IW: Last Friday, in the markets, it was bad. I haven't given a moment's thought to them until now, but this was a tipping point weekend out there in The Shop. The talk has moved from meltdown to panic.
At the time of writing (Monday 27th October 2008) I haven't checked the Asian markets overnight, nor the European opening prices. I haven't looked at any news save the daily article index of the IHT for Monday - that is to say, news from over the weekend. I haven't listend to a radio, we don't own a television to turn on. I don't feel I need to. I know.
I would say the markets, on Monday, 27th October, 2008 are going to be black, pitch black.
Here in The Valley I have not had one single conversation with one person about the financial meltdown, neither with friends on Friday night, nor on Saturday at the protest march against the closure of rural services, nor yesterday when a friend dropped by with some cheese. In the Auvergne, not many of us own stocks, or have much debt, we are close to the land and the food it brings, close to the wood to heat to our homes, water to drink. This is not our problem. Yet.
But here is something I heard just now, while I was making this post. According to a source at the post office bank in our local town (with a catchment area of 24,000 people), the Post Office bank received €24 million in cash deposits, money withdrawn from the town's local banks and moved to the state owned/backed post office bank.
Think about that.
And if you believe in omens, there were three major earthquakes yesterday and here this Monday morning the dawn was a burnt red of a type I have never seen here in three years. Now I hear thunder and it is raining.
No surface ice found in Moon crater
By Henry Fountain
Sunday, October 26, 2008
For years, scientists have wondered whether there might be water ice on the Moon's surface. The question is of more than academic interest, because ice could be used by a future Moon base to produce oxygen to breathe and hydrogen to fuel spacecraft.
Since almost all of the Moon is exposed to sunlight, ice could exist only in the few areas that are in permanent shadow — the inside walls and floors of certain craters near the poles. One candidate is Shackleton crater, which is about 13 miles in diameter and 2.5 miles deep.
But images taken by a Japanese spacecraft throw hot water on the idea that Shackleton might have surface ice. Since parts of the crater are in permanent shadow, the images relied for illumination on sunlight glancing off the walls on the opposite side.
In an analysis of the images published in Science, Junichi Haruyama of the Japan Aerospace Exploration Agency and colleagues report that the area is certainly cold enough to harbor ice, but that the reflectance indicates there is only soil on the surface. If ice does exist there, they say, it is probably mixed in small concentrations with the soil.
By Elisabeth Rosenthal
Sunday, October 26, 2008
VITORIA-GASTEIZ, Spain: With governments having trouble feeding the growing number of hungry poor and grain prices fluctuating wildly, food scientists are proposing a novel solution for the global food crisis: Let them eat potatoes.
Grains like wheat and rice have long been staples of diets in most of the world and the main currency of food aid. Now, a number of scientists, nutritionists and aid specialists are increasingly convinced that the humble spud should be playing a much larger role to ensure a steady supply of food in the developing world.
Poor countries could grow more potatoes, they say, to supplement or even replace grains that are most often shipped in from far away and are subject to severe market gyrations.
Even before a sharp price spike earlier this year, governments in countries from China to Peru to Malawi had begun urging both growing and eating potatoes as a way to ensure food security and build rural income.
Production in China rose 50 percent from 2005 to 2007, and the government has called potatoes "a way out of poverty." In Peru, where potatoes are traditionally part of the highland diet, President Alan García has led a campaign to promote potato eating in cities. Schools, prisons and army canteens are serving papapan, bread made with potatoes, helping increase potato consumption 20 percent this year.
A decade ago, the vast majority of potatoes were grown and eaten in the developed world, mostly in Europe and the Americas. Today, China and India - neither big potato-eating countries in the past - rank first and third, respectively, in global potato production. And in 2005, developing countries produced a majority of the world's potatoes for the first time.
"Increasingly, the potato is being seen as a vital food-security crop and a substitute for costly grain imports," said NeBambi Lutaladio, a roots and tubers specialist at the UN Food and Agriculture Organization in Rome. "Potato consumption is expanding strongly in developing countries, where the potato is an increasingly important source of food, employment and income."
Though the price of grains has receded in recent months from historic highs, grains are still far more expensive than just two years ago. The UN agency continues to strongly encourage countries to diversify into potato production, Lutaladio said, adding: "The world economy has entered a phase of wild swings. New and even more severe high price events could be just around the corner."
And so the potato's image is shifting from that of a food fit for peasants and pigs (and associated mostly with a devastating famine in Ireland) to a serious nutritional aid and an object of scientific study. When the United Nations announced last year that 2008 would be the Year of the Potato, few took it seriously. That was before grain prices doubled between early 2007 and spring 2008, and the UN World Food Program announced that it needed an extra half-billion dollars to buy grain.
Pamela Anderson, director of the International Potato Center, a global scientific research center in Lima, said that as recently last year, the most common question she fielded concerned her favorite potato recipe. "Now the food system is so fragile that people have stopped laughing. People are asking, 'How can potatoes help solve the problem?"' Anderson was one of dozens of international scientists who met this month in the heart of Basque country at Neiker Tecnalia, a 200-year-old agricultural research center. Their goal: to discuss advances in potato farming, like the development of pest- and drought-resistant strains that could be used in poorer countries.
Potatoes are a good source of protein, starch, vitamins and nutrients like zinc and iron. As a crop, they require less energy and water to grow than wheat, taking just three months from planting to harvest.
Since they are heavy and do not transport well, they are not generally traded on world financial markets, making their price less vulnerable to speculation. They are not generally used to produce biofuels, a new use for food crops that has helped drive up grain prices. When grain prices skyrocketed, potato prices remained stable.
Beyond that, potato yields can be easily increased in most of the world, where they are grown inefficiently and in small numbers.
Thanks to the "green revolution" of the 1970s, yields of wheat, rice and corn jumped more than 50 percent in a decade as fertilizers and new planting techniques were used. Potatoes never got that kind of attention.
In poor countries, potato yields are still relatively low, at just one to five tons of potatoes per hectare, or about two and a half acres, less than 15 percent the yield in the developed world.
But potatoes have limitations from the perspective of traditional food aid programs, which buy or receive food from where it can be produced cheaply and efficiently and send it to where it is needed.
Because they spoil easily and are heavy to ship, groups like the World Food Program avoid them. Pound for pound, they contain less protein than wheat, although, looked at another way, an acre of potatoes yields more protein than an acre of wheat.
"They are quite perishable, especially in hotter climates; they sprout and rot quite quickly," said Tina van den Briel, a nutrition specialist at the World Food Program. She added that potatoes were currently a staple food in very few countries, although they were widely used in stews.
"Moving from rice to potatoes is a big leap for people," she said. Nonetheless, the agency has made it a priority to increase production of food for aid in the countries where it is needed, both to lessen transit costs when fuel costs are high and to aid local economies.
The Associated Press
Sunday, October 26, 2008
HONG KONG: The discovery of excessive levels of the industrial chemical melamine in Chinese eggs has prompted the Hong Kong authorities to expand testing to include meat products imported from China, a senior official said Sunday.
The move follows the announcement late Saturday that Hong Kong testers had found 4.7 parts per million of melamine in imported eggs produced by a division of Dalian Hanwei Enterprise Group, a Chinese company. The legal limit for melamine in foodstuffs in Hong Kong is 2.5 parts per million.
York Chow, the Hong Kong secretary for food and health, said the melamine may have come from feed given to the chickens that laid the eggs.
The egg results have prompted officials to expand food testing to meat imports from China, Chow said Sunday. He said that Hong Kong officials would also step up checks of eggs imported from China.
Calls to Dalian Hanwei Enterprise Group, based in the northeastern port city of Dalian, went unanswered Sunday.
In an earlier egg-related food safety scare in Hong Kong and China, the banned cancer-causing industrial dye Sudan Red was used to color egg yolks.
China is caught in a food safety scandal over dairy products tainted with melamine. More than 3,600 children remain sick in China from contaminated milk, with three in serious condition, the Ministry of Health said last week. The deaths of four infants have been blamed on dairy products contaminated with melamine.
The authorities say that middlemen apparently added melamine to milk they had collected from farmers to sell to large dairy companies. The suppliers are accused of watering down the milk and then adding the nitrogen-rich chemical to make the milk seem higher in protein when tested.
Melamine is used in the manufacturing of plastics, fertilizer, paint and adhesives. Health experts say that ingesting a small amount poses no danger, but in larger doses, the chemical can cause kidney stones and lead to kidney failure. Infants are particularly vulnerable.
The Hong Kong government also said it had found excessive amounts of melamine in Blueberry Cream Sandwich crackers made by Croley Foods, a Philippine company.
The Chinese prime minister said Saturday that the country would take steps to improve its food safety, blaming the tainted milk products on a failure of regulation. Speaking at a 43-nation Asia-Europe Meeting summit in Beijing, Wen Jiabao said the milk scandal would spur the introduction of the first major food safety law in China and that Chinese food exports would meet international standards.
"Food involves a full process from the farmland to the table, it involves many links and many processes," Wen said. "In every link and every process, we need to put in place effective and powerful regulatory measures."
The state-run China Daily newspaper said the new law would impose safety standards on food additives and ban all harmful chemicals. It would also allow the government to recall unsafe food if companies fail to comply.
Since the authorities announced that melamine had been found in many milk products in September, the scandal has prompted recalls of Chinese-made milk products in dozens of countries.
Japan, which has also been hit by several high-profile food scandals involving contamination and mislabeling, is considering creating a new, specialized agency to monitor food and product safety.
The latest recall covers nearly 2.7 million packages of sausages and pizza sold in Japan. Itoham said it had detected large amounts of cyanide in the water at two of the three wells at its factory in Chiba, near Tokyo. Tests were still being carried out on sausages to see if they had been tainted.
Sunday, October 26, 2008
By Alastair Sharp
Compensation for farmers affected by bird flu helps the early detection of new outbreaks, the U.N's avian influenza chief said on Sunday, but refrained from criticising countries like Egypt that lack such programmes.
Cambodia and Egypt -- which is hosting a ministerial summit on the virus -- are the only countries heavily affected by bird flu that do not offer some form of compensation.
"In our view, compensation for the value of birds that are destroyed for the control of avian influenza is important if public cooperation is to occur," David Nabarro told Reuters on Sunday.
"At the same time we appreciate that governments will wish to decide who is most in need of compensation," he added.
Egypt paid compensation for birds that had to be culled in the first months after the avian influenza virus arrived in the North African country in early 2006, but the agriculture ministry says this programme ended in May 2006.
At a joint press conference earlier, Egyptian Agriculture Minister Amin Abaza said Egypt wanted to provide compensation, but that "this is a cost we cannot shoulder."
Some 22 Egyptians have died of the deadly H5N1 strain of bird flu since the virus arrived in the most populous Arab country, where 5 million households depend on poultry as a main source of food and income.
Abaza said Egypt was relying on public education to combat the disease and on a large-scale vaccination programme, including for household flocks. He said 60 percent of non-commercial poultry had been vaccinated so far at a cost of 150 million Egyptian pounds (17 million pounds). "We would have liked to have enough resources to compensate, but the only alternative is free vaccinations," Abaza added.
Egypt, the worst-hit country outside of Asia, has said it is unlikely the disease can be completely eradicated despite the vaccination programme.
Many experts attending the conference in the Red Sea resort town of Sharm el Sheikh this weekend have praised long-term compensation programmes as the best way to ensure rapid detection of new outbreaks.
But Abaza said he believed Egyptian farmers and small-scale poultry owners would alert authorities following a successful public awareness campaign, despite the lack of compensation.
"Now they understand this outbreak is dangerous for their own children," he said.
Bird flu has killed 245 people in Asia, Africa and Europe since late 2003. Countless birds have also been culled.
The World Bank estimates that a global pandemic resulting from the mutation of bird flu could cost $3 trillion and result in a nearly 5 percent drop in world gross domestic product.
It has said that more than 70 million people could die worldwide in a severe pandemic.
(Editing by Sue Thomas)
Sunday, October 26, 2008
SANAA: About 100 people are dead or missing in Yemen after severe flooding caused by torrential rain affected large areas of the country in the past few days, a government official said Sunday.
Television pictures showed survivors signalling to rescue helicopters in the provinces of Hadramout and Mahra which suffered 30 hours of heavy rain.
"About 7,000 people have been made homeless and there are about 100 dead or missing. We are still trying to gather more exact figures but communications with some of the affected areas have been cut off," the Yemeni official told Reuters.
President Ali Abdullah Saleh called Sunday for parliament to approve 20 billion rials (63 million pounds) in emergency funding for rescue operations and to help rebuild areas affected by the most serious flooding in decades.
Yemeni authorities have declared the provinces a disaster area and Saleh has toured some of the worst affected regions.
Yemen is one of the poorest countries in the world and its government is grappling with a rebellion in the north, unrest in the south and a resurgence of al Qaeda, while a growing number of Somali refugees stretch its resources to the limit.
Situated at the southern tip of the Arabian Peninsula, Yemen is prone to flooding during the monsoon season.
(Reporting by Mohammed Sudam; Writing by Firouz Sedarat; editing by Andrew Dobbie)
Sunday, October 26, 2008
WASHINGTON: Two earthquakes shook northern California early on Sunday, but local officials said there were no immediate reports of injuries or damages.
A magnitude 5.1 quake occurred about 19 miles (30 km) west of Petrolia, California, according to the U.S. Geological Survey. The town is about 265 miles (426 km) north of San Francisco. The quake hit at 2:26 PST (9:26 a.m. British time) and was 11 miles (17 km) deep, according to the USGS National Earthquake Centre.
The second quake, a 4.1 magnitude, struck about a minute later, 11 miles (17 km) west southwest of Fort Ross, California, which is about 90 miles (144 km) from San Francisco, California. It was 3.1 miles (5 km) deep, the centre said.
Magnitude 5 quakes are considered moderate and capable of causing considerable damage, while magnitude 4 quakes are considered light and capable of moderate damage.
Police in Humboldt and Sonoma counties said they had not received reports of damage or injuries.
"So far, so good," said a dispatcher with the Sonoma County Sheriff's Department who declined to give her name.
Sonoma County, a popular tourist destination, is part of California's famed wine country.
Sunday, October 26, 2008
JAKARTA: An earthquake measuring 6.4 on the Richter scale jolted Indonesia's north Sulawesi island on Sunday, but there were no immediate reports of casualties or damage, the meteorology agency said.
The quake struck at a depth of 32 km (20 miles), and the epicentre was 91 km (56 miles) southwest of Gorontalo town, said Suhardjono, an agency official. The agency did not issue a tsunami warning.
