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Tuesday, September 16, 2008

Free Internet Press Newsletter - Tuesday September 16 2008 - (813)

Tuesday September 16 2008 edition
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Wall Street Crisis Is Culmination Of 28 Years Of Deregulation
2008-09-16 03:04:24
No one cog in the federal government's machine of financial regulation let down the country by failing to prevent the latest shakeout on Wall Street. The entire system did.

"They just haven't done a particularly good job," said James Barth, a senior finance fellow at the Milken Institute, a nonpartisan research group based in Los Angeles, California.

Kathleen Day, a spokeswoman for the Center for Responsible Lending, a consumer-oriented research group, explained the regulatory lapses more starkly: "The job of regulators is that when the party's in full swing, make sure the partygoers drink responsibly," she said. "Instead, they let everyone drink as much as they wanted and then handed them the car keys."

Analysts and politicians are raising serious questions about the nation's financial regulatory system, which dates to the New Deal era.

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Europe's Biofuel Conundrum
2008-09-16 03:03:57
The European Parliament may be backing away from its targets for crop-based biofuels, but the European Union is still hoping that it can create a certification scheme that will ensure that biofuels are produced in a sustainable and environmentally friendly way.

It's not seldom that Jan Henke finds himself on a jet cruising at 10,000 meters above the Atlantic Ocean on yet another trip from Germany to Brazil. Or to Argentina. Sometimes he heads the other way to Malaysia or Indonesia. Once he arrives, his procedure is generally the same. He doesn't waste much time taking in the sights or hanging out in the cities. Rather, Henke heads out into the countryside to tromp through the mud in yet another isolated field on a farm far away from Europe.

Henke is a senior consultant with International Sustainability and Carbon Certification (ISCC). Since February, his group has been running a pilot program for the German Energy Agency to find out just how farmers around the world raise their crops. Particularly, Henke is interested in those plantations that grow crops like sugar cane, African palms and even corn. And, if the crop can be processed into fuel for European gas tanks, Henke wants to see how it is raised so his organization can create rules that ensure the methods used are environmentally sustainable.

"We are creating a checklist, and then going from plantation to plantation to see if they are fulfilling these criteria. The idea is to see what can actually be done in practice to see if you can control these things," Henke told Spiegel Online. "You don't want to reinvent the wheel, but you want to see if these criteria fulfill what is being asked for on the European market."

And yet, the project Henke is working on is very much akin to reinventing the wheel. Just a little over one year after the European Union established concrete targets requiring all fuel sold in the 27-member bloc to contain a 10 percent mixture of biofuel by the year 2020 - with an interim target of 5.75 percent by 2010 - the idea of making gas and diesel from plants is under attack. Some say the savings on CO2 emissions relative to fossil fuels isn't nearly enough. Others point out that, having rapidly developed into a massive market, farmers in the tropics are mowing down rain forests and draining peat bogs - and releasing massive amounts of CO2 in the process - to get in on some of the biofuels action. Still others say that mass planting of biofuels crops means less land is available for growing edible crops, thus driving up food prices.

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Palin 'Unlikely' To Meet With Prosecutor
2008-09-16 03:03:13
Alaska Gov. Sarah Palin is unlikely to meet with a special prosecutor looking into whether she or other state officials improperly pushed to punish a trooper, a spokesman for John McCain's presidential campaign announced Monday.

Since Palin was named as McCain's running mate Aug. 29, the campaign has dismissed the state legislature's investigation into her dismissal of the state's director of public safety, saying that Democrats are exploiting the probe for political gain.

McCain campaign spokesman Ed O'Callaghan said that Palin is "unlikely to cooperate" with the investigation, which he called "tainted."

Palin's husband, Todd, was subpoenaed in the probe last week. O'Callaghan said he did not know whether Todd Palin would challenge the subpoena.

Sarah Palin has said she fired Walter Monegan over disagreements about budget priorities. Monegan says he received repeated e-mails and phone calls from both Palins and her staff expressing dismay over the continued employment of state trooper Mike Wooten, whose divorce from Sarah Palin's sister was ugly.

Todd Palin and 12 other people were subpoenaed Friday by a joint committee, made up of three Republicans and two Democrats, after prosecutor Stephen Branchflower said that someone may have attempted to deny worker's compensation benefits to Wooten.

