Saturday, April 28, 2007

Active-duty officer criticizes handling of Iraq war

Active-duty officer criticizes handling of Iraq war
By Thomas Wagner
Copyright © 2007, Chicago Tribune and The Associated Press
Published April 28, 2007

BAGHDAD -- An active-duty U.S. Army officer has taken the unusual step of openly criticizing the way generals have handled the Iraq war, accusing them of failing to prepare their forces for an insurgency and misleading Congress about the situation here.

"For reasons that are not yet clear, America's general officer corps underestimated the strength of the enemy, overestimated the capabilities of Iraq's government and security forces and failed to provide Congress with an accurate assessment of security conditions in Iraq," Lt. Col. Paul Yingling wrote in an article published Friday in the Armed Forces Journal.

"In 2007, Iraq's grave and deteriorating condition offers diminishing hope for an American victory and portends risk of an even wider and more destructive regional war," he said.

Several retired U.S. generals have delivered similar criticism, questioning planning for the Iraq conflict as well as the management competence of former Defense Secretary Donald Rumsfeld.

But public criticism from an active-duty officer is rare and may be a sign of growing discontent among military leaders at a key time in the troubled U.S. military mission in Iraq.

In the article, Yingling, deputy commander of the 3rd Armored Cavalry Regiment, wrote that the generals went into Iraq prepared for a high-tech conventional war but with too few soldiers.

They also had no coherent plan for postwar stabilization and failed to tell the American public about the intensity of the insurgency, he wrote.

"The intellectual and moral failures common to America's general officer corps in Vietnam and Iraq constitute a crisis in American generalship," said Yingling, who has served two tours in Iraq as well as in Bosnia and the 1991 Persian Gulf war.

In February, the U.S. forces launched the Baghdad security operation, which calls for deploying about 28,000 additional American troops as well as thousands of Iraqi soldiers. Most will try to secure Baghdad.

Yingling welcomed the change but suggested it is too little too late.

During the past decade, U.S. forces have done little to prepare for the kind of brutal, adaptive insurgencies they are now fighting in Iraq and Afghanistan, Yingling said.

"Given the lack of troop strength, not even the most brilliant general could have devised the ways necessary to stabilize post-Saddam Iraq," he wrote.

Yingling said he believes that no single civilian or military leader has caused what he regards as the current failure in Iraq. Instead, he argued that Congress must reform and better monitor the system for selecting and promoting generals.

In Baghdad, U.S. spokesman Lt. Col. Christopher Garver said Yingling was expressing "his personal opinions in a professional journal" and the U.S. command is focused on "executing the mission at hand."

Ex-CIA chief accuses Cheney over Iraq

Ex-CIA chief accuses Cheney over Iraq
By Demetri Sevastopulo in Washington
Copyright The Financial Times Limited 2007
Published: April 27 2007 19:24 | Last updated: April 27 2007 19:24

George Tenet, the former Central Intelligence Agency director, has accused Dick Cheney, US vice-president, of making him the scapegoat for the decision to invade Iraq on the basis of flawed intelligence about weapons of mass destruction (WMD).

Mr Tenet, who ran the CIA from 1997 to 2004, came under intense fire for reportedly telling President George W. Bush in December 2002 that the US intelligence on Saddam Hussein’s WMD programme was a “slam dunk”.

Mr Tenet says his remark has been repeatedly taken out of context by Mr Cheney and Condoleezza Rice, secretary of state, in an attempt to justify the US decision to invade Iraq after it emerged that the intelligence on Iraq was flawed.

According to an advance transcript of a CBS interview scheduled to run to-morrow, Mr Tenet says: “The hardest part of all this has been just listening to this for almost three years, listening to the vice-president ... say ‘Well, George Tenet said slam dunk’, as if he needed me to say ‘slam dunk’ to go to war with Iraq.”

Mr Tenet, whose book At the Center of the Storm, goes on sale in the US on Monday, concedes that the CIA believed Iraq had WMD but says his “slam dunk” comment referred to the administration’s ability to make a public case for war.

“We can put together a better case. That’s what I meant,” said Mr Tenet.

Mr Tenet also disputes claims in Bob Woodward’s Plan of Attack that Mr Bush considered the “slam dunk” statement as “very important”. He said Mr Bush had already decided to invade Iraq in December 2002, two months before Colin Powell, then secretary of state, gave his now infamous presentation on Iraqi WMD before the United Nations.

According to the New York Times, Mr Tenet claims in his book that the administration never had a serious debate about the imminence of the Iraqi WMD threat.

The White House Friday rejected that claim, by suggesting Mr Tenet was not aware of the full extent of the debate.

Mr Tenet has been criticised for his role in allowing Mr Bush to claim in his 2003 State of the Union address that Iraq had attempted to purchase yellowcake uranium from Niger, which the White House later conceded was not backed up by US intelligence.

The administration is opposing attempts by a congressional committee to investigate the role of Ms Rice in allowing the famous “16 words” to appear in the State of the Union.

In his CBS interview, Mr Tenet says the CIA never tortured detainees but adds that the CIA’s “high value detainee” programme, which involved using controversial interrogation techniques such as “water boarding” on Khaled Sheikh Mohammed, the alleged mastermind of the 9/11 attacks, was extremely valuable.

Australia poised to ease uranium curbs

Australia poised to ease uranium curbs
By Raphael Minder in Sydney
Copyright The Financial Times Limited 2007
Published: April 27 2007 18:18 | Last updated: April 27 2007 18:18

Australia is set to take an important step on Saturday towards boosting its production and export of uranium, with the opposition Labor party expected to abandon its long-standing policy of restricting the mining of the ore.

Kevin Rudd, the Labor leader, intends to push through a proposal at the party’s annual conference to drop the “three mines” policy that Labor introduced in 1984. That policy has restricted uranium production to three specific sites.

The move is significant because, although the Liberal party leads the federal government, mining permits are handled by state governments, all of which are under Labor control.

The policy shift is being closely watched by many companies and governments. India, China, Russia and others hope to import more Australian uranium to help power their fast growing economies and their interest has helped boost uranium prices to record levels.

Alexander Downer, foreign minister, Friday said that talks were held this week with Russia on a supply agreement that would allow uranium shipments to Russian nuclear power plants. Further talks are to be held next month.

Prospects for an expansion of uranium mining have also spurred corporate consolidation in the sector.

Paladin Resources is hoping to complete the A$1.23bn (US$1bn, €750m, £511m) purchase of Summit Resources, which has a uranium deposit in the state of Queensland that it has not been able to exploit because of the “three mines’’ rule.

Areva of France this week acquired a minority stake in Summit, but said it would not mount a counter-bid.

Kim Beazley, the previous Labor leader, suggested the policy change last July, soon after John Howard, prime minister, called for Australia to better exploit its position as holder of the world’s largest uranium reserves in order to become an energy superpower.

Anti-nuclear protesters gathered Friday outside Labor’s conference in Sydney, calling for the mining restrictions to be maintained.

While the issue is expected to spark intense debate, it is thought that Mr Rudd will secure a comfortable majority.

Since his election as leader last December, he has managed to damp internal feuding having taken a commanding lead in opinion polls ahead of federal elections this year.

India and the US have been trying to negotiate a nuclear deal that could pave the way for India to import substantial quantities of uranium from Australia. Mr Downer this month told the Financial Times that a US-India deal was a prerequisite for any exports, as it would ensure international monitoring of Indian nuclear facilities.

Mr Howard has previously gone as far as suggesting that Australia should consider developing uranium enrichment activities, even if that might upset Washington’s efforts to contain nuclear proliferation worldwide.

US economic growth loses momentum

US economic growth loses momentum
By Krishna Guha in Washington
Copyright The Financial Times Limited 2007
Published: April 27 2007 18:06 | Last updated: April 27 2007 23:13

The US economy suffered a serious loss of momentum in the first three months of this year, new figures revealed on Friday, as growth fell to 1.3 per cent, its lowest in four years.

The annualised growth rate fell a full half-point short of market expectations. However, after an initial sharp response, financial markets recovered as investors took comfort in more detailed data suggesting that the underlying trajectory of the US economy was closer to 2 per cent growth.

Stocks closed slightly up on the day. Treasury bonds were largely unchanged, with 10-year Treasuries yielding 4.69 per cent. The dollar, which initially plunged 0.7 per cent to a new record low against the euro, pulled back to trade about 0.3 per cent lower.

The data show that unexpected weakness in net exports and government spending added to the anticipated severe drag on growth from housing construction during the first quarter.

Michael Mackenzie discusses surprisingly low GDP figures, and some positive US economic signals
Corporate spending was also subdued. But consumer spending remained very strong, with real personal consumption rising at an annualised rate of 3.8 per cent.

Most economists expect the surprise weakness in net exports and government spending – for which there is no obvious macro-economic explanation – will reverse in the months ahead.

Final sales to domestic purchasers – a figure that excludes volatile swings in net exports and in inventories – rose 2 per cent, essentially unchanged from the third and fourth quarters of 2006.

Art Hogan, chief market analyst at Jefferies & Co, said: “We expected the first quarter would be the slowest period of growth this year and investors expect a rebound in the economy.”

David Greenlaw, economist at Morgan Stanley, said his bank was now “upping our tracking estimate for second-quarter GDP from 2 per cent to 2.4 per cent”.

The main risk to the US economy continues to be from the housing slump, which showed no signs of abating.

Meanwhile, Erik Nielsen, an economist at Goldman Sachs, said there was no indication that the stronger euro was “biting” European growth.

Additional reporting by Ralph Atkins in Frankfurt, Richard Beales and Michael Mackenzie in New York and Peter Garnham in London

Intimidation won't solve immigration issue

Intimidation won't solve immigration issue
Copyright by The Chicago Sun-Times
April 28, 2007

Last fall, I did a story that took me inside Cook County Detention Center. Being in jail, even as a visitor, was a very intense experience, and I knew I had to calm down before I went back into the office.

