Free Internet Press Newsletter - Wednesday October 15 2008 - (813)

Wednesday October 15 2008 edition
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Smaller U.S. Banks Resist Federal Cash Infusion, But May Be Forced To Take It 2008-10-15 03:52:33 Community banking executives around the country responded with anger Tuesday to the Bush administration's strategy of investing $250 billion in financial firms, saying they don't need the money, resent the intrusion and feel it's unfair to rescue companies from their own mistakes. Yet regulators said some banks will be pressed to take the taxpayer dollars anyway. Others banks judged too sick to save will be allowed to fail. The government also said Tuesday that it will guarantee up to $1.4 trillion of private investment in banks. The combination of public and private investment is intended to refill coffers emptied by losses on real estate lending. With the additional money, the government expects, banks would be able to start making additional loans, boosting the economy. President Bush, in introducing the plan, described the interventions as "limited and temporary." "These measures are not intended to take over the free market but to preserve it," said Bush. On Capitol Hill, lawmakers from both parties praised the plan and scrambled to take credit for writing provisions into the law passed almost two weeks ago that allowed the government to switch from buying bad loans to buying ownership stakes in banks. Read The Full Story Commentary: Buckle Up, We Haven't Reached Bottom Yet 2008-10-15 03:52:08 Intellpuke: This commentary was written by Washington Post Business Columnist Steven Pearlstein and appeared in the Post edition for Wednesday, October 15, 2008. In the wake of an unprecedented, coordinated effort by governments around the world, the global financial meltdown has been contained, at least for the moment. Amazing what you can accomplish with a mere $2 trillion! If we're lucky, the panic phase of this crisis may be over - the hoarding of cash, the tidal waves of forced selling and indiscriminate liquidation. As the various initiatives are put in place over the coming weeks, credit should begin to flow more freely again through the financial system and out to the wider economy. There is no guarantee that the panic won't return, but certainly there is nothing that makes it inevitable. What is significant is that governments have now established that they are willing and able to do whatever is necessary to prevent the financial system from spinning out of control, which is crucial to putting a floor under investor and consumer confidence. Do not confuse this moment of calm with a stock market bottom or a sign that a serious recession has been avoided. We are in a bear market and will be for some time. That doesn't mean that you can't have good days or even long strings of good days - what traders refer to as bear market rallies. But for a bear market to become a bull market, there needs to be some evidence that corporate profits have bottomed out and are about to take off again in response to a pickup in the economy - and at this point we're a long way from that. Read The Full Story European Union's Climate Pact In Crisis 2008-10-14 20:14:50 French attempts to craft a global warming pact to make the European Union a world leader in tackling climate change are gridlocked, with governments unable to agree on how to share the pain and costs of slashing greenhouse gases by 20% within 12 years. A European summit tonight in Brussels will fail to agree on the means to the end of meeting the E.U.'s ambitious targets, warned diplomats and officials. The deal has to be struck by the end of the year for the package, which was agreed unanimously by European governments 18 months ago, to become European law. Senior officials and diplomats doubt whether that will be possible despite the fanfare that accompanied the unveiling of the policy last year. "The targets have been agreed and we have presented them all over the world," said Jose Manuel Barroso, the European Commission chief. "There will be a real problem of credibility for Europe." Read The Full Story Missing Florida Girl's Mom Indicted On Murder Charge 2008-10-14 20:14:31 The mother of a missing 3-year-old girl was arrested Tuesday and charged with killing her daughter, even though the child's body has not been found during an exhaustive four-month search. A grand jury indicted Casey Anthony on charges of first-degree murder, aggravated child abuse, aggravated manslaughter and four counts of lying to investigators about the disappearance of her daughter, Caylee, said State Attorney Lawson Lamar. The mother is being held without bond. If convicted of first-degree murder she could face the death penalty or life in prison. Prosecutors said no decision has been made on whether the death penalty will be sought. Orange County Sheriff Kevin Beary said investigators' satisfaction that the indictment had been issued was tempered by what it concludes about the girl's fate. "Speaking as a father, a day doesn't pass where I wish the evidence that we have gathered didn't add up to the painfully obvious," he said. "Sadly, I cannot change the facts surrounding the investigation." Read The Full Story Winds Diminish As Firefighters Fight 2 Wildfires In California 2008-10-14 14:54:44 Santa Ana winds calmed down this morning as watchful residents and firefighters at the northern edge of the San Fernando Valley waited to see if they would kick up again, fueling two wildfires that have already claimed two lives, 10,000 acres and 49 structures. The 4,824-acre Marek fire near Lake View Terrace was 70% contained this morning, and the Sesnon fire that started Monday in Porter Ranch was still burning in a southwesterly direction and threatening homes in Los Angeles and Ventura counties. It almost doubled in size overnight to 9,872 acres. "Once again, we are facing the perfect storm of high winds, low humidity and high heat," said Gov. Arnold Schwarzenegger, speaking today at the command post for the Marek fire at Hansen Dam Recreation Center in Lake View Terrace. Statewide, from the U.S.