Free Internet Press Newsletter - Tuesday November 25 2008 - (813)

Tuesday November 25 2008 edition
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World Scrambles To Deal With Pirate Threat 2008-11-25 03:33:12 In their inflatable speedboats and armed with bazookas, Somalia's barefoot pirates are posing a threat to world trade. Now that they have hijacked a supertanker, Europe is deploying warships in the region, while private security firms are offering their services to shipping companies. The most important things in life are simple, at least in the world of Erik Prince. A square-jawed American with closely cropped hair, Prince served as an elite soldier in the U.S. Marines in Bosnia, Haiti and the Middle East. Given his experience, he believes that it will be relatively easy for him to distinguish between good and evil on the new battlefield, the high seas. "If a couple of guys are sitting in a six-meter (20-foot) fishing boat, in the middle of the Gulf of Aden, and if they've got bazookas in their hands, they're clearly not out there for the fishing," says Prince, 39, the CEO of Blackwater Worldwide, the world's largest and most infamous private security firm. "You have a pretty good idea of what they're up to." Prince is recruiting fellow former Marines to provide a new service: escorting merchant ships. In performing the job, their first step will be to issue warnings to attacking pirates through the ships' P.A. system. This will be followed by a few shots in the air, as a deterrent. And if none of this works, the sharpshooters on board the two helicopters on Blackwater's ship, the McArthur, will do their jobs. Up to 3,000 of his mercenaries have already been deployed to support the U.S. military in Iraq. There, they acquired the reputation of shooting first and asking questions later. This has already caused problems. In September 2007, for example, 17 civilians were killed during a Blackwater mission in Iraq. Blackwater is now receiving inquiries from dozens of new clients, mainly shipping companies and shipping insurance companies. All of them want the same thing: that Blackwater mercenaries guide their freighters and tankers safely past Somalia, through the world's most dangerous waters, the hunting grounds of bands of pirates armed with Kalashnikovs and grenade launchers, attacking anything that comes into their sights. In their flip-flops and inflatable plastic boats, they look more like small-time crooks, the sort hardly worth the effort of any coast guard vessel. And yet, in reality, these pirates are causing huge problems for the naval fleets of major powers - and, of course, for the governments in places like Berlin, Paris and Washington. Somali pirates have already attacked more than 90 ships this year, three times as many as in 2007. They have managed to hijack 39 freighters, tankers and fishing vessels. At least 14 of them are currently anchored, under heavy guard, off pirate villages along the coast. The ships' crews have been waiting for months for ransom money to arrive and secure their release. The United Nations estimate that shipping companies have already paid close to €25 million ($31 million) in ransom. Read The Full Story Dow Ends Trading Up 396 Points On Obama Plans, Citigroup Bailout 2008-11-24 18:27:52 A rescue plan for Citigroup turned into a boon for Wall Street on Monday, as stocks surged higher on the strength of financial firms buoyed by the government’s sweeping plan to assist the ailing banking giant. The Standard & Poor’s 500-stock index soared 6.4 percent or 51.78 points, bringing its two-day gain to 12.8 percent and erasing all of last week’s painful losses. Those declines had worried investors, but the Citigroup plan appears to have placated those anxieties for now. “It’s big and it’s relevant. This is a big number,” said David Kovacs, chief quantitative investment officer at Turner Investment Partners, referring to the day’s gains. The Dow Jones industrials jumped 396.97 points or 4.9 percent to close at 8,443.39, back to its level from last Wednesday. Shares of Citigroup - perhaps the gauge most widely watched on Monday - were 55 percent higher and traded above $6 a share for the first time since Thursday. Monday’s session suggested that government’s actions to stanch the losses had passed a critical test of investor confidence. Few of the enormous federal bailout efforts over the last year have been met with such an unequivocally positive reaction. Read The Full Story Editorial: Return Of The Predators 2008-11-24 18:27:33 Intellpuke: This editorial appeared in the New York Times edition for Monday, November 24, 2008. The demise of the subprime mortgage industry has been hard on predatory brokers, too. They feasted for years on bad loans until reality crashed down and the money ran out, and there they were: sharks without a frenzy. Now they are circling again. Predators of every sort have regrouped and returned to their old ways, this time as loan-modification companies, inserting themselves between hard-strapped homeowners and banks, offering to work deals - for cash up front. It’s a high-pressure, high-volume business, advertising in the usual