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Friday, September 19, 2008

Free Internet Press Newsletter - Friday September 19 2008 - (813)

Friday September 19 2008 edition
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Financial Shock Ripples Around The Planet
2008-09-18 19:45:31
Signs of crisis rippled around the globe Thursday as fears that the ailing U.S. financial system would drag down the rest of the world ricocheted from trading floors in Singapore to the streets of Hong Kong and energy markets in Europe.

While markets gyrated, Russia's president made an unusual appeal for the United States to calm the global financial turmoil it had unleashed and oil-producing countries scrambled to cope with lower prices, indications that the crisis has the potential to reshape politics, as well as finance.

Around the globe, fear pervaded trading floors, leaving many traders dazed.

"People are shell-shocked," said Tim Condon, the Singapore-based chief Asia economist for ING Bank. "No one is doing very much. They're just sitting on the sidelines trying to preserve their cash.

"The only question on people's lips is which institution will be next to fail."

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British Government Bans Short Selling Of Bank Shares
2008-09-18 19:44:53

The British government Thursday night stunned the City (London's financial district) when it banned short selling of bank shares by speculators hours after a pledge by Prime Minister Gordon Brown to tackle the deepening global credit crunch with a "clean-up" of the financial markets.

Amid concern that the officially-brokered marriage between Lloyds TSB and HBOS could fall victim to the controversial practice of driving down a company's share price, the Financial Services Authority said it is prohibiting the "active creation or increase" of short positions in financial companies for three months from midnight Thursday.

The government is relying on the deal to revive Britain's housing market and has agreed to override Britain's competition laws in return for a pledge by the newly-created mega bank to offer more home loans, particularly to first-time buyers. Alistair Darling told the Guardian newspaper that the events of the past 13 months - culminating in this week's collapse of Lehman Brothers, and the takeover of Merrill Lynch and HBOS - had made the case for improved regulation unanswerable.

Morgan Stanley, one of only two remaining investment banks on Wall Street, was Thursday night the latest high-profile institution to be facing the loss of its independence after a savage sell-off in its shares. Goldman Sachs, one of the banks to have money in the early stages of the year-long financial turbulence, was also under pressure.

Hector Sants, the chief executive of the FSA, said: "While we still regard short-selling as a legitimate investment technique in normal market conditions, the current extreme circumstances have given rise to disorderly markets. As a result, we have taken this decisive action, after careful consideration, to protect the fundamental integrity and quality of markets and to guard against further instability in the financial sector."

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Elizabeth Edwards, In Washington, Slams McCain On Health Care
2008-09-18 19:44:11
Elizabeth Edwards didn't draw any embarrassing questions Thursday morning when she showed up on Capitol Hill to talk health care.

No one remarked on her husband's candidacy for president, or his infidelity, or the baby of uncertain parentage being raised somewhere by the younger woman who once produced Web videos for John Edwards.

Instead, Elizabeth Edwards drew salutations of praise, especially from Democratic female members of Congress, during a House subcommittee hearing on health care reform.

"Our friend," Rep. Lois Capps, of California, described her.

"Incredible vision and leadership," said Rep. Jan Schakowsky, of Illinois.

"So courageous," added Rep. Hilda Solis, of California.

It was Edwards' most public appearance since her husband admitted his infidelity on national television last month. And while John Edwards may be ducking the limelight until after Election Day, his wife took up the mantle of his campaign for the Democratic nomination for president by forging headlong into the health care debate.

In her testimony, Edwards showed hints of the feisty image she's cultivated over the years, slamming Republican presidential nominee John McCain and arguing with a Republican congressman about the cost of universal health care.

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Alaska Rep. Young Wins Squeaker Of Primary Election
2008-09-18 19:43:38
Alaska Lt. Gov. Sean Parnell has conceded the tight Republican House primary race to incumbent U.S. Rep. Don Young.

Parnell said Thursday he would not ask for a recount in the race he lost by 304 votes.

Parnell conceded in a statement e-mailed to reporters and confirmed by campaign spokeswoman Cathy Giessel.

