How a Loophole Benefits GE in Bank Rescue

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Industrial Giant Becomes Top Recipient in Debt-Guarantee Program

Jeff Gerth and Brady Dennis
June 29, 2009 - The Washington Post and ProPublica

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General Electric, the world's largest industrial company, has quietly become the biggest beneficiary of one of the government's key rescue programs for banks.

At the same time, GE has avoided many of the restrictions facing other financial giants getting help from the government.

The company did not initially qualify for the program, under which the government sought to unfreeze credit markets by guaranteeing debt sold by banking firms. But regulators soon loosened the eligibility requirements, in part because of behind-the-scenes appeals from GE.

As a result, GE has joined major banks collectively saving billions of dollars by raising money for their operations at lower interest rates. Public records show that GE Capital, the company's massive financing arm, has issued nearly a quarter of the $340 billion in debt backed by the program, which is known as the Temporary Liquidity Guarantee Program, or TLGP. The government's actions have been "powerful and helpful" to the company, GE chief executive Jeffrey Immelt acknowledged in December.

GE's finance arm is not classified as a bank. Rather, it worked its way into the rescue program by owning two relatively small Utah banking institutions, illustrating how the loopholes in the U.S. regulatory system are manifest in the government's historic intervention in the financial crisis.

The Obama administration now wants to close such loopholes as it works to overhaul the financial system. The plan would reaffirm and strengthen the wall between banking and commerce, forcing companies like GE to essentially choose one or the other.

"We'd like to regulate companies according to what they do, rather than what they call themselves or how they charter themselves," said Andrew Williams, a Treasury spokesman.

GE's ability to live in the best of both worlds -- capitalizing on the federal safety net while avoiding more rigorous regulation -- existed well before last year's crisis, because of its unusual corporate structure.

Banking companies are regulated by the Federal Reserve and not allowed to engage in commerce, but federal law has allowed a small number of commercial companies to engage in banking under the lighter hand of the Office of Thrift Supervision. GE falls in the latter group because of its ownership of a Utah savings and loan.

Unlike other major lenders participating in the debt guarantee program, including Bank of America, Citigroup and J.P. Morgan Chase, GE has never been subject to the Fed's stress tests or its rules for limiting risk. Also unlike firms that have received bailout money in the Troubled Assets Relief Program, or TARP, GE is not subject to restrictions such as limits on executive compensation.

The debt guarantee program that GE joined is administered by the Federal Deposit Insurance Corp., which was reluctant to take on the new mission, according to current and former officials who were not authorized to speak publicly. The FDIC also initially resisted expanding the pool of eligible companies, fearing it would add more risk to the program, the officials said.

Despite those misgivings, there have been no defaults in the loan guarantee program. It has helped buoy confidence in the credit markets and enabled vital financial firms to raise cash even during the darkest days of the economic crisis. In addition, the program has raised more than $8 billion in fees.

"The TGLP program has been a moneymaker for us," FDIC chairman Sheila C. Bair has said. "So I think there have been some benefits to the government and the FDIC."

For its part, GE said that it properly applied for and qualified for the program. "We were accepted on the merits of our application," company spokesman Russell Wilkerson said.
The Cash Cow

The current good fortune of General Electric, ranked by Forbes as the world's largest company, has roots in the Great Depression, when it created a consumer finance arm so that cash-starved families could buy its appliances.

What grew from those beginnings is now a powerful engine of profit, accounting for nearly half of its parent's net earnings in the past five years. GE may be better known for light bulbs and home appliances, but GE Capital is one of the world's largest and most diverse financial operations, lending money for commercial real estate, aircraft leasing and credit cards for stores such as Wal-Mart. If GE Capital were classified as a banking company, it would be the nation's seventh largest.

Unlike the banking giants, GE Capital is part of an industrial company. That allows GE to offer attractive financing to those who buy its products.

At the height of last fall's financial crisis, GE's cash cow became a potential liability. As credit markets froze, analysts feared that GE Capital was vulnerable to losing access to cheap funding -- largely commercial paper, or short-term corporate IOUs sold to large investors.

Company officials projected confidence. "While GE Capital is not immune from the current environment," Immelt said in October, "we continued to outperform our financial-services peers." Behind the scenes, they urgently sought a helping hand for GE Capital. One key hope was a rescue plan taking shape at the FDIC.

The program emerged during a hectic weekend last October as regulators scrambled to announce a series of rescue efforts before the markets opened.

They found a legal basis for the program in a 1991 law: If a faltering bank posed "systemic risk," then the FDIC, the Fed, the Treasury secretary and the president could agree to give the FDIC more authority to rescue a failing institution. The financial regulators applied the statute broadly, so it would cover the more than 8,000 banks in the FDIC system.

The FDIC hurried to approve the program Oct. 13.

"This was crisis management on steroids," said a person familiar with the process. "A lot was made up on the fly."

The author of the systemic-risk provision, Richard Carnell, now a law professor at Fordham University, says it was intended to apply to a single institution, and that in their rush to find legal footing for unprecedented new programs, regulators "turned the statute on its head."

The FDIC launched the program Tuesday, Oct. 14, the same day Treasury officials announced large capital infusions into nine of the country's banking giants under TARP. That day, the FDIC also expanded its deposit guarantees to a broader range of accounts.

Within days, the FDIC held conference calls with bankers to explain the program. Agency officials explained that not all companies that owned banks were eligible. "The idea is not to extend this guarantee to commercial firms," David Barr, an FDIC spokesman, said during one of the calls.
A Broader Program

GE was watching closely. Though GE Capital owned an FDIC-insured savings and loan and an industrial loan company, they accounted for only 3 percent of GE's assets. Company officials concluded that GE couldn't meet the program's eligibility requirements.

So the company requested that the program "be broadened," GE's Wilkerson said. GE's main argument was fairness: The FDIC was trying to encourage lending, and GE Capital was one of the country's largest business lenders.

GE deployed a team of executives and outside attorneys, including Rodgin Cohen, a banking expert with the New York firm Sullivan & Cromwell.

"GE was among the parties that discussed this with the FDIC," along with the Treasury and Fed, according to FDIC spokesman Andrew Gray. He said the details about eligibility "had not been specifically addressed" in the beginning.

Citigroup, the troubled banking giant, also was pressing for an expansion of the FDIC program. Though Citigroup was included in the debt guarantee program, its main finance arm, Citigroup Funding, appeared ineligible. Fed Vice Chairman Donald L. Kohn wrote to the FDIC's Bair on Oct. 21, arguing that debt issued by Citigroup Funding should be covered "as if it were issued directly by Citigroup, Inc."

Two days later, the FDIC announced a new category of eligible applicants -- "affiliates" of an FDIC-insured institution. Bair explained that "there may be circumstances where the program should be extended" to keep credit markets flowing. That meant "certain otherwise ineligible holding companies or affiliates that issue debt" could apply, she said.

GE Capital now was eligible.

Raising Billions

GE Capital won approval to enter the FDIC program in mid-November with support from its regulator, the Office of Thrift Supervision. The company used the government guarantee to raise about $35 billion by the end of 2008. By the end of the first quarter of 2009, the total reached $74 billion, helping to cover the company's 2009 funding needs and about $8 billion of its projected needs for 2010.

Despite government support, GE lost its Triple-A rating for the first time in decades this year and was forced to sharply cut its dividend. But the outlook could have been much worse.

The debt guarantee program has "been of critical importance" to the fiscal health of GE Capital, said Scott Sprinzen, who evaluates GE's finance arm for the Standard & Poor's credit-rating company. He said the FDIC program enabled GE to "avoid an exorbitant price" for its debt late last year.

GE has not disclosed how much the company has saved because of TLGP backing.

Like other companies in the program, GE pays the FDIC fees to use the guarantees -- a little more than $1 billion so far. But as Bair explained to bankers last fall, the fees, while "healthy," are "far below certainly what the cost of credit protection is now in the market."

Not every finance company has had that peace of mind. One of GE's competitors in business lending markets, CIT Group, a smaller company, has had a harder time raising cash. It has been unable to persuade the FDIC to allow it into the debt-guarantee program, at least in part because of its lower credit ratings. A recent Standard & Poor's analysis cited CIT's "inability to access TLGP" as a factor in the company's declining financial condition.
The 'Cliff' Ahead

Two weeks ago, the Obama administration said it would seek to eliminate the Office of Thrift Supervision and force companies like GE to focus on commerce or banking, but not both. That could require the industrial giant to spin off GE Capital.

Last week, Immelt said GE had no intention of doing that. "GE is and will remain committed to GE Capital, and we like our strategy," he said in a memo to staff.

In its proposal to overhaul financial regulation, the Treasury Department pointed out that some firms operating under the existing rules, including collapsed companies such as American International Group, "generally were able to evade effective consolidated supervision and the long-standing policy of separating banking from commerce."

GE's Wilkerson said the company generally supports regulatory reform but thinks that it should be permitted to retain its structure. "Bank reform has historically included grandfathering provisions upon which investors have relied," he said, "and there is no reason this settled principle should not be followed here." He said the company "didn't have any choice" but to have OTS as its regulator.

The company also objects to the Treasury's proposal to force firms to separate banking and commerce because that issue "had nothing to do with the financial crisis," Wilkerson said.

Wilkerson said GE has remained profitable and avoided some of the exotic financial products that contributed to losses at other institutions. He also said that GE performed an internal stress test this year and found that its capital position was "quite strong by comparison to the banks."

