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Dec. 10, 2019
Armored vehicles and other machinery waiting to be transported out of Afghanistan in 2014. Credit...Brendan Smialowski/Agence France-Presse — Getty Images
What emerges from a tranche of documents, obtained by The Washington Post, outlining the abject failure of the war in Afghanistan and the decades of lies told about it, is the inescapable notion that the American government refuses to be honest with itself.
For years, military and civilian leaders said that the mission to rebuild Afghanistan was not only possible, but succeeding. Yet in private, the men and women who ran the war acknowledged to the Special Inspector General for Afghanistan Reconstruction what has long been clear to all but the most blinkered observers.
“We were devoid of a fundamental understanding of Afghanistan — we didn’t know what we were doing,” Douglas Lute, an Army general who served in the Obama and Bush administrations, said during a 2015 interview with the inspector general.
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General Douglas Lute in 2007.Credit...Doug Mills/ The New York Times
The dim prospects of achieving anything that could be called victory were evident almost immediately after the Taliban was toppled from power in 2002. “We are never going to get the U.S. military out of Afghanistan unless we take care to see that there is something going on that will provide the stability that will be necessary for us to leave,” Donald Rumsfeld, the secretary of defense, wrote in a memo in the spring of 2002, which was cited in The Post report. Mr. Rumsfeld ended with a plea: “Help!”
More than a year later, Mr. Rumsfeld, the man in charge of the most well-resourced military on the planet, was blunt: “I have no visibility into who the bad guys are,” he wrote.
After more than $1 trillion spent and 18 years of fighting the government in Kabul is still not stable enough to function without the backing of American troops. There is little evidence to suggest that it ever will be.
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Members of the administration of President George W. Bush listen as he holds a Rose Garden news conference with President Hamid Karzai of Afghanistan in 2004.
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Doug Mills/The New York Times
“The time frame for creating a strong central government is 100 years, which we didn’t have,” an unidentified former State Department official told investigators in 2015. But to admit that the goal is unattainable is to admit failure.
So the mythmaking continues, institutional inertia persists and the Pentagon keeps issuing deployment orders to maintain a 13,000-person presence in the country. “Victory on the battlefield will always belong to you, the American warrior,” President Trump assured a uniformed crowd at Bagram Air Field last month.
An unidentified former member of the National Security Council staff was more explicit about the real marching orders: “Your job was not to win, it was to not lose,” the staffer told an interviewer in 2014, according to the documents.
It has been a long and bloody stalemate. Since the war began, more than 2,400 Americans have been killed and more than 20,000 wounded. More than 38,000 Afghan civilians have died, with countless more injured. The Taliban now controls much of the country, which is awash with refugees, and opium production has quadrupled.
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President Obama, about to make an announcement in 2014 about troops in Afghanistan.
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Kevin Lamarque/Reuters
Mr. Trump’s administration has been in talks with the Taliban to bring the conflict to an end but has little to show for it. In September, the Air Force dropped more bombs and other munitions in Afghanistan than in any other month in nearly a decade. Civilian casualties are appallingly high.
America’s failure in Afghanistan may come as a surprise to some Americans. But the Americans who should not be at all surprised are the members of Congress who voted to launch the war, repeatedly voted to continue funding it and have been absent without leave in their duty to oversee its progress.
“This is truly shocking. Years and years of half truths and outright falsehoods,” said Josh Hawley, a senator from Missouri, in a tweet about the documents. Mr. Hawley is a member of the Armed Services Committee.
“It is deeply troubling to read a report of interviews with U.S. government officials that appear to contradict the many assurances we have heard at committee hearings that the continuing war in Afghanistan has a coherent strategy and an end in sight,” Kirsten Gillibrand, a senator from New York, wrote in a letter to the head of the Armed Services Committee, of which she is a member.
It is both truly shocking and deeply troubling that members of Congress, who oversee the military and are privy to classified assessments like those published by The Post, were surprised by the revelations in the documents, which took three years and two federal lawsuits to pry loose for public consumption.
