Category Archives: China

Iran, North Korea and the Cruz Letter

Posted on by

The Keys to Iran’s Missiles are in China and North Korea

The latest revelations about Iran’s ballistic missile program make it clear that sanctions on Tehran are pointless unless they’re imposed on China and the DPRK, too. Full story and intelligence here.

Iran space navigation system to be launched  

TEHRAN, Feb. 10 (MNA) – National plan to improve navigation and positioning services will soon become operational with special features.

Iran’s very modern system of navigation and positioning system has been produced by Iran Electronics Industries (IEI) as the executive and with the support of Iran’s National Space Center as one of the subordinate units of the Science and Technology Department of the Presidential Office.

The system aims to provide advanced services to increase life quality of Iranian people and will soon become operational providing the whole country with the possibility to simultaneously exploit three highly-advanced global positioning systems called GPS, GLONAA as well as BeiDou.

Numerous valuable services offered by the system with centimeter accuracy include car navigation, crisis management, social services, mapping, identification of stationary and moving targets, precision farming, urban traffic control, tracking oil and gas pipelines, environmental services, advanced housing and urban development services, customs issues and smuggling prevention, accurate harness of fire, current and advanced insurance services, shipping services and ports, fine weather forecast.

The implementation of the navigation and positioning system will be carried out in three phases in 2016.

****

Sen. Cruz to President Obama: “Strategic Patience” Toward North Korea Isn’t Working

WASHINGTON, D.C. – U.S. Sen. Ted Cruz (R-Texas) today sent a letter to President Barack Obama that expresses grave concerns about the administration’s North Korea policy and outlines alternative policy actions to address North Korea’s illegal nuclear tests, strengthen U.S. national security and return greater stability to East Asia and the Korean Peninsula.

Cruz sent the letter today after announcing he will vote for the North Korea Sanctions Enforcement Act of 2016 (H.R. 757), which would impose nuclear weapons-related sanctions on North Korea. The Senate is expected to pass the bill this evening.

“I write to express deep concern regarding [President Obama’s] policy of ‘strategic patience’ toward the Democratic People’s Republic of Korea (DPRK), particularly in light of their recent nuclear test and satellite launch that also served as a long-range ballistic missile test,” wrote Sen. Cruz. “Your administration has, for too long, hoped to achieve denuclearization through failed diplomacy and limited sanctions. The nuclear tests of May 2009, February 2013, and January 2016 suggest that ‘strategic patience’ with a country still officially at war with us is not working.”

Cruz’s letter to Obama lists five actions rooted in American strength that might actually modify the hostile and aggressive behavior of North Korea and its protectors:

1) Fully enforce U.S. laws. The U.S. needs to sharpen the choices for North Korea by raising the risk and cost for those who choose to violate laws and resolutions.

2) Stop protecting China. It is time to tell the truth about China: the PRC is not our partner in denuclearizing the Korean peninsula. Lax enforcement of U.S. laws have made China complacent in policing the illicit financing of regimes like North Korea and Iran, thus becoming complicit in their proliferation.

3) Rebuild the U.S. Navy. The U.S. must renew its commitment to force projection to protect our allies and deter our enemies.

4) Deploy a Terminal High Altitude Area Defense (THAAD) unit to better protect U.S. troops and critical targets in South Korea. This system is more capable than any ballistic missile system that South Korea has or will have for decades. And if the U.S. is serious about defending South Korea, we must openly confront China’s support for North Korea.

5) Relist North Korea as a state sponsor of terrorism. North Korea’s cyber attack and accompanying threats of a “9/11-type attack” fulfill the legal definition of international terrorism – “violent acts or acts dangerous to human life that…appear to be intended to intimidate or coerce a civilian population” (18 U.S. Code § 2331).  Removal from the list has resulted in no improvement in the behavior of the DPRK, and we should end the dangerous fiction that they are not engaged in international terrorist activities.

The full letter can be viewed here and below.

February 10, 2016
President Barack Obama
The White House
1600 Pennsylvania Ave. NW
Washington, DC 20500

Dear Mr. President:

I write to express deep concern regarding your policy of “strategic patience” toward the Democratic People’s Republic of Korea (DPRK), particularly in light of their recent nuclear test and satellite launch that also served as a long-range ballistic missile test. Your administration has, for too long, hoped to achieve denuclearization through failed diplomacy and limited sanctions. The nuclear tests of May 2009, February 2013, and January 2016 suggest that “strategic patience” with a country still officially at war with us is not working.

I would like to propose five alternative actions rooted in American strength that might actually modify the hostile and aggressive behavior of the DPRK and its protectors:

1. Fully enforce U.S. laws. In September 2015, Secretary Kerry warned of “severe consequences” if North Korea “refuses to live up to its international obligations.”[1] It is well past time to impose those consequences. History demonstrates that the United States is able to dictate the agenda when dealing with hostile regimes and improve global security through our leadership. Unilateral U.S. actions against Iran, combined with diplomatic pressure, led other nations to impose their own financial and regulatory measures against Tehran. Collectively, the international sanctions isolated Iran from the international banking system, targeted critical Iranian economic sectors, and forced countries to restrict purchases of Iranian oil and gas, Tehran’s largest export.

