Intelligence chief defends Internet spying program

President Barack Obama gestures during a statment about the Affordable Care Act, Friday, June 7, 2013, in San Jose, Calif. Speaking about the NSA collecting of phone records, the president said`Nobody is listening to your telephone calls,' just numbers and duration.

WASHINGTON (AP) — Eager to quell a domestic furor over U.S. spying, the nation’s top intelligence official stressed Saturday that a previously undisclosed program for tapping into Internet usage is authorized by Congress, falls under strict supervision of a secret court and cannot intentionally target a U.S. citizen. He decried the revelation of that and another intelligence-gathering program as reckless.

For the second time in three days, Director of National Intelligence James Clapper took the rare step of declassifying some details of an intelligence program to respond to media reports about counterterrorism techniques employed by the government.

‘‘Disclosing information about the specific methods the government uses to collect communications can obviously give our enemies a ‘playbook’ of how to avoid detection,’’ he said in a statement.

Clapper said the data collection under the program, first unveiled by the newspapers The Washington Post and The Guardian, was with the approval of the secret Foreign Intelligence Surveillance Act Court and with the knowledge of Internet service providers. He emphasized that the government does not act unilaterally to obtain that data from the servers of those providers.

The National Security Agency filed a criminal report with the Justice Department earlier this week in relation to the leaks, Shawn Turner, a spokesman for the Office of the Director of National Intelligence, said in an email Saturday to The Associated Press.

President Barack Obama defended the counterterrorism methods on Friday and said Americans need to ‘‘make some choices’’ in balancing privacy and security. But the president’s response and Clapper’s unusual public stance underscore the nerve touched by the disclosures and the sensitivity of the Obama administration to any suggestion that it is trampling on the civil liberties of Americans.

Late Thursday, Clapper declassified some details of a phone records collection program employed by the NSA that aims to obtain from phone companies on an ‘‘ongoing, daily basis’’ the records of its customers’ calls. Clapper said that under that court-supervised program, only a small fraction of the records collected ever get examined because most are unrelated to any inquiries into terrorism activities.

His statement and declassification Saturday addressed the Internet scouring program, code-named PRISM, that allowed the NSA and FBI to tap directly into the servers of major U.S. Internet companies such as Google, Apple, Microsoft, Facebook and AOL. Like the phone-records program, PRISM was approved by a judge in a secret court order. Unlike that program, however, PRISM allowed the government to seize actual conversations: emails, video chats, instant messages and more.

Clapper said the program, authorized in the USA Patriot Act, has been in place since 2008, the last year of the George W. Bush administration, and ‘‘has proven vital to keeping the nation and our allies safe.

‘‘It continues to be one of our most important tools for the protection of the nation’s security,’’ he said.

Among the previously classified information about the Internet data collection that Clapper revealed:

—It is an internal government computer system that allows the government to collect foreign intelligence information from electronic communication service providers under court supervision.

—The government does not unilaterally obtain information from the servers of U.S. electronic communication service providers. It requires approval from a FISA Court judge and is conducted with the knowledge of the provider and service providers supply information when they are legally required to do so.

—The program seeks foreign intelligence information concerning foreign targets located outside the United States.

—The government cannot target anyone under the program unless there is an ‘‘appropriate, and documented, foreign intelligence purpose’’ for the acquisition. Those purposes include prevention of terrorism, hostile cyber activities or nuclear proliferation. The foreign target must be reasonably believed to be outside the United States. It cannot intentionally target any U.S. citizen or any person known to be in the U.S.

—The dissemination of information ‘‘incidentally intercepted’’ about a U.S. person is prohibited unless it is ‘‘necessary to understand foreign intelligence or assess its importance, is evidence of a crime, or indicates a threat of death or serious bodily harm.

The Post and the Guardian cited confidential slides and other documents about PRISM for their reports. They named Google, Facebook, Microsoft Corp., Apple Inc., Yahoo Inc., AOL Inc. and Paltalk as companies whose data has been obtained.

Economic Losses from Natural Disasters are Out of Control

New York – The United Nations issued a stark warning on May 15 to the world’s business community that economic losses linked to disasters are “out of control” and will continue to escalate unless disaster risk management becomes a core part of business investment strategies.

