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International Herald Tribune Editorial - America's misery strategy

2007-08-10T07:22:00.000-07:00

International Herald Tribune Editorial - America's misery strategy
Copyright by The International Herald Tribune
Published: August 9, 2007

The path the United States has set on since the defeat of immigration reform in the Senate in June enshrines enforcement and punishment above all else. It is narrow, disruptive and self-defeating. On top of that, it won't work.

What it will do is unleash a flood of misery upon millions of illegal immigrants. For the ideologues who have pushed America into this position, that is more than enough reason to plunge ahead.

The latest phase of the crackdown, expected to be announced this week, would require employers to resolve discrepancies between their employee records and those of the Social Security Administration. If the data don't match, presumably because a worker is an illegal immigrant using a false number, the worker must be fired. There are millions of people in thousands of workplaces who could be caught in that net, and the government is promising to start dragging it zealously, with stepped-up raids around the country. "We are tough, and we are going to be even tougher," said a spokesman for the Department of Homeland Security.

Toughness is now the mantra at every level of government. The Senate had struggled for years to erect the immense framework of bipartisan, comprehensive immigration reform, coupling stricter enforcement with a citizenship path and an orderly flow of workers. But restrictionists pushed the unwieldy structure over, and now even its architects have fled the scene.

Senator John McCain, trying to keep his presidential hopes aloft by jettisoning his courage and good sense, has leapt to the enforcement barricades, joining Senators Jon Kyl and Lindsey Graham in sponsoring a bill that is essentially a Minuteman's to-do list of fence-building and punishments. He has shamefully repudiated his commitment to giving illegal immigrants a way to get right with the country.

The federal government's abandonment of comprehensive reform has been matched by unprecedented crackdowns at the state and local level. Lawmakers this year have introduced more than 1,400 immigration-related bills in all 50 states, according to the National Conference of State Legislatures, and enacted 170 of them. Many of the bills severely restrict where immigrants can live and work, and leave them vulnerable to exploitation and fearful of the police. It's the federal approach of raids and aggression, metastasized across the continent.

America will have a long time to watch this approach as it fails. The politicians who killed the Senate bill for offering "amnesty" have never offered a workable alternative. Their one big idea is that harsh, unrelenting enforcement at the border, in the workplace and in homes and streets would dry up opportunities for illegal immigrants and eventually cause the human tide to flow backward. That would be true only if life for illegal immigrants in America can be made significantly more miserable than life in, say, rural Guatemala or the slums of Mexico City. That will take a lot of time and a lot of misery to pull that off in a country that has tolerated and profited from illegal labor for generations.

The American people have supported reform that includes a reasonable path to earned citizenship. Their leaders have given them immigration reform as pest control.

Democratic Candidates Address Gay Rights Issues - First-Ever Televised Presidential Forum Underlines Increasing Importance of Community in Elections

2007-08-10T07:14:00.000-07:00

Democratic Candidates Address Gay Rights Issues - First-Ever Televised Presidential Forum Underlines Increasing Importance of Community in Elections
By Perry Bacon Jr.
Copyright by The Washington Post
Friday, August 10, 2007; Page A07

LOS ANGELES, Aug. 9 -- At the first-ever televised presidential forum devoted to gay rights issues, the Democratic front-runners, Sens. Hillary Rodham Clinton (N.Y.) and Barack Obama (Ill.), were sharply questioned on why they do not support same-sex marriage, while the two joined the other candidates in backing civil unions and the end of the "don't ask, don't tell" policy on gays in the military.

Obama said it is less important to focus on the semantics of the word "marriage" than to focus on equal rights, and Clinton -- responding to a comment by singer Melissa Etheridge that gays were "thrown under the bus" during Bill Clinton's administration -- said "I am a leader now" on gay rights.

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Activists were even more frustrated with New Mexico Gov. Bill Richardson, who when asked whether people are born gay or choose to be, said, "It's a choice" and later explained, "I'm not a scientist."

At the two-hour event in West Hollywood, Obama was asked several times why he would not back same-sex marriage, and he pledged to ensure that all same-sex couples have the same rights as married couples, the stance adopted by most of the Democrats.

"Semantics may be important to some," he said, adding that if gay couples had equal rights, "then my sense is that's enormous progress."

The forum, organized by the Human Rights Campaign and Logo, a gay-themed television network operated by MTV, underscored the increasing importance of the constituency to the Democratic Party. When a similar forum was held in 2003, one of the top contenders, then-Sen. John Edwards (N.C.), did not attend, and the event was not televised.

This time, Edwards appeared, along with Obama and four other Democratic candidates who each spent more than 15 minutes taking questions from a four-person panel that included Joe Solmonese, president of the Human Rights Campaign, and Etheridge.

When pressed on gay marriage, Edwards said, "My position on same-sex marriage has not changed." He then used the question to challenge the Clinton administration on its approach to gay rights -- and by implication to challenge his rival, Sen. Clinton. " 'Don't ask, don't tell' is not just wrong now, it was wrong when it began," Edwards said.

Clinton took a stance similar to Edwards's and Obama's, not backing marriage but saying she wanted same-sex couples to have equal rights. She also said states were making better progress on gay rights than the federal government.

"I've also been a very strong supporter of letting the states maintain their jurisdiction over marriage," Clinton said.

The event was a love fest for Rep. Dennis J. Kucinich (Ohio), who backs same-sex marriage. When one panelist, Washington Post editorial writer Jonathan Capehart, asked Kucinich if there was any issue on which he disagreed with the gay rights community, the talkative congressman was left speechless.

"All I can say is keep those contributions coming, and you'll have the president you want," he told the audience Kucinich and former senator Mike Gravel (Alaska) were praised for their support of same-sex marriage.

But Obama, who was questioned first by the moderators, appeared frustrated by a question that noted that people under 30 back gay marriage at higher rates than others and asked how he could be "a candidate of change when your stance on same-sex marriage is decidedly old school?"

"Oh, come on, now," Obama said. "I mean, look, guys, you know, I mean, we can have this conversation for the duration of the 15 minutes." He added, "If people are interested in my stance on these issues, I've got a track record of working with the LGBT community."

Richardson was the only candidate who opposes same-sex marriage to acknowledge the complicated politics of the issue.

"The country isn't there yet on gay marriage," he said. "We have to bring the country along."

His comment on the roots of homosexuality drew hisses from the audience of about 200.

Activists say this year's event was a milestone in showing the Democratic candidates' interest in courting the gay and lesbian vote.

"It firmly establishes us a major constituency in the Democratic Party," said David Mixner, a longtime gay rights activist and Democratic fundraiser. "It's a real validation of our position within the party."

Unlike sessions on Saturday with liberal bloggers at the Yearly Kos convention and on Tuesday with labor union members in Chicago, where the candidates sought to win over influential liberal interest groups, the candidates were not on stage at the same time last night. Instead, each of the Democrats took questions separately from the panelists.

Six Democratic candidates appeared, and Sen. Christopher J. Dodd (Conn.), who cited scheduling conflicts as his reason for not coming, said he would post answers to the questions presented at the forum on his campaign's Web site. The only other major Democratic contender to skip the event was Sen. Joseph R. Biden Jr. (Del.), who also cited scheduling problems. Organizers said they invited several Republican presidential candidates to appear as well, but the GOP hopefuls declined.

Already, the candidates from the two parties have diverged sharply in rhetoric on gay rights issues. During a GOP debate earlier this year, none of the candidates said they would change the "don't ask, don't tell" policy, and several have strongly argued that marriage should be defined as being between a man and a woman. The Democrats, on the other hand, have courted gay rights supporters more aggressively than ever.

Clinton has criticized the "don't ask, don't tell" policy, established during her husband's administration, and has offered the line from onetime GOP senator from Arizona and presidential hopeful Barry Goldwater: "You don't have to be straight to shoot straight." In 2003, the future Democratic nominee, Sen. John F. Kerry (Mass.), said he did not like the policy but warned that some units might be adversely affected by having gay members.

Edwards released a list of his prominent gay backers on the eve of the forum, as did Obama. Clinton, who had put out a similar list, has had two fundraisers for her gay supporters and planned to attend an event at The Abbey, a well-known gay bar in Los Angeles.

The candidates have not forgotten the complicated politics of gay rights, which may be a popular cause in the Democratic primary but will prove to be a more complicated issue in the general election. Almost a dozen states voted to ban same-sex marriage in 2004, leaving Democrats wondering if those ballot initiatives increased turnout among conservative Republicans.

In March, gay rights activists were infuriated when Chairman of the Joint Chiefs of Staff Peter Pace called homosexuality "immoral," and Obama and Clinton at first sidestepped questions about whether they disagreed with Pace's sentiments. At the forum, Clinton called this stance a "mistake," saying she should have rebuked him earlier.

America’s illusory strategy in Iraq

2007-08-10T07:12:00.001-07:00

America’s illusory strategy in Iraq
By David Gardner
Copyright The Financial Times Limited 2007
Published: August 9 2007 19:27 | Last updated: August 9 2007 19:27

Future historians of how Iraq was lost will, of course, alight on the memoirs and the memos of those who drove the policy, measuring declaration against execution, ambition against outcome. They will savour the solipsism of a Paul Bremer, the US viceroy whose disbandment of the Iraqi army left 400,000 men destitute and bitter, but armed, trained and prey to the insurgency then taking shape – but whose memoir paints him as a MacArthur of Mesopotamia.

They will be awed by the arrogance and fecklessness of a Donald Rumsfeld, defence secretary and theorist of known unknowns, who summed up the descent into anarchy and looting in the hours after Baghdad fell (when, very possibly, Iraq was lost) – “Stuff happens”.

But their research will be greatly assisted by the diligence of the Government Accountability Office, the investigative arm of the US Congress, which keeps on unearthing the bottomless depths of incompetence behind the Bush administration’s misconceived adventure in Iraq.

This week, the GAO reported that the Pentagon cannot account for 110,000 AK-47 assault rifles and 80,000 pistols supposedly supplied to Iraqi security forces – adding to well-founded suspicions that insurgents are using US-supplied arms to attack American and British troops.

This discovery might be considered the mother of all known unknowns, were it not that in March this year the GAO published a drily damning report on the coalition’s failure to secure scores upon scores of arms dumps abandoned by the Iraqi army after the 2003 invasion – and that by October last year it had still failed to secure this giant toolbox that keeps the daily slaughter going in Iraq.

That carnage continues, barely moderated by the “surge” of troops that this week raised US forces to their peak level in Iraq of 162,000 – a last heave that looks destined to be the prelude to withdrawal.

As a policy it is hard to see how any surge can fix an Iraq so traumatised by tyranny and war and then broken by invasion and occupation. It takes place as an already indecipherable ethnic and sectarian patchwork is being pulled bloodily to pieces. Iraq has reached advanced societal breakdown. Ethnic cleansing proceeds regionally, through neighbourhoods, even street by street.

There has been a mass exodus of teachers and doctors, civil servants and entrepreneurs, a haemorrhage of Iraq’s future. Nearly 4m Iraqis have been uprooted by this cataclysm. Instead of bringing democracy to Iraq and the Arabs, the 2003 invasion has scattered Iraqis across the Middle East – as well as creating laboratory conditions for the urban warfare urged on jihadis by Ayman al-Zawahiri, al-Qaeda’s strategist. The time to have surged is long since past.

Politically, there are no institutions, there is no national narrative. Ministries are sectarian booty and factional bastions. The interior ministry, headquarters for several death squads, is, according to the Los Angeles Times, partitioned into factional fiefs on each of its 11 floors – with the seventh floor split between the armed wings of two US-allied groups.

Two ostensibly benign by-products of the US invading Iraq were: the empowerment of the Shia majority there, giving the sect, a dispossessed minority within Islam, rights denied for centuries; and the welcome panic of an ossified Sunni Arab order based on a toxic mix of despotism and social inequity that incubated extremism. But Iraq’s Shia politicians seem unwilling to put state above sect. Such is the Sunni, jihadi-abetted backlash, and the intra-Shia fight over the spoils, that the Shia have not so much come into their inheritance as entered a new circle of hell.

The Shia-led government of prime minister Nouri al-Maliki has ceased to pursue even a communalist agenda, preferring the narrower sectarian interest of his faction of the Da’wa party. With the withdrawal of 17 of 38 members of Mr Maliki’s cabinet – including all the Sunnis and two big Shia factions – government has for most practical purposes ceased.

To believe any policy might work in these circumstances – let alone a slow-motion surge – requires heroic optimism. Some of that was placed in Gen David Petraeus, US commander in Iraq. At least until this week.

It turns out those Kalashnikovs went missing on his previous watch, as trainer-in-chief of the still barely existent Iraqi army. Gen Petraeus, a student of counterinsurgency with a PhD from Princeton and a gift for PR, had been lionised for his command of the 101st Airborne division in 2003-04, and especially his “hearts and minds” campaign in the north. After his withdrawal, however, two-thirds of Mosul’s security forces defected to the insurgency and the rest went down like fairground ducks. His forces appear not to have noticed, moreover, that Saudi-inspired jihadis had established a bridgehead in Mosul before the war had even started.

But US commanders seem to have no trouble detecting the hand of Tehran everywhere. This largely evidence-free blaming of serial setbacks on Iranian forces is a bad case of denial. First, the insurgency is overwhelmingly Iraqi and Sunni, built around a new generation of jihadis created by the US invasion. Second, to the extent foreign fighters are involved these have come mostly from US-allied and Sunni Saudi Arabia, not Shia Iran. Third, the lethal roadside bombs with shaped charges that US officials have coated with a spurious veneer of sophistication to prove Iranian provenance are mostly made by Iraqi army-trained engineers – from high explosive looted from those unsecured arms dumps.

Shia Iran has backed a lot of horses in Iraq. If it wished to bring what remains of the country down around US ears it could. It has not done so. The plain fact is that Tehran’s main clients in Iraq are the same as Washington’s: Mr Maliki’s Da’wa and the Supreme Islamic Council of Iraq led by Abdelaziz al-Hakim. Iran has bet less on the unpredictable Moqtada al-Sadr and his Mahdi army, which has, in any case, largely stood aside during the present troop surge.

So, in sum. Having upturned the Sunni order in Iraq and the Arab world, and hugely enlarged the Shia Islamist power emanating from Iran, the US finds itself dependent on Tehran-aligned forces in Baghdad, yet unable to dismantle the Sunni jihadistan it has created in central and western Iraq. Ignoring its Iraqi allies it is arming Sunni insurgents to fight al-Qaeda. And, by selling them arms rather than settling Palestine it is trying to put together an Arab Sunni alliance (Egypt, Jordan and Saudi Arabia) with Israel against Iran. All clear? How can anyone keep a straight face and call this a strategy?

david.gardner@ft.com

‘Reforms’ will not assuage anger at Congress

2007-08-10T07:09:00.000-07:00

‘Reforms’ will not assuage anger at Congress
By Jim Thurber
Copyright The Financial Times Limited 2007
Published: August 7 2007 19:11 | Last updated: August 7 2007 19:11

Is Washington going to get better? Congress passed the long-awaited Honest Leadership and Open Government Act of 2007 last week. Harry Reid, the Senate majority leader, called the bill the “most significant change in lobbying ethics in the history of the country”, and reformers say they like it.

However, John Boehner, the House minority leader, called it “a glass of warm milk” and asserted that: “it doesn’t do anything”. President George W. Bush has threatened to veto the bill. Is this the most important ethics reform in the history of Congress, or so insignificant that it should be vetoed lest it become a substitute for meaningful reform? It is neither.

The bill purports to address some of the anger and distrust expressed last year by US voters, 40 per cent of whom said that corruption and lobbying were extremely important issues that motivated them to vote (compared with 36 per cent who cited Iraq). The ethics and lobbying legislation was essential for the Democrats, who campaigned on ending the “culture of corruption” and who had promised to “drain the swamp” in Washington.

The crucial provisions promise internet disclosure of lobbyist fundraising for lawmakers. Lobbyists must report their activities electronically every three months. The measure imposes new restrictions on members and staff accepting gifts, meals and discounted travel on private aircraft paid for by lobbyists.

Names of sponsors and recipients of congressional pet projects, called “earmarks”, are to be made public at least 48 hours before approval of appropriations and tax laws, both sources of billions of dollars of secret special-interest spending and tax breaks. The act extends the “cooling-off period” before senators are eligible to join a lobbying firm from one to two years. Former House members would have to wait one year. Senators and House members are required to disclose any job negotiations they engage in while serving in Congress and members are forbidden from attempting to influence hiring decisions among lobbying firms. The reform also bans secret “holds”, which often kill legislation in the Senate.

These are important provisions and may even lead to some change in the way decisions are made in Washington. But we already see unintended consequences, with the growth of earmarks, exemptions to the use of subsidised corporate jet travel, new methods of collecting and spending campaign funds and clever positioning to avoid being called a lobbyist.

Moreover, Congress defeated a proposal to have its ethics and lobbying rules enforced by an outside group (the Office of Public Integrity) rather than the timid House and Senate ethics committees. It has been reluctant to let others enforce existing rules, let alone new ones, for fear of breaking the “iron law of reciprocity” practised with such excellence on the Hill and with lobbyists.

Will these reforms be appreciated by the American electorate? I think not. As of late last month, Americans gave Congress a near-record low approval rating of 22.6 per cent (down from 33 per cent in January), well below Mr Bush’s job performance rating.

There is little in this legislation that might have prevented the actions of lobbyist Jack Abramoff, representatives “Duke” Cunningham (bribes for earmarks) and Bob Ney (corruption), who are all in jail, and that of Mark Foley and 14 other members of Congress who were under an ethical cloud in November 2006, when the congressional elections were held. Nor is there much to allay the public anger about Congress in general and the way members waltz with lobbyists.

Public anger about corruption in Congress goes well beyond what is addressed in this bill. It has to do with good government. The American public no longer tolerates the absence of government owing to deadlock, extreme partisanship and lack of civility and comity in Congress. The 2006 congressional election was as much a plea for just and effective government as it was a plea for ethics reform. The public still perceives Washington as a place where money buys political power.

The American people want the Congress and the president to do their jobs, to work together to solve the most important problems facing America. Washington has become more dysfunctional through partisanship, institutional gridlock and the entrenchment of powerful special interests since the 2006 election and these “reforms” do little to change that.

The writer is director of the Center for Congressional and Presidential Studies at American University

Canada to flex military muscles in Arctic

2007-08-10T07:07:00.001-07:00

Canada to flex military muscles in Arctic
By Daina Lawrence in Ottawa and Clive Cookson in London
Copyright The Financial Times Limited 2007
Published: August 9 2007 22:34 | Last updated: August 9 2007 22:34

Canadian Prime Minister Stephen Harper is poised to announce plans for a deepwater docking facility and military base in the far north of the country as part of the nation’s quest to assert its sovereignty in the Arctic.

Military planning documents, obtained by CBC news on Thursday, outline C$60m ($57m) plans to adapt an abandoned mine in Nanisivik at the northern tip of Baffin Island into a naval station.

A separate army base will also be located in Resolute, Nunuvut, on the shores of the disputed Northwest Passage. The base would give Canada the military resources it needs to monitor traffic in the Arctic’s Northwest Passage, according to Pierre Leblanc, former commander of the Canadian Forces in the North.

“The military forces we have up in the north is less than 400, and that’s to look after an area that is larger than Europe,” says Mr Leblanc. “So any addition the government puts up there is significant.”

At present the Northwest Passage remains free to all navigation, although Canada claims ownership over the much-coveted waterway and shipping route. This is causing reaction from foreign countries, with Russia flexing its muscles by planting a titanium flag on the Arctic seabed and the US Coast Guard sending an icebreaker vessel toward the Bering Sea.

“Canada is open to being used as a maritime navigable way, but we want to control what goes on there. We are claiming this as internal waters,” says Mr Leblanc. “To be able to control it you have to know what’s going on and right now we don’t.”

Warmer temperatures in the Arctic are causing commodities such as oil and gas to become accessible and, therefore, valuable in the area, with the known gas reserves exceeding C$200bn.

At the heart of the international dispute over territorial rights is the Lomonosov Ridge. This huge undersea feature stretches 1,800km from the tip of Greenland and Canada’s Ellesmere Island, under the North Pole, to the coast of Siberia. The scientific and legal question is whether Lomonosov can be regarded as a natural extension of the continental shelf of Russia, Canada or the Danish territory of Greenland.

The International Convention on the Law of the Sea allows a country to extend its territorial waters beyond the usual 200 nautical miles (or 320km) if it can prove that the sea bed is connected geologically to it in this way.

Ralph Rayner, vice-president of the London-based Institute of Marine Engineering, Science and Technology, says more geological mapping needs to be done before the conflicting claims can be resolved.

In spite of global warming, the Arctic Ocean is still covered with thick ice for most of the year, making survey work very difficult.

“The Arctic was of little geological interest until recently,” said Dr Rayner. “A lot of surveying of the sea floor was carried out during the Cold War but the topographical data is still largely classified.”

Ironically the revival of territorial disputes over the Arctic is taking place against the background of International Polar Year, an intense scientific programme taking place from March 2007 to March 2009 meant to foster international collaboration.

The controversial Russian submarine expedition that left a flag on the ocean floor was carried out under the auspices of IPY. The move carried echoes of the Soviet launch of the first satellite, Sputnik, as part of International Geophysical Year in 1957.

Tension rises in Clinton nuclear dispute

2007-08-10T07:06:00.001-07:00

Tension rises in Clinton nuclear dispute
By Andrew Ward in Washington
Copyright The Financial Times Limited 2007
Published: August 10 2007 01:07 | Last updated: August 10 2007 01:07

Hillary Clinton faced scrutiny on Thursday over her attitude towards the use of nuclear weapons, amid a deepening foreign policy dispute with Barack Obama, her rival for the Democratic presidential nomination.

Mrs Clinton criticised Mr Obama last week for ruling out the use of nuclear weapons in the hunt for terrorists in Afghanistan and Pakistan, arguing that presidents should not discuss hypothetical military situations.

But it emerged on Thursday that Mrs Clinton had herself rejected nuclear weapons as an option against Iran in a television interview last year. “I would certainly take nuclear weapons off the table,” she said in April 2006.

The apparent inconsistency could prove embarrassing to Mrs Clinton if it undermines her carefully crafted image for strength and reliability on foreign policy, in contrast to the more inexperienced Mr Obama.

A spokesman for Mrs Clinton insisted it was unfair to compare her comments with Mr Obama’s because she had been responding to a specific report that the Bush administration was considering the nuclear option against Iran.

“She wasn’t talking about a broad hypothetical, nor was she speaking as a presidential candidate.

“Given the sabre-rattling that was coming from the Bush White House at the time, it was totally appropriate and necessary to respond to that report and call it the wrong policy,” he said.

Foreign policy has become the main source of division between Mrs Clinton and Mr Obama in the increasingly fractious race for the Democratic presidential nomination.

Mr Obama, the first-term senator for Illinois, is struggling to narrow his rival’s double-digit lead in nationwide opinion polls with less than five months before the first party primary elections and caucuses.

South Carolina’s Republican party on Thursday rescheduled its primary for January 19, an earlier-than-planned date that could result in Iowa bringing forward its caucuses to December.

Iowa, New Hampshire and South Carolina are seeking to protect their traditional right to hold the first ballots in the presidential nomination season, amid attempts by other states to claim a bigger role in the process.

Florida is among dozens of states to have brought forward its primary date, threatening South Carolina’s status as the first southern state to express its choice of presidential nominees.

South Carolina’s move to remain first in the south is expected to prompt New Hampshire and Iowa to bring forward their dates, raising the prospect of the presidential electoral process starting before Christmas for the first time.

The front-loaded primary election calendar makes it likely that both parties’ presidential candidates will be all but decided by early February, nine months before the presidential election.

The accelerated nature of the 2008 race for the White House reflects the unusually open nature of the contest, with neither the incumbent president nor vice-president standing for re-election.

ECB injects a fresh €61bn into markets

2007-08-10T07:04:00.001-07:00

ECB injects a fresh €61bn into markets
By Richard Milne in Frankfurt
Copyright The Financial Times Limited 2007
Published: August 10 2007 11:46 | Last updated: August 10 2007 11:46

The European Central Bank took more emergency action to try to calm jittery markets on Friday by lending €61bn to institutions over the weekend.

A day after injecting an unprecedented €95bn into money markets, the ECB said it received bids totalling €110bn on Friday but decided to lend €61bn after setting an average rate of 4.08 per cent, just above its main interest rate of 4 per cent.

It follows concerted action from central banks in North America and Asia to inject liquidity to calm fears of a credit crunch and allow borrowers to meet short-term lending needs.

The Bank of Japan became the latest central bank to inject funds into the market to alleviate fears of a credit squeeze.

The BoJ injected a relatively modest Y1,000bn ($8.5bn) after the call rate rose to 0.54 per cent against the bank’s 0.5 per cent overnight target.

Other Asian central banks sold the US dollar and tried to reassure markets that any effects of any credit crisis would be limited as exposure to subprime loans in the region is relatively low.

Monetary authorities of Singapore and Hong Kong said they were monitoring markets but saw no need to inject cash for now.

The Bank of Korea said it would provide liquidity to financial markets should a credit crunch arise due to the US subprime crisis.

Shares fell across Asia in heavy selling. South Korea led the drop in equities, with the Kospi down 4.2 per cent.

In Tokyo, the Nikkei 225 average closed at a 5-month low, while in Sydney, the S&P/ASX 200 suffered its heaviest daily fall since the attacks on the United States in September 2001.

Some analysts had criticised Thursday’s ECB intervention for offering banks unlimited relatively cheap money and potentially stoking the panic by the size of its issue.

In contrast, Friday’s tender was a three-day offer and was set at a variable rate allowing the ECB to decide how much money to inject into markets. 62 banks bid on Friday compared with 49 on Thursday.

The Short View: Central banks’ aid

2007-08-10T06:53:00.001-07:00

The Short View: Central banks’ aid
By John Authers, Investment Editor
Copyright The Financial Times Limited 2007
Published: August 9 2007 23:29 | Last updated: August 9 2007 23:29

In the long run, economies grow, stock markets go up and, as Keynes said, we are all dead. The long run looks after itself. The problem is the short run.

After another frenetic day of trading on Thursday, which again saw the kind of movements and volumes that normally occur in weeks, it was clear that it is the very short term that is at issue.

Bad news from Europe dominated the day. First, BNP Paribas closed three investment funds to withdrawals, blaming the “complete evaporation of liquidity” in US credit markets. Then the European Central Bank intervened to provide liquidity after the rates at which banks can borrow overnight shot up.

Neither had anything to do with the long-term dynamics of the world economy. The ECB’s unprecedented intervention came within days of a clear signal that it will raise lending rates next month, as part of its fight against inflation. Judging by futures markets, the ECB even persuaded traders that its anti-inflationary zeal remained intact, even as it offered money to any bank that asked for it.

Thus it was a successful intervention. Stocks sold off, as was inevitable after scary news, but the losses were limited. European equities remained far above their lows of a week ago. Several analysts made glowing reviews of the bank’s actions.

But within hours there was an afternoon “flight to quality” on Wall Street, setting up what will likely be an exceptionally tense opening in Europe on Friday.

Wall Street’s new fear is that another source of short-term liquidity is in danger. Yields on asset-backed commercial paper, used by companies to raise overnight funds, hit six-year highs. This is more contagion from the subprime debacle: buyers took fright, because mortgage-backed bonds are often used as collateral.

If markets get through their short-term problems, with or without aid from central banks, none of this prejudices the long-run picture. But they must first survive the short run.

Financial Times Editorial Comment: The markets need clarity and calm

2007-08-10T06:52:00.001-07:00

Financial Times Editorial Comment: The markets need clarity and calm
Copyright The Financial Times Limited 2007
Published: August 9 2007 18:31 | Last updated: August 9 2007 18:31

Thursday’s spike in the cost of borrowing euros, dollars or sterling overnight takes the current round of credit turmoil into a new phase. There is now the risk of a real financial crisis, with banks forced to sell assets because they cannot borrow cash. Their underlying problem is losses and illiquidity in markets for asset-backed securities, but if central banks provide liquidity to compensate, and if banks and regulators move quickly to clarify the extent of losses, there is no need for panic.

In the midst of Thursday’s tumult the European Central Bank felt it had to offer unlimited short-term loans to the money market, distributing €94.8bn, but while the ECB provided the banking system with extra cash it did not cut interest rates. The ECB, like the Federal Reserve and the Bank of England, clearly sees a financial problem rather than a shortage of credit in the real economy.

An important question is why interest rates spiked and why the ECB felt it had to intervene. A generalised loss of market confidence should be easy to stabilise, but if the market has got wind of a specific problem at a large bank then the situation is more dangerous.

Thursday’s suspension of three BNP Paribas funds stuffed full of structured debt matters little. It will be painful for retail investors in the funds, but any eventual losses will be contained by the funds’ capital.

The drip, drip, drip of ABS losses at European banks such as NIBC of the Netherlands and IKB of Germany is more serious. Nobody knows how big the losses are, or who will be affected next, creating credit risks in the money market.

The real problem, though, is the complete standstill in the ABS market, which means banks cannot securitise new assets or offload any ABS they hold. Banks are also being forced to lend to asset-backed funds such as IKB’s Rhineland Funding when investors refuse to roll over their commercial paper.

What is needed first is clarity. With clarity on ABS losses it will be possible to lend with comfort, so banks should update both markets and regulators on their holdings and possible losses. It is unacceptable that IKB’s position is still not clear more than a week after news of that crisis broke.

What is needed even more, however, is calm. Based on what we know today, there is no reason to think any big financial institution is in danger. Central banks should provide short-term liquidity as needed but should not be panicked into interest rate cuts. Investors, meanwhile, will gain nothing from a disorderly stampede for the exits.

China trade surplus nears record

2007-08-10T06:50:00.000-07:00

China trade surplus nears record
August 10 07:40 BST
© Reuters Limited

China on Friday reported its second biggest monthly trade surplus on record, handing more ammunition to critics who say Beijing gains an unfair trade advantage by keeping the yuan undervalued.

The surplus in July was $24.36bn, down from June’s record high of $26.91bn, but above forecasts of $22.5bn and dwarfing the July 2006 figure of $14.6bn.

Economists had expected export growth to taper off after factories rushed to ship goods in June before rebates of value added tax were cut or scrapped on July 1 on 2,800 export lines.

But annual export growth in fact accelerated from 27.1 per cent in June to 34.2 per cent despite a string of recalls of Chinese products in a number of countries, notably the United States, due to safety concerns involving everything from toys to toothpaste.

“It shows Chinese exporters are still scrambling to export despite government tightening,” said Li Yushi, vice-director of a Ministry of Commerce think tank.

“Many exporters are privately run, and they have no intention to slow down their businesses,” Mr Li said.

Legislation is wending its way through the US Congress that would impose duties on goods imported from countries deemed to have fundamentally misaligned exchange rates. China is the main target of the lawmakers.

But Mr Li said he doubted that trying to raise barriers to Chinese goods would make much of a difference.

“Demand for China-made products in overseas markets is still strong despite headline-grabbing anti-dumping cases and the like. I don’t think there will be any massive boycott of Chinese products,” he said.

Li Huiyong, chief economist at Shenyin & Wanguo Securities in Shanghai, noted that exports usually gain momentum in the second half of the year as factories gear up for Christmas deliveries.

The trade surplus in the first seven months rose 81 per cent from the same period of 2006 to $136.8bn, and Mr Li said it could well reach $300bn for the whole year.

The surplus in 2006 was a record $177.5bn.

“The surplus is still high and doesn’t seem to have been affected much by the yuan’s appreciation and cuts in export tax rebates,” he said.

The yuan has risen 7 per cent since it was revalued by 2.1 per cent against the dollar in July 2005 and untethered from a dollar peg to float within managed bands.

Annual import growth also outstripped expectations, accelerating from 14.2 per cent in June to 26.9 per cent in July.

Mr Li with the Commerce Ministry said the jump probably reflected robust domestic investment.

That would be a worry to policy makers, who are striving to prevent a resurgence of capital spending out of fear that the economy is already at risk of overheating.

Companies have strong incentives to invest. Global and domestic demand is strong, profits are rising fast and banks are awash in cheap money generated by the trade surplus.

The People’s Bank of China, the central bank, is concerned that inflation could accelerate under these conditions.

Economists expect figures on Monday to show that consumer prices rose 4.9 per cent in July from a year earlier, up from 4.4 per cent in the year to June.

There are rumours in financial markets that the figure could be as high as 5.6 per cent, driven by a surge in pork and egg prices.

Analysts who contend that price pressures are confined to food took comfort on Friday from an unexpected dip in wholesale inflation in July to 2.4 per cent from 2.5 per cent in June.

They said the benign report lends support to the argument that, although the economy has been growing at a double-digit pace for five years, competitive pressures and productivity gains are keeping a lid on broad inflationary pressures.

“It’s a figure that should give investors less reason to panic when we get a high-side CPI on Monday,” said Ben Simpfendorfer, an economist with Royal Bank of Scotland in Hong Kong.

Investment funds hit by volatility

2007-08-10T06:38:00.000-07:00

Investment funds hit by volatility
By Anuj Gangahar in New York and Adam Jones in Paris
Copyright The Financial Times Limited 2007
Published: August 9 2007 08:57 | Last updated: August 9 2007 21:55

Investment funds on both sides of the Atlantic were affected by recent market turmoil on Thursday. BNP Paribas shocked European markets by freezing three funds exposed to the stumbling US subprime mortgage market.

Goldman Sachs and Renaissance Technologies were also affected as performance at quantitative hedge funds reflected volatile markets.

Goldman Sachs’ North American Equity Opportunities fund saw falls of 12 per cent in July and a further 12 per cent this month. People close to the firm said no decision had been made about its future.

Funds of hedge funds familiar with the performance of Renaissance Technologies, one of the world’s biggest hedge funds, run by billionaire James Simons, said it had experienced difficulties this week as its quantitative approach struggled to deal with increasingly volatile market conditions. A spokesman for Renaissance did not return a call.

BNP Paribas, one of Europe’s biggest banks, blamed a “complete evaporation of liquidity in certain market segments of the US securitisation market” for the temporary decision to stop redemptions from the three funds, and further investments.

Collapse of demand for some forms of securitised debt made their assets impossible to value, the bank said.

Freezing the funds, which invest in asset-backed securities, was the best way to “protect the interests and ensure the equal treatment of our investors”.

Shares in BNP Paribas fell 3 per cent to €82.57 by the close on Thursday.

The funds are Parvest Dynamic ABS, BNP Paribas ABS Euribor and BNP Paribas ABS Eonia. The bank said their combined value was €1.6bn, down from about €2bn on July 27.

All eyes on Wall Street as Fed intervenes

2007-08-10T06:21:00.000-07:00

All eyes on Wall Street as Fed intervenes
By Andrew Wood in Hong Kong, Sudeep Doshi in London and Michael Mackenzie in New York
Copyright The Financial Times Limited 2007
Published: August 10 2007 08:56 | Last updated: August 10 2007 14:28

All eyes were on Wall Street on Friday as the sell-off in global equity markets entered its second day.

Central banks around the world tried to calm nerves after pumping $120bn of extra liquidity into the international capital markets in the face of steep falls in Asian and European equity markets.

The New York Federal Reserve followed counterparts in Asia and Europe and injected more funds than usual into the repurchase market to stabilise overnight lending rates.

Earlier the European Central Bank intervened for a second day after it made a fresh €61bn of funding available to financial institutions. The move by the ECB followed a €95bn injection of liquidity on Thursday which was followed by central bank intervention in Japan and Australia.