Another person would have found a quiet place to reflect. Me, I needed to see the good side of life. So I headed over to Little Village to have a burrito across the street from the open-air mall off 26th and Albany. It was a nice sunny day, much like it was on Tuesday this week, and the mall is always pretty busy.

Families were out shopping then, too. The families are what I always like seeing when I'm in a largely Latino place like that mall. You'll see a gaggle of kids, siblings and cousins, mamas, the little grandma and an aunt or two, all out together. Watching the little children goofing around, hearing the women chatting together -- oh, and munching that burrito -- lifted my spirits.

So I can't even imagine the terror that innocent people felt on Tuesday when federal agents swooped down on that mall. Just think: One minute you're out casually shopping for a pair of shoes, and next thing you know, officers carrying high-powered rifles are barking orders and slapping plastic cuffs on you and your neighbors while they look for the suspected members of a phony ID ring. All this happening while your children are right there.

I have no problem with the U.S. Attorney's Office going after criminals. Those officers have a job to do. But I have a big problem in the way this operation was handled. Do you really think the feds would have carried out a similar operation on Michigan Avenue or at Woodfield mall? Of course not. But they had no problem descending like the Gestapo in what's probably Chicago's largest Latino community and treating everyone -- including law-abiding U.S. citizens -- like common criminals.

According to media reports, among those the feds were tracking down was a man they considered highly dangerous who had ordered the murder of a competitor. How did the feds know that the suspect wasn't armed while in the mall and wouldn't start firing back, even though women and children were all around? They didn't.

Those same media reports also have the U.S. Attorney's Office giving details of where the suspects lived and operated. Why couldn't this raid have taken place at one of those locations where only the suspects would be facing guns, not everyday people? It sure seems as if a lot of innocent people could have been spared the high drama and fear that Tuesday's raid brought.

But could that have been the point of this exercise? To try to scare the living daylights out of the Latino community right before the march in support of immigration reform that is to take place Tuesday? Was the federal government trying to get out the message that they came to the barrio once and nothing is stopping them from returning again and again? Maybe sending a little reminder that they've got the march in their appointment book, too?

Whether that was the intention or not, that's what's being heard loud and clear in Latino and other immigrant communities. This time Little Village. Maybe next time it'll be Chinatown. Better be careful up on Milwaukee Avenue. Watch out Devon Avenue.

So if you are a supporter of immigration reform and are tired of human beings being used as pawns in this political game, get yourself down to that march and rally Tuesday. If you love the freedom of this country, then don't let the Bush administration trample it.

It's time to stand up and show your political leaders that intimidation, scary as it can be, isn't going to work. They need to hammer out changes to the immigration laws --and now.

If the Little Village actions were someone's idea of sending a message, show 'em it didn't send immigrants and their supporters back into the shadows but out into the streets this Tuesday.

Friday, April 27, 2007

AIDS controversy dominates Abbott Labs' annual meeting

AIDS controversy dominates Abbott Labs' annual meeting
By Bruce Japsen
Copyright © 2007, Chicago Tribune
Published April 27, 2007, 12:21 PM CDT

Abbott Laboratories won't back away from its controversial decision to withhold drug applications in Thailand, Chief Executive Miles White told AIDS activists at the North Chicago company's annual shareholders meeting.

White, in one his most prominent public statements since the giant drugmaker became embroiled in a dispute with Thai officials over its pricing of the AIDS drug known as Kaletra, reiterated the company's determination to protect its intellectual property.

Early this year, Thailand said that it couldn't afford the price Abbott charges for Kaletra, and disclosed plans to issue what's known as a "compulsory license" for the drug. International trade law permits governments to bypass pharmaceutical patent protections under certain limited circumstances, and Thailand's threat represents a significant challenge to Abbott's patent protections.

Abbott responded to the threat by announcing it won't register any newly developed drugs in Thailand. That move will deprive Thailand of new drugs just coming to market, including a form of Kaletra that -- in contrast to the current form -- doesn't require refrigeration.

AIDS activists have condemned that action as "blackmail" and a threat to access, given Thailand's hot climate and underdeveloped healthcare infrastructure.

Activist groups had publicized their plans to demonstrate at Abbott's annual meeting, held today at the company's sprawling campus in Northfield.

Stockholders greeted White with loud applause, and at various times the crowd shouted down the protesters. Only a relative handful of activists actually entered the hall for the stockholder meeting, but a larger number was outside

White noted the company's strong financial performance, saying "our net earnings rose to a new high of $4.1 billion" in 2006.

Among the protesters was Jon Ungphakorn, a former member of Thailand's senate and a longtime AIDS activist. During the meeting's question and answer period, Ungphakorn stepped to the microphone to deliver a blistering broadside.

The pharmaceutical company, he said, is holding drugs "for ransom," and making "hostages" of patients in Thailand.

"Abbott is certainly no 'Promise for Life' in Thailand," he said, in a reference to the company's slogan.

"You're wildly mistaken," White responded, asking the challenger "Why would we submit" the new drug for approval, if Thailand plans to make generic forms of patented Abbott drugs anyway, he asked.

While the meeting was under way, AIDS activists were scheduled to be staging protests at Abbott facilities around the world.

Tribune offers big payday or mayday - 40% returns possible for employee owners; debt concerns loom

Tribune offers big payday or mayday - 40% returns possible for employee owners; debt concerns loom
By Michael Oneal
Copyright © 2007, Chicago Tribune
Published April 27, 2007

The significant risks and potential rewards facing Tribune Co. as a highly leveraged concern became clear this week when the company launched the first step in an audacious $8.2 billion gambit to take itself private.

Documents filed with a tender offer for roughly half its outstanding shares disclosed for the first time the financial assumptions Tribune and its advisers used in assessing the company's various options during its six-month auction process.

The documents also contain "pro forma" data showing what could happen to Tribune's financial picture when the company increases its debt to more than $13 billion after transferring ownership to an employee stock ownership plan and Chicago billionaire Sam Zell.

The welter of charts, text and tables paints a vivid picture of the rich upside and chilling downside presented by the leveraged ESOP structure. For employees, who will end up owning 60 percent of the new Tribune, the potential returns could be staggering -- better than those of either Zell, who will control 40 percent, or management, which will receive phantom stock equivalent to 8 percent of the company.

But if Tribune falters, as it did in the first quarter, those returns could evaporate quickly. And even if the company does just a little worse over the next five years, it could easily find itself rubbing up against debt covenants that could trigger a default, the documents show.

"That's not an unrealistic outcome given where we are today," said one source close to the company. "But we think we can do better than that."

The management projections used to analyze the deals assume Tribune's revenues will grow an average 0.7 percent each year between 2006 and 2011, to about $5.6 billion. This lack of growth helps explain why only 4 of the 31 groups that examined Tribune's books eventually made offers.

The projections assume that revenues from the company's newspapers, which include the Chicago Tribune and the Los Angeles Times, remain flat. The broadcast group, which includes Chicago's WGN-Ch. 9, would have to grow a little less than 2 percent annually under this scenario.

Operating cash flow, meanwhile, would grow about 2.7 percent, powered mostly by 20 percent growth in equity investments like Tribune's 42.5 percent stake in CareerBuilder and its one-third share of Food Network TV. Without those investments, overall cash flow would grow just 1.2 percent annually and publishing cash flow would essentially stay flat.

Despite these anemic projections, the Zell deal has the potential to pay off big for the company's new employee owners, the documents show.

Employees stand to reap returns of about 40 percent annually over the next 10 years, assuming that the company's shares are valued at about 8 times cash flow by the end of that period.

What does that mean for the typical employee? Say the employee makes $60,000 a year. In the first year of the deal, that employee's distribution from the ESOP would likely be 5 percent of his or her salary, or $3,000. Even if that $3,000 was all the employee ever got from the ESOP, it would grow to $86,766, compounded at 40 percent annually.

But if the employee got $3,000 distributions every year, that return would jump to almost $380,000.

Those kinds of returns are made possible by the leverage. Because the new company will have more than $13 billion in debt and a tiny sliver of equity initially, the company's stock will be worth very little in the beginning. But if the debt gets paid down and the company's balance sheet improves, its cash flow will grow quickly and the equity value will explode.

It's the same principle as taking out a mortgage. Equity grows as you pay down the loan, and if the market for houses increases, the return is all yours.

Zell's potential rate of return -- somewhere between 25 percent and 30 percent annually -- is significantly less than the ESOP's for two reasons. First, he is investing more upfront and second, he is buying his shares for $34 apiece while the ESOP purchased its stake for $28 a share.

These terms were negotiated by the ESOP trustee charged with guarding the employees' interest.

The documents show that in a version of the deal contemplated in late February, Zell's 10-year annualized return would have been in the mid-20 percent range while the employees' return was less than 20 percent.

Over the next month, the trustee pushed Zell to contribute more equity, and on the final weekend of negotiations the trustee squeezed out terms that allowed the ESOP to buy its stake at a $6-per-share discount, meaning the employees' return would always outpace Zell's.

The leverage that drives those returns was made possible because Zell's team figured out how to structure the deal so that the company will not have to pay taxes. The interest expense incurred as a result of the debt will slash Tribune's cash flow, but if all goes as planned, the elimination of taxes will make the debt affordable.

According to projections prepared by Merrill Lynch, the new Tribune would generate free cash flow available to pay down debt of close to $300 million in 2008. If the management plan holds up, that number would grow to more than $580 million by 2012, even accounting for capital spending of about $300 million.

The question posed by the company's dismal first-quarter results, however, is what happens if management's plan doesn't hold up?

Plagued by falling advertising and circulation revenue, Tribune's revenue fell 6 percent in the first quarter, which was 2 percentage points below management's assumptions in February, the documents show. And many in the industry are bracing themselves for declines in cash flow stretching into 2008 as readers and advertisers defect to the Internet and newspaper companies struggle to adjust.

