Monday, 13 October 2008

A Place in the Auvergne, Sunday, 12th October 2008


The melamine stain: One sign of a worldwide problem
By Thomas Fuller
Sunday, October 12, 2008
BANGKOK: Is there more tainted food out there?
The far-flung recall of products contaminated with melamine - dozens of brands of infant formula in China, Cadbury chocolates in Australia, Lipton green tea in Taiwan and Nabisco Ritz cheese crackers in South Korea among them - has shaken the confidence of consumers and provided a window into what some describe as disturbing aspects of the increasingly globalized food manufacturing industry.
The melamine scandal has heightened fears that the food business is racing ahead of the ability of governments to detect health-threatening contamination, whether accidental or deliberate.
The physical toll of the milk scandal has been largely contained to China: the four children who died and almost all of the 54,000 who were sickened by the melamine were on the Chinese mainland.
But melamine has been found in products as far away as the Netherlands and the United States. And recalls far from China affected food made by Chinese companies and multinational brands.
Now shoppers are stopping in supermarket aisles to read labels more closely. They are shunning Chinese brands and choosing international name brands instead. But even then, they are wary.
"People used to have more confidence in international brands," said Yang Fan, a specialist on the food industry at the Shanghai offices of Euromonitor, a market research company. "Now the multinationals have similar problems."
Shan Cheung, a Hong Kong housewife, said she tossed out all her Lipton tea packages, Cadbury chocolates and cookies when she heard that some of those brands had found small amounts of melamine in their products. "Now I look very carefully if the food I am buying are made in China," she said, and she avoids it.
Worrying for consumers both inside and outside China is the sense that processed foods may contain tainted ingredients no matter how trusted the brand. When contamination occurs, they cannot be sure of the provenance of the ingredients - and, ultimately, whether foods are safe.
Big food companies, like Nestle, Kraft and Danone, say that while they do not use Chinese milk in their products outside of China, they use other Chinese ingredients for goods sold around the world.
"It's difficult sometimes to try to figure out how a certain product has been assembled and where a problem may have come from," said Peter Hoejskov, a specialist in food quality and safety at the regional headquarters here of the Food and Agriculture Organization, a UN agency. "The globalization of food production is definitely an issue."
Chinese companies are major suppliers of common ingredients and additives, like citric acid and many types of vitamins. The country is the world's largest exporter of seafood, most of it from fish farms, and a major exporter of chicken, fruits and vegetables. In the medical field, China sells large quantities of penicillin and paracetamol, an aspirin alternative, overseas.
Chinese products have been failing food inspections for years. Hundreds of Chinese shipments have been stopped by inspectors in Europe, the United States and Asian countries in recent years because they contained banned chemicals or were unfit for consumption, government data show.
In the European Union alone, Chinese fish and shrimp were rejected because they contained fungicides, antibiotics or other banned drugs; dried fruit and vegetables were found to have more than the allowable level of the preservative sulfite; peanuts had excessive levels of fungus-related toxins; and packaged foods tested positive for heavy metals that leached from their packaging.
Although only the world's eighth-largest exporter of food, China ranked in first place last year for the number of hazardous imports detected by regulators in the European Union. China had 352 notifications, its highest level ever, compared with 191 for the United States, which is the world's largest agricultural exporter.
On Friday, the Chinese government announced measures intended to improve the quality and safety of dairy products as well as new regulations on the breeding of cows and the production and sale of dairy products. It also called for tougher penalties for who people who violate safety standards, according to Xinhua, the official state news agency.
China is not alone in struggling with tainted food. The European Union's annual report on food safety found contamination in foods exported from well over 100 countries.
Hoejskov said the scale of production involved in the food industry had greatly increased the monetary incentive to cut corners and adulterate food.
"There is a lot of cheating," he said. "Sometimes you discover it and sometimes you never discover it."
One of the difficulties for regulators is knowing what to look for - and having the manpower to carry out the tests. In the case of the Chinese milk scandal, Fonterra, a New Zealand company that owns a large stake in one of the manufacturers that distributed tainted baby formula, says it never occurred to them to check for melamine.
"Melamine is not something you would be reasonably expected to find in milk," a spokeswoman for the company said. "We have only recently become aware of one dairy company in the world who routinely tests for melamine."
Melamine, a white powder used to make plastics, was added because it duped the instruments used to measure protein, creating the false impression that diluted or poor-quality milk was up to standard.
Governments often do not have adequate resources to carry out more than basic, random testing. The Food and Drug Administration in the United States only has the capacity to examine 1 percent of all shipments into the country, according to a report last year by the Congressional Research Service, a nonpartisan U.S. government agency.
The problem can be more severe in poorer countries.
Quirino Marquinez, the president of the Consumer Union of the Philippines, a private nonprofit group, said the country's food inspection agency "only takes action if someone complains or if the media reports about food products that are defective or pose serious threat to public health." The agency, he said, "needs to be more proactive."
With China's growing influence in Asia, governments in the region are also sometimes afraid to anger Beijing. Officials at the Thai food and drug administration said in interviews that they had discovered mushrooms imported from China with unacceptably high levels of mercury. But they declined to disclose the full list of Chinese products barred from the country.
"I hesitate to give you this information as I'm afraid that it will affect the relationship between Thailand and China," said Jureeporn Boonyawongwiroj, the director of the Bureau of Food Quality and Safety. "When I was in China last time, they complained to me about this," she said.
China's melamine scandal has been particularly damaging to consumer confidence because it comes after Beijing said it had tightened regulations and heightened vigilance in the wake of problems with tainted dog food, also made in China, that sickened or killed thousands of dogs worldwide last year, and other tainted products.
In July 2007 the government carried out the execution of the head of the food and drug safety agency who was convicted of taking bribes in return for approving drugs. Regulators also closed 180 food manufacturers that it said had been using banned dyes, hydrochloric acid and formaldehyde in candies, seafood, pickles and cookies.
"This whole system is broken," said Bing Zhang, a consultant based in Shanghai for AT Kearney and co-author of a report on food safety in China last year.
"The root cause is a combination of factors - the intense competition for profits and a general lack of tracing and monitoring," he said.
Fruit, vegetables and most meat in China are not required to go through a cold distribution chain, said the Kearney study.
Almost 80 percent of retailers do not monitor temperature of products during shipping and two-thirds did not check temperature when they receiving goods, the study found.
In recent weeks, Cadbury withdrew candy bars from shelves in Hong Kong and Australia after it found trace amounts of melamine in them.
Unilever recalled Lipton Green Milk Tea from the Taiwan market because the product used Chinese-made milk. H.J. Heinz Co. recalled a batch of baby food in Hong Kong because it showed trace levels of melamine. In all of these cases, the levels of melamine were too low to make people sick. But the companies sought recalls to avoid further public relations damage.
The Chinese government now says recent testing of the Chinese milk supply shows no sign of melamine contamination.
There are some signs that the Chinese food industry is cleaning up its act. The European Commission said it had recorded a decline in quality problems with Chinese food imports in the second half of last year. It is also working with Chinese regulators to improve their monitoring techniques.
Yet the Food and Drug Administration in the United States has maintained an "import alert" on certain types of seafood - shrimp, catfish, basa, dace and eel - coming from China.
As of April 2007, China had the third-highest rate of import refusals in the United States, after Mexico and India.
Carlos Conde contributed reporting from Manila, Janesara Fugal from Bangkok and Carmen Ng from Hong Kong.

Thomas L. Friedman: The post-binge world
By Thomas L. Friedman
Sunday, October 12, 2008
My friend Rob Watson, the head of EcoTech International, has a saying about Mother Nature that goes like this: "Mother Nature is just chemistry, biology and physics. That's all she is." And because of that, says Rob, you cannot spin Mother Nature. You cannot bribe Mother Nature. You cannot sweet talk her, and you cannot ignore her.
She's going to do with the climate whatever chemistry, biology and physics dictate. And Mother Nature always bats last, and she always bats a thousand.
There is a parallel with markets. At their core, markets are propelled by fear and greed. They're just the balance at any given moment of those two impulses. Over the long run, you cannot spin the market. You cannot sweet talk it into going up or beg it not to go down. It's going to do whatever it's going to do - whichever way greed and fear tug it. And the market always bats last and it always bats a thousand.
What am I saying? We are where we are today because we went on a credit binge and we're now paying the price. Because it was the biggest credit binge the world has ever been on, a lot of wealth is going to be wiped out. Now what you're witnessing is the market re-evaluating and re-pricing every asset in the world, without mercy, telling each stock, bond and bank what its value is in a post-credit binge world.
So why, despite the congressional bailout, haven't banks started lending again?
You have to go back to the beginning of the problem. After the fall of the Berlin Wall, virtually every economy in the world moved to a capitalist system, which eventually made the world awash with money looking for investments. It didn't take long for financial engineers to figure out how to move home mortgages and commercial loans from a transaction between you and your local bank - or between your company and a syndicate of banks - to something much more diffused and fragmented. While your bank may have initiated the mortgage or the corporate loan, it was quickly sold to an aggregator who turned these different loans into bonds and then sold them all over the world in small pieces to banks and money market and pension funds.
The good news about this democratization of finance is that it powered enormous growth around the world. More people than ever grew out of poverty faster - or got rich faster. But the process became so lucrative that people - imbeciles - who should not have been selling these things got into the food chain of selling them. Banks and insurance companies that should not have even nibbled on them, gorged on them. And companies that should not have been dependent on raising capital through them became dependent.
So when some of these loans inevitably turned bad, the whole financial system got infected. Eventually everyone stopped lending to everyone else because no one knew what the other bank's assets were worth. Indeed, if all the banks were really honest about the value of these toxic assets on their balance sheets, many of them would be under water.
The whole story of the last few months has been about different government plans to get the banks lending again. But the market is not waiting. It just keeps saying to the big banks and insurance companies: "We think you're carrying a lot of junk on your books, and if you don't mark it all the way down and re-price it to what it is really worth today, we will re-price you - fairly or not." The market is going to do what it is going to do.
So what could ease this crisis? "There is going to have to be a workout," said the financial strategist David Smick, author of "The World Is Curved," a book about the hidden dangers in today's global economy. "There will have to be a restructuring of all these institutions to clean up their balance sheets and recapitalize them." Banks and insurance companies will have to be reconstituted, merged or left to die, until these toxic assets are properly priced and off the books.
The government's job - which it is still trying to figure out exactly how to do - will be to provide a safety net of guarantees for the surviving banks, so they will be honest about pricing their assets, and then, once they have been, to help recapitalize them.
"Government's other job," added Smick, "is to quickly establish the new rules of the road for truth-in-lending on a global basis. We still need these kind of lending facilities if the economy is going to grow again."
This workout promises to be painful, complicated and protracted.
Government will have to do its part. But it must regulate the excesses without smothering the underlying innovative, entrepreneurial and risk-taking attributes of our economy, which are what will ultimately bail us out - as they always have.
"I have no idea what the stock market is going to do next month or six months from now," Warren Buffett told CNBC on Friday. "I do know that the American economy, over a period of time, will do very well, and people who own a piece of it will do well."