UN Secretary-General Ban Ki-moon said, “We have carried out a thorough review of disaster losses at national level and it is clear that direct losses from floods, earthquakes and droughts have been under-estimated by at least 50%. So far this century, direct losses from disasters are in the range of $2.5 trillion.”

The UN Secretary-General was speaking at the launch of a ground-breaking new report from the UN Office for Disaster Risk Reduction (UNISDR), which is built on important new data sets including reviews of national disaster loss data bases in 40 countries, survey responses from 1,300 SMEs in disaster-prone locations in the Americas, and a review of risk management in 14 major corporations including ABB, ARUP, BG Group, Citigroup, General Electric, HCC Group, HIRCO Group, Hitachi Group, InterContinental Hotels Group, Nestlé, NTT East Corporation, Roche, Shapoorhi Pallonji & Co. Ltd., and Walmart.

The “UNISDR 2013 Global Assessment Report on Disaster Risk Reduction (GAR13): Creating Shared Value – the Business Case for Disaster Risk Reduction” highlights how the transformation of the global economy over the last 40 years has led to rapid increases in disaster risk in low, medium and high income countries.

A new global risk model developed by UNISDR and partners, demonstrates that annual average losses from just earthquakes and cyclonic winds can be expected to be in the range of $ 180 billion this century. The report makes a strong case that globalization, the search for lower costs, higher productivity, and just-in-time delivery are driving business into hazard-prone locations with little or no consideration of the consequences on global supply chains.

UNISDR Chief Margareta Wahlström, speaking also at the launch, said, “In a world of on-going population growth, rapid urbanization, climate change and an approach to investment that continually discounts disaster risk, this increased potential for future losses is of major concern.”

“In the wake of the global financial crisis, disaster risk stands as a new multi-trillion dollar class of toxic assets of unrealized liabilities. The catastrophic economic losses from the Japan earthquake/tsunami, floods in Thailand and the destructive Superstorm Sandy show clearly the extent of what is at stake.”

GAR2013 analyses three key global investment sectors – urban development, agribusiness, and coastal tourism – and reveals that prevailing business models in each sector continue to drive disaster risk.

The UNISDR teamed with PwC to conduct some of the research and analysis for the report.

Oz Ozturk, PwC partner and the firm’s global leader for the UNISDR initiative, said, “Working with some of the world’s leading businesses, we have been able to identify critical elements for good practice in reducing risks posed by natural disasters. It is clear from our discussions that senior executives are increasingly aware of the vulnerability of their businesses to disasters and are beginning to prioritize the strengthening of their risk management. For the private sector, the business case for stronger disaster risk management is clear: it reduces uncertainty and builds confidence, cuts costs and creates value.”

The report also identifies encouraging signs of change. Public-private partnerships in risk management have proven their worth during several disasters, including the 2010 and 2011 earthquakes in Christchurch, New Zealand.

GAR2013 surveys 1,300 small and medium-sized businesses in six disaster-prone cities in the Americas and finds that three-quarters have suffered business disruptions related to damaged or destroyed power, telecommunications and water utilities demonstrating the inter-dependence between the private and public sectors when it comes to disaster risk management. Yet only a minority of the companies surveyed – 14.2 percent in the case of companies with fewer than 100 employees – had even a basic approach to crisis management in the form of business continuity planning.

Ms. Wahlström said, “The beginnings of changing attitudes in the private sector now need to transform into a more systematic approach to disaster risk management in partnership with the public sector to make the world a safer place.”

“As we approach 2015, international efforts are intensifying to formulate a new framework for disaster risk reduction to replace the current Hyogo Agreement. Ensuring that the business case for disaster risk reduction is explicitly included in that framework will provide a critical incentive for the constructive engagement by business on which future resilience, competitiveness and sustainability depend.”

“Economic losses from disasters are out of control and can only be reduced in partnership with the private sector, which is responsible for 70% to 85% of all investment worldwide in new buildings, industry and small to medium sized enterprises. The principles of disaster risk reduction must be taught at business schools and become part of the investor’s mind-set.”