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A memorial service for two soldiers killed in Kandahar, Afghanistan, in 2012.
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Bryan Denton for The New York Times
The inspector general conducted the interviews between 2014 and 2018 with military and civilian officials who oversaw the war as part of a series of reports called “Lessons Learned.” There have been plenty of lessons to draw from the war in Afghanistan: the corrosive effects of corruption, the lack of strategy and accountability, civilian deference to assurances from military leaders and seductive idea that the United States — and not the Afghans — was in control of what was happening in the country. But there’s little evidence that the American government has learned them.
And as long as the military and civilian leadership overseeing the war in Afghanistan keep insisting that their strategies are working, there’s little hope they ever will.
Long before Epstein’s disputed suicide, the major media called for an end to speculation about Epstein’s source of wealth and his financial operations. In 2010 Forbes staff writer Clare O’Connor questioned whether Epstein possessed any wealth at all, while suggesting that even if he did, pursuing the source and nature of that wealth is pointless, since Epstein’s deals were done offshore.(1)
Matt Steib wrote in the July, 2019 edition of the NYMag Intelligencer that only “wild theories” exist about the nature of Epstein’s wealth. According to Steib, a market trading ponzi scheme must not be the source for Epstein’s wealth because nobody knew about it or talked about it, at least not in the polite circles Douglas Kass traded in. (2)
NYMag Intelligencer piled-on with another article, this time by Michelle Celarier, published by Vox Media. The article ignored Epstein’s known investments with Citigroup, ignored his hedge fund and his special investment vehicle, where Bear Stearns owned 40% of that trading operation. Instead, the Intelligencer concluded that Epstein’s trading activity relied upon blackmail, and that Epstein as blackmailer must be true, because an anonymous blogger said so, and everyone else agreed. Such is the nonsense upon which Vox and other major media outlets do grandstand.
To blackmail the rich and powerful might work once — or twice – depending upon how rich and how powerful the victim is… but to succeed at blackmail for many years to accumulate wealth like Epstein had (and without discovery) is unconscionable. To say that blackmail is the plausible source for Epstein’s wealth is almost as astounding as the assertion that a well-connected offshore trader working through a criminal offshore trading operation could not trade big and could not keep that trade hidden.
The true ‘wild theory’ for the Intelligencer to consider, is that the conspiracy of silence surrounding Epstein’s wealth relates to high financial crimes and misdemeanors underwritten by the ultra-wealthy — crimes that might have been discovered had he only lived.
Jeffrey Epstein: Genie Behind the Crash provides an overview to the financial chicanery Epstein was involved in. But so far, no concerted effort has been made to fully examine Epstein’s financial operation or the source of his wealth in detail. Perhaps that’s due to the many financial eras Epstein’s career spanned. So, it is important to separate the phases of Epstein’s career and concentrate only on the most significant trading period, from 1999 to the beginning of the collapse of the United States financial system in 2007.
Epstein’s Bear Stearns fortune began with his association to ‘Ace’ Greenberg where Epstein’s mathematical brilliance (applied to securities trading) ensured a bright future. Then Epstein’s association with billionaire Lex Wexner proved profitable as well, providing the cash basis upon which Epstein could build his fortune, especially via the Wexner wealth management fund relationship to Citigroup, which Epstein leveraged until 2002 and then jettisoned by 2006.
When the Wexner/Citigroup star began to fade for Epstein, Epstein shifted his trading focus back to his Bear Stearns connections, using a special investment vehicle called Liquid Funding Limited. Epstein was an active trader on behalf of Bear’s offshore Irish operation via LFL from the year 2000 until US markets began to crash in 2007.
According to SEC regulatory filings, by 2003 Bear Stearns owned a 40% interest in Epstein’s special investment (trading) vehicle, Liquid Funding Limited. Two of LFL’s directors — Jeffrey Lipman and Paul Novelly — were also directors and board members for Bear Stearns at the time. According to one source, Lipman was Epstein’s go-to man at Bear for Liquid Funding’s SIV activities, and Epstein traded by way of Bear’s offshore Irish operation via Liquid Funding, Ltd. into 2007.