”Central banks are not supposed to be tightening credit when markets are in complete disarray,” said John Richards, head of Asia-Pacific Strategy at RBS Securities. ”And this is close to a complete disarray.”

Wall Street was braced for further losses. US futures prices changed rapidly in volatile pre-market trading. The S&P 500 futures were down 18.4 points at 1,439.5, Nasdaq futures were off 21.5 points at 1,924, while futures for the Dow Jones Industrial Average were down 147 points at 13,180.

European equities followed Asia and suffered more heavy losses.

The FTSE 100 in London was off its lows but down 2.8 per cent or 175 points at 6,095.3. The pan-regional Eurostoxx 50 was down 2.5 per cent at 4,168.09, Frankfurt’s Xetra Dax fell 1.5 per cent to 7,342.49, and the CAC 40 in Paris lost 2.7 per cent to 5,475.59.

Asian markets also fell heavily as they caught up with the global sell-off. In Tokyo, the Nikkei 225 average closed at a 5-month low, down 2.4 per cent or 407 points at 16,764.09, while in Sydney, the S&P/ASX 200 suffered its heaviest daily fall since the attacks on the United States in September 2001, losing 3.7 per cent at 5,936.0.

“Risk aversion has returned to the market with a vengeance. Current sentiment is likely to continue with Dow futures down,” said Melinda Smith, an analyst at ABN Amro.

Government bond yields fell and short-term interest rate futures rose for a second day. The yield on the 10-year benchmark gilt was five basis points lower at 5.2 per cent, while interest rate future contracts were up as much as eight ticks.

The three-month dollar rate was set at 5.57 per cent, up from 5.50 per cent on Thursday and 5.26 per cent earlier this week. The euro three-month rate was set at 4.45 per cent, above Thursday’s level of 4.399 per cent and 4.309 per cent at the start of the week.

In the derivatives market, the cost of insuring €10m of high-yield European corporate debt against default increased to €365,000 as concerns about the lack of liquidity in the market unsettled investors.

In the equity markets financial stocks once again suffered the heaviest losses as investors steared clear of a sector that has heavy exposure to the US subprime mortgage market through collaterised debt products.

Deutsche Bank became the latest European bank to reveal it had suffered heavy losses in one of its funds. The DWS ABS fund, which invests in asset-backed securities, had suffered outflows totalling around 30 per cent in the last week. The bank said that despite the drop in the value of the fund from €3bn to €2.1bn it would not hold redemtions. Deutsche Bank shares fell 5.4 per cent at €92.80.

BNP Paribas, which on Thursday suspended three of its funds because of losses linked to securitised debt products, lost 4.7 per cent at €78.70 in Paris.

In the UK Man Group was one of the heaviest fallers as rumours mounted that the world’s larged listed hedge fund could pull its upcoming US initial public offering due to uneasy credit conditions. The shares shed 6.6 per cent at 492p.

Dutch takeover target ABN Amro fell 5 per cent to €33.33 on concerns that Fortis will struggle to raise the €24bn in order to finance its part of the €71bn deal along with Royal Bank of Scotland and Santander. RBS is holding an EGM in Edinburgh on Friday to vote on its offer for the Dutch bank.

Shares in Fortis were down 3.5 per cent to €26.80 and RBS fell 5.4 per cent to 554p. Rival bidder Barclays lost 5.4 per cent at 644½p amid talk that it may withdraw its offer altogether.

The world’s biggest mining company, BHP Billiton, was 4.9 per cent down at £12.84, with competitor Rio Tinto losing 3.8 per cent at £30.82 and platinum mining group Lonmin 2.8 per cent lower at £31.79.

Old Mutual lost 4.2 per cent at 155p after it reported a 12 per cent fall in first-half operating profit at £782m due to weak the rand and dollar. The British and South African insurer, whose shares have been hit by concerns over subprime exposure, said on Friday that its exposure was tiny, representing just 4 per cent of its US assets.

For Rudy, Gay Is A Drag

2007-08-10T05:43:00.000-07:00

For Rudy, Gay Is A Drag
By: ANDY HUMM,
Copyright by GAY CITY NEWS, NYC
05/03/2007

Rudy Giuliani, then mayor of New York City, in a public appearance March 1, 1997, eight months before he faced LGBT advocate Ruth Messinger in his re-election bid. (EDWARD REED/ OFFICE OF THE MAYOR, NYC)

Rudy Giuliani is continuing an emerging pattern of abandoning his previous support for gay rights, this past week attacking New Hampshire for enacting a civil union law for same-sex couples because it "goes too far" and is "the equivalent of marriage."

That statement from the Republican presidential hopeful follows his retreat earlier this year on gays in the military on the grounds that "we are at war" and should not change the Don't Ask, Don't Tell policy that he had criticized.

Giuliani voiced support for civil unions as recently as 2004 on Fox News and signed a domestic partners bill as mayor of New York City in 1998. He supported that legislation in 1997 in exchange for the neutrality of the Empire State Pride Agenda in his re-election bid against Manhattan Borough President Ruth Messinger, a leading LGBT rights advocate.

In an October 1997 letter to the Pride Agenda, Giuliani pledged "to determine how the City of New York can extend to registered domestic partners all rights that the city currently affords to married persons," the very position he is chastising the New Hampshire Legislature for.

Dick Dadey, then head of Pride Agenda, recalled this week, "He made a pledge to go as far as he could go under the law."
Giuliani told Mike Signorile on Sirius Radio in 2003 that he not only signed the 1998 domestic partners law, "but then we expanded it to include a lot of other benefits."

Former City Council Speaker Peter Vallone, who presided over passage of the domestic partners law, told Gay City News that Giuliani "was never averse to giving equal rights to gays. Our meetings were always very productive."

The Giuliani presidential campaign's press office did not return a call asking what rights would have to be denied gay couples to satisfy him now. In a statement to the New York Sun, which broke the story, the campaign said he "believes marriage is between one man and one woman," despite the fact that he is on his third woman. The statement also said, "Domestic partnerships are the appropriate way to ensure that people are treated fairly," and that the New Hampshire law "states same-sex civil unions are the equivalent of marriage and recognizes same-sex unions from outside states. That goes too far and Mayor Giuliani does not support it."

Tony Fabrizio, a Republican pollster, told the Sun, "Why would you want to take a position where you are splitting hairs, when you have consistently been so on the record as for civil unions? You can't turn around at the 11th hour and say this comes a little too close to marriage and then not support it."

While Giuliani will not clarify what partner rights gay couples should and should not have, he is alone among the eight Republican candidates and several potential contenders - with the possible exception of Senator John McCain - in voicing any support for them. McCain also came out against the New Hampshire legislation because it "impinges or impacts the sanctity of marriage between men and women." The Arizona Republican is on his second sacred marriage.

McCain told ABC News late last year that he was not against civil unions and that he was against them in what can only be described as a totally confused exchange with "This Week" host George Stephanopolous. Although he stood against the Bush administration effort to amend the federal Constitution to bar same-sex marriage, he was an outspoken supporter of a failed effort last year to do exactly that in the Arizona Constitution.

Despite the mainstream media's habitual reference to Giuliani as a "pro-gay rights Republican" and his public cross-dressing at benefits and on "Saturday Night Live," he has a decidedly mixed record on LGBT issues. In his first run for mayor in 1989, he told a gay audience that he wasn't sure if he supported the city's gay rights law that had passed in 1986. He also condemned Mayor David Dinkins for settling a lawsuit granting domestic partner benefits to city employees in 1993 on the eve of their re-match, which Giuliani won.

Giuliani has marched numerous times in the annual LGBT Pride Parade, but also defies a boycott of the St. Patrick's Day Parade over the exclusion of a gay Irish contingent, though he is in the company of fellow presidential hopeful Hillary Rodham Clinton on that score.

In 1997, Giuliani tried to pass a watered-down codification of domestic partner rights sponsored by out gay conservative City Councilman Antonio Pagan, who hoped to use the bill to aid his run for Manhattan borough president, but that measure was vigorously opposed by then Councilman Tom Duane, the sponsor of a comprehensive domestic partners bill. Pagan's bill was not passed.

In early 1998, however, Duane's bill was again by-passed in favor of a bill engineered by Giuliani and the Pride Agenda to codify domestic partner rights. The authors of the Giuliani bill went through the city code and gave domestic partners every right given to spouses, but excluded any requirement for recognizing gay and lesbian couples in collective bargaining agreements and would not articulate the sweeping, though simple statement that any right a spouse receives a domestic partner is also entitled to.

That lapse in making the law truly comprehensive was not corrected until this year with legislation pushed by out lesbian Council Speaker Christine Quinn.

Giuliani opposed any requirement that companies with city contracts provide domestic partner benefits on par with the spousal rights they confer, a Quinn bill that the Council passed in 2004 only to be vetoed by Mayor Michael Bloomberg. The Council overrode that veto, but failed at New York's highest court in its effort to force the mayor to implement the contractor law.

When Donna Hanover, in a bitter divorce fight with Giuliani, won the right to remain in Gracie Mansion, the mayor famously lived with gay couple Howard Koeppel and Mark Hsiao. In 2001, Koeppel told the Advocate, "If they pass a law that marriage would become legal between same-sex couples, I would be the first in line. And if Rudy were still mayor, I know he'd be performing the civil ceremony for me."

Giuliani's campaign Web site is short on issue statements, but one of them condemns same-sex marriage and others mark his retreats on abortion rights and gun control. There is no mention of issues such as health care and civil rights.
Among the Democratic candidates for president, only Dennis Kucinich supports same-sex marriage. The others support full civil union rights.

The Log Cabin Republicans, a national gay group, did not return a call seeking comment as of press time.
This week, Senator Russ Feingold, a gay marriage supporter who declined to mount a White House run despite widespread urging, told a Manhattan audience, "I hate it when I see my colleagues running for president saying they're against [same-sex marriage]. They're on the wrong side of history."
©GayCityNews 2007

[-End-]

.Shared with you by Stephen Hunt, Inference Reader, email: infreader2@aol.com, Chicago, IL., usa. As listed by Marquis' Who's Who in the Midwest, and in the World.

See compl;ete story with Mr Giuliani in drag at: http://www.gaycitynews.com/site/index.cfm?newsid=18296833&BRD=2729&PAG=461&dept_id=568864&rfi=8

The New Vision: The Speech I Want the Democratic Nominee to Give

2007-08-09T14:14:00.000-07:00

The New Vision: The Speech I Want the Democratic Nominee to Give
By Theodore C. Sorensen
Copyright by The Washington Monthly

July/August 2007 Issue
On the 15th of July, 1960, Senator John F. Kennedy accepted his party's presidential nomination at the Democratic Convention in Los Angeles. In his remarks, made at a moment of high tension in the cold war, Kennedy asserted that the United States was at "a turning point in history" and called on his listeners to be "pioneers" in a "New Frontier" of "uncharted areas of science and space, unsolved problems of peace and war, unconquered pockets of ignorance and prejudice, unanswered questions of poverty and surplus."

Collaborating with Kennedy on the speech was a thirty-two-year-old aide named Theodore C. Sorensen, to whom Kennedy was known to refer as his "intellectual blood bank." With Sorensen's help, Kennedy would earn a reputation as one of American history's great orators and provide a bold new vision for the nation.

Today, we are at another moment of high tension, the result of a disastrous war abroad and division and drift at home. Like Kennedy, the next Democratic nominee, whoever he or she might be, will have a similar opportunity to form a new vision for America and to reestablish its moral leadership in the world. To encourage such boldness of thinking, we, too, tapped Kennedy's intellectual blood bank. We called Theodore C. Sorensen and asked him to write the speech he would most want the next Democratic nominee to give at the party convention in Denver in August 2008. We requested that he proceed with no candidate in mind and that he give no consideration to expediency or tactics-in other words, that he write the speech of his dreams. Here is the speech he sent us.

My fellow Democrats: With high resolve and deep gratitude, I accept your nomination.

It has been a long campaign - too long, too expensive, with too much media attention on matters irrelevant to our nation's future. I salute each of my worthy opponents for conducting a clean fifty-state campaign focusing on the real issues facing our nation, including health care, the public debt burden, energy independence, and national security, a campaign testing not merely which of us could raise and spend the most money but who among us could best lead our country; a campaign not ignoring controversial issues like taxation, immigration, fuel conservation, and the Middle East, but conducting, in essence, a great debate-because our party, unlike our opposition, believes that a free country is strengthened by debate.

There will be more debates this fall. I hereby notify my Republican opponent that I have purchased ninety minutes of national network television time for each of the six Sunday evenings preceding the presidential election, and here and now invite and challenge him to share that time with me to debate the most serious issues facing the country, under rules to be agreed upon by our respective designees meeting this week with a neutral jointly selected statesman.

Let me assure all those who may disagree with my positions that I shall hear and respect their views, not denounce them as unpatriotic as has so often happened in recent years. I will wage a campaign that relies not on the usual fear, smear, and greed but on the hopes and pride of all our citizens in a nationwide effort to restore comity, common sense, and competence to the White House.

In this campaign, I will make no promises I cannot fulfill, pledge no spending we cannot afford, offer no posts to cronies you cannot trust, and propose no foreign commitment we should not keep. I will not shrink from opposing any party faction, any special interest group, or any major donor whose demands are contrary to the national interest. Nor will I shrink from calling myself a liberal, in the same sense that Franklin and Theodore Roosevelt, John and Robert Kennedy, and Harry Truman were liberals-liberals who proved that government is not a necessary evil, but rather the best means of creating a healthier, more educated, and more prosperous America.

They are the giants on whose shoulders I now stand, giants who made this a better, fairer, safer, stronger, more united America.

By making me your nominee, you have placed your trust in the American people to put aside irrelevant considerations and judge me solely on my qualifications to lead the nation. You have opened the stairway to what Teddy Roosevelt called the "bully pulpit." With the help of dedicated Americans from our party, every party, and no party at all, I intend to mount that stairway to preach peace for our nation and world.

My campaign will be based on my search for the perfect political consensus, not the perfect political consultant. My chief political consultant will be my conscience.

Thank you for your applause, but I need more than your applause and approval. I need your prayers, your votes, your help, your heart, and your hand. The challenge is enormous, the obstacles are many. Our nation is emerging from eight years of misrule, a dark and difficult period in which our national honor and pride have been bruised and battered. But we are neither beaten nor broken. We are not helpless or afraid; because in this country the people rule, and the people want change.

True, some of us have been sleeping for these eight long years, while our nation's values have been traduced, our liberties reduced, and our moral authority around the world trampled and shattered by a nightmare of ideological incompetence. But now we are awakening and taking our country back. Now people all across America are starting to believe in America again. We are coming back, back to the heights of greatness, back to America's proud role as a temple of justice and a champion of peace.

The American people are tired of politics as usual, and I intend to offer them, in this campaign, something unusual in recent American politics: the truth. Neither bureaucracies nor nations function well when their actions are hidden from public view and accountability. From now on, whatever mistakes I make, whatever dangers we face, the people shall know the truth-and the truth shall make them free. After eight years of secrecy and mendacity, here are some truths the people deserve to hear:

We remain essentially a nation under siege. The threat of another terrorist attack upon our homeland has not been reduced by all the new layers of porous bureaucracy that proved their ineptitude in New Orleans; nor by all the needless, mindless curbs on our personal liberties and privacy; nor by expensive new weaponry that is utterly useless in stopping a fanatic willing to blow himself up for his cause. Indeed, our vulnerability to another attack has only been worsened in the years since the attacks of September 11th-worsened by our government convincing more than 1 billion Muslims that we are prejudiced against their faith, dismissive of international law, and indifferent to the deaths of their innocent children; worsened by our failure to understand their culture or to provide a safe haven for the hundreds of thousands of Iraqi refugees displaced by a war we started; worsened by our failure to continue our indispensable role in the Middle East peace process.

We have adopted some of the most indefensible tactics of our enemies, including torture and indefinite detention.

We have degraded our military.

We have treated our most serious adversaries, such as Iran and North Korea, in the most juvenile manner-by giving them the silent treatment. In so doing, we have weakened, not strengthened, our bargaining position and our leadership.

At home, as health care costs have grown and coverage disappeared, we have done nothing but coddle the insurance, pharmaceutical, and health care industries that feed the problem.

As global warming worsens, we have done nothing but deny the obvious and give regulatory favors to polluters.

As growing economic inequality tarnishes our democracy, we have done nothing but carve out more tax breaks for the rich.

During these last several years, our nation has been bitterly divided and deceived by illicit actions in high places, by violations of federal, constitutional, and international law. I do not favor further widening the nation's wounds, now or next year, through continuous investigations, indictments, and impeachments. I am confident that history will hold these malefactors accountable for their deeds, and the country will move on.

Instead, I shall seek a renewal of unity among all Americans, an unprecedented unity we will need for years to come in order to face unprecedented danger.

We will be safer from terrorist attack only when we have earned the respect of all other nations instead of their fear, respect for our values and not merely our weapons.

If I am elected president, my vow for this country can be summarized in one short, simple word: change. This November 2008 election-the first since 1952 in which neither the incumbent president's nor the incumbent vice president's name will appear on the national ballot, indeed the first since 1976 in which the name of neither Bill Clinton nor George Bush will appear on the national ballot-is destined to bring about the most profound change in the direction of this country since the election of 1932.

To meet the threats we face and restore our place of leadership in the free world, I pledge to do the following:

First, working with a representative Iraqi parliament, I shall set a timetable for an orderly, systematic redeployment and withdrawal of all our troops in Iraq, including the recall of all members of the National Guard to their primary responsibility of guarding our nation and its individual states.

Second, this redeployment shall be only the first step in a comprehensive regional economic and diplomatic stabilization plan for the entire Middle East, building a just and enduring peace between Israel and Palestine, halting the killing and maiming of innocent civilians on both sides, and establishing two independent sovereign states, each behind peacefully negotiated and mutually recognized borders.

Third, I shall as soon as possible transfer all inmates out of the Guantanamo Bay prison and close down that hideous symbol of injustice.

Fourth, I shall fly to New York City to pledge in person to the United Nations, in the September 2009 General Assembly, that the United States is returning to its role as a leader in international law, as a supporter of international tribunals, and as a full-fledged member of the United Nations which will pay its dues in full, on time, and without conditions, renouncing any American empire; that we shall work more intensively with other countries to eliminate global scourges, including AIDS, malaria, and other contagious diseases, massive refugee flows, and the proliferation of weapons of mass destruction; and that we will support the early dispatch of United Nations peacekeepers to halt the atrocities in Darfur. I shall make it clear that we do not covet the land of other countries for our military bases or the control of their natural resources for our factories. I shall make it clear that our country is not bound by any policies or pronouncements of my predecessor that violate international law or threaten international peace.

Fifth, I shall personally sign the Kyoto Protocol, and seek its ratification by the United States Senate, in order to stop global warming before it endangers all species on earth, including our own; and I shall call upon the Congress to take action dramatically reducing our nation's reliance on the carbon fuels that are steadily contributing to the degradation of our environment.

Sixth, I shall demonstrate sufficient confidence in the strength of our values and the wisdom and skill of our diplomats to favor communications, negotiations, and full relations with every country on earth, including Cuba, North Korea, Palestine, and Iran.

Finally, I shall restore the constitutional right of habeas corpus, abolish the unconstitutional tapping of private phones, and once again show the world the traditional American values that distinguish us from those who attacked us on 9/11.

We need not renounce the use of conventional force. We will be ready to repel any clear and present danger that poses a genuine threat to our national security and survival. But it will be as a last resort, never a first; in cooperation with our allies, never alone; out of necessity, never by choice; proportionate, never heedless of civilian lives or international law; as the best alternative considered, never the only. We will always apply the same principles of collective security, prudent caution, and superior weaponry that enabled us to peacefully prevail in the long cold war against the Soviet Union. Above all, we shall wage no more unilateral, ill-planned, ill-considered, and ill-prepared invasions of foreign countries that pose no actual threat to our security. No more wars in which the American Congress is not told in advance and throughout their duration the true cost, consequences, and terms of commitment. No more wars waged by leaders blinded by ideology who have no legal basis to start them and no plan to end them. We shall oppose no peaceful religion or culture, insult or demonize no peace-minded foreign leader, and spare no effort in meeting those obligations of leadership and assistance that our comparative economic strength has thrust upon us. We shall listen, not lecture; learn, not threaten. We will enhance our safety by earning the respect of others and showing respect for them. In short, our foreign policy will rest on the traditional American values of restraint and empathy, not on military might.

In the final analysis, our nation cannot be secure around the world unless our citizens are secure at home-secure not only from external attack, but secure as well from the rising tide of national debt, secure from the financial and physical ravages of uninsured disease, secure from discrimination in our schools and neighborhoods, secure from the bitter unrest generated by a widening gap between our richest and poorest citizens. They are not secure in a country lacking reasonable limitations on the sale of handguns to criminals, the mentally disturbed, and prospective terrorists. And our citizens are not secure when some of their fellow citizens, loyal Islamic Americans, are made to feel they are the targets of hysteria or bigotry.

I believe in an America in which the fruits of productivity and prosperity are shared by all, by workers as well as owners, by those at the bottom as well as those at the top; an America in which the sacrifices required by national security are shared by all, by profiteers in the back offices as well as volunteers on the front lines.

In my administration, I shall restore balance and fairness to the national tax system. I shall level the playing field for organized labor. I shall end the unseemly favors to corporations that allow them to profit without competing, for it is through competition that we innovate, and it is through innovation that we raise the wages of our workers. It shames our nation that profits for corporations have soared even as wages for average Americans have fallen. It shames us still more that so many African American men must struggle to find jobs.

We will make sure that no American citizen, from the youngest child to the oldest retiree, and especially no returning serviceman or military veteran, will be denied fully funded medical care of the highest quality.

To pay for these domestic programs, my administration will make sure that subsidies and tax breaks go only to those who need them most, not those who need them least, and that we fund only those weapons systems we need to meet the threats of today and tomorrow, not those of yesterday.

The purpose of public office is to do good, not harm; to change lives, help lives, and save lives, not destroy them. I look upon the presidency not as an opportunity to rule, but as an opportunity to serve. I intend to serve all the people, regardless of party, race, region, or religion.

Let us all, here assembled in this hall, or watching at home, constitute ourselves, rededicate ourselves, as soldiers in a new army. Not an army of death and destruction, but a new army of voters and volunteers, in a new wave of workers for peace and justice at home and abroad, new missionaries for the moral rebirth of our country. I ask for every citizen's help, not merely those who live in the red states or those who live in the blue states, but every citizen in every state. Although we may be called fools and dreamers, although we will find the going uphill, in the words of the poet: "Say not the struggle naught availeth." We will change our country's direction, and hand to the generation that follows a nation that is safer, cleaner, less divided, and less fearful than the nation we will inherit next January.

I'm told that John F. Kennedy was fond of quoting Archimedes, who explained the principle of the lever by declaring: "Give me a place to stand, and I can move the world." My fellow Americans-here I stand. Come join me, and together we will move the world to a new era of a just and lasting peace.

The Dems are all good

2007-08-09T09:27:00.000-07:00

The Dems are all good
By Jennifer Vanasco
Copyright by The Chicago Free Press and By Jennifer Vanasco
August 8, 2007

I’ve got news for you.

It doesn’t matter who you pick in the Democratic primary.

They’re all good.

Yep. I said they’re all good. I don’t just mean Kucinich or Gravel, the unlikely iconoclastic winners. I mean Clinton. I mean Obama. I mean Edwards.

This goes completely in the face of what gays and lesbians, bisexuals and transgenders tend to think of our slate of Democratic candidates, I know.

Not long ago, I went to a small dinner hosted by a group of politically savvy lesbians. The theme: How can we change American politics? The question was based around the idea that it seemed as if politicians of the left and right were pandering to the 15 percent of voters who comprise the Religious Right. Gays and lesbians, with 5 percent of the vote, are influential but not crucial.

We talked about a lot of things at that dinner. About how it was impossible to change the inertia of big elections without corporate money, for example. About how the strategy that evangelicals used in the 1980s clearly worked. They focused on school district elections and on small local elections, gradually building up power and a constituency.

But mostly we discussed the presidential candidates, talking about how we were sad and angry that none of the Big Three seemed to be watching our backs.

One woman said, “What do we do? Do we vote for Kucinich as a protest? But we know he won’t get elected. So what do we do?”

What we do is vote for one of the Big Three.

Because they are not where you think they are.

For some reason, we tend to have a narrow view of our own rights. If a candidate says that they are not for same-sex marriage, we decide that means they are not for us.

But, in fact, same-sex marriage is only one of a package of issues that matter to our community.

The others are just as important: the repeal of “Don’t Ask, Don’t Tell”; federal law recognizing same-sex partners for tax, Social Security and immigration purposes; the inclusion of sexual orientation and gender identity in hate crime, employment and public accommodations law; the support of funding for HIV/AIDS research and prevention; the right of gays and lesbians to adopt children.

There are more, of course, but those are the main issues. And those are the ones on the questionnaire HRC sent to each of the major candidates.

You know what? Except for a couple odd blips (Obama, to my surprise, doesn’t support same-sex partner recognition in immigration law because he worries about fraud. Hmmm.) each candidate supports every pro-gay HRC position.

Except marriage.

But without exception, those candidates who don’t support "marriage" do support full federal civil unions that include all the rights and benefits of marriage.

All the rights.

Everything, that is, except the word.

And yes, I agree with you that the word is important. The word is very important. But let’s not fool ourselves; even though our country now calls itself 50-percent Blue, “pro-gay marriage” is not a position that will get you elected.

So for right now, we can’t have that.

But that’s OK. That’s honestly OK. Because what we have instead is a slate of candidates who are with us in everything else. They do think we should be protected. They do think we should have our full civil rights. They are, in fact, on our side.

What does this mean to you?

It means you can relax and think about other issues. Vote for the candidate in your state’s primary who best articulates your feelings about the war, or about the environment, or about taxes, health care, campaign finance reform, farming subsidies, whatever. Whatever else is important to you. You can vote that way.

What a relief, right? How lucky we are, in this one primary, to be able to vote for the candidate who best represents us on a range of issues, instead of worrying that the wrong choice will sent GLBT rights back into a dark, slimy pit.

They’re all good. They are.

Check out their records and see.

Jennifer Vanasco is an award-winning, syndicated columnist based in New York. Email her at jennifer.vanasco@gmail.com; read her column and occasional blog at jennifervanasco.com.

Bumbling CIA's failures hurt America

2007-08-09T06:26:00.000-07:00

Bumbling CIA's failures hurt America
BY ANDREW GREELEY
Copyright by The Chicago Sun-Times
August 9, 2007

''The structure of our intelligence organization is faulty. It makes no sense. It has to be reorganized and we should have done it long ago. Nothing has changed since Pearl Harbor. I have suffered an eight-year defeat on this. . . . I will leave a legacy of ashes. . . .''

Those words were spoken by a president of the United States, though not the present incumbent. It was Dwight Eisenhower. Legacy of Ashes is the title of Tim Weiner's history of the CIA. The thesis of the book is that this country has never had a functioning espionage agency. Its leaders either were incompetent or, like Allen Dulles and William Casey, over-the-top and round-the-bend rogues who lied to presidents and told them only what they wanted to hear. Its covert operations, like the Bay of Pigs, usually failed (Dulles lied in telling JFK that Eisenhower had approved the plan). Its intelligence analyses missed the invasion of Korea by China, the economic decline of Russia, the absence of a Stalin plan for war, the missiles in Cuba, the building of the Berlin Wall and its subsequent fall, the actual state of weapons in Iraq, the rise of the ayatollahs in Iran and the importance of religious conflicts in Iraq.

Its rare successes -- support for the Baath Party in Iraq and the defeat of the Russians in Afghanistan -- prepared the way for Saddam Hussein and Osama bin Laden. Despite the many brave and intelligent people who have worked there, the CIA turns out to be a dysfunctional secret bureaucracy that, as one of its former agents says, produces $40 billion worth of crap every year. After reading Weiner's book, one is forced to conclude that the country would have been better off without the CIA.

One also concludes that the United States is not the great superpower that many of its leaders think it is. The CIA cannot collect good intelligence. It cannot provide adequate information to the White House, but usually gives a president the information he wants to hear and not what he needs to hear -- even to this day. It never figured out what was going on in Russia, and it still does not understand Islam.

Similarly, and despite the experience of the Philippines insurrection and the Korean and Vietnamese wars, the nation's military has never learned how to fight a small guerrilla war. Rather, it charges into battle with "shock and awe," just as George S. Patton's Third Army swept across Europe.

Nor has the political leadership learned how to mobilize national support for these small wars despite ever-increasing casualties. The populace supports the little war for awhile and then changes its mind and demands, ''Bring the troops home!''

Almost 800 English soldiers died in the Northern Island "Troubles,'' and the English government did not have to worry about public pressure of that sort. England is an old hand at imperialism. Still, after a hundred years, the United States should be able to play the game better than it has. Perhaps it never will.

When, then, will our leaders learn that, despite previous exercises into imperialism -- Mexico, the Indian Wars, Spain -- this country is doomed to fail when it tries to play the game, no matter how much hubris, arrogance and phony toughness ("Bring them on!") the leadership musters? This would be a great blessing.

Approach to gay issues is key matter for Democrats - Candidates must gauge public opinion

2007-08-09T06:18:00.000-07:00

Approach to gay issues is key matter for Democrats - Candidates must gauge public opinion
By Mike Dorning
Copyright © 2007, Chicago Tribune
August 9, 2007

SAN FRANCISCO - The high political anxiety that gay rights can provoke in Democratic presidential aspirants broke out into the open early in this campaign, as the party's two leading candidates both stumbled when asked to give unrehearsed answers on morality and homosexuality.

Sens. Hillary Clinton (D-N.Y.) and Barack Obama (D-Ill.), both schooled in the politics of home states with influential gay communities, each instinctively dodged in March when first asked to respond to a top military officer who, in justifying the Pentagon's ban on openly gay soldiers, publicly declared homosexuality immoral.

Only after a torrent of criticism from gay donors and supporters over their initial hesitancy did Clinton and Obama come out with unequivocal statements that they consider homosexuality to be moral, repudiating Marine Gen. Peter Pace, chairman of the Joint Chiefs of Staff.

There will be no such time to recover when Democratic candidates appear Thursday at a live televised forum in Los Angeles to face questions from gay-rights activists including singer Melissa Etheridge.

While opposition operatives will be watching for a video moment that later can be used to portray a candidate as out of the social mainstream, gay-rights advocates will be alert to signs of discomfort or hedged commitment.

'Are they passionate?'

"I think people will be looking for body language, the choice of words to see how comfortable the candidates are. Are they passionate?" said Ethan Geto, a longtime gay political activist in New York who is an informal adviser to Clinton on related issues.

Democratic candidates face evolving but still mixed public attitudes toward homosexuality.

Their own party includes an important constituency of gay donors and political activists as well as large numbers of social liberals who look to candidates' views on gay rights as a bellwether for commitment to broader progressive values such as tolerance.

Public opinion overall is moving slowly toward greater acceptance of a range of gay-rights positions, and passions have cooled since same-sex marriage erupted as a key issue on the verge of the last presidential campaign. Even among social conservatives, illegal immigration has supplanted gay marriage as a source of grass-roots fervor.

"There was a great deal of shock in 2003 and 2004, when the gay marriage issue became prominent, and things have calmed down a bit," said Andrew Kohut, director of the Pew Research Center, which studies public opinion.

Wedge issue

But polls show the public still largely disapproves of gay marriage and remains closely divided on whether homosexual relations are morally acceptable. Democrats also have fresh memories of gay rights as a wedge issue used to portray the party's candidates as removed from traditional cultural values and a cause to galvanize social conservatives to turn out to vote for Republicans.

Matt Foreman, executive director of the National Gay and Lesbian Task Force, said Republican candidates frequently highlight their opposition to gay marriage and gay-rights causes, either directly or by promising to uphold "the sanctity of marriage" and "traditional values."

"They're code words. Everybody knows what they're talking about," Foreman said.

But, Foreman added, Democratic candidates rarely place support for gay-rights causes at the center of their campaigns by incorporating the themes in stump speeches or messages to general audiences.

When Democratic candidates are "asked about gay people and our causes, they freeze up," Foreman said.

During the 2004 election, social conservatives placed referendums banning same-sex marriage on the ballots in 13 states. Though Democratic strategists disagree on how important a factor the issue was in the outcome of the presidential campaign, conservative evangelicals turned out in large numbers, aiding President Bush's re-election.

2004 presidential race

Bob Shrum, a media adviser to 2004 Democratic nominee John Kerry, wrote in a recent book that former President Bill Clinton considered the issue so damaging that he urged Kerry to support a federal ban on gay marriage as a way to defuse the matter. Kerry did not do so.

On the eve of his own re-election in 1996, Clinton signed the Defense of Marriage Act, permitting states to refuse recognition of same-sex marriages performed elsewhere and denying federal benefits to same-sex married couples. Many saw that as a protective maneuver.

In the successful Democratic campaign to retake control of Congress last year, party leaders worked to de-emphasize hot-button social issues such as abortion, gay rights and gun control that divide its working-class base. And in the current campaign, the party's major candidates have sought to focus on opposition to the war in Iraq and populist stands on economic issues.

Still, the two parties present sharp distinctions. In debates this year, all of the Democratic presidential candidates have said they would favor ending the "Don't Ask, Don't Tell" policy and permitting gays to openly serve in the armed forces. All the Republican candidates support keeping the current policy on gay military personnel.

- - -

Thursday debate

The two-hour Democratic debate will be broadcast beginning at 8 p.m. CDT on the gay-themed cable channel Logo. The channel is generally available with premium service packages. The debate also will be available online at logoonline.com.

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mdorning@tribune.com

Toymaker knew about lead - Tribune inquiry prompts company to recall toy 5 years after test

2007-08-09T06:15:00.000-07:00

Toymaker knew about lead - Tribune inquiry prompts company to recall toy 5 years after test
By Maurice Possley and Michael Oneal
Copyright © 2007, Chicago Tribune
August 9, 2007

The makers of a Thomas & Friends spinning top on Wednesday initiated a voluntary recall of the product, prompted by a Tribune test that found a painted wooden knob on one of the toys contained 40 times the legal limit for lead.

The toymaker, Schylling Associates, of Rowley, Mass., said the recall would cover 24,000 Chinese-made tops shipped by the company between June 2001 and July 2002.

The company also revealed that its own records show it knew about the problem five years ago. But instead of recalling the tops, a Schylling executive said, the company changed the design to a plastic knob.

In researching its records after inquiries from the Tribune, Jim Leonard, the company's chief operating officer, said Schylling found a June 2002 test report showing that the Thomas & Friends top contained lead paint on its wooden knob. That led the company a month later to make the switch to plastic.

Asked why the company did not recall the toy at that time, Leonard said, "I can't answer that. ... I had just started here."

Schylling also is investigating whether lead contaminated two more of its products, a similar toy called a Circus Top and a number of metal pails that featured wooden handles, Leonard said. "It's very clear we have a product we sold that had lead in it," he said. "It's not something we intended or wanted to have happen. We're very frustrated by that."

The company is the latest toymaker forced to recall lead-tainted products made in China. The number of Schylling toys affected is far smaller than the recent lead-related recalls of nearly 1 million Fisher-Price toys and 1.5 million Thomas & Friends wooden railway toys. But the Schylling case illustrates how the government's reliance on companies to police themselves can leave consumers unwittingly vulnerable to unsafe products.

It also shows how even tainted toys that haven't been shipped in years can remain in circulation through the retail bazaar that flourishes on the Internet. In the case of the Thomas top, the Tribune was able to purchase it online through eBay.

