ICANN Envision #NetFreedom

In Spy We Trust

In Spy We Trust

I’m no technocrat. I don’t stand to claim that I understand the nitty-gritty behind the decision to relinquish American control of ICANN. I can claim that this may be a bold move on the part of the US Commerce Department & the Obama Administration. How so? The White House may be building a diplomatic framework that encourages Net Freedoms. While protecting intellectual property rights and freedoms of expression/speech/assembly; The US can only approach the Global community from a “neutral” standpoint.

ICANN controls how the internet is addressed. This may not seem huge, but already the internet stands on the crux of something huge. The internet is about to become decentralized and not Anglo-Centric. Of this, the kernal must be created to ensure that any government, including the United States can control the free flow of information any more. The NSA revelations due to Edward Snowden was damning to the US in the sense that it showed how pervasive governments can potentially become through the technological marvels of today. There are bigger lobby’s out there with larger consequences for a “free” Internet within the United States. Issues such as monopolistic consequences for a Comcast-Time Warner Merger or the Net Neutrality lobby of AT&T & Verizon shed a spotlight on the White House, the Bureaucracy, and Congress.

The White House has told the US Department of Commerce to signal its relinquishing of control over ICANN for internal and diplomatic reasoning. Diplomatically speaking, we have strong allies that are beginning to utilize internet censorship to establish autocratic regimes; Turkey & China come to mind. Internally, The White House may have signaled how powerless the government is to the monetary pressures of big business. With the bellwether Citizens United case; Money is now Speech. Corporations are now Persons. Its hard to believe when typed out but this is the legalisms of the 21st century thanks to the Neo-Conservative victories of Reagan & Bush I, II. The pressures of the worst rated Congress in history will break the levy’s controlling the Internet Landscape. Net Neutrality had lost a significant Appeals battle and the previous issues of cable mergers / phone companies are ratcheting up.

The White House had to relinquish Governmental control of some of the governing bodies to the International Community; such as the G7 or United Nations.

The NSA has not relinquished its abilities upon the Internet. The United States recognizes a Cyber Playing Field that is in play with the likes of Russia and China 24/7. By giving up ICANN the US may have given itself more Carte Blanche to continue its activities with less liability. Liability being that the Government of the United States may also be fighting against internal forces that are profiteering on the Internet. The US will inevitably have to go after these forces or be completely disabled, with an AOL-Compuserve model of 1995 internet for the 21st Century. Control in the forces of Corporate Powers, through the weak Congress may be far less advantageous than setting up a Neutral Playing Field through stable, sound, & allied governance of ICANN. If anything this move shows how vulnerable the United States has become to its own Corporate Masters. Masters that legally may be bound to investors not of the United States …

In short, this was a PR stunt. In short, this was a bold move to keep the internet free as we know it!

If you are an internet activist and a political activist; please do all you can to plant the mental virus of Freedom. The 21st Century deserves the Natural Law understood by the 18th Century Founding Fathers.

Arab Ba’ath Party

Ba’ath Party

From Wikipedia, the free encyclopedia
For the party which governed Iraq and governs Syria presently, see Arab Socialist Ba’ath Party – Iraq Region and Arab Socialist Ba’ath Party – Syria Region respectively
Arab Socialist Ba’ath Party
حزب البعث العربي الاشتراكي
Flag of the Ba'ath Party.svg
Slogan “Unity, liberty, socialism”
Founded 7 April 1947
Dissolved 23 February 1966
Preceded by Arab Ba’ath and Arab Ba’ath Movement (1947)
Arab Socialist Movement(1952)
Succeeded by Split into two factions: theIraqi-dominated Ba’ath factionand the Syrian-dominated Ba’ath faction
Newspaper Al-Ba’ath
Ideology Ba’athism
Colors Black, Red, White and Green (Pan-Arab colors)

The Arab Socialist Ba’ath Party (Arabic: حزب البعث العربي الاشتراكي‎ Ḥizb Al-Ba‘ath Al-‘Arabī Al-Ishtirākī) was a political party founded in Syria by Michel AflaqSalah al-Din al-Bitar and associates of Zaki al-Arsuzi. The party espoused Ba’athism (from Arabic: البعث‎ Al-Ba’ath or Ba’athmeaning “renaissance” or “resurrection”), which is an ideology mixing Arab nationalistpan-ArabismArab socialist and anti-imperialist interests. Ba’athism calls for unification of the Arab world into a single state. Its motto, “Unity, Liberty, Socialism”, refers to Arab unity, and freedom from non-Arab control and interference.

The party was founded by the merger of the Arab Ba’ath Movement, led by Aflaq and al-Bitar, and the Arab Ba’ath, led by al-Arsuzi, on 7 April 1947 as the Arab Ba’ath Party. The party quickly established branches in other Arab countries, although it would only hold power in Iraq andSyria. The Arab Ba’ath Party merged with the Arab Socialist Party, led by Akram al-Hawrani, in 1952 to form the Arab Socialist Ba’ath Party. The newly formed party was a relative success, and became the second-largest party in the Syrian parliament in the 1954 election. This, coupled with the increasing strength of the Syrian Communist Party, led to the establishment of the United Arab Republic (UAR), a union of Egypt and Syria. The union would prove unsuccessful, and a Syrian coup in 1961 dissolved the union.

Following the break-up of the UAR, the Ba’ath Party was reconstituted. However, during the UAR, military activists had established the Military Committee to take control of the Ba’ath Party from civilian hands. In the meantime, in Iraq, the local Ba’ath Party branch had taken power by orchestrating and leading the Ramadan Revolution, only to lose power a couple of months later. The Military Committee, with Aflaq’s consent, took power in Syria in the 8th of March Revolution of 1963.

A power struggle quickly developed between the civilian faction led by Aflaq, al-Bitar and Munif al-Razzaz and the Military Committee led by Salah Jadid and Hafez al-Assad. As relations between the two factions became worse, the Military Committee initiated the 1966 Syrian coup d’état which ousted the National Command led by al-Razzaz, Aflaq and their supporters. The 1966 coup split the Ba’ath Party between the Iraqi-dominated Ba’ath movement and the Syrian-dominated Ba’ath movement.

Ideology and policy

Further information: Ba’athism

Classical Ba’ath: 1947–1960

Arab Nation

Part of the 1947 Ba’ath Party constitution

From its very beginning, the party was a manifestation of Arab nationalist thought, with the party itself referring to itself as “The Party of Arab Unity”.[1] The pan-Arab tendencies of the party’s predecessor, the Arab Ba’ath Movement, was strengthened 1945–1947 by recruiting members from the Zaki al-Arsuzi‘s Arab Ba’ath.[2] The first article of the party’s constitution stated “the Arabs form one nation. This nation has the natural right to live in a single state. [As such,] the Arab fatherland constitutes an indivisible political and economic unit. No Arab can live apart from the others.”[3]

To express his heartfelt belief in Arab nationalism, Aflaq coined the term “one Arab nation with an eternal message” (Arabic: ummah arabiyyah wahidah thatu risalah khalidah‎).[4] Party ideology, and Ba’athism in general, was not based on concepts such as the purity of the Arab race or ethnic chauvinism, but on idealistic thoughts borrowed from the enlightenment era.[5] According to Middle East expert Tabitha Petran, the basic idea of the party’s ideology was;[6]

that the Arab nation is a permanent entity in history. The Arab nation is considered, philosophically speaking, not as a social and economic formation, but as a transcendent fact inspiring different forms, one of its highest contributions taking the form of Islam. It was not Islam that modeled the peoples of Arabia, the Fertile Crescent, and North Africa, equipping them with Islamic values, especially the Arabic language and the Arabic culture, but the Arab nation which created Islam. This conception of the Arab nation implicitly advantages the Arab contribution to history. On the other hand, Arab decadence can be overcome through a purifying and spiritual action, not religious but moral.”[6]

Peasant and workers

The early Ba’ath gave little attention to the problems facing the peasants and workers.[7] As Hanna Batatu notes, “Aflaq was basically urban in outlook. The peasants never constituted an object of his special concern. In his writing there is scarcely an expression of concentrated interest in the country’s husbandsmen.”[7] While peasants and issues facing them are mentioned in some of Aflaq’s work, there was scarcely any depth given to them or the issues facing them.[7] To take an example, in one instance Aflaq states “the [national struggle] … can only be based on the generality of the Arabs and these will not take part in it if they are exploited.”[7] Secondly, Aflaq never had any official enmity towards the traditional landlords.[7] Issues such as these would only gain prominence when Akram al-Hawrani became a leading party figure, and when the “transitional Ba’athists” took power.[7] Of the four members in the 1st Executive Committee, Wahib al-Ghanim was the only who paid much attention to the problems of the peasants and workers,[7] because the other members (Aflaq, Salah al-Din al-Bitar and Jalil al-Sayyide) had a middle class upbringing and upheld middle class values.[8]

The early party organization never cultivated a deep following in rural areas.[7] In fact, at the party’s founding congress, only one peasant and one worker were present among the 217 delegates.[7] Most of the delegates were either school teacher or students attending universities.[7] When the Akram al-Hawrani‘s Arab Socialist Party (ASP) merged with the Ba’ath Party, the majority of ASP members of peasants origins did not join the Ba’ath Party, instead becoming personal followers of Hawrani.[7] However, the majority of Ba’ath members were of rural upbringing.[7] The “Transitional Ba’ath”, which grew out of the dissolution of the Syrian Regional Branch in 1958 dissolution and the Military Committee, were more rural in outlook, policy and ideology.[9]

“Unity, liberty, socialism”

The slogan “Unity, liberty, socialism” is the key tenet in Ba’athist thought.[10] Unity stood for the creation of an independent, strong Arab Nation (see “Arab Nation” section).[10] Liberty did not mean liberal democracy, but rather freedom from colonial oppression and freedom of speech and thought.[11] Aflaq believed that the Ba’ath Party, at least in theory, would rule, and guide the people, in a transitional period of time without consulting the people,[12] however he did support intra-party democracy.[13] The last tenet, ‘socialism’, did not mean socialism as it is defined in the West, but rather a unique form of Arab socialism.[14] According to Ba’athist thought, socialism had originated under the rule of Muhammad.[14] The original interpretation of Arab socialism did not answer questions such as: how much state control was necessary, or economic equality; but instead focused on freeing the Arab Nation and its people from colonization and oppression in general.[14]

Transitional Ba’ath: 1960–1964

Regionalists versus nationalists

After the failure of the United Arab Republic (UAR), a union of Egypt and Syria, the Ba’ath Party was divided into two main factions, the Regionalists (Arabic: Qutriyyun‎) and the Nationalists (pan-Arab) (Arabic: gawmiyyun‎).[15] When the union with Egypt collapsed, the Ba’ath Party was put in a difficult position, the party still sought Arab unity, but did not oppose the UAR’s dissolution and did not want to seek another union with Egypt under Gamal Abdel Nasser‘s rule.[15] However, being the unionist party that it was, the party’s leaders could not state their position on this issue.[15] The end result was that the pro-Arab nationalists within the Ba’ath Party became committed Nasserists, while the more moderate Arab nationalists founded the pro-Nasserite Socialist Unionists party.[15] The third group, led by people disenchanted with both Nasser and the union period, remained in the Ba’ath Party, stopped believing in the feasibility pan-Arabism.[15] on 21 February 1962, the National Command issued a new policy regarding the pan-Arab project by first mentioning the successes and failures of the UAR, but ending the statement by calling for the reestablishment of the UAR as a decentralized federal union with Nasser’s Egypt.[16] Many rank-and-file members opposed this change in policy, with many members being both disenchanted with pan-Arabism and Aflaq’s continued party rule.[16]

When the Syrian Regional Branch was reestablished, the majority of its members in the provinces were of communal origins–Druze, Alawi or Ismaili.[17] The provincial party members had not been told of the Syrian Regional Branch’s dissolution, which in fact broke the communication line with provincial branches and the National Command.[17] While its true that in 1962 the Regionalists supported the slogan, adopted at the 5th National Congress, “the renewal of the union with Egypt while taking note of past mistakes”, they treated such a slogan as a propaganda slogan, and not as a feasible goal.[18]

The “Arab road to socialism”

The disillusionment felt among party members on the pan-Arab project, led to the radicalization of the party’s interpretation of socialism.[19] Yasin al-Hafiz, a former member of the Syrian Communist Party, was an early frontrunner for the party’s radicalization.[19] While he didn’t oppose the pan-Arab project, he wanted to turn the concept of Arab socialism into a scientific and revolutionary socialist ideology which adapted Marxism to local conditions.[19] Jamal al-Atassi, who had been a moderate socialist for most of his life, called for the renunciation of Arab socialism in 1963 and the adoption of a “virtually Maxist concept of socialism” by claiming thatclass struggle was the moving force in society.[20]

Hammud al-Shufi became the leader of the party’s Marxist faction during his short stint as Syrian Regional Secretary, literally the head of the Syrian Regional Organization.[21] Shufi was able, due to his position as head of the Organization Bureau of the Regional Command, to recruit several Marxist or Marxist-leaning members to the top of the Syrian Regional party hierarchy.[22] Radical socialists led by Ali Salih al-Sadi took control of the Iraqi Regional Branch in 1963, which led to the official radicalization of the party’s ideology.[23]

The delegates at the 6th National Congress elected an Ideology Committee which was responsible to write a charter about the party’s ideology.[24] The end result was the document Points of Departure.[24] The document, which was approved by the 6th National Congress, relegated Arab unity to a secondary role and gave socialism prominence.[24] Marxists concepts were used interchangeably alongside Ba’athist ones, however, the document was reluctant in explicitly admitting that certain ideas were of Marxist origins.[25] While the Points of Departure didn’t exist a break with party’s traditional ideology, it criticized the party’s old guard for given Arab unity primary over socialism and their failing in turning Ba’athism into a comprehensive theory.[25] While the documents says Arab unity is progressive, the reason for it being important changed.[26] The document stated; “Arab unity is an indispensable basis for the construction of a socialist economy.”[26] Aflaq’s also believed that Arab unity was only an intermediate goal, but it stood at the centre of classical Ba’athism.[26] In the Points of Departure, despite it doesn’t saying it firmly, the goal of creating a socialist society seemed to be both an immediate goal and the main goal of the party.[26]

The concept of Arab socialism, accused of being narrow-minded and nationalistic, was replaced with the Arab road to socialism concept.[26] The Points of Departure criticized the classical Ba’athist view regarding private ownership.[26] While classical Ba’athist supported private ownership as a way to recruit petty bourgeoiselements into the party.[27] The document called for nationalization of the commanding heights of the economy, the slow incorporation of the petty bourgeoise into the socialist economy and the elimination of the national bourgeoise and it’s allied classes.[27] To safeguard the party from evolving into one supporting state capitalism, the socialist economy would be controlled by a vanguard party together with popular participation from the toiler masses.[27]