The United States should use its actions against Iran as a model for imposing the same severity of targeted financial measures against North Korea. Washington should no longer hold some sanctions in abeyance, to be rolled out after the next North Korean violation or provocation. There will be little change until North Korea feels the full impact of sanctions and China feels concern over the consequences of Pyongyang’s actions and its own obstructionism. The U.S. needs to sharpen the choices for North Korea by raising the risk and cost for those who choose to violate laws and resolutions. Actors who have thus far been willing to facilitate North Korea’s prohibited programs and illicit activities should not be exempt for political convenience. If Congress passes additional sanctions in the coming days, my hope is that, in addition to signing them into law, you would faithfully and consistently execute such targeted measures in a non-discriminant manner.

2. Stop protecting China. It is time to tell the truth about China: the PRC is not our partner in denuclearizing the Korean peninsula. Lax enforcement of U.S. laws have made China complacent in policing the illicit financing of regimes like North Korea and Iran, thus becoming complicit in their proliferation. China has enabled DPRK arms shipments to Iran to travel unimpeded through Chinese ports[2] and airspace.[3] It has facilitated the shipment of chemical reagents and protective suits from North Korea to Syria.[4] It has allowed transfer of arms-related material to Syria.[5]

Perhaps the most egregious act was the Chinese transfer of transporter-erector-launchers (TELs) to North Korea in 2011. Upon receipt of these vehicles, North Korea modified them with the ability to launch the KN-08, an intercontinental ballistic missile capable of reaching the West Coast of the United States from a road-mobile launch platform. This capability poses a nuanced challenge to our ground-based interceptors deployed in Alaska and California. A subsequent report from the United Nations confirmed that Chinese entities were responsible for the sale of these vehicles.[6] On April 7, 2015, Admiral Bill Gortney, the Commander of North American Aerospace Defense Command, confirmed that the KN-08 was operational. Because of China, North Korea has a modern mobile missile launcher that increases its ability to threaten Alaska, Washington, Oregon, and California with a road-mobile nuclear strike.[7]

3. Rebuild the U.S. Navy.

The foundation of the United States’ ability to project power overseas is the aircraft carrier, and its supporting Carrier Strike Group. One would hope that your annual budget submission to Congress would reflect the centrality of the aircraft carrier to America’s defense of our national interests and our allies abroad, but sadly this is not the case. The USS Gerald Ford is over budget,[8] the second ship of the class remains behind schedule,[9] and our Navy has only 272 combatants.[10] The budget you submitted further exacerbates this problem by reducing shipbuilding funds an additional $1.75 billion, as our adversaries expand their presence at sea and increase aggressive rhetoric regarding territorial sea claims.

While Naval force projection has declined under your watch, Japan has invested heavily in its armed forces. Leading the effort to broaden the definition of “self-defense” and expand the military missions Japan would be willing to accept, Prime Minister Shinzo Abe has prudently responded to the threat environment he faces in East Asia. In contrast to your administration, the Japanese government increased defense spending by 2.8% to $42 billion in 2015, which amounted to the largest defense budget in Japan’s history.[11] Your administration has celebrated our ally’s commitment to stability in the region, but I/we fear that your unwillingness to fully fund America’s military to meet its threats will render moot the courageous actions of our friend and ally Japan. The U.S. must renew its commitment to force projection to protect our allies and deter our enemies.

4. Deploy THAAD in South Korea. Last year, your administration approached Seoul with the prospect of deploying a Terminal High Altitude Area Defense (THAAD) unit to better protect U.S. troops and critical targets in South Korea. This system is more capable than any ballistic missile system that South Korea has or will have for decades. The THAAD deployment is wholly in line with China’s stated goal of preserving stability on the Korean peninsula and would not in any way constrain China’s military capabilities. Yet, the PRC reacted aggressively to this prospective deployment. In July 2014, President Xi Jinping warned President Park Geun-hye to “tread carefully”[12] regarding THAAD so it “won’t be a problem between South Korea and China.”[13] Beijing has issued similar warnings after Seoul began publicly discussing the need to improve its missile defenses after last month’s North Korean nuclear test.

I welcome recent progress this week in negotiations with South Korea on THAAD. However, I am concerned that you have not publicly condemned Xi Jinping for attempting to intimidate and blackmail a U.S. ally into rejecting our military assistance. It would be unfortunate if the climate agreement and progressing trade negotiations with the PRC were higher strategic priorities for the United States than standing up to the world’s largest communist state. If the U.S. is serious about defending South Korea, we must openly confront China’s support for North Korea. The U.S. should strongly push back against China’s opposition to THAAD by rebutting its false assertions that the system would impact Chinese security.

A good place to start would be disinviting them from Rim of the Pacific Exercise (RIMPAC) 2016. While speaking in Jakarta on March 20, 2013, you linked participation in these exercises with political engagement: “We have invited the Chinese to participate in the RIMPAC exercise which we host, and we are delighted that they have accepted.  We seek to strengthen and grow our military-to-military relationship with China, which matches and follows our growing political and economic relationship.”[14] Given China’s complicity in North Korea’s nuclear capability, stonewalling of missile defense in South Korea, and its aggressive actions in the South China Sea, I/we believe it is time for the United States to fundamentally reevaluate U.S.-China relations.

