce in Long Beach, Seal Beach Los Angeles Times. Lambert: “Union busting”.
Mr. Market Has a Sad
THE SELLOFF GOES GLOBAL Business Insider
The NASDAQ mini-bubble is popping MacroBusiness
Macro Horizons: Phooey to Poor Data; Markets Place Hope in Central Banks WSJ MoneyBeat. Ah, what a difference a day makes…
Speculation in the Commodities Market: Part 2 A Response to Price Asset Management New Economic Perpsectives
Only the ignorant live in fear of hyperinflation Martin Wolf, Financial Times (Joe Costello). Wow, for Wolf to rouse himself on this topic says something is afoot…
Family Structure and Inequality House of DebtDereck and Beverly Joubert): here
Yves here. Gillian Tett of the Financial Times has also been taking up the credit mania theme of late. For instance, from today’s newspaper:
A few short years ago, “subprime” was almost an expletive..
But the financial world has a short memory…In recent months subprime lending has quietly staged a surprisingly powerful return, not in relation to real estate, but another American passion – cars…
The historical echoes are uncanny. During most of the past decade the amount of car-related debt grew only modestly. Yet outstanding car loans, which totalled $700bn in 2010, have jumped by a quarter in the past three years…
Even more notable is that this has occurred amid a sharp deterioration in loan quality. Five years ago, subprime loans represented barely a 10th of the total; today they account for a third. A particularly high proportion of GM cars sales are financed by subprime loans. Meanwhile, a 10th of new loans are now going to so-called “deep subprime”, or consumers who would previously have had little chance of getting funding – particularly given that incomes for poorer households have stayed flat or declined, even as car prices jumped.
The problem is that the authorities’ solution to the credit bubble that led to the crisis was to reinflate it rather than restructure the debt (although they got more liquidations via foreclosures than they probably wanted as a result of the failure to rein in bank servicers). Unfortunately, it appears that they’ve succeeded all too well in this strategy.
By Wolf Richter, a San Francisco based executive, entrepreneur, start up specialist, and author, with extensive international work experience. Originally published at Testosterone Pit.
Hidden in the IMF’s just released 188-page Global Financial and Stability Report is a doozie of a chart that screams not only “credit bubble” but also flashes a red warning sign: “seek cover, implosion in sight.” It depicts US issuance of covenant-lite loans and second-lien loans since 2001, including their phenomenal bubble that so spectacularly collapsed in 2008, and the even greater bubble currently underway – with an equally spectacular future.
Covenant-lite loans, which eliminate many of the protections that lenders normally require, allow over-leveraged junk-rated companies to pile on even more debt when they would normally no longer be able to do so. A key benefit for the Private Equity firms that own them: PE firms make a big part of their profit by having their portfolio companies borrow money, but not for expansion purposes or other productive uses. Instead, PE firms suck that cash out the back door through special dividends, fees, and other devices. When the portfolio company pops, the PE firm conveniently has the cash, and the lenders eat the loss.
To protect themselves, lenders normally force borrowers into covenants that prevent these and other shenanigans. But not anymore. Lenders, driven to near insanity by the Fed’s interest rate repression, are caught up in an all-out chase for yield and don’t look at anything else, and to get that minuscule extra yield, they take on risks, any risks, no questions asked, and to heck with future losses, and they hold their noses and close their eyes and pick up the worst crap, and then find ways of stuffing those risks into your mutual fund.It’s a Feeding Frenzy Out There.
The longer it goes on, and the more of this reeking debt with a high probability of default is piling up on the books of banks and other lenders, the more damaging the implosion will be. And so covenant-lite debt has become a flashing red light of a credit bubble in its final throes. A record $238 billion were issued in 2013, according to Thomson Reuters. Over 50% of the market, another hair-raising record.
The IMF chart shows the prior bubble as expressed in covenant-lite loans (green line, right scale) and second-lien loans (red line, left scale) and where it all ended so spectacularly – namely in the financial crisis. It also shows the current bubble through 2013. Covenant-lite loans started setting new records last year, but second-lien loans, a particularly nasty contraption for banks, haven’t quite caught up yet. Up to us to figure out where it ends:
Through March, about $68 billion in covenant-lite loans have been issued, according to Thomson Reuters. Banks are making even more concessions and relax loan terms further, giving over-leveraged companies enormous flexibility in how they deal with their debt if they run into trouble and allow them to pile on yet more debt. These new loosey-goosey loans have lovingly been dubbed, “covenant-lite 2.0.”