Neo-Ba’ath: 1964–1966

Further information: Neo-Ba’athism

Neo-Ba’athism is a term used to describe the dramatic changes which manifested itself in Ba’athist ideology from 1960 to 1964, and the Military Committee’s takeover of the Syrian Regional Branch and the National Command in the period 1964 to 1966.[28] The 6th National Congress signified the takeover of the party by an anti-militarist left which opposed both the traditional leaders in the National Command and the pragmatists in the Military Committee.[29] When the anti-military left called for popular democracy, no involvement in the military in national politics and popular struggle, the Military Committee became concerned.[30] By 1965 the anti-military leftists began to “spread rumors about the rightist character of the military junta [Military Committee] within the party and their subversive efforts to engulf it. There was not a single officer in the party who was not accused of conspiracy and reactionary tendencies.”[31] In collaboration with the National Command the Military Committee succeeded in expelling the anti-military left from the party at the 7th National Congress.[32] The Military Committee, which now controlled the Syrian Regional Branch, took control of the Ba’ath Party in the coup of 1966 (see “1966 split” section).[33] According to Middle East expert Avraham Ben-Tzur “the [neo-]Ba’th in its latest variant is a bureaucratic apparatus headed by the military, whose daily life and routine are shaped by the rigid military oppression on the home front, and [Soviet aid among others] military aid.”[34]


The organizational structure of the Ba’ath Party was created at the 2nd National Congress by amending the party’s Internal Regulations (Arabic: An-Nidhämu-d-Däkhilï‎), which was approved at the party’s 1st National Congress in 1947.[35] The organizational structure ran from top to bottom, and members were forbidden to initiate contacts between groups on the same level of the organisation—all contacts had to pass through a higher command level.[36]

National organization

The National Command was the ruling organ of the party between sessions of the National Congress, and was headed by a Secretary General.[37] Between National Congresses, the National Command was held accountable by the National Consultative Council (Arabic: al-majlis al-istishari al-quami).[38] The National Consultative Council was a forum made up of representatives from the party’s regional branches.[38] However, the number of National Consultative Council members were decided by the size of the regional branch.[38] The National Congress elected the National Command, National Tribunal, the party’s discipline body, and the Secretary General, the party leader.[38] The congress delegates determined the party’s policies and procedures.[38]

Before 1954, the party was ruled by the Executive Committee, but this organ, along with others too, were replaced at the 2nd National Congress (for more, see “Structure” section).[37] In Ba’athist jargon “Nation” means the Arab Nation, because of that, the National Command formed the highest policy-making and coordinating council for the Ba’ath movement throughout the Arab world.[37] The National Command had several bureaus, similar to those of the Regional Command.[38] National Command sessions were held monthly.[38] Of these, the National Liaisons Office was responsible for maintaining contact with the party’s Regional Branches.[39]

Regional organization

The term region reflected the Party’s refusal to acknowledge them as separate nation-states.[40] A “Region” (quṭr), in Ba’athist parlance, is an Arab state such as Syria, Iraq, or Lebanon.[40] The Regional Congress, which combined all the provincial branches, was the region’s highest authority and elected a Regional Command, the party leadership in a specific region, the Regional Tribunal, the body responsible for discipline inspection, and a Regional Secretary, the regional party leader.[36] The Regional Congress is made of delegates from the provincial branches; other members attended to, but as observers.[36] The Regional Congress was responsible for evaluating the party’s performance since the last Regional Congress, while at the same time formulating new policies for the next period, which lasts until the next Regional Congress is held.[36] How long this period lasts is decided by the Regional Command.[36] The Regional Command, similar to the Branch Command, operated through bureaus and met for weekly-sessions.[36]

Below the Regional Commands there existed branches.[40] The Branch came above the Subbranch; it comprised at least two to five subbranches,[36] and operated at the provincial level.[40] The branch held a congress periodically in which it elected a Command and a Secretary (leader).[36] The Command operated through bureaus, such as the Workers Bureau and the Bureau of the Secretariat for instance.[36] Underneath the branch was the Subbranch, which was made up of three to five sections, “and was the lowest level of the party to hold a periodical Congress.”[36] Some subbranches were independent of central authority, and elected their own Command and secretaries, while other subbranches were incorporated into the Branches.[36] In these cases the Subbranch Secretary is appointed by the superior Branch.[36]

A Section, which comprised two to five Divisions, functioned at the level of a large city quarter, a town, or a rural district.[37] It elected its own Command, composed of five members, but the Command’s secretary was appointed by the Subbranch.[36] Below that there existed divisions.[37] A division comprised two to seven Circles, controlled by a Division Commander.[37] Such Ba’athist groups occurred throughout the bureaucracy and the military. They functioned as the Party’s watchdog and were an effective form of covert surveillance within a public administration.[40] The lowest level was the circle. It was composed of three to seven members, constituted the basic organizational unit.[37]

The Military Organization was made up of branches similar to those in the Ba’ath’s civilian sector.[36] However, unlike the civilian sector the Military Organization was controlled by a separate Military Bureau, and held periodical Military Congresses.[36] The Military Organization and the Civilian Organization converged at the Regional Congress.[36]


There existed three types of membership categories in the Ba’ath Party; Active member (Arabic: udw ämil), Apprentice Member (Arabic: udw mutadarrib) and Supporter (Arabic: firqa).[36] An Active member had to attend all formal meetings of his party unit, was given the right to vote in party elections,[36] and could run for party office.[36] In the Syrian Regional Branch a member had to spend 18 months as a Supporter to be promoted to Apprentice status, and then wait another 18 months to be promoted to Active member status.[36]


Early years: 1947–1958

The party was founded on 7 April 1947 as the Arab Ba’ath Party by Michel Aflaq (a Christian), Salah al-Din al-Bitar (a Sunni muslim) and the followers of Zaki al-Arsuzi (an Alawite).[41] The founding congress, the 1st National Congress, was held in Rasheed Coffee Shop, close to what is know the Russian Cultural Centre.[41] While Arsuzi’s followers attended the congress, he himself did not.[41] He never forgave Aflaq and Bitar of stealing the name “Ba’ath” from him.[41] While the party remained small during the 1940s, the party together with some recruited Ba’athist military officers participated in the March 1949 coup which toppled President Shukri al-Quwatli.[42] When Husni al-Za’im‘s rule proved just as repressive as that of Quwatli, the Ba’ath participated in another coup to overthrow the former.[43] While al-Za’im’s overthrow led to the reestablishment of democracy, the 1949 elections saw the People’s Party (PP) win a majority.[43] The PP sought the establishment of an Iraqi–Syrian monarchical federal union, which Aflaq, strangely enough, supported.[43] However, Akram al-Hawrani, the leader of the Arab Socialist Party, persuaded the Ba’ath Party leadership in supporting a coup led by Adib Shishakli.[43]

While Shishakli was dismissed at the beginning as being a follower of Hawrani, who was appointed Minister of Defense, but in 1952 Shishakli dismissed parliament and initiated a crackdown of the opposition.[44] Aflaq, Bitar and Hawrani, after a short-lived government detention, left Syria for Lebanon.[44] The most significant outcome of this was the merger of Hawrani’s Arab Socialist Party with the Arab Ba’ath Party to form the Arab Socialist Ba’ath Party.[44] The merger had been discussed before Shishakli’s crackdown of the opposition, but Aflaq had been reluctant.[45] With the general amnesty of October 1953, the Ba’ath leaders returned.[45]Hawrani, after his returned, immediately began planning a coup against Shishakli.[45] In collaboration with the PP and the National Party (NP), and through his contacts in the military, Shishakli was forced to step down in February 1954.[45] The Ba’ath Party became the major beneficiary of Shishakli’s downfall, and in the 1954 elections, 90 percent of the Ba’ath Party members who stood for elections were elected to parliament, and it became the third largest party in the country.[46]

The 2nd National Congress convened in June 1954 elected a seven-man National Command (replacing the old Executive Committee), the party’s highest organ between National Congresses.[47] Aflaq, Bitar and Hawrani represented the Syrian Regional Branch[48] while Abdullah Rimawi and Abdallah Na’was represented theJordanese Regional Branch.[49] The modern Ba’ath Party structure was created at the 2nd National Congress by amending the party’s Internal Regulations.[35] The Congress officially approved the merger of 1952 of the Arab Ba’ath and the Arab Socialist Party.[50]

The failure of the traditionalist parties (the PP and the NP) to close ranks, strengthened the public image of the Ba’ath Party.[51] When Ba’athist Adnan al-Malki, the deputy chief of staff, was assassinated by Yunis Abd al-Rahim, a member of the Syrian Socialist Nationalist Party (SSNP), the Ba’ath Party launched a vehemently anti-SSNP hate-campaigns which “reached hysterical proportions”.[52] What followed organized anti-SSNP demonstrations, attacks on the SSNP’s party organ al-Bina, the sentencing of its party leaders to jail, and the SSNP’s dissolution.[52] After this, the traditionalist parties with the Ba’ath Party and the Syrian Communist Party, signed a National Pact which sough the establishment of a unity government.[53] After bickering with the tradionalist parties of the PP and the NP, a unity government was formed led by Sabri al-Asali.[54] Bitar and Khalil Kallas were appointed Minister of Foreign Affairs and Minister of Economics respectively in the new government.[54] The Ba’ath Party, in a position of strength, was then able to force the government to join a proposed federal union with Egypt.[55] This would lead to the establishment of the United Arab Republic (UAR) and the dissolution of the Syrian Regional Branch.[55]

United Arab Republic period: 1958–1961

On 24 June 1959, Fuad al-Rikabi, the 1st Regional Secretary of the Iraqi Regional Branch, called a press conference in Beirut, Lebanon in which he condemned the National Command, accusing them of not living up their official pan-Arab principles.[56] According to Rikabi he spoke on the behalf of the Iraqi Regional Command.[56]He further accused them of conspiring against the UAR.[56] The National Command, Rikabi said, had taken over the Iraqi Regional Branch organization by illegal means, and had established a puppet Regional Command.[56] This was confirmed by the National Command, which responded to criticism by stating that Rikabi had left his post as Regional Secretary on 29 November 1959, and that he was unqualified to speak on the party’s behalf.[56]

The 3rd National Congress, held 27 August – 1 September 1959, was attended by delegates from “Iraq, Lebanon, Jordan, South Arabia, the Gulf, Arab South, Arab Maghreb, Palestine and Party student organisations in Arab and other universities outside the [Arab] homeland”.[57] The congress endorsed the dissolution of the Syrian Regional Branch, which had been decided by Aflaq and Bitar in 1958.[58]

The National Command expelled Rimawi from the Ba’ath Party in September 1959, because if his opportunism and his failure to appear in a National Command meeting which was investigation him on charges of financial irregularities.[59] On 6 September 1959 Rimawi and Gharbiyah issued a resolution which declared the National Command resolution null and void, and denied the allegations which had been leveled against Rimawi.[59] In May 1960, Rimawi had established a rival National Command,[60] an organ which would develop into the Arab Socialist Revolutionary Ba’ath Party (ASBP), a pro-UAR party.[61] The Revolutionary Ba’ath Party stopped its activity in either 1962 or 1963.[61] By 1966, the Regional Branch had 1,000 members.[62]

On 2 February 1960 the National Command, in the presence of Rikabi, elected a Temporary Regional Command with Talib Hussein ash-Shabibi as Regional Secretary.[56] Not long after, in July 1960, the 3rd Regional Congress of the Iraqi Regional Branch called on the national leadership to investigate Rikabi.[56] The National Command investigated him in 1960, and expelled him from the party on 15 June 1961.[56] Rikabi was later reported to be a member of the ASBP,[63] and Radio Cairo continued to refer to him as the Regional Secretary of the Iraqi Regional Branch.[63]

The 4th National Congress, held in August 1960, reversed the decision reached at the 3rd National Congress, which supported the dissolution of the Syrian Regional Branch.[64] It was mainly attended by representatives from the Lebanese Regional Branch.[65] The congress had a strongly anti-Nasserite tendency, and the traditional leadership of Aflaq and Bitar was criticized.[66] The delegates decided to deemphasize pan-Arabism for Marxian interpretation of socialism, and criticized the traditional leadership for entering Syria into the UAR.[66] Discontent with Egyptian dominance of the UAR, led elements opposed to the union under Abd al-Karim al-Nahlawi, to seize power on 28 September 1961. Two days later, the Syrian Arab Republic was reestablished.[67]

Ba’ath rule and the 1966 split: 1961–1966

Michel Aflaq (left) and Salah Jadid (right), shortly after taking power in 1963

The challenges of building a Ba’athist state led to considerable ideological discussion and internal struggle within the party.[68] The Iraqi Regional Branch was increasingly dominated by Ali Salih al-Sadi, now a self-described Marxist, previously anti-communist as of the summer of 1963.[68] He was supported in his ideological reorientation by Hammud al-Shufi, the Regional Secretary of the Syrian Regional Command,[69] Yasin al-Hafiz, one of the party’s few ideological theorists, and by certain members of the secret Military Committee.[70]

The far-left tendency gained control at the party’s 6th National Congress of 1963, where hardliners from the dominant Syrian and Iraqi regional parties joined forces to impose a hard left line, calling for “socialist planning”,[71] “collective farms run by peasants”, “workers’ democratic control of the means of production”, a party based on workers and peasants, and other demands reflecting a certain emulation of Soviet-style socialism.[72] In a coded attack on Michel Aflaq, the congress also condemned “ideological notability”, criticizing his middle-class background, within the party.[71] Aflaq, angry at this transformation of his party, retained a nominal leadership role, but the National Command as a whole came under the control of the radicals.[73]

Ahmed Hassan al-Bakr (left), the Regional Secretary of the Iraqi Regional Branch, shaking hands with Michel Aflaq in 1968.

