Monday, 17 November 2008

A Place in the Auvergne, Sunday, 16th November 2008


M. slept with me, the boys with B.

At lunchtime Sydney time, M. woke up, hungry and we ate. She went back to bed, I to my office and wrote. At 0600hrs. M. woke up again and came down to my study.

Their return is surreal; I can't deny I feel as if I have survived a great ordeal, emerging exhausted, tested and wiser. A friend jokes at the fuss I have made over my 'calvaire domestique'.

The fog is closed in tight around us and we cocoon. Life seems perfect. But beyond the fog, beyond The Valley, beneath these lines, beneath these photos, I know it's not.

China, America and melamine
By James E. McWilliams
Sunday, November 16, 2008
AUSTIN, Texas:
China's food supply appears to be awash in the industrial chemical melamine. Dangerous levels have been detected not only in milk and eggs, but also in chicken feed and wheat gluten, meaning that melamine is almost impossible to avoid in processed foods. Melamine in baby formula has killed at least four infants in China and sickened tens of thousands more.
In response, the United States has blasted lax Chinese regulations, while the Food and Drug Administration, in a rare move, announced last week that Chinese food products containing milk would be detained at the border until they were proved safe.
For all the outrage about Chinese melamine, what American consumers and government agencies have studiously failed to scrutinize is the place of melamine in America's own food system. In casting stones, we've forgotten that our house has its own exposed glass.
To be sure, in China some food manufacturers deliberately added melamine to products to increase profits. Makers of baby formula, for example, watered down their product, lowering the amount of protein and nutrients, then added melamine, which is cheap and fools tests measuring protein levels.
But melamine is also integral to the material life of any industrialized society. It's a common ingredient in cleaning products, waterproof plywood, plastic compounds, cement, ink and fire-retardant paint. Chemical plants throughout the United States produce millions of pounds of melamine a year.
Given the pervasiveness of melamine, it's always possible that trace elements will end up in food. The FDA thus sets the legal limit for melamine in food at 2.5 parts per million. This amount is indeed minuscule, a couple of sand grains in an expanse of desert that pose no real threat to public health. Moreover, the 2.5 parts per million figure is calculated for a person weighing 132 pounds - a cautious benchmark given that the average adult weighs 150 to 180 pounds.
But these figures obscure more than they reveal. First, while adults eat about one-fortieth of their weight every day, toddlers consume closer to one-tenth. Although scientists haven't measured the differential impact of melamine on infants versus adults, it's likely that this intensified ratio would at least double (if not quadruple) the impact of legal levels of melamine on toddlers.
This doubled exposure might not land a child in the hospital, but it could certainly contribute to the long-term kidney and liver problems that we know are caused by chronic exposure to melamine.
On a more concrete note, melamine not only has widespread industrial applications, but is also used to buttress the foundation of American agriculture.
Fertilizer companies commonly add melamine to their products because it helps control the rate at which nitrogen seeps into soil, thereby allowing the farmer to get more nutrient bang for the fertilizer buck. But the government doesn't regulate how much melamine is applied to the soil. This melamine accumulates as salt crystals in the ground, tainting the soil.
A related area of agricultural concern is animal feed. Chinese eggs seized last month in Hong Kong, for instance, contained elevated levels of melamine because of the melamine-laden wheat gluten used in the feed for the chickens that produced the eggs.
To think American consumers are immune to this unscrupulous behavior is to ignore the Byzantine reality of the global gluten trade. Tracking the flow of wheat gluten around the world is like trying to contain a drop of dye in a churning whirlpool.
More ominous, the United States imports most of its wheat gluten. Last year, for instance, the FDA reported that millions of Americans had eaten chicken fattened on feed with melamine-tainted gluten imported from China. Around the same time, Tyson Foods slaughtered and processed hogs that had eaten melamine-contaminated feed. The government decided not to recall the meat.
Only a week earlier, however, the FDA had announced that thousands of cats and dogs had died from melamine-laden pet food. This high-profile pet scandal did not prove to be a spur to reform so much as a red herring. Our attention was diverted to Fido and away from the animals we happen to kill and eat rather than spoil.
Frightening as this all sounds, the concerned consumer is not completely helpless. We can seek out organic foods, which are grown with fertilizer without melamine - unless that fertilizer was composted with manure from animals fed melamine-laden feed (always possible, as the Tyson example suggests).
We could further protect ourselves by choosing meat from grass-fed or truly free-range animals, assuming the grass was not fertilized with a conventional product (something that's also very hard to know).
But as all the caveats above indicate, these precautions will only go so far. Melamine, after all, points to the much larger relationship between industrial waste and American food production. Regulations might be lax when it comes to animal feed and fertilizer in China, but take a closer look at similar regulations in the United States and it becomes clear that they're vague enough to allow industries to "recycle" much of their waste into fertilizer and other products that form the basis of our domestic food supply.
As a result, toxic chemicals routinely enter our agricultural system through the back channels of this under-explored but insidious relationship.
So, sure, let's keep the heat on China. And, yes, let's take with a big dose of skepticism the Chinese government's assurances that they're improving the food supply.
At the same time, though, instead of delivering righteous condemnation, the United States should seize upon the melamine scandal as an opportunity to pass federal fertilizer standards backed by consistent testing for this compound, which could very well be hidden in plain sight.
James E. McWilliams, a history professor at Texas State University at San Marcos, is the author of "American Pests: The Losing War on Insects From Colonial Times to DDT."

California fires devastate a close-knit community
By Solomon Moore and Rebecca Cathcart
Monday, November 17, 2008
LOS ANGELES: David Grieb had just returned home three days earlier from a cross-country drive to be at his dying mother's bedside when the order came for him to evacuate the Oakridge Mobile Home Park because of an approaching fire.
Several weeks before, Grieb had been roused by a similar wildfire warning, and he said he spent hours cramming as many of his belongings as he could into his car before fleeing.
When the alarm was raised Friday, Grieb said he pretty much threw a few items into his car and drove off, leaving behind most of his possessions, including those he had only days before hauled from his late mother's house in Philadelphia.
"I just lost all the stuff I carted 3,000 miles," he said.
Firefighters on Sunday began to gain the upper hand with the blaze that destroyed about 500 homes in the development, in the Sylmar area of Los Angeles. They also had a fire in Montecito — a hillside enclave 90 miles northwest of Los Angeles where 111 homes were destroyed since Thursday — 75 percent contained.
A third wildfire burned along the border of Riverside and Orange Counties. Battalion Chief Kris Concepcion of the Orange County Fire Authority said that firefighters were gaining control of the fire by Sunday night and that most of the 25,000 people who had been evacuated were allowed to return to their neighborhoods. A total of 168 homes, including 50 apartment units, were damaged or destroyed by the fire, which has burned 10,500 acres, Chief Concepcion said.
Governor Arnold Schwarzenegger of California on Sunday declared states of emergency in Los Angeles, Orange and Santa Barbara Counties.
The Sylmar fire was about 30 percent contained, firefighters said, but any gains meant little to the hundreds of families of the Oakridge park. Officials say the 500 homes that were destroyed make it one of the worst property losses from fire in the history of Los Angeles.
On Sunday, Grieb, 46, and other Oakridge residents gathered on a street corner hoping to get into the development to see what was left.
Residents were not allowed in because the development had been declared a crime scene. Los Angeles police officials said they were conducting a routine arson investigation. The Red Cross was registering the residents who had been accounted for, but police officials declined to say how many were missing.
On Sunday, employees of the Los Angeles County Coroner's Office and sheriff's deputies leading cadaver dogs were looking through the wreckage for victims. No remains were found.
Officials at the coroner's office said that their satellite office in the Sylmar area burned on Friday but that workers were able to save the cars and computers.
Grieb, too, was waiting on Sunday to see whether there was anything to salvage.
"I want to get in, say goodbye and dig through a little," said Grieb, a Hollywood teamster who works on the ABC television show "Dirty Sexy Money."
Grieb said the only belongings he had left were in his car. "I don't want to be more than five feet from the stuff I've got left," he said.
Even without getting back to his home, Grieb is fairly certain that all is lost.
He and his neighbors have seen aerial photos of the devastated development and, in stark black and white, a chalkboard at an evacuation center lists the homes, by lot numbers, that were spared. About 124 out of 600 homes are on the list, and Grieb's home is not among them.
For the park's residents, it was as if an entire village had vanished in the flames.
"I used to refer to it as our little Mayberry," said Tracey Burns, 47. She and her partner, Wendy Dannenberg, 46, lived in Oakridge for 15 years. Burns's parents lived nearby in a part of the complex that was spared by the fire.
"It was just a very nice community," Burns said. "Someplace safe with a lot to offer from the pool to the tennis courts to bingo on Tuesday nights. It was a very nice way of living. People waved not because they had to but because they wanted to. We always took offense to people calling it a trailer park because you had a yard, a porch, a garage, a garden. It was a home, not a trailer."
Like many Oakridge residents, Barbara and John Harris said they were wiped out.
"We lost everything," Harris said. "How do you start over when you're 66?"
Before this weekend, most Oakridge residents might have argued that there were few better deals to be had in the Los Angeles area. Living was affordable, and despite its sprawl, the development was a close-knit community of thrifty families and retirees nestled in the arid foothills of the Angeles National Forest.
In the evenings, with the air made blustery by Santa Ana winds, many residents took walks, stopping to watch deer, coyotes and raccoons that wandered out of the wilderness.
Many of the Oakridge park's residents are elderly or live on fixed incomes and have only a gossamer financial safety net of savings and fire insurance.
Residents who waited to see if the fire would be put down or veer and spare their homes were forced to flee in panic.
Among the last of the people evacuated from the development on Friday night was a 300-pound woman whom firefighters carried out of her bed as flames stabbed through the windows and walls of her home, Los Angeles City Fire Department officials say.
The going was little better for the firefighters, who confronted a blaze fanned by near hurricane force winds that funneled 50 foot flames at a horizontal level. The fire was so fast moving that crews had to flee themselves, leaving their hoses to melt.
Firefighters said their efforts to douse the fire were hindered by failing water pressure. They also complained that the development had only one exit and entrance, which made it difficult to move fire crews in as residents tried to move out.
And some of the very things that made the community so appealing to many of its residents also made it vulnerable.
The wood, aluminum siding and tar roofs of the modular homes provided ready fuel for the fire. The dry winds howling out of the canyons helped spread the flames.
At a news conference near the development, Governor Schwarzenegger said the devastation had convinced him that mobile homes should be required to include more fire-resistant materials.
"The fire ran through the mobile homes so fast," he said. "Like matches, they caught fire, one right after the other."
A Los Angeles County supervisor, Zev Yaroslavsky, said he would push for better safety regulations for mobile home parks.
"Somehow there's an assumption that because these are prefabricated homes confined to a small area they are somehow not in the category as other bigger homes," Yaroslavsky said. "But this was a community. These homes, however, were flammable and packed in like sardines on top of each other."


Greens in Germany pick son of Turks as leader
By Judy Dempsey
Sunday, November 16, 2008
BERLIN: The Green party, one of Germany's main political parties, has elected the son of Turkish immigrants to its top political post, the first time any party here has chosen a leader with an immigrant background.
The election Saturday of Cem Ozdemir, 42, born in southern Germany of parents who had come from Turkey to work as "Gastarbeiter," or guest workers, during the 1960s, marks a major turning point not only for the opposition Greens, but also for the country as a whole.
Even though more than 2.6 million Turks live in Germany, accounting for 3 percent of the population, few have managed to make it to the higher ranks of the professions, including politics and the civil service.
But with a conservative party that had chosen Angela Merkel to run as chancellor in 2005 - a successful gambit - and now an ethnic Turk at the helm of an influential party, it appears that German society is slowly breaking with the past, when women were inconspicuous in public and immigrants' voices were seldom heard.
Ozdemir, a social scientist who studied at the Lutheran College for Social Sciences in Reutlingen in the state of Baden-Württemberg, was elected as a Greens legislator to the lower house of Parliament, the Bundestag, in 1994, the first time anyone with a Turkish background had won such a mandate. He moved to the European Parliament in 2004 after he was forced to give up his parliamentary seat for using his publicly paid airline miles for private use.
With his comeback to domestic politics over the weekend, Ozdemir - who is married, has one child and speaks German with a slight southwestern accent - joins a handful of ethnic Turks in the Greens, the Social Democrats and the new populist Left Party who want to make the parties more representative of the ethnic composition of the German population.
"I want a society where everyone has an equal chance, regardless of where they come from," Ozdemir said in his acceptance speech at the Greens' congress in the central city of Erfurt. He won 79.2 percent of the votes and joined Claudia Roth as the co-leader of the Greens.
It is estimated that 660,000 Turks have taken up German citizenship since 1972, giving them a significant influence. According to the main political parties, more than half a million Turks were eligible to vote in the 2005 election; 75 percent voted for the Social Democrats, 9.2 percent for the Greens and less than 5 percent for the Merkel's Christian Democrats.
With new leaders in place, the Greens are now turning their attention to federal elections next September. Some observers are asking whether the Greens, along with the pro-business Free Democrats, might win enough votes to become junior partners for Merkel's conservative bloc.
Such an idea was treated with ridicule until recently. But in February, the Christian Democrats chose to share power with the Greens in the port city of Hamburg. So far, the coalition, the first of its kind on the state level, has been working effectively, serving as a litmus test for other states.
Ralf Fücks, director of the Heinrich Böll Foundation, which is affiliated with the Green party, said, "In some ways we have more in common with the conservatives when it comes to human rights and values, which Merkel has paid particular attention to."
The Greens and the conservatives also support economic reform, and Merkel has made environmental issues a central theme of her party. But the sticking point for any cooperation, as Fücks acknowledged, is nuclear power. The Greens have always opposed atomic energy, while Merkel has promised to let nuclear power plants continue to run if she is re-elected next year. The conservatives are also against Turkey's joining the European Union, while the Greens favor such a move.
Traditionally, the Greens have been allies of the Social Democrats. The party had been the junior partner in the former coalition led by the Social Democratic chancellor Gerhard Schröder, which lasted from 1998 to 2005. That coalition was defeated by Merkel's conservative bloc, which was forced to band together with the Social Democrats because neither of the big parties was strong enough to establish a coalition with its preferred smaller partners.
Since late 2005, the discipline that characterized the Greens in government has given way to the old divisions between the "fundamentalists" who have opposed German soldiers serving abroad, for example, and the pragmatists, or "Realos," who favor Germany's playing a much greater role, even militarily, in international affairs, economic reform and pushing the environmental agenda.
Under the leadership of Joschka Fischer, who was foreign minister in Schröder's government, the pacifist and fundamentalist wing of the Greens was marginalized as Fischer pushed the party into accepting the NATO bombing of Serbian targets to stop the ethnic cleansing by Serbian security forces of the Albanians in Kosovo.

Tsunami warning: Quakes hit near Indonesia
The Associated Press
Sunday, November 16, 2008
JAKARTA: A powerful 7.5-magnitude earthquake struck waters off Sulawesi island in eastern Indonesia early Monday, geological agencies reported. There were no immediate reports of damage or injuries.
The Pacific Tsunami Warning Center said the quake had the potential to generate a destructive tsunami along coasts within 600 miles, or 1,000 kilometers, of the epicenter.
The U.S. Geological Survey put the quake's preliminary magnitude at 7.5 and said it struck 13 miles beneath the sea. It was centered 54 miles from Gorantalo, a coastal town on Sulawesi island.
Fauzi, an official with Indonesia's geological agency who goes by only one name, put the magnitude of the quake at 7.7.
Indonesia is prone to seismic upheaval because of its location on the so-called Pacific "Ring of Fire," an arc of volcanos and fault lines encircling the Pacific Basin.
In December 2004, a massive earthquake off Indonesia's Sumatra island triggered a tsunami that battered much of the Indian Ocean coastline and killed more than 230,000 people — 131,000 of them in Indonesia's Aceh province alone.
A tsunami off Java island last year killed nearly 5,000 people.
California to plan climate change strategy
By Felicity Barringer
Sunday, November 16, 2008
SAN FRANCISCO: Governor Arnold Schwarzenegger has instructed state agencies to prepare for climate change, especially rising seas, as they plan to replace, upgrade and repair the system of pipelines that distributes water around sewage treatment plants and low-lying airports, among other things.
"We have to adapt the way we work and plan in order to manage the impacts and challenges that California and our entire planet face from climate change," Schwarzenegger, a Republican, said on Friday after issuing the executive order.
Other jurisdictions, including Florida, Maryland and New York City, are also looking at the future with an eye toward climate change, but California officials believe this order goes further in calling for both studies and actions.
"We've got a huge budget deficit," said Anthony Brunello, deputy secretary for climate change and energy at the California Resources Agency. "We don't want to be investing in infrastructure that could be underwater in 20 to 30 years."
The executive order came a day after the release of a report by an economist at the University of California, Berkeley, predicting that the state, if it fails to act, could suffer tens of billions of dollars in damage to its real estate, transportation systems and industries from water, fire and other climate-driven calamities by the century's end.
An example of vulnerable systems, Brunello said, is the infrastructure of pipes and canals that deliver fresh water from the Sierra Nevada snowmelt to communities and agricultural areas from the San Francisco Bay Area to the southern part of the Central Valley. A rise in the sea level could mean the inundation of these freshwater systems with salt water.
Under the order, the state, he said, would first request a scientific study of its specific vulnerabilities from the National Academy of Sciences, then use the data, expected to be ready by 2010, as the basis for long-term planning. At the same time, state agencies are directed to begin preparing recommended strategies for coping with rising seas, using various models for how high the water would rise.
The order may be the country's most sweeping in pushing state agencies for concrete plans, but it is not alone in its examination of the problem. In April 2007, Governor Martin O'Malley of Maryland, a Democrat, established a climate change task force with the assignment of determining how to reduce the state's emission of greenhouse gases and assessing the its vulnerabilities.
Washington State agencies have also been sketching out plans for anticipating a rise in the sea level, including raising the height of the wharves at the Port of Tacoma.

Blackouts mark North Korea's real power struggle
Sunday, November 16, 2008
By Jack Kim
While the world wonders if North Korea is in the throes of a leadership crisis over Kim Jong-il's suspected stroke, the real power struggle for ordinary people in the hermit state is coping with electricity shortages.
Blackouts frequently interrupted a four-day stay in Pyongyang for South Koreans attending a rare joint seminar between the Cold War rivals, with the North's showcase city often plunged into pitch darkness by power outages.
"What is going on here?" a North Korean border control officer said when computer terminals lost power and the lights went out at the Soviet-era Sunan Airport terminal, which serves
Pyongyang, while he was processing the documents of the visiting South Koreans.
One of his colleagues tried in vain to keep the line of visitors moving by checking passports in the faint light from a distant door.
When the sun goes down in Pyongyang, people hurry along unlit sidewalks before they have to grope their way home in near total darkness. At street level there were far more apartments in complete darkness than there were enjoying the faint glow of fluorescent lights.
Outside observers are equally in the dark over Kim's health and succession plans in Asia's only communist dynasty.
U.S. and South Korean officials said Kim suffered a stroke in August, raising questions about who was in control of the reclusive state and who was making decisions about the North's nuclear weapons programme.
In the past week the secretive North has announced it will close its few border crossings with the South and will refused to allow international inspectors remove nuclear samples from a plutonium-producing plant.
Analysts fear the North is retreating deeper into its shell amid growing speculation over Kim's health.
Outwardly, the North says the moves are in response to perceived mistreatment by conservative South Korean President Lee Myung-bak, who cut off what once had been a free flow of unconditional aid when he took office in February and tied future handouts to the North's denuclearisation.
The North's official KCNA news agency said at the weekend that Kim attended an art festival given by soldiers where he heard the troops sing ""Soldier Lives near the General" and waved to the performers.
The appearance at the art performance was one of several events in recent weeks where Kim has been shown in his state's media, although doubts persist about his health.
Inside North Korea, its citizens remain in the dark, figuratively and literally.
The official Rodong Sinmun newspaper said in a front-page feature article on Friday that workers at the Pyongyang power station were hard at work "in the battle to increase electric power production" under Kim's guidance.
North Korea's dilapidated power system means that its factories are largely idle, dealing a heavy blow to its already battered economy.
"We can bring about exaltation in the production and construction (of electric power) through correct strategy and execution, especially when the condition is adverse," the newspaper quoted Kim as saying at an unspecified occasion.
The visiting South Koreans were treated to a performance by artistically gifted students but had to wait to applaud because the lights went out at the end of the show in an unheated hall, leaving them wondering if the darkness was part of the act.
One of the visiting South Koreans was injured during a blackout at the hotel where they were staying, considered one of the country's finest. He bumped his head when stranded in a lightless corridor, leaving him with a gash on his forehead and in need of medical treatment.
"It's all because it is so damned dark in there," a fellow visitor said.
(Editing by Jon Herskovitz and Paul Tait)
Auction of land in U.S. national parks for oil upsets environmentalists
The Associated Press
Sunday, November 16, 2008
Salt Lake City, Utah: The view of Delicate Arch natural bridge - an unspoiled landmark so iconic it's on Utah's license plates - could one day include a drilling platform under a proposal that environmentalists call a Bush administration "fire sale" for the oil and gas industry.
Late on election day, the U.S. Bureau of Land Management announced a Dec. 19 auction of more than 50,000 acres of oil and gas parcels alongside or within view of Arches National Park and two other redrock national parks in Utah: Dinosaur and Canyonlands.
The National Park Service's top official in the state calls it "shocking and disturbing" and says his agency wasn't properly notified. Environmentalists call it a "fire sale" for the oil and gas industry by a departing administration.
Officials of the BLM, which oversees millions of acres of public land in the West, say the sale is nothing unusual, and one is "puzzled" that the Park Service is upset.
"We find it shocking and disturbing," said Cordell Roy, the chief Park Service administrator in Utah. "They added 51,000 acres of tracts near Arches, Dinosaur and Canyonlands without telling us about it. That's 40 tracts within four miles of these parks."
Top aides to Interior Secretary Dirk Kempthorne stepped into the fray, ordering the sister agencies to make amends. His press secretary, Shane Wolfe, told The Associated Press that deputy Interior Secretary Lynn Scarlett "resolved the dispute within 24 hours" last week.
A compromise ordered by the Interior Department requires the BLM to "take quite seriously" the Park Service's objections, said Wolfe.
However, the BLM didn't promise to pull any parcels from the sale, and in an interview after the supposed truce, BLM state director Selma Sierra was defiant, saying she saw nothing wrong with drilling near national parks.
"I'm puzzled the Park Service has been as upset as they are," said Sierra.
"There are already many parcels leased around the parks. It's not like they've never been leased," she said. "I don't see it as something we are doing to undermine the Park Service."
Roy and conservation groups dispute that, saying never before has the bureau bunched drilling parcels on the fence lines of national parks.
"This is the fire sale, the Bush administration's last great gift to the oil and gas industry," said Stephen Bloch, a staff attorney for the Southern Utah Wilderness Alliance.
"The tracts of land offered here, next to Arches National Park or above Desolation Canyon, these are the crown jewels of America's lands that the BLM is offering to the highest bidder," he said.
An examination of the parcels, superimposing low-resolution government graphics onto Google Earth maps, shows that in one case drilling parcels bordering Arches National Park are just 1.3 miles from Delicate Arch.
"If you're standing at Delicate Arch, like thousands of people do every year, and you're looking through the arch, you could see drill pads on the hillside behind it. That's how ridiculous this proposed lease sale is," said Franklin Seal, a spokesman for the environmental group Wildland CPR.
In all, the BLM is moving to open 359,000 more acres in Utah to drilling.
Other Utah leases that are certain to draw objections from conservation groups include high cliffs along whitewater sections of Desolation Canyon, which is little changed since explorer John Wesley Powell remarked in 1896 on "a region of wildest desolation" while boating down the Green River to the Grand Canyon.
Others extend to plateaus populated by big game atop Nine Mile Canyon, site of thousands of ancient rock art panels, Moab's famous Slick Rock Trail and a campground popular with thousands of mountain bikers.
Sierra, the BLM's director for Utah, said the Park Service was consulted on the broad management plans that made the sale of parcels next to national parks permissible, even if it was not given notice on which specific leases were being offered. She apologized for that omission but said notice wasn't legally required.
She said national parks want to keep oil and gas wells five to 10 miles away "but that policy doesn't exist."
Roy said the standard for an eyesore visible from a national park turns on what a "casual" observer might see.
The hostility carried over into an e-mail exchange between Sierra and Mike Snyder, the Denver-based regional Park Service director, who noted his agency's demand that BLM pull 40 to 45 drill parcels from the auction list. "You stated that you were not willing to do this," Snyder wrote Nov. 6.
Within hours, Sierra responded "These decisions and the lands available for leasing should come to no one's surprise," according to copies of the e-mails obtained from her office.
Sierra said she instructed her district and field managers to educate the park superintendents on why drilling is OK "adjacent to and near the park boundaries."
In the e-mail, Sierra boasted of having "a very good working relationship" with Roy, the federal coordinator in Utah for the Park Service, but in an interview he said he had "no idea this sale was coming down the pike."
Roy said that when he asked Sierra what was going on, she replied: "We added some tracts, sorry we didn't notify you. We can take up these concerns when we issue" drilling permits. He said his response was: "Holy cow."