5. Relist North Korea as a State Sponsor of Terrorism. One need not look far for justification. North Korea’s cyber attack and accompanying threats of a “9/11-type attack” fulfill the legal definition of international terrorism – “violent acts or acts dangerous to human life that…appear to be intended to intimidate or coerce a civilian population” (18 U.S. Code § 2331).  Removal from the list has resulted in no improvement in the behavior of the DPRK, and we should end the dangerous fiction that they are not engaged in international terrorist activities.

The regime in Pyongyang has not only issued explicit threats against American citizens, but there is also documented evidence that North Korea has shipped arms to Iran. Three intercepted vessels bound for Iran in July 2009 contained North Korean weapons that Western intelligence and Israeli intelligence officials and non-government experts believe were bound for Hezbollah and Hamas.[15] All three ships contained North Korean components for 122 mm Grad rockets and rocket launchers, 2,030 corresponding detonators, and related electric circuits and solid fuel propellant. As you know, Hezbollah and Hamas frequently fire these rockets into Israel. Yet your Administration continues to assert that North Korea is “not known to have sponsored any terrorist acts since the bombing of a Korean Airlines flight in 1987.”[16]

Until such actions are taken, the North Korean threat will continue to metastasize. Their launch last Saturday is further evidence of the escalating danger the DPRK poses to the U.S. and our allies. America must once again lead from a position of strength, rekindling the fear of our enemies and restoring the trust of our friends.

Sincerely,

Ted Cruz

[1] Secretary Kerry, Press Availability With South African Foreign Minister Maite Nkoana-Mashabane, September 16, 2015.

[2] Report of the Panel of Experts established pursuant to resolution 1874 (2009),  United Nations, June 11, 2013 (p. 31),http://www.securitycouncilreport.org/atf/cf/%7B65BFCF9B-6D27-4E9C-8CD3-CF6E4FF96FF9%7D/s_2013_337.pdf.

[3] Ibid (pp. 33-34).

[4] Report of the Panel of Experts established pursuant to resolution 1874 (2009), United Nations, June 14, 2012 (pp. 27-29),http://www.securitycouncilreport.org/atf/cf/%7B65BFCF9B-6D27-4E9C-8CD3-CF6E4FF96FF9%7D/NKorea%20S%202012%20422.pdf.

[5] Report of the Panel of Experts established pursuant to resolution 1874 (2009),  United Nations, June 11, 2013 (pp. 36-38),http://www.securitycouncilreport.org/atf/cf/%7B65BFCF9B-6D27-4E9C-8CD3-CF6E4FF96FF9%7D/s_2013_337.pdf.

[6] Report of the Panel of Experts established pursuant to resolution 1874 (2009),  United Nations, June 11, 2013 (pp. 26-28),http://www.securitycouncilreport.org/atf/cf/%7B65BFCF9B-6D27-4E9C-8CD3-CF6E4FF96FF9%7D/s_2013_337.pdf.

[7] Bill Gertz, “Admiral: North Korea Can Hit U.S. With Long-Range Nuclear Missile,” Washington Free Beacon, October 12, 2015,http://freebeacon.com/national-security/admiral-north-korea-can-hit-u-s-with-long-range-nuclear-missile/.

[8] Christian Davenport, “New Gerald R. Ford carrier class, as predicted, called $13 billion ‘debacle,’” Stars and Stripes, October 1, 2015,http://www.stripes.com/news/navy/new-gerald-r-ford-carrier-class-as-predicted-called-13-billion-debacle-1.371389.

[9] Ibid.

[10] Status of the Navy, as of February 9, 2016,http://www.navy.mil/navydata/nav_legacy.asp?id=146.

[11] Ankit Panda, “Japan Approves Largest-Ever Defense Budget,” The Diplomat, January 14, 2015,http://thediplomat.com/2015/01/japan-approves-largest-ever-defense-budget/.

[12] Yonhap, “China’s Xi Asked Park to ‘Tread Carefully’ over U.S. Missile-Defense System,” August 26, 2014,http://english.yonhapnews.co.kr/national/2014/08/26/73/0301000000AEN20140826002100315F.html.

[13] Chang Se-jeong and Ser Myo-ja, “Xi Pressed Park on Thaad System,” Korea JoongAng Daily, February 6, 2015,http://koreajoongangdaily.joins.com/news/article/article.aspx?aid=3000595

[14] Ashton Carter, “The U.S. Defense Rebalance to Asia,” Remarks as prepared for delivery, April 8, 2013,http://archive.defense.gov/Speeches/Speech.aspx?SpeechID=1765.

[15] Manyin, Mark, “North Korea: Back on the State Sponsors of Terrorism List?” CRS, January 21, 2015,http://www.crs.gov/Reports/R43865?source=search&guid=738771c7105c426fac0c7ad3efa85187&index=4.