Up and down the energy learning curve
Sunday, October 12, 2008
The cramped rules of the presidential debates and the McCain campaign's descent into content-free name-calling mean that voters are unlikely to hear a serious debate about energy issues.
Still, we have heard enough to know that there are big differences between John McCain and Barack Obama. We have also heard enough to know that Obama promises a much more robust approach to the two big energy-related problems of the age: oil dependency and climate change.
Obama also keeps moving up the learning curve on energy issues, whereas McCain seems to regress. As recently as two months ago, Obama was pandering to voters with short-term fixes for gas prices like tapping the Strategic Petroleum Reserve. His present strategy is coherent and farsighted. Obama says he would limit carbon emissions with a strong cap and trade program, invest heavily in alternative energy sources, raise federal fuel-economy standards and require that 10 percent of America's energy be generated by renewable sources by 2012. He would help Detroit develop more fuel-efficient cars with loans and tax credits, and - to the annoyance of some environmentalists - he rightly includes nuclear energy as part of the mix.
In last week's debate, McCain said airily that he would do "all of the above." But within minutes he had reaffirmed that the centerpiece of his strategy is to drill for more oil, mainly in previously off-limits areas of the outer continental shelf.
This politically seductive idea is flawed on three counts. It will not provide short-term relief to gas prices. It will make a minimal long-term contribution to America's energy needs. And it ignores a fundamental truth that Obama confronted squarely in the debate: a nation using one-fourth of the world's oil production while owning only 3 percent of the world's reserves cannot drill its way to energy independence.
Both candidates agree that because nuclear power is carbon-neutral it has to be part of any serious effort to reduce global warming. But in the debate McCain glossed over formidable problems of cost, safety and waste disposal, meanwhile suggesting that the public was clamoring for nuclear power.
The old John McCain - the brave advocate of putting a price on carbon emissions - has all but disappeared. The saddest evidence of that was his choice of Governor Sarah Palin of Alaska as his running mate. Astonishingly, he claims that Palin "knows more about energy than probably anyone in the United States," and if Palin is to be believed, he has more or less anointed her as his energy czar.
Palin's strategy is frighteningly simplistic: drill for more oil.Meanwhile, she continues to express doubts about the human causes of climate change.
Unless we recognize the human causes of climate change, the essential changes in the way people produce and consume energy are unlikely to happen. The old John McCain knew that.

Sarkozy stops extradition of convicted Italian radical
The Associated Press
Sunday, October 12, 2008
PARIS: France has decided not to extradite to Italy a former member of the Italian leftist terrorist group the Red Brigades because she is in poor health, the president's office announced Sunday. It stressed that the measure did not weaken French resolve to fight terrorism.
Marina Petrella's weakened state and "profound depression" is potentially life-threatening, the office of President Nicolas Sarkozy said, announcing that he had annulled an extradition decree for humanitarian reasons.
The statement confirmed a report in the Journal du Dimanche and comments by Petrella's lawyer.
Petrella, who is hospitalized, was convicted in absentia in Italy in 1992 of complicity in the murder of a police chief a year earlier. She was sentenced to life in prison.
In France since the 1990s, Petrella, now 54, was jailed last year, but a court ordered her freed in August because of severe depression.
"She cried a lot, she trembled" after being notified Saturday of the decision, Petrella's lawyer, Irène Terrel, said in a telephone interview.
She said her client's physical and psychological state was "very bad."
The French president's office said the decision was "an individual measure" that "in no way weakens France's commitment to the fight against terrorism, as well as its cooperation with other democracies in this domain."
The Red Brigades plagued Italy with attacks in the 1970s and 1980s. Many of the leftist militants fled to France, benefiting from a policy instituted under President François Mitterrand of accepting them if they renounced their extremist pasts.
But over the past years conservative French governments have moved away from Mitterrand's policy.
Sarkozy's government said in June that Petrella would be extradited, but asked Prime Minister Silvio Berlusconi of Italy to consider a presidential pardon because her convictions were so long ago and her health compromised. Italy gave no indication that a pardon was in the offing.
In August, a court in Versailles formally freed Petrella from prison.

Bombers strike in Mosul, Baghdad, killing 13
The Associated Press
Sunday, October 12, 2008
BAGHDAD: Suicide car bombers struck twice Sunday in the northern city of Mosul, killing at least six people and wounding dozens of others, U.S. and Iraqi officials said. A car bomb killed seven other people in Baghdad.
Two Iraqi soldiers were killed by snipers in separate attacks Sunday in the capital's Yarmouk district, police said.
Also Sunday, the government announced new security measures to protect Christians in Mosul after a spate of attacks against them by Sunni religious extremists.
The series of attacks shows the ongoing security challenges facing Iraq as the U.S. shifts responsibility to this country's own soldiers and police following the sharp decline in violence since last year.
The first attack in Mosul occurred when a suicide car bomber attacked a U.S. patrol, the U.S. military said. There were no American casualties, but five Iraqis were killed, including three young boys, the U.S. said. The attack also killed the bomber.
Another suicide car bomber targeted Iraqi police in Mosul, 225 miles northwest of Baghdad. Twenty-five people were wounded, the U.S. said.
In Baghdad, a parked car bomb exploded in a commercial street in the Bayaa district, killing seven people and wounding nine others, police said. They spoke on condition of anonymity because they were not supposed to release the information.
The southwestern Baghdad neighborhood was the scene of bitter Sunni-Shiite fighting until last year when the U.S. troop "surge," the Sunni revolt against al-Qaida and a cease-fire by anti-American cleric Muqtada al-Sadr brought down violence to its lowest level in four years.
"Several car bombings have occurred on this street but no measures were taken to prevent these events," one Bayaa resident, who gave only his nickname Abu Ibrahim, told Associated Press Television News. "Where is the government? Where are the security officials to prevent such attacks?"
Attacks have been continuing in Mosul, Iraq's third largest city, despite months of U.S. and Iraqi security operations against al-Qaida and other Sunni extremist groups.
The governor of the province that includes Mosul, Duraid Mohammed Kashmoula, said Saturday that about 3,000 Christians have fled the city over the past week alone to escape threats and attacks by Sunni extremists.
Interior Ministry spokesman Maj. Gen. Abdul Karim Khalaf said Sunday that the government was taking new measures to protect Mosul's Christians, including more police in their neighborhoods and more checkpoints and patrols near churches.
"Anyhow, there is a kind of exaggeration in describing the events in Mosul," Khalaf said. "We don't deny that hostile acts occurred, but we have the ability to stop such acts and the situation is under control."
In an interview Sunday with Al-Sharqiya television, Iraqi Cardinal Emmanuel III Delly condemned the killings that have occurred recently in Mosul "especially our sons the Christians."
"We the sons of Iraq, should be of one heart, one population and one homeland for the sake of the prosperity of our country," he said from Rome.
In Baghdad, Iraq's Sunni vice president, Tariq al-Hashemi, said the plight of Mosul Christians indicated "a real defect" in the security operation there and urged the government to take steps immediately to correct the problems.
He said Christians in the northern city "have the right to be protected from those criminals and murderers."
U.S. officials are concerned that violence may rise in the run-up to provincial elections, which are expected by the end of January. Voters will select ruling councils in most of the country's 18 provinces. No date for the election has been set.
On Sunday, the spokesman for the election commission, Qassim al-Aboudi, told reporters that a total of 440 provincial seats would be contested, with 57 of them in Baghdad.
About 20,000 people have been trained as election monitors, he said.


Commander says not losing Afghan war
Sunday, October 12, 2008
By Jonathon Burch
NATO is not losing the war against the Taliban in Afghanistan, but there are not enough troops to provide sufficient security for the people, the commander of international troops in Afghanistan said Sunday.
Spiralling and seemingly unending violence in Afghanistan has led to a number of military and political leaders issuing dire warnings for the country where at least 4,000 people, a third of them civilians, have been killed in this year alone.
"We are not losing in Afghanistan," General David McKiernan told a news conference. But, he said, "we have insufficient security forces here to adequately provide for the security of the people of Afghanistan."
The commander of British troops in Afghanistan, Brigadier Mark Carleton-Smith, last week said NATO was not going to win the war, but the aim was to reduce the insurgency to a level where it could be managed by Afghan forces.
U.S. Defence Secretary Robert Gates dismissed the brigadier's comments as "defeatism."
McKiernan said what was most needed was more Afghan soldiers and police, but until those forces were large enough and capable of ensuring security, the will of the international community to continue to send troops to fight remained paramount.
"We do not have enough security forces everywhere in Afghanistan for the size of this country and the population and the geography and the insurgency, so we need more contributions," he said.
McKiernan last month said he needed three more brigades plus support units - possibly some 15,000 troops - on top of 4,000 extra U.S. troops already scheduled to arrive in Afghanistan.
But more troops alone would not ensure victory, said McKiernan, stressing the need for good governance and economic development in addition to security.
"We certainly need more military forces here. But I will be the first to tell you that additional military forces by themselves will not guarantee victory for the Afghan people," he said.
"I do believe that the people of Afghanistan will win in this country. It's not as fast and even as all of us would like it to be. But we will win, and win means the people of Afghanistan will win," he said.
In the latest wave of violence, Afghan and NATO-led forces killed 65 Taliban militants preparing to attack the provincial capital of the southern province of Helmand, the provincial governor's spokesman Daud Ahmadi said Sunday.
The leader of the group of Taliban militants, Mullah Qudratullah, was also among the dead, he said, but there were no casualties among Afghan and NATO forces.
Most NATO troops in Helmand are British.
"A large number of insurgents in the hundreds were detected and were acted upon by a combined operation, a partnered operation between Task Force Helmand and the Afghan National Army," McKiernan said.
"A large number of insurgents have been killed. I have not heard of reports of civilian collateral damage or civilian casualties," he said.
Britain has some 8,000 troops in the mainly desert province, which is bisected by a lush strip of land irrigated by the Helmand River where about half the world's opium is grown.
British troops have been engaged in almost daily battles with Taliban militants in Helmand since they moved into the province in 2006, but the capital Lashkar Gah has been relatively quiet.
(Additional reporting by Mirwais Afghan in Kandahar; Writing by Jon Hemming; Editing by Richard Balmforth)

