Free Internet Press Newsletter - Saturday October 18 2008 - (813)

Saturday October 18 2008 edition
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Government's Leap Into Banking Has Its Perils 2008-10-18 00:47:24 Now that the big five investment banks of America have been shut down, sold off or turned into more staid bank holding companies, there is one big risk-taking banker left: the federal government. The decision this week to put $250 billion in banks in return for shares will make the government a major investor, and owner, in the banking industry. The bold move is one of many that is redefining and enlarging Washington’s role in the country’s banking system. Especially if conditions worsen, further government actions may be deemed necessary to shelter banks, businesses and consumers from the financial turmoil. This fundamental shift at least raises long-term questions about government’s appropriate role in financing and the economy. Will the government inevitably be tempted to guide lending decisions, steering loans to some and not to others? History shows that government intervention in banking systems can carry its own dangers, with money funneled to political favorites instead of an economy’s innovators. The federal government’s initiatives are all carefully cast as emergency measures that will be phased out in months or years. “It’s explicitly temporary, but we don’t really know where this crisis ends yet,” said Robert E. Litan, an economist at the Brookings Institution. “The logic of intervention is that the more ownership the government has, the greater the regulation and management control.” There is a cautionary example, economists say, in today’s troubles. The nation’s two largest mortgage finance companies, Fannie Mae and Freddie Mac, are quasi-governmental institutions. Fannie was created during the depths of the Great Depression, and Freddie in 1970, to help make mortgages more affordable for homeowners. Read The Full Story Editorial: The Acorn Story 2008-10-18 00:46:59 Intellpuke: This editorial appeared in the New York Times edition for Friday, October 17, 2008. In Wednesday night’s debate, John McCain warned that a group called Acorn is “on the verge of maybe perpetrating one of the greatest frauds in voter history” and “may be destroying the fabric of democracy.” Viewers may have been wondering what Mr. McCain was talking about. So were we. Acorn is a nonprofit group that advocates for low- and moderate-income people and has mounted a major voter-registration drive this year. Acorn says that it has paid more than 8,000 canvassers who have registered about 1.3 million new voters, many of them poor people and members of racial minorities. In recent weeks, the McCain campaign has accused the group of perpetrating voter fraud by intentionally submitting invalid registration forms, including some with fictional names like Mickey Mouse and others for voters who are already registered. Based on the information that has come to light so far, the charges appear to be wildly overblown - and intended to hobble Acorn’s efforts. Read The Full Story U.S., Iraqi Officials Question Terms Of Draft Security Deal 2008-10-18 00:46:31 A number of senior Iraqi and U.S. politicians expressed strong reservations Friday about the terms of a draft agreement that gives Iraq  the "primary right" - subject to U.S. acquiescence - to try American soldiers accused of serious crimes committed during off-duty hours outside U.S. military bases in Iraq. Some political leaders in Baghdad, who got their first look at the controversial agreement to extend the U.S. military presence in Iraq beyond 2008, said it did not go far enough in guaranteeing Iraqi sovereignty. The bilateral accord was presented Friday to the Political Council for National Security, an advisory body including political, legislative and judicial leaders, whose support is necessary before it can be submitted to Prime Minister Nouri al-Maliki's cabinet and then to parliament for final approval. After an initial review, the council said it would continue discussions next week. In Washington, congressional Democrats questioned ceding any authority over U.S. troops to Iraq. "I am very concerned about reports that U.S. service personnel may not have full immunity under Iraqi law," said Rep. Ike Skelton (D-Missouri), the House Armed Services Committee chairman. The Bush administration allowed a small group of senior congressional aides to read the document at a White House briefing Friday morning but did not allow copies to be made. A provision in the draft would give the United States "primary" jurisdiction over military personnel and Defense Department employees who are on bases or engaged in authorized military operations. Iraq, it says, would have the "primary right to exercise judicial jurisdiction" over "premeditated and gross felonies ... committed outside the agreed facilities and areas and when not on a mission." Foreign Minister Hoshyar Zebari said Friday that any disagreement would be resolved by a joint committee. "If the crime is very grave or serious, the U.S. may waive its jurisdiction," he said. Read The Full Story Colin Powell Expected To Endorse Barack Obama 2008-10-17 23:55:37 Former U.S. secretary