-Mexico border to Los Angeles, wildfires in recent days have consumed 26,000 acres and 64 structures, Schwarzenegger said. Inspector Paul Hartwell of the Los Angeles County Fire Department said today that although winds appeared calm, they could kick up by 11 a.m. "This thing is not out. This thing is not over," said Hartwell. "This is halftime. Don't get comfortable, we're not comfortable." Read The Full Story PepsiCo To Cut 3,300 Jobs, Close 6 Plants As Profits Fall 10 Percent 2008-10-14 14:54:21 PepsiCo announced plans Tuesday to cut 3,300 jobs and close six plants as it deals with lagging U.S. drinks sales and a surging dollar, which will hurt profits from its rapidly growing international business. The announcement came as the global snacks and drinks maker reported a 9.5 percent drop in third-quarter profit and offered a downbeat profit outlook. The job cuts amount to roughly 1.8 percent of PepsiCo's global work force of about 185,000 employees. The cuts will affect managerial and factory jobs both in and outside the U.S. Most will be eliminated in the coming months, said Chief Financial Officer Richard Goodman. The nation's second-largest drink maker said it expects to generate a pretax savings of more than $1.2 billion over the next three years, with $350 million to $400 million to be saved in 2009. "While we can't control the macro economic situation, we can enhance PepsiCo's operating agility to respond to the changing environment," Chief Executive Indra Nooyi said in a statement. Read The Full Story Commodity Prices Fall In Financial Crisis 2008-10-14 03:35:14 The global financial panic and the economic slowdown have put at least a temporary end to the commodity bull market of the last seven years, sending prices tumbling for many of the raw ingredients of the world economy. Since the spring and early summer, when prices for many commodities peaked amid fears of permanent shortage, wheat and corn - two cereals at the base of the human food chain - have dropped more than 40 percent. Oil has dropped 44 percent. Metals like aluminum, copper and nickel have declined by a third or more. The swift turnaround is the brightest economic news on the horizon for consumers, putting money into their pockets at a time they need it badly. Gasoline prices in the United States are falling precipitously - by about 24 cents over the last five days, to a national average of $3.21 a gallon on Monday - and analysts said they could go below $3 a gallon nationally this fall, down from a high of $4.11 a gallon in July. Prices for most commodities remain elevated by past standards, and they rose a bit on Monday amid the broad market rally. The trend seems to be downward as traders weigh the prospect that the global economic crisis will lead to sharp drops in demand. The big question is whether prices will drop all the way to long-term norms or whether Asia’s continuing economic boom has set a floor. The rapid commodity decline has eased fears of inflation, a reason central banks were able to lower interest rates around the world last week in an effort to salvage economic growth. It also represents a fundamental shift of view that is driving markets these days. Read The Full Story Editorial: Mr. Paulson's Client 2008-10-14 03:34:48 Intellpuke: This editorial appeared in the New York Times edition for Monday, October 13, 2008. Call it bailout, take two. With credit markets frozen and the financial system teetering on collapse, Treasury Secretary Henry Paulson has decided to invest $250 billion directly in the nation’s banks in exchange for an ownership stake. It is a bold move for a desperate time. But Mr. Paulson still has to do more to ensure that American taxpayers, whose money he is investing, get the best deal. The hope is that new capital - along with a government guarantee for new bank debt issued over the next three years - will get the banks lending freely again. The approach - an about-face from Mr. Paulson’s earlier plan to buy up the banks’ bad assets - is more in line with European efforts. Coordination is essential to manage what has clearly become a global financial crisis. By taking an equity stake, taxpayers could have a better chance of seeing an eventual return on their investment. If the banks do turn around, then the government, as a shareholder, reaps the benefits. But we are disturbed that Mr. Paulson wants the government to be a passive investor with little say on how these banks are run, despite the billions of dollars at risk. That means the banks’ current boards and current management - the same people who got the country into this mess - will still be making all of the decisions. Read The Full Story Sex Scandal Shakes Florida Congressional Race 2008-10-14 03:34:01 The Florida congressman who succeeded Mark Foley after he resigned because