European leaders agree to banking rescue
By David Jolly and Katrin Bennhold
Sunday, October 12, 2008
PARIS: European financial and political leaders agreed late Sunday to a plan that would inject billions of euros into their banks in a bid to restore confidence to the teetering financial system.
Taking their cue from a rescue plan announced last week by Britain, the European countries led by Germany and France pledged to take equity stakes in distressed banks and vowed to guarantee bank lending for periods up to five years.
Both France and Germany were planning to unveil national rescue packages on Monday worth hundreds of billions of euros, officials said.
"The meeting that we had was exceptional," President Nicolas Sarkozy of France, said at a news conference. "We need concrete measures, we need unity. That's what we achieved. The plan on which we agreed today will be applied in all our respective states."
The plan "treats all the dimensions of the financial crisis," Sarkozy said.
The Belgian finance minister, Didier Reynders, said, "We are committed in all European states to recapitalize banks if we establish a threat to solvency and a risk to the economy."
"The goal is to kick-start the interbank lending market," he said.
Reynders said the European Central Bank had also committed to helping to unfreeze the commercial paper market, which companies use to finance day-to-day operations.
Leaders of the 15 countries that use the euro did not put a price tag on any of their promises — contrary to Britain, where Prime Minister Gordon Brown announced £150 billion, or $255 billion, in government funds and other measures, and the United States, where a $700 billion bailout plan will now partly be used to recapitalize banks.
European officials said actions would be taken at the national level, within the framework of the agreed "toolbox." The idea, they said, was that governments face different challenges and needed to act quickly but that a common front would avoid the possibility that one country might undercut another.
Each country, Reynders said, will announce concrete figures for the measures they expect to take individually.
"There is no question of setting up a European fund," he said.
Announcements last week by Britain and the United States that they would move to take ownership shares in ailing banks, the 15 leaders of the countries that use the euro found themselves looking for a collective response to avoid tit-for-tat actions by individual countries that might harm their neighbors.
Brown said earlier after meeting at the Elysée Palace with Sarkozy, that he believed Europe would "work together with America." Brown, whose country has maintained its own currency, the pound, also warned that the decisions made Sunday would have economic consequences for years to come.
In contrast to the meeting last weekend, European leaders on Sunday seemed to be reading from the same script.
"Our goal is to have coordinated action for the euro zone," Angela Merkel, the German chancellor, said, and the meeting "is a very important signal for the strength of the euro zone."
Germany is considering a plan to inject €50 billion to €100 billion into its banks, with a price tag for all of the new measures reaching as much as €400 billion, or $536 billion, according to a person briefed on the government's work. A German official cautioned that the numbers remained speculative.
Current plans are to have the package approved by the cabinet on Monday and through the German Parliament this week.
France is expected to announce a two-pronged plan aimed at safeguarding the solvency of French banks and jump-start lending between financial institution, according to a senior official who has worked on the plan.
Paris is expected to buy stakes in banks threatened by failure, though the magnitude of any rescue fund will be smaller than the €50 billion to €100 billion plan expected in Germany, the official said. "Our need for recapitalization is certainly weaker than that in Germany," he said.
The French government will also pledge more than €100 billion to address liquidity concerns in banks and insurers. A new instrument guaranteeing bank debt in exchange for collateral will be announced, the official said. A draft law will be passed Monday in an extraordinary cabinet meeting and will be submitted Tuesday to Parliament.
The freezing of credit markets has made it difficult for most companies to borrow money on more than an overnight basis. Stocks have plummeted, meanwhile, making it more difficult for banks to shore up their balance sheets by raising capital from investors.
In Oslo, which is outside the euro zone, the Norwegian central bank moved to provide banks with $58 billion in additional liquidity.
"The Norwegian money market isn't working," Reuters quoted the central bank governor, Svein Gjedrem, as saying. "Today, Norges Bank is for all practical purposes functioning as a clearing house for all activity in the Norwegian money market," he added.
Michel Fleuriet, director of the investment banking program at Université Paris-Dauphine and the former head of Merrill Lynch in France, "These measures should add some life to the short-term financing of the economy," Fleuriet said after news of the deal. "But it's going to take some time for the market to digest this information. If investors are convinced that that the banks are going back to doing their jobs — financing the real economy — the stock market could stabilize. Right now the stock market believes the economy is dead."
Earlier Sunday, the authorities in Australia and New Zealand announced a guarantee of bank deposits. Australia's prime minister, Kevin Rudd, called the financial meltdown "the economic equivalent of a national security crisis" because of the danger that money would flee Sydney banks for countries where governments had guaranteed deposits.
In Washington, President George W. Bush held a Saturday morning meeting at the White House with G-7 finance ministers, who were in the city for the annual meetings of the International Monetary Fund and the World Bank.
"All of us recognize that this is a serious global crisis, and therefore requires a serious global response, for the good of our people," Bush said afterward.
The president said the countries had agreed to general principles to respond to the crisis, including working to prevent the collapse of important financial institutions and protecting deposits. But the G-7 communiqué issued Friday did not clearly detail what measures would be taken, suggesting that countries remained unable to agree on a common approach to shoring up their respective financial systems.
The Group of 20, which includes the world's 20 richest nations, issued a statement in support of that communiqué late Saturday after Bush, Treasury Secretary Henry Paulson Jr. and the Federal Reserve chairman, Ben Bernanke, met with leaders of the group.
The turbulence of the past week moved Germany from advocating action on a case-by-case basis to support for a systemic solution for the country's banks. So far Germany has rescued several banks and guaranteed deposits.
Germany's major banks accept that partial nationalizations — even if they are not called that — are necessary under the circumstances, Klaus-Peter Müller, chairman of the German Banking Association, said. "This measure will be like a bridge since for some firms there is no capital out there on reasonable terms," Müller said.
The shift in Berlin does not extend to contributing to a common fund that would support all European banks, largely because the government fears that German taxpayers would end up financing other countries' banks.
With the bond market in the United States and all Japanese markets closed on Monday for holidays, British policy makers appeared to be speeding plans to inject capital into their troubled banks. At the top of the list is Royal Bank of Scotland, whose market value has fallen to below £12 billion, or about $20 billion — less than the amount of capital it raised from private investors in June.
Royal Bank of Scotland is expected to need about that amount, giving the Exchequer a majority stake. As much as £35 billion of the £50 billion that the government set aside for sick banks could be disbursed.
Other British banks that are likely to receive tax payer funds include HBOS, Lloyds TSB and Barclays. That these banks, which for weeks have been saying they did not need new funds from taxpayers, will welcome the British government as a large shareholder is a reflection of how little confidence remains in banks
Late last week, Barclays had signaled that it might go to capital markets for the £3 billion it needs to bolster its tier-one ratio, a measure of financial strength. Such an initiative would take as much as 10 days, an eternity in today's fear-stoked climate. And now Barclays, along with its peers, is preparing to take the direct, if not more humiliating, path by accepting public funds.
Faced with the growing intensity of the crisis, the Bush administration has embarked on an overhaul of its own strategy. Two weeks after persuading the Congress to let it spend $700 billion to buy distressed securities tied to mortgages, the administration put that idea aside in favor of an approach that would have the government inject capital directly into the nation's banks — in effect, partially nationalizing the industry.


Debt is whittling away U.S. economic power
By David Leonhardt
Sunday, October 12, 2008
At the turn of the 20th century, toward the end of a brutal and surprisingly difficult victory in the Second Boer War, the people of Britain began to contemplate the possibility that theirs was a nation in decline.
They worried that London's big financial sector was draining resources from the industrial economy and wondered whether Britain's schools were inadequate.
In 1905, a new book - a fictional history, set in the year 2005 - appeared under the title, "The Decline and Fall of the British Empire."
The crisis of confidence led to a sharp political reaction. In the 1906 election, the Liberals ousted the Conservatives in a landslide and ushered in an era of change. But it did not stave off a slide from economic or political prominence.
Within four decades, a much larger country, across an ocean to the west, would clearly supplant Britain as the world's dominant power.
The United States of today and Britain of 1905 are certainly more different than they are similar. Yet the financial shocks of the past several weeks - coming on top of an already weak economy and an unpopular war - have created their own crisis of national confidence.
On Friday, as the U.S. stock market finished one of its worst weeks by falling yet again, the Gallup Poll reported that Americans were substantially more pessimistic about the economy than they had been in more than two decades of polling. Nearly 60 percent said the economy was in poor shape, and 90 percent said it was still getting worse.
"One thing seems probable to me," Peer Steinbrück, the German finance minister, said recently. "The U.S. will lose its status as the superpower of the global financial system."
At another time, that remark might have sounded like mere nationalist bluster. Right now, it does not seem so ridiculous to ask whether 2008 will come to be seen as the first year of a distinctly non-American century.
At the heart of the troubles, both short term and long term, is debt.
Debt helped create the housing bubble and has now left almost one of every six homeowners with a mortgage larger than the value of their home.
Debt built up, and then laid low, modern Wall Street, where some firms borrowed $30 for every $1 they owned. And in the coming years, debt will constrain the U.S. government, as it copes with the combined deficits created by the policies of the administration of President George W. Bush, the ever-more-expensive financial rescue and the biggest item of all, Medicare for the baby boomers.
In essence, households, banks and the government have already spent some of their future earnings. The current crisis marks the point at which the bills begin to get paid.
Whereas Britain lumbered under the weight of imperial overreach, as the historian Niall Ferguson has written, the United States will be shackled primarily by its financial overreach.
"Given the burden of debt that has accumulated, it's hard to see the U.S. economy growing as fast as it did over the past few decades," Ferguson said. "There is a profound mood shift occurring." But he added two caveats. The political language of both presidential campaigns makes clear that many voters, for all the current pessimism, still believe in the idea of American pre-eminence. So, apparently, do many of the world's investors.
In recent weeks, the dollar has held its own. Stocks in every other major country are down about as much over the past year as they are in the United States, if not much more. The country may not be a haven anymore, but it does seem to be safer.
Robert Zoellick, the president of the World Bank, said that he was recently speaking to a senior Chinese economist, who said that people in his home country - today's rising economic power - did not see the sky falling on the U.S. economy.
"They know its ability to turn around problems is really unmatched, historically," Zoellick said, quoting the economist about the United States. "At the same time, they ask themselves, will the United States get at some of the root causes that could determine its real strength over the next 10 or 20 or 30 years?"
This is not the first time in recent history that the economic position of the United States has appeared precarious. At various points between the mid-1970s and early 1990s, Europe and Japan each looked like the next great power. Neither turned out to be.
Japan suffered through its own burst bubble and spent years denying the depth of its problems. Europe proved unable to create engines of growth that could match the software, biotechnology or entertainment industries in the United States.
Taken to its extreme, the U.S. preference for a faster, riskier capitalism led directly to the current crisis. But that preference also helps explain why the United States is weathering the crisis at least as well as other countries.
Compared with many banks elsewhere, U.S. banks uncovered their problems fairly quickly. Consider the case of Steinbrück, the German finance minister. Only two weeks ago, around the time that he was predicting the end of U.S. financial dominance, he rejected calls for a Europewide bailout. The crisis, he said, was largely American.
On Oct. 5, however, Steinbrück and Chancellor Angela Merkel had to go before television cameras to assure Germans that their government was guaranteeing their savings.
On Friday, Paul Volcker, the former Federal Reserve chairman, seemed to deliver a message to the Germans in an op-ed article in The Wall Street Journal: "The days of finger pointing and schadenfreude are over."
U.S. policy makers have also seemed behind the curve for much of the past year. On Friday, only a week after Ben Bernanke, the current Fed chairman, and Henry Paulson Jr., the Treasury secretary, dismissed the idea as unwise, Paulson said the government would buy stock in financial companies. The British government announced a similar plan Tuesday.
On the whole, though, U.S. officials have been more aggressive than their overseas counterparts, and that has served as a reminder of the U.S. economy's durable flexibility.
It is possible, then, that the main legacy of the crisis will be some form of corrective to the recent U.S. excesses. The economy looks to be heading into a period of more regulated, but still U.S.-style, capitalism, more along the lines of how it operated in the 1950s, 1960s and 1990s. Those decades happen to have produced the biggest and most widely shared economic gains since World War II.
But if that outcome is possible, it is not inevitable, and many economists say it is not even likely. The debts run up in recent years are particularly unfortunate, because they stole resources from the future without laying the groundwork for future growth.
"If you told me we were spending like crazy to build schools and send everyone to college, that would have infinitely different implications than borrowing like crazy to finance current consumption," said Christina Romer, an economist at the University of California at Berkeley.
Schools, roads, airports and the medical system, as well as the country's energy policy, all appear to need significant fixing, and yet there will be less money to fix them than there was 5 or 10 years ago. With the coming explosion in Medicare costs, the U.S. budget deficit could eventually get so large that foreign investors would get spooked. They might then decide that other economies were safer bets and shift more of their lending there. Were that to happen, and the United States struggled to attract financing, the country would face a whole new crisis.
As it is, the Chinese economy has grown so quickly in recent years that it could overtake the U.S. economy as the world's largest by 2027, according to Goldman Sachs. Just three years ago, Goldman predicted that China was unlikely to become No. 1 until at least 2040.
Some of this catch-up is inevitable. As in the British Empire's day, poorer countries are able to attract investment thanks to their low wages and also copy the successes of their richer rivals, notes Benjamin Polak, an economic historian at Yale. China still seems considerably less advanced, relative to its rivals, than the United States was in 1905. China remains a politically insecure, deeply unequal country.
But it is indeed making enormous progress, and that progress has consequences. Economic might translates quite directly into political and military might.
Will that prospect be enough to galvanize a serious response to the long-term economic problems in the United States? Or are there still more crises to come?
"The political system does not deal well with gradual, long-term problems," Peter Orszag, the director of the Congressional Budget Office, said. "It deals with crises, often imperfectly, but it does deal with them. The current experience makes the case."