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Obama, McCain Give Positions On Science Policies
2008-09-15 21:30:09

Both presidential candidates have now issued answers to a series of questions about science policy, Senator Barack Obama having done so in late August and Senator John McCain on Monday.

Their responses show clear areas of agreement on such apple-pie issues as ocean health, as well as sharp contrasts, as when Obama stresses the role of government and McCain that of business in addressing some of the nation’s main challenges.

What follows is a digest of their answers, as posted by Science Debate 2008. The private group, in an effort endorsed by leading scientific organizations, has worked since November to get candidates to articulate positions on science policy. The full answers are at . 

INNOVATION: Obama calls for doubling federal budgets for basic research over a decade and supports broadband Internet connections “for all Americans.” McCain stresses policies to provide “broad pools of capital, low taxes and incentives for research in America,” as well as the streamlining of “burdensome regulations.” McCain also said Congress, “under my guiding hand,” adopted wireless policies that “spurred the rapid rise of mobile phones and WiFi technology.”

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Dow Drops 326 Points As Lehman Bros. Collapse, Merrill Lynch Sale, AIG Woes Pummel Stock Markets
2008-09-15 16:35:06
Stocks plunged and investors rushed for the safety of Treasury bonds Monday, amid a dramatically altered financial landscape that raised new fears about the struggling economy.

Share prices bounced from their worst levels of the morning, then headed lower again.

The Dow Jones industrial average was off 326.41 points, or 2.9%, to 11,095.58 shortly before 11 a.m. PDT. The blue-chip index had been down as much as 344 points earlier.

Some traders said that although losses were broad-based, panic selling was confined to a relative few bank, brokerage and insurance stocks.

"Volume is very orderly outside of a handful of issues," said Dan McMahon, a veteran trader at Raymond James & Associates in New York.

Still, he said, the bankruptcy of investment bank Lehman Bros. Holdings Inc., Merrill Lynch & Co.'s surprise sale to Bank of America Corp. and fear that insurance giant American International Group could be mortally wounded all left many Wall Street players in shock - and looking for places to hide.

"People are still wanting to take a lot of risk off the table," said McMahon.
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New York State Throws AIG A $20 Billion Lifeline
2008-09-15 16:34:46

New York Gov. David A. Paterson said on Monday that the state would allow the American International Group (AIG), a big insurance company, to borrow $20 billion from its subsidiaries to bolster its capital as it faces potentially disastrous credit downgrades.

Shares in A.I.G. tumbled more than 60 percent on Monday morning as investors grew concerned that the firm lacked capital to withstand cuts to its debt rating, but Paterson reiterated the state’s support of the firm and declared A.I.G. "financially sound."

The firm approached the state for help, said Paterson, and government officials worked closely with the firm throughout the weekend. He vocally supported A.I.G.’s efforts to seek help from the Federal Reserve. 

People brief on the matter said Monday that the Federal Reserve had hired Morgan Stanley to advise it on potential lifelines to give to A.I.G. Morgan will help evaluate the risk that A.I.G. poses to the already battered financial system, and help the Fed negotiate possible solutions, which may include a $20 billion bridge loan, said these people.

Earlier, Paterson argued that New York taxpayers would not be put at risk by the state’s involvement.

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Controlled Drugs Dumped Uncontrolled Into Water
2008-09-15 16:33:49
In a frustrating quirk in government policy, the most tightly controlled drugs - like painkilling narcotics prone to abuse - are the ones that most often elude environmental regulation when they become waste.

Federal narcotics regulators impose strict rules meant to keep controlled pharmaceuticals out of the wrong hands. Yet those rules also make these drugs nearly impossible to handle safely as waste, say hospital environmental administrators.

Many would like to send controlled substances to landfills or incinerators to keep them out of waterways as much as possible. Instead, they are nearly always dropped into sinks and toilets by hospitals, nursing homes and other long-term care facilities.

The problem is huge, because more than 365 medicines are controlled by the U.S. Drug Enforcement Administration - almost 12 percent of all prescriptions, the agency says. They include widely used narcotics, stimulants, depressants and steroids - drugs like codeine, morphine, oxycodone, diazepam (often sold as Valium) and methylphenidate (often sold as Ritalin).

