The Parthenon: Chevy Chase’s Neighborhood Restaurant

August 15, 2013

The “Neighborhood Restaurant” has always been a mainstay of American society. Even as the size and pace of our lives has grown and quickened, the restaurants that we frequent close to home offer a consistency and comfort that is actively sought out, as places where everyone knows you, your family, and the events that define us.

One of those establishments in the Washington, DC metro area that best defines the “neighborhood restaurant” descriptor best is Parthenon Restaurant–an authentic Greek restaurant in Chevy Chase. Established in 1989 by Pete Gouskos and Steve Tsiolis, The Parthenon replaced the Swiss Chalet. The challenge was to quickly renovate the dark interior to a bright, warm ambience; and to build a reputation for fresh, well-prepared meals.

Over time, Pete and Steve renovated their restaurant. Among their regular customers from the very beginning were Yankel and Pamela Ginzburg. Learning of Yankel’s reputation as a world-renowned artist, Pete asked Yankel if he would consider doing a painting for the restaurant. Yankel advised Pete to wait, given their budget focus. “You don’t need a painting from me!” After several years of cajoling, however, Yankel finally agreed. Pete handed him a 1948 black and white postcard of the Parthenon that his mother had sent to him. “It should look like this, but in color.” After months of effort, Yankel delivered the painting to the restaurant, where it remains prominently displayed in the main dining room.

With the goal of creating a neighborhood restaurant that would last, Pete and Steve immediately recognized the need to serve not only quality food and memorable cuisine. Doing so required a world-class chef. After an extensive nationwide search, they found their ideal candidate just across the Potomac in Alexandria: Juan Galeas. “Juan’s been with us 22 years, and remains our head chef,” Pete tells me. In addition, Parthenon has three assistant chefs, many of whom have been there 15+ years.

Parthenon’s crab cakes are reputed to be the best in Washington, D.C. Ben Olsen, manager of DC United frequents Parthenon, and always orders them, I’m told.

I ask Pete how he achieved such a reputation, he smiled and said simply, “To prepare the best food, you must have the best ingredients.”

Senator Jim Sasser and his wife, Mary, are long-time customers of Parthenon. “We stumbled upon it,” the Senator tells me. “And have been coming back for ten years!”

Another couple, Ken and Nancy Malm, rave about the menu. “It has 96 items. They’re always able to fill every item you order, and it’s always exceptional,” Nancy says.

“Who is your most loyal customer?” I ask Pete.

I’m told the restaurant has been frequented by many famous personalities, to include Secretary of State Madeleine Albright, Supreme Court Justices Sotomayor and Souter, Senator Ted Kennedy and Chris Matthews.

“Patricia,” Pamela Ginzburg says, smiling.

“Patricia? I ask, now curious.

“Patricia Cook,” Pete answers. “She’s 99 years old and has been coming here every day for lunch. At the end of every meal, she orders a martini and smokes a cigarette. Every day.”

Loyal indeed.

“That is why we are here,” Pete says. “The quality of our people. In a nice neighborhood. With loyal customers who keep coming back.”

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Egypt’s President Morsi, Firmly Behind the Wheel

August 22, 2012

In his excellent Middle East travelogue, “Baghdad Without a Map and Other Misadventures in Arabia,” Tony Horwitz writes:

“In Egypt, aggression and impatience are frowned upon. The unofficial Egyptian anthem, ‘Bokra, Insha’allah, Malesh’ (‘Tomorrow, God Willing, Never Mind’), isn’t just an excuse for laziness. In a society requiring millennial patience, it is also a social code dictating that no one make too much of a fuss about things.”

This sentiment seemed alive and well in Cairo as Mohammed Morsi was sworn in as Egypt’s president last month. Not even the first choice of the Islamist Group, the Muslim Brotherhood, Morsi was widely viewed as an accidental president of sorts, and therefore destined to be a figurehead president. It was widely believed that real power would continue to reside, as it always had, in the Supreme Council of the Armed Forces—or SCAF.

But early last week, Morsi took everyone by surprise—including the United States. In a lightning-fast series of maneuvers and brokered deals that would make Machiavelli proud, Morsi removed his political and military rivals, and nullified a constitutional decree that gave the military council ultimate authority over Egypt’s administration, security and, significantly, the government’s purse strings.

Simultaneously, Morsi issued a constitutional edict granting himself full authority over the executive and legislative branches of government. Knowing a bridge too far when he saw one, he left the judiciary alone. To preempt any potential dissent from the judiciary, Morsi appointed reformist senior judge Mahmoud Mekki as his vice president.

The ostensible catalyst for the shakeup was the killing of 16 Egyptian soldiers in northern Sinai earlier in the week, but it seems obvious that this was only a convenient excuse for actions already planned. Morsi quickly exploited the incident, and replaced his defense minister, the army chief of staff and each of the service chiefs.

It is the moral equivalent of a U.S. president firing his Secretary of Defense and all of his Joint Chiefs of Staff in one fell swoop.