Sovereign wealth funds seek safety
By Landon Thomas Jr.
Sunday, October 12, 2008
LONDON: Don't expect Middle Eastern sovereign wealth funds to jump on the government bailout bandwagon.
As stock markets around the world have cratered, some of the world's largest wealth funds have been hoarding cash, much like the hedge funds and big institutional investment funds that have been running for cover in recent weeks.
The oil-rich emirate of Abu Dhabi oversees the world's largest government-sponsored fund and has been steadily increasing its cash position to the highest level it has been in years. According to people who have been briefed on its investment strategy, the Abu Dhabi Investment Authority now has a cash position between 10 and 20 percent of its total size, estimated at $550 billion. The sum could reach $100 billion.
Very little of that amount is expected to go to wounded financial institutions in America, these people say.
The second largest fund in the region, the Kuwait Investment Authority, with assets of about $250 billion, has also been accumulating cash. The fund director, Bader al-Saad, was in New York last week and he has told bankers that he has no interest in buying distressed financial companies.
That means the cash-hungry U.S. and British governments, which together plan to commit about $800 billion in borrowed money to invest in flailing banks, cannot rely on foreign contributions as they confront the momentous task of saving their troubled financial institutions.
About all that can be expected of the cash-rich wealth funds, analysts said, is that they will lend some money to the U.S. government on a short-term basis because they can count on it to be paid back.
"Sovereign funds are piling up cash because there has not been a big reward of putting your money to work," said Brad Setser, an international finance analyst at the Council of Foreign Relations. "But what I find to be more worrisome is a complete absence on the part of sovereigns to hold anything else but super safe Treasury bills."
That sovereign funds appear to have the same buyers' fright as the portfolio manager of a U.S. mutual fund should not necessarily be a surprise, given the widespread revulsion for holding assets with even the slightest risk. But with their longer-term investment horizons, these funds were expected to have a stronger stomach for riding out the stomach-churning ups-and-downs of the market.
The plunge in the value of oil, along with fears that the global economic downturn is likely to be deeper and longer-lasting than expected, has probably been the most important factor in changing that thinking.
Setser points to data showing an upward spike in the holdings of Treasury bills by foreign institutions since the credit crisis first erupted about 15 months ago. That has led to a sharp decrease in their purchases of riskier securities, like the equities and bonds issued by corporations and Fannie Mae and Freddie Mac.
In the 12-month period that ended in July, the net purchase by foreigners of U.S. long-term securities almost halved - from $751 billion in the year to July 2007 to $456 billion for the same period ending in July of this year.
Both Kuwait and Abu Dhabi, which has a mandate to invest overseas, were early buyers of big Wall Street financial firms. Abu Dhabi invested in Citigroup and Kuwait purchased a stake in Merrill Lynch and a subsequent position in Citigroup, too.
The investment returns have been poor - Citi trades at $13, down from $31 when Abu Dhabi invested. What is worse, economic troubles are now cropping up closer to home.
In Kuwait, its stock market has stumbled badly, prompting its sovereign fund to promise to invest $1 billion to prop it up.
As for Abu Dhabi, it may become distracted by an imminent economic slowdown in Dubai, its neighboring emirate, which has attracted global renown for its debt-fueled development boom, one that it has undertaken through heavy reliance on now stricken international loan markets. Unlike Abu Dhabi, Dubai does not sit on a large oil reserve.
This year alone, Dubai's borrowing has swelled to $32 billion - a large figure relative to its $54 billion gross domestic product. With many ambitious development projects depending on rising property prices, the combination of a price correction and an inability to borrow could result in the type of reversal that has plagued the U.S and British economies.
While the Abu Dhabi Investment Authority's international orientation makes a bailout of Dubai less feasible, analysts say that Dubai's financial difficulties and lower oil prices will stanch what had been a growing flow of petrodollars to Western stock and bond markets.
Indeed, Gulf Arab states took emergency measures to support their financial systems Sunday. These included a rare cut by Saudi Arabia in its benchmark lending rate and a vow by the United Arab Emirates to protect national banks and guarantee deposits.
Gulf stock markets have been falling for weeks now, driven lower mostly by the decline in oil prices.
Wealth funds outside the Middle East are facing similar pressures.
The $5 trillion explosion in global dollar reserves during this decade was driven by an export boom in Asian countries from China to South Korea and India that relied largely on satisfying consumer demands in the United States and Europe. As a recession takes hold, demand will flag and foreign institutions in these counties are likely to be more concerned with using their surpluses to stimulate their own economies, analysts say.
In recent months, many troubled financial firms made the pilgrimage from Abu Dhabi to Singapore in search of an investment lifeline. They went home empty handed.
"These funds are risk averse like others are now," said Edwin Truman, a long-time observer of global finance at the Peterson Institute for International Economics in Washington. "Because of the attention paid to them in the past two years, they may be even more so."


Across U.S., investors re-examine savings and retirement strategies
By Laura M. Holson
Sunday, October 12, 2008
A year ago, Robert Paynter was comfortably retired and looking forward to years of refurbishing old cars and boating from his dock on Lake Norman in North Carolina. Over a 17-year career at Wachovia, he amassed a pile of stock and options from the bank that he had assumed would be worth more than $600,000.
But now the options are worthless, and he watched the value of his Wachovia shares shrink to about $15,000 before he sold all of them this week after the bank succumbed to the financial crisis and its stock fell to fire-sale prices. The rest of his investments are in free fall.
"It's like having an out-of-body experience," said Paynter, 61. "It's like being in a hospital bed and watching yourself dying. Whatever the bottom is going to be, I wish it would just get there. It's the every day, watching the blood drain out of it, that's hard to take."
To be sure, he has enough savings to not worry about missing any meals. But Paynter is resetting his plans for retirement, and has already canceled a trip with friends to Europe next year. "Today I'm O.K.," he said. "But a year ago I felt like I was in great shape."
Across the United States, people are tallying their many losses from the relentless rout in the markets. Financial message boards on the Internet are filled with confessions of fear - about hits to savings, job security and scuttled retirement plans.
"My plan was to never work again," wrote one person who posted a comment on, a Web site for investors who follow the long-term investing advice of John Bogle, founder of the Vanguard funds. "But somebody called me yesterday to see if I was interested in a job, and I am thinking maybe I will go back to work."
It is not just the declines in savings that people are feeling, reflected in the shrinking balances on quarterly banking statements now arriving in mailboxes.
Based on interviews around the country last week as the market continued its steep slide, many people say they are sensing losses beyond the short-term hits to their portfolios. Some feel a loss of faith in the United States and its government. Others are lowering their sights for the kinds of lives they expect to lead in coming years.
"Maybe we have to readjust our expectations," said Nicholas Gaffney, a partner in a San Francisco public relations firm. "No one is entitled to anything."
Gaffney describes himself as a buy-and-hold investor, and he has been sensing good opportunities of late. He has plowed more than $10,000 into his funds. The value of his portfolio, now at several hundred thousand dollars, has dropped more than a quarter.
He confesses he has been fighting with himself over how closely he should follow the market's gyrations. One day, he checked the market on his Treo cellphone about 200 times. "I thought to myself, 'What am I doing?"' he said. "I had to stop, because I was driving myself crazy. I think everything is going to be fine if people don't panic."
That is wishful thinking at this point. Investors have withdrawn more than $81 billion from stock mutual funds since the beginning of the year, with nearly 40 percent of that coming in the last six weeks, according to AMG Data Services, an industry research firm.
Not everyone is panicking, of course. Some are able to see the big picture or find ways to distance themselves from the crush of news about the market.
"Maybe a shrink would have a field day with me," said Beth Sparks, 40, a self-employed lawyer in Colorado Springs. "But I have an ability to not think about it."
A week ago, Sparks reviewed her investments for the first time since January. All are down roughly 30 percent. But Sparks said she was not concerned, because she and her husband did not have a lot of debt. When her husband inherited $50,000 last year, they used it to pay off their mortgage. Vacations typically mean drives to Arizona to spend time with her parents. "I'm just happy me and my family are healthy," she said.
Peter Schade, 49, who runs his own ad design firm in Farmington Hills, Michigan, said each day of bad news was a blow to the idea that he would ever be able to retire.
"I've kind of resigned myself to the fact that I'm going to be working for the rest of my life," he said.
For the last few weeks, Schade said, he has been closely monitoring the news on the CNN satellite radio network in his car. "I just feel numb," he said. "The news is changing every half hour."
Schade said he and others in the Detroit area were accustomed to weathering downturns in the economy.
"It doesn't make it any easier, but we've sort of fortified ourselves," he said. In many ways, he said, the rest of the country is just now starting to feel what Detroit has been going through for years, giving people here a head start in coping. "Detroit was the canary in the mine for this. We started this at least three years ago."
Tom Drooger, 56, of Grand Haven, Michigan, is president of a chapter of BetterInvesting, an investment club affiliated with the National Association of Investors Corp.
Usually, Drooger is the type to study stocks closely and track the market's movement throughout the day. By Friday, he was no longer even paying attention. He has decided to stop watching the market news on CNBC for now and instead puts on easy-listening music.
"There's nothing you can do about it after a while," he said.
He compared the financial crisis to a house on fire and said he was merely waiting until the flames die down.
"Once the fire's out, you go in and do the repairs," he explained. "To start to try to move things around until the market wrings itself out is pointless. I'm just sitting on the sidelines, leaving everything where it's at."
College students are watching from the sidelines, too, since they typically are more concerned about jobs at this stage of their lives than the nest eggs.
Matthew Ehrlich, 23, a second-year law student at Wayne State University in Detroit, is worried about whether the economy will improve before he graduates in 2010.
"If things don't get better in the next two years, I'm going to have a real tough time," he said. "My hope is that I can just ride it out until the financial markets get back on track."
Ehrlich is still debating what type of law to specialize in and said this crisis might ultimately influence his decision.
"The way things are going, bankruptcy law seems to be pretty hot," he said.
Beyond the personal toll to their savings, some people said they were concerned about what the financial crisis said about the United States.
"All I can tell you is it is a lack of faith in America," said Pat Emard, 65, of Aptos, California, who now worries she may have to go back to work. "People have lost faith in our government. I don't know what happens now."
That sense of uncertainty is also troubling to Renee Snow, 73, a retired teacher who taught in the Chicago public schools for 38 years.
Born during the Depression, Snow said it was in her DNA to save, save, save.
Over her career as a teacher, she did just that, and Snow, now a widow, lives off her pension and income from her tax-exempt savings plan. She says she has always put her money in insured products when she could.
"I never watch the stock market, and now I'm watching it every day," she said.
She has money socked away in savings accounts in different banks but recently began researching whether her banks were solid.
The economy is a frequent topic of conversation among friends at the Jane Addams Senior Caucus, an organization in Chicago where she volunteers as a board member.
Over the last couple of weeks, a general malaise has taken over, Snow said. "It's very hard to have much faith in what the government is doing when they change it every day," she said. "As you read more and more about how we got into this situation, you have less and less faith of how we're going to get out of it."
She has an ominous feeling about the future, she said. "You don't go through life thinking the bank I do business with could go belly up tomorrow," she said.
"This is a new feeling people are living with."
Nick Bunkley and Crystal Yednak contributed reporting.