The FDIC has been working to wean financial institutions off the program. The TLGP originally was slated to end in June, but at the Treasury's request the FDIC agreed to extend it until Oct. 31. Some participants have stopped using the program, but GE Capital continues to do so for the overwhelming majority of its debt.

Much of the $340 billion in debt will come due in 2012, the year the FDIC guarantees expire. At that point, known in banking circles as the "cliff," the agency will have to make good if companies such as GE are unable to honor their obligations. FDIC officials say they are comfortable that the agency has collected more than enough money to cover potential losses.

Iraqi Whose Lies Made the Case for War Looks on from Afar

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Martin Chulove
June 29, 2009 - The Guardian/UK

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When the Iraqi who could be considered more responsible than any other for the US invasion six years ago quietly returned last March to the land his lies helped shape, Iraq was entering one of its most stable and promising phases in six years of turmoil

Rafid Ahmed Alwan - otherwise known as Curveball - slipped back into Baghdad after 10 years of exile in Germany.

Before the invasion, Curveball had become the CIA's most valuable source on Iraq's fictitious chemical and biological weapons programme, a man who underscored the White House's push for war through a litany of lies that later claimed the careers of the former secretary of state Colin Powell, and CIA chief George Tenet.

Both were forced to admit they had gone to war partly on the word of a collaborator whom no American agency had even debriefed until one year after Baghdad fell.

Curveball was a trained chemical engineer, who had been taken straight from university to work in a division of Saddam Hussein's intelligence services, known as division four, which dealt with the former dictator's pet projects. That much was true. But he also harboured illusions of grandeur; a life in a new land with riches, unveiled women and a new Mercedes.

The Baghdad he returned to in March must have seemed almost unrecognisable. Curveball stayed with a nephew in Baghdad's north-east who he told he was planning to return for good from Germany, which has continued to offer him sanctuary.

The plump 42-year-old saw none of his old friends or colleagues during his visit; nor did he bother the alumni of Baghdad University of Technology - a campus still reeling from the conduct of its former student.

"Are you here to talk about uncle coming back again?" his nephew asked expectantly last week, believing the Guardian was facilitating Curveball's travel. "He hasn't been gone long and we are expecting him soon."

Had he gone near his old workplace, the Saad State Company for Housing and Construction, Curveball would have found his former colleague Dr Abdul Salam Jeber at his desk. He agreed to talk for the first time about his three months in CIA custody, which he now knows were caused by Curveball, a man he barely knew, but never trusted.

Two months after Baghdad fell, Jeber was approached by his boss who told him a group of Americans wanted to meet him. At the time, the American military was scanning Iraq intensively, looking for proof of a chemical and biological weapons programme. They were building their case on the word of Iraqi collaborators who had filled in the dots when United Nations weapons inspectors could not.

There were about six high value informants, used by the US and Britain, none more so than Curveball.

As the ultimately fruitless search intensified, Curveball remained under the protection of his German handlers, who drip-fed reports to the CIA throughout the lead-up to the invasion and the increasingly desperate months that followed.

Their man was sticking to his story. He had provided highly detailed and technically specific information about several facilities around Iraq that apparently masqueraded as agricultural plants. Jeber worked at one of them, the al-Hakem plant, south-west of Baghdad.

"They were expecting to find information about fermentation projects for bacterial weapons. I was the chief of the fermentation section of the company at the time," he said. "I know exactly what all the facilities were used for and there was no dual purpose for any of them.

"The Americans interrogating me didn't understand that if a project like that was to be started, a minimum of 200 people would know about it; there would be technical reports, chemical process designs, mechanical design, installation, then operation. Any one of the 800 employees in Saad Company may well have known about it."

Jeber was moved around Iraq from American-run prisons at Baghdad airport, to Camp Bucca near the Kuwaiti border, desert tents nearby, Abu Ghraib, and a small room in one of Saddam Hussein's over-run palaces. He estimates he was interrogated at least 50 times - always the same questions.

He was blindfolded and sleep-deprived for days then enticed with fruits and family visits. It was a classic counter-espionage routine designed to break defences that didn't exist.

"They said I had signed an agreement not to disclose information to foreigners, which is totally true. We all had to do that," he said.

"I now know that the 15 July date they kept talking about was a date in which Rafid had told them about an important moment in the so-called dual purpose facility. They also asked me about the three tucks that he talked about."

Jeber was given $1,000 and released in September 2003. Within eight months Tenet and Powell had resigned. He is, however, satisfied at a serendipitous achievement that he lays at Curveball's feet. "It was very important to get rid of Saddam," he said. "I never expected he would be removed from Iraq.

Should Curveball return, he faces a highly uncertain future in Iraq. Ba'athist militias still see him as an enemy. His friends seem to have largely disowned him and his family has scattered to the four winds. The wife he abandoned when he fled to Germany will have nothing to do with him. Tracked down at her home in Baghdad, she sighed and, holding her three-year-old son said: "My life with him was lie after lie after lie."

Betraying the Planet

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Paul Krugman
June 28, 2009 - The New York Times

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So the House passed the Waxman-Markey climate-change bill. In political terms, it was a remarkable achievement.

But 212 representatives voted no. A handful of these no votes came from representatives who considered the bill too weak, but most rejected the bill because they rejected the whole notion that we have to do something about greenhouse gases.

And as I watched the deniers make their arguments, I couldn't help thinking that I was watching a form of treason — treason against the planet.

To fully appreciate the irresponsibility and immorality of climate-change denial, you need to know about the grim turn taken by the latest climate research.

The fact is that the planet is changing faster than even pessimists expected: ice caps are shrinking, arid zones spreading, at a terrifying rate. And according to a number of recent studies, catastrophe — a rise in temperature so large as to be almost unthinkable — can no longer be considered a mere possibility. It is, instead, the most likely outcome if we continue along our present course.

Thus researchers at M.I.T., who were previously predicting a temperature rise of a little more than 4 degrees by the end of this century, are now predicting a rise of more than 9 degrees. Why? Global greenhouse gas emissions are rising faster than expected; some mitigating factors, like absorption of carbon dioxide by the oceans, are turning out to be weaker than hoped; and there's growing evidence that climate change is self-reinforcing — that, for example, rising temperatures will cause some arctic tundra to defrost, releasing even more carbon dioxide into the atmosphere.

Temperature increases on the scale predicted by the M.I.T. researchers and others would create huge disruptions in our lives and our economy. As a recent authoritative U.S. government report points out, by the end of this century New Hampshire may well have the climate of North Carolina today, Illinois may have the climate of East Texas, and across the country extreme, deadly heat waves — the kind that traditionally occur only once in a generation — may become annual or biannual events.

In other words, we're facing a clear and present danger to our way of life, perhaps even to civilization itself. How can anyone justify failing to act?

Well, sometimes even the most authoritative analyses get things wrong. And if dissenting opinion-makers and politicians based their dissent on hard work and hard thinking — if they had carefully studied the issue, consulted with experts and concluded that the overwhelming scientific consensus was misguided — they could at least claim to be acting responsibly.

But if you watched the debate on Friday, you didn't see people who've thought hard about a crucial issue, and are trying to do the right thing. What you saw, instead, were people who show no sign of being interested in the truth. They don't like the political and policy implications of climate change, so they've decided not to believe in it — and they'll grab any argument, no matter how disreputable, that feeds their denial.

Indeed, if there was a defining moment in Friday's debate, it was the declaration by Representative Paul Broun of Georgia that climate change is nothing but a "hoax" that has been "perpetrated out of the scientific community." I'd call this a crazy conspiracy theory, but doing so would actually be unfair to crazy conspiracy theorists. After all, to believe that global warming is a hoax you have to believe in a vast cabal consisting of thousands of scientists — a cabal so powerful that it has managed to create false records on everything from global temperatures to Arctic sea ice.

Yet Mr. Broun's declaration was met with applause.

Given this contempt for hard science, I'm almost reluctant to mention the deniers' dishonesty on matters economic. But in addition to rejecting climate science, the opponents of the climate bill made a point of misrepresenting the results of studies of the bill's economic impact, which all suggest that the cost will be relatively low.

Still, is it fair to call climate denial a form of treason? Isn't it politics as usual?

Yes, it is — and that's why it's unforgivable.

Do you remember the days when Bush administration officials claimed that terrorism posed an "existential threat" to America, a threat in whose face normal rules no longer applied? That was hyperbole — but the existential threat from climate change is all too real.

Yet the deniers are choosing, willfully, to ignore that threat, placing future generations of Americans in grave danger, simply because it's in their political interest to pretend that there's nothing to worry about. If that's not betrayal, I don't know what is.

Foreclosure Fiasco

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Robert Scheer
June 24, 2009 - Truthdig

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It's not working. The Bush-Obama strategy of throwing trillions at the banks to solve the mortgage crisis is a huge bust. The financial moguls, while tickled pink to have $1.25 trillion in toxic assets covered by the feds, along with hundreds of billions in direct handouts, are not using that money to turn around the free fall in housing foreclosures.

As The Wall Street Journal reported Tuesday, "The Mortgage Bankers Association cut its forecast of home-mortgage lending this year by 27% amid deflating hopes for a boom in refinancing." The same association said that the total refinancing under the administration's much ballyhooed Home Affordable Refinance Program is "very low."

Aside from a tight mortgage market, the problem in preventing foreclosures has to do with homeowners losing their jobs. Here again the administration, continuing the Bush strategy, is working the wrong end of the problem. Although President Obama was wise enough to at least launch a job stimulus program, a far greater amount of federal funding benefits Wall Street as opposed to Main Street.