Briefly, a Special Investment Vehicle (SIV) is a shell company which profits by exploiting price spreads, or differences in price, which exist between synthetic products created by Wall Street — sometimes in conjunction with the Federal Reserve banks — to maintain liquidity in the financial system.
SIV products – created and exploited by Wall Street mathematicians like Epstein – relate to complex mortgage-backed or credit/loan guarantees which may include collateral debt obligations (CDO) home equity lines of credit (HELOC) and collateralized loan obligations (CLO) as securitized by Wall Street banks. They are variable yield speculative issues or investments, which may be split or combined.
Liquid Funding Limited was setup as a special investment vehicle to trade the spread in those Wall Street’s derivative products. LFL traded offshore in these vehicles, usually in higher yielding collateral bond or debt obligations, financial products which significantly contributed to instability resulting in the US financial collapse of 2008-2009. In other words, an SIV trades. And Epstein was a trader.
Another Epstein corporation was the Financial Trust Company, Inc. which operated out of the Virgin Islands, and acted more like a trust than an active trading entity. In 2003, Epstein’s FTC corporation filed suit versus Citibank for significant sums, relating to a con run by AIG at the time, AIG being an insurance company heavily involved in the US market crash of 2008.
In Epstein’s 2003 FTC lawsuit versus Citigroup, two $10M USD investment loan figures are repeatedly bandied about, relating to collateral bond obligation investments purchased from Citi but fraudulently guaranteed in part by AIG. We may conclude that the Epstein lawsuit figures represent just one tiny fraction of Epstein’s overall trading activity. (3)
The era from 1999 to the onset of the US collapse in 2007 is key because Glass-Stegall banking protections were repealed in 1999 by the Gramm–Leach–Bliley Act (GLBA) perhaps one of the most heinous financial acts ever perpetrated. Phil Gramm’s bill (4) allowed investment banks to gamble again with depositor accounts (as they had leading up to the 1930’s collapse) aiding traders like Epstein.
Note that Epstein’s Liquid Funding Limited and his Financial Trust Company were setup during the year 2000 when Gramm Leach Blilely’s repeal of financial safeguards came into effect. As can be seen via Open Secrets, Epstein repeatedly donated to Phil Gramm’s political campaign in 1995 when the push was on to repeal Glass-Stegall and other protections provided by law versus predatory banker abuse.
According to Wall Street on Parade, Epstein’s Liquid Funding Limited was given the highest credit rating possible, and:
‘As a result of those Tier 1 ratings on Liquid Funding’s commercial paper, it ended up in some very big-name money market funds. Two of JP Morgan’s money market funds held a total of $100 million; two Dreyfus money markets held at least $139 million; and a Frank Russell money market fund held $125 million. Those amounts are very likely the tip of the iceberg that ended up in money market funds.’
Liquid Funding Ltd was incorporated in Bermuda on October 19th, 2000, almost one year on from the passage of Phil Gramm’s bill to de-regulate Wall Street. Epstein was the Chairman and sole trader for Liquid Funding, Ltd. According to Fitch ratings, by 2006 Epstein’s Liquid Funding Ltd possessed $6.7Bn US in liabilities. Again, LFL, a special investment vehicle, traded on behalf of Bear Stearns until the onset of the financial crash. As for Bear Stearns, according to an SEC regulatory filing:
“At November 30, 2002, the Company [Bear Stearns] had an approximate 40% equity interest in Liquid Funding, Ltd. (‘LFL’), a AAA-rated special purpose vehicle established to participate in the repurchase agreement and total return swap markets. A subsidiary of the Company acts as investment manager.”
Because LFL traded through a Bear Stearns’ offshore entity (Ireland) via Epstein’s own Bermuda creation, Liquid Funding, Ltd — which was itself domiciled in the US Virgin Islands – Epstein’s LFL did not ever file a US tax return related to income, due to Epstein’s claim of residence on Little St. James Island, and the corporation’s registration in Bermuda.