Morsi’s stunning consolidation of power followed a sequence that caught the occupants of Washington’s “C” suites and cabinet secretaries completely off-guard. Reluctant to admit a lack of advance knowledge of Marsi’s power-play, State Department spokesperson Victoria Nuland said:

“We obviously did know that there were discussions ongoing about a new defense team — with regard to the precise timing, less so.”

In retrospect, the move should have been fully anticipated. The obvious historical examples of past presidents Anwar Sadat and Hosni Mubarek are clear evidence that staying power in Egyptian politics requires strength. Morsi was understandably motivated to reclaim the political power that the military had seized in the wake of the Arab Spring uprising last year.

To calm those at home and abroad, Morsi delivered a radio address, insisting,

“I never meant to antagonize anyone… We go on to new horizons, with new generations, with new blood that has long been awaited.”

Assuming an apparent wait-and-see posture, the White House has yet to offer any substantive reaction to Morsi’s dramatic power-grab, except to issue non-specific diplomatic statements about “shared interests” and the new appointees being “well known” to them.

Their silence on the real issues at hand is what’s so significant. Indeed, if the aim of the White House’s long-range goal was Egypt’s “full transition to civilian rule,” as Secretary of State Hillary Clinton has articulated it, the end result has been hardly worthy of celebration. Any vision of a secular democracy in Egypt has been relegated to virtual-mirage status.

While the administration would like to calmly portray Morsi as doing what is necessary to place Egypt back on the road to democracy, it should be worried. Morsi’s actions point to a far more ominous course now underway.

A judge in Egypt’s Higher Constitutional Court (HCC), immediately responded to Morsi’s actions, saying, “A president does not have the power to abrogate a constitution, even a temporary one….”

With his newfound authorities in place, and with the ability to rewrite the new constitution, the process of Islamizing Egypt’s domestic policy is almost sure to follow.

Despite Morsi’s personal assurance to media chiefs that press freedom would not be restricted, actions to suppress media criticism against Morsi are now fully underway. The day after Morsi’s “Sunday Coup,” police attempted to confiscate all copies of newspapers critical of the Muslim Brotherhood and suspended the broadcast license of a television station that has actively criticized Morsi in the past. Last week, Egypt’s upper house of parliament appointed new editors for the country’s 50 state-run newspapers, effectively placing the media under Brotherhood control.

Morsi now has control of all executive and legislative levers of powers, and has reinforced his authority by imposing control of the media. In such an environment, and given the stated long-term goals of the Muslim Brotherhood, the implications for Israel’s security and the future of the Camp David Accords are obvious.

To even the casual observer of Egyptian politics, Morsi is now fully in the driver’s seat as president. As such, Horowitz’s continued observations of the “Bokra, Insha’allah, Malesh” anthem seems entirely, metaphorically, relevant:

“Egyptians undergo an odd personality change behind the wheel of a car. …But put an Egyptian in the driver’s seat, and he shows all the calm and consideration of a hooded swordsman delivering Islamic justice.”

The Dancing Monkeys of Libor

August 7, 2012

Aesop tells the fable of a prince who had trained some monkeys how to dance. As natural mimics, they soon proved to be very good dancers. And when dressed in rich clothes and masks, they danced as well as any of the human courtiers. The spectacle at the lavish parties the prince held became wildly popular throughout the land and was repeated each night to great applause from the partygoers.

Applied today, at a time where the extremely affluent are today’s self-appointed royalty, the prince could be the CEO of any of the world’s superbanks: Barclays, JPMorgan Chase, Citibank, or Deutsche Bank. No commercial arena has consolidated more power, influence and wealth. In that glamorous world of hedge fund managers and investment executives, the monkeys—the lowest-of-the-low (with the low bonuses and salaries to prove it)—are the money market traders.

Until the financial boom began to show signs of slowing, there was no real incentive for the royals of finance to pay any attention to their money market traders. With their princes awash in cash, this band roamed the dense jungles of finance from The City of London to Wall Street, happily feeding off scraps. One day in 2007, however, the jungle caught fire and began to consume their collective habitat. Cash flew out of high rise windows. Banks began to fail. Panic ensued.

A few years earlier, Thomas Haye, and Philippe Moryoussef, both former derivatives traders, began to form loose cells of fellow traders from the other superbanks to manipulate interest rates. They had one goal: to obtain advance knowledge of the benchmark interest rate. Together, they communicated with the money market traders—the monkeys—and then colluded to rig the world’s benchmark interest rate, called the “Libor.” The adjustments were slight—usually just fractions of a percentage point—with the specific intent to eliminate any uncertainty in the rise or fall of the core interest rate.

It was a dazzling and grand scheme. Today, the Libor is tied to up to an estimated $800 trillion in financial derivatives and instruments worldwide.

And so it went. Suddenly, the prince’s monkeys found themselves in the spotlight, with a key role in eliminating uncertainty for the superbankers—the princes. They were now thrust on center stage.

The advanced rigging was often done in bars and pubs over champagne.

“Come on over; I’ll open a bottle of Bollinger,” one trader emailed his colleague after a triumphant Libor rigging session. To another monkey trader he exclaimed, “Dude. I owe you big time!

… I’m opening a bottle of Bollinger.”