[16] “Country Reports on Terrorism 2012,” Department of State, May 30, 2013,http://www.state.gov/j/ct/rls/crt/2012/209980.htm.

 

 

In the first phase, a total of 15 network stations and two data centers will be launched in Tehran as an experiment to collect accurate position information.

 

After the implementation of the first phase in Tehran, the second phase of the project will be implemented in major cities while the third phase the whole country will be covered by the system.

 

The hardware of the system is supposed to be available to users who will only be charged for a very low annual cost

Clapper Breaks with Obama’s Threat Crisis Plank

Posted on by

North Korea has restarted plutonium reactor: US

North Korea has restarted a plutonium reactor that could fuel a nuclear bomb and is seeking missile technology that could threaten the United States, Washington’s top spy said on Tuesday.

Intel Chief Breaks From Obama Narrative On Iran Deal

DailyCaller: The head of U.S. intelligence believes that Iran’s recent actions speak loudly to its intentions, particularly given the country’s recent provocations since the Iran nuclear deal came into effect.

Testifying to the Senate Committee on Armed Services Tuesday, director of national intelligence James Clapper gave a very somber description of what he sees as Iran’s intentions toward the U.S. now that last summer’s nuclear deal has commenced. In particular, his statements offered little assurance that Iran is acting as an honest actor with the U.S. and the other states involved in last year’s negotiations, or that the nuclear deal will stop Iran from obtaining a nuclear weapon.

“Iran probably views JCPOA [Iran deal] as a means to remove sanctions while preserving nuclear capabilities, as well as the option to eventually expand its nuclear infrastructure,” said Clapper, who also noted that, so far, he sees no evidence that Iran is violating the nuclear deal.

Clapper’s statements stand in stark contrast with those made by President Barack Obama, who lauded the nuclear accord last summer, claiming it would not only stop all of Iran’s possible pathways to a nuclear weapon, but that “under its terms, Iran is never allowed to build a nuclear weapon.” More here.

***

Clapper went into all specifics on the threat matrix both at home and globally. He did not leave anything behind, from cyber wars, space wars, weapons systems, human trafficking, terror organizations, economic instability, migrants, disinformation and drug cartels.

 STATEMENT FOR THE RECORD WORLDWIDE THREAT ASSESSMENT of the US INTELLIGENCE COMMUNITY
February 9, 2016
INTRODUCTION
Chairman McCain, Vice Chairman Reed, Members of the Committee, thank you for the invitation to offer
the United States Intelligence Community’s 2016 assessment of threats to US national security. My statement reflects the collective insights of the Intelligence Community’s extraordinary men and women, whom I am privileged and honored to lead. We in the Intelligence Community are committed every day to provide the nuanced, multidisciplinary intelligence that policymakers, warfighters, and domestic law enforcement personnel need to protect American lives and America’s interests anywhere in the world.
 The order of the topics presented in this statement does not necessarily indicate the relative importance or magnitude of the threat in the view of the Intelligence Community. Information available as of February 3, 2016 was used in the preparation of this assessment.
 
TABLE OF CONTENTS
 
GLOBAL THREATS Cyber and Technology Terrorism Weapons of Mass Destruction and Proliferation Space and Counterspace
 
Counterintelligence Transnational Organized Crime
 
Economics and Natural Resources Human Security
 
REGIONAL THREATS East Asia
China Southeast Asia North Korea
Russia and Eurasia
Russia Ukraine, Belarus, and Moldova The Caucasus and Central Asia
Europe
 
Key Partners The Balkans Turkey Middle East and North Africa 
Iraq Syria Libya  Yemen Iran  Lebanon Egypt Tunisia
 
South Asia
Afghanistan Bangladesh Pakistan and India
Sub-Saharan Africa  Central Africa Somalia South Sudan Sudan Nigeria
 
Latin America and Caribbean
 
Central America Cuba Venezuela Brazil
 

 

 

 

 

Obama’s Final Cyber Offense, Einstein?

Posted on by

Sheesh, just the name points to a misguided failure since 2008. Einstein has a price tag, $ 5 billion. There are other questions to be asked like what does the NSA have to offer or the countless cyber security professionals in the private sector?

From the White House, there has been a 12 point plan and it has not advanced at all.

In May 2009, the President accepted the recommendations of the resulting Cyberspace Policy Review, including the selection of an Executive Branch Cybersecurity Coordinator who will have regular access to the President.

Meanwhile, hacks are real, dangerous and coming at mach speed. Using old software language such as COBOL speaks volumes as to how antiquated protections are and how dysfunctional all agencies are in maintaining crack-proof.

The Department of Homeland Security appears to be the lead agency for Einstein compliance, what could go wrong and has? The fact sheet from DHS is here.

Obama makes final push to cement cyber legacy

TheHill: President Obama on Tuesday made what is likely his last major push to bolster the government’s digital defenses before leaving office.

As part of the annual White House budget proposal, the Obama administration rolled out a sweeping plan to inject billions of extra dollars into federal cybersecurity funding, establish a new senior federal cyber official and create a presidential commission on cyber that will establish a long-term road map.