of a sex scandal is now embroiled in a sex scandal of his own, and has requested a Congressional ethics investigation to clear his name. The congressman, Tim Mahoney, a Democrat, agreed to a $121,000 settlement with a former mistress who worked on his staff and was threatening to sue him, said two Democratic staff members who have been briefed on the settlement. The revelation, first reported by ABC News, could cost Mahoney his House seat. His South Florida district is conservative, and he was already in one of the most competitive races involving an incumbent Democrat. Mahoney was elected two years ago after the resignation of Representative Foley, a Republican, whose lewd Internet messages to Congressional pages created a national outrage. Without denying the accusations or explaining how he might benefit from an ethics investigation, Mahoney said the truth would vindicate him. Read The Full Story Commentary: Now It's Wall Street's Turn 2008-10-14 03:33:17 Intellpuke: This commentary was written by Washington Post Business Columnist Steven Pearlstein. It appeared in the Post edition for Tuesday, October 14, 2008. Mr. Pearlstein's commentary follows. The country has done for Wall Street. What is Wall Street willing to do for the country? Now, what was that about Hank Paulson having blown it? How he foolishly let Lehman Brothers go under and started a chain reaction that quickly turned into a financial meltdown? How he was so focused on his cockamamie plan to buy up distressed mortgages and mortgage-backed securities, instead of injecting capital into banks in exchange for shares? How he and the other finance ministers were so way behind the curve this past weekend in failing to come up with a detailed and coordinated plan to restore confidence in financial markets? The truth is we were going to have a serious financial crisis no matter what Paulson did or didn't do, thanks to the incredible ineptitude of Wall Street and the nation's financial regulators over the past few years, whether an insolvent and mismanaged investment bank was rescued or not. Lehman was the veritable straw that finally broke the back of the financial camel overloaded with debt. If it hadn't been Lehman, it would have been something else. Read The Full Story	CIA Tactics Endorsed In Secret White House Memos 2008-10-15 03:52:21 The Bush administration issued a pair of secret memos to the CIA in 2003 and 2004 that explicitly endorsed the agency's use of interrogation techniques such as waterboarding against al-Qaeda suspects - documents prompted by worries among intelligence officials about a possible backlash if details of the program became public. The classified memos, which have not been previously disclosed, were requested by then-CIA Director George J. Tenet more than a year after the start of the secret interrogations, according to four administration and intelligence officials familiar with the documents. Although Justice Department lawyers, beginning in 2002, had signed off on the agency's interrogation methods, senior CIA officials were troubled that White House policymakers had never endorsed the program in writing. The memos were the first - and, for years, the only - tangible expressions of the administration's consent for the CIA's use of harsh measures to extract information from captured al-Qaeda leaders, said the sources. As early as the spring of 2002, several White House officials, including then-national security adviser Condoleezza Rice and Vice President Cheny, were given individual briefings by Tenet and his deputies, the officials said. Rice, in a statement to congressional investigators last month, confirmed the briefings and acknowledged that the CIA director had pressed the White House for "policy approval." The repeated requests for a paper trail reflected growing worries within the CIA that the administration might later distance itself from key decisions about the handling of captured al-Qaeda leaders, former intelligence officials said. The concerns grew more pronounced after the revelations of mistreatment of detainees at the Abu Ghraib prison in Iraq, and further still as tensions grew between the administration and its intelligence advisers over the conduct of the Iraq war. Read The Full Story Buckley Endorses Obama, Resigns From National Review 2008-10-15 03:51:51 Christopher Buckley, the son of conservative icon William F. Buckley, said Tuesday he's resigned from the conservative National Review days after endorsing Barack Obama's White House bid, among the most powerful symbols yet of the conservative discontent expressed this election cycle. In an online column, Buckley said he had decided to offer his resignation from the magazine his father founded after hundreds of readers and some National Review colleagues expressed outrage he was backing the Illinois senator. "While I regret this development, I am not in mourning, for I no longer have any clear idea what, exactly, the modern conservative movement stands for," Buckley wrote. "Eight years of 'conservative' government has brought us a doubled national debt, ruinous expansion of entitlement programs, bridges to nowhere, poster boy Jack Abramoff and an ill-premised, ill-waged war conducted by politicians of breathtaking arrogance. As a sideshow, it brought us a truly obscene attempt at federal intervention in the Terry Schiavo case," he also wrote. The resignation comes four days after Buckley formally endorsed Obama on the Website The Daily