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Saturday, March 21, 2009

Free Internet Press Newsletter - Saturday March 21 2009 - (813)

Saturday March 21 2009 edition
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Afghanistan On The Brink - The West Stares Into The Abyss
2009-03-20 23:06:28

Afghanistan is on the brink of chaos: That is the stark message from local leaders, the U.S. military and development workers in the troubled country. The elected government, they warn, can no longer compete with the Taliban.

On the Red Bridge across the Red River, protected by watchtowers on both sides, Mohammed Halim Fidai orders his convoy to stop so that he can take a short, symbolic walk through enemy territory 50 kilometers (31 miles) west of Kabul. His three Toyota pickups, with machine guns mounted on their beds, block Highway One at the front of the convoy, while another three Toyotas bring up the rear in the snow-covered landscape. Policemen, their weapons at the ready, fan out, forming a cordon around Fidai.

Fidai, who is the governor of Wardak province in central Afghanistan, walks around in thin-soled shoes that turn dark from the melting snow. "Look at me," he says. "I walk where I please. I can move around anywhere without any trouble at all. All this talk about the Taliban controlling everything is nonsense."

Fidai is on his way to visit a resident of the village of Badam who has just returned from a pilgrimage to Mecca. After the stop on the bridge, the convoy heads away from the highway, traveling along ice-covered dirt roads and crossing crumbling bridges before reaching Badam, a tiny market town in the Nirkh district often described as a Taliban stronghold. There are said to be many such places in Fidai's province. Indeed, six of the eight districts in Wardak are allegedly under Taliban control.

A collection of mud buildings - farms, huts, barns - is scattered across the vast plateau. The mountains dominate the horizon like a massive wall. Offshoots of the Hindu Kush range, these peaks, most of them between 4,000 and 5,000 meters tall (13,120-16,400 feet), are so numerous that most are unnamed.

The house of the returned pilgrim in Badam is surrounded by neighbors and friends who have come to congratulate him. They drink water from the holy land in small glasses and accept gifts from the pilgrim. Children stand barefoot in the snow, and men protect their faces from the cold with their turban scarves. The governor's convoy is greeted with smiles. Tea is served and pleasantries are exchanged, and the visitors and their host embrace. Fidai nods approvingly, as if to say: I go where I please. You see, all this talk of the Taliban is nothing but talk.

The talk which the plucky governor is trying to resist is loud - and getting louder. The enemy has been steadily gaining ground in Afghanistan for at least two years now. The Taliban already controls the south, the east and the west of the country, but now it has gained a foothold once again in central Afghanistan, in Wardak, Logar and Paktia, the provinces south and west of Kabul, not far from the capital.

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Gearing Up For The G-20 Conference
2009-03-20 23:05:41

The European Union has made up its mind: Fighting the financial crisis with American-style stimulus plans will not be the model for Europe. At a summit in Brussels this week, European leaders are preparing the party line - and it is to focus on a new financial world order.

Angela Merkel, Gordon Brown and Nicolas Sarkozy may be in Brussels, Belgium, but they're looking forward to the G-20 summit in London, England, where in two weeks they expect a showdown over the financial crisis among the most powerful economies in the world - namely the United States, China and other leading world economies.

Indeed, the so-called "spring summit" of E.U. leaders in Brussels this week looks more and more like a training camp for the G-20 conference on April 2. The 27 European leaders are using the day-and-a-half meeting in Brussels to cobble together some fundamental positions and negotiating strategies for London. German Chancellor Angela Merkel says she'd like all of Europe to speak with a single voice at the April summit.

Only the four largest E.U. nations and the Czech Republic - which currently holds the rotating E.U. presidency - will go to London. But they will represent the interests of the whole European bloc. On Thursday evening the E.U. leaders didn't take long to agree on the two essential messages: Europe doesn't want to see any more stimulus packages, but it does want to lead as a force to reform the world's finance markets.

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Fannie Mae: Bonus Cuts May Derail Housing Recovery
2009-03-20 17:37:03

The government-appointed chief executive of Fannie Mae warned this morning that legislation in Congress to severely tax bonuses could imperil the Obama administration's housing recovery program.

Federally controlled Fannie Mae and Freddie Mac, which own or back half the nation's home loans, are the major players in the administration's efforts to lower mortgage rates and keep struggling borrowers in their homes by modifying distressed mortgages and preventing foreclosures. Employees said Thursday the legislation could ignite an exodus of staffers.

"I am deeply concerned that eliminating our retention plan would jeopardize our ability to fulfill the mission the Government has given us to address the housing crisis, including the Administration's Homeowner Affordability and Stability Plan that so many of you have been working nights and weekends to carry out," Fannie Mae chief executive Herbert Allison wrote in an internal message to employees this morning.

"Your experience and expertise make you highly competitive in the job market, especially as so many other companies need your talents to work through this crisis," wrote Allison, who declined a salary and bonus in 2008. "I know headhunters are calling throughout the company every day and many of you have declined offers of higher pay elsewhere to help us implement the Government's Making Home Affordable program for the American public."