The move is likely to complete Obama’s cyber legacy, which will include an historic attention to digital security, unprecedented executive orders on the topic, and shepherding through Congress the largest-ever cyber bill, as well as numerous bruising hacks at federal agencies and allegations that government networks were woefully outdated.

In a release, the White House called the plan “the capstone of more than seven years of determined effort.”

“[Obama] is the first president that is making a big cybersecurity push and I think that’s tremendously important,” Rep. Ted Lieu (D-Calif.), one of Congress’s most prominent cyber voices, told The Hill.

The proposal aims to inject more than $5 billion in new funding across the government to strengthen network defenses that have been repeatedly infiltrated by suspected foreign government spies.

The ask is a 35-percent increase over last year’s allotment of $14 billion, and would put overall federal cyber spending at over $19 billion.

The budget request earmarks $3.1 billion for an “Information Technology Modernization Fund” that the White House described as a “down payment on the comprehensive overhaul” of federal IT systems.

Lieu said this fund could help solve one of the inherent budgeting problems when it comes to defending interconnected networks from hackers.

“What’s important about [the fund] is it can go across agencies and upgrade systems that touch more than one agency,” said Lieu, who sits on both the House Budget and Oversight committees.

Currently, each agency has its own individual cybersecurity budget that can be spent on its network, but that cannot necessarily be expended on portions of the agency’s IT infrastructure at other agencies.

Hackers have exploited this balkanized budgeting process.

Over the summer, suspected Chinese cyber spies cracked into the Office of Personnel Management (OPM), pilfering over 22 million people’s personal information in two separate hacks. The initial intrusion — which exposed roughly 4.2 federal workers’ personnel files — occurred at an OPM database that was housed at the Interior Department.

The OPM hacks also exposed the antiquated legacy systems the government relied on to run its networks.

Congress bashed OPM officials for not fully encrypting all their sensitive data. But the agency’s systems were simply too old to even accept modern encryption, they repeatedly explained.

The network also relied on the dated COBOL programming language, which initially became popular in the 1960s and is now eschewed by younger programmers.

A new federal official will oversee much of these update efforts.

As part of its proposal, the White House is establishing a federal chief information security officer, or CISO. The official will be housed within the Office of Management and Budget (OMB) and report to federal chief information officer, Tony Scott, who oversees government technology.

“This is the first time that there will be a dedicated senior official who is solely focused on developing, managing, and coordinating cybersecurity strategy, policy and operations across the entire federal domain,” the White House said.

Centralizing cybersecurity oversight is an attempt to help overcome the lack of agency-to-agency communication on the subject.

“For a while, I’ve seen the argument that there are too many lines of authority in the federal government on cybersecurity,” said Lieu. “Sometimes it’s not clear who is responsible for what.”

The CISO will also help monitor the government’s digital defense spending, which has been knocked as cost-ineffective.

Recently, a federal watchdog report concluded that the government’s main cyber defense system, known as “Einstein,” was largely ineffectual at thwarting sophisticated hackers. The report echoed long-standing criticism from security experts who say the program is a much-delayed boondoggle that is already obsolete.

Federal officials insist the system is in its final phase of implementation and will soon serve as a platform to add on leading cyber tools.

This budget infusion and new federal CISO will with these technology updates, the White House said.

The proposal also includes a robust research and public awareness component.

In a bid to build a bridge to the next administration, Obama is launching a “Commission on Enhancing National Cybersecurity.”

The administration is directing a bipartisan group of lawmakers to appoint top industry representatives and leading technologists to the commission. The group will be tasked with taking the long view.

“The commission will make recommendations on actions that can be taken over the next decade to strengthen cybersecurity in both the public and private sectors while protecting privacy,” the White House said.

Security experts almost unanimously agree that one of these actions will be eliminating the traditional online password.

Since 2011, the White House has been trying to push people away from passwords. Tuesday’s plan includes a last bid to encourage stronger people to adopt stronger login practices.

The proposal creates a new public awareness campaign that includes leading tech firms such as Google, Facebook and Microsoft.

“By judiciously combining a strong password with additional factors, such as a fingerprint or a single-use code delivered in a text message, Americans can make their accounts even more secure,” the White House said.

The proposal is likely Obama’s concluding statement on cybersecurity.

During his presidency, cybersecurity has gone from a fringe issue to one that most leaders acknowledge is vital to national and economic security. The topic received an increasing amount of attention in all but Obama’s final State of the Union address.

In recent years, the U.S. has seen the dramatic rise of global cyber crime syndicates that have pillaged banks, department stores and hotels.

According to an October report from Hewlett Packard and the Ponemon Institute, cyber crime costs the average American firm $15.4 million annually, up 82 percent over the last six years. By 2019, it’s believed the cost of data breaches will reach $2.1 trillion globally.

Digital adversaries such as China, Russia, Iran and North Korea have also swooped in unexpectedly, plundering health insurers, airlines, nuclear plants, government agencies and, most memorably, a major movie studio.

Even terrorist groups such as the Islamic State in Iraq and Syria (ISIS) are causing fears by hijacking high-profile twitter accounts and digitally defacing websites around the world.