State and local governments have been forced into draconian budget cuts, firing workers who are among the most reliable in making their mortgage payments--when they have jobs. Yet the Obama administration won't spend even a small fraction of what it has wasted on the banks to cover state shortfalls.

California couldn't get the White House to guarantee $5.5 billion in short-term notes to avert severe cuts in state and local payrolls, from prison guards to schoolteachers. Compare that with the $50 billion already given to Citigroup, plus an astounding $300 billion to guarantee that institution's toxic assets. Citigroup benefits from being a bank "too big to fail," although through its irresponsible actions to get that large it did as much as any company to cause this mess.

How big a mess? According to the Federal Reserve's most recent report, seven straight quarters of declining household wealth have left Americans $14 trillion poorer. Many who thought they were middle class have now joined the ranks of the poor. Food banks are strapped and welfare rolls are dramatically on the rise, as the WSJ reports, with a 27 percent year-to-year increase in Oregon, 23 percent in South Carolina and 10 percent in California. And you have to be very poor to get on welfare, thanks to President Clinton's so-called welfare reform, which he signed into law before he ramped up the radical deregulation of the financial services industry, enabling our economic downturn.

Citigroup, the prime mover for ending the sensible restraints of the Glass-Steagall Act of 1933, is now a pathetic ward of the state. But back in the day President Clinton would tour the country with Citigroup founder Sandy Weill touting the wonderful work that Weill and other moguls were doing to invest in economically depressed communities. It wasn't really happening then, and now millions of folks in those communities have seen their houses snatched from them as if they were just pieces in a game of Monopoly that Clinton and his fat-cat buddy were playing.

Once Weill got the radical deregulation law he wanted, he issued a statement giving credit: "In particular, we congratulate President Clinton, Treasury Secretary Larry Summers, NEC [National Economic Council] Chairman Gene Sperling, Under Secretary of the Treasury Gary Gensler, Assistant Treasury Secretaries Linda Robertson and Greg Baer."

Summers is now Obama's top economic adviser, Sperling has been appointed legal counselor at Treasury, and Gensler, a former partner in Goldman Sachs, is head of the Commodity Futures Trading Commission, which he once attempted to prevent from regulating derivatives when it was run by Brooksley Born. Robertson worked for Summers in pushing through the Commodity Futures Modernization Act, which freed the derivatives market from adult supervision and contained the "Enron Loophole," permitting that company to go wild. Robertson then became the top Washington lobbyist for Enron and was recently appointed senior adviser to Fed Chair Ben S. Bernanke. Baer went to work as a corporate counsel for Bank of America, which announced his appointment with a press release crediting him with having "coordinated Treasury policy" during the Clinton years in getting Glass-Steagall repealed. As a result of deregulation, B of A too spiraled out of control and ended up as a
beneficiary of the Treasury's welfare program.

Why was I so naive as to have expected this Democratic president to not do the bidding of the banks when the last president from that party joined the Republicans in giving the moguls everything they wanted? Please, Obama, prove me wrong.

Foreclosure Fiasco Continues: The Bush-Obama Strategy of Throwing Billions at Banks Doesn't Work

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Robert Scheer
June 27, 2009 - Truthdig

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It's not working. The Bush-Obama strategy of throwing trillions at the banks to solve the mortgage crisis is a huge bust. The financial moguls, while tickled pink to have $1.25 trillion in toxic assets covered by the feds, along with hundreds of billions in direct handouts, are not using that money to turn around the free fall in housing foreclosures.

As The Wall Street Journal reported Tuesday, "The Mortgage Bankers Association cut its forecast of home-mortgage lending this year by 27% amid deflating hopes for a boom in refinancing." The same association said that the total refinancing under the administration's much ballyhooed Home Affordable Refinance Program is "very low."

Aside from a tight mortgage market, the problem in preventing foreclosures has to do with homeowners losing their jobs. Here again the administration, continuing the Bush strategy, is working the wrong end of the problem. Although President Obama was wise enough to at least launch a job stimulus program, a far greater amount of federal funding benefits Wall Street as opposed to Main Street.

State and local governments have been forced into draconian budget cuts, firing workers who are among the most reliable in making their mortgage payments--when they have jobs. Yet the Obama administration won't spend even a small fraction of what it has wasted on the banks to cover state shortfalls.

California couldn't get the White House to guarantee $5.5 billion in short-term notes to avert severe cuts in state and local payrolls, from prison guards to schoolteachers. Compare that with the $50 billion already given to Citigroup, plus an astounding $300 billion to guarantee that institution's toxic assets. Citigroup benefits from being a bank "too big to fail," although through its irresponsible actions to get that large it did as much as any company to cause this mess.

How big a mess? According to the Federal Reserve's most recent report, seven straight quarters of declining household wealth have left Americans $14 trillion poorer. Many who thought they were middle class have now joined the ranks of the poor. Food banks are strapped and welfare rolls are dramatically on the rise, as the WSJ reports, with a 27 percent year-to-year increase in Oregon, 23 percent in South Carolina and 10 percent in California. And you have to be very poor to get on welfare, thanks to President Clinton's so-called welfare reform, which he signed into law before he ramped up the radical deregulation of the financial services industry, enabling our economic downturn.

Citigroup, the prime mover for ending the sensible restraints of the Glass-Steagall Act of 1933, is now a pathetic ward of the state. But back in the day President Clinton would tour the country with Citigroup founder Sandy Weill touting the wonderful work that Weill and other moguls were doing to invest in economically depressed communities. It wasn't really happening then, and now millions of folks in those communities have seen their houses snatched from them as if they were just pieces in a game of Monopoly that Clinton and his fat-cat buddy were playing.

Once Weill got the radical deregulation law he wanted, he issued a statement giving credit: "In particular, we congratulate President Clinton, Treasury Secretary Larry Summers, NEC [National Economic Council] Chairman Gene Sperling, Under Secretary of the Treasury Gary Gensler, Assistant Treasury Secretaries Linda Robertson and Greg Baer."

Summers is now Obama's top economic adviser, Sperling has been appointed legal counselor at Treasury, and Gensler, a former partner in Goldman Sachs, is head of the Commodity Futures Trading Commission, which he once attempted to prevent from regulating derivatives when it was run by Brooksley Born. Robertson worked for Summers in pushing through the Commodity Futures Modernization Act, which freed the derivatives market from adult supervision and contained the "Enron Loophole," permitting that company to go wild. Robertson then became the top Washington lobbyist for Enron and was recently appointed senior adviser to Fed Chair Ben S. Bernanke. Baer went to work as a corporate counsel for Bank of America, which announced his appointment with a press release crediting him with having "coordinated Treasury policy" during the Clinton years in getting Glass-Steagall repealed. As a result of deregulation, B of A too spiraled out of control and ended up as a
beneficiary of the Treasury's welfare program.

Why was I so naive as to have expected this Democratic president to not do the bidding of the banks when the last president from that party joined the Republicans in giving the moguls everything they wanted? Please, Obama, prove me wrong.

.....

Robert Scheer is Editor in Chief of Truthdig and author of a new book, The Pornography of Power: How Defense Hawks Hijacked 9/11 and Weakened America.

New Washing Machine Uses Only 1 Cup of Water

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Alastair Jamieson

June 25, 2009 - The Telegraph (UK)

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An environmentally friendly washing machine developed in Britain that uses only one cup of water to clean clothes could be on sale next year.

The appliance, which could save billions of litres of water a year, has been developed at the University of Leeds.

It uses less than 10 percent of the water of conventional machines and 30 percent less energy by replacing most of the water with thousands of tiny reusable plastic beads to attract and absorb dirt under humid conditions.

Xeros, the company behind the technology, will start selling the machine to commercial customers such as hotels and dry cleaners before taking the idea to ordinary household consumers
Only a small amount of water and detergent is needed to dampen the clothes, loosen stains and create the water vapour that allows the beads to work. After the cycle is finished, the beads fall through a mesh in the machine's drum and can be re-used up to a hundred times.

Xeros has signed a deal with GreenEarth Cleaning, an environmentally friendly dry-cleaning business, to sell the technology across North America.

Chief executive Bill Westwater said: "We've got an eye on the consumer but it will take time and we hope commercial success could act as a springboard to move into the consumer market.

"We've been very encouraged by the response from people, but the proof is in the pudding and that means putting a machine into someone's operations and justifying the savings."

The technology has been developed by Professor Stephen Burkinshaw of the University of Leeds and funded by IP Group, an intellectual property commercialisation group.

Right-Wing Israeli Extremists Using Gay Rights to Justify Incursions Into Palestinian Villages

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Gay Pride marches are being exploited by rabidly homophobic extremists who plan to parade through Arab towns, asserting their "Jewish pride."

Marsha B. Cohen 
June 27, 2009 - AlterNet

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Gay Pride parades in Tel Aviv and Jerusalem are being invoked as the legal basis for ultra-right wing Jewish extremists to march through 15 Israeli Arab communities this weekend, waving Israeli flags and asserting their "Jewish pride."

Organizers of the 11th annual Tel Aviv Pride Parade estimate as many as 30,000 people may have participated in the June 14 march through Israel's largest city and cultural capital. Although their unions won't be recognized by the state of Israel, five gay couples exchanged rings and took commitment vows in a group ceremony on Gordon Beach, adding a new dimension to the event.

A smaller and more subdued hourlong march was scheduled to take place in Jerusalem between 5 and 6 p.m. on June 25, followed by a low-key rally.