What’s the harm in a little Bollinger?

When I recently asked one veteran Wall Street friend his thoughts on the Libor scandal, he shrugged. “Nothing significant will be done about it because the adjustments were done mostly on the downside, not the upside.”

It’s taken me a while to frame my thoughts on this, but I’ve come to the conclusion that my Wall Street friend is wrong. Libor matters to everyone. Everyone who borrows money—whether it’s a car loan, student loan, credit card, mortgage or personal loan is affected by what happens to the Libor, because it affects the cost of money for all of us. So, if the Libor rate was artificially high when you took out any of those loans, you were effectively ripped off.

Many pension funds are also pegged to the Libor. Cities like Baltimore are suing the superbanks involved with artificially rigging interest rates because of the adverse affects the rigging had on their city pension funds.

Superbanks who were in relatively weak financial shape arranged through the growing Libor cartel to artificially inflate or deflate their interest rates to give the false impression that they were strong and creditworthy.

What’s perhaps most intriguing about the Libor scandal is how brazenly and open the collusion was:

“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.”

–Senior trader in New York to submitter

Senior Department of Treasury and Federal Reserve Officials openly admitted that the Libor was “deeply flawed,” and yet proceeded to use the same rigged rates for federal bailout programs like TARP, knowing that in doing so, they were saving the superbanks billions and billions of dollars.

So, even if you still don’t know what Libor is, know this: it’s a very big deal, and we’re all affected. “This is the banking industry’s tobacco moment,” said one bank’s CEO. “It’s that big.” An investigating official recently remarked, “It’s hard to imagine a bigger case than Libor.”

Aesop’s fable goes on to relate how the prince’s monkey’s were received with great applause, until on one occasion a courtier, bent on mischief, took from his pocket a handful of nuts and threw them upon the stage. The Monkeys at the sight of the nuts forgot their dancing and became (as indeed they were) Monkeys instead of actors.

Pulling off their masks and tearing their robes, they fought with one another for the nuts. The dancing spectacle came to an end amidst the laughter and ridicule of the audience.

Let’s hope that the Libor Cartel Show has come to an end, and that the Glass–Steagall Act is being brought back to replace it.


June 13, 2012

In private sideline conversations between
principals during the G-8 summit meeting at
Camp David, some significant decisions were
made that will impact the long-term fate of the
European Union over the coming weeks and

Those conversations centered on the decision
to plunge ahead with the bailout of the
European banks in an effort to save the Euro
system, with Greece still inside. The prime
influencers behind this decision were Managing
Director of the International Monetary Fund
Christine Lagarde and President Obama. Both
Lagarde and Obama are concerned that if Greece
leaves the Euro, the contagion will spread to
Spain, Portugal, Ireland, and, perhaps, even
Italy. President Obama’s unspoken motivation
in preventing a financial meltdown of the Euro
system is the possibility that it would almost certainly
spill over into Wall Street and adversely
affect the U.S. economy.

Christine Lagarde put the IMF squarely
behind a bailout of the European banks, with
the full backing of the U.S. Federal Reserve and
Treasury to boost the leveraged lending of the
European Central Bank (ECB) to prop up the
European banks. The ECB will likely take junk
bonds and other vastly over-priced assets as collateral
for loans to the Spanish, Greek and other
European banks—a move that will offset an
additional estimated $500 billion in new writeoffs
by bondholders of Greek debt.

So, the IMF, the Obama Administration
and the ECB appear to have colluded to further
delay the reality of the financial and banking
crisis through what are–by any measure–very
risky, hyperinflationary measures. From the
Obama Administration’s perspective, however,
the strategy will have succeeded as the crisis is
effectively postponed, taking many months to
fully play out (versus days or weeks), well past
the November elections in the United States.

In his sideline meeting with new French
President Francois Hollande, President Obama
reached a full agreement on this perpetuation of
the Euro. This is an area where Hollande and
German Chancellor Angela Merkel will agree
to disagree. They both want to defend the Euro,
but Hollande will continue to insist that austerity
must be limited and a growth program initiated.
While the feasibility of such a dual-track program
is questionable at best, it is nonetheless the
growing agenda of the Euro-socialists, including
Hollande, Germany’s Social Democratic Party
and the Italian Socialist Party. A majority of
Greek voters are in favor of staying in the Euro,
so long as the austerity is reduced.

Hollande will make continued efforts to push
for Euro bonds as one way to implement this
bailout plan. Merkel will continue to oppose and
block the Euro bond argument. Merkel recently
told her party that “under no circumstances”
would she agree to a Euro bond strategy.

“A Euro bond would take a few years to
implement because there are lots of technical
issues to solve and also implementation of the
Euro bond procedure would take several years,”
Finnish Prime Minister Jyrki Katainen says. “So
Euro bond[s] are not a solution for this current

The total amount of assets on the books
of the US Federal Reserve and the European
Central Bank, combined, fall well short of the
currently estimated 4 trillion Euro liability of
the European private banks—something that
U.S. Treasury Secretary Timothy F. Geithner is
acutely aware of.