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U.S. Markets Take A Tumble
2009-03-20 17:36:37

Stocks fell Friday afternoon as investor confidence in banking stocks waned, but Wall Street still managed to squeak by with another positive week.

The Dow Jones industrial average and the Standard & Poor's 500 stock index were up 0.8 percent and 1.5 percent respectively this week. The Nasdaq composite index gained nearly 2 percent.

It was the markets' second consecutive week in positive territory and the first time it has registered back to back weekly gains since last May.

The drop Friday came as the Congressional Budget Office said the federal deficit will pass $1.8 trillion this year, a far deeper debt level than the White House had estimated.

The Dow, the index of blue chip stocks, closed down 1.65 percent, or about 122 points, and the broader S&P was off 2 percent, or 15.5 points. The tech-heavy Nasdaq composite index fell 1.8 percent, or 26 points.

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Bernanke: Financial Firms' Pay Policies Need Closer Scrutiny
2009-03-20 17:36:11

Amid public outrage over employee bonuses at troubled firms like Merrill Lynch and the American International Group, Federal Reserve Chairman Ben S. Bernanke on Friday called for executive pay policies that are created with a company’s long-term health in mind.

“Poorly designed compensation policies can create perverse incentives that can ultimately jeopardize the health of the banking organization,” Bernanke said during a speech in Phoenix, Arizona, to the Independent Community Bankers of America. “Management compensation policies should be aligned with the long-term prudential interests of the institution.”

His speech came as lawmakers in Washington, D.C., tried to claw back some $165 million in bonuses paid to employees at A.I.G., which has received $170 billion in government aid. The furor over bonus payments at the government-controlled insurance giant prompted the House to pass a bill on Thursday that would tax 90 percent of bonuses paid this year by firms that have received bailout funds.

In his speech, Bernanke also called for smarter regulation of the financial system that would address the problem of companies deemed “too big to fail.” Huge and interconnected institutions like Citigroup and A.I.G. have received billions in government aid to keep their troubles from pulling down other companies.

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Israeli Coalition Seems Fated To Clash With U.S.
2009-03-20 17:35:15
The foreign minister of Israel's incoming government lives in a West Bank settlement and will begin life as a diplomat battling the perception that he is anti-Arab.

A leading contender to become defense minister once characterized the two-state solution that forms the basis of U.S. and international policy toward Israel and the Palestinians as "a story the Western world tells with Western eyes"; and the potential make-or-break votes in the country's new parliamentary coalition belong to legislators from religious parties that would like to expand settlement construction in the occupied West Bank.

The coalition that will make up Israel's next government is not yet final. On Friday, Prime Minister Binyamin Netanyahu received permission to extend negotiations for two more weeks in hopes of reaching agreements with some of the country's more moderate parties and forging a broader-based unity government in the 120-seat parliament. Netanyahu thus far has not been able to strike deals with those parties, instead pulling from conservative and religious factions to create a narrow majority that seems tailor-made for conflict with the Obama administration, which supports a Palestinian state and is expected to push for progress on drawing its borders. Netanyahu is himself a skeptic when it comes to Palestinian statehood and has referred to U.S.-backed peace talks as a waste of time.

While Netanyahu has compromised in past dealings with Washington - an earlier term as prime minister was cut short after he made land concessions at the urging of President Bill Clinton - his still-to-be-finalized coalition partners may not leave him much room to maneuver.

"The more narrow the government the more difficult it will be for Netanyahu to make some gesture towards the U.S.," said Gerald Steinberg, chairman of the political science department at Bar-Ilan University outside Tel Aviv. On issues such as settlements, if pressure comes from Washington, "it is likely to lead to a major confrontation."

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AIG Warns Staff To Travel In Pairs Following Death Threats Over Bonuses
2009-03-20 23:05:58

The embattled U.S. insurance company AIG has warned its staff to travel in pairs after dark, not to wear company logos and to avoid discussing their work outside the office, as public outrage boils over at multimillion-dollar executive bonuses.

AIG's employees have been subjected to death threats since the company handed out $165 million (£115 million) in "retention" awards to employees in its disastrously loss-making financial products division this week.

Recipients of the bonuses said they feared for their own safety. A union-backed campaign group is today taking protesters on a bus tour of AIG executives' homes in a wealthy enclave of Connecticut known as the "gold coast".

In a leaked company-wide memo, AIG's corporate security team this week warned staff to take special precautions "due to a growing sense of public attention fueled by increased media scrutiny".

The memo, posted on the New York website Gawker, urges staff to "avoid wearing any AIG apparel (bags, shirts, umbrellas etc) with the company insignia". It advises workers to take off identity badges when they go outside, to report the presence of any strangers, and to call the emergency services if they think they are being followed. "At night, when possible, travel in pairs and always park in well-lit areas," it reads.

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Latest CIA Scandal Puts Focus On Agency's Self-Policing Efforts
2009-03-20 17:37:16

As a novice CIA case officer in the Middle East, Andrew Warren quickly learned the value of sex in recruiting spies. Colleagues say that he made an early habit of taking informants to strip clubs, and that he later began arranging out-of-town visits to brothels for his best recruits. Often Warren would travel with them, according to two colleagues who worked with him for years.