One of the most common hazards is lead, a toxic metal banned in most products in the U.S. three decades ago but still a frequently used raw material in factories overseas. It can cause brain damage if ingested by children, lowering IQs and causing developmental delays. The Centers for Disease Control and Prevention says there is no safe level of lead exposure for children and recommends that all children be screened once a year, especially those who are 6 months to 6 years old.

The Tribune recently had the Schylling top tested by the Hygienic Laboratory of the University of Iowa as part of a broader examination of the hazards hidden among popular children's products.

A spokesman for the Consumer Product Safety Commission, Scott Wolfson, would not comment on the Schylling recall. In general, though, Wolfson said companies that discover they have tainted products have a legal obligation to report it immediately to the agency.

When informed of the Tribune test results on his company's Thomas & Friends top, Schylling Chief Executive David Schylling said earlier this week that he was "amazed" at the finding.

But one of Schylling's former customers, a Houston man who operates an online toy store called Retro Toys, said he had complained to Schylling officials for many months that some Thomas tops as well as pails and Circus Tops had handles covered with lead paint.

Gary Giddings, owner of Retro Toys, told the Tribune in an e-mail that his firm had filed a complaint with the CPSC last year for lead paint in Schylling products. He said he had done his own tests using swabs, which sometimes falsely indicate the presence of lead.

Wolfson would not comment on whether Giddings had sent the agency such a complaint.

Leonard said Giddings had never complained about lead paint on any items and that Retro Toys had a combative relationship with Schylling. But Leonard held out the possibility that Schylling also would have to recall the metal pails because of tainted wooden handles. "I think we had a problem with those," he said.

The company has "been aware for a long time that there can be issues with paint, specifically related to heavy metals and toxicity," he said. "And so we test for that. We test five samples in a shipment and a sample of the wet paint. It is never our intention to ship a product with a known test failure report."

In the wake of the earlier lead paint disclosures in the industry, Schylling increased the testing of its products, Leonard said. He also said the company is planning to use a third-party testing company to perform tests during production.

"We work very hard to get this right, and it's been very difficult for us," he said, contending that "the real issue is that the Chinese are allowed to make lead paint."

Leonard acknowledged, though, that it becomes an American company's concern as soon as the products test positive for lead, as the Thomas & Friends top did in 2002. "It clearly is our problem," he said.

The Tribune purchased the Thomas & Friends top on eBay from a seller in Virginia and sent it to the University of Iowa lab for testing. Teresa Bowman, a chemist at the Iowa lab who helped conduct the testing, said it showed a lead content of 2.4 percent -- 40 times higher than the federal limit of 0.06 percent.

"That is very high, and that knob is the part of the toy that will probably go into a child's mouth," Bowman told the Tribune. "The chemist repeated the test and got the same answer."

Without an official recall, parents should take the product away from children and look for more information in the coming weeks, according to a government safety expert. Once a recall process is initiated, as happened Wednesday, it can take three weeks for a detailed recall notice. The CPSC Web site (CPSC.gov) provides information on recalls.

The woman who sold the toy on eBay was stunned when she learned the test results. "Oh, my gosh," she said when contacted by the newspaper. "I have three children and they've all played with it. I can't believe it." She said her son, who just turned 8, had outgrown his fondness for Thomas toys, so she was selling them on the online auction site.

Schylling is the only company that is licensed to sell the Thomas & Friends spinning tops. David Schylling said the company has been selling the tops for about 10 years and that for about a year the tops were sold with wooden knobs painted red.

He said that the company was aware that there were problems with lead paint being used on the knobs. "We have rejected shipments that tested positive. And they've remade the goods and they've used different paint and they've been accepted," Schylling said.

"The contamination can come from all sorts of sources. I don't know if they are consciously putting lead in the paint, but somewhere along the line they are getting contaminated. Clearly, wood is a problem area."

A spokesman for HIT Entertainment, the London-based company that licenses the Thomas & Friends brand to companies such as Schylling, said no officials would be available for comment. When told about the Tribune's findings, the spokesman provided a statement saying HIT "requires that its licensees manufacture to meet the highest standards of quality and safety and all of our contracts contain detailed provisions designed to ensure compliance."

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mpossley@tribune.com

mdoneal@tribune.com

International Herald Tribune Editorial - Probing Pat Tillman's death

2007-08-09T06:14:00.001-07:00

International Herald Tribune Editorial - Probing Pat Tillman's death
Copyright by The International Herald Tribune
Published: August 8, 2007

Now that the U.S. Army has completed its seventh inquiry into the death of Corporal Pat Tillman and military leaders have testified in Congress, we still don't know who concocted a phony story about how Tillman died and whether the White House knew it was happening. Congress needs to clarify whether this affair reflects incompetence or a conspiracy to exploit a soldier's death.

Tillman, who gave up a pro football contract to volunteer as a U.S. Army Ranger, was killed in Afghanistan in April 2004 while trying to assist another Ranger unit. Almost immediately, soldiers in the field recognized that he had been hit by fire from fellow Rangers. Yet witness reports were rewritten to make it seem like he had been felled by the enemy. That became the basis for expediting a posthumous Silver Star. Even after the truth was recognized, the army stuck by its award on the theory that Tillman acted heroically before he was killed.

The misrepresentations might well have been the army's sole doing. Yet the White House could ease doubts by granting the House Oversight and Government Reform Committee full access to key personnel and documents.

The committee has already learned that, immediately after Tillman's death, at least 97 White House officials exchanged hundreds of e-mails about how the White House should respond. Have embarrassing e-mails been withheld from congressional scrutiny? The committee needs to find out.

International Herald Tribune Editorial - A weak dollar and the Fed

2007-08-09T06:12:00.000-07:00

International Herald Tribune Editorial - A weak dollar and the Fed
Copyright by The International Herald Tribune
Published: August 8, 2007

Despite the Federal Reserve's latest stay-the-course message, investors are betting on at least one interest-rate cut by January, intended to quell turmoil in the markets and to juice the slow economy. But with the dollar also weak - recently hitting its lowest point in 15 years against an index of other major currencies - the Fed may be reluctant to oblige.

A declining dollar is a source of inflationary pressure because it can boost the cost of imports. So if the Fed tried to rev up the economy with a rate cut at the same time the dollar is falling, it could end up provoking even more inflation. That would be a drag on economic growth rather than a boost. In an extreme case, it could result in a toxic combination of weak growth and high prices that is a central banker's nightmare.

How did the Fed lose room to maneuver? The answer is rooted in the Bush administration's misguided economic policies.

Over the last several years, America's imbalances in trade and other global transactions have worsened dramatically, requiring the United States to borrow billions of dollars a day from abroad just to balance its books.

The only lasting way to fix the imbalances - and reduce that borrowing - is to increase America's savings. But the administration has rejected that responsible approach since it would require rolling back excessive tax cuts and engaging in government-led health care reform - both anathema to President George W. Bush. It would also require revamping the nation's tax incentives so that they create new savings by typical families, instead of new shelters for the existing wealth of affluent families - another nonstarter for this White House.

Stymied by what it won't do, the administration has gone for a quicker fix - letting the dollar slide. A weaker dollar helps to ease the nation's imbalances by making American exports more affordable, thus narrowing the trade deficit.

But to be truly effective, a weaker dollar must be paired with higher domestic savings. Otherwise, the need to borrow from abroad remains large, even as a weakening currency makes dollar-based debt less attractive. That's the trap the United States is slipping into today.

Among other ills, it could lead to a deterioration in American living standards as money flows abroad to pay foreign creditors, leaving less to spend at home on critical needs. Or, it could lead to abrupt spikes in interest rates as American debtors are forced to pay whatever it takes to get the loans they need.

In volatile economic times like now, leadership is crucial - and notably absent with this administration. Officials have made no effort to orchestrate a more coordinated and comprehensive realignment of the world's currencies, in part, it seems, because the administration is unwilling to have America do its part by saving more.

Until the administration - either this one or the next - is willing to acknowledge the source of the economy's imbalances, and starts addressing them seriously, the dollar is likely to remain weak. And the Fed's ability to maneuver will be constrained.

British military asks U.S. forces to leave Afghan province

2007-08-09T06:09:00.000-07:00

British military asks U.S. forces to leave Afghan province
By Carlotta Gall
Copyright by The International Herald Tribune
Published: August 8, 2007

SANGIN, Afghanistan: A senior British commander in Afghanistan's Helmand Province said he had asked the U.S. military to withdraw its special forces from his area of operations because the high level of civilian casualties they have caused was making it difficult to win over local people.

A U.S. military spokesman denied the request was ever made, either formally or otherwise, but the dispute underlined differences of opinion among NATO and U.S. forces in Afghanistan on tactics for fighting Taliban insurgents and concerns among soldiers on the ground about the consequences of civilian casualties.

A precise tally of civilian casualties is difficult to pin down, but one reliable count puts the number killed in Helmand this year at close to 300 - the vast majority of them caused by foreign and Afghan forces, rather than the Taliban.

"Everyone is concerned about civilian casualties," the senior British commander said. "Of course it is counterproductive if civilians get injured, but we've got to pick up the pack of cards that we have got. Other people have been operating in our area before us."

After 18 months of heavy fighting, British commanders say they are finally making headway in securing key areas, like this town, and are now in the difficult position of trying to win back the support among people whose lives have been devastated by aerial bombing.

American special forces have been active in Helmand since U.S. forces first entered Afghanistan in late 2001, and for several years they maintained a small base outside the town of Gereshk. But the foreign troop presence was never more than a few hundred men.

British forces arrived last spring and now have command of the province: About 6,000 soldiers are deployed, with small units of Estonians and Danish troops. American special forces have continued to assist in fighting insurgents, operating as advisers to Afghan security forces.

It is those small teams that are coming in for criticism. Their tactics rely heavily on airstrikes for cover because they are unable to defend themselves if they encounter a large group of insurgents. Special forces teams have often called in airstrikes in Helmand and elsewhere and civilians have subsequently been found to have suffered casualties.

In just two cases, airstrikes killed 31 nomads west of Kandahar in November 2006 and 57 villagers, half of them women and children, in western Afghanistan in April. In both cases U.S. special forces called in the airstrikes.

British officers on the ground in Helmand, speaking on condition of anonymity, said the Americans had caused the lion's share of the civilian casualties in their area. They expressed concerns that the Americans' extensive use of air power was turning the people against the foreign presence.

The chief British press officer in Helmand, Colonel Charles Mayo, defended the American special forces, and said they were essential to NATO's efforts to clear out Taliban insurgents.

An American military spokesman said the special forces would continue to operate in Helmand for the foreseeable future. He denied that the special forces' tactics had caused greater civilian deaths and blamed the Taliban for fighting from civilian compounds.

"U.S. special forces have a tremendous reputation not only in combat operations, but also in training and advising the Afghan National Security Forces," Lieutenant Colonel David Accetta, a spokesman for U.S. forces in Afghanistan, said in an e-mail from the Bagram Air Base.

The special forces also provide development and medical assistance, he said, which with their combat missions "can be said to have 'turned the tide' in Helmand."

But the senior British commander, who also spoke on condition of anonymity, said that in Sangin, which has been calm for a month, there was no longer a need for the special forces. "There aren't large bodies of Taliban to fight anymore," he said. "We are dealing with small groups and we are trying to kick start reconstruction and development."

He said orders had just come down from the NATO force's headquarters in Kabul, which is headed by a U.S. general, Dan McNeill, that re-emphasized the need to avoid civilian deaths.

"The phrase is: 'It may be legal but is it appropriate?' No one is saying it is illegal to use air power, but is there any other way of doing it if there is a risk of collateral damage?" the senior British commander said.

For months, frequent reports of civilian casualties have trickled out of Helmand Province, the scene of some of the fiercest battles of the war here. But there has rarely been independent confirmation of the reports because the province has been too dangerous for journalists and others to visit. NATO officials accuse Taliban sympathizers of exaggerating claims of civilian casualties in airstrikes.

Yet there is no doubt there have been civilian casualties, and British and Afghan officials acknowledged that they have seen some of them.

Villagers brought the bodies of 21 civilians killed in airstrikes on the village of Sarwan Qala on May 8 to show the authorities in Sangin, they said. U.S. special forces were battling the Taliban on that occasion and called in the strikes, the military said in a statement at the time.

Three days later the nearby village of Sra Ghar was hit. British soldiers at a base called Robinson just south of Sangin said they had received 18 civilians around that time who were wounded in an American operation and flew them out to NATO hospitals for treatment.

On a rare visit to Helmand in mid-July, a journalist encountered children who were still suffering wounds sustained in that bombing raid or another around that time. Their father, Mohammadullah, 24, brought them to the gate of the British army base seeking help.

His son, Bashir Ahmed, 2, listless and stick thin, seemed close to dying. The boy and his sister Muzlifa, 7, bore terrible shrapnel scars. NATO doctors had removed shrapnel from the boy's abdomen and had warned his father that he might not survive, but two months later he was still hanging on. Mohammadullah said the bombing raid killed six members of his family and wounded five. His wife lost an arm and the children's grandmother was killed, he said.

Altogether, he said, 20 people were killed in the airstrikes after Taliban fighters came through the village. He said that he opposed the Taliban, but that after the bombing the villagers were so angered that most of the men joined the insurgents.

It is the possibility of the population turning against them, or the unpopularity of the campaign back home, that most concerns the military, one NATO official said. "We know we can beat the Taliban on the ground," the official said. "The issue is the population."

Major Dominic Biddick, commander of a company of British soldiers in Sangin, is making a big effort to ease the anger and pain as his men patrol the villages. He has a $5,000 goodwill fund and hands out cash to victims he comes across, such as the farmer whose two sons were shot in the fields during a recent operation.

But while some of the local people blame the Taliban for bringing violence to Helmand, hostility toward the foreign forces remains. Mahmadullah said: "Now we have understood that the Americans are a curse on us and they are here just to destroy Afghanistan."

US migrant laws hit cash sent to Mexico

2007-08-09T05:56:00.001-07:00

US migrant laws hit cash sent to Mexico
By Richard Lapper in São Paulo
Copyright The Financial Times Limited 2007
Published: August 8 2007 22:37 | Last updated: August 8 2007 22:37

Legal restrictions targeting illegal immigrants have contributed to a sharp fall-off in the remittances sent to Mexico from a number of US states, according to a survey published on Wednesday.

The survey, commissioned by the Inter-American Development Bank, shows that Mexicans living in southern and other US states without a strong tradition of Latin American immigration – such as Louisiana, North Carolina and Georgia – are feeling uneasy about the future.

These states have also seen a recent surge in legislation increasing penalties for those who employ illegals and making it more difficult for migrants to obtain driving licences and other documentation, for example.

Only about half the almost 2m Mexicans in these so-called “new” migration states are sending back remittances, compared with four-fifths a year ago. That is the biggest single factor explaining a levelling-off in remittance growth to Mexico following several years of double digit growth, according to the report.

“The environment is becoming much more hostile in these new states,” said Don Terry, head of the multilateral investment facility, which leads the IADB’s work on remittances.

The research singled out the southern state of Georgia as “the epicentre” of the new trend. “It is logical that if you feel you are not welcome and are going some place else you start to save a little kitty to deal with emergencies. In addition, in these states it is not so easy to get a job or to secure an increase in wages,” said Sergio Bendixen, a pollster who conducted the research.

Mexico received $23.1bn (€16.8bn, £11.4bn) in remittance income in 2006, with the flows helping to boost substantially the income of poor families. However, the rate of increase has begun unexpectedly to tail off this year. Figures from the Mexican Central Bank show remittances grew by only about 0.6 per cent in the first six months of 2007 compared with a rise of 23 per cent a year previously.

“Immigrants feel they are suffering from discrimination and lack of respect,” said Mr Bendixen, whose research was based on focus group interviews with Mexican and Central American migrants. “They are unable to rent homes and in some cities it is becoming more and more difficult to find a job.”

The survey shows a slightly different picture emerging in 10 states such as New York, California and Florida where there has traditionally been a strong Hispanic presence and where the Mexican, Central American and other Latin American communities are well organised.

About two-thirds of the estimated 8.4m Mexicans who live in these states have continued to send remittances this year.

Remittances from Guatemalan, El Salvadorian and Honduran migrants, who tend to be concentrated in these traditional areas, rose by 11 per cent in the first six month of this year from just under $4.5bn to almost $5bn.

Financial Times Editorial Comment: Transatlantic travellers’ trials

2007-08-09T05:52:00.001-07:00

Financial Times Editorial Comment: Transatlantic travellers’ trials
Copyright The Financial Times Limited 2007
Published: August 8 2007 20:21 | Last updated: August 8 2007 20:21

The European Union’s frustration with the new US visa law is pal pable. Washington has produced a measure that perpetuates a two-tier system for allowing entry into the US from EU countries, and imposes a new obligation on those with more favoured status to register their travel plans. Travellers to the US will suffer from the new restrictions, but so will the US itself.

The proposals stem from the in dependent commission into the terrorist attacks of 2001, which reported three years ago. The intense desire to prevent another attack is understandable and explains why the measures have commanded wide political support in Washington. Yet extra security measures come at a high price, as the US has already discovered.

In recent years, travel to the US, excluding Mexico and Canada, has fallen while cross-border travel generally has risen. So US companies have lost billions of dollars of potential business. The drop in foreign visitors has also indirectly damaged the US’s reputation: research suggests foreigners who have visited America have a more favourable view than those who have not.

The new measures could be hugely burdensome. The electronic traveller authorisation scheme demands that foreigners from the 26 developed countries whose citizens do not need visas to enter the US give advance notice of their plans to visit. This does not have to be a nightmare – Australia has operated such a system for more than 10 years – but many aspects of the US scheme have not yet been settled and the background to the new act is not encouraging. Another sweeping provision requires all air and sea cargo heading for the US to be screened before being shipped. This would be onerous and expensive, and may be simply unfeasible.

It is true that the law also adds to the countries in the visa waiver programme and slightly relaxes the test for new applicants for the programme. But including the Czech Republic is not the same as providing equal treatment across New Europe – the EU countries in central and Eastern Europe. States such as Poland and Hungary must surely have expected a more positive response for their support for the US in Afghanistan and Iraq.

So it is no wonder the EU is thinking of putting US passengers to Europe through a similar registration process. This would be a mistake. Retaliation is not the right basis for making security policy. The US should recognise the antagonism its new visa law has aroused, and show greater dexterity and adroitness in implementing the law than it did in passing it.

Transparency: the new democracy

2007-08-09T05:42:00.000-07:00

Transparency: the new democracy
By Grover Norquist
Copyright The Financial Times Limited 2007
Published: August 8 2007 18:56 | Last updated: August 8 2007 18:56

The nice venture capitalists in Silicon Valley are always looking for “the next big thing”. While we will have to wait for another six months to learn who will make it through the Republican and Democrat “Survivor” reality show we call primaries we can already see the next big thing in politics bubbling up from the 50 states: transparency. Making state budgets, contracts and individual expenditures available to the public on the internet

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Rick Perry, the Republican governor of Texas, helped advance this cause of transparency last autumn by putting his own governor’s office expenses on the web in a searchable form. Susan Combs, the state’s elected comptroller, followed suit when she took office in January.

Five states passed laws this spring mandating various levels of transparency, such as posting all contracts and grants and even all state expenditures on the web: Kansas, Oklahoma, Minnesota, Hawaii and Texas. Legislation was introduced or debated in a dozen others and is set to pass next spring.

The state of Texas has further required that any school district that cannot prove that it is spending at least 65 per cent of its education budget in the classroom must publish its check register – every single expenditure – online for citizens to inspect.

Republican Mitch Daniels, Indiana’s governor, put his state’s contracts on the internet on the very day he took office in January 2005.

Governor Matt Blunt of Missouri, a Republican, has gone the furthest the fastest. Through executive order, Mr Blunt has put up the Missouri Accountability Portal (“Map Your Taxes”) website, which posts a wide range of government expenditures.

You can look up the actual expense records of your favourite politician and bureaucrat. A linked website provides access to the actual contracts let by the state. There are other plans, including the posting of state employee salaries.

Mr Blunt explained: “One of my goals has been to transform state government by using technology to improve efficiency and enhance transparency. The old-way bureaucrats like the paper-based system, which empowers them and is less accountable to taxpayers. Few Missourians can take the time to root through mounds of paperwork in some de partment to find out where their taxes are going. Missourians deserve open- ness in state spending. These dollars belong to the people of our state.”

Popular response? The Map Your Taxes website has received more than 600,000 hits in its first few weeks.

Opponents of transparency tried in other states to assume large costs to posting financial data on the web. Some proffered estimates ran into the millions.

Mr Blunt demolished this delaying tactic for other states when he put the entire state finances online without a single additional appropriation – just using existing staff and resources.

Transparency is advancing rapidly for several reasons.

First, it is moving fastest at the state level and is not stymied by partisan wrangling in Washington, where everything is about gaining a footing in the 2008 presidential campaign.

Second, transparency has a visible supporter in the media. Putting state government or school board expenditures on the web might be called the “lazy-journalist-wins-a-Pulitzer” legis lation. Newsmen and women like openness. No more waiting around for pre-digested bits of news coming through press releases. Now everything the state or local government does is visible 24/7.

Third, most of this information in most states is already legally public information. It just sits in boxes in the basement of city hall or state government buildings. Putting it on the web does not require changing any laws or asking permission.

Fourth, the effort is oddly trans-ideological. This writer, a taxpayer advocate, and Ralph Nader, a somewhat left-of-centre consumer advocate, jointly sent a letter to all governors of both parties urging them to make their books transparent. Both teams assume the other guys are up to no good. And they are probably both right.

And what about Washington? The Bush administration was urged to put its contracts and grants and books online years ago.

Mr Daniels, then at the Office of Management and Budget, supported the effort, but the White House could not be bothered. So Senator Tom Coburn of Oklahoma, a conservative, and Senator Barack Obama of Illinois, a certifiable liberal, joined together to require that at least an outline of grants and contracts be made available online. The legislation passed last September and will be fully implemented by January 2008. Although it is a step in the right direction, this legislation is very weak beer compared with what has been or is being implemented at the state level.

Washington will fall last. The Democrats now running Congress have been moving backwards by making their 38,000 secret earmarks – pet projects of individual members of Congress – less transparent, and the keeper of the executive branch’s privileges against the public’s right to know is Dick Cheney, vice-president. His penchant for secrecy makes Howard Hughes look like Gypsy Rose Lee.

There is a history of reform coming to Washington through the states: the property tax revolt in the 1970s, term limits for politicians in the 1990s, and now transparency. The argument that something “cannot be done” or “costs too much” collapses when a dozen states have shown the way.

The writer is president of Americans for Tax Reform. A detailed memo on the transparency movement can be found at www.atr.org

Bush backs markets to ride out crisis

2007-08-09T05:40:00.000-07:00

Bush backs markets to ride out crisis
By Krishna Guha and Andrew Ward in Washington
Copyright The Financial Times Limited 2007
Published: August 8 2007 21:13 | Last updated: August 8 2007 23:02

President George W Bush played down the notion of giving Fannie Mae and Freddie Mac a larger role in efforts to stabilise the troubled US mortgage market, as he expressed confidence that financial markets are functioning well in spite of bouts of volatility.

Mr Bush told reporters that the government-sponsored mortgage companies should “focus on their core business.” He did not rule out loosening limits on their investment portfolios but said the entities should be “reformed first” adding “now is the time to get it done”.

The president said the financial markets were performing their job as investors repriced risk, and sounded confident that they would soon stabilise as investors focused on sound US fundamentals.

“There is a lot of liquidity in our system,” Mr Bush said, adding “conditions for the market place working through these issues are good”.

The president’s remarks came after a day of meetings with his advisers at the US Treasury. Mr Bush said he was interested in a proposal floated by Hank Paulson, the Treasury secretary, to finance a reduction in the US corporate tax rate by eliminating some corporate tax breaks.

However, he said it was too early to say whether the administration would put propose corporate tax legislation.

Mr Bush meanwhile sought to draw broad political dividing lines on tax, public spending and free trade, accusing Democrats of plotting the biggest tax increase in US history, endangering the solid economic growth achieved over the past four years.

He renewed his threat to veto Democratic plans to increase next year’s federal budget above the $933bn requested by the White House. The comments signalled an escalation in tensions between the Bush administration and Congress.

The remarks appeared aimed at reclaiming the initiative in the debate over economic policy at a time when Democrats are seeking to exploit widespread pessimism among middle-class Americans about the direction of the US economy.

“I will use the veto to keep your taxes low and keep federal spending under control,” he said in a public statement.

Congress will have less than a month to pass budget legislation before the end of the fiscal year when lawmakers return from their summer recess in September. If the deadline is missed, the federal government would face a funding crisis.

GAY PREZ DEBATE

2007-08-08T16:39:00.001-07:00

GAY PREZ DEBATE
by Bob Roehr
Copyright by The Windy City Times
2007-08-08

The gay community had won one of its most important victories only weeks earlier when the U.S. Supreme Court issued the Lawrence decision striking down the remaining state sodomy laws as unconstitutional when seven Democratic presidential candidates took the stage to discuss LGBT issues on July 15, 2003.
Only the Southern Senators Bob Graham ( Florida ) and John Edwards ( North Carolina ) did not participate in the event organized by the Human Rights Campaign ( HRC ) , due to prior commitments.

The setting was the recently completed Ronald Reagan Building, that huge edifice that sits on Pennsylvania Avenue between the White House and the Capitol. The pit bull of television journalism Sam Donaldson grilled the candidates, and C-SPAN carried it live.

Three candidates supported gay marriage, including Rep. Dennis Kucinich ( Ohio ) , who is running again this year. Former Sen. Carol Moseley Braun traced her support back to her aunt, who married a white man at a time when interracial marriage was still illegal in many states. But as a practical matter, she thought the issue of marriage should remain in the hands of the states.

The Rev. Al Sharpton drew the most sustained applause when he said that the inference of the question on gay marriage “is that gays and lesbians are not human beings that can make decisions like any other human being. We must stop this separation of gays and lesbians from other Americans.”

“If people respect you, it is not about gays and lesbians having the right to marry, it is about human beings having the right to marry who they choose.” Sharpton said, “It’s like saying we give Blacks or whites or Latinos the right to shack up but not to marry.”

The event was universally deemed a success. It was the first time that major presidential candidates of a political party had agreed to appear at a forum to address issues of concern to the gay community. It took place at the symbolic center of the nation’s politics, and it was broadcast by the chronicler of the nation’s political life.

WHY CHANGE?

Given that unbridled success, why change the formula this time around? The answer is that times change, particularly in the rapidly evolving area of communications. The LGBT cable channel Logo was launched in June 2005, and with it a number of other associated communications platforms.

Logo VP for Communications Steven Fisher says the company’s goal is “super-serving the niche audience.” Early in the year they began talking internally about hosting a forum. “We saw this as a tremendous opportunity to educate and inform and bring our community together, and give the candidates an opportunity to speak directly to this audience in a way that has never been done before,” he said.

Fisher had worked at HRC and approached them about collaborating on the event. David Smith agreed; HRC had been planning to hold its own forum but the candidates have limited time and rather than compete, a partnership made sense.

A firestorm of protest erupted when word got out that one of the most vocally pro-gay candidates, former Sen. Mike Gravel, was not going to be invited to participate. Smith said, “We wanted to make sure that our community had the opportunity to hear from the next President of the United States. And, that is not going to be Mike Gravel.”

But he added, “we listened” to those protests; Gravel was quickly included. Smith also acknowledged the importance of “minor” candidates in pushing the “major” ones on issues important to the community, as Sharpton did in 2003.

Fisher said the importance of the early California primary ( Feb. 8, 2008 ) and the large, diverse and politically active LGBT community in the state were significant factors in deciding to hold the forum in Los Angeles. It doesn’t hurt that there are great television production studios there, as well.

The event has morphed from one hour to two hours—more time for the candidates and for political analysis at the end. Several of the candidates have agreed to participate.

Smith said that the forum “is designed to educate gay voters on the differences of positions and opinions of the major presidential candidates. A by-product of that is an intelligent, thoughtful conversation on our issues in the mainstream media.”

EXPECTATIONS

Bob Witeck—the public relations guru who has worked for Logo, HRC, and corporate America—said it will be good to have all of the candidates on the record: “They have gone round and round on the issues already. In the question on gays in the military they raised their hand—so talk to me about it.”

He thought the average viewer “is also going to be looking for the connection; does the candidate ‘get it?’” How comfortable are they with the issues? What is the body language? Sometimes it is even saying ( or avoiding ) certain buzzwords for the community.

Witeck believed that panelists “Melissa Etheridge and Joe Solmonese are under deep pressure to do it right and make it authentic.” She might draw a crossover audience, “which is not a bad thing.”

Ken Sherrill, the dean of gay political scientists who teaches at Hunter University in New York, said, “Logo has developed a much larger viewership than anybody expected it to have at this point.” Given the various ways to access the program, it may capture more gay viewers than would tune into C-SPAN.

He believed the forum is more important for Logo than for HRC. “It is saying to an audience and to advertisers, we are an important segment of the market, take us seriously.”

“If Logo is going to perform a service, it should be doing stuff like this,” said Larry Gross, chair of the Annenberg School of Communications at the University of Southern California.

“The problem with this whole thing is that HRC is such a suck-up to the Democratic Party that this can be seen as more of an attempt to round up gay support for Democratic candidates than the reverse,” he said. “It is more servicing the Democratic Party than challenging the Democratic Party. … It is more, how can we help you get gay voters—and money—no doubt.”

Gross said the questions will need to be focused. “If you narrow it enough, you have enough time to force them to say something” beyond platitudes, he said. “Somebody should ask Hillary about DOMA [ the Defense of Marriage Act ] . Bill signed it.”

“Many of the critical issues that marriage impacts are federal,” he said. “DOMA means that being married in Massachusetts still doesn’t get you any of the federal benefits or opportunities. So, leaving it up to the states is a false solution if the feds are holding the cards on immigration, taxes and a lot of other issues. You can’t say it should be up to the states if it’s not.”

The forum airs live on Aug. 9 at 8 p.m. on various Logo platforms, including online at www.VisibleVote08.com .

BOOKS Carlos Mock: Blazing a Trail

2007-08-08T14:33:00.001-07:00

BOOKS Carlos Mock: Blazing a Trail
by Ross Forman
Copyright by The Windy City Times
2007-08-08

When Carlos Mock wanted to publish his first book, he went to the Internet for help. He searched Google for “gay,” “Latino” and “publisher.” Floricanto Press was the first hit.

So Mock sent his manuscript to Floricanto Press “and they loved it,” he said.

In 2003, Floricanto published Borrowing Time: A Latino Sexual Odyssey, Mock’s memoirs, which dealt with his struggles with coming out in a Latino culture ruled by machismo, religion and close family ties. It also detailed his battle with AIDS.

Mock’s book became Floricanto’s best seller.

Mock also has written Mosaic Virus, a fictitious high-profile pedophile tale about a cardinal and the church cover-up that follows. On Sept. 30, Mock’s third novel, Papi Chulo: A Legend, a Novel, and the Puerto Rican Identity will be released at the West Hollywood ( Calif. ) Book Fair.

“All I do is write; I don’t really have any hobbies. And I’m very active in the community, too,” said Mock, who has homes in Chicago’s Uptown neighborhood and Three Oaks, Mich. “My husband [ Bill Rattan ] is responsible for me ever writing anything because I was driving him crazy.” [ Mock’s community involvement includes working with the groups Equality Illinois and Orgullo en Accion, with the latter being a Latino LGBTQ organization. ]

Mock is a board-certified obstetrician, but has not practiced since 1996; he is disabled because of HIV.

Mock and Rattan, who also is HIV-positive, met on Jan. 1, 2000.

Mock, who was born in Puerto Rico and grew up in the San Francisco area, did his medical residency at the Cook County Hospital. He then went into private practice in the Chicago suburbs.

Now, he is an editor of Floricanto Press for its LGBT Latino literature division. The company publishes about 10 titles per year from Latino writers.

“I’m enjoying this [ new position ] . What we want to form is a network of Latinos … and help each other sell books,” said Mock, 51. “When I was asked if I would be interested in [ being an editor ] , I said, ‘Sure; why not?’”

In an effort to reach its goal, Floricanto will see its books considered for honors such as the LAMBDA Literary Foundation Awards ( Lammies ) , The Publishing Triangle Awards and the American Library Association Roundtable Stonewall Awards.

In addition to Mock’s Papi Chulo, Floricanto will release Leo Cabranes-Grant’s The Chat Room and Other Plays—A Puerto Rican Anthology this summer. And next summer, Floricanto will release the First Anthology of Latino GLBT Poetry—Mariposas.

Floricanto Press is primarily heterosexual. The first gay book it did was Mock’s. The publisher saw that it sold well and realized that there is a market for this genre, and proposed to Mock to edit the LGBT section of the company.

No one in the company is gay other than Mock.

“I want to bring an outlet [ to Floricanto ] ,” Mock said. “There are a lot of voices that need an outlet ... because it’s becoming very difficult to become published, especially if you’re Latino and gay.”

Carlos Mock will be at the Lambda Legal booth at Northalsted Market Days on Aug. 11-12. A portion of the sales of his books will benefit Lambda Legal.

International Herald Tribune Editorial - Those missing guns in Iraq

2007-08-08T07:57:00.000-07:00

International Herald Tribune Editorial - Those missing guns in Iraq
Copyright by The International Herald Tribune
Published: August 7, 2007

U.S. taxpayers are rightly prepared to pay for all the equipment American soldiers need to defend themselves in Iraq. What is harder to accept is that because of the Pentagon's scandalous mismanagement, they may have been paying to arm Iraqi insurgents who are shooting at American soldiers.

The Government Accountability Office reports that more than 100,000 AK-47 assault rifles and another 80,000 pistols that Washington thought it was providing to Iraqi security forces in 2004 and 2005 are now unaccounted for. More than 100,000 pieces of body armor and a similar number of helmets have also gone missing.

These numbers represent the discrepancy between the equipment ordered by the American commander in charge of training Iraqi forces and the equipment actually logged into the property records of those forces. Disturbingly, that commander was General David Petraeus, now the overall commander of American forces in Iraq.

The missing weapons amount to fully 30 percent of the weapons handed out by Washington to Iraqis through the start of this year. Some were presumably diverted into black market arms bazaars. Some almost certainly ended up in the hands of insurgent militias.

In the past, the State Department has managed these train-and-equip programs. In Iraq, the Pentagon insisted on taking charge, just as it insisted on taking charge of everything else - whether or not it had the competence to do so. Remember the arrogant sidelining of the State Department's experts, who had actually spent time thinking about how to manage a post-invasion Iraq? The result is one more failed policy that has put the lives of U.S. troops at even greater risk.

Overall, the United States has spent more than $19 billion trying to develop capable Iraqi security forces, with little to show in return. Last month's benchmarks report from the White House found only six Iraqi battalions able to operate without American support, four fewer than in March.

It is bad enough that Washington is now officially backing two of the opposing armies in the multisided civil war: the Shiite-dominated government in Baghdad tied to sectarian militias and the Sunni militias fighting Al Qaeda in Anbar Province. How much worse if the Pentagon's ineptitude has been funneling AK-47s to insurgent fighters killing Americans on a daily basis.

