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Friday, November 14, 2008

Free Internet Press Newsletter - Friday November 14 2008 - (813)

Friday November 14 2008 edition
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After Volatile Session On Wall Street, Dow Closes Up 577 Points
2008-11-13 16:22:37

American markets swung wildly on Thursday, flirting with new lows before they rebounded and headed into positive territory during a volatile trading session.

Stocks had drifted all morning, then dropped off a cliff at mid-day. The Dow Jones industrial average briefly fell below 8,000 points and the broader Standard & Poor’s 500-stock index sunk below its recent lows.

By the close, the three major indexes had all recovered. The Dow was up 577 points or 6.9 percent, and the broader Standard & Poor’s 500-stock index was 7 percent higher. The Nasdaq composite was up 6.5 percent.

“It’s whiplash,” said Howard Silverblatt, senior index analyst at Standard & Poor’s. “There’s still no direction one way or another.”

Thursday’s roller coaster session came after three days of losses for Wall Street. The Dow lost nearly 8 percent of its value since Monday, and the S.&P. was down 9 percent for the week - sharp declines that bring markets near lows they reached at the end of October.

“We’ve taken an enormous hit over the last several days,” said Silverblatt. “The volatility is enormous.”

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Scientists Take First Photos Of Planets Orbiting Stars
2008-11-13 16:22:02
Marking a milestone in the search for Earth-like planets elsewhere in the universe, two teams of astronomers have parted the curtains of space to take the first pictures in history of planets orbiting stars other than our sun.

"This is amazing," said Eugene Chiang, an astronomer at University of California, Berkeley. "It's almost science fiction. I didn't think this day would occur until years from now."

The first team, led by Berkeley researchers, used the Hubble Space Telescope to take a picture of a giant planet orbiting the star Fomalhaut, located 25 light-years from Earth.

Paul Kalas, the lead astronomer for the Berkeley team, said he "nearly had a heart attack" when he found the new planet, which he calls Fomalhaut b.

"It's a profound and overwhelming experience to lay eyes on a planet never before seen," he said.

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News Analysis: Obama Leaves Stage To Bogeyman Bush
2008-11-13 14:38:51
Barack Obama has no plans to participate in this weekend's G-20 crisis summit in Washington, D.C. - for good reasons, too. By skipping out, he is point out the man he feels is responsible for the U.S. financial misery: George W. Bush.

It was a harmonious scene at the White House earlier this week: George W. Bush and Barack Obama, smiling together in the Oval Office. One man came for his inaugural visit to his soon-to-be workplace, while the other appeared open to his successor, saying it would be a "stirring sight" when the Obama family arrives at the White House.

Contact won't be so close later this week, though, when Obama leaves the stage to Bush at the G-20 financial summit on Friday and Saturday. The meeting has been called in order to create the framework for a new global financial order.

Bush was determined to hold the summit in the capital and not in New York, as the United Nations had suggested. On Friday, the outgoing president will invite the other participants to a grand dinner at the White House. This will be followed on Saturday by intensive work in the stately National Building Museum. And at the end of the summit, Bush will address the media. Up to 30 minutes are scheduled for this appearance, unusually long for a closing statement - this one could also be something of a farewell message.

Foreign heads of state had hoped at first for an informal meeting with Obama this week, but that wish won't be fulfilled just yet. At first, rumors circulated that the president-elect would meet privately with German Chancellor Angela Merkel or Russian President Dmitry Medvedev. Now it appears Obama will instead send others on his behalf, to be available for conversations with foreign leaders during the summit. The mini delegation will consist of Madeleine Albright, former secretary of state under Bill Clinton, and Jim Leach, a Republican congressman of many years.
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Commentary: U.S., U.K. Could Hinder Financial Reform
2008-11-13 14:38:04
Intellpuke: This commentary was written by Charles Hawley and appeared under "The World From Berlin" column on the Spiegel Online website edition for Thursday, November 13, 2008.

World Leaders are gathering in Washington, D.C., this weekend to consider reforms to the global financial system. Many, though, are trying to lower expectations amid widespread disagreement. German commentators say Britain and the U.S. will have to change course by giving up power and influence.

When the Friday finance summit in Washington, D.C. was first announced, many thought it could very well become a second Bretton Woods, a reference to the post-World War II conference in the United States which established global financial architecture for years to come. Now, though, with the meeting of leaders from 20 developed or developing economies just a day away, a number of leaders are doing what they can to dampen expectations.