In 1998, for $7.95 million, Epstein purchased Little St. James Island just one year prior to Gramm’s deregulation of US share markets. Little St James is in the Virgin Islands territory of the United States, and has a peculiar tax structure. US Virgin Island residents are subject to US IRS tax regulations, but may file and pay corporate and/or personal taxes directly to the US Virgin Islands government instead of to the IRS.
The US Virgin Islands government decides whether information relating to taxes paid in the USVI will be released to any entity – including by legal subpoena – and also decides the amount of tax to be paid based on special criteria for foreign (Non-US) brokerage accounts. Attorneys for Epstein’s victims did not receive his US federal tax returns most likely for that reason.
Since Liquid Funding Ltd was setup as a Bermuda corporation domiciled in the US Virgin Islands and traded through a Bear Stearns account based in Ireland, it is possible that Epstein fully evaded taxation on his major fortune. That’s because the financial disclosure legislation known as Foreign Bank Account Reporting (FBAR) was legislated long ago, and the wealthy have exploited the relative non-enforcement of FBAR by the IRS for many years.
Again, since Epstein was a Virgin Islands resident with a Bermuda corporation (LFL) trading through Ireland or other offshore brokerages, the possibility that Epstein or his corporations ever paid US tax is exceedingly remote. Furthermore, to register his corporations and shield his privacy, Epstein hired a Bermuda law firm called Appleby, and Epstein used Swiss banks for deposits.
When Appleby was hacked, large volumes of financial information became publicly available via the ICIJ. The Paradise Papers contain about 550 pages related to Epstein’s corporations, mostly corporate registration documents and encoded accounting spreadsheets which shed little light on his money movements, since Appleby did not manage Epstein’s funds.
By 2001 when Prince Andrew was or was not photographed with Virginia Roberts, Epstein’s LFL/Bear trading empire was under his sole control, and Epstein’s dependence on big donors had been greatly reduced. (It would be interesting to know if the royal family has ever invested in any of Epstein’s trading or fund vehicles.)
The shift began in 1997 when Epstein parked his wealth management proceeds in Swiss banks. After 2000 and the GLBA, Epstein was free to offshore trade in a big way, with Liquid Funding Ltd and a de-regulated market. This period – from 2001 until 2007 – is evidently the era where Epstein’s abuse of children was most pronounced, too.
Then, as Chairman Bernanke has shown us, US markets began to tank in 2007 and really cratered in 2008. Epstein’s fortunes were fading fast, especially since the synthetics he traded in were particularly hard hit. As Bear went belly-up so did Epstein.
Fitch ratings valued all LFL liabilities at $6.7Bn in 2006, but according to Moody’s reports, by April 2008, Liquid Funding Ltd had been wound up:
Rating Action: Moody’s Withdraws Ratings Of Liquid Funding, Ltd.
18 Apr 2008
All Outstanding Rated Liabilities Paid in Full
New York, April 18, 2008 — Moody’s Investors Service announced today that it has withdrawn its ratings of Liquid Funding, Ltd. Moody’s had previously assigned to Liquid Funding, Ltd. three ratings: a rating of counterparty risk, a rating of its global medium-term note program and a rating of its commercial paper note program.
Moody’s explained that the withdrawal of the three ratings was in response to Liquid Funding’s request for withdrawal, in connection with the voluntary wind-down of Liquid Funding and following the payment and satisfaction in full of all outstanding rated liabilities of Liquid Funding. According to the Outstanding Detail Report issued by JPMorgan as of April 7, 2008 in its capacity as trustee, none of the rated debt issued under the global medium-term note program or the commercial paper note program was outstanding as of that date. Additionally, the Program Outstanding Report issued as of April 8, 2008 by the Bank of New York Mellon in its capacity as trustee showed that all transactions for which Liquid Funding was serving as counterparty have matured or been terminated.
In other words, Liquid Funding was bailed and shut down by the Federal Reserve – just like Bear Stearns was ‘made whole’ so it could be bought by JP Morgan – to prevent an inter-party catastrophe.