In 1963 the Ba’ath Party seized power, from then on the Ba’ath functioned as the only officially recognized Syrian political party, but factionalism and splintering within the party led to a succession of governments and new constitutions.[74] On 23 February 1966, a bloody coup d’étatled by a more left-wing, radical Ba’athist faction headed by Chief of Staff Salah Jadid, overthrew Aflaq and the Salah al-Din al-Bitar‘s Government.[75] The coup sprung out of factional rivalry between Jadid’s “regionalist” (qutri) camp of the Ba’ath Party, which promoted ambitions for aGreater Syria and the more traditionally pan-Arab, in power faction, called the “nationalist” (qawmi) faction.[75]

Jadid’s supporters were seen as radically left-wing then Aflaq and his peers. Many of Jadid’s opponents managed to make their escape and fled to Beirut, Lebanon.[75] Jadid moved the party in a more radical direction, although he and his supporters had not been supporters of the victorious far-left line at the Sixth Party Congress, they had now moved to adopt its positions.[76] The moderate faction, formerly led by Aflaq and al-Bitar, were purged from the party.[76]

In the aftermath of the 1966 coup, the Ba’ath Party split in two; out of it a Damascus-based Ba’ath Party and a Baghdad-based Ba’ath Party were formed, with each maintaining that it was the genuine party and electing a separate National Command to take charge of the international Ba’ath movement.[73] However, both in Iraq and Syria, the Regional Command became the real centre of party power, and the membership of the National Command became a largely honorary position, often the destination of figures being eased out of the leadership.[73]A consequence of the split was that Zaki al-Arsuzi took Aflaq’s place as the official father of ba’athist thought in the Damascus-based Ba’ath Party, while the Baghdad-based Ba’ath Party still considered Aflaq the de jure father of Ba’athist thought.[77]

Regional Branches


Fuad al-Rikabi founded the Iraqi Regional Branch either in 1951[78] or 1952.[79] There are those who trace the branch’s founding to Abd ar Rahman ad Damin and Abd al Khaliq al Khudayri in 1947, after their return from the 1st National Congress, which was held in Syria.[80] Another version is that the branch was established in 1948 by Rikabi and Sa’dun Hamadi, a Shia Muslim.[81] However, Efraim Karsh and Inari Rautsi contend that the Regional Branch was established in the 1940s, but that it received official recognition as a Regional Branch of the Ba’ath Party in 1952 by the National Command.[82] What is certain is that Rikabi was elected the Regional Branch’s first Regional Secretary in 1952.[81]

The party initially consisted of a majority of Shia Muslims, as Rikabi recruited supporters mainly from his friends and family, but slowly became Sunni dominated.[83] The Regional Branch, and other parties of pan-Arab inclination, had difficulties in recruiting Shia members.[84] Most Shi’ites considered pan-Arab ideology as a Sunni project, since the majority of Arabs are Sunnis.[84]

At the time of 14 July Revolution in 1958, which overthrew the Hashemite monarchy, the Regional Branch had 300 members.[85] The Iraqi Regional Branch supported Abd al-Karim Qasim‘s rule on the grounds that he would seek Iraq’s entry into the United Arab Republic.[86] Of the 16-members of Qasim’s cabinet, 12 of them were Regional Branch members.[86] After taking power, Qasim’s change his position on the UAR, reverting to the old “Iraq first policy”.[86] This turn displeased the Regional Branch and other Arab nationalists groups.[87] Because of his policy reversal, the Regional Branch gathered a group, led by Saddam Hussein, which tried but failed to assassinate.[88]

The Regional Branch seized power in the February 1963 Iraqi coup d’état, referred to as the Ramadan Revolution.[89] The coup was led by leading Regional Branch member Ahmed Hassan al-Bakr.[89] The plotters appointed Abdul Salam Arif, a Nasserite, to the Presideny while al-Bakr was appointed the country’s Prime Minister.[90] However, real power was in the hands of Ali Salih al-Sadi, the branch’s Regional Secretary.[91] After taking power, the Regional Branch through its militia, the National Guard, initiated what Iraqi expert Con Coughlin referred to as an “orgy of violence” against communist and left-wing elements.[90] These repressive measures coupled with factionalism within the Regional Branch led to the November 1963 Iraqi coup d’état by President Arif and his Nasserite supporters.[92] Iraq expert Malik Mufti believes Aflaq may have Arif’s coup because it weakened al-Sadi’s position within the party and strengthen his own.[93] The coup forced the branch to go underground.[94] Because of the coup, several leading Ba’athist were jailed, such as al-Bakr and Saddam.[94] Despite this, the Regional Branch elected al-Bakr as Regional Secretary in 1964.[94]


Following the party’s establishment in Syria, Ba’athist ideas spread throughout the Arab world. In Jordan Ba’athist thought first spread to the East Bank in the late-1940s, most notably at universities.[95] While the Regional Branch was not formed until 1951, several meetings took place at the universities where students and professors alike would discuss the Ba’athist thought.[95] Despite the ideology being very popular, it took time before the actual Regional Branch was established.[96] A group of teachers established the Regional Branch in the city by Al Karak.[96] At the very beginning, the clinic owned by Abd al-Rahman Shuqyar was used as the branch’s meeting place.[96] Bahjat Abu Gharbiyah became the Regional Branch’s first member in the West Bank, and was thus resigned the responsibility of building the party’s organization in the area the branch secretary in the West Bank, and was thus responsible in that area.[96] In the West Bank, the branch was most active in the cities of Jerusalem and Ramallah.[96]

The 1st Regional Congress was held in 1951 in the home of Abdullah Rimawi.[96] The congress mapped out the “future course of the party”.[96] The next year, the 2nd Regional Congress was held, this time in Abdallah Na’was‘ home.[96] It elected a Regional Command and appointed Rimawi as the branch’s Regional Secretary.[96]Shugyar, Gharbiyah and Na’was agreed to serve in the Regional Branch’s Central Committee.[96] Rimawi and Na’was, his deputy, would prove effective leaders.[96] Shortly after the 2nd Regional Congress, the branch launched a successful recruitment campaign in Jordanian and Palestinian neighbourhoods and cities.[96] On 28 August 1956 the branch was legalized by a High Court.[97]

Both Rimawi and Na’was were elected to Parliament in the 1950 and 1951 elections as independents (the branch was not a legal party at the time).[98] In the 1951 election, the branch managed to elect three members to parliament.[95] Rimawi was able to retain his seat in parliament until the 1956 election.[96] None of these elections can be considered democratic.[99] Shuqyar, during the 1951 elections, was imprisoned by the authorities because his views were deemed to radical.[99] Less than a month before the election day, the British Embassy in Amman had estimated that Shuqyar would gain an easy victory.[99] However, because of the undemocratic nature of the election, Shuqyar was not elected.[99] As voting patterns would prove, voters who voted for Ba’athist candidates lived in Irbid and Amman on the East Bank, and Jerusalem and Nablus on the West Bank.[96]

Shuqyar during a government-imposed exile to Southern Jordan, used his spare time reading Marxist and Leninist literature.[98] While he never became a communist, Shuqyar began to support communist concepts.[98] On his return from exile he tried to persuade the Regional Branch to join in an electoral front with the Jordanese Communist Party.[98] However, the Regional Branch leaders Rimawi, Na’was, Gharbiyah and Munif al-Razzaz opposed such an idea, and because of it, Shuqyar left the Ba’ath Party.[98]

Rimawi and Na’was were elected to the National Command at the 2nd National Congress (held in 1952).[49] At the 6th and 7th National Congress, the Regional Branch elected Razzaz to the National Command.[100]


The Lebanese Regional Branch was formed in 1949–1950.[101] During the existence of the UAR, the Regional Branch was split into two factions, those supporting Nasser and those opposing him.[59] However, in April 1960, the UAR denied the Regional Branch organ As Sahafäh access into the UAR-ruled Syria.[59]

The Regional Branch was strongest in the city of Tripoli.[102] In the 1960 electionsAbd al-Majid Rafi was just a few votes short of being elected to parliament.[102] However, a persistent problem for him during his election campaign was the vocal criticism of him and the Regional Branch by the Lebanese Communist Party.[102] In Tripoli the Communists supported the candidacy of Rashid Karami, to ensure themselves of a Regional Branch victory.[103] On 17 July 1961 a group of rival Ba’athists led by Rimawi (see “Jordan” section) opened fire on several of the Regional Branch’s members.[104]

During the UAR years, the same factional lines which developed in the Syrian Regional Branch came to the Lebanese Regional Branch.[65] At the 4th National Congress (held in Lebanon), which was mainly attended by delegates representing Lebanon, several resolutions with a pronounced anti-Nasser tone were approved.[105] At the same time, criticism of Aflaq and Bitar was severe, both their leadership records and their ideology were criticized.[66] A resolution was approved which stated that the party leaders [Aflaq, al-Bitar among others had to hastily entered into a union with Egypt, had wrongly dissolved the Syrian Regional Branch in 1958, given pan-Arabism primacy when socialism was the more important, the need to use Marxist, not Ba’athi, tools to analyze the current situation and the need for the party to strengthen their positions amongst the popular classes–the workers, peasants, artisans and shopkeepers.[66] Because of the position of the Lebanese Regional Branch, Aflaq at the 5th National Congress invited enough Iraqi Regional Branch delegates to neutralize the Lebanese delegates.[16] However, at the same time, the Lebanese Regional Branch opposed Hawrani and his faction.[106] At the 6th National Congress, the Lebanese Regional Branch elected Jubrän Majdalani and Khalid al-Ali to the National Command.[100]

At the 7th National Congress the National Command in collaboration with the Military Committee either expelled or removed leftists such as those found in the Lebanese Regional Branch from leadership position, and in the most severe cases, expelled them from the party.[107] The Lebanese Regional Branch managed to elect three members to the National Command at the 7th National Congress; Majdalani, al-Ali and Abd al-Majid Rafi.[100]


The Regional Branch was founded in the 1950s[108] by Amr Taher Deghayes.[109] Ba’athism was a major political force in Libya following the establishment of the United Arab Republic. Many intellectuals were attracted to Ba’athist ideology during the later years of the Kingdom of Libya. However, with help from Nasserist propaganda, several Ba’athists changed affiliation and became Nasserists instead.[110] The growth of these pan-Arab ideologies concerned the government, which led to the incarceration of several Nasserist and Ba’athist military officers in the early sixties.[111] The Ba’athist were accused of working to overthrow “the political, economic and social system” of the Kingdom; the sentences ranged from everything to eight months to two years.[112] By 1964, the Libyan Regional Branch had only managed to establish one-level below the Regional Command, the branch-level.[113] Syrian specialist John Devlin estimated that the Libyan Regional Branch had been 50 and 150 members in 1964.[113]


Syrian politics took a dramatic turn in 1954 when the military government of Adib al-Shishakli was overthrown and the democratic system restored. The Ba’ath, now a large and popular organisation, won 15 out of 142 parliamentary seats in the Syrian election that year, becoming the second-largest party in parliament. Aside from the Syrian Communist Party (SCP), the Ba’ath Party was the only party able to organise mass protests among workers.[114] The party was supported by the intelligentsia due to their pro-Egyptian and anti-imperialist stance along with their avocation of social reform.[115]

The Ba’ath faced considerable competition from ideological competitors, notably the Syrian Social Nationalist Party (SSNP), which supported the establishment of a Greater Syria. The Ba’ath Party’s main adversary was the SCP, whose support for class struggle and internationalism was anathema to the Ba’ath.[116] In addition to parliamentary-level competition, all these parties (as well as Islamists) competed in street-level activity and sought to recruit support among the military.[117]

By the end of 1957, the SCP was able to weaken the Ba’ath Party to such an extent that the Ba’ath Party drafted a bill in December which called for a union with Egypt, a move that proved to be very popular. The Ba’ath Party was banned in the United Arab Republic (UAR), the union between Egypt and Syria, due to Gamal Abdel Nasser‘s hostility to parties other than his own. The Ba’ath leadership dissolved the party in 1958, gambling that the illegalisation of certain parties would hurt the SCP more than it would the Ba’ath.[118]

Akram al-Hawrani (left) with Michel Aflaq, 1957.

A military coup in Damascus in 1961 brought the UAR to an end.[119] Sixteen prominent politicians signed a statement supporting the coup, among them al-Hawrani and Salah al-Din al-Bitar (who later retracted his signature).[120] Following the UAR’s dissolution, the Ba’ath Party was reestablished at the 1962 congress.[74] The Military Committee did not show itself to the civilian wing of the party at this congress.[121] During the congress, Aflaq and the Military Committee, through Muhammad Umran, made contact for the first time; the committee asked for permission to initiate a coup d’état; Aflaq supported the conspiracy.[122]

Following the success of the February 1963 Iraqi coup d’état, led by the Ba’ath Party’s Iraqi Regional Branch, the Military Committee hastily convened to hatch a coup against Nazim al-Kudsi‘s presidency.[123] The 8 March Revolution proved successful, and a Ba’athist government in Syria was established.[123] The plotters first order was to establish the National Council of the Revolutionary Command (NCRC), consisting entirely of Ba’athists and Nasserists, and controlled by military personnel rather than civilians from the very beginning.[124]

While the Ba’ath Party had attained power, there was a problem; internal infighting.[125] The Military Committee which was itself a tiny minority of the already small Ba’ath Party membership was forced to rule by force.[125] The Ba’ath Party had only 2,500 members by mid-1963, the party lacked a popular base. Even if membership expanded, the authoritarian way of ruling it had introduced when coming to power would get worse, not better.[125]

Another problem was that the civilian wing was riven by infighting between the radical socialist and moderate faction, while the military stood more unified.[126] Whatever the case, the Syrian Regional Command slowly amassed its powers by weakening the National Command.[126]This all came to a head in the 1966 Syrian coup d’état (see “1966 split” section).[126]


Following the Ba’ath Party’s founding, regional branches were established in Kuwait and Saudi Arabia.[62] Not long after it established branches in North Yemen and South Yemen.[127] In Tunisia, a Regional Branch was established in the 1950s, but was forced underground for much of its existence.[128] The Saudi Regional Branches elected Ali Ghannäm to represent them at the 7th National Command.[100] While its currently unknown which side the Saudi Ba’ath took after the 1966 split, it published a newspaper, Sawt al-Tal‘iyya, from 1973 to 1980. It was an ardent critic of the Saudi royal family and American imperialism. The majority of its members were Shia Muslims.[129] In late 1963, Ba’ath cells were being established in Sudan, and there were even rumours that a Ba’ath cell had been established in Egypt.[130]


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Articles & journals

External links

LIBOR Scandal

Libor scandal

From Wikipedia, the free encyclopedia
Scale of the scandal
This dwarfs by orders of magnitude any financial scam in the history of markets.[1][2]
Andrew LoMIT Professor of Finance

The Libor scandal was a series of fraudulent actions connected to the Libor (London Interbank Offered Rate) and also the resulting investigation and reaction. The Libor is an average interest rate calculated through submissions of interest rates by major banks in London. The scandal arose when it was discovered that banks were falsely inflating or deflating their rates so as to profit from trades, or to give the impression that they were more creditworthy than they were.[3] Libor underpins approximately $350 trillion inderivatives. It is administered by the British Bankers’ Association (BBA).[4]

The banks are supposed to submit the actual interest rates they are paying, or would expect to pay, for borrowing from other banks. The Libor is supposed to be the total assessment of the health of the financial system because if the banks being polled feel confident about the state of things, they report a low number and if the member banks feel a low degree of confidence in the financial system, they report a higher interest rate number. In June 2012, multiple criminal settlements by Barclays Bank revealed significant fraud and collusion by member banks connected to the rate submissions, leading to the scandal.[5][6][7]

Because Libor is used in US derivatives markets, an attempt to manipulate Libor is an attempt to manipulate US derivatives markets, and thus a violation of American law. Since mortgages, student loansfinancial derivatives, and other financial products often rely on Libor as a reference rate, the manipulation of submissions used to calculate those rates can have significant negative effects on consumers and financial markets worldwide.