Beast, writing the presidential campaign had made John McCain "inauthentic," and Obama appeared to have a "first-class temperament and first-class intellect." Read The Full Story Commentary: If China Spends Its Trillions, Recession Could Be Averted 2008-10-14 20:14:41 ntellpuke: This commentary was written by Andrew Graham, an economist and master of Balliol College, Oxford,  and appeared in the Guardian edition for Wednesday, October 15, 2008. China should be invited into the G8 immediately, it has a vital role to play in restoring global stability. The massive government interventions announced on both sides of the Atlantic in the last 48 hours may, just, have prevented the world's financial system from imploding. Alongside the largest monetary meltdown in half a century, we face collapsing consumer and business spending. These problems are closely intertwined - the financial crisis is part of the cause of the collapse in spending, and the collapse in spending is now undermining financial markets - but they need separate (and yet non-conflicting) solutions. To get a handle on these problems, start on the financial side and two big "facts" about banking and money. First, since the emergence of modern capitalism some three centuries ago, we have seen more than 30 major financial crises - about one every 10 years. But this is an average. In the U.K., we've had more than 30 years since the last banking rescue (the secondary banks in 1974). One result was a growing belief, now shattered, that banking could be left largely to the private sector. In the U.S., the ideology of the unfettered market is more deep-seated. Despite the collapse and rescue of Continental Illinois in 1984, despite the savings and loans crisis of the 80s, and despite the rescue of Long-Term Capital Management in 1998, the U.S. clung, until the last few weeks, to the belief that the banks could largely be left alone. Nevertheless, economic history is clear: banking systems almost always eventually over-extend themselves and have to be rescued - not just the Brits and the Americans, but the Japanese and the Latin Americans in the early 80s and then the Scandinavians, the south Asians and the Russians in the 90s. Secondly, money is not like cars or cups of tea - you cannot test-drive or taste it. It depends, above all, on trust and confidence which cannot be bought or exchanged. Money is the bedrock for the whole economic system. If you are to avoid catastrophe when confidence evaporates, as it has done in the recent turmoil, the only option is for the state to underpin the core financial institutions. Read The Full Story After Early Rally, U.S. Stocks Slide 2008-10-14 14:54:55 An initial bounce on Wall Street lost steam on Tuesday morning as stocks traded nearly flat after the Treasury Department unveiled a rescue plan it described as “extensive, powerful and transformative.” The Dow Jones industrial average jumped more than 360 points at the opening bell, minutes after the nation’s leading financial officials appeared in Washington, D.C., for a joint appearance introducing the $250 billion plan to inject money directly into major banks in return for equity stakes. The plan came on the heels of similar actions taken by governments around the world, in a coordinated effort by central banks to combat the credit crisis. Asian and European markets had rallied overnight, with Japan’s Nikkei index rising a remarkable 14 percent in a single session. By 2 p.m., stocks had given up some of those gains. The Dow was down about 21 points and the broader Standard & Poor’s 500-stock index, which had risen 3.5 percent, was essentially flat. In perhaps a more critical test of the rescue plan, there were signs that the frozen credit markets had started to thaw. Read The Full Story Russian Spacecraft Docks With International Space Station 2008-10-14 14:54:32 An American computer game designer boarded the international space station Tuesday, floating onto the orbital outpost 35 years after his astronaut father circled the Earth on Skylab. Richard Garriott was greeted by another man who has turned space flight into a family tradition: Russian cosmonaut Sergei Volkov, whose father is a decorated veteran of the Soviet space program. Both proud fathers - Owen Garriott with a U.S. flag patch on his jacket and Alexander Volkov with a Soviet medal pinned to his chest - watched on a screen at Russian Mission Control outside Moscow as the Soyuz craft that delivered Garriott homed in on the station and docked flawlessly. "It's looking great and they are starting off on a fascinating new adventure," Owen Garriott told the Associated Press. About 90 minutes later, Garriott and his two crewmates floated through a hatch and onto the station, where they got bear hugs from Sergei Volkov and the other two men aboard. Read The Full Story China, Russia Unveil Boundary Markers 2008-10-14 14:54:05 China and Russia jointly unveiled boundary markers Tuesday in a final step toward resolving a territorial dispute along their eastern border, said their foreign ministries. The two Cold War rivals battled over the frontier in the 1960s and 1970s, but have agreed to a settlement under which Russia will reportedly cede 67 square miles (174 square kilometers) of territory to China. The deal is "the result of years of negotiations and shows our strategic partnership," Chinese Foreign Ministry spokesman Qin Gang told reporters at a regularly scheduled news conference. "The settlement is a