Indonesia suffers frequent earthquakes, being located in an active seismic region where several tectonic plates meet.
(Reporting by Telly Nathalia, writing by Karima Anjani, editing Sugita Katyal)
Sunday, October 26, 2008
KABUL: A strong earthquake of magnitude 5.6 struck northeastern Afghanistan on Sunday, but caused no casualties or damage, a government official said.
The U.S. Geological Survey (USGS) said on its website the quake's epicentre was at a depth of 208 km (130 miles).
The quake occurred at about 6 am local time and was also felt in the capital, Kabul, some 260 km (160 miles) from the epicentre lying to the south of the city of Faizabad of northeastern Badakhshan province.
Mountainous Afghanistan is an earthquake prone country.
Thousands of people were killed by earthquakes in northern Badakhshan province in the late 1990s.
In 2002 at least 1,500 people were killed when a series of quakes of between magnitude 5 and 6 struck northern Baghlan province in the Hindu Kush mountains, destroying the district capital of Nahrin.
(Writing by Jonathon Burch; Editing by David Fox)
By Mark Landler
Sunday, October 26, 2008
WASHINGTON: The International Monetary Fund said over the weekend that it would stand by its managing director, Dominique Strauss-Kahn, despite concluding that he had shown poor judgment in a sexual affair with a subordinate.
After receiving a report from an outside law firm, the executive board of the fund said Saturday that there was no evidence that Strauss-Kahn had abused his power or shown favoritism in his brief relationship with a senior official at the fund, who later resigned to take a job in London.
Still, the longest-serving member of the board, A. Shakour Shaalan, described the affair as a "serious error of judgment" on the part of Strauss-Kahn, 59, a former French finance minister who took charge a year ago and is now steering the fund through the most serious global financial crisis in decades.
In a statement, Strauss-Kahn said, "I am grateful that the board has confirmed that there was no abuse of authority on my part, but I accept that this incident represents a serious error of judgment."
The inquiry, by the firm Morgan, Lewis & Bockius, concerned a brief relationship between Strauss-Kahn and Piroska Nagy, then an official in the Africa department. Nagy left the fund in August as part of a buyout of nearly 600 employees instituted by Strauss-Kahn to cut costs.
At issue was whether Strauss-Kahn had sexually harassed Nagy, pressed her to leave the fund or used his authority to give her preferential treatment in her buyout. In all cases, the report found no evidence.
Last week, Strauss-Kahn issued an apology to the fund's staff, Nagy and his wife, Anne Sinclair, a French television journalist. Sinclair wrote on her personal blog that her husband's affair had been a "one-night stand," and that the couple had "turned the page."
Strauss-Kahn's affair came at an awkward time, just as the American mortgage crisis jumped borders to become a global financial upheaval, destabilizing countries from Iceland to Argentina and creating a list of would-be borrowers from the fund.
On Friday, Iceland reached a tentative agreement with the fund for a $2 billion emergency loan to stabilize its economy, which has been devastated by the collapse of its three main banks. Loans to Hungary and Ukraine could be announced this week, fund officials said.
Beyond these efforts, the fund is trying to arrange a huge credit line for countries like Brazil and South Korea, which have sound economies but are suffering from a lack of access to foreign currency.
Strauss-Kahn has been a whirlwind of activity, appearing with President George W. Bush at a meeting of finance ministers of the Group of 7 industrialized countries earlier this month and presiding over the fund's annual meeting in Washington.
Still, Shaalan said that despite retaining the support of the board, Strauss-Kahn would have to work to regain the trust of the staff, particularly female employees. "There are a number of staff who are not at all happy, and do not approve of the managing director's behavior," he said.
Sunday, October 26, 2008
It would be fairly easy to dismiss the gleeful boast by President Nicolas Sarkozy of France that American-style capitalism is over, to file it with French critiques of fast food and American pop culture.
Except that the U.S. government now owns stakes in the nation's biggest banks. It controls one of the biggest insurance companies in the world. It guarantees more than half the mortgages in the country. Finance - the lifeblood of capitalism - has to a substantial degree been taken over by the state.
Even Alan Greenspan, the high priest of unfettered capitalism and a former chairman of the Federal Reserve, conceded last week that he had "found a flaw" in his bedrock belief of "40 years or more" that markets would regulate themselves. "I made a mistake," he said.
The question is what new direction capitalism should take. In a globally interconnected world, the U.S. cannot simply march back to the gray flannel capitalism of the 1950s and 1960s when regulations were tough and coddled monopolies dominated the corporate world. Still, the next president will have a chance, not to be missed, to reconsider some tenets of the freewheeling, deregulated version of a market economy that has dominated America since the Reagan administration.
Financial deregulation enabled the boom-and-bust dynamic - removing barriers to capital flows, allowing unrestricted trading of abstruse financial products and letting financial institutions take on more and more debt. Cheap money, from China or the Federal Reserve, fueled the fire. But America's virtually unregulated shadow financial institutions - brokerages, hedge funds and other nonbank banks - played a particularly important role at the center of this process.
The solution will require rethinking the rules of finance. The amount of capital that banks must keep in reserve will have to rise; deregulated financial institutions will have to be regulated. Yet much more will be needed than just putting the bridle back on American banks.
The next government must re-establish some notion of equity of opportunity. Investment is desperately needed in health care, education, infrastructure. The social contract and the government's role in it should be re-examined. Addressing these challenges will be an enormous task - especially amid the recession that most economists expect over the next year or so. But they must be faced. Fixing finance is merely the start.
By Bruce Weber
Sunday, October 26, 2008
"When you hear this message, I will no longer be there," the voice, characteristically spirited, confident, just a little bit cheeky and familiar to all of France, said on a tape released last week.
The words were those of Sister Emmanuelle, a nun revered for her work with the disenfranchised, especially among the garbage-scavengers of Cairo, and renowned for her television appearances in France as an advocate for the poor. She died Oct. 20 at a retirement home operated by her order, the Congregation of Notre-Dame de Sion, in Callian, in the south of France.
She was immediately praised by the Vatican, her work and achievement likened to those of Mother Teresa. A spokeswoman for her charitable organization, the Sister Emmanuelle Association, confirmed the death. She was 99 and would have turned 100 next month.
But Sister Emmanuelle, who told an interviewer in August that she was not afraid of death, was not quite through with her earthly work. The tape, part farewell and part public relations coup, was released by the book publisher Flammarion as part of the announcement that her autobiography, written two years ago and held for posthumous release, will now be published.
"In telling of my life - all of my life - I wanted to bear witness that love is more powerful than death," Sister Emmanuelle said on the tape, which was recorded when she finished the book. "I have confessed everything, the good and the less good, and I can tell you about it."
And so she has. In the book, mischievously titled "Confessions of a Nun," Sister Emmanuelle wrote seriously of a life of faith and service. "Remember the simple soul of your brothers and sisters in rags," she counseled herself. "Do not turn yourself to the 'beautiful world' unless it is useful for the slums; do not let your original vanity carry you off to the heights."
She wrote as well of having to overcome what she described as an early fear of Jews, though her grandmother was Jewish. Her order was founded, in 1843, to promote the conversion of Jews to Christianity. But "little by little," she wrote, "I went from rejection of, to pride in, my origins."
She also wrote frankly of her lifelong feelings of lust, of masturbating as a girl, of falling in love and having to renounce physical love for the love of God.
As a girl, she wrote, "when desire assaulted me, only some outside presence had the power to stop me; otherwise I was powerless against the avidity of pleasure. A penchant for voluptuousness and an obsession for sensuality developed in my flesh, the intensity of which is difficult to describe. The fact that the needle has not left my old woman's body is a source of constant surprise and humiliation. I thought that, with the years, its tip of fire would completely disappear. Not at all."
Such candor always characterized Sister Emmanuelle, who was known to favor allowing priests to marry, who was benignly indifferent to homosexuality and who wrote to Pope John Paul II in defense of the use of contraceptive pills, telling him about the slum-dwelling Egyptian girls who were marrying as young as 12 and having babies.
After she took her vows - in either 1929 or 1931, according to varying reports - she taught in schools in Turkey, Tunisia and Egypt. In 1971, when she was 62, she received permission from her order for what had long been her desire, to move to Cairo and live among the poorest of its citizens in Ezbet El Nakhl, a slum whose residents, known as zabbaleen, share space with refuse, sorting and recycling it for the city, and scavenging in it, too. There she lived in a one-room hut for 22 years, while helping to establish schools, clinics and play areas.
The Sister Emmanuelle Association, which she founded in 1980, eventually extended its work to Brazil, Burkina Faso, Haiti, the Philippines, Senegal and Sudan. She returned to France in 1993 and became an outspoken advocate for the rights of the poor.
The Associated Press
Sunday, October 26, 2008
KINSHASA, Congo: Congolese rebels began a new offensive Sunday, defying the UN Security Council and seizing the headquarters of a park that is home to many of the world's last mountain gorillas, officials said.
The UN Security Council condemned the Congolese Tutsi rebel leader Laurent Nkunda last week for calling for a national rebellion, and urged all armed groups in the huge country's violent eastern provinces to lay down their arms.
Nkunda's fighters accuse Congo's army of attacking them, and say the UN's biggest peacekeeping mission has sided with the army and Rwandan Hutu rebels.
Nkunda's forces drove government troops out of an army base at Rumangabo, North Kivu Province, during intense fighting early Sunday, and heavy artillery exchanges were continuing, a spokeswoman for the UN mission, MONUC, said.
Virunga National Park officials said the rebels had seized its headquarters. "When the rebels started approaching the park station, we thought we were all going to be killed," a park ranger, Bareke Sekibibi, said, according to a statement issued by the park.
Virunga, near the border with Uganda and Rwanda, is home to about 200 of the world's 700 remaining mountain gorillas, which are considered critically endangered. Ten mountain gorillas were killed last year, including two Silverbacks, causing an international outcry.
The attack Sunday marked the second time rebels have seized the Rumangabo base since Aug. 28, when Nkunda went on the offensive charging that government troops had broken a January cease-fire agreement.
More than 200,000 people have fled their homes since then, joining at least 1.2 million displaced when the conflict began in 2007, the United Nations said.
"There's heavy fighting. A lot of people have been killed - rebels, soldiers, civilians. We're lucky we got away," said Jean-Baptiste Bushu Mbusho, a builder who works for the Italian aid agency AVSI.
The United Nations deployed a rapid reaction force Sunday and appealed to both sides to cease fire - at least to allow civilians to escape.
"But nobody is listening to us and they keep fighting," a UN spokeswoman, Sylvie van den Wildenberg, said.
Nkunda's fighters, who claim to be protecting the region's Tutsi minority, have occupied parts of Virunga National Park for nearly a year, but attacked the headquarters for the first time Sunday.
The park director , Emmanuel de Merode, called the seizure of the headquarters "unprecedented, even in all the years of conflict in the region."
"The conflict on the ground is chaotic and dangerous, and we cannot allow our rangers to become targets," he said.
More than 50 park rangers fled into the forest and were making their way on foot to Kibumba, 20 kilometers, or 12 miles, south of Rumangabo, from where trucks would evacuate them to the provincial capital Goma, he said in a statement.
Many of the civilians who have been displaced are malnourished and some are dying of hunger, the UN World Food Program said Friday. The agency is seeking $46 million in donations for food aid needed to sustain refugees through March.
The fighting has also jeopardized aid deliveries, and the UN agency said some contractors were refusing to go to certain areas.
A war in Congo from 1998-2003 and the resulting humanitarian disaster killed an estimated 5.4 million people, most through hunger and disease.
By Katrin Bennhold
Sunday, October 26, 2008
"I haven't forgotten history," says Gert Heinz, a tax adviser in Munich. "If you depend on paper money you can lose everything. We've learned that the hard way after two world wars."
So when Chancellor Angela Merkel went on television recently to tell Germans that their bank accounts were safe, Heinz, who at 68 still remembers the rows of canned food that his mother hoarded in the attic, decided he would rather be safe than sorry.
He converted another chunk of his savings into gold and stocked up on a six-month supply of rice, sugar, flour and a special brand of milk powder that lasts for half a century.
Heinz may be an extreme example, but he is not alone among Europeans who are looking for ways to protect themselves in the face of a financial storm that - at least so far - has affected them much less directly than it has many Americans. Indeed, his reaction reflects the history of a Continent that has weathered wars, revolutions and financial crises over the centuries, burnishing national convictions that are very different from those in the United States.
In America, wealth and retirement savings are much more tied up in the stock market, with a majority of people owning at least a modest stake. By contrast, only 13 percent of German households and 24 percent of French ones own shares, according to 2006 figures compiled by the European Savings Institute. Pensions are still largely state-driven, not 401(k)-style investment accounts. Even for the British, who look more like Americans in terms of their credit card debt and mortgage exposure, the share of those who have invested in the market is only about 20 percent.
But Europeans know that the situation can get a lot worse.
There is a long tradition of burying treasures in troubled times. Today, tales of people taking money out of banks to keep it somewhere else are circulating in Paris bistros and London pubs. Companies selling or renting safes are reporting an increase in demand, though hard numbers are difficult to establish.
"History matters. In times of crisis you really get to know a country and its people," said Toni Pierenkemper, a professor of economic history at Cologne University. "Traumatic events are seared into the collective consciousness and often survive into the next generations."
Germany, where many people lost their savings twice in the 20th century, is one of the richest laboratories of European historical scars - welds that help explain the country's fears of inflation and its interest in maintaining a complex public-private banking system.
The network of 446 publicly owned savings banks, which have been guaranteeing their deposits for three decades, have proved popular in recent weeks as nervous Germans moved part of their savings onto their books.
Even more striking, a sudden surge in the demand for gold has led several Internet sites and gold vendors to temporarily shut down their sales operations.
"I've never seen anything like this. We're basically sold out until the end of the year," said Robert Hartmann, co-founder of ProAurum, a gold vendor based in Munich. Despite the shortages, about 200 customers line up at his counter every day, he said, asking for coins and bars, not certificates. According to his estimates, "only about 5 percent of German investors" are interested in converting a small part of their savings to gold "but it's enough to put suppliers under strain."
Heinz, the financial adviser, started diversifying his investments in the run-up to the 1992 recession. He has bought land and gradually built up a stock of gold, which he buys in small units suitable as emergency payment and keeps in a safe in a specialized company.
He still remembers the stories his grandfather told of a suitcase full of bank notes buying no more than a loaf of bread during hyperinflation in 1923 Germany. He also remembers the currency changes of 1948 that again wiped out savings.
Some of his clients share his fears.