Germany considers aiding GM's Opel
The Associated Press
Sunday, November 16, 2008
BERLIN: The German government is ready to talk with the troubled carmaker Adam Opel, officials said in remarks published Sunday, but it would not offer blanket aid to entire industries suffering because of the financial crisis.
"There are tens of thousands of jobs, directly and indirectly, linked to Opel. No politician can remain indifferent in such a situation," the finance minister, Peer Steinbrück, told the daily Leipziger Volkszeitung newspaper. "But we cannot have crisis freeloaders. I can only warn managers against thinking they can take advantage of the current situation to get something from the government they would not have otherwise received."
Opel has asked for aid to help it weather a financial rough patch that has been aggravated by the troubles of its parent company, General Motors.
The chancellor of Germany, Angela Merkel, was scheduled to meet with Opel representatives Monday. Officials from the Finance Ministry, Economy Ministry and German states are set to hold talks Tuesday to discuss the broader woes in the auto sector.
Steinbrück's comments were echoed by the economy minister, Michael Glos, who voiced his opposition to a rescue package for the entire German auto sector, saying it was not the state's role to step in when consumer demand waned.
"I see the danger that one sector after another will come to us," he told the Frankfurter Allgemeine Sonntagszeitung.
The financial crisis has severely hit demand for new automobiles, a major worry in Germany, where close to one in five workers is employed, directly or indirectly, in the sector.
The three largest U.S. automakers - GM, Ford Motor and Chrysler - are seeking billions of dollars in emergency aid from Washington, and GM has warned that it is running seriously short of cash. For their part, European automakers have said they would seek as much as €40 billion in government help.
On Friday, Opel became the first European carmaker to formally seek government assistance, asking for guarantees to finance its development and assembly facilities should GM stop supplying cash.
The carmaker employs about 25,000 people in its German plants in Rüsselsheim, Bochum, Kaiserslautern and Eisenach.
Opel's worker representatives and union leaders sought Saturday to allay fears about the company's solvency, saying Opel's appeal for loan guarantees from the government was just a precaution. They also assured workers that not "one cent" would be drained from Opel to prop up GM.
Exxon confident it can weather the global storm
By Jad Mouawad
Sunday, November 16, 2008
Six years of relentlessly rising prices have showered the oil industry with record profits, even as whipsawing energy costs have left many Americans by turns furious and baffled.
Now that the high times appear to be screeching to a halt, one corporate giant remains confident it can weather the slowdown and uncertainty better than its rivals.
"It's not that we like lower prices, but our competitive advantage is more obvious to people in a low-price environment," said Rex Tillerson, the chairman and chief executive of Exxon Mobil, the world's largest, most powerful oil company. "But in a high-price environment, our competitive advantage has been quite evident as well."
However undaunted Exxon feels, it is still facing more complicated problems than mere price shifts. It is straining to adjust to a host of potentially seismic issues that raise pointed questions about its long-term strategy. Oil reserves are harder to find, resource-rich governments have become more assertive and concerns about climate change have spurred forceful calls to action on environmental matters.
Moreover, with the election of Barack Obama, a new chapter is about to open for U.S. energy policy. Obama says he wants to move away from oil dependence, and his policies are likely to emphasize conservation, alternative energy sources and new limits on the emissions of the greenhouse gases that are responsible for climate change.
The question for Exxon, which Obama repeatedly singled out during the presidential campaign as an exemplar of corporate greed, is whether the model that has served the company so well for so long will keep it competitive, or whether it will still be producing hydrocarbons long after the world has moved away from dirty fuels.
Last year, Exxon, which is based in Irving, Texas, celebrated its 125th anniversary, a benchmark on a straight line that connects it to John D. Rockefeller's original Standard Oil Trust before the government broke up the enterprise. While other oil companies try to paint themselves greener, Exxon's executives believe their venerable model has been battle-tested. The company's mantra is unwavering: brutal honesty about the need for oil and natural gas to power economies for decades to come.
"Over the years, there have been many predictions that our industry was in its twilight years, only to be proven wrong," Tillerson said. "As Mark Twain said, the news of our demise has been greatly exaggerated."
From a purely financial standpoint, there is no doubt that Exxon's business strategy has paid off. Despite the broader economic turmoil, Exxon is worth about $375 billion - more than General Electric, Bank of America and Google combined - making it the world's largest company.
Its balance sheet is pristine and its credit rating is better than that of most governments. If Exxon's revenue were stacked against the world's GDPs, it would rank between Austria and Greece as the 26th-largest economy. As oil prices peaked this summer, the company once again set a record as the most profitable U.S. company, taking in $14.8 billion in the third quarter. Since 2004 alone, the company has rung up profits of about $180 billion.
Throughout its various incarnations - the Standard Oil Trust, Standard Oil of New Jersey, Exxon, and now Exxon Mobil - the company has exercised an ambiguous fascination on many. It is an enduring U.S. icon, as lasting as Coca-Cola or General Electric, but also a perennial corporate villain, one that reminds the nation of its dependence on hydrocarbons.
Rivals acknowledge its expertise around an oil field, even as they bristle at what they call arrogance. Exxon's own executives brag that their company outperforms its peers by sticking to their playbook. "Exxon is a very professional company," says Jeroen van der Veer, the chief executive of a leading competitor, Royal Dutch Shell.Others say they respect the company's clarity of vision. "People know the rules when they work with Exxon," said a top oil executive who asked not to be identified so as not to jeopardize his company's relationship with Exxon. "Exxon can pick its battles. It's a pretty good strategy to have if people know that you will fight to the bitter end." Examples of such grit abound. After a dispute with the Venezuelan government, during which Exxon persuaded a British court briefly to freeze $12 billion in government assets to fight what it considered an expropriation, the country's oil minister accused the company of "legal terrorism."
Whatever its critics might say about the company's hard-headedness, the approach has paid off for Exxon's bottom line. Last year, profit per barrel at Exxon was $17, exceeding $12 a barrel at BP, $14 at Royal Dutch Shell and $16 at Chevron, according to Neil McMahon, a Bernstein Research analyst.
No one is apologetic at Exxon about what it takes to get those results, especially Tillerson. "The business model is based on a disciplined and rigorous approach to dealing with scientific data and facts," he says. "What we do is largely invisible to the public. They see the nozzle at the pump, and that's about it. They don't see the enormous level of risk that is managed very well to get that gallon of gas."
Exxon has battled powerful forces in recent years, locking horns with governments and multinational rivals from Africa to Central Asia, from Eastern Europe to South America. But last spring, the challenge struck closer to home - at the company's annual shareholder meeting in Dallas.
As oil prices zoomed above $100 a barrel, a group of investors tried to push Exxon to lay out a new strategy for developing alternative fuels and addressing global warming. While the challenge was not unprecedented - raucous shareholder meetings have been a staple for years - the dissent was led by a symbolic, if slightly quixotic, constituency: descendants of John D. Rockefeller, who founded Standard Oil in 1882.
"Exxon Mobil needs to reconnect with the forward-looking and entrepreneurial vision of my great-grandfather," Neva Rockefeller Goodwin, a Tufts University economist, speaking for the family, said. The company, she added at the time, was focused "on a narrow path that ignores the rapidly shifting energy landscape around the world."
Exxon's top managers easily brushed off the Rockefeller revolt, as they have so many obstacles over the years. Even so, Exxon and the other oil giants are facing a stark new landscape.
High prices have meant stratospheric profits, of course, but they have also led to more restrictions on access to oil fields around the world, making it harder for companies to increase their production and replace reserves.
"The largest oil companies are under tremendous pressure," said Fadel Gheit, a veteran oil analyst at Oppenheimer, who worked for Mobil before moving to Wall Street.In the 1960s, the so-called Seven Sisters oil companies, including Exxon and Mobil, controlled most of the world's oil reserves. Today, state-owned companies, like Saudi Aramco, hold the vast majority of these reserves, while other resource holders like Russia and Venezuela have become increasingly assertive about limiting access to their reserves."The problem is very real," said Henry Lee, a lecturer in energy policy at Harvard University. "The oil majors are looking at a very different world than 20 years ago. That has big implications for the future of these companies. They all know it and they are all trying to figure out where they are going to be in 10 and 20 years."The threat from state-controlled energy companies - and the larger question of tapping reserves - led to the big wave of industry mergers in the late 1990s, including Exxon's $81 billion purchase of Mobil in 1999. "We were worried," said Lou Noto, the former chairman of Mobil. "We expected the environment to become more volatile, and more competitive, and more difficult geographically and geologically. The easy stuff had been found and we were getting into very esoteric stuff."
While the combination of Exxon and Mobil created the world's most valuable oil company, the joint entity has struggled to expand production. Exxon derives its strength from its size. But its problems are also a function of size: The company has become so big that to grow it must find increasingly big projects.
At a meeting of analysts on Wall Street in March, Tillerson acknowledged the difficulty he faced: "The challenge we have today is continuing to have access to resources." Since 1999, Exxon has spent about $125 billion foraging for new energy supplies around the globe. It expects to spend $25 billion to $30 billion each year through 2012 to seek and develop hydrocarbons.Yet the company is pumping about as much oil and natural gas today as Exxon and Mobil once did separately. In fact, Exxon's hydrocarbon production has been falling recently, dropping 8 percent, to 3.6 million barrels a day in the third quarter, compared with 3.9 million barrels a day in the period last year. With about $37 billion in cash and a clean balance sheet, Exxon can afford to be picky about what prospects to explore. It has about 120 projects on its books, either in operation or in the planning stages, and it sits on as much as 72 billion barrels of oil and natural gas reserves around the world, the most of any nonstate oil company.
To keep up momentum, Exxon plans to start up more than 60 fields or major projects by 2011, including dozens of offshore fields in West Africa, export terminals for liquefied natural gas in the Middle East and scores of natural gas and oil developments in Australia, Indonesia, the United States and the Caspian Sea.
Still, despite its ability to stride the energy world like a colossus, Exxon remains more cautious than its rivals. Rather than overspend, it sows its huge returns in-house through share buybacks and large dividend payments to shareholders.
From 2003 to the third quarter of 2008, the company has paid out nearly $150 billion to shareholders, spending more than $40 billion in dividends and buying back about $110 billion in shares.
Yet Exxon's shares are on track for their worst performance since the early 1980s, a result of the market sell-off and the drop in oil prices recently. Some analysts also said the performance reflected the questions hanging over the company's long-term strategy.
"Exxon is a cash machine, and they could be using that cash to invest in clean technologies that would expand their base," said Andy Stevenson, an energy analyst at the Natural Resources Defense Council. "Right now, they have no growth story. They are trapped in oil and gas."
If Exxon maintains its current buyback rate of $8 billion each quarter, it will become a private company between 2020 and 2030, according to a report by Bernstein Research. While that is unlikely, these payouts - $30 billion so far this year - have been criticized by some experts, who would like to see the company invest more to increase its production or expand its reserves.
"If a company is not replacing reserves, and they are spending their cash to buy back their shares, and they are not growing their production, that is called liquidating the company," says Amy Myers Jaffe, the associate director of Rice University's energy program in Houston.
Ultimately, the biggest test for Exxon's long-term business model is the fact that rising energy use - whether in the United States or in China - will eventually have to be reconciled with reducing carbon emissions and finding low-carbon energy sources. But as its contentious shareholder meeting with the Rockefeller heirs demonstrated, few topics are as touchy as Exxon's stance on climate change.
During the tenure of Lee Raymond, who ran the company from 1993 to 2005, Exxon became the lightning rod in the debate about climate change. Throughout the 1990s, the company was vilified by environmental groups and scientists for questioning the effect of human activities, especially the use of fossil fuels, on global warming.
Gingerly, over the past three years, Exxon has moved away from its extreme position. It stopped financing climate skeptics this year, and it has sought to soften its image with a $100 million advertising campaign featuring real company executives, scientists and managers.
The company has acknowledged that climate change is a risk to the world. In a speech given before the Royal Institute of International Affairs in London last year, Tillerson said policy makers should consider setting a carbon tax or a plan that limits carbon emissions through a cap-and-trade system.
But while Exxon is slowly unshackling itself from Raymond's stance on global warming, it is still faithful to his legacy by dismissing most green alternatives and sticking with hydrocarbons.
Although the company's tone has changed, its strategy has not. Despite growing pressures on oil companies to invest in alternative energy, Exxon's long-term view remains unapologetically tied to fossil fuels. "Rex looks more approachable than his predecessor," said a rival executive, who requested anonymity because he did not want to jeopardize his relationship with Tillerson, "but he is more inflexible."
Exxon's belief is that as populations expand and economies grow in developing countries, they will aspire to the comforts and amenities taken for granted in industrialized nations and this will mean more cars on the roads - and more oil to power them.
According to Exxon's own outlook, global oil demand is set to reach 116 million barrels a day by 2030, up sharply from 86 million barrels a day today.

Socialists in France wage civil war
Sunday, November 16, 2008
PARIS: France's squabbling Socialists failed to agree on a leader or a platform over the weekend at a closely watched party congress that was supposed to revive the country's main opposition force as a serious challenger to President Nicolas Sarkozy's administration.
The three-day congress in the northern city of Reims had been billed as a first step to position the left for winning back the Élysée Palace after suffering three consecutive presidential defeats.
Instead, as Sarkozy was basking in the spotlight with fellow world leaders gathered in Washington to deal with the global economic crisis, senior Socialists wondered publicly whether their party could even survive until the next ballot, in 2012.
"If we are not able to get our act together," Martine Aubry, one of three would-be leaders, remarked darkly, "it is perhaps the end of the Socialist Party."
At the heart of the latest episode of infighting is a familiar face: Ségolène Royal, the glamorous but deeply polarizing former presidential candidate, who has been making a comeback in recent weeks.
Royal, 55, stunned her rivals when her draft program unexpectedly won more support than theirs in a vote among party members last week. She then irked them by belatedly joining in the race for the party leadership over the weekend.
Despite their mission to forge a compromise between rivaling policy platforms and unite behind a consensus candidate for leader, senior Socialists refused to back Royal.
But they also failed to put up a single candidate against her. Only one of four candidates withdrew from the weekend race: Bertrand Delanoë, the mayor of Paris. Aubry, who is best known as the architect of the 35-hour workweek, and Benoît Hamon, a leader of one of the party's left-wing factions, will face off against Royal in an internal vote among party members on Thursday.
The vote will settle the leadership issue, but is likely to leave the party deeply divided.
While Aubry and Hamon want to move the party to the left, Royal has lobbied for an alliance with the centrist Democratic Movement of François Bayrou. She has also changed her wardrobe and hairstyle, swapping the white blazers that earned her the nickname "Madonna" during the campaign last year for casual tunics in earthy colors.
As the center-right Le Figaro newspaper put it recently: "Images rules. She knows this. And like others — Nicolas Sarkozy and Barack Obama — she is acting her part."
Royal's supporters describe her as a charismatic, grass-roots leader with mass appeal. Her detractors see her as vapid and populist, warning that with her at its helm, the party is doomed to lose again in four years.
She has spent the last few months traveling the countryside, holding town hall meetings and attracting crowds with a vague but apparently effective message about healing rifts and sticking together in adverse economic times.
"We are the left. We are what is born again when everything seems lost," Royal told fellow Socialists in Reims as half the room applauded and the other half heckled. "We are socialism. Let's stand up with virtue and courage."
The Socialists have struggled to position themselves between a new anti- capitalist movement run by a charismatic young postman named Olivier Besançenot, and an ever-moving president who has recently seen his popularity bounce back with his activism on the international stage.
It has not helped that Sarkozy has poached some of the party's most popular figures and ideas.
He has made Bernard Kouchner, long one of the most popular politicians in France, his foreign minister, and sent Dominique Strauss-Kahn, the leading reformist of the Socialist Party, to Washington to run the International Monetary Fund. He has also put more minorities into government than any Socialist administration ever has, and has reacted to the global financial crisis by ramping up the role of the state in the economy, a traditional leftist theme.
"It's a bitter paradox for the Socialist Party," the left-leaning newspaper Libération said in an editorial published Friday. "At the moment when its ideas receive a stunning boost from reality, it offers us the spectacle of a personality clash of rare intensity."

G-20 mostly avoids the thornier questions
By Mark Landler
Sunday, November 16, 2008
WASHINGTON: Leaders of the Group of 20 nations headed back to their home countries Sunday to continue work on reviving their economies, leaving no clear direction for the thornier questions of overhauling financial regulation that President-elect Barack Obama of the United States will have to address.
While the group put on a strong united front during its summit meeting here Saturday in the face of a global crisis, members delayed any top-level decisions, including far-reaching but hotly debated proposals to restructure financial regulation, until the 101st day of the incoming Obama administration.
The group planned its next meeting for April 30, months after Obama was scheduled to be sworn into office.
The measures announced by the G-20 on Saturday, though cast as ambitious reforms, mainly reflected steps that the countries were already undertaking to grapple with the crisis. What remains to be seen is whether, working with Obama's new White House, the G-20 leaders will be able to put aside their political and economic differences to embrace more radical changes.
Reaction around the globe varied from studiedly dubious to carefully optimistic. The French daily Le Monde suggested Sunday that the world leaders had settled largely for "declarations of principle," leaving the hard work to their finance ministers.
But The Toronto Star said that the group's most important decision was to meet again: "That signaled that the world has, in effect, elected a new body to oversee the international capitalist economy."
Prime Minister Gordon Brown of Britain, whose country is set to preside over a follow-up meeting of the 20 countries next year, said that the meeting in Washington had provided a "route map" to recovery that would save millions of people around the globe from greater hardship.
"By the actions we take, savings are safe, people will be able to keep their jobs, they will not lose their homes in all of our countries," he said after the summit meeting. "These are extraordinary times and they require extraordinary measures."
Some doubts remained. The mechanics of more coordinated banking regulation have consumed policy makers for years, and further progress will not come easily. Still, most participants portrayed the talks in Washington as an important first step toward greater and more broadly based coordination and harmonization of standards.
Both Brown and Chancellor Angela Merkel of Germany indicated that they believed Obama would agree with the central thrust of the measures announced in Washington, and their public comments were mostly upbeat.
Obama did not attend the summit meeting but two of his envoys, the former secretary of state, Madeleine Albright, and a former Republican congressman, James Leach, spent hours huddled with leaders from many of the 20 countries.
Merkel said she did not have "the slightest doubt" about Obama's support for the line taken in Washington. Her foreign policy adviser, Christoph Heusgen, spent two hours with Albright and Leach on Friday, according to German press reports.
The French economy minister, Christine Lagarde, said on France 2 television Sunday that President George W. Bush "told us that he had kept his successor regularly informed and had received his support."
Brown also signaled that he would announce an economic stimulus package for Britain, perhaps early next week, although George Osborne, an opposition spokesman for the Exchequer, said that Brown had failed in an effort to secure global agreement for a fiscal stimulus package.
The finance ministers of Britain, Brazil and South Korea have been charged with the primary responsibility for directing the working groups to draw up regulations aimed at overhauling the world's financial regulatory framework in time for a summit meeting on April 30, probably in London.
Facing the gravest economic crisis in decades, the leaders of the 20 countries agreed Saturday to work together to revive their economies, but they put off thornier decisions about how to overhaul financial regulations.
Though the countries' stimulus packages were cast as ambitious steps, they mainly reflected measures that the countries were already undertaking to respond to the crisis. What remains to be seen is whether, working with a new White House, the leaders will cast aside their political and economic differences to embrace more radical changes, including far-reaching but fiercely debated proposals to revamp regulation.
Julian Jessop, chief international economist for Capital Economics, said that while the summit meeting failed to deliver new stimulus measures, "at least it avoided the knee-jerk responses" like rushed regulation that would have made things worse.
"More importantly, world leaders took the first steps on the reforms of the global financial system necessary to make it less likely that this crisis will happen again," he said.
Obama will find common ground with the leaders in his support of a further stimulus program in the United States - something Bush opposes. The group called for more fiscal measures to cushion the blow of a downturn that is hitting rich and poor countries.
In a five-page communiqué that mixed general principles with specific steps, the G-20 pledged to bolster supervision of banks and credit-rating agencies, scrutinize executive pay and tighten controls on complex derivatives, which deepened the market turmoil.
"Our nations agree that we must make the financial markets more transparent and accountable," Bush said. He warned that "a meeting is not going to solve the world's problems," and described the talks as the beginning of a process that would carry over to the next administration.
With dueling news briefings and statements through the weekend, it was clear that bridging ideological gaps among nations afflicted with different versions of the economic contagion would provide Obama and other world leaders with a daunting challenge.
There is also a more basic philosophical divide across the Atlantic: Europeans in general favor more state control over markets, even to the point of granting regulators cross-border authority, while the United States stresses the primacy of national regulators. President Nicolas Sarkozy of France, who called on Bush to organize the meeting, alluded to those differences, saying the negotiations, even on general principles, had been challenging.
Sarkozy said: "I am a friend of the United States of America, but if you ask, was it easy? No, it wasn't easy." He added that he did not fly to Washington "simply for the pleasure of traveling." He said the Americans had made concessions even by agreeing to discuss issues like regulatory coordination and executive pay. The communiqué, however, suggested there were concessions on both sides.
Prodded by Bush, who earlier in the week gave an impassioned defense of capitalism, the leaders reaffirmed their commitment to free trade. But they also clearly laid blame for the crisis at the doorstep of the United States.
The meeting set out a road map for overhauling regulations in a wide range of areas, and assigned the work to groups of experts. At the next meeting, the leaders will debate specific proposals developed by those groups.
Among those measures is a European proposal to set up so-called colleges of supervisors, to share information about global banks with operations in many countries.
Another idea is to expand the membership of the Financial Stability Forum, an influential group of finance ministers and central bankers from industrialized countries, to include emerging markets like Brazil and China.
Still, for all the talk of action and history-making change, some experts said the outcome was disappointing.
"This is plain-vanilla stuff they could have agreed on without holding a meeting," said Simon Johnson, an economist at the Massachusetts Institute of Technology and a former chief economist of the International Monetary Fund. "What's new, except that this is the G-20 instead of the G-7?"
Brian Knowlton contributed reporting.