Under a "sensitivity plan" included in the Merrill Lynch analysis, management tries to imagine a less rosy future. It assumes a 2 percent annual decline in publishing revenues, a drop in operating cash flow and flat revenues in broadcasting.

In that case, free cash flow to pay down debt would start close to $200 million in 2008 and drop to about $196 million in 2012. The amount of debt eliminated over that period would be just 17 percent, versus 48 percent under the better-case plan.

Consequently, those massive employee investment returns would shrink from 40 percent to somewhere between zero and 8 percent, depending on certain assumptions. If the results get any worse, which could happen given the industry's troubles, the returns could evaporate entirely and problems could escalate.

The documents show that if the company pays down its debt on a regular schedule, as envisioned in the management plan, it will easily fly below debt-to-cash-flow limits imposed by its bank agreements.

But under the sensitivity plan, one document shows, debt-to-cash flow could approach these limits as early as 2011. That might force management and Zell to sell assets or look for other ways to throw off ballast. And that assumes a 2 percent decline in publishing revenue. If the revenue dropped more, the threat of technical default could arrive even sooner.

The effect of all of this is that it puts enormous pressure on the company to turn around its advertising and circulation declines while squeezing more revenue out of TV stations that are depending on the unproven new CW Network to provide them programming.

Zell has handed Tribune employees the chance to make a bundle. But unless they find ways to solve problems that have confounded the industry for years they could easily be left holding the bag.

New name in chase for LaSalle - Local market leader JPMorgan Chase may enter bidding

New name in chase for LaSalle - Local market leader JPMorgan Chase may enter bidding
By Becky Yerak, Tribune staff reporter.
Copyright © 2007, Chicago Tribune - Bloomberg News contributed to this report
Published April 27, 2007

A marriage of LaSalle and Chase?

As ABN Amro Holding NV seeks more offers for its LaSalle Bank unit, JPMorgan Chase could jump into the bidding war, but any offer it made would raise regulatory red flags because of its potential impact on the Chicago banking scene, industry observers said Thursday.

At its annual shareholder meeting Thursday in Europe, ABN said it is "soliciting alternative bids" for LaSalle, which at the moment is slated to be sold to Bank of America Corp. for $21 billion.

But ABN is deep in the middle of the financial-services industry's biggest takeover battle, so LaSalle's future is uncertain.

On Monday, Barclays PLC offered $91 billion for ABN, and as part of the deal ABN agreed to sell LaSalle, Chicago's No. 2 bank, to Bank of America.

Two days later , Royal Bank of Scotland Group PLC and two other European banks offered $98.6 billion for ABN, hinging on the scuttling of Bank of America's purchase of LaSalle, which RBS covets.

Thursday, ABN defended its proposed sale of LaSalle to Bank of America but said it hopes "another bidder will come along," and it "wouldn't mind if it's Royal Bank of Scotland."

The receptivity to new offers immediately sent tongues wagging about who else could bid for LaSalle, and at least one analyst prominently mentioned Chicago's No. 1 and No. 3 banks.

Market share leader JPMorgan Chase or BMO Financial Group, parent of No. 3 Harris Bank, "could enter the arena" and bid on LaSalle, Sigrid Baas, an analyst for ING Wholesale Banking, said in a report Thursday.

Chase has Chicago-area market share of 15.3 percent, edging out LaSalle's 14.1 percent. Harris has 9.5 percent.

Although a Federal Deposit Insurance Corp. study has shown that Chicago is the banking industry's most competitive U.S. major metropolitan area, antitrust watchdogs would take a hard look at a combination of Chase and LaSalle, bank industry observers say.

Bank Advisory Group LLC, an Austin, Texas-based mergers and acquisitions consultant, said the Chicago area's score on a banking competitiveness index is 743.

Anything above 1,800 is considered "highly concentrated," or less competitive. "Less than 1,800 is considered not highly concentrated and, therefore, highly competitive," Bank Advisory President Stephen Skaggs said Thursday.

Chicago's score would rise nearly 75 percent, to 1,300, if Chase bought LaSalle, he said.

"That would cause somebody, somewhere, some heartburn," Skaggs said.

Even at 1,300, Chicago would remain a competitive banking market, but "you'd be talking about the banks with the No. 1 and No. 2 market shares combining, and I don't think that would be looked on very favorably," Skaggs said.

"Technically, by the numbers, it would not result in a concentrated market, but regulators would be more enthused if it was the second and third banks, or the second and fourth, or the first and fifth," he said. "The smell test on that would be a lot easier to accommodate than No. 1 and No. 2.

"Plus, there's no telling the heat that the Justice Department would get from the congressional delegation, so I don't imagine Chase is looking real hard at this."

Baylor Lancaster, regional banking analyst for CreditSights, agreed.

"There definitely would have to be some divestitures, especially in Chicago," Lancaster said. "And I'm not sure that would be Chase's first choice, since RBS and Bank of America are hot on the case" of LaSalle.

The bidding for LaSalle likely will come down to RBS and Bank of America, she said.

"You're already talking about a high price, so there are a limited number with those deep pockets," Lancaster said.

Citibank has the wherewithal and would benefit from LaSalle's branch footprint -- 140 locations in the Chicago area and 260 in Indiana and Michigan -- but "it doesn't seem like they've been really interested in this deal," Lancaster said.

Abol Jalilvand, dean of the business administration school of Loyola University Chicago, said Chase's newfound clout through LaSalle would set off antitrust alarm bells. But if it really wanted LaSalle, it would divest whatever it needed to get the deal done, he said.

Indeed, Chase has made dramatic deals in the past to gain a more dominant toehold.

When it bought Bank One in 2004, its Houston market share was set to shoot up to 47 percent, the Dallas Morning News reported at the time.

A trade publication later reported that Chase had transferred "several billion" in deposits out of Texas as activists raised concerns.

The latest FDIC numbers show that JPMorgan Chase has Houston-area market share of 29.3 percent, followed by Bank of America's 10.3 percent.

In New York, Chase had market share of 26.4 percent as of June 30, 2006. Last fall, it acquired the retail banking business of Bank of New York, which had market share of 4.5 percent. The deal gave Chase a total of about 800 branches in the New York area.

In the Chicago area, Chase has about 340 branches, so a deal for LaSalle likely would result in overlapping branches, raising the issue of layoffs.

Teen abortion rules are upheld - State House rejects easing restrictions

Teen abortion rules are upheld - State House rejects easing restrictions
By Jeffrey Meitrodt and Monique Garcia
Copyright © 2007, Chicago Tribune
Published April 27, 2007

SPRINGFIELD -- After a divisive and emotional debate, the House narrowly rejected a bill Thursday that would have made it easier for minors to get an abortion without telling their parents.

The legislation would have allowed teens to get an abortion after consulting with a medical provider, such as a physician, licensed nurse, clinical psychologist or clinical social worker. Parents would not have been informed of their daughter's decision to seek an abortion, even if the medical practitioner thought she was too immature to make an informed choice.

The measure, which failed on a 55-62 vote, would have overhauled a long-dormant state law that prohibits minors from obtaining abortions without notifying a parent, stepparent, legal guardian or grandparent. Minors could bypass the notification requirement by going before a county judge and explaining why they believed notification was not in their best interests. The notice requirement also would be waived for victims of sexual abuse, physical abuse or neglect by either parent.The General Assembly passed the law in 1995, but it never went into effect because the state Supreme Court refused to issue rules to govern how minors could seek waivers in special circumstances. The Illinois Supreme Court finally issued those rules last year, but a federal judge ruled in February that the law can't be enforced yet because rules and procedures have not been put in effect in all 102 counties. He did not rule on the law's constitutionality.

Rep. John Fritchey (D-Chicago) said he sponsored the bill because he thinks many young girls do not feel comfortable seeking advice from a forbidding authority figure like a judge and would prefer to discuss options with a family doctor or some other medical practitioner.

"It's not only bad girls who get themselves pregnant and are looking for an easy way out," Fritchey said. "It is good girls who can't bring themselves to tell their parents. That is what this is about."

Fritchey said the bill wasn't necessarily a "pro-choice bill" because medical practitioners would have been required to explain the medical consequences of abortion and discuss other options, including adoption or carrying the baby to term. Fritchey said he believed many young girls would ultimately decide against abortion once they got such advice.

But opponents assailed the proposal, saying parents have an absolute right to be involved in what could be the most important decision in their daughter's lives. They said it is ridiculous to restrict a minor's ability to get a tattoo or use a tanning bed without parental consent, but allow them to terminate a pregnancy without telling their parents.

"I gotta tell you, I am pro-choice," said Rep. Robert Molaro (D-Chicago). He said a parent should not be able to stop abortion but, as a father, "I thought I should be notified."

In other action, the House voted 72-43 to send the Senate legislation to create a cell-phone lemon law. The bill, sponsored by Rep. Susana Mendoza (D-Chicago), would allow customers to cancel their service contracts without paying early-termination fees if a phone must be replaced or repaired at least three times within a contract period.

The House also defeated two measures aimed at tightening gun laws. One would have required a private seller to conduct a background check before transferring ownership of a handgun to anyone except an immediate family member.

Opponents said the legislation was redundant since legal gun owners must have a Firearm Owner's Identification Card, which already requires background checks. The measure failed on a 58-59 vote.

The second measure would have required state police to regulate gun dealers, which is currently handled at the federal level. The bill's sponsor, Rep. Deborah Graham (D-Chicago), said federal inspectors are stretched too thin and allowing state police to randomly inspect gun dealers' records would prevent illegal sales. The bill failed 51-66.


States see new fights on abortion - Both sides expect push for restrictions

States see new fights on abortion - Both sides expect push for restrictions
By Judy Peres
Copyright © 2007, Chicago Tribune
Published April 27, 2007

Buoyed by last week's victory in the U.S. Supreme Court, abortion opponents in various states are dusting off old laws and drafting new ones to curb access to the nation's most controversial medical procedure.