low-rent ways: talk-radio ads, Web come-ons, fliers on car windshields. The ads are full of glossy promises, like this one for a Long Island outfit: “Reduce your mortgage rate to as low as 4%. No refinancing - no closing costs. Reduce your monthly payment. Foreclosures, late pays/bad credit okay.” It’ll cost you - in this case, 1 percent of your outstanding loan, half of it in advance. There’s often nothing illegal about this booming and largely unregulated business. Some shops are true scams, taking the money and running. But others are just immoral, profiting on fear and false hopes with expensive services that nonprofit organizations and government agencies offer for nothing. Read The Full Story Delaware's Governor Names Edward Kaufman To Replace Biden In U.S. Senate 2008-11-24 18:26:37 Senator Joseph R. Biden, Jr., of Delaware, will be replaced in the United States Senate by his longtime aide, Edward Kaufman, when Biden resigns the seat to become vice president. Delaware Governor Ruth Ann Minner announced on Monday that she would name Kaufman, the senator’s chief of staff for 19 years and a close personal friend, to fill the vacancy through 2010. Kaufman, 69, said he intended to retire after two years, leaving opening the possibility that Senator Biden’s son Beau, the state’s attorney general, could run in 2010. In remarks made in Wilmington, Delaware, after his pending appointment was made public, Kaufman said he wanted “to make clear that I that I am very comfortable with retiring after two years. I don’t think Delaware’s appointed senator should spend the next two years running for office.” Aides to Biden, who said he welcomed the appointment, said he intends to resign in the next 40 to 50 days but that an exact date has not been announced. He won re-election to a seventh term in November, running simultaneously with his vice presidential bid, and would begin that term on Jan. 6. Read The Full Story Citigroup Is Latest Tottering Giant To Receive Bailout Aid 2008-11-24 14:59:29 The federal government rushed to the aid of faltering banking giant Citigroup Inc. late Sunday night, agreeing to invest $20 billion more and accept the lion's share of losses on more than $300 billion worth of the firm's troubled mortgage-backed assets. In the largest single rescue effort thus far in the current financial crisis, the Treasury Department, the Federal Reserve and the Federal Deposit Insurance Corp. will shoulder 90% of the losses on most of a $306-billion portfolio of toxic mortgages and related securities. The company will cover the first $36 billion of losses, but beyond that will see its risk of loss shrink drastically. In return for the protection and aid, Citigroup will grant Washington nearly $30 billion of preferred shares and warrants. The firm will give the government sweeping powers over its operations, allowing it to effectively prohibit stock dividends for the next three years and pass judgment on all executive pay packages. Read The Full Story Foreclosures, Delinquencies Among 'Prime Borrowers' Are Skyrocketing 2008-11-24 14:59:07 By this year, the bleeding housing market had drained the equity from Judy Jones' home in Murrieta, but her life still seemed secure. She had a government job, after all, and a 30-year fixed-rate mortgage at 5.875%, unlike the shaky, variable-rate loans of many of her Inland Empire neighbors. Then her employer, the city of Corona, decided to deal with the economic slump by eliminating 112 positions, including Jones' job as a code enforcer. Last month, at age 61, she joined a surge of once-solid borrowers who no longer could afford their mortgages. "Every week at church, somebody else is out of work," Jones said. "I've been a homeowner a long time - the last 10 years as a single mother -- and I never missed a payment. Now look at me. And it could be you - any middle-class person who goes to work today could be walking out the door of a foreclosed house in a couple of months." Jones' concern is well-founded. Although soaring defaults on subprime loans and other dicey mortgages are a well-known cause of the country's financial crisis, delinquencies and foreclosures now are skyrocketing among "prime" borrowers - people with good credit histories who documented their incomes when applying for their relatively straightforward mortgages. Nationwide, 3.07% of prime mortgages were in foreclosure or at least 60 days late in the second quarter of this year, the latest period for which the Mortgage Bankers Association has figures, easily topping the previous record of 1.97% set in 1985. Read The Full Story U.S. Government Pays Millions For Unapproved Drugs 2008-11-24 14:57:18 U.S. taxpayers have shelled out at least $200 million since 2004 for medications that have never been reviewed by the government for safety and effectiveness but are still covered under Medicaid, an Associated Press analysis of federal data has found. Millions of private patients are taking such drugs, as well. The availability of unapproved prescription drugs to the public may create a dangerous false sense of security. Dozens of deaths have been linked to them. The medications date back decades, before