The way forward
By Kofi Annan
Sunday, November 16, 2008
The ink is hardly dry on the communiqué from Saturday's Group of 20 meeting, where members pledged to work together to revive their economies. Time, political will and in particular the Obama administration will determine whether the goals and ambitions set out will be realized. But the communiqué's significance should not be underestimated.
First, that the pledge should emerge from a G-20 meeting - a forum of advanced and emerging countries - rather than, say, a G-8 or OECD meeting, bodes well for a more inclusive response to the global economic crisis.
Events of the past few months have again underscored that no single country or small subset of countries, even the most powerful or wealthy, can manage the forces unleashed in our globalized world. The Washington meeting potentially represents the beginning of an era of unprecedented cooperation for concerted action on other equally pressing issues, such as climate change, food security and poverty reduction.
Second, it is proposing a process and a timetable both to brake if not reverse the slide into global recession, and to reform the international economic architecture. To date, response has been in crisis mode. But the underlying issues require a sustained response, being systemic in nature: insufficient regulation and supervision of the financial markets; unsustainable energy policies; unpredictable and insufficient assistance for the most vulnerable; and uncoordinated macro-economic policies.
These issues could not be more relevant for Africa. The economic meltdown has come at the worst possible time. Notwithstanding the persistence of conflict and untold humanitarian tragedy in far too many places, including the Horn of Africa, Darfur, eastern Congo and Zimbabwe, the continent has enjoyed a decade of real progress, albeit starting from a low base relative to other parts of the world.
Africa has seen growth rates that are higher than in the past, impressive increases in foreign direct investment and breakthroughs in governance, accountability, education, disease control and the quality of life.
The current crisis comes as Africa struggles to maintain this positive momentum after a year of rising food prices and unprecedented volatility in fuel costs. Food and fertilizer are punishingly unaffordable for consumers and farmers. Recession and slowdown in high-income countries, as well as China, India and the Middle East, are resulting in plummeting commodity prices and exports, reduced remittance flows and decreases in foreign direct investment.
African leaders face an almost impossible challenge: how to protect their fragile economies and vulnerable people from global recession at a time when their revenues are decreasing. Maintaining levels of public investment is the basis for political stability and achievement of the Millennium Development Goals. Inability to do so could have profound consequences - in terms of unemployment, poverty and social and political tensions.
Last week, at the Tunis meeting of African ministers of finance and central bank governors, the outlines of a way forward were agreed: continued macro-economic stability, strengthened regulation and oversight of financial institutions, and renewed efforts to improve governance and accountability structures.
African countries want to diversify economic activity, strengthen regional infrastructure and recognize the need to create the conditions to encourage investment and domestic savings.
At a time when private capital flows are diminishing, increased access to loans and grants from the international financial institutions and predictable development assistance, are critical.
Failure to honor aid commitments would be a breach of faith and potentially disastrous for the ability of Africa to achieve the Millenium Development Goals. For richer countries, this is not about charity. It is about self-interest. By helping Africa to build roads and railways, power plants, and irrigation and water treatment systems, donors will increase capital exports to Africa at a time when their own industries are facing a collapse of demand.
Aid can be a global stimulus - a powerful way to convert excess capacity in wealthier countries into long-term and high-return benefits, including quick recovery from high unemployment. There is an important brokerage role to be played - to encourage partnerships between governments, development banks, export credit agencies and the private sector to catalyze this two-way stimulus.
Development assistance can also contribute to global security. Problems in one country, let alone one continent, cannot be contained within borders. If African countries cannot overcome the many social and economic challenges they face, these problems will spill over rapidly.
Migration to Europe, for example, cannot be managed without addressing the social and environmental fundamentals that are contributing to both conflict and mass movement of people.
Africa still has a long way to go; too many leaders remain unaccountable to their people, and the capacity of regional institutions to prevent and manage conflict remains weak. But in my lifetime, and in the last decade, there has been enormous progress.
Since the 2002 Monterrey meeting on Financing for Development, a compact has been emerging. Richer countries will put development issues at the heart of global agreements, whether on finance, trade, climate change, intellectual property or other pressing issues. Developing countries will prioritize good governance, accountability and the Millenium Development Goals.
Success in tackling the great challenges before us requires genuine partnership and mutual accountability. The least-developed countries must also have a voice and be fully represented in the institutions empowered by the global community to take the lead.
Whether the G-20 meeting on Saturday was a success or not now depends upon the follow-up. It will have served us well if it launches a new era of inclusive economic cooperation and diplomacy.
Kofi Annan, the former secretary general of the United Nations, is chairman of the Africa Progress Panel. He is appearing Monday at the Forum for New Diplomacy hosted by the International Herald Tribune and the Académie Diplomatique Internationale.


More Americans slipping into bankruptcy
By Tara Siegel Bernard and Jenny Anderson
Sunday, November 16, 2008
The deep troubles of the U.S. economy are pushing a growing number of already struggling Americans into bankruptcy, often with far more debt than those who filed in previous downturns.
Plummeting home values, dwindling incomes and the near disappearance of credit have proved a potent mixture. While all the usual reasons that distressed borrowers seek bankruptcy — job loss, medical bills, divorce — play significant roles, new economic forces are changing the calculus of who can ride out the tough times and who cannot.
The number of personal bankruptcy filings jumped nearly 8 percent in October from September, after marching steadily upward for the last two years, said Mike Bickford, president of Automated Access to Court Electronic Records, a bankruptcy data and management company.
Filings totaled 108,595, surpassing 100,000 for the first time since a law that made it more difficult — and often twice as expensive — to file for bankruptcy took effect in 2005. That translated to an average of 4,936 bankruptcies filed each business day last month, up nearly 34 percent from October 2007.
Robert Lawless, a professor at the University of Illinois College of Law, pointed to the tightening of credit by banks as a significant factor in the increase in October. As banks have pulled back on lending, he said, consumers have been finding it more difficult, and in many cases impossible, to use credit cards, refinance their home mortgages or fall back on their home equity lines to get them through a rough period.
"A credit crunch can drive people into bankruptcy today rather than later as sources of lending dry up," Professor Lawless said. "With the consumer credit tightening and the economy in a nosedive, this pop could just be the beginning of a long-term rise in the bankruptcy filing rate to levels that are even higher than we had before the 2005 bankruptcy law."
Not only are filings up, but recent filers have had much more credit card debt, often run up in an attempt to keep current on a mortgage that now exceeds the value of their home, bankruptcy lawyers said in interviews.
A recent study found that the typical family who filed for bankruptcy in 2007 was carrying about 21 percent more in secured debts, like mortgages and car loans, and about 44 percent more in unsecured debts, like credit cards and medical and utility bills, than filers in 2001.
Their incomes, meanwhile, remained static over those six years, according to the study, which used data from the 2007 Consumer Bankruptcy Project, a joint effort of law professors, sociologists and physicians. Researchers surveyed 2,500 households nationwide that filed for bankruptcy in February and March 2007.
"Earlier downturns followed strong booms, so families went into recessions with higher incomes and lower debt loads," said Elizabeth Warren, a professor at Harvard Law School and, along with Professor Lawless, part of the Bankruptcy Project team. "But the fundamentals are off for families even before we hit the recession this time, so bankruptcy filings are likely to rise faster."
Not surprisingly, filings are increasing most rapidly in states where real estate values skyrocketed and then crashed, including Nevada, California and Florida. In Nevada, bankruptcy filings in October were up 70 percent compared with last year. In California, bankruptcies jumped 80 percent in the same period, while Florida's filings rose 62 percent.
In those regions, some people are trying to rescue their homes through bankruptcy proceedings, but many are just as relieved to walk away, shedding layers of debt that otherwise would have taken decades to pay off.
Tony and Carrie Forsyth, both 30, chose not to walk away from their house in Florida. The couple said they thought their financial situation would improve in 2006, when Forsyth accepted a promotion from his employer, a Michigan food distributor, that required them to move to Florida. But they could not sell their home in Ypsilanti, Michigan, so they decided to rent it out.
In June 2006, the couple headed south and bought a house for $220,000 in Tamarac, Florida, with no money down. Five months later, their tenants in Michigan stopped paying, and the family had to carry two mortgage payments, just as the adjustable-rate mortgage on their Michigan home reset to a higher interest rate. They lost the Michigan home to foreclosure in February 2007.
By that time, however, the couple, who have two young daughters, were using credit cards to pay for food, utilities and clothes. After accumulating about $20,000 in debt, they said, they realized that bankruptcy was the only way they could remain in their Florida home, whose value, meanwhile, had plunged 25 percent. They filed for Chapter 13 bankruptcy protection this year, which permitted them to keep the house, and they agreed to repay a portion of their debts over the next three years.
A Chapter 7 bankruptcy, by contrast, provides filers with what is known as a "fresh start" because debts are forgiven. In this case, assets are liquidated, though the states allow for various exemptions. To qualify for a Chapter 7, filers need to pass a means test to determine whether they are unable to repay their debts.
Filers who are deemed able to repay a portion of their debts must file for Chapter 13 bankruptcy. Some debtors choose Chapter 13 because it permits them to save their primary homes from foreclosure, though they are required to catch up on their mortgage payments.
Forsyth said declaring bankruptcy was a difficult step. "Because of our Christian background, it didn't feel right," he said. "But there was no other way for us to live and support our family unless we went that route."
Forsyth added: "We are just rolling with life. You have to eat. You have to have diapers."
The Forsyths are emblematic of the new forces that have led to the sharp rise in bankruptcy filings. "Historically, a person would get behind in his mortgage because of a temporarily catastrophic financial event, such as job loss, divorce, illness," said Chip Parker, a bankruptcy lawyer in Jacksonville, Florida. "However, when these adjustable-rate mortgages started resetting from their teaser rate and clients couldn't refinance their way out of trouble, they were getting behind even though there was no catastrophic event."
Bankruptcy lawyers report that they have been having more consultations with middle-class families with six-figure incomes — including many who either bought a home during the boom or pulled out most or all of their available home equity just keep to up with the cost of living. Also caught up in the bankruptcies are real estate investors, who hoped to flip properties they had bought near the height of the market.
"There are a lot of foreclosures that haven't taken place yet because people still have available credit," said Jeffrey Tromberg, a bankruptcy lawyer in Fort Lauderdale, Florida. "We don't see them until they've maxed out their credit cards."
A similar pattern has emerged in Las Vegas, where more people are filing for Chapter 7 bankruptcy protection because it makes more financial sense to walk away from their homes. Real estate values have plummeted, and now the local economy is also suffering. Car salesmen and casino dealers are being laid off. Valet parking attendants and masseuses are collecting less in tips.
"My clients are basically good people that got into a home the best way they could and can no longer meet their obligations because their income has gone down," said Roger Croteau, a lawyer in Las Vegas who concentrates on bankruptcy. "There is no equity to pay off their credit cards, and they are maxed out. They haven't saved enough because of housing costs."
Ellen Stoebling, a bankruptcy lawyer in Las Vegas, added: "People are using their cards to try and hold onto their property for as long as possible in hopes they can somehow talk some sense into their lender and stay in the property."
The problems are not limited to people with adjustable-rate mortgages and homes that are now worth less than they owe. Job losses are also playing a role. Bankruptcies are also up sharply in Delaware, Rhode Island and Indiana, where the unemployment rates have been climbing.
And, of course, some people continue to seek bankruptcy for the usual reasons.
Lisa Marquis, a 35-year-old mother of five in Indiana, has no medical insurance but has undergone 21 operations in the last nine years, some related to emphysema and other respiratory diseases, and others related to accidents and several miscarriages.
Marquis cannot work, but her husband earns $13.50 an hour as a truck driver — a salary that makes them ineligible for Medicaid but unable to pay their medical bills. Earlier this year, the family had to leave the mobile home they owned because the mold there was making it hard for her to breathe; they moved into a house where they paid more than $600 a month in rent. Marquis was spending three days a week in court fending off angry creditors, cutting down on the number of hours he could work.
In April, facing more than $114,000 in medical bills and less available overtime work, the Marquises filed for Chapter 13 bankruptcy — the third time in less than 10 years that Marquis had to file for protection because of medical bills. Because the latest filing is a Chapter 13, they have agreed to pay some of their debts.
"We could have waited to do a 7," Marquis said. "I want to pay my debts. I didn't want to cheat people who helped to save my life."
Despite the rise in bankruptcies, academics and lawyers say they believe that many others have been discouraged from filing because of the 2005 bankruptcy law.
Warren, the Harvard law professor, said many borrowers had been left with the mistaken impression that they could no longer file. And, she argued, "the widespread perception that bankruptcy is not available to help families makes this economic crisis worse."


Conspicuous consumption goes out of style
By Alex Williams
Sunday, November 16, 2008
The owners of the South City Grill restaurants in New Jersey opened the first of three planned upscale steakhouses this year, and the décor was one of opulence and glamour. The owners "wanted it to sparkle like jewelry," recalled Anurag Nema, one of the designers.
The interior featured shimmering silk curtains, ruby-tinted glass and a hulking crystal chandelier. The stainless steel accents were polished to mirror brilliance, said Nema, who designed the steakhouse, South City Prime, in Little Falls, with Orit Kaufman.
The second restaurant is scheduled to open in January in Montvale, New Jersey, but the sparkle is gone, the designers said. With the economy in free fall, the concept is now sturdy American grill and the name is now Wildfire by South City.
Wooden shutters and brick have replaced the silk curtains. Salvaged wood from a barn will stand in for the ruby-tinted glass. As for the chandelier, well, there is no chandelier.
"There's a shift to get away from glitz," Kaufman said. "I'm almost starting to feel that luxury is a dirty word."
It is no secret that consumers are cutting back, anxious about jobs, plummeting home values and shrinking retirement savings. But that belt-tightening seems to have also prompted a reconsideration of what is acceptable consumerism even for those relatively unaffected by the economic cataclysm.
When just about everyone is making do with less, sometimes much less, those $2,000 logo-laden handbags and Aspen vacations can seem in poor taste. "Luxe" is starting to look as out of fashion as square-toed shoes.
As sales at high-end stores like Neiman Marcus plunged by nearly 30 percent in October, compared with a year earlier, Costco sales slipped just 1 percent and Wal-Mart reported gains.
Henri Barguirdjian, the president of Graff, the diamond merchant, said on the cable news channel CNBC last week that the market for pieces from $20,000 to $100,000 had grown softer. Marine Products, an Atlanta-based maker of yachts and pleasure boats, saw net sales decrease by nearly 40 percent in the quarter ending in September compared with a year earlier.
"The era of conspicuous consumption, at least for the foreseeable future, has come to a close," said Paco Underhill, the author of "Why We Buy," which explores the science of retail. "Consumption will still happen. It's just not going to be as public."
He cited a story from an Audi dealer: a buyer of an S4 high-performance sedan requested the nameplate be removed, "so only the person who really knew what they were looking at," he said, "would know what it is."
Today, bejeweled fashionistas are pegged as tone-deaf Marie Antoinettes. "It's not good taste in our business to walk into a party loaded with the biggest diamonds you can find," said Bud Konheim, the chief executive of Nicole Miller. "You don't brag about paying $10,000 for a dress for a party. The feeling now is, so what are you telling us? You're either a sucker or showing off when people have lost jobs."
Conspicuous consumption has gone out of style before, in the recession that followed the 1980s stock market boom; and briefly after Sept. 11, 2001, until spending was recast as patriotic. But for a precedent for such a complete about-face in people's attitudes toward luxury, you would have to look to the Great Depression. In 1932, wary of insulting the vast number of unemployed Americans, J. P. Morgan Jr. kept his 343-foot, or 105-meter, yacht, Corsair IV, in the boatyard, Ron Chernow wrote in "The House of Morgan."
Among those who remained solvent in the Depression, there was "a widespread sense that you don't flaunt your success," said David Kyvig, the author of "Daily Life in the United States, 1920-1940: How Americans Lived Through the Roaring Twenties and the Great Depression."
The economic collapse was also seen as a chance, after the 1920s bacchanalia, for moral cleansing. The industrialist Andrew Mellon said it would "purge the rottenness out of the system. People will work harder, live a more moral life."
Konheim of Nicole Miller, who was born in 1935, said he grew up in a mansion on Long Island, New York, with servants, but even for his family, waste was bad form.
"We had three cars, and they were all Plymouths," he said. "When the soap got down to slivers, what you did was squeeze soap together to make a soap bar — you didn't throw it out."
Today, such thriftiness might make a comeback, said Alexandra Lebenthal, president of the wealth management firm Lebenthal and a contributing editor for the Web site New York Social Diary. It has become fashionable, she said, for socialites to talk enthusiastically about sample sales, eBay bargains and postponements at the hair salon in the interests of thrift.
"It's now chic to cut back," she said. "If you ask people if they are going away for the holidays, they say, 'No, we're just spending a very quiet holiday with family' — instead of 'We're going to Anguilla for Thanksgiving.' "
Harry Slatkin, the founder of Slatkin & Co., a home fragrances company, said he and his wife, Laura, recently canceled a 50th birthday party for her at a Four Seasons hotel. Instead, they plan to have a party at home, with defrosted White Castle cheeseburgers served on silver trays. "It's not time to have splashy birthday parties," Slatkin said. "It's a time to stay home, spend time with friends and connect."
Harrison Group, a market research firm in Waterbury, Connecticut, recently did a survey of attitudes toward wealth among people with household discretionary incomes above $100,000, in partnership with American Express Publishing. While 83 percent of respondents said they were in "good shape to endure this economic climate," those who agreed that "a few luxuries are important in tough times" slipped to 50 percent, from 61 percent, from June to September.
"The definition of living well is changing," said Jim Taylor, a Harrison vice chairman. "There is a desire to not stand out. If you're laying people off, you don't want to buy a Ferrari."
Julien Tornare, a president of the Swiss luxury watchmaker Vacheron Constantin, predicted that his industry would move toward a period of "subtle luxury."
"I think people are going to go with more conservative, not ostentatious — something more discreet that only the connoisseur would know and appreciate, not the bling bling," he said.
The rich were not the only ones consuming conspicuously in recent years, said Marshal Cohen, chief industry analyst for NPD Group. The middle class, bingeing on cheap credit, also treated itself. Sub-Zero refrigerators, $300 jeans and Cadillac Escalades seemed within reach, even in average homes. "Those consumers were beneficiaries of false wealth, and they were living, literally, like millionaires," Cohen said.
Now as the middle class goes back to living like the middle class, Cohen said, the culture itself might feel more modest. Consumers may put a premium on comfort over flash. At restaurants, for example, ostentatious fare may look less tempting, said Bobby Flay, the chef and television personality.
"Not to take anything away from chefs who specialize in edible paper, pea shoots and fennel pollen," Flay said, "but I think classic American dishes with substance are what people will grasp onto."
In other words, roast chicken will be very popular.
While fashion is always headed in three directions, consumers are turning away from disposable style — the overdesigned "it" handbag, for example — toward high-quality pieces that will endure over multiple seasons, said David Wolfe, creative director of the Doneger Group, which forecasts fashion and retail trends.
The British company Mulberry has seen a shift toward its unadorned handbags, said Sarah Geary, its marketing director. Until a few months ago, consumer tastes were "focused on extravagance, irrespective of price," she said in an e-mail message, but "in the coming months, the mood will be against that 'blind consumption.' "
Any new era of no-frills consumption, however, might last only as long as it takes for the Dow to recover, which could take months, years or decades.
But Konheim recalled that after the Depression ended, conspicuous consumption was still vaguely sinful. When he was in high school in 1949, for instance, a girl at his school received a mink coat for her Sweet 16 party.
"The whole town was in shock," he said. "It was just a different atmosphere in the entire country."