He tells of one who dropped a vacuum-sealed sack filled with gold and silver to the bed of a lake, in case the government were to levy an additional tax on wealth or try to ban households from owning gold. Another has buried his riches in a forest. All of them think that it is just a matter of time until another wave of inflation erodes the value of money.
In France, gold sales have also increased but people are more trusting of the government.
The entire French banking system was state-owned as recently as 1987 and the state has played a prominent role in the economy dating to the days of Louis XIV.
In contrast to the unease and suspicion among most Americans about the government taking stakes in distressed financial institutions, many people in France feel comforted - even vindicated - in their belief that the state has a responsibility to look after the economy.
"We nationalize, we denationalize and we re-nationalize. That's the way it goes in France," quipped Bernard Candiard, director-general of Crédit Municipal de Paris, a 231-year-old pawnshop that is doing brisk business these days and is, yes, a state monopoly.
"Today we are again in the process of nationalizing banks," Candiard said. "It's a sign to the people. The government wants to give them confidence. And confidence in France is the state. We have a different tradition from America."
In Eastern Europe, where people were hardened by modest living standards under communism, the trust in government is more limited.
In Bulgaria, for example, more people are looking at moving their money to West European banks that offer an unlimited deposit guarantee, said Adriana Alexandrova, a financial executive at the TV2 television station in Sofia.
"There is a great lack of confidence in the banks and in the government," said Alexandrova, whose parents had to close down their pharmacy business after several Bulgarian banks collapsed in the mid-1990s. "Several of my friends have moved their money to safes."
The phrase "he likes gardening" has a double meaning in Bulgaria, she added. "Under communism it mainly meant people preparing jars of pickled vegetables to get them through the winter. These days, it mainly means someone is hiding money in their garden or under their pillow."
By Roger Cohen
Sunday, October 26, 2008
NEW YORK: I was talking to a banker friend and he told me the "unraveling" could go on for ages. I thought he meant the unwinding of all the leverage that had inflated everything from the price of stocks to the price of homes.
But, just to be sure, I asked him: "Unraveling of what?"
He paused, before saying, "Almost our way of life."
A friend of his, he went on, has a horse farm north of New York City. "I told him, for heaven's sake, you have to get rid of your horses. Shoot them if necessary."
That got me thinking. Are we Americans going to be living on horse meat before we get to the bottom of this?
It's now clear that our credit system the world over was rotten all the way through, a giant house of cards maintained by the ingenious connivance of banks, rating agencies and insurance companies in a monumental heist. The only buyers anyone trusts any more are governments.
No wonder Alan Greenspan says he's in a state of "shocked disbelief." He's not the only one.
But as the state intervenes, in what Ed Yardeni, an investment analyst, called "a giant global game of Whac-A-Mole," the moles keep popping out of new black holes in the financial system.
"We've tried rubber mallets, now we're using bazookas, but we're flying blind," Yardeni told me.
It's really a wonder, when you think about it, that there are still two guys in the race to become U.S. president, pulling out all the stops in these last eight days of campaigning to be chosen as the one to face the nightmare.
Let's fast-forward a year to October, 2009. The U.S. unemployment rate stands at 10 percent. Crime is up across the country. The economy is shrinking. No arm-twisting from the Treasury has managed to restore the broken confidence between borrowers and lenders. Banks, the few still standing, are holding fast to their cash. Property prices are down more than 25 percent from current levels.
The Dow is still heading south as people get used to the idea that stocks long traded at no more than ten times earnings, rather than the much higher ratios our former leveraged world delivered.
New buildings stand empty all over New York because it's at the end of a boom - that's to say right now - that most new construction comes to market. Exports, long a bright spot in the economy, have plummeted because of a rising dollar. The deficit and national debt stand at unprecedented levels.
The hedge fund industry is decimated - its model of flipping cheap borrowings into leveraged bets around the world has blown up - and one desperate, even contrite, former master of the universe has just sold a Rauschenberg for $9 million less than he paid in 2004.
People still have way too much debt and the collateral for it keeps evaporating. They are angry. Civil unrest is stirring.
I ask you, Senator McCain, Senator Obama, do you still want the job?
It may not get that bad, of course. On the bright side, gas prices are plunging. There's a lot of money sitting on the sidelines in places like Dubai. And, as I mentioned, the dollar is up - about 20 percent against sterling and the euro in the last three months.
You can get a plate of pasta in central London now for less than $50. You can even take a short tube ride for less than $6. There must be hope for us all!
In a way, what's going on with the dollar is a measure of the extent of global desperation. Here's a currency backed by debt so massive that it will presumably have to be inflated away some day - and it's rocketing upward.
Every investment position that made sense during a global boom and doesn't make sense during a global bust is being unwound, and the people doing the unwinding want dollars. They are buying U.S. Treasury bills yielding basically zilch because they are too plain scared to buy anything else. Capital preservation is the name of the game if you have any capital left.
Of course, there's the option to try preserving that capital in euros or other currencies. But at some very basic level - and we're down to basics - the full faith and credit of the U.S. taxpayer is still deemed more credible than any other. That's a confidence vote, slim but real, in the United States and its ability to come back.
As Avinash Persaud, the chairman of Intelligence Capital Limited, told me: "Money, in the end, is confidence. It's a check the Federal Reserve has issued."
Perhaps that's why Obama and McCain are still in the race: because they believe confidence can be restored.
But both candidates should be clear-eyed about what's looming. They shoot horses, don't they?
By N. Gregory Mankiw
Sunday, October 26, 2008
LIKE most economists, those at the International Monetary Fund are lowering their growth forecasts. The financial turmoil gripping Wall Street will probably spill over onto every other street in America. Most likely, current job losses are only the tip of an ugly iceberg.
But when Olivier Blanchard, the IMF's chief economist, was asked about the possibility of the world sinking into another Great Depression, he reassuringly replied that the chance was "nearly nil." He added, "We've learned a few things in 80 years."
Yes, we have. But have we learned what caused the Depression of the 1930s? Most important, have we learned enough to avoid doing the same thing again?
The Depression began, to a large extent, as a garden-variety downturn. The 1920s were a boom decade, and as it came to a close the Federal Reserve tried to rein in what might have been called the irrational exuberance of the era.
In 1928, the Fed maneuvered to drive up interest rates. So interest-sensitive sectors like construction slowed.
But things took a bad turn after the crash of October 1929. Lower stock prices made households poorer and discouraged consumer spending, which then made up three-quarters of the economy. (Today it's about two-thirds.)
According to the economic historian Christina Romer, a professor at the University of California, Berkeley, the great volatility of stock prices at the time also increased consumers' feelings of uncertainty, inducing them to put off purchases until the uncertainty was resolved. Spending on consumer durable goods like autos dropped precipitously in 1930.
Next came a series of bank panics. From 1930 to 1933, more than 9,000 banks were shuttered, imposing losses on depositors and shareholders of about $2.5 billion. As a share of the economy, that would be the equivalent of $340 billion today.
The banking panics put downward pressure on economic activity in two ways. First, they put fear into the hearts of depositors. Many people concluded that cash in their mattresses was wiser than accounts at local banks.
As they withdrew their funds, the banking system's normal lending and money creation went into reverse. The money supply collapsed, resulting in a 24 percent drop in the consumer price index from 1929 to 1933. This deflation pushed up the real burden of households' debts.
Second, the disappearance of so many banks made credit hard to come by. Small businesses often rely on established relationships with local bankers when they need loans, either to tide them over in tough times or for business expansion. With so many of those relationships interrupted at the same time, the economy's ability to channel financial resources toward their best use was seriously impaired.
Together, these forces proved cataclysmic. Unemployment, which had been 3 percent in 1929, rose to 25 percent in 1933. Even during the worst recession since then, in 1982, the U.S. economy did not experience half that level of unemployment.
Policy makers in the 1930s responded vigorously as the situation deteriorated. But like a doctor facing a patient with a new disease and strange symptoms, they often acted in ways that, with the benefit of hindsight, appeared counterproductive.
Probably the most important source of recovery after 1933 was monetary expansion, eased by President Franklin D. Roosevelt's decision to abandon the gold standard and devalue the dollar. From 1933 to 1937, the money supply rose, stopping the deflation. Production in the economy grew about 10 percent a year, three times its normal rate.
Less successful were various market interventions. According to a study by the economists Harold Cole and Lee Ohanian, both of the University of California, Los Angeles, and the Federal Reserve Bank of Minneapolis, President Roosevelt made things worse when he encouraged the formation of cartels through the National Industrial Recovery Act of 1933. Similarly, they argue, the National Labor Relations Act of 1935 strengthened organized labor but weakened the recovery by impeding market forces.
LOOKING back at these events, it's hard to avoid seeing parallels to the current situation. Today, as then, uncertainty has consumers spooked. By some measures, stock market volatility in recent days has reached levels not seen since the 1930s. With volatility spiking, the University of Michigan's survey reading of consumer sentiment has been plunging.
Deflation across the economy is not a problem (yet), but deflation in the housing market is the source of many of our present difficulties. With so many homeowners owing more on their mortgages than their houses are worth, default is an unfortunate but often rational choice. Widespread foreclosures, however, only perpetuate the downward spiral of housing prices, further defaults and additional losses at financial institutions.
The Fed and the Treasury Department, intent on avoiding the early policy inaction that let the Depression unfold, have been working hard to keep credit flowing. But the financial situation they face is, arguably, more difficult than that of the 1930s. Then, the problem was largely a crisis of confidence and a shortage of liquidity. Today, the problem may be more a shortage of solvency, which is harder to solve.
What's next? Perhaps the most troubling study of the 1930s economy was written in 1988 by the economists Kathryn Dominguez, Ray Fair and Matthew Shapiro; it was called "Forecasting the Depression: Harvard Versus Yale." (Fair is an economics professor at Yale; Dominguez and Shapiro are at the University of Michigan.)
The three researchers show that the leading economists at the time, at competing forecasting services run by Harvard and Yale, were caught completely by surprise by the severity and length of the Great Depression. What's worse, despite many advances in the tools of economic analysis, modern economists armed with the data from the time would not have forecast much better. In other words, even if another Depression were around the corner, you shouldn't expect much advance warning from the economics profession.
Let me be clear: Like Blanchard at the IMF, I am not predicting another Great Depression. We have indeed learned a lot over the last 80 years. But you should take that economic forecast, like all others, with more than a single grain of salt.
By Jeremy GauntReuters
Sunday, October 26, 2008
LONDON: The big question facing investors across the world this week is, "How long will this go on."
The U.S. Federal Reserve Board is widely expected to cut interest rates sharply, corporate earnings reports will flow in and many investors will be looking at the preparations for a global financial summit meeting next month, and even the U.S. presidential election.
But the sell-off/panic/rout - call it what you will - on stock markets and foreign exchange last week and in the months preceding has become so severe that it is almost gaining a life of its own outside of events.
"There's nothing we can do; investors may just have to suffer," Koichi Ogawa, chief portfolio manager at Daiwa SB Investments, said Friday as his local stock index, the Japanese Nikkei 225 share average, tumbled nearly 10 percent in one day. "Nobody wants to catch a falling knife."
The numbers tell a mind-boggling tale.
The MSCI all-country world stock index hit a five-year low Friday. In reaching that level it has wiped out in less than a year about 80 percent of the approximately $20 trillion in value gained in the prolonged recovery since the Internet-stock debacle.
The latest wrinkle, however, is that an emerging-market decline is gathering pace. The MSCI emerging market index lost about 15 percent last week for a month-to-date decline of 39 percent.
At the same time, emerging market sovereign debt was clobbered and various developing economy currencies sank. Hungary was even required to raise interest rates by 3 full percentage points to protect its falling currency, the forint.
It is not at all clear that this week will prove much different.
The abandonment of emerging markets has not been brought on just by lack of confidence in riskier assets as the global recession takes hold. The repatriation of money is also a reflection of hedge funds and others deleveraging, that is, liquidating their holdings to get back borrowed money.
Such funds are essentially selling into any strength they see, meaning that any attempts at a rally are short-lived. It is also unclear how much needs to be liquidated.
A Société Générale strategist, Albert Edwards, suggested that the deleveraging trend could run at least for the rest of this year and that it would start adding to a deteriorating picture for emerging markets.
"As reserves fall in EM economies, liquidity is squeezed and they get hurt by this on top of the export slowdown," he said, adding that there were "bigger downside surprises to come in EM growth disappointment."
Not that emerging markets are alone. The world's richest economies are where the rot set in, and there is little likelihood of immediate improvement there, either.
The Swiss-based wealth manager Sarasin is warning clients to expect U.S. data this week to show falling sales for new home and home prices, a gloomy outlook for U.S. production, weaker durable goods and battered consumer confidence.
Into this will step the Fed, with investors expecting a lot from its meetings Tuesday and Wednesday. Interest rate futures show a majority of market players leaning toward a cut of 100 basis points rather than 75 basis points. This would follow an emergency cut of 50 basis points earlier this month and leave federal fund rates as low as a wafer-thin 0.5 percent.
Reuters polls also show economists are expecting a half-point cut from the Bank of England after its next meeting on Nov. 6 and at least 25 basis points from the European Central Bank by the end of the year.
Normally, such prospects of easier money would lift investor sentiment. But the problem for the authorities is that very little seems to be working as the worst financial crisis in 80 years turns into a global recession.
"Markets don't seem to be satisfied with anything at the moment," said Emiel van den Heiligenberg, an asset allocator at Fortis Investments.
One immediate area of concern is corporate earnings. Until recently, companies outside of the banking industry have performed reasonably well.
This is beginning to change - if not in the third quarter earnings that are being released, then in the outlooks that accompany them.
Global electronics giant Sony, for example, halved its profit forecast Friday, citing sagging demand for cameras and flat-screen televisions as well as currency fluctuations strengthening its home currency, the yen.
With about a third of the Standard & Poor's 500-stock index companies having reported, Thomson Reuters calculates that just more than 60 percent have been above market expectations. But that is the past, not the future.
Reports this week include those from U.S. Steel, Procter & Gamble, Legg Mason, Kraft Foods, MetLife and Sun Microsystems. In Europe, reporting companies include Banco Santander, BP, Alcatel-Lucent, France Telecom and Deutsche Bank.
Whether any positive surprises will have much long-lasting effect in the current climate remains to be seen.
People are looking for the light at the end of the tunnel, said Darren Winder, an equity strategist at Cazenove. "If they see light at the end of the tunnel they don't know if it's genuine light or if it's just another train coming."
By Emily KaiserReuters
Sunday, October 26, 2008
WASHINGTON: The more than $4 trillion that governments have thrown at the financial crisis pales in comparison with the wealth destroyed in falling stock markets, and conditions may get worse as economic reality sets in.