International Herald Tribune Editorial - The fear of fear itself

2007-08-08T07:55:00.000-07:00

International Herald Tribune Editorial - The fear of fear itself
Copyright by The International Herald Tribune
Published: August 7, 2007

It was appalling to watch over the last few days as Congress - now led by Democrats - caved in to yet another dangerous expansion of President George W. Bush's powers, this time to spy on Americans in violation of basic constitutional rights. Many of the 16 Democrats in the Senate and 41 in the House who voted for the bill said that they had acted in the name of national security, but the only security at play was their job security.

There was plenty of bad behavior. Republicans marched in mindless lockstep with the president. There was double-dealing by the White House. The director of national intelligence, Mike McConnell, crossed the line from being a steward of U.S. security to acting as a White House political operative.

But mostly, the spectacle left us wondering what the Democrats - especially their feckless Senate leaders - plan to do with their majority in Congress if they are too scared of Republican campaign ads to use it to restrain an out-of-control president.

The votes in the House and Senate were supposed to fix a genuine glitch in the 1978 Foreign Intelligence Surveillance Act, which requires the government to obtain a warrant before eavesdropping on electronic communications that involve someone in the United States.

The court charged with enforcing that law said the government must also seek a warrant if the people are outside the United States, but their communications are routed through data exchanges in the country - a technological problem that did not exist in 1978.

Instead of just fixing that glitch, the White House and its allies on Capitol Hill railroaded Congress into voting a vast expansion of the president's powers. They gave the director of national intelligence and the attorney general authority to intercept - without warrant, court supervision or accountability - any telephone call or e-mail message that moves in, out of or through the United States as long as there is a "reasonable belief" that one party is not in the United States. The new law all but eviscerates the 1978 law. The only small saving grace is that the new statute expires in six months.

The House handled this mess somewhat better than the Senate, moving to the floor a far more sensible bill. McConnell certified that the House bill would address the problem raised by the court. That is, until the White House made clear that it wanted to use the court's ruling to grab a lot more power. McConnell then reversed his position and demanded that Congress pass the far more expansive bill.

In the Senate, the team of Harry Reid, the majority leader, gave up fast, agreeing to a deal that doomed any good bill. The senators then approved the White House bill, dumped it on the House and skulked off on vacation. Representative Rahm Emanuel, the fourth-ranking member of the Democratic House leadership, said Monday that his party would not wait for the new eavesdropping authority to expire, and would have a new, measured bill on the floor by October. We look forward to reading it.

But the problem with Congress last week was that the Democrats allowed Bush and his fear-mongering to dominate all discussions on terrorism and national security.

Bush claims that he has kept America safe since 9/11. But that claim ignores the country's vulnerabilities. Six years after the 9/11 attacks the administration has still failed to secure ports, railroads and airports from terrorist attack.

Bush's fear-mongering has had one notable success. The only issue on which Americans say that they trust Republicans more than Democrats is terrorism. At least those Americans are afraid of terrorists. The Democrats who voted for this bill show only fear of Republicans.

The Democratic majority has made strides on other issues like children's health insurance against White House opposition. As important as these measures are, they do not excuse the Democrats from remedying the damage Bush has done to civil liberties. That is their most important duty.

Extreme weather: A global problem

2007-08-08T07:54:00.001-07:00

Extreme weather: A global problem
Copyright by Reuters and The Associated Press
Published: August 7, 2007

GENEVA: Much of the world has experienced record-breaking weather events this year, from flooding in Asia to heat waves in Europe and snowfall in South Africa, the United Nations weather agency said Tuesday.

The World Meteorological Organization said global land surface temperatures in January and April were the warmest since such data began to be recorded in 1880, at more than one degree Celsius higher than average for those months.

There have also been severe monsoon floods across South Asia; abnormally heavy rains in northern Europe, China, Sudan, Mozambique and Uruguay; extreme heat waves in southeastern Europe and Russia; and unusual snowfall in South Africa and South America this year, the meteorological agency said.

"The start of the year 2007 was a very active period in terms of extreme weather events," Omar Baddour of the agency's World Climate Program said in Geneva.

While most scientists believe extreme weather events will be more frequent as heat-trapping carbon dioxide emissions cause global temperatures to rise, Baddour said it was impossible to say with certainty what the second half of 2007 would bring. "It is very difficult to make projections for the rest of the year," he said.

The Intergovernmental Panel on Climate Change, a UN group of hundreds of experts, has noted an increasing trend in extreme weather events over the past 50 years and said irregular patterns will probably intensify.

South Asia's worst monsoon flooding in recent memory has affected 30 million people in India, Bangladesh and Nepal, destroying croplands, livestock and property and raising fears of new health crises in the densely populated region.

Heavy rains also hit southern China in June, with nearly 14 million people affected by floods and landslides that killed 120 people, the World Meteorological Organization said.

England and Wales this year had their wettest May and June since records began in 1766, resulting in extensive flooding and more than $6 billion in damage, as well as at least nine deaths. Germany swung from its driest April since country-wide observations started in 1901 to its wettest May on record. And torrential rains have followed weeks of severe drought in northern Bulgaria - officials said Tuesday that at least seven people have been killed in floods.

Mozambique suffered its worst floods in six years in February, followed by a tropical cyclone the same month. Flooding of the Nile River in June caused damage in Sudan.

In May, Uruguay had its worst flooding since 1959.

In June, the Arabian Sea had its first documented cyclone, which touched Oman and Iran.

Temperatures also strayed from the expected this year. Records were broken in southeastern Europe in June and July, and in western and central Russia in May. In many European countries, April was the warmest ever recorded.

Argentina and Chile saw unusually cold winter temperatures in July while South Africa had its first significant snowfall since 1981 in June.

The World Meteorological Organization and its 188 member states are working to set up an early warning system for extreme weather events. The agency also wants to improve monitoring of the impacts of climate change, particularly in poorer countries that are expected to bear the brunt of floods.

As exceptionally heavy rains continued to cut a wide swath of ruin across northern India, a top UN official warned Tuesday that climate change could destroy vast swaths of farmland in the country, ultimately affecting food production and adding to the problems of already desperate peasants, The New York Times reported from New Delhi.

Even a small increase in temperatures, said Jacques Diouf, head of the Food and Agricultural Organization, could push down crop yields in the world's southern regions, even as agricultural productivity goes up in the north. A greater frequency of droughts and floods, one of the hallmarks of climate change, the agency added, could be particularly bad for agriculture.

"Rain-fed agriculture in marginal areas in semi-arid and sub-humid regions is mostly at risk," Diouf said. "India could lose 125 million tons of its rain-fed cereal production - equivalent to 18 percent of its total production." That is a sign of the steep human and economic impact of extreme weather in India.

Big Labor struts its stuff at debate

2007-08-08T07:52:00.001-07:00

Big Labor struts its stuff at debate
BY CAROL MARIN cmarin@suntimes.com
Copyright by The Chicago Sun Times
August 8, 2007

In the steamy, sticky environs of Chicago's Soldier Field last night, the winner wasn't any one of the Democratic presidential wannabes who jockeyed for rhetorical primacy. Not Biden, Clinton, Dodd, Edwards, Kucinich, Obama or Richardson. They were as much a part of the audience as the rest of us.
The winner last night was Big Labor. And it was strutting its stuff.

The AFL-CIO-sponsored "Presidential Candidates Forum" brought more than 10,000 union members and their families to Chicago's revered football field. They were there to demonstrate that labor still belongs in the gladiator class when it comes to constituencies capable of determining the leader of the free world in 2008. This despite plummeting union membership, erosion of its manufacturing base, and internal struggles that have factionalized it.

Though the AFL-CIO's choice of a 60,000-seat venue violated the long-standing political principle of always making sure your crowd is bigger than the room you wedge it into, that's a small nit to pick in an otherwise stellar display of labor's leaders marketing their union wares and forcing candidates to fall all over themselves promising to man/woman the picket lines.

"Four years ago," said Rick Jasculca of Jasculca/Terman and Associates, the project manager of last night's event, "we did this at Navy Pier with 1,800 attending and C-SPAN broadcasting it."

This time, organizers had irreverent political junkie and talk show host Keith Olbermann moderating and MSNBC, WMAQ-TV and XM Satellite broadcasting it live. The AFL-CIO, in true Marshall McLuhan fashion, had it all -- the medium and the message.

Still, let's resist any further temptation to refer to these events as "debates."

At best, they are demonstration projects of the clout of the groups doing the inviting and, only secondarily, proving grounds for the quickwittedness of candidates whose chief task is to make no memorable mistakes.

Just this past weekend, another "debate" took place here in Chicago. The DailyKos Web site held its YearlyKos convention to flex its own considerable blogospheric political muscle. And here again, it was all about the audience, like the bloggers who booed Hillary or sang "Happy Birthday" to Barack.

As television critics who like to lament the morphing of news into "infotainment," these candidate forums are susceptible to the same criticism: more eye candy than content. And that worries true debate devotees like my friend Newton Minow.

Minow is one of the fathers of the televised presidential debate, having been at the birth of it in 1960 here in Chicago, where the Kennedy-Nixon debate was staged at CBS' WBBM-TV.

"The first debate had no audience at all," Minow said. "The original idea was a neutral sponsor like a broadcaster or the League of Women Voters. Now the sponsor is partisan, so the character of the debate has changed."

Is that a bad thing?

"It's a bad thing," Minow said.

Minow is 81, but he's nobody's fuddy-duddy about television. An avid watcher of "The Sopranos," he loves the power of great TV. But his worry is hardly misplaced. Rather than have a debate be about the audience, he wants us all to focus fully on the candidates. And though more formal, nonpartisan national debates will be staged next year after each party has decided on a nominee, what we're seeing this year is more of a traveling road show geared to increase the importance of the promoters, not necessarily the process. Or the public, for that matter.

Chicago Sun-Times Editorial - Where are my keys, and ... what did i do with the AK-47s?!

2007-08-08T07:49:00.000-07:00

Chicago Sun-Times Editorial - Where are my keys, and ... what did i do with the AK-47s?! - Defense department sloppiness might have left 190,000 weapons in the hands of our enemies
Copyright by The Chicago Sun-Times
August 8, 2007

Flabbergasted. That's how we feel about the United States' misplacement of billions of dollars in weapons meant to train Iraqi military and police.

We aren't talking lost keys, here, but assault rifles and pistols -- at least 190,000. The U.S. Government Accountability Office discovered that the weapons -- mostly AK-47s and Glock pistols -- were missing during a routine audit, released a few days ago. The weapons were mislaid between 2004 and 2005, and the Pentagon says it doesn't know where they are, if they were intercepted by insurgent forces, if they're sitting in a storage facility or if Iraqi security personnel got the equipment in the first place, according to Joseph Christoff, director of the GAO's international affairs and trade office.

Could we be getting shot at by our own guns? Christoff won't say -- but it sure does make you think.

"We never got a complete answer," Christoff said. "That's what was so surprising."

Since 2003, the United States has spent $19.2 billion developing Iraqi security forces, including their army, navy, air force, police, border control officers and more. If Americans can't trust our military to keep up with this expensive, deadly equipment, how can we trust the ultimate handoff -- Iraq's security to its own military?

How could the military lose so many weapons? Bad clerical work, lack of staffing and poor attention to detail, Christoff told us by phone Tuesday. Normally "train-and-equip" programs are directed by the U.S. State Department, which administers funds and sets policies and procedures, leaving the heavy lifting to the Defense Department. In the interest of flexibility, the Defense Department and the Multinational Force-Iraq were given leeway to run things their way -- which apparently means a sketchy paper trail.

"The flexibility was at the expense of accountability," Christoff admitted.

Christoff notes that the Defense Department did some pretty decent recordkeeping when the U.S. Congress appropriated $100 million to arm Bosnia forces. But that was a process NATO tightly controlled -- no Defense Department shortcuts there.

The Defense Department is asking for more money, $2 billion, to continue arming Iraq military and police. It says it has started to shore up recordkeeping procedures, including taking an archaic spreadsheet system that reportedly takes several computer screens to view, and will create an appropriate database management system.

All this so-called flexibility makes you wonder about arming foreign countries when our own sloppiness could end up hurting us. It makes Christoff wonder, too.

"We've started a review of Afghanistan," he said.

Giuliani's daughter jumps onto Obama bandwagon - She backs off when asked about her Web page

2007-08-08T07:48:00.000-07:00

Giuliani's daughter jumps onto Obama bandwagon - She backs off when asked about her Web page
BY ABDON M. PALLASCH Political Reporter/apallasch@suntimes.com
Copyright by The Chicago Sun-Times and The Associated Press
August 7, 2007

Republican presidential front-runner Rudy Giuliani learned Monday he's losing support at home -- his 17-year-old daughter announced on her Facebook page that she supports Democratic presidential hopeful Barack Obama.

Giuliani is on his third marriage and has had strained relations with the children of his second marriage.

But after Slate, the online magazine, asked Caroline Giuliani about her support for Obama, she removed herself from the "One Million Strong for Barack" group.

On her Facebook profile, 17-year-old Caroline Giuliani, right, pictured with her father Rudy, listed herself as a member of Barack Obama's Facebook group.
(AP photos)

''Before the presidential campaign got under way, Caroline added herself to a list on Facebook as an expression of interest in certain principles,'' said a spokeswoman for Caroline Giuliani, Joannie Danielides. ''It was not intended as an indication of support in a presidential campaign and she has removed it.'' She still lists her politics as "liberal."
''My daughter I love very much,'' Giuliani said. ''I have great respect for her, and I'm really proud of her, and I don't comment on children, because I want to give them the maximum degree of privacy."

Britain asks U.S. to free 5 at Gitmo - Call is policy change for prime minister

2007-08-08T07:41:00.001-07:00

Britain asks U.S. to free 5 at Gitmo - Call is policy change for prime minister
By Tom Hundley
Copyright © 2007, Chicago Tribune
August 8, 2007

LONDON - In a significant policy shift for the British government, Prime Minister Gordon Brown has asked the United States to release five British residents imprisoned at the U.S. detention center at Guantanamo Bay, Cuba.

The request came in a letter Tuesday to Secretary of State Condoleezza Rice from British Foreign Secretary David Miliband.

"The Foreign Secretary and the Home Secretary have decided to request the release from Guantanamo Bay and return to the U.K. of the five men who, whilst not [United Kingdom] nationals, were legally resident here prior to their detention," a statement from the Foreign and Commonwealth Office said on Tuesday.

The government of former Prime Minister Tony Blair sought and obtained the release of nine British nationals from Guantanamo Bay but it said it had no responsibility to intervene on behalf of noncitizens who lived in Britain.

Some analysts here saw Tuesday's policy shift as an attempt by Brown to pursue a tougher stance toward the United States in line with Britain's long-standing opposition to the Guantanamo Bay camp. But the move is likely to be welcomed by the Bush administration, which is eager to downsize Guantanamo Bayand has been critical of nations, including Britain, that have chastised the U.S. for alleged human-rights violations at the facility while refusing to accept the repatriation of prisoners.

"Britain is taking these people off America's hands. That's not something America is going to complain about," said Robin Shepherd, a political analyst with Chatham House, a London think tank.

In Washington, the State Department said the request was being reviewed.

"Our policy has been for quite some time to work with countries who have an interest in either having their nationals returned or taking responsibility for third-country nationals," spokesman Sean McCormack said.

But the policy shift does have domestic political significance in Britain. Blair was widely perceived to be too acquiescent to Bush on matters related to Iraq and terrorism, and Brown appears to be looking for ways to differentiate himself from his predecessor without damaging Britain's special relationship with the United States.

"Brown's public-relations strategy on this is brilliantly constructed," Shepherd said. "It's a low-cost approach in terms of political damage to the relationship with the U.S. but it yields high returns in terms of his image in Britain."

The new British prime minister met with Bush last week at Camp David presidential retreat in Maryland.

Brown's hand may have been forced by a decision from Britain's High Court last month ordering a judicial review of the government's failure to decide whether one of the five prisoners, Jamil el-Banna, would be allowed to return to London where his wife and five children, all British nationals, live. The court set a Thursday deadline for the Home Office to make up its mind.

"The Foreign Secretary and Home Secretary have reviewed the government's approach to this group of individuals in light of these ongoing developments, our long-held policy aim of securing the closure of Guantanamo Bay and the need to maintain national security," the Foreign Office said in the statement. "They have decided to request the release and return of the five detainees who have links to the U.K. as former residents."

The four other detainees are Shakar Aamer of Saudi Arabia, Omar Deghayes of Libya, Binyam Mohamed of Ethiopia and Abdennour Sameur of Algeria.

----------

thundley@tribune.com

For the sake of liberty and security: legalise all drugs

2007-08-08T07:26:00.001-07:00

For the sake of liberty and security: legalise all drugs
By Willem Buiter
Copyright The Financial Times Limited 2007
Published: August 8 2007 03:00 | Last updated: August 8 2007 03:00

The government is considering reclassifying cannabis from a class C drug to a class B drug, carrying higher penalties for using and dealing. As an economist with a strong commitment to personal liberty and responsibility, my preference would be to see all illegal drugs legalised. The only exception would be substances whose consumption leads to behaviour likely to cause material harm to others.

Following legalisation, the pro-duction and sale of these drugs should be regulated to ensure quality and purity. They should also be taxed, as are tobacco products and alcoholic beverages. Greater resources should be devoted to educating the public, especially children and teenagers, about the health hazards associated with the drugs; more money should be spent on the rehabilitation of addicts.

Ideally legalisation should occur simultaneously in a number of neighbouring countries, preferably at the level of the European Union. When the Netherlands became an enclave of tolerance of drug use, drug users from all over Europe congregated there.

The principle-based argument for legalisation is that behaviour that harms others ought to be criminalised, not behaviour that hurts only the person engaged in it. It is not the government's job to protect adults of sound mind from the predictable consequences of their actions.

If the public is ill-informed about the consequences of drug taking, there is an educational role for the state. Children should be protected from drugs, as they are from tobacco and alcohol. So should the mentally ill and mentally incapacitated. Parents should be paternalistic, but when it comes to mentally competent grown-ups the state should not be. It is not the responsibility of the state to ensure our "happiness" - whatever that is. That is the road to a Brave New World.

The argument that countries with publicly funded or subsidised healthcare have the right to proscribe the use of drugs likely to cause harm to the user is a ludicrous misuse of the concept of an externality. Should we ban rugby because it is more danger- ous than tiddlywinks? If it is con- sidered unfair that those who do not use drugs end up subsidising the care of those who do, this is an argument for the National Health Service to deve- lop a policy of discriminating among patients on the basis of how they have contributed to their illnesses.

A pragmatic argument against criminalising drugs is that crim- inalisation creates vast rents and encourages criminal entrepreneurs to use violence, intimidation, bribery, extortion and corruption to extract these rents. Another pragmatic argument is that it is pointless to waste resources fighting a war that cannot be won. The losing war on drugs wastes resources that could be used to fight terrorism and other crimes.

Another important argument for legalising, in particular, all cultivation of poppy and of coca (and their illegal derivatives) is that this would take away a vital source of income and political support for terrorist move- ments, including the Taliban and al-Qaeda in Afghanistan, and Colom- -bia's Revolutionary Armed Forces (Farc) and various paramilitary groups.

The United Nations estimates that opium production in Afghanistan grew to more than 6,000 metric tonnes last year with a value exceeding $3bn (£1.5bn). It is the origin of more than 90 per cent of the world's illegally consumed opiates.

A significant portion of the profits flows to the Taliban, who act as middlemen in the opium business. They combine extortion and threats of violence towards the poppy farmers with the sale of protection to these same farmers against those who would destroy their livelihood, mainly the Nato allies and the Afghan central government.

Following legalisation, theallies in Afghanistan could further undermine the financial strength of the Taliban and al-Qaeda by buying up the entire poppy harvest. If a sufficient premium over the prevailing market price were offered, the Taliban/al-Qaeda middle- man could be cut out altogether, and thus would lose his tax base. Winning the hearts and minds of poppy growers and coca growers is a lot easier when you are not seen as intent on destroying their livelihood.

This proposal for legalising poppy growing regardless of what the poppy is used for is much more radical than the proposal from the Senlis Council to license the growing of poppy in Afghanistan only for the production of essential medicines. The Senlis Council proposal would not end the problem of illicit poppy cultivation co-existing with licensed cultivation. With the illicit price likely to exceed the licit price, the Taliban would retain a significant tax base.

Is legalisation of all opiates an integral part of the proposal that the allies procure the entire poppy harvest in Afghanistan? Consider procurement without legalisation. The allies would find themselves each year with the largest stash of poppy the world has ever seen. What to do with it?

The entire global medical demand for morphine, codeine and other legal poppy derivatives could be satisfied - possibly even free of charge. The global demand for medicinal opiates at a zero price would greatly exceed the current medicinal use of opiates, since many developing countries are either in effect priced out of the legal market altogether or are, for budgetary reasons, restricted to purchasing inadequate quantities that leave widespread, unnecessary suffering among poor patients. Supplying the world's demand for medicinal opiates free of charge would create economic problems for the current licit growers of poppy for opium, in Turkey, India and elsewhere; well-targeted develop- ment aid could address this issue.

If poppies could not be profitably turned into biofuel and if opium and heroin remained illegal, the rest of the allies' poppy stash would have to be destroyed. This would drive up the street price of opium and heroin and create even more massive rents for the remaining suppliers. Poppy growers would try to withhold poppy from the allies' procurement round in order to sell it later in the illicit market. The Taliban would retain a tax base. Legalisation is crucial for the success of this squeeze play on the Taliban.

If opium and heroin were legalised, the allies' stash could be sold to regulated producers/distributors of opium, heroin and other formerly illegal poppy derivatives. Our chemical and pharmaceutical industries, and indeed our cigarette manufacturers, would be well-positioned to enter this trade. The profits made by the allies on the sale of the stash could be turned over to the Afghan government. It surely makes more sense for the government to tax the poppy harvest than for the Taliban to do so.

So legalise, regulate, tax, educate and rehabilitate. Stop a losing war, get the government off our backs, beat the Taliban and deal a blow to al-Qaeda in the process. Not a bad deal!

The writer is professor of European political economy at the London School of Economics' European Institute

Democrats call for action on mortgage crisis

2007-08-08T07:22:00.000-07:00

Democrats call for action on mortgage crisis
By Andrew Ward and Stephanie Kirchgaessner in Washington
Copyright The Financial Times Limited 2007
Published: August 7 2007 20:18 | Last updated: August 8 2007 00:31

Influential Democratic senators on Tuesday called for Fannie Mae and Freddie Mac, the government-sponsored mortgage companies, to be given a bigger role in efforts to stabilise the troubled US mortgage market.

Chris Dodd, chairman of the Senate banking committee, and Chuck Schumer, chairman of the Senate subcommittee on housing, supported the lifting of investment caps on the companies.

Hillary Clinton, the New York senator and Democratic presidential frontrunner, also urged expansion of the mortgage groups.

The comments added to growing hope among investors that Fannie and Freddie would be freed to buy more mortgages from struggling lenders, easing the crisis in the subprime sector.

Federal regulators are understood to be reviewing the portfolio caps imposed on Fannie and Freddie last year after a probe found flaws in their accounting, corporate governance and risk management practices.

“It may be appropriate, consistent with safe and sound practices as determined by the regulator, to ease the temporary regulatory cap on Fannie and Freddie’s mortgage portfolio,” said Mr Dodd.

Such a move would “allow Fannie Mae and Freddie Mac to provide needed stability to the secondary mortgage market”, said Mr Schumer.

Mrs Clinton proposed expansion of the groups among measures to tackle weaknesses in the mortgage market and support homeowners. She vowed to clamp down on “unfair lending practices” and create a $1bn federal fund to help homeowners avoid foreclosure.

Mrs Clinton said fixing the mortgage crisis would be among the priorities of Democratic lawmakers when Congress returns.

“We need to put an end to fly-by-night mortgage brokers peddling loans to unqualified applicants based on inflated appraisals,” she said. “We need to help those facing the pain of foreclosure. We need to secure the market place and put reforms in place right now.”

The remarks added to the populist economic rhetoric that has become a theme of the Democratic presidential campaign as candidates respond to concern about economic insecurity among middle-class Americans.

Steve O’Connor, senior vice-president for public policy at the Mortgage Bankers Association, said there were signs that Democratic lawmakers could favour a bail-out of homeowners, but that such a proposal would be mired in difficulties.

“You have to think of who you are bailing out and are you really helping who you intend to help?” he said. “A lot of loans going bad are held by speculators – you can argue that you shouldn’t be bailing out speculators.”

One banking lobbyist in Washington said the idea of a bail-out had been rejected because of its cost. He predicted disagreement among Democrats because Barney Frank, chairman of the House financial services committee, would support a measure assigning liability on some of the big trading houses, whereas Mr Dodd, his Senate counterpart, would not.

Additional reporting by Eoin Callan in Washington

Travellers from US face EU crackdown

2007-08-08T07:19:00.000-07:00

Travellers from US face EU crackdown
By Tobias Buck in Brussels and Demetri Sevastopulo in Washington
Copyright The Financial Times Limited 2007
Published: August 7 2007 22:56 | Last updated: August 7 2007 22:56

US business travellers and tourists flying to the European Union are facing the threat of the same laborious registration requirements that Washington has demanded of Europeans in the latest US security crackdown.

In its first reaction to the new US visa law, the European Commission said it was “considering” a so-called electronic traveller authorisation scheme – similar to the American plan – that would require foreigners heading to the EU to give notice of their travel plans before departure.

The threat has been conveyed to senior US officials and lawmakers, with one letter sent last month stressing that a European system would “of course operate on a reciprocal basis”.

A spokesman for the EU executive said no final decision had been taken, but the idea had received “new impetus” by the adoption of a US counter-terrorism bill last week that requires travellers to give US authorities at least 48 hours’ notice of their plans to visit the country.

George W. Bush, US president, signed the law last Friday in spite of repeated appeals by the Commission and European business groups to reconsider the measures. The law will tighten scrutiny of travellers from the 26 developed countries whose citizens do not at present require visas to enter the US, including Britain, France, German and most other western European countries.

Russ Knocke, spokesman for the Department of Homeland Security, said the US was “comfortable” with the EU having a reciprocal system. “It would lend itself to increasing baseline security for air travel throughout the west,” he said.

European business groups voiced sharp criticism of the US law. Carlos González, an international relations adviser at Business Europe, a pan-European federation that lobbies on behalf of more than 16m companies, said: “This measure is a setback for business travellers and we are concerned about it. Business travel to the US is a very regular activity.” The law demands the screening of all air and sea freight at foreign ports before being shipped to the US.

The German Industry Federation, BDI, hit out at the screening requirements enshrined in the law. “We are following with concern the tightening of security measures in the US, which impose a burden that is not justified by the benefits,” said the BDI’s Carsten Kreklau.

The federation added that the law “contradicted all existing customs security initiatives, which are based on targeted risk analysis”. According to BDI data, it takes about 10 minutes to scan each container – meaning that the screening of a large cargo ship “could easily result in an additional delay of 1,600 hours [nearly 70 days]”.

The spokesman for Franco Frattini, EU commissioner for justice and home affairs, said Brussels had asked the US for more information about the details of its plans – some of which have been left open in the legislation.

Mortgage sector faces further tightening

2007-08-08T07:18:00.001-07:00

Mortgage sector faces further tightening
By David Wighton, Saskia Scholtes and Michael Mackenzie in New York
Copyright The Financial Times Limited 2007
Published: August 7 2007 21:55 | Last updated: August 7 2007 21:55

Large parts of the stricken US mortgage market are facing further tightening in the supply of credit following the collapse of dozens of lenders and a buyers’ strike by investors in mortgage-backed securities.

Falling Treasury yields in recent weeks have led to lower interest rates on standard mortgages. But for larger and less creditworthy new borrowers loans have become more expensive and harder to obtain.

Some types of borrowers can no longer get a loan from a mainstream lender at any price and the prospect of rate cuts by the Federal Reserve may bring little respite.

Rates on standard fixed-rate mortgages have steadily declined in the past two months with the national average rate on a 30-year loan falling from 6.27 per cent a week ago to 6.22 per cent on Tuesday, Bankrate.com says.

But the picture is very different for mortgages that the lender cannot sell on to Fannie Mae and Freddie Mac, the government-sponsored mortgage giants. Rates on mortgages above Fannie and Freddie’s cap of $417,000 have soared. According to Bankrate.com, the rate on a 30-year “jumbo” was 6.8 per cent, up from 6.6 per cent a week ago. Three months ago it was 6.1 per cent.

Lenders’ ability to sell mortgage securities on to other investors has been dramatically reduced in recent weeks amid severe credit market turbulence and reduced investor appetite for risk.

Investment banks sold $46.16bn of new mortgage-backed securities in July, down more than 65 per cent since the $135.26bn sold the previous month. “Several of the arteries are blocked in the lending market,” said Richard Gilhooly, senior fixed-income strategist at BNP Paribas.

A rate cut from the Federal Reserve would help alleviate problems in the mortgage market, he said, as it would produce lower short term rates and thus enable banks to take advantage of lending money at higher longer term rates. “A steeper yield curve will encourage the lending process.”

However, rate cuts are unlikely to bring quick relief to the riskier parts of the market.

Soaring deliquencies in subprime loans to borrowers with weaker credit histories have prompted lenders to tighten their policies, partly in response to the demands of the regulators.

The slump in the supply of subprime loans has been followed by a sharp contraction in the provision of so-called Alt-A mortgages, which are deemed to fall between subprime and prime in terms of credit quality.

A large number of lenders specialising in weaker borrowers have gone out of business with the latest casualty, American Home Mortgage, filing for bankruptcy on Monday.

Impac Mortgage Holdings, a top 10 provider last year, said on Tuesday it had stopped funding all Alt-A loans. The company’s shares fell by a third.

Other big lenders, such as Wells Fargo and Wachovia, have cut back on supply of Alt-A loans through brokers and last week JPMorgan Chase increased its Alt-A rates by 125 basis points.

Countrywide, the largest US home lender, on Tuesday bought some branches from HomeBanc Corp, which said on Monday it would stop funding new loans.

Fed fails to signal interest rate cut

2007-08-08T07:16:00.000-07:00

Fed fails to signal interest rate cut
By Eoin Callan in Washington and John Authers in New York
Copyright The Financial Times Limited 2007
Published: August 7 2007 19:14 | Last updated: August 8 2007 00:40

The US Federal Reserve on Tuesday acknowledged for the first time that the current turbulence in the credit markets could threaten economic growth, but stopped short of signalling an interest rate cut later in the year.

Instead, while noting that market turmoil would increase borrowing costs for companies and consumers, the Fed retained a hawkish stance on inflation as it kept rates on hold at 5.25 per cent for the ninth straight meeting.

The Fed statement accompanying the decision said: “Financial markets have been volatile in recent weeks, credit conditions have become tighter for some households and businesses, and the housing correction is ongoing.”

The statement did not halt volatility as equity investors reacted negatively at first, then reversed course. The S&P fell by as much as 1.4 per cent in an initial reaction to the statement before rebounding as much as 2.2 per cent from its lows of the day to close 0.6 per cent higher.

Bond prices also gyrated, with the yield on the two-year Treasury, which began the day at 4.51 per cent, falling as low as 4.42 per cent before hitting 4.56 per cent. Fed Funds futures indicated traders thought the chances of a rate cut this year had diminished slightly.

While nobody in the market had expected a cut on Tuesday, there were growing expectations that the Fed’s governors might remove language describing inflation as the “predominant risk,” as a signal of rate cuts in the near future. Some market commentators have said liquidity in the markets is so restricted that a “rescue” rate cut is needed to stimulate activity.

“Ultimately, they are going to have to cut,” said Bill Gross, managing director of Pimco, the giant fixed-income fund manager.

However, Drew Matus, an economist at Lehman Brothers, said: “Things would have to get significantly worse for the Fed to respond via a rate cut.”

Economists at the Bank of New York suggested the message was that the Fed had decided against a “pre-emptive” cut of 0.25 percentage points. Instead, if it did need to cut interest rates because of the subprime crisis, it would be an “after-the-fact rescue effort,” with a cut of as much as one percentage point.

The dollar weakened after the announcement, dropping by 0.5 per cent against the yen, and falling below the psychologically important level of Y118. It remained relatively stable against other currencies.

Lenders’ ability to sell debt to investors has been dramatically reduced in recent weeks amid severe credit market turbulence and reduced investor appetite for risk.

Hedge funds globally suffered their second-worst week in four years during the final full trading week of July as continuing concerns about the spread of US credit problems took their toll on performance.

Toll warns on deepening housing slump

2007-08-08T07:10:00.000-07:00

Toll warns on deepening housing slump
By Daniel Pimlott in New York
Copyright The Financial Times Limited 2007
Published: August 8 2007 15:07 | Last updated: August 8 2007 15:07

Toll Brothers, the largest US luxury homebuilder, on Wednesday warned that home sales might fall even further in the latest sign that the worst housing slump in 16 years has not yet reached its lowest point.

“With the uncertainties roiling the mortgage markets right now, the pace of home sales could slow further until the credit markets settle down,” said Robert Toll, chief executive, as he announced that Toll Brothers’ revenues fell in the company’s third quarter. “We are now in the twenty-third month of a down housing market. Hesitant customers remain on the sidelines, unsure of whether home prices have bottomed.”

Lenders have been raising requirements for home loans following a flood of defaults and late payments on homes purchased with subprime mortgages. This, combined with still falling prices across most of the US, has deterred home buyers, leading to a string of poor results and losses for major US homebuilders, such as KB Home and DR Horton, over the last year.

The cautionary note from Toll Brothers is particularly troubling because the company mainly sells high-end homes which have fared better in avoiding the fall-out from the subprime crisis. Toll’s earnings have still fallen every quarter in the last year.

Mr Toll warned the increasing obstacles to mortgage borrowing would deepen the housing crisis.

“In the near term, tightening credit standards for borrowers should reduce the pool of potential buyers: Liquidity and affordability issues may impede some customers from closing, while others may find it more difficult to sell their existing homes,” he said. “Excess supply exists in most markets and there is concern that additional inventory will emerge due to mortgage defaults.”

Toll said home building revenues fell 21 per cent at $1.21bn, at the upper end of its May forecasts of $990m to $1.28bn. The company sold 1,792 homes compared with its estimate of between 1,400 and 1,800. Its backlog dropped 34 per cent to $3.67bn and signed contracts slid 31 per cent to $727m. The cancellation rate was 23.8 per cent up from 18.9 per cent in the previous quarter.

Shares in Toll rose $1.06 to $24.01 in early trading.

International Herald Tribune Editorial - A surer way to feed the poor

2007-08-07T06:37:00.000-07:00

International Herald Tribune Editorial - A surer way to feed the poor
Copyright by The International Herald Tribune
Published: August 6, 2007

Globally, about 800 million people are chronically hungry, and the number rises every year. The Bush administration is pushing what should be an obvious policy change to help those most acutely in need. Instead of shipping American-grown food abroad, Washington would send U.S. dollars to buy food from local farmers.

The present food aid system is a favorite of American farmers. But it is also slow, expensive and leaves people hungry who could easily be fed. President George W. Bush has rightly proposed shifting $300 million from farm subsidies to enable governments and relief groups to buy food locally.

This plan struck a responsive chord almost everywhere except the Congress. The House omitted the idea from the farm bill it passed last week. And prospects for the Senate approving anything more than a pilot program seem dim.

This is sad but unsurprising. U.S. farm policy continues to be dominated by farm-state legislators who prefer the traditional approach of sending surplus food abroad, further enriching heavily subsidized farmers as well as the shipping industry.

A recent article by Celia Dugger of The New York Times shows why that makes so little sense. Starving Africans in the arid reaches of northwestern Kenya desperately needed food. Kenyan officials did not want surplus American corn because they feared driving down the prices for local farmers. The obvious answer was for the Americans to buy local corn, but American law prevented this. So the corn was never shipped and people continued to go hungry.