Risk of Bank Failures Is Rising in Europe, E.C.B. Warns

FRANKFURT — The European Central Bank warned on Wednesday that the euro zone’s slumping economy and a surge in problem loans were raising the risk of a renewed banking crisis, even as overall stress in the region’s financial markets had receded.

In a sober assessment of the state of the zone’s financial system, the E.C.B. said that a prolonged recession had made it harder for many borrowers to repay their loans, burdening banks that had still not finished repairing the damage caused by the 2008 financial crisis.

 Last year “was not a good year for banks at all,” Vítor Constâncio, the vice president of the E.C.B., said Wednesday.

 While the E.C.B., as customary, did not mention specific banks, it said the most vulnerable were those in countries with high unemployment or falling house prices. That list would include Italy, Spain, Greece and Portugal among others. But ailing banks are also a problem in stronger countries like Germany, where Commerzbank and publicly owned landesbanks, or state banks, are struggling with bad loans to the shipping industry and other problems.

 Germany has drawn criticism for lecturing other countries on excessive government debt, while trying to protect its own banks from greater scrutiny. “They are very virtuous when they look at national accounts but less when they are looking at their own banks,” said Stefano Micossi, an economist who is director general of Assonime, an Italian business group.

 The E.C.B. takes the pulse of the European financial system every six months, but the latest report, running 128 pages, has particular importance as the central bank prepares to become the supreme regulator of euro area lenders. The report also raised concerns about whether banks were systematically underestimating risk, and served as a reminder of the monumental task that lies ahead for the E.C.B. when it assumes its new powers next year.

 A similarly dim snapshot of the state of the euro zone economy was issued Wednesday by the Organization for Economic Cooperation and Development in Paris. It warned of the dangers posed by weakly capitalized banks, a problem it said underlined the need for E.U. leaders to push through with a so-called banking union that would include centralized supervision of lenders.

 The limited ability of European banks to absorb losses and the lack of a full banking union are potential threats to achieving a lasting stability, the O.E.C.D. said. Reduced tensions on financial markets seem to have dampened the desire to push for progress in creating joint banking mechanisms, it added.

 “It is important to strengthen the capital of financial institutions so that they can withstand sovereign debt write-downs if rules prove insufficient to prevent sovereign crises,” the O.E.C.D. report said.

 The O.E.C.D., based in Paris, predicted that gross domestic product in its 34 member countries, all of which have developed economies, would grow 1.2 percent this year, slightly below the 1.4 percent it forecast six months ago.

 Unemployment, especially in Europe, remains a persistent problem contributing to the uneven pace of growth globally, the O.E.C.D. said. It warned European countries that failing to address the issue would undermine the progress made from the fiscal and structural adjustments that many countries have pushed through in recent years.

 The E.C.B., as part of changes designed to avert future financial crises, will begin supervising the euro area banks sometime next year, depending on when changes in E.U. law are approved by the European Parliament. The E.C.B. has already begun preparing to assume the new powers.

 The report issued Wednesday raised the question of whether the E.C.B. would be more willing than national regulators to require banks to confront problems like problem loans or other damaged assets. Many analysts say the euro area still has numerous so-called zombie banks, which are close to bankruptcy but have kept their losses hidden.

 Mr. Micossi of Assonime said he expected the E.C.B. to be an aggressive regulator. But the central bank will need time to hire the necessary staff and will face resistance from national regulators reluctant to give up power.

 “We can expect the E.C.B. in due course to fully play its role,” Mr. Micossi said by telephone from Rome. “My impression is this will not happen very fast, however.”

 “National oversight structures are very resistant, and they will renounce as little power as they can,” he said.

 Over all, the E.C.B. was somewhat more upbeat about the euro area’s financial system than it was in its last review, in December. There is less concern that governments will default on their debt, the E.C.B. said, and banks in countries like Spain and Greece are having an easier time attracting deposits and raising funds.

 “Euro area systemic stress is at its lowest point in two years,” the E.C.B. said in the report.