Banks are lapping it up. Classic covenant-lite debt, of the type that helped blow up the banks in 2008, have maintenance covenants to give lenders at least a modicum of protection in case of default. But one of the many newfangled features – increasing the “restricted payments baskets” – permits companies to channel more borrowed money via dividends and other devices back to the PE firms that own them. The cash is gone. The debt is still there. The loan-to-value ratio deteriorates and wreaks havoc on recovery in case of default.
Covenants are supposed to protect banks from those shenanigans – but aren’t anymore. Leverage ratios have been rising for a couple of years and now exceed those of the white-hot bubble market of 2007. But these hyper-leveraged companies won’t pop right away, not as long as new covenant lite loans allow them to borrow even more, and not as long as they can bamboozle desperate banks into lending more. Yet piling on more debt to deal with old debt merely pushes the day of reckoning into the future and increases the loss for the banks.
Even the Fed, which never sees signs of a bubble, and denies the very existence of bubbles until long after they have imploded, is seeing the ballooning covenant-lite loans as a risk to the very banks it had so heroically bailed out during the financial crisis, and Fed heads have mentioned them as an item on their worry list, and as a reason for eliminating QE.
In the IMF chart, second-lien loans (red line, left scale) also bubbled and collapsed beautifully. These loans are secured by a second lien over assets that have already been pledged as lien for other loans. In case of default, holders of first-lien loans have first claim to the assets. Holders of second-lien loans get whatever is left, which is mostly nothing. These second-lien loans, a particularly nasty contraption for banks, are jumping again. The skyward angle of the slope continues beyond the IMF chart: in January and February, $7.4 billion in second-lien loans were issued, up from $4.5 billion during the same period in 2013.
Defaults are unlikely as long as the Fed shoves nearly free money out the front door into the hands of even over-leveraged junk-rated companies that would otherwise have trouble servicing their existing debt. But the Fed is cutting back on QE and is generating a deafening cacophony about raising interest rates. Watch out for falling debris.
Finian Cunningham, in a post on the Ukraine, struggled to describe the alternative reality in which American officials were operating, and came up with this formulation:
Welcome to the world of surrealpolitik, where anything you assert to be true is true, notwithstanding the factual evidence….
NATO and Washington are not only inverting fact and reality over Ukraine and the wider serious geopolitical implications. The reckless distortion is delivered with a contempt born of the most fatuous purblind arrogance. The conundrum is how to deal with such insanity?
On the Obamacare front, Lambert describes how the overdue ouster of Health and Human Services chief Kathleen Sebelius reveals more deep-seated dysfunction in the Administration. I’m sure the kingmakers and breakers thought they were terribly clever. Sibelius was clearly a political dead woman walking due to the huge embarrassment of the multidimensionally botched Obamacare site launch. In the private sector, when you have a train wreck and you need to restore confidence, you clean house and bring in someone who looks credible as a toxic waste remediation expert. But Sibelius instead became the official Obamacare pinta doll until the Administration though it could declare victory by virtue of having reached the 7 million enrollment mark. So the motivation, as ever, is about perception management, and is at best only tangentially related to reality.
By Lambert Strether. Cross posted from Corrente
Health and Human Services Secretary Kathleen Sebelius is resigning six months after a disastrous rollout of President Barack Obama’s signature health law, according to administration sources.
On Friday, Obama will nominate Sylvia Mathews Burwell, the director of the Office of Management and Budget, to replace her.
Sebelius, 65, gave no hint of her imminent departure as she testified Thursday before a Senate panel.
So, did she fall or was she pushed? I say pushed:
Sebelius’s departure was unexpected by at least one person close to her, Kansas Insurance Commissioner Sandy Praeger, a Republican who has worked with her since 1991. Praeger said she was at a dinner where the health secretary spoke last week and that “she seemed like she was in it for the long haul.”
Alas, with Obama, falling on your sword is no guarantee you won’t be stabbed in the back:
HHS chief: President didn’t know of Obamacare website woes beforehand
In an exclusive interview with Health and Human Services Secretary Kathleen Sebelius, CNN’s Dr. Sanjay Gupta asked when the President first learned about the considerable issues with the Obamacare website. Sebelius responded that it was in “the first couple of days” after the site went live October 1.
“But not before that?” Gupta followed up.
To which Sebelius replied, “No, sir.”
Which, if true, raises even larger questions:
The Times has a horrifying story under a dull headline:
Tension and Flaws Before Health Website Crash
Yes, well, an oncoming “train wreck” will do that.