The United States is the world's most generous provider of food aid, amounting to $2 billion annually. But too much of that aid is wasted in overhead, mainly shipping costs. At the other end of the pipeline, subsidized American food can hurt local farmers, while local procurement gives them a commercial outlet. Administration officials also note that food purchased in the United States usually takes four months to reach its destination. Food purchased locally takes days.

The virtues of Bush's idea are self-evident. What it needs is full congressional support. It would be nice if, for once, America's farm bloc could think of interests

International Herald Tribune Editorial - The executioner's hood

2007-08-07T06:35:00.000-07:00

International Herald Tribune Editorial - The executioner's hood
Copyright by The International Herald Tribune
Published: August 6, 2007

Many people assume that execution by lethal injection is simple and gentle. It's neither. An inmate is given three drugs to do three things: (1) Knock him out. (2) Paralyze him so he doesn't flop around or gasp in a way that upsets witnesses. (3) Kill him. If a step goes awry, an inmate can be paralyzed, inadequately sedated or unable to move or cry out as the poisons do their agonizing work.

The job requires medical competence, but U.S. states have had a hard time finding skilled executioners. Most doctors refuse to do the ultimate harm; the American Medical Association forbids doctors to participate in executions.

A recent spate of botched executions has led some American courts and states in the encouraging direction of reviewing lethal-injection protocols. But other states have thrown a shroud over the procedure - a new executioner's hood - to hide the system's flaws.

One truly disturbing example, recounted by Adam Liptak in The New York Times, involves Missouri, where a doctor was revealed as an unqualified bumbler who admitted having confused the drug dosages in some of the more than 50 executions he had supervised. "It's not unusual for me to make mistakes," he said, blaming dyslexia.

We oppose capital punishment for a host of reasons. Even those who support it must see the need to ensure that the process is not cruel and is fully open to public scrutiny.

Last month, however, Missouri's governor signed a law that makes it a crime to reveal the identities of executioners - as The St. Louis Post-Dispatch did in the case of the doctor who claimed dyslexia. It allows executioners to sue those who expose them and forbids medical boards to punish doctors or nurses who participate in executions.

Missouri contends that executioners need protection from retaliation. That is a flimsy argument, since the state is not trying to extend that privacy shield to the many other government employees - judges, prosecutors, court officials, prison wardens - whose names are public and who are far likelier retribution targets. Under the new secrecy law, Missouri's capital punishment system may plunge deeper into incompetence and cruelty, and it will be harder for citizens to stop it.

American Home Mortgage files for Chapter 11

2007-08-07T06:29:00.001-07:00

American Home Mortgage files for Chapter 11
Copyright by Bloomberg News
August 7, 2007

WILMINGTON, Del. - American Home Mortgage Investment Corp. filed for bankruptcy protection Monday, becoming the second-biggest residential lender in the U.S. to do so this year.

American Home said in the filing it has assets of more than $20.6 billion and debt of more than $19.3 billion. The company said Thursday that it would halt operations and slash its staff.

The filing adds to signs that late payments have spread beyond the subprime market. American Home specialized in mortgages for people who fall just short of top credit scores. More than half a dozen competitors have declared bankruptcy this year as defaults spilled over from borrowers with the worst repayment records to those with more reliable payment histories.

"Their sources of funding have all dried up," said Mark Power, a lawyer advising some of the more than 100,000 creditors of American Home. "This case is going to be very similar to New Century."

New Century Financial Corp., based in Irvine, Calif., became the largest home lender to seek court protection from its creditors when it filed for bankruptcy in April. That company is now being liquidated.

American Home also is probably going to be forced to liquidate, Power said.

The company plans to sell a package of loans and its loan servicing department, which provided collection and escrow services for about 197,000 loans worth $46.3 billion, according to court records.

At the end of July, the company had four unidentified entities interested in buying its retail and wholesale loan businesses, according to court papers. The proposals were never completed.

The bankrupt company will be financed by as much as $50 million in loans from WL Ross & Co., according to a statement from American Home. It said it doesn't believe it has enough money to pay all its creditors and expected to be delisted from the New York Stock Exchange.

Melville, N.Y.-based American Home didn't provide estimates for how much each of its top 40 unsecured creditors was owed. It listed some of the biggest investment banks as its top creditors. The top five unsecured creditors are units of Deutsche Bank AG, Wilmington Trust Corp., JPMorgan Chase & Co., Countrywide Financial Corp. and Bank of America Corp.

Investment bankers began shutting off credit to American Home this year as concerns about subprime mortgages spread, leaving the lender unable to fund at least $750 million in loans and stranding thousands of borrowers, according to a Securities and Exchange Commission filing.

American Home reduced its staff to 1,000 last week from about 7,400 at the end of 2006. That number is expected to fall in the coming weeks, according to the company's court filings.

'It's a nightmare' for air travel - Delays this year are at record levels, and they may get worse

2007-08-07T06:23:00.000-07:00

'It's a nightmare' for air travel - Delays this year are at record levels, and they may get worse
By Julie Johnsson |
Copyright © 2007, Chicago Tribune
August 7, 2007

Air travel is as bad as it's ever been. Passengers suffered through a record number of flight delays during the first half of 2007, federal data show.

And Chicago's O'Hare International Airport was certainly no picnic, having posted the worst on-time number in the nation for the first six months of the year.

Nearly one-quarter of all U.S. flights arrived late to their destinations, the industry's worst on-time performance since the Bureau of Transportation Statistics began tracking such data in 1995.

"It's a nightmare," said aviation analyst Darryl Jenkins. "We're stretched. There's no give in the system if anything goes wrong."

The dismal results reflected the record number of commercial airline flights flown from January through June, about 3.7 million, as well as storms that wracked Chicago and other major airline hubs in February and June.

And the outlook for the months ahead is even worse, experts warn.

Anticipating a market slowdown, most major carriers are cutting domestic capacity, shifting larger planes to more lucrative overseas routes. They're turning to regional partners to pick up the slack on routes within the United States. But since they operate smaller planes, these partners will have to increase flights to keep pace with passenger demand.

"Less domestic capacity doesn't mean less flights; it often means more flights," said aviation consultant Robert Mann.

While O'Hare posted the worst on-time numbers for the six-month period, the three major airports in the New York area fared far worse in June. About half of the flights out of the area were delayed in June, compared with 31 percent of flights at O'Hare.

The culprits: air-traffic control constraints along the busy Atlantic seaboard and overscheduling at airports already operating at full capacity. "I avoid [flying through] New York like the plague. It's just a disaster there," Jenkins said.

jjohnsson@tribune.com

Democrats debate; unions delight - In national spotlight, candidates to court Big Labor in Chicago

2007-08-07T06:18:00.000-07:00

Democrats debate; unions delight - In national spotlight, candidates to court Big Labor in Chicago
By Stephen Franklin
Copyright © 2007, Chicago Tribune
August 7, 2007

They will probably sound like a giant barbershop quartet, singing different notes in the same song.

And that's perfectly fine with leaders of the AFL-CIO, who are savoring the prospect of the Tuesday night debate among seven Democratic presidential candidates that the labor federation is sponsoring at Soldier Field.

"All of them are talented and all of them are our candidates," Gerald McEntee, president of the American Federation of State, County and Municipal Employees told a group of union political activists this weekend in Chicago. The forum will be "the biggest job interview ever," he added with a broad smile.

The labor federation's glee is easy to understand.

The candidates' eagerness to court organized labor is viewed as a message that labor is still a major player in national politics, despite its steadily shrinking numbers and a deep division within its ranks that led to a splinter federation two years ago. Organized labor, with 16 million members, today represents about only 1 out of 8 workers in the U.S.

The AFL-CIO's leaders are similarly pleased by the fact that the candidates' wooing will be very public.

More than 12,000 union members and their families are expected to attend the 90-minute gathering that will be broadcast live on MSNBC and WMAQ-Ch.-5 and over XM Satellite Radio, starting at 6 p.m.

In fact, the meeting was switched from McCormick Place West to the massive open-air stadium when ticket requests soared beyond expectations, union officials said. More than 17,000 tickets have been handed out to unions in the Chicago area, added officials with the half-million-member Chicago Federation of Labor.

MSNBC host Keith Olbermann will be the moderator. The candidates also will field questions from about 10 union members, who have been selected from across the U.S., as well as questions culled from several thousand submitted to the AFL-CIO over the Internet.

Just as the unions hope to gain from the much-publicized debate, the payoff for the candidate that wins labor's embrace can be critical.

As AFL-CIO officials point out, their ability to churn out voters has steadily improved since their political efforts were stepped up in 1996.

Nearly three-fourths of the union members taking part in the 2006 election voted for the union-endorsed candidate, the highest such figure ever, according to Karen Ackerman, the AFL-CIO's political director.

So, too, unions have been able to turn out large numbers of their members and families in traditionally union-friendly states. For example, union households made up 35 percent of the voters in Michigan in 2006 and 32 percent in Illinois, according to Ackerman.

$200 million given in 2004

In order to get such numbers, unions have matched traditional techniques with high-tech support, she said. In 2006, union campaign workers knocked on 8.2 million doors, sent out 30 million pieces of mail and handed out 14 million fliers, she said.

In terms of campaign support, organized labor gave more than $200 million in 2004 to its candidates, according to AFL-CIO officials, and that number is likely to grow in the coming year, labor officials predicted.

AFSCME alone expects to spend more than $50 million, outstripping the $48 million the AFL-CIO spent in 2004, and the Service Employees International Union intends to spend over $60 million, said union President Andy Stern.

To measure the Democrats' ability to identify with workers, the SEIU has asked them to spend one day doing one of their union member's jobs, and several have already put in their time, said Stern, who was in Chicago last week for the YearlyKos convention.

One of the union leaders who spurred the competing Change to Win Federation, Stern said his 6-million-member group cooperated with the AFL-CIO in its political efforts last year and would continue to do so.

Ackerman agreed, but added that not all of the rival federation's seven unions have joined in.

A longtime critic of politicians who take unions' support but then ignore them once in office, Stern also noted his federation's role in helping set up a new political action committee meant to keep elected officials accountable, Working for Us PAC.

AFL-CIO President John Sweeney said he will be listening closely Tuesday to hear the candidates' views on health care. "They all have to recognize that the health care issue has to be addressed effectively after they get elected," he explained.

The AFL-CIO's leadership, which is meeting now in Chicago, has yet to decide on the endorsement timetable and spending, and Sweeney said the debate could have an impact on union leaders when they bring up these issues at a Wednesday meeting.

As for individual unions' early endorsements, Sweeney said that "nobody is making any quick decisions like they did several years ago."

Unlike 2004, when several unions rushed to back Howard Dean or Richard Gephardt, "they all want to make sure they make a decision their members can live with," Sweeney said.

"People want the process to play out a little more," suggested John Gage, president of the American Federation of Government Employees. Gage said he personally favors former Sen. John Edwards of North Carolina, but his union has yet to reach a decision on a candidate.

A GOP endorsement?

Edwards, who has played to labor's heart with a focus on poverty and working-class issues, told a union meeting Monday in Cedar Rapids, Iowa, that "it remains to be seen" who will win labor's support.

"Obviously, I have friends in organized labor because I've done a lot of work in the last several years on behalf of issues that I care about and they also care about. But I think it's very much an open question what the unions are going to do," he said.

Some unions are also looking at Republican candidates. About 1 in 5 members of AFL-CIO unions consider themselves Republicans, union officials said.

The International Association of Machinists and Aerospace Workers, for example, plans to endorse a Republican candidate as well as a Democrat, marking the union's first such effort, said machinists spokesman Rick Sloan. "Some members are pretty adamant about supporting their brand of politics," he said.

Republican presidential candidates were also invited to take part in Tuesday's debate, but none returned the questionnaires sent to them, AFL-CIO officials said. Neither did Democratic candidate and former U.S. Sen. Mike Gravel of Alaska, they added.

In case of bad weather, AFL-CIO officials said they will have heaps of ponchos ready and lots of crossed fingers.

- - -

Tribune political reporter Rick Pearson contributed to this report from Iowa

sfranklin@tribune.com

Financial Times Editorial Comment: The hard fight to stop insider deals

2007-08-07T06:09:00.000-07:00

Financial Times Editorial Comment: The hard fight to stop insider deals
Copyright The Financial Times Limited 2007
Published: August 6 2007 19:32 | Last updated: August 6 2007 19:32

The US Securities and Exchange Commission has had some victories this year in its fight against insider trading, filing charges against employees of big investment banks, including Morgan Stanley, UBS and Credit Suisse. But analysis commissioned by the Financial Times, which finds suspect trading prior to almost 60 per cent of large North American mergers and takeovers so far in 2007, shows the SEC still has work to do.

Insider trading, the purchase or sale of shares using non-public information such as knowledge of a pending takeover bid, does great harm to markets. Insiders profit at the expense of long-term investors, such as pension funds, which suffer lower returns. Insider trading also saps liquidity, because offering tight prices to buy or sell stocks is unwise if your counterparty may be using inside information.

The difficulty, however, is that insider trading can be almost impossible to prove or even to detect. Share purchases just before a takeover are not evidence of insider dealing: the buyer may have worked out, through skilful analysis, that a company is a likely takeover target or, in some cases, they may have just got lucky.

The US, which balances harsh, deterrent punishments with plea bargaining to encourage confessions, probably has the most effective anti-insider trading regime in the world. But as corporate deals become larger and more complex, creating better inside opportunities for an ever greater number of bankers, lawyers and executives, it does not seem to be enough.

The SEC needs to use its existing powers to the utmost, and other regulators, such as Britain’s Financial Services Authority, should be gran ted similar weapons. But however harsh the potential punishment, most insider traders get away with it, and the only way to deter the offence is to catch more offenders.

One possible answer is new statistical methods and algorithms that can identify suspect trading, be it in actual stocks or in derivatives based on them. Regulators need to invest in these techniques, and use them to investigate the greatest possible number of suspect trades.

Statistical methods will make it possible to identify deals that are outside an investor’s normal pattern, or trading records that are just too good to be true. There will still, however, be the problem of proof. If this is the pattern of the future – clear indications of insider trading but no evidence to prove it – it may be time to debate some new form of sanction, less harsh than criminal punishment, but one that requires a lower standard of proof.

More business as usual for bankers

2007-08-07T05:59:00.000-07:00

More business as usual for bankers
By John Dizard
Copyright The Financial Times Limited 2007
Published: August 6 2007 16:06 | Last updated: August 6 2007 16:06

Central bankers used to have a business not, as today, a religious calling. We may soon be wishing for a return to the old model.

The central bankers’ first priority, in return for which they received their monopoly privileges, was to ensure that governments could borrow money, particularly during difficult times such as wars. After that, though, they could make a good, low-risk living buying or selling against the short-term market noise, taking a few points out of “self-liquidating” short-term transactions and, in a crisis, lending to desperate borrowers against good collateral.

Note well the last function. This wasn’t charity. It was the provision of liquidity at a price, not bailing bankrupts out of insolvency. The measurement of risk wasn’t done with value-at-risk (VAR) models, but with first hand assessments of the realisable value of the underlying assets.

They don’t do that any more, as the term credit markets noted last month.

In order to perform those valuations, central bankers used to have much more contact with grubby speculators and other real-economy operators than they do now. Within living memory – mine, for example – the presidents of regional Federal Reserve Banks would be drawn from the ranks of local businessmen, who, it was thought, would have more of a sense of underlying conditions than appointees shipped in from New York or Washington.

Now the ideal type regional Fed President would be William Poole. He gets a tip of the hat from me for calling himself “Mr” Poole in his official biography, when he could use the doctorate he has from the University of Chicago, the Qom of monetary economics.

Before ascending to the Fed, he had a distinguished career as an academic and Federal economic adviser. I would no more expect to see him in the company of reckless speculators and desperate market operators than flying to the moon.

You can tell that from the speech he gave to a gathering of Milton Friedman acolytes last week. As he told the assembled clerics: “When new information arrives, most of the time the central bank can wait for market responses and the passage of time to clarify what is happening . . . . I’m not saying the Fed should ignore what happened last week – we need to understand what is happening. However, it is important that the Fed should not permit uncertainty over policy to add to the existing uncertainty.”

I think Mr Poole and his colleagues might usefully spend more time with those reckless speculators, desperate market operators and bankers who have gotten in over their heads. This less respectable company than he usually keeps could tell him that “the passage of time to clarify what is happening” on offer is a lot shorter than it was before, even in the last decade.

The VAR models devised by the descendants of the sainted Eugene Fama of Mr Poole’s beloved University of Chicago have created systemic risks that should be unwound carefully. Otherwise, the “existing uncertainty” could turn into blind panic in the next phase of this ongoing crisis.

Mr Poole and his colleagues are right to be concerned about the moral hazard of central bank bailouts. Some “assets” and institutions should go bust. No doubt there will be prison time for some after the coming washout. But a disorderly collapse of values and seizing up of markets could lead to the inflationary reaction that they fear, as Fed Reserve governors resort to shoving bales of cash out of the helicopter doors.

What we saw last month was a toy trainset model of what is in store for us with the unwinding of the great credit bubble. Dealers and banks, whose capital committed to market making was greatly reduced by frozen bridge loans and volatility-based pricing models, were unable to perform much of their usual function. In the credit derivatives market, where mechanisms are not incorporated in the central banks’ models, adverse marks-to-market could lead to spiralling price declines.

This could come in forms such as the unwinding of synthetic “investment grade” CDOs. Even without defaults, marks could lead to the triggering of unwinds, which would require the purchase of scarce default protection, the price effect of which would lead to more triggers being pulled and lawyers being called.

Interestingly, the Fed staff studied what could be done to directly provide credit back in 2000. The sprightly prose of “Monetary Policy When the Nominal Short Term Interest Rate is Zero” (Clouse, Henderson, Orphanides, Small & Tinsley, November 27, 2000), might be dusted off and re-considered.

It turns out that the Fed has quite a few potential channels for the direct lending under sections 10B, 13(8) and 13(13) of the Federal Reserve Act, while the discounting, or purchase of paper in the secondary market is authorised under other parts of section 13. This doesn’t have to be a “bailout” of risk, since in most of these cases the credit risk remains with the institution that discounts the paper.

Direct lending is more problematic, but that wouldn’t have been necessary to stop mini-panics such as July’s.

The large and capable staffs in Washington and at the regional Feds should, at flank speed, consider how to provide crisis liquidity. This would be an especially useful exercise given the jerry-built credit derivatives structures we have built (using Chicago models).

johndizard@hotmail.com

International Herald Tribune Editorial - A bridge collapses

2007-08-06T08:18:00.000-07:00

International Herald Tribune Editorial - A bridge collapses
Copyright by The International Herald Tribune
Published: August 5, 2007

America's physical foundations seem to be crumbling. Last week, a 40-year-old interstate highway bridge collapsed in Minneapolis, plunging rush-hour traffic into the Mississippi River 60 feet below. Two weeks earlier, an 83-year-old steam pipe under the streets of Manhattan exploded in a volcano-like blast, showering asbestos-laden debris. And two years before that, substandard levees gave way in New Orleans, opening the way for the floodwaters of Hurricane Katrina.

These are some of the most dramatic signs of America's failure to maintain its aging physical structures at a time when demands on roads, transit systems, sewage treatment plants and other vital facilities are rising. In the event of a catastrophic failure, many lives can be lost. But even the slower deterioration undermines the quality of life and retards economic growth.

In the midst of ballooning deficits and a hugely expensive war, most politicians will be tempted by the quick fix. But that is exactly how the country got into this problem.

No one yet knows what caused the Minneapolis bridge to fall apart. Theories include undetected cracks or metal fatigue, vibrations from a resurfacing project on the roadway, or possibly soil erosion around the underwater supports.

The design of the structure was almost certainly an element. The 1,900-foot span lacked much redundancy for its critical supports, which could allow a single failure of a crucial structural part to bring down the whole edifice. The notion that critical parts ought to have backup systems seems so basic to current engineering practice that it is shocking to learn that some 756 bridges of similar design around the country also lack redundancy. They will need to be inspected and monitored with great care.

Unfortunately, the adequacy of current inspections is also in question. It is disturbing that the pipe that burst in Manhattan had just been declared sound by a utility crew, that the levees in New Orleans had been regularly inspected by the Army Corps of Engineers, and that the Minneapolis bridge had been inspected annually.

In these and other failures it will be important to establish whether the inspectors failed to do a diligent job or whether the problem is that inspections are inherently limited.

The larger problem of crumbling roads, bridges and levees and crashing electrical grids can almost always be traced to a lack of investment. When budgets are tight, elected officials find it convenient to cut back on maintenance and leave some future administration to deal with the consequences. When Congress appropriates money for public works, the legislators typically prefer shiny new projects that will enhance their reputations, not mere maintenance on a bridge named after someone else.

Congress is now scrambling to provide extra money to help Minnesota replace its stricken bridge and is planning hearings on broader infrastructure needs. One sensible bill that ought to be quickly passed would set up a commission to assess the state of America's infrastructure, set priorities, and recommend financing approaches.

Another bill is proposing a new national bank to leverage both public and private investment for repair and new construction projects.

The collapse of Minneapolis' Bridge No. 9340 is a reminder that such long-postponed investments can no longer be neglected.

We pay for gov's poor leadership - BUDGET BATTLE | While pols sit idle, other services -- like the CTA -- neglected

2007-08-06T08:15:00.000-07:00

We pay for gov's poor leadership - BUDGET BATTLE | While pols sit idle, other services -- like the CTA -- neglected
BY CAROL MARIN
Co[yright by The Chicago Sun-Times
August 5, 2007

Since Gov. Blagojevich spends more time in Chicago than Springfield, surely he has noticed what is a recurring sight: a broken-down CTA bus.

There isn't a day lately that I haven't seen at least one. A couple of weeks ago, in fact, there were 51 that broke down at rush hour. Fifty of those 51 were 1991 vintage TMC buses with 600,000 miles on them. They should have been taken out of service four years ago when they hit 12 years of road wear, but, lacking a capital replacement budget, the CTA hangs on to them even though they cost three times more to maintain than a newer bus.

When I asked Ron Huberman, the new head of the CTA, about all the broken buses I've been seeing, he told me that whenever he spots one, he makes it a point to pull over, introduce himself to stranded, frazzled passengers, and apologize.

What do they say back?

''People aren't sure where to focus their anger,'' Huberman said.

A far bigger, broken-down bus is the Illinois General Assembly and the chief executive who's at the wheel of what passes for a legislative process in this state.

The summer of our legislative discontent is quickly rolling into what promises to be future seasons of despair in Springfield.

Blagojevich, a politician who in person and in public can charm the socks off a snake, has from the very beginning of his first term in 2003 shelved his considerable people skills in favor of alienating just about everyone he needs to get something of significance done in Springfield.

From the moment he took office, he began cutting himself off, demonizing legislators of both parties for spending ''like drunken sailors'' and inexplicably refusing to return phone calls from fellow governors or even Illinois' senior U.S. senator, Dick Durbin.

Blagojevich made it clear from the beginning that he was going to go it alone. A solo player, the ultimate visionary populist.

There is no better example of that than his announcement early this year that he would push for universal state health care funded by a gigantic gross receipts tax on business. His proposal came out of the blue and was met with deafening silence.

Had Blagojevich prepared anyone for that idea during his 2006 re-election campaign?

No.

Had he built a bipartisan consensus or engaged the business community in discussions to prepare the way for such a grand plan?

No.

Had he galvanized public support in behalf of it?

No. No. No.

And yet, today, the governor hangs onto his health-care plan like a life preserver on the Titanic, last week threatening a shutdown of state government if he doesn't get his way, as other state services risk being thrown overboard.

There are icebergs ahead, one of them being the next two years' worth of pension payments that make this year's look like small change.

And, in addition to already unpaid Medicaid bills and struggling schools, there is the looming question of infrastructure. Last week's collapsed bridge tragedy in Minneapolis is not a Minnesota problem, it's our problem too, a warning of a ticking time bomb that, like so many other urgent needs, has been deferred because of a lack of smart legislative strategies, wise spending and, above all, leadership in finding a dependable, equitable source of new revenue.

Rod Blagojevich doesn't take all the blame in this battle. House Speaker Mike Madigan is no altar boy, nor is Senate President Emil Jones. And the Republican leaders have no halos.

But somewhere, I don't know where, a collective sense of statesmanship needs to be summoned by the egos at the top and most particularly by the governor -- not just to navigate the next few months, but the next few years.

Like passengers stuck on a busted bus, people may not know exactly where to focus their anger. But they're figuring it out.

America finally gets immigration reform -- state by state

2007-08-06T08:12:00.000-07:00

America finally gets immigration reform -- state by state
BY STEVE LEBLANC
Copyright by The Associated Press
August 6, 2007

BOSTON -- State lawmakers are increasingly stepping into the void created by the failure of Congress to approve sweeping changes to immigration policy, a new report finds.

Legislatures have passed bills dealing with a range of immigration issues, from employment and health care to driver's licenses and human trafficking -- creating a sometimes uneven patchwork quilt of immigration law across the country:

• • Arkansas approved a law barring state agencies from contracting with businesses that hire illegal immigrants.

• • Louisiana has a new law barring the state from issuing driver's licenses to foreigners until their criminal background has been checked.

• • Oregon made it illegal for anyone other than lawyers to perform immigration consultation work.

In the first six months of the year, 171 immigration bills became law in 41 states. That's more than double the 84 laws approved in all of 2006.

More than half of the states have considered bills seeking to toughen or clarify laws related to driver's licenses or other identification. Nineteen have studied immigration laws that would affect the ability of immigrants to find jobs.

While the states have been taking action, Congress failed this summer to pass President Bush's immigration plan, which would have legalized as many as 12 million unlawful immigrants.

Though immigration previously was largely a concern of border states, it has quickly become a national concern, and lawmakers in all 50 states are weighing legislation this year, according to Sheri Steisel of the National Conference of State Legislatures.

''Given the absence of federal consensus of national immigration reform, state legislators are stepping into the void and doing their best,'' Steisel said.

However, their newly enacted policies don't always agree, she said.

While Arizona lawmakers passed a bill requiring employers to use a new federal database to avoid hiring illegal immigrants, lawmakers in Illinois passed a bill barring businesses from using the same database, saying it contained too many errors.

''We have states looking at the same problem and coming up with different solutions,'' she said.

The preacher and the porn star to debate - Touring speakers discussing pros and cons of pornography

2007-08-06T08:10:00.000-07:00

The preacher and the porn star to debate - Touring speakers discussing pros and cons of pornography
By Manya A. Brachear
Copyright © 2007, Chicago Tribune
August 6, 2007

Warning: This article contains sexually oriented adult content, verbal descriptions of nude adults and the unusual partnership of a pastor and a porn star.

Rev. Craig Gross, a former youth pastor and founder of XXXChurch.com, will bring his anti-porn crusade to Chicago on Monday at the Lakeshore Theater when he takes the stage opposite longtime porn star Ron Jeremy for "The Great Porn Debate." On tour together for the last few years, Gross promotes his ministry while Jeremy defends his industry, which he says has been unfairly targeted for years by the Christian right as shameful.

"People have a right to watch porn if they choose to and not feel bad," Jeremy said in an interview. "I'm going to combat that attitude till I'm blue in the face. And they're not going to beat me on it."

While Gross delivers the same dire warnings as other opponents of porn, he does so in a manner that Jeremy considers more respectful. Gross argues that pornography destroys relationships and degrades women. Jeremy counters that it enhances couples' sex lives and empowers men and women who use their bodies to make millions.

"There are two sides of the story," Gross said. "In the Christian world a lot of times we want to pretend there's only one side. The thing for me is, beyond my view of porn, as a Christian I want to show I can disagree with this guy and still be his friend."

Aiming to clean up what he considers the dirtiest little secret of the 21st Century, Gross hands out Bibles at porn shows and runs a Web site where people disclose their fixations and download free software to curb their obsession. A regular at porn industry conventions, he stands among porn stars who are offering autographs and hawking adult toys -- a strategy that has enabled him to reach those most in need.

"I can't escape what God is doing," Gross said. "I'm responsible for the platform God has given us, not only to push the envelope on this issue, but stay away from it. Now my phone will ring and it will be a porn star [seeking help]. I'm OK with that."

It was at such a convention that Gross met Jeremy, who invited the pastor to debate the pros and cons of porn for college students. While Gross has preached against pornography in at least 250 churches across the country, he soon realized he could ride Jeremy's coattails to reach a different kind of flock.

"I'm the underdog on the tour," Gross said. "There are more Ron fans than anti-porn church fans."

Jeremy applauds the pastor's approach for flying in the face of other porn foes.

"Jesus supposedly was a very special person. Nobody argues that. He was a very nice guy," said Jeremy, a secular Jew. "He wouldn't shy away from healing people right where the problem was. While other churches give Craig a hard time for doing what he's doing, he's doing what Jesus would try to do."

Though there's plenty of Scripture that condemns "lust of the eyes" and warns about "the harlot who lurks on every corner," Gross does not quote the Bible on his tours with Jeremy, but sticks to secular warnings instead. For shock value, he often reads off a list of raunchy movie titles to illustrate how the industry degrades women -- pronouncing words in public that he would never utter in a pulpit.

"This is degrading and hurtful," he said. "It creates false expectations for what sex is all about. It's not real. It's fantasy."

Gross waged war on pornography as a youth pastor after he heard conversations that suggested young people were watching sex on the Internet. He remembered his buddies stealing smut magazines and living in fear of getting caught.

But today's teens just surf the Web with little risk of being found out, he said, adding that those teens form unrealistic expectations about sex.

Jeremy, who was born Ron Hyatt but goes by his middle name in his porn career, argues that the pornography industry is not to blame. He said that movies are not marketed to youths and that hard-core porn is not supposed to be sold to customers who can't prove they are 18 or older.

"We're trying to do the right thing," Jeremy said. "I'd like to think we're doing it for moral reasons, and for many of us that's true. I don't want to come across that we're holier-than-thou because not only is it a moral issue -- it's an intelligent one to avoid jail."

Still, if young people want to satisfy their curiosity, they will find a way, and Victorian sensibilities about sex in many churches don't help, Gross said. More than 48 percent of Christian families struggle with pornography, and that figure is exacerbated by Christian youths who trade in premarital sex for pornography, he said.

Rev. Dennis Lyle, rector of Mundelein Seminary, teaches aspiring priests in his moral theology classes how to deal with the topic of pornography. He is quick to say it's not about nudity. The Sistine Chapel is covered with images of naked bodies. "The problem with pornography is not that it shows too much but that it shows too little," Lyle said. "It doesn't reveal a totality of the human person. ... Pornography draws our attention only to the external, so we never really arrive at a true appreciation for the person as he or she is. The person becomes an object ... like a toy or a tool."

Lyle said moral theologians are divided on whether a small dose of porn can enhance a couple's sex life, as Jeremy often suggests during the debate. Lyle has heard confessions that suggest otherwise. He hears husbands and wives express feelings of hurt and inadequacy.

Confessions are precisely what Gross is after. "The Bible says confess your sins one to another," he said. "Most people look at porn in secrecy. If you really want to stop, you tell somebody."

Jon Peacock, director of Willow Creek Community Church's Axis Ministry for young adults, praises the virtual conversation on the XXXChurch.com Web site for providing a safe space to do that. It also offers free software for addicts to download and disclose their Internet activity to friends.

"It's a portal for hope," Peacock said. "What helps for so many people when they go on the site, they see that there's hope if they've gotten themselves into destructive patterns that there are other people out there wrestling with the same thing, which is really powerful. I love that Craig and his crew don't leave people where they're at. They meet them where they're at."

----------

mbrachear@tribune.com

Chicago Tribune Editorial - The failure of abstinence ed

2007-08-06T08:03:00.000-07:00

Chicago Tribune Editorial - The failure of abstinence ed
Copyright © 2007, Chicago Tribune
August 6, 2007

Congress has spent $1.5 billion in the last 10 years on programs that deliver a single message: Abstain from sex until you marry. That's a good message for young people about how to stay healthy and safe. Taken alone, though, it doesn't appear to be a terribly effective message.

A recent study of 2,000 children who were tracked over 10 years found no evidence that abstinence-only programs delayed the start of sexual activity by teens. The study found that such programs didn't increase condom use by teens who do have sex. The study was commissioned by the federal government and conducted by the non-partisan firm Mathematica Policy Research Inc.

Sexual activity by teens declined through the 1990s but has essentially been level since 2001, roughly tracking the time Congress has put big money into abstinence education. That doesn't argue for the effectiveness of the programs.

Yet the U.S. House recently approved $204 million for abstinence education, a $28 million increase over current spending. Democratic leaders in the House say they agreed to the increase to draw Republican votes to a health and education spending bill.

The view here has been that the federal experiment in funding abstinence programs should be given a chance to see if it works. It has had the chance, and the evidence isn't encouraging. If Congress is going to put money into sex education in schools, it ought to promote broader programs that stress abstinence, but also include information on the correct use of contraception and the treatment and testing of sexually transmitted diseases.

Under federal law, abstinence-only programs cannot include discussion about contraception, except to discuss its failure rates. An increasing number of states -- 11 so far -- have rejected the federal money.

There is a longer track record for comprehensive sex education than for abstinence programs, and it has been a positive track record. Teens who have been through such programs tend to delay the onset of sexual activity, more often use condoms when they do have sex and have fewer partners. This approach is recommended by the American Academy of Pediatrics and the American Medical Association.

It's a good idea to encourage abstinence, to emphasize that it is the only certain way to avoid unwanted pregnancies and sexually transmitted diseases. But such teaching already is part of comprehensive sex education. The results of this 10-year experiment are in. It's time for Congress to spend its money more wisely.

Bishops launch ads to promote, sustain marriage

2007-08-06T08:00:00.000-07:00

Bishops launch ads to promote, sustain marriage
By Stephanie Simon
Copyright © 2007 Los Angeles Times
August 6, 2007

The gestures are sweet, but modest:

One husband carried his wife's purse. Another made his wife breakfast. And another taped a note to her mirror telling her he liked her haircut.

Nothing earth-shattering there. And yet the Roman Catholic Church is counting on publicizing these small acts of everyday kindness to revitalize the institution of marriage.

Alarmed by the persistently high divorce rate and the explosion in couples living together without a license, Catholic bishops nationwide have teamed up on a media blitz aimed at promoting and strengthening marriage.

The first ad campaign, launched in June, featured ordinary people talking about what they've done to enrich their marriage. The bishops hope the stories -- one wife brought her husband mustard for his sandwich; another gave hers an enormous hug to start the day -- will inspire spouses everywhere to work to keep the flame alive.

Some supporters of the campaign say this may not be an ideal moment for the church to offer relationship advice.

"These guys are plagued by scandals involving sexual misconduct -- how come they're telling other people what to do? That's the obvious, cynical reaction," said John Grabowski, an associate professor of moral theology at the Catholic University of America.

Grabowski also said the campaign would be colored by the same-sex marriage debate. The Catholic Church strongly opposes such unions. With that in the background, some viewers might dismiss the ads as conservative propaganda.

"That's a minefield the bishops will have to walk," Grabowski said.

He believes they can do it and has signed on as an adviser to the campaign. The bishops are also consulting with couples at all stages of dating, marriage and divorce, to make sure the advice isn't coming solely from a bunch of single men sworn to celibacy.

In future stages, the bishops' campaign -- known as the National Pastoral Initiative for Marriage -- will be directed more narrowly at Catholic couples. A pastoral letter, to be released within the year, will reinforce the theology of heterosexual marriage as a sacrament. The bishops also plan to develop brochures and counseling resources for priests.