Speaking in Washington on Wednesday - where he was for a meeting with U.S. President-elect Barack Obama - French Foreign Minister Bernard Kouchner said: "I am not expecting big recipes coming out of the G-20 meeting. But I am expecting, particularly from the new administration, certainly a road map." Kouchner also said that U.S.  President George W. Bush could be a potential drag on financial system reform, according to the Agence-France Presse (AFP). Kouchner's boss, French President Nicolas Sarkozy, has come out in favor of radical financial market reforms to improve oversight and to set up an international monitoring system for financial markets.

Bush, for his part, warned on Wednesday against abandoning free-market principles in the search for a solution to the financial freeze-up. Bush said the world "should fix the problems we have rather than dismantle a system that has improved the lives of hundreds of millions of people around the world."

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Industrial Nations Headed For Major Economic Slowdown
2008-11-13 13:46:50
The world’s major industrial nations are headed for a major slowdown, the Organization for Economic Cooperation and Development (O.E.C.D.) forecast on Thursday. The leading economies are all likely to contract in the fourth quarter, and many will slip into recession, the group said, as overall economic activity in its 30 member states shrinks in 2009.

Germany is already there: The country’s central statistical office announced on Thursday that gross domestic product fell 0.5 percent in the third quarter, following a 0.4 percent fall in the second; the widely accepted definition of a recession is two or more consecutive quarters of decline in output. Figures expected Friday from other Western European nations like Britain, Italy and the Netherlands are likely to show declines as well.

The next report on United States economic output is due Nov. 25, updating preliminary figures from Oct. 30 that showed a 0.3 percent decline in the third quarter.

The worldwide financial crisis, with its sharp deterioration in housing and credit markets, is the chief culprit in the slowdown, the O.E.C.D. said. And the slowdown’s effects are likely to be felt in rising unemployment and falling inflation across the developed world.

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Editorial: Foreclosure Protection Lite
2008-11-13 13:46:07
Intellpuke: This editorial appeared in the New York Times edition for Wednesday, October 12, 2008.

Treasury Secretary Henry M. Paulson Jr. was notably absent from the rollout on Tuesday of the Bush administration’s newest foreclosure prevention plan. Maybe he was finally too embarrassed to stand before the American people yet again and offer yet another too-little, too-late solution.

He did send his protégé, the recently appointed bailout czar, Neel Kashkari, who dutifully mouthed the phrases that Mr. Paulson has used for a year now to describe the foreclosure crisis (“a necessary correction”) and to justify the administration’s pathetic responses (“there is no silver bullet”).

The nation’s banks and other financial firms also are undergoing a necessary correction for which there is no silver bullet. But that hasn’t stopped Mr. Paulson from intervening forcefully - using taxpayer dollars - on behalf of an ever-expanding cast of bailout recipients. The tight fist is reserved for homeowners.

That is a huge policy error. The whole point of the bailouts is to stabilize the financial system. But the system will not stabilize until house prices stabilize, and house prices will not stabilize until the government finds a way to stanch foreclosures on a large scale.

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Wall Street Flat After Sell-Off
2008-11-13 13:45:38
American markets struggled to find a direction on Thursday, drifting as investors weighed earnings reports from Wal-Mart and Intel and glum new economic data.

The Dow Jones industrial average veered between modest gains and modest losses on Thursday, and was flat at noon. The broader Standard & Poor’s 500-stock index was up slightly, and the Nasdaq was down slightly.

It was an indecisive morning after three days of losses for Wall Street. The Dow has lost nearly 8 percent of its value since Monday, and the S.&P. is down 9 percent for the week - sharp declines that bring markets near lows they reached at the end of October.

“We’ve taken an enormous hit over the last several days,” said Howard Silverblatt, senior index analyst at Standard & Poor’s. “The volatility is enormous.”

On Thursday, the government said that new jobless claims increased more than expected last week to a seven-year high. The Labor Department reported that the number of laid-off workers seeking unemployment benefits rose by 32,000 to a seasonally adjusted 516,000.

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Britain's Largest Phone Company, BT, To Cut 10,000 Jobs
2008-11-13 13:44:48
Britain’s biggest phone company, the BT Group, said Thursday that it would cut 10,000 jobs before the end of March to reduce costs after second-quarter earnings declined despite rising sales.

BT will cut about 6 percent of its work force after its global services unit, which supplies companies and government with Internet, telephone and security services, reported a 36 percent drop in earnings in the quarter through September. Shares, which have declined 55 percent this year, jumped 8.6 percent on Thursday in London.

“Profits in BT Global Services are simply not good enough and we are taking decisive action to put matters right,” Ian Livingston, who took over as chief executive in June, said in a statement. “What we have to do now is translate revenue growth into better profitability.”

