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Wednesday, July 16, 2008

Free Internet Press Newsletter - Wednesday July 16 2008 - (813)

Wednesday July 16 2008 edition
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Congressional Opposition, From Both Parties, Over Bailout Plan
2008-07-16 03:30:18
The Bush administration’s plan to rescue the nation’s two largest mortgage finance companies ran into sharp criticism in Congress on Tuesday as some lawmakers questioned the open-ended request for money that could be used to help the companies.

The criticism prompted House leaders to push back their timetable for approving emergency housing legislation, saying final action would take at least until early next week. A growing number of Republicans had voiced skepticism and, in some cases, angry opposition, to the administration’s proposal to help the two companies, Fannie Mae and Freddie Mac. 

It was unclear whether the criticism was hand-wringing before Congress ultimately adopted the rescue package or whether it meant a delay or that major changes to the proposal were in the works.

The Republican opposition threatened to incite an ugly intramural fight with the White House. In a high-stakes election year, the resistance reflected the deep fear among some lawmakers that the plan could set off a large taxpayer bailout, touching off a wave of voter anger in November.

For some lawmakers facing tough re-election contests, opposing the rescue plan is a way to reaffirm their identity as budget hawks while publicly breaking with a deeply unpopular lame-duck administration.

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Israel Exchanges Lebanese Murderer For Bodies Of 2 Captured Soldiers
2008-07-16 03:29:32

Israel's cabinet Tuesday gave final approval for a prisoner swap Wednesday in which it will give up a notorious Lebanese militant in return for two Israeli soldiers who are presumed dead.

The capture of the soldiers, Eldad Regev, 27, and Ehud Goldwasser, 32, two years ago sparked a month-long war in Lebanon that claimed nearly 1,200 lives. Although at first Israel hoped the reservists survived the ambush, it now believes both are dead. Their remains will be returned to Israel at 9 a.m. through the Rosh Hanikra crossing at the border in northern Israel.

In return, Israel was due last night to pardon a Lebanese prisoner, Samir Kuntar, who has spent nearly three decades in Israeli jails for murder and attempted murder. In 1979, at the age of 16, he was one of four militants who sailed from Lebanon to the coast at Nahariya on a rubber dinghy and then attacked an apartment block. They broke into a flat and dragged out a man, Danny Haran, and his four-year-old daughter Einat. Kuntar, according to witnesses, shot and killed Haran and then beat his daughter to death. Haran's wife, Smadar, hid in their bedroom with their second daughter, Yael, who was two, but as she tried to silence the child's cries she accidentally smothered her to death.

Kuntar is one of five Lebanese prisoners who will be handed back Wednesday. In addition, Israel will deliver the remains of 199 Lebanese and Palestinian fighters who have been killed in recent years. The agreement was negotiated through a German mediator.

Shimon Peres, the Israeli president, was to sign the pardon. "It's not a happy choice," Peres said before the cabinet vote. "On one hand, we have the most terrible murderer. On the other hand, we have our commitment to our boys who were sent to fight for their country. It is our moral duty and our heartfelt wish to see them come back."

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Poll: Obama Holds 8-Point Lead Over McCain
2008-07-15 18:39:05

Democrat Barack Obama holds his biggest advantage of the campaign as the candidate best prepared to fix the nation's ailing economy, but lingering concerns about his readiness to handle international crises are keeping the race close, according to a new Washington Post-ABC News poll. 

Overall Obama holds an 8-point advantage among registered voters across the nation, lifted by a big advantage among women voters, and he has also regained an edge among political independents, but it is Obama's lead on the economy that has become a particularly steep challenge for McCain.

Economic concerns continue to eclipse other issues, with half the country saying the country's economy is "extremely important" to their vote in the presidential contest. Gasoline and energy prices, which voters rarely mentioned at the start of the year, come in just behind. The Iraq war, which was again the subject of direct engagement between Obama and McCain today, ranks third. A cluster of domestic issues, including education, health care and Social Security, ranked behind the war, as did the issue of terrorism.

Obama continues to hold an edge over McCain on many areas of domestic policy.

The presidential campaign is playing out against the backdrop of a leadership crisis in Washington, with Americans remaining in a generally sour mood about their representatives in the nation's capital. In the new survey, President Bush's overall approval rating hit another record low in Post-ABC polling: Just 28 percent approve of the way he is handling his job; 69 percent disapprove, including 56 percent who "strongly" disapprove.

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Stocks Are Volatile As Oil Prices Fall
2008-07-15 18:38:42

Wall Street was in an uproar on Tuesday as stocks churned, oil plummeted, and policy makers issued a darker outlook on the economy.