The primary was held Aug. 26, and Parnell had trailed Young by a few hundred votes.

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Markets Gyrate After Central Banks' Move
2008-09-18 15:37:26

Wary investors waded back into the stock market on Thursday after the world’s central banks embarked on a coordinated effort to ease the fear coursing through the global financial system.

But there was little relief from the paralysis that has gripped the credit markets this week, which has sent investors flocking to the safety of Treasury bills and threatened to starve businesses of capital as Wall Street grapples with its most dramatic shake-up in decades.

The Dow Jones industrials breached negative territory around noon, erasing an earlier 100-point gain after the Federal Reserve said it would offer up to $180 billion in loans to other world banks to improve liquidity in money markets, which froze this week as fearful investors refused to lend.

The Dow was up about 80 points, and the broader Standard & Poor’s 500-stock index was down about 0.91 percent in afternoon trading. Earlier, President Bush made a brief statement in Washington intended to reassure Americans about the stability of the financial system.

“The American people can be sure we will continue to act to strengthen and stabilize our financial markets and improve investor confidence,” the president said at the White House, after canceling a trip to Alabama and Florida. He reiterated the events of the last week in a statement that lasted less than two minutes.

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Putnam Investments Closes $12.3 Billion Fund
2008-09-18 15:37:04

Putnam Investments has closed a $12.3 billion money-market fund to limit losses to its investors, the large mutual fund company said today. The highly unusual announcement is the latest sign that tremendous financial pressures are now threatening even some of the safest kinds of investments. 

The Prime Money Market Fund was open only to institutional investors. Putnam said in a statement that its board decided to close the fund last night after receiving a large number of redemption requests. The company said it could only honor those requests by selling assets at a loss, reducing the value of the remaining shares.

Putnam said it decided instead to liquidate the fund and spread any losses evenly among all the investors. It is not clear how much of a loss, if any, the shareholders will absorb.

"We wanted to treat all shareholders equally," said spokeswoman Laura McNamara. She said it was "premature" to discuss how much of a loss, if any, shareholders will incur.

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Transformer Breaks On Large Hadron Collider
2008-09-18 15:36:12
A 30-ton transformer that cools the world's largest particle collider malfunctioned, forcing physicists to stop using the atom smasher just a day after launching it to great fanfare, the European Organization for Nuclear Research said Thursday.

The faulty transformer has been replaced and the ring in the 17-mile circular tunnel under the Swiss-French border has been cooled back down to near absolute zero - or minus 459.67 degrees Fahrenheit - the most efficient operating temperature, said a statement by CERN, as the organization is known. When the transformer malfunctioned, operating temperatures rose from below 2 Kelvin to 4.5 Kelvin - extraordinarily cold by most standards, but warmer than the normal operating temperature.

The Large Hadron Collider was launched Sept. 10, when scientists circled a beam of protons in a clockwise direction at the speed of light. That was followed by a counterclockwise beam.

"Several hundred orbits" were made, said the statement.

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Congress Left On Sidelines As Treasury, Fed Reserve Move Swiftly
2008-09-18 02:26:40
The frenetic pace of the financial crisis has forced the Treasury Department and Federal Reserve to make rapid-fire decisions in recent days, leaving Capitol Hill lawmakers effectively impotent - and frustrated.

The frenetic pace of the financial crisis has forced the Treasury Department and Federal Reserve to make rapid-fire decisions in recent days, leaving Capitol Hill lawmakers effectively impotent - and frustrated.

Lawmakers on both sides of the aisle expressed concern Wednesday that they have had no control over when and how federal money has been used to curb the panic on Wall Street. While many have been convinced that the moves so far have been necessary to prevent a wider financial meltdown, they said they felt confined to the sidelines as power to make momentous decisions has been concentrated in very few hands.

House Speaker Nancy Pelosi (D-California) said she has dispatched Rep. Barney Frank (D-Massachusetts), chairman of the House Financial Services Committee, to determine whether Federal Reserve Chairman Ben S. Bernanke should retain authority to unilaterally bail out failing firms, as he did Tuesday with a loan of $85 billion to insurance giant American International Group.