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Cheney Shielded Bush From Crisis
2008-09-15 04:59:13
This is the second of two stores adapted from Barton Gellman's "Angler: The Cheney Vice Presidency," to be published Tuesday by Penguin Press.

Vice President Cheney convened a meeting in the Situation Room at 3 p.m. on Wednesday, March 10, 2004, with just one day left before the warrantless domestic surveillance program was set to expire. Around him were National Security Agency Director Michael V. Hayden, White House counsel Alberto Gonzales and the Gang of Eight - the four ranking members of the House and the Senate, and the chairmen and vice chairmen of the intelligence committees.

Even now, three months into a legal rebellion at the Justice Department, President Bush was nowhere in the picture. He was stumping in the battleground state of Ohio, talking up the economy.

With a nod from Cheney, Hayden walked through the program's vital mission. Gonzales said top lawyers at the NSA and Justice had green-lighted the program from the beginning. Now Attorney General John D. Ashcroft  was in the hospital, and James B. Comey, Ashcroft's deputy, refused to certify that the surveillance was legal.

That was misleading at best. Cheney and Gonzales knew that Comey spoke for Ashcroft as well. They also knew, but chose not to mention, that Jack L. Goldsmith, chief of the Office of Legal Counsel at Justice, had been warning of major legal problems for months.

More than three years later, Gonzales would testify that there was "consensus in the room" from the lawmakers, "who said, 'Despite the recommendation of the deputy attorney general, go forward with these very important intelligence activities'." By this account - disputed by participants from both parties - four Democrats and four Republicans counseled Cheney to press on with a program that Justice called illegal.

In fact, Cheney asked the lawmakers a question that came close to answering itself. Could the House and Senate amend surveillance laws without raising suspicions that a new program had been launched? The obvious reply became a new rationale for keeping Congress out.

The Bush administration had no interest in changing the law, according to U.S. District Judge Royce C. Lamberth,  chief of the federal government's special surveillance court when the warrantless eavesdropping began.

"We could have gone to Congress, hat in hand, the judicial branch and the executive together, and gotten any statutory change we wanted in those days, I felt like," he said in an interview. "But they wanted to demonstrate that the president's power was supreme."

Late that Wednesday afternoon, Bush returned from Cleveland. In early evening, the phone rang at the makeshift  FBI command center at George Washington University Medical Center, where Ashcroft remained in intensive care. According to two officials who saw the FBI logs, the president was on the line. Bush told the ailing Cabinet chief to expect a visit from Gonzales and White House Chief of Staff Andrew H. Card, Jr.

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London Market Slumps After Lehman Bros. Collapse
2008-09-15 04:58:48

The London stockmarket nosedived Monday morning as traders dumped shares and piled into gold and government bonds, following the turmoil on Wall Street.

As distressed employees arrived at Lehman Brother's Canary Wharf offices, with many fearing redundancy, the FTSE 100 index of leading shares plunged into the red. By shortly after 9:30 a.m. (BST)  it had racked up a 200.4 point loss, or 3.7%, to 5216.3.

Investors were left reeling by the triple whammy of the failure of Lehman Brothers, the shock sale of Merrill Lynch, and the revelation that AIG, the world's largest insurance firm, may need to raise as much as $40 Billion. 

Banks led the fallers in London, amid fears that they could suffer badly from Lehman's collapse into bankruptcy early this morning. HBOS dived by almost 13% to 246.5p, Barclays dropped by 6% to 323p and Royal Bank of Scotland lost 5% to 219.25p.

Barclays confirmed this morning that it had walked away from rescue talks with Lehman because it could not guarantee itself against further losses.

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Lehman Bankruptcy Hits Florida Pension Funds
2008-09-16 03:04:09

The bankruptcy of Lehman Brothers, a prestigious Wall Street firm, will touch Florida's pension funds and the state-run insurer because both hold its securities.

The State Board of Administration holds $322 million in Lehman stock and bonds. The SBA manages the state's employee fund and more than two dozen other funds, including assets for the Florida Hurricane Catastrophe Fund and the Florida Prepaid College Plan.

Dennis MacKee, a spokesman for the SBA, said the agency has an $84 million unrealized loss on its holdings.