On 27 July 2012, the Financial Times published an article by a former trader which stated that Libor manipulation had been common since at least 1991.[8] Further reports on this have since come from the BBC[9][10] and Reuters.[11] On 28 November 2012, the Finance Committee of the Bundestag held a hearing to learn more about the issue.[12]

The British Bankers’ Association said on 25 September 2012 that it would transfer oversight of Libor to UK regulators, as predicted by bank analysts,[13] proposed by Financial Services Authority managing director Martin Wheatley‘s independent review recommendations.[14] Wheatley’s review recommended that banks submitting rates to Libor must base them on actual inter-bank deposit market transactions and keep records of those transactions, that individual banks’ LIBOR submissions be published after three months, and recommended criminal sanctions specifically for manipulation of benchmark interest rates.[15] Financial institution customers may experience higher and more volatile borrowing and hedging costs after implementation of the recommended reforms.[16] The UK government agreed to accept all of the Wheatley Review’s recommendations and press for legislation implementing them.[17]

Significant reforms, in line with the Wheatley Review, came into effect in 2013 and a new administrator will take over in early 2014.[18][19] The UK controls Libor through laws made in the UK Parliament.[20][21] In particular, the Financial Services Act 2012 brings Libor under UK regulatory oversight and creates a criminal offence for knowingly or deliberately making false or misleading statements relating to benchmark-setting.[18][22]

Early reports of Libor manipulation

WSJ Libor study

Libor manipulation to lower rate

Hi Guys, We got a big position in 3m libor for the next 3 days. Can we please keep the lib or fixing at 5.39 for the next few days. It would really help. We do not want it to fix any higher than that. Tks a lot.

Barclays Bank trader in New York to submitter,
13 September 2006[23]

On 16 April 2008, The Wall Street Journal released a controversial article, and later study, suggesting that some banks might have understated borrowing costs they reported for the Libor during the 2008 credit crunch that may have misled others about the financial position of these banks.[24][25] In response, the BBA claimed that the Libor continued to be reliable even in times of financial crisis. Other authorities contradicted The Wall Street Journal article saying there was no evidence of manipulation. In its March 2008 Quarterly Review, the Bank for International Settlements stated that “available data do not support the hypothesis that contributor banks manipulated their quotes to profit from positions based on fixings.”[26] Further, in October 2008, theInternational Monetary Fund published its regular Global Financial Stability Review which also found that “Although the integrity of the U.S. dollar Libor-fixing process has been questioned by some market participants and the financial press, it appears that U.S. dollar Libor remains an accurate measure of a typical creditworthy bank’s marginal cost of unsecured U.S. dollar term funding.”[27]

A study by economists, Snider and Youle, in April 2010, however, corroborated the results of the earlier Wall Street Journal study that the Libor submissions by some member banks were being understated.[28] Unlike the earlier study, Snider and Youle suggested that the reason for understatement by member banks was not that the banks were trying to appear strong, especially during the financial crisis period of 2007 to 2008, but rather that the banks sought to make substantial profits on their large Libor interest-linked portfolios.[29] For example, in the first quarter of 2009, Citigroup had interest rate swaps of notional value of $14.2 trillion, Bank of America had interest rate swaps of notional value of $49.7 trillion and JPMorgan Chase had interest rate swaps of notional value of $49.3 trillion.[30] Given the large notional values, a small unhedged exposure to the Libor could generate large incentives to alter the overall Libor. In the first quarter of 2009, Citigroup for example reported that it would make that quarter $936 million in net interest revenue if interest rates would fall by .25 percentage points a quarter, and $1,935 million if they were to fall by 1 percentage point instantaneously.[31]

Central banks aware of Libor flaws

The Governor of the Bank of EnglandMervyn King, by the end of 2008, described the Libor to the UK Parliament saying “It is in many ways the rate at which banks do not lend to each other, …it is not a rate at which anyone is actually borrowing.”[32][33]

The New York Federal Reserve chose to take no action against them at that time.[34][35] Minutes by the Bank of England similarly indicated that the bank and its deputy governor Paul Tucker were also aware as early as November 2007 of industry concerns that the Libor rate was being under-reported.[36][37] In one 2008 document, a Barclays employee told a New York Fed analyst, “We know that we’re not posting an honest Libor, and yet we are doing it, because if we didn’t do it, it draws unwanted attention on ourselves.”[35]

The documents show that in early 2008, a memo written by then New York Fed President Tim Geithner to Bank of England chief Mervyn King looked into ways to “fix” Libor.[38][39] While the released memos suggest that the New York Fed helped to identify problems related to Libor and press the relevant authorities in the UK to reform, there is no documentation that shows any evidence that Geithner’s recommendations were acted upon or that the Fed tried to make sure that they were. In October 2008, several months after Geithner’s memo to King, a Barclays employee told a New York Fed representative that Libor rates were still “absolute rubbish.”[35]

Regulatory investigations

The Wall Street Journal reported in March 2011 that regulators were focusing on Bank of America Corp., Citigroup Inc. and UBS AG in their probe of Libor rate manipulation.[40] A year later, it was reported in February 2012 that the US Department of Justice was conducting a criminal investigation into Libor abuse.[41] Among the abuses being investigated were the possibility that traders were in direct communication with bankers before the rates were set, thus allowing them an unprecedented amount of insider knowledge into global instruments.[42] In court documents, a trader from the Royal Bank of Scotland claimed that it was common practice among senior employees at his bank to make requests to the bank’s rate setters as to the appropriate Libor rate, and that the bank also made on occasions rate requests for some hedge funds.[43] One trader’s messages from Barclays Bank indicated that for each basis point (0.01%) that Libor was moved, those involved could net, “about a couple of million dollars.”[42]

The Canadian Competition Bureau was reported on 15 July 2012 to also be carrying out an investigation into price fixing by five banks of the yen denominated Libor rates. Court documents filed indicated that the Competition Bureau had been pursuing the matter since at least January 2011. The documents offered a detailed view of how and when the international banks allegedly colluded to fix the Libor rates. The information was based on a whistleblower who traded immunity from prosecution in exchange for turning on his fellow conspirators. In the court documents, a federal prosecutor for the bureau stated, “IRD (interest-rate derivatives) traders at the participant banks communicated with each other their desire to see a higher or lower yen LIBOR to aid their trading positions.” The alleged participants were the Canadian branches of the Royal Bank of ScotlandHSBCDeutsche BankJP Morgan Bank, and Citibank, as well as ICAP (Intercapital), an interdealer broker.[44]

Fines for manipulation

Libor manipulation to raise rate

Pls go for 5.36 libor again, very important that the setting comes as high as possible … thanks.

Barclays Bank trader in New York to submitter,
29 July 2007[23]

On 27 June 2012, Barclays Bank was fined $200 million by the Commodity Futures Trading Commission,[5] $160 million by the United States Department of Justice[6] and £59.5 million by the Financial Services Authority[7] for attempted manipulation of the Libor and Euribor rates.[45] The United States Department of Justice and Barclays officially agreed that “the manipulation of the submissions affected the fixed rates on some occasions”.[46][47][48]

Barclays manipulated rates for at least two reasons. Routinely, from at least as early as 2005, traders sought particular rate submissions to benefit their financial positions. Later, during the 2007–2012 global financial crisis, they artificially lowered rate submissions to make their bank seem healthy.[6]

Following the interest rate rigging scandal, Marcus Agius, chairman of Barclays, resigned from his position.[49] One day later, Bob Diamond, the chief executive officer of Barclays, also resigned from his position.[50][51] Bob Diamond was subsequently questioned by the Parliament of the United Kingdom regarding the manipulation of Libor rates. He said he was unaware of the manipulation until that month, but mentioned discussions he had with Paul Tucker, deputy governor of the Bank of England.[52]Tucker then voluntarily appeared before parliament, to clarify the discussions he had with Bob Diamond. He said he had never encouraged manipulation of the Libor, and that other self-regulated mechanisms like the Libor should be reformed.[53]

On 19 December 2012, UBS agreed to pay regulators $1.5 billion ($1.2 billion to the US Department of Justice and the Commodity Futures Trading Commission, £160m to the UK Financial Services Authority and 60m CHF to the Swiss Financial Market Supervisory Authority) for its role in the scandal.[54] The investigations revealed that UBS traders had colluded with other panel banks and had made over 2,000 written requests for movements in rates from at least January 2005 to at least June 2010 to benefit their trading positions.[55] According to transcripts released by the UK’s Financial Services Authority, UBS traders also offered financial inducements to interdealer brokers to help manipulate rates by spreading false information. In one exchange between a UBS banker identified as Trader A and an interdealer broker, the banker wrote,

if you keep 6s [i.e., the six-month JPY Libor rate] unchanged today … I will f—ing do one humongous deal with you … Like a 50,000 buck deal, whatever … I need you to keep it as low as possible … if you do that …. I’ll pay you, you know, 50,000 dollars, 100,000 dollars… whatever you want … I’m a man of my word.

Subsequent trades between UBS and this broker generated more than $250,000 in fees to the broker.[56][57]

US Assistant Attorney General Lanny Breuer described the conduct of UBS’s as “simply astonishing” and declared the US would seek, as a criminal matter, the extradition of traders Tom Hayes and Roger Darin.[54] The bank has stated that these and other fines would probably result in a significant fourth-quarter loss in 2012.[54]The fine levied by the FSA, reduced due to the bank’s co-operation, was the largest in the agency’s history.[54]

In September 2013, ICAP settled allegations that they had manipulated Libor. The United States Department of Justice charged three former employees, and ICAP paid $65 million to the US’s Commodity Futures Trading Commission and £14 million ($22 million) to Britain’s Financial Conduct Authority.[58]

In December 2013 European Commission announced fines for six financial institutions participating in one or more bilateral cartels relating to Libor submissions for Japanese yen in the period from 2007 to 2010. UBS received full immunity for revealing the existence of the cartels (due to Leniency policy) and thereby avoided a fine of around €2.5 billion for its participation in multiple infringements. Citigroup received full immunity for one of the infringements in which it participated, thereby avoiding a fine of around €55 million, but was fined €70 million for other infringements. The Royal Bank of Scotland was fined €260 million, Deutsche Bank €259 million,JPMorgan €80 million and broker RP Martin €247 thousand.[59]

Breadth of scandal becomes apparent

By 4 July 2012, the breadth of the scandal was evident and became the topic of analysis on news and financial programs that attempted to explain the importance of the scandal.[60] Two days later, it was announced that the UK Serious Fraud Office had also opened a criminal investigation into manipulation of interest rates. The investigation was not limited to Barclays.[61][62] It has been reported since then that regulators in at least ten countries on three different continents are investigating the rigging of the Libor and other interest rates.[63][64] Around 20 major banks have been named in investigations and court cases.[65]

Early estimates are that the rate manipulation scandal cost US states, counties, and local governments at least $6 billion in fraudulent interest payments, above $4 billion that state and local governments have already had to spend to unwind their positions exposed to rate manipulation.[66] An increasingly smaller set of banks are participating in setting the Libor, calling into question its future as a benchmark standard, but without any viable alternative to replace it.[67]

United States investigations

The United States Congress began investigating on 10 July. Senate Banking Committee Chairman Tim Johnson (D.South Dakota) said he would question Treasury Secretary Timothy Geithner and Federal Reserve chairman Ben Bernanke about the scandal during scheduled hearings. Rep. Randy Neugebauer (R.Texas) of theHouse Financial Services Committee, wrote New York Federal Reserve (New York Fed) President William Dudley. He was seeking records of communications between the New York Fed and Barclays between August 2007 and November 2009 related to Libor-like rates.[68]

On 4 October 2012, Republican US Senators Chuck Grassley (Iowa) and Mark Kirk (Illinois) announced that they were investigating Treasury Secretary Tim Geithner for complicity with the rate manipulation scandal. They accused Geithner of knowledge of the rate-fixing, and inaction which contributed to litigation that “threatens to clog our courts with multi-billion dollar class action lawsuits” alleging that the manipulated rates harmed state, municipal and local governments. The senators said that an American-based interest rate index is a better alternative which they would take steps towards creating.[69]

Federal Housing Finance Agency Inspector General and auditor Steve A. Linick said in a 3 November memo that Fannie Mae and Freddie Mac may have lost more than $3 billion because of the manipulation.[70]

Parliamentary investigation

Appearing before Parliament on 16 July, Jerry del Missier, a former senior Barclays executive, said that he had received instructions from Robert Diamond to lower rates after Diamond’s discussions with bank regulators. He said that he had received information of a conversation between Diamond and Paul Tucker, deputy governor of the Bank of England, in which they had discussed the bank’s financial position at the height of the 2008 financial crisis. It was his understanding that senior British government officials had instructed the bank to alter the rates. Del Missier’s testimony followed statements from Diamond in which he denied that he had told his deputies to report false Libor rates. Speaking before Parliament the previous week, Tucker stated that he had shared concerns regarding Barclays Libor rates because the markets might view Barclays to be at risk if its Libor submissions continued to be higher than those of other international banks. In the midst of the Lehman Brothers collapse, there was concern the bank might need to be bailed out if the financial markets perceived it was a credit risk. Tucker told the committee, “I wanted to make sure that Barclays’ day-to-day funding issues didn’t push it over the cliff.”[71]

Libor banks are sued in civil court

Libor fixing operates as a cartel

Libor fixing a banking cartel

It’s just amazing how Libor fixing can make you that much money or lose if opposite. It’s a cartel now in London.

RBS trader in Singapore to Deutsche Bank trader,
19 August 2007[72]

In court documents filed in Singapore, Royal Bank of Scotland (RBS) trader Tan Chi Min told colleagues that his bank could move global interest rates and that the Libor fixing process in London had become a cartel. Tan in his court affidavit stated that the Royal Bank of Scotland knew of the Libor rates manipulation and that it supported such actions. In instant messages, traders at RBS extensively discussed manipulating Libor rates. In a released transcript of a 21 August 2007 chat, Jezri Mohideen, who was the head of yen products in Singapore, asked to have the Libor fixed in a conversation with other traders:[72]

Mohideen: “What’s the call on the Libor?”
Trader 2: “Where would you like it, Libor that is?”
Trader 3: “Mixed feelings, but mostly I’d like it all lower so the world starts to make a little sense.”
Trader 4: “The whole HF [hedge fund] world will be kissing you instead of calling me if Libor move lower.”
Trader 2: “OK, I will move the curve down 1 basis point, maybe more if I can.”

In another conversation on 27 March 2008, Tan asked that RBS raise its Libor submission and noted that an earlier lower figure that the bank had submitted had cost his team £200,000. In other released instant chats, Tan made it clear that the Libor fixing process had become a highly lucrative money making cartel. Tan in a conversation with traders at other banks, including Deutsche Bank’s Mark Wong said on 19 August 2007:[72]

Tan: “It’s just amazing how Libor fixing can make you that much money or lose if opposite. It’s a cartel now in London.”
Wong: “Must be damn difficult to trade man, especially [if] you [are] not in the loop.”

Mortgage rates manipulated on reset date

Homeowners in the US filed a class action lawsuit in October 2012 against twelve of the largest banks which alleged that Libor manipulation made mortgage repayments more expensive than they should have been.