of state Colin Powell is expected to use a high-profile television appearance tomorrow to end months of speculation by throwing his support behind Barack Obama. His decision to go on television just two weeks before the election suggests he has finally made up his mind. Powell, a four-star general who worked closely with three Republican presidents, said he would decide between Obama and John McCain,a long-time friend, after watching the presidential debates, the last of which was held on Wednesday. His endorsement would be the biggest Obama has secured so far. As a prominent member of President George Bush's administration, he may shift some Republican-leaning voters into Obama's camp. McCain's campaign team admitted privately it would be a blow, not least because it would be another day in which Obama dominated the news. But Democratic strategists are divide about the benefits. One said Friday he was concerned it could backfire. He suggested that Powell's decision might be seen as being based on racial solidarity and that could alienate some white voters already reluctant to back Obama on grounds of race. Read The Full Story Wall Street Bankers In Line For $70 Billion In Pay, Bonuses 2008-10-17 23:30:56 Pay and bonus deals equivalent to 10 percent of bailout package. Financial workers at Wall Street's top banks are to receive pay deals worth more than $70 billion (£40 billion), a substantial proportion of which is expected to be paid in discretionary bonuses, for their work so far this year - despite plunging the global financial system into its worst crisis since the 1929 stock market crash, the Guardian has learned. Staff at six banks, including Goldman Sachs and Citigroup, are in line to pick up the payouts despite being the beneficiaries of a $700 billion bail-out from the U.S. government that has already prompted criticism. The government's cash has been poured in on the condition that excessive executive pay would be curbed. Pay plans for bankers have been disclosed in recent corporate statements. Pressure on the U.S. firms to review preparations for annual bonuses increased Friday when Germany's Deutsche Bank said many of its leading traders would join Josef Ackermann, its chief executive, in waiving millions of euros in annual payouts. The sums that continue to be spent by Wall Street firms on payroll, payoffs and, most controversially, bonuses appear to bear no relation to the losses incurred by investors in the banks. Shares in Citigroup and Goldman Sachs have declined by more than 45% since the start of the year. Merrill Lynch and Morgan Stanley  have fallen by more than 60%. JP MorganChase fell 6.4% and Lehman Brothers has collapsed. Read The Full Story Supreme Court Rejects Republican Bid In Ohio Voting Dispute 2008-10-17 15:32:19 The Supreme Court sided Friday with Ohio's top elections official in a dispute with the state Republican Party over voter registrations. The justices overruled a federal appeals court that had ordered Ohio's top elections official to do more to help counties verify voter eligibility. Secretary of State Jennifer Brunner, a Democrat, faced a deadline Friday to set up a system to provide local officials with names of newly registered voters whose driver's license numbers or Social Security numbers on voter registration forms don't match records in other government databases. Ohio Republicans contended the information for counties would help prevent fraud. Brunner said the Republican Party is trying to disenfranchise voters. In a brief unsigned opinion, the justices said they were not commenting on whether Ohio is complying with a provision of the Help America Vote Act of 2002 that lays out requirements for verifying voter eligibility. Read The Full Story Markets Fluctuate As Investors Ponder Weak Housing Data 2008-10-17 15:31:49 Wall Street fought against more negative economic news, including fewer new homes being built and further evidence of slumping consumer confidence, to rally in early afternoon trading Friday. After falling more than 200 points at the opening, the Dow Jones industrial average was up about 2.5 percent, or 223 points, at 1:30 p.m. The Standard & Poor's 500-stock index was up 3 percent and tech-heavy Nasdaq was up 2.8 percent. It appears Wall Street is going to end the week with another volatile session. Thursday the Dow surged in the last hour of trading, closing up 400 points, after falling more than 700 points on Wednesday and Tuesday and scoring a historic gain of more than 900 points on Monday. Speaking before the markets opened, President Bush defended his response to the financial crisis and urged Americans to be patient and allow time for the government's market interventions to work. In its latest response to the crisis, the Treasury Department said this week it will make direct capital injections in major banks, and last week the Federal Reserve participated in a coordinated global interest rate cut. Read The Full Story French Mutual Bank Suffers $807 Million Trading Loss 2008-10-17 15:30:48 A large French mutual bank, Groupe Caisse d’Epargne, said Friday that it had lost 600 million euros, or $807 million, as a result of unauthorized derivatives trading by a team on the bank’s own account. The