These demonstrations of gay rights in Israel are being exploited by rabidly homophobic, ultra-right wing Jewish extremists, who plan to parade through Arab cities, towns and villages in the next few days, asserting their "Jewish pride."

Knesset member (parliamentarian) Michael Ben-Ari of the National Union party, and provocateurs Baruch Marzel and Itamar Ben Gvir are framing and justifying their march as retaliation for the desecration of Jerusalem by gays.

"This year, the police have taken the unprecedented step of allowing the parade to take place in the center of the city," they pointed out. "We will use this precedent to call for our marches to take place in the center of Arab cities." 

In some ways, the marches can be compared to Ku Klux Klan rallies in the downtown streets of major American cities, or neo-Nazis parading through the Jewish neighborhood of Skokie, Ill., in the late 1970s. In the U.S., such events have often put civil libertarians in a painfully awkward position, forcing them to choose whether to defend the constitutional rights of free speech and assembly -- even for unpopular causes and hate groups -- or to protect vulnerable minorities from calculated expressions of political extremism and violence. The dilemma of democracy, after all, is that the principle of free expression depends upon, and makes possible, the right to express beliefs that decry democratic values.

But Israeli Arabs have no recognized right of free speech or peaceful assembly. More often than not, they are legally constrained (on the basis of "national security considerations") from holding rallies, let alone protests, in their own towns and villages, let alone marching through Jewish towns and neighborhoods.  Although Israel touts itself as, and is widely considered to be, a "Western-style democracy," its citizens have no uniformly recognized "constitutional rights," since Israel has no constitution.

The expansion of Arab cities, towns and villages within "green line" Israel -- the boundaries of the state between 1948 and 1967 -- is held firmly in check, in contrast to Israeli  settlements in the West Bank, which apparently need to keep doubling in size to accommodate their "natural growth." 

Israeli Arabs find it both difficult and expensive to obtain the necessary building permits from Israeli zoning officials to modify their homes when their children marry and cannot find their own homes nearby. Any house (particularly if owned by an Arab) that is built, remodeled or expanded without a proper permit is subject to demolition by authorities.

The "Jewish pride" marchers claim the right to assist authorities in discovering and dealing with "zoning" violations in Arab communities.

Gays, on the other hand, do have recognized rights of speech and assembly in Israel, and the "Jewish pride" activists are determined to both undermine and  arrogate them.

"The law needs to be the same for everyone," Ben Ari is quoted in several Israeli news sources as saying. "Freedom of speech isn't just for members of the Open House (gay organization) and the radical left. It's our right to march and to examine the illegal construction in those communities."

Ironically, many Muslim and Christian leaders in Israel have joined Orthodox and ultra-Orthodox Jewish rabbis in opposing gay pride demonstrations, especially in the "Holy City."  This makes any asserted parallel between the "Jewish pride" and "gay pride" movements particularly bizarre, as well as Machiavellian and meretricious.

In summer 2006, the Jerusalem Post reported that threats of violence by ultra-Orthodox groups and these same extremists had caused authorities to consider  postponement of the Jerusalem Gay Pride Parade, scheduled for Aug. 6, for security reasons.

Marzel had called for a "holy war" against homosexuals" and threatened that a stabbing at the pride celebration in Jerusalem the previous year would be nothing compared to the violence that would ensue if the parade took place. Ben-Gvir declared that "Jerusalem is not Sodom," and "He who is not blotted out can expect punishment from the heavens."

In response, State Prosecutor Eranger Ettinger warned, "The price Israeli society will pay in the case of surrender to violence will be difficult to bear."

Nevertheless, the event was put on hold until Nov. 10. When it took place, protests from ultra-Orthodox Jews and political extremists wounded seven policemen and a still-undetermined number of the thousands of protesters, but there were no fatalities.

Last December, a planned march through the Arab town of Umm al-Fahm, a city of about 43,000 almost exclusively Arab residents, was organized by the National Union party. It was postponed when police received intelligence that rioting and violence were likely to break out if it took place. Arab and Jewish community leaders expressed relief at the police decision, although they would have preferred the outright cancellation of the event, rather than its postponement.

At the time, Umm al-Fahm's Deputy Mayor Mostafa Mahamid told the Jerusalem Post that such a march "was liable to destroy the fabric of a common life" that Arab and Jewish citizens have created in the area. "It's a bad feeling for our residents to have this kind of provocation," he said.

Marzel, an American-born adherent of the late Meir Kahane who lives in the Tel Rumeida settlement near Hebron, insisted he would petition the High Court of Justice, which had approved the march in October, to reverse the police decision.

"The government, the police and the leftists have proven that the rule of law does not interest them," he complained. "It doesn't interest them what the High Court of Justice says; they're only interested in what we are doing ... Despite everything, the march has to take place." The march was postponed.

In February 2009, Marzel arranged to be designated the elections supervisor of Umm al-Fahm and boasted he would "purify" the vote of the Arab town. Local leaders protested Marzel's appointment as a poll watcher, and Israel's Attorney General Menachem Mazuz sent an emergency petition to the Central Elections Commitee to replace Marzel on grounds that his presence could provoke a riot in the city.

The attorney general's petition was denied as "premature," despite concerns about security and public order expressed by Yuval Diskin, who heads the Shin Bet (Israel's equivalent of the FBI).

At the last moment, as Marzel approached Umm al-Fahm with a cohort of thugs, the Elections Committee agreed to replace Marzel with a representative of another small right-wing party because of security concerns, calming tensions among Umm al-Fahm's residents. Marzel was furious. He accused the Elections Committee of yielding to "the Arab sector's violence, blackmail and treachery," and demanded that the ballots of all the city's voters be disqualified.

The postponed parade through Umm el-Fahm took place on March 24. Roughly 100 ultra-right-wing Jewish nationalists, waving flags and singing "Am Yisrael chai" ("the nation of Israel lives"), made their way through Umm el-Fahm in under an hour, protected by police.

Hundreds of Umm al-Fahm residents gathered in the streets and watched from their balconies and rooftops. Some masked their faces with head scarves, knowing that Israeli security agents had been planted in the crowds. Some waved Palestinian flags, and a few began throwing rocks. Police used tear gas and stun grenades to subdue them. Fifteen Umm al-Fahm residents and about the same number of police officers -- but no marchers -- were reported wounded. Ten Arabs were arrested.

This weekend, the far-right activists plan a reprise of their parade through Umm el-Fahm on a far grander scale. They plan to march through 14 other Arab municipalities and neighborhoods, including Abu Isa, Abu Rukik, Araara, Baka el-Arabiya, el-Gharbiya, Kfar Lakiya, Musraifa, Nazareth, Sakhnin and Taibe. Israeli police will again provide security for them.

Instigation of violence among Israeli Arabs by Jewish ultra-nationalists comes at a particularly sensitive time in terms of Middle East geopolitics, with implications that, for the moment, are going largely unnoticed.

Since 1948, Israeli Arabs have been second-class Israeli citizens, but citizens nonetheless. Making up 20 percent of Israel's present population, they have good reason to fear the "two-state solution" being embraced by Prime Minister Benjamin Netanyahu and Foreign Minister Avigdor Lieberman.

Lieberman has openly declared that the "Palestinian state" he has in mind is a noncontiguous virtual entity that will solve Israel's "demographic problem."  Israeli sovereignty over the residents of the major settlement blocs of the West Bank and Gaza could be traded for Palestinian sovereignty over Arabs who live in the cities and towns inside Israel's pre-1967 boundaries.

Lieberman touts this as a win-win for all parties concerned. Arabs inside post-1948, pre-1967 Israel (without necessarily being asked what future they might choose for themselves) stay in their homes and receive "self-determination" insofar as they would be subject to Palestinian, rather than Israeli governance.

Their cities, towns and villages, while remaining within the boundaries of the state of Israel, would become Palestinian cantons, geographically encircled by an Israel, of which they would no longer be citizens and which no longer would accept any responsibility for their infrastructure or for them.

Fareed Zakariah pointed out in Newsweek in February:

As fiercely as he [Lieberman] denounces the Palestinian militants of Hamas and Hezbollah, his No. 1 target is Israel's Arab minority, which he has called a worse threat than Hamas. He has proposed the effective expulsion of several hundred thousand Arab citizens by unilaterally redesignating some northern Israeli towns as parts of the Palestinian West Bank. Another group of several hundred thousand could expect to be stripped of citizenship for failing to meet requirements such as loyalty oaths or mandatory military service (from which Israel's Arabs are currently exempt).

Israeli Arabs may soon lose the option of pledging allegiance to the Jewish state. Whether they agree or not, they may find themselves amputated from the Israeli body politic and attached to a Palestinian entity that is not now, and may never be, a real state.

Meanwhile, a violent response to extremist provocations this weekend will only confirm the Israeli -- and "pro-Israel" image of Israeli Arabs as violent and disloyal, resistant to responsible Jewish governance and rejecting the notion of Israel as a state whose Jewish citizens have the right to affirm their "Jewish pride."

.....

Marsha B. Cohen, Ph.D., teaches International Relations of the Middle East and North Africa at Florida International University's School of International and Public Affairs in Miami.

TOON

Western Aid Declines, Financial Bailouts Mount

Over three billion people - almost half the world, live on less than $2.50 a day.

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Thalif Deen
June 26, 2009 - Inter Press Service

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As the world's poorer nations warn about the gravity of the global financial crisis on their fragile economies, the United Nations has exposed the hypocrisy of Western donors who cry poverty even while they raise trillions of dollars to rescue their beleaguered financial institutions.