While there are some encouraging signs that efforts to revive credit markets are beginning to gain traction and lending is slowly resuming, companies are sounding the alarm over the damage already done to their profits.
Sony of Japan is finding fewer buyers for its cameras and televisions. The French automaker PSA Peugeot Citroen is planning "massive" production cuts as demand fades. The online retailer Amazon.com is warning that holiday sales will not be as strong as expected. The sheer volume of companies reporting disappointing earnings is as distressing as the breadth of industries and countries affected.
"We are now in the midst of a full-blown global financial crisis," said Robert Buckland, a Citigroup analyst. "Policy makers have been unable to calm the storm, although the increasingly aggressive response offers some hope. The earnings downturn looks to have much further to go."
In the five weeks since the investment bank Lehman Brothers collapsed, stock markets have fallen so sharply that they have wiped out $12 trillion in wealth, according to Citigroup.
Consumer and business confidence has also dropped since then, and spending has fallen sharply. That will no doubt weigh heavily in the U.S. Federal Reserve's decision Wednesday on whether to cut short-term borrowing costs.
Investors widely expect another half-point reduction, which would take the benchmark federal funds rate to 1 percent. When the credit crisis first spiked in August 2007, the rate stood at 5.25 percent.
There is some evidence that the Fed and its fellow central bankers are having some success in easing the credit market strains that drove up borrowing costs and effectively barred many healthy borrowers from accessing cash.
Interbank lending rates have begun to ease and bank borrowings from the Fed slipped last week for the first time since Lehman's collapse.
If those trends continue, they will go a long way toward fostering a quicker economic recovery. However, the short-term damage is already done.
A report due Thursday is expected to show that the U.S. economy contracted at an annual pace of 0.5 percent in the third quarter, according to a Reuters poll.
Bruce Kasman, an economist at JPMorgan, thinks that things may get much worse. He is predicting that GDP will decline at a 4 percent clip in the fourth quarter, which would be the worst since 1982.
Wall Street analysts have yet to reflect the gloomy outlook in their fourth-quarter corporate earnings forecasts. They are still looking for companies in the Standard & Poor's 500 index to turn in 35 percent profit growth in the current period, according to Thomson Reuters research.
While that forecast has come down considerably since April, when analysts were predicting a 64 percent jump, it still seems wildly optimistic, considering that earnings have fallen for five straight quarters through September and economic prospects have dimmed considerably since then.
That points to more earnings disappointments to come, particularly if the world economy continues to wobble.
As the earnings picture darkens, companies are responding by cutting spending and jobs, which deepens consumer gloom and creates a vicious circle that is difficult to break.
Those circles are circumnavigating the globe. Consider the poultry producer Sanderson Farms in the United States. Its best customer for chicken legs is Russia, but sales are falling because Russia is getting a lower price for its oil and its access to credit is drying up.
That could translate into weaker profits at Sanderson, which would exacerbate the U.S. economic slowdown and in turn drive oil prices lower and weaken exporters like Russia.
"The next cycle of growth must come from emerging markets, as many have vast pools of untapped consumers," said Benjamin Reitzes, an economist with BMO Capital Markets.
Until that next cycle starts, corporate profits may hold quite a few more unpleasant shocks for stock markets.
The Associated Press
Sunday, October 26, 2008
WASHINGTON: The U.S. bailout is now the hottest lobbying game in town.
Insurers, automakers and American subsidiaries of foreign banks all want the Treasury Department to cut them a piece of the largest government rescue in U.S. history.
The betting is that many with their hands out will be successful, especially with financial markets in a stomach-churning dive and predictions that the U.S. economy is about to tumble into a deep recession. These groups argue that the credit squeeze is so severe and the risks to the economy so dire that their industries need financial support as well.
The Treasury is considering requests from a variety of industries, but has not decided whether to expand the program, officials said Saturday.
Lobbying efforts are intensifying. The Financial Services Roundtable wrote Treasury officials on Friday requesting that the initiative to buy $250 billion in bank stock grow to cover insurers, auto companies, securities dealers and U.S. subsidiaries of foreign companies, including banks. The Treasury's plan is intended to bolster banks' tattered balance sheets and get them to resume making loans.
As the Treasury now interprets it, these additional groups would not participate in the bank stock program. They could receive help from a separate part of the $700 billion rescue that will buy bad assets from financial institutions.
Steve Bartlett, the president of the Roundtable, urged the Treasury to broaden the definition of those eligible for the stock purchase program. "The institutions that are excluded play a vital role in the U.S. economy by providing liquidity to the market," Bartlett wrote Neel Kashkari, the Treasury official running the bailout program.
Referring to U.S. subsidiaries of foreign companies, Bartlett said, "This is a global crisis and to not recognize the U.S. firms controlled by foreign banks or companies would create further impediment to the market's recovery."
A financial industry official said Treasury Secretary Henry Paulson Jr. had met over the past week with various groups, including hedge fund managers, that were petitioning for assistance. The official spoke on condition of anonymity because the Treasury had not made a decision. This official said the discussions with insurance industry executives were being held in advance of what are expected to be disappointing earnings reports by some insurance companies in the coming week.
The official said the insurance industry would like to get government purchases of their stock on a mandatory basis, duplicating the agreement Paulson struck two weeks ago with nine major banks.
Paulson pressured the big banks to go along with the program as a way of removing the stigma that might be attached to the payments if only a few major banks had received them.
Some insurers technically would be eligible for stock purchases now if they own subsidiaries that are savings and loan institutions regulated by the Office of Thrift Supervision.
Last month, American International Group, the largest insurance company in the nation, received an $85 billion loan from the Federal Reserve. Since then, it has gotten further support in an effort to withstand the biggest upheavals on Wall Street since the Great Depression.
Complicating the government's decision-making is that the administration of President George W. Bush will not be in charge after Jan. 20. Paulson, who has said he has no intention of staying on the job, has pledged to consult both campaigns on his bailout actions.
Barack Obama's presidential campaign said Friday that it supported the effort by the auto industry to get money from the $250 billion made available for stock purchases. That would be in addition to $25 billion recently approved by Congress for low-interest loans to help the struggling industry retool and build fuel efficient vehicles.
The debate over expanding the bailout comes as the Treasury is rushing to get money out the door to the primary recipients: banks that sharply curtailed lending after suffering billions of dollars of losses on mortgage-related assets as home foreclosures soared in the housing slump. Lawmakers are pressuring the Treasury to do more in the foreclosure area, as well.
Sheila Bair, head of the Federal Deposit Insurance Corporation, told Congress about efforts to provide government-backed loan guarantees for mortgages that are reworked to help homeowners in danger of default. That would give banks an incentive to speed up refinancing efforts because the government would back part of the reworked loan.
The Treasury is also moving ahead to get bank stock purchases approved. It announced on Oct. 14 that it was spending $125 billion to buy stock in nine of the largest financial institutions. An announcement was expected Friday about a second round involving 20 to 22 other banks. But it was decided each bank would announce its own agreements with the Treasury, out of concern that excluded banks could suffer a stock sell-off from disappointed investors.
PNC Financial Services Group announced Friday it was acquiring National City for $5.58 billion, in what was the first instance of a bank using fresh investments from the bailout program to make an acquisition.
By David Leonhardt
Sunday, October 26, 2008
On a recent morning in Manhattan, a friend of mine walked into his bank, carrying his briefcase. He went up to the teller's window and asked to withdraw thousands of dollars of his savings, which the teller handed over in $100 bills. He then walked home, holding his briefcase a little more tightly than usual, and put his money in a drawer.
Was he being a little paranoid? He knew that he was. His savings were guaranteed by the Federal Deposit Insurance Corp., which, as government officials have been reminding us lately, has never failed to cover a bank deposit in its 70 years of existence. Cash in a drawer comes with no such guarantee. If there's a house fire, the money is gone. But my friend figured that even if his savings were at no real risk of disappearing at the bank, they might become unavailable to him for some period of weeks or moths, were the financial crisis to keep worsening. He didn't like that idea. So he was willing to give up a few months of interest — meager interest, to be sure — in exchange for a sense of control. Given all of the once-unthinkable events that had already happened, it was hard to know what might come next.
For the better part of the past two decades, Americans have been living in a state of willful optimism about our financial future. It is probably fair to date the start of this period to the late 1980s, when the stock market took off and the Soviet empire began to unravel. Since then, our default attitude toward the economy has been to believe that, one way or another, things will work out.
Companies began ditching their pension plans, forcing workers into riskier 401(k)s. But, really, how risky could they be? They were invested mainly in the stock market, one of the most profitable investment vehicles in the history of mankind. We became so comfortable with Wall Street, in fact, that we moved money out of boring old FDIC-insured accounts and into uninsured mutual funds. Many people simply stopped saving altogether. So did the U.S. government in the last several years, despite the enormous Medicare and Social Security bills that are just around the corner. We told ourselves that everything would be fine, because the alternative seemed so implausible.
The personal saving rate — that is, income minus spending — arguably tells the best story about our recent optimism. From the mid-1950s through the mid-1980s, the rate hovered around 9 percent, which meant that, on average, Americans set aside nine cents of every dollar they earned — to use in the future on college tuition, a down payment, retirement or an unexpected misfortune. In the late 1980s, however, the rate began to fall. In the 1990s, it averaged only 5 percent. In the last several years, it has barely exceeded zero.
There was a simple enough justification for the decline. Since the 1980s, incomes for most families haven't been growing very quickly, which has made it more difficult to save. At the same time, the value of assets, mainly houses and stocks, was growing enormously. So nest eggs continued to get larger even without much new money flowing into them.
For a time earlier this decade, it was intellectually fashionable among economists to point out that the size of the nest egg — not the money flowing into it (which was the basis for the official saving rate) — mattered most. By this standard, the country's savings behavior was perfectly healthy. The ratio of household assets to income actually looked high. In 2001, Lehman Brothers — yes, that Lehman Brothers — put out a report with the mischievous title of "Are U.S. Households Saving Too Much?" One section was called "Forget Ben Franklin."
The hitch, of course, was that asset values had to stay high. Many people simply could not conceive of another outcome. Not since the Great Depression, some analysts noted, as if to underscore the absurdity of such a possibility, had house prices fallen nationwide. And even skeptics had a hard time imagining that the situation could get nearly as bad as it has. I was one of those journalists who tried to point out over the past decade that house prices and stock values were getting out of control. Yet when I look back at those articles now, there are still passages that make me cringe. In 2005, while describing the dangerous boom in adjustable-rate mortgages, a colleague and I wrote, "The impact is not likely to derail the economy on its own, economists predict, but it will probably slow growth."
The point of that sentence was to make clear that we weren't anything like those crazy people walking around with doomsday sandwich boards. We understood that, despite our concerns, everything would work out just fine. It always had before, hadn't it?
At times over the past several weeks, the country has certainly gone too far in the other direction. Our binge of optimism has been followed by bouts of deep pessimism, which is a dangerous combination. It's the stuff of bank runs, stock-market crashes and once-in-a-century economic downturns. Finding the right middle ground — in which we neither hoard our way into a deep recession nor spend our way into bankruptcy — will not be easy. But it's also not impossible. Economic mores can change.
Well into the 1940s, Americans wondered whether the hard times had really ended. They spent the next few decades behaving as if the country's prosperity depended on their actions. They saved money, which provided the capital for the great postwar boom and also paid for their retirement. Then came the change, and many of us began to assume that prosperity was an inalienable part of life, regardless of what we did. We failed to be sufficiently afraid of the alternative. A little fear can often be a healthy thing.
By Gretchen Morgenson
Sunday, October 26, 2008
My hypocrisy meter conked out last week. It started acting up Wednesday, spinning wildly as executives from the leading U.S. credit-rating agencies testified before Congress about their nonroles in the credit crisis. Leaders from Moody's, Standard & Poor's and Fitch all said that their firms' inability to see problems in toxic mortgages had been an honest mistake. The woefully inaccurate ratings that have cost investors billions were not, mind you, a result of issuers' paying ratings agencies handsomely for their rosy opinions.
Still, there were those pesky e-mail messages cited by the House Committee on Oversight and Government Reform that showed two analysts at Standard & Poor's speaking frankly about a deal they were being asked to examine.
"Btw - that deal is ridiculous," one wrote. "We should not be rating it."
"We rate every deal," came the response. "It could be structured by cows and we would rate it."
Asked to explain the cow reference, Deven Sharma, president of Standard & Poor's, told the committee: "The unfortunate and inappropriate language used in these e-mails does not reflect the core culture of the organization I am committed to leading."
Maybe so, but that was a lot for my malarkey meter to absorb.
Then, on Thursday, my meter sputtered as Alan Greenspan, former "maestro" of the Federal Reserve, testified before the same Congressional questioners. He defended years of regulatory inaction in the face of predatory lending and said he was "in a state of shocked disbelief" that financial institutions did not rein themselves in when there were billions to be made by relaxing their lending practices and trafficking in exotic derivatives.
Greenspan was shocked, shocked to find that there was gambling going on in the casino.
My poor, overtaxed smoke-and-mirrors meter gave out altogether when Christopher Cox, chairman of the Securities and Exchange Commission, took his turn on the committee's hot seat. His agency had allowed Wall Street firms to load up on leverage without increasing its oversight of them. But he said Thursday that the credit crisis highlights "the need for a strong SEC, which is unique in its arm's-length independence from the institutions and persons it regulates."
He said that with a straight face, too.
There was more. Cox went on to suggest that his hapless agency should begin regulating credit-default swaps.
This, recall, is that $55 trillion market at the heart of almost every big corporate failure and near-collapse of recent months. Trading in these swaps, which offer insurance against debt defaults, exploded in recent years. As the market for the swaps grew, so did the risks - and the interconnectedness - among the firms that traded them.
During the years when these risks were ramping up unregulated, Cox and his crew were silent on the swaps beat.
How exasperating. After all the time and taxpayer money spent trying to resolve the financial crisis, we are still in the middle of the maelstrom. The S&P 500 stock index was down 40.3 percent for the year at its close Friday.
Yes, the problems are global, and made more complex by Wall Street's financial engineers. And a titanic deleveraging process like the one we are in, where both consumers and companies must cut their debt loads, is never fun or over fast.
Still, as the stock market continues to grind lower, something more may be at work. And that something centers on trust and credibility, which have been lacking in corporate and government leadership in recent years.
Like the boy who cried wolf, corporate and regulatory officials have issued a lot of hogwash over the years. Until recently, investors were willing to believe it. Now they may not be so easily gulled.
Companies, even those in cyclical businesses, routinely told investors that the reason they so regularly beat their earnings forecasts was honest hard work - and not cookie-jar accounting. They were believed.