lender, which is in merger talks with a French rival, said in a statement that the loss was the result of “extreme market volatility” on stock exchanges last week, and that the position had been closed. Speculation of a big derivatives loss at a large bank rattled the stock exchanges in Paris last week, adding to downward pressure on banks’ shares and forcing rival lenders Societe Generale and Dexia to issue denials. The incident “does not affect the financial solidity of the group and will have no consequences on clients,” the bank said, adding that it retains more than 20 billion euros, or $26.8 billion, in shareholder equity. A spokeswoman for the bank said that a team of “around six traders” from the proprietary desk was responsible for the trades, and they no longer worked for the bank. She said she did not know whether they would face legal charges. Read The Full Story Bush Struggles To Be Heard On Economic Crisis 2008-10-17 15:30:13 With the economy in full roller coaster mode, President Bush has been working overtime to convince the nation that the situation is under control. Hardly a day has passed this month without Bush appearing in the Rose Garden, or meeting with business leaders, or convening his cabinet, or giving a speech, as he did at the United States Chamber of Commerce on Friday, to talk about the “systematic and aggressive measures” his government has taken to put the fragile economy back on track. The headlines on the White House Web site all sound the same: “President Bush visits Ada, Michigan, Discusses Economy,” or “President Bush Meets with G7 Finance Ministers to Discuss World Economy” or simply, “President Bush Discusses Economy.” On Saturday, there will be another, when Bush meets with the president of France, Nicolas Sarkozy, at Camp David. It is, in short, an intensive public relations effort, designed, White House officials say, to keep Bush front-and-center in explaining the intricacies of a complicated and fast-moving financial crisis. At times, the president sounds like an economics professor, with his talk of interest rates and capital and tightening of credit. “Let me explain this approach piece by piece,” he said Friday. Yet, while Bush is doing plenty of talking, Americans do not appear to be taking much reassurance from his words. Read The Full Story Four Tops Frontman Levi Stubbs, Dies At 72 2008-10-17 15:29:39 Four Tops lead singer Levi Stubbs, who possessed one of the most dynamic and emotive voices of all the Motown singers, died Friday at 72. He had been ill recently and died in his sleep at the Detroit, Michigan, house he shared with his wife, said Dana Meah, the wife of Stubbs' grandson. The Wayne County medical examiner's office also confirmed the death. With Stubbs in the lead, the Four Tops sold millions of records, including such hits as "Baby I Need Your Loving," "Reach Out (I'll Be There)" and "I Can't Help Myself (Sugar Pie, Honey Bunch.)" The group performed for more than four decades without a single change in personnel. Stubbs' death leaves one surviving member of the original group: Abdul "Duke" Fakir. Read The Full Story	Sen. Stevens Spars With Prosecutor 2008-10-18 00:47:09 A feisty Sen. Ted Stevens sparred with a federal prosecutor Friday, testifying at his corruption trial that he always paid his bills and that an oil services company played no role in remodeling his Alaska house. Stevens (Alaska), one of the most powerful Republicans in the Senate, took the witness stand in his own defense to counter charges that he lied on financial disclosure forms to hide more than $250,000 in gifts and renovations to his Girdwood house provided by a close friend, Bill Allen, who headed the now-defunct oil services company Veco. Federal prosecutors have alleged that Stevens turned to Allen and Veco for the work because Stevens knew the labor would be free. The 84-year-old lawmaker, who is running for reelection to a seventh full term, lived up to the combative reputation he has earned in Congress. A former prosecutor himself, Stevens repeatedly critiqued the way he was questioned by Justice Department attorney Brenda Morris.  "I am not going to get in a numbers game with you," he said at one point. "You are not listening to me," he said, criticizing another of her questions as "tautological." Read The Full Story Editorial: Barack Obama For President 2008-10-18 00:46:49 Intellpuke: This editorial appeared in the Washington Post edition for Friday, October 17, 2008. The nominating process this year produced two unusually talented and qualified presidential candidates. There are few public figures we have respected more over the years than Sen. John McCain. Yet it is without ambivalence that we endorse Sen. Barack Obama for president. The choice is made easy in part by Mr. McCain's disappointing campaign, above all his irresponsible selection of a running mate who is not ready to be president. It is made easy in larger part, though, because of our admiration for Mr. Obama and the impressive qualities he has shown during this long race. Yes, we have reservations and concerns, almost inevitably, given Mr. Obama's relatively brief experience in national politics. But we also have enormous hopes. Mr. Obama is a man of supple