Statistical analysis indicated that the Libor rose consistently on the first day of each month between 2000 and 2009 on the day that most adjustable-rate mortgages had as a change date on which new repayment rates would “reset”. An email referenced in the lawsuit from the Barclay’s settlement, showed a trader asking for a higher Libor rate because “We’re getting killed on our three-month resets.”[73] During the analysed period, the Libor rate rose on average more than two basis points above the average on the first day of the month, and between 2007 and 2009, the Libor rate rose on average more than seven and one-half basis points above the average on the first day of the month.[74]

The five lead plaintiffs included a pensioner whose home was repossessed after her subprime mortgage was securitised into Libor-based collateralised debt obligations, sold by banks to investors, and foreclosed. The plaintiffs could number 100,000, each of whom has lost thousands of dollars.[75] The complaint estimates that the banks earned hundreds of millions, if not billions of dollars, in wrongful profits as a result of artificially inflating Libor rates on the first day of each month during the complaint period.[74]

Municipalities lost billions due to rigging

The city of Baltimore and others in the US filed a class action lawsuit in April 2012 against Libor setting banks which alleged that the manipulation of Libor caused payments on their interest rate swaps to be smaller than they should have been.[76] Before the financial crisis, states and localities bought $500 billion in interest rate swaps to hedge their municipal bond sales. It is estimated that the manipulation of Libor cost municipalities at least $6 billion. These losses were in addition to $4 billion that localities had already paid to unwind backfiring interest rate swaps.[77]

Municipalities began using interest rate swaps to hedge their municipal bond sales in the late 1990s. At this time, investment bankers began offering local governments a way to save money on the sale of municipal bonds. The banks suggested instead of selling fixed interest rate bonds that local governments sell variable interest rate bonds which typically have interest rates as much as one percentage point lower than fixed interest rate bonds. For a municipal government this could mean saving as much as $1 million a year on the sale of a $100 million bond.[78]

To hedge costs on the sale of variable interest rate bonds, which can rise and fall with the market, local governments, such as Baltimore, purchased interest rate swaps which exchange a variable interest rate for a fixed interest rate.[79] In a swap deal, when the interest rate rises, the swap seller pays the local government the increased cost on the bond, while when the interest rate falls, the swap seller saves and pays the local government the decreased cost on the bond. The interest rate swap mechanism generally works well, however, between 2007 and 2010 the payments to local governments on their swaps artificially decreased but the cost on their bonds remained at actual market rates. This was because most interest rate swaps are linked to the Libor interest rate, while municipal bond rates are linked to the SIFMA Municipal Bond Index interest rate. During the financial crisis the two benchmark rates decoupled. Municipalities continued to pay on their bonds at the actual market Sifma rate but were paid on their interest rate swaps at the artificially lower Libor rate.[78]

Reactions and impact on banking regulation

The cost to colluding and suspect banks from litigation, penalties, and loss of confidence may drive down finance industry profits for years. The cost of litigation from the scandal may exceed that of asbestos lawsuits.[80]

United States

US experts such as former Assistant Secretary of the Treasury Paul Craig Roberts have argued that the Libor Scandal completes the picture of public and private financial institutions manipulating interest rates to prop up the prices of bonds and other fixed income instruments, and that “the motives of the Fed, Bank of England, US and UK banks are aligned, their policies mutually reinforcing and beneficial. The Libor fixing is another indication of this collusion.”[81] In that perspective they advocate stricter bank regulation, and a profound reform of the Federal Reserve System.

Former Citigroup chairman and CEO Sandy Weill, considered one of the driving forces behind the considerable financial deregulation and “mega-mergers” of the 1990s, surprised financial analysts in Europe and North America by calling for splitting up the commercial banks from the investment banks. In effect, he says, “Bring back the Glass-Steagall Act of 1933 which led to half a century, free of financial crises.”[82]


Mainland European scholars discussed the necessity of far-reaching banking reforms in light of the current crisis of confidence, recommending the adoption of binding regulations that would go further than the Dodd–Frank Act: notably in France where SFAF and World Pensions Council (WPC) banking experts have argued that, beyond national legislations, such rules should be adopted and implemented within the broader context of separation of powers in European Union law, to put an end to anti-competitive practices akin to exclusive dealing and limit conflicts of interest.[83][84] This perspective gained ground after the unraveling of the Libor scandal, with mainstream opinion leaders such as the Financial Times editorialists calling for the adoption of an EU-wide “Glass–Steagall II.”[85]

Naomi Wolf of The Guardian suggested in an editorial that the

notion that the entire global financial system is riddled with systemic fraud – and that key players in the gatekeeper roles, both in finance and in government, including regulatory bodies, know it and choose to quietly sustain this reality – is one that would have only recently seemed like the frenzied hypothesis of tinhat-wearers.[86]

Following Tim Geithner‘s promotion to Treasury Secretary, Wolf commented,

It is very hard, looking at the elaborate edifices of fraud that are emerging across the financial system, to ignore the possibility that this kind of silence – “the willingness to not rock the boat” — is simply rewarded by promotion to ever higher positions, ever greater authority. If you learn that rate-rigging and regulatory failures are systemic, but stay quiet, well, perhaps you have shown that you are genuinely reliable and deserve membership of the club.[86]


The British Bankers’ Association said on 25 September 2012 that it would transfer oversight of Libor to UK regulators, as proposed by Financial Services Authority managing director Martin Wheatley and CEO-designate of the new Financial Conduct Authority.[14] On 28 September, Wheatley’s independent review was published, recommending that an independent organisation with government and regulator representation, called the Tender Committee, manage the process of setting Libor under a new external oversight process for transparency and accountability. Banks that make submissions to Libor would be required to base them on actual inter-bank deposit market transactions and keep records of their transactions supporting those submissions. The review also recommended that individual banks’ Libor submissions be published, but only after three months, to reduce the risk that they would be used as a measure of the submitting banks’ creditworthiness. The review left open the possibility that regulators might compel additional banks to participate in submissions if an insufficient number do voluntarily. The review recommended criminal sanctions specifically for manipulation of benchmark interest rates such as the Libor, saying that existing criminal regulations for manipulation of financial instruments were inadequate.[15] Libor rates could be higher and more volatile after implementation of the reforms, so financial institution customers may experience higher and more volatile borrowing and hedging costs.[16] The UK government agreed to accept all of the Wheatley Review’s recommendations and press for legislation implementing them.[17]

Bloomberg LP CEO Dan Doctoroff told the European Parliament that Bloomberg LP could develop an alternative index called the Bloomberg Interbank Offered Rate that would use data from transactions such as market-based quotes for credit default swap transactions and corporate bonds.[87][88]


The administration of Libor has itself become a regulated activity overseen by the UK’s Financial Conduct Authority.[89] Furthermore, knowingly or deliberately making false or misleading statements in relation to benchmark-setting was made a criminal offence in UK law under the Financial Services Act 2012.[18][20][22]

The Danish, Swedish, Canadian, Australian and New Zealand Libor rates have been terminated.[18][89]

From the end of July 2013, only five currencies and seven maturities will be quoted every day (35 rates), reduced from 150 different Libor rates – 15 maturities for each of ten currencies, making it more likely that the rates submitted are underpinned by real trades.[18][89]

Since the beginning of July 2013, each individual submission that comes in from the banks is embargoed for three months to reduce the motivation to submit a false rate to portray a flattering picture of creditworthiness.[18][90]

A new code of conduct, introduced by a new interim oversight committee, builds on this by outlining the systems and controls firms need to have in place around Libor. For example, each bank must now have a named person responsible for Libor, accountable if there is any wrongdoing. The banks must keep records so that they can be audited by the regulators if necessary.[18][91][92]

In early 2014, NYSE Euronext will take over the administration of Libor from the British Bankers Association.[93] The new administrator is NYSE Euronext Rates Administration Limited,[94] a London-based, UK registered company, regulated by the UK’s Financial Conduct Authority.[18]