the Food and Drug Administration tightened its review of drugs in the early 1960s. The FDA says it is trying to squeeze them from the market, but conflicting federal laws allow the Medicaid health program for low-income people to pay for them. The A.P. analysis found that Medicaid paid nearly $198 million from 2004 to 2007 for more than 100 unapproved drugs, mostly for common conditions such as colds and pain. Data for 2008 were not available but unapproved drugs still are being sold. The A.P. checked the medications against FDA databases, using agency guidelines to determine if they were unapproved. The FDA says there may be thousands of such drugs on the market. Medicaid officials acknowledge the problem, but say they need help from Congress to fix it. The FDA and Medicaid are part of the Health and Human Services Department, but the FDA has yet to compile a master list of unapproved drugs, and Medicaid - which may be the biggest purchaser - keeps paying. Read The Full Story	Interview With George Soros: 'The Economy Fell Off The Cliff' 2008-11-25 03:32:51 George Soros, 78, has made billions as a hedge-fund manager and investor. Germany's Spiegel magazine spoke with him about the current financial crisis, how he expect President-elect Barack Obama to respond to the economic disaster and the responsibilities borne by speculators. SPIEGEL: Mr. Soros, in spite of massive interventions by governments and federal banks the financial crisis is getting worse. The stock markets are in free fall, millions of people could lose their jobs. More and more companies are in trouble, from General Motors in Detroit to BASF in Ludwigshafen. Have you ever seen anything like it? Soros: Never. I find the present situation dramatic and overwhelming. In my latest book, “The New Paradigm for Financial Markets: The Credit Crisis of 2008”, I predicted the worst financial crisis since the 1930s. But to tell you the truth: I did not actually anticipate that it would get as bad as it did. It has gone beyond my wildest imagination. SPIEGEL: What are your fears for the coming months? Soros: I think that the dark comes before dawn. The financial markets are under great pressure because of the lack of leadership during the transition period. In the next two months, the markets will experience maximum pressure. Then we will see some initiatives from the Obama administration. How long the crisis lasts will depend on the success of these measures. SPIEGEL: The markets don't seem to have much confidence in the new president - in stark contrast to the enthusiasm in the population. Since Election Day on November 4, stocks have fallen by almost 20 percent. Soros: I have great hopes for Barack Obama. But at the time of the election the financial community had not yet fully grasped the magnitude of the economic decline. They did not anticipate that the default of Lehman Brothers would cause cardiac arrest in the markets. The economy fell off the cliff, you begin to see mangled bodies lying at the bottom. Read The Full Story U.S. Appeals Court Backs Warrantless Searches Abroad 2008-11-24 18:27:41 A federal appeals court in Manhattan upheld the convictions on Monday of three al-Qaeda operatives in a ruling that bolsters the government’s power to investigate terrorism by holding that a key Constitutional protection afforded to Americans does not apply overseas. The unanimous decision by a three-judge panel of the United States Court of Appeals for the Second Circuit holds for the first time that government agents may obtain admissible evidence against United States citizens through warrantless searches abroad. The searches must still be reasonable, as the Constitution requires, Judge Jose A. Cabranes wrote, adding that the government had met that standard in its search of the home and monitoring of the telephone of one defendant, Wadih El-Hage, a close aide to Osama bin Laden, who was a naturalized American citizen living in Nairobi, Kenya. “The Fourth Amendment’s requirement of reasonableness - but not the Warrant Clause - applies to extraterritorial searches and seizures of U.S. citizens,” wrote the judge. El-Hage and two other defendants had appealed their convictions for participating in a terrorism conspiracy, led by bin Laden, to kill Americans around the world. The conspiracy included the 1998 bombings of two American embassies, in Nairobi, Kenya, and Dar es Salaam, Tanzania, which killed 224 people and wounded thousands. They were convicted in Manhattan federal court in 2001 in the last major terrorism trial in the United States before the Sept. 11 attacks. Read The Full Story News Analysis: Another Crisis, Another Guarantee 2008-11-24 18:27:21 Guarantees that could not be honored thrust the world financial system into its worst crisis since the Great Depression.  