For now, however, the ad campaign is designed with ecumenical appeal. There are no references to the Catholic Church until the end of each spot, when the announcer promotes ForYourMarriage.org, the campaign's Web site.

The church is not buying airtime for the ads; it's trying to get them placed as 30- and 60-second public-service announcements on radio, network- and cable-TV outlets nationwide.

So far the campaign has cost $600,000 in parishioner donations. Much of that has gone to develop the Web site, which offers spot polls ("Was the last fight you had with your spouse worth it?"), compatibility quizzes and the marriage tip of the day.

Those tips often are grimly resolute, such as this one: "Love is not simply a feeling; it is a decision. ... When the feeling fades -- and it will at times -- recommit to building your relationship."

That's not a very delicate view of romance, but sociologists and counselors say it's a vital dose of reality in an era when close to 50 percent of first marriages, 60 percent of second marriages and 75 percent of third marriages end in divorce. Catholics are less likely than Protestants to divorce, but faith leaders say they still see many ruptured and rocky unions.

Young couples go into marriage "with the idea that love will conquer all," said Bill Urbine, who directs family life programs for the diocese of Allentown, Pa. "They just don't get it."

Historically, their church has not been much help.

Many Protestant pastors regularly devote sermons to practical advice on communication, conflict resolution, even sex. But those topics rarely come up in Catholic homilies, Grabowski said.

The couples interviewed in the bishops' TV spots suggest ways, large and small, to nurture a marriage: Set up a date night; send a loving e-mail; clean the house without being asked.

An elderly man says in an ad: "I've done today what I usually do. And that is: Obey."

U.S. lost track of weapons - Report: 190,000 guns given to Iraqi security forces by Pentagon unaccounted for

2007-08-06T07:53:00.000-07:00

U.S. lost track of weapons - Report: 190,000 guns given to Iraqi security forces by Pentagon unaccounted for
By Glenn Kessler
Copyright by The Washington Post
August 6, 2007

WASHINGTON - The Pentagon has lost track of about 190,000 AK-47 assault rifles and pistols given to Iraqi security forces in 2004 and 2005, according to a new government report, raising fears that some of those weapons have fallen into the hands of insurgents fighting U.S. forces in Iraq.

The highest previous estimate of unaccounted-for weapons had been 14,000, in a report issued last year by the inspector general for Iraq reconstruction.

The new report from the Government Accountability Office indicates the United States has spent $19.2 billion trying to develop Iraqi security forces since 2003, the GAO said, including at least $2.8 billion to buy and deliver equipment. But the GAO said weapons distribution was haphazard and rushed, and failed to follow established procedures, particularly from 2004 to 2005, when security training was led by Gen. David Petraeus, who now commands all U.S. forces in Iraq.

The report also indicates that U.S. military officials do not know what happened to 30 percent of the weapons the United States distributed to Iraqi forces from 2004 through early this year as part of an effort to train and equip the troops.

The Pentagon did not dispute the GAO findings, saying it has launched its own investigation and indicating it is working to improve tracking. Although controls have been tightened since 2005, the inability of the United States to track weapons makes it nearly impossible for the U.S. military to know whether it is battling an enemy equipped by American taxpayers.

"They really have no idea where they are," said Rachel Stohl, a senior analyst at the Center for Defense Information who has studied small-arms trade and received Pentagon briefings on the issue. "It likely means that the United States is unintentionally providing weapons to bad actors."

One senior Pentagon official acknowledged that some of the weapons probably were being used against U.S. forces. He cited the Iraqi brigade created at Fallujah that quickly dissolved in September 2004 and turned its weapons against the Americans.

'Very little is being done'

Stohl said insurgents frequently use small-arms fire to force military convoys to move in a particular direction -- often toward roadside bombs that target troops and vehicles. She noted that the Bush administration frequently complains that Iran and Syria are supplying insurgents but has paid little attention to whether U.S. military errors play a role. "We know there is seepage and very little is being done to address the problem," she said.

Stohl said that U.S. forces, focused on a fruitless search for weapons of mass destruction after Baghdad fell, failed to secure massive weapons caches. The failure to track small arms given to Iraqi forces repeats that pattern of neglect, she added.

The GAO is studying the financing and weapons sources of insurgent groups, but that report will not be made public. "All of that information is classified," said Joseph Christoff, the GAO's director of international affairs and trade.

In an unusual move, the train-and-equip program for Iraqi forces is being managed by the Pentagon. Normally, the traditional security assistance programs are operated by the State Department, the GAO reported. The Defense Department said this change permitted greater flexibility, but as of last month it was unable to tell the GAO what accountability procedures, if any, apply to arms distributed to Iraqi forces, the report said.

Iraqi security forces were virtually non-existent in early 2004, and in June of that year Petraeus was brought in to build them up. No central record of distributed equipment was kept until December 2005, and even now the records are on a spreadsheet that requires three computer screens lined up side by side to view a single row, Christoff said.

The GAO found that the military was consistently unable to collect supporting documents to "confirm when the equipment was received, the quantities of equipment delivered, and the Iraqi units receiving the equipment." The agency also said there were "numerous mistakes due to incorrect manual entries" in the records.

The GAO reached the estimate of 190,000 missing arms -- 110,000 AK-47s and 80,000 pistols -- by comparing the property records of the Multi-National Security Transition Command for Iraq against records Petraeus maintained of the arms he had ordered. Petraeus' figures were compared with classified data and other records to ensure that they were accurate enough to compare against the property books.

Gaps in Petraeus' records

In all cases, the gaps between the two records were enormous. Petraeus reported that about 185,000 AK-47 rifles, 170,000 pistols, 215,000 pieces of body armor and 140,000 helmets were issued to Iraqi security forces from June 2004 through September 2005. But the property books contained records for 75,000 AK-47 rifles, 90,000 pistols, 80,000 pieces of body armor and 25,000 helmets.

A military commander involved in the program at the time, speaking on condition of anonymity because he was not authorized to discuss the report, acknowledged in an e-mail, "We did issue some items, including weapons, body armor, etc. to new Iraqi units that were literally going into battle."

But, the commander argued, "there was, frankly, not much of a choice early on: We had very little staff and could have held the weapons until every piece of the logistical and property accountability system was in place, or we could issue them, in bulk on some occasions, to the U.S. elements supporting Iraqi units who were needed in the battles of Najaf, Fallujah, Mosul, Samarra, etc."

During the Bosnian conflict, the United States provided about $100 million in defense equipment to the Bosnian Federation Army, and the GAO found no problems in accounting for those weapons.

Much of the equipment provided to Iraqi troops, including the AK-47s, originates from countries in the former Soviet bloc. In a report last year, Amnesty International said that in 2004 and 2005 more than 350,000 AK-47 rifles and similar weapons were taken out of Bosnia and Serbia, for use in Iraq, by private contractors working for the Pentagon.

Democrats back eavesdropping bill

2007-08-06T07:48:00.001-07:00

Democrats back eavesdropping bill
By Stephanie Kirchgaessner in Washington
Copyright The Financial Times Limited 2007
Published: August 5 2007 18:45 | Last updated: August 5 2007 18:45

Democrats in the House of Representatives reluctantly handed the Bush administration a victory this weekend with the passage of a bill that expands the government’s ability to eavesdrop on foreign suspects without warrants.

Nancy Pelosi, House speaker, had said the bill contained “unacceptable” provisions, but it was passed 227-183 after a campaign by the White House and congressional Republicans who argued that failure to pass the bill, which expires in six months, would leave the US vulnerable to terrorist attacks. Democrats are wary of being perceived as weak on national security.

The bill updates the Foreign Intelligence Surveillance Act, a law that requires the White House to seek approval from a special court to eavesdrop on Americans. It allows intelligence agencies to intercept telephone calls and e-mails of foreign terror suspects routed through the US, without a warrant.

It passed after the Republican minority leader John Boehner disclosed that a secret court decision had made such intercepts illegal, in effect leaving intelligence agencies “blinded”, according to Republican congressman Peter Hoekstra. Some Democrats, including Jane Harman of California, condemned the “fear tactics” deployed to ensure its approval.

Separately Newsweek magazine reported on Sunday that the FBI last week searched the home of a former Justice Department lawyer, Thomas Tamm, as part of an investigation into the leak of the administration’s warrantless surveillance programme. Mr Tamm did not respond to a message left for him at his home.

Mr Tamm appears to have been a critic of the administration. In an online post on the website MediaMatters, Mr Tamm, who said he was a “former DOJ lawyer”, criticised the White House for being “guilty of taking the blindfold off lady justice” in connection to the controversy over the firing of US attorneys.

Phoney fears grip America

2007-08-06T07:45:00.001-07:00

Phoney fears grip America
By Matt Miller
Copyright The Financial Times Limited 2007
Published: August 5 2007 19:32 | Last updated: August 5 2007 19:32

A spectre is apparently haunting America – the spectre of “populism”. “New populism spurs Democrats on the economy,” cried the front page headline in The New York Times the other day. Republicans rail against unseemly “class warfare”, while centrist Democrats fret that hard-edged populist appeals will spook suburban voters.

“It is not unusual,” The New York Times explained, “for candidates seeking the Democratic presidential nomination to move left in the primary season.” However, rhetoric aside, there is little reason to view today’s supposedly wild-eyed Democrats as “populist” or “leftwing” at all.

Consider John Edwards, who the press and Republicans have cast as the heartthrob of the resurgent “left”. The centrepiece of Mr Edwards’ agenda is a call for universal health coverage. It sounds radical to American ears, perhaps. But Margaret Thatcher would have been chased from office in the UK if she had proposed a health plan as radically conservative as Mr Edwards’ – under which private doctors would supply the medicine, and years would still pass with millions of Americans uncovered.

Mr Edwards wants to lift the minimum wage substantially, and to boost wage subsidies for low-income work besides. But the outer limits of Mr Edwards’ ambition would leave low income work less generously compensated than the minimum wage and subsidy blend enacted by Britain’s New Labourites Tony Blair and Gordon Brown – arrangements Conservative party leader David Cameron says suit him just fine.

On taxes, Mr Edwards wants to return marginal rates for high earners from 35 per cent to the 39.6 per cent level that existed under Bill Clinton – rates slightly lower than those in force after Mrs Thatcher got through cutting them. Mr Edwards jawbones against outsized CEO pay that is divorced from performance – a concern that arch-capitalist Warren Buffet trumpets at every opportunity. Mr Edwards’ plans for college aid would still leave American graduates far deeper in debt than anything conservative parties across Europe would tolerate.

Mr Edwards and others question the received wisdom that “free trade is good no matter how many people get hurt”, but here again, this is not as “leftist” as some seem to think. We know this from the recent American debate on immigration, where not a single market-loving economist made the case for unfettered immigration of unskilled workers. Why not? Because of the social havoc it would cause.

The idea that the consequences of free markets are worth considering when assessing how open an economy should be has therefore already been conceded by the economics profession. One can cherish the enormous gains to be had from trade and still note that it is only a matter of time (and the jobs of more politically vocal Americans being offshored) before economists routinely apply this distributional logic to trade in goods and services as instinctively as they apply it to trade in people.

I could go on, but you get the point. The fact that a Thatcher-Cameron-Buffet agenda can be hyped as “populist” says more about propaganda success and media norms than anything else. Over three decades, America’s conservative movement has so deftly shifted the boundaries of debate to the right that even modest adjustments to the market system can be cast as the second coming of Marx without anyone blushing. Today’s phony populist fears also remind us that the real problem with the media is not ideology but stenography. If official sources call something “populist” often enough, it is.

More depressing is that many Democrats fall into the same trap, worrying that a Thatcher-Cameron agenda in America will frighten suburban swing voters, rather than asking themselves how they might win the argument over the direction America needs to take. At this rate, Americans will be lucky to catch up a decade from now to today’s social policy consensus in the UK. Meanwhile, Brits and others will have moved forward on a new generation of ideas to help citizens find security and opportunity in a global economy.

But maybe America’s latest surreal debate should not come as a surprise. It stands to reason that a country capable of turning Bill Clinton’s lies about sex into an epic national crisis can morph a prim Tory platform into some scary rush to the barricades. And so America hyperventilates again, too busy gasping theatrically for breath to know its actual condition.

Matt Miller is a senior fellow at the Center for American Progress and the author of The 2% Solution: Fixing Americans Problems In Ways Liberals And Conservatives Can Love.

US healthcare hit by hospital bad debts

2007-08-06T07:42:00.000-07:00

US healthcare hit by hospital bad debts
By Christopher Bowe in New York
Copyright The Financial Times Limited 2007
Published: August 5 2007 22:10 | Last updated: August 5 2007 22:10

Bad debts at hospitals from unpaid patient bills are triggering deep and growing problems within the US healthcare system as up-front costs are increasingly passed on to consumers and growing numbers of people are opting out of health insurance.

Bad debts for hospitals in 2004 were estimated to be between $26bn and $30bn(€22bn, £15bn), representing about 12 per cent of their revenue and rising.

Last week, hospital groups including Health Management Associates, United Health Services and Community Health Systems reported varying increases in bad-debt levels affecting second-quarter results. The week before, LifePoint Hospitals also reported bad debt increases in the quarter.

Highlighting the problem, HMA shares plunged 32 per cent last week after it slashed profit forecasts this year.

Paul Mango, healthcare expert at consultancy McKin sey & Company, said the situation showed that the healthcare system was compounding its own sustainability problems. “Are we at an inflection point? That would be a reasonable question. Probably yes,” he said.

Healthcare benefits and costs, particularly for the approximately 45m uninsured Americans, remain one of the most explosive issues in US politics.

In recent years employers have increasingly turned towards healthcare plans where the patient pays part of their care costs out of their own pocket.

The plans were intended to stem rising costs to insurers and employers by making consumers aware of how much their healthcare was costing, but one result has been an increase in the level of bad debts.

Average out-of-pocket costs vary according to insurance plans, but patients can pay thousands of dollars before their insurer takes over the cost of treatment. A McKinsey report estimated consumers’ out-of-pocket healthcare costs could increase 68 per cent to $420bn by 2015.

Many of these bills are never paid and end up as debts on the hospitals’ books. Hospitals collect 8-12 cents on the dollar from debts by uninsured patients – of which 60-70 per cent are estimated to be working. Bad debts by patients with insurance have higher collection rates at 50 cents on the dollar.

Bad debts are increasingly driving a little-discussed vicious circle. Hospitals seeing more debt from insured patients can react by pushing insurers to help them offset it. This in turn can push insurers to charge higher premiums to employers, which can force employers to place more of the risk of healthcare costs on to their employees.

David Bachman, analyst at Longbow Research, said: “If you keep passing the cost around it does just spiral into a worse situation where people have even less coverage, bigger balances, and it gets out of hand.”

Paul Watson, analyst at AG Edwards, said: “The concern investors have at the moment [is] when does this problem stop?”

Not only might the problem for hospitals not stop under the current system, but it was likely signalling that the US healthcare benefits system had begun to feed on itself, Mr Mango said. Trends show ever-increasing ranks of Americans who are uninsured or unlikely to pay their out-of-pocket healthcare costs.

According to McKinsey, since 2001 the US has seen an increase of 3m-4m uninsured while the economy has created about 7m jobs. Overall that may indicate the presence of up to 10m-11m people who would previously have taken out health insurance but currently do not.

US hospitals are seeing double the rate rise in uninsured patient visits versus insured. But the fastest-growing segment of bad debt for hospitals is from people with health insurance.

Mr Mango said this was a direct result of changes towards higher out-of-pocket payments from patients.

As healthcare insurance becomes more expensive, employers and employees are choosing plans that pass more of the cost on to the consumer or opting out of insurance altogether. “Bad debt is going up fast because people with means have less insurance or no insurance,” Mr Mango said.

US Iraq pull-out may start this year, says Gates

2007-08-06T07:41:00.001-07:00

US Iraq pull-out may start this year, says Gates
By Stephanie Kirchgaessner in Washington
Copyright The Financial Times Limited 2007
Published: August 5 2007 19:09 | Last updated: August 5 2007 23:00

The Bush administration could begin drawing troops out of Iraq by the end of the year, Robert Gates, the defence secretary, said on Sunday. Mr Gates insisted, however, that the so-called surge in US deployment this year had been effective.

The defence secretary said on NBC’s Meet the Press there was a possibility that the US could begin to withdraw forces by the end of this year.

But he also made clear that any decision would depend on the outcome of a progress report by General David Petraeus, the senior military commander in Iraq, and Ryan Crocker, the US ambassador, to be released to Congress in September.

He reiterated he was disappointed with the resignation of Sunni from the Iraqi cabinet last week and admitted the administration had underestimated the deep mistrust between Iraq’s sectarian factions.

But Mr Gates said he disagreed with the recommendation by the bipartisan Iraq Study Group last year that the US reduce military and economic support for the Baghdad government if it failed to make substantial progress towards national reconciliation.

While Mr Gates said he would have agreed with that assessment earlier, he and others had “not anticipated” six months ago the positive “turn” in conditions that had developed on a “local level” in Iraq. “We’ve had some very interesting developments in Anbar province and Diyala and some of the other provinces and local areas.”

The US was working with local officials who had changed sides, “who are enlisting their young men in the police, who are co-operating”, he said on CNN.

He also suggested it was inevitable US forces would have to align themselves with Sunni leaders who had previously opposed the US occupation of Iraq in order for the political process to move forward.

In interviews on Sunday both Mr Gates and Condoleezza Rice, the US secretary of state, defended the Bush administration’s trust in General Pervez Musharraf by ruling out the possibility that the US would unilaterally attack terrorist targets in Pakistan, including Osama bin Laden, without first discussing any such action with the country’s military ruler.

“I think that our relationship with the Pakistan [president] is such that we would share that information with Musharraf, and he would be delighted to work with us in making that kind of an operatiomn work,” Mr Gates said.

Abnormal trading ‘ahead of 49% of N American deals’/Boom time for suspicious trades

2007-08-06T07:37:00.000-07:00

Abnormal trading ‘ahead of 49% of N American deals’
By Victoria Kim in New York
Copyright The Financial Times Limited 2007
Published: August 6 2007 04:30 | Last updated: August 6 2007 04:30

The high-stakes worlds of casinos, hotels and banking are most susceptible to suspicious share trading ahead of big merger and acquisition announcements, according to analysis carried out by the Financial Times.

Abnormal share trading has been seen far more often ahead of large deals in these industries than in others such as insurance or telecoms, suggesting they may be more vulnerable to insider trading.

The FT analysis shows that 80 per cent of hotel and casino M&A deals since 2003 saw abnormal trading in the days leading up to an announcement. The banking industry comes second with 52 per cent of deals in the same period showing suspicious share movements.

The FT examined trading data for the top 100 US and Canadian deals since 2003 collected by Measuredmarkets, a Toronto research firm that uses a weighted average based on volume, price and number of trades to flag unusual trading patterns.

The survey found suspicious trading occurred ahead of 49 per cent of all North American deals.

Deals in the telecoms industry showed the lowest level of suspicious trading at 33 per cent, followed by media at 38 per cent and insurance 43 per cent.

While the suspicious moves detected by the Measuredmarkets data may indicate insider trading, the data is not proof that improper trading occurred, nor does it flag every insider trade.

Insider trading may vary from sector to sector because non-public information may yield higher returns in some industries than it does in others, says Henry Hu, a corporate and securities law professor at the University of Texas.

The variation by sector may also be due to hedge funds preferring certain types of stocks over others, said John Coffee, a Columbia University law professor. Mr Coffee, who has testified on hedge funds before the US congress, said some funds may be more willing than other investors to take the risk of trading on improperly obtained inside information.

Measuredmarkets does not track call or put options, which are often used in insider trading. On Friday, the US Securities and Exchange Commission filed a civil complaint against Taher Suterwalla of London, alleging he used call options purchased through a Swiss bank to trade ahead of Petco Animal Supply’s announcement it would be acquired by two private equity firms. No trial date has been set.

Though Measuredmarkets flagged 49 deals for suspicious trading, only a handful have been the subject of civil or criminal cases. It is often hard to link specific trades to improper leaks.

Sometimes the Measuredmarkets data appears spot on. The firm flagged April 16 and 17 for deviant trading in Dow Jones shares when the prices rose 4.8 per cent. On April 30, News Corp made public its $60-a-share bid. In May, the US Securities and Exchange Commission charged a Hong Kong couple with insider trading, alleging they improperly purchased 415,000 Dow Jones shares between April 13 and 30.

The SEC declined to comment on the FT survey.

But Rick Ketchum, chief of regulation for the New York Stock Exchange, said: “We are continually working to improve and strengthen our system of monitoring trades in NYSE-listed securities, options, bonds, ETFs, and other products. Our surveillance systems allow us to review and investigate anomalous patterns that may constitute insider trading and market manipulation.”

Additional reporting by Brooke Masters

Boom time for suspicious trades
By Victoria Kim and Brooke Masters in New York
Copyright The Financial Times Limited 2007
Published: August 5 2007 22:03 | Last updated: August 5 2007 22:03

Suspicious trading ahead of large US mergers and acquisitions has risen four-fold in the past five years, suggesting that the recent M&A boom might have sparked an even bigger increase in insider trading, according to analysis commissioned by the Financial Times.

Almost 60 per cent of the 27 big deals announced in North America so far this year were preceded by unexplained spikes in trading in the stock of the target company, according to a review of data by Measuredmarkets, a Toronto research firm. This compares with 14 per cent for the seven largest deals announced in 2003.

Though the data highlight only suspicious transactions, rather than identifying particular trades that could be the basis for insider trading charges, the sharp rise will add to concerns that Wall Street insiders are illegally benefiting at the expense of ordinary investors.

Regulators and prosecutors have expressed increasing concern at the apparent growth in insider trading, suggesting it could ultimately undermine public confidence in the financial markets.

Just this year, former employees of Credit Suisse, Morgan Stanley and UBS have faced criminal insider trading charges, and the US Securities and Exchange Commission recently warned David Li, a member of the board of Dow Jones, that he might face civil charges in connection with suspicious trading ahead of News Corp’s bid for the financial information group.

The growing number of hedge funds could be a factor behind increased suspicious trading as funds scramble for information that will provide them with an edge.

“You’re in a world where there is much more competition. You need to trade quicker, search for additional facts. Sometimes that induces illegal behaviour,” said John Coffee, a Columbia University law professor. “Human nature has not changed since 2003, but the predominance of hedge funds has.”

Measuredmarkets monitors US and Canadian stock exchanges for sudden changes in trading behaviour. The firm uses a weighted measure that takes into account changes in a stock’s price, trade volume and number of trades, and compares it with up to four years of trading history to identify aberrations.

Measuredmarkets reviewed trading data for the 100 largest deals announced in the past five years. Days flagged as suspicious by Measuredmarkets were matched with media databases to exclude days on which news reports appeared to explain the deviant trading.

The Financial Times also used a measure 10 times more conservative than the threshold used by Measuredmarkets to account for random fluctuations.

The SEC does not track overall levels of suspicious trading, but the UK’s Financial Services Authority this year said it found no significant increase in suspicious trading in the London stock market between 2000 and 2005. Abnormal price movements occurred before 23.7 per cent of all merger and acquisition deals in 2005, compared to 24 per cent in 2000, it found.

Bear Stearns co-president resigns

2007-08-06T07:34:00.000-07:00

Bear Stearns co-president resigns
By David Wighton in New York
Copyright The Financial Times Limited 2007
Published: August 5 2007 19:43 | Last updated: August 5 2007 23:24

The turmoil in the US mortgage market claimed its latest top level victim on Sunday when Warren Spector resigned as co-president of Bear Stearns, six weeks after the collapse of two mortgage hedge funds it managed triggered a crisis in the broader credit markets.

Mr Spector, 49, who has long been seen as the likely successor to Jimmy Cayne, chairman and chief executive, resigned at a meeting of the Wall Street bank’s board on Sunday.

Head of all Bears’ capital markets operations, Mr Spector was also responsible for the asset management arm that ran the hedge funds. Bear said that Alan Schwartz, previously co-president, will become sole president and Sam Molinaro, will become chief operating officer in addition to chief financial officer.

On Friday, Mr Molinaro’s comments on a conference call caused a sharp sell-off in US stocks, setting the stage for a nervous start to the week for world markets on Monday.

US financial stocks were particularly badly hit on Friday, prompting calls for the Federal Reserve to intervene by cutting interest rates. At its meeting on Tuesday, some economists expect the Fed to acknowledge the risk that weakness in the US housing market could spread to the broader economy.

The Fed is expected to leave rates unchanged but US Treasury yields tumbled on Friday as the futures market priced in a strong chance of two cuts in the Fed Funds rate by the end of the year.

Investors will be looking nervously for more corporate victims of the slump in US subprime mortgage securities caused by increasing late payments on home loans.

In a statement to be released on Monday, Natixis, the French investment bank whose shares fell almost 10 per cent on Friday, is expected to seek to ease concerns about its exposure to US mortgages by reiterating its full-year profits guidance.

Natixis has a small stake in IKB, the German bank bailed out by the government last week after suffering losses on US subprime loans.

Some observers said investors had overreacted to Bear Stearns’ comments on Friday, particularly Mr Molinaro’s statement ruling out share buy-backs to preserve “liquidity”.

Bear said it had been profitable in June and July, in spite of markdown on its holdings of mortgage bonds and other securities. It also detailed the steps it had made – in common with other Wall Street banks – to bolster its cash holdings and borrowing facilities in recent months.

The turmoil in the credit markets was partly triggered by the collapse six weeks ago of two mortgage hedge funds run by Bear Stearns. Mr Spector, seen as the most likely successor to Mr Cayne, was also responsible for the asset management arm that ran the funds.

Chicago Tribune Editorial - 'Doctor of the nation'

2007-08-05T15:54:00.000-07:00

Chicago Tribune Editorial - 'Doctor of the nation'
Copyright © 2007, Chicago Tribune
August 4, 2007

The president's nomination for the next surgeon general looks to be in deep trouble. The nominee, Dr. James Holsinger, wrote a graphic paper years ago on homosexuality that has riled gay and lesbian activists and others. In recent testimony before a Senate committee, Holsinger appeared to disavow the 1991 paper, saying that it has been taken out of context and "does not represent where I am today [and] who I am today." He said that if confirmed as surgeon general, he would be an advocate for the health of all Americans, regardless of sexual orientation. And then he pledged to crusade against childhood obesity.

Whether he gets that chance won't be known until the Senate votes on his nomination in the coming weeks. Given his disavowal of the 1991 paper, there do not seem to be strong reasons to vote against him.

But one thing is certain: Politics is playing a huge role in all of this. The administration chose its nominee carefully to reflect its political values. Many Democrats are likely to vote against confirmation for exactly the same reason.

Whether the administration is Republican or Democratic, the surgeon general's office is always under political pressure to trim its views to fit a political zeitgeist. Unfortunately, that has meant generation after generation of surgeons general frustrated by meddling administration officials -- and vice versa. Apparently this has become particularly heavy-handed in the Bush administration.

The former surgeon general, Dr. Richard Carmona, testified recently his speeches were censored to match administration political positions and that he was prevented from giving the public accurate scientific information on issues such as stem cell research and teen pregnancy prevention. He said officials tried to "water down" a significant report on secondhand smoke. The administration went so far as to order Carmona to mention President Bush three times on every page of his speeches, Carmona told a congressional committee.

"Anything that doesn't fit into the political appointees' ideological, theological or political agenda is ignored, marginalized or simply buried," Carmona told the panel. "The job of surgeon general is to be the doctor of the nation -- not the doctor of a political party."

He's right. And that's exactly what's wrong with the job as currently defined.

The Bush administration has been particularly heavy handed in its interference with the office, but other surgeons general testified that they faced political interference while serving other administrations.

If this office is worth filling, and we believe it is, then its description must change. The surgeon general should be an independent, impartial voice of medical science. He or she can't fill that role under the current system. Letting politicians oversee this office is like getting a medical opinion from a doctor who calls your congressman for a second opinion. It's a bad idea.

Sen. Edward Kennedy (D-Mass.) recently introduced legislation that aims to "ensure that sound science is not trumped by politics" in the surgeon general's office. That's moving in the right direction.

Here's what we'd like to see: an independent surgeon general who doesn't answer to politicians but is free to speak his presumably well-educated mind on the medical and scientific issues of the day. The model is the Federal Reserve System. Its members are appointed for 14-year terms to insulate them from day-to-day political pressures. A surgeon general probably wouldn't serve that long, but the basic principle stands. If we're going to have a top doctor, the position should be shielded from political interference.

Chicago Sun-Times Editorial - Obama shouldn't be reactive to critics - The candidate should not form his foreign policy because he is afraid

2007-08-05T10:31:00.000-07:00

Chicago Sun-Times Editorial - Obama shouldn't be reactive to critics - The candidate should not form his foreign policy because he is afraid of appearing weak
Copyright by THe Chicago Sun-Times
August 5, 2007

Sen. Barack Obama shouldn't allow his foreign policy to be shaped by criticism that he's "naive" on international affairs.
Though he has long criticized the Iraq war, Obama came out this week sounding an awful lot like a hawk Wednesday when he said he'd launch a strike on Pakistan, our tenuous ally and a nuclear power, to get at terrorists in hiding along the Afghanistan/ Pakistan border.

Even though his campaign insists his stance was formed weeks ago, excerpts of his speech before the Woodrow Wilson Scholars in Washington, D.C., made many question whether his controversial plan was simply a campaign strategy -- a reaction to Hillary Clinton's earlier charge that Obama was "irresponsible and naive" for saying he'd open talks with leaders of rogue nations. That Clinton echoed Obama's stance on Pakistan seemed to go unnoticed. The freshman senator does sit on the Foreign Relations Committee.

Then on Thursday, Obama appeared to be making policy during a media interview. Asked if there were any circumstances in which he would be prepared or willing to use nuclear weapons against terrorists in Afghanistan and Pakistan, he replied: "I think it would be a profound mistake for us to use nuclear weapons in any circumstance," adding, after a pause, "involving civilians." Then he quickly added, "Let me scratch that. There's been no discussion of nuclear weapons. That's not on the table."

Wise men do not apologize for taking time to think. And we'd like to think that Obama is taking full advantage of the experienced foreign policy experts he has on his staff. We certainly wouldn't want him to commit to getting the United States involved in any more Middle East conflicts simply because he wanted to deflect criticism that he wasn't strong enough in dealing with terrorists.

What started all this was Obama's statement during the YouTube debate two weeks ago when he said he would be willing to meet with governments long shunned by the U.S. In his speech last week, he repeated the position, saying "not talking does not work." He named Iran, Syria and North Korea. We happen to agree that diplomacy is far better than silence. A generation ago, it was hard to imagine the United States having diplomatic relations with the Soviet Union or China.

We urge Obama to pace himself and not let the breakneck speed of the e-world or the snarking of his political opponents set it for him. Voters demand answers from those who ask to lead us. Good answers. Thoughtful answers. Honest answers. Not answers shaped on the fly.

For gays in Iraq, a life of constant fear - Since the U.S.-led invasion, homosexuals have been increasingly targeted by militias and police

2007-08-05T10:14:00.000-07:00

For gays in Iraq, a life of constant fear - Since the U.S.-led invasion, homosexuals have been increasingly targeted by militias and police, human rights groups say.
By Molly Hennessy-Fiske
Copyright © 2007, The Los Angeles Times
August 5, 2007

BAGHDAD — Samir Shaba sits in a restaurant, nervously describing gay life in Iraq. He speaks in a low voice, occasionally glancing over his shoulder.

The heavyset, clean-shaven Christian says that before the U.S.-led invasion in 2003, he frequented the city's gay blogs, online chat rooms and dance clubs, where he wore flashy tight clothes, his hair long and loose to his shoulders.

After the invasion, he and other gays and lesbians were driven underground by sectarian violence and religious extremists. Shaba, 25, packed his flashy clothes away, started wearing baseball caps and baggy T-shirts and stopped visiting clubs and chat rooms. But he couldn't bear to cut his hair.

"I cannot change everything immediately," he said, fingering his black ponytail. "I suffered because I didn't cut it."

Recently, Shaba said, police commandos spotted his hair as he was riding in a taxi through a checkpoint in central Baghdad. Suspecting that he was gay, the four commandos dragged him out of the taxi by his hair, and forced him into an armored car. They demanded his cellphone, cash and sex.

When he refused, they beat him with a baton and gang-raped him. He rubbed the back of his shirt, feeling for the scars.

"They got what they wanted because I thought otherwise I would lose my life," Shaba said, and he began to weep. "They threatened me that if I told anyone, they would kill me."

Heightened attacks

Human rights groups say that Iraqi gays are increasingly targeted by militias and police. The United Nations and State Department have issued reports documenting some of the more recent killings.

A U.N. report in January cited attacks on gays by militants, as well as the existence of "religious courts, supervised by clerics, where homosexuals allegedly would be 'tried,' 'sentenced' to death and then executed."

Iraqi leaders dismiss those allegations, and Middle East experts say it's difficult to tell whether the attacks are state-sanctioned.

"Nobody's paying attention to this issue," said Ali Dabbagh, spokesman for Prime Minister Nouri Maliki. "It is not the custom of the people of Iraq. Not only Iraq, but the whole region."

In October 2005, Iraq's leading Shiite Muslim cleric, Grand Ayatollah Ali Sistani, issued a fatwa, or religious decree, on his website forbidding homosexuality and declaring that gays and lesbians should be "punished, in fact, killed."

"The people involved should be killed in the worst, most severe way," the decree said.

The fatwa against gay men was removed from Sistani's website last year, but it was not revoked, said Ali Hili, an Iraqi gay-rights activist living in London who petitioned Sistani's office to remove it.

Hili compiles details of the killings of homosexuals, including photographs of victims, and posts them online. Included in his list of victims are:

• Anwar, 34, a taxi driver who ran a safe house for gays in the southern city of Najaf. Hili said Anwar was shot execution-style after he was stopped at a police checkpoint in March.

• Nouri, 29, a tailor in the southern city of Karbala who had received death threats for being gay and was beheaded in February, Hili said.

• Hazim, 21, of Baghdad also received threats, Hili said, and after police seized him at home in February, his body was found with several gunshots to the head.

Shaba said his cousin Alan, 26, who also was gay, was shot in the head one day when he went to answer the door while the two were having lunch. Although Alan might have been targeted because he was working as an interpreter with U.S. forces in the Green Zone, Shaba said he thought his cousin was killed because he was openly gay.

"There are other translators in our neighborhood, and nobody killed them," he said.

Difficult to discern

Given the pervasiveness of sectarian violence in Iraq, it's hard to tell whether such men are targeted for being gay, said filmmaker Parvez Sharma, a gay Muslim based in New York. Sharma just finished filming a documentary called "A Jihad for Love," set in Iraq and a dozen other Middle Eastern countries. It is to be released this fall.

Sharma's film concentrates on the prosecution of 52 gay men arrested in 2001 aboard a floating nightclub on the Nile; they became known as the "Cairo 52." No similar incident has been documented in Iraq, Sharma said.

"It's very difficult to tell whether there is a pogrom of any sort to kill gay men," he said, but the environment for gays in Iraq has clearly soured.

In the 1980s, Baghdad and Cairo were gay social centers, Sharma said. Many Iraqi gays settled into straight marriages and had families, but many continued to have homosexual relationships on the side.

Although President Saddam Hussein shut down many of Baghdad's gay bars in the 1990s and passed a law against sodomy in 2001, Iraqi gays and lesbians still socialized.