Treasury said, in a written statement, that
Katainen and Geithner recently met and “discussed
the global economy, including the United
States’ economic recovery and the plans of
European leaders to reinforce the institutions
of the Euro area.” Federal Reserve Chairman
Ben Bernanke, conspicuously absent from the
Treasury statement, also was also present and
participated in the same discussions.

Both Bernanke and Geithner are said to be
extremely worried about the worsening trajectory
of the Euro crisis. While they know they are
in a position to delay a breakup of the EU, they
may well be powerless to prevent it if the downward
spiral continues unabated. Geithner’s
message has been a clarion call to EU leaders to
address their core problems now, not later. With
unemployment at depression era levels, and the
periphery of the EU experiencing zero growth,
the massive deficits of countries like Greece,
Italy and Portugal are simply too large to bail
out, even with U.S. help.

So, while EU politicians sit on their deck
chairs, discussing ways to achieve deeper integration
in the 17-nation euro area, Germany,
Austria, and the Netherlands are privately donning
life vests, preparing for the EU ship to sink
in cold, unchartered waters.

When that happens, the well-practiced
S.O.S. call will go out to U.S. rescue ships in
the area, as always, only to find out that they’ve
run out of gas.?

The Lessons of J.P. Morgan: Defining Oligopoly

May 30, 2012

J.P. Morgan’s $2-4 billion trading blunder has reignited the debate of whether our banking industry should remain the oligopoly that it is, or be subject to a broader array of regulatory reforms and restructuring.

The media’s focus on the several billion dollars in bad derivative trades, while replete with shock value, misses the real lessons of the incident. While significant, the losses were hardly catastrophic for the bank. With $2.3 trillion in assets, J.P. Morgan’s loss represents only .1 percent of its total assets and 1 percent of its equity. Clearly, the bad trades represent a failure of risk management, yet the fact remains that J.P. Morgan remains fundamentally well managed. Chances are, the bank will still be profitable in the second quarter.

In the midst of the ongoing media feeding frenzy, J.P. Morgan will do what any well-run organization would do: analyze what went wrong and fix it. Ina Drew, the J.P. Morgan chief investment officer who ran the department behind the massive trading loss, has left the bank with a $32 Million severance package. Other heads will roll in the coming weeks as the forensics behind the bad trades become more apparent.

Jaime Dimon, J.P. Morgan’s chairman and chief executive once praised for adeptly navigating the bank through the 2008 financial crisis shares the blame. His biggest mistake, perhaps, was his lack of humility and his reflexive—if not extreme—resistance to enhanced regulation of the banking industry. On April 13, Dimon downplayed the rumors of the massive losses by referring to it as “a tempest in a teapot.” But after the extent of the losses became clear, and when Dimon was forced to announce the losses on May 10, he explained, “In hindsight, the new strategy was flawed, complex, poorly reviewed, poorly executed and poorly monitored.”

To even a passive observer, the incident highlights that Dimon and other megabank CEOs, supported by a government sanctioned and licensed oligopoly, dominate trading flows and market making, particularly in the “over the counter” (OTC) markets.

What exactly does that mean?

The term, “Oligopoly” comes from the Greek, “Oligos” and “Polein.” “Oligos” translates to “few”; “Polein” means “to sell.” Simply defined, an oligopoly is an economic condition where there are few sellers and many buyers. The few sellers who dominate a market exert control over their competitors’ prices or their ability to freely compete. In an oligopoly, the market is also particularly vulnerable to the mistakes and fates of those few dominant influences.

When Citigroup or Bank of America experience massive losses, the government invariably comes to their rescue with billions in taxpayer dollars quite literally because they are “too big to fail.”

The 2008 financial crisis was largely caused by an overconcentration of derivative instruments in the hands of a few banks. Today, the top six megabanks hold 95 percent of the entire $1.2 quadrillion derivatives market. J.P. Morgan has 44 percent of that market. Those statistics alone constitute an oligopoly in that particular market. Alarming? Now, consider this: today, those same banks have assets that exceed 60 percent of our national GDP.

While the CEOs of the megabank club know the risks of overconcentration well, those whispered conversations normally occur behind closed doors or on the back nine. Their interest, understandably, is in turning massive profits for their shareholders. Each bank, therefore, contributes millions to both political parties, and employs an army of Capitol Hill’s best lobbyists to ensure their advantages are preserved.

Over a century ago, President Theodore Roosevelt confronted the financiers (J.P. Morgan among them) and industrialists head-on with antitrust suits. Despite the accusations of his critics, Roosevelt’s objective was to regulate the giants, not to destroy them. Roosevelt’s direct approach was politically courageous and effective in 1907. Created to safeguard against undo risks by improving accountability and transparency in the financial system, the Dodd-Frank Act was the closest we’ve come to TR’s method yet. But even that “big stick”has, by most accounts, fallen short.
The lessons should be abundantly clear. Mitigating against risk requires sufficient capital. Because J.P. Morgan is a healthy bank, the losses they announced last month, while uncomfortable, were nonetheless manageable. Banks should, therefore be required, by law, to hold ample equity capital to cover any potential losses. That is something regulations can’t do.