These trends are bound to continue after Obama leaves the White House, but this ultimate cyber thrust could help cement his reputation as the first president to actively address the digital security challenge.

“If we can get this through, the funding, I think that would be very positive for his legacy,” Lieu said. “This is not just a federal government problem, it’s endemic in the private sector.”

The DoJ Hacked, DHS Files Compromised

Posted on by

Hackers leaked DHS staff records, 200GB of files are in their hands

A hacker accessed an employee’s email account at the Department of Justice and stole 200GB of files including records of 9,000 DHS staffers and 20,000 FBI employees.

SecurityAffairs: Yesterday, the data related a Department of Homeland Security (DHS) staff directory were leaked online, a Twitter account shared the link to an archive containing 9,355 names.

The responsible for the data leakage first contacted Motherboard to share the precious archive.

Each record of the DHS Staff Directory includes name, title, email address, and phone number.

Going deep in the archive it is possible to note that it includes information of DHS security specialists, program analysts, InfoSec and IT and also 100 employees with a title “Intelligence”.

The same Twitter account has announced later the imminent release of an additional data dump containing 20,000 FBI employees.

DHS firewall

Are the records authentic?

Motherboard that obtained the archive reached the operations center of the FBI, and in one case the individual who pick up the phone presented himself with the same name associated with that number in the archive. A similar circumstance occurred with a DHS employee, Motherboard so confirmed that the information is legit.

Which is the source of data?

According to Motherboard, a hacker accessed an employee’s email account at the Department of Justice. As proof, the hacker sent the email message to Motherboard’s contributor Joseph Cox directly from the compromised account.

“A hacker, who wishes to remain anonymous, plans to dump the apparent names, job titles, email addresses and phone numbers of over 20,000 supposed Federal Bureau of Investigation (FBI) employees, as well as over 9,000 alleged Department of Homeland Security (DHS) employees, Motherboard has learned.” wrote Cox in a blog post.

“The hacker also claims to have downloaded hundreds of gigabytes of data from a Department of Justice (DOJ) computer, although that data has not been published.”

The hacker first tried to use the compromised credentials to access a DOJ staff portal, but without success, then he called the department directly and obtained the access through social engineering techniques.

The hacker accessed the DoJ intranet where the database is hosted, then he downloaded around the, out of 1TB that he had access to.

“I HAD access to it, I couldn’t take all of the 1TB,” the hacker told to MotherBoard.

The hackers confirmed his intention to release the rest of the data in the near future.Which is the motivation behind the attack?

It is not clear at the moment why the hacker released the archive, surely it’s not financially motivated. The hacker only left the following message when has leaked the data-

“This is for Palestine, Ramallah, West Bank, Gaza, This is for the child that is searching for an answer…” which are the verses of “Long Live Palestine”

The only certainty right now is that similar incidents are becoming too frequent, apparently the government staff is not properly trained on the main cyber threats or the hacking technique. Similar incidents show the lack of knowledge on the most basic security measures.
Whenever a hacker leaks so sensitive data, I think the number of his peers who had access to the same information with the intent to use them in other attacks or resell them, perhaps to a foreign government.

Pierluigi Paganini

*** As a reminder, in 2014 a much more dangerous hack intrusion happened at the DHS:

The Department of Homeland Security (DHS) alerted critical infrastructure operators to recent breaches within the sector – including the hack of a U.S. public utility that was vulnerable to brute-force attacks.

This week, the Industrial Control Systems Cyber Emergency Response Team (ICS-CERT), a subgroup of DHS, revealed information about the incidents in a newsletter (PDF).

According to ICS-CERT, industrial control systems were compromised in two, new incidents: one, involving the hack of an unnamed public utility, and another scenario where a control system server was remotely accessed by a “sophisticated threat actor.”

After investigating the public utility hack, ICS-CERT found that the system’s authentication mechanism was susceptible to brute-force attacks – where saboteurs routinely run through a list of passwords or characters to gain access to targeted systems. The control system used a simple password mechanism, the newsletter revealed.

In

What do Banks Say About the Recession?

Posted on by

What do economists have in their forecasts?

It is important to watch other countries performance like China, Greece and Brazil:

Bank Of America Admits The U.S. May Already Be In A Recession

Zerohedge: Almost one year ago, in March 2015, we explained how “The Fed’s Artificial Steepening Of The Yield Curve” has resulted in many unexpected consequences, the most important of which has been the erroneous interpretation of the yield curve as a leading recessionary signal. As said back then, “the artificially steep yield curve is a reflection of policy intent not economic reality…. Where the yield curve in the all-important belly of the 5s10s might have deeply inverted in the past just prior to recession, there is no justification to expect the same attainment of absolute levels where artificial monetary intrusion has pushed the curve much, much steeper.”

One week ago, it was as if a light bulb went off over Wall Street’s head, when first Deutsche Bank’s Dominic Konstam realized the significance of the above excerpt, and admitted that far from the 4% recession odds that the Fed’s hopeless FRB/US DSGE computer model spews out when looking at the “normal” yield curve, when normalizing for the Fed’s intervention odds of a recession in the next 12 months soar to 50%!