After the 2003 invasion, a man who gave his name as Ahmed still cruised Rubaie Street, a once popular gay thoroughfare in the eastern Baghdad neighborhood of Zayuna, but he was not openly gay, he said.

A year and a half ago, one of the men he'd met there showed up at his apartment wearing an Iraqi army uniform. He threatened to tell fellow soldiers that Ahmed was gay unless he paid a bribe of 160,000 dinars, about $135.

That was a probable death sentence, he said.

Ahmed paid, fled the country for Amman, Jordan, and considers himself among the lucky ones.

A 31-year-old gay pharmacist in the mostly Sunni west Baghdad neighborhood of Amiriya, said several of his friends were killed for being gay. He is often followed and stopped at checkpoints, he said. He spoke on condition of anonymity, for fear that he might be attacked.

He dreams of getting a visa to Sweden, Germany or the Netherlands, which have accepted the bulk of Iraqi refugees, and then applying for asylum because of political persecution.

The United States has recognized asylum claims by gays and lesbians since 1994, but the applications of only about 14% of lesbians and 16% of gay men have been approved, according to the San Francisco-based Asylum Documentation Program of the International Gay and Lesbian Human Rights Commission.

In Iraq, the wait for visas is long. Fake travel documents cost at least $15,000 on the black market, out of the pharmacist's price range.

"I'm just looking for salvation," he said. "Maybe next month you will call and my family will say, 'Oh, he is killed.' "

'A cultural issue'

A U.N. spokesman said it was difficult to determine how many gays have been targeted and whether the Iraqi government is trying to help them.

"They have said they are trying to improve human rights for all Iraqis, but they are not even willing to say there are gays in Iraq. This is a cultural issue," U.N. spokesman Said Arikat said.

Wijdan Mikaeil, Iraq's minister of human rights, said her office had not received reports of attacks on gays. She said that gays may be afraid to come forward but that the United Nations is over-emphasizing the problem.

"The Iraqi people have been attacked all across Iraq — not because they are gay, but because of the sectarian issue," she said.

The State Department has urged Iraq to prevent attacks on gays, spokeswoman Janelle Hironimus said, but the insurgency and sectarian violence have made it difficult for the government to protect human rights.

Gabor Rona, international legal director at New York-based Human Rights First, said the chaos shouldn't stop the U.S. government from pressuring Iraqi authorities to hold security forces accountable for abusing gays.

"We may not have any ability to do anything about suicide bombings and insurgent attacks, but we may have the ability to influence the Iraqi government if they have a hand in this," Rona said.

Some U.S. legislators are demanding that the State Department act.

Rep. Tammy Baldwin (D-Wis.) and Rep. Barney Frank (D-Mass.), both openly gay lawmakers, sent a letter to Secretary of State Condoleezza Rice in June demanding that she investigate attacks on Iraqi gays and pressure Maliki to respond.

Rep. Earl Blumenauer (D-Ore.) has sponsored legislation that would prioritize gay Iraqi refugees in an expanded Iraqi refugee program.

Ahmed, now living in Amman, said U.S. forces in Iraq should investigate reports of assaults on gays and ensure that those responsible are punished.

"At least if they catch one of them, they may be afraid to do it again."

molly.hennessy-fiske@latimes.com

International Herald Tribune Editorial - Stampeding Congress, again

2007-08-04T06:28:00.000-07:00

International Herald Tribune Editorial - Stampeding Congress, again
Copyright by THe International Herald Tribune
Published: August 3, 2007

Since the 9/11 attacks, the Bush administration has repeatedly demonstrated that it does not feel bound by the law or the Constitution when it comes to the war on terror. It cannot even be trusted to properly use the enhanced powers it was legally granted after the attacks.

Yet, once again, President George W. Bush has been trying to stampede Congress into a completely unnecessary expansion of his power to spy on Americans. And, hard as it is to believe, congressional Republicans seem bent on collaborating, while Democrats (who can still be cowed by the White House's with-us-or-against-us baiting) aren't doing enough to stop it.

The fight is over the 1978 Foreign Intelligence Surveillance Act, which requires the government to obtain a warrant before eavesdropping on electronic communications that involve someone in the United States. The test is whether there is probable cause to believe that the person being communicated with is an agent of a foreign power or a terrorist.

Bush decided after 9/11 that he was no longer going to obey that law. He authorized the National Security Agency to intercept international telephone calls and e-mail messages of Americans and other residents of the United States without a court order. He told the public nothing and Congress next to nothing about what he was doing, until The New York Times disclosed the spying in December 2005.

Ever since, the White House has tried to pressure Congress into legalizing Bush's rogue operation. Most recently, it seized on a secret court ruling that spotlighted a technical way in which the 1978 law has not kept pace with the Internet era.

The government may freely monitor communications when both parties are outside the United States, but must get a warrant aimed at a specific person for communications that originate or end in the United States. The Los Angeles Times reported Thursday that the court that issues such warrants recently ruled that the law also requires that the government seek such an individualized warrant for purely foreign communications that, nevertheless, move through American data networks.

Instead of asking Congress to address this anachronism, as it should, the White House sought to use it to destroy the 1978 spying law. It proposed giving the attorney general carte blanche to order eavesdropping on any international telephone calls or e-mail messages if he decided on his own that there was a "reasonable belief" that the target of the surveillance was outside the United States. The attorney general's decision would not be subject to court approval or any supervision.

Senator Jay Rockefeller, the chairman of the Senate Intelligence Committee, has offered a sensible alternative law, as did his fellow Democrat, Senator Russ Feingold. In either case, the attorney general would be able to get a broad warrant to intercept foreign communications routed through American networks for a limited period. Then, he would have to justify the spying in court. This fix would have an expiration date so Congress could then dispassionately consider what permanent changes might be needed to the intelligence surveillance act.

This is not, and has never been, a debate over whether the United States should conduct effective surveillance of terrorists and their supporters. It is over whether America is a nation ruled by law, or the whims of men in power. Bush faced that choice and made the wrong one. Congress must not follow him off the cliff.

Letter writers beware: Words may haunt you

2007-08-04T06:24:00.000-07:00

Letter writers beware: Words may haunt you
By Mary Schmich
Copyright © 2007, Chicago Tribune
August 5, 2007

In one of her poems, the Polish poet Wislawa Szymborska refers to dropping letters in the mail as "a whim of foolish youth."

You can bet that Hillary Clinton and a lot of the rest of us didn't understand the potential folly of that youthful whim.

Where are your old letters? Do you know? Can you really trust the friends to whom you poured out your callow soul with the exuberance of a bartender dispensing beer?

Do these questions make you at least a little nervous? If you've ever posted letters, they should.

Let this also be a warning to those of you too young to have ever licked a stamp, but who e-mail the contents of your heart without a second thought: Unlike you, your words may never die. But they may lurk out there in the universe to haunt you until you do.

This reminder came recently when some of Sen. Clinton's letters surfaced in the New York Times, thanks to a "friend" from her high school days in Park Ridge with whom she corresponded when they went off to college.

I put "friend" in quotes because in my cosmos, a friend who serves your letters to the world is about as friendly as a viper.

According to the story, John Peavoy, who now teaches at Scripps College in California, first shared Hillary's letters with the author Gail Sheehy. After that, Clinton, with whom he has had little contact since they were collegiate pen pals, wrote him and asked for copies.

"For all I know," the Times quotes Peavoy as saying, "she's mad at me for keeping the letters."

Keeping the letters is not likely to be the kind of thing that would make the letter-writer mad. That could be construed as a compliment.

The problem is sharing them with strangers. That's more like a taunt.

Luckily for Clinton, it doesn't seem she has any significant reason to be embarrassed by what she wrote to Peavoy while she was a Wellesley College student. Though it was the mid- to late 1960s—the first great wave of sex, drugs and rock 'n' roll—her letters are conspicuously short on that trio of pleasures.

She comes across as thoughtful, sometimes a little sad or frustrated, sometimes lofty, sometimes condescending, sometimes sweet or silly. She comes across as 19, a smart 19.

No crimes are on display, unless earnestness counts as a felony.

Even so, there's something unsavory and cautionary about the spectacle of personal letters offered up for public consumption. Most of us aren't front-page news, but all of us who have ever scribbled our souls out are vulnerable to such treachery.

Writing a personal letter, especially when you're young, tends to be like dancing in the mirror. You fling yourself into the enterprise with a mix of vanity and abandon.

Your letter may be directed with deep affection at some friend or soulmate, but it's a solo act aimed in large part at figuring out who you are and what you think. It's journal-writing with an audience.

"I still have your old letters, you know," a boyfriend of high school and college vintage announced a few years ago. His chortle made me shiver. Since then, I've learned there are others out there holding my old letters hostage.

Which raises the obvious question: What kind of weirdo hoards old letters? Why?

"It's part of my mental attic," explains one weirdo, a friend who keeps old letters in a file drawer, a way of keeping old friends and times at hand, even if he never looks in the file.

To be honest, I keep that stuff in my mental attic too, meaning on a high shelf in a guest bedroom.

Marge, Steve, Rusty, Tom, Dave, Bart and a few others had better think twice before they run for office.

Mary Schmich's column appears in the Chicago Tribune on Wednesdays, Fridays and Sundays and online at chicagotribune.com/schmich.

Financial Times Editorial Comment: China’s new debt to US consumers

2007-08-04T06:21:00.001-07:00

Financial Times Editorial Comment: China’s new debt to US consumers
Copyright The Financial Times Limited 2007
Published: August 3 2007 19:46 | Last updated: August 3 2007 19:46

Another week, another safety scandal involving Chinese exports: Mattel, the US toymaker, is recalling 1.5m toys because the paint contains too much lead. That follows a recall of Thomas the Tank Engine toys and problems with other contaminated Chinese-made products ranging from toothpaste to pet food.

Tempting though it may be for US politicians on the campaign trail to pounce on China – first they take our jobs, the putative script goes, then they kill our cats and poison our children – the recent revelations about unsafe Chinese exports should not be used as an excuse for protectionist rhetoric or the erection of new trade barriers.

It is not even proven that products from China are more dangerous than those from elsewhere; the fact that almost all toys recalled for safety reasons in the US are made in China simply reflects Chinese manufacturers’ overwhelming dominance of the US toy market.

To reject protectionism, however, is not to assert that the Chinese authorities are blameless. On the contrary, they have neglected their duty to regulate and enforce product safety in the Chinese domestic market, while assuming – correctly, on the whole – that foreign importers will ensure the quality of the goods distributed in developed countries because of the large financial penalties of failure.

While Chinese consumers have been subjected to appalling abuses, including the sale of lethal antibiotics and milk powder that helped kill a dozen infants, US shoppers have so far been spared the worst, for which they can thank lawyers eager to launch product liability suits and the vigilance of companies such as Mattel that value their brands.

Chinese consumers should use the publicity about the safety of the country’s exports as an opportunity to press for an overhaul of their entire health and safety regime, just as environmentalists exploit disasters to enforce green standards.

China, unfortunately for those same consumers, is not a democracy. Communist party leaders know they have a problem with product safety, but instead of promoting the transparent regulation, media freedom and independent judiciary required to tackle it they are resorting to old-fashioned and spectacularly ineffective methods: ordering their underlings to comply with the rules and punishing them when they disobey and get caught. So it is that Zheng Xiaoyu, the former head of the State Food and Drug Administration, was executed for taking bribes from drugs companies and approving fake medicines.

Bo Xilai, China’s commerce minister, insists that most Chinese exports are safe and says the safety issue should not be allowed to damage trade. If he wants to be taken seriously, China must accept that Chinese consumers – not just Americans – have the right to know what they are buying and deserve to be protected from dangerous products.

Global overview: Wild ride for markets continues

2007-08-04T06:19:00.001-07:00

Global overview: Wild ride for markets continues
By Dave Shellock
Copyright The Financial Times Limited 2007
Published: August 3 2007 17:53 | Last updated: August 3 2007 17:53

Financial markets went on another wild ride this week as investors remained unsettled by the fallout from the US subprime mortgage crisis and fears of a global “credit crunch”.

Adding to the mood of uncertainty was a spike in oil prices to a record high and the release of some disappointing US employment data yesterday.

Credit markets see-sawed as they responded to a steady stream of largely negative news, much of it concerned with the potential impact on private equity deals, one of the key pillars of recent support for stock markets.

Bernd Meyer, strategist at Deutsche Bank, estimated that the repricing of credit risks had halved the number of potential leveraged buyout candidates.

“While our credit strategists reckon that the repricing of credit risks might be largely behind us, at least in the short term, the de-leveraging of investors is far from being over,” Mr Meyer said.

The iTraxx Crossover index - a closely watched indicator of credit market sentiment - pushed above 500 basis points on Monday for the first time ever. However, by late yesterday the index was back below 400bp - roughly where it began the week.

Equity markets had an equally volatile time. By midday yesterday in New York, the Dow Jones Industrial Average was showing a gain over the week of 1.3 per cent, while the S&P 500 was 1.3 per cent.

In Europe, the FTSE Eurofirst 300 index suffered its worst one-day fall for more than year on Tuesday, but still finished the week with a loss of just 0.2 per cent.

It was a slightly grimmer picture in Asia, as the Nikkei 225 Average fell 1.8 per cent over the five-day period to end below the 17,000 mark. Most other markets in the region eased back, although Shanghai bucked the trend as it climbed to a record high.

Most analysts remained upbeat about the outlook for equities, suggesting that fundamentals remained intact.

“If anything, valuations have even improved by virtue of last week’s sell-off,” said Mike Lenhoff, chief strategist at Brewin Dolphin. “Earnings are still being upgraded, for this year and next, and there is still a lot of dividend growth.”

Mr Lenhoff conceded that private equity groups have been forced to rethink acquisitions in the publicly-quoted sector but added that public companies are continuing to buy back their shares.

“Does all that sound bearish or bullish? Our view is that all we’re seeing is another correction in a secular bull market.”

Despite the equity turmoil, there was relatively little evidence of safe-haven buying of US and European government bonds for much of the week.

However, prices rose sharply after yesterday’s soft US non-farm payrolls data.

The number of jobs created in the US last month rose by 92,000 in July, down from June’s less than the forecast gain of about 128,000, while the unemployment rate edged up from 4.5 per cent to 4.6 per cent.

Currency markets saw a tentative re-establishing of carry trades, where investors sell low-yielding currencies such as the yen to fund purchases of higher-yielding assets.

The Japanese currency had rallied strongly in the previous week as risk aversion was heightened by the turmoil in credit markets.

Sterling was little changed over the week after the Bank of England, as expected, left interest rates at its policy meeting this week. The European Central Bank also kept borrowing costs steady but dropped a strong hint that rates would rise next month - offering support to the euro.

Worries about emerging market currencies - previously relatively isolated from the turmoil elsewhere - began to emerge this week.

Analysts suggested that currencies of EM nations running large current account deficits, such as Iceland, South Africa and Turkey, could face problems.

Emerging market bonds also came under selling pressure, with the spread on JPMorgan’s EMBI+ index over US Treasuries briefly touching its highest level for over a year.

In commodities, US oil futures touched a record high in the wake of data showing a steep decline in US oil inventories. Prices subsequently eased back, leaving September West Texas Intermediate down more than 1 per cent over the week.

Court rules FBI raid on lawmaker illegal

2007-08-04T06:17:00.001-07:00

Court rules FBI raid on lawmaker illegal
By Stephanie Kirchgaessner in Washington
Copyright The Financial Times Limited 2007
Published: August 4 2007 00:22 | Last updated: August 4 2007 00:22

The FBI illegally seized documents from the Capitol Hill office of a Louisiana lawmaker last year, a US court ruled on Friday, in a decision that could affect the ability of federal prosecutors to investigate political corruption.

The court of appeals for the District of Columbia said the Department of Justice must return to William Jefferson some privileged documents that were taken during the raid.

It ruled that the search of Mr Jefferson’s computer hard drives was not illegal, however, because it did not reveal “legislative material” to the executive branch of government.

Mr Jefferson, a Democratic congressman who is alleged to have kept $90,000 in cash in his home freezer, was indicted on corruption charges in June, months after the search of his Washington office caused a bipartisan furore over whether the raid was constitutional.

The Department of Justice said on Friday it was pleased that the court did not find the search of the office unconstitutional but was “disappointed” that the ruling required members of Congress to be given “advance notice and the right to review materials before the execution of a search warrant”.

The department said its prosecution of Mr Jefferson would not be hurt by the decision because of “procedures” it put in place before its search warrant was executed.

Mr Jefferson’s attorney, Robert Trout, hailed the ruling as a victory.

“This is a reminder that just because the Department of Justice says it’s so, doesn’t make it so. We are confident that as this case moves forward, and when all of the facts are known, we will prevail again and clear Congressman Jefferson’s name,” Mr Trout said in a statement.

But Melanie Sloan, a former prosecutor and ethics watchdog, said the decision was “devastating” to the investigation and prosecution of congressional corruption because it could have a “profound effect” on other cases, including the fed- eral investigation into Ted Stevens, the longest-serving Republican in the Senate.

Mr Stevens’ Alaska home was searched by the FBI and tax officials on Monday as part of a wide-ranging corruption probe.

“Sen Ted Stevens now has every incentive to store in his congressional office any document concerning the renovations of his house, secure in the knowledge that it will be beyond the reach of federal investigators,” she said.

Signs of cooling in US labour market

2007-08-04T06:14:00.000-07:00

Signs of cooling in US labour market
By Eoin Callan in Washington
Copyright The Financial Times Limited 2007
Published: August 3 2007 14:47 | Last updated: August 3 2007 22:44

The US unemployment rate rose unexpectedly last month to 4.6 per cent, in a sign the labour market is cooling.

Employers added fewer staff to their payrolls than Wall Street economists were expecting, as hiring increased by 92,000 after a gain of 126,000 in June, according to the Department of Labor. The government also lowered its estimate of job creation in the previous two months by 8,000, bringing the annual growth in payrolls below 1.4 per cent for the first time since 2004.

The slowdown in hiring underlined investor fears that economic growth is vulnerable to a downturn in job creation, viewed as one of the main supports for consumer spending amid the worst housing downturn in 16 years.

The dollar’s value dropped against other leading currencies while stocks fell. US treasury bond prices rose as investors priced in a lower likelihood of an interest rate rise by the Federal Reserve in the coming months. Interest rate futures pointed to a 68 per cent chance the Fed would cut rates by the fall.

Peter Kretzmer, an economist at Bank of America, said Fed policymakers would welcome a slight increase in the unemployment rate from 4.5 to 4.6 per cent because it reduced inflation pressures.

The central bank is expected to keep interest rates on hold when it meets next week and again underline its concern that unwelcome price increases will return.

Workers’ average hourly earnings rose 6 cents, or 0.3 per cent, in line with forecasts, after a 0.4 per cent increase in each of the previous two months.

Mr Kretzmer said the easing in the labour market was gradual and would not alter the Fed’s forecast for “moderate” growth this year.

Economists pointed out that much of last month’s slowdown in job creation was due to a cutback in government hiring and added that private sector employment appeared resilient.

Bruce Kasman, chief economist at JPMorgan, said the risks to growth had risen in recent weeks after a sharp fall in equities, renewed housing market weakness and softer consumer spending.

He said the biggest risk - albeit an unlikely one - was that consumers would have difficulty sustaining spending habits if credit markets tightened, making affordable loans harder to find, and the job market worsened.

Administration officials said the economy would weather the housing slump and market turbulence.

Carlos Gutierrez, commerce secretary, said: “Other sectors can pick up the slack. We have managed through hurricanes, 9/11 and stock market downturns, so we’ll manage through this.”

But Charles Schumer, a Democratic senator, said: “The uptick in the unemployment rate, downward revisions to jobs created in May and June, combined with the ongoing subprime lending crisis, should spur the administration into more action and less cheerleading.”

Bear gloom drags markets down

2007-08-04T06:13:00.000-07:00

Bear gloom drags markets down
By David Wighton in New York and Paul J Davies in London
Copyright The Financial Times Limited 2007
Published: August 3 2007 18:47 | Last updated: August 4 2007 01:02

US stocks plunged in late trading on Friday as credit concerns mounted and the chief financial officer of Bear Stearns said fixed-income markets were “as bad as I’ve seen in 22 years”.

Markets were hit early on when Standard & Poor’s said there was an increased chance of it downgrading Bear’s credit rating. Bear responded with a conference call for investors, during which Jimmy Cayne, chief executive, said all financial institutions were facing “an extremely challenging environment”.

The call did nothing to calm nerves and the S&P 500 index closed 2.7 per cent off. The yield on the two-year US Treasury fell 15 basis points to 4.43 per cent, the lowest since January last year, as futures markets priced in a strong chance of two cuts in the Fed Funds rate this year.

David Wighton explains why Standard & Poor’s has given Bear Stearns’ debt rating a negative outlook
The cost of insuring against default on the debt of Wall Street banks rose sharply, with Bear Stearns trading at a level higher than the average for junk bonds.

S&P said Bear had a relatively high reliance on both the troubled mortgage and leveraged finance sectors and “profitability would be especially affected if there were an extended downturn in these markets”. It was also concerned on the impact on Bear’s reputation of the collapse of two mortgage hedge funds it managed.

This week saw increased signs of pain in the US mortgage market while it emerged on Friday that banks had for the moment abandoned attempts to sell to investors $1bn (£490m) of debt for the leveraged buy-out of Alliance Boots, the pharmacy chain.

Sam Molinaro, Bear’s chief financial officer, said it had been profitable in June and July and that it had a strong and highly liquid balance sheet. He also pointed out that Moody’s had recently reaffirmed its credit rating.

Credit ratings are particularly important for broker dealers such as Bear Stearns, which depend on the capital markets to fund their balance sheets.

The threat of downgrades are likely to increase speculation that Mr Cayne, who did not stay on the conference call to answer questions, might consider selling the company.

Bear shares fell more than 6 per cent while Lehman Brothers were off nearly 8 per cent.

International Herald Tribune Editorial - Resegregation now

2007-06-30T11:11:00.000-07:00

International Herald Tribune Editorial - Resegregation now
Copyright by The International Herald Tribune
Published: June 29, 2007

The Supreme Court ruled 53 years ago in Brown v. Board of Education that segregated education is inherently unequal, and it ordered America's schools to integrate.

On Thursday, the court switched sides and told two cities, Louisville and Seattle, that they cannot take modest steps to bring public school students of different races together. It was a sad day for the court and for the ideal of racial equality.

Since 1954, the Supreme Court has been the nation's driving force for integration. Its orders required segregated buses and public buildings, parks, and playgrounds to open up to all Americans. It wasn't easy, but the court never wavered. In many of the most important cases it spoke unanimously.

On Thursday, the court's radical new majority turned its back on that proud tradition in a 5-4 ruling written by Chief Justice John Roberts. It has been some time since the court did much to compel local governments to promote racial integration. But now it is moving in reverse, broadly ordering the public schools to become more segregated.

In an eloquent dissent, Justice Stephen Breyer explained just how sharp a break the decision is with history. The Supreme Court has often ordered schools to use race-conscious remedies, and it has unanimously held that deciding to make assignments based on race "to prepare students to live in a pluralistic society" is "within the broad discretionary powers of school authorities."

Roberts, who assured the Senate at his confirmation hearings that he respected precedent, and Brown in particular, eagerly set these precedents aside.

The nation is getting more diverse, but by many measures public schools are becoming more segregated. More than one in six black children now attend schools that are 99 percent to 100 percent minority. This resegregation is likely to get appreciably worse as a result of the court's ruling.

Subprime problems hit WaMu - Itasca office to close; 110 layoffs

2007-06-30T09:40:00.000-07:00

Subprime problems hit WaMu - Itasca office to close; 110 layoffs
By Becky Yerak
Copyright © 2007, Chicago Tribune
Published June 30, 2007

The Chicago job market continues to be haunted by problems in the nation's subprime mortgage industry, even as federal regulators fashion guidelines they hope will improve conditions in the sector.

Washington Mutual Inc. has disclosed that it is closing a subprime mortgage office at One Pierce Place in Itasca, leaving more than 100 employees out of work, according to a filing this week with the Illinois Department of Commerce and Economic Opportunity.

"As a result of the changing subprime market, we made the decision to close the facility," a WaMu spokesman confirmed Friday.

The state filing said 140 workers would be affected, but WaMu said the final number would be 110. Layoffs begin July 31, the document said.

WaMu's cost-cutting action follows numerous other Chicago-area layoffs at subprime lenders, which cater to borrowers with blemished credit or those with little credit history. Mortgage defaults have been rising, particularly among subprime borrowers.

In May, Irvine, Calif.-based New Century Financial Corp. said it laid off 133 workers at its Itasca office. And in April, nearly 900 other Chicago-area workers at four mortgage firms were told that they would lose their jobs.

Also Friday, watchdog agencies for banks, thrifts and credit unions finished guidelines that urge lenders to better scrutinize consumers' wherewithal to repay home loans.

The Federal Reserve, the Federal Deposit Insurance Corp., the National Credit Union Administration and the Treasury Department's Office of the Comptroller of the Currency and Office of Thrift Supervision took the action amid housing-market woes and pressure from lawmakers who believe there are shortcomings in the oversight of the mortgage industry.

The voluntary standards, which apply to federally regulated lenders, call for verification of consumers' incomes in most cases. Borrowers should have clear disclosures of their mortgage terms and have at least two months to refinance a loan, without penalty, that is about to adjust to a higher rate.

The Mortgage Bankers Association cautioned that the guidelines would tighten credit for borrowers. It urged Congress not to turn what would be voluntary standards into law. Although the guidelines wouldn't affect state-regulated companies, many state regulators are expected to follow suit.

But Sheila Bair, the FDIC's chairman, said in a statement that because the guidelines won't affect non-bank lenders, which have been the main originators of subprime loans, it is "essential for Congress or the Federal Reserve to establish comparable principles" for all lenders.

----------

byerak@tribune.com

Beware the gurgles as liquidity starts to drain

2007-06-30T09:35:00.000-07:00

Beware the gurgles as liquidity starts to drain
By Francesco Guerrera
Copyright The Financial Times Limited 2007
Published: June 30 2007 03:00 | Last updated: June 30 2007 03:00

To understand the recent setbacks in debt markets and takeover activity, imagine taking a bath in a luxury hotel.

As you slosh around in the warm water, nothing seems to matter other than that moment of relaxation. But things can change quickly. With one wrong move, you hit the plug and the hotel's super-efficient draining system leaves you shivering and wet in an empty marble tub.

Over the past fortnight or so, the plug that has kept the global financial system warm and liquid for the past few years has endured repeated knocks.

The question is whether "liquidity" - the flow of money that has lubricated capital markets and fuelled the recent takeover frenzy - is about to disappear down the plug hole.

This is not a trivial matter: an abrupt draining of liquidity would put an end to these boom times, hurting investors and companies. There certainly have been some worrying leaks from the global financial bathtub.

The first whiff of trouble came from the US a couple of weeks ago, when two hedge funds run by Bear Stearns hit the rocks. The news should not have been a surprise: the two funds had heavy exposure to troubled subprime mortgages - loans to people with poor credit records.

What spooked the market, though, was that the funds' losses were magnified by their liberal use of debt. The Bear funds' debacle reminded Wall Street of a simple truth that had been trampled in the thundering herd's stampede towards ever juicier returns: debt is a double-edged sword.

Leveraging companies and funds up to the hilt supercharges returns in a bull market but it also amplifies losses in times of trouble. Still, after initial dithering, Bear offered $3.2bn to bail out the less leveraged of the funds.

The move staved off the feared meltdown in parts of the credit market but did not ease investors' anxiety on leverage. This quickly spread. Concerns about leverage in a small part of the US mortgage market quickly became a global retreat from risk in credit markets. The contagion was particularly nasty in a sector that had been in rude, almost arrogant, health: the buy-out market.

For more than two years, private equity groups have been exploiting investors' low risk-aversion and feasting on cheap debt. Large firms such as Blackstone have ruled the roost, buying ever-larger companies and forcing banks to lend them vast amounts of money with no strings attached. Not anymore.

This week - for the first time in years - investors said "thanks, but no thanks" to risky bonds issued by buy-out groups to fund takeovers. Companies such as US Foodservice, a caterer, Dollar General, a US retailer, and Arcelor Finance, part of the Arcelor Mittal steel group, had to shelve their debt offerings.

Put simply: investors got fed up with taking on risk without being adequately paid for it. They took particular issue with bubble-like features such as the one allowing private equity-owned companies to stop paying interest on debt when cash flow was low.

In this case, however, it was the over-eager investment banks, not the buy-out funds, that were left carrying the can. But that will soon change. The latest rout should persuade even the most short-sighted of lenders to share the financing risk with private equity groups.

That, in turn, is likely to have a chilling effect on the buy-out bonanza. As for the fate of the rest of the market, keep an eye both on the global economy and investors from emerging markets. Healthy economic growth across the world will help companies and markets to weather the credit downturn. That is why stock markets were relatively unaffected by the recent turmoil.

And as long as investors from the Middle East, Russia and China keep pouring their petrodollars and foreign exchange reserves into the West, there should be a well-stocked source of liquidity. I would not, however, subscribe to the complacent optimism emanating from self-interested sources.

The mellifluous words that came from several heads of Wall Street banks this week for example, should be taken with a shaker of salt. The truth is that we are facing a mini-liquidity crunch. We should be able to weather it without too much pain but the plug at the bottom of the bathtub is wobbling. Be wary of any unexpected gurgling sounds.

John Authers: Just take it easy over the big sell-off season

2007-06-30T09:33:00.001-07:00

John Authers: Just take it easy over the big sell-off season
By John Authers
Copyright The Financial Times Limited 2007
Published: June 29 2007 16:04 | Last updated: June 29 2007 16:04

Timing the market is a mug’s game. The efficient markets hypothesis holds that it is impossible: markets always adjust to account for all known data.

In practice, of course, markets are not always efficient. But inefficiencies at the grand level of overall stock markets or asset classes are harder to spot than at the level of individual stocks. Market calls look like a bad gamble.

But they are a gamble that can make a lot of money. And several market-timing models signalled a risk of a sell-off earlier this month. Should they be taken seriously?

Several factors go into these models. First, the amount investors spent to protect themselves from equity market volatility, as measured by the Chicago Board Options Exchange’s Vix index, spiked to its highest level in months this week. That is a bad sign.

Then, credit spreads – the extra cost of borrowing for higher risk companies – have widened.

And trading in the Japanese yen suggests traders are growing nervous about the risky game of borrowing at low Japanese interest rates.

All suggest growing risk aversion. When sudden waves of risk aversion hit, markets are vulnerable.

A historical pattern might also come into play. Teun Draaisma, European equity strategist at Morgan Stanley, points out that stocks are less volatile in the first stage of a bull market, when returns are earned on the good value that stocks have come to represent. In the later stages of a bull market, returns are based on more optimistic multiples and hopes for economic growth, and things get much more volatile.

In US stocks, there were six separate “corrections” of 10 per cent or more in the three years leading up to the top of the internet boom in 2000. There has not been one single correction of this magnitude in the US since the current bull market started in late 2002 (although there was one correction this deep in Europe, which started in May last year).

It is logical to expect more sharp corrections as the bull market grows older.

Then there is seasonality. David Schwartz points out powerfully that it is always possible for patterns to recur over time by coincidence.

But the annoying old saw of the stock market that you should “sell in May and go away” turns out, quite remarkably, to have been a good strategy.

David Bowers of Absolute Strategy Research in London looked into the historical results from two seasonal patterns of investing. A strategy of being in stocks (the FTSE All-Share) from November to April each year since 1963, and in bonds from May to October, would have beaten the FTSE All-Share. Holding bonds from November to April and stocks from May to October would, on the other hand, have lost money in nominal terms.

Since 1997, the “Sell in May” strategy has gained 95 per cent, while the “Buy in May” strategy has lost 19 per cent. The All-Share is up 57 per cent. This is not due to a few one-off events. Over every three-year and five-year period since 1980, these results have held good. Selling in May always wins. This also holds true whether the money held out of the market is parked in bonds, or cash, or hidden under the mattress.

As for this year, the market in several countries peaked on June 1 – exactly when Draaisma of Morgan Stanley wrote what would be a highly-publicised note recommending that investors go tactically “neutral” on European stocks, to guard against a summer sell-off, and shift into cash (while staying underweight in bonds).

At the time of writing, all the major western indices were on course either to be flat or down for the month of June – apart from a few Asia-Pacific markets. Investors obviously started selling at the end of May.

There are a few good reasons why stocks should be seasonal. The oil price affects stocks, and it is justifiably seasonal. Traders, currently preoccupied by the state of oil inventories in the US, need to know the full impact of the summer driving season in the US and Europe, and they also need to know about the annual hurricane season.

Liquidity also helps to drive stock prices, as do deals. Both tend to go down during the summer months, when schools are on vacation and when fewer traders are at work.

With fewer deals to keep the market bubbling in the holiday season, summer drift is not surprising. The recent rise in bond yields, and the widening of credit spreads, make it harder to finance acquisitions and make a lull more likely.

Weather, too, can have an effect on trading activity. For example, the morning weather in Chicago can affect that day’s action in its futures markets.

But Bowers suggests not much weight should be put on this, as stocks in Australia also trade sideways from May to October – the Antipodean winter.

The efficient markets hypothesis says none of this need hold this year, because players in the market can see all these factors and position themselves accordingly. But the case for taking it easy over the summer is still tempting.

john.authers@ft.com

Core US inflation falls below 2%

2007-06-30T09:31:00.001-07:00

Core US inflation falls below 2%
By Eoin Callan in Washington
Copyright The Financial Times Limited 2007
Published: June 29 2007 17:55 | Last updated: June 29 2007 17:55

Core inflation fell below 2 per cent for the first time in three years after a modest increase in prices last month, according to new government figures.

A key index of consumer prices, excluding volatile food and energy, climbed only 0.1 per cent in May, which brought the rate for 12 months to 1.9 per cent. High petrol prices drove the headline rate up 0.5 per cent.

The slowdown in core inflation will be welcomed by the Federal Reserve, which on Thursday left interest rates unchanged and kept a resolute focus on risks of future inflation.

In its statement at its June policy meeting, which kept rates at 5.25 per cent, the Fed dropped its description of core inflation as “somewhat elevated” and acknowledged that “readings on core inflation have improved modestly in recent months”.

But it warned that “a sustained moderation in inflation pressures has yet to be convincingly demonstrated.”

Gary Bigg, economist at Bank of America, said of the Federal open market committee: “The FOMC should be quite pleased with recent inflation developments.”

Ethan Harris, chief economist at Lehman Brothers, said the economy was “evolving as the Fed expected” with inflation easing and growth projections also being reined in.

The report from the commerce department on Friday also showed consumer spending and income lower than expected in May.

Personal income increased 0.4 per cent. Consumption spending increased 0.5 per cent for the second consecutive month.

“The slender gain in income will restrain consumption spending,” said Gary Bigg, economist at Bank of America.

“Income and spending gains were weaker than expected, suggesting that spending for the quarter will be soft.”

Economists said higher fuel prices explained much of the spending increase.

Nigel Gault, US economist at Global Insight, said: “Although consumer spending rose by what looks like a robust 0.5 per cent in May, more than half of the increase in spending went into gasoline tanks as consumers were hit by higher gasoline prices.”

”Spending should improve in the second half of the year, with gasoline prices easing back, but not back to the runaway first-quarter pace, as the downturn in the housing market will weigh on consumers,” he said.