See also


  1. Jump up^ “Explaining the Libor interest rate mess”. CNN. 10 July 2012. Retrieved 16 July 2012.
  2. Jump up^ “The LIBOR Scandal Explained”. Accounting Degree. Retrieved 17 July 2012.
  3. Jump up^ “Libor scandal explained and what rate-rigging means to you”USA Today. July 2012. Retrieved 3 August 2012.
  4. Jump up^ Calculating Interest. British Bankers’ Association. Retrieved 17 July 2012.
  5. Jump up to:a b “CFTC Orders Barclays to pay $200 Million Penalty for Attempted Manipulation of and False Reporting concerning Libor and Euribor Benchmark Interest Rates”.
  6. Jump up to:a b c “Barclays Bank PLC Admits Misconduct Related to Submissions for the London Interbank Offered Rate and the Euro Interbank Offered Rate and Agrees to Pay $160 Million Penalty”. Department of Justice. 27 June 2012. Retrieved 17 July 2012.
  7. Jump up to:a b “Barclays fined £59.5 million for significant failings in relation to Libor and Euribor”.
  8. Jump up^ Keenan, Douglas (27 July 2012), “My thwarted attempt to tell of Libor shenanigans“. Financial Times. (An extended version of this article is on the author’s web site.)
  9. Jump up^ BBC News (10 August 2012), “Libor scandal: Review finds system ‘no longer viable’”.
  10. Jump up^ BBC News Online (10 August 2012), “Libor review: Wheatley says system must change”.
  11. Jump up^ Reuters (7 August 2012), “Libor collusion was rife, culture went right to the top”.
  12. Jump up^ “Britischer Finanzexperte berichtet von langjährigen Zinssatz-Manipulationen” – in German. An English summary is on the trader’s web site.[1]
  13. Jump up^ “Dissecting Barclays’ Libor woes”Euro Money. 29 June 2012. Retrieved 7 January 2013. “‘Regulators might look to quote Libor based on actual transactions, though the technical hurdles are enormous. Regulators will try to safeguard the model rather than find an alternative to Libor.'”
  14. Jump up to:a b Main, Carla (26 September 2012). “Libor Spurned, Credit Score Review, Germany’s Audit: Compliance”. Bloomberg. Retrieved 26 September 2012.
  15. Jump up to:a b Alexis Levine and Michael Harquail (5 October 2012)“Wheatley Review May Mean Big Changes for Libor” Blakes Business (Blake, Cassels & Graydon LLP)
  16. Jump up to:a b Karen Brettell (28 September 2012) “Libor reform may add volatility, increase some funding costs” Reuters
  17. Jump up to:a b Ainsley Thomson (17 October 2012) “UK Treasury Minister: Government Accepts Recommendations Of Wheatley Libor Review In Full” Dow Jones Newswires/Fox Business
  18. Jump up to:a b c d e f g h Anthony Browne, chief executive of the British Bankers’ Association (11 July 2013). “Libor now has a new administrator – but our reforms have gone much further”. City A.M. Retrieved 20 July 2013.
  19. Jump up^ “BBA Libor Benchmark Administrator’s News”. The British Bankers’ Association. Retrieved 25 July 2013.
  20. Jump up to:a b “UK Government Policy: Creating stronger and safer banks”. UK Government. 17 July 2013. Retrieved 21 July 2013.
  21. Jump up^ “UK Parliament General Committee Debates”. UK Parliament. 27 February 2013. Retrieved 22 July 2013.
  22. Jump up to:a b “Financial Services Bill receives Royal Assent” (Press release). UK Government. 19 December 2012. Retrieved 27 July 2013.
  23. Jump up to:a b “Behind the Libor Scandal”The New York Times. 10 July 2012. Retrieved 13 July 2012.
  24. Jump up^ http://webcache.googleusercontent.com/search?q=cache:-QRw4n8zTGwJ:online.wsj.com/article/SB120831164167818299.html+bankers+cast+doubt+on+key+rate+amid+crisis&cd=1&hl=en&ct=clnk&gl=us
  25. Jump up^ Mollenkamp, Carrick; Whitehouse, Mark (29 May 2008).“Study Casts Doubt on Key Rate”.The Wall Street Journal. Retrieved 24 July 2012.
  26. Jump up^ Gyntelberg, Jacob; Wooldridge, Philip (March 2008).“Interbank rate fixings during the recent turmoil”BIS Quarterly Review (Bank for International Settlements): 70. ISSN 1683-0121. Retrieved 10 July 2012.
  27. Jump up^ “Global Financial Stability Report”.World economic and financial surveys (International Monetary Fund): 76. October 2008. ISSN 1729-701X. Retrieved 11 July 2012.
  28. Jump up^ Carl Schreck (11 October 2012) “US Students Detected Libor-Fixing Years Before Banking Scandal” RIA Novosti
  29. Jump up^ Snider, Conan; Thomas Youle (2 April 2010). “Does the Libor Reflect Banks’ Borrowing Costs?”Social Science Research Network: 13–14. Retrieved 22 July 2012.
  30. Jump up^ Snider, Conan; Thomas Youle (2 April 2010). “Does the Libor Reflect Banks’ Borrowing Costs?”Social Science Research Network: 11. Retrieved 22 July 2012.
  31. Jump up^ Snider, Conan; Thomas Youle (2 April 2010). “Does the Libor Reflect Banks’ Borrowing Costs?”Social Science Research Network: 12. Retrieved 22 July 2012.
  32. Jump up^ Stephanie Flanders (4 July 2012). Inconvenient truths about Libor. BBC News. Retrieved 17 July 2012.
  33. Jump up^ (12 January 2009). House of Commons – Treasury – Minutes of Evidence. Q34. Retrieved 17 July 2012.
  34. Jump up^ Jill Treanor & Dominic Rushe (13 July 2012). Timothy Geithner and Mervyn King discussed Libor worries in 2008The Guardian. Guardian News and Media. Retrieved 17 July 2012.
  35. Jump up to:a b c Mark Gongloff (13 July 2012). New York Fed’s Libor Documents Reveal Cozy Relationship Between Regulators, BanksHuffington Post. Retrieved 17 July 2012.
  36. Jump up^ Alex Klein (13 July 2012). “Rate-Fixing Scandal Hits U.S.: Fed Drops LIBOR Bombshells”The Daily Beast.
  37. Jump up^ “Attendees”. Bank of England. Retrieved 7 January 2013.
  38. Jump up^ Jia Lynn Yang (13 July 2012). Paul Tucker, deputy governor of the Bank of England.Geithner made recommendations on Libor in 2008, documents show. The Washington Post. Retrieved 17 July 2012.
  39. Jump up^ 13 July 2012 Libor email from Timothy Geithner to Bank of EnglandThe GuardianRetrieved 17 July 2012.
  40. Jump up^ Enrich, David; Mollenkamp, Carrick; and Eaglesham, Jean (18 March 2011). “U.S. Libor Probe Includes BofA, Citi, UBS”The Wall Street Journal.
  41. Jump up^ “U.S. conducting criminal Libor probe”. Reuters. 28 February 2012.
  42. Jump up to:a b “Eagle fried”The Economist. 30 June 2012. Retrieved 20 July 2012.
  43. Jump up^ Armstrong, Rachel (30 March 2012). “Ex-RBS trader says Brevan Howard sought Libor rate change”. Reuters.
  44. Jump up^ Julian Beltrame (15 July 2012). Canadian connection to Libor scandal probed by Competition Bureau.National Post. Retrieved 17 July 2012.
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  46. Jump up^ “Statement of Facts”. United States Department of Justice. 26 June 2012. Retrieved 11 July 2012.
  47. Jump up^ Taibbi, Matt, Why is Nobody Freaking Out About the LIBOR Banking Scandal?Rolling Stone, 3 July 2012
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  49. Jump up^ Reuters (2 July 2012). “Barclays chairman resigns over interest rate rigging scandal”NDTV profit. Retrieved 2 July 2012.
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  51. Jump up^ Ram, Vidya (4 July 2012). “Bob Diamond resigns as Barclays CEO”.Business Line. Retrieved 19 July 2012.
  52. Jump up^ “Bob Diamond questioned by MPs on Barclays Libor scandal: as it happened”The Telegraph. 4 July 2012. Retrieved 10 July 2012.
  53. Jump up^ “Bank of England deputy governor Paul Tucker fights Libor accusations – as it happened”The Guardian. 9 July 2012. Retrieved 10 July 2012.
  54. Jump up to:a b c d “UBS fined $1.5bn for Libor rigging”. BBC. 19 December 2012. Retrieved 20 December 2012.
  55. Jump up^ http://www.cftc.gov/PressRoom/PressReleases/pr6472-12
  56. Jump up^ http://business.time.com/2012/12/20/libor-scandal-yep-its-as-bad-as-we-thought/
  57. Jump up^ http://www.fsa.gov.uk/static/pubs/final/ubs.pdf pp.12
  58. Jump up^ Scott, Mark and Julia Werdigier (25 September 2013).“ICAP to Pay $87 Million Fine in Libor-Fixing Case”The New York Times. Retrieved 26 September 2013.
  59. Jump up^ = (4 December 2013). “Antitrust: Commission fines banks € 1.71 billion for participating in cartels in the interest rate derivatives industry” (Press release). Brussels: European Commission. Retrieved 18 December 2013.
  60. Jump up^ Capitalism Without Failure coverage of a discussion among Matt TaibbiEliott Spitzer, and Dennis Kelleher on Viewpoint with Eliot Spitzer on 4 July 2012 regarding the emerging Libor Scandal
  61. Jump up^ Carla Main & Ellen Rosen (9 July 2012). Libor Criminal Probe, CFTC Exemptions, Canada.Bloomberg BusinessWeek. Retrieved 17 July 2012.
  62. Jump up^ Treanor, Jill (6 July 2012). “Serious Fraud Office to investigate Libor manipulation”The Guardian. Retrieved 10 July 2012.
  63. Jump up^ David Enrich & Dana Cimilluca (15 July 2012). Missteps on Libor Doomed Barclays’s LeadersThe Wall Street Journal. Dow Jones & Company. Retrieved 17 July 2012.
  64. Jump up^ http://www.bloomberg.com/news/2013-01-28/libor-lies-revealed-in-rigging-of-300-trillion-benchmark.html
  65. Jump up^ “The rotten heart of finance”The Economist. 7 July 2012. Retrieved 17 July 2012.
  66. Jump up^ Darrell Preston (10 October 2012) “Rigged Libor costs states, localities $6 billion” Bloomberg
  67. Jump up^ John Glover (8 October 2012) “Libor, Set by Fewer Banks, Losing Status as a Benchmark” Bloomberg Business Week
  68. Jump up^ Reddy, Sudeep (11 July 2012). “Congress Joins Libor Probes: Focus Includes U.S. Regulators Who Knew About Problem as Early as 2007”The Wall Street Journal. p. C2. Retrieved 11 July 2012.
  69. Jump up^ HITC Business (4 October 2012) “Senators Launch Investigation Into Treasury Secretary Geithner’s Involvement In Libor Manipulation” (FOX Business)
  70. Jump up^ Clea Benson (19 December 2012) “Fannie Mae, Freddie Mac Libor Loss Tops $3 Billion in Audit”Bloomberg
  71. Jump up^ Scott, Mark. “Former Senior Barclays Executive Faces Scrutiny in Parliament”The New York Times. London.
  72. Jump up to:a b c Tan, Andrea (26 September 2012). “RBS Instant Messages Show Libor Rates Skewed for Traders”. Bloomberg. Retrieved 30 September 2012.
  73. Jump up^ Binham, Caroline (15 October 2012). “US Woman Takes on Banks Over Libor”.Financial Times. Retrieved 15 October 2012.
  74. Jump up to:a b Touryalai, Halah (15 October 2012). “Banks Rigged Libor To Inflate Adjustable-Rate Mortgages: Lawsuit”.Forbes. Retrieved 15 October 2012.
  75. Jump up^ Reuters (14 October 2012) “Home owners file class action suit versus banks over Libor: FT” Chicago Tribune Business
  76. Jump up^ “In re: Libor-Based Financial Instruments Antitrust Litigation”2012 WL 1522306 (S.D.N.Y.) (Trial Pleading). United States District Court, S.D. New York. Retrieved 19 October 2012.
  77. Jump up^ Preston, Darrell (8 October 2012). “Rigged Libor Hits States-Localities With $6 Billion: Muni Credit”. Bloomberg. Retrieved 19 October 2012.
  78. Jump up to:a b Gandel, Stephen (11 July 2012). “Wall Street’s latest sucker: Your hometown”Fortune. Retrieved 19 October 2012.
  79. Jump up^ Rushe, Dominic (19 July 2012). “Baltimore and the Libor scandal: ‘We can’t leave any money on the table'”The Guardian. Retrieved 19 October 2012.
  80. Jump up^ Shawn Baldwin (26 October 2012) “LIBOR Liabilities: How litigation will drive down banks profitability for years to come” Forbes
  81. Jump up^ Paul Craig Roberts and Nomi Prins (14 July 2012). “The Real Libor Scandal”Paul Craig Roberts. Retrieved 28 August 2013.
  82. Jump up^ Denning, Steve (25 July 2012). “Rethinking Capitalism: Sandy Weill Says Bring Back Glass-Steagall”Forbes. Retrieved 25 July 2012. Quoting interview on CNBC’s Squawk-Box.
  83. Jump up^ (French)M Nicolas Firzli, Bank Regulation and Financial Orthodoxy: the Lessons from the Glass-Steagall Act, Revue Analyse Financière, Q1 2010, retrieved 8 January 2010
  84. Jump up^ Nicolas J. Firzli quoted by Marie Lepesant (11 June 2012).“Le Modèle des Banques Françaises en Question”Le Parisien (in French). Retrieved 12 June 2012.
  85. Jump up^ “Restoring trust after Diamond”Financial Times. 3 July 2012. Retrieved 15 July 2012. quoting FT Editorial Page.
  86. Jump up to:a b Naomi Wolf (14 July 2012). This global financial fraud and its gatekeepersThe Guardian. Guardian News and Media. Retrieved 17 July 2012.
  87. Jump up^ Michelle Price “Libor tender puts focus on data providers”, “Financial News”, 28 September 2012
  88. Jump up^ Ben Moshinsky and Lindsay Fortado “U.K. Lawmakers Seek Speedy Overhaul of Libor Following Review”, Bloomberg, 28 September 2012
  89. Jump up to:a b c “LIBOR becomes a regulated activity” (Press release). The British Bankers’ Association. 2 April 2013. Retrieved 25 July 2013.
  90. Jump up^ “Announcement of LIBOR changes” (Press release). The British Bankers’ Association. 12 June 2013. Retrieved 25 July 2013.
  91. Jump up^ “Code of Conduct for Contributing Banks becomes Industry Guidance and Whistleblowing policy issued”(Press release). The British Bankers’ Association. 15 July 2013. Retrieved 25 July 2013.
  92. Jump up^ “BBA Libor Limited has established the Interim LIBOR Oversight Committee (ILOC)”(Press release). The British Bankers’ Association. 5 July 2013. Retrieved 25 July 2013.
  93. Jump up^ “NYSE EURONEXT SUBSIDIARY TO BECOME NEW ADMINISTRATOR OF LIBOR” (Press release). NYSE Euronext. 9 July 2013. Retrieved 21 July 2013.
  94. Jump up^ “BBA to hand over administration of LIBOR to NYSE Euronext Rate Administration Limited”(Press release). The British Bankers’ Association. 9 July 2013. Retrieved 20 July 2013.

External links

Barclays Bank


ICAP Europe Limited


Royal Bank of Scotland


European Union


Iran-Contra Scandal (thanks Wikipedia!)

Iran–Contra affair

From Wikipedia, the free encyclopedia
Add to Google CalendarIran–Contra affair
Reagan meets with aides on Iran-Contra.jpg

Reagan meets with (left to right) Secretary of DefenseCaspar Weinberger, Secretary of State George Shultz, Attorney General Ed Meese, and Chief of Staff Don Regan in the Oval Office
Date August 20, 1985 – March 4, 1987
Also known as Iran–Contra
Participants Ronald ReaganRobert McFarlaneCaspar WeinbergerHezbollahContrasOliver North,Manucher GhorbanifarJohn Poindexter,Manuel Antonio Noriega

The Iran–Contra affair (Persian: ایران-کنترا‎, Spanishcaso Irán-Contra), also referred to as Irangate,[1] Contragate[citation needed] or the Iran–Contra scandal, was a political scandal in the United States that came to light in November 1986. During the Reagan administration, senior administration officials secretly facilitated the sale of arms to Iran, the subject of an arms embargo.[2] Some U.S. officials also hoped that the arms sales would secure the release of several hostages and allow U.S. intelligence agencies to fund the NicaraguanContras. Under the Boland Amendment, further funding of the Contras by the government had been prohibited by Congress.

The scandal began as an operation to free the seven American hostages being held in Lebanon by a group with Iranian ties connected to the Army of the Guardians of the Islamic Revolution. It was planned that Israel would ship weapons to Iran, and then the United States would resupply Israel and receive the Israeli payment. The Iranian recipients promised to do everything in their power to achieve the release of the U.S. hostages. The plan deteriorated into an arms-for-hostages scheme, in which members of the executive branch sold weapons to Iran in exchange for the release of the American hostages.[3][4] Large modifications to the plan were devised by Lieutenant Colonel Oliver North of the National Security Council in late 1985, in which a portion of the proceeds from the weapon sales was diverted to fund anti-Sandinista and anti-communist rebels, or Contras, in Nicaragua.[5][6]

While President Ronald Reagan was a supporter of the Contra cause,[7] the evidence is disputed as to whether he authorized the diversion of the money raised by the Iranian arms sales to the Contras.[3][4][8] Handwritten notes taken by Defense Secretary Caspar Weinbergeron December 7, 1985, indicate that Reagan was aware of potential hostage transfers with Iran, as well as the sale of Hawk and TOW missiles to “moderate elements” within that country.[9] Weinberger wrote that Reagan said “he could answer to charges of illegality but couldn’t answer to the charge that ‘big strong President Reagan passed up a chance to free the hostages'”.[9] After the weapon sales were revealed in November 1986, Reagan appeared on national television and stated that the weapons transfers had indeed occurred, but that the United States did not trade arms for hostages.[10] The investigation was impeded when large volumes of documents relating to the scandal were destroyed or withheld from investigators by Reagan administration officials.[11] On March 4, 1987, Reagan returned to the airwaves in a nationally televised address, taking full responsibility for any actions that he was unaware of, and admitting that “what began as a strategic opening to Iran deteriorated, in its implementation, into trading arms for hostages”.[12]

Several investigations ensued, including those by the U.S. Congress and the three-person, Reagan-appointed Tower Commission. Neither found any evidence that President Reagan himself knew of the extent of the multiple programs.[3][4][8] Ultimately the sale of weapons to Iran was not deemed a criminal offense but charges were brought against five individuals for their support of the Contras. Those charges, however, were later dropped because the administration refused to declassify certain documents. The indicted conspirators faced various lesser charges instead. In the end, fourteen administration officials were indicted, including then-Secretary of Defense Caspar Weinberger. Eleven convictions resulted, some of which were vacated on appeal.[13] The rest of those indicted or convicted were all pardoned in the final days of the presidency of George H. W. Bush, who had been vice-president at the time of the affair.[14]




Contra militants based in Honduras waged a guerrilla war to topple the Sandinista National Liberation Front (FSLN) revolutionary government of Nicaragua. Direct U.S. funding of the Contras insurgency was made illegal through the Boland Amendment,[8] the name given to three U.S. legislative amendments between 1982 and 1984 aimed at limiting U.S. government assistance to the Contra’s militants. Funding ran out for the Contras by July 1984 and in October a total ban was placed in effect. In violation of the Boland Amendment, senior officials of the Reagan administration continued to secretly arm and train the Contras and provide arms to Iran, an operation they called “the Enterprise”.[15]

Ironically, military aid to the Contras was reinstated with Congressional consent in October 1986, a month before the scandal broke.[16]

Arms sales to Iran

Michael Ledeen, a consultant of National Security Adviser Robert McFarlane, requested assistance from Israeli Prime Minister Shimon Peres for help in the sale of arms to Iran.[17][18] Having been designated a State Sponsor of Terrorism since January 1984,[19] Iran was in the midst of the Iran–Iraq War and could find few Western nations willing to supply it with weapons.[20] The idea behind the plan was for Israel to ship weapons through an intermediary (identified as Manucher Ghorbanifar)[3] to the Islamic republic as a way of aiding a supposedly moderate, politically influential faction within the regime of the Ayatollah Khomeini who were believed to be seeking a rapprochement with the United States; after the transaction, the United States would reimburse Israel with the same weapons, while receiving monetary benefits.[21] The Israeli government required that the sale of arms meet high level approval from the United States government, and when McFarlane convinced them that the U.S. government approved the sale, Israel obliged by agreeing to sell the arms.[17]

In 1985 President Reagan entered Bethesda Naval Hospital for colon cancer surgery. While the President was recovering in the hospital, McFarlane met with him and told him that representatives from Israel had contacted the National Security Agency to pass on confidential information from what Reagan later described as the “moderate” Iranian faction opposed to the Ayatollah’s hardline anti-American policies.[21] According to Reagan, these Iranians sought to establish a quiet relationship with the United States, before establishing formal relationships upon the death of the aging Ayatollah.[21] In Reagan’s account, McFarlane told Reagan that the Iranians, to demonstrate their seriousness, offered to persuade the Hezbollah terrorists to release the seven U.S. hostages.[22] McFarlane met with the Israeli intermediaries;[23] Reagan claims that he allowed this because he believed that establishing relations with a strategically located country, and preventing the Soviet Unionfrom doing the same, was a beneficial move.[21] Although Reagan claims that the arms sales were to a “moderate” faction of Iranians, the Walsh Iran/Contra Report states that the arms sales were “to Iran” itself,[24] which was under the control of the Ayatollah.