Second, the Department of Justice as well as federal regulators should both be empowered and instructed to preemptively break up large financial institutions that pose a threat to the nation’s financial stability. Currently, Dodd-Frank empowers regulators to intervene “only as a last resort.” Dodd-Frank also requires banks to have a “living will” to provide for a managed dissolution in the event of a bankruptcy. This provision remains ill-defined and untested, and offers little reassurance that our economy won’t be driven into the same kind of crisis we experienced in 2008.

Today, the banking system is even more concentrated than pre-2008. Because the largest banks have the implicit backing of U.S. taxpayers, their cost of capital is artificially low. As a result, the megabanks are incentivized to take outsized, irrational risks—and smaller banks are challenged to compete with them.

That is the textbook definition of an oligopoly.

White House Correspondents’ Dinner: Like Flies to Honey

May 17, 2012

In a little-known Aesop’s fable, a number of flies are attracted to a jar of honey that is overturned in a housekeeper’s room. Placing their feet in the spilled honey, they eat greedily, happily gorging themselves. Their feet, however, become so smeared with the honey that they cannot use their wings, nor release themselves … and they slowly suffocate.

It was this fable that came to mind as I watched the garish coverage of the White House Correspondents’ dinner a few weeks ago pop up on entertainment shows, newspapers, blogs and social media sites. As an annual event, Hollywood celebrities flood to the nation’s capital for a three-day period of pre-dinner receptions and post-dinner parties at mansions in Georgetown, hotels or museums downtown and embassies around Massachusetts Avenue that are often more lavish than the dinner itself. Journalists, politicos and celebrities flock to each party and each reception … like flies to honey.

As star-struck reporters trip over themselves to gain often lop-sided, fuzzy iPhone photos with Kim Kardashian, George Clooney, Reese Witherspoon and Uggie the Dog to post on their Facebook pages, all journalistic pretense is gone for those three days or more, surrounding the last Saturday in April.
It’s become known, euphemistically, as the “Nerd Prom.” Begun in 1920, the ostensible purpose of the dinner is to “acknowledge award-winners, present scholarships and give the press and president an evening of friendly appreciation.” To outside observers (we, the uninvited masses), however, the White House Correspondents Association dinner is anything but. Instead, the event has become the most obvious symbol of a mainstream media that has abdicated its responsibility to the people, for a chance to preen and rub elbows with Hollywood and political elites.

The criticisms of the dinner as spectacle of sorts are not new. After the 2007 dinner, then-New York Times columnist Frank Rich characterized the event as “a crystallization of the press’s failures in the post-9/11 era…[because it] illustrates how easily a propaganda-driven White House can enlist the Washington news media in its shows.” A few Sundays ago, Tom Brokaw appeared on NBC’s “Meet the Press” and remarked, “Look, I think George Clooney is a great guy, I’d like to meet Charlize Theron, but I don’t think the big press event in Washington should be that kind of glittering event, where the whole talk is Cristal champagne … who had the best party, who got to meet the most people.” Brokaw went on to say, “That’s another separation between what we’re supposed to be doing and what the people expect us to be doing, and I think that the Washington press corps has to look at that … It’s gone beyond what it used to be.”

After the festivities, we’re expected to believe that the press and White House will go back to their business-as-usual adversarial relationship, like Ralph E. Wolfs and Sam Sheepdogs, punching their time clock in the famous Looney Tunes cartoon.

Don’t get me wrong: the same issue exists with the White House’s official state dinners, where Tom Hanks, Barbra Streisand and Steven Spielberg are provided open access to the White House’s compound along with media figures like Katie Couric, PBS’s Charlie Rose, Washington Post’s Jonathan Capehart. As the nation’s gentry gather, many members of the press have proven more than willing to assimilate themselves into exclusive affairs without regard to perceptions from the outside world.
During his tenure, WHCA President Steve Scully countered the critics by saying, “An evening of civility does not mean we are selling out … [and] if people want to criticize the dinner, then don’t come.” Scully, of course, had little to be concerned about. The rest of us—the uninvited “everyman”—never do.

So, Aesop’s story about the flies and the honey jar represents a cautionary tale for the press and for all of us. The fable itself concludes, as the flies are expiring from their foolish escapade, with their collective lament: “O, foolish creatures that we are, for the sake of a little pleasure we have destroyed ourselves.”

Preparing for a Financial Pearl Harbor

May 3, 2012

“The present situation is as dangerous as if the United States decided to outsource the design of bridges, electrical grids and other physical infrastructure to the Soviet Union during the Cold War.” ? —The Intelligence and National Security Alliance

Cyber-attacks on large banks have never been anything new, but the FBI special agent noticed that the attacks this time are different—large banks in Charlotte, New York and Chicago have reported some kind of virus that has taken control of their computer systems. By midnight, cyber-forensic teams have identified the culprit as a stand-alone malware program– a computer worm.

In the morning, an FBI spokesperson announces “highly sophisticated,” coordinated and targeted attack against banks in Charlotte, New York and Chicago. The attack is well-timed to occur during the holiday season when banking operation centers and response teams were thinly staffed. The machines bombard government and Wall Street websites with incessant network traffic, crashing or partially disabling them.