His methods earned him promotions and notoriety over a lengthy career, until Warren, 41, became ensnared in a sex scandal. Two Algerian women have accused the Virginia native of drugging and sexually assaulting them, and, in one instance, videotaping the encounter.

Six weeks after the allegations came to light, Warren has been formally notified by CIA Director Leon E. Panetta of his impending dismissal, according to U.S. government officials familiar with the case; but the episode - one of three sex-related scandals to shake the CIA this year - has drawn harsh questions from Congress about whether the agency adequately polices its far-flung workforce or takes sufficient steps to root out corrupt behavior.

The CIA says that these problems involve a tiny fraction of its workforce, and that those found to have breached rules are punished or fired. Former officers say the cases underscore a perennial challenge: guarding against scandal in a workforce - the size of which is classified but is generally estimated to be 20,000 - that prides itself on secrecy and deception.

"You have an organization of professional liars," said Tyler Drumheller, who oversaw hundreds of officers as chief of the agency's European division. Experienced field managers are needed, he said, because inevitably "some people will try to take advantage of the system ... and it's a system that can be taken advantage of."

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U.S. Submarine, Warship Collide In Strait Of Hormuz
2009-03-20 17:36:50
A nuclear-powered United States submarine collided with a Navy warship early Friday in the Strait of Hormuz, the narrow passage through which much of the world’s oil must pass on its way to market, the Navy announced Friday.

Both ships were damaged in the crash and 15 sailors on board the submarine, the Hartford, were slightly injured, according to the Fifth Fleet, which is based here in Bahrain. A spokesman for the fleet, Lt. Nate Christensen, said none of the sailors needed medical evacuation and all were back on duty.

The second vessel, the New Orleans, an amphibious assault ship carrying 1,000 personnel, ruptured its fuel tanks and spilled 25,000 gallons of fuel into the Gulf, he said.

The submarine was submerged and the two vessels were headed to port around 1 a.m. when the collision occurred, Lieutenant Christensen said. The fleet reported that there was no damage to the submarine’s nuclear reactor and that both ships were able to return to port on their own power.

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U.S. Federal Deficit Soars Beyond Previous Estimates
2009-03-20 17:36:27

Deteriorating economic conditions will cause the federal deficit to soar past $1.8 trillion this year and leave the nation wallowing in a sea of red ink far deeper than the White House had previously estimated, congressional budget analysts said Friday.

In a new report that provides the first independent analysis of President Obama's budget request, the nonpartisan Congressional Budget Office predicted that the administration's agenda would generate deficits averaging nearly $1 trillion a year over the next decade - $2.3 trillion more than the president predicted when he unveiled his spending plan just one month ago.

Although Obama would come close to meeting his goal of cutting the deficit in half by the end of his first term, the CBO predicts that the nation's annual operating deficit would never drop below 4 percent of the overall economy over the next decade, a level administration officials have said is unsustainable because the national debt would grow too rapidly.

By the CBO's estimate, for example, the nation's debt would grow to 82 percent of the overall economy by 2019 under Obama's policies, compared with a pre-recession average of 40 percent.

The new report could complicate efforts to win congressional approval for Obama's $3.6 trillion budget request for the fiscal year that begins Oct. 1. Democrats in the House and Senate are currently putting the finishing touches on their versions of Obama's spending plan, which calls for an expensive expansion of health coverage for the uninsured and new spending on education programs, as well as a first-time tax on greenhouse gas emissions.

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$2.5 Billion In Merrill Bonuses Would Avoid Tax In U.S. House Bill
2009-03-20 17:35:37
Merrill Lynch's $3.6 billion bonus pool has been among the most controversial payouts on Wall Street. But most of those bonuses, which included some 700 awards of over $1 million, would not be affected by a new bonus tax being considered in Congress.

The tax, which passed in the House on Thursday, would affect only bonuses paid during 2009. Typically, Merrill’s bonuses are paid in January, along with the rest of Wall Street’s, but the investment bank pushed $2.5 billion of the bonuses out the door in December in advance of its merger with Bank of America.

It is unclear whether the bonus tax will pass in the Senate, where the tax rate being proposed on the bonuses is 33 percent. That is far lower than the 90 percent tax that passed in the House. It is also unclear how many banks the tax would affect. Both bills apply to companies that received bailout money, but the House bill covers only the largest companies while the Senate bill includes mid-size banks.

The bonus tax was hastily proposed this week in response to the public outcry over bonuses paid at the American International Group; but that furor was just the latest iteration of populist outrage over Wall Street misdeeds that kicked off in January, when the focus was on Merrill’s bonuses.

A spokeswoman for Representative Joseph Crowley, Democrat of New York, said that bonuses from December were not included because lawmakers wanted to keep the scope of the bill within the current tax year. Crowley is a member of the House Ways and Means Committee, which drafted the House bill.

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