Politicians proclaiming that the economy was strong and that the crisis would not spread kept our trust.
Brokerage firms insisting that auction-rate securities were as good as cash won over investors - and, as we all know now, that market froze up.
Wall Street dealmakers were fawned over like all-knowing superstars, their comings and goings celebrated. No one doubted them.
Banks engaging in anything-goes lending practices assured shareholders that safety and soundness was their mantra. They, too, got a pass.
Directors who didn't begin to understand the operational complexities of the companies they were charged with overseeing told stockholders that they were vigilant fiduciaries. Investors suspended their disbelief.
And regulators, asserting that they were policing the markets, convinced investors that there was a level playing field.
Is it any surprise that virulent mistrust seems to own the markets now?
Janet Tavakoli, a finance industry consultant who is president of Tavakoli Structured Finance, said the stock market's gyrations are a result of a severe lack of confidence in the very officials who are charged with cleaning up the nation's mess.
"It is not enough to throw money at a problem; you also have to use honesty and common sense," Tavakoli said. "In fact, if you leave out the last two, you are wasting taxpayers' money."
What she means by common sense is a plan that will force institutions to get a fix on what their holdings are actually worth.
"If you are going to hand out capital, you have to first revalue the assets or take over so that you can force a mark to market," she said. "Force restructurings, mark down the assets to defensible levels and let the market clear."
She also suggests that financial regulators impose a form of martial law, allowing them to rewrite derivatives contracts that bind counterparties to terms they may not even comprehend.
"If I were queen of the world, I would wade in there with a small army of people and just start straightening out these books," she said. "Start stripping them down and simplifying contracts so people can start to understand what they own."
That move, which would begin the much-needed healing process for investors, would be unprecedented in another way. It might get the people who run our companies and our regulatory agencies into the business of telling the truth.
Naïve, I know. But something to wish for - I'd like to give my hypocrisy meter a breather.
By Louise Story
Sunday, October 26, 2008
David Armstrong was proud for a long time to be part of Merrill Lynch's thundering herd — the brokers in the storefronts and office buildings who are the face of Wall Street to many Americans.
But he struck out on his own in May, relieved, he said, that he would no longer have to explain how Merrill traders far from his office in Virginia had made investments that so weakened the firm.
He said the Merrill name used to help him gain clients. Now, he said, "I will never have to worry about another person in my firm making bad business decisions that can put the entire business in jeopardy."
Brokers like Armstrong — not just at Merrill, but at other Wall Street firms as well — have been caught in the middle of the credit squeeze and stock market downturn. Even as they perform their traditional role of comforting their shaken clients, they find themselves having to explain the write-downs, losses, layoffs and capital infusions that they had nothing to do with. And because some of their income was paid in company stock, their own net worth has dropped along with the stock's value.
So some are leaving.
"Brokers are walking out the door," said Brad Hintz, an analyst at Sanford C. Bernstein & Company. "This is a rare opportunity for them to leave, with the stock price down. The golden handcuffs which have tied them to these companies because of deferred compensation are now essentially gone."
It is too early to claim an all-out broker exodus, and many who are leaving are simply going to competitors that are dangling better pay packages.
The problem is that the brokers have become more important to the bottom lines of their employers. Wall Street firms like Merrill and Citigroup are increasingly reliant on their wealth management businesses because they provide stable earnings. Even as brokers are leaving, Wall Street firms like Morgan Stanley and UBS are aggressively trying to hire more brokers and lure them away from competitors.
Merrill's nearly 17,000 brokers were a driving force in its $50 billion sale to Bank of America. The same is true for Wells Fargo's $15 billion deal to buy Wachovia, which includes its A. G. Edwards brokerage business.
"It is the crown jewel of Merrill," Kenneth Lewis, chief executive of Bank of America, said about Merrill's brokers in a conference call about the bank's merger with Merrill.
Several brokers who left recently said in interviews that they had talked to their clients before leaving and had made sure that most would follow. When a broker leaves, banks select new brokers to handle the accounts. Investors who want to follow their broker generally have to move their money on their own. And some investors, disappointed with the market this year, may choose not to follow their brokers.
One of the latest broker defections was last Friday when a group of four Merrill advisers in Westport, Connecticut, resigned to set up their own shop. The four had worked at Merrill since the late 1990s and managed $1 billion. Now they are trying to attract clients to their newly created firm, called the LLBH Group.
Merrill brokers were notified this Friday about Bank of America's plans to retain them. Top earners will receive a cash grant equaling up to 100 percent of their recent annual production for Merrill, and they will be allowed to keep the money if they stay at Bank of America for seven years. The other half of brokers, though, will receive far less — ranging from 10 to 20 percent of their production, depending on their length of service and other factors. That could be about $40,000 for some advisers — not a lot by the standards of Wall Street payouts of even a year ago.
On the other hand, there might not have been any payments of this sort if Merrill had remained independent. The number of Merrill's brokers was up in the third quarter, but its assets under management fell by $8 billion in the last two quarters, not counting market losses. That implies that the brokers are managing less money and some may be trainees, said Hintz, the analyst at Sanford C. Bernstein. There have also been net outflows of assets at Wachovia and Citigroup over the last two quarters.
Not just any broker can hang up a shingle and lure clients from a former employer. The ones leaving tend to have decades of experience and clients who will come to a company run in the broker's name rather than a big bank's. Their new businesses, though, may not have access to as many alternative investments for their clients.
Brokers still far outnumber independent advisers, and banks will probably remain the training ground for new brokers. There are just 10,000 to 15,000 independent advisers, fewer than Merrill's herd alone, and those independent brokers manage about $2.4 trillion in assets, according to a Citigroup report on the industry in September.
Companies that provide services to independent brokers have been trying to take advantage of what they see as an opportunity for more business.
Fidelity is running advertisements that say, "Want to be your own boss?" A Charles Schwab ad said, " 'Independent adviser' suddenly has a nice ring to it." And companies like LPL Financial are increasing their mailings to brokers.
"The American consumer has just had their confidence shaken to the soles of their feet in the brands on Wall Street," said Mark Casady, chief executive of LPL Financial. "I think you will see a permanent change in their perception of those brands."
Chris Luce, a broker at Wachovia in Dallas, left his job Sept. 19, three days before the bank announced that it would sell itself to Citigroup. (Days after that, Wachovia canceled its deal with Citigroup in favor of an offer from Wells Fargo.)
Luce, 39, who had worked for Wachovia for four years and for Merrill Lynch for 10 years before that, said that he had considered going independent for a few years, but that it was the current storm that helped him make up his mind.
"Clients, they don't have that faith and trust that they used to have," Luce said. "I think 'disillusioned' is probably a very good word."
Several brokers who split off in recent months said they had already recaptured most of their old business.
"The relationship is always with the adviser," said Lori Van Dusen, who left Citigroup's Smith Barney division in August and went to work out of Rochester for Convergent Wealth Advisors, a larger independent advisory business. "We fully expect to repaper every relationship."
A spokesman for Smith Barney said that brokers were moving between banks but that fewer than 10 big producers like Van Dusen — who advised on $5 billion of client money at Citigroup — had left to go independent this year.
Smith Barney's total count of brokers has decreased by 500, but the spokesman said the bank's long-term attrition was below industry averages.
Part of the exodus seems to be a reaction to the industry's consolidation. Charles Schwab reported a nearly $29 billion gain in assets in its independent adviser business over the last two quarters, and executives there said they expected more brokers to defect this fall.
Armstrong, the broker in Virginia who left Merrill, said he had been hearing not only from old clients but also old colleagues. He has been meeting once a week with brokers in the area who are thinking of going independent, he said, and he encourages them to follow the model he used.
"We're not having to play defense on our brand name anymore," Armstrong said. "A lot of advisers are spending a lot of time defending the actions of the firm they're affiliated with."
Financial tempest spreads to Gulf states
Financial turmoil catches up with online advertising
Asia and Europe call for joint action on markets
General Motors driven to brink
U.S. layoffs increase as businesses confront crisis
China reports a healthy economy, but prepares for effects of crisis
South Korean leaders struggle for credibility in market crisis
European and Asian leaders call for unity in facing economic crisis
So when will banks give loans?
The broker rebellion
Citadel chief denies rumors of trouble
U.S. government aid seen as vital to a merger in Detroit
House prices fell 7.3 percent in October
Brown defends surge in borrowing
IMF and Hungary reach agreement on funding
London bourse begins search to replace CEO
London Scottish Bank mulls selling debt collection unit
Bidders eye Gatwick Airport
Retailers Shop Direct and Boots cut jobs
IMF and Ukraine agree on loan deal
ECB seen cutting inflation and growth forecasts
China's top aluminium maker Chalco net dives 92 percent
Dubai loses status as haven for bankers
Recession fears haunt markets
By William Safire
Sunday, October 26, 2008
Metaphor is speech with a cute figure. That's a metaphoric sentence, taking "a verbal device that implies comparison with a wholly different subject" and comparing that figure of speech to a woman with a fine physique.
Such trope-a-dope can be an effective play on words. In Shakespeare's time, "a sea of troubles" was a gloomy metaphor of life itself; when in his "to be or not to be" soliloquy, Hamlet said he might "take arms against a sea of troubles," he was speculating about using a weapon against his life - "not to be."
But you have to keep the comparison straight; mixing the elements invites ridicule. Decades ago, I wrote a speech for Senator Everett Dirksen hailing a president's "firm hand on the rudder of the ship of state"; the mellifluous senator glumly forwarded me a letter from a constituent saying that "if Nixon's hand is on the rudder, he's drowning and nobody is minding the tiller."
In the metaphor mixer, you hear examples like "that isn't rocket surgery" and "he's cut out of the same mold." In the second U.S. presidential debate, Barack Obama said, "Senator McCain suggests that somehow, you know, I'm green behind the ears." Obama apparently confused one old metaphor, green around the gills, meaning "nauseated," with another, wet behind the ears, meaning "immature, gullible."
That wet metaphor began with its opposite: "Dry back of the ears" was cited in Dialect Notes in 1914 and was defined as "adult, experienced." That led to a 1931 citation by Eric Partridge of wet behind the ears in a British soldier's song, which the great slang lexicographer defined as "a term of reproach imputing ignorance or youth." The origin of green around the gills is obscure, but it may be a reference to uncured, stale fish, causing the potential customer to feel ill and his cheeks to appear pale. Green also has a longtime meaning of "unripe," as in bananas; it is a possible reason that Obama substituted green in its derogative sense for wet, stuffing both metaphors into a mental blender.
A nursery rhyme was introduced in the 16th century that helped children not only to memorize the days of the week but also to brace themselves for the vicissitudes of fate. It began, "Monday's child is fair of face." Some speculate that this was a subtle allusion to the "face" of the moon, source of the name "Monday."
Wall Streeters and millions of investors called the date of the stock market crash - Friday, Oct. 25, 1929 - "Black Friday." Ever since, black has been associated with bad-news days in the financial world.
That posed a problem to headline writers recently: What adjective should be used to describe a day of great good news? "Bonny and blithe and good and gay" is out, because Sunday is a day the stock market is closed. White is also out in contrast to black, for subliminal reasons of sensitivity to race. Last month, The Guardian, turned to tried-and-true alliteration in dating days of dreary drops, with "Meltdown Monday," which came along "nearly every other week nowadays, along with 'Frantic Friday' and 'Tsunami Tuesday' and 'black' any old day."
But leading up to Monday, Oct. 13, 2008, it seems the whole English-speaking world had been testing the moniker for the hoped-for good-news day, pioneered as the title of a 1984 song written by Prince and made famous by the Bangles. Google reported hundreds of usages this month of a date that will live in the opposite of banking infamy: Manic Monday.
Intriguing choice of adjective: If alliteration was the preferred rhetorical device, why not merry, marvelous, magnificent, miraculous or, to get with it, mind-blowing Monday? The choice of manic was mindful of current meaning. Related to mania, with its Greek root in mad, the word was taken up in psychiatry to describe a state including excessive enthusiasm and unstable moods; when manic depressive became stigmatized, as many illnesses do, doctors adopted bipolar disorder. The word manic, however, has remained in everyday discourse to mean "a wildly high state" - one that resulted in the largest point gain in the history of the financial averages. Manic Monday carried the connotation of caution: "a big swing upward, but watch out for unrealistic joy."
So much for alliterative nomenclature based on days of the week in some of this month's financial news. In politics this coming week, the old nursery rhyme will bear recalling: For about half the nation's voters, next Tuesday's child will be "full of grace," while Wednesday morning, for the other half, will be "full of woe."
By Kelley Holland
Sunday, October 26, 2008
U.S. Senators Barack Obama and John McCain have been competing fiercely to be president. But there is a win-win option for both of them: they could just take corporate jobs.
There are presidents everywhere in business these days — corporate presidents, of course, but also presidents of divisions, regions and product lines. General Motors has around a dozen, from the president of the whole company to presidents in various countries to the president of its OnStar division.
Leonard Lodish, a consultant who is a marketing professor at the Wharton School of the University of Pennsylvania, says the title of president has become much more common in the last 15 years among companies with whom he works.
But it is not only presidencies that have proliferated. Title inflation is rife in corporate America.
There are seemingly endless numbers of chief officers — of technology, marketing, sustainability, people, diversity and more. Vice chairmen (not so many vice chairwomen) are cropping up all over.
"Now you find instead of the head of human resources, it's chief people officer," said Steven Gross, the global rewards consulting leader at Mercer. "The role hasn't changed. There is this upward pressure for everybody to have bigger titles."
And the title of managing director, once treasured on Wall Street, now sometimes appears with fancy add-ons. The late Bear Stearns, for example, had a number of senior managing directors, a title it dangled when it recruited managing directors from top-tier firms.
Another round of title inflation may be at hand, because managers often dole out chiefdoms, directorships and vice presidencies in times of economic weakness as a substitute for raises and bonuses.
This year, Gross said, "employers will use the recognition value of a title" in lieu of pay increases.
Certainly, fancy titles can make employees feel that they are scaling the ladder. A chief whatever officer may also be able to negotiate for more pay.
An early wave of title inflation occurred in the 1970s, when wage and price controls were in place, said Peter Cappelli, director of the Center for Human Resources at the Wharton School. Employers sometimes handed out bigger titles to get around the controls and give valued employees raises, he said.
On Wall Street, a bigger title can mean that an employee's base pay rises, even if his or her bonus is unchanged, said John Lee, the sector leader for United States global markets at Heidrick & Struggles.