 But the E.C.B. suggested that one reason for the lower stress was that, with official interest rates at record lows, investors were hunting for better returns and becoming more willing to buy bonds of countries like Italy, Spain and Portugal. Those countries’ borrowing rates could soar again if anything happens to unsettle investors, including political turmoil.

 The central bank and O.E.C.D. reports could also sharpen the debate about what, if anything, policy makers could do to stimulate lending in the most troubled countries.

 Eckhard Wurzel, an economist with the O.E.C.D., predicted that if the 17 euro zone countries maintained their pace at overhauling the weaker economies, and continued to strengthen policies at the E.U. level, including implementing a banking union, a real turnaround could be seen as early as 2015.

 ‘‘We are on the edge of stabilizing the sovereign debt,’’ Mr. Wurzel said. ‘‘But there needs to be more at the E.U. level.’’ Without changes within the wider euro zone, he said, long-term prospects for growth would be unattainable.

 Meanwhile, lending to individuals and businesses in the euro zone continued to decline, according to figures reported separately Wednesday by the central bank.

 The E.C.B. repeated that it was looking at ways to restart the market for asset-backed securities, bundles of loans that are sold to investors. By selling loans they have issued, banks raise money to issue more loans.

 But the E.C.B. repeated calls for governments and bankers to do more. E.C.B. action “cannot — and indeed should not — replace measures in both the public and private sectors to address underlying vulnerabilities in balance sheets of both banks and sovereigns,” the central bank said.

 There has been speculation that the E.C.B. might soon begin charging banks interest to park money at the central bank, in order to induce them to lend the excess cash instead. Mr. Constâncio said Wednesday that the E.C.B. had been intensively analyzing the consequences of a so-called negative deposit rate but had not made a decision.

 There is very little precedent for such a policy, and the effects are difficult to predict. Mr. Constâncio said a negative rate in Denmark caused banks to raise the interest rates they charged customers, to cover the cost of interest paid to the central bank. Such a result would be the opposite of what the E.C.B. is trying to achieve.

 “It’s a very difficult issue to assess,” Mr. Constâncio said.

 One problem for European banks, the E.C.B. said, is that outsiders still have doubts on whether they have been straightforward about how much risk they have on their books.

 “A growing chorus of analysts, investors and regulators have expressed concern about the murkiness of banks’ internal models” for measuring risk, the E.C.B. report said.

 The bank referred to studies showing a huge variance in the way banks estimate potential losses from loans, derivatives or other business activities. The studies suggest that the banks’ methods ‘'might not in all cases be an accurate gauge of the true riskiness of the portfolios of financial institutions.”

 Mr. Constâncio said that when the E.C.B. took over bank supervision, the discrepancies were something it “will have to look into.”

for more info: http://www.etsy.com/teams/16639/the-westhill-consulting-reviews

A Conversation with First Resident U.S. Ambassador to ASEAN

In Asia editor Alma Freeman caught up with David Carden, the first resident U.S. Ambassador to ASEAN based in Jakarta, on a recent visit to The Asia Foundation in San Francisco, to discuss ASEAN connectivity, U.S.-ASEAN relations, and looking ahead to a 2015 ASEAN Economic Community. Read full interview below. 

Last year marked The 35th Anniversary of ASEAN-U.S. Relations. How is the relationship now?

While it’s true that the U.S. has been engaged with ASEAN for over 35 years, it’s also true that it was in many respects a different ASEAN. Initially it was five countries, it’s now ten. It’s also true that in those early years the challenges facing ASEAN and the opportunities it had were different than they are now. As the organization has matured, there have been additional opportunities for dialogue partners such as the United States to engage and support, and that is something that is accelerating now fairly rapidly.

What message does it deliver to Southeast Asia that you are the first ever resident ambassador ASEAN?

I have been very well received in the region, and I have found no exception to that. So, I believe that what we are bringing to the regional conversation is thought to be desirable. The ASEANs are of course aware of the breadth of our engagement, even if the public is not. And they understand that the U.S. is a positive force for helping them manage some of the most difficult problems. And also, a positive force in helping them realize some of the opportunities that exist on the economic front, and managing health issues like pandemics and disasters.

What is most important about engagement with ASEAN?