Media reports that the attack has destroyed hundreds of thousands of computers, and initiates a panic from account holders that has caused the Federal government to impose a sudden semi-freeze on all accounts, with a $500/day individual account withdrawal limit until further notice.

Despite thousands of man-hours, mitigation efforts are only partially successful. U.S. law enforcement and commercial researchers attempt to determine the origin of the attack and find that the worm received its commands from servers in 26 countries. Researchers have seen this kind of sophistication before in attacks on the defense industry, but never in the commercial sector. Investigators still aren’t certain who launched the assault, although many suspect North Korea.

Although this is a fictional scenario, recent testimony on Capitol Hill from a host of cyber-defense experts and national security officials has made it clear that such an event is not only possible — it may very well be inevitable.

It is widely recognized that a strong and well-protected U.S. banking information infrastructure is critical to maintaining our nation’s economic security. But are we prepared for a deliberate and concerted cyber-attack on our financial system?

The cyber domain provides unprecedented opportunities for catastrophic attacks against the banking and finance sectors. Because of the banking community’s heavy reliance on networked information systems, both of these sectors are extremely vulnerable.

The secure networks that banks use every day are the target of persistent hostile activities. To an adept hacker, they are anything but secure. The intrusions are being conducted by a host of adversaries with a wide range of capabilities and objectives. Whether state-sponsored or otherwise, these attacks threaten the integrity and safety of the nation’s financial infrastructure.

To effectively defend itself, the banking industry requires a systemic method not only to defeat these threats, but to also exploit them. Such a method has proven elusive, however. Instead, our financial institutions gravitate toward standard technical cyber security tools that provide a passive defense — but not an active one.

Standard cyber security measures, while always prudent, are largely irrelevant to the most significant threats facing the financial sector today. The prevailing approach of searching for vulnerabilities and applying updated security patches is much like plugging leaks in a badly constructed dam … with a large city situated squarely downstream.

A better approach incorporates some timeless counterintelligence methods that the CIA has long-used to ferret out spies at home and abroad. Using cyber-forensics, these techniques can neutralize cyber-attackers, isolate, manipulate and interdict them.

Behind every virus, mole, worm and cyber intrusion, there are faces — faces of real people who wish to inflict damage on carefully selected targets. But do we know who these people are and what motivates them?

Whether the objective of an attack is theft, money laundering, extortion or indirect warfare, fast-moving attacks are best handled by cyber-forensics, international law enforcement and counterintelligence experts who are empowered to move quickly and seamlessly through the interagency and commercial arena.

Any effort to understand who these actors are, will also ask who they are allied with, the nature of their activities, the purpose behind them, and what can be done to protect against them. A counterintelligence approach, properly applied and adapted can both produce information on cyber-attackers and protect networks in a proactive, targeted way while protecting our national financial networks.

Today, invisible battle lines are being drawn between banks and cyber-attackers. While traditional cyber-security measures against hackers have become commonplace, very little has been done to address the threat of systemic attacks to the banking industry conducted by state-sponsored and transnational actors. Until a comprehensive approach is adopted, scenarios like the one above will be more possible than anyone in the banking industry would like us to believe.

Does the President Really Matter?

From now until November, all of us will be bombarded in print and on the airwaves with political campaign ads, polling numbers, social media advocacy, vitriol and validation.  All focused on the election of one individual to a single office, the President of the United States.  

But in the grand scheme of things, as you watch these campaign commercials, ask yourself this simple question:  Does the president really matter? 

Think about it for just a second. 

There are those who are reasonably certain that the president they elect will be their personal salvation — rendering their household bills suddenly affordable, putting cheap gas in the tanks of their SUVs, reducing crime in their neighborhoods and taking them off the unemployment rolls. 

The perception of the president as having absolute power over one’s life is nothing new.  But it is a naive and polarizing view. 

In the 1840s, Scottish writer Thomas Carlyle wrote that “the history of the world is but the biography of great men.”  Writing about men like Muhammad, Luther and Napoleon, Carlyle theorized that heroic men shape history through both their personal attributes and via divine inspiration — that all great events turned on the great decisions of great men. 

If the entire country defines the chief executive’s span of responsibility, can a president be held accountable for everything that the nation does or fails to do? 

Credit or blame, in their cumulative form, generally define a presidency.  Both are spun wildly by pundits in countless venues with countless agendas.  But the reality is that a president actually has far less influence on our daily lives than we may give him credit.  The president is routinely described as the most powerful person in the world.  It is, after all, the president who creates budgets, develops domestic policy, energy policy and conducts foreign policy.  The president nominates Supreme Court and Federal judges.  He sets legislative agendas and has veto power over congressionally passed bills. 

But they never do so in a vacuum.  There are countless countervailing, equalizing forces that face every presidential decision — from sending troops into a war zone to submitting a budget resolution.  He must face congressional opposition, media scrutiny, lobbyists, foreign leaders and Supreme Court decisions. 