Following the Israeli–U.S. meeting, Israel requested permission from the United States to sell a small number of TOW antitank missiles (tube-launched, optically tracked, and wire-guided) to Iran, claiming that this would aid the “moderate” Iranian fraction,[22] by demonstrating that the group actually had high-level connections to the U.S. government.[22] Reagan initially rejected the plan, until Israel sent information to the United States showing that the “moderate” Iranians were opposed to terrorism and had fought against it.[25] Now having a reason to trust the “moderates”, Reagan approved the transaction, which was meant to be between Israel and the “moderates” in Iran, with the United States reimbursing Israel.[22] In his 1990 autobiography An American Life, Reagan claimed that he was deeply committed to securing the release of the hostages; it was this compassion that supposedly motivated his support for the arms initiatives.[3] The president requested that the “moderate” Iranians do everything in their capability to free the hostages held by Hezbollah.[26]

A BGM-71 TOW anti-tank guided missile

The following arms were supplied to Iran:[27][28]

  • August 20, 1985 – 96 TOW anti-tank missiles
  • September 14, 1985 – 408 more TOWs
  • November 24, 1985 – 18 Hawk anti-aircraft missiles
  • February 17, 1986 – 500 TOWs
  • February 27, 1986 – 500 TOWs
  • May 24, 1986 – 508 TOWs, 240 Hawk spare parts
  • August 4, 1986 – More Hawk spares
  • October 28, 1986 – 500 TOWs

First arms sale

On August 30, 1985, Israel sent 100 American-made BGM-71 TOW antitank missiles to Iran through an arms dealer named Manucher Ghorbanifar. Subsequently, on September 14, 1985, 408 more TOW missiles were delivered. On September 15, 1985, following the second delivery, Reverend Benjamin Weir was released by his captors, the Islamic Jihad Organization.[29]

Modifications in plans

Robert McFarlane resigned on December 4, 1985,[30][31] citing that he wanted to spend more time with his family.[32] He was replaced by Admiral John Poindexter.[33]

Two days later, Reagan met with his advisors at the White House, where a new plan was introduced. This one called for a slight change in the arms transactions: instead of the weapons going to the “moderate” Iranian group, they would go to “moderate” Iranian army leaders.[34] As the weapons were delivered from Israel by air, the hostages held by Hezbollah would be released.[34] Israel would continue to be reimbursed by the United States for the weapons. Though staunchly opposed by Secretary of State George Shultz and Secretary of Defense Caspar Weinberger, the plan was authorized by Reagan, who stated that, “We were not trading arms for hostages, nor were we negotiating with terrorists”.[35] Now retired National Security Advisor McFarlane flew to London to meet with Israelis and Ghorbanifar in an attempt to persuade the Iranian to use his influence to release the hostages before any arms transactions occurred; this plan was rejected by Ghorbanifar.[34]

On the day of McFarlane’s resignation, Oliver North, a military aide to the United States National Security Council (NSC), proposed a new plan for selling arms to Iran, which included two major adjustments: instead of selling arms through Israel, the sale was to be direct, and a portion of the proceeds would go to Contras, or Nicaraguan paramilitary fighters waging guerrilla warfare against the democratically-elected Sandinista government, at a markup. North proposed a $15 million markup, while contracted arms broker Ghorbanifar added a 41% markup of his own.[36] Other members of the NSC were in favor of North’s plan; with large support, Poindexter authorized it without notifying President Reagan, and it went into effect.[37] At first, the Iranians refused to buy the arms at the inflated price because of the excessive markup imposed by North and Ghorbanifar. They eventually relented, and in February 1986, 1,000 TOW missiles were shipped to the country.[37] From May to November 1986, there were additional shipments of miscellaneous weapons and parts.[37]

Both the sale of weapons to Iran, and the funding of the Contras, attempted to circumvent not only stated administration policy, but also the Boland Amendment.[8] Administration officials argued that regardless of the Congress restricting the funds for the Contras, or any affair, the President (or in this case the administration) could carry on by seeking alternative means of funding such as private entities and foreign governments.[38] Funding from one foreign country, Brunei, was botched when North’s secretary, Fawn Hall, transposed the numbers of North’s Swiss bank account number. A Swiss businessman, suddenly $10 million richer, alerted the authorities of the mistake. The money was eventually returned to the Sultan of Brunei, with interest.[39]

On January 7, 1986, John Poindexter proposed to the president a modification of the approved plan: instead of negotiating with the “moderate” Iranian political group, the United States would negotiate with “moderate” members of the Iranian government.[40] Poindexter told Reagan that Ghorbanifar had important connections within the Iranian government, so with the hope of the release of the hostages, Reagan approved this plan as well.[40] Throughout February 1986, weapons were shipped directly to Iran by the United States (as part of Oliver North’s plan, without the knowledge of President Reagan) and none of the hostages were released. Retired National Security Advisor McFarlane conducted another international voyage, this one to Tehran; bringing with him a gift of a bible having a handwritten inscription by Ronald Reagan;[41][42] and, according to some, a cake baked in the shape of a key.[41] He met directly with the “moderate” Iranian political group that sought to establish U.S.-Iranian relations in an attempt to free the four remaining hostages.[43] This meeting also failed. The members requested concessions such as Israel’s withdrawal from the Golan Heights, which the United States rejected.[43]

Subsequent dealings

In late July 1986, Hezbollah released another hostage, Father Lawrence Martin Jenco, former head of Catholic Relief Services in Lebanon. Following this, William Casey, head of the CIA, requested that the United States authorize sending a shipment of small missile parts to Iranian military forces as a way of expressing gratitude.[44] Casey also justified this request by stating that the contact in the Iranian government might otherwise lose face, or be executed, and hostages killed. Reagan authorized the shipment to ensure that those potential events would not occur.[44]

In September and October 1986 three more Americans—Frank ReedJoseph Cicippio, and Edward Tracy—were abducted in Lebanon by a separate terrorist group. The reasons for their abduction are unknown, although it is speculated that they were kidnapped to replace the freed Americans.[45] One more original hostage, David Jacobsen, was later released. The captors promised to release the remaining two, but the release never happened.[46]

Discovery and scandal

North‘s mugshot, after his arrest

After a leak by Iranian Mehdi Hashemi, the Lebanese magazine Ash-Shiraa exposed the arrangement on November 3, 1986.[47] This was the first public reporting of the weapons-for-hostages deal. The operation was discovered only after an airlift of guns (Corporate Air Services HPF821) was downed over Nicaragua. Eugene Hasenfus, who was captured by Nicaraguan authorities, initially alleged in a press conference on Nicaraguan soil that two of his coworkers, Max Gomez and Ramon Medina, worked for the Central Intelligence Agency.[48] He later said he did not know whether they did or not.[49] The Iranian government confirmed the Ash-Shiraa story, and ten days after the story was first published, President Reagan appeared on national television from the Oval Office on November 13, stating:

“My purpose was… to send a signal that the United States was prepared to replace the animosity between [the U.S. and Iran] with a new relationship… At the same time we undertook this initiative, we made clear that Iran must oppose all forms of international terrorism as a condition of progress in our relationship. The most significant step which Iran could take, we indicated, would be to use its influence in Lebanon to secure the release of all hostages held there.”[10]

The scandal was compounded when Oliver North destroyed or hid pertinent documents between November 21 and November 25, 1986. During North’s trial in 1989, his secretary, Fawn Hall, testified extensively about helping North alter, shred, and remove official United States National Security Council (NSC) documents from the White House. According to the New York Times, enough documents were put into a government shredder to jam it.[36] North’s explanation for destroying some documents was to protect the lives of individuals involved in Iran and Contraoperations.[36] It was not until years after the trial that North’s notebooks were made public, and only after the National Security Archive and Public Citizen sued the Office of the Independent Counsel under the Freedom of Information Act.[36]

During the trial North testified that on November 21, 22, or 24, he witnessed Poindexter destroy what may have been the only signed copy of a presidential covert-action finding that sought to authorize CIA participation in the November 1985 Hawk missile shipment to Iran.[36] U.S. Attorney General Edwin Meese admitted on November 25 that profits from weapons sales to Iran were made available to assist the Contra rebels in Nicaragua. On the same day, John Poindexter resigned, and Oliver North was fired by President Reagan.[50] Poindexter was replaced by Frank Carluccion December 2, 1986.[51]

In his expose Veil: The Secret Wars of the CIA 1981–1987, journalist Bob Woodward chronicles the role of the CIA in facilitating the transfer of funds from the Iran arms sales to the Nicaraguan Contras spearheaded by Oliver North.[52] Then Director of the CIA, William J. Casey, admitted to Woodward in February 1987 that he was aware of the diversion of funds to the contras confirming a number of encounters documented by Woodward.[53] The controversial admission occurred while Casey was hospitalized for a stroke, and, according to his wife, was unable to communicate. On May 6, 1987, William Casey died the day after Congress began its public hearings on Iran–Contra.

Tower Commission

Main article: Tower Commission

On November 25, 1986, President Reagan announced the creation of a Special Review Board to look into the matter; the following day, he appointed former Senator John Tower, former Secretary of State Edmund Muskie, and former National Security Adviser Brent Scowcroft to serve as members. This Presidential Commissiontook effect on December 1 and became known as the Tower Commission. The main objectives of the commission were to inquire into “the circumstances surrounding the Iran-Contra matter, other case studies that might reveal strengths and weaknesses in the operation of the National Security Council system under stress, and the manner in which that system has served eight different presidents since its inception in 1947″.[3] The Tower Commission was the first presidential commission to review and evaluate the National Security Council.

President Reagan (center) receives the Tower Commission Report in the White House Cabinet Room; John Tower is at left and Edmund Muskie is at right, 1987.

President Reagan appeared before the Tower Commission on December 2, 1986, to answer questions regarding his involvement in the affair. When asked about his role in authorizing the arms deals, he first stated that he had; later, he appeared to contradict himself by stating that he had no recollection of doing so.[54] In his 1990 autobiography, An American Life, Reagan acknowledges authorizing the shipments to Israel.[55]

The report published by the Tower Commission was delivered to the president on February 26, 1987. The Commission had interviewed 80 witnesses to the scheme,[3] including Reagan, and two of the arms trade middlemen: Manucher Ghorbanifar and Adnan Khashoggi.[54] The 200-page report was the most comprehensive of any released,[54] criticizing the actions of Oliver North, John Poindexter, Caspar Weinberger, and others. It determined that President Reagan did not have knowledge of the extent of the program, especially about the diversion of funds to the Contras,[3] although it argued that the president ought to have had better control of the National Security Council staff.[3] The report heavily criticized Reagan for not properly supervising his subordinates or being aware of their actions.[3] A major result of the Tower Commission was the consensus that Reagan should have listened to his National Security Advisor more, thereby placing more power in the hands of that chair.[3]

Congressional Committees Investigating The Iran-Contra Affair

The Democratic-controlled United States Congress issued its own report on November 18, 1987, stating that “If the president did not know what his national security advisers were doing, he should have”.[4] The congressional report wrote that the president bore “ultimate responsibility” for wrongdoing by his aides, and his administration exhibited “secrecy, deception and disdain for the law”.[56] It also read that “the central remaining question is the role of the President in the Iran–Contra affair. On this critical point, the shredding of documents by Poindexter, North and others, and the death of Casey, leave the record incomplete”.[8]


Reagan expressed regret regarding the situation during a nationally televised address from the Oval Office on March 4, 1987, and two other speeches;[57] Reagan had not spoken to the American people directly for three months amidst the scandal.[58] President Reagan told the American people the reason why he did not update them on the scandal:

“The reason I haven’t spoken to you before now is this: You deserve the truth. And as frustrating as the waiting has been, I felt it was improper to come to you with sketchy reports, or possibly even erroneous statements, which would then have to be corrected, creating even more doubt and confusion. There’s been enough of that.”[58]

He then took full responsibility for the acts committed:

“First, let me say I take full responsibility for my own actions and for those of my administration. As angry as I may be about activities undertaken without my knowledge, I am still accountable for those activities. As disappointed as I may be in some who served me, I’m still the one who must answer to the American people for this behavior.”[58]

Finally, the president stated that his previous assertions that the U.S. did not trade arms for hostages were incorrect:

“A few months ago I told the American people I did not trade arms for hostages. My heart and my best intentions still tell me that’s true, but the facts and the evidence tell me it is not. As the Tower board reported, what began as a strategic opening to Iran deteriorated, in its implementation, into trading arms for hostages. This runs counter to my own beliefs, to administration policy, and to the original strategy we had in mind.”[58]

To this day Reagan’s role in the transactions is not definitively known; it is unclear exactly what Reagan knew and when, and whether the arms sales were motivated by his desire to save the U.S. hostages. Oliver North wrote that “Ronald Reagan knew of and approved a great deal of what went on with both the Iranian initiative and private efforts on behalf of the contras and he received regular, detailed briefings on both…I have no doubt that he was told about the use of residuals for the Contras, and that he approved it. Enthusiastically.”[59] Handwritten notes by Defense Secretary Weinberger indicate that the President was aware of potential hostages transfers with Iran, as well as the sale of Hawk and TOW missiles to what he was told were “moderate elements” within Iran.[9] Notes taken on December 7, 1985, by Weinberger record that Reagan said that “he could answer charges of illegality but he couldn’t answer charge [sic] that ‘big strong President Reagan passed up a chance to free hostages'”.[9] The Republican-written “Report of the Congressional Committees Investigating the Iran-Contra Affair” concluded, that

There is some question and dispute about precisely the level at which he chose to follow the operation details. There is no doubt, however, … [that] the President set the US policy towards Nicaragua, with few if any ambiguities, and then left subordinates more or less free to implement it.[60]

Domestically, the scandal precipitated a drop in President Reagan’s popularity as his approval ratings saw “the largest single drop for any U.S. president in history”, from 67% to 46% in November 1986, according to a New York Times/CBS News poll.[61] The “Teflon President“, as Reagan was nicknamed by critics,[62] survived the scandal, however, and by January 1989 a Gallup poll was “recording a 64% approval rating”, the highest ever recorded for a departing President at that time.[63]

Internationally the damage was more severe. Magnus Ranstorp wrote, “U.S. willingness to engage in concessions with Iran and the Hezbollah not only signaled to its adversaries that hostage-taking was an extremely useful instrument in extracting political and financial concessions for the West but also undermined any credibility of U.S. criticism of other states’ deviation from the principles of no-negotiation and no concession to terrorists and their demands”.[64]

In Iran Mehdi Hashemi, the leaker of the scandal, was executed in 1987, allegedly for activities unrelated to the scandal. Though Hashemi made a full video confession to numerous serious charges, some observers find the coincidence of his leak and the subsequent prosecution highly suspicious.[65]