In a special report published earlier this week, we noted that today’s near-zero interest rate regime does not allow the yield curve to freely invert or even flatten too much because of certain structural limits. For example, liabilities-driven investors who in the past could receive long rates below the fed funds rate can no longer do so once rates are floored at zero. Investment fund managers are also restricted by mandates from buying negative yielding assets that lead to mark-to-market losses on their portfolios. Pension investors, who must target returns based on liability assumptions, have been driven into high yielding non-core rate assets as their discount rates are stubbornly and unrealistically high compared to Treasury yields. These factors keep the curve artificially steep even though both short and long rates have been clearly trending downward over the years.

An “artificially steep yield curve” – almost as if that’s exactly the phrase we used before. What DB did then is the logical next step: to adjust the artificial yield curve and exclude the Fed’s intervention. 

To address the artificial steepness of the curve we corrected the 3m10y spread for the level of the rates. Specifically we regressed the spread against the short rate, leaving the residual which by definition removes for the bias of the rate level and is centered at zero. Using this new curve as model input, we found the probability of a recession in the next 12 months is 46 percent, considerably higher than the original Fed model has predicted.

But wait, there’s more, because while the short-end remains anchored, with every 25 bps tightening in the 10Y yield, recession odds rise by another 6%.

As it may be useful for investors, we attempt to handicap the relationship between the yield curve and future recessions captured in our model. Holding the 3m rate constant, every 25 bps rally in 10s (implying an equal flattening in 3m10y) raises the recession probability by 6 percent. If 10yr yields rally to 1.50%, our model predicts a 59 percent chance of recession in the next 12 months; at 1.00% 10s, the probability is 71 percent.

 

At Friday’s close, recession odds are well over 50% according to DB’s model.

Or perhaps far higher, because shortly after DB admitted what we said in early 2015, namely that everyone who was looking at the yield curve as is was wrong, Bank of America’s Ruslan Bikbov did the exact same analysis and ended up with a far more disturbing conclusion:

The US Treasury curve is still steep by historical standards. Taken at face value, this may suggest recession odds are small. However, we argue this logic is flawed because the curve is structurally steep when the Fed Funds rate is close to zero. When adjusted for the proximity of rates to zero, the curve may already be inverted and therefore may already be priced for a recession.

And numerically: “Implied recession odds are as high as 64% if the adjusted OIS curve is used”

Laughably, this comes from the same bank whose chief economist Ethan Harris recently “predicted” US GDP for the next decade and forecast there will be no recession until 2027… the same Ethan Harris as profiled in “Perma-bears” 1 – BofA Economist 0.”

* * *

Below are the full wonkish details from BofA for all those Wall Street strategists who still hold on to the erroneous creed that recession odds are non-existent if simply looking at the unadjusted yield curve.

A leading recession indicator

We received numerous questions on the shape of the US yield curve and its relationship to recession odds. With the sharp weakening of US manufacturing data in recent months, recession risks are on everybody’s mind, while the curve has the reputation of one of the most powerful leading recession indicators. The basic fact is likely well known to our clients: each US recession since the mid 1950s (when Treasury bond data become available) was preceded by an inverted or extremely flat curve within one year before a recession start (Chart 8). This is, of course, intuitive because a flat curve reflects lower growth and/or inflation expectations. Some of our clients and market commentators pointed to this fact and the relative steepness of the curve to argue that current recession risks are rather low. Indeed, the 3m10s curve at 155bp is still far from being flat (Chart 8).

Mind the zero bound

However, we believe that a simple mechanical extrapolation of the past link between the curve and recession odds is flawed. In particular, curve-based models calibrated to pre-2009 data are likely to underestimate recession odds today. This is because with the Fed Funds at only 38bp risks for plausible Fed Funds paths are asymmetric. Although tighter policy paths are unconstrained, the room for further cuts is likely limited resulting in a steepening bias for the curve. To see this, imagine an extreme situation where the policy rate is at zero and negative rates are not feasible. In such a scenario the curve simply cannot invert, and must be necessarily biased steeper relative to its historical distribution.

Granted, we cannot rule out the possibility of negative rates in the US, but it is safe to say the Fed’s reaction function must be highly asymmetric around zero. Because negative rates entail significant risks for the financial stability of money market funds and the banking sector, the negative growth/inflation shock required for a cut below zero should be larger than positive shocks required for a hike of a comparable size. In addition, negative rates should be floored by the storage cost of currency, another reason for asymmetric risks around zero. In any case, the market currently sees only a small chance of negative rates in the US (Chart 9). The end result is structural steepness of the curve at near-zero Fed Funds levels.

Don’t wait for the curve to invert

Even a casual look at other countries with near-zero policy rates confirms that the curve does not need to flatten significantly for a recession to occur. Consider Japan, a country with the longest zero-rate history. Japan had a recession in 1991-1993, which was preceded by an inverted curve, consistent with past US experience (Chart 10). But note the call rate was at 8% when the curve inverted. Since 1995, the call rate has not exceeded 50bp. Over that period, Japan had four official (announced by the Committee for Business Cycle Indicators) recessions, none of which was preceded by an inverted curve (Chart 10).