Most of the job cuts will come from workers not directly employed by BT, such as contractors, subcontractors and offshore workers, said the company.

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U.N. Report Sees New Pollution Threat
2008-11-13 16:22:27
A noxious cocktail of soot, smog and toxic chemicals is blotting out the sun, fouling the lungs of millions of people and altering weather patterns in large parts of Asia, according to a report released Thursday by the United Nations. 

The byproduct of automobiles, slash-and-burn agriculture, wood-burning stoves and coal-fired power plants, these plumes of carbon dust rise over southern Africa, the Amazon basin and North America, but they are most pronounced in Asia, where so-called atmospheric brown clouds are dramatically reducing sunlight in many Chinese cities and leading to decreased crop yields in swaths of rural India, say a team of more than a dozen scientists who have been studying the problem since 2002.

The scientists who worked on the report said the blanket of haze might be mitigating the worst effects of greenhouse gases, by absorbing solar heat or reflecting it away from the earth. Greenhouse gases, by contrast, tend to trap the warmth of the sun and lead to a rise in ocean temperatures.

“All of this points to an even greater and urgent need to take on emissions across the planet,” said Achim Steiner, executive director of the United Nations Environment Program, in Beijing, which the report identified as one of the world’s most polluted cities, and where the report was released. “The imperative to act has never been clearer.”

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Obama To Leave His Senate Seat
2008-11-13 16:21:50
President-elect Barack Obama intends to step down from his seat in the United States Senate on Sunday, leaving his seat just as lawmakers return to Washington, D.C., for a lame-duck Congressional session.

Obama’s decision allows him to avoid participating in next week’s session on Capitol Hill. The seat will remain empty until Gov. Rod Blagojevich appoints a successor to fill out the remaining two years of the term, which he said he would do by year’s end.

“It has been one of the highest honors and privileges of my life to have served the people of Illinois in the United States Senate,” Obama said in a statement on Thursday afternoon.

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Nobel Economists Offer First Aid For Global Economy
2008-11-13 14:38:33
Five winners of the Nobel Price for Economics share their views on what the future global finance order should look like in exclusive essays for German news magazine Spiegel.

Later this week, the heads of state and government of more than 20 countries are to meet in Washington to discuss the consequences of the global financial crisis. While some countries are satisfied with strong government influence on incentives systems for managers, others are demanding more far-reaching action: nothing short of a radical shake-up of the global financial system complete with new controls and new monitoring mechanisms. Spiegel asked five previous winners of the Nobel Prize for economics to provide their own advice for what world leaders should do.

Edmund S. Phelps, 75: What Has Gone Wrong Up Until Now

It is preposterous to speak, as some Europeans have, of the "end of capitalism." A good life requires a rewarding workplace - one of change and challenge - and that requires some sort of well-functioning capitalism.

There is no question that the banking industry in the United States has gone awry. In buying mortgages for packaging in mortgage-backed securities, the banks exported to the rest of the world a profusion of assets that were overvalued by the financial companies that purchased them.

The ratings agencies, which made their calculations based only on rosy scenarios, and never on a worst-case basis, were complicit in this over-valuation.

In selling derivatives, such as default insurance and other collateralized debt obligations, the banks were selling assets that were too complex for a great many investors to understand.

Finally, the banks were their own worst enemies. The level of their loans and their borrowings to make those loans reached so high a level in relation to their capital, or equity, that any serious disturbance to asset prices - a default shock or a shock to liquidity premia - could have devastating effects on the equity of any bank and thus on its ability to function and to survive. At some banks, measured leverage was not extraordinarily high but the opacity of the assets and the resulting uncertainty over their future returns was very high.

That the banks chose to take on ever-greater levels of risk, with no end in sight until the collapse, was an effect of employee compensation: Fortunes could be made for each additional day that the bank could operate. There was no claw-back provision that would pay bonuses only for performance over the long term.

Is regulation required here? Undoubtedly some new regulations are required here and there.

Yet, many observers have argued the lack of restraints on the banking industry was more a failure of the regulatory authorities to exercise their powers than it was an absence of regulatory authority to act. A new mindset is required, above all.

A fundamental issue that regulatory discussions must confront, however, is what function society needs the banking industry to perform. Increasingly over the past two decades, the banks have tried to make money with mortgages, residential and commercial. As this has proved difficult, the banks will either have to shrink their supply of credit to the economy as a whole or else redirect some their credit to the business sector.