  • Caspar WeinbergerSecretary of Defense, was indicted on two counts of perjury and one count of obstruction of justice on June 16, 1992. [1] Weinberger received a pardon from George H. W. Bush on December 24, 1992, before he was tried.[66]
  • William Casey, Head of the CIA. Thought to have conceived the plan, was stricken ill hours before he would testify. Reporter Bob Woodward reported Casey knew of and approved the plan.[67]
  • Robert C. McFarlane, National Security Adviser, convicted of withholding evidence, but after a plea bargain was given only two years of probation. Later pardoned by President George H. W. Bush.[68]
  • Elliott Abrams, Assistant Secretary of State, convicted of withholding evidence, but after a plea bargain was given only two years probation. Later pardoned by President George H. W. Bush.[69]
  • Alan D. Fiers, Chief of the CIA’s Central American Task Force, convicted of withholding evidence and sentenced to one year probation. Later pardoned by President George H. W. Bush.
  • Clair George, Chief of Covert Ops-CIA, convicted on two charges of perjury, but pardoned by President George H. W. Bush before sentencing.[70]
  • Oliver North, member of the National Security Council convicted of accepting an illegal gratuity, obstruction of a congressional inquiry, and destruction of documents, but the ruling was overturned since he had been granted immunity.[71]
  • Fawn Hall, Oliver North’s secretary, was given immunity from prosecution on charges of conspiracy and destroying documents in exchange for her testimony.[72]
  • Jonathan Scott Royster, Liaison to Oliver North, was given immunity from prosecution on charges of conspiracy and destroying documents in exchange for his testimony.[73]
  • National Security Advisor John Poindexter was convicted of five counts of conspiracy, obstruction of justice, perjury, defrauding the government, and the alteration and destruction of evidence. The Supreme Court upheld a lower court ruling that overturned these convictions.[74]
  • Duane Clarridge. An ex-CIA senior official, he was indicted in November 1991 on seven counts of perjury and false statements relating to a November 1985 shipment to Iran. Pardoned before trial by President George H. W. Bush.[75][76]
  • Richard V. Secord. Ex-major general in the Air Force who organized the Iran arms sales and Contra aid. He pleaded guilty in November 1989 to making false statements to Congress and was sentenced to two years of probation.[77][78]
  • Albert Hakim. A businessman, he pleaded guilty in November 1989 to supplementing the salary of North by buying a $13,800 fence for North with money from “the Enterprise”, which was a set of foreign companies Hakim used in Iran-Contra. In addition, Swiss company Lake Resources Inc., used for storing money from arms sales to Iran to give to the Contras, plead guilty to stealing government property.[79] Hakim was given two years of probation and a $5,000 fine, while Lake Resources Inc. was ordered to dissolve.[77][80]

Oliver North and John Poindexter were indicted on multiple charges on March 16, 1988.[81] North, indicted on 16 counts, was found guilty by a jury of three felony counts. The convictions were vacated on appeal on the grounds that North’s Fifth Amendment rights may have been violated by the indirect use of his testimony to Congress which had been given under a grant of immunity. In 1990 Poindexter was convicted on several felony counts of conspiracy, lying to Congress, obstruction of justice, and altering and destroying documents pertinent to the investigation. His convictions were also overturned on appeal on similar grounds. Arthur L. Limanserved as chief counsel for the Senate during the Iran–Contra Scandal.[82]

The Independent CounselLawrence E. Walsh, chose not to re-try North or Poindexter.[83] In total, several dozen people were investigated by Walsh’s office.[84]

During his election campaign in 1988, Vice President Bush denied any knowledge of the Iran–Contra affair by saying he was “out of the loop”. Though his diaries included that he was “one of the few people that know fully the details”, he repeatedly refused to discuss the incident and won the election.[85] However, a book published in 2008 by Israeli journalist and terrorism expert Ronen Bergman asserts that Bush was personally and secretly briefed on the affair by Amiram Nir, counter-terrorism adviser to the then Israeli Prime Minister, when Bush was on a visit to Israel. “Nir could have incriminated the incoming President. The fact that Nir was killed in a mysterious chartered airplane crash in Mexico in December 1988 has given rise to numerous conspiracy theories“, writes Bergman.[86] On December 24, 1992, nearing the end of his term in office after being defeated by Bill Clinton the previous month, Bush pardoned six administration officials, namely Elliott AbramsDuane ClarridgeAlan FiersClair GeorgeRobert McFarlane, and Caspar Weinberger.[87]

In Poindexter’s hometown of Odon, Indiana, a street was renamed to John Poindexter Street. Bill Breeden, a former minister, stole the street’s sign in protest of the Iran–Contra affair. He claimed that he was holding it for a ransom of $30 million, in reference to the amount of money given to Iran to transfer to the Contras. He was later arrested and confined to prison, making him, as satirically noted by Howard Zinn, “the only person to be imprisoned as a result of the Iran–Contra Scandal”.[88]

Reports and documents

The 100th Congress formed a joint committee (Congressional Committees Investigating The Iran-Contra Affair) and held hearings in mid-1987. Transcripts were published as: Iran-Contra Investigation: Joint Hearings Before the Senate Select Committee on Secret Military Assistance to Iran and the Nicaraguan Opposition and the House Select Committee to Invesitgate Covert Arms Transactions with Iran (U.S. GPO 1987-88). A closed Executive Session heard classified testimony from North and Poindexter; this transcript was published in a redacted format.[89] The joint committee’s final report was Report of the Congressional Committees Investigating the Iran-Contra Affair With Supplemental, Minority, and Additional Views (U.S. GPO November 17, 1987).[90] The records of the committee are at the National Archives, but many are still non-public.[91]

Testimony was also heard before the House Foreign Affairs CommitteeHouse Permanent Select Committee on Intelligence, and Senate Select Committee on Intelligence and can be found in the Congressional Record for those bodies. The Senate Intelligence Committee produced two reports: Preliminary Inquiry into the Sale of Arms to Iran and Possible Diversion of Funds to the Nicaraguan Resistance (February 2, 1987) and Were Relevant Documents Withheld from the Congressional Committees Investigating the Iran-Contra Affair? (June 1989).[92]

The Tower Commission Report was published as the Report of the President’s Special Review Board. U.S. GPO February 26, 1987. It was also published as The Tower Commission Report, Bantam Books, 1987, ISBN 0-553-26968-2 [93]

The Office of Independent Counsel/Walsh investigation produced four interim reports to Congress. Its final report was published as the Final Report of the Independent Counsel for Iran/Contra Matters.[94] Walsh’s records are available at the National Archives.[95]

See also


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  61. Jump up^ Mayer, Jane and Doyle McManusLandslide: The Unmaking of The President, 1984-1988. Houghton Mifflin, (1988) p.292 and 437
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  69. Jump up^ Walsh, Lawrence E.(August 4, 1993). “Final Report of the Independent Counsel For Iran/Contra Matters Vol. I: Investigations and Prosecutions”. Summary of Prosecutions. U.S. Court of Appeal for the District of Columbia.
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External links

My Enron Hauntings


Enron HQ

Its extremely difficult to fully verbalize my feelings about Enron. I became personally involved with the Corporation; soon before the scandal and bankruptcy. My time there was limited, but what I experienced amassed a lifetime of emotion & wisdom. A young, hopeful corporate warrior soon became a jaded, depressed person. Ignorance is Bliss. This is the first time I’m attempting to catalog my experience & understandings of this company. I believe in 2014 this continues to be a historical lesson that has not been fully grasped by the US. Even so, it continues to have a reverberation within our fragile economy & political theater. It shines a light on the vulnerable underbelly of the United States sociopolitical economic system. As it became an emotional fulcrum in my life, it continues to be a historical fulcrum for Amerika. Enron will not go away. Enron must be understood and talked about. It is too important to become a historical footnote. From this perspective, of anecdotes and analysis, I begin this journey of self-revelation. This post is extremely important to me and I hope you find it relevant and life changing.

In 2001, I was a young upstart wannabe corporate warrior. I was a Senior at NYU Stern School of Business. I was studying Finance; along with a co-major in International Business & minor in Politics. Politically motivated from my time as a US House Page in 1996-1997, I was attempting to understand and navigate real economic motivations. I was an academic analyst soon to be in the eye of a historical economic hurricane! Today I find these insights gained as irreplaceable. As such, I cannot keep it to myself any longer. I must share whatever wisdom I have. In doing so, I find myself starting with the application for my Senior Summer Internship. I found investment banking and finance extremely boring. I found it, however, academically important to understand the machinations of the world realpolitik. With this understanding I gravitated to the upstart 6th largest Corporation in the United States. Enron.

I was lucky to achieve a Summer Analyst position on the 6th floor of the Headquarters of the 6th largest Corporation in the United States. I was to support Enron Energy Services – Energy Portfolio Management – Fast Track Group. This was a test group, not fully realized into operational success. It was a test group meant to play out political and economic objectives for Enron Executives. I vaguely understood this at the time. My Manager was named Craig Sutter. My mentor was Celia Delahuesay (I’m sorry for the spelling nowadays). Much of this can be cross referenced via the FERC lists that can be accessed online. My name pops up. Of this I was to provide general support of the Origination group. The Fast Track Group at its core was a Sales force. The goal was to sell to Companies with an energy spend of $10-$30 million. They were to build contracts that would provide stable, fixed rates of gas & electricity. Enron would then find ways to absorb the costs and profit on the wholesale end. This concept is very important as it eventually had catastrophic results for the State of California under Governor Gray Davis. On my part, I was to smooth out the numbers on the contracts and ensure that energy spends were “smooth” enough to provide a basis to sell the fixed contracts. Of this, Originators were to grow a business out of nothing. It was a new exciting frontier; one that has been largely lost in the aftermath. It also was a piece of the puzzle’s totality in understanding the vast machinations of this Corporation.

Enron Energy Services was one of many departments pushing the envelope of new economic environments. Enron Broadband, Enron Energy Services, Enron Wind, etc were truly attempting to build viable business models. Of this though, the economic situations became manipulated. If you can sell a growth rate, you can sell a stock price: essentially setting up a probable pump & dump scenario. Growth rates pushed the economic envelope in the late 90’s early 2000’s. It was how Investment Bankers were justifying wild stock prices for all these internet stocks. With this bubble, trickle-down exuberance allowed companies like Enron manipulate the regulatory & economic macro-environment.

I started my Summer Internship not fully grasping the scope and breadth Enron had in 2001. It was after more education, study, & personal revelation that I began to realize the multifaceted realities this Company brought about. First and foremost, $ENE Stock Price must be addressed. It was when things slipped that the house of cards fell. A stock price is derived via a basic Financial formula. Dividends divided by the market cap rate minus growth rate. Dividends are cut and dry. Market Cap is “verified” by Accounting Firms such as Enron’s Arthur Anderson. Growth Rate is a hypothetical of what future growth may hold.

Of this, Cash Dividends were not utilized. This was due to the cash being diverted to fund Enron Operations & Projects. Enron had the largest natural gas pipeline in the United States at the time. This was a Cash Cow that allowed the funding of its Commodity Market operations + energy generation operations. Enron also had the largest Online Commodity marketplace at the time. Not only are commodities not regulated well, but ENE spent big bucks in Washington to ensure that Lawmakers would not get involved. Enron essentially got paid for running the marketplace, while being an active participant in its Wholesale Energy Sales. This was then supported via Projects like Enron Energy Services that were to sell energy contracts. On this note we must remember that Enron also maintained monopolistic power to many US region’s electricity transportation. Market Capitalization was underscored by the Natural Gas Pipeline and Enron Trading operations. While there was very real cash, the Market Capitalization as publicly recorded was being manipulated. Arthur Anderson was involved in the corruption and falsification of accounting data. When the house of cards fell, so did they. This in turn brought about economic recessionary pressures that were mounting from the tech bubble burst. The Growth Rate was sold to investors via Investment Banking Analysts. They utilized the falsified accounting data to pump up wild growth rates; ensuring high stock valuations. Projects such as Enron Energy Services, Enron Broadband, & Enron Wind were unproven business models. Of this they sold the dream that it would grow exponentially; justifying an analyst’s growth rate.

When Jeff Skilling said he was resigning, 30 feet from me, he said it was for family reasons. It was sudden to me. He explained that it was for family reasons and YES he was selling stock. What wasn’t said was that Ken Lay was selling stock as well. Though this is public information at the Corporate level legally, nobody seemed to put 2 and 2 together that they were jumping ship with loads of cash. Ken Lay came in as CEO to save the day. He gave the employees stock options to calm them down. As we see in hindsight, this was absolutely worthless. Of the stock, Employees were mandated to retain high levels of $ENE in their 401k portfolios. When the house of cards fell, many good people lost a life savings for retirement. At every step of the way, rules and regulations were manipulated to tailor information in the favor of high stock prices. As long as Capital Investments were coming in, the ponzi scheme could continue. Once the stock slipped, the jig was up.

As an NYU Student, at the 6th largest corporation in the country, I was cocky to say the least. I was sure of my knowledge and sure of my abilities. This mattered not as I did not receive an offer of employment from Enron. I was devistated. What I later understood is that only a handful of people were offered jobs to continue the rouse, while inquisitive people were pushed out quickly. I was well liked by all but my Manager of Fast Track Group. I had a rocky start and learned quickly that Corporate politics is always involved in operational affairs. At one point, I loudly proclaimed that “I’m smarter than half these yahoos working on this floor!” Absolutely stupid by a 21 year old to say when a Career was desired. Live and learn. Vindication soon came when everything came out. During my time in Enron Energy Services, I overheard contract analysts discussing the nature of their business. They would sell at the highest possible rates regardless of reality. The State of California learned this the hard way. Enron bled the transmission lines to California, making the anemic electricity go up into enormous costs on the spot market. California was desperate to show that they were able to maintain control, even though this was a contrived crisis. Enron got their way and came in to save the day! They then sold long-term Fixed Contracts at high rates; given justification via the spot market. Governor Davis accepted this Fixed contract with little respect for analytically minded criticism.

I’m left with many what if’s. I’m hurt to this day by the Summer of 2001 at Enron. I hope this post sheds light on Enron’s affairs as I saw them at the time. I am no expert; but then again the experts brought about this crisis. Nobody asked where the peripheral players recieved their ethics and education. Nobody seemed to care about the poor lazzes-faire regulatory environment in the US. Nobody today seems to remember the monopolistic machinations Enron involved themselves in. I believe the lessons learned from 2001 had ripples in understanding the Great Recession of 2008. 2001 Economic Crisis laid they foundation of vulnerabilities for the Great Recession. Essentially the bubble tactics utilized in the Tech Bubble & Enron then was diverted into Mortgage Backed Securities. Lehman was the result. Fast forward to today and we see huge merger proposals from the likes of Comcast & Time Warner. These regional monopolies have every incentive to manipulate the markets as seen fit to profit over the well-being of society. Above and beyond this, the internet backbone that they would control could siphon Freedoms away from Net Neutrality and Net Freedom. The forces of inequality via imperfect information is always a problem. My Enron Hauntings have helped me to understand a Progressive Regulatory Environment is key to a stable, advanced Economy.