[O]ver the past three years five different lower-level managers held posts overseeing the development of HealthCare.gov, none of whom had the kind of authority to reach across the administration to ensure the project stayed on schedule.
As a result, the president’s signature initiative was effectively left under the day-to-day management of Henry Chao, a 19-year veteran of the Medicare agency with little clout and little formal background in computer science.
Mr. Chao had to consult with senior department officials and the White House, and was unable to make many decisions on his own. “Nothing was decided without a conversation there,” said one agency official involved in the project, referring to the constant White House demands for oversight.
Yet that same White House also let Obama swan around the country making ludicrous statements like this, four days before launch:
“[OBAMA:] This is real simple. It’s a website where you can compare and purchase affordable health insurance plans side by side the same way you shop for a plane ticket on Kayak, same way you shop for a TV on Amazon. You just go on, and you start looking, and here are all the options.”
That’s complete management dysfunction.
As we asked earlier, how was this even possible? At the best, Obama’s staff — who were constantly demanding oversight — can’t pass bad news on to him; at the worse, Obama’s just telling outright lies that are going to be exposed in days.
Or, even worse, I suppose, we have a political class — like the ruling class in the FIRE sector, in its own way — that’s completely disconnected from all basic reality. It’s not merely that the political class can’t distinguish between campaigning and governing: They cannot distinguish between what can be done and what can’t; they don’t see any difference between bullshit and lies; they cannot be honest with each other, or with us, because they literally do not know what it means to be honest; they confuse empathy and compassion with manipulation and public relations; and they experience no consequences for their actions, whether good or bad.
Anyhow, it was important to get Sebelius out of the way before the midterms. (Of course, if the Republicans were the fearsome, feral oppositional force the entire political class tells us they are, they’d be roasting the entire HHS leadership, and the White House team, over a slow fire, in hearings, on television. They aren’t, so they don’t. What we get is more kayfabe about repealing the law, to be followed by a whimpering acceptance that hey, maybe RomneyCare isn’t so bad.)
* * *And Sebelius’s successor:
President Barack Obama intends to nominate Sylvia Mathews Burwell, current director of the Office of Management and Budget, to replace Sebelius, according to the official.
Burwell, 48, was confirmed to her current Cabinet-rank position in April 2013. She came to the White House from her spot atop the Walmart Foundation — the giant retail chain’s charitable organization which, according to its website, donated nearly $1 billion to causes worldwide in 2011.
Prior to that, Burwell worked for the Bill and Melinda Gates Foundation and in President Bill Clinton’s administration under then-Treasury Secretary Robert Rubin.
Burwell certainly seems well-connected. I’m sure ObamaCare is in good sucking mandibles hands.
NOTE  CNN:
Although the website has been repaired and enrollment has recovered strongly, the debacle continues to baffle many outside experts who have blamed weak leadership at the White House and the health agency that Sebelius heads.
They’re baffled! “Obama couldn’t have fucked up, we can rule that out….” So, ’tis a puzzlement!
By Matt Stoller, who writes for Salon and has contributed to Politico, Alternet, Salon, The Nation and Reuters. You can reach him at stoller (at) gmail.com or follow him on Twitter at @matthewstoller. Originally published at Observations on Credit and Surveillance
We are not setting the price. The market is setting the price. We have algorithms to determine what that market is.
That’s a remarkable quote from the CEO of Uber.
Uber of course is a cab service that lets you order a cab from your smartphone via an App. It’s really neat, you get to watch the cab approach on a map, the payment is automatically applied so you don’t have to even deal with the transaction itself. The company is now taking its approach to logistics, and moving to ‘disrupt’ the delivery industry as well, competing with courier services, UPS, Fedex, and the Post Office. It’ll be interesting to see what happens there.
But it’s important to recognize just what Uber actually represents. Uber started out named UberCab, and ‘uber’ is a German word which means ‘over’ or ‘better than’ or ‘the ultimate’. So UberCab meant, the ultimate cab. At the core of Uber’s strategy has been lobbying and advocacy to make sure that it can get into regulated cab markets. And this is so Uber can ‘disrupt’ and destroy them.
A healthy cab ecosystem relies on expectations of a market (with price-fixing by political authorities, mostly taxi commissions). There have to be people trying to hail cabs, and cabs driving around to find customers. As more people use Uber, there will be fewer people trying to hail cabs, and fewer cabs picking up people, which will lead to reduced expectations cabs will be available, and so on and so forth. Gradually the ‘open cab market’ will be displaced by a closed Uber service. I’ve already noticed it’s harder to hail cabs where I live, capacity is often taken up by Uber riders.