Unfortunately, the banks for the most part appear to have lost the expertise to make business loans and investments, which they once had in the fabulous years of investment banks such as Deutsche Bank and J.P. Morgan.

Wíll the big banks in the U.S. be able to regain such expertise?

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Despite Billions Pledged, Bailout Lacks Oversight
2008-11-13 13:47:02

In the six weeks since lawmakers approved the Treasury's massive bailout of financial firms, the government has poured money into the country's largest banks, recruited smaller banks into the program and repeatedly widened its scope to cover yet other types of businesses, from insurers to consumer lenders.

Along the way, the Bush administration has committed $290 billion of the $700 billion rescue package.

Yet for all this activity, no formal action has been taken to fill the independent oversight posts established by Congress when it approved the bailout to prevent corruption and government waste. Nor has the first monitoring report required by lawmakers been completed, though the initial deadline has passed.

"It's a mess," said Eric M. Thorson, the Treasury Department's inspector general, who has been working to oversee the bailout program until the newly created position of special inspector general is filled. "I don't think anyone understands right now how we're going to do proper oversight of this thing."

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News Analysis: Paulson's Toxic-Loan Plan Never Got Started
2008-11-13 13:46:24
Treasury Secretary Henry M. Paulson's decision to abandon plans to buy troubled bank assets shows that he has come to two conclusions about what was once the chief focus of the government's $700-billion bailout: The first is that it wouldn't work. The second is that the economists and financial experts who agitated to have capital injected directly into the banking system now appear to have been right all along.

Paulson announced Wednesday that the federal government would formally abandon plans to buy troubled mortgage-backed securities from banks and other big investors to instead focus its efforts on thawing credit markets.

The shift, however, had been in place since last month. A week after the package was passed by Congress on Oct. 3, Paulson began signaling that the thrust had changed and that much of the $700 billion instead would go toward providing capital to banks by investing in their preferred shares.

That action might be compared to replacing a gravely ill patient's slow intravenous drip with a shot of adrenaline into the heart. The stock market rallied, and over the next few weeks the capital injections intensified and talk of the asset purchases ebbed.

"The surprise content of the announcement today is precisely zero," Georgetown University finance professor Sandeep Dahiya said Wednesday. "This is not a change of policy, but a recognition of a policy that's already happened."
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U.S. Trade Deficit Declines On Lower Oil Prices
2008-11-13 13:45:56
The decline in crude oil prices helped to narrow United States trade deficit in September. But in the latest sign of a weakening economy, both imports and exports fell sharply.

The Commerce Department reported Thursday that the trade deficit shrank by $2.6 billion, or 4.4 percent, to $56.5 billion in September from $59.1 billion a month earlier. Much of that was the result of a 15.7 percent decline in petroleum imports as the price of crude oil, which is trading at less than $60 a barrel, declined throughout the month.

Excluding oil, the deficit widened to $35.5 billion in September from $33.7 billion in August as American exports slumped, said James O’Sullivan, United States economist at UBS. American exports fell $9.9 billion from August to September.

“It’s reflecting weakening domestic as well as foreign demand,” said O’Sullivan. “In some sense, they offset each other.”

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Begich Has 813 Vote Lead Over Stevens
2008-11-13 13:45:19
Just as Sen. Ted Stevens appeared set to return to Congress, felony conviction and all, his re-election bid has faltered. If he loses, it also closes a possible door into the Senate anytime soon for Gov. Sarah Palin.

As counting of early and absentee ballots continued in Stevens' race against Democrat Mark Begich, the contest for Alaska's only House seat was settled Wednesday, with the re-election of Republican incumbent Don Young for his 19th term.

In the Stevens race, Begich jumped to an 814-vote lead, after trailing by 3,200 when the day began. The tally late Wednesday was 132,196 to 131,382, with an estimated 30,000 ballots remaining to be counted, some on Friday and some next week.

"After watching the votes today, I remain cautiously optimistic," Begich, a two-term Anchorage mayor, said in a news release. "We ran an aggressive campaign, especially when it came to early voting and absentee."

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Bulgaria To Pull Troops From Iraq At Year-End
2008-11-13 13:44:31
The Bulgarian prime minister says his country will withdraw its small military force from Iraq at the end of the year.

Bulgaria has 155 servicemen at a camp near Baghdad, where they handle the security of some detainees held there.

Prime Minister Sergei Stanishev said Thursday after a Cabinet meeting that ''the presence of the Bulgarian military contingent on a humanitarian mission in Iraq ends on Dec. 31.''

Stanishev had pledged to withdraw Bulgarian troops from Iraq as part of his election campaign in 2005.

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