Consumer caution is crimping loan effort
By Emily KaiserReuters
Sunday, November 16, 2008
WASHINGTON: The latest U.S. effort to get more money flowing to consumers assumes that there are plenty of credit-worthy households eager to borrow and spend.
That may not be the case.
Rising unemployment and foreclosures are driving more people out of the "prime" credit category, in which banks are still fairly willing to lend. At the same time, consumer confidence has fallen so far that even wealthier people with little trouble getting credit are cutting their spending.
The U.S. Treasury secretary, Henry Paulson Jr., announced last week that he was redirecting a $700 billion rescue package to focus on consumer loans in an effort to spur lending and get the economy going again.
It was the third incarnation of a program launched last month that was initially touted as a way for the government to buy bad assets from banks and unclog credit channels. Instead, it has been used primarily to buy stakes in banks in the hope that the capital cushion would encourage lending.
So far, there is little sign that banks are loosening their grip on cash, much to the frustration of the U.S. government and countries around the world that rely on a healthy U.S. consumer to drive economic growth. That will no doubt be a major topic this week as investors brace for another round of grim economic data from many advanced economies and as leaders in Washington consider whether even more spending is needed to stave off a deep recession.
Charles Dallara, managing director of the bank lobby group Institute of International Finance, said that just because banks have billions of taxpayer dollars in hand, it was unrealistic to expect normal lending to resume immediately.
"Capital does not automatically create credit-worthy borrowers," he said. "In an environment where banks are already recovering from serious losses on earlier lending, it's not only natural - it's inevitable that there is a substantial degree of caution built in to lending activities."
That caution is largely a reflection of the current economic weakness and concern that it will get much worse.
The number of U.S. workers drawing jobless benefits hit a 25-year high, according to data released last week. Unemployment is likely to climb through next year, perhaps surpassing 8 percent for the first time since 1983.
Between job losses and foreclosures, the number of people who qualify for lower-cost prime rates on credit cards and other loans has been declining. According to the consumer-credit company Experian, 4.3 percent of U.S. consumers fell out of prime into subprime between September 2007 and 2008.
U.S. retail sales fell a record 2.8 percent in October and were down four straight months, an ominous sign considering consumers account for two-thirds of economic activity.
"Whether this recession turns out to be the worst in 30 years or 60 years is a question of little consequence to most Americans at the moment," said Bernard Baumohl, chief global economist at the Economic Outlook Group.
"People are now sufficiently scared about their jobs and future income that they are shutting down all spending and hunkering down. Many simply want to hibernate through the recession winter."
It is a similar story in the rest of the developed world. Figures due on Friday are expected to show a 0.5 percent decline in consumer spending in France and a sharp contraction in manufacturing across the euro zone.
In Japan, where exports have been hit hard by falling demand in the United States and elsewhere, economists expect a report on Monday to show the economy grew by a slim 0.1 percent in the third quarter. A separate report on Thursday is expected to show an 8 percent decline in October exports.
To restore U.S. consumer confidence, particularly among higher-income brackets that account for a disproportionately large percentage of spending, it may be a matter of more time rather than more government money.
A Reuters/University of Michigan consumer survey showed that the mood picked up slightly in November, thanks primarily to a steep drop in fuel prices. But a gauge of expectations fell, suggesting that consumers have little hope the economy will improve quickly.
That does not bode well for spending in the Christmas holiday season, typically the biggest shopping period of the year.
UN sees inequalities hobbling Chinese economic growth
Sunday, November 16, 2008
BEIJING: Chinese growth prospects are getting clouded by a gap between rich and poor that is deterring consumption and dragging down productivity, according to a report released Sunday.
The UN-sponsored "China Human Development Report" was issued a day after President Hu Jintao said at a summit meeting in Washington that his country's continued growth was its "important contribution" to steadying the global economy.
But the report, by researchers from the China Institute for Reform and Development and other research institutes, said growth could falter because of social strains, outdated skills and restrained consumer spending unless the government does more to channel services, resources and opportunities to poor groups and regions.
"Inequalities that have emerged during rapid growth have widened to levels that pose additional obstacles" to development, the report states.
"New risks arising in the global economic environment in which the role of low-wage and labor-intensive manufacturing will decline imply that improvement in China's basic public services will be central to continued sustainable economic growth."
Using the UN "human development index" as a key measure, the researchers found that China has made striking gains in raising the incomes, living standards and health of citizens.
From 1990 to 2005, China climbed from 101st to 81st in its global ranking on the index, and its performance in health care "surpasses developing country averages by wide margins," they found.
But those gains have been far from even, leaving China and its more than 1.3 billion people exposed to dangerous imbalances in social welfare, education funding and care for seniors.
Human development levels in the richest cities, Beijing and Shanghai, are comparable to poorer European countries like Portugal and Cyprus.
But the "worst performing Chinese provinces like Guizhou, on the other hand, have HDI levels comparable to Botswana and Namibia," the report said, referring to the human development index.
Tibet has the lowest HDI level of provincial Chinese administrations, and Shanghai has the highest.
The report urged that steps be taken faster to give poor rural residents public services and support comparable to those of urban residents, and to extend protections to hundreds of millions of migrant workers leaving farms for factories and cities.
Otherwise, the report warns, the "imbalances between consumption and investment could pose risks to macroeconomic stability."
When Citi lost Sallie
By Geraldine Fabrikant
Sunday, November 16, 2008
On a Saturday in late September, at a corporate retreat at the Phoenician resort in Scottsdale, Arizona, Sallie Krawcheck gave a speech thanking her troops at Citigroup for their hard work, and then returned to her room.
Krawcheck, a 43-year-old executive at the bank, checked her BlackBerry and found an e-mail message that enraged her. A friend had written to warn her that within a few days Citigroup would announce that it was stripping her of most responsibilities as head of the bank's wealth management unit.
That she was being shunted aside was not a surprise to Krawcheck. Once one of the fast-rising female stars on Wall Street, she had spent the better part of the previous year battling with Vikram Pandit, the chief executive of Citigroup, and his hand-picked managers over a number of business issues.
What infuriated Krawcheck was that the bank moved up its announcement without telling her, according to a person with direct knowledge of her thinking who, like top Citigroup officials, would not agree to be quoted by name. This person requested anonymity in order to preserve professional relationships with Citigroup.
Returning to her New York office the next Monday, Krawcheck listened to a voice-mail message formally notifying her that the timing of the announcement was being accelerated. She immediately told the bank she was leaving. Within minutes, the news was on the cable TV channel CNBC.
The chaos on Wall Street has claimed many careers, including those of two of its highest-ranking women: Zoe Cruz, a former co-president at Morgan Stanley, and Erin Callan, the former chief financial officer of Lehman Brothers. But Krawcheck was perhaps the best known.
In an era when the executive suite is still dominated by men, it's tempting to attribute Krawcheck's downfall to the ruthless vagaries of the glass ceiling. As it turns out, however, her departure from Citigroup was largely the result of an old-fashioned corporate bar brawl at a bank already notorious for dysfunctional management.
And the turmoil continues at Citigroup, a bank that appeared formidable 10 years ago when Sanford Weill and John Reed created it with a megamerger. Since then, despite the guiding hand of Weill's successor as chief executive, Charles Prince 3rd, and the presence of luminaries like a former Treasury secretary, Robert Rubin, Citigroup has been humbled by lackadaisical oversight, financial scandal and tens of billions of dollars in write-offs and losses related to the credit crisis.
Concerns about Citigroup's management and its grim business prospects pummeled the bank's stock last week. Its shares closed Friday at $9.52, its lowest price in years and far below its 52-week high of $37.50.
Krawcheck is said to believe her exit from Citigroup was the result of pressures she faced from Pandit to be a team player and to follow his lead on the best way to deploy talent at the bank — and not related to her sex. The two also sparred over how to compensate clients who lost money by following the bank's investment advice.
Krawcheck gained national attention in 2002 when Fortune magazine put her on its cover. She was a largely unknown research director at Sanford C. Bernstein & Co. then, and the magazine called her one of the "last honest analysts" — at a time when Wall Street was plagued with conflict-of-interest scandals.
When Weill recruited her to Citigroup that year in a bid to burnish the bank's tainted reputation, her $15 million-plus pay package made headlines. She gained even more prominence two years later when Citigroup, then the world's biggest bank, appointed her its chief financial officer. A subsequent reshuffling landed her atop the wealth management group.
An outspoken advocate for her own beliefs, Krawcheck had good relationships with some members of Citigroup's board. Those relationships, and her stellar résumé, may have helped lull her into assuming her conflicts with Pandit would have to be resolved, according to those who know her. Pandit declined to comment.
"After a number of discussions about the best management structure for our wealth management business, Sallie suggested to Vikram that she take an entirely client-facing senior role as chairman of the business," said a Citigroup spokeswoman. "Vikram agreed that such a role would be terrific given his view that Sallie has extraordinary client skills. Later, Sallie changed her mind about this role and ultimately decided to leave the company. We were disappointed that she made that decision."
Several sources close to the bank say that Citigroup did not oppose some of Krawcheck's ideas but that it needed more time to consider them. And they say the bank had to move up the announcement of Krawcheck's revised role because news of it was already spreading.
One executive in the wealth management unit, who requested anonymity because he is not authorized to speak publicly about the bank, said she was seen as counterproductive. "I think they thought she carried her advocacy too far," he said.
These days, Krawcheck, a native of South Carolina, spends a lot of time running in Central Park. Leaving Citigroup felt "like I got a divorce," she has told friends. The emotional toll of her departure caused her to lose seven pounds, or three kilograms, within a few weeks.
Though she has made enough money to live comfortably the rest of her life, she has no desire to slow down. An addict of the fast-paced, take-no-prisoners New York lifestyle, she has told friends: "They kicked me out of the South. I only know one speed."
The fall of Krawcheck's career was closely followed in large part because her ascent had been so meteoric.
She majored in journalism at the University of North Carolina but was drawn to Wall Street, initially to learn business with an eye toward becoming a reporter. She landed a job in investment banking at Salomon Brothers in New York in 1987. After short stints at other companies, she joined Sanford C. Bernstein as a senior analyst in 1994. Within seven years she was the firm's chief executive.
"She was capable and skilled as a research analyst," recalled Lewis Saunders, chief executive of AllianceBernstein. "That led us to promote her to the manager of the research business itself."
Krawcheck has told friends that growing up in Charleston, South Carolina, as the daughter of a Jewish businessman and a Protestant mother taught her about being an outsider and toughened her for a career in a cut-throat, male-dominated industry.
She took only a short time off for the birth of her first child, and no time off for the second. Over the years, her increasing professional responsibilities never tempted her to rein back and spend more time with family. She has told friends that her drive was partly "insecurity" and partly the joy she took in her work.
After she leapt into Wall Street's upper ranks, however, some of her appetites might have outpaced her abilities. When she first arrived at Citigroup, she oversaw an area with which she had deep familiarity — the brokerage business. But just two years later, Prince, Weill's heir, promoted her to a substantially more complex job, chief financial officer.
Many analysts came to believe that Krawcheck did not handle that post well, especially after the bank began posting titanic losses and suffering downturns in some of its key businesses.
"There was not an appropriate amount of understanding of the risks they bore," said Gary Townsend, who heads Hill-Townsend Capital, a firm that invests in the financial services industry, when asked about Krawcheck's tenure. "The chief financial officer has to be able to assess the myriad risks that a large financial institution faces."
In March 2007, Prince pushed Krawcheck out of the chief financial officer's position and sent her back to lead the wealth management division — a very public demotion. "Being moved down a peg makes it hard to move back up," said Jeffrey Harte, a banking analyst at Sandler O'Neill. "It probably meant that the promotion ladder at Citi had come to an end for her."
Then Pandit arrived, and things only got worse.
From the beginning, their relationship was tense. "She could always get to Sandy and Chuck," recalled one top wealth management executive who requested anonymity because he is not authorized to speak about the company. "But we sensed that her relationship with Vikram never jelled."
Pandit, who grew up in India and came to the United States as a teenager, joined Morgan Stanley's investment banking team in 1983. Passed over for a promotion that might have led to the top job, he quit in 2005 to start his own hedge fund. When Citigroup later acquired his fund, he joined the bank.
In December 2007, after Prince's ouster from the bank during a wave of losses, Pandit was named chief executive.
The wealth management unit was a relatively small component of the bank. Last year it contributed $12.9 billion of the bank's $81.6 billion in revenue. Still, in the fourth quarter of 2007, when the bank was already facing losses, Citigroup cited Krawcheck's unit as one of its bright spots.
The next year was another matter, and Krawcheck and Pandit began to feud.
The first dispute occurred in February, when two Citigroup-sponsored hedge funds, Falcon and Asta/Mat, ran into trouble. An investment in Falcon would have lost 80 percent of its value by February, and an investment in Asta/Mat would have been almost entirely wiped out.
Krawcheck believed that investors should be compensated for some losses, said the person acquainted with her thinking. She argued that these were extraordinary declines in the value of the funds and she thought the risks in one fund had been misrepresented to investors. She feared that angry clients would leave the bank, which could deal a serious blow to revenue (particularly that of her own unit). She also felt compensation would keep the bank from facing lawsuits.
On March 5, Krawcheck got a call from Gary Crittenden, the bank's chief financial officer, the person with knowledge of her thinking said. Crittenden told her the bank would not reimburse any money because hedge funds were risky products sold to sophisticated investors.
Crittenden declined to comment for this article. But others at Citigroup familiar with the discussions said that Crittenden believed that the bank had no legal obligation to customers but that he had not ruled out a payment. Krawcheck had also sent an e-mail message to Pandit saying that she regretted that the bank had made its decision about the hedge fund clients without her input. He told her, according to those familiar with the exchange, that if the bank could come up with a creative solution to help investors, maybe the parties could work things out.
By the end of March, Citigroup had agreed to make some financial amends to investors in the funds.
Even as the hedge fund crisis was unfolding, investors were shaken again when the market for auction-rate securities froze and they could not get access to their money. Citigroup was one of many firms that ran auctions for these securities.
Krawcheck wanted to offer a way for customers to recover funds despite the market freeze, but a person acquainted with her thinking says she was unable to reach Pandit for a discussion. So her unit improvised by offering clients loans equal to the value of the frozen securities.
In mid-April, Attorney General Andrew Cuomo of New York State began to investigate the sale of auction-rate securities. Citigroup agreed to buy back $7.3 billion of the troubled securities. It also reached a settlement with the New York government, other state regulatory agencies and the U.S. Securities and Exchange Commission that included a $100 million fine.
There was another sticking point between Krawcheck and Pandit: he wanted Citigroup investment advisers to push largely Citigroup products; she thought they should be free to pitch products from a variety of companies to give clients greater choice.
As these conflicts emerged, Krawcheck felt that the fact that she was a woman and not part of Pandit's inner circle made her situation particularly difficult.
Aware that her future at the bank was growing fragile, Krawcheck asked Pandit for a performance review. At a meeting on Aug. 1, he praised her work, according to the person with direct knowledge of her career. But he added that she needed to be a better partner with the investment banking division.
Bank officials said that the meeting went differently but declined to be specific.
Later that month, she checked her BlackBerry to find a message from Lewis Kaden, Citigroup's vice chairman. The message said that people in the investment research unit would report to the chief of the investment bank rather than to her. With that, her power base, which included Smith Barney and the research and wealth management units, began to shrink.
In a series of meetings in early September, Pandit proposed that Michael Corbat, head of the global relationship bank, assume some of her management responsibilities.
Krawcheck argued that she was too young to give up so much, but wavered about whether to stay on in a role in which she had no operating responsibility, as chairman of the wealth management unit.
Meanwhile, Citigroup told its board about the pending changes. Shortly after that, Krawcheck made the trip to Scottsdale, where she learned that the company had changed its plans for announcing her new position.
"Everyone knew it was going to happen, but I was sort of hoping and I thought the situation could change," she has told friends. "For a while it got better, but when it was over I still couldn't believe it, and I feel like I got a divorce. You still mourn and remember the good times."
While she has said that most women at Citigroup are treated as "a condiment" rather than "a main course," she also has saidthat she has no regrets about her experiences there. Ever restless, she's also hesitant to stay on the sidelines. From her apartment in New York, where she lives with her husband, a fund manager, and their teenage son and daughter, she is putting out feelers, looking for another job in wealth management.
Tossed on stormy markets: LSE's chief
By Daisy KuReuters
Sunday, November 16, 2008
LONDON: Clara Furse has proved her mettle at the helm of the centuries-old U.K. stock market, the London Stock Exchange, by warding off a series of suitors, but tough markets are a different challenge just as she prepares to step down.
In the worst economic crisis in 80 years, her defensive strength in side-stepping bidders who could have been welcome partners could yet turn on the 51-year-old Canadian, analysts say.
Born to Dutch parents, Furse oversaw the acquisition of Borsa Italiana last year but has failed to build up a meaningful derivatives business, making the group more vulnerable to economic downturns.
"The bourse is essentially still a cash market and is increasingly competing on price," said Herbie Skeete, managing director of Monovision. "The lack of a credible derivatives strategy is the LSE's Achilles' heel."
Furse, a multilingual ex-derivatives trader, was parachuted into the London Stock Exchange in January 2001, half a year before the exchange went public and started listing its own shares.
Made a Dame of the Court this summer, she was the first woman to lead the venerable gentlemen's club, helping to lead London as it vied to become the financial center of the world.
She successfully warded off hostile takeover bids from the Australian group Macquarie, the German exchange Deutsche Börse and the trans-Atlantic group Nasdaq OMX.
But a raft of new rivals emerging after the introduction of new European Union financial rules, known as Mifid, has forced the LSE to cut prices.
The Chi-X exchange owned by Nomura, the Turquoise exchange backed by brokerage houses, Nasdaq OMX Europe and one of the largest U.S. exchanges, BATS, have grabbed about a quarter of trading in FTSE 100 blue chips.
Such multilateral trading facilities offer cheap and fast execution, with lean structure and trading engines at just one-fifth the cost of the LSE.
The British bourse has begun planning to find a replacement for its chief, but the search takes place in difficult times, with LSE shares tumbling 70 percent this year as the global economic crisis deepened.
No formal timetable has been put in place, but Furse is likely to step down around 2010 as she wraps up the integration of Borsa Italiana, her biggest deal.
"I'm here. I remain fully committed to this job," Furse said after delivering half-year results Thursday. "Am I going to be here forever? No."
Some shareholders may not be unhappy with Furse's departure, remembering how they missed a chance to cash in when she rejected bid offers well above the LSE's current price.
Any new chief will be facing the fast rise of competitors, rapid consolidation and the breakneck speed technological change. Whoever takes the helm is probably hoping markets look better by 2010.
Investors see little to cheer in global data
By Jeremy Gaunt
Sunday, November 16, 2008
LONDON: Investors enter the week surrounded by unrelentingly poor global economic news, fading hopes of a significant end-of-year stock market recovery and a growing reliance on governments coming to the rescue.
Attention is likely to be particularly intensely focused on Britain, a G-7 economy from which investment is fleeing; Russia, which has been in free fall; and on global interest rate and tax policy.
But investors are also desperately sifting through the market wreckage for new investments that may bring returns after a year of mind-numbing losses for many.
"We are sitting at a point where the data is unremittingly gloomy, so any sign of life would be comforting," said John Stopford, head of fixed income at the Anglo-South African firm Investec Asset Management.
Investors are being battered by a wave of economic indicators pointing to recession in the United States, Britain, Germany and the euro zone as a whole, while major emerging markets are toppling.
This is leading in many cases to investment flight.
Few places are currently under as much pressure as Britain, where growth has tumbled, unemployment has surged and interest rates have been slashed. The pound has lost a quarter of its value against the dollar over the past three and a half months and is down nearly 8 percent this month alone.
On a trade-weighted basis, the pound hit a 13-year low against other currencies last week and a new record low against the euro.
This is showing up in fixed-income investments.
"After a 12-month period of relatively stable flows of foreign capital into and out of U.K. fixed-income instruments," Neil Mellor, a Bank of New York Mellon analyst, wrote last week, "since mid-September we have been registering extremely heavy outflows."
He estimated that the outflows from British fixed-income instruments since Sept. 10 have offset about 75 percent of the inflows since the start of 2004.
The flight is unlikely to be reversed by the Bank of England. Just days after it slashed rates by 1.5 percentage points to 3 percent, Governor Mervyn King said last week that the bank was prepared to cut rates further if needed to refloat the economy. That left many investors expecting rates of just 1.5 percent or even 1 percent next year.
Meanwhile, once-booming Russia is being clobbered by investor capital flight, triggered by a mixture of economic concern, falling oil prices and uneasiness over the potential for political intervention.
Last week the authorities allowed what was effectively a 1 percent devaluation of the ruble against their euro/dollar basket, and investors are concerned about more if oil prices continue to fall.
Russian stocks, meanwhile, have shed more than $1 trillion since May, with the dollar-based RTS exchange falling 73 percent since the beginning of June.
It is also becoming apparent to many investors that a hoped-for year-end rally in the stock markets may not materialize.
MSCI's main gauge of world stocks, its all-country index, is heading for its sixth consecutive month of losses, down around 45 percent for the year to date.
The current batch of U.S. and European earnings has done little to lift spirits despite lowered expectations and about as many surprises on the upside as on the downside.
Neil Dwane, European chief investment officer of the fund firm RCM, noted that companies are still reporting results that trigger sharp stock falls, suggesting that corporate gloom is still not properly priced in.
"Falls of 10 percent suggest the market is too optimistic," he said.
It has all led some investors to predict a severe earnings recession next year. AXA Investment Managers in France, for example, is forecasting an overall global earnings decline of 25 to 40 percent over two years.
Despite this, a number of leading investors have begun looking at corporate debt, which is seen as having priced in too much gloom.
Stopford of Investec, for example, reckons that the current price of corporate bonds globally is assuming a far greater economic disaster than the Great Depression.
Little wonder, against this economic and market background, that investors are becoming increasingly reliant on governments and central banks to dig them out of the hole.
Following the weekend meeting of G-20 political leaders in Washington, the focus is likely to be on new stimulus packages and tax cuts to reflate consumer spending.
Announcements of such plans in the past have lifted stock market sentiment, but often only for a brief time.
Stock markets, for example, rallied sharply a week ago after China announced a stimulus package of nearly $600 billion, but it fizzled rapidly, with world stocks falling for most of the week.
Meanwhile the relative absence of inflation - the result of falling global demand - is allowing central banks to cut or promise to cut interest rates.
On Wednesday, the Bank of England will publish the minutes of the Nov. 6 meeting at which it slashed rates. The Bank of Japan will announce its latest decision on Friday.
Stock market bottom? For some, it's close enough
By Paul J. Lim
Sunday, November 16, 2008
Every time the market suffers another steep drop, it's tempting to think that stock prices may have come down so much that the elusive market bottom is finally in sight.
Prices have certainly come down. On Friday, the Standard & Poor's 500-stock index was 44 percent below its peak of a little more than a year ago. Since then, the price-earnings ratio on the S&P has dropped from 16.8 all the way down to 12. With numbers this low, is the sell-off nearing an end?
It's certainly possible, and some canny investors have begun nibbling at stocks. But don't count on being able to time the market.
While cheap stock prices are always a welcome development for bargain-seeking investors, low P/E ratios haven't always been an accurate gauge of predicting turnarounds in the market.
If they were, stocks would have surged sharply in the mid to late '70s, when the market's P/E ratio sank into single digits. Instead, the S&P was pretty much flat throughout that time.
"Cheap valuations are simply a symptom of what's wrong, not the catalyst to get the market out," said Richard Bernstein, chief investment strategist at Merrill Lynch. After all, just because stocks are trading at extremely low levels today, it doesn't mean they can't become even cheaper tomorrow.
To be sure, investors may be hopeful now that some respected investors — including Warren Buffett, chief executive of Berkshire Hathaway, and Jeremy Grantham, a chairman of the investment management firm GMO — say they've begun to selectively buy stocks.
But both have gone to painstaking lengths to stress that they weren't predicting that the worst of the sell-off was over.
In an Op-Ed article in The New York Times, Buffett wrote: "I can't predict the short-term movements of the stock market. I haven't the faintest idea as to whether stocks will be higher or lower a month — or a year — from now."
Similarly, Grantham said in an interview that even though his firm began buying stocks in early October, after prices fell to attractive levels, the market had a tendency to "overshoot" during sell-offs. "Market bottoms have this Murphy's Law style of being much lower than you ever expected in your worst nightmare," he said.
Grantham adds that he thinks the odds are roughly two to one that stock prices will sink to new lows next year. If the economy is in a modest recession, Grantham thinks the S&P could fall from its current level of around 870 down to 800. But if the recession turns out to be a severe one, "the S&P could fall to a range that's closer to 600 than 800," he said.
If that's the case, why did GMO begin to buy stocks in this market? Because Grantham doesn't believe in trying to time short-term market moves.
Grantham noted that GMO began buying only after its portfolios had fallen below some key thresholds. For example, in GMO's global balanced portfolio of stocks and bonds, the firm's minimum allocation to equities is usually 45 percent. But after the market sell-off, that equity allocation dipped to around 38 percent. So once stock prices began to look attractive, GMO started rebalancing back into what it regards as the most undervalued types of equities: emerging markets stocks and high-quality domestic blue chip shares. After a few rounds of purchases, stocks now make up around 55 percent of GMO's global balanced portfolio.
Grantham says that although he doesn't know how well he timed his purchases, "we do know that seven years out, these will be good purchases for us."
But what if you are determined to be opportunistic? How can you tell if the market is poised to rebound anytime soon — or at least sooner than seven years?
There is no sure-fire answer. But one way is to pay close attention to the asset allocation recommendations of Wall Street strategists. "It turns out to be a tremendous contrarian signal" for spotting market trends, said Bernstein.
For more than two decades, Bernstein has tracked recommended equity allocations in balanced portfolios managed by Wall Street firms. He found that when the consensus recommendation for stocks exceeds 60 to 65 percent of a balanced portfolio — as was the case between 2000 and 2004 — it tends to be a bearish indicator for future stock performance. On the other hand, when market strategists recommend keeping only around half of your portfolio in stocks, as was the case in 1997, it tends to be a bullish sign.
The most recent survey taken by Bernstein, about two weeks ago, shows an allocation of around 58 percent stocks. While that's down from the mid-60s percentages of the start of last year, it's still far from real pessimism. "We're still hovering right around the long-term average," he said. His own assessment is more bearish. He recommends allocating 50 percent in stocks, with the rest in bonds and cash.
In addition to investor sentiment, it's also worth keeping tabs on the sentiment of another group of Wall Street pros: the analysts who follow individual companies.
In recent weeks, these analysts have begun to lower their forecasts for 2009 earnings. Bernstein notes that for the first time in seven years, the ratio of upward earnings revisions to downward revisions has fallen to 0.5 — meaning that for every corporate earnings forecast that has grown more positive, two have become more pessimistic. "Analysts may be finally appreciating that the financial crisis has turned into a full-blown economic crisis," he said.
Still, analysts are far from throwing in the towel on their earnings forecasts, which may be needed for the market to start to rally.
While profit projections have declined, they may still be way too bullish. According to a survey of analysts by Thomson Financial, earnings growth estimates for S.& 500 companies in 2009 have fallen well below the rosy 22 percent forecast at the start of October. Still, they're expecting corporate profits to grow more than 12 percent next year. Since many are predicting a difficult first half of the year, thanks to the weakening economy, this would assume a tremendous profit surge in the latter half of 2009.
Christopher Orndorff, head of equity strategy at Payden & Rygel, an asset manager based in Los Angeles, predicts that "the earnings releases in January are going to be poor." That should drive down earnings forecasts for 2009 even lower, he said.
If earnings forecasts begin to fall substantially, he said, "it will be very difficult for stocks to rally."
Education IPO could end the freeze
By Phil Wahba
Sunday, November 16, 2008
NEW YORK: If Grand Canyon Education manages to get a planned $179 million initial public offering off the ground this week, it will break a nearly four-month drought in U.S. IPOs.
But whether that will happen is still an open question. Even more doubtful is whether even a successful deal by the on-line university operator will signal any kind of broader market reopening.
Still, while the markets remain turbulent in most sectors for established stocks, let alone IPOs, Grand Canyon, based in Phoenix, has a deal that might get a warmer reception from investors seeking safety in an industry that thrives during economic downturns.
A number of leading education companies have fared well so far this year. DeVry, a technology-based business education company, has seen its stock rise almost 7 percent.
Apollo Group, which focuses on education for working adults, is down about 3 percent, but has been rising since the company reported better-than-expected earnings recently, bringing other education stocks up with it. By contrast, the S&P 500 is down nearly 40 percent so far in 2008.
"In a bad economy, people go back to school and learn a new trade," said Jeffrey Silber, a senior analyst with BMO Capital Markets. "There is counter-cyclicality in this sector, and where you see it most is in post-secondary programs and companies that specialize in non-degree granting programs."
The entire sector was volatile earlier in 2008 because of fears about the availability of student loans. But after the Education Department increased lending limits on certain loans in May, investors were reassured, analysts said.
"The government has stepped up to close the funding gap," Silber said.
Because investors want companies with a lot of cash and fast growth, education companies have proven popular.
"Students pay tuition upfront and companies recognize revenues over time, so that generates strong cash flows and high returns," said Jennifer Childe, an analyst with Credit Suisse.
But Childe said the sector's fortunes could change if the economy began turning around and investors shift toward industries that move more closely with the economy.
In contrast to most other IPOs since early 2007, the two IPOs by U.S. education companies have performed well.
On-line post-secondary education provider American Public Education, which went public with a $94 million IPO about a year ago, posted better-than-expected earnings Wednesday. The stock is up more than 100 percent from its offer price.
K12's shares are up 29 percent since the on-line education company's $124 million start last December.
In addition to Grand Canyon, the other education company in the IPO pipeline is Education Management, which is aiming for a $500 million IPO.
Still, the climate remains difficult, with investors skittish and more inclined to trust known companies.
One of Grand Canyon's challenges could be valuation. It has already reduced its target IPO price range once, to between $16 and $18, from $18 to $20.
Using the deal's mid-range price of $17, Grand Canyon's price-earnings ratio would be about 67, based on annualized earnings for the nine-month period ended Sept. 30 - well above that of many of its competitors.
The online university operator Capella Education boasts a multiple of 31 based on estimated 2008 earnings, while Apollo Group is trading at about 24 based on actual 2008 earnings.
While Grand Canyon's growth - including 38 percent revenue growth in 2007 - might make it attractive, investors could be turned off by the fact that 75 percent of the deal's proceeds would go to insiders, one analyst said.
"IPOs where existing investors are selling stocks have not gone well in 2008," said Scott Sweet, a senior managing director with the advisory firm IPO Boutique, adding that investors want IPO proceeds to go toward building the company.
While no one expects one deal to un-freeze the IPO market, a successful Grand Canyon IPO would help.
"It would instill some minor amount of confidence that IPOs can come in, in an environment as volatile as this," Sweet said.
Still, as long as the economy stays mired in a slowdown, education stocks likely will remain popular.
"You have investors hiding in this sector," Silber, of BMO, said.
An alternate financial rescue plan
Gretchen Morgenson
Sunday, November 16, 2008
NEW YORK: Hello, U.S. taxpayers. Worried about the fate of the $350 billion that the government has asked you to fork over so far to help rescue financiers from themselves?
Last week, Treasury Secretary Henry Paulson Jr. gave you every errant golfer's favorite response: Oops! Mulligan!
While the government still declines to say exactly how it has spent your funds, or who all the beneficiaries are, Paulson conceded that his huge capital injection hasn't persuaded banks to lend more money.
When he first peddled the Troubled Asset Relief Program in September as a solution to the credit mess, he urged Congress to back the plan post haste. But on Thursday, he scotched his idea of using even more of your billions to buy rotten mortgage assets from banks.
Looking on the bright side, there is something to be said for flexible responses to a complicated financial crisis.
But now that the original TARP design has been toe-tagged, and because there's still another $350 billion left for Paulson to deploy, perhaps it's time to consider actually attacking the root of the problem: falling home prices and rising delinquencies and defaults.
Since the $700 billion TARP was funded, it has been used solely to shore up banks and other financial institutions. (An irreverent friend calls it The Act Rewarding Plutocrats.)
Treasury officials did move closer to helping consumers with a new plan floated last week aimed at offering $50 billion in loans to companies that issue credit cards, make student loans and finance car purchases.
Kind of interesting, isn't it, that troubled homeowners are missing from the list of TARP beneficiaries and left to fend for themselves?
To be sure, private efforts to modify mortgages have increased recently: Citigroup, JPMorgan Chase and Bank of America have all announced plans to restructure troubled borrowers' loans. So have Fannie Mae and Freddie Mac.
But these efforts are limited to loans that these institutions hold. They don't address the millions of loans sitting in securitization pools, those profitable instruments cobbled together by Wall Street that are collapsing en masse.
Wall Street engineering has created an epic problem: Restructuring loans bundled into pools of securities is much thornier than simply changing the terms of individual loans residing inside individual banks.
Not only do such changes require the approval of hard-to-identify investors who essentially control the mortgages, but also many pools were designed with rules that limit the numbers of loans that can be modified.
Securitization trusts hold $1.5 trillion of subprime and alt-A loans. As of late August, according to figures from the Securities Industry and Financial Markets Association, roughly $400 billion of the loans were delinquent and $1.1 trillion were current on interest and principal payments.
But that latter group of loans could become troubled as well if more borrowers become unable to pay (which rising unemployment figures suggest might be the case).
To make matters worse, many borrowers will face severe interest-rate resets on their adjustable-rate mortgages next year and beyond. A new report from Demos, a public policy research group in New York, points out that millions of mortgages are ticking toward a possible explosion.
The report, citing data from First American CoreLogic, a real estate research firm, says $250 billion in loans will reset in 2009 and $700 billion in 2010 and after. If left on their own financially, many of these borrowers will be forced into foreclosure.
Still, there are many smart ideas floating around about how to solve the twin problems posed by securitizations and resetting mortgages.
One interesting idea was conceived by two veteran investment managers, Thomas Patrick, co-founder of New Vernon Capital, and Mac Taylor, a principal of the Verum Capital Group.
They propose refinancing all $1.1 trillion of the loans in securitization pools that are still performing but that may soon face punishing interest-rate resets. Homeowners whose loans are in these pools would receive newly issued loans with fixed interest rates, currently 6.14 percent, and 30-year terms. Under this plan, Fannie Mae and Freddie Mac would issue debt to pay off the outstanding principal on the loans and then guarantee the new ones.
Voilà: Investors who own the underlying interests in the mortgages would be fully repaid and the securitizations would be closed out.
"Our proposal is based upon the fundamental principle that the only way to ameliorate the problem is to somehow improve the underlying collateral," said Patrick. "It rewards those homeowners who have paid their mortgages and have demonstrated financial responsibility."
Currently, with everyone worried about more losses, the securitizations are trading at rock-bottom levels.
Because big banks and other financial institutions hold most of the securities, refinancing the $1.1 trillion in securitized loans would provide big capital infusions to many of the entities the Treasury is trying to help with TARP, Patrick said.
But while TARP involves direct payment of taxpayer money to banks, the Patrick-Taylor plan would create losses for taxpayers only if the refinanced loans took a hit later on.
There's another benefit. Remember all those complicated products like collateralized debt obligations and credit default swaps that have been scaring the pants off people and causing some financial giants to look into the abyss?
Well, the Patrick-Taylor plan would reinflate the value of CDOs made out of bundled mortgages. And firms that sold CDSs as insurance against mortgage defaults would also get a boost. (The biggest bailout recipient, the American International Group, for example, has been struggling to pay billions of dollars in collateral on weakening CDSs.)
The investment managers reckon that their plan would give the financial system an immediate capital infusion of about $385 billion. That's their estimate of the difference between the value at which depressed mortgage securities are now valued - 65 cents on the dollar - and par value.
If the assigned value of those assets drops even lower than 65 cents, then the financial benefit to the banks of the Patrick-Taylor plan would be greater.
In return for all of this financial aid tied to the $1.1 trillion of securitized mortgage loans that are still current, the Patrick-Taylor plan would require banks to buy the $400 billion in delinquent securitized loans at full value.
The banks would have to absorb any losses they incur when selling the underlying mortgages. But that's a small price to pay for getting out from under this albatross.
It is impossible to predict how much financial institutions might lose on that $400 billion. But it is likely to be less than the losses they will suffer if they sit idly by while defaults and delinquencies accelerate.
Because the program would provide such a boost to the banks, Patrick said, these institutions should be required to absorb a portion of possible losses on the $1.1 trillion in healthy loans guaranteed by Fannie and Freddie. The Treasury should be able to bludgeon them into eating some of these losses, Patrick argued.
"This set of securities is what started the fire: It's what brought down Merrill Lynch, Lehman Brothers and Bear Stearns," Patrick said. "You can't deal with the securities in their current framework, and you can't solve the problem one mortgage at a time. If we eliminate these securities, strip away the complex structure, we can fix the banking system."
Under the Patrick-Taylor plan, homeowners would also be helped. Future delinquencies might be reduced, and the downward spiral of home prices could be curbed.
Worth at least a moment of our leaders' consideration, don't you think? At the very least, it's better than a mulligan.

