James Bamford’s latest book, The Shadow Factory, about the National Security Agency shortly before and since the 9/11 attacks, leaves his first two re same (The Puzzle Palace and Body of Secrets) seeming quaint, jolly, the Good Old Days. That Obama has only elaborated what Bush-Cheney began means we are surely beyond the pale and point of return.
But for the moment, a look back, to the weeks preceding the attacks.
Mr Bamford writes that:
– Mohammed Atta & co bought their airline tickets August 25-29, 2001.
– Up until then, across the summer, Atta had been refusing pressure from his Al Qaeda contact to set the date of the attack and git it done.
The first point is in tune with the FBI’s public chronology of the alleged terrorists’ actions. But the second point is new to my eyes.
Mr Bamford writes that Atta, on July 8, with all his fellow hijackers now safely on US soil, flew to Spain to meet Ramzi Binalshibh — “his former roommate and the man who was helping bin Laden and Khalid Sheikh Mohammed coordinate the operation from his base in Germany.” (p59)
Binalshibh told Atta that bin laden wanted the attacks carried out as soon as possible because he was concerned about the large number of operatives in the US at the same time. But Atta said he was still unable to provide an exact date for the attacks because he was too busy organizing the arriving soldiers. In addition, he still needed to coordinate the timing of the flights so that the crashes would occur simultaneously. Atta said he needed about five to six more weeks before he could provide an accurate attack date. (p60)
The rationale for delay seems rather weak.
Note that Mr Bamford does not provide a single citation for the chapter in which he tells this story of how Atta finally came to select the date and set the attacks in motion. Given Bamford’s history, readers seem invited to assume the sources are NSA intercepts (phone calls and emails) and deep background interviews with the NSAyers who handled them.
This newly public story of the date’s selection folds into old thoughts about the leasing and securitization of the Twin Towers, a refinancing project with curious consequences which — in contrast to Atta — was racing across that summer toward the day of infamy in September.
Two things to note about the date of the attacks:
– The nexus of military exercises those early days of that week in September was such that most of the east coast was stripped of jet fighter protection. (Webster Tarpley’s book is perhaps the best source for this.)
– the complex deal that financed the long-term leasing of most of the Trade Center by Silverstein Properties Inc had only recently closed — on August 21 — when the Twin Towers were securitized in a bond issuance.
Housekeeping note: The leasing by SPI (agreed to in the spring and finalized on July 24) and the bond sale by its banker that followed in August, each encompassed WTC buildings 1 and 2 (the towers) and 4 and 5 — four of the seven that comprised the Trade Center complex. (References henceforth to “Twin Tower bonds” are to the whole package, ie, bonds based on the securitization of buildings 1, 2, 4, and 5.)
Not part of the deal were: Building 3 — a big hotel on site. Building 6 — the US Custom House. And building 7 — the Spook House, where about every police and secret police agency one might call to mind rented space.
WTC 7 is the odd man out for a number of reasons. It was not truly part of the WTC complex, having been built across the street during the 80s — by none other than Larry Silverstein, the principal of SPI. The building was then refinanced by a (separate) securitization and bond sale in 1999. And, of course, shortly after 5 pm on 9/11, the building, having suffered only minor damage in the attacks, suddenly collapsed in its footprint in what looks to have been a professional demolition.
And now, our featured presentation.
There are three details worth noting about the August securitization of WTC 1-2-4-5.
(1) The SECURITIZATION was RUSHED and SHABBILY DONE.
In particular, the insurance coverage for the buildings required by the securitization was inconsistent with the coverage required by the lease. And a good deal of the insurance coverage stipulated was not contracted before the securitization closed — even though such coverage was a precondition to the sale of the bonds.
And note that time just kept on flying: A big chunk of the stipulated insurance remained uncontracted when the jetliners arrived on 9/11.
All of this came out at the two insurance trials subsequent to the attacks. The insurance broker for SPI testified at gory length as to the chaos and unprecedented (in his experience) late summer rush to get the bond deal done without dotting Is and crossing Ts. (The best sources here are the insurance trade journals, which covered the trials in depth.)
(2) The KEY MONEY on the LEASE was SUBSTANTIAL.
When SPI finalized its 99-year managerial lease of 1-2-4-5 on July 24, it paid $491 million in cash to the Port Authority in key money.
SPI borrowed borrowed this key money (and more, $563 mm) the same day from its anchor banker, GMAC, the then-proud new-age investment bank run by General Motors. Henceforth much of the monthly rent paid by WTC tenants would go not to the PA or SPI but rather to GMAC, as interest on the loan.
EXCEPT that, a month later, GMAC got all its money back in a lump — by selling $563 million in Twin Tower bonds to institutional investors worldwide. Henceforth much of the monthly WTC rents would flow to these numerous, scattered investors, tagged as interest on their new bonds.
That is: The whole point of the securitization of 1-2-4-5 was to make GMAC whole by transferring the SPI key-money loan to the new bondholders.
