Free Internet Press Newsletter - Tuesday December 30 2008 - (813)

Tuesday December 30 2008 edition
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The Crash: What Went Wrong? 2008-12-29 17:48:07 How did the most dynamic and sophisticated markets in the world come to the brink of collapse? The Washington Post examined how Wall Street innovation outpaced Washington regulation. Part 1: The Beautiful Machine: Greed on Wall Street and blindness in Washington, D.C., certainly helped cause the financial system's crash. But a deeper explanation begins 20 years ago with a bold experiment to master the variable that has defeated so many visionaries: Risk. Three men, partnering with American International Group, or AIG, built an elegant and powerful system that earned billions of dollars, operating in the seams and gaps of the market and federal regulation. The firm would alter the way Wall Street did business and eventually test Washington's growing belief that capitalism could safely thrive with little oversight. Howard Sosin and Randy Rackson conceived their financial revolution as they walked along the Manhattan waterfront during lunchtime outings. They refined their ideas at late-night dinners and during breaks in their busy days as traders at the junk-bond firm of Drexel Burnham Lambert. Sosin, a 35-year-old reserved finance scholar who had honed his theories at the famed Bell Labs, projected an aura of brilliance and fierce determination. Rackson, a 30-year-old soft-spoken computer wizard and art lover, arrived on Wall Street with a Wharton School pedigree and a desire to create something memorable. They combined forces with Barry Goldman, a Drexel colleague with a Ph.D. in economics and a genius for constructing complex financial transactions. "Imagine what we could do," Sosin would tell Rackson and Goldman as they brainstormed in the spring of 1986. The three men had earned plenty of money through short-term deals known as interest-rate swaps, a clever transaction designed to protect banks, corporations and other clients from swings in interest rates that threw uncertainty into the cost of borrowing the money necessary for their business operations. They believed their revolution could never happen if they stayed at Drexel. Swaps in those days typically lasted no longer than two or three years. The trio envisioned deals lasting decades that would lock in profits and manage risks with unprecedented precision. But the junk-bond firm's inferior credit rating sharply raised its borrowing costs, making it a dubious and risky partner for such long-term deals. Read The Full Story Stocks Decline On News Of Scuttled Dow Deal 2008-12-29 17:47:32 Stocks declined Monday afternoon after a week of relative calm, as a scuttled multi-billion dollar deal between Kuwait and one of America’s largest chemical companies underscored the depth of the global economic crisis. Shares of Dow Chemical fell 15 percent after the government of Kuwait backed out of a joint venture to create a petrochemical operation, citing deteriorating oil prices and economic instability. The setback raised questions about whether Dow could go forward on a $15 billion purchase of the specialty chemicals company, Rohm & Haas, whose stock fell 16 percent. Locked credit markets have doomed hundreds of deals this year, and reduced the global volume of mergers by a third. “Look, people still can’t find financing,” said Russ Koestrich, head of investment strategy at Barclay’s Global Investors. “The long end of the credit market still remains fairly frozen.” Read The Full Story Scenic Pakistani Valley Falls To Taliban 2008-12-29 17:46:59 Taliban militants are beheading and burning their way through Pakistan's picturesque Swat Valley, and residents say the insurgents now control most of the mountainous region far from the lawless tribal areas where jihadists thrive. The deteriorating situation in the former tourist haven comes despite an army offensive that began in 2007 and an attempted peace deal. It is especially worrisome to Pakistani officials because the valley lies outside the areas where al-Qaeda and Taliban militants have traditionally operated and where the military is staging a separate offensive. ''You can't imagine how bad it is,'' said Muzaffar ul-Mulk, a federal lawmaker whose home in Swat was attacked by bomb-toting assailants in mid-December, weeks after he left. ''It's worse day by day.'' The Taliban activity in northwest Pakistan also comes as the country shifts forces east to the Indian border because of tensions over last month's terrorist attacks in Mumbai, potentially giving insurgents more space to maneuver along the Afghan frontier. Read The Full Story Gaza Residents Fear Israeli Tank Assault Is Near 2008-12-29 17:46:24 Residents of the Gaza Strip Monday braced for a long-feared Israeli tank incursion as warplanes pounded the bottled-up coastal enclave for a third straight day. The West Bank-based Palestinian Authority announced the suspension of its peace talks with Israel in protest of the Israeli campaign against the rival Hamas movement, which controls Gaza. But Israeli Defense Minister Ehud Barak promised an "all-out war against Hamas and its kind." As a third day of multiple air strikes pushed the Gazan death toll to 345, according to local medical sources, Barak addressed a stormy session of the Knesset, the Israeli parliament. "This operation will be