Secretary-General Ban Ki-moon has warned that the current financial meltdown should not be an excuse to slash development aid or marginalise developing nations, specifically the world's 49 least developed countries (LDCs) - ranging from Bhutan and Benin to Sierra Leone and Solomon Islands.

The United Nations Millennium Campaign, which is battling to help eradicate extreme poverty and hunger worldwide, points out that since the inception of overseas development assistance almost 50 years ago, donor countries have given some 2.0 trillion dollars in aid.

And yet over the past year, 18 trillion dollars has been found globally to bail out banks and other financial institutions.

"The stark contrast between the money dispersed to the world's desperately poor after 49 years of painstaking summits and negotiations and the staggering sums found virtually overnight to bail out the creators of the global economic crisis makes it impossible for governments to any longer claim that the world can't find the money to help the 50,000 people who are dying of extreme poverty every day", says Salil Shetty, director of the Millennium Campaign.

The amount of total aid over the past 49 years represents just 11.0 percent of the money found for financial institutions in one year, he added.

Addressing the three-day U.N. summit on the global financial crisis Wednesday, the secretary-general reinforced the same argument.

The annual aid to the crisis-stricken continent of Africa, he said, was at least 20 billion dollars below the promises made by the leaders of the industrial world in Gleneagles, Scotland back in 2005.

"Surely, if the world can mobilise more than 18 trillion dollars to keep the financial sector afloat, it can find more than 18 billion dollars to keep commitments to Africa," Ban said.

But would it?

The challenge to the industrial world will come up once again at a summit meeting of the G8 countries - the United States, Britain, France, Italy, Germany, Japan, Canada and Russia - in L'Aquila, Italy Jul. 8-10.

"We need clear priorities," Ban told the U.N. summit. "That is why I have just sent a letter to G8 leaders urging concrete commitments and specific action to renew our resolve."

A 16-page outcome document, to be adopted by political leaders Friday, says the evolving crisis, which began within the world's major financial centres, has spread throughout the global economy, causing severe social, political and economic impacts.

"This crisis is negatively affecting all countries, particularly developing countries, and threatening the livelihoods, well-being and development opportunities of millions of people," the draft says.

The bottom line: millions of people all over the world are losing their jobs, their income, their savings and their homes.

The document specifically says that developing countries, "which did not cause the global economic and financial crisis, are nonetheless severely affected by it."

The Food and Agriculture Organisation (FAO) says the economic meltdown has resulted in 100 million more people going hungry, with the total number of the world's starving population reaching over one billion this year.

The World Bank projects a finance gap of up to 700 billion dollars, desperately needed by developing nations, with the possibility of a "lost generation", resulting in added deaths of 1.5 to 2.8 million infants by 2015.

Asked why rich countries keep ignoring the pleas of the world's poorer nations while they bail out banks and other financial institutions, Shetty of the U.N. Millennium Campaign told IPS: "The leaders in rich countries don't face any short-term political consequences by not acting on the needs and aspirations of poor people living in poor countries."

He said the only long-term solution is to build public support through sustained public education on these issues in rich countries.

"The decision-makers in rich countries don't see the same self-interest and mutuality as they now see in climate change, swine flu/pandemics, the so-called war against terror and to a lesser extent in trade on which the need for multilateral action has become painfully clear," he added.

Shetty pointed out they did realise the possible consequences in the case of Eastern Europe, where they live physically next to poor countries.

"They forget that there is less than 10 miles of water separating Europe from Africa," he noted.

Asked if developing nations, who are now part of G20, have a role to play in convincing their rich partners to respond to the call, Shetty said: "Yes, like climate change the growing economic importance particularly of China has certainly rebalanced the highly asymmetric power relations between rich and poor countries."

The members of the G20 are the finance ministers and central bank governors of 19 countries: Argentina, Australia, Brazil, Canada, China, France, Germany, India, Indonesia, Italy, Japan, Mexico, Russia, Saudi Arabia, South Africa, South Korea, Turkey, the United Kingdom and the United States of America, plus the European Union.

Shetty said: "The challenge we now face is to make sure that the BRICs (Brazil, India and China) themselves don't forget the 49 least developed countries (LDCs), as they bargain for a better deal for themselves with the richest countries."

"Otherwise, we could be back to the historic game of divide and rule," he stressed.

Shetty also said it is crucial that the emerging nations continue to place the achievement of the Millennium Development Goals (MDGs) at the forefront of their negotiations at the G8 in Italy in two weeks time and the G20 in September in the United States.

U.S. Lawmakers Act to Tame 'Vulture Funds'

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A coalition of African solidarity and debt relief organizations applauded U.S. legislation introduced last week to protect countries from vulture funds -- companies that profit off of the debt of poor nations.           

June 25, 2009 - OneWorld.net

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What's the Story?

The Stop VULTURE Funds Act is a "key step in protecting developing countries from vulture funds," said Nicole Lee, executive director of the TransAfrica Forum, an African American human rights and social justice advocacy organization.

Reintroduced last week into the lower house of Congress, the bill would block U.S. investment funds from purchasing the debt of impoverished countries at reduced rates and then suing the countries to collect astronomical profits. The bill would also limit the amount of interest for which the firms could sue to six percent and require greater transparency during these transactions.

According to Neil Watkins, executive director of the Jubilee USA Network, an alliance of 75 religious denominations, development agencies, and human rights groups, "vulture funds make their profits by deepening the suffering of millions of people in some of the poorest countries in the world. They are stealing the resources that should be invested in education, health, and infrastructure improvement."

Preying on the Poor

Every year, African nations pay approximately $14 billion in debt remunerations to wealthy nations and international financial institutions while receiving less than $13 billion in international aid. Agreements to cancel or reduce debts have enabled states to spend more on much-needed social programs and translated into a higher quality of life for millions of people in developing countries.

Money used to pay back vulture funds is typically rerouted from programs intended to benefit these countries' least privileged citizens.

One report estimates the average potential cost of lawsuits brought against Heavily Indebted Poor Countries' (HIPCs) by vulture funds amounts to 18 percent of spending on health care and education, 59 percent of debt repayments, and 5 percent of budget revenue. A 2007 study by the organization Debt Relief International found that lawsuit costs totaled 52 percent of health and education expenditure in Niger and 98 percent of revenue in Cameroon.

Vulture funds prey on countries that qualify for debt cancellation precisely because their governments have access to money for such programs, writes the TransAfrica Forum.

"Since the vulture fund buys the loan from the creditor, not the debtor, the vulture fund can technically claim payment of the full amount, even if it paid only a fraction of the value," explains Africa Action. Investment funds that pursue vulture activities often do so in great secrecy, by basing their operations in tax havens like the British Virgin Islands and litigating in European and U.S. courts, which they see consider more creditor-friendly and efficient. Moreover, some investment funds -- known as hedge funds -- are exempt from certain regulatory processes and can more easily target indebted countries.

Zambia and Donegal International

In 1979, Zambia purchased agricultural equipment and services from Romania on credit. Shoddy equipment and European farm subsidies, however, prevented the southern African nation from bringing in the revenue necessary to repay the loan.

In 1999, the two countries agreed to liquidate the debt for $3.28 million. But Donegal International, a British Virgin Islands-based fund, moved quickly to purchase the debt from Romania for the liquidation price and then sued the Zambian government in a U.K. court for $55 million seven years later.

The British High Court ordered Zambia to pay $15.4 million to Donegal International, or what amounted to 65 percent of Zambia's savings in debt relief in 2006.

Clipping the Wings of Vulture Funds

"More than two-thirds of the lawsuits brought by vulture funds are adjudicated in U.S. or U.K. courts," explains the TransAfrica Forum. "In the majority of cases, vulture funds sue in courts located in New York, Paris, and London because these courts are viewed as more creditor-friendly and more efficient."

In addition to efforts in the United States, lawmakers in the United Kingdom introduced legislation in May that would allow funds to sue only for the amount they paid for the debt, force funds to disclose a list of their investors, and introduce measures to combat the corruption often involved in these deals.

The U.K.-based Jubilee Debt Campaign is calling on supporters to urge their local representatives to engage in various efforts aimed at ending "the vulture culture."

Similarly, Jubilee USA is encouraging people in the United States to take action against vulture funds by encouraging greater political support for the Stop VULTURE Funds Act currently under consideration in Congress.

Will the 'Dollar Wars' Kill What's Left of the American Dream?

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Countries yoked to America's currency, and therefore its cratering empire, want to kick the dollar to the curb. And that's bad news for the U.S.

Scott Thill
June 26, 2009 - AlterNet

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Here's a terrible joke: An elderly man walks into a bar and says, "I got good news and I got bad news."

"What's the good news?" the bartender asks.

"I stayed out of the stock market, so my retirement dollars are safe."

"What's the bad news?"

"They're dollars."

OK, I said it was a terrible joke. But that may be what the dollar is becoming, now that the critical mass of wartime spending, rampant consumption, hyper-real finance  and environmental collapse has hit the fan.

The hangover from the last three presidential terms, but especially the last two, has taken the American economy down the rabbit hole, with the international monetary system begging for mercy while hitched to its off-the-ralls crazy train. But the ride has stopped, and some countries yoked to America's currency, and therefore its cratering empire, don't want to get back on.

Namely, Brazil, Russia, India and China, loosely termed BRIC by Goldman Sachs economist Jim O'Neill, who is not alone in predicting the four countries' ascendant power, as the United States and the Eurozone fade into the 20th century.