In the past week, North Dakota's legislature passed a law that would ban virtually all abortions, the Missouri House voted to tighten regulation of abortion clinics and two federal appeals courts were asked to lift injunctions blocking enforcement of state abortion bans.

At the same time, state and federal abortion-rights advocates are stepping up their efforts as well and announced plans to seek laws guaranteeing women the right to terminate a pregnancy.

More than 70 members of Congress -- including Democratic Reps. Jesse Jackson Jr., Rahm Emanuel, Danny Davis and Jan Schakowsky of Illinois -- have signed on as co-sponsors of the federal Freedom of Choice Act. The bill would codify the protections conferred by the Supreme Court in its 1973 Roe vs. Wade decision -- protections the sponsors say have been eroded over the intervening years.

And on Wednesday, New York Gov. Eliot Spitzer said he would introduce legislation to shore up abortion rights in that state and officially decriminalize the procedure.

These are just the latest skirmishes in an ongoing battle. Lawmakers have already enacted hundreds of state laws restricting the circumstances under which abortions can be performed. Many of those laws have been upheld by federal courts, and activists on both sides predict an avalanche of new curbs in the wake of the high court decision upholding the federal Partial-Birth Abortion Ban Act.

More than half the states have bans on this kind of abortion procedure, but they were unenforceable under previous Supreme Court rulings. On Monday the justices ordered appellate courts in St. Louis and Richmond, Va., to reconsider Missouri's and Virginia's laws in light of last week's ruling on the federal statute.

Nancy Keenan, president of NARAL Pro-Choice America, noted that the federal ban says doctors who perform the outlawed procedure could go to jail for two years. But a doctor convicted under the Missouri ban would be guilty of "infanticide," a Class A felony punishable by up to life imprisonment.

While some abortion opponents have been working to overturn Roe directly, others have counseled that an incremental chipping away at abortion rights would be more effective.

In line with that strategy, more than two dozen states have enacted laws regulating facilities where abortions are performed, including such details as how wide the hallways must be and how frequently the air must circulate. More than 30 states have abortion-counseling laws, most of which mandate a waiting period before a woman can give her informed consent to the procedure.

As in most areas of the abortion debate, the two sides don't even use the same language. What anti-abortion groups call "measures prescribing minimum health and safety standards," abortion-rights advocates call "TRAP laws" (for Targeted Regulation of Abortion Providers). What the anti-abortion camp calls "informed consent," abortion-rights forces call "biased counseling" or "misinformed consent."

At least four states compel abortion providers to tell women that abortion increases their risk of developing breast cancer, although the National Cancer Institute has concluded there is no such link. Five states require women to be told that a fetus can feel pain, although that has never been conclusively determined. And four states say abortion leads to severe psychological distress, also disputed.

Karen Nelson, who had an abortion in 1978, wishes she had been told the procedure can be traumatic. Nelson, now a 50-year-old homemaker and mother of seven in Elkton, S.D., says her life went spiraling out of control. She dropped out of college and began drinking heavily, "trying to hide my guilt and shame."

Nelson believes the state should require abortion providers to tell women in advance that terminating a pregnancy may lead to depression and suicide, among other complications.

The South Dakota Legislature agreed, enacting a law in 2005 to require doctors to recite a list of the potential risks of abortion. The law, which has been blocked by court order, also says doctors must tell women contemplating abortion that the procedure "will terminate the life of a whole, separate, unique, living human being."

The U.S. Court of Appeals in St. Louis recently heard new arguments that the law should be allowed to stand. Its ruling is expected later this year.

Dispute on informed consent

On the question of informed consent to abortion, the Supreme Court has said a mandatory waiting period is permissible if it contains an exception for medical emergencies, and counseling materials are all right as long as they're relevant, truthful and not misleading.

That's the crux of the South Dakota case. Planned Parenthood, which is challenging the law, says the script doctors are required to recite -- including the notion that the fetus is a "living human being" -- is ideological, not factual. Its lawyers argued that the law violates the 1st Amendment free-speech right because it compels doctors to parrot state-sponsored ideology.

As "another aspect of informed consent," Denise Burke of Americans United for Life said at least eight states require that women seeking abortions be given the opportunity to see an ultrasound image of their abdomen. A law signed just last month in Mississippi says women must also be allowed to listen to the fetal heartbeat if it's audible.

That, too, seems like a good idea to Nelson.

"Had I seen an ultrasound of my pregnancy -- [had I seen] that this little baby was indeed a baby and not just a blob of tissue -- I know I would have chosen to carry it to term," she said.

Ultrasound requirements

Abortion-rights groups say requiring an ultrasound, which may not be medically necessary, increases the cost of abortion and creates a barrier for some.

Anti-abortion strategists admit that the main purpose of ultrasound tests for women seeking abortion is to persuade them to keep the pregnancy. Focus on the Family, which helps anti-abortion pregnancy centers purchase ultrasound equipment, calls it "an invaluable medical tool allowing us to highlight the reality of life inside the womb."

No ultrasound measures have been challenged, and abortion-rights lawyers have had little success invalidating other abortion regulations.

South Carolina in 1995 enacted detailed regulations for first-trimester abortions, which a federal district judge found to be an "undue burden" because they would increase the cost of abortions or could not reasonably be met. But an appellate court overturned that ruling, saying challengers would have to prove regulations were actually preventing women from getting abortions -- a standard that they could not meet.

Illinois' abortion laws are less restrictive than those of many states, said Lorie Chaiten of the American Civil Liberties Union.

Under a settlement reached between the state and the ACLU in 1989, abortion providers are no longer singled out for discriminatory treatment under the state's regulatory laws, Chaiten said. Illinois also has no "misinformed consent legislation" or compulsory waiting periods, she said. The parental-notice statute contains a 48-hour waiting period for minors seeking abortions, but that is still blocked by a court order.


U.S. economic growth slows to its weakest pace in 4 years

U.S. economic growth slows to its weakest pace in 4 years
Copyright by Reuters

WASHINGTON: Weaker exports and a steady slide in spending on homebuilding helped slow U.S. economic growth to its softest pace in four years during the first quarter, the Commerce Department reported on Friday.

Gross domestic product or GDP, which measures total goods and services output within U.S. borders, increased at a weaker-than-expected 1.3 percent annual rate in the three months from January through March.

That was a little more than half the fourth quarter's 2.5 percent rate and well below the 1.8 percent rate that Wall Street analysts had forecast GDP would expand. The last quarter when growth was weaker was in the first three months of 2003, when GDP expanded at a 1.2 percent rate.

Growth has been slowing since late last year under the impact of a hard-hit housing sector where rising defaults are taking a toll on the subprime lending sector and causing builders to scale back until inventories of completed but unsold homes are reduced.

Residential spending shrank by 17 percent in the first quarter following declines of 19.8 percent in the fourth quarter and 18.7 percent in the third quarter last year. It was the sixth straight quarter in which spending on residential construction contracted.

Treasury prices initially gained across the board on hopes that weaker growth might raise chances for lower official interest rates later this year but gave up most of the gains later because of concern about higher-than-forecast core prices in the GDP report.

Stock futures sank and the dollar's value fell to a record low against the euro, hurt by the possibility that U.S. interest rates might fall and so make the U.S. currency less attractive to hold than the euro.

Steve Barrow, a foreign exchange specialist with Bear Stearns in London, said the dollar was likely to remain under pressure out of concern about softening U.S. growth.

"You have a low GDP growth and a high deflator and that's the worst combination," Barron said. "The idea of stagflation will not be far from the market's mind."

The implicit deflator, one of several price measures within the GDP report, jumped at a four percent rate in the first quarter, move than double the prior quarter's 1.7 percent rate.

A price gauge favored by the Federal Reserve -- personal consumption expenditures excluding food and energy items -- increased at a 2.2 percent rate in the first quarter, slightly ahead of forecasts for a 2.1 percent advance.

That was up substantially from the fourth quarter's 1.8 percent rate and is likely to keep Fed policy-makers wary about the potential for a pickup in inflation.

But Pierre Ellis, a senior economist with Decision Economics Inc. in New York, said the GDP report's indication that consumers still were spending and the fact that growth was losing some steam could be helpful for policy-makers in the long run.

"The weakness in the total is actually a silver lining for the Fed because it reduces stress on resources without the number suggesting any fundamental new weakness in the economy," Ellis suggested.

The GDP report showed consumers increased spending in the first quarter at a 3.8 percent annual rate, down modestly from the 4.2 percent rate in the fourth quarter but a significant reservoir of strength since consumer spending accounts for the about two-thirds of national economic activity.

A second report, from the Labor Department, demonstrated corporate efforts to keep employee benefits damped, with overall employment costs rising a smaller-than-expected 0.8 percent in the first quarter.

That occurred despite a 1.1 percent gain in wages and salaries, the strongest since a 1.3 percent rise in the first quarter of 2001, as benefits costs edged up a scanty 0.1 percent, the least since a matching 0.1 percent rise in the first quarter of 1999.

The GDP report showed companies were wary about building up large inventories. Spending on inventories increased at a $14.8-billion rate in the first quarter, well down from the fourth quarter's $22.4 billion. It was the weakest pace of inventory addition since the third quarter of 2005, when companies drew them down at a $12.2-billion rate.

But business investment showed some signs of resilience, with spending up at a 2 percent rate in the first quarter, partly recovering from a 3.1 percent decline in the closing quarter of 2006.

Exports declined at a 1.2 percent rate in the first quarter, a sharp reversal from the fourth quarter's 10.6 percent advance. It was the first decline in exports since the second quarter of 2003 when they fell at a 1.7 percent rate.