Open cab markets aren’t gone, but they will die eventually. They will go the way of open cattle, pig, and chicken markets, which mostly don’t exist anymore due to concentration in the meat market (read The Meat Racket for a great understanding of what happens when markets are captured by big business).
Uber’s ascendance hasn’t come without controversy. A lot of people are focused on the company’s use of surge pricing, which is when the company charges more money to customers because there is ostensibly high demand, such as during snowstorms or during New Year’s eve. It’s a controversial practice, to say the least.
The CEO of Uber, Travis Kalanick, has responded by basically saying ‘deal with it, it’s market-pricing.’ His argument is that higher pricing brings more drivers into the market, matching supply with demand. It is the optimal way to get as many people home as possible.
His argument, though, is phrased somewhat oddly. Kalanick notes “we are not setting the price, the market is setting the price.” But then, non-ironically, immediately adds “we have algorithms to determine what that market is.” In other words, the prices his company sets in the markets that his company controls are somehow, well, natural. So complaining about this is like complaining about the rain.
This is, of course, absurd. Uber is aiming for an algorithmic monopoly, control of a market through contract pricing. That the contract pricing is done with a complicated algorithm doesn’t make it a market, it just makes it complicated. Standard Oil would love this rationale.
There are three big issues with Uber’s model.
One, Uber controls all of the information in this so-called ‘market’. One of the premises of a market is relatively balanced information on the part of both the buyer and the seller. But Uber is neither a buyer or seller, it’s a broker. And as a broker, it shows the buyer and seller only what it wants to. Its algorithm is not regulated nor is it transparent, so neither the buyer or the seller has any credible information. This isn’t a market, it’s a monopoly. It’s a special type of monopoly, an algorithmic monopoly. It may mimic market-style pricing, or it may not. That’s up to Uber.
We’ve already seen that Uber withholds supply to drive up prices, as illustrated by a text message encouraging drivers to stay home so pricing would surge. Uber denies doing this, but even the denial proves the point that Uber absolutely controls all aspects of the ‘market’. Here’s the company’s PR on the text message debacle.
“The message was a poor choice of words by the local team but its clear purpose was to get more supply on the system, not less — to keep surge pricing down and the numbers speak to that,” says Noyes. “Only 3.1% of all Valentine’s Day trips in San Diego had surge pricing. The average Valentine’s Day trip price was 2% more expensive or $0.26 more expensive on average. In addition there were 306 drivers onboarded in the 2 weeks leading up to Valentine’s Day.”
Noyes explained the bit about not activating new drivers to The Verge:
“[Noyes] explained the text simply noted that Uber did not onboard as many San Diego drivers as they could have that week because in the two weeks prior, a very large number of new drivers were added to the system,” The Verge’s Ben Popper writes. ”Earnings had been low, and the company wanted to reward new drivers with a strong holiday paycheck.”
“The company wanted to reward new drivers….” But wait, how is ‘rewarding drivers’ consistent with market pricing? Markets don’t reward anyone, they simply clear at a price. So the answer is, it’s not a market, it’s contract-pricing controlled by Uber.
Right now, the only competitive force working to constrain Uber is the open cab market (well there’s politics, but that’s being swept away effectively). As this disappears, will Uber’s algorithms, aka the magical market, adjust as well? I think we can count on it. Uber believes in supply and demand, and when Uber is the only supply, well…
The second problem is simpler to explain. Cab drivers have a history of discrimination, whether it’s not picking up African-Americans or refusing to go to certain neighborhoods. Uber solves this problem, as Latoya Peterson explains in Racialicious. Here’s a sample comment.
A good example of race, class, and gender intersecting and the cost of racism and sexism. As a black woman I don’t get discriminated with Uber and feel safer than hailing a cab since my ride is tracked but if I couldn’t afford Uber, oh well. I take Uber all the time and have never been sexually harassed or treated rudely like I have the many times I’ve taken cabs in DC over the past 10 yrs.
Getting rid of racism is a good thing. But in eliminating one problem, this service introduces another. You have to have a smartphone and credit to use Uber. As Uber displaces the regular cab market, racism as a screen for cab drivers will decline. But the new screen, which will be contained in the magic market, aka Uber’s algorithm, will be whether you have a credit card and a smartphone. That means you can’t give someone twenty dollars for cab fare. It means that an entire slice of the population simply can’t get into Uber’s magic market.