We routinely elect our presidents under the promise of “change.”  But presidents are seldom the sole catalysts for change.  They get plenty of help along the way.  They can help set the conditions for progress, but they rarely directly cause it to occur.  If a president goes too far with a policy, opposition sets in, and the intended action is voted down or modified in some way.  In the longer term, if he goes way too far or doesn’t do enough, he’s not re-elected.  The president submits a budget for the nation, but Congress must pass it.  When Congress passes a budget resolution, even when he opposes it, the president has no choice but to spend the money. 

What was the last presidential decision that affected you?  Most of us will be hard-pressed to think of even one. 

Certainly, for our servicemen and women and their families, the question will be readily answered with whatever theater of war to which they or their loved ones have deployed.  For those who have been injured or killed, the loss of life or limb cannot be reversed or changed.  And so, for the 1 percent of our nation who serve, the president and the decisions he makes as commander-in-chief, matter a great deal. 

For everyone else, whoever is president affects our lives to a far lesser extent than we may believe.  We may agree or disagree with a president’s policies, but precious few of those policies represent original thought.  Chances are, for each policy cited, other presidents before them have espoused something very similar.  Agendas may matter far more than the president himself. 

So, here’s a quick drill for you.  Answer this quickly:  Who are the truly great presidents? 

Maybe you answered with names like Washington, Lincoln, Jefferson, FDR.  Those Americans born before 1963 may point to President John F. Kennedy, based on the decisions he made during the Cuban Missile Crisis, that played a principal role in averting a global nuclear war. Whomever you picked, chances are, those presidents likely did indeed do great things — created the conditions for our democracy, preserved the Union, averted nuclear war, etc.  But whoever were your top picks, it’s likely that your list represents only a fraction of the 44 U. S. presidents.    

That’s why leadership matters, above all else. 

As politics becomes more and more polarizing, and as Americans are moved further and further to extremes, there will be many who attempt to attach the “Great Man” theory to the Office of the President. 

But don’t fall for it.  For even a second.

R2P: The New Obama Doctrine?

“More and more, we all confront difficult questions about how to prevent the slaughter of civilians by their own government, or to stop a civil war whose violence and suffering can engulf an entire region. I believe that force can be justified on humanitarian grounds. . . . Inaction tears at our conscience and can lead to more costly intervention later. That’s why all responsible nations must embrace the role that militaries with a clear mandate can play to keep the peace.” — President Barack Obama

This statement from President Obama could easily be applied to the emerging civil war in Syria, but they were actually spoken at the outset of his administration, on the occasion of his Nobel Peace Prize acceptance. In his speech, he spoke eloquently about “just war,” and “the choice between armed intervention and complicity in oppression.” Both of these messages implicitly embrace an internationalist philosophy that’s widely become known as “Responsibility to Protect,” or “R2P.”

A little over a decade ago, the phrase “responsibility to protect” was introduced by an international commission in an effort to recast the doctrines of “right to intervene” and “obligation to intervene,” while still preserving the intent to act decisively in humanitarian crises. R2P quickly assumed the status of a “norm” (rather than a law) for the United Nations in preventing mass atrocities of the kind witnessed in Rwanda and Bosnia.

A year ago, in his speech justifying the U.S. intervention in Libya, Obama announced that Libya’s assault against its civilian population created a “responsibility” for the international community, stating that “when our interests and values are at stake, we have a responsibility to act.”

Most recently, the U.S. dispatched a special operations force to Uganda to act against one of Africa’s most brutal guerrilla groups.

The precedents in word and deed clearly convey an active endorsement of R2P. However, the true test may lie ahead in our response to Syria’s ongoing repression.

R2P has evolved with a set of defining “pillars,” “thresholds” and “obligations.” Entire non-governmental organizations have since been built around R2P. It even has its own Twitter hash-tag with a host of followers, to include billionaire George Soros and actress Mia Farrow — all of the necessary marketing ingredients for a presidential doctrine, ready-made.

R2P has strong advocates within the Obama administration, including Susan Rice, the U.S. ambassador to the UN, and Samantha Power, the National Security Council’s senior director, widely considered one of the principal architects of the Libya intervention.

In short, R2P shatters the premise that sovereignty, in the strict Westphalian sense is inviolable, arguing instead that it is a responsibility. According to R2P, every state has a responsibility to protect its population from mass atrocities. If they can’t do it themselves, the international community is obligated to assist them — even if they don’t want the help. Once peaceful measures like economic sanctions have failed, the international community has the responsibility to intervene militarily — but only as a last resort and only if the UN Security Council authorizes it.

In a narrative reminiscent of St. Augustine’s letter to Boniface outlining what would ultimately become the foundation for Just War theory, R2P advocates that all military interventions must fulfill six broad criteria:

• Just Cause
• Right Intention
• Final Resort
• Legitimate Authority
• Proportional Means
• Reasonable Prospect

Even a cursory review of President Obama’s speech justifying our Libya intervention last year shows a close alignment — even synchronization — with these criteria.

While circumventing Congress is nothing new for presidents, what is noteworthy in the case of Libya is Obama’s apparent effort to elevate R2P as a universal principle that not only trumps traditional perceptions of national sovereignty but also transcends the constitutional tenets that give Congress the sole authority to declare war.