An employee with a lofty title may also have more leverage in a meeting, or in dealings with customers or government officials. Impressive titles can be especially helpful for senior managers overseas, particularly if they or their employers aren't well known.
But, too often for companies, many positive effects of inflated titles are short-lived. For one thing, employees with big titles may want to be paid at a level that matches the words on their business cards.
"In the short term you're saving some money by giving them the title," Professor Cappelli said. "But in the long term, it erodes the value of the hierarchy and it does lead people to want to cash in the title. And if they can't do it with you, they'll do it someplace else."
Too many titles or too-fancy titles can dilute the value of each one. Consider Kim Jong Il of North Korea, who has something like 1,200 formal and informal titles. Haile Selassie, who was emperor of Ethiopia, also held the titles of King of Kings and Conquering Lion of Judea. (It kind of makes president of the United States seem a little plain, doesn't it?)
The same often holds true in corporate life. In the old days, maybe 20 years ago, companies generally had one CEO at most, but that is not necessarily the case today.
The executive team at CB Richard Ellis, the real estate services firm, includes four chief executives — some as leaders of divisions — five presidents and a group president. In the sales force are numerous vice chairmen and executive vice presidents.
Robert McGrath, a spokesman for the firm, said the CEO title represents "significant revenue responsibility and operating responsibility for major business," while titles for "sales professionals are honorary" and awarded based on revenue generation over time. He says the title structure is consistent with standard practice in the industry.
CB Richard Ellis does not limit how many people can earn a given title, but in many other organizations, the awarding of lofty titles can create logjams. If an employer limits how many people can hold a given title, and if people with that title don't move up or retire, more-junior employees may become frustrated and leave for other jobs.
Cranium, a toy company that was acquired by Hasbro earlier this year, took a different tack with titles. The co-founders, Richard Tait and Whit Alexander, let employees come up with their own titles, provided they accurately described what the employees did. As for themselves, Alexander became chief noodler, and Tait became the grand poo-bah.
Come to think of it, grand poo-bah has a nice ring to it. Maybe I'll try it out the next time I deal with the tech support people — sorry, customer service specialists — at the phone company.
Sunday, October 26, 2008
McCain advisers have been scathing about the "sexism" of critics who dismiss Sarah Palin as Caribou Barbie.
How odd then, to learn that McCain advisers have been treating their own vice presidential candidate like Valentino Barbie, dressing her up in fancy clothes and endlessly playing with her hair.
In 1991, with Americans fretting about a shaky economy, Poppy Bush visited a J.C. Penney and bought $28 worth of tube socks and a toddler's sweat suit in a desperate effort to seem in touch with the common folk. Palin might have followed that example and popped into Penney's to buy some new American-made duds. She is so naturally good-looking, there is no need to gild the Last Frontier lily.
Instead, with the economy cratering and the McCain campaign running on an "average Joe" theme, dunderheaded aides, led by the former Bushies Nicolle Wallace and Tracey Schmitt, costumed their Eliza Doolittle for a ball when she should have been dressing for a bailout.
The Republicans' attempt to make the case that Barack Obama is hoity-toity and they're hoi polloi has fallen under the sheer weight of the stunning numbers:
The McCains own 13 cars, eight homes and access to a corporate jet, and Cindy had her Marie Antoinette moment at the convention. Vanity Fair calculated that her outfit cost $300,000, with three-carat diamond earrings worth $280,000, an Oscar de la Renta dress valued at $3,000, a Chanel white ceramic watch clocking in at $4,500 and a four-strand pearl necklace worth between $11,000 and $25,000. While presenting herself as an I'm-just-like-you hockey mom frugal enough to put the Alaska state plane up for sale on eBay, Palin made her big speech at the convention wearing a $2,500 cream silk Valentino jacket that the McCain staff had gotten her at Saks.
At that point, Palin should have been savvy enough to tell those doing her makeover that she was a Wal-Mart mom. The sartorial upgrade was bound to turn into a strategy downgrade, as Palin pressed her case as a homespun gal who was ever so much more American than the elite, foreignish Obama, while she was gussied up in Italian couture.
Politico broke the news that the Republican National Committee spent over $150,000 on a "Pretty Woman"-style shopping spree for Palin, including about $75,000 at Neiman Marcus in Minneapolis and nearly $50,000 at Saks Fifth Avenue in New York and St. Louis.
Palin advisers did their best to spin the fashion explosion during the economic implosion, telling The New York Times that she needed new outfits to match the climate changes across 50 states.
Republicans once more charged the media with sexism for reporting on Palin's Imelda Marcos closet. "No one would blink if this was a male candidate buying Brooks Brothers suits," said William F.B. O'Reilly, a Republican Party consultant.
It doesn't wash to cry sexism now any more than it did at the beginning, when the campaign tried to use that dodge to divert attention from Palin's lacunae in the sort of knowledge you need to run the world. The press has written plenty about the vanities and extravagances of male candidates. (See: Haircuts, John Edwards and Bill Clinton.) Sexism would be to treat Palin differently, or more delicately, than one of the guys.
The governor who spent all her time talking about how she had cleaned up excesses in Alaska, and would do the same in Washington, also went over the top on hair and makeup. As a former beauty pageant contestant and sports anchor on TV, Palin already seemed on top of her grooming before the McCain campaign made her traveling makeup artist, Amy Strozzi, the highest-paid individual on the campaign for the first two weeks of October. Strozzi, who earned an Emmy nomination for her war paint skills on the TV show "So You Think You Can Dance," made $22,800 for the first half of this month.
Palin, who used to get her hair done at the Beehive in Wasilla and shop at an Anchorage consignment shop called Out of the Closet, paid her traveling hairstylist - recommended by Cindy McCain - $10,000 for the first half of October.
In The New York Times Magazine, Robert Draper reveals that the campaign also hired a former New York stage and screen actress, Priscilla Shanks, to be her voice coach for the convention. The expense was listed in finance reports as Operating Expenditures and Get-Out-The-Vote consulting. Apparently getting out the vote includes teaching a potential vice president the correct way to pronounce "nuclear."
The conservative big shots who have not deserted Palin and still think she can be Reagan in a Valentino skirt are furious at those who have mishandled the governor and dimmed her star power. They mourn that she may have to wait now until 2016 to get rid of the phony stench of designer populism.
Makeovers are every woman's dream. But this makeover has simply pushed back Palin's dream of being president.
Sunday, October 26, 2008
PRINCETON, New Jersey: Reality's liberal bias
Maybe the polls and the conventional wisdom are all wrong, and John McCain will pull off a stunning upset. But right now the election looks like a blue sweep: a solid victory, maybe even a landslide, for Barack Obama; large Democratic gains in the Senate, possibly even enough to produce a filibuster-proof majority; and big Democratic gains in the House, too.
Yet just six weeks ago the presidential race seemed close, with McCain if anything a bit ahead. The turning point was the middle of September, coinciding with the sudden intensification of the financial crisis after the failure of Lehman Brothers. But why has the growing financial and economic crisis worked so overwhelmingly to the Democrats' advantage?
As someone who's spent a lot of time arguing against conservative economic dogma, I'd like to believe that the bad news convinced many Americans, once and for all, that the right's economic ideas are wrong and progressive ideas are right. And there's certainly something to that. These days, with even Alan Greenspan admitting that he was wrong to believe that the financial industry could regulate itself, Reaganesque rhetoric about the magic of the marketplace and the evils of government intervention sounds ridiculous.
In addition, McCain seems spectacularly unable to talk about economics as if it matters. He has attempted to pin the blame for the crisis on his pet grievance, congressional budget earmarks - which leaves economists scratching their heads in puzzlement. In the immediate aftermath of the Lehman failure, he declared that "the fundamentals of our economy are strong," seemingly unaware that he was closely echoing what Herbert Hoover said after the 1929 crash.
But I suspect that the main reason for the dramatic swing in the polls is something less concrete and more meta than the fact that events have discredited free-market fundamentalism. As the economic scene has darkened, I'd argue, Americans have rediscovered the virtue of seriousness. And this has worked to Obama's advantage, because his opponent has run a deeply unserious campaign.
Think about the themes of the McCain campaign so far. McCain reminds us, again and again, that he's a maverick - but what does that mean? His maverickness seems to be defined as a free-floating personality trait, rather than being tied to any specific objections on his part to the way the country has been run for the last eight years.
Conversely, he has attacked Obama as a "celebrity," but without any specific explanation of what's wrong with that - it's just a given that we're supposed to hate Hollywood types.
And the selection of Sarah Palin as the Republican vice-presidential candidate clearly had nothing to do with what she knew or the positions she'd taken - it was about who she was, or seemed to be. Americans were supposed to identify with a hockey mom who was just like them.
In a way, you can't blame McCain for campaigning on trivia - after all, it's worked in the past. Most notably, President Bush got within hanging-chads-and-butterfly-ballot range of the White House only because much of the media, rather than focusing on the candidates' policy proposals, focused on their personas: Bush was an amiable guy you'd like to have a beer with, Al Gore was a stiff know-it-all, and never mind all that hard stuff about taxes and Social Security. And let's face it: Six weeks ago McCain's focus on trivia seemed to be paying off handsomely. But that was before the prospect of a second Great Depression concentrated the public's mind.
The Obama campaign has hardly been fluff-free - in its early stages it was full of vague uplift. But the Barack Obama voters see now is cool, calm, intellectual and knowledgeable, able to talk coherently about the financial crisis in a way McCain can't. And when the world seems to be falling apart, you don't turn to a guy you'd like to have a beer with, you turn to someone who might actually know how to fix the situation.
The McCain campaign's response to its falling chances of victory has been telling: Rather than trying to make the case that McCain really is better qualified to deal with the economic crisis, the campaign has been doing all it can to trivialize things again. Obama consorts with '60s radicals! He's a socialist! He doesn't love America! Judging from the polls, it doesn't seem to be working.
Will America's new demand for seriousness last? Maybe not - remember how 9/11 was supposed to end the focus on trivialities? For now, however, voters seem to be focused on real issues. And that's bad for McCain and conservatives in general: Right now, to paraphrase Rob Corddry, reality has a clear liberal bias.
By Katherine Zoepf
Sunday, October 26, 2008
BAGHDAD: An explosion on Sunday killed nine construction workers and wounded 19 others near the border of Iraq and Syria, the police in Anbar Province said.
Local witnesses said they believed the blast was caused by American shelling, but Major General Tariq al-Youssef, the provincial police chief in Ramadi, the capital of Anbar, which borders Syria, said that could not be confirmed.
The police statement did not indicate on which side of the border the blast had taken place.
Syria's state-run news channel later reported that United States helicopters had attacked an area within Syria, near the town of Abu Kamal. Its official news agency, SANA, cited an anonymous official as saying four American helicopters had "launched aggression on a civilian building under construction," killing eight people. The United States military did not immediately comment on the attack.
The Syrian deputy foreign minister summoned the chargé d'affaires from the American and Iraqi embassies in protest, SANA reported.
The United States is trying to negotiate a strategic agreement with Iraq that would allow American troops to remain in the country and carry out military operations. The pact faces strenuous opposition from neighboring countries, especially Syria and Iran, because of fears that the United States might use Iraqi territory to carry out attacks on them.
The Americans have no diplomatic relations with Iran and have withdrawn their ambassador to Syria.
Also late Sunday, an Iraqi lawmaker announced that the country's oil and gas law had been sent on to Parliament. The law had been stalled in Iraq's cabinet since February 2007 because of disputes over control of Iraq's oil fields, and has gone through several revisions.
Abdul-Hadi al-Hasani, deputy chairman of the parliamentary committee on oil, gas and natural resources, said the latest draft of the law had been received by his committee on Thursday and was undergoing careful review before being presented to the full legislature.
"The draft still needs more discussion and the opinion of experts in this field before it really goes to the Parliament," Hasani said in a telephone interview. "We wish to activate the law very soon, and we're serious about it. We talked today with the parliamentary leadership and went through some points concerning the draft of the law."
Also Sunday, the chief of the Wasit provincial council announced that he had refused to sign a memorandum of understanding with United States forces that was intended to formalize Wasit's transfer to the control of Iraq's own security forces. Wasit, a province that borders Iran, was due this week to become the 13th of Iraq's 18 provinces to be handed over to full Iraqi control.
The council chief, Muhammad Hassan Jasem, said he had rejected the memorandum because its first article gave the United States permission to continue military operations in Wasit.
By Robert F. Worth and Eric Lipton
Sunday, October 26, 2008
BEIRUT: For years, the Lebanese military was ridiculed as the least effective armed group in a country that was full of them. After the army splintered during the 15-year civil war, its arsenal slowly rotted into a museum of obsolete tanks and grounded aircraft.
That is starting to change. At the gates of the military base in Karantina, just north of Beirut, groups of soldiers drive in and out all day in new American Humvees and trucks, some of them toting gleaming new U.S. rifles and grenade launchers.
The weapons are the leading edge of a new American commitment to resupply the military of this small but pivotal Middle Eastern country, which emerged three years ago from decades of Syrian domination.
The new wave of aid, the first major American military assistance to Lebanon since the 1980s, is meant to build an armed force that could help stabilize Lebanon's perpetually fractured state, fight a rising terrorist threat and provide a legitimate alternative to the Shiite militant group Hezbollah. That organization, which controls southern Lebanon, has refused to disarm, arguing that it is the only force capable of defending the country against Israel.
So far, none of the deliveries of heavier weapons, which in some cases are likely to involve the transfer of older systems from other American allies, have been large enough to require a formal notification to the U.S. Congress. (That becomes a mandate once the sale for a particular modern weapons system exceeds $50 million.) Those deals are still in the early stages of negotiation, administration officials said.
Some officials within the Pentagon and State Department have expressed concern about extensive military aid to a country so recently free of Syrian control and in which Hezbollah, which has close ties to Syria and Iran ties, has continued to gain political power. And that has been a main concern for Israel, which has been lobbying for a lower level of support to remove the possibility that American tanks and helicopters might one day be used against it.
History also casts a shadow: The last major American effort to assist the Lebanese Army, in the 1980s, ended with American troops being caught up in a civil war.
These doubts, and the contrast with the robust American military aid to Israel, have provoked some anger in Lebanon. A television comedy here depicted American envoys handing out socks and toy airplanes to Lebanese generals.
Still, officials at the State Department and the Pentagon say they are convinced that rebuilding Lebanon's military is essential to long-term peace efforts in the region.
Other nations are involved, including the United Arab Emirates, Germany, Belgium, Britain and Canada. There have even been offers of assistance from Russia, China and Iran. But so far the United States, which has long been the Lebanese military's main source of outside support for weapons and training, maintains that it will anchor the effort.