widened and deepened as we see fit," said Barak, who promised "war to the bitter end" designed to neutralize the rocket fire from Gazan militants that had plagued southern Israeli towns. Several Arab parliamentarians were ejected for heckling and interrupting Barak's speech. Read The Full Story Arsenic Levels Too High In Water At California's Kern State Prison 2008-12-29 17:45:32 Beside a field of rolling tumbleweed in this remote Central Valley town, the state opened its newest prison in 2005 with a modern design, cutting-edge security features and a serious environmental problem. The drinking water pumped from two wells at Kern Valley State Prison contained arsenic, a known cause of cancer, in amounts far higher than a federal safety standard soon to take effect. Yet today, nearly three years after missing the government's deadline to reduce the arsenic levels, the state has no concrete plans or funding to do so. Officials spent $629,000 to design a filtration system and then decided not to build it, while neglecting to inform staff and inmates that they were consuming contaminated water. After the prison finally posted notices last April on orders from the state Department of Public Health, the inmates continued drinking the water, under protest. "We have no choice," said Larry Tillman, 38, who was serving time for burglary. "We should at the very least receive bottled water, or truck in water from another city." Read The Full Story Russia's Ruble Continues To Slide 2008-12-29 17:44:34 Russia’s Central Bank on Monday allowed its plummeting currency to drop further on the last day of trading before the long New Year’s holiday, ending a roller-coaster year for the ruble on a historic low. The ruble slid 1.5 percent on the Micex foreign currency exchange, to close at 34.9 rubles against the Central Bank’s euro-dollar basket. It hit 29.2 against the dollar - a level that has not been seen since 2005 - and 41.7 against the euro - an all-time low. It is the third sharp drop in the national currency in five days, and the 12th since Nov. 11, when the supervised slide began. Read The Full Story Prosecutors File To Release Blagojevich Recordings 2008-12-29 17:44:07 U.S. Attorney Patrick Fitzgerald wants lawmakers to hear what Gov. Rod Blagojevich said on wiretapped phone calls. Fitzgerald filed paperwork Monday to release conversations caught on wiretaps to the Illinois House panel considering impeachment proceedings. Federal prosecutors have asked a judge for permission to disclose a limited number of the intercepted conversations in a redacted form. Fitzgerald says disclosing four calls wouldn't interfere with the ongoing criminal investigation. Read The Full Story	Concern Grows For Young Survivors Of Covina Shooting Victims 2008-12-29 17:47:44 Surviving family members Sunday were grappling with how to best care for the victims' children after a Christmas Eve slaying in Covina that left nine people dead. At least 13 young people were orphaned after the shooting and two others lost one parent, according to a family attorney. "We have to help them," said Jose Castillo, a relative who came to the Covina home Sunday to pay his respects. The shooting occurred at the Knollcrest Drive home of Joseph and Alicia Ortega, who headed a large, close-knit family. They were among those who police believe perished in the shootings but who have not been officially identified by the coroner's office. Read The Full Story Inventors Find Inspiration In Nature 2008-12-29 17:47:12 For some, whale watching is a tourist activity. For Gunter Pauli, it is a source of technological inspiration. "I see a whale, I see a six-to-12-volt electric generator that is able to pump 1,000 liters per pulse through more than 108 miles of veins and arteries," he said. The intricate wiring of the whale's heart is being studied as a model for a device called a nanoscale atrioventricular bridge, which will undergo animal testing next year and could replace pacemakers for the millions of people whose diseased hearts need help to beat steadily. Pauli - who directs the Zero Emissions Research and Initiatives (ZERI) Foundation in Geneva - is an unabashed promoter of biomimicry, the science of making technological and commercial advances by copying natural processes. At a time when many are looking for a way to protect Earth's biodiversity and reduce the ecological impact of industrial products and processes, a growing number of business leaders and environmental activists alike are looking to biomimicry as a way to achieve both ends. "The idea behind biomimicry is that life has already solved the challenges that we're trying to solve," said Janine Benyus, who leads the Biomimicry Guild, a Helena, Mont.