(3) The SECURITIZATION had an UNUSUALLY LARGE RESERVE FUND.
That is, an unusually large amount of the proceeds of the bond sale were held in reserve by the bond trustee (Wells Fargo), rather than delivered to the issuer of the bonds (a new shell vehicle, more or less a “trust,” created to issue the bonds on behalf of GMAC).
This reserve fund came in handy when the business-basis of the bonds went up in smoke twenty days after they were sold — the most dramatic instance of “collateral decay” in finance history, one imagines. Despite that calamity, the reserve allowed the bonds to continue paying interest until insurance money started to dribble in.
Perhaps the import of the three points noted above is as clear as mud.
The gist is this: When the bonds were sold on August 21, it completed a two-step deal that:
(a) via the lease, took the Port Authority of NY & NJ — which owned the Trade Center and until July 2001 had always managed it — off the hook for a lot of headaches and for the next five years of rent on 1-2-4-5.
(b) via the August securitization, took GMAC — which had financed the leasing with (in essence) a bridge loan — off the hook.
The Port Authority was off the hook in two simple respects:
(i) The $491 million in key money it received at lease signing constituted over five years worth of rent on 1-2-4-5. If by chance the buildings were to disappear from the face of the earth tomorrow, well, the PA had five years to rebound. And as for the headaches …
(ii) The 99-year managerial lease transferred responsibility for rebuilding in case of mishap from the PA to SPI.
In short sum: The SPI lease had the effect of cushioning the Port Authority from the blast of 9/11.
And the bank that provided the financing to make it happen backed out of the deal twenty days before the jetliners arrived.
Readers of the news wondering or already persuaded that controlled demolition was employed on 9/11 might surmise that somebody wanted the Twin Towers to come down that day, but nobody wanted to destroy the Port Authority of New York and New Jersey in the process.
The leasing & securitization, willy nilly, served that end, by transferring the lion’s share of the risk of owning WTC 1-2-4-5 across the next five years from the PA to the bondholders, the insurance companies and SPI.
Funny — The first interest payment on the bonds was made on September 10. One imagines a proud bondholder, early the next morning, hanging up after confirming the payment with his broker and turning to his wife — “Honey, we got a piece of the Rock!” — while she aghast over the ironing board watches the North Tower burn.
And interesting — The Twin Tower bonds never defaulted. Interest continued to be paid out of the reserve fund, and then the bonds were called and cashed out early, when enough insurance money came in and was approved for the purpose. The bonds were built stronger than the towers, one might say.
To return, then, to the business of selecting a date.
As seen above, circa July 9 in Spain, Atta told Binalbshih he needed another five or six weeks to pick a date. In emails across the subsequent weeks (Bamford writes) Atta:
suggested that the attacks not happen until after the first week in September, when Congress reconvened. [ED: Again the rationale seems weak.] For months Binalbshih had been communicating bin Laden’s impatience and his desire for a date for the operation, and by mid-August Atta was ready to give it to him. (p71)
About three or five business days before closing a securitization, the “pricing” of the deal occurs. This is the final negotiation among the bankers, the rating agency analysts and (usually) the institutional investors who will buy the bulk of the bonds, which process, when complete, fills in all the blanks — dates, dollar amounts and percentage figures — in tune with current interest-rate and other market variables.
So — in Bamford’s “mid August,” when Atta was finally ready to give Binalbshih a date — the Twin Tower bonds were priced. And days later they were sold, on August 21, leaving GMAC whole and closing the two-step process of leasing the Trade Center for 99 years.
Then, Bamford writes:
With the date now set in stone, Atta again flew up to Newark [on August 23] to meet with Hazmi and begin coordinating the complex task of picking just the right seats on just the right flights on just the right type of aircraft … (p 71)
We all recall, I hope, Atta’s picture on the Able Danger corkboard in the Pentagon.
And anyone who has read Welcome to Terrorland by Daniel Hopsicker has reason to believe that Atta was playing at least two sides of the table in the so-called intelligence world.
So readers of the news may wonder:
– if the securitization was rushed and shabbily done because someone with the power to influence it, and with a wish to get GMAC off the hook, knew that the window in early September when the Air Force would be elsewhere was fast approaching; and
– if that same or a similar someone made sure that the reserve fund was fat enough to pay the interest on the Twin Tower bonds for a year or two; and
– if, in order to hit that window in September and to give GMAC time to close its deal, all across the summer the attacks were delayed — frustrating Al Qaeda central — by Atta’s colleagues/controllers somewhere within the world wide web of so-called intelligence operators. Maybe, for instance, the “Pentagon lawyers” who, we are told, turned off Able Danger in 2000 due to concerns for the civil rights of its targets.
Even if all those IFs are in fact counterfactual — it’s fascinating to learn (assuming Bamford is accurate) that Atta organized his calendar such that it fell into sync with those of the Air Force and the WTC leasing project, even as Al Qaeda Central pressed for attacks in summer.