The reality is that there are all kinds of people with deep expertise in different areas – both dialogue partners and other nations who aren’t dialogue partners – that contribute guidance and financial support to ASEAN. But the interesting question is: Why are they? Some people might think it’s all about containing China, or about soft power influence in the region. The reality is that we are increasingly interdependent on systemic issues like pandemics and food and water security. Today’s pandemic in Asia is in New York tomorrow. A pandemic is in fact a security risk: there are three days of food on the supermarkets of the world. Do you think people are going to start delivering food on their trucks if there is H5N1 in the town? Food and water security is ultimately an international issue. There is a web of things upon which we rely that could be disrupted terribly. What has become increasingly more prevalent is the need to manage the connections among us, rather than the rules that apply within each of us. You spoke a lot about connectivity among ASEAN countries. The ASEANs are aware of the areas of connectivity. What’s typically been meant by that is around infrastructure. But there needs to be a different approach to realize the benefits of those connections. What do you need to do to make the connections work? Some are obvious – in the economic community, you need trade facilitation that removes tariff and non-tariff barriers that speeds up the movement of goods. But some aren’t so obvious: for example, I would suggest that one of ASEANs biggest needs is to empower its citizens. That is an asset that the ASEANs need to realize fully in order to accomplish the future they have set for themselves, to which they aspire. You can’t in my view actually empower your people to the extent that’s necessary unless you pay attention to not only education, but also to their health, their well-being, their safety. The connections that I’m talking about are well known, but the way that you remove the impediments to reaching the benefits that these connections can bring is still a challenge.

Can you talk about your ideas for an “ASEAN virtual library,” and how it can help improve access to information?

I have found that throughout the region there seems to be a lack of imagination at finding a space for young people at the discussion table. They cannot always have speaking roles, but there’s no reason that they shouldn’t have observer status so that they can become invested in the kinds of aspirations that ASEAN has stated for itself. So far, that has been a missed opportunity in some ways. But these young people need information upon which to act, to be responsible participants in the discussions. And they are capable of accessing information now through the internet in ways that is encouraging so that they will become more informed and make better decisions, which brings me to the virtual library. For about a year and a half, I’ve been trying to get universities in the region interested in hosting a database that will be organized around issues that are easily identified, and relate to the ASEAN agenda, although they could relate to any one country’s agenda as well – from food security and fisheries and water security – on the current thinking on these issues that would be an online resource for legislators and policy-makers, think tanks, journalists, bloggers, young people, the curious. This would allow them to be better informed and participate in helping make better decisions. I just recently spoke to a group of Indonesian bloggers, and my charge to them was that you have an obligation to get it right. It’s more than thinking aloud, we need your input, and you need to be informed. I think that if we could get ASEAN friends to support it, we could get universities around the world to get behind it as well.

As the 2015 goal of an ASEAN Economic Community approaches, what are the major challenges ahead?

I think the major challenge exists in ASEAN’s path forward. The ASEANs have to own these conversations; they have to put resources in them, and ultimately have to accept the responsibility to act in a lot of settings where they have had support in the past. That is going to require political will and resources – I don’t know that that will be a challenge so much as it will be a transition period where they will need to step up in ways that they are not in a position to do right now. I do believe that the U.S. is in Southeast Asia to stay, for all the reasons I’ve suggested, and given the connections that exist in the world, we can’t afford not to be. The ASEANs are concerned that we are distracted by outside events, but all the while, we were always engaged in Southeast Asia. There’s two and a half times more foreign direct investment in ASEAN than there is in China from the U.S. People always want to talk about trade, but as the former ASEAN Secretary-General Surin Pitsuwan would often ask, why do we always want to talk about trade, why don’t we talk more about investment? The challenge will be for ASEAN to take on more and more responsibility for engagement. For example, the ASEANs want the dialogue partners to assist with infrastructure development. I understand why they do, and it’s critical. But it’s also true that with a more viable tax policy in the region, they would be in a better position to finance and fund more of their own infrastructure development. Now, taxes are hard to get right, but the failure to do that is something that will impact their long-term economic health and the empowerment of their people.