With Brazil and Russia lording over a large share of what's left of the planet's natural gas and oil, and China and India providing a titanic labor force that rivals the intelligence, productivity and regimentation of workers anywhere outside their borders, BRIC is in the house, big time. And it wants a say in what's going on, as Marvin Gaye sang.

What's going on is that the dollar, to which the majority of the planet's economies and currencies are now reliant, has us all by the proverbial balls, and BRIC is screaming about it in the press. Something has to give, it's saying, and that thing is the dollar.

"There is a lot of political and economic posturing involved," Rachel Zimeba, lead analyst at economist Nouriel Roubini's RGE Monitor, explained to AlterNet. "But I think there is substance to it. China has been trying, relatively unsuccessfully, to diversify for a couple of years, which has conflicted with its desire to have undervalued exports. Same thing has happened to countries in the Middle East, which are pegged to the dollar. And we're going to see even more pressure to diversify from these countries to reduce the share of their [dollar] assets.

"They see that the U.S. has a rising debt burden and record financing needs. Over time, they are worried that inflation and a weaker dollar will reduce the value of those assets."

They should be worried. Since the Bush administration took office, the dollar has lost 33 percent of its value. And since the Bushies left office, the dollar has been on autopilot, hovering beneath the pound and euro and jockeying for position with the Canadian dollar for the bronze medal in underperforming currencies, losing or gaining altitude every time a politician from Russia or China slams or praises it in the press. Like the American economy itself, the Humpty Dumpty dollar is wobbling on the fence, hoping reality doesn't hop along and give it a shove.

The good news? It could land softly.

"This is not an overnight thing," Ziemba added. "Same thing goes for these countries' attempts to turn their own currencies into transactional and reserve currencies."

That's reassuring, especially to what's left of those who still have a lot of dollars, as the American unemployment rate rises to levels nearly unseen since World War II. But once you wormhole a bit further into the future, the dollar's fate is much more murky.

"The debate between the inflationists and deflationists is red-hot these days, as the U.S. financial system continues to wobble and the 'real' economy of goods and services staggers," explained Jim Kunstler, author of The Long Emergency, World Made By Hand and the riotously acerbic column "Clusterfuck Nation."  "The fate of the dollar in the short-term depends on which way this really goes. But in the long term, both sides say the dollar is toast."

Helping push America off the debt-soaked cliff it built for itself by hitching its future to hyper-real derivatives and unsustainable deregulation and development is beginning to look less like sacrilege and more like prudent international monetary policy. Whereas in the past, China and Russia's public protestations about the hegemonic corruption of the American empire would have been shooed away like jealous flies, now more countries are joining in the anti-American chorus, even as they shake President Barack Obama's hand and hope openly for a kindler, gentler global village.

What's going on behind the scenes is anybody's guess. But it's probably a good guess that more than a few long knives have been unsheathed. 

"Geopolitically, I suspect there is whispered consensus between our various partners and rivals that the American situation is pretty hopeless,"  Kunstler cracked, "and that they would now all more or less benefit from the diminishment of U.S. power across the board. The Chinese, for instance, must know that we will never again ramp up the orgy of credit spending. Why keep throwing away their wealth to keep us consuming?"   

It's a good question. One of the BRIC members' solutions to the conundrum is to spend more time on their own currencies, as well as those of the beleaguered International Monetary Fund, which has its own currency, called special drawing rights. The SDRs are pegged to a currency basket, containing the U.S dollar, the euro, the yen and the U.K. pound sterling. In other words, the currencies of the 20th century's superpowers. 

BRIC, the purported superpowers of the 21st century, have been buying SDRs like mad lately. When BRIC met in mid-June in the Siberian city of Yekaterinberg, it committed to giving $80 billion to the IMF, with China carrying the lion's share at $50 billion. Add that to the $250 billion that the G20 coughed up in April, and the IMF is quickly becoming the planet's reserve bank of choice. 

"There is a need to make the IMF a true representative of the world's leading economies," Russian Finance Minister Alexei Kudrin asserted in June. "It's not there right now," he said, adding that it would be a decade before what People's Bank of China Governor Zhou Xiaochuan recently called a super-sovereign reserve currency mounted enough of a challenge to displace the dollar.

In the meantime, Russia, China and the other BRIC members are putting their money where they want their mouths to be, which is in the International Monetary Fund's ear. But whether that super-sovereign reserve currency is the SDR is too soon to say.

"The SDR can't handle the load in its current form," Zimeba argued. "You'd need a payment system that accepted the SDR, for one. But where it can grow is in reserve assets, and this upcoming issuance of IMF bonds denominated in SDR will be a significant increase. But SDRs will only be open to governments, not the secondary market where they can be traded, which fails the requirements of convertibility and liquidity.

"Right now, the SDR doesn't have that mechanism. But that can change over time. In the near term, this is a way towards diversification, because the dollar doesn't have a majority share in the SDR."

Kunstler adds: "They're obviously hedging their bets as much as possible. Put yourself in their shoes. They see the U.S. financial system's stupendous swindles, and they know the score. So their interests are strictly tactical and strategic in the interests of their survival. They also surely want to try to insure the continuation of world trade, with or without the U.S. consumer."

Which is why BRIC, and by extension the countries beneath its heel or shaking its hand, are diversifying their dollars and dumping cash into the IMF, where they can attempt to influence the international monetary system in their favor. The United States has so far committed $108 billion, including $5 billion siphoned from the controversial war-funding bill that passed in mid-June.

In addition, it has arranged for the IMF to receive over $500 billion altogether, mostly to prop up zombie European banks that drank too much of the derivatives Kool-Aid. So BRIC has an uphill battle ahead of it. But it's gaining strength, and wants to convert that to IMF say-so.

"They want more significant voting rights in the IMF," Ziemba said. "The money is in exchange for leverage. China has talked in detail about how the over-reliance on the dollar was adding to global instability, creating a situation where the optimal monetary policy for the U.S. is not optimal for countries tacked to the dollar. But it's fairly obvious that, in five to 10 years, the role of these countries in the global economy will only increase. But they also have to figure out how much responsibility they want to take on."

Or can take on. BRIC is ascendant for sure, but it's about to inherit a global economy and environment that is nothing like the respectively stable climates American and European empires have enjoyed over the last few hundred years. From the econopocalypse to climate crisis and beyond, BRIC is quickly going to find its hands full of problems that will doubtlessly dampen its upward surge. Sure, the dollar is toast, but so is Earth's biodiversity and store of natural resources. It's hard to build a superpower on that heap. 

"I think all nations are losing the ability to control events at the global level," Kunstler concluded. "It's a symptom of the crack-up of globalization, per se: A set of transient economic relations that only existed because of special conditions, namely, the final blowout of the cheap energy era. With that over, it's now a mad scramble for each player to survive.

"Observers seem to think that China will become the new global hegemon, but I doubt it. They have problems with water, food, overpopulation and environmental degradation that are much worse than ours. The world is comprehensively headed for a reduced standard of living."

Naval overhaul slides off Russia’s agenda

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Roger N McDermott
Jun 26, 2009 - Asia Times

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The Russian military top brass continues to make officially ambitious and upbeat assessments concerning the navy, mainly alleging that it carries out all "tasks assigned to it".

For example, on June 1, the official Ministry of Defense (MoD) publication Krasnaya Zvezda hailed record tactical exercises of two divisions, naval minesweepers and small anti-submarine warfare (ASW) ships, organized by the Black Sea fleet.

These claims often emanate from the Black Sea fleet information and public relations service, clearly tasked with presenting a positive view of naval activities. For instance, they emphasize that

 

seamen recruited in the draft last autumn participated in recent exercises.

Drafted mainly from Russia's central regions, these latest recruits passed the relevant tests and expressed their desire to serve on surface vessels. "The vessel crews worked skillfully and in a coordinated fashion," said the information service. This was in stark contrast, however, to the reported accidental shelling of a village near St Petersburg on May 28 by a vessel in the Northern fleet.

Other elements of the Russian navy are also praised in official military sources, no doubt in an effort to boost the morale of its personnel. In 2008, the Pacific fleet made high profile visits to foreign ports, and a detachment from the fleet entered the Indian Ocean in May 2009 under command of Captain First Rank Ildar Akhmerov, preparing calls to the seaports of Salalah (Oman) and Manama (Bahrain).

The detachment was formed before its embarkation, in a "manner which would enable it to tackle the tasks which might emerge both in coordination and independently by individual ships". It included the Admiral Panteleyev, a large ASW vessel, Izhora and Irkut tankers and the MB-37 tugboat, and was similar in composition to a group that carried out international anti-piracy tasks earlier in the year. It was essentially tasked with convoying vessels along the so-called security corridor, following which the detachment separated.

The challenges of containing international piracy have also provided opportunities for an enhanced "footprint" by the Russian navy. According to the International Maritime Bureau Piracy Reporting Center, by early May 2009 the number of attacks on shipping in the Bay of Aden and the eastern coast of Somalia exceeded the figure for the entire year of 2008. Since the start of the year pirates carried out 114 attacks, 29 of which ended in seizure of vessels: compared with 2008, these figures were 111 and 42 respectively.

On June 1, the first deputy Minister of Defense Colonel-General Aleksandr Kolmakov, summarized the results of the winter training period. "During the past winter training period, Russian navy surface ships and submarines took to sea on 438 occasions. During the summer the navy will also participate in international exercises," Kolmakov explained.