The Dow Jones industrials, down 200 points after the opening bell, spent the day slipping between positive and negative territory. A late afternoon slide sent the blue-chip barometer to a 92.65 point deficit at the close. The broader Standard & Poor’s 500-stock index followed a similar trajectory and ended down about 1.1 percent. The Nasdaq was essentially flat, closing up 2.84 points.

The dizzying day came alongside a big batch of economic developments, including pessimistic testimony from Ben S. Bernanke, the Federal Reservechairman, who warned that “significant” economic risks remained and that inflation would accelerate.

Meanwhile, the dollar fell to a new low against the euro, General Motors said it would slash jobs and suspend its dividend, and a report showed that consumer spending slowed in June more than economists had anticipated.

The bulk of the news seemed bleak, and stocks fell sharply in morning trading but, shortly after 10 a.m., as Bernanke was speaking to Congress, investors were forced to do a double-take: oil prices, previously trading at record highs, had suddenly plunged by $10 a barrel.

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Alleged Al-Qaeda Driver Testifies On Interrogation
2008-07-15 18:38:02
Salim Ahmed Hamdan, the alleged al-Qaeda driver who faces an historic military trial next week, testified Tuesday that a female interrogator elicited information from him using sexually suggestive behavior that was offensive to him.

Hamdan, a former driver for Osama bin Laden, told a military court conducting a pretrial hearing that during questioning in 2002 a woman interrogator "came close to me, she came very close, with her whole body towards me. I couldn't do anything. I was afraid of the soldiers.''

"Did she touch your thigh?," asked Hamdan's lawyer, Charles Swift.

"Yes...I said to her 'what do you want?'' said Hamdan. "She said 'I want you to answer all of my questions.'''

"Did you answer all of her questions after that?'' Swift asked. Hamdan said he did.

Hamdan's lawyers are seeking to convince a judge to throw out incriminating statements Hamdan allegedly gave to interrogators at the military prison here, arguing that they were obtained through coercive interrogation tactics. His trial, scheduled for Monday, would be the first military commission conducted by the United States in more than half a century.

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Scramble Led To Bush Rescue Plan On Mortgages
2008-07-15 03:58:23
The Bush administration hastily arranged the dramatic Sunday evening rescue of Fannie Mae and Freddie Mac after Wall Street executives and foreign central bankers told Washington that any further erosion of confidence could have a cascading effect around the world, officials said on Monday.

Treasury Secretary Henry M. Paulson, Jr., and other top officials were warned, after Fannie and Freddie lost nearly half their stock market value on Friday morning, that any more turmoil threatened to reduce the value of trillions of dollars of the companies’ debt and other obligations, which are held by thousands of domestic and foreign banks, pension funds, mutual funds and other investors, said government officials.

The warnings of a potential systemic failure led to the resulting rescue package, and one of the most striking - though unspoken - regulatory shifts in modern times. For decades, Treasury secretaries and Federal Reserve chairmen have insisted that the government did not stand behind the debt of Fannie and Freddie, but the safety net Paulson announced on Sunday sends the opposite message: that the government is determined not to let either one fail.

For the second time in four months, the housing crisis prompted the government to scramble over a weekend to rescue a major financial institution. While the danger of a systemic failure arising from Fannie and Freddie’s market problems was not as immediate as in March when Bear Stearns stumbled, the stakes were exponentially bigger.

Fannie and Freddie have combined debts of $1.5 trillion. They own or guarantee $5 trillion in mortgages. They have contracts with other institutions worth $2 trillion more to hedge the risks behind those mortgages.

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Wachovia Plans To Add To Its Shallow Reserves
2008-07-16 03:30:01
Wachovia's stock fell to a 17-year low Tuesday after an analyst warned that the commercial bank, which holds more deposits than any other in the Washington, D.C., region, will face two years of losses arising from the credit crisis and a dramatic restatement of troubled assets on its books.

The amount of the bank's bad loans is growing faster than what the company is stashing away, and its reserves are markedly lower than the industry average, according to bank officials and regulators. Wachovia has enough money to cover about 84 percent of its non-performing loans, the bank said yesterday.

As fears mount over the health of the nation's banking system, Wachovia will have to take exceptional steps to raise enough capital to meet its obligations, analysts said. This does not mean that the bank will fail anytime soon or that depositors face imminent danger.

"Wachovia is a fundamentally strong and stable company on solid footing ... and is well-capitalized," said spokeswoman Christy Phillips-Brown.

Company officials disclosed yesterday that the bank was raising enough money to add $4.2 billion to its reserves and $1.3 billion more to cover losses in the second quarter. Those sums are in the same league as the provisions made by the biggest banks in the country to cover losses due to the credit crisis.