A number of other G10 countries adopted near-zero rate policy regimes since 2008 and experienced recessions since then. Some of these recession episodes are analyzed in Table 3. We use two methods to identify recessions: technical definition (at least two consecutive quarters of negative growth) and recession dates reported by Economic Cycle Research Institute (ECRI), which employs methodology similar to that of the NBER in the US. For each recession episode, we report the range of the 3m10s government curve and the policy rate observed for a year immediately before the beginning of a recession.

Again, an inverted curve did not emerge to signal an imminent recession. In fact, in some cases the curve ahead of recessions was steeper than in the US today. As an illustration, Chart 11 shows the historical German curve. Consistent with typical US experience, the curve flattened to extreme levels ahead of each of the pre-2009 recessions. However, Germany also had a technical recession in Q4 2012-Q1 2013 when the ECB rate depo rate was at zero. Not surprisingly, the curve remained steep before that recession. In fact, the curve did not flatten below 120bp in the one-year period ahead of the recession.

Adjusting the curve for zero-rate effects

Although the curve cannot be taken at face value in a near-zero rate regime, we believe it may still provide useful information about recession odds if adjusted for the zero bound effect. The idea is to estimate a model-implied curve that could be prevalent today if negative rates were just as feasible as positive. The curve adjusted in such a way may be directly compared to its historical distribution. As a result, it may be a better recession signal than the observed curve.

Turning to technical details, we model forward rates with a truncated (at zero) normal distribution, calibrated by matching its mean and standard deviation to forward rates and at-the-money option prices. We then compute adjusted forwards as the mean of the corresponding distribution without truncation (hence, using a symmetric distribution around the mean and allowing for negative rates). Although the choice of the truncated normal distribution is somewhat arbitrary, it provides a simple tool to model the core of our argument. Because very long-dated options are not liquid, we analyze 3m5s rather than 3m10s (normally used in academic literature) Treasury curve for this analysis. We found only a small deterioration in R2 statistics for recession forecasting probit models when the 3m5s curve is used instead of 3m10s. Consistent with intuition, the 3m5s curve adjusted in such a way has been significantly flatter than actually observed curve (Chart 12).

Technical factors contributed to Treasury curve steepness

Further, the Treasury curve may be currently skewed steeper by technical factors. Treasury bonds in the belly of the curve dramatically cheapened in the past few months, which is evident from extremely tight levels of swap and OIS/Treasury spreads. As a result, the Treasury curve now looks very steep to OIS. While the 3m5s Treasury curve is at 92bp, the corresponding OIS curve is only at 56bp (Chart 13). The likely reason for this is reserve selling of foreign central banks who need to support national currencies against the recent USD appreciation. International reserves of world central banks declined by about $1tn since September 2015. At the same time, the ability of dealers to absorb the supply has declined in recent years due to regulatory pressures on balance sheets.

Conventionally, academic literature on recession forecasting uses Treasury curve data. But the Treasury curve may not be the best measure of market expectations, presumably the key component of the curve predictive power. Because of the technical nature of the recent Treasury cheapening, the OIS curve should be a better measure of market expectations, and therefore may be more relevant for  assessing recession risks.

 

The curve may be priced for a recession

Applying our methodology to the OIS curve, we found that the adjusted 3m5s OIS curve at -30bp is already inverted. This suggests that the curve already could be priced for a recession (Chart 12). Granted, our methodology signaled a false alarm in 2012 when the curve was also inverted but a recession did not follow (Chart 12). However, at that time the curve flattened to extreme levels because of the forward guidance, an unprecedented event in the history of US monetary policy. In contrast, this time the curve flattened following the Fed hike, which looks more like a typical curve inversion episode. In fact, the Fed was hiking in all previous historical episodes where the curve inverted ahead of US recessions (Chart 8). From this point of view, the current curve flattening may be more worrisome.

Implied recession odds

Our economics team sees only about a 20% probability of a recession in the next year. They argue that the two most important causal factors in recession–aggressive Fed tightening in a battle against above-target inflation and very high oil prices–are not evident today. They also argue that both “real” and financial bubbles are small. The only sector that overexpanded in the recovery is the tiny oil and gas sector (about 2% of the economy at the peak) and the high yield sector overshot fundamentals, but it is much less important than the housing and equity market bubbles of the last two cycles.

Nonetheless, clearly markets are worried and an indicator we have developed confirms their concerns. To quantify implications from the inversion of the adjusted curve, we follow academic literature to compute model-implied recession probabilities from a standard probit regression based on the curve. We acknowledge this type of a model is highly simplistic and does not take into account all the complexities of today economic environment. Still, model probabilities may be interesting to know given the curve’s track record.

We estimated a standard probit model to pre-2009 sample when zero rates were not an issue. We then computed implied probability of a recession within next 12 months with different assumptions about the proper curve to be used in the current regime (Table 4). The model implies about 32% recession odds if the Treasury curve is taken at face value. Just using OIS instead of Treasury rates brings this probability to about 42%. Implied recession odds are as high as 64% if the adjusted OIS curve is used (Table 4).