Experience can be a drawback

2007-06-30T09:20:00.000-07:00

Experience can be a drawback
By Christopher Caldwell
Copyright The Financial Times Limited 2007
Published: June 29 2007 19:20 | Last updated: June 29 2007 19:20

After a fundraising dinner in Chicago this week, Illinois senator and presidential hopeful Barack Obama made a verbal gaffe that sums up his predicament in defeating Hillary Clinton for the Democratic party’s nomination. “I’m sure the Clintons can raise more money than us,” he told the Chicago Sun-Times. “She was president – or he was president – for eight years.” Mr Obama is arguably the upper chamber’s best thinker and orator and certainly its best writer. He is simultaneously in closer touch with the party’s hardline base (he opposed the Iraq war from the outset) and more palatable to Republican and independent voters (polls show he fares better than Mrs Clinton does against all Republican challengers). He continues to be a formidable fundraiser and is expected to match Mrs Clinton when quarterly accounts are made public next week.

Yet Mrs Clinton has one great advantage among partisan Democrats that Mr Obama is finding it difficult to surmount: her “experience”. Voters and fundraisers consistently allude to it in interviews; Mrs Clinton strains to show it off. (“I have fought for more than 35 years to raise educational standards,” she said on Thursday night at Howard University.) It is working. In a Gallup poll released this week, Mrs Clinton has the loyalty of 35 per cent of Democratic voters, versus 20 for Mr Obama.

It is not obvious, however, what people mean by experience or why Mrs Clinton is deemed to have so much more of it. Both candidates are, relative to most of their rivals, neophytes. Mr Obama is in his first term as senator, Mrs Clinton in the opening months of her second. Before that, Mr Obama was editor of the Harvard Law Review, a community organiser, a lecturer in constitutional law at the University of Chicago, a state legislator and an unsuccessful candidate for Congress. Mrs Clinton, a lawyer, was made the custodian of various policy projects when her husband held power. Where is the advantage to Mrs Clinton? To say that her deeds were done on a national stage, while Mr Obama has been in the public eye only since 2004, is to measure their relative fame rather than their relative experience.

Both candidates have career experience that is arguably relevant to the presidency. Stacking them up against one another requires figuring out what kind of experience one gains by being married to a powerful executive and the nature of the non-constitutional position of US “first lady”. Was Mrs Clinton a combination of apprentice, adviser and inheritor, Georges Pompidou to her husband’s Charles de Gaulle? Or was she simply an observant and ambitious relative, George W. to her husband’s George H.W. Bush?

Mrs Clinton managed, at least for the first two years of her husband’s presidency, to seize real policymaking power. But Carl Bernstein, the most thorough (and by no means the least sympathetic) of her recent biographers, judges that she failed wherever she did. “With the notable exception of her husband’s libidinous carelessness, the most egregious errors, strategic and tactical, of the Bill Clinton presidency, particularly in its infancy, were traceable to Hillary,” Mr Bernstein writes, “. . . For the first time in American history, a president’s wife sent her husband’s presidency off the rails.” Mr Bernstein, who takes seriously the idea that the Clinton presidency was a “co-presidency”, at least for its first two years, blames Mrs Clinton for most of the missteps that resulted in the Republican congressional landslide of 1994. These include the politicisation of White House staff, an over-ambitious healthcare plan and a high-handedness towards key legislators.

The basic thing a politician seeks to do is turn himself from a public nobody into a public somebody. The big challenge is building a political organisation – a task that is part managerial, part financial and part intellectual, and that involves both long-term planning and an infinity of snap judgments, many of which are undertaken when one is still powerless, vulnerable and shut off from inside information. This is the essence of being a political executive and Mrs Clinton has had to do relatively little of it. Her political organisation – like that of President Bush, but unlike that of Ronald Reagan or Mr Clinton or Mr Obama – came largely pre-assembled. It is a close call, but here the advantage in experience goes to Mr Obama.

What is more, as a black politician, Mr Obama has a longer row to hoe than Mrs Clinton as a female one. This is only partly because the US has historically had more racism and less sexism than other western countries. The larger problem is that US blacks, who owe much of their advancement to political activism, seldom recognise themselves in the anti-statist rhetoric that has dominated US politics for a quarter-century. A black politician who wants to develop a national following while being hailed as “authentic” must square an ideological circle.

If Mr Obama’s experience reveals more competence, Mrs Clinton’s reveals more resilience. Experience is also about learning to react to crises and Mrs Clinton met the attempt to impeach her husband with a steely obstinacy. Whether steely obstinacy is necessarily a plus in an administration not victimised by overzealous prosecutors is another question. The country has lately had a bad experience with an obstinate president “finishing off” a war launched by a relative in years past. It is possible that Mrs Clinton’s ideology has hardened along the lines of 1990s conflicts that no longer exist.

That does not seem to worry Democrats. Voters may have reasons to believe that Mrs Clinton would make a better president than Mr Obama. But they are wrong if they think that experience is one of them.

The writer is a senior editor at The Weekly Standard

Bad week for Bush as allies melt away

2007-06-30T09:19:00.001-07:00

Bad week for Bush as allies melt away
By Andrew Ward in Washington
Copyright The Financial Times Limited 2007
Published: June 29 2007 20:16 | Last updated: June 29 2007 20:16

As President George W. Bush told the story of Cory Endlich, a 23-year-old from Ohio, who died in Iraq this month, his voice cracked and his chin quivered.

“Cory was an Ohio boy who wanted to join the army so badly that his dad let him start training his senior year of high school,” he told an audience in Rhode Island on Thursday.

There was no doubting the authenticity of Mr Bush’s anguish about Sgt Endlich’s death, but the show of emotion may also have reflected the strain of what has been one of the worst weeks of his presidency.

In recent days, Mr Bush has suffered a series of damaging setbacks that have exposed the waning influence of his increasingly unpopular and isolated administration.

As Mr Bush was speaking in Rhode Island, Congress was in the process of dealing a fatal blow to a bipartisan immigration reform bill that the president had spent much of the past several months promoting.

What made the defeat particularly damaging was the fact it was delivered not by Democrats but by Mr Bush’s own party.

Earlier in the week, Senator Richard Lugar, senior Republican on the Senate foreign relations committee, became the most senior member of his party to call for the start of US withdrawal from Iraq, giving voice to growing unrest among Republicans about the war.

Together, the collapse of the immigration bill and mounting rebellion over Iraq have highlighted Mr Bush’s diminishing authority over his own party as Republicans turn their attention towards next year’s elections.

Sensing weakness, Democrats chose this week to intensify a range of investigations into the Bush administration, including the issuing of subpoenas demanding documents relating to the National Security Agency’s controversial domestic surveillance programme.

The bad news continued on Friday when the Supreme Court agreed to review whether Guantánamo Bay detainees may go to federal court to challenge their indefinite confinement, raising fresh doubts about the legality of the administration’s treatment of prisoners captured in the “war on terror”.

Mr Bush had hoped an overhaul of US immigration laws would provide the lasting domestic legacy he has been seeking since his efforts to reform the Social Security system failed earlier in his second term.

With little prospect of agreement between the White House and Democratic-controlled Congress on other main issues, the defeat means Mr Bush’s legislative agenda is in effect dead 18 months before he leaves office. In a make-or-break procedural vote, only 12 of 48 Republican senators voted in favour of keeping the bill alive. The outcome was a humiliation for Mr Bush, who had made personal phone calls to numerous senators seeking their support, and dispatched senior cabinet and White House officials to Capitol Hill.

EU strikes deal with US on passenger data

2007-06-30T09:17:00.000-07:00

EU strikes deal with US on passenger data
By Andrew Bounds in Brussels
Copyright The Financial Times Limited 2007
Published: June 29 2007 19:57 | Last updated: June 29 2007 19:57

European countries endorsed a controversial deal to share information on airline passengers with the US in a move that should avert the threat of transatlantic travel chaos this summer.

European Union ambassadors meeting in Brussels reached a “basic political understanding” on the issue, according to Germany, which chaired the talks. Several countries said they could not commit before their parliaments had debated the issue but did not dispute the substance of the deal reached, diplomats said.

The accord, which replaces an interim agreement due to expire at the end of July, will increase from three to 15 years the time that US authorities can hold passenger data such as names, payment details and seat numbers. Under the deal, EU airlines must provide 19 pieces of information, down from 34, shortly before take-off.

Wolfgang Schäuble, German interior minister, Fran co Frattini, EU justice commissioner, and Michael Chertoff, US homeland security secretary, struck the agreement on Wednesday.

Mr Chertoff says that the deal is not legally binding but Brussels regards it as an international agreement that could be revoked if not complied with. “We can cut off the flow if we are not satisfied,” said one official. However, that would lead the US to ban airlines that refuse to supply the information.

Critics say the deal would allow the Department of Homeland Security as well as US customs access to the data and there are insufficient limitations on how it can share it with other law enforcement agencies, such as the CIA. The US is obliged to filter out sensitive data such as dietary requirements – a clue to religion – unless it is essential to preventing loss of life.

Police hunt London bomb plot terrorists

2007-06-30T09:16:00.001-07:00

Police hunt London bomb plot terrorists
By Stephen Fidler in London
Copyright The Financial Times Limited 2007
Published: June 29 2007 08:16 | Last updated: June 29 2007 20:54

Police were Friday night hunting terrorists after two car bombs capable of killing hundreds of people were found in London’s West End.

The vehicles which contained similar explosive materials were “clearly linked” and both were “potentially viable”, police said.

The first bomb, discovered in a green Mercedes outside the Tiger Tiger nightclub in Haymarket near Piccadilly Circus and defused by police, was set to go off less than 48 hours after Gordon Brown assumed office as prime minister.

The second car, a blue Mercedes, was found near Trafalgar Square and taken to a car pound near Hyde Park before being removed by police. Like the first car, it contained substantial quantities of fuel, gas canisters and nails, police said.

Terrorism experts who follow jihadi websites said there had been calls to mark Mr Brown’s coming into office with an attack, although government officials could not Friday night authenticate these reports.

CBS News also reported that, on a jihadi internet chatroom, someone calling himself Osama al-Hazeen had predicted “London shall be bombed”, hours before the attempted attack. It cited, among other supposed provocations, the recent knighthood given to the author, Salman Rushdie.

The second bomb was discovered amid a series of scares in the capital which led to several main roads being sealed off.

Police were seeking the driver of the four-door Mercedes left outside the Haymarket nightclub and were on Friday beginning to plough through CCTV footage of the area.

Terrorism experts said the relatively crude nature of the devices suggested, at least at first sight, that the culprits had not received sophisticated weapons training from al-Qaeda but instead may have been a self-starting group influenced by the group’s ideology.

However, previously convicted plotters had discussed targeting a nightclub with a bomb using gas canisters. The Crevice plotters, arrested in 2004 after buying 600kg of fertiliser and storing it in a lock-up garage, discussed bombing the Ministry of Sound, another London nightclub.

The security services said they had received no advance warning of such attacks on Friday and they were not among the 30 or so terrorist plots being monitored.

The website of MI5 said the national threat level remained at “severe”, the second-highest rating, meaning future terrorist attacks were highly likely. The level has remained unchanged since an alleged plot to blow up airliners across the Atlantic was uncovered last August.

Central London is one of the most intensively photographed and video-taped areas in the world, and every driver entering the centre of the city is photographed.

The new home secretary, Jacqui Smith, said she had chaired a session with the government’s “Cobra” committee, made up of ministers, police, emergency services and intelligence agencies, to discuss the attempted attacks. “We are currently facing the most serious and sustained threat to our security from international terrorism,” she said.

Police said the first alert was raised by an ambulance crew called to treat someone inside the nightclub at about 1am. The police were called and dismantled the device, which would have been detonated by a simple timer.

US Supreme Court in U-turn on Gitmo

2007-06-30T09:11:00.000-07:00

US Supreme Court in U-turn on Gitmo
By Demetri Sevastopulo and Patti Waldmeir in Washington
Copyright The Financial Times Limited 2007
Published: June 29 2007 18:38 | Last updated: June 29 2007 22:49

The Supreme Court delivered a blow to the White House on Friday by deciding to consider whether prisoners held at Guantánamo Bay could challenge their detention in US courts.

The move is the latest setback to Bush administration efforts to bring about 80 of the 375 detainees held at Guantánamo Bay before military commissions. It also comes as the administration faces increased pressure to close the Cuba-based prison.

In February, a federal court ruled that the Military Commissions Act passed by Congress last year stripped prisoners at Guantánamo of the right to challenge their detention in US courts.

The Supreme Court re fused to hear an appeal in April, but on Friday, in a highly unusual move, the court reversed position and announced it would hear an appeal later this year.

“[We] are confident in our legal ar guments and look forward to presenting them before the court,” said Erik Ablin, a Justice Department spokesman.

Five of the nine justices are required to reverse a decision in this way. When the court previously de clined to hear the case, two of the justices, John Paul Stevens and Anthony Kennedy, said they wanted the detainees to go before military tribunals first. Eu gene Fidell, a military law attorney at Feldesman, Tuc k er, Leifer, Fidell, said the court may have been swayed by a statement submitted by an army reservist involved in legal proceedings at Guantánamo, which raised serious concerns about the integrity of the process to decide whether prisoners could be held indefinitely as “enemy combatants”.

So far, the Pentagon has only brought two prisoners, who include the alleged former driver for Osama bin Laden, before the commissions. But that effort failed after military judges threw out charges. The judges said Congress only permitted the commissions to hear the cases of “unlawful enemy combatants”, and not “enemy combatants” as they have been classified. The administration asked the judges to reconsider.

The White House is coming under increased pressure to close Guantánamo, where most of the prisoners have been held without trial for more than five years. In a stinging rebuke, Colin Powell, former secretary of state, last month urged the administration to close the prison.

Robert Gates, US defence secretary, on Friday said the Pentagon was striving harder to work through some of the legal issues that surrounded closing the prison.

“The biggest challenge is finding a statutory basis for holding prisoners who should never be released and who may or may not be able to be put on trial,” said Mr Gates. “I think that this is the challenge that faces both the administration and the Congress.”

Separately, Jim Moran, a Virginia Democrat, and more than 140 members of the House of Representatives, sent a letter to the White House calling for the closure of Guantánamo.

“Guantánamo is anathema to our values as a nation, governed by the rule of law,” said Mr Moran. “Its continued operation undermines our efforts to combat terrorism, providing psychological ammunition for those bent on doing us harm.”

Banks told to show subprime leniency

2007-06-30T09:09:00.000-07:00

Banks told to show subprime leniency
By FT reporters
Copyright The Financial Times Limited 2007
Published: June 29 2007 20:45 | Last updated: June 29 2007 23:58

US regulators on Friday told banks to be more lenient with subprime mortgage borrowers in difficulties, potentially compounding uncertainties in the troubled mortgage securities market.

Such changes could affect the value of securities backed by subprime loans, which have already fallen sharply following a recent surge in defaults.

“Banks will have to work out how to reconcile the requirements of the regulators and the interests of holders of mortgage securities,” said one official.

American International Group has said implementing the guidelines will cost it at least $178m, while Washington Mutual has committed to cut rates on up to $2bn of subprime loans, some of which have been securitised.

The turmoil in the mortgage-backed securities market has brought two Bear Stearns hedge funds near to collapse, spreading wider concerns across credit markets. Richard Marin, Bear’s head of asset management, on Friday became the first high-profile casualty when he was replaced by Jeffrey Lane, a senior Lehman Brothers executive.

Several junk-rated deals coming to market were forced either to drop their most aggressively-structured elements or raise pricing.

The moves reflected investor jitters fuelled partly by subprime worries but also by rising global interest rates, expectations of heavy supply of debt for leveraged buy-outs and resistance to increasingly fashionable borrower-friendly debt structures.

Regulators have also expressed concern about rising levels of risk. A senior Bank of England official warned the vulnerability of the global financial system had increased as financial institutions have taken on greater risks in search of higher returns.

Meanwhile, investors are still struggling to evaluate the potential scale of subprime exposure in financial markets after the losses at Bear’s two funds and at others, including a listed fund run by London-based Cheyne Capital.

Much of the exposure to the subprime sector is through opaque and complex instruments known as collateralised debt obligations, which repackage tranches of debt of varying risk.

Morgan Stanley estimates the total volume of CDOs issued since the start of 2005 with some subprime mortgage exposure is about $550bn.

Reporting by Richard Beales, Joanna Chung, Saskia Scholtes and David Wighton

Orgullo en Accion Announces Latin Pride July 14, 2007

2007-06-29T10:43:00.000-07:00

Good Morning: Orgullo en Accion’s Supporters, Friends, and Colleagues.

Personally, I would like to send my appreciation for your participation in yesterday evening event at T’s.
This was a fundraiser designed for the second annual OEA Latino Pride.

Strength, energy, and community support will build the strong foundation required for our work. Two years ago, a small group of community members believed/envisioned in working together for social and political change, a new wave to promote education and provide leadership development (Latino/o LGBTQQ Summit), and increases Latino/a LGBTQQ awareness within our communities thru the multiple phrases and struggles: Orgullo en Accion gave birth.

Orgullo en Accion through it movement have create and build strong collaborations/relationships with numerous sisters/brothers organizations, community members, and communities, in which we are deeply honored.

As board chair, I have earned the privilege to be a presence in a group with wonderful diversity, an uncontrollable force, dedication, and faith in the beautiful future head of us: it will be a fruitful journey.

Thank you! All in advance for the support in 2007.. Orgullo en Accion Latino/a LGBTQQ Pride!
See you all there!!! Spread the Word!!!

Date: July 14, 2007
Time: 12 pm- 6pm
Location: Humboldt Park
(Corner Division and Sacramento)

Nilsa Irizarry
Orgullo en Accion
Board Chair

Ethnic biases stronger than ever

2007-06-29T07:42:00.001-07:00

Ethnic biases stronger than ever
BY ANDREW GREELEY agreel@aol.com
Copyright by The Chicago Sun-Times
June 29, 2007

As the 19th century turned into the 20th, Americans began to worry about the stability of their society and its culture. Strange languages were spoken on the streets, strange-looking people in strange clothes were shopping in our stores. Strange smells percolated in certain neighborhoods. Strange customs were appearing on strange holidays. These strangers were pouring into our country. They threatened our democracy, our way of life, our culture, our religious beliefs, our economy, our blood stock. Why didn't they stay in their own countries?

The answer is they were caught in a demographic transition -- the birth rate had increased and the death rate had fallen. A population explosion was driving people out of eastern and southern Europe.

In the decade before the beginning of the Great War, the government established a commission, presided over by Sen. William P. Dillingham of Vermont, to recommend restrictions of immigration from Europe. Many of the immigrants were of inferior races, as 19th century ''scientific'' racialism defined inferior. It was evident to explorers that Asian and African races were inferior to the ''white'' races. However, all one had to do was to observe eastern and southern Europeans to realize that they were inferior too. Indeed, the most successful of the races were the white Anglo-Saxon Protestants. Surely they represented, along perhaps with the Germans, the greatest progress in human civilization.

Therefore, the Dillingham Commission informed the country that it was patent that Italians were an innately criminal race, that the Poles had very limited intelligence, that Jews were incapable of honest business dealings and that the Irish were shiftless, superstitious and incapable of ambition. Such individuals could never become good Americans. On the basis of ''science'' like this, the commission recommended draconian limitations on immigration. The country sighed with relief.

These ''racial'' stereotypes persist -- not as vehement as they once were, but still part of the national unconscious. ''The Godfather'' and ''The Sopranos'' fit perfectly. So does the film ''The Break-up,'' in which Vince Vaughn plays an insensitive oaf. He is subtly labeled "Pole" by the huge Polish flag, complete with the Polish eagle, on the wall of his office. The lazy, alcoholic Irish laugh all the way to their hedge-fund manager.

A Mexican-American high school sophomore sent me an e-mail asking why other Americans hate them so much and tell so many lies about them. My answer is that Dillingham is alive and well. They don't want more people with somewhat darker skin who can never become good Americans.

Harvard Professor Samuel Huntington has argued that Mexicans do not want to acculturate into our Protestant political and social system. Don't tell me, kid, that you can refute all the "facts" they propound to establish your inferiority (you're second generation, but you have no right to the educated prose of your e-mail). The bigots (less than a third of the country) who hate you know in the depths of their souls that you and your kind are an inferior people who are trying to take over their country and ruin it. We don't need no more Mexican flags at soccer matches and certainly no more statues of Guadalupe parading down our streets.

More seriously, young woman, you're very smart, the kind of young person this country needs. I pray to God that you can avoid the stormtroopers who might throw you out of the country. Given half a chance, you will become a successful American. Maybe someday you can laugh at them all the way to your hedge-fund broker.

Boston Globe Editorial - Why Guantánamo is unjust

2007-06-29T07:38:00.000-07:00

Boston Globe Editorial - Why Guantánamo is unjust
Copyright by The Boston Globe
Published: June 28, 2007

For most of the 400 prisoners at Guantánamo Bay, Cuba, the only chance to challenge their confinement as enemy combatants comes at their Combatant Status Review Tribunals. No one in the Bush administration ever claimed these proceedings were full-blown trials in which the prisoners would have the benefit of an attorney. But it was not until last week that a military insider revealed just what a travesty of justice the tribunals actually are.

The disclosures of Lieutenant Colonel Stephen E. Abraham of the U.S. Army Reserve are more reason to close Guantánamo, move the prisoners to mainland U.S. prisons, and try those suspected of war crimes in federal courts or courts martial. Under pressure from Defense Secretary Robert Gates, the administration is at least moving closer to shuttering the detention center.

The attorneys who have worked with Guantánamo prisoners but have not been allowed to represent them in the tribunals have long said the hearings were kangaroo courts. The tribunals are important because they offered a chance for prisoners to claim they were detained by mistake in Afghanistan or Pakistan, where U.S. officials paid as much as $5,000 in bounties for individuals taken into custody.

In an affidavit in a federal appeals case, Abraham charged that evidence against prisoners was often generalized and did not allege specific acts. He also charged military commanders with putting pressure on the officers serving on the tribunals.

Despite the Defense Department's effort to answer Abraham's criticism by stating that he had "limited experience" with the tribunals and that they were "fair, rigorous, and robust," Abraham had a sound basis for his observations. He was both a member of a tribunal and served as a liaison between the office conducting the tribunals and intelligence agencies with access to information about the prisoners.

In that capacity, he reviewed intelligence data to see if there was any information favorable to the prisoners. He said that when he asked the intelligence agencies to state in writing that there was no undisclosed evidence that would benefit the prisoners, "the requests were summarily denied."

Gates has said any trials of suspects should take place elsewhere, because "no matter how transparent, how open the trials, if they took place in Guantánamo. . . they would lack credibility." The Combatant Status Review Tribunals lack transparency, openness, and fairness.

International Herald Tribune Editorial - Housing and hedge funds

2007-06-29T07:36:00.000-07:00

International Herald Tribune Editorial - Housing and hedge funds
Copyright by The International Herald Tribune
Published: June 28, 2007

It should not be permitted for lenders, banks and hedge funds to risk everyone's economic well-being in their attempts to enrich the few.

The United States needs vastly better regulation than it now has. It must embrace global coordination of hedge fund regulation, just as banking regulation is increasingly global. Mortgage lenders must be restricted to recommending loans that are reasonably within the borrowers' ability to repay over time. Hedge funds should be regulated if they accept pension money, because doing so exposes ordinary people to outsized investment risks. Regulation should also cover hedge funds with large sums of borrowed money.

In this context, there may be a silver lining in the recent hedge fund debacle at Bear Stearns. Until now, the deepest pain of the housing slump has been felt by hard-pressed borrowers, generally low-income homeowners stuck with unsuitable and even predatory subprime loans - adjustable-rate mortgages made to people with weak credit.

As monthly payments have increased, the loans have become unaffordable, while falling housing prices and tougher credit terms have made them harder to refinance. Defaults and foreclosures have multiplied, but Congress has provided scant relief.

Now the pain is being felt by Wall Street. The two big Bear Stearns hedge funds that neared collapse last week were full of tricky investments tied to subprime mortgages.

To try to ensure that hundreds of billions of dollars worth of similar investments don't also plummet, endangering the financial system, Congress may finally have to do more to help lower-end borrowers. That, in turn, would prop up the investments based on their mortgages.

We're all for helping distressed borrowers. And we accept government's role, if necessary, to avert a financial collapse. But in the end, intervention on behalf of Wall Street would be an outrage, because Wall Street - abetted by lax federal regulation - is largely to blame for this fiasco. Wall Street firms encouraged the issuance of risky loans to troubled borrowers and then reaped a windfall by packaging them as investments for hedge fund clients.

Yet, the possibility of economywide problems from further Bear Stearns-like debacles is real. The Bear Stearns funds, like many others, borrowed big to invest in subprime loans. Investing with borrowed money juices returns in hot markets and magnifies losses in down markets, making losers out of lenders as well as equity investors.

One of the Bear Stearns funds borrowed some $6 billion, from Merrill Lynch, Goldman Sachs, Bank of America and other powerhouses. For the other fund, Bear Stearns reportedly put up $3.2 billion to help liquidate holdings. That's 32 cents on the dollar for assets once valued at $10 billion.

In the past two years, Wall Street firms have issued investments similar to the Bear Stearns holdings, worth about $500 billion on paper. If those were to tank, the damage could be felt broadly.

In the coming year, interest rates on some $850 billion in mortgages are scheduled for their first increase. Over half of that is in subprime loans. That is the dangerous financial world we live in. It needs strong regulations.

U.S. says Blair's Mideast role will be limited

2007-06-29T07:34:00.000-07:00

U.S. says Blair's Mideast role will be limited
By Helene Cooper
Copyright by The International Herald Tribune
Published: June 28, 2007

WASHINGTON: In his new role as envoy to the Middle East, Tony Blair will be charged with shoring up Palestinian institutions, but not with trying to nail down a peace deal between Israelis and Palestinians, a job Secretary of State Condoleezza Rice will handle herself, according to Bush administration officials.

Rice has said several times that she intends to spend her remaining months in office trying to push peace talks forward.

Some Middle East analysts said Wednesday that such a narrow mandate would hamper the chances of Blair, who resigned as British prime minister Wednesday, succeeding. Indeed, the lack of a link between final status talks and the building of Palestinian institutions is the crux of why previous attempts have been unsuccessful, those analysts say.

"Unless he has the authority to deal with the Israelis on the issue of movement and lifting of barriers, he's not going to get very far," said Aaron David Miller, a scholar at the Woodrow Wilson Center who was a senior adviser for Arab-Israeli relations at the State Department under the last three U.S. presidents.

"If this is a variation of the Jim Wolfensohn portfolio, where you have a very smart guy who is thrown at the economics of the Palestinian issue, but without the authority to help change the situation on the ground, then this isn't going to work," Miller said.

He was referring to the last envoy to represent the so-called quartet, James Wolfensohn, the former World Bank president, who left the post last year, expressing frustration with the lack of progress. The quartet consists of the United States, the European Union, the United Nations and Russia.

In their official statements, Bush administration officials have said that Rice and Prime Minister Ehud Olmert of Israel believe strongly that the United States is the only country Israel trusts as a broker of a Middle East peace pact.

"Mr. Blair, who is stepping down from office this week, has long demonstrated his commitment on these issues," the State Department spokesman, Sean McCormack, said in announcing the appointment.

But, he added, "Secretary Rice and President Bush are going to focus on the political negotiations, as they have, and Mr. Blair is going to focus his considerable talents and his efforts on building those Palestinian institutions."

Bush administration officials defined Blair's mandate as one in which he would mobilize international assistance to the Palestinian president, Mahmoud Abbas, identify and secure financing for Palestinian institutions and governing tasks and work out plans to promote Palestinian economic development.

In the steps outlined by McCormack, Rice would be the one to try to work with Olmert and Abbas on a separate track that addresses the "final status" issues that have bedeviled peace negotiators since 1979: Jerusalem's future, a Palestinian state's borders and what to do about Palestinian refugees who fled, or were forced to leave, homes in Israel.

In the Arab world, many reacted to Blair's appointment with a mixture of bemusement and cynicism.

"Blair is hated so much here - he took the Bush line all the way, and he was not worthy of Britain's past diplomacy," said Fahd Kheitan, a columnist with the Jordanian daily Al Arab al Youm. "Most people will ultimately view him as a prisoner of America's will."

Many Arabs see Blair as the man who lent the greatest legitimacy to the Bush administration's push for war with Iraq in 2003, a conflict that is seen as the basis of the region's current instability.

Others say they will never forget his unwillingness to insist on an end to Israel's bombardment of Lebanon last summer as Israeli forces tried to crush Hezbollah, the Shiite militia, in southern Lebanon. And still others accuse him of having come out on the side of the Israelis despite calling for the peace talks to be restarted.

Writing in a syndicated column, Rami Khouri, editor at large at The Daily Star in Beirut, said, "Appointing Tony Blair as special envoy for Arab-Israeli peace is something like appointing the Emperor Nero to be the chief fireman of Rome."

A senior Bush administration official maintained that Blair had not pressed U.S. officials to allow him to take on the final status issues.

With Gaza now in the hands of Hamas and the West Bank in the hands of Fatah, Blair will also have to try to strengthen a prospective Palestinian state that, at this point, consists of two sets of peoples who are separated both physically and politically.

Reflecting those differences, Abbas, the Palestinian president, welcomed the Blair appointment while the Hamas leadership in Gaza rejected it, saying Blair had always sided with Israel and the United States over the Palestinians.

Hassan M. Fattah contributed reporting from Amman.

U.S. strings rankle some in AIDS fight - Funding is tied to abstinence message

2007-06-29T07:32:00.001-07:00

U.S. strings rankle some in AIDS fight - Funding is tied to abstinence message
By Mark Silva
Copyright © 2007, Chicago Tribune
Published June 29, 2007

LUSAKA, Zambia -- On a bright yellow wall facing the red clay courtyard of Regiment Basic School, rules of the school are painted in bold letters. Among the strictures: Eat healthy foods, drink boiled or chlorinated water, wash hands often and say no to sex and drugs, "because AIDS is real."

In Africa, where the United States is spending billions of dollars in an unprecedented global war against AIDS, the Republican-run Congress that first authorized this money also set a requirement: One-third of the money spent on prevention of the disease must go toward promotion of sexual abstinence.

While the U.S. is widely hailed for spending more than any other nation on a commitment already costing $15 billion -- and with President Bush seeking a doubling of that to $30 billion over the next five years -- Americans also are criticized for attaching strings that some relief advocates insist render the aid worthless.

Some agencies reject funding

Some of the many non-governmental relief agencies offering aid around the world have refused to accept U.S. funding with promotion of abstinence required , and some have sued the U.S. Agency for International Development.

"We have people living with HIV-positive partners," said Paul Kasonkomona, an activist in Lusaka who has had HIV since 2001 and whose wife has tested positive. "We believe that staying abstinent is not healthy. We feel it is not right -- the imposition of another government because it has power and it is telling us what to do."

Administrators of the U.S. aid insist that abstinence is only a small part of a comprehensive program -- representing about 7 percent of the money spent so far on the fight against AIDS in 15 nations, mostly in Africa. They say more than 1 billion condoms have been distributed as part of the program.

In Zambia and other stricken corners of Africa, where schoolchildren are tutored in the basics of abstinence with the help of U.S. funding, the program is known as ABC -- "Abstinence, Be Faithful, Condoms."

It is pictured in a cartoon poster on the classroom wall of teacher Emelde Chewe. It shows three men up to their waist in water, with three small lifeboats strung together by rope: "Life saving boats in an AIDS flood." The boats are labeled: "Abstinence, Be faithful, Condom."

"The ABC program is part of the Zambian national strategy," said Mark Dybul, U.S. Global AIDS coordinator. "The ABC approach was actually developed in Africa by Africans."

For the U.S., he said, it is part of a wider approach under the President's Emergency Plan for AIDS Relief. "You've got to get to these kids to begin with and teach them messages when they're 10 years old."

Since Congress started paying for a program that Bush sought in his 2003 State of the Union address, it has required that one-third of the AIDS prevention money go toward abstinence. Prevention accounts for nearly a quarter of the overall money spent on a program that includes testing for HIV and treatment of AIDS patients using antiretroviral drugs.

'We must save lives'

Yet relief advocates say the restraint on spending has hindered programs that could use more money for treatment. With Democrats in control of Congress, Rep. Nita Lowey of New York has won House approval of an amendment on a bill containing the coming year's AIDS funding that would allow the president to waive the one-third requirement.

"We must save lives," said Lowey, whose waiver is headed to the Senate this summer.

As First Lady Laura Bush completes a four-nation tour of Africa this week to showcase the U.S. campaign against AIDS and malaria on a continent where 1 million children die of malaria each year and where an estimated 30 million people are HIV-infected, she has touted the comprehensive approach to fighting AIDS and staunchly defends abstinence as a strategy.

Bush also has touted church-affiliated programs involved in counseling and treatment of AIDS patients, such as a World Vision-supported and U.S. government-funded program outside Lusaka that trains caregivers for patients.

"One of the greatest sources of hope is the compassion of people of faith," she said Thursday. "In the United States and around the world, I've seen how houses of worship inspire volunteers ... and they are putting their faith into practice across the continent of Africa. ... Their compassion is right on display here in Zambia."

At Chreso Ministries, which treats more than 4,000 people with medicine supplied by the U.S., the first lady met one woman whose family of 18 includes four who are HIV-positive and a man who said medication has given him a "second chance" in life.

First Lady Maureen Mwanawasa of Zambia, who toured the Lusaka area with Bush on Thursday, insists the U.S. spending requirement is not a hindrance in her country, where 17 percent of the people ages 15 to 49 have HIV. .

"What we are saying, the children should not get into sexual activities until they are mature enough to understand the consequences," Mwanawasa said.

"This money regarding abstinence is being spent properly, and it must be encouraged," the Zambian president's wife said. "There are several ways in which we can reach young people. ... One of the effective ways is abstinence. ... It brings back dignity and self-responsibility to young people, because they know their bodies are not supposed to be abused and they should learn to say no."

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mdsilva@tribune.com

House bid to cut off Cheney funds fails - Emanuel led effort in flap over secrecy

2007-06-29T07:30:00.000-07:00

House bid to cut off Cheney funds fails - Emanuel led effort in flap over secrecy
Copyright © 2007, Chicago Tribune and The Associated Press
Published June 29, 2007

WASHINGTON -- Vice President Dick Cheney won't lose his home, his office and his entertainment expense account after all.

The House on Thursday rejected an attempt to eliminate the vice president's executive office budget, a move that Democrats tied to Cheney's assertion that his office did not need to comply with national security disclosure rules required of other executive branch agencies.

Republicans denounced the proposal as political theater.

The vote, rejecting an amendment to a 2008 spending bill for the Treasury Department and executive branch agencies, was 217-209.

"We are pleased to see a bipartisan majority reject this political stunt," said Cheney spokeswoman Megan McGinn.

Rep. Rahm Emanuel (D-Ill.), the author of the amendment, said it was the logical outgrowth of Cheney's claim that his office was outside the scope of rules imposed on other executive offices.

"Perhaps the vice president thought he occupied an undisclosed fourth branch of government," Emanuel said.

The proposal would have withheld about $4.8 million in the budget for the vice president's official residence, his office and for other expenses including the hiring of passenger vehicles and entertainment expenses. He still would have received a budget for his role as president of the Senate.

The latest dispute between the Democratic Congress demanding information from the White House and a vice president with a penchant for secrecy came when Cheney said his office was exempt from sections of a presidential order that executive branch offices provide data on how much material they classify and declassify.

Cheney's office, with backing from the White House, argued that the offices of the president and vice president were exempt from the order because they are not executive "agencies."