Congressional leaders learned of the rescue late Tuesday during a hastily called meeting in the Capitol with Bernanke and Treasury Secretary Henry M. Paulson, Jr., who explained the deal after it was done.

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U.N. Power Shifts Away From The West, Wrecks Human Rights Agenda
2008-09-18 02:26:17

The West's efforts to use the United Nations to promote its values and shape the global agenda are failing, according to a detailed study published Wednesday.

A sea change in the balance of power in favor of China, India, Russia and other emerging states is wrecking European and U.S. efforts to entrench human rights, liberties and multilateralism. Western policies in crisis regions as diverse as Georgia, Zimbabwe, Burma or the Balkans are suffering serial defeats in what the study identifies as a protracted trend.

The hemorrhaging of western power, as reflected in longer-term voting patterns in key U.N. bodies, is mirrored by the increasing clout of China, Russia and the Islamic world, according to an audit of European influence at the U.N.  by the European Council on Foreign Relations.

"The E.U. is suffering a slow-motion crisis at the U.N.," says the report, noting that the west is now being regularly outwitted in global diplomatic poker by the Chinese and Russians. "The problem is fading power to set the rules. The U.N. is increasingly being shaped by China, Russia and their allies ... The west is in disarray. The E.U.'s rifts with the U.S. on many human rights issues at the U.N. in the Bush era have weakened both."

U.S. and European failure to win the day at the U.N. Security Council in recent votes on Zimbabwe and Burma as well as defeats last year on Kosovo or Darfur and the constant struggle to muster support for global action against Iran because of its nuclear ambitions are traced as part of a broader decline over the past decade.

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Al-Qaeda Blamed For Attack Against U.S. Embassy In Yemen
2008-09-18 02:25:48
Attackers used vehicle bombs, rocket-propelled grenades and automatic weapons to mount a coordinated assault on the U.S. Embassy here Wednesday, leaving 10 guards and civilians dead outside the main gate but failing to breach the walled compound. No Americans were killed.

Yemeni officials and experts on al-Qaeda said an aggressive new generation of the group's leaders in Yemen was responsible for the assault, the deadliest attack on a U.S. target in this country since the 2000 bombing of the USS Cole. Yemeni security forces have begun to pursue al-Qaeda fighters more vigorously this summer, following years of complaints by U.S. officials that the government was not fulfilling promises to counter the group.

"The attack on the U.S. Embassy was retaliation by al-Qaeda for the measures taken by the government to fight the terrorists," said Foreign Minister Abou Bakr al-Qurbi, according to a statement.

U.S. State Department spokesman Sean McCormack said in Washington that the multi-phased attack bore "all the hallmarks" of al-Qaeda and credited "the vigilance and the response" of Yemeni forces with preventing a more devastating assault. The government has received an average of nearly $40 million a year in U.S. economic and military aid since 2000.

The attack began at 9:15 a.m., when the sound of automatic weapons fire brought resident Yahyah Mousa to his roof overlooking the street outside the walled embassy compound.

"I saw soldiers shooting," before a jarring blast flung pieces of metal, glass and flesh onto the roof, said Mousa. As he and his family fled their home, at least five more explosions sounded behind them, amid heavy gunfire, Mousa said. The blasts sent plumes of black smoke rising over this medieval city of narrow towers and cramped streets.

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Livni Wins Kadima Party Landslide In Israel
2008-09-18 02:25:04

Tzipi Livni, Israel's foreign minister, claimed a remarkable election victory Wednesday to become the leader of the ruling Kadima party, putting her on track to become the country's first female prime minister in more than 30 years.

Exit polls put Livni ahead of her closest rival, Shaul Mofaz, the hawkish transport minister and former army chief. Livni, a former Mossad agent and lawyer, now has six weeks to put together a coalition government. If she succeeds - and her large margin of victory will help - she will become Israel's first female prime minister since Golda Meir resigned in 1974. If she fails, general elections will be held within three months.