About two-thirds of the securities are held by the Florida Retirement System, which includes the pension funds for local counties such as Miami-Dade and Broward. The rest is spread out in the catastrophe fund and the Lawton Chiles Endowment Fund, which helps fund Medicare.

MacKee said because the SBA is such a substantial investor in the financial markets, with more than $159 billion in funds under management, the agency has a relationship with most of the large Wall Street houses.

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Commentary: The Ugly New McCain
2008-09-16 03:03:30
Intellpuke: This commentary was written by Washington Post Op-Ed Columnist Richard Cohen and appeared in the the Post's edition for Tuesday, September 16, 2008.

Following his loss to George W. Bush in the 2000 South Carolina primary, John McCain did something extraordinary: He confessed to lying about how he felt about the Confederate battle flag, which he actually abhorred. "I broke my promise to always tell the truth," said McCain. Now he has broken that promise so completely that the John McCain of old is unrecognizable. He has become the sort of politician he once despised.

The precise moment of McCain's abasement came, would you believe, not at some news conference or on one of the Sunday shows but on "The View," the daytime TV show created by Babara Walters. Last week, one of the co-hosts, Joy Behar, took McCain to task for some of the ads his campaign has been running. One deliberately mischaracterized what Barack Obama had said about putting lipstick on a pig - an Americanism that McCain himself has used. The other asserted that Obama supported teaching sex education to kindergarteners.

"We know that those two ads are untrue," said Behar. "They are lies."

Freeze. Close in on McCain. This was the moment. He has largely been avoiding the press. The Straight Talk Express is now just a brand, an ad slogan like "Home Cooking" or "We Will Not Be Undersold." Until then, it was possible for McCain to say that he had not really known about the ads, that the formulation "I approve this message" was just boilerplate. But he didn't.

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Dow Drops More Than 500 Points After Late Sell-Off
2008-09-15 21:30:20

The churn of a rapidly changing financial landscape left Wall Street cold on Monday, as a late afternoon sell-off sent the stock market to its worst daily loss in seven years.

The Dow Jones industrial average plummeted more than 500 points - its worst session since the days after the Sept. 11, 2001 terrorist attacks.

The blue-chip index spent the entire day in negative territory, but the losses did not begin approaching dramatic levels until late in the afternoon. In the last 30 minutes of trading, investors seemed to give in to their fears about the health of the financial system, igniting a wave of selling that sent the Dow, already about 300 points lower, to a 504.48 point decline for the day.

The Standard & Poor’s 500-stock index fared even worse, losing 4.7 percent, and the technology-heavy Nasdaq composite index fell 3.2 percent. In Europe, benchmark stock indexes were off nearly 4 percent in London and Paris and almost 3 percent in Frankfurt.

In a briefing in Washington, D.C., U.S. Treasury Secretary Henry M. Paulson, Jr., said the financial markets were going through a tough time “as we work off some of the past excesses,” but that Americans could “remain confident in the soundness and the resilience of our financial system.”

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U.S. Defense Secretary's Iraq Visit Marked By Bombings
2008-09-15 21:29:54
U.S. Defense Secretary Robert M. Gates landed in Baghdad Monday to meet Iraqi officials and preside over Tuesday’s change-of-command ceremony as Lt. Gen. Raymond T. Odierno takes over from Gen. David H. Petraeus as the senior American officer in Iraq.

Gates’ unannounced visit coincided with at least three explosions - one at a Ramadan feast in Diyala Province and two in central Baghdad - that killed at least 32 people.

Such attacks have grown less common during the strategy known as the surge, for which Gates praised General Petraeus.

General Petraeus “has played a historic role” in his “translation of a great strategy into a great success in very difficult circumstances,” said Gates. The general, who became the top American commander in Iraq last February, will be assuming command of American military forces across the Middle East and Southwest Asia.

En route to Iraq for his eighth visit as defense secretary, Gates described the challenge of the months ahead, saying the central question was “how do we preserve the gains that have already been achieved, and expand upon them, even as the numbers of U.S. forces are shrinking?”

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Galveston, Houston Struggle In Wake Of Hurricane Ike
2008-09-15 16:34:56
The barrier island of Galveston, Texas, was a jumble of crushed homes, flattened businesses and towering mounds of debris Monday as local officials struggled to cope with a daunting catastrophe and residents lined up for food and water.