At the heart of the U.S. economic meltdown, desperation
By Jennifer Steinhauer
Sunday, October 12, 2008
ELKHART, Indiana: To understand just how grim things have gotten in this northern Indiana town, consider a new law passed last month by the City Council that limits residents to one garage sale a month.
It seems the perpetual garage sales - which for scores of people in this town are a sole source of income, and for others the only source of clothing - were annoying some residents. The restrictions will make the financial pinch that much tighter.
"I have no other option," said Todd Baker, 34, who lost his factory job in July just before his wife gave birth to their third child. Friday was his last permissible day to sell old children's clothing, muffin tins, a fake white Christmas tree, stereo speakers and dozens of household items out of his garage.
"I've never missed a day of work in my life," Baker said. "Man, I'm shocked that I have to shut this down. My neighbors are usually out here, too. We've got regulars who are in the same situation, or lost their house, and when the bank took it, they took everything that was in it. I'm just trying to do as much as I can because the heat bills are going to go up 25 percent this winter, too."
Elkhart, near the Michigan border in an area known as Michiana, is the white-hot center of the meltdown of the American economy. Its main industries, the manufacturing of recreational vehicles and motor homes, have fallen apart over the last year because of high gasoline prices. That has taken down ancillary businesses like RV parts suppliers and storage warehouses.
The jobless rate in Elkhart has increased more than in any metropolitan area in the country; it rose more than 4.8 percentage points from August 2007 to August 2008. According to labor statistics released this summer, nearly 10,000 people were out of work, a rate of 9.3 percent.
"I'm just dwindling to the bottom," said Melinda Owens, 24, as she emerged from the unemployment office.
City services are on the decline, and holdups are on the rise - there were nine armed robberies or attempted armed robberies on convenience stores in the last two weeks. On Friday, the front-page news of the paper, The Elkhart Truth, was about a local plastic company that was actually not closing its plant.
The busiest spot in town seems to be the unemployment office, where 20 people stood in line on Friday and streams more passed through. Bryan and Christy Fisher were among them. The couple lost their house to foreclosure this year, then found one to rent; next week they will downsize to an apartment.
Bryan Fisher's job in RV production has been reduced to four days every other week. "For a family of five, this is a big deal," he said. "We have three kids, and two of them are in high school. We are hoping to find a way to send them to college, but you can't send a kid to college on eight days of work a month."
Whether voters here believe that Senator John McCain, the Republican presidential nominee, or Senator Barack Obama, the Democratic candidate, can offer solutions to the dire economy seems a matter of greatly mixed opinion. Bryan Fisher is planning to cast his lot with McCain, while his wife said she would vote for Obama.
"I just feel like McCain's idea to tax your health care insurance is ludicrous," Christy Fisher said. "People in Elkhart are ready for a change, and they don't think it's going to come from McCain."
Political yard signs in the area seem to be about half and half, and interviews with people on the unemployment line break about even, too. But that in itself may be remarkable. Indiana has voted for a Democrat for president exactly once since 1936: in 1964, when Lyndon B. Johnson took the state.
In some of the political talk, there are undercurrents of something other than concern about Obama's relatively short experience in Washington.
"I think Obama's kind of arrogant," said Theresa Ghrist, 40, whose work schedule has been reduced at her RV plant. "When it comes down to it around here, people are going to vote color, and I don't think people are ready to vote for a colored president. I don't care myself, but at work a lot of people talk color there."
A co-worker, Jim Podemski, agreed with her assessment, but added, "I wouldn't want to vote Republican again."
While it may be hard to find a consistent political opinion in Elkhart, it is not hard to find people in pain. Nearly every street seems to have a house for sale or rent. Storefronts are newly shuttered.
Masses of residents huddle outside the unemployment office, dragging on cigarettes and trading stories of companies that left, late unemployment checks, job leads that may or may not come to fruition.
"It's horrible here," said Alicia Egas, 26. "My fiancé just got laid off. We have four kids, and we're not getting any income except for his unemployment. Food stamps are not giving us very much, and we're behind on rent, we're behind on utilities, and those are threatening to get shut off. And of course it's impossible to get a job around here that makes any money. I'm stressed. We've never been this low. I'm voting Obama because hopefully he can bring a change."
Kelly McCrory, 41, called Obama the "lesser of two evils." He will vote for him, he said, "because his vice-presidential candidate has a lot more on the ball than McCain's."
McCrory was one of the last people at his plant to lose his job, on Sept. 11. "I was in the RV industry like everyone else," he said. "I'm a lot better off than most people because I planned. But I'm down here filing for unemployment so I don't take the last trip down the toilet bowl."


Finance students keep their job hopes alive
By John Leland
Sunday, October 12, 2008
For students in the United States who set their sights on Wall Street during the boom years, the end has come just as they are getting ready to join the party.
Wall Street recruiters have canceled or postponed visits to elite universities like Harvard, Princeton and Stanford, citing the turmoil in the markets.
"Jobs are being taken down by the day on our career services Web site," said Kenton Murray, 20, a senior at Princeton, where JP Morgan Chase, Lehman Brothers, Deutsche Bank and others canceled recruitment sessions since the start of the semester.
But even as the markets spiraled downward, business and finance students at top universities said they were not panicked about their futures and were confident that the financial markets would recover. For the young achievers drawn to finance, expectations die hard.
Murray described the mood at Princeton as cautiously optimistic.
"No one I've talked to is worried about moving back home yet," he said. "But everyone I know is studying for the LSATs right now, people who a month ago had no intention of ever going to law school."
Financial companies shed 150,000 jobs last year and more than 100,000 so far this year, according to Challenger, Gray & Christmas, a national job placement company. Yet amid the downturn, applications to graduate business schools rose this year, as they have in other periods of uncertainty.
Adam Hallowell, 20, an economics major at Harvard, said his classmates were not overly upset by the market because they were prepared to change direction. "Mine is a generation that's been told from high school onward, 'You're going to change careers five or six times throughout the course of your life,' " he said. Even as the Dow plunged day after day, Hallowell said the mood on campus had not changed, adding that "most students don't personally have stock portfolios and 401(k) plans yet, which is probably why they aren't very concerned."
This resilience has surprised Charissa Asbury, who runs a program at Columbia University's School of Continuing Education for graduates who want to go to business school. Asbury said she expected to see a panic among her students. Many were working on Wall Street; some had lost their jobs.
"I wondered if they would say, 'Maybe this isn't the time; I don't want to spend the money if the salary is not going to be there,' " she said. "But instead they're even more interested in finding exactly what they need to get into a top business school. Everyone's worried about their prospects, but it's translated into, 'How do we get better credentials?' "
She added, "Now they feel, if they want to go to business school, they need to be from one of the top ones."
Even at Harvard, students were more attentive at sessions and résumé round tables, said Robin Mount, interim director of career services. In previous years, they often spent these sessions sending text messages; this year, the sessions have been purposeful and heavily attended. Mount said she could have heard a pin drop.
Beverly Principal, assistant director of employment services at Stanford, said she had already seen a reduction in campus recruitment by banks, though a spokeswoman at JP Morgan Chase said it would continue recruiting at target universities throughout the semester.
When students do receive offers, they come under more scrutiny, before and after hiring, said Ronald Storch, a partner at Marcum and Kliegman, a large accounting firm. "A couple years ago there was too much work and not enough bodies," Storch said. "We were hiring just to get bodies, and people could bounce from firm to firm. Now they're not getting the same opportunities."
Jian Yang, 25, who is in his second year at the University of Chicago's graduate business school, recently considered his prospects in this new climate. Yang said he had friends who had lost jobs or taken internships at Lehman and Bear Stearns expecting to land full-time jobs, only to watch the companies fail. He expects to graduate with $200,000 in student debt.
"It's definitely impacting the mood of the student body," Yang said. "We're all watching the news every day." Where students in past years set their course on a single field, like investment banking, now they are looking in several areas to improve their chances, he said.
But Yang said he was not reconsidering his career path because he felt there would still be good jobs available to people like him, who come from top schools and are willing to work abroad. He said he and his friends had not changed their lifestyles, either. "Life kind of goes on," he said.
"It's almost a blessing to be in school while the economy is down; it's a shelter," Yang added. "So in one way I feel unlucky, because I missed the boom, but in another way I'm lucky. It's a good way to spend three years of downturn."
In a June poll by the Rockefeller Foundation, people ages 18 to 29 were more pessimistic about the economy than any other age group, with half saying that America was a better place in the 1990s and would continue to decline. But they did not apply this pessimism to themselves; they were most likely to say that if they work hard and play by the rules, they will be able to achieve the American Dream.
John Challenger, chief executive of Challenger, Gray & Christmas, said that even as investment banking suffered, opportunities remained in health care, energy, international business and consulting. "It'll be interesting to see if the top graduates flow to other industries," Challenger said. "It remains to be seen whether we'll see an increase in idealism or public service like we did after 9/11 or Hurricane Katrina."
For Tina Phoolka, 28, a graduate business student at Bentley College in Waltham, Massachusetts, the new reality means staying in school, even after she earns her MBA.
"I thought I was going to get a $100,000-plus job and everything would be great, with lots of opportunities," Phoolka said. "Now I'm wondering if I should extend my graduation date, enroll in a doctorate program or get a dual degree. I'll probably study more or look for a job in another country."
For those who are out of school, the changes in the horizon have been more immediate.
When Jon Cifuentes, 28, landed a job at Smith Barney out of college, he believed that within three years, he would be making more than $100,000 a year, reaping ever larger bonuses.
Then this May, after two job changes, Cifuentes lost his job in a large layoff at Nomura, an investment bank based in Asia, leaving him with a $3,000 mortgage payment and a case of disillusionment.
After a summer of working part time in his father's contracting business, Cifuentes now has a temporary job at Macquarie Capital Partners and is finishing his master's degree in economics. He and his wife moved into an apartment owned by his sister; they can rent theirs out.
"Compared to some friends I used to work with, I'm doing well," Cifuentes said. "Some guys are in their mid-40s, with a wife, kids, mortgage and a lot of bills. They're in a much worse spot."
Jonathan Miller, 24, who joined a midmarket investment bank in July 2007, just before the market started to fall, has also tasted the new reality. Miller had majored in philosophy and English but was drawn to banking in his senior year by the prospect of a high salary and "something with sparkle and shine" for his résumé, he said.
"When I got the job," Miller said, "the recruiter told me, just don't screw up and you'll do well." But he and his team were laid off last month — all now scrambling for work, along with thousands of others.
Miller said he thought his skills and contacts would pull him through the downturn. Asked what he was doing with the 12 to 14 hours a day he previously spent at his job, he said: "Looking for work. I spend nine hours a day on the phone, writing e-mails, talking to headhunters. You need to be aggressive and focused. My prospects aren't terrible."
He said if he did not find a job in the next few months, he would consider graduate school or a new field of work.
"I don't feel cheated," Miller said. "But it's unfortunate that by lack of timing I missed it by a year or two."


Baghdad car bomb kills nine and wounds 13
Sunday, October 12, 2008
BAGHDAD: A car bomb killed nine people and wounded 13 in the Bayaa district of southern Baghdad on Sunday, police said.
The bomb exploded in a car parked on a busy commercial street in Bayaa, a mainly Shi'ite area, police said, adding the death toll could rise.
Violence in Iraq has dropped to four-year lows, but militants still carry out bombings and other attacks almost daily.