intelligence, with a nuanced grasp of complex issues and evident skill at conciliation and consensus-building. At home, we believe, he would respond to the economic crisis with a healthy respect for markets tempered by justified dismay over rising inequality and an understanding of the need for focused regulation. Abroad, the best evidence suggests that he would seek to maintain U.S. leadership and engagement, continue the fight against terrorists, and wage vigorous diplomacy on behalf of U.S. values and interests. Mr. Obama has the potential to become a great president. Given the enormous problems he would confront from his first day in office, and the damage wrought over the past eight years, we would settle for very good. The first question, in fact, might be why either man wants the job. Start with two ongoing wars, both far from being won; an unstable, nuclear-armed Pakistan; a resurgent Russia menacing its neighbors; a terrorist-supporting Iran racing toward nuclear status; a roiling Middle East; a rising China seeking its place in the world. Stir in the threat of nuclear or biological terrorism, the burdens of global poverty and disease, and accelerating climate change. Domestically, wages have stagnated while public education is failing a generation of urban, mostly minority children. Now add the possibility of the deepest economic trough since the Great Depression. Read The Full Story 20 Billion Barrel Oil Discovery Puts Cuba In The Big League 2008-10-17 23:55:46 Friends and foes have called Cuba many things - a progressive beacon, a quixotic underdog, an oppressive tyranny - but no one has called it lucky, until now . Mother nature, it emerged this week, appears to have blessed the island with enough oil reserves to vault it into the ranks of energy powers. The government announced there may be more than 20 billion barrels of recoverable oil in offshore fields in Cuba's share of the Gulf of Mexico, more than twice the previous estimate. If confirmed, it puts Cuba's reserves on par with those of the U.S. and into the world's top 20. Drilling is expected to start next year by Cuba's state oil company Cubapetroleo, or Cupet. "It would change their whole equation. The government would have more money and no longer be dependent on foreign oil," said Kirby Jones, founder of the Washington-based U.S.-Cuba Trade Association. "It could join the club of oil exporting nations." "We have more data. I'm almost certain that if they ask for all the data we have, (their estimate) is going to grow considerably," said Cupet's exploration manager, Rafael Tenreyro Perez. Read The Full Story Ex-MI5 Chief: Response To 9/11 Was 'Huge Overreaction' 2008-10-17 23:55:25 A former head of Britain's MI5 Saturday described the response to the September 11, 2001 attacks on the U.S. as a "huge overreaction" and says the invasion of Iraq influenced young men in Britain who turned to terrorism. In an interview with the Guardian, Stella Rimington calls al-Qaeda's attack on the U.S. "another terrorist incident" but not qualitatively different from any others. "That's not how it struck me. I suppose I'd lived with terrorist events for a good part of my working life and this was as far as I was concerned another one," she says. In common with Dame Eliza Manningham-Buller, who retired as MI5's director general last year, Rimington, who left 12 years ago, has already made it clear she abhorred "war on terror" rhetoric and the government's abandoned plans to hold terrorism suspects for 42 days without charge. Saturday, she went further by criticizing politicians including Jacqui Smith, Britain's Home Secretary, for trying to outbid each other in their opposition to terrorism and making national security a partisan issue. Read The Full Story Treasury's Rescue Plan Hits Technical Snag 2008-10-17 15:32:30 Banking regulators are scrambling Friday to resolve accounting roadblocks that would hold up the government's plan to revive financial markets by investing $250 billion in the nation's banks. The problem is this: Under existing rules, banks cannot count the Treasury Department's investment as part of their core capital, the foundation of money that supports a bank's operations. The very goal of the plan was to buttress those foundations, which have been eroded by recent losses, undermining the stability of the banks. The Treasury's initial investment in nine of the largest banks cannot go forward until the accounting issues are resolved, people familiar with the matter said. Regulators are now working to figure out how to change existing rules to accommodate the program, the latest in a string of ad hoc measures to address the financial crisis. Last night, the Federal Reserve issued guidance, effective tomorrow, that suspends its longstanding objections to counting such an investment toward core capital, but other regulators have yet to act. A Treasury spokeswoman declined to comment on what she described as a regulatory matter. The Treasury has not yet made the investments, but said it could do so within days. Read The Full Story U.S. New Home Construction At Slowest Pace Since 1991 2008-10-17 15:32:06 U.S. government data released Friday showed that construction of new homes declined more than expected in