Two days after Hurricane Ike battered Galveston and then roared into Houston 50 miles to the north, roads here were still buried in sand and debris even as floodwaters began to recede. Many streets were still blocked with debris and fallen trees. There was no electricity, running water, sewage or telephone service.

The air reeked of fuel and saltwater and was heavy with humidity and mosquitoes. Local officials worried about the possible spread of disease as thousands of residents who survived the storm tried to live in damaged homes without proper sanitary facilities.

"It's going to take weeks and months to get this place cleaned up," Galveston City Manager Steve LeBlanc said during a press conference. "Quite frankly, we are reaching a health crisis. We have insects biting people ... it's a major problem."

LeBlanc said that the hurricane's confirmed death toll stood at four as of this morning - revised from five - and that 11 people had been arrested for looting in the storm's aftermath.
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Obama, McCain Weigh In On Wall Street Turmoil
2008-09-15 16:34:30
Hours after Senator John McCain said “the fundamentals of our economy are strong,” Senator Barack Obama seized upon the remark on Monday and offered a blistering critique of the Republican Party’s stewardship of the economy as the Wall Street turmoil created fresh ripples in the presidential campaign.

“We just woke up to news of financial disaster and this morning and he said that the fundamentals of the economy are still strong?” Obama told voters at an afternoon rally here. “Senator McCain, what economy are you talking about?”

As he campaigned in Florida on Monday, McCain cautioned against panic as the stock market fell, Lehman Brothers filed for bankruptcy protection and Merrill Lynch was abruptly acquired. He acknowledged “tremendous turmoil in our financial markets,” but said taxpayers should not be forced to pay for a government bail out.

“People are frightened by these events. Our economy, I think still, the fundamentals of our economy are strong,”  McCain told a rally in Jacksonville. “But these are very, very difficult times.”

Obama’s campaign quickly pounced on the remarks by McCain, pointing to them as the latest evidence that  McCain does not appreciate the severity of the crisis.

“I could walk from here to Lansing and I wouldn’t run into a single person who thought our economy was doing well, unless I ran into John McCain,” Senator Joseph R. Biden, Jr., said during a campaign stop in St. Clair Shores, Michigan.

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Judge Rules Against Yellowstone Snowmobile Plan
2008-09-15 16:32:36
A federal judge has thrown out plans to allow more than 500 snowmobiles in Yellowstone National Park this winter.

U.S. District Judge Emmet Sullivan made the decision Monday.

The National Parks Service had planned to license 540 snowmobiles and 83 snowcoaches to go through Yellowstone every day beginning this winter. For the last three winters, approximately 250 snowmobiles per day used the park's trails, according to environmentalists and park advocates.

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Lehman Bros. To File For Bankruptcy
2008-09-15 04:58:59
Lehman Brothers announced early Monday morning that it will file for bankruptcy, becoming the largest financial firm to fail in the global credit crisis, after federal officials refused to help other companies buy the venerable investment bank by putting up taxpayer money as a guarantee.

The failure of the nation's fourth-largest investment firm offers a profound test of the global financial system, and government and private officials had been bracing Sunday night for an upheaval in a range of financial markets that have never before experienced the bankruptcy of such a large player. To keep cash flowing normally through these markets, the Federal Reserve announced new lending procedures, while 10 major banks combined to create a new $70 billion fund.

After a marathon series of negotiations over the weekend, Federal Reserve and the Treasury stepped aside to allow a wrenching transformation of Wall Street to proceed. After galloping to the rescue of other major financial institutions in recent months, the federal government drew the line with Lehman Brothers, ignoring pleas from would-be buyers of the company who insisted on receiving federal backing for its troubled assets.

Leaders of the Federal Reserve and Treasury Department decided that Lehman was unlike the investment bank Bear Stearns, whose sudden collapse in March threatened the world financial system, or Fannie Mae and Freddie Mac, whose potential insolvency did the same.

In betting that Lehman could be allowed to fail without catastrophic consequences, New York Federal Reserve  President Timothy F. Geithner, Fed Chairman Ben S. Bernanke,and Treasury Secretary Henry M. Paulson, Jr.,  were making it clear that struggling financial firms cannot count on a bailout.

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