Security is first test of school year in Iraq
By Sam Dagher
Sunday, October 12, 2008
BAGHDAD: On the first day of school, 10-year-old Basma Osama looked uneasy standing in formation under an already stifling morning sun. She and dozens of schoolmates listened to a teacher's pep talk - probably a necessary one, given the barren and garbage-strewn playground.
"Security has returned to Baghdad, city of peace and land of pan-Arabism," the teacher told the students, many as young as 5, who were loaded down with bright backpacks.
Basma's mother, Hind Majid, who had just returned after a year in Egypt waiting out Iraq's uncertainties, was not yet convinced about the security part.
"I am still fearful of the situation," she said, watching as her daughter marched into class. "I have taken a gamble with my return to Iraq."
It was certainly not the gamble it would have been a year ago, as calm has settled over ever-larger areas of Iraq. But still there are many reasons for worry: Only a few hours after Basma walked into class, the school was evacuated when Iraqi commandos stormed in and warned that two women were planning suicide bombing attacks on schools in the area.
The first day of school feels like a fresh start everywhere, and Iraq's six million schoolchildren returned to much more hope and far less violence this year.
But the start of school also seems an acute measure of one crucial part of Iraq's overall improvement: whether uprooted families feel confident enough, after years of war, crime and sectarian bloodshed, to go back to their homes and old neighborhood schools. After all, few parents, if any, willingly expose their children to danger.
A tentative answer, from interviews in a half-dozen Baghdad neighborhoods, begins with a far greater feeling of safety. That is borne out by figures from the UN High Commissioner for Refugees.
In August, the number of Iraqis who returned home from abroad or from internal displacement soared to 37,835, compared with 20,546 in July and 16,338 in June. Baghdad and Diyala Province, just to the north, account for more than 90 percent of those numbers.
Millions remain displaced, and in September the pace slowed, with 23,821 returning to their homes. But the monthly average for the 10 months beginning in August 2007, according to the UN figures, was only about 11,000.
Even for those who come back to Iraq from outside the country, there still seems much reluctance to return to their homes if they fled sectarian violence, particularly in areas that were mixed Sunni and Shiite.
And so the opening of school, which for most Baghdad children is in October, is also a measure of how deeply the city's sectarian map was redrawn in the violence of 2006 and 2007.
Majid, for example, is a Shiite married to a Sunni, and she was willing to return this year from Egypt with their two daughters, but she drew the line at returning to Saydia, the southern neighborhood she had fled, which was one of the main battlegrounds for sectarian feuds. She now lives with her parents in Amel, a mainly Shiite area that was once more mixed.
Over all, the sentiment around Baghdad seemed a mix of hope and anxiety, which together translated into endless calculations and complex compromises: Should the whole family return, or just the adults? Is it wise to reclaim a home in a previously mixed neighborhood? Or might it be better to find a new one in an area dominated by one's own sect, and dare again to trust neighbors enough to contemplate a basic act like letting a child walk to school alone?
Complicating the choices, many schools in the heart of Baghdad are overcrowded, understaffed and in ruins, lacking some basic infrastructure, like classroom benches and clean drinking water.
In the southern city of Basra, more parents are opting this year to enroll their children in better-run private schools, despite the steep costs.
"School is probably the most important institution that needs to be re-established for the return to normalcy," said Major Tom Nelson, an American engineering officer in Baghdad.
So far, the U.S. military seems to be bearing the brunt of costs associated with rebuilding and equipping schools. It has spent more than $85 million since October 2006 in Baghdad alone. Nelson's unit of the 101st Airborne Division has spent $6.7 million in recent months on schools in northwestern Baghdad, more than double the Iraqi government's contribution of $2.6 million.
The Kifah elementary public school in Fadhil, a central Baghdad neighborhood that until recently was among the most dangerous, just got from the U.S. military a power generator, air-conditioners in every classroom and a bright blue paint job. Bordering the building, though, there remains a swamp of sewage.
And notwithstanding the American help, the principal, Awatef Fadhel, said she cannot get money from the district board of education to run the new generator, let alone hire a guard, a janitor and replacements for the teachers who fled Fadhil.
The Iraqi education minister, Khudayr al-Khuzai, said the nation's schools have been in shambles since the mid-1980's as a result of wars and international sanctions. Now that the security situation is better, he said, the government will embark on a multibillion-dollar program of renovations and building over the next four years.
"I do not think we have serious problems," he said. "The most serious problem is when the lives of students and teachers were being threatened."
UN officials say it is critical that the Iraqi government act quickly and be less bureaucratic in helping the returning refugees, including providing adequate education and schools. Experts hope improvements in schools will reinforce the idea that neighborhoods are safer, so that still more people will return.
"Nothing is irreversible," Andrew Harper, who is in charge of the Iraq desk in the Office of the High Commissioner, said, referring to the current calm. "We need to do things quickly and hit it while the iron is hot."
In the heart of Huriya, a sprawling working-class neighborhood in northwestern Baghdad ripped apart by reprisal killings and displacement, a sewage pool consumes half the playground of the Wasit elementary school for girls.
Zahra Saheb, the school's principal, conceded that progress toward normalcy had been limited. The school, which has 560 students, had lost nearly 50 students when Sunnis fled Huriya, and only three daughters of recently returned families have registered. "A lot of blood was spilled here," Zaheb said.
Almost no day goes by without reports of the singling out of families returning to homes they had fled. Many encounter graffiti warning them not to stay, and some are threatened with bombs and grenades. Some meet a fate like that of a Shiite man who was killed late last month shortly after going back to his home in the now mainly Sunni neighborhood of Ghazaliya.
Saleh Mahdi and his family returned this fall from Syria, after an absence of more than two years. On Monday he was registering his daughter Baraa at al-Amal high school in Amel.
Mahdi, a Shiite, owns a house in Ghazaliya but recently rented a new one in Amel. He went back to check on his Ghazaliya home a few days ago and learned that a neighbor had been strangled with a bag, his body dumped on the street.
At the Amal school last Monday, almost 50 students were crammed into a stuffy and dusty classroom. For them, sectarian polarization is a part of life.
"We moved to Amel because it is a Shiite area now and the closest to Dora," said Hawra Kadhim, 18, referring to her native neighborhood in southern Baghdad, until recently one of the city's most violent areas.
The New York Times


Israel offers 'zero tolerance' to rioters
Sunday, October 12, 2008
JERUSALEM: Prime Minister Ehud Olmert of Israel told the police Sunday to show "zero tolerance" towards rioters after a fourth night of violence between Arabs and Jews in a northern Israeli city.
Trouble began in Acre, a city Olmert said before Wednesday had been "a shining example of co-existence," until after an Arab drove into a Jewish neighborhood on Yom Kippur, the Jewish Day of Atonement, when traffic in Israel largely comes to a halt.
"The scenes from Acre since Yom Kippur and over the past several nights have been very distressing," Olmert told the weekly cabinet meeting, saying the city's 53,000 residents were being "held hostage by a small group of extremists."
"The police have been instructed to show zero tolerance towards violence," he said.
The Israeli police sent reinforcements to Acre to try to end stone-throwing clashes that continued Saturday night. Some 25 Arabs and 25 Jews in the city, a former Crusader capital of the Holy Land, have been arrested since Wednesday.
The violence has brought to the surface underlying tensions between Jews and Israeli Arab citizens, who sympathize with Palestinians in Israeli-occupied territory and have long complained of discrimination.
At least 11 Arab homes have been burned since the rioting began, local officials said. About 28 percent of Acre's residents are Arabs, according to the city's Web site.
Arabs make up about 20 percent of the population of the Jewish state. Israeli officials say Arabs enjoy full citizenship rights and have strong representation in Parliament.
In the Gaza Strip, the leader of Hamas, Ismail Haniyeh, said Jewish attacks on Arab homes in Acre were part of "a systematic policy to force the Palestinians to quit their lands."
An Israeli Arab Islamic leader has pledged his movement would fund repairs for the burned Arab dwellings.


Roger Cohen: History and the really weird
Sunday, October 12, 2008
PECULIAR, Missouri: Back when he was vice president of the United States, Dan Quayle noted that: "People that are really weird can get into sensitive positions and have tremendous impact on history."
He was right, as the Germans know, even if his own impact was limited by the fact the president he was understudying for remained alive.
Quayle's words came back to me because, like a lot of Americans, I've gone down with Palinitis: the acute fear that Sarah Palin might get into one of those "sensitive positions."
This is no ordinary moment. More than two trillion dollars have disappeared from Americans' retirement accounts. The hedge-fund high priests of the universe have suspended their Warhol purchases. Iceland, de-banked, has gone back to fishing (if there are any fish left). On the next president will hinge the choice between recession, with a small "r," and Depression, with a big "D."
It's not a time, in history's great sweep, for Quayle's weird people to run the world. Tremendous might prove an inadequate description of their impact. What we need is a safe pair of hands. Or we'll all be fishing.
Then I pulled into Peculiar.
I'd decided to go for a spin around Missouri because this bellwether, battleground state has voted for the winner in every election since 1904, with the sole exception of 1956. In many respects, it is America miniaturized.
Of its 108 rural counties, 107 voted Republican in 2004. But its big cities, St. Louis and Kansas City, are another story, trending heavily Democrat. Rural, Bible-belt, America-first Missouri tends to views St. Louis as the fallen East Coast.
The growing number of conservative, evangelical voters led John Kerry to abandon campaigning here four years ago; he lost heavily to President Bush. In Peculiar (motto "Where the 'Odds' are with you"), Democrats are rare. Cass County, where it's located, voted 61.6 percent Bush.
There's not a lot to Peculiar, a smattering of low-slung buildings off Highway 71. At a general store, I asked about the name and a woman told me: "When they incorporated the town, they tried a few names, but those already existed, and somebody wrote back saying we should try something more 'peculiar.' And, son, we did."
End of story.
Or not quite: America's become a place where Peculiar folks think the city folks have lost the plot and city folks think the rural folks are peculiar.
In this twisted culture war, where Palin's hockey moms and Joe Sixpacks are supposed to be the only patriots still standing, believing in a woman's right to choose can actually be cast as unpatriotic. (Belief in regulating markets used to be unpatriotic too.)
I pulled out of Peculiar, passed a sign saying "Nothing's hard for God," cranked up the radio and got the Eagles: "And I wanna sleep with you/ In the desert tonight/ With a billion stars all around/ Cause I got a peaceful easy feeling/And I know you won't let me down ..."
Man, that felt good: a peaceful easy feeling is not something I've had about the United States in a while. But around Humansville (I didn't ask), a country music station brought me this: "I'm just a common man/ Drive a common van/ And my dog ain't got no pedigree/ I'm just happy to be free/ Way I wanna be/ Because highbrow people lose their saniteeee..."
That did it. Not wishing to lose mine, I asked Kenneth Warren, a professor of political science at St. Louis University, how Missouri's battle of the Republican common man and the Democratic highbrow dude was going since the Dow went south and the Bush presidency began its final descent into flames.
"There's strong movement in Obama's direction," he said. "He was trailing by 10 points in August, and now two polls show him ahead. You've got a perfect storm for him. With the financial collapse, the Republican White House gets blamed. McCain's looking rattled and disconnected on the economy. And Palin's become a liability because she doesn't look qualified for a crisis."
In Branson, in southern Missouri, I ran into Gail Hinshaw, a business executive. He told me he's an independent who's "leaned Republican." But, he said, "I'm an orthodox Republican, not big on big government, and who's spent more or grown government more than this president? He's one of the worst presidents we ever had."
Hinshaw said no person has all the answers. So he's looking for someone who can pull people together. It's time, he noted, to paint or get off the ladder. He feels movement toward Obama as independents like him decide. "We got to do something different."
Missouri's still a toss-up. But if the Hinshaw drift continues and Obama wins the state, he'll likely be elected president by a landslide. Compared to Missouri, most other battleground states look more comfortable for him.
I'm starting to believe in a Republican bloodbath. You can't fool all the people all the time. As Quayle also noted, "The future will be better tomorrow."


Investigator discounted Palins' fears in removal of trooper
By Serge F. Kovaleski
Sunday, October 12, 2008
One of the paramount reasons that Governor Sarah Palin and her husband have given for voicing their concerns to Alaska public safety officials about Michael Wooten, her former brother-in-law, is that they and their relatives live in fear of him.
They have complained that Wooten made threats of violence against the family, used a Taser, an electroshock weapon, on his 10-year-old stepson and has generally struggled to control his anger.
But an independent investigator for the state Legislature - who has concluded that Palin abused the powers of her office by pressuring subordinates to dismiss the trooper - contends that the claims of fear were a facade to mask a maneuver in a family dispute.
In a report released Friday, the investigator, Stephen Branchflower, said that evidence, like the governor's decision to reduce the manpower of her security detail, showed that "such claims of fear were not bona fide and were offered to provide cover for the Palins' real motivation: to get Wooten fired for personal family related reasons."
Branchflower described what he considers another inconsistency: If Wooten was inclined to harm any of the Palins, then having him terminated could lead to an act of retaliation. Forcing him out of his job "would not have de-escalated the situation or provided" Palin or her family with "greater security," the report stated.
The assertion about Palin's motivations in trying to have Wooten dismissed was one of the conclusions in the report, which was the culmination of an inquiry into whether she used her office to try to settle a family score. The investigation was unanimously opened in July by the 14-member, Republican-dominated Legislative Council, about a month before Palin was selected by Senator John McCain to be the Republican vice-presidential nominee. The same panel voted unanimously on Friday to release the report amid accusations by the McCain-Palin campaign that the inquiry was a pro-Barack Obama witch hunt designed to affect the Nov. 4 election.
One of the key findings in the 263-page document was that Palin was within her legal right to dismiss her public safety commissioner, Walt Monegan. Fired on July 11, he was Wooten's boss. The report says that while it was clear Monegan's failure to bend to pressure from the governor, her husband, Todd, and others in the administration and dismiss the trooper was a reason for his ouster, the evidence suggests that it was not the only factor.
Campaigning in Altoona, Pennsylvania, on Saturday, Palin insisted that the investigation found "no unlawful or unethical activity on my part" and added that "there was no abuse of authority at all in trying to get Officer Wooten fired."
"In fact, remember, Officer Wooten is still an Alaska state trooper, which is up to the commissioner and the personnel top brass in the Department of Public Safety," she said. "If they think that Trooper Wooten is worthy of that, that's their decision."
But Branchflower, in his report, stated that Palin violated the Alaska Executive Branch Ethics Act by applying pressure to get Wooten dismissed, as well as allowing her husband and subordinates to press for his firing. Three years ago, the trooper had been ensnarled in a bitter divorce and child-custody battle with Palin's sister, Molly McCann, that resulted in ill will toward him from the Palin family.
Branchflower wrote that Palin "knowingly permitted a situation to continue where impermissible pressure was placed on several subordinates in order to advance a personal agenda."
Gary Wheeler, who worked in the governor's security detail, told Branchflower of the Palins, "I never really felt they were in fear of Wooten doing anything to them."
Wheeler added that about two or three weeks into the Palin administration, "the governor actually asked us not to drive her to and from her residence and the events," and the day-to-day duties "that the protection detail normally does were curtailed greatly."