Obama, and the risk of disillusioned fans
By Peter Baker
Sunday, November 16, 2008
CHICAGO: It did not go unnoticed among the paisans that Barack Obama loves a four-star Italian restaurant on the Magnificent Mile near the lakefront. Not some pizza joint, but "the Ferrari of Italian cooking," as Spiaggia's chef and co-owner, Tony Mantuano, puts it. Appreciation for fine Italian culture, he said, has earned Obama a strong following in the community. "He's the pride of the Italians," Mantuano said.
And why not? Practically everyone wants to claim Obama these days. Blacks, obviously, but also Hispanic Americans, Muslim Americans, Jewish Americans and even white Americans purging feelings of racial guilt. The youth, the netroots, the bipartisan consensus builders, the East Coast elites, the Hollywood crowd. Liberals, centrists and even some conservatives who see Reaganesque qualities. The British, the Germans and other foreigners disaffected with Bush's America.
"I am like a Rorschach test," Obama noted at one point during the campaign. "Even if people find me disappointing ultimately, they might gain something."
The Rorschach part may fade with the end of the campaign, but the test part is here. Reconciling all those different impressions of who Obama is and what he stands for may prove as defining a challenge as fixing the economy.
Whose president is he? The standard line from his advisers would naturally be that he is the president of all Americans. But it rarely works out that simply. Ultimately, the gauzy picture of the campaign trail sharpens in the act of governing. Ultimately, choices are made and illusions shattered. And so many of Obama's supporters invested so much passion in him that the potential for letdown seems considerable.
The president-elect's first few actions and statements since the election have provided some initial clues that are already being scrutinized for larger meaning. His first appointment, for instance, was to make his friend, Representative Rahm Emanuel of Illinois, his White House chief of staff.
Some critics saw that as a betrayal of Obama's campaign pledge to foster a "new politics" reaching across the aisle in Washington because Emanuel is such a skilled specialist in the razor-edged old politics of slicing up the opposition. But others saw ideological significance in the fact that Emanuel had been an advocate for more centrist policies on issues like trade, crime and welfare.
The selection of Emanuel and other veterans of President Bill Clinton's administration to run the transition stood in contrast to Obama's message about finally moving beyond the Clinton era. All the more striking was his decision last week to sound out Senator Hillary Rodham Clinton herself as a possible secretary of state. The Clinton faction is pleased, but those who saw Obama as a clean break may wonder what it means.
Similarly, many inside the Beltway sat up and paid attention when Obama, through a spokeswoman, said he did not hold any grudges against Senator Joseph Lieberman of Connecticut, who calls himself an independent Democrat but barnstormed for Senator John McCain, the Republican presidential nominee. Obama said he would not get involved in deciding whether Lieberman should keep his committee chairmanship and would welcome his staying in the Democratic caucus.
Republicans and some Democrats were relieved at what they viewed as an act of statesmanship, but some liberals intent on punishing Lieberman for his behavior were disappointed. Interestingly, even among critics of Lieberman, the statement was interpreted differently.
Greg Sargent, writing on TPM Election Central, argued that the statement "risks giving cover to senators who want to do nothing about Lieberman." Markos Moulitsas Zuniga, writing on the Daily Kos Web site, said, "Greg Sargent seems to take this as pro-Lieberman. I see it exactly the opposite," because Obama did not take a position on the committee chairmanship, which Moulitsas considers the issue. Even now, Obama remains what he is in the eye of the beholder.
"He reminds me of John Kennedy in this respect," said Peter Wehner, a former Bush White House official and now at the conservative Ethics and Public Policy Center. "If you read the books on Kennedy, intellectuals who spoke to Kennedy felt like he was an intellectual; politicians who spoke with him felt like he was a politician. He had the ability to make people think he was what they wanted and what they were looking for. I get the sense that Obama is a little like that, and everyone is going to lay claim to him."
Obama has an advantage that some other presidents did not, in that he has been a singular political phenomenon who probably does not owe his election primarily to any particular group.
If Ronald Reagan leaned heavily on the support of the religious conservatives and Clinton tried to move his party to the center in search of independents, Obama did not define himself in strongly ideological terms, even if his record and program are left of center.
But it was Obama who set the expectations so high among so many different constituency groups. His advertising during the primaries urged Democrats to vote for him because he would do nothing less than "save the planet," which as campaign promises go certainly beats a chicken in every pot.
"There's going to be enormous pressure on him to produce, to meet these expectations," said Tom Andrews, a former Democratic congressman from Maine who is now national director of the activist group Win Without War.
And among those exerting that pressure will be Andrews's fellow opponents of the Iraq war. An early test will be picking a secretary of defense. Advisers have said Obama is thinking about asking the current Pentagon chief, Robert Gates, to stay on, at least for a while, in a show of bipartisanship. But Andrews said that would undermine the founding ideal of Obama's campaign to end the war.
"Clearly when you compare Gates and Rumsfeld it's night and day; everybody recognizes that," Andrews said, referring to Gates's predecessor, Donald Rumsfeld. "But still, we need to turn the page and have a new direction and deliver clear and strong messages including who is going to be our secretary of defense. The strongest message would be to put in a new team with a new vision."
Possibly in no area will this tension be more fraught than in race relations. As the first African-American president in a nation long divided over race, Obama will face crosscurrents that none of his predecessors ever did, embodying as he does the hopes of a long-disenfranchised segment of the population yet determined not to be locked into old paradigms.
Many of his actions will be viewed through the lens of race, from the composition of his cabinet to the priority he places on issues historically important to black Americans.
Obama managed to balance those pressures through nearly two years of campaigning and now will have to do it again.
"He'll still have to be a master manipulator, in a sense, and know how to navigate all those different forces," said Representative Bennie Thompson of Mississippi, chairman of the Congressional Black Caucus Institute. "He has shown himself to be a very cool-under-fire kind of guy."
Representative James Clyburn of South Carolina, the House majority whip and the highest-ranking black member of Congress, said Obama would show that he could be bold without being radical and that most black supporters would recognize the limits the economy had placed on what he could do.
"He knows he has to be careful not to make any lurches left or right," Clyburn said. "He plays the game inside the hash marks."
Perhaps, but blacks are not the only ones to see in him a unique champion, and the demands for action could be considerable. Two out every three Hispanic voters supported Obama, according to exit polls, and turnout in that demographic shot up more than 30 percent. Hispanic leaders said they provided the margin of victory in Florida, New Mexico, Colorado and Nevada.
"We feel like we had a big stake in the election, and that's what prompted this historic turnout," said Janet Murguía, president of the National Council of La Raza. The advocacy group did not wait long to begin publicly pushing Obama to recognize this support with key White House or cabinet positions.
"At some point in the first term we would definitely expect to see an effort to move responsible immigration reform," Murguía said. "It would be a big mistake not to act on this important priority."
Or all of the other important priorities that the president-elect's believers assume he will tackle. After all, he's got a planet to save.

Thomas L. Friedman: We need a bigger boat
Sunday, November 16, 2008
Barack Obama surely has one of the toughest leadership challenges any incoming president has ever faced. We're in the midst of a terrible economic meltdown, the current administration has lost all credibility, the House of Representatives is full of knuckle-dragging Neanderthals, and the public is being whipsawed between free-market fundamentalists preaching the virtues of just letting the market rip and left-wingers who think we can punish Wall Street while protecting Main Street. It feels like a mess with no one in charge.
Now is when we need a president who has the skill, the vision and the courage to cut through this cacophony, pull America together as one nation and inspire and enable us to do the one thing we can and must do right now:
Go shopping.
Obama can't wait until Jan. 20 to weigh in on this. If we don't stimulate the global economy fast enough enough, some of Obama's inaugural balls might be held in soup kitchens.
When President Bush told us to go shopping after 9/11, he was right. We needed to stimulate the economy then. The problem was that the Bush economic team never turned off the green light and told people to "go saving." So with easy credit seemingly endlessly available, American consumers saved virtually nothing and bid up housing prices to record levels. Retailers expanded stores and China expanded factories to accommodate all the shopping. It was quite a party. We had banks in America giving mortgages to people whose only qualification "was that they could fog up a knife," one mortgage broker told me.
But when something seems too good to be true, it usually is. When these reckless mortgages eventually blew up, it led to a credit crisis. Banks stopped lending. That soon morphed into an equity crisis, as worried investors liquidated stock portfolios. The equity crisis made people feel poor and metastasized into a consumption crisis, which is why purchases of cars, appliances, electronics, homes and clothing have just fallen off a cliff. This, in turn, has sparked more company defaults, exacerbated the credit crisis and metastasized into an unemployment crisis, as companies rush to shed workers.
Governments are having a problem arresting this deflationary downward spiral - maybe because this financial crisis combines four chemicals we have never seen combined to this degree before, and we don't fully grasp how damaging their interactions have been, and may still be.
Those chemicals are: 1) massive leverage - by everyone from consumers who bought houses for nothing down to hedge funds that were betting $30 for every $1 they had in cash; 2) a world economy that is so much more intertwined than people realized, which is exemplified by British police departments that are financially strapped today because they put their savings in online Icelandic banks - to get a little better yield - that have gone bust; 3) globally intertwined financial instruments that are so complex that most of the chief executives dealing with them did not and do not understand how they work - especially on the downside; 4) a financial crisis that started in America with our toxic mortgages. When a crisis starts in Mexico or Thailand, we can protect ourselves; when it starts in America, no one can.
You put this much leverage together with this much global integration and start the crisis in America and you have a very explosive situation.
If you are going to fight a global financial panic like this, you have to go at it with overwhelming force - an overwhelming stimulus that gets people shopping again and an overwhelming recapitalization of the banking system that gets it lending again. I just hope the U.S. Treasury has enough money to do it.
And that brings me back to Obama. We need a leader who can look the country in the eye and say clearly: "We have not seen this before. There are only two choices now, folks: doing everything we can to shore up banks and homeowners or risk a systemic meltdown."
Yes, that may mean rescuing some bankers who don't deserve rescuing, while also helping prudent bankers who were doing the right things. And, yes, that may mean rescuing reckless home buyers who never should have taken out mortgages and now can't pay them back, while not aiding people who are still meeting their payments.
No, it's not fair. But fairness is not on the menu anymore. We will deal with that later. Right now we need to throw everything we can at this problem to make sure this recession doesn't spiral down into a depression. This is no time for half-measures.
If you want to know where we are right now, rent the movie "Jaws." We're at that moment when Roy Scheider first sets eyes on the Great White Shark and comes back and says to the skipper, with eyes wide with fear: "You're gonna need a bigger boat."
Obama faces BlackBerry withdrawal
By Jeff Zeleny
Sunday, November 16, 2008
WASHINGTON: Sorry, Mr. President. Please surrender your BlackBerry.
Those are seven words President-elect Barack Obama is dreading but expecting to hear, friends and advisers say, when he takes office in 65 days.
For years, like legions of other on-the-move professionals, Obama has been all but addicted to his BlackBerry. The device has rarely been far from his side - on most days, it was fastened to his belt - to provide a singular conduit to the outside world as the bubble around him grew tighter and tighter throughout his campaign.
"How about that?" Obama replied to a friend's congratulatory e-mail message on the night of his victory.
But before he arrives at the White House, he will probably be forced to sign off. In addition to concerns about keeping e-mail secure, he faces the Presidential Records Act, which puts his correspondence in the official record and ultimately up for public review, and the threat of subpoenas. A final decision has not been made on whether he could go against precedent to become the first e-mailing president, but aides said that seemed doubtful.
For all the perquisites and power afforded the president, the chief executive of the United States is essentially deprived by law and by culture of some of the very tools that other chief executives depend on to survive and to thrive. Obama, however, seems intent on pulling the office at least partly into the 21st century on that score; aides said he hoped to have a laptop computer on his desk in the Oval Office, which would be a first for a U.S. president.
Obama has not sent a farewell dispatch from the personal e-mail account he uses - he has not changed his address in years - but friends say the frequency of correspondence has diminished. In recent days, though, he has been seen typing his thoughts on transition matters and other items on his BlackBerry, bypassing, at least temporarily, the bureaucracy that is quickly encircling him.
A year ago, when many Democratic contributors and other observers were worried about his prospects against Hillary Rodham Clinton, they reached out to him directly. Obama had changed his cellphone number, so e-mail remained the most reliable way of communicating directly with him.
"His BlackBerry was constantly crackling with e-mails," said David Axelrod, the campaign's chief strategist. "People were generous with their advice - much of it conflicting."
Obama is the second president to grapple with the idea of this self-imposed isolation. Three days before his first inauguration, George W. Bush sent a message to 42 friends and relatives that explained his predicament.
"Since I do not want my private conversations looked at by those out to embarrass, the only course of action is not to correspond in cyberspace," Bush wrote from his old address, "This saddens me. I have enjoyed conversing with each of you."
But in the interceding eight years, as BlackBerrys have become ubiquitous - and often less intrusive than a telephone, the volume of e-mail has multiplied and the role of technology has matured. Obama used e-mail to stay in constant touch with friends from the lonely confines of the road, often sending messages like "Sox!" when the Chicago White Sox won a game. He also relied on e-mail to keep abreast of the rapid whirl of events on a given campaign day.
Obama's memorandums and briefing books were seldom printed out and delivered to his house or hotel room, aides said. They were simply sent to his BlackBerry for his review. If a document was too long, he would read and respond from his laptop computer, often putting his editing changes in red type.
His messages to advisers and friends, they say, are generally crisp, properly spelled and free of symbols or emoticons. The time stamps provided a window into how much he was sleeping on a given night, with messages often being sent to staff members at 1 a.m. or as late as 3 a.m. if he was working on an important speech.
He received a scaled-down list of news clippings, with his advisers wanting to keep him from reading blogs and news updates all day long, yet aides said he still seemed to hear about nearly everything in real time. A network of friends - some from college, others from Chicago and various chapters in his life - promised to keep him plugged in.
Not having such a ready line to that network, staff members who spent countless hours with him say, is likely to be a challenge.
"Given how important it is for him to get unfiltered information from as many sources as possible, I can imagine he will miss that freedom," said Linda Douglass, a senior adviser who traveled on the campaign plane for months.
Obama has, for at least brief moments, been forced offline. As he sat down with a small circle of advisers to prepare for debates with John McCain, one rule was quickly established: No BlackBerrys. Axelrod ordered everyone to put their devices in the center of a table during work sessions.
Obama, who was known to sneak a peek at his, was no exception.
In the closing stages of the campaign, as exhaustion set in and the workload increased, aides said Obama spent more time reading than responding to messages. As his transition team prepares a final judgment on whether he can keep using e-mail, perhaps even in a limited read-only fashion, several authorities in presidential communication said they believed it was highly unlikely that he would be able to do so.
Diana Owen, who leads the American Studies program at Georgetown University, said presidents were advised not to use e-mail because of security risks and fear that messages could be intercepted.
"They could come up with some bulletproof way of protecting his e-mail and digital correspondence, but anything can be hacked," said Owen, who has studied how presidents communicate in the Internet era. "The nature of the president's job is that others can use e-mail for him."
She added: "It's a time burner. It might be easier for him to say, 'I can't be on e-mail."'
Should Obama want to break ground and become the first president to fire off e-mail messages from the West Wing and wherever he travels, he could turn to Al Gore as a model. In the later years of his vice presidency, Democrats said, Gore used a government e-mail address and a campaign address in his race against Bush.
The president, though, faces far greater public scrutiny. And even if he does not wear a BlackBerry on his belt or carry a cellphone in his pocket, he almost certainly will not lack from a variety of new communication.
On Saturday, as Obama broadcast the weekly Democratic radio address, it came with a twist. For the first time, it was also videotaped and will be archived on YouTube.