Whether the president will declare his official sponsorship of R2P remains to be seen, but the language of his recent speeches and the actions of his administration make it clear that R2P is indeed a cornerstone of his foreign policy. A telling indicator will be whether he is willing to give R2P even more prominence by intervening militarily in Syria without UN Security Council approval.

While some may hail a unilateral NATO campaign against Syria as further strengthening R2P, the irony is that it could actually weaken it. Just as inconsistency or failure to act in humanitarian crises can diminish an R2P-based policy, any perception of “R2P-as-Subterfuge” for Western national self-interests (crushing the Iran-Syria-Hezbollah axis, for instance), could have devastating affects for the broad R2P construct, long term.

In the coming months, Obama’s action or inaction on Syria will largely determine whether R2P is to remain a UN norm or if it will ultimately emerge as the “Obama Doctrine.” It’s a topic being discussed by administration strategists — and the whispers outside the White House gates have already begun. Yet, a more fundamental, if not practical, question for those West Wing discussions will be whether an R2P policy is sustainable in a time when defense budgets are dramatically declining.

Protecting Our Schools…Beyond the Half Measures

April 4, 2012

“The gunman entered … and opened fire on ‘everything that moved… How can they attack something as sacred as a school?’”

This witness account, from the school shootings in Toulouse, France is reminiscent of the countless other incidents we have experienced across the United States, most recently at Chardon High School in Ohio.

When a shooting incident occurs in any of our nation’s schools, news travels instantly.  Coverage of the incident dominates our television screens—images of students and faculty streaming outside, parents rushing to police lines, stacks of SWAT teams preparing to enter school doors, media vans lined up on roadways—all of it creating an all-too-familiar scene. So familiar, in fact, that the images and details of each incident have become largely indistinguishable from others.
As the discussion has become garbled, so have our strategies for dealing with shooting rampages in our nation’s schools.
Following an incident, we’re riveted for a period of a week or so to the news coverage.  We’re systematically guided through the stages of grief by network anchors and pundits: through our guilt for not having recognized the signs earlier…through our anger at the perpetrators…and finally, to our collective view of the incident as an anomaly—something that “could never happen here.” 
Months later, another school shooting occurs. This one seemingly disconnected from the one preceding it. And yet, the shooters’ characteristics are remarkably similar:  chronic truancy, religious or political fanaticism, a preoccupation with weapons, someone socially marginalized…on “the fringe,” who is struggling with addiction…and who has announced his intent to kill.  The symptoms and signs remain constant. And in our collective quest to better understand a shooter’s motives, the media narrative often conveys upon us a societal guilt-by-association for the carnage he inflicts.
Defining the Problem

On occasion, we take a few steps back to gain perspective rather than catharsis.  And in those moments, it’s possible to transcend our complacency and to see school rampages for what they are: acts of terror.
Defining the problem in these terms is a crucial first step toward effective defense—but that step has proven to be surprisingly elusive as we tend to focus instead on the psychology and motivations of the shooter in an incident’s aftermath. But the problem has remained constant:  our children are at risk from those who seek media attention through acts of mass murder.
The problem of active shooters in our schools is not new. The first school massacre incident occurred in 1764 at a schoolhouse near Greencastle, Pennsylvania, when four Delaware warriors killed ten children and their schoolmaster. In 1927, a school administrator bombed the Community School in Bath, Michigan, killing 38 people—mostly children.  Numerous other incidents have occurred through the years. The well known and often discussed, like Columbine and Virginia Tech, eclipse those that occurred decades ago, but are no less deadly, like South Pasadena Junior High School (1940) and University of Texas at Austin (1966).
What Can be Done?

Identifying students who display at-risk behavior remains key to stopping a school shooting before it occurs.  Homicidal ideation is perhaps the most obvious indicator that a teen may be considering such an act, but there are a host of others, to include: cruelty to animals, suicidal tendencies, and abuse or neglect at home. Reporting comments and observations in advance have prevented many attacks; however, forecasting a school rampage is not always achievable. 

There will be more attacks. As youth addiction to point-and-shoot video games grows, and as weapons become more powerful, a perfect storm of entertainment realism and lethality has gathered, making the potential consequences of future school attacks even more catastrophic than the last.
Defending against school rampages is a sensitive topic—far more so than preparing for tornados or fire.  Active shooter drills involving all parties—students, faculty and first responders—are rarely conducted for fear that the visual of the drills alone will be met with cries of outrage from school commissions and PTAs. 

The great irony is that school rampages are responsible for far more fatalities in our schools than severe weather, earthquakes or fires, combined.

So, rather than shrink from tabletop exercises and rehearsals, perhaps we should be insisting on them? Even the simple act of identifying the locations for staging areas, police command posts, media cordons, and reunification sites expedite incident response.  Exercises also give faculty and students a reflexive understanding of school lockdown procedures, and how to effectively respond should they come face-to-face with a gunman. Drills and rehearsals have the added benefit of building relationships with local law enforcement before an incident occurs.  The time for police, first responders and school administrators to be introduced to one another should never be in the midst of a crisis.