The secret buried with Jeffrey Epstein is not just the knowledge that the products he helped create were used to swindle the market and contribute to the financial collapse that crashed the US in 2008. What the political class really wants to hide is the Federal Reserve’s bail-out for a child abuse sex criminal to the tune of $6,7 billion with US taxpayer funds.
Finally – if there can be a finally — there is an interesting twist to this story. Sources are limited, but apparently Epstein had only about $157M US scattered among Swiss accounts and elsewhere, even though Liquid Funding Limited was valued at $6.7Bn US in 2006. That’s why Vox and the others puzzle and scratch their heads and say Epstein didn’t have anything.
After LFL was wound up in 2008, Epstein was comfortable enough to cover his overhead, legal fees (attorneys are expensive), and living expenses, but that’s about it. And since the Fed bailed LFL we will never know precisely what trading Epstein was engaged in — only the LFL company charter / prospectus and a long list of Bear Stearns trades (relating to a charity) and assorted lawsuits indicate. Meanwhile the mega-media just eats it up: “Oh we don’t know if he had any money at all! Maybe he was blackmailing!”
All the public is left with: “what if…” and “maybe”. That’s because the big corporate media hopes we believe that those who possess vast wealth and political power were not attracted to Jeffery Epstein by his ability to procure children for abuse. And for it to be discovered that a sleazy child sex offender was bailed out by the US government to the tune of $6.7Bn in taxpayer funds, is something no one should know – except the Fed of course. The big media hopes that this will all just go away… as the Vox Intelligencer states.
According to Prince Andrew, Epstein was most notable for his teaching ability and the opportunity Epstein provided to learn new things and to help the Prince meet new and interesting people. By extension we are led to believe that all powerful people within Epstein’s circle were enticed by the same ideal. Of course, we know that is not true.
The rich and powerful were attracted to Epstein because Epstein knew how to move large sums of money in ways that seemed private and safe… but most of all to avoid tax.
You see, the ultra-wealthy have two very big problems. One problem is growing their fortune when interest rates are in reality negative or zero (accounting for inflation, the real interest rate on savings in the US is zero) and the other is having funds subject to taxation. As we have seen, that was Epstein’s true genius, to hide the Elite’s wealth and prevent it from being taxed.
So, whether Epstein simply bought T Bills, Treasury Notes, Treasury bonds or traded in exceedingly complex derivatives on behalf of his wealthy clients — where Epstein truly understood David X Lee’s magic risk equation — is an irrelevance.
The wealthy and powerful game the financial system just like Epstein did. They use the same tricks, the same methods, the same tools that Epstein used. And that is why there is such concerted effort on behalf of the mega-media to avoid questions about Epstein’s wealth, and why the specific details of that wealth – and its related abuse – had to forever be buried with him.
According to Forbes, Epstein’s victims didn’t care about obtaining a settlement based on Epstein’s wealth – his victims only cared about the pain and anger that Epstein had caused them. But Epstein could not have engaged in such criminality without access to major funding… major funding which drew the wealthy and powerful to him.
One can only wonder what Kass knew about Madoff!
Epstein engaged in other lawsuits too for significant sums, including a $150M US settlement to Epstein in the D.B. Zwirn Special Opportunities Fund scandal.
Phil Gramm was the chairman of the Senate Banking Committee and still writes for the Wall Street Journal, he is a fellow at the Neoconservative American Enterprise Institute
Steve Brown is the author of “Iraq: the Road to War” (Sourcewatch) editor of “Bush Administration War Crimes in Iraq” (Sourcewatch) “Trump’s Limited Hangout” and “Federal Reserve: Out-sourcing the Monetary System to the Money Trust Oligarchs Since 1913”; Steve is an antiwar activist, a published scholar on the US monetary system, and has appeared as guest contributor to The Duran, Fort Russ News, Herland Report, Lew Rockwell Report, The Ron Paul Institute, and Strategika51.
Armored vehicles and other machinery waiting to be transported out of Afghanistan in 2014.