George Tenet, in a new book, denounces Cheney over war in Iraq

George Tenet, in a new book, denounces Cheney over war in Iraq
By Scott Shane and Mark Mazzetti
Copyright by The International Herald Tribuine
Published: April 27, 2007

WASHINGTON: George Tenet, the former director of central intelligence, has lashed out against Vice President Dick Cheney and other Bush administration officials in a new book, saying they pushed the country to war in Iraq without ever conducting a "serious debate" about whether Saddam Hussein posed an imminent threat to the United States.

The 549-page book, "At the Center of the Storm," is to be published by Harper Collins on Monday.

By turns accusatory, defensive and modestly self-critical, it is the first detailed account by a member of the president's inner circle of the Sept. 11, 2001, terrorist attacks, the decision to invade Iraq and the failure to find the unconventional weapons that were a major justification for the war.

"There was never a serious debate that I know of within the administration about the imminence of the Iraqi threat," Tenet writes in a devastating judgment that is likely to be debated for many years.

Nor, he adds, "was there ever a significant discussion" about the possibility of containing Iraq without an invasion.

Tenet admits that he made his famous "slam dunk" remark about the evidence that Iraq had weapons of mass destruction. But he argues that the quote was taken out of context and that it had little impact on Bush's decision to go to war. He also makes clear his bitter view that the administration made him a scapegoat for the Iraq war.

A copy of the book was purchased at retail price in advance of publication by a reporter for The New York Times. Tenet described with sarcasm watching an episode of "Meet the Press" last September in which Cheney twice referred to Tenet's "slam dunk" remark as the basis for the decision to go to war.

"I remember watching and thinking, 'As if you needed me to say 'slam dunk' to convince you to go to war with Iraq,' " Tenet writes.

As violence in Iraq spiraled, beginning in late 2003, Tenet writes, "rather than acknowledge responsibility, the administration's message was: Don't blame us. George Tenet and the CIA got us into this mess."

Tenet takes blame for the flawed 2002 National Intelligence Estimate about Iraq's weapons programs, calling the episode "one of the lowest moments of my seven-year tenure."

He expresses regret that the document was not more nuanced, but says there was no doubt in his mind at the time that Saddam Hussein possessed unconventional weapons. "In retrospect, we got it wrong partly because the truth was so implausible," he writes.

Despite such sweeping indictments, Bush, who in 2004 awarded Tenet a Presidential Medal of Freedom, is portrayed personally in a largely positive light, with particular praise for his leadership after the 2001 attacks.

"He was absolutely in charge, determined and directed," Tenet writes of the president, whom he describes as a blunt-spoken kindred spirit.

But Tenet largely endorses the view of administration critics that Cheney and a handful of Pentagon officials, including Paul Wolfowitz and Douglas Feith, were focused on Iraq as a threat in late 2001 and 2002 even as Tenet and the CIA concentrated mostly on Al Qaeda.

Tenet describes helping to kill a planned speech by Cheney on the eve of the invasion because its claims of links between Al Qaeda and Iraq went "way beyond what the intelligence shows."

"Mr. President, we cannot support the speech and it should not be given," Tenet wrote that he told Bush. Cheney never delivered the remarks.

Tenet hints at some score-settling in the book. He describes in particular the extraordinary tension between him and Condoleezza Rice, then national security adviser, and her deputy, Stephen Hadley, in internal debate over how the president came to say erroneously in his 2003 State of the Union address that Iraq was seeking uranium in Africa.

He describes an episode in 2003, shortly after he issued a statement taking partial responsibility for that error. He said he was invited over for a Sunday afternoon, back-patio lemonade by Colin Powell, then secretary of state. Powell described what Tenet called "a lively debate" on the presidential plane, Air Force One, a few days before about whether the White House should continue to support Tenet as CIA director.

"In the end, the president said yes, and said so publicly," Tenet wrote. "But Colin let me know that other officials, particularly the vice president, had quite another view."

Tenet writes that the controversy over who was to blame for the State of the Union error was the beginning of the end of his tenure.

He also says in the book that he had been "not at all sure I wanted to accept" the Medal of Freedom. He agreed after he saw that the citation "was all about the CIA's work against terrorism, not Iraq."

He also expresses skepticism about whether the increase in troops in Iraq will prove successful. "It may have worked more than three years ago," he wrote. "My fear is that sectarian violence in Iraq has taken on a life of its own and that U.S. forces are becoming more and more irrelevant to the management of that violence."

Tenet says he decided to write the memoir in part because the infamous "slam dunk" episode had come to define his tenure at CIA.

He gives a detailed account of the episode, which occurred during an Oval Office meeting in December 2002 when the administration was preparing to make public its case for war against Iraq.

During the meeting, the deputy CIA director, John McLaughlin, unveiled a draft of a proposed public presentation that left the group unimpressed. Tenet recalls that Bush suggested that they could "add punch" by bringing in lawyers trained to argue cases before a jury.

"I told the president that strengthening the public presentation was a 'slam dunk,' a phrase that was later taken completely out of context," Tenet writes. "If I had simply said, 'I'm sure we can do better,' I wouldn't be writing this chapter - or maybe even this book."

Tenet has rarely spoken in public, and never so caustically, since stepping down in July 2004.

Asked about Tenet's assertions, a White House spokesman, Gordon Johndroe, defended the prewar deliberations.

"The president made the decision to remove Saddam Hussein for a number of reasons, mainly the National Intelligence Estimate on Iraq and Saddam Hussein's own actions, and only after a thorough and lengthy assessment of all available information as well as congressional authorization," the spokesman said Thursday.

The book recounts CIA efforts to fight Al Qaeda in the years before the Sept. 11 attacks and Tenet's early warnings about Osama bin Laden. He contends that the urgent appeals of the CIA on terrorism received a lukewarm reception at the Bush White House through most of 2001.

"The bureaucracy moved slowly," and only after the Sept. 11 attacks was the CIA given the counterterrorism powers it requested earlier in the year.

Tenet gives a vigorous defense of the CIA's program to hold captured Qaeda members in secret overseas jails and to question them with harsh techniques, which he does not explicitly describe.

He expresses puzzlement that, since 2001, Qaeda has not sent "suicide bombers to cause chaos in a half-dozen American shopping malls on any given day."

"I do know one thing in my gut," he writes. "Al Qaeda is here and waiting."

David E. Sanger contributed reporting from Washington and Julie Bosman from New York.

International Herald Tribune Editorial - Corporal Pat Tillman haunts the Pentagon

International Herald Tribune Editorial - Corporal Pat Tillman haunts the Pentagon
Copyright by The International Herald Tribune
Published: April 27, 2007

Despite multiple investigations and hand-wringing by the Pentagon, the full truth has not emerged about the death of Corporal Pat Tillman, the football star turned infantryman who was accidentally shot dead down by other American soldiers in Afghanistan.

Details dribble out about how quick Army brass were to burn his battle uniform, concoct tales of heroism and go into a full public relations blitz.

At a House of Representatives hearing, a buddy who witnessed Tillman's death told of being ordered not to tell his family that "friendly fire" was the cause. (An early report by this witness was doctored by someone in the military in awarding Tillman the Silver Star, a medal for heroism.)

The truth was evident, yet the family was not told for five weeks, until after the corporal was mourned in a nationally televised funeral as a soldier killed by terrorists.

The pain inflicted by the Pentagon's mendacious account was evident in the maternal gaze of Mary Tillman as she pleaded at the hearing for investigators to search unstintingly up the chain of command to track the cover-up that victimized her son. The truth remains elusive and eats at so many other tales of war.

Mary Tillman properly asks whether her son was exploited through official lies to offset such bad war news as prisoner abuses by the military. The Army has singled out a number of officers, including four generals, for possible disciplinary action, but says the cover-up goes no higher.

Congress must press forward, particularly in tracking an officer's memo sent to superiors in Washington a week after the tragedy to ask that word of the likely finding of friendly fire be quietly passed on to White House and Pentagon officials.

The nation, like the Tillman family, deserves nothing less than the full truth of war.

International Herald Tribune Editorial - Compounding the injustice at Guantánamo Bay

International Herald Tribune Editorial - Compounding the injustice at Guantánamo Bay
Copyright by the International Herald Tribune
Published: April 27, 2007

It can be hard to tell whom the Bush administration considers more of an enemy at the Guantánamo Bay detention camp: the prisoners or the lawyers.

William Glaberson reported in the International Herald Tribune on Friday that the Justice Department had asked a federal appeals court to remove some of the last shreds of legal representation available to the prisoners.

Under current rules, the mail between lawyers and inmates at Guantánamo Bay is checked for contraband, but not read. The lawyers are also allowed to review classified evidence against their clients, and there is no limit on the number of visits they can make.

The government wants the court to allow intelligence and military officers to read the mail sent by lawyers to their clients. Lawyers would also be limited to three visits with each client, and an inmate would be allowed only a single visit to decide whether to authorize an attorney to handle his case.

Interrogators at Guantánamo Bay have a history of masking their identities, so the rule would make it much harder than it already is to gain the trust of a prisoner.

Perhaps the most outrageous of the Justice Department's proposals would allow government officials - on their own authority - to deny lawyers access to the evidence used to decide whether an inmate is an illegal enemy combatant.

Not even the appalling Military Commissions Act of 2006, rammed through in the last days of the Republican-controlled Congress, goes that far.

The filing, with the federal appeals court in Washington, D.C., says lawyers have caused unrest among the prisoners and improperly relayed messages to the news media.

The administration offered no evidence for these charges, probably because there is none. This is an assault on the integrity of the lawyers, reminiscent of a former Pentagon official's suggestion that they are unpatriotic and that American corporations should boycott their firms.

The Justice Department also said lawyers had no right to demand access to clients at Guantánamo Bay because the clients are "detained aliens on a secure military base in a foreign country."

The Supreme Court has already rejected that argument, and President George W. Bush can hardly be worried about the sensibilities of Fidel Castro's government. (The camp is on land leased to Washington after the Spanish-American War.)