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Medvedev Launches Outspoken Criticism Of U.S. Missile Defense Plan
2008-07-16 03:29:12

Russia's new president, Dmitry Medvedev, Tuesday launched an outspoken attack on America's European missile defense plans, in the latest sign that policy towards the west is unchanged since Vladimir Putin.

Medvedev denounced the Bush administration's plans to build a missile defence shield in the Czech Republic and Poland, allegedly to shoot down a rogue missile fired by Iran. He accused the U.S. of aggravating the situation and promised that Russia would respond appropriately.

"This common [security] heritage cannot survive if one of the sides selectively destroys isolated elements of the strategic construction," Medvedev said, adding: "This doesn't satisfy us."

Addressing Russian ambassadors in Moscow, Medvedev also dubbed Kosovo's U.S.-backed independence illegal and accused the Baltic states of glorifying fascism. "They are shuffling history like a pack of cards," he said.

Medvedev's hard line in one of his first speeches on foreign policy since his May inauguration is likely to disappoint western observers. They hoped his presidency might usher in a more conciliatory era.

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On U.S. Economy: Bernanke Is Pessimistic, Bush Urges A 'Deep Breath'
2008-07-15 18:38:55
Warning of the risks of a further slowdown and higher inflation, Ben S. Bernanke, chairman of the Federal Reserve,  offered a gloomy assessment of the economy on Tuesday as President Bush, speaking a few blocks away, urged Americans to have faith in the country’s financial foundation.

In testimony before the Senate Banking Committee, Bernanke avoided the word “recession” in characterizing the current economy, noting instead that consumer spending and exports were keeping growth “at a sluggish pace” while the housing sector “continues to weaken.”

He added that spending for personal goods had “advanced at a modest pace so far this year, generally holding up somewhat better than might have been expected given the array of forces weighing on household finances and attitudes.”

While the risks to the overall economy were still “skewed to the downside,” he said, inflation “seems likely to move temporarily higher in the near term.”

Even as Bernanke fielded questions from senators, a different view of the economy emanated from the White House.

President Bush, speaking at a White House news conference that coincided with the Fed chair’s testimony, urged Americans to “take a deep breath.”

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Federal Appeals Court Backs Bush On Detentions
2008-07-15 18:38:21

President Bush has the legal power to order the indefinite military detentions of civilians captured in the United States, the federal appeals court in Richmond, Virginia, ruled on Tuesday in a fractured 5-to-4 decision.

Yet a different 5-to-4 majority of the court, the United States Court of Appeals for the Fourth Circuit, ruled that Ali al-Marri,a citizen of Qatar now in military custody in Charleston, South Carolina, must be given an additional opportunity to challenge his detention in federal court there. An earlier court proceeding, in which the government had presented only a sworn statement from a defense intelligence official, was inadequate, the second, overlapping majority ruled.

The decision was a victory for the Bush administration, which had maintained that a 2001 Congressional authorization to use military force after the Sept. 11 attacks granted the president the power to detain people living in the United States.

The court effectively reversed a divided three-judge panel of its own members, which ruled last year that the government lacked the power to detain civilians legally in the United States as enemy combatants. That panel ordered the government either to charge Marri or to release him. The case is likely to reach the Supreme Court.

How helpful the decision will be to be Marri remains to be seen, as the majority that granted him some relief was notably vague about what the new court proceeding should look like. In that respect, Tuesday’s decision resembled last month’s decision from the United States Supreme Court granting habeas corpus rights to prisoners held at Guantanamo Bay.

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Banking Stocks Take Worse Loses In Decades
2008-07-15 04:00:12

Banking stocks suffered some of their worst losses in a generation yesterday as investors' confidence in the U.S. financial system continued to erode despite the dramatic initiative by the federal government Sunday evening to bolster mortgage giants Fannie Mae and Freddie Mac.

Some banks have become increasingly vulnerable because of the risky approach they have used to raise money after traditional sources of finance on the credit markets evaporated last summer, according to banking executives and regulators.

Outside branches of California-based IndyMac Bancorp, people lined up as early as 4 a.m. Monday to withdraw money after the bank shuttered its doors last week, becoming the third-largest bank in U.S. history to fail.

Federal regulators said Monday that IndyMac's predicament was not widespread and that most banks remained financially stable.

The concerted effort to calm the public came as shares of Washington Mutual, the country's largest savings and loan, tumbled 35 percent, its biggest decline ever. Trading in National City, a large, Ohio-based bank, was briefly suspended during a panicked sell-off, its shares sinking to a 24-year low even as it issued an urgent statement that it was experiencing no unusual activity by depositors or creditors.

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