concrete step of the two countries to implement a treaty of good neighborliness and friendly cooperation." Under the agreement, Russia is handing over all of Yinlong Island, known as Tarabarov Island in Russian, along with the largely uninhabited half of Heixiazi Island, or Bolshoi Ussuriysky. Read The Full Story U.S. Backs Mitsubishi's $9 Billion Stake In Morgan Stanley 2008-10-14 03:34:59 U.S. Backs Mitsubishi's $9 Billion Stake In Morgan Stanley U.S. officials paved the way Monday for a private $9 billion investment into Morgan Stanley by Japan's largest financial firm by promising to protect its stake in the struggling Wall Street bank in the event of a government bailout. Mitsubishi UFJ Financial is throwing a lifeline to Morgan Stanley in exchange for 21 percent of the company. The deal bolsters the capital position of the Wall Street firm, whose shares had declined sharply over the past few weeks as some traders bet it would collapse. Monday, Morgan Stanley's shares jumped 87 percent, or $8.42, to close at $18.10. Mitsubishi had said last month it would make an investment in Morgan Stanley, but questions emerged about whether the deal would go through after Morgan Stanley's shares plunged and the Japanese stock market tanked. The new deal is more generous to Mitsubishi, offering the Japanese bank preferred stock paying a 10 percent dividend rather than a mix of common and preferred shares. Mitsubishi also was concerned about a U.S. government plan to take equity stakes in banks, perhaps wiping out existing shareholders. Treasury officials assuaged those concerns over the weekend, pledging that if the government did make investments in banks, Mitsubishi wouldn't see its investment disappear, according to a person familiar with the conversations. A Morgan Stanley official said company executives believed throughout the process that the bank doesn't need a capital injection from the government. Read The Full Story Iraq Opens Bidding On Oil Fields 2008-10-14 03:34:36 Iraq opened bidding Monday on the first round of contracts to develop its oil fields since the fall of Saddam Hussein,  a move intended to jump-start a sector crucial to the country's rebuilding. Iraq has the world's third-largest oil reserves. Yet, despite five years of efforts and $2.7 billion in U.S. reconstruction funds, Iraqi production is still well below the frequently cited U.S. goal of 3 million barrels per day. Oil fields have been looted and attacked by insurgents since the 2003 U.S.-led invasion, technical experts have fled abroad because of violence and the infrastructure is creaky after years of international sanctions and neglect. Iraq needs billions of dollars of investment to increase production, experts say. "Current production is by no means meeting demand for the reconstruction of the country," Iraq's oil minister, Hussein al-Shahristani, told reporters after meeting Monday in London with representatives of three dozen international oil companies. "International companies are needed to fast-track development. The response was fairly encouraging." Vera de Ladoucette, director of Middle East research for Cambridge Energy Research Associates, noted that the first round of bidding involves fields representing a third of known Iraqi oil reserves. Read The Full Story U.S., Iraq Seek Plan B On Allowing U.S. Troops To Stay Beyond Dec. 31 Deadline 2008-10-14 03:33:44 With time running out for the conclusion of an agreement governing American forces in Iraq, nervous negotiators have begun examining alternatives that would allow U.S. troops to stay beyond the Dec. 31 deadline, according to U.S. and Iraqi officials. Neither side finds the options attractive. One possibility is an extension of the United Nations mandate that expires at the end of the year. That would require a Security Council vote that both governments believe could be complicated by Russia or others opposed to the U.S.-led war. Another alternative would amount to a simple handshake agreement between Iraqi Prime Minister Nouri al-Maliki and President Bush to leave things as they are until a new deal, under a new U.S. administration, can be negotiated. Negotiators have been stuck for months on the question of legal jurisdiction over U.S. troops and immunity for possible crimes. Even if the sides reach a deal in the next few days or weeks, it is not clear that a formal status-of-forces agreement could be approved by the end of the year. Maliki has pledged to submit an accord to Iraq's divided parliament before he signs it - a promise he reaffirmed last week during a visit to Grand Ayatollah Ali Sistani, Iraq's most influential Shiite cleric. Sistani has said he will not endorse any document without the support of Iraq's population and political factions. If the parliament refuses, Maliki would have "no choice" but to request a U.N. extension "because the American forces will lose their legal cover on Dec. 31," he told the Times of London in a weekend interview. "If that happens, according to international law, Iraqi law and American law, the U.S. forces will be confined to their bases and have to withdraw from Iraq," said Maliki. U.S. officials do not dispute that the absence of an agreement would probably require an immediate end to combat operations and, at a minimum, confinement to bases on Jan. 1. Officials refused to discuss the sensitive issue on the record while negotiations are ongoing. Read The Full Story
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