Iraqi ministers agree to extend U.S. military presence
By Campbell Robertson
Sunday, November 16, 2008
BAGHDAD: The Iraqi cabinet voted overwhelmingly Sunday to approve the security agreement that sets the conditions for the continued U.S. presence in Iraq from Jan. 1, 2009, until the end of 2011.
All but one of the 28 cabinet ministers at the session Sunday voted for the agreement and sent it to Parliament for consideration, a huge relief to the United States, which had been in intense negotiations for nearly a year.
The White House welcomed the vote as a "positive step," Reuters reported from Washington.
"While the process is not yet complete, we remain hopeful and confident we'll soon have an agreement that serves both the people of Iraq and the United States well," said Gordon Johndroe, the White House spokesman.
The United Nations Security Council resolution that allows U.S. troops to operate in Iraq expires Dec. 31, and, without an extension of the resolution or a separate agreement with the Iraqis like that approved by the cabinet Sunday, forces of the U.S.-led coalition would have no legal mandate to operate.
"This is the best available alternative," the Iraqi government spokesman, Ali al-Dabbagh, said soon after the vote. "We have always said this is not a perfect solution for the Iraqi side and it is not a perfect solution for the American side. But it is a procedure which was forced by circumstances and necessity."
The draft approved Sunday requires coalition forces to withdraw from Iraqi cities and towns by the summer of 2009, and from the whole of Iraq by the end of 2011. An earlier version had language giving some flexibility to that deadline, with both sides discussing timetables for withdrawal, but the Iraqis managed to have the deadline set in stone. The United States has about 150,000 troops in Iraq.
For months, the fate of the pact has been in doubt as Iraqis pressed for more changes, including jurisdiction over operations by U.S. troops and the flexibility of the withdrawal date. The United States, which had wanted the pact concluded by midsummer, gave significant concessions. Iraqi officials said minor tweaks were being made last week.
Under the agreement, U.S. soldiers are still guaranteed immunity, except in cases of serious felonies committed while off duty outside their bases.
"We welcome the cabinet's approval of the agreement today," said a representative of the U.S. Embassy in Baghdad. "This is an important and positive step."
Many members of Parliament from Tawafiq, the Sunni bloc, said they were still undecided on the pact, arguing that a national referendum was crucial to approval. Parties representing about a third of that bloc's members have indicated that they would support the agreement in its current form.
The Kurds, who had recently expressed hesitation about the agreement despite weeks of solid support, seem to have decided on approval.
"We have already expected that the cabinet would pass this agreement, because this is the best option," said Mahmoud Othman, an independent Kurdish member of Parliament. "Our Kurdish leaders are with the agreement."
Leaders of some of the smaller blocs, like Iraqia, a secular group representing 24 lawmakers, and Fadhila, a Shiite party that includes 15 members of Parliament, said Sunday that they had not yet taken a stance on the agreement because they had not seen the final draft.
In a crucial development, Grand Ayatollah Ali al-Sistani, the most influential Shiite cleric in Iraq, indicated Saturday that he would support whatever decision is made in Parliament as representative of the will of the Iraqi people.
Shiite officials who met with the ayatollah said he found the latest draft acceptable, if not perfect. Sistani also made clear that he did not side with politicians who refused any agreement with the United States out of hand.
"The people who reject this agreement did not give us a logical alternative," an official in the ayatollah's office said Sunday. "We respect their position, but we support the majority decision."
The anti-U.S. Shiite cleric Moktada al-Sadr had called for armed resistance against any agreement that allowed a continued U.S. presence in Iraq.
"I repeat my demand to the occupier to leave our land without keeping bases or signing agreements," Sadr said in a text read to thousands of supporters at Friday prayers. "If they keep bases, then I would support honorable resistance."
Sistani is enormously influential among the majority Shiite population. In 2004, when he wanted to put pressure on the Americans to hold direct elections, he called upon his followers to march by the hundreds of thousands in a peaceful but powerful demonstration of force.
Dabbagh said of the Sadrists: "You cannot guarantee a 100 percent approval of anything. They are performing and they are practicing their role in Iraqi democracy right now, and they are expressing their opinion in a peaceful way and not a violent way, which we encourage."
Stephen Farrell, Tariq Maher, Riyadh Muhammed, Muhammed Hussein, Suadad al-Salhy and Abeer Mohammed contributed reporting.Suicide car bomb in Diyala
The Iraqi police said Sunday that seven people died in a suicide car bombing at a police checkpoint in Diyala Province, The Associated Press reported from Baghdad.
Colonel Ahmed Khalifa, chief of the Jalula police station, said one police officer and six civilians were dead. The attack, in Jalula, also wounded five police officers and two civilians. The checkpoint that was targeted is near a military base and an office of the Patriotic Union of Kurdistan, a Kurdish political party.


Closing Guantánamo may not be easy
By William Glaberson
Sunday, November 16, 2008
As a presidential candidate, Barack Obama sketched the broad outlines of a plan to close the detention center at Guantánamo Bay, Cuba: Try detainees in U.S. courts and reject the Bush administration's military commission system.
But as Obama moves closer to assuming responsibility for Guantánamo, his pledge to close the detention center is bringing to the fore thorny questions under consideration by his advisers. They include where Guantánamo's detainees could be held in the United States, how many might be sent home and a matter that people with ties to the Obama transition team say is worrying them most: What if some detainees are acquitted or cannot be prosecuted at all?
That concern is at the center of a debate among national security, human rights and legal experts that has intensified since the election. Even some liberals are arguing that to deal realistically with terrorism, the new administration should seek congressional authority for preventive detention of terrorism suspects deemed too dangerous to release even if they cannot be successfully prosecuted.
"You can't be a purist and say there's never any circumstance in which a democratic society can preventively detain someone," said one civil liberties lawyer, David Cole, a Georgetown law professor who has been a critic of the Bush administration.
Although the nation has long had limited legal procedures for detaining dangerous people who have not been convicted of a crime, the issue has become particularly controversial in the context of Guantánamo, where some detainees have been held for almost seven years without being charged.
Whether the Obama administration should push for a preventive detention law has inspired "a very hot and serious debate," said Ken Gude, a national security scholar at the liberal Center for American Progress, adding, "I've had conversations with progressives who think it is a good idea and conservatives who think it's a terrible idea."
The president-elect's transition office would not comment on whether that idea was even under discussion. But human rights groups have been mounting arguments to counter pressure that they say is building on Obama to show toughness, perhaps by echoing the Bush administration's insistence that some detainees may need to be held indefinitely.
The international law of warfare provides authority for governments to hold captured enemy fighters until the completion of a conflict. Tens of thousands of German and Italian prisoners of war were held inside the United States during World War II.
But inasmuch as the Bush administration invoked that authority as a basis for its much-criticized detention policies, a move by Obama to seek explicit authorization for indefinite detention without trial would be seen by some of his supporters as a betrayal.
Opponents of a preventive detention law say that continuing to treat captives as detainees instead of defendants in court would support terrorists' self-image as warriors rather than criminals. And though the Guantánamo center might be closed, they say, the new law would effectively import Guantánamo and its image into the United States.
"Not only do you not need a system of preventive detention, but it would perpetuate the problem of Guantánamo and put us right back in the same dead end we are in now," said Elisa Massimino, executive director of Human Rights First.
On the other hand, some proponents of such a law say it would clarify questions left murky by the Bush administration's years of legal battles over Guantánamo. Benjamin Wittes, a fellow at the conservative Brookings Institution, argued in a book published in June that Americans needed to cross a "psychological Rubicon" and accept the idea that preventive detention was a necessary tool for fighting terrorism.
"I'm afraid of people getting released in the name of human rights and doing terrible things," Wittes said in an interview. He said debates over Guantánamo had created a mythology that American law permitted detention only upon conviction of a crime. Locking up mentally ill people who are deemed dangerous, he noted, is an accepted American legal practice.
At the heart of the debate about whether a preventive detention law is necessary is uncertainty about the risks of criminal trials. Some lawyers warn that given the nature of evidence against some Guantánamo detainees, prosecutors may not be able to convict them.
"We have lots of information that is reliable, that tells us someone is a threat and that cannot be proved in court," said Andrew McCarthy, a former federal terrorism prosecutor who is director of the Center for Law and Counterterrorism.
Putting detainees on trial in American courts could be difficult in part because suspects captured in war do not receive protections, like warnings against self-incrimination, that are standard police practice. And much evidence against the detainees is classified; intelligence officials say it cannot be disclosed.
Further, some interrogation practices, including the simulated-drowning technique of waterboarding, might leave crucial government evidence unacceptable to American judges.
Jack Goldsmith, a former Justice Department official in the Bush administration who has written a book critical of some of the administration's legal strategies, is among those calling for a preventive detention law.
In the absence of such a law, any plan to move even some of the remaining 250 Guantánamo prisoners to the United States would require a careful analysis of the authority to hold the detainees, several of whom have said they would relish an opportunity to kill Americans.
In the end, the Obama administration may conclude that it is simply not feasible to seek a new preventive detention measure. Doing so could portray the new administration as following in the footsteps of President George W. Bush, surely an unlikely goal as Obama sorts through his options.