-based consulting group. "There are literally as many ideas as there are organisms." Read The Full Story Gaza Death Toll Hits 300 In Third Day Of Israeli Air Strikes 2008-12-29 17:46:41 In a third straight day of deadly air strikes against the emblems and institutions of Hamas on Monday, Israeli warplanes pounded targets in Gaza including the Interior Ministry while the Israeli Army declared areas around the beleaguered enclave a “closed military zone.” The attacks brought the death toll in Gaza to more than 300, according to Palestinian medical officials. Israel says that its onslaught - its most ferocious against Palestinians in decades - is designed to prevent Palestinians from attacking towns in southern Israel with missiles. But a rocket fired from Gaza killed a man and wounded seven in the Israeli town of Ashkelon on Monday, the Israeli Army said. Three Israelis were also stabbed by a Palestinian in a Jewish settlement in the West Bank, said the army. The air strikes followed bombing late Sunday that hit the Islamic University in Gaza, a Hamas stronghold, and the Interior Ministry, according to Hamas. Footage recorded from Israeli warplanes showed bombs striking the entrances to tunnels allegedly used to smuggle weapons into Gaza from Egypt. Read The Full Story Food, Medical Supplies Grow Scarce In Gaza Strip 2008-12-29 17:46:11 The family of Um Shadi al-Bardaweel did not sleep. The Israeli air strikes and the explosions, the sirens and the screams of strangers outside their house near the Shati refugee camp in the Gaza Strip kept them awake into the predawn hours Sunday. At the first light of dawn, the mother of five sent her son to the bakery to buy bread. Hundreds of Palestinians had the same idea, joining a never-ending line. "There's no food in the market," Bardaweel explained in an interview with a reporter. Her son did not return until nightfall. Then came another air strike close to their camp, rocking the house and shattering the windows. "Our children started screaming in a crazy way," she recalled. "After each air strike, my sons ask me: 'Why are we targeted? Will they arrest us? Will they come after us?' I tell them not to panic. We are far away from the shelling. But then tonight, the bombing reached our doorsteps." As Israeli attacks on the Gaza Strip continued for a second day, Palestinians struggled to survive amid a growing humanitarian crisis. Meanwhile, Israeli citizens living along the Gaza border prepared for retaliation from Palestinian fighters, fleeing their homes and readying bomb shelters. Humanitarian aid groups sounded the alarm Sunday about what they described as a deteriorating medical situation in the strip and urged the opening of Gaza's borders to allow supplies to flow to hospitals. There are growing shortages of vital medicines and equipment, said the aid workers. Read The Full Story Well Water Near Tennessee Spill May Be Unsafe 2008-12-29 17:45:16 Some water samples near a massive spill of coal ash in eastern Tennessee are showing high levels of arsenic, and state and federal officials on Monday cautioned residents who use private wells or springs to stop drinking the water. Samples taken near the spill slightly exceed drinking water standards for toxic substances, and arsenic in one sample was higher than the maximum level allowed for drinking water, according to a news release from the Tennessee Valley Authority, which operates the power plant where the spill occurred, the Environmental Protection Agency and other officials. TVA spokesman Jim Allen said there are four private drinking water wells in the area affected by the spill and the agency should have tests from them this week. "I think they were beyond the actual slide point of the material," EPA spokeswoman Laura Niles said of the wells. "There shouldn't be direct impact, but that's why they are sampling." Read The Full Story Rahm Emanual Informs Blagojevich He Will Resign U.S. House Seat Friday 2008-12-29 17:44:19 U.S. Rep. Rahm Emanuel (D-Illinois), who is set to serve as chief of staff to President-elect Barack Obama, will resign his U.S. House seat Friday. Emanuel sent a letter to Illinois Gov. Rod Blagojevich on Monday indicating that he planned to step down at the end of the week. The new Congress will be sworn in on Jan. 6. Blagojevich has no power to appoint Emanuel's replacement - as is the case with Obama's vacated Senate seat. Instead, the letter triggers a provision under state law that gives Blagojevich five days to set a date for a special election to replace Emanuel. The election to fill the seat on Chicago's North Side must be held within 115 days. The governor will likely set a date for a primary election as well. Emanuel took a surprisingly personal tone in his missive to Blagojevich, considering that the nature of his communication with the governor's office regarding Obama's successor has been the subject of intense scrutiny. Blagojevich stands accused by federal authorities of attempting to sell his power of appointment over Obama's seat. Read The Full Story Somalia's President Resigns 2008-12-29 17:43:44 Abdullahi Yusuf Ahmed, the cantankerous, 70-something president of beleaguered Somalia, resigned on Monday. The question now is: Will it make a difference? Could it be the death knell of Somalia’s transitional government, whose zone of control is down to a few city blocks in a country nearly as big as Texas? Or will it be the government’s saving grace? For weeks now, Western diplomats, Somali elders and United Nations officials have been crossing their fingers that Yusuf, who has been widely blamed for trying to block a peace deal with Somalia’s increasingly powerful Islamist insurgents, would step aside. Yusuf was one of Somalia’s first warlords and he never seemed able to shake his warlord ways. Western diplomats have accused him of favoring his clan at the expense of all others, enabling corruption and too often trying to solve knotty political problems, which called for a little finesse, with the business end of a machine gun. Read The Full Story
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