There were cheers at Kadima's headquarters when exit polls from Israel's three main television networks gave Livni between 47% and 49% of the vote, against 37% for Mofaz. The two other candidates, Avi Dichter, the internal security minister, and Meir Sheetrit, the tourism minister, were a long way behind. With about half of the actual votes counted early this morning, Livni had won 47% and Mofaz 41%, party officials told Israel Radio. She needed 40% to avoid a runoff next week.

Minutes after the voting ended, Livni telephoned her party workers at their Tel Aviv headquarters to congratulate them. "We fought like lions, against many opportunists, and you were simply amazing ... The good guys won," she said. "I know you did it as friends, but like me you did it because you want this to be a better place."

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Watchdog: Justice Dept. Erred By Not Prosecuting Managers In Oil-Sex Scandal
2008-09-18 19:45:17
The U.S. Interior Department's watchdog criticized the Justice Department on Thursday for declining to prosecute the managers of an oil- and gas-royalty program that's been tainted by allegations of illicit sex, drug use and taking favors worth thousands of dollars.

The Justice Department prosecuted two employees from the Minerals Management Service (MMS), but Inspector General Earl Devaney said he didn't know why the department's lawyers didn't act on his recommendation to prosecute two high-ranking officials who've since retired.

"I would have liked a more aggressive approach, and I would have liked to have seen some other people prosecuted here," he said during a hearing before the House of Representatives' Natural Resources Committee.

Last week, in three reports, Devaney implicated a dozen current and former employees of the Minerals Management Service in inappropriate or unethical relationships with industry officials. He described "a culture of substance abuse and promiscuity'' in the Royalty in Kind (RIK) program, in which the government forgoes royalties and takes a share of the oil and gas for resale instead. From 2002 to 2006, nearly a third of the RIK staff socialized with and received gifts and gratuities from oil and gas companies.

"Simply stated, the MMS employees named in these reports had a callous disregard for the ethical rules by which the rest of us are required to play," he told committee members.

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Toxic Rice Prompts Mass Japanese Recall
2008-09-18 19:44:36

Thousands of Japanese bureaucrats are under investigation for possible involvement in a toxic rice scandal that has prompted a mass recall of alcoholic drinks and shaken the country's reputation for food safety.

The investigation by the agriculture ministry comes after a rice miller was found to have sold contaminated rice for human consumption in order to boost profits.

Mikasa Foods in Osaka admitted this month that it had sold on about 400 tons of inedible rice intended for use as fertiliser, animal feed and glue as more expensive grain to hundreds of companies across Japan.

The rice was used to make the distilled spirits sake and shochu, as well as rice crackers. One of Mikasa Food's clients later supplied several hundred kilograms of the toxic rice to more than 100 hospitals, homes for the elderly and at least one school.

Reports said that the firm had sold the rice, mainly from China and Vietnam, on 53 occasions over the past five years, knowing that it could dramatically improve its profit margin by disguising it as higher-quality grain.

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Campaign Blog: A Spaniard In The Works
2008-09-18 19:43:57
Intellpuke: This campaign blog was written by Oliver Burkeman and appeared in the Guardian edition for Thursday, September 18, 2008.

Does John McCain know that Zapatero is the Spanish prime minister, and that Spain is in Europe?

You'll have to decide for yourself whether the painful interview which John McCain gave Wednesday to a Spanish journalist in Florida, really does seem to indicate that he didn't know that Jose Luis Zapatero is the prime minister of Spain, and that he perhaps even thinks Spain might be in Latin America.
Josh Marshall, who's pushing this story hardest, seems to think that it's possible McCain is that confused. At the very least, McCain's odd insistence on answering a question about whether he'd invite Zapatero to visit the White House by talking only about Mexico suggests he might have thought the topic under discussion was Mexico's Zapatista movement.

McCain's foreign policy advisor Randy Scheunemann, meanwhile, claims McCain's refusal to confirm that he'd meet with Zapatero was deliberate. (It's true that there's no love lost between Zapatero and the Bush administration, but McCain has said he'll patch up relationships of this sort, damaged by Iraq.)