And three, Uber is quietly gaining enormous power, almost feudal power, over its drivers. Remember, Uber wanted to ‘reward’ drivers with a great paycheck. This works both ways. Are you an Uber driver who is complaining too much about Uber stealing your tips? Well, gosh, it seems like the magic algorithm keeps giving you bad customers. Or no customers. Or think a few years down the road, when there is nothing but Uber in certain localities. Then Uber can raise prices on consumers, who may have other options and can squeal. But it can also lower prices paid to drivers, and these drivers are dependent on Uber for their livelihood. In fact, Uber is even starting a financing program for its drivers, so they can get loans for cars.
Remember, the customer doesn’t even pay a driver, the payment goes through Uber. What are these drivers going to do when Uber totally controls the market? Sue? Ha, not if they want the algorithm, I mean the market pricing, to ‘reward’ them. And let’s be clear, when a company offers low cost financing for capital investment for independent contractors and controls all aspects of the transaction and customer relationship, these are no longer independent contractors. They are employees. Only in this case, they are employees who have taken on debt to work for Uber. Uber has figured out that it is cheaper to trick people into thinking they are independent contractors and get them to risk their capital. Then Uber can happily take the profits. I guarantee you, if Uber thought its capital would be best used to run a fleet of cars, it would simply hire people straight out to be drivers. That it’s not doing that suggests something.
Uber is a fascinating and convenience-inducing shift in urban logistics, for now. I’ve used it. But what the company is really doing is supplying a governing service, replacing taxi commissions, and taking a fee for doing that. This means no input from the public, and since the public seems to hate politicians these days, maybe that’s what people want. But still, to the extent that there is interest in democratic decision-making, algorithmic monopolies are something antitrust authorities should watch. Right now Uber is wringing a lot of inefficiency out of the taxi industry. But eventually it will have so much power that it will introduce problems of its own.
Uber used to be called UberCab, with the goal of bettering all the cabs out there, creating an indispensable service. It’s nearly there. Soon after starting, it removed ‘cab’ from the name, and is just called Uber. Now it’s expanding into new areas.
What’s next? Maybe everything.
The US government is refusing to grant Angela Merkel access to her NSA file or answer formal questions from Germany about its surveillance activities, raising the stakes before a crucial visit by the German chancellor to Washington.
Merkel will meet Barack Obama in three weeks, on her first visit to the US capital since documents leaked by whistleblower Edward Snowden revealed that the NSA had been monitoring her phone.Continue reading...
I managed to listen to all of this session with Edward Snowden (hat tip Deontos) before turning in. It’s long and the pacing may be a bit too leisurely for some due to the formalities of an international gathering, plus the need to speak at a measured pace to facilitate translation.
Snowden’s formal remarks start just after the 7:00 minute mark. There’s then a section where various officials make remarks. That part might seem a bit stilted, but I was struck by the directness and the sense of urgency of some of these remarks. Snowden does a fine job at the end of fielding questions that are often scattered. Snowden’s big messages were familiar: the lack of effective supervision of the US surveillance state, the scope and methods of surveillance, and the ability of citizens to protect themselves if they use strong enough encryption of their data and their communications. I wonder what he would have said about the Heartbleed bug. Note that some sites that used the flawed OpenSSL were able to maintain secure communication by virtue of having additional defenses.From the PACE website:
Speaking via Google Hangout from Moscow, Mr Snowden told PACE’s Legal Affairs Committee that such mass surveillance “results in societies that are not only less liberal, but less safe”. He stressed again that his motivation for revealing NSA secrets was to “improve government, not to bring it down”.
Rapporteur Pieter Omtzigt (Netherlands, EPP/CD) said: “Mr Snowden revealed that there is a dedicated programme that specifically targets human rights organisations. He also made it clear that there is a total lack of judicial and political oversight of the NSA. Lastly he said that the countries that co-operate extensively with the NSA – he mentioned the UK, Germany and the Netherlands in particular – have no binding assurances from the US that the exchanged data is not used for illegal operations.”
Other participants included a former head of Germany’s Federal Intelligence Service Hansjorg Geiger, who proposed a “codex” to regulate intelligence activities between friendly states. He also hailed whisteblowing as an effective means of enforcing such a code.
“This is the first clear statement from the (former) head of an intelligence service in support of procedures for whistleblowing in secret services,” said Mr Omtzigt.