He nonetheless admitted the improved figures were only marginal, and that mostly naval elements had underperformed in the winter training period. "In recent years more than 540 modern technical training systems have been delivered to train army and navy personnel. The Defense Ministry is currently completing the development of a blueprint for the development of technical training systems for the period through 2020," he said. Its results, however, appear a long way off.

Objectives: Local or global?
On June 15, Vice Admiral Viktor Kravchuk, the commander of the Caspian flotilla, confirmed that it will remain under the direct subordination to the main staff of the Russian navy, despite the current military reform, in which all formations will be transferred to permanent readiness.

Earlier, Russian media mooted the idea that the Caspian flotilla was scheduled to become an operational naval command subordinated to the commander of the Black Sea fleet by December 1, as part of the reform. "By December 1, 2009, the reorganization of the flotilla will be carried out by abolishing parallel structures and uniting the formations that deal with secondary goals. Twenty five percent of positions will be reduced. However, the Caspian flotilla as a separate combat naval force will remain. The flotilla will remain a force under direct command of the main staff of the Russian navy in Moscow," Kravchuk said.

In his view, this will give the flotilla a "new image", with the critical change being its transfer to permanent readiness. Moreover, he explained that the reorganization of its combat composition will entail reducing older types of weaponry and equipment, and the number of units tasked with duties "not characteristic of a naval force". After the completion of the structural reforms, the Caspian flotilla will consist of two brigades of surface ships, naval infantry, logistical support units and auxiliary ships.

He said that the unstable military-political situation in the Caspian region justified the strengthening of the flotilla's combat capabilities. "The main sources of instability are the problems of the unsettled international legal status of the Caspian Sea, disputed oil and gas fields in the southern Caspian Sea and illegal fishing of valuable species of fish," Kravchuk said.

Sources within the Russian MoD have also alleged that the navy plans to transfer eight to 10 submarines to the Black Sea fleet, which is fiercely opposed by the Ukrainian government. Vasily Kirilich, the press spokesman for the Ukrainian Foreign Ministry, said that "the modernization or the introduction of new vessels of the Russian Black Sea fleet may be undertaken only with the consent of Ukraine, and this is specified clearly by the agreement between Ukraine and the Russian Federation on the parameters of the division of the Black Sea fleet of 1997."

Vice Admiral Oleg Burtsev, deputy chief of the Russian navy main staff, disagrees, arguing that Russia is entitled to replace the fleet's submarine forces without any reference to Kyiv. The Ukrainian Security Service also recently called on the withdrawal of all officers of the Federal Security Service of the Russian Federation attached to the fleet.

The status of the Black Sea fleet aside, it has become more strategically significant following the five-day war between Russia and Georgia in August 2008. Though naval combat played no meaningful role in the conflict, some naval officers have suggested that the fleet needs additional submarines. It currently has one permanent diesel-powered sub, the Alrosa, which is undergoing repairs; a painful situation for officers that recall around 40 submarines stationed in the Black Sea fleet in the Soviet period.

Economic issues challenge naval ambition
A series of setbacks has shaken the navy and the plans to carry out the reform program successfully. The much publicized though wholly unnecessary relocation of the navy headquarters to St Petersburg was "postponed" due to the costs involved and the opposition from admirals and senior officers who questioned its logic.

On June 18, a much more serious blow was disclosed by the deputy Defense Minister for Armaments Colonel-General Vladimir Popovkin, confirming that the planned development of six to seven carrier task groups in 2012 had also been "postponed".

The commander-in-chief of the Russian navy, Admiral Vladimir Vysotsky, first announced this ambitious program in July 2008. "Before going to the trouble, let us first decide what we need carrier task groups for. What strategic interests far from home do we have? There is more to a carrier task group than the aircraft-carrier alone. Aircraft-carriers need escorts. And the Russian navy only includes four fleets nowadays," Popovkin said.

Admiral Vysotsky said that such carrier task groups centered around nuclear-powered aircraft-carriers and capable of supporting strategic nuclear submarines were planned for the Northern and Pacific fleets. He emphatically promised that work on the project would begin in 2012.

If this postponement proves to be a diplomatic way of abandoning the plans, it will indicate that in practical terms the Russian military and security elites recognize the futility of pursuing global military ambitions. Moreover, these targets were announced prior to the global financial crisis while oil prices were relatively high on the world market.

There were also issues concerning which shipyards were capable of carrying out such construction work, while the long-running repairs to the Admiral Gorshkov aircraft carrier earmarked for export to India has been underway for more than a decade, complicating bilateral negotiations on pricing. Popovkin also said that tests of the Yuri Dolgoruky, a Borey class nuclear submarine which will carry Bulava missiles, submarine launched ballistic missiles, were scheduled to begin shortly; while the Bulava tests in 2008 resulted in 50% failure. More tests will commence in July, with four or five scheduled for this year. Equally, the MoD has decided to halve the number of ships scheduled for either repair or modernization.

On June 1, Russian Prime Minister Vladimir Putin criticized the MoD leadership during a Russian government session. He reported that the defense industrial complex enterprise directors have complained about the lack of progress in conclusion of contracts within the framework of the state defense order. "The directors are saying that the money is not arriving at the enterprises. We have the money but real problems are emerging at the enterprises."

The state defense order is based on the program for rearming the army and the navy that has been approved by the government, which was calculated for 2007-2015. The sluggishness involved reflects poor management, weaknesses within the defense industry and state corruption often resulting in vast sums vanishing - originally intended for repair or modernization.

Colonel Yuriy Rubtsov, an expert on the strategic culture fund in Moscow's Academy of Military Sciences, explained: "Unfortunately, the main mass of the 300 ships, which are in the Russian navy's fighting strength today, have been operating for more than 20 years now. The eloquent statements about the state-of-the-art navy are empty promises."

Conclusion
Although Russian military reform plans are currently concentrating on implanting organizational changes, from the mass mobilization principle and abandoning the division based structure, moving toward permanent readiness, a mobile brigade-based system by the end of the end the year, it appears that the navy is being hardest hit by the economic downturn, as the Russian economy contracts.

This might entail a more realistic assessment within the Russian MoD and General Staff concerning global military capabilities, focusing instead on raising the potential to intervene in local conflicts, perhaps in support of a more limited resurgence of Russian power within its near abroad.

Equally, the critique in Western assessments, that the military reform is being conducted in a "crazy" order, without first rewriting the military doctrine, actually makes sense from a Russian military perspective; the need to overcome internal objections to reform meant rushing to first restructure the organizational table.

Having already passed the halfway mark, they have secured the reforms and ensured they cannot be easily unpicked. While this might have implications locally, it appears that the more ambitious elements of the modernization agenda, including the navy and its dream of multiple aircraft carriers, are being corrected: Russia's power aspirations are therefore, more local than global - a point which could take more than a generation for the navy to accept.

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Roger N McDermott is an honorary senior fellow, Department of Politics and International Relations, University of Kent at Canterbury (UK) specializing in defense and security issues in Russia, Central Asia and the South Caucasus.

TOON

Gas Pump Thievery: Who's Really Behind the Rising Prices at the Pumps?

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Jim Hightower 
June 25, 2009 - AlterNet

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Like a Fourth of July crescendo of fireworks, our gasoline prices are rising higher and higher. While this is tough on consumers, we're assured by a covey of tongue-clucking industry analysts that nothing can be done about it, for it's simply the law of supply and demand in action -- so suck it up, and pay up.

But hold your BPExxonMobilShellChevron horses right there. Supply and demand? The supply of crude oil has risen this year to its highest level in nearly two decades, even while the demand for gasoline has dropped dramatically, having fallen this month to a 10-year low. Let's see -- supply up, demand down. That's a classic market formula for cheaper prices at the pump. Yet our prices have steadily moved up, rising by two-thirds since the beginning of the year (and by 60 cents a gallon in the past two months alone).

What's going on here is not the "magic of the marketplace," but some hocus-pocus by brand-name dealers. What might surprise you, though, is that the wheeler-dealers now jacking up our pump prices don't operate under the BPExxonMobilShellChevron brands -- but the logos of Goldman Sachs, Morgan Stanley and other Wall Street traders that have been placing vast, unregulated, secretive bets on the future price of oil. They're playing an electronic casino game in a global "dark market" of exotic derivatives and credit swaps.

If this sounds vaguely familiar to you, it's because this is the same game that Wall Street played with subprime mortgages, leading to the present crash of our economy. And, yes, these are the exact same banksters that you and I are presently bailing out with our trillions of tax dollars.

Yet, there they go again. By pooling money from sheltered hedge funds, sovereign state funds, offshore accounts and other super-wealthy investors, speculators like Goldman and Morgan have quietly been buying trillions of dollars worth of oil derivatives -- which essentially are bets that oil prices will rise to a certain level by a certain date.

Unlike those investors who actually purchase contracts for future delivery of oil, there is no limit on how much money these gamblers can put into the oil market. Nor do they have to report to anyone how much they have bet, even though their massive infusion of money is totally and artificially distorting the real value of petroleum.

As CNBC television's top energy correspondent, Sharon Epperson, reported last month, "It's this money flow -- rather than the fundamental supply-demand data -- that's driving oil prices higher."

Why is this allowed? Because the Commodity Futures' Modernization Act of 2000 included a provision that was quietly tucked into the law by then-Sen. Phil Gramm, R-Texas, specifically prohibiting any regulation of such commodity-based derivatives. Among the enthusiastic backers of this legalized thievery were Robert Rubin, the Wall Streeter who was Bill Clinton's treasury secretary, and his protege, Larry Summers, who is now Barack Obama's chief economic advisor.