So, to clarify matters for McCain: Jose Luis Rodriquez Zapatero is the lefty prime minister of Spain. The Zapatistas  are armed revolutionaries who have declared war on the government of Mexico. Zippy is an irascible non-human character in the children's TV series Rainbow, and Captain Zep was the star of an awesome 1980s British children's sci-fi drama. Franco Zeffirelli is a celebrated Italian film director who I once pretended to know the first thing about in order not to look stupid in a conversation in a restaurant.

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Fed Reserve Raises Central Bank Funds To $247 Billion
2008-09-18 15:37:35
The Federal Reserve early this morning boosted to nearly $250 billion the pot of dollars that central banks can auction off around the world in a move aimed at stemming the latest phase of the roiling financial crisis -- a seize-up of bank lending and a threat of substantial money market withdrawals.

In a 3 a.m. Eastern Time (U.S.) statement, the Fed said it was raising from $67 billion to $247 billion the funds available to the European Central Bank, the Bank of Japan and other central banks to "address the continued elevated pressures in U.S. dollar short-term funding markets."

The move was the latest by U.S. policymakers to restore investor confidence in financial markets that was shaken anew by the Fed's seizure of insurance giant American International Group Inc., the weekend collapse of Lehman Brothers Holding Cos., and the sudden sale of Merrill Lynch & Co. to Bank of America Corp.

Separately, President Bush scrubbed planned trips to Florida and Alabama. Instead, he went before the cameras today to tell Americans he shared their concerns about the crisis and would "closely monitor the situation."

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Russia Again Halts Stock Trading As Market Turbulence Spreads
2008-09-18 15:37:15
Russia suspended stock trading for a second straight day and took other emergency measures in an attempt to halt a severe crash Wednesday as market turmoil spread to Latin America and raised fears the U.S. crisis will test the strength of the emerging economies that supply oil and other commodities to the world.

Already battered by falling oil prices and capital flight in the wake of last month's war with Georgia, Russian stocks fell sharply for the third consecutive day despite a decision by the Kremlin to lend $45 billion to the nation's three largest banks. Trading was suspended at midday; more than five hours later, the government sought again to calm the markets by slashing reserve requirements for banks, freeing up as much as $12 billion.

Russia's benchmark index, the ruble-based Moscow Interbank Currency Exchange, or MICEX, has plunged 25 percent this week, including a 17.5 percent drop Tuesday that was its largest decline since the country's traumatic financial collapse a decade ago. The index of the dollar-based Russian Trading System Stock Exchange, or RTS, has fallen 21 percent, and both exchanges have lost more than half their value since hitting highs in May.

Analysts blamed the immediate declines on a liquidity crisis - a shortage of money - caused by tightening access to international credit, and a chain reaction of selling by investors who took out loans collateralized by stocks that have suddenly lost much of their value. But the sell-off also reflected investor panic over the health of an economy largely dependent on oil production as petroleum prices have plummeted in recent weeks.

The market turmoil did not appear to spread to all other major oil producers. Stock markets in Kuwait, Saudi Arabia and the United Arab Emirates, for instance, saw gains Wednesday, while Nigeria and Venezuela were modestly down; but the Venezuelan currency tumbled for a sixth straight day, in part on concerns about oil prices.

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Pakistan: No Compromise On U.S. Cross-Border Strikes
2008-09-18 15:36:47
Pakistan's prime minister said Thursday that strikes by foreign forces were "counterproductive," as officials said there was no warning about the latest U.S. missile strike in the Pakistani northwest.

Meanwhile, militants briefly seized 300 boys at a school in northwest Pakistan on Thursday, said police. The incident ended with the deaths of two suicide bombers; no children were harmed.

The missile strike Wednesday was part of a surge in U.S. cross-border operations, and it was especially galling to Pakistanis because it came the same day an American military leader assured the nation's leaders the U.S. respects Pakistan's sovereignty.

Pakistan's civilian leaders stressed diplomacy to resolve the mounting tensions with an anti-terror ally that has given the Muslim nation billions of dollars in aid.

In his statement, Prime Minister Yousuf Raza Gilani did not specifically mention Wednesday's missile strike, though he spoke generally of strikes by foreign forces as being "counterproductive."