It's obvious why the administration is attacking the lawyers. It does not want the world to know more than it already does about this immoral detention camp. Brave lawyers have helped expose abuse and torture there, as well as detentions of innocent men - who are a large portion, if not a majority, of the inmates at Guantánamo Bay. The Bush administration does not want these issues aired in public, and certainly not in court.

Bush thinks that he has the right to ignore the Constitution when it suits him. But this is a nation of laws, not the whims of men, and giving legal rights to the guilty as well as the innocent is a price of true justice. The only remedy is for lawmakers to rewrite the Military Commissions Act to restore basic rights to Guantánamo Bay and to impose full accountability for what has happened there.

Financial Times Editorial Comment: US and Russia must modernise, not scrap, old pacts

Financial Times Editorial Comment: US and Russia must modernise, not scrap, old pacts
Copyright The Financial Times Limited 2007
Published: April 26 2007 20:05 | Last updated: April 26 2007 20:05

President Vladimir Putin has raised the stakes in Russia’s deepening conflict with the west over missiles, deterrence and security.

By suspending the 1990 Conventional Forces in Europe Treaty, the Russian leader hit at a key pact ending the cold war. Mr Putin complained the treaty was unfair because Nato states had not ratified it. Nato said it had not been ratified because Russia had not met key conditions – pulling troops from Georgia and Moldova.

The practical effect of Russia’s move will be small since the huge arms cuts envisaged by the treaty happened long ago and will not be reversed. Russia, with a defence budget only 5 per cent of the US’s, would see a new arms race as a disaster. Mr Putin also promised to continue the politically-sensitive withdrawal of troops from Georgia.

However, Thursday’s decision is strategically important because it signals Russia’s growing readiness to tear up the post-1990 diplomatic order. Moscow believes today’s strong Russia can revisit the deals done in the 1990s by a weak Russia. The Kremlin also argues the US has repeatedly acted unilaterally, including over Iraq and over recent plans for Czech and Polish missile defence bases. If the US can set aside bilateral or multilateral pacts, says Moscow, so can Russia.

These developments take the world into perilous waters. While there is no open ideological conflict between east and west, there are deep differences over democracy and the rule of law. It will be dangerous if these disputes prevent Russia, the European Union and the US co-operating on matters of mutual interest, including energy, the war against terrorism and nuclear non-proliferation.

The US is entitled to look after its own security. But it must accept security is often easier to build in partnership with others than alone. America, not Russia, was the first to pull out of a cold war arms pact when in 2001 it abandoned the 1972 Anti-Ballistic Missile Treaty. Washington’s recent effort to explain its missile defence plans to sceptical European states, including Russia, is long overdue.

Moscow also must take more account of the concerns of others when promoting its own security. Its former satellites understandably take fright at Mr Putin’s senseless sabre-rattling. When Moscow makes threats, they huddle closer to the west, and Russia accuses the US of increasing its influence on Russia’s borders. Tensions grow and everyone feels less secure. Instead of scrapping old arms control treaties, the US and Russia should be developing relevant new agreements.

Anti-graft experts warn Wolfowitz

Anti-graft experts warn Wolfowitz
By Krishna Guha in Washington
Copyright The Financial Times Limited 2007
Published: April 27 2007 00:35 | Last updated: April 27 2007 00:35

The crisis over Paul Wolfowitz’s leadership of the World Bank is destroying the bank’s credibility on governance and anti-corruption, virtually the entire team of bank managers working on these issues said on Thursday.

The warning came in a ­letter to Mr Wolfowitz and the bank’s board of directors from 46 senior bank officials, including Daniel Kaufmann, one of the world’s leading governance experts, and Sanjay Pradhan, director of the bank’s public sector governance board.

“The credibility of our front line staff is eroding in the face of legitimate questions from our clients about the bank’s ability to practise what it preaches on governance. In these circumstances, we cannot credibly implement the governance and anti-corruption strategy,” they wrote.

They stopped short of explicitly calling for Mr ­Wolfowitz’s resignation, but demanded that the bank’s governance standards be “upheld and enforced impartially...even when they touch the highest levels of this institution”.

Mr Wolfowitz is under pressure to step down over revelations that he arranged for a large pay rise for his girlfriend, a bank official, as part of a secondment.

Anti-corruption policies have been a priority for Mr Wolfowitz and many of those who signed the letter have championed them against sceptics within the bank.

The signatories include virtually all the career officials who drafted the bank’s contentious governance and anti-corruption strategy.

They said: “We believe that the governance and anti-corruption strategy is an essential part of the bank’s overall mission to reduce poverty.”

But they warned that “to implement the governance and anti-corruption strategy effectively, the bank needs to be recognised by all stakeholders as an institution maintaining the highest standards of integrity and governance”.

One bank official told the Financial Times that this meant not just getting rid of Mr Wolfowitz but also revamping weak governance arrangements at board level.

The letter referred to “reports from field offices of concrete cases where the bank’s policy dialogue and operational work on governance and anti-corruption are being undermined”.

No specific cases were listed in the letter but two bank officials told the FT that a bank staffer in Aceh, Indonesia, was mocked when he raised concerns about the use of rural housing funds. In another, two officials said, a staffer was asked by a policeman in the Democratic Republic of Congo whether reports about the president’s girlfriend’s pay were true.

Other officials said they were not being taken seriously by developing country governments when they raised governance issues.

Mr Wolfowitz’s spokesman could not immediately be reached for comment.

The letter came as the bank’s board and Mr Wolfowitz and his lawyer sparred over how and when he would testify before an investigating panel.

Putin in threat on European arms treaty

Putin in threat on European arms treaty
By Neil Buckley in Moscow and Daniel Dombey in Oslo
Copyright The Financial Times Limited 2007
Published: April 26 2007 12:10 | Last updated: April 27 2007 09:41

President Vladimir Putin used his final state-of-the-nation address on Thursday to accuse the west of "colonial-style" interference in Russia's domestic affairs and said Moscow would stop implementing an important arms limitation treaty.

Mr Putin also gave his clearest signal yet that he would stand down as Russian president next year. Next year's address, he said, "will be given by a different head of state".

Much of his 70-minute speech was devoted to plans to pour billions of dollars of Russia's mounting oil wealth into massive programmes to build new roads, housing, nuclear power stations, airports and shipping terminals.

But two sections highlighted the continued deterioration of relations between Russia and the west and Moscow's deep suspicion over the intentions of Nato and the US - and particularly of Washington's planned missile defence system. Mr Putin announced a moratorium on Russian observance of the 1990 Conventional Forces in Europe treaty, which imposes limits on non-nuclear arms in Europe. He threatened that Russia might withdraw from the treaty altogether unless Nato countries ratified a revised version agreed in 1999.

He linked the decision to US plans to site elements of its missile defence in eastern Europe, but also alleged that European countries were not fulfilling their obligations under the treaty.

"This gives us full grounds to declare that our partners are, to say the least, behaving incorrectly . . . using this situation to build up systems of military bases near our borders."

"This creates real dangers with unpredictable surprises for us . . . I consider it expedient to announce a moratorium on Russian fulfilment of this treaty until all countries of Nato, without exception, ratify this treaty," he said.

Speaking after a Nato foreign minsters meeting in Oslo, Condoleezza Rice, US secretary of state, said: "These are treaty obligations and everyone is expected to live up to treaty obligations." Jaap de Hoop Scheffer, Nato secretary-general, said the alliance's ministers had expressed "grave concern and regret" at Mr Putin's move.

But Sergei Lavrov, Russia's foreign minster, said Nato's expansion had rendered the CFE treaty "valueless".

Earlier, Mr Putin declared: "There is a growing influx of money from abroad, used for direct interference in our internal affairs."

He added:"There are those who, skilfully using pseudo-democratic phrases, would like to return to the recent past."

His words appeared a thinly-veiled reference to alleged western support for political opposition in Russia.

Senate opens new front in Iraq skirmish

Senate opens new front in Iraq skirmish
By Demetri Sevastopulo and Andrew Ward in Washington
Copyright The Financial Times Limited 2007
Published: April 26 2007 19:42 | Last updated: April 27 2007 06:07

The Democratically-controlled US Congress yesterday paved the way for the next battle with the White House over Iraq after the Senate approved legislation that includes a timetable for withdrawal from the war-torn country.

After the Senate voted 51-46 to approve the emergency spending bill, the White House said the legislation, which largely resembles the House version, was “dead on arrival”. President George W. Bush is expected to veto the legislation, which would force Congress to work on another bill.

The vote came as General David Petraeus, the top US commander in Iraq, said the overall level of violence in the country remained unchanged from January despite a recent decrease in sectarian killings.

The four-star general, who was appointed to manage the US “surge” in Iraq, also warned that the security situation could deteriorate before any improvement was seen. “This effort may get harder before it gets easier,” he said at the Pentagon.

Gen Petraeus is this week briefing politicians and military leaders in Washington about the surge that began in February.

“I think there is the very real possibility that there is going to be more combat action and that, therefore, there could be more casualties,” he said, adding that the full complement of additional US forces should be in place by mid-June.

Gen Petraeus pointed to some positive signs, including a significant reduction in sectarian killings and an increase in the number of weapons caches discovered. But he also warned that groups affiliated with al-Qaeda continued to have success with spectacular car bomb attacks.

In September Gen Petraeus and Ryan Crocker, the new US envoy to Iraq, will present Mr Bush with an assessment of whether the surge has been effective. Asked whether he could call for a withdrawal if he believed the surge was not working, Gen Petraeus said it was his duty to provide a forthright assessment.

He said interrogations of Iranians captured in Iraq this year had provided additional information about the involvement of the Iranian Revolutionary Guard in financing attacks in Iraq.

Following the Senate vote yesterday, Carl Levin, the Democratic chairman of the Senate armed services committee, said: “Mr President, the present course in Iraq is failing. The Iraqis are no closer to political reconciliation today than they were at the time the surge started. Instead of Prime Minister [Nouri al-] Maliki’s government becoming stronger, it appears that it is weaker.”