Will a guarantee by the United States government finally restore confidence in the American financial system? Only a week after Treasury Secretary Henry M. Paulson, Jr., said that the government bailouts had stabilized the most important financial institutions, plunging stock prices forced it to step in again, both to make another direct investment and to guarantee that losses would be contained from $306 billion in possibly toxic assets on Citigroup's balance sheet. The government injected an additional $20 billion into Citigroup, on top of the $25 billion it invested a few weeks ago. It also said that it would cover 90 percent of the losses on those $306 billion in securities after Citigroup absorbed the first $29 billion of losses. The fact it was necessary to guarantee so many assets - about a sixth of the $2 trillion in assets that Citigroup reported at the end of September - was another indication of both the complexity and the opacity of many of the securities that were created by financial engineers in the great wave of innovation. That opacity evidently contributed to the delay in announcing the transaction, which did not come until just before midnight, New York time, on Sunday. That was well after Asian markets had opened with losses. They did not recover even after the announcement, but European markets rallied on Monday. Read The Full Story Obama Names Economic Team, Outlines Recovery Plan 2008-11-24 14:59:40 President-elect Barack Obama Monday announced the appointment of four key members of his new administration's economic policy team and issued a somber warning that the nation's economy "is likely to get worse before it gets better." In a news conference in Chicago, Obama introduced New York Federal Reserve Bank President Timothy F. Geithner as his nominee for Treasury secretary, a choice that cheered the stock markets when it leaked late last week. He announced, as expected, that Lawrence H. Summers would become director of the National Economic Council in the Obama White House. Obama also introduced two women as his picks to fill important policy jobs: Christina D. Romer to chair the Council of Economic Advisers and Melody Barnes as director of the Domestic Policy Council. Noting that "we do not have a minute to waste," Obama said his economic team will immediately start working on a comprehensive plan to pull the economy out of the "vicious cycle" in which he said it is currently trapped. Read The Full Story Commentary: Is Citigroup Too Big To Succeed? 2008-11-24 14:59:19 Intellpuke: This commentary was written by Washington Post business columnist Steven Pearlstein and appeared in the Post edition for Monday, November 24, 2008. Of all the rescues mounted by the government so far this year, none carries with it more symbolism, or more irony, than that of Citigroup. Until recently, Citi was not only the largest U.S. financial institution, but the very embodiment of the new financial order. Under the relentless empire building of former chief executive Sanford Weill, it was Citi that brought down the old regulatory wall that had separated commercial banking from investment banking and insurance. The combination of Citibank with Solomon Smith Barney under the bright red umbrella of Travelers Insurance was accepted with a regulatory wink and nod by the Federal Reserve while then-Fed Chairman Alan Greenspan worked to persuade Congress to make it legal by repealing the Glass-Steagall Act, put in place during the Great Depression to prevent another market crash like that of 1929. Now that another market crash has required the government to rescue Citi, there will certainly be those who wonder whether the New Dealers didn't have it right all along. The rationale for saving Citi is that with $2 trillion in assets, more than 300,000 employees and operations in 100 countries, this was a bank that was too big and too inter-connected with the rest of the financial system to be allowed to fail. The question now, however, is whether an institution of that size and scope is also too big to succeed. Read The Full Story Big Names Seek Pardons As Bush's Term Ends 2008-11-24 14:58:49 With a backlog of applications piled up at the Justice Department, high-profile criminals and their well-connected lawyers increasingly are appealing directly to President Bush for special consideration on pardons and clemency, according to people involved in the process. Among those seeking presidential action are former junk-bond salesman Michael Milken, who hired former solicitor general Theodore B. Olson, one of the nation's most prominent Republican lawyers, to plead his case for a pardon on 1980s-era securities fraud charges. Two politicians convicted of public corruption, former congressman Randy "Duke" Cunningham (R-California) and four-term Louisiana governor Edwin W. Edwards (D), are asking Bush to shorten their prison terms. It remains to be seen how Bush will respond to these requests as his term ends. The president has used his broad pardon powers rarely during seven years in office, granting 157 pardons out of 2,064 petitions, and only six of 7,707 requests for commutations, according to an analysis by former Justice Department lawyer Margaret C. Love. Aggressive appeals for clemency at the end of an administration are not unusual, but they can raise concerns about influence peddling and fairness, particularly if the president and his legal advisers are not fully transparent, pardon scholars say. Read The Full Story
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