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U.S. Senate Passes Defense Bill Including Military Pay Raise
2008-09-18 15:36:04

The U.S. Senate passed a massive defense bill Wednesday that includes a pay raise for military personnel, despite objections to billions of dollars in special projects lawmakers had added.

Seven weeks from Election Day, blocking the measure in wartime was not a political risk many senators were willing to take. The measure passed 88 to 8 after negotiations on amendments failed at midday.

Retiring Sen. John Warner, of Virginia, led the negotiating for Republicans who objected to the added projects, called earmarks, but he also said he could not cast a vote that implied disrespect for soldiers fighting in Iraq and  Afghanistan.

Warner said Democrats and Republicans alike objected to parts of the bill or proposed amendments.

The bill passed yesterday had earlier attained the support of 61 senators - barely clearing the required 60-vote threshold -- on a test vote. Following Warner's lead, a dozen Republicans voted to advance the measure, many of them in tough reelection bids.

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Commentary: 'Who Would Lend An American Bank Money These Days?'
2008-09-18 02:26:28
Intellpuke: The following commentary appeared on Spiegel' website edition for Tuesday, Sept. 16, 2008.

The U.S. government's refusal to bail out Lehman Brothers could herald the beginning of a painful but overdue flushing out of the financial sector. By letting Lehman collapse, German commentators argue, Washington is giving banks a choice: Clean up your own mess or go under.

The collapse of Lehman Brothers and takeover of Merrill Lynch in a dramatic weekend that has shaken world  financial markets shattered two symbols of American financial power and highlighted that much of America's economic boom was built on self-delusion, write German media commentators.

They say the decision by the U.S. financial authorities not to bail out Lehman may signal the beginning of the end of the financial crisis. It will force the world's financial insitutions to get their own houses in order rather than relying on taxpayers' money to bail them out. This painful process will end up making the banking sector stronger, commentators argue. But the big investment banks will never be as powerful as they were before the crisis.

Conservative Die Welt writes:

"There hasn't been such a quake on Wall Street since Black Friday of 1929. The old-established investment bank Lehman Brothers tumbled into insolvency and will go under just like Bear Stearns did before it - and Merrill Lynch saved itself by hurling itself into the arms of Bank of America."

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FDA To Rule On Bioengineered Animals
2008-09-18 02:26:03
The U.S. Food and Drug Administration (FDA) will release Thursday long-awaited regulatory guidelines governing genetic engineering of animals for food, drugs or medical devices.

Although none of the provisions is likely to surprise the biotech industry, their formal appearance after years of discussion is expected to energize a field whose commercial potential is huge but so far unrealized.

The agency's regulatory control of animals will be considerably stronger than its oversight of genetically engineered plants and microorganisms. The latter - or substances derived from them - are on the market and, in some cases, have proved controversial.

The guidelines tell companies what the FDA wants to know about their work at virtually every stage of creating an engineered animal.

For example, biotech firms will be asked to provide the molecular identity of snippets of DNA inserted in an animal's genome, as well as where the genetic message lands and whether it descends unaltered through subsequent generations. The FDA also wants to be told how the genetic alterations might change an animal's health, behavior and nutritional value.

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Copter Crash In Iraq Claims Lives Of 7 U.S. Soliders
2008-09-18 02:25:16
An American Chinook helicopter crashed early Thursday as it was landing in southern Iraq, killing seven U.S. soldiers, said the military .

The CH-47 Chinook was landing after midnight about 60 miles west of Basra at the time of the crash, the U.S. statement said.

A spokesman for the Multi-National Force-Iraq confirmed to the Associated Press that the helicopter had crashed. He said five had died, and the bodies of two soldiers who had originally been missing were found.

The spokesman said hostile fire was not suspected.

The official spoke on condition of anonymity because he wasn't authorized to provide details.

The chopper was a part of an aerial convoy flying from Kuwait to the U.S. military base at Balad just north of Baghdad. The Chinook, the Army's workhorse, is designed to transport troops and supplies to combat and other regions.

The statement said the incident is under investigation.

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