This bipartisan cabal created a speculative mechanism that's presently sucking money out of your pocket with every gallon of gas you pump. Meanwhile, every dollar that Goldman, Morgan and the rest use to inflate oil prices is a dollar they are not investing in real economic activity that could create middle-class jobs.

Of course, Wall Street culprits are trying to keep their involvement hush-hush. When a McClatchy newspaper reporter approached Goldman Sachs about it, the response was terse: "Goldman Sachs declines to comment for your story."

As Woody Guthrie wrote in a song about outlaws: "Some'll rob you with a six-gun/Some with a fountain pen." It's time to regulate Wall Street's gas-pump thievery -- and to put a few of the perpetrators in jail.

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Jim Hightower is a national radio commentator, writer, public speaker, and author of the new book, "Swim Against the Current: Even a Dead Fish Can Go With the Flow."

Operation Enduring Folly: US Kills 60 More in Pakistan Air Strike

Slick and deadly: Most of the victims in at least 22 unmanned "drone" missile attacks in Pakistan have been civilians. (US Air Force)

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Pierre Tristam
June 24, 2009 - About.com

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"Operation Enduring Freedom is ostensibly being fought to uphold the American Way of Life. It'll probably end up undermining it completely," the Indian writer Arundhati Roy wrote in 2001, in "The Algebra of Infinite Justice." Roy took a lot of grief for that piece from American public opinion, hijacked at the time by a blind desire for violent revenge (and the silencing of dissenters) that would prove to be far worse than 9/11's mass murders. Far worse, because we're living its consequences still, though far less in the West than in the Middle East: Iraq, Iran (yes, even Iran), Afghanistan and Pakistan as Roy's words have been unfortunately and terribly vindicated many times over, with no end in sight.

Yesterday there was this headline in The Times: "U.S. Tightens Airstrike Policy in Afghanistan," over a Dexter Filkins story quoting the new U.S. commander in Afghanistan, Gen. Stanley A. McChrystal, saying that "Air power contains the seeds of our own destruction if we do not use it responsibly," and pledging, "Even in the cases of active firefights with Taliban forces," in Filkins' paraphrase, that "airstrikes will be limited if the combat is taking place in populated areas - the very circumstances in which most Afghan civilian deaths have occurred. The restrictions will be especially tight in attacking houses and compounds where insurgents are believed to have taken cover."

Then this headline, barely 24 hours later: "Suspected U.S. Strike Kills at Least 60 in Pakistan." The attack was carried out by a CIA or Pentagon drone--killing people attending a funeral in South Waziristan. Dawn, the Pakistani newsper, puts the death toll at 50 and describes most of the victims as "militants." The Times is less categorical:
Details of the attack, which occurred in Makeen, remained unclear, but the reported death toll was exceptionally high. If the reports are indeed accurate and if the attack was carried out by a drone, the strike could be the deadliest since the United States began using the aircraft to fire remotely guided missiles at members of the Taliban and Al Qaeda in the tribal areas of Pakistan. The United States carried out 22 previous drone strikes this year, as the Obama administration has intensified a policy inherited from the Bush administration.
It begs the question. What's Stanley A. McChrystal doing differently? What's the Obama administration doing differently? McChrystal's words sounded strangely similar to those of Mike Mullen, the chairman of the Joint Chiefs, who told a congressional committee in September 2008, "We can't kill our way to victory." Only to let the killing continue.
Sometime this summer, the United States will register its 5,000th American soldier killed as a result of wars in either Iraq or Afghanistan. The media, if there's still any interest in casualties of any sort Stateside, will write the mournful editorial or two, missing, as always, the larger problem: the day-in-and-day-out devastation visited on local populations by the very forces ostensibly dispatched to protect them, at a price far, far heavier than the one sustained by Americans.

That one strike today killed more people in Pakistan than the death toll of American soldiers in Iraq since March. That many, maybe most, of the victims may turn out to be "militants" won't diminish the ripples of the attack in Pakistan, precisely the kind of ripples McChrystal was claiming to want to control from here on.

It's no longer the American Way of Life American deployments are fighting to preserve. The wind went out of that shameless bit of flag-waving years ago. But it hasn't been clear for years, either, what the deployments are fighting for. Or against. Except for the one recurrent target that never fails to take a hit, even when all else fails: civilians.

Cooking in a Coffee Pot and Other Useful Tips for the Homeless

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David Glenn Cox
June 23, 2009 - Smirking Chimp

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I write this for the millions who, like myself, are holed up in basements, garages, empty houses, fields, culverts and what have you. Guilty of being Americans and homeless, trying to make it through just one more day in the land of Fuck You and the home of the slave. I am at the top of the homeless pyramid; I still have internet access and a toilet.

The one thing to remember about the homeless is that they never have a day off. They are homeless every day; it's easy to forget and difficult to understand, but the homeless face the world without a buttress. They are toe-to-toe with the heat and the humidity, the rain, the mud, and the bugs.

They have lost their basic building block of society, a home, a place to lay down their heads. A place to lie in comfort, a simple retreat from the world. I consider myself among the lucky; I have a leaking air mattress and a roof to keep myself dry and a box fan to keep me cool. I don't sleep in a bed but on a floor, and eat on a table salvaged from a dumpster. But it is not a home, it is a garage. It is a refuge and I am a refugee in modern America.

Brought up in another place, I feel myself an alien in this land. This is not the land of my birth. Where did it all go? How can we get back there? Our goals, motives and principles become polluted and reverse reclamated, blurred and obscured by the lack of a home. We live like cave men and women, targeted and dodging the monsters in squad cars or just avoiding the looks of disgust from those who believe themselves invincible.

But we know better and we look back with "see you soon eyes," and we dream a dream of beds with clean linen or a hot bath or a shower. A job with decent wages and maybe even a front door and a window with a screen. But if I had one wish it would be to play the movie "The Grapes of Wrath" on every TV channel for twenty-four hours, because I am living every line of it every day. "Don't take no nerve to do something when you ain't got no other choice."

"It's my dirt, it ain't no good but its mine!"

We are looking for our California, our promised land, a place to start again. Because, just like Tom Joad, we are getting angry. "They're working away at our spirit, trying to make us crawl" feeding us promises, programs that, like the rain, sound good but never reach us here on the ground.

I laugh myself through the want ads each day at jobs that make promises that are either sucker gambits or flat out frauds. Come work for free! Learn Grant Writing, only $200. "I never should have come on this trip. You remember that coupon in the spicy Western stories magazine? Learn to be a radio expert." Jobs that aren't jobs at all, promising good work and good wages but paying a nickel a box when they promised a dime. "An' you fellas will have to take it cause you'll be hungry."

I traded my truck for a 1992 Paseo and $1,500, but I don't drive; it is merely a vestige of who I once was. I don't drive because I don't have insurance, but it is like an escape pod. Just knowing that I could go if I had somewhere to go, it is my last redoubt. I'm down to about $250 dollars and still looking for work, foolishly, pointlessly. I applied to a popular website that was seeking in depth journalism on the subject of homelessness but they never replied. Typical American media, they just want anecdotes about homelessness, they want to hear about it but don't want to know about it.

I watch the body shop next door meandering towards oblivion as their work dries up. Friday, they had six body men working on three cars and you can't keep the doors open like that. The cabinetry shop on the other side is working four and a half days a week.

I buy groceries according to what I can keep in a mini fridge, more like an icebox really. It keeps food cool, not cold. For soup you measure a cup of water in a plastic cup and place the soup in the coffeepot. Then you let the water pour through and wait for the warmer to warm the concoction. It's not piping hot, but it's hot enough and beggars can't be choosers now, can they? Because of my culinary limitations I buy the same foods each week; two months ago it cost $45.00 and last week it was $65.00.

The money is rapidly loosing its value, which also explains why gas prices are rising even as demand sinks. I know that more of you are coming to join us in the time that the land forgot and you will have questions just as we had questions. But there are no answers for them, you just do and try and make the day. You wait anxiously for the Georgia sun to go down to offer some relief from the heat. As the sky turns red, the box fan again begins to offer some relief, the only relief available.

The kitties, Moxie and Blackie, still visit me each night and it is peculiar because I've joined their society more than they mine. When I wrote about them before, some people, well-intentioned I'm sure, suggested that I capture them and turn them over to the humane society. You don't understand, we are equals in this life. I don't rat them out and they don't rat me out. If I turned them over maybe they'd have a better life; maybe they'd get gassed.

But, like the Joads, "We had meat tonight, not much but we had it." The kitties are free and for the time being happy. I feed them and welcome them but they are free to go as well. They are not mine, merely night visitors who befriended me without qualifications. It would be too hard on my conscience to turn them in without knowing the outcome. Maybe you understand, maybe you don't. Tom said it like this, "Seems the government has more interest in a dead man than a live one." Or in this case they have more interest in picking up kitties than in finding them homes. Besides, the government has done nothing to help me; why should I expect more for cats that will never vote?

The cool and the stillness of Sunday night are a comfort to me and I must take my pleasure where I can, because the air mattress still leaks and the hot sun will return again tomorrow. So I will lay my head on the floor and dream.

"Fear the time when the strikes stop while the great owners live - for every little beaten strike is proof that the step is being taken … fear the time when Manself will not suffer and die for a concept, for this one quality is the foundation of Manself, and this one quality is man, distinctive in the universe."

I dedicate this posting to citizensue, DGC