"United States policy is that Lebanon be sovereign and independent and the Lebanon government and its institutions govern all of Lebanon's territory and disarm militias," said Christopher Straub, deputy assistant secretary of defense for the Middle East. "We recognize that is not going to happen overnight, but that is our policy."
The plan to rearm Lebanon was born in 2005, after the popular uprising known as the Cedar Revolution forced Syria to withdraw and seemed to vindicate the Bush administration's efforts to spread democracy throughout the region. In 2006, the 34-day war between Israel and Hezbollah bolstered the notion that Lebanon needed a stronger military, so as to provide a national alternative to the Shiite group's militia.
The army was in terrible condition. After a brief injection of American aid during the early 1980s, it had split along sectarian and political lines. The 6th Brigade, composed of Shiites trained by the Americans, went over to the militias and won it a mocking new slogan: "We serve and defect."
After the civil war, during the years of Syrian domination, the army's stocks had deteriorated to the point that most soldiers fired no more than 30 rounds a year. None of its fixed-wing aircraft could even fly.
"It was like a police force, but undertrained and under-equipped," said Elias Hanna, a retired Lebanese general. "Even the special forces are very young and inexperienced now, whereas Hezbollah has lots of experience."
In fact, the army was deliberately kept weak by the country's Syrian overseers, who did not want a strong alternative force. That was part of what allowed Hezbollah to grow into such a formidable power during the 1980s and 1990s, using advanced weaponry provided by Iran and Syria.
Now, however, U.S. officials say they have faith in the independence and professionalism of the army, which has become thoroughly integrated to include all of Lebanon's many religious and ethnic factions and has rigidly avoided interfering in politics. American-driven audits have shown that almost nothing given to the army has ended up in Hezbollah's hands.
"They have demonstrated year after year after year that when we give them equipment, they take responsibility for it," said Mark Kimmitt, assistant secretary of state for political-military affairs. An important moment for the army came in the summer of 2007, when it fought and won a three-month battle with Islamists in the Nahr al Bared refugee camp for Palestinians in the northern city of Tripoli.
That struggle, in which 168 soldiers and an unknown number of militants were killed, vividly underscored the need to re-equip the army. With no combat helicopters or precision weapons, the army had to resort to dropping bombs by hand from its Vietnam-era Huey helicopters, a hopelessly inaccurate method that resulted in the near-leveling of the camp.
Although the United States rushed them 40 planeloads of ammunition and other gear, army commanders bitterly resented the failure to provide them with more sophisticated arms.
"Nahr al Bared lasted 105 days," said one high-level Lebanese officer involved in procurement issues, who spoke on condition of anonymity because of the delicate negotiations surrounding the military aid. "If we had had attack helicopters, it would have been over in 15 days."
Another stark illustration of Lebanon's new military ambitions, and its gaping needs, is visible right now on the country's northern border with Syria. In recent weeks, after a string of bombings in Tripoli that left 20 people dead - most of them Lebanese Army soldiers - the military sent 8,000 soldiers to the border to monitor smuggling routes across the northern mountains.
The effort was a measure of Lebanon's new independence from Syria. But the border control force was too small and lacked the equipment needed for the job, Lebanese military officials say.
"They have no UAVs," the Lebanese procurement officer said, using the abbreviation for unmanned aerial vehicles, "no night-vision equipment, none of the sensors they use in other countries to tell if what you're seeing is a threat or just an animal."
Lebanese commanders say they are anxious about the slow pace of American military support so far. Of the $410 million that has been committed since 2006, less than half has been delivered - mostly ammunition, communications equipment, Humvees, trucks, rifles, automatic grenade launchers and other light weapons, and spare parts, according to Lebanese and American military officials.
It is heavier weapons that Lebanon really needs, Lebanese officials say. In particular, they want an air defense system, which would allow them to argue that they could completely replace Hezbollah as a force to ward off Israel in the south.
Yet one State Department official said that conflicts within the administration were holding up any major deals, as some Pentagon and State Department officials were more eager to rebuild the Lebanese armed forces while others were reluctant to move too quickly, given Israel's concerns.
For now, American officials say that they are committed to helping Lebanon get the weapons it needs to defend itself, and they acknowledge that the delays have caused anxiety for the Lebanese.
"There is not a country in the world that believes our ability to equip forces is fast enough, including our own country," Kimmitt of the State Department said.
By Carlotta Gall and Sangar Rahimi
Sunday, October 26, 2008
KABUL: The director and deputy of the international courier service DHL in Afghanistan, both foreign men, were shot and killed outside their office in central Kabul over the weekend. The police said the assailant was one of their security guards.
The police said the guard then shot himself. Two other Afghans were seriously wounded in the Saturday morning shooting, the police said.
The British Foreign Office said one Briton and one South African were killed in the attack but did not immediately release their names, The Associated Press reported.
General Ali Shah Ahmadzai, the deputy police chief of Kabul, called the shooting "an internal issue of their office." But other police officials did not rule out a connection to insurgents.
"This was a terrorist-style attack," Mirza Muhammad Yarmand, the chief of the criminal investigations department, said on Saturday, adding that the guard had nothing in his pockets and carried no cellphone, a precaution that suicide bombers often take.
The attack occurred less than a week after a fatal shooting, last Monday, of a British aid worker in western Kabul, and further raised security concerns for the thousands of foreigners living and working in the Afghan capital.
The shooting on Saturday took place about 11 a.m. at a busy intersection opposite the Iranian Embassy and near several other embassy compounds. The streets were clogged with heavy traffic, and dozens of security officials were on duty in the area.
Zabiullah Mujahed, a spokesman for the Taliban who was reached by telephone, denied that the movement was responsible for the attack and said he did not know who was behind the shooting.
The Taliban did, however, claim responsibility for the shooting of the aid worker, Gayle Williams, 34, on Oct. 20. The Kabul police chief, Muhammad Ayub Salangi, said he had no doubt the movement was behind her killing, although no one had been detained in connection with the attack. "It was 100 percent a terrorist attack, and I am sure that Taliban were involved," he said by telephone.
Many foreign organizations and embassies employ private security guards armed with assault rifles. Many of the employees are former guerrilla fighters from the Northern Alliance, an anti-Taliban faction.
The police said the guard in Saturday's shooting, whose name was Babrak and who was newly employed, fired on the two foreigners as they sat in their SUV just outside the entrance to the building. It was not clear whether they had just arrived or were just leaving the office.
A rash of killings and kidnappings has occurred in Kabul and elsewhere in Afghanistan recently. Security officials say the Taliban have increased their attacks to raise ransom money from kidnappings and to spread fear among the public through individual killings. They are also known to have urged members to seek positions inside Afghan and foreign institutions to work as informants.
Criminal gangs are also behind many of the kidnappings for ransom, security officials say. In the latest such abductions, two Turkish telephone engineers were kidnapped in Khost Province, in the east, and two Bangladeshi rural development workers were kidnapped in Ghazni Province, south of the capital, Afghan officials confirmed Saturday.
The Taliban spokesman also denied responsibility for those kidnappings.
On Sunday, the Afghan provincial authorities were investigating reports that 20 private security guards were killed in a U.S.-led coalition airstrike in the Giro district of Ghazni, Reuters reported. U.S.-led forces called in the airstrike to fend off an attack by Taliban insurgents on several posts of the local security company that guards a road construction project, the news agency said, citing a provincial government source.
Sunday, October 26, 2008
ISLAMABAD: Pakistani and Afghan political and ethnic Pashtun tribal leaders will meet in Islamabad on Monday to try to agree on ways of tackling rising militant violence, including the possibility of opening talks with the Taliban.
The meeting, dubbed a Pakistan-Afghanistan jirgagai, or mini-jirga, is a follow-up to a grand assembly in Kabul last year in which delegates called for talks with Taliban militants to end bloodshed in both countries. A jirga is a consultative system that the proudly independent Pashtuns have used for more than 1,000 years to settle group affairs or rally behind a cause.
About 50 political leaders, Pashtun elders and Muslim clerics from both countries will meet on Monday and Tuesday to ponder growing violence by Al Qaeda and the Taliban militants on both sides of their disputed border.
"The two main objectives of the jirgagai are to expedite the ongoing dialogue process with the opposition and monitor implementation of decisions of the jirga," said Mohammad Sadiq, a spokesman for the Pakistani Foreign Ministry.
But skeptics say the mini-jirga will be little more than a talking shop without the participation of representatives of the Taliban.
Violence in Afghanistan has surged over the past two years, raising doubts about prospects for the country and its Western-backed government seven years after the Taliban were forced from power.
At the same time, violence has increased in Pakistan. The security forces have launched offensives in the northwest and the militants have responded with suicide bombs. The violence has unnerved investors and exacerbated an economic crisis.
Ties between the two important U.S. allies have been severely strained over Afghan complaints that Pakistan has not done enough to stop Taliban from infiltrating from sanctuaries in Pakistan's northwestern Pashtun lands along the border.
The two sides pledged at their grand assembly in Kabul that their governments and people "would not allow sanctuaries or training centers for terrorists in their respective countries."
The Afghan government has taken a first step toward opening talks with the Taliban with a meeting in Saudi Arabia last month between a group of pro-government Afghan officials and former Taliban officials.
Foreign Minister Rangeen Dadfar Spanta of Afghanistan said last week that his government was at the start of a dialogue process, but it would only negotiate with those who lay down arms.
The U.S. defense secretary, Robert Gates, said this month that the United States would be prepared to reconcile with the Taliban, but not with Al Qaeda, if the Afghan government pursued talks.
Pakistan has said it was also ready to hold talks with the militants if they shunned violence.
Some analysts say that the revival of the jirga would help cement ties between the Pakistan and Afghanistan but that the governments should open dialogue with the militants without preconditions.
"When you are talking about peace, then you have to talk to those responsible for the peace being shattered," said Ayaz Wazir, a former Pakistani ambassador to Afghanistan.
Pashtuns live on both sides of the border and many of them sympathize with the Taliban, most of whom are also Pashtun. Analysts say that winning over the Pashtun tribes is essential for ending violence in both Afghanistan and Pakistan.Soldiers battle militants
Troops clashed with Taliban militants in northwestern Pakistan on Sunday, killing 11 in an insurgent stronghold overlooking the Afghan border, The Associated Press reported from Khar, Pakistan.
Jamil Khan, a government representative in Bajaur, said eight insurgents died and several others were injured when helicopters and artillery shelled several areas on Sunday morning. Three more insurgents died in a gun battle at a checkpoint in Tang Khata, a village supposedly under the control of security forces, Khan said. He said there were no troop casualties.
U.S. officials have praised the two-month offensive in Bajaur, a tribally governed region considered a possible hiding place for Osama bin Laden and his deputy, Ayman al-Zawahri. The army said Saturday that 95 noncombatants as well as some 1,500 militants and 73 troops had died so far in the fighting.
Separately, Reuters reported Sunday that a younger brother of the Pakistani Taliban commander Baitullah Mehsud had been shot and killed and his body dumped near a canal in the northwestern district of Bannu. Yahya Mehsud was not a member of his brother's militant group, which is linked to Al Qaeda and the Afghan Taliban.
The Associated Press
Sunday, October 26, 2008
ISLAMABAD: Tribesmen battled with Taliban militants who beheaded a local militiaman in public and tried to abduct their chief, as clashes across northwest Pakistan left 41 people dead Sunday, officials said.
The government has hailed the emergence of anti-Taliban tribal militias as evidence that it can root out militants waging an insurgency in both Pakistan and Afghanistan.
The militias, known as lashkars, have been compared to the so-called awakening councils that have helped U.S. forces turn the tables against Al Qaeda in Iraq.
"Our tribal brothers, those who are patriots, have broken" with the militants "and lashkars are fighting against those involved in terrorism," Prime Minister Yousuf Raza Gilani of Pakistan said Sunday.
But there are doubts that the ramshackle militias can face down heavily armed insurgents who have seized swaths of Pakistan's border belt, forged ties with Qaeda and targeted pro-government elders with suicide bombings and kidnappings.
Officials have denied reports that they are arming the militias, although observers suspect that they at least receive government funding.
The botched abduction occurred in Swat, a picturesque valley once popular with tourists, where government forces have been battling militants for more than a year.
The police said a group of assailants were trying to take a militia chief, Pir Samiullah, from his home in the Mandaldag area to a getaway car when dozens of local tribesmen confronted them and snatched him back.
Dilawar Bangash, the Swat police chief, said hundreds of Taliban later returned, seized three members of the militia and beheaded one of them on a road before a large crowd.
A Taliban commander called Mullah Shamsher told onlookers "that this was a lesson for anyone who tried to oppose them," Bangash said, citing accounts gathered later by the police.
Meanwhile, the militia was gathering men from the surrounding area who engaged the Taliban in an hours-long battle.
Bangash said 20 militants, 6 militiamen and 4 bystanders were killed in the shooting. Another police official said several tribesmen were missing.
Muslim Khan, a militant spokesman contacted by telephone, confirmed a clash but said only three Taliban had died. He reported that 12 tribesmen had been killed and 62 abducted.
Insecurity and government restrictions make it virtually impossible to verify accounts of the fighting.
While the militia in Mandaldag is the first to emerge in Swat, several tribes have swung behind the government in Bajur, a nearby region that has also seen heavy fighting. Their role appears to be to hold territory cleared by an ongoing military offensive.
Sunday, October 26, 2008
By Shir Ahmad
Afghan provincial authorities on Sunday were investigating reports that 20 private security guards were killed in a U.S.-led coalition air strike southwest of Kabul, two officials said.
U.S.-led forces called in the air strike to fend off an attack by Taliban insurgents on several posts of the local security company that guards a road construction project in the Giro district of Ghazni, a provincial government source said.
"According to the reports that we have received 20 people of the company have been killed in ... the coalition attack," another official said.
A U.S. military spokesman said he had no information about the incident which comes just days after the Afghan government said a U.S. coalition air strike killed nine Afghan soldiers in a mistaken attack in the southeastern province of Khost.
Afghanistan has suffered a marked escalation of violence this year, the bloodiest period since U.S.-led and Afghan forces toppled the Taliban in late 2001 for refusing to give up al Qaeda leaders behind the September 11 attacks on the United States.
Hundreds of civilians have been killed by foreign troops in operations against Taliban militants in Afghanistan this year, according to Afghan officials and aid groups.
While Taliban insurgents have killed more ordinary Afghans in their attacks, the issue of civilian casualties caused by international troops has led to a rift between the Afghan government and its Western backers.
The hardline Islamist Taliban have extended both the size and the scope of their insurgency in the last two years with scores of suicide and roadside bombs backing a campaign of guerrilla warfare and intimidation.