September as builders cut production to the slowest place since early 1991. The Commerce Department reported that construction of new homes and apartments dropped 6.3 percent last month, a much bigger decline than the 1.6 percent decrease that had been expected. The drop pushed total production to a seasonally adjusted annual rate of 817,000 units. That’s the slowest pace since January 1991, a period when the country was in a recession and going through a similar painful housing correction. The declines last month reflected weakness in many parts of the country. It was led by a 20.9 percent drop in the Northeast, where construction of single-family units dropped to the lowest level on record. Construction slipped by 16.8 percent in the West, with single-family building hitting a record low there, too. The Midwest saw a gain of 5.6 percent, although that reflected strength in apartment construction; single-family building also hit a record low in that region. Construction activity in the South was up a slight 0.5 percent. Applications for building permits, considered a good sign for future activity, also fell sharply in September, dropping 8.3 percent to an annual rate of 786,000 units, the weakest level since November 1981. Read The Full Story Stevens Claims He Was Unaware Of Renovation Details 2008-10-17 15:31:10 U.S. Sen. Ted Stevens (R-Alaska) told jurors on Friday that he and his wife tried to plan and oversee their home renovation project as best they could, but he suggested that some details may have gotten lost amid the busy life of a senator working thousands of miles away. The Alaska Republican appeared as his own star witness, trying to convince jurors that he paid every bill he received and didn't know he received any freebies during the renovations. The 2000 remodeling project is at the heart of Stevens' corruption trial. The Senate's longest-serving Republican is charged with lying on Senate financial disclosure documents about more than $250,000 in renovations and other gifts he received from his friend, oil services contractor Bill Allen. Stevens told jurors that he and his wife, Catherine, relied on their friends to oversee the project and arranged a loan to pay for it. He described making it clear that he intended to pay for everything. Read The Full Story Sarkozy Calls For Revamping Of Capitalist System 2008-10-17 15:30:38 European leaders meeting in Brussels, Belgium, on Thursday urged that a pending international summit carry out an urgent overhaul of the world's financial architecture and impose new controls on freewheeling bankers and traders. U.S. officials pledged that all good ideas would get an airing but hinted of opposition to giving new authority to international regulators. French President Nicolas Sarkozy, who holds the European Union's rotating presidency, said that he will meet President Bush on Saturday in Washington, D.C., to lay the groundwork for the conference, which the Group of Eight industrialized countries is convening. It should "re-found the capitalist system" that has governed international financial exchanges since World War II, said Sarkozy. E.U. leaders, who on Thursday completed a two-day meeting in Brussels, have called for globally coordinated regulation of the financial industry, elimination of tax havens and a compensation system in which traders are not rewarded for dangerous risk-taking. The current international financial system grew out of a U.S.-dominated meeting of 44 allied nations in 1944 at a genteel resort in Bretton Woods, New Hampshire, as victory in World War II was coming into sight. In addition to establishing the World Bank and International Monetary Fund, the conference laid down a philosophy of lowering trade barriers and easing the movement of money across borders. Launching a remake of this old model - particularly in such a short time, with so many new participants - would represent a daunting challenge at any time, but particularly during the twilight of the Bush presidency and the crisis that is still jolting banks and stock markets around the world. Read The Full Story 'Dinosaur Graveyard' Found In Southeast Utah 2008-10-17 15:30:00 Los Angeles researchers have discovered a "dinosaur graveyard" in southeastern Utah that is yielding a wealth of fossilized animals and footprints from the Jurassic and Cretaceous periods. The centerpiece of the new finds is the well-preserved skeleton of a 150-million-year-old sauropod - a long-necked herbivore - that researchers have named "Gnatalie" because the scientists were "eaten alive" by gnats while they were excavating it earlier this year. The team has so far excavated only part of the fossilized skeleton, which they estimate to be about 50 feet long. "It's big and takes a lot of time," said paleontologist Luis Chiappe, director of the Dinosaur Institute and the Natural History Museum of Los Angeles County. Gnatalie was found in the remains of what was once a big riverbed and is now a light-colored stratum on the face of an exposed cliff. Nearby in the bed were the disarticulated remains of other sauropods and meat-eating dinosaurs, including the five-foot-long femur of a brachiosaur. Read The Full Story
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