Pakistan to re-open Khyber to supply Western forces
Sunday, November 16, 2008
By Kamran Haider
Pakistan will reopen a main supply route to Western forces in Afghanistan on Monday, a week after militants hijacked more than a dozen trucks on the road through the Khyber Pass, a senior official said on Sunday.
Most supplies, including fuel, for U.S. and NATO forces in landlocked Afghanistan are trucked through Pakistan, much of it through the fabled pass that lies between the northwestern city of Peshawar and the border town of Torkham.
Over the course of last week, aside from the hijacking, militants in Peshawar carried out a suicide bomb attack, shot dead an American aid worker and his driver, kidnapped an Iranian diplomat and killed his police bodyguard, and shot and wounded a Japanese and an Afghan journalist working with foreign media.
Pakistan's support is seen as vital to the West's efforts to defeat al Qaeda globally and the Taliban in Afghanistan.
The unending violence has heightened fears that the nuclear-armed nation could slide into chaos unless its 8-month-old civilian government, also battling an economic crisis, and the army can turn the tide against the Islamist militants.
Pakistani authorities in the tribal region of Khyber blocked the main road from Peshawar through the pass to the border at Torkham soon after militants hijacked 13 trucks laden with Western military supplies on November 10.
A senior government administrator in Khyber, one of Pakistan's seven semi-autonomous tribal regions, told Reuters that truck convoys would start rolling again with armed escorts.
"Now they will be escorted by security personnel and vehicles," Fida Mohammad Bangash, the deputy political agent for Khyber, told Reuters.
The result of the past week's interruption to traffic could be seen along Peshawar's ring road, where dozens of Humvees and trucks full of supplies for NATO forces lay parked in the open, with little security in evidence.
People in Jamrud, the main commercial hub in the Khyber Pass, say militants move freely in the area, and drive through on pick-up trucks half-an-hour before prayers, ordering shopkeepers to close and escorting them to mosques.
"We have virtually become hostage in the hands of Taliban. There is no security," Mohammad Shafiq, a Khyber resident, said, adding that militants controlled a corridor of 15 km (9 miles) either side of the road, and went virtually unchallenged by paramilitary troops stationed in the area.
Security forces were preparing for an operation to clean out militants and criminal gangs that operate in the hills overlooking the road winding through the pass, Bangash said.
The fiercely independent tribes in Khyber have long been known for their involvement in smuggling, running drugs and arms, and kidnapping.
There have been worrying signs this year that Islamist militancy has spread to the area from more distant tribal regions where the Taliban and al Qaeda have taken root, and criminal gangs in Khyber have begun using religious zeal as a cover.
North West Frontier Police Chief Malik Naveed Khan told Reuters there were three criminal gangs in Khyber with direct links to militant groups.
The recent attacks on foreigners in Peshawar were an attempt "to defame Pakistan internationally and give an impression that there's no rule," Khan said, adding they were acts of desperation rather than boldness.
Khan was confident that an offensive by security forces in Bajaur and pressure in other tribal regions had begun to pay off.
Last June, as security deteriorated in Peshawar, soldiers carried out a sweep in parts of Khyber to push militants back from the outskirts of the city.
The booty from last week's hijacking was two Humvee vehicles and a consignment of wheat but there were no weapons or ammunition.
The militants unloaded the trucks and abandoned them but held most of the drivers.
Earlier this year, four U.S. helicopter engines worth more than $13 million (8.7 million pounds) were stolen in northwest Pakistan while being trucked from Afghanistan to Karachi port to be shipped home.
Transport operators say the government had neglected the security along the road. About two dozen trucks and oil-tankers have been attacked in the past month.
"If the government wanted to clear the road and open, it could do it within a day," said Mohammad Shafiq, a transport company owner. "We don't know why they're not taking action."
"Either they are scared of these militants or they are their own men," said Haji Omer, a transporter, complaining bitterly over the money he loses with every day the road is blocked.
A diplomatic spat with the United States in September after a U.S. commando raid in the Waziristan tribal region sparked outrage in Pakistan, and led to the government halting the flow of supply trucks through the border town of Torkham for a day.
The other main land route to Afghanistan runs from the southwestern city of Quetta through the border town of Chaman to the southern Afghan city of Kandahar.
Although the U.S. military has refrained from sending ground troops into Pakistani territory since the September 3 incursion, Pakistan continues to protest against unilateral U.S. missile strikes launched by pilotless drone aircraft against militant targets in the Waziristan region.
(Writing by Simon Cameron-Moore; Editing by Jeremy Laurence)
Security for any Afghan Taliban talks says Karzai
Sunday, November 16, 2008
By Sayed Salahuddin
Afghan President Hamid Karzai said on Sunday he would guarantee security for Taliban leader Mullah Omar if he ever wanted to negotiate and said Western allies should remove him or leave if they disagreed with that.
With the Taliban insurgency spreading seven years after the hardline Islamists were forced from power, the possibility of talks with more moderate Taliban leaders is increasingly being considered, both in Afghanistan and among its allies.
The Afghan government says it is willing to talk to anyone who recognises the constitution.
A tentative first step towards talks was taken in September when a group of pro-government Afghan officials and former Taliban officials met in Saudi Arabia for discussions on how to end the conflict.
But the Taliban have rejected any suggestion of talks as long as foreign troops remain.
Karzai told a news conference he would guarantee the safety of notorious Taliban leader Mullah Omar, if he ever wanted to talk peace.
"If I hear from him that he is willing to come to Afghanistan or to negotiate for peace ... I, as the president of Afghanistan, will go to any length providing protection," Karzai said.
"If I say I want protection for Mullah Omar, the international community has two choices: remove me or leave if they disagree," he said.
But Karzai said there was a way to go before a security guarantee for Mullah Omar was even an issue. He was still waiting for the Taliban to prove that they wanted peace.
"We are not in that stage yet. Right now, I have to hear it from the Taliban leadership, that they are willing to have peace in Afghanistan. They must prove themselves," he said.
Violence in Afghanistan has surged over the past two years, raising the doubts about prospects for the country and its Western-backed government.
About 70,000 foreign troops, about half of them American, are struggling against the Taliban, whose influence, and attacks, are spreading through the countryside in the south, east and west.
U.S. President-elect Barack Obama has also suggested he was open to talks with more moderate Taliban leaders to explore whether a strategy used in Iraq of talking to enemies, that is credited with helping turn around the situation there, would work in Afghanistan.
(Writing by Robert Birsel; Editing by Jeremy Laurence)
Fort Bragg baby boom overwhelms hospitals
By Julie Scelfo
Sunday, November 16, 2008
FAYETTEVILLE, North Carolina: Joanne Chavonne saw pregnant women everywhere in town, shopping at Target for diapers or dining at a Mexican restaurant.
Then she heard that so many families were calling the medical clinic at nearby Fort Bragg for the results of pregnancy tests that the U.S. Army had to install an extra telephone line.
And finally, over the summer, an administrator told her that the hospital on base was overrun with women in labor and was delivering nearly 300 babies a month. "I was shocked," said Chavonne, whose husband, Anthony, is the local mayor. "That's 10 a day."
The entire 82nd Airborne division was deployed in Iraq during the surge in 2007. Nearly 22,000 soldiers joyously reunited with their families when they began returning last October. The base is also host to 29,000 soldiers from other units, which all contributed to what by August was an estimated 50 percent surge in births at Womack Army Medical Center, the base hospital, compared with the previous year.
The community is turning this into a celebration. On Saturday, about 1,000 recent mothers or mothers-to-be gathered as guests of honor at Boots & Booties, billed as the largest military shower ever. Under billboards with fuchsia butterflies at the Crown Exposition Center, pregnant women in stretchy pants and flip-flops drank red punch and helped themselves to deviled eggs and cupcakes. Sarah Deady arrived at the extravaganza right from her recovery bed - she had had a Caesarian section on Thursday and walked gingerly.
Catherine Robinson, 35 and pregnant with her third child, was experiencing contractions. "I have long labors," she said, explaining why she decided to come anyway.
The impact of the baby surge is being felt all across Fayetteville, a city of 210,000, from the registries at Fleishman's Tiny Town to the civilian hospital, Cape Fear Valley Medical Center, where the overflow of military patients sometimes has to labor in the waiting room until beds become available. Dr. David Schutzer, who runs the Highland Ob-Gyn Clinic in town, said that his practice delivered 50 percent more babies than usual last month, most of them military.
It is impossible to walk through the produce sections of the commissaries on base without seeing bellies or newborns in car seats. "Overseas, our soldiers concentrate on their mission," said Tom McCollum, the public affairs officer for Fort Bragg, which occupies the north and west sides of Fayetteville. "But they can't wait to get back home."
At Dads 101, a class for new and soon-to-be fathers that helps ease the transition from soldier to caretaker, attendance has doubled.
Maternity-size army combat uniforms in the digitized, sand-patterned camouflage used in Iraq and Afghanistan are on back order at the base clothing store. And in anticipation of growing demand for home visits and other family services, the base's New Parents Support Program has increased its staff to 19 from 5.
Baby furniture is selling so quickly at a Target store near the base, that pregnant women are despairing when they cannot find matching cribs, dressers and changing tables. "They'll be, like, 'I just called and y'all said you had it,"' said Tyneisha McRae, a clerk working the night shift, when the infant department gets restocked.
Lisa Olivares, a manager at CCE Headgear Plus, a kiosk at the mall that offers custom embroidery, has been inundated with requests to stitch unit crests and nicknames onto baby onesies, polka-dot bonnets and camouflage diaper bags. "It's all I do," she said.
Soldiers have noticed the boom among their ranks. "Four females in my unit have had babies," said Staff Sergeant Bill McSwain, as he held his own new daughter, Gabrielle, in his lap.
Doctors, nurses and midwives at the clinic were among the first to feel the impact of the surge, as demand for prenatal appointments began to overwhelm the staff members at the beginning of the summer. As women poured into the facility, which now has pastel streamers with hearts dangling from its windows, the medicine cabinets began running low on progesterone, used to treat early labor. The doctors wanted to know why the nurses were using so much progesterone, said Belenda Douglas, the head nurse. "We were like, 'O.K., but there's a baby boom."'
With only 11 beds, Womack's labor and delivery unit quickly filled up, and the patient load was capped at 260 deliveries a month - but soon exceeded that number. Nearly 300 babies were born in August, and 261 in September.
Colonel Flavia Diaz-Hays, chief of maternal child health services at Womack, estimates that one-fifth of expectant mothers are active-duty soldiers who get nondeployment status for the birth of their child. On Aug. 1, in response to requests from mothers and military health care providers, the Army extended nondeployment status for mothers from three to six months.
Fathers can still be deployed at any time, and the impact of a missing parent is felt by the entire family.
Sue O'Brien, who coordinates the New Parents Support Program at Fort Bragg, helps new mothers and their toddlers struggling to make sense of a parent's absence by giving out a book called "Over There," which matches pictures of a child's activities at home - sleeping or brushing his teeth - next to pictures of a soldier parent doing the same activity.
Katheryn Smith, who is due with her fourth child on Dec. 10, said that after her 2-year-old daughter was born, her husband, home from Iraq after three tours, was reluctant to leave. "He didn't really want to leave her," Smith said. "He never likes being away from family."
Reflecting on that time, First Sergeant Stephen Smith, of the 82nd Airborne, said: "You miss their first words, their first steps, and the bonding that you're supposed to have." He added, "That's the hardest part, to get to know them all over again. In some cases, they don't even remember you when you come home."
No one from the 82nd has been redeployed yet, but that will change in the next few months, when one of the brigades is scheduled to go overseas to Iraq or Afghanistan, McCollum said.
Until then, families and the Fayetteville community are focusing on the excitement of its budding population. On Saturday, 125 tables at the shower were decorated with pale yellow, lavender, green and polka-dot tablecloths, and a pallet-load of goodie bags containing donated diapers, wipes and baby clothes were waiting to be distributed.
Rachel Hall, 26, who gave birth to her fifth baby, a daughter, Makenna, on Sept. 2, was excited about the shower. "I never got to have a shower with my family for any of my other kids," she said, with her own parents too far away, in New York, and her husband being deployed four times in the last six years.
Lieutenant Colonel Paul Whitecar, chief of obstetrics at Womack, said that during the surge of births, which he expects to continue for a few months, until the next round of deployments, he and his staff have no choice but to continue cutting back on lunch breaks.
But Wanda McCants, a nurse on the labor and delivery unit, said she did not mind the extra work, especially considering the high rates of injured veterans that she sees around the hospital. "I think it's the nature of war to come back and to want to create something," she said. Seeing all the new life after so much tragedy, she added, "is uplifting for me, too."
Somali president says Islamists control most of country
Sunday, November 16, 2008
MOGADISHU: President Abdullahi Yusuf has admitted Islamist insurgents now control most of Somalia, and he raised the prospect that his government could completely collapse.
Islamists have been slowly advancing on the capital, raising the stakes in their two-year rebellion and undermining fragile UN-brokered peace talks to end 17 years of chaos in the Horn of Africa nation. A grenade attack Sunday killed four people and injured nine others in Baidoa, the government's seat.
"Most of the country is in the hands of Islamists and we are only in Mogadishu and Baidoa, where there is daily war," Yusuf told some of his legislators in neighboring Kenya on Saturday.
His remarks were aired by Somali media late Saturday.
"We, ourselves, are behind the problems and we are accountable in this world and in the hereafter. Islamists have been capturing all towns and now control Elasha. It is every man for himself if the government collapses.
The Islamists kill city cleaners, they will not spare legislators," Yusuf said.
Elasha is only 15 kilometers, or 9 miles, south of Mogadishu.
The insurgents have been enforcing a strict form of Islamic law in areas they capture. On Saturday, they whipped 32 people for taking part in a traditional dance in rebel-held territory south of the capital.
Last month, they stoned to death a young woman accused of adultery in the southern port of Kismayu. It was the first such public killing by the hard-line militants for about two years.
Yusuf blamed his government's ineffectiveness partly on disagreements between him and Prime Minister Nur Hassan Hussein.
Regional heads of state held a Somali crisis meeting at the end of October and demanded the four-year administration name a new cabinet within 15 days.
"The prime minister gave me a list of new cabinet ministers but I do not know how to approve names of those who destroyed our government when the constructive ones were excluded," Yusuf told the legislators.
"We have no government and we should go back to our country very quickly and establish a government," he said referring to the cabinet.
Yusuf is in Nairobi to meet lawmakers who remained after the regional meeting. Some analysts said he lobbied them to vote against the list of ministers the prime minister forwarded to him when the matter was tabled in Parliament.
Meanwhile, the insurgency continues. "Three women and a baby died after Islamists hurled two hand grenades at police patrolling Baidoa's main market on Sunday," Abdihakim Abdi, chief of police operations, said.
A Somali aid worker was also critically injured when gunmen shot him in the head in Merka, a port city captured by the rebels Wednesday.
Islamists ruled Mogadishu and most of south Somalia for half of 2006. Allied Ethiopian and Somali government forces toppled them but they have waged an Iraq-style guerrilla campaign since then, gradually taking back territory.
As when they controlled the capital in 2006, the Islamists are again providing much-needed security in many areas, but are unpopular with many moderate Muslims in Somalia for also imposing fundamentalist practices.
The turmoil in Somalia has caused instability across the Horn of Africa, fueling one of the world's worst humanitarian disasters and triggering a wave of pirate attacks in the Gulf of Aden, a vital shipping lane between Europe and Asia.
Israel urges "greater force" against Iran nuclear work
Sunday, November 16, 2008
JERUSALEM: Israeli Prime Minister Ehud Olmert called on Sunday for a stronger international campaign against Iran's nuclear programme to "thwart it with greater force."
"We must increase our measures to prevent Iran from achieving its devious goals," Olmert said in a speech to Jewish leaders in Jerusalem. "Iran cannot become nuclear. Israel cannot afford it ... the free world must not accept it.
"We must unite our forces as part of the international community, led by the United States of America. We must confront Iran's malevolent diligence and thwart it with greater force."
Israel and the West fear Iran may be using its nuclear programme to develop a nuclear weapon, which the Jewish state sees as a potential threat to its existence. Iran says its atomic programme is solely for energy purposes.
Israel is widely believed to have the Middle East's only nuclear arsenal, although it has never confirmed nor denied it.
Israel has backed Western economic sanctions against Iran but has said it is keeping all options on the table in its bid to halt Iran's nuclear programme.
Israeli leaders have voiced concern about U.S. President-elect Barack Obama's stated readiness to seek dialogue either alongside or instead of sanctions as a method of persuading Iran to change its policies.
"Iran has not terminated its pursuit of nuclear weapons," Olmert said.
He also accused the Islamic Republic of continuing to fund Palestinian militants and gunmen in Iraq, Syria and Lebanon.
Olmert called for further sanctions against Iran, saying: "It must become more costly to Iran to pursue nuclear weapons than to give it up."
Olmert resigned as prime minister in September in the heat of a corruption investigation, but is staying on as caretaker prime minister until a new Israeli government can be formed after a February 10 election.
(Writing by Allyn Fisher-Ilan; Editing by Janet Lawrence)
U.K. minister on outspoken tour of Mideast
The Associated Press
Sunday, November 16, 2008
JERUSALEM: Foreign Secretary David Miliband of Britain is expressing strong opposition to Jewish settlement in the West Bank, and officials are speaking of an economic offensive to try to force them to be taken down.
Miliband will also urge Syria to tie up peace talks with its historical enemy during talks over the next two days in Jerusalem and Damascus, Israeli and British officials said Sunday as Miliband began his visit. He also has meetings scheduled in Lebanon and the Palestinian territories, his office said.
Miliband is pressing European partners for tighter control of imports to the European Union from the Jewish settlements, some of which are admitted at European ports as the produce of Israel and therefore enjoy tariff benefits under an Israel-EU treaty, the officials said.
"We know of the British concern referring to this matter," Yigal Palmor, Israeli Foreign Ministry spokesman, said. "We have been involved for some time now in dialogue with our British counterparts in order to find a way to solve this issue."
Karen Kaufman, British Embassy spokeswoman, said that in a meeting Sunday with Prime Minister Ehud Olmert of Israel the two had a "clear exchange of views," on the subject but she said Miliband told Olmert that he was not seeking to rewrite existing agreements.
"The foreign secretary made it clear that Britain is not trying to shift the goal posts on this issue but is following up on representations made to us about the workings of the system," she said.
Miliband later met Foreign Minister Tzipi Livni and pledged to pay a solidarity visit to Sderot, the battered Israeli border town where a rocket from Gaza hit a house under construction, slightly wounding one person.
European diplomats, speaking on condition of anonymity as a fresh economic offensive on the West Bank settlements has not been officially approved, said Miliband has been trying to muster support in Brussels for tougher implementation of existing customs regulations in the hope that settlements, a core issue in the Israeli-Palestinian dispute, could be placed under a pressure that might hasten their dismantlement.
In a Nov. 4 speech in London, Miliband spoke with passion about the despair of Palestinians who, shortly after a U.S.-sponsored peace conference a year ago in Annapolis saw Israeli construction in the West Bank soar by 80 percent on land the Palestinians seek for a state.
"For Palestinians, feeling cheated and abused," he said, there were fears that talks were a screen to cover "continued settlement expansion, home demolition, land confiscation and the daily indignities of occupation.
"Settlement activity is illegal; it also makes a Palestinian state more difficult to achieve by the week."
Israel has traditionally defended its settlements by maintaining that the West Bank ownership was disputed and could be resolved only through negotiations.
Miliband has also spoken of Israel's security concerns, among them the rockets aimed at northern Israel by the violent Syrian-backed Hezbollah militia just across the border in Lebanon.
"We've been engaging with the Syrian government for some time impressing upon them the responsibilities they have to curb the flow of rockets to Hezbollah; to curb the flow of fighters into Iraq; to contribute positively to stability in the Middle East ultimately through normalization of their relations with Israel," he said in remarks broadcast Sunday by Israel Radio.
Miliband was scheduled to meet other Israeli officials Monday and visit Palestinian President Mahmoud Abbas in the West Bank, then travel on to Syria and Lebanon.Olmert warns of Iran's aims
Prime Minister Ehud Olmert said that Iran was still trying to make nuclear weapons, and the world had to make a concerted effort to stop the project, The Associated Press reported from Jerusalem.
Olmert told a Jewish gathering in Jerusalem, "Iran has not terminated its pursuit of nuclear weapons," adding, "Iran cannot become nuclear. Israel cannot afford it.
"The free world must not accept it. We must all do whatever we can to prevent it."
Israel considers Iran a strategic threat because of its nuclear program, its development of long-range missiles and repeated threats to destroy the Jewish state.
In his appearance before the so-called General Assembly of Jewish leaders Sunday, Olmert did not give specific warnings about possible Israeli actions against Iran.
Israeli air strike kills 4 militants in Gaza
Sunday, November 16, 2008
By Abed Shana
An Israeli air strike killed four militants in the Gaza Strip on Sunday and Prime Minister Ehud Olmert said he had commissioned a plan for military action in the Hamas-run territory if rocket attacks on Israel persist.
"I ordered security chiefs to present their proposals to me as soon as possible so that an orderly plan of action could, if necessary, be brought to the decision-makers in the government for approval," Olmert told his cabinet, in broadcast remarks.
Olmert said Israel could not tolerate rocket salvoes during a "so-called calm."
He stopped short of declaring dead an Egyptian-brokered cease-fire with Hamas that has been tested by a flare-up of violence over the past two weeks.
Olmert appeared to rule out any immediate move towards significantly stronger Israeli military action, saying that despite "soaring emotions and hot blood," his government would examine the situation and act in a "calm and settled" manner.
But he gave no indication Israel would soon lift its closure of Gaza's crossings to humanitarian aid, including food distributed by the United Nations to 750,000 needy Palestinians and fuel for Gaza's sole power plant.
Both the United Nations and the European Union have urged Israel to let aid supplies through.
At least 17 Palestinian militants have been killed since November 4, when Israel raided the Gaza Strip to destroy a tunnel it said gunmen were planning to use to seize a soldier. Gunmen have fired dozens of rockets at Israel, causing several injuries.
British Foreign Secretary David Miliband said in Jerusalem he would visit the southern Israeli town of Sderot where most of the rockets fired from Gaza in recent days have struck.
"I very much look forward to be showing my solidarity with them on my visit there," Miliband said in Jerusalem, alongside Israeli Foreign Minister Tzipi Livni, who said: "Israel cannot just sit watching our citizens under attack."
Hamas leaders accused Israel of violating a truce that had largely held since mid-June.
Hamas spokesman Fawzi Barhoum said: "We have the right to respond to Zionist attacks. The Israeli government wrecked the truce and failed to meet any of its understandings."
Ismail Haniyeh, Hamas's top leader in Gaza, told reporters that a "continuation of this calm" depended on Israel ending military raids and lifting a two-week border closure that has choked off fuel and food aid to the enclave.
Three rockets were fired from the Gaza Strip at Israel and an Israeli was lightly injured by shrapnel from a rocket that slammed into the yard of a home in Sderot.
One rocket attack was followed by an Israeli air strike in northern Gaza against what the Israeli military said was a squad of militants preparing to fire across the border.
The Popular Resistance Committees militant group said the four men killed by the aircraft were in its military wing.
Israeli officials have said a large-scale ground operation in Gaza to try to curb rocket attacks would cause heavy casualties on both sides. Such an assault would pose political risks for members of Olmert's coalition cabinet as a February 10 parliamentary election approaches.
Olmert resigned in September but serves as a caretaker prime minister until a new government is formed after the ballot.
(Additional reporting by Nidal al-Mughrabi and Joseph Nasr; Writing by Jeffrey Heller and Allyn Fisher-Ilan, Editing by Richard Williams)
Obama close to Clinton on foreign policy issues
By Helene Cooper
Sunday, November 16, 2008
CHICAGO: During his presidential campaign, Barack Obama spoke of sitting down for talks with Iran, an idea that Hillary Rodham Clinton publicly criticized.
So the idea that Obama might choose Clinton as secretary of state might seem incongruous. But foreign policy advisers to both Clinton and Obama said that the two were not as far apart on foreign policy - particularly the issues of Iran and Iraq - as they seemed to be during the long battle for the Democratic presidential nomination.
In reality, Clinton and Obama are much closer to each other on the global issues that are likely to confront the Obama administration. Although Clinton voted to authorize the Iraq war in 2002, so did a majority of her Democratic colleagues in the Senate. Since then, she and Obama, who opposed the Iraq war, have found their way to similar positions on a timetable for withdrawing U.S. troops. They both support sending additional troops to Afghanistan and agree on climate change and Israeli-Palestinian peace efforts.
And although they publicly sparred during the primary over whether Obama, as president, should meet with Iranian leaders without preconditions, Obama has since said that such an outreach would first involve lower-level preparatory work, a position that is closer to Clinton's.
But a more complicating factor is whether Clinton could be the one to begin that preparatory work.
"I don't think that Hillary Clinton could do this," said Abbas Milani, director of the Iranian studies program at Stanford University. "When she thought she had no serious opponent in Obama, she was a much more reasonable person on Iran. But the minute she got into the game of trying to embarrass Obama, she began saying things, and the words you say during a campaign do have meaning."
In May, Iran lodged a formal protest at the United Nations about comments Clinton had made in an interview in April with ABC News. Asked what she, as president, would do if Iran attacked Israel with nuclear weapons, Clinton replied: "I want the Iranians to know that if I'm the president, we will attack Iran. In the next 10 years, during which they might foolishly consider launching an attack on Israel, we would be able to totally obliterate them."
Iranian leaders called Clinton's comments "provocative, unwarranted and irresponsible." Iranian specialists said the choice of Clinton as a possible emissary to Iran would be hard for the regime to stomach, given that women in Iran are not allowed to run for president or to be judges. That did not stop President Bill Clinton from appointing Madeleine Albright as secretary of state, or President George W. Bush from appointing Condoleezza Rice to the job.
The possibility of a Clinton appointment received support Sunday from two powerful senators.
"I think she'd be an excellent choice, would have instant credibility around the world," said Senator Byron Dorgan, a Democrat from North Dakota, who as chairman of the Democratic Policy Committee carries considerable influence.
Senator Jon Kyl of Arizona, the Senate Republican whip, also said he thought Clinton would be a good choice. "She's got the experience, she's got the temperament for it," he said, adding that he thought she would be "well-received around the world" Kyl said he did not know whether she would have any problem being confirmed by the Senate. Both men spoke on Fox News.
Obama is said to be considering several other Democrats for secretary of state, including Governor Bill Richardson of New Mexico, Senator John Kerry of Massachusetts and former Senator Tom Daschle of South Dakota, and one Republican, Senator Chuck Hagel of Nebraska.
Clinton and Richardson have met with Obama in Chicago to discuss the job. Like Obama, Richardson, who is a veteran diplomatic negotiator, has encouraged dialogue with Iran.
Obama could skirt the problem of who could best represent him in initial talks with Iran by appointing a high-level presidential envoy who would report directly to him.
Or, if Obama chooses Clinton, he could leave Iran for her to handle, advisers said, under the assumption that having her as his emissary could promote the very ideal of U.S. democracy that leaders in Washington have been trying to advance. It could send a strong signal to the Iranian president, Mahmoud Ahmadinejad, who, only a few months ago, said he did not think either Obama or Clinton had a chance of winning the election.
"Presidency of a woman in a country that boasts its gunmanship is unlikely," Ahmadinejad said, according to the semiofficial Mehr News Agency in Iran. "Do you think a black candidate would be allowed to be president in the U.S.?"

A rush for tin, a catastrophe for the Congo
By Lydia Polgreen
Sunday, November 16, 2008
BISIE, Congo: Deep in the forest, high on a ridge stripped bare of trees and vines, the colonel sat atop his mountain of ore. In track pants and a T-shirt, he needed no uniform to prove he was a soldier, no epaulets to reveal his rank.
Everyone here knows Colonel Samy Matumo, commander of a renegade brigade of army troops that controls this mineral-rich territory. He is the master of every hilltop as far as the eye can see.
Columns of men, bent double under sacks of ore, emerged from the colonel's mineshaft. It had been carved into the mountain with Iron Age tools powered by human sweat, muscle and bone. Porters carry the ore on their backs for two days through a mud-slicked maze to the nearest road and a world hungry for the laptops and other electronics that tin helps create, each man a link in a long global chain.
On paper, the exploration rights to this mine belong to a consortium of British and South African companies that claim they will turn this perilous and exploitative operation into a safe, modern beacon of prosperity for Congo. But in practice, the company's workers cannot even set foot on the mountain. Matumo and his men extort, tax and appropriate at will, draining this vast operation worth as much as $100 million a year while Congo once again teeters toward war.
The struggle for this mountain is emblematic of the failure to right this sprawling African nation after so many years of tyranny and war, and the deadly role the country's vast natural wealth has played in its misery.
Despite a costly effort to unite the country's many militias into a single army, billions of dollars spent on international peacekeepers and an election that brought democracy to Congo for the first time in four decades, the government is unable or unwilling to force these fighters - who wear government army uniforms and collect a government paycheck - to leave the mountain.
The ore these fighters control is central to the chaos that continues to plague Congo, helping to perpetuate a vast conflict in which as many as five million people have died.
In the latest chapter, fighting between government troops and a renegade general, Laurent Nkunda, has forced tens of thousands of civilians here in eastern Congo to flee and pushed the nation to the brink of a new regional war.
The proceeds of this and other mines here in eastern Congo, along with the illegal tributes collected on roads and border crossings controlled by rebel groups, militias and government soldiers, help bankroll virtually every armed group in eastern Congo.
No roads lead to Bisie. This hidden city of 10,000 lies 50 kilometers, or 30 miles, down a narrow, muddy footpath through dense, equatorial forest. Built entirely for the mine, Bisie is a cloistered world of expropriation and violence that mirrors the broad crisis in which Congo still finds itself mired.
This is Africa's resource curse: Its wealth is unearthed by the poor, controlled by the strong, then sold on to a world largely oblivious of its bloody origins.
Under Matumo's rule, Bisie is a fetid, Darwinian place where those with weapons and money leech off a desperate horde in a pyramid of payoffs.
The chokehold begins a long way from the mine. At the trailhead, a burly soldier with a spade-shaped beard demanded 50 cents from every man, woman and child to enter the trail to the mine. A clamoring crowd hands wrinkled bills to the soldier, who opens the wooden gate a crack to let those with cash make the journey through the jungle.At the other end of the trail, at the base of the mountain, another crowd forms at the gate into Bisie. Porters exhausted from the two-day trek sprawl on felled trees, waiting for soldiers to inspect their load and extract another tribute. The price is usually 10 percent of entering merchandise and cash.The men at the checkpoints describe these payments as taxes. But the people of Bisie don't get much in return.
The village at the base of the mountain is a warren of mud huts off narrow alleyways of trash and the foul emissions of thousands of haphazard latrines. Disease courses through the town, carried by filthy water from a river that is used for everything from washing clothes to cleaning ore.
In some ways, Bisie is a thriving commercial town. It has makeshift movie theaters showing bootleg kung fu movies on televisions powered by sputtering generators. Its bars are stocked with whiskey and beer, each bottle carried by porters through the jungle. It has hotels that double as brothels. There is even a clapboard church.
But these meager comforts do not come cheap. Squalid mud huts rent for $50 a month or more, partly because every single item must be carried through the forest - and because opportunism is the town ethos.A scramble for loot
The saga of Bisie is merely another chapter in Congo's epic tragedy. Though blessed with an incomparable endowment of minerals, water and abundant fertile land, this vast nation in the heart of Africa has known little but domination and war since its founding as a colony under King Leopold II of Belgium in the 19th century.
The bloodshed and terror have always been driven in part by the endless global thirst for Congo's resources, "the vilest scramble for loot that ever disfigured the history of human conscience," as the novelist Joseph Conrad put it.
Just as the pneumatic tire was invented, King Leopold of Belgium began sucking every last drop of rubber from Congo's jungles, his militia killing or maiming anyone who stood in his way. Generations later, Mobutu Sese Seko used his country's vast cobalt reserves to keep the United States, which needed the mineral to build fighter jets, firmly behind him during the Cold War despite his obstinately kleptocratic and repressive ways.
Congo's riches have played a starring role in the conflict that has unfolded within its capacious borders over the past decade. The war began in the aftermath of the Rwandan genocide, when the perpetrators of the slaughter fled into neighboring Congo. Rwanda backed an effort to flush out the killers in 1996, but it soon led to a vast regional conflict that descended into a war of plunder by half a dozen nations and countless homegrown rebel groups.
A peace deal officially ended the war in 2003, and elections in 2006 brought the first democratically chosen leaders to Congo in more than four decades. And in many parts of this vast nation, which covers an area the size of Western Europe, life is slowly returning to normal. International investors, especially China, have begun pouring billions into the Congolese economy.
But here on the eastern edge of the country, the war never really ended. The unfinished battles over the Rwandan genocide play out on Congolese soil, by armed groups fueled in no small part by lucrative mines like the one in Bisie.The rule of the gun
In 2002, a hunter discovered chunks of tin ore, known as cassiterite, lying on the slopes of a mountain deep in the vast jungle here in eastern Congo. Almost overnight, a horde of miners arrived, driven by fevered reports of piles of ore just lying around, waiting to be carted off. But civilians were not the only ones interested. Armed groups fought pitched battles over who would control the area. In 2004, a group of Mai Mai fighters allied with the government took control.
Under the terms of a peace agreement that ended the war, the militia had been absorbed into the national army and became the 85th Brigade. The fighters were supposed to be sent for military training and then deployed to different areas of the country, to dilute the influence of regional militias.
But the 85th has refused to disband. Matumo, its commander, is known as a ruthless warrior with a keen eye for business. These days the fighters of the 85th Brigade violently enforce a system of illegal taxation of every worker, merchant and mineral trader who comes to the mine.
That system has ensured that they and their allies have creamed millions of dollars in the years the militia has controlled the mine - a lost opportunity for a nation desperately in need of development.
Tin has replaced lead in the solder used to make many electronics. But as the price shot upward in recent years, to a high of $25,000 a ton in May, Matumo and his men staked out a whole ridge of the mine as their personal property. Senior commanders of the brigade have built large houses and opened businesses, like hotels and bars, with the proceeds of the mine.
A company called Mining and Processing Congo bought the rights to search for tin ore at the mine in 2006. But the militia has effectively barred the company, which is owned by a consortium of South African and British investors, from the premises, shooting at its helicopter and chasing away its representatives.
When the company started working on a road to link the mine to the main road, local officials barred the route. When they began working on a campsite for their geologists to begin prospecting, soldiers opened fire on the company's workers, injuring several of them, according to company officials.
"We have all our documents and permits in order," said Brian Christophers, the weary managing director of the company. "We have written to the head of the military, the minister of mines and even the president. But there are no rules in Congo, just the rule of the gun."
Christophers said his company was prepared to help pay for a road to the mine, along with schools, clinics and a hydroelectric power station. It also promised to invite government agencies to enforce labor standards. But they have not had the chance.
Workers toil in hand-dug tunnels as deep as 180 meters, or 600 feet, held up precariously by wooden pillars. Some of the workers are children.
The tunnels, suffocatingly narrow, often fill with dangerous gases. Cave-ins, mudslides and gassing kill and maim an unknown number of workers every year.
Hard rock miners who work deep in the tunnels say the money they can make on a productive day makes up for the risk. A young man who gave his name as Pypina said he made $200 on a good shift. But his friend, Serge, said such days were rare.A global commodity
Matumo declined to be interviewed for this article. But he made no effort to conceal his control over the mine, openly supervising production and sale of dozens of sacks of ore.
A major who said he had been sent by Congo's top brass to assess the situation said the government wanted the militia to leave but had too many other security problems to contend with. Laurent Nkunda has been waging a fierce insurgency against the government in another part of eastern Congo, and the army has so far been unable to defeat him.
"Samy is just one of many problems," the major, who refused to give his name, said of Matumo. "If we can't deal with Nkunda, how can we force Samy to go when he does not want to leave?"
Bisie might be the middle of nowhere, but the ore produced here is tightly linked to the global market. After it is loaded onto the backs of porters, the ore is hauled to middlemen along the main road.
The ore is then trucked a few kilometers down an eerily intact stretch of pavement to the village of Kilambo. There, on a slightly curved stretch of road, Soviet-era cargo planes take off and land, as many as two dozen trips a day.
The flights land in Goma, the provincial capital, where another layer of middlemen buy and process the ore for export. Alexis Makabuza's Global Mining Co. is one of these buyers. Amid the clattering of his rudimentary processing plant sit dozens of barrels filled with ore. On each is stenciled with the address of Malaysian Smelting Co. Berhad, one of the world's leading tin smelters.
In a handwritten contract signed in 2006 by a representative of Makabuza's company, then operating under a different name, the company agreed to pay a large percentage of its earnings from the mine in exchange for a guarantee of security. Matumo's militia is the only force operating in the area, and most of this money ended up in his hands, according to security officials in the region.
In an interview Makabuza shrugged off questions about his business dealings with Matumo's militia. "We follow all the rules," he said. "I am just a buyer like anybody else."
Congo's tin ore represents a relatively small slice of the world market, but in recent years supplies have been so tight that efforts to stop mining at Bisie have caused price spikes.
This year the government tried to shut down the mine, but it was quickly reopened by the local authorities, who feared the economic and political costs of putting thousands of miners out of work and cutting off the cash flow to a volatile renegade military commander.
Indeed, many fear banning exports of tin from Congo would cause more problems than it solved.
"A blanket ban on tin from Congo is nonsense because it penalizes the millions dependent on the sector the most," said Nicholas Garrett, a mining expert who has written reports on Congo for the World Bank and other institutions.
Julien Paluku, the governor of North Kivu, said that the government must move cautiously. Already faced with a renegade Tutsi general who has large swaths of the region under siege, the government can scarcely afford to pick a fight with another armed group, he said."Solving this problem will take time," Paluku said.Some analysts say that the situation in Bisie is so blatant that its very persistence is evidence of collusion between the militia and powerful politicians."Unless immediate action is taken to transfer these soldiers out of Bisie mine and to prosecute those responsible for the large scale looting of minerals, we can only conclude that these activities are sanctioned at the highest levels," said Patrick Alley of the anti-corruption organization Global Witness in a statement.
In May, the U.S. senators Sam Brownback and Richard Durbin introduced a bill to require certifying minerals from Congo. "Without knowing it, tens of millions of people in the United States may be putting money in the pockets of some of the worst human-rights violators in the world, simply by using a cellphone or laptop computer," Durbin said.
Here in Bisie, daily life offers few clues that such technology exists. Isolated and indebted, few of its workers have any clue what tin is used for.
"It is for weapons," one miner, Djuma Assualani, 21, suggested. "Kalashnikov, bombs. They make war with it." "It's gold," shouted Makami Kimima, 18. His fellow miners jeered at his ignorance.
"It is something like gold," he said, chastened. "It goes to America. And China. It makes people rich."UN envoy meets rebel leader
The United Nations' special envoy on Congo met the main rebel leader for the first time Sunday in a bid to end the crisis, The Associated Press reported from Jomba, Congo.
The envoy, former President Olusegun Obasanjo of Nigeria, flew to Jomba, a rebel-held town near the Ugandan border, and was greeted with a hug by Laurent Nkunda. The two then entered a church compound for private talks.