Taliban militants also abducted 17 employees of a construction company in the northeastern province of Kunar on Sunday, a spokesman for the provincial governor said.
The Taliban said they would only free the captives after the company, building a U.S.-led funded road, abandoned the project.
(Additional reporting by Rohullah Anwari in Kunar; Writing by Sayed Salahuddin; Editing by David Fox)
Sunday, October 26, 2008
HEBRON, West Bank: Jewish settlers vandalised a Muslim cemetery on Sunday after the Israeli army razed a West Bank outpost built by a militant settler leader without government authorisation, Palestinians said.
Residents of Harat al-Jabari neighbourhood in the city of Hebron, a frequent flashpoint between Palestinians and Jewish settlers, blamed settlers for spraying paint on Muslim graves as well as puncturing the tyres of some 24 cars.
Israeli police spokesman Micky Rosenfeld said an investigation had been launched but could not confirm that the vandals were settlers.
Hours earlier, an Israeli army bulldozer demolished the makeshift dwelling of Noam Federman, a hardline settler leader. Police arrested four settlers who attacked a policeman and tried to set fire to a police car during the demolition.
Prime Minister Ehud Olmert condemned settlers who incited violence against Israeli soldiers and policemen and vowed to bring them to justice.
"We will show zero tolerance towards calls of this kind," Olmert said at Sunday's cabinet meeting. "We are fed up with this verbal violence."
Palestinians and human rights groups have long complained that Israeli security forces do little to curb settler violence in the occupied West Bank that recently included stepped-up attacks on Palestinian olive harvesters.
A U.S.-sponsored "road map" for peace, reaffirmed at the Annapolis summit last year that relaunched Israeli-Palestinian negotiations, calls on Israel to freeze all settlement activity on land Palestinians want for a state.
(Reporting by Mamoun Wazwaz; Writing by Joseph Nasr; Editing by Caroline Drees)
Sunday, October 26, 2008
By Missy Ryan
Five years of war have reduced much of Mosul to rubble, and U.S. and Iraqi authorities are pledging to deliver on long-time promises to rebuild as they launch a new campaign to rout a stubborn insurgency.
Mistrust runs deep among residents of this ethnically and religiously diverse city, which U.S. forces see as one of their last battlegrounds against al Qaeda militants as violence drops sharply across most of Iraq.
Near a giant U.S. military base, American humvees rumble down "Baghdad Highway." The thoroughfare is lined by buildings flattened into heaps of cinderblock or pockmarked by mortar blasts and bullets.
Sewage runs freely and cows graze around mounds of litter. Shops keep their metal gates shut tight, and people stay indoors. At dusk the air is thick with burning trash.
The Iraqi government, alongside the United States, is promising to succeed where past reconstruction efforts failed in the city, fraught with simmering tension between an Arab majority and politically powerful Kurdish minority.
Last week Prime Minister Nuri al-Maliki sent one of his deputies, Rafie al-Esawi, to Mosul to discuss reconstruction plans with local officials. He has named his communications minister, a Mosul native, to take charge of the work.
"When anyone arrives in Mosul today, he would think it is a battleground," said the minister, Farouq Abdul-Qadir, ticking off a list of problems: an ancient sewage system, a woefully inadequate power supply, high unemployment, and a slowing but still grim drumbeat of assassinations and bomb attacks.
"In the past, the problem for reconstruction was security, and the same problem exists now. We still don't have full security in Mosul," he said.
Since 2003, the United States has spent millions of dollars in Mosul to improve electricity, overhaul army facilities, rehabilitate schools and on other works.
U.S. soldiers and a State Department-led provincial reconstruction team are at work in Mosul and surrounding Nineveh province, providing humanitarian aid, equipping hospitals, and supporting a farm sector blighted by years of drought.
The Iraqi government has backed its own array of projects but officials acknowledge Mosul's needs remain vast.
"No security plan can achieve success without providing for the people's basic needs," said Mosul Mayor Zuhair Muhsin al-Aaraji. He and other officials feel Mosul has been neglected, saying Baghdad has moved too slowly to provide funds.
U.S. Brigadier General Tony Thomas, commander of U.S. forces in Mosul, said a recent Iraqi initiative to follow military operations with millions of dollars' worth of reconstruction had been an "abject failure."
"People thought, 'Here it comes. We're going to turn the corner. We've got reconstruction flowing in right on top of security," he said adding that reconstruction money was spent "in all the wrong places." As an example, instead of major road repairs, U.S. officials say, Mosul got new curbstones.
On October 15, Iraqi and U.S. forces began their third major military operation in Mosul since May. They will go house to house in search of insurgents and weapons caches.
They have also formed a new committee to oversee future reconstruction projects in the city and pledge greater coordination that will help avoid a repeat of past problems.
Across the province, there are plans in the next few months to haul away rubble, buy garbage bins, hire more than 2,000 schoolteachers, help farmers buy wheat and barley seed and bolster hospitals' blood and trauma supplies.
In the long run, the sewage system is to be rebuilt, a thermal power plant is to be completed and highways expanded.
VIOLENCE AND DECAY
Rebuilding a city still marred by violence is not easy.
Earlier this year, U.S. soldiers visited a school in western Mosul they were planning to renovate. Soon afterwards, the headmaster received a call warning him to send the children home early. A car bomb flattened the school that afternoon.
"People don't just forget about that overnight," said Master Sergeant Kevin Rowe, who works on U.S. rebuilding efforts.
Many Mosul residents, who have heard promises of reconstruction and prosperity before, will remain wary.
On a market street in the al-Sukar neighbourhood, business is recovering and people welcome the drop in violence. They are, however, still waiting for basic services.
"We haven't had proper electricity for 10 or 12 years," said Amer, a shopkeeper. "The government is in charge of sewage, but it's not 100 percent. It's at 50 percent, maybe 25 percent."
Riyadh Mohammed, a retired teacher leaning against the gate of his home, prayer beads in hand, gives little credence to renewed promises of better things to come in Mosul.
"All the government does is take our money," he said.
(Additional reporting by Khalid al-Ansary in Baghdad; editing by Andrew Roche)
By Alice Rawsthorn
Sunday, October 26, 2008
LONDON: What's the secret of a happy, healthy old age? Money? Grandchildren? Great doctors? They all help, but not as much as the two most important ingredients: a social network of at least six people who you see regularly and freedom from worrying about everyday problems like leaking taps and broken light bulbs.
That's the conclusion of Hilary Cottam, co-founder of the social design group, Participle, after a year of analyzing the lives of the elderly residents of Southwark, one of London's poorer boroughs. "It's staggering how little the quality of their lives is determined by income," she said. "The secrets are being socially connected and not having to worry about minor things like changing light bulbs. If you take away the little hindrances that can stop an elderly person with limited energy from doing other things, you can make a huge difference."
Participle is now testing that theory by creating the Southwark Circle, a network of groups of several dozen seniors living near each other. Each local circle combines the functions of a concierge service, self-help group, co-operative and social club. The project is funded by the local authority, the London Borough of Southwark, with contributions from the seniors themselves. After six months of prototyping, the first two circles are being prepped to go live in late November, and others will be introduced over the next three years. If they work in Southwark, the circles may be launched elsewhere in Britain which, like other countries, is struggling to support a rapidly expanding elderly population at a time when the health care system is faltering, and pensions and savings are dwindling.
When seniors join a local circle, an assessor comes to see them to discuss whether they need help or to learn new skills. Perhaps they're having difficulty cleaning their home, or their heating is faulty but they're nervous about hiring a plumber. Maybe their husband or wife died recently, and they'd depended on them to do all of the cooking, gardening, paperwork and to organize their social life. Or their kids have moved far away, and they'd like to keep in touch but don't know how to open an e-mail account and haven't heard of Skype.
The assessor also finds out what a senior can contribute. Maybe he or she could help fellow members with cooking, odd jobs, using the Internet and writing letters, or could teach them how to do so. They then work out how best to meet the senior's own needs. Southwark may provide a useful service that the senior didn't know of, or it might be better to seek help from a professional or another member. Circle members can also benefit from discounts on fuel bills and at local cafés, and join group activities like those at fitness clubs, where they might meet new people.
Sounds great, but what does it have to do with design? The answer is that design played a critical role in researching the needs of Southwark's 25,000 elderly residents as well as in developing the circle concept and selling it to prospective investors and local seniors. There are several designers in the 15-strong Participle team working alongside social scientists, anthropologists, psychologists, management strategists and economists. "Designers understand people's motives, aspirations and needs," Cottam said. "They're also natural lateral thinkers, which is critical in projects like this, and their communication skills help to persuade people to participate. Design is only ever one tool in the mix, but it brings something very special."
She and her colleagues at Participle are among the pioneers of one of the most dynamic areas of contemporary design. It's so new that it's still called by different names, including "social design," "service design" and "the new design," but the universal aim is to use designers' skills to tackle the urgent social problems of our time. There is a long tradition of designers engaging in humanitarian projects in the developing world. The growing interest in social design (as we'll call it) reflects the determination of European and American designers to crack problems in their own countries at a time when politicians and economists recognize the need to rethink their approach to areas like crime, education, health and aging. Rather than simply designing buildings, products or literature for use in those fields, social designers are helping to plan and develop the services provided, and the systems that run them.
Originally a social scientist, Cottam, 42, discovered design when working on urban poverty projects for the World Bank in Africa during the mid-1990s. Huge sums were being invested in new infrastructure, and she realized that the quality of design would determine whether the money was well spent. Cottam also concluded that many projects needed to be more radically redesigned to meet the changing needs of their users. Returning to Britain in 1996, she realized that the same principle applied there and formed cross-disciplinary teams to develop new design models for schools, prisons and health services.
Two years ago, Cottam founded Participle with the dotcom entrepreneur Hugo Manassei, the innovation strategist Charles Leadbeater, and the industrial designer Colin Burns. They identify areas where they want to work and outline their strategy, before pitching for funding from public and private sources. Their first target was aging, and they secured development funding from Southwark and Sky, a subsidiary of Rupert Murdoch's News Corporation. Participle is now working on another aging project in nearby Westminster, and is soon to unveil plans for a youth initiative.
Participle also has lots to do in Southwark before the first two circles go live. It would like the seniors' families to buy extra services for them, but hasn't worked out how to approach family members, especially as the seniors may be loathe to ask for help. And Cottam is still puzzling over how to persuade London pensioners to use life coaches to help them to change their lifestyles. "We're convinced that life coaching is a great way of helping them to find a new sense of purpose," she said. "But they're not having any of it. They think it's all too Californian."
By Matt Richtel and Ashlee Vance
Sunday, October 26, 2008
SAN FRANCISCO: It is the black hole of the digital age — the three minutes it can take for your computer to boot up, when there is nothing to do but wait, and wait, and wait some more before you can log on and begin multitasking at hyper-speed.
Some people stare at their screen and fidget. Others pace or grab a cup of coffee. "Half the time, I go brush my teeth," said Monica Loos, 40, who is starting a business selling stationery online from her home in San Francisco.
Now the computer industry says it wants to give back some of those precious seconds. In coming months, the world's major PC makers plan to introduce a new generation of quick-start computers, spotting a marketing opportunity in society's short attention span.
"It's ridiculous to ask people to wait a couple of minutes," said Sergei Krupenin, executive director of marketing of DeviceVM, a company that makes a quick-boot program for PC makers. "People want instant-on."
Hewlett-Packard, Dell and Lenovo are rolling out machines that give people access to basic functions like e-mail and a Web browser in 30 seconds or less. Asus, a Taiwanese company that is the world's largest maker of the circuit boards at the center of every PC, has begun building faster-booting software into its entire product line.
Even Microsoft, whose bloated Windows software is often blamed for sluggish start times, has pledged to do its part in the next version of the operating system, saying on a company blog that "a very good system is one that boots in under 15 seconds." Today only 35 percent of machines running the latest version of Windows, called Vista, boot in 30 seconds or less, the blog notes. (Apple Macintoshes tend to boot more quickly than comparable Windows machines but still feel glacially slow to most users.)
There is nothing new about frustration with start-up times, which can be many minutes. But the agitation seems more intense than in the pre-Internet days. Back then, people felt less urgency to log on to their solitary, unconnected machines. Now the destination is the vast world of the Web, and the computer industry says the fast-boot systems cater to an information-addicted society that is agitated by even a moment of downtime.
Yet it is a condition that the technology industry — with smartphones and other always-on gadgets — helped create, said Gary Small, a professor at the Semel Institute for Neuroscience and Human Behavior at the University of California, Los Angeles. "Our brains have become impatient with the boot-up process," Small said. "We have been spoiled by the hand-held devices."
PC makers are not merely out to ease our data anxieties with the new machines. They want to help themselves, too. The industry has grown so competitive, and profit margins so thin, that each company is looking for any advantage it can trumpet. Computer makers say the battle for boot-up bragging rights could resemble the auto industry's race to shave tenths of a second from the time it takes a car to go from 0 to 60 miles an hour.
Hewlett-Packard research shows that when boot times exceed more than a few minutes, users have an exaggerated sense of the time it takes. Four or five minutes can feel like an eternity.
In June, HP introduced a new kind of fast-booting laptop, for $1,200, and the company says the technology is destined to spread quickly. Right now, HP's goal is to offer PCs that boot in 30 to 45 seconds, said Philip McKinney, chief technology officer for the company's personal systems group. "In 18 months, you've got to be 20 to 30 seconds."
Until Microsoft comes up with a way to greatly shorten the time it takes to load Windows, PC makers are speeding up boot times using programs that bypass Windows. The systems vary technically, but they all rely on a version of an operating system called Linux that gives users quick access to Web browsing and other basic functions of their computer. In some cases, Windows never boots, while in others, Windows starts in the background.
DeviceVM, the maker of a fast-boot program called Splashtop, says it charges PC makers $1 to $2 a machine for its software. The company hopes to make more revenue over the long term by charging other software providers that want to include their applications in the menu of programs accessible without a full boot.
Of course, some computer users try to avoid slow boot times by never turning off their machines; they simply leave them in standby mode. But PCs sometimes have a hard time waking up from standby and tend to crash the longer they run without rebooting. Leaving a machine on also wastes electricity and, for laptops, can drain the battery.
Victor Dailey, 54, a computer engineer from San Diego who works at NASA, has an alternative prescription for boot-up anxiety: "I'll do the cigarettes and a cup of coffee while I wait."
But he would much rather skip the caffeine and nicotine and get his fix from his computer. "If you could just open it up immediately, just like you do with your cellphone, and text somebody or whatever and close it back up, that would be ideal," he said.