The House on Wednesday passed, by 218 votes to 208, its version of the emergency spending bill, calling for an end to combat operations by April 2008.

The legislation represents the most serious congressional challenge to Mr Bush’s policies in Iraq since the Democrats took control of Capitol Hill in January.

Democrats said the bill was likely to be delivered to Mr Bush on Tuesday, the fourth anniversary of his “victory speech” on the deck of the USS Abraham Lincoln beneath a banner declaring “Mission Accomplished”. A Bush administration official described the timing as the “height of cynicism”.

Democrats attack Bush on Iraq in debate

Democrats attack Bush on Iraq in debate
By Andrew Ward in Washington
Copyright The Financial Times Limited 2007
Published: April 27 2007 07:36 | Last updated: April 27 2007 07:36

All eight Democratic presidential hopefuls competed to strike the strongest opposition to the war in Iraq on Thursday evening as they held the first debate of what promises to be the longest presidential election campaign in US history.

The 90-minute event at South Carolina State University came more than eight months before the first primary elections and 18 months before the general election in November 2008.

Campaigning has started unusually early because the election is considered the most open in decades, with President George W. Bush required to step down after two terms in office and Vice-President Dick Cheney having ruled himself out.

There were no serious flashpoints among the Democratic rivals and all three leading candidates – Hillary Clinton, Barack Obama and John Edwards – produced solid performances with no glaring gaffes.

Mr Edwards, the former Senator and defeated vice-presidential candidate in 2004, highlighted Senator Clinton’s failure to renounce her vote for the war in Iraq by saying members of Congress who backed the invasion should “search their conscience”.

Ms Clinton, the Democratic frontrunner, said she would not have voted for the war had she known then what she knows now and vowed to end the war if elected president.

“If this president does not get us out of Iraq, when I’m president I will,” she said. “We have given the Iraqi people the chance to have freedom, to have their own country. It is up to them to decide whether or not they're going to take that chance."

Hopes are running high among Democrats that the party can reclaim the White House as the turmoil in Iraq sours public opinion towards Mr Bush’s Republican party.

Thursday’s debate came hours after the Senate joined the House of Representatives in voting to impose a timetable for US withdrawal from Iraq – the strongest challenge to presidential authority since the Democrats took control of Capitol Hill in January. Mr Bush has promised to veto the bill.

Mr Obama, Senator for Illinois, highlighted that he had opposed the war from the outset but said it would be wrong for Congress to cut off funding for the troops, as some Democratic activists favour.

Most analysts judged Ms Clinton to have been the most polished candidate and some felt Mr Obama, known for his sparkling oratory, was less fluent than usual.

He gave a particularly hesitant answer to a question about how he would respond to a terrorist attack, prompting him to clarify his response later in the debate with a more robust statement about his willingness to take military action when justified.

Discussion of serious issues such as Iraq, healthcare and gun control was interspersed with lighter moments, including a question to Mr Edwards about his recent $400 haircut, paid out of campaign funds. "That was a mistake, which we remedied," he said, before telling a story about his humble roots as the son of a textile mill worker. "I've not forgotten where I came from," he added.

Some spice was injected to the largely bland proceedings by Mike Gravel, a former Senator, who aimed a series of barbed quips at his better-known rivals.

"Some of these people frighten me, they frighten me,” he said, referring to the refusal by Mr Obama and others to rule out military action against Iran.

The other candidates are Bill Richardson, governor of New Mexico, Dennis Kucinich, an Ohio Congressman, and Senators Joe Biden of Delaware and Chris Dodd of Connecticut.

An opinion poll released this week showed Mr Obama closing the gap on Ms Clinton. The NBC News/Wall Street Journal poll of likely Democratic voters found that Ms Clinton’s support had fallen to 36 per cent, from 40 per cent a month ago, while Mr Obama’s had risen from 28 per cent to 31 per cent. Mr Edwards also saw his support rise from 15 per cent to 20 per cent.

Output and jobs pose statistical mismatch

Output and jobs pose statistical mismatch
By Krishna Guha
Copyright The Financial Times Limited 2007
Published: April 26 2007 19:34 | Last updated: April 26 2007 19:34

If you believe the official statistics, something very strange is happening in the US economy. Output growth is bouncing along at about 2 per cent – below almost every economist’s estimate of US potential growth – but unemployment is not going up. In fact unemployment ticked down in March to 4.4 per cent.

This is odd, since one of the oldest rules of economics, Okun’s law, implies that, when output grows by less than its potential growth rate, unemployment should go up (to be precise, it should rise relative to the natural unemployment rate).

There are essentially three possible explanations for the output/unemployment mismatch. The first is that the official statistics are understating the true unemployment rate – perhaps because of difficulties tracking the employment status of illegal migrant workers.

This is possible, though the unemployment rate is based on a household survey that should catch all types of worker.

The second is that the official statistics are underestimating the true growth rate of the economy. Economists normally cite gross domestic product – an output-based measure – as the most reliable measure of economic activity.

However, there is another estimate of economic activity called gross domestic income – an income-based measure.

In principle, after all appropriate revisions, the two should add up to the same thing. In practice the two series often diverge.

Over 2006 as a whole, and also in the second half of the year, GDI rose more rapidly than GDP. This may indicate that the GDP series is understating growth, possibly because of difficulty capturing small businesses and start-ups in service sectors.

If GDP is later revised up, it would result in better productivity figures for recent months.

However, if both the unemployment and output statistics are correct, only one possible explanation remains: US potential growth has fallen sharply, at least in the very short term.

First quarter GDP figures to be published on Friday are likely to show productivity growth close to zero year-on-year . The question is whether this decline is essentially cyclical – due to labour hoarding as the economy slows – or in part at least the result of a decline in the trend productivity growth rate, which would help determine the potential growth rate of the economy going forward.

When the economy first dipped below trend in mid-2006, the cyclical explanation looked the most plausible. As every month passes, though, it becomes harder to argue that it is simply a result of time lags before companies ditch surplus workers.

This might still be the case. Construction firms are still holding on to a surprisingly large number of workers, given the collapse in new home sales. This is holding down the overall unemployment rate and also depressing economy-wide productivity measures.

Peter Hooper, chief economist at Deutsche Bank Securities, says falls in construction employment tend to lag behind falls in total construction activity by two quarters – or six months. He says it is “still too soon” therefore to dismiss the notion that the weakness in productivity is essentially cyclical and will be short-lived.

On the other hand, surprisingly weak business investment could be signalling that companies in a wide range of sectors outside construction do not see opportunities to make productivity-enhancing investments.

There is always the possibility that they could be incorrect about the scope for such investments. But even if they turned out to be wrong, sustained underspending on capital goods could result in a lower speed limit for the economy in the medium term (in the long run, technology wins out).

Most Federal Reserve policymakers have already revised down their base case estimate of potential growth from 3-3.25 per cent a year or two ago to 2.75-3 per cent today. They may need to incorporate into their thinking some risk that potential growth could in fact be still slower – perhaps 2.5 per cent or even less.

What a lower rate of growth of productivity, and therefore of potential output, would mean for interest rates is less obvious than it might seem at first glance.

As Ben Bernanke has said in speeches both as a governor and as Fed chairman, the immediate implications of a step-change in productivity growth on rates depend on the extent to which consumers and businesspeople factor it into their calculations.

In the late 1990s productivity rose, but businesses and consumers quickly factored all or more of the benefit into their near-term spending decisions, putting upward pressure on inflation.

In the early 2000s productivity rose again, but businesses and consumers were slower to factor it into their spending activity, putting downward pressure on inflation.

If the trend rate of productivity growth has now fallen significantly, the Fed rate response will depend on whether consumers and businesspeople figure this out and alter their spending behaviour, or continue to base today’s spending decisions on over-optimistic expectations of the future.

How Chicago can lose its bid for the 2016 Olympics

How Chicago can lose its bid for the 2016 Olympics
Copyright by The Chicago Sun-Times
April 27, 2007

Like most Chicagoans, I believe that this city should win the big prize in 2009 when they choose an Olympic site. Only Rio can beat Chicago for the beauty of its setting. The trouble with its beaches is that large numbers of teens with automatic weapons are up in the favillas waiting for opportunities to terrorize the city. None of the other contestants has a plan like Chicago's to put all the venues within a fairly compact area. Chicago is a fascinating and variegated city despite the constant putdowns from New York, which blew its opportunity to have the Olympics.

However, there are a number of conditions that have to be met before Chicago can be hopeful about victory.

With advent of new leadership, one hopes that the few rogue cops in the Police Department will be brought under proper control. Any more misbehavior, and the Olympics will be in grave jeopardy. Moreover, the city must convince African Americans that it does not intend to take away Washington Park from them. ''White folk want to take back the South Side," representatives of the Washington Park Forum argued on public radio the other night. The Olympic planners must convince them that there is no such plot.

Chicago officials must deal with those problems. The more serious ones are beyond the city's control. Many people in other countries are convinced that Americans are "cowboys" who swagger around with guns, much like the Earps and the Clantons did in Tombstone in days of yore, or various Italian mobs did during Prohibition under the aegis of Chicagoan Al Capone. The "Outfit" (a k a "The Boys on the West Side") is still alive, but it is elderly, conservative, and generally deplores violence. Yet the United States is a heavily armed country in which crazies can buy guns almost at will and use them for mass murders like the horror at Virginia Tech last week. One more such incident of mayhem, with overweight cops rushing across campus cradling automatic weapons, searching for someone to shoot, and Chicago's Olympic bid, I fear, is sunk on arrival.

Since the National Rifle Association won't let us control the sale of guns, there is always the possibility of another spree of killing. Some NRA enthusiasts suggested -- seriously, I fear -- that the killing wouldn't have happened if some of the endangered students in the classrooms had their own guns to pull out and shoot back! Tombstone seems to be their idea of an appropriate social order.