Once greeted warmly, Google wears out welcome
By Kevin J. O'Brien
Sunday, November 16, 2008
BERLIN: When Google began hiring in Zurich for its new engineering center in 2004, local officials welcomed the U.S. company with open arms. Google's arrival is still bearing fruit for Zurich: 450 employees, about 300 of them engineers, work in Google's seven-story complex in a converted brewery on the outskirts of the placid mountain metropolis.
But almost five years into its expansion into Europe - where it has a headquarters in Dublin, large facilities in Zurich and London and smaller centers in Denmark, Russia and Poland, among other countries - Google is beginning to bump up against a web of privacy laws that threaten its growth and the positive image it has cultivated as a company dedicated to doing good - its unofficial motto.
In Switzerland, data protection officials are quietly pressing Google to scrap plans to introduce Street View, a mapping service that provides a vivid, 360-degree, ground-level photographic panorama from any address. Swiss privacy law prohibits the unauthorized use of personal images or property.
In Germany, where Street View is also not available, the simple process of taking photographs for the service violates privacy laws.
"The privacy issue will likely become increasingly important for Google as it continues to offer new services in Europe," said Dirk Lewandowski, a professor of information sciences at the University of Applied Sciences in Hamburg and an expert on search engine technology. "For the moment, most consumers are not aware their data is being used by Google in some fashion. But I think as people become aware of this, there could be protests that Google will have to address."
The conflict does not end with Street View, which so far in Europe depicts only major cities in France, Spain and Italy.
Data protection advisers to the European Commission in Brussels are questioning Google about how long the company retains user logs - the files the company compiles of queries typed by individuals into Google search fields. A panel of EU national regulators called the Article 29 Working Party wants Google - as well as Yahoo and Microsoft's MSN Search - to purge the records after six months.
Google says it needs the data for nine months to adjust its search engine to reflect the constant changes in contextual meaning generated by news and events. Before October, Google retained the records for 18 months in the EU. Yahoo is retaining its records for 13 months and MSN, for 18 months. EU officials are trying to persuade Google and the others to comply but have not ruled out asking the commission to intervene.
Nelson Mattos, a vice president responsible Google's 12 engineering centers in Europe, the Middle East and Africa, said he was confident that the company would reach a compromise with the authorities. In an interview in Zurich, Mattos, a Brazilian who was educated in Germany and spent 15 years at International Business Machines before moving to Google in 2007, said Google's Street View would be applied in Switzerland and Germany "at some point." But he declined to say when that might be.
"Google is committed to making sure the data of its users is well-protected and not misused," Mattos said. "Europe has a history of innovation. Where it has not always done as good a job in my opinion is in follow-on innovation, in commercializing the innovation. If you restrict too much how a company like Google can innovate, that will restrict the follow-on benefits in Europe."
To enhance its profile among European decision makers, Google has increased its presence in major government centers around Europe. The company now has enough employees to fill three floors of an office building in downtown Brussels. In five years, Google has hired about 3,500 people in Europe for its regional headquarters in Dublin; its large offices in London and Zurich; and smaller centers in Krakow, Poland; St. Petersburg; and Aarhus, Denmark.
Many of the company's most recent innovations, like elements of its new Chrome Web browser, an analytical tool called Google Trends and a mass transportation function called Transit, have been conceived or improved in Europe.
The engineering center in Zurich helped speed up the functioning of Video ID, an automated video search service that allows video and music copyright owners to sweep YouTube, the largest online Web video-sharing site, to detect illegal uploads. Google bought YouTube for $1.65 billion in October 2006.
Introduced year ago, Video ID is being used by 300 companies, including Lion's Gate Films, Sony Music Entertainment and the Italian broadcaster RAI. In 90 percent of cases, said Patrick Walker, director of partnerships at YouTube in London, companies choose not to block the illegal footage but to run advertisements next to the homegrown uploads, splitting the revenue with YouTube.
"It's the best video search technology available today on the market," Walker said. "It has basically allowed all types of rights holders for the first time to protect their content on the Web, and in most cases, has opened up a whole new way for companies to make money off of their inventories."
Some of Google's technical advances are starting to impress European policy makers. At a conference in Brussels in October, the European commissioner for Internet issues, Viviane Reding, said Video ID "ensures that rights owners regain sovereignty over the exploitation of their work."
In Switzerland, Google has so far agreed to block Street View, said Bruno Baeriswyl, the director of Privatim, the privacy agency for the Canton of Zurich.
"But we don't know how long that is going to last," he said.
The data protection agency Edõb is also in talks with Google because a Swiss law that took effect Jan. 1 requires all companies in Switzerland that maintain databases on individuals - as Google does - to disclose to the agency how they manage the information.
"We have been in contact with Google about different topics," said Eliane Schmid, a spokesman for the agency, called the Eidgenössicher Datenschutz und Öffentlichkeitsbeauftragter. "These are initial contacts and as such not of an official nature. Therefore, you will understand that any details remain confidential for the moment."
In Germany, opposition to Street View is more visible. In Kiel, a town on the Baltic Sea coast, data protection officials are threatening Google with fines and are distributing stickers for homeowners to display advising Google's photographers against making pictures of their property for Street View.
"What Google is doing with Street View violates German law," said Marit Hansen, deputy director of the Unabhängiges Landeszentrum für Datenschutz in Schleswig-Holstein, the state in which Kiel is located. "It's not enough that Google's Street View is not yet available in Germany. The simple photographing is in itself a violation."
European consumers appear to be less worried than some regulators about the potential loss of privacy. ComScore, a research firm in Reston, Virginia, found that 8 in 10 Europeans used Google for online search queries.
"The data protection agencies tend to be extreme," said Peter Heinzmann, chief executive of a Swiss company that makes software for Web cameras called CN Lab. "But most people are voluntarily giving information to Google because they think the benefits outweigh the risks. So why restrict innovation?"

Blind children in Baghdad gain a feel for their world
By Alissa J. Rubin
Sunday, November 16, 2008
BAGHDAD: Imagine being near a bomb blast but being unable to see it. Or hearing gunfire but not knowing whether the gunman is shooting at you.
That is the world of the blind in Baghdad. An explosion's size and nearness are judged by sound - a boom, a pop, a thud. Or by smell - acrid means burning rubber; metallic, burning cars.
At the Al Noor Institute for the Blind, in a troubled neighborhood, children come to know their world "feelingly," as Shakespeare put it.
They go into the small courtyard and know where there are trees because it is cooler in their shade. Sometimes, they have been closer to gunmen than they like to remember, in part because they could not see them approaching.
Yet, some still learn to write and draw, play musical instruments and sing.
At 13, Mortada Majid is frail and serious. He has a gift, one all but lost in the West. He is a reciter of poetry; a kind of oracle of the times. When he recites, his soft voice becomes strong and resonant as if he is calling from the rooftops. He recites two poems one morning. One is an ode to Baghdad: ancient Baghdad, historic Baghdad, learned Baghdad, beautiful Baghdad. The second is a poem of love and appreciation for his mother.
A blind teacher, Hamid Qatan, 43, comes in. His students call him Beethoven because he is also going deaf, yet still plays Kurdish folk tunes on his violin, from which he can barely hear the notes.
Ahmed Abdul Rasool, an 18-year-old student, carries his drum under his arm as if it were a pet cat. He calls his brothers "my eyes" and walks with them all over Baghdad. More than a year ago, a gunman began to shoot as he and his brother and friends played outside. "It was very near," he said. "My brother took my hand, and we ran. And I had a feeling then that life was precious."
Later, he thought, "Thank God that I cannot see, because my friends had such a bad time after that," he said. "I tried to comfort them, but they could not forget because they had seen the man with the gun."
Zainab Radha, 13, is captivated by painting done by touch, puncturing thin plastic sheets with a sharp pen, drawing designs that she can feel. "I like trees best," she said. "I like trees with many leaves that cast a shadow. I can feel it.
"Trees represent another atmosphere. It's as if I'm escaping from reality."
A dark reality, but one that she can imagine is filled with light.

Iraq struggles to sweep Saddam's landmine legacy
Sunday, November 16, 2008
By Aseel Kami
Inside an Iraqi clinic close to where Saddam Hussein's henchmen killed thousands of Kurds with poison gas, Azima Qadar waits for a check up of her artificial limb.
Her right leg was blown off by a landmine as she went to tend her family's walnut farm in rural northern Iraq, near the Iranian border, in 1993.
"When it happened, I thought: I'm not going to live long, I'll die soon," said the thin, frail Azima. "Instead, I'm trapped in continuous suffering."
Iraq is littered with an estimated 25 million landmines, the Environment Ministry says. Many lie in areas bordering Iran, a legacy of the 1980-88 Iran-Iraq war that killed a million people.
Mines claimed 14,000 victims in Iraq between 1991 and 2007, the United Nations Development Programme says. More than half died from their wounds. For survivors, life is a daily struggle.
Aged 39, illiterate and unmarried in a culture in which women wed in their early 20s, Azima has few real hopes.
Her father was killed along with thousands of other Kurds during Saddam's 1987-1988 "Anfal" or "Spoils of War" campaign, when soldiers razed villages and forced thousands into camps.
Azima used to make traditional Kurdish shoes and sell them, but deteriorating eyesight forced her to stop. She wonders how she will support her mother, who also lost a leg to a landmine.
Halabja prosthetic centre is one of six Iraqi-run clinics helping mine victims to walk again in the country's largely autonomous Kurdistan region, which has born the brunt of Iraq's mine accidents. Today, it receives 10 mine victims a month.
It also treats people losing limbs to illness or accidents.
"We usually provide the patient with the artificial limb six months after his accident," said Sattar Fattah, who runs the clinic. "We teach him how to walk again."
The Kurdish town of Halabja is better known for a poison gas attack by Saddam's Iraq that killed 5,000 people in 1988. Fattah's father died in that attack and his other family members still suffer from partial blindness.
Standing next to a bar he uses to train amputees how to walk with fake limbs, Fattah lamented he could not do more.
"Unfortunately, we do not have psychiatric therapy," he said, as a man with one leg grabbed the bar to support himself. "We just tell him that life has not ended by his handicap. He should be strong and think of his future."
Child mine victims adjust better to their new limbs than the adults, who struggle to learn to walk again, Fattah said.
At a minefield in the mountainous, rural area of Sharazoor, a red flag marks a spot where 34 mines have been lined up after being recovered from nearby fields. A de-mining team prepares to blow them up with TNT.
All were planted as part of a campaign against Kurdish rebels and have rendered fertile land useless for agriculture.
"They're a hidden death laid by the previous regime. They left, but they left behind secret soldiers that keep on killing," said de-mining team head Jamal Mohammed, before a mine sweeper in the distance detonated one of them with a bang.
Some fields have been swept, others are still going through the painstaking process, many others have yet to be started.
Iraq ratified the 1997 Mine Ban Treaty in August 2007. Since then, the Iraqi government has been working to try to meet its treaty obligations, including destroying mine stockpiles by 2011 and clearing all fields by 2017.
But few think it will be finished on time. In Kurdistan alone, there are 788 square kilometres of mines, and only a sixth of that area has been cleared.
"It is a drop in the ocean," said Twana Bashir, a technical advisor to the government's de-mining programme. "We're going to need 35 years to finish if we don't increase capacity."
(Editing by Tim Cocks and Janet Lawrence)

Bond film is tops at U.S. box office
By Brooks Barnes
Monday, November 17, 2008
LOS ANGELES: James Bond brushed off some lackluster reviews to sell an estimated $70.4 million in tickets at North American theaters, setting an opening-weekend record for this 46-year-old film franchise.
"Quantum of Solace," starring Daniel Craig as 007, arrived in the United States unusually late; MGM and Sony Pictures released it overseas in late October. The move may have contributed to strong domestic sales. By withholding the hotly anticipated picture from fans in the world's largest movie market, the studios stoked an online frenzy.
The movie's global cumulative gross through Sunday was $322 million, according to Sony. "It's an extraordinary opening that speaks to how much audiences have embraced Daniel Craig as Bond," said Rory Bruer, Sony's president for domestic distribution.
The stronger-than-anticipated opening is a relief to the two studios because of the picture's outsize cost. The combined production and marketing budgets are estimated at about $400 million, although Sony places the number lower because of tax credits. MGM in particular was counting on a strong opening; a hit of this size helps shore up its financial footing.
Many critics poured cold water on "Quantum of Solace," complaining that filmmakers strayed too far from the franchise's signature story elements. The movie depicts a bitter and emotional 007 seeking revenge for the death of a lover. Assisted by a Russian-Bolivian agent (Olga Kurylenko), he stops a criminal (Mathieu Amalric) from taking control of a country's water supply.
Domestic sales for "Quantum of Solace" were sharply higher than those for "Casino Royale," the 2006 franchise entry that marked Craig's debut in the role. That film sold $40.8 million in tickets during its first weekend in theaters. The previous high watermark was set by "Die Another Day," which opened with $47.1 million in 2002.
The DreamWorks Animation film "Madagascar: Escape 2 Africa" was No. 2 at the weekend box office with $36.2 million in sales (for a new domestic total of $118.1 million). "Role Models," an R-rated comedy from Universal Pictures, was third with $11.5 million ($37.8 million over all), and "High School Musical 3: Senior Year" (Disney) was fourth with $5.7 million ($84.3 million over all).
"Changeling" (Universal), the period drama starring Angelina Jolie, rounded out the Top 5 with $4.2 million ($27.6 million over all).

Darling confident about world economy
Sunday, November 16, 2008
By Tim Castle
Chancellor Alistair Darling said he was more confident about the prospects for the world economy that he had been for some time after the weekend finance summit of G20 countries.
"The important thing this weekend was that you saw a determination to act that frankly wouldn't have been there even a few weeks ago," he told BBC television.
Darling was speaking in London after returning from the Washington meeting, which he attended with Prime Minister Gordon Brown.
World leaders agreed to take rapid action, including fiscal stimulus measures, to stabilise financial markets and restore growth in the worsening global economy.
But they fell short of announcing any new measures or major regulatory changes, leaving it up to individual countries to decide what action to take.
"There was an agreement that, whilst we need to do things in our own countries to support people and businesses, it would be so much better if we act together," Darling said.
"That is the best way of ensuring that, as we go into this downturn, as many major economies move into recession, we can get through this as quickly as possible.
"I remain confident that, if you look at the longer term prospects of the world economy, they are good."
Darling is expected to announce measures to increase borrowing, reduce taxes and bring forward public spending in Britain when he presents the government's pre-budget report this month.
Darling would not be drawn on specific details but suggested that any tax breaks would have a immediate impact.
"If this is going to work here, or anywhere else, you need to do something decisively and you need to do it quickly."
But he indicated that taxes would have to rise at a later date to pay for the economic boost.
"Like every individual, countries have to live within their means, so if you put money into the system now you have got to make sure it is sustainable in the medium term."
Analysts forecast he will revise up this year's public borrowing forecast by more than 20 billion pounds and next year's borrowing forecast by more than 40 billion pounds.
The Conservatives say the government's borrowing plans are irresponsible and could further weaken the pound sterling, which fell to a record low against the euro on Friday.
(Editing by Richard Balmforth)
Conservatives stumble over pound talk
Sunday, November 16, 2008
By Tim Castle
The Conservative Party sought on Sunday to parry accusations it had imperilled the country's currency by publicly warning of the danger of a run on the pound.
The Conservatives appear to be struggling while Prime Minister Gordon Brown's popularity has risen over his handling of a credit crunch. One poll published on Sunday showed their lead, as high as 20 points in the summer, trimmed to five.
Conservative Party Treasury Spokesman George Osborne said he had done nothing wrong by telling a newspaper that Prime Minister Gordon Brown's plans to let borrowing rise in the recession could cause a run on the pound.
The global financial crisis has battered the economy in recent months, pushing unemployment to its highest level in more than a decade and hammering house prices and retail sales.
The pound had fallen to a record low against the euro on Friday on expectations the country will cut interest rates again after this month's surprise 1.5 percentage point cut.
"My job ... is to tell the British people the truth about the British economy," Osborne told BBC television. "We are warning the country that Gordon Brown is abandoning fiscal responsibility.
"And when a government does that it stacks up debts for future generations and stacks up tax rises for future generations as well."
Osborne rejected suggestions there had been a convention that politicians should not talk about the value of sterling for fear of encouraging market buying or selling.
But his gloomy forecast for the currency was seen as political gift to the Labour government.
"At the very least, Labour will now try to pin the blame for the pound's slide on Osborne rather than their own failings," the Observer newspaper said.
Osborne could become the next chancellor if his Conservative party wins the next election, due by May 2010.
Brown, who was in Washington with other world leaders at the G20 financial summit, capitalised on Osborne's comments, dismissing them as "partisan talk."
"When other countries are coming together for a common purpose, I think it is the duty of politicians to show responsibility and to show leadership," he said.
Osborne had told the Times newspaper: "We are in danger, if the government is not careful, of having a proper sterling collapse, a run on the pound."
Brown says he is ready to provide fiscal stimulus to help the economy recover and urged other countries at the G20 summit to do the same.
Analysts expect Chancellor Darling to revise up this year's public borrowing forecast by more than 20 billion pounds and next year's borrowing forecast by more than 40 billion pounds when he details the government's pre-budget report later this month.
House asking prices down in November
Monday, November 17, 2008
LONDON: Increasingly desperate sellers slashed asking prices for homes in England and Wales by 2.9 percent in November, pushing them 7.1 percent below their level a year ago, a survey showed on Monday.
Property Web site Rightmove said sellers were recognising the need for more drastic action as the traditional season for moving home drew to a close.
Still, the annual fall in property asking prices remains around half the drop in selling prices recorded by Britain's biggest mortgage lenders. "Some sellers could avoid months of disillusionment and despair if they started marketing at an asking price a lot closer to where evidence indicates they are likely to end up," said Miles Shipside, Rightmove's commercial director.
Many banks have clamped down on lending over the past year, squeezing the life out of the property market.
All regions in England and Wales registered year-on-year falls in asking prices. Wales saw the steepest fall of 11.2 percent.
The number of new sellers dwindled to just 20,000 a week, almost half the number this time last year.
However, the bulk of the survey was conducted before the Bank of England's 1.5 percentage point interest rate cut on November 6 which took official rates to 3.0 percent, their lowest in more than 50 years.
"The lowest base rate since 1955 and the promise of further aggressive cuts gives the potential for a greater volume of sales in 2009," Rightmove said.
(Reporting by Christina Fincher; editing by David Stamp)
Busy week for Johnson as England look for positives
Sunday, November 16, 2008
By Mitch Phillips
England manager Martin Johnson has plenty to work with when the players gather on Monday after a performance against Australia where the few chinks of light were overshadowed by amateurish thinking and poor execution.
England were beaten 28-14 on Saturday by a well-drilled Wallaby team who punished the hosts harshly for their misdemeanours by slotting seven of the eight kickable penalties they were offered.
Many of those offences were inexcusable and the former lock will no doubt read the riot act to ensure there is no repeat against world champions South Africa next week.
Johnson will, or should, also be worried about England's lack of power in the pack, a concept unthinkable when the World Cup-winning skipper was in the trenches himself.
Andrew Sheridan, who almost single-handedly destroyed the Australian scrum on his debut in 2005 and again in last year's World Cup quarter-final, made no impact on Saturday, while lock Steve Borthwick seems to be captain in name only after another failure in the "aura test."
Adding bite, menace and physicality are easier said than done but it is exactly that sort of leadership by example that Johnson, with no coaching experience, was brought in to provide.
What will be much tougher will be how he and his coaching team set about training the players to use the chances they do create, not a skill that can be passed on with a loud voice or stern look.
"We had the pace, there were lots of mismatches out there but we didn't see them or exploit them," Johnson said.
"The back three will be frustrated not to have got the ball when they had space but you've got to see those opportunities and doing it in the heat of the battle is what it's all about."
Attack coach Brian Smith must have been tearing his hair out as England wasted a series of opportunities by running straight and hard instead of looking wide. And when they did, it was too often the forwards, twice in the form of hooker Lee Mears, who ended up gunning for the corner with the inevitable result of being met by an Australian cover tackle.
Despite England's failure to attain their expected superiority in a messy scrum battle and with Australia bossing the lineout, they did manage to generate a huge amount of possession.
The match statistics gave them 64 percent with a 67 percent share of territory. With the Wallabies forced to make 159 tackles to the 56 of England, the hosts were certainly in position to attack.
However, only when flyhalf Danny Cipriani cut loose on a couple of occasions did England actually look dangerous and their only try came from number eight Nick Easter after a forward shove.
The flyhalf had a mixed day, with some horrible goalkicking and an ill-advised, poorly executed drop-goal attempt just when England were getting up some steam.
Opposite number Matt Giteau kicked beautifully, landing seven of eight goalkicks, and was a calm, efficient orchestrator.
Cipriani, 21 and still finding his feet after his lengthy injury lay-off, will no doubt be offered sage advice to follow Giteau's example and not try to push things too quickly.
However, he remains a key part of Johnson's new England and with his ability to cut through the best of defences will hopefully be encouraged to continue with his natural game.
(Editing by John Mehaffey)


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