Republicans splinter over McCain's tactics
By Adam Nagourney and Elisabeth Bumiller
Sunday, October 12, 2008
WASHINGTON: After a turbulent week that included disclosures about Sarah Palin and signs that John McCain was struggling with the tone of his campaign, Republican leaders said over the weekend that they were worried the Republican nominee for president would lose the race unless he brought stability to his candidacy and settled on a clear message to counter Barack Obama.
Again and again, party leaders and conservative spokesmen said in interviews and on television that while they believed that McCain could still win, they were concerned that he and his advisers were adrift in dealing with an extraordinarily challenging political battleground and a crisis on Wall Street.
Bill Kristol, a conservative political commentator, said Obama's favorable ratings had steadily risen despite tough negative ads from the McCain campaign. A lack of coherence in the McCain camp was taking a toll, Kristol said on Fox News.
"It's a stupid campaign," Kristol said in unusually blunt language that seemed to reflect deep frustration. "It's really become a pathetic campaign."
The expressions of concern came after a difficult week for McCain. On Friday, an investigation by the Alaska Legislature concluded that Palin, the governor, had abused her power in trying to orchestrate the firing of her former brother-in-law, a state trooper.
"I think you're seeing a turning point," said Saul Anuzis, the Republican chairman in Michigan, where McCain has decided to stop campaigning. "You're starting to feel real frustration because we are running out of time."
Tommy Thompson, a former Republican governor of Wisconsin, said it would be difficult for McCain to win in his state but not impossible. Asked if he was happy with McCain's campaign, Thompson replied, "No," and he added, "I don't know who is."
In Pennsylvania, Robert Gleason Jr., the Republican chairman, said he was concerned that McCain's increasingly aggressive tone was not working with moderate voters and women in the important southeastern part of a state.
"They're not as susceptible to attack ads," Gleason said. "I worry about the southeast. Obama is making inroads." Several Republican leaders said McCain needed to settle on a single message and warned that his changing day-to-day dialogue - a welter of evolving economic proposals, mixed with on-again, off-again attacks on Obama's character - was actually helping Obama in his effort to portray McCain as erratic.
"The main thing he needs to do," said Vin Weber, a former Republican congressman from Minnesota, "is focus on a single message - a single, concise or clear-cut message, and stick with that." John Danforth, a retired Republican senator from Missouri, said McCain should turn his attention mainly to drawing contrasts with Obama and "essentially go back to the basics," including "the very dramatic taxes and spending in the Obama program."
Even that might not be enough, he said. "This is a year where everything that could go in Obama's favor is going in Obama's favor," he said. "Everything that could go against McCain is against him. It's absolutely the worst kind of perfect storm."
McCain's advisers said they remained confident. "John McCain beat back what was a political climate that would have snuffed out any other candidate in the Republican Party," said Nicolle Wallace, a senior adviser. "He's beat back every hurdle that was ever placed in front of him."
McCain acknowledged the challenge Saturday as he campaigned in Iowa, where President George W. Bush won narrowly in 2004 but where polls show Obama with a healthy lead. "The political pundits have been wrong several times," McCain said, "and they're wrong because we will win the state of Iowa in November."
Yet there were continued signs of confusion and turmoil in the campaign, as McCain's aides wrestled with conflicting advice, daunting poll numbers and criticism from state party leaders.
Republicans said he had been damaged by several rallies last week in which supporters shouted insults and threats about Obama, prompting McCain on Friday night to chide audience members. His aides suggested that they were trying to find a balance between attacking Obama and painting him as untested and risky without stirring unruly reactions.
But on Sunday, McCain's campaign manager, Rick Davis, reacted aggressively to criticism from a civil rights leader, Representative John Lewis of Georgia, who likened the rhetoric at some McCain-Palin rallies to comments by the segregationist candidate George Wallace in 1963 that he said fueled "an atmosphere of hate" before a church bombing in Birmingham, Alabama, killed four black girls.
McCain said Saturday that the remark was "shocking and beyond the pale." The Obama campaign called the comparison with Wallace improper but said that Lewis was right to condemn "hateful rhetoric." Davis said that the comments by Lewis, "a big Obama supporter, are reprehensible." He added, "Barack Obama should apologize to John McCain directly."
Davis was on Fox News along with David Axelrod, a top Obama strategist, in a bruising appearance in which they spent much of their time shouting at each other or talking over the other's comments. Emotions are raw in the campaign, and McCain's advisers have voiced frustration at what they said was an unfair focus by the news media on the rowdy crowds.
"I think there have been quite a few reporters recently," said McCain's closest adviser, Mark Salter, "who have sort of implied, or made more than implications, that somehow we're responsible for the occasional nut who shows up and yells something about Barack Obama."
As concerns mounted, the difficulties of the McCain campaign have led some Republican leaders to express fears that he could end up dragging other Republican candidates down.
"If Obama is able to run up big numbers around the country," said Anuzis, the Michigan party chairman, "the potential for hurting down-ballot Republicans is very big."
In this churning environment, McCain was getting conflicting advice. Former Governor Mitt Romney of Massachusetts, a rival of McCain's for the Republican nomination, said McCain, who has offered scattershot proposals on the economy, should present a broad "economic vision that is able to convince the American people that he really knows how to strengthen the economy."
But no subject has more divided Republicans than how directly to invoke Obama's connection to his controversial former minister, the Reverend Jeremiah Wright, and William Ayers, a former member of the radical Weather Underground who has had a passing association with Obama.
In Colorado, a traditionally Republican state that McCain is struggling to keep in his column, the party chairman, Dick Wadhams, urged McCain to hit the issue hard, arguing that it was fair game - as Palin has said. Wadhams said he was surprised McCain had failed to do so in their debate last week.
Even Obama said after that debate that he was surprised McCain had not confronted him directly with such questions when some of his surrogates have done so forcefully.
Asked whether McCain would do so in the next and final debate, on Wednesday at Hofstra University in Hempstead, New York, Davis said, "I don't know what he's going to say at the debate." But Fergus Cullen, the Republican chairman in New Hampshire, warned that such attacks would turn off moderate voters in his state.
Although McCain has declared Wright off-limits, the campaign has brought up Ayers. But the campaign appeared to step back a bit in raising that relationship Saturday; Palin pulled back on the sharp jabs at a fund-raiser in Philadelphia.
"We just want to make sure that in this campaign, that we uphold the standards of tolerance and truth-telling," she said. "There have been things said, of course, that have allowed those standards to be violated on both sides, on both tickets. We want to uphold those standards, and again it's not mean-spirited, it's not negative campaigning, when we call someone out on their record."
Romney referred to his own defeat at the hands of McCain in arguing that the race was not over yet. "Never count John McCain out," he said. "Who knows? He has ground to make up. But he makes up ground in a big hurry. He did it in the primary."
Michael M. Grynbaum and Jim Rutenberg contributed reporting from New York, and Brian Knowlton contributed from Washington.






Congressman rebukes McCain for recent rallies
By Elisabeth Bumiller
Sunday, October 12, 2008
WASHINGTON: Representative John Lewis, the Georgia Democrat and civil rights leader, said Saturday that Senator John McCain and his running mate, Governor Sarah Palin, were "sowing the seeds of hatred and division" in a way that reminded him of former Governor George Wallace and "another destructive period" in the nation's history.
In a blistering statement reacting to the angry crowds at McCain-Palin rallies in the past week that have shouted "off with his head" and other insults about Senator Barack Obama, Lewis said: "During another period, in the not-too-distant past, there was a governor of the state of Alabama named George Wallace who also became a presidential candidate. George Wallace never threw a bomb. He never fired a gun, but he created the climate and conditions that encouraged vicious attacks against innocent Americans who were simply trying to exercise their constitutional rights.
"Because of this atmosphere of hate, four little girls were killed on Sunday morning when a church was bombed in Birmingham, Alabama."
Lewis, who was referring to the 1963 church bombing by the Ku Klux Klan, added: "As public figures with the power to influence and persuade, Senator McCain and Governor Palin are playing with fire, and if they are not careful, that fire will consume us all. They are playing a very dangerous game that disregards the value of the political process and cheapens our entire democracy."
McCain has cited Lewis as one of three people on whom he depends for sage advice. Stunned by Lewis's comments, McCain responded with his own statement, calling the remarks "a character attack against Governor Palin and me that is shocking and beyond the pale."
"The notion," McCain's statement added, "that legitimate criticism of Senator Obama's record and positions could be compared to Governor George Wallace, his segregationist policies and the violence he provoked is unacceptable and has no place in this campaign."
McCain said he was "saddened" by the criticism from "a man I've always admired" and called on Obama to repudiate Lewis's comments.
In response, the Obama campaign said in a statement, "Senator Obama does not believe that John McCain or his policy criticism is in any way comparable to George Wallace or his segregationist policies." But the campaign added that Lewis was right to condemn some of the "hateful rhetoric" at McCain's rallies.