The most important condition for a successful Chicago bid, however, is that the new president, whoever he or she may be, will present an image of the United States not as the only superpower in the world (a pretty weak superpower just now!), but as the sensitive and intelligent leader of the free world that it was in the time of the Eisenhower, Kennedy and Clinton administrations.

The president of the United States must show that he realizes he's the leader of the Free World and not the cowboy-in-chief of the only superpower. While we were grieving for the dead in Blacksburg, in a single day almost 200 people died in one car-bomb explosion. A distraught man shouted at the camera, "The Americans did this!"

America bungled into an unjust war and was incompetent in its attempts to recreate order. Still is, in fact. If the new president seems to the rest of the world to be one more cowboy-in-chief, Chicago can forget about the Olympics, and the United States about much more than that.

Thursday, April 26, 2007

Congress reopens discussion on Puerto Rico's status

Congress reopens discussion on Puerto Rico's status
By Tamara Lytle | Washington Bureau
Copyright by The Orlando Sentinel
Posted March 22, 2007, 7:59 PM EDT

Congress reopened the heated debate Thursday over Puerto Rico's political status, beginning hearings that could lead to action in the House this year.

People on various sides of the dispute over whether the island should be a separate nation, a state or a new type of commonwealth started off agreeing on a few key points.

One is that mainlanders of Puerto Rican descent should be allowed to vote if the three options reach a referendum. In Orlando, that would include qualified voters among the 200,000 Puerto Ricans in the metropolitan area.

Another is the acknowledgement that Puerto Ricans are not happy with the current commonwealth setup in which they are U.S. citizens but do not have a vote in Congress and in presidential elections.

Several lawmakers and activists also agreed Thursday that the White House has not taken an active enough role. Maggie Grant, White House director of intergovernmental affairs, was invited to testify Thursday at the hearing of the House Subcommittee on Insular Affairs but did not.

Grant led a White House task force that proposed a two-part vote on the island's status that critics say is rigged in favor of statehood.

Donna Christensen, a delegate from the Virgin Islands who chairs the subcommittee, and Rep. Nick Rahall II, D-W.V., both said they were disappointed with the White House for not showing up and hoped the Bush administration would testify at the next hearing on April 25.

"I hope that this does not mean that their intention is to drop that bombshell and disappear," Christensen said of the task force report. Christensen favors legislation preferred by commonwealth supporters.

That bill would allow Puerto Ricans to convene a constitutional convention where they would choose the options voters later would have to shape the island's political future.

Eduardo Bhatia, who runs the Puerto Rico governor's Washington office, said the lack of White House testimony Thursday showed "there should be no doubt now that the White House has turned its back on the report by the 'President's task force on Puerto Rico's status.'."

Puerto Rico's congressional delegate, Luis Fortuño, he said, "has gone out of his way to have the White House adopt that report. He even acknowledged meeting with Maggie Grant last week to try to get her to testify."

White House spokesman Blair Jones said Grant had never agreed to testify at the hearing. "We are currently reviewing the pieces of legislation that were discussed," Jones said.

Much of the focus Thursday was on the constitutionality of the two bills in Congress. The idea backed by statehood advocates and recommended by the White House task force would pit commonwealth against the combined supporters of statehood and independence.

If commonwealth lost, as polls and previous votes show it might against the combined forces of the other two sides, a second vote would be held between statehood and independence. Independence is the least popular of the three options with single digit support. Critics say that system unfairly stacks the deck against commonwealth.

The other bill would allow a convention at which Puerto Ricans from the island and the mainland would decide on the options for voters. Critics say commonwealth advocates want to propose something that would never be accepted by Congress, such as a relationship that would allow Puerto Rico to reject U.S. laws and court decisions but still have citizenship and tax benefits.

Eni Faleomavaega, congressional delegate from American Samoa, said Congress has become bogged down worrying about whether Puerto Rico would vote Democratic or Republican if it became a state. Hawaii and Alaska were admitted together as states with the assumption that Hawaii would be Republican and Alaska would be Democratic, but the reverse has happened.

Rep. Patrick Kennedy, D-Rhode Island, said the island is large enough to have seven voting members of Congress if it became a state, instead of one non-voting delegate.

As he spoke, the buzzers of the House public address system and pagers of lawmakers sounded with notification a vote had begun and lawmakers began to leave the hearing to go to the House chamber. "He doesn't get to vote," Kennedy said of Fortuño. "If you want to cut right through all of the talk, that's where the bottom line is."

Tamara Lytle can be reached at 202-824-8255 or

International Herald Tribune Editorial - Guns and more guns

International Herald Tribune Editorial - Guns and more guns
Copyright by The International Herald Tribune
Published: April 26, 2007

By now, the logic is almost automatic. A shooter takes innocent lives, and someone says that if the victims had been armed, this wouldn't have happened. The only solution to a gun in the wrong hands, it seems, is a gun in the hands of everyone.

That's the state of the debate over gun control in the United States today. The National Rifle Association and the gun lobby have silenced every legislature in this country. Instead of stricter laws, tighter controls and better background checks, the gun lobby proposes more guns. And what the gun lobby proposes, lawmakers deliver.

Seung-Hui Cho bought his guns illegally, though with the appearance of legality. He slipped through a loophole, through a disconnect between the way Virginia defines a disqualifying mental incapacity and the way the federal government does. After the fact, the loophole is self-evident, and it's tempting to believe that now political leaders will work harder to keep people who are dangers to themselves from becoming dangers to others by buying guns. But the laws are as fragile and imperfect as they are because that is how the gun lobby wants them - and it is paying good money to keep them that way.

Those gun advocates who believe that the Second Amendment confers the right to carry a gun in public are quick to point out that they are law-abiding, decent citizens trying to protect themselves and their families in a world gone mad. But, of course, the guns can't tell the difference. Arming more people would be a recipe for disaster.

True safety lies in the civility of society, in laws that protect all of our rights and in having law-enforcement officers who are trained in the use of deadly force, then authorized to apply it in rationally defined situations. It is the gun lobby's efforts to weaken the gun laws that makes a tragedy like the one at Virginia Tech possible.

International Herald Tribune Editorial - Ranting at reality on Iraq

International Herald Tribune Editorial - Ranting at reality on Iraq
Copyright by The International Herald Tribune
Published: April 26, 2007

If President George W. Bush and Vice President Dick Cheney believe the belligerently partisan and misleading things they have been saying about Congress' war spending bill, their grip on the few options left in this disastrous war is even more tenuous than we had guessed.

The sooner Bush and his allies drop the pretense that military victory is still possible in Iraq and their charges of "defeatism" against those who know better, the closer the United States will be to rescuing what can still be rescued from the debacle.

Obviously, the White House and Congress will eventually have to arrive at some kind of compromise. But that compromise cannot be on the "my way or the highway" terms Bush is demanding. The fact is, Congress has served the country well by finally forcing open debate about how America can best extricate itself from Iraq while minimizing the long-term damage to itself and the Iraqi people.

The "dramatically different" military strategy Bush now claims to be carrying out in response to the frustrations voters expressed in last November's election is nothing fundamentally new at all. It is just an escalated version of the failed approach - 99 parts military - that the administration has clung to for the past four years.

It is actually Congress that is proposing a different and healthier approach by insisting on a serious political strategy, one that requires a genuine turn from the deliberately divisive policies of the radical-Shiite-led Iraqi government, policies that have been fueling civil war.

The war spending measure that the White House is now so frantically demonizing requires Bush to demand that the Iraqi government finally demonstrate measurable progress toward more conciliatory policies on oil, policing and employment discrimination.

Without such policy changes, American troops cannot hope to hold Iraq together, no matter how many thousands more are sent and how long they are ordered to remain. To give added force to American calls for political conciliation, the legislation links a specific timetable for the phased withdrawal of American combat troops to political progress.

If Bush has problems with the withdrawal dates Congress proposes, those can be negotiated. But if he refuses to insist on policy changes from Baghdad and acts as if American troops can stay in Iraq indefinitely, he throws away all leverage. That invites the worst kind of endgame: more chaos inside Iraq and, we fear, more chaos for the region when American troops leave, as they inevitably will.

The Short View By John Authers 4-26-07

The Short View By John Authers
Copyright The Financial Times Limited 2007
Published: April 26 2007 03:00 | Last updated: April 26 2007 03:00

Needed: one bucket of cold water. The Dow Jones Industrial Average, the world's best-known stock market benchmark, passed 13,000 for the first time early yesterday. It was a symptom of the air of optimism in Wall Street. But ultimately a landmark for the Dow signifies little or nothing.

This column has addressed the Dow's technical limitations before. It is weighted by share price, not market value, so the biggest companies do not have the biggest impact. A third of the 1,000 index points by which the Dow has increased since it passed 12,000 last October came from just four companies - Altria, Boeing, Honeywell and ExxonMobil.

It is too heavily weighted towards industrials to be a barometer of corporate America. But with constituents such as Citigroup, Wal-Mart, Microsoft and McDonald's, it is not a true industrial index either.

It is not even a true benchmark for "mega-cap" large companies. These are under-performing but you need the Russell Top 50 index, up only 1.6 per cent this year, compared with a 4.2 per cent rise in the Dow, to tell you this.

Its defenders point out that the Dow continues to be correlated closely with the S&P 500, by far the most important index in terms of the money linked to it. But that acknowledges the importance of the S&P, which needs to grow only 2.7 per cent to set its first record high since 2000 - a much more important event.

Ironically, another Dow Jones benchmark set up at the same time as the Industrials may be more interesting. The 20-stock Transportation Average is also at a record high. It is up 14 per cent for the year - 10 percentage points better than the Industrials.

Transport stocks are highly exposed to the global economy, and a joint high for Industrials and Transportation is traditionally viewed as a very bullish indicator. It at least suggests that if there is a risk at present, it is of overheating, not a slowdown. That, maybe, is of some interest.