Pollsters ponder racial bias among U.S. voters - and in their own polls
By Kate Zernike
Sunday, October 12, 2008
Three weeks to Election Day, and polls project a victory, possibly a big one, for Barack Obama.
Yet everywhere, anxious Democrats wring their hands. They have seen this Lucy-and-the-football routine before, and they are just waiting for their ball to be snatched away, the foiled Charlie Browns again. Remember how the exit polls in 2004 predicted President John Kerry?
The anxiety is more acute this year, because Obama is the first African-American major-party presidential nominee. And even pollsters say they cannot be sure how accurately polls capture people's feelings about race, or how forthcoming Americans are in talking about a black candidate.
In recent days, nervous Obama supporters have traded worry about a survey - widely disputed by pollsters yet voraciously consumed by the politically obsessed - that concluded racial bias would cost Obama six percentage points in the final outcome. He is, of course, about six points ahead in current polls. See? He's going to lose.
If he does, it would not be the first time that polls have overstated support for an African-American candidate. Since 1982, people have talked about the Bradley effect, where even last-minute polls predict a wide margin of victory, yet the black candidate goes on to lose, or win in a squeaker. (In the case that lent the phenomenon its name, Tom Bradley, the mayor of Los Angeles, lost his race for governor, the assumption being that voters lied to pollsters about their support for an African-American.)
But pollsters and political scientists say concern about a Bradley effect - which some call a theory in search of data - is misplaced. It obscures what they argue is the more important point: There are plenty of ways that race complicates polling. Considered alone or in combination, these factors could produce an unforeseen Obama landslide with surprise victories in the South; a stunningly large Obama loss; or a recount-thin margin.
Among the non-Bradley factors at the intersection of race and polling is something called the reverse Bradley (perhaps more prevalent than the Bradley), in which polls understate support for a black candidate, particularly in regions where it is socially acceptable to express distrust of blacks. Then there are the voters not captured by polls. Research shows that those who refuse to participate in surveys tend to be less likely to vote for a black candidate. The race of the questioner, too, affects a poll - but no one is sure whether people give more or less accurate answers when they are interviewed by someone of their own race.
"How much we are under-representing people who are intolerant and therefore unlikely to vote for Obama is an open question," said Andrew Kohut, the president of Pew Research Center. "I suspect not a great deal, but maybe some. And 'maybe some' could be crucial in a tight election."
In 1982, exit polls had Bradley so likely to win that newspaper headlines called him the victor. Yet he lost, narrowly. There emerged what seemed like a pattern: A number of polls found more support than there actually was for Harold Washington in the 1983 Chicago mayoral race, for David Dinkins in the 1989 New York mayoral race, and for L. Douglas Wilder in the 1989 Virginia governor's race.
Were people so afraid to appear bigoted that they lied to pollsters, thinking it more socially acceptable to support a black candidate? Pollsters and political scientists have long questioned that assumption, because they do not believe people have an incentive to deceive unless they are explicitly asked, "Do you support the white guy or the black guy?"
"We have no evidence that people lie to us," said Joe Lenski, executive vice president of Edison Media Research, which conducts the exit polls the television networks use. He and others say that discrepancy in the polls has more to do with which people decline to participate, or say they are undecided.
Adam Berinsky, a political scientist at the Massachusetts Institute of Technology who has written about the "I don't know" voters, points out that while polls overpredicted Dinkins' support in 1989, they got it right in 1993, when he was running against the same opponent, Rudolph Giuliani.
In 1989, Berinsky argues, people who feared being thought racist said, "I don't know." By 1993, they could find things in Dinkins' mayoral record to object to and so felt more free to express their opposition without fear of seeming racist.
Kohut conducted a study in 1997 looking at differences between people who readily agreed to be polled and those who agreed only after one or more call-backs. Reluctant participants were significantly more likely to have negative attitudes toward blacks - 15 percent said they had a "very favorable" attitude toward them, as opposed to 24 percent of the ready respondents. "The kinds of people suspicious of surveys are also more intolerant," Kohut said.
Scott Keeter, Pew's director of survey research, said pollsters had a harder time reaching voters with lower levels of education. Less-educated whites are the kind Obama has had trouble winning over. Conversely, young people are more likely to answer surveys, and they tend to favor Obama.
There may be several factors at work: Michael Traugott, a University of Michigan professor who studies polling, argues that the Bradley effect was misnamed from the start; the problem with the polls in the 1982 race was not that they failed to capture latent racism but that they failed to account for the absentee ballots, which ultimately handed the election to the white Republican, George Deukmejian.
Whatever its causes, the Bradley gap seems to be disappearing.
In a new study, Daniel Hopkins, a postdoctoral fellow at Harvard, considered 133 elections between 1989 and 2006 and found that blacks running for office before 1996 suffered a median Bradley effect of 3 percentage points. Blacks running after 1996, however, performed about 3 percentage points better than their polls predicted. Hopkins argues that the changes in the welfare laws in 1996 and the decline of violent crime took off the table issues that had aggravated racial animosity.
The Bradley effect in the 2006 vote was largely absent (and in some instances a reverse effect was seen by some pollsters). In Tennessee, Harold Ford Jr., a black congressman, lost by 6 points. His pollster, Pete Brodnitz, said the campaign had been watching for a Bradley effect and screened carefully to make sure its own polls looked only at the people most likely to vote. Internal polls were largely correct, but some public polls, relying on a more general population, were wildly off. Brodnitz blamed bad polling, not lying.
In this year's Democratic primaries, University of Washington researchers found a Bradley effect in three states, but a reverse Bradley effect in 12 (in the 17 others, polls were within a seven-point margin of error).
The results tended to correlate with the black population in a state: Blacks made up 15 percent or more of the population in almost all the states where the polls showed less support for Obama than there actually was; in the three states where polls showed more support than there was, less than 10 percent of the population is black.
The differences are too great to be explained by just high black turnout, said Anthony Greenwald, one of the researchers. Nor were people necessarily lying. Instead, he sees a cultural dynamic at work: The states where polls underpredicted support for Obama were generally in the Southeast, where the culture has more stubbornly favored whites, so the "right" answer there was to choose the white candidate.
In the three states where polls in the study overpredicted support for Obama - Rhode Island, California and New Hampshire - "the desirable thing is to appear unbiased and unprejudiced," Greenwald said.
The Bradley effect, Greenwald concluded, "has conceptually mutated." "It's not something that's an absolute that we should generally expect, but something that will vary with the cultural context and the desirability of expressing pro-black attitudes."
The question of how race affects polling is of course different from the question of how it affects the vote. Many experts argue that race does not play a huge role in either this year, because the economy has emerged as such a dominant issue, and Obama is not primarily identified by his race.
But most of what they know, they know from polls. And even in the least complicated years, polling is a recipe with a good dash of "Who knows?"



New South looks away
By Albert R. Hunt

Bloomberg News
Sunday, October 12, 2008
Harvey Gantt is exuberant over Barack Obama's prospects of carrying Gantt's home state of North Carolina: "This state has changed."
Then he has a flashback. Eighteen years ago, the African-American Gantt, the popular former mayor of Charlotte, was leading Senator Jesse Helms in the polls. The Republican incumbent then began running a blatantly racist ad. Gantt lost.
"I am confident but leery," he said over a salad at a restaurant in downtown Charlotte, a city emblematic of the new North Carolina.
Obama, according to polls and politicians, is running even or slightly ahead of Republican John McCain in North Carolina, a reflection of both the Democrat's campaign and how much this once decidedly Southern state has changed.
North Carolina, like Florida and Virginia, represents a New South that is politically different from the deeply conservative, reliably red - as in Republican - one found in most of Dixie.
North Carolina has a long progressive tradition. It has the region's best universities and had more good newspapers than other Southern states.
It has produced two of the most significant governors of the last century, Terry Sanford in the early 1960s, and Jim Hunt, who served four terms, until 2001.
The North Carolina of several decades ago still had the aura of the old-school textile and farm belt and the politics that went with that. Its cultural conservatism was dominated by the race issue, which was central to the 30-year reign of Helms, the late senator.
Over the past 40 years, the only Democratic presidential candidate to carry North Carolina was Jimmy Carter, in 1976.
A look at the state's two largest and fastest-growing counties illustrates the new North Carolina: Mecklenburg, centered on Charlotte, and Wake County, home of Raleigh, the state capital.
Charlotte, a global financial center, is full of young professionals, black and white. Its politics now bear little resemblance to the old days.
Last week, Hugh McColl, the former chairman of Bank of America, based in Charlotte, and even in retirement perhaps the best-known North Carolina business leader, effusively praised and endorsed Obama in a newspaper column, which he says was a first for him.
Some 150 miles away is Wake County, where the most interesting city is Cary, with a population of 125,000, fourfold what it was two decades ago and the fifth-fastest-growing city in America. This is a byproduct of the high tech-, health services-, universities-driven economy. Almost 60 percent of Cary residents have at least a bachelor's degree, more than double the national average, and median household income is more than $80,000.
A microcosm of this year's presidential race was the state legislative battle in Wake County two years ago, when Ty Harrell, a young black fund-raiser and small businessman, upset a longtime conservative Republican in a district that is 85 percent white.
"I like to think I transcended race," Harrell said. "I think Obama is doing that, too."
In Mecklenburg and Wake counties and increasingly in other parts of this state, there are fewer Helms Republicans. That's why the presidential race in North Carolina is a tossup and why the Republican Senator Elizabeth Dole is fighting for her political life. It's also why in the gubernatorial race the seven-term mayor of Charlotte, Patrick McCrory - a moderate Republican who raised taxes to fund a new light-rail transit system - is threatening to break the Democratic hold on the Statehouse.
A poll by Public Policy Polling, a Democratic-affiliated organization, is telling. McCain wins among native North Carolinians, while Obama is ahead among newcomers to the state; a sizable percentage of non-natives who back Obama say they'll also vote for McCrory for governor.
The slow evolution in Tar Heel politics is evident in the congressional delegations. Since the civil rights laws were enacted decades ago, most U.S. House delegations from the South have been dominated by white Republicans, and many of the Democrats have been African-Americans. That's a result of an alliance between Republicans and blacks in mapping safe districts.
In North Carolina, seven of the 13 House members are Democrats, and six of those are white.
Republicans insist that the state still tilts their way, especially in national elections. "Yes, a lot of new people have come to North Carolina, but many of them share our values," said Linda Daves, the Republican state party chairwoman. "They are not the values of far-out liberals like Barack Obama."
Daves acknowledges that most of the 600,000 new voter registrations this year - a reflection of unprecedented enthusiasm - are Democrats. She said, "There's no evidence that a lot of those people will vote, however." Maybe so, but the prospect of a huge turnout of African-American and young voters has supporters of Senator Dole, once considered unbeatable in this state, on edge.
Moreover, even with the success stories, this is a state on its heels economically, and that is expected to redound to the Democrats' advantage. The jobless rate is 6.9 percent, the ninth-highest in the country, and the already eroding manufacturing base is in shambles.
Hunt, the former governor, also credits the Democratic presidential candidate. "The regular party white Democrats are comfortable with Obama; they appreciate and admire his cool and how smart he is." Asked if he ever thought he would see an African-American winning a presidential election in his home state, the 71-year-old replied, "I never expected a fellow like Obama to come along."
Gantt, remembering what happened to him, has no doubt that the race card, subtly or not, will be played in the final weeks of the campaign. He does not dismiss its emotional resonance.
Still, he believes that it's going to be a harder sell in the current North Carolina: "There are fewer people in this state that can be exploited by that sort of tactic today."

The EU ticks a box
By Galima Bukharbaeva

Sunday, October 12, 2008
Galima Bukharbaeva, an Uzbekistan journalist in exile since she personally witnessed the Andijan massacre in May 2005, is editor of

The European Union held a seminar on media freedom in Uzbekistan at the beginning of this month. Seems logical enough. Journalists who cross the authoritarian regime in Uzbekistan have been murdered, others have been tortured, and yet others are being framed by the police right now. A two-day EU seminar was just what was needed to sort that all out.
In Tashkent's assault on freedom of speech, Uzbekistan's foreign journalists have been the lucky ones. They were all kicked out after the massacre in the eastern city of Andijan on May 13, 2005, when government troops shot and killed at least 750 protesters.
Uzbek journalists have fared far worse. In 2007, one was shot to death. Alisher Saipov, just 26 years old, was an Uzbek, a citizen of Kyrgyzstan and a relentless critic of Uzbekistan's president, Islam Karimov. Many people believe the Karimov regime was behind the killing.
The journalists who are still walking free in Uzbekistan are widely censored and watched carefully by the country's extensive secret police network. Not only what they write, but what they read is controlled by the regime: The Internet is heavily censored and the authorities block external Web sites that carry any criticism.
The EU seems to believe it can weaken this state intimidation and open up space for a free press with a seminar. Surely the Uzbek government would not oppose freedom of speech, they reckoned, if only someone would properly explain its benefits to the country's development.
That bubble of naïveté was not even burst by the difficulty of setting up this pointless event. The EU had tried to hold this seminar in the Uzbek capital Tashkent before: It was scheduled for late May, but at the last minute the Uzbeks postponed it for two weeks, and then indefinitely. Then, instead of the EU-sponsored seminar, the Uzbek authorities held a media conference in June, at which "experts" from different repressive countries competed to prove that freedom of speech brings nothing but chaos, revolution and disaster.
At about the same time, the government was fabricating charges against a well-known journalist, Salijon Abdurahmanov, 58, who wrote for a Web site blocked in Uzbekistan,, and worked with Radio Free Europe/Radio Liberty. He was arrested on June 7 after police found drugs - almost certainly planted - in the trunk of his car. He was first charged with using drugs, but then the police changed the charge to a more serious one - large-scale drug dealing. On Friday he was convicted and sentenced to 10 years in prison. With Uzbek judges, the state gets the result it seeks.
Perhaps Abdurahmanov should be relieved: At least he is not being tortured, like the dissident writer Yusuf Juma, who was jailed in the spring. As a master of critical poems and pamphlets which were mainly about the president and his family, Juma is regarded by the regime as Karimov's personal enemy. The prison warders told him so. And then they told him they had orders to kill him - slowly and painfully. Juma's relatives hope the international community will pay attention to him while he is still alive, but the EU is too busy to worry about a wrongly imprisoned writer.
Do EU politicians really believe that the Uzbek authorities will now allow freedom of speech after hearing reports by speakers from Europe, and that journalists will rush to write about the crimes committed by the regime - the torture, abuse and poverty - or the fact that over two million Uzbek children are forcibly removed from schools to pick cotton for two months each year?
Of course, no one in Brussels can really believe the seminar would bring any positive benefits. It was part of an attempt to tick a few boxes so that EU officials can say that Uzbekistan has improved its human rights record and that the sanctions the EU imposed in 2005 can be lifted - for the good of Germany's military base in the south of the country and a mistaken belief that Uzbekistan has huge reserves of gas.
But the EU's sanctions were never about human rights or media freedom. They were imposed in 2005 as a response to the government's mass slaughter in Andijan. The propaganda machines in Tashkent and Brussels might try to spin this media freedom seminar as a sign of real regime improvement. But any journalist living in freedom would report it differently.


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