Sunday, February 24, 2008

Wall Street Bank Run

Wall Street Bank Run

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It doesn't look like an old-fashioned bank run because it involves the biggest financial institutions trading paper assets so complicated that even top executives don't fully understand the transactions. But that's what it is -- a spreading fear among financial institutions that their brethren can't be trusted to honor their obligations.

Frightened financiers are pulling back from credit markets -- going on strike, if you will -- to escape the unraveling daisy chain of securitized assets and promissory notes that binds the global financial system. As each financier tries to protect against the next one's mistakes, the whole system begins to sag. That's what we're seeing now, as credit market troubles spread from bundles of subprime residential mortgages to bundles of other kinds of debt -- from student loans to retailers' receivables to municipal bonds.

Investors are nervous because they aren't sure how to value these bundles of securitized assets. So buyers stay away, prices fall further, and the damage spreads.

The public, fortunately, doesn't understand how bad the situation is. If it did, we might have a real panic on our hands. And there would be more pressure for bad policies -- ones that try to freeze the damage, rather than letting prices fall to levels where buyers will return and the markets will clear. Hillary Clinton's proposed moratorium on home foreclosures, in that respect, is one of the truly bad ideas of our time. It would make the situation worse by increasing even more the illiquidity and inflexibility of the housing market.

The answer to Wall Street's bank run may be a version of what saved Main Street banks during the Great Depression. President Franklin Roosevelt created the Federal Deposit Insurance Corporation in 1933 to reassure the public that there was an insurer of last resort for the banks -- and that people's money was safe even if they couldn't see it or touch it or put it under a mattress. Rep. Barney Frank and other congressional experts are weighing different approaches to this problem of how to backstop the markets without Clinton's misguided moratorium.

These markets are now so complicated that most of us can't begin to understand the details. So I asked the chief financial officer of a leading concern to walk me through what has been happening. The problem, he said, is that financial institutions are required to "mark to market" their tradable assets (which is a fancy term for setting a value) even when there isn't a functioning market. In many cases dealers can do little more than guess at the value -- and other investors down the line know it.

To explain how this happened, the CFO took a simple example of residential mortgages. As financial engineering improved in the 1990s, these individual loans were gathered into bundles -- 10,000 home loans of $100,000 each, let's say -- and turned into a $1 billion security that could be traded in ways the individual mortgages never could. But that wasn't enough. The financiers realized they could boost their profits by carving the $1 billion package into different slices, with different risk levels. In that way, a pool of B-rated mortgage assets could generate a slice that was rated AAA, because it was judged the slice most likely to be repaid.

But what happened when the real estate market confounded recent history and began to turn down? People holding the paper could no longer be sure if or when their particular slice would be repaid. The traditional accounting approach -- of estimating the projected cash flow and then discounting for the risk -- didn't work. With 10,000 disparate mortgages underlying the paper, both the rate of cash payments and the risk of default were impossible to predict. So the pyramid began to wobble.

The hubris in this system was Wall Street's confidence that it could value paper securities that had been sliced and diced so many times that they no longer had solid connections to their underlying assets. The nation's leading financier, Warren Buffett, had warned years before that "derivatives," whose value was balanced loosely on the real assets underneath, were the equivalent of "financial weapons of mass destruction." But in the rush for profits, nobody listened.

I've saved the worst for last. Do you want to know who is bailing out America's biggest banks and financial institutions from the consequences of their folly -- by acting as the lender of last resort and controller of the system? Why, it's the sovereign wealth funds, owned by such nations as China and the Persian Gulf oil producers. The new titans are coming to the rescue, if that's the right word for their mortgage on America's future.

Bank of America Secretly Asking Congress for a Banking Industry Bailout

Bank of America Secretly Asking Congress for a Banking Industry Bailout

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$739 Billion Worth of Toxic Waste Subprime Loans Threaten Entire System
WASHINGTON — Over the last two decades, few industries have lobbied more ferociously or effectively than banks to get the government out of its business and to obtain freer rein for “financial innovation.”

But as losses from bad mortgages and mortgage-backed securities climb past $200 billion, talk among banking executives for an epic government rescue plan is suddenly coming into fashion.

A confidential proposal that Bank of America circulated to members of Congress this month provides a stunning glimpse of how quickly the industry has reversed its laissez-faire disdain for second-guessing by the government — now that it is in trouble.

The proposal warns that up to $739 billion in mortgages are at “moderate to high risk” of defaulting over the next five years and that millions of families could lose their homes.

To prevent that, Bank of America suggested creating a Federal Homeowner Preservation Corporation that would buy up billions of dollars in troubled mortgages at a deep discount, forgive debt above the current market value of the homes and use federal loan guarantees to refinance the borrowers at lower rates.

“We believe that any intervention by the federal government will be acceptable only if it is not perceived as a bailout of the bond market,” the financial institution noted.

In practice, taxpayers would almost certainly view such a move as a bailout. If lawmakers and the Bush administration agreed to this step, it could be on a scale similar to the government’s $200 billion bailout of the savings and loan industry in the 1990s. The arguments against a bailout are powerful. It would mostly benefit banks and Wall Street firms that earned huge fees by packaging trillions of dollars in risky mortgages, often without documenting the incomes of borrowers and often turning a blind eye to clear fraud by borrowers or mortgage brokers.

A rescue would also create a “moral hazard,” many experts contend, by encouraging banks and home buyers to take outsize risks in the future, in the expectation of another government bailout if things go wrong again.

If the government pays too much for the mortgages or the market declines even more than it has already, Washington — read, taxpayers — could be stuck with hundreds of billions of dollars in defaulted loans.

But a growing number of policy makers and community advocacy activists argue that a government rescue may nonetheless be the most sensible way to avoid a broader disruption of the entire economy.

The House Financial Services Committee is working on various options, including a government buyout. The Bush administration may be softening its hostility to a rescue as well. Top officials at the Treasury Department are hoping to meet with industry executives next week to discuss options, according to two executives.

“There are a lot of ideas out there,” said Scott Stanzel, a spokesman for President Bush, when asked at a White House press briefing on Friday about a possible buyout program. “There are many different ways in which we can address this problem and we continue to look at ways in which we can do that.”

Supporters contend that a government rescue could be the fastest and cleanest way to force banks and investors to book their losses from bad mortgages — a painful but essential first step toward stabilizing the housing market.

The government would buy the mortgages at their true current value, perhaps through an auction, at what would probably be a big discount from the original loan amount. The mortgage lenders, or the investors who bought mortgage-backed securities, would be free of the bad loans but would still have to book their losses.

If the government took control of the bad mortgages, supporters of a rescue contend, it could restructure the loans on terms that borrowers could meet, keep most of them from losing their homes and avoid an even more catastrophic plunge in housing prices.

“Every citizen has a dog in this hunt,” said John Taylor, president of the National Community Reinvestment Coalition, a community advocacy group that has developed its own mortgage buyout plan. “The cost of spending our way out of a recession is something that everybody would have to bear for a very long time.”

Mr. Taylor estimated the government might end up buying $80 billion to $100 billion in mortgages. But he said the government could recoup its money if it was able to buy the mortgages at a proper discount, repackage them and sell them on the open market.

Surprisingly, the normally free-market Bush administration has expressed interest. Treasury officials confirmed that several senior officials invited Mr. Taylor to present his ideas to them on Feb. 15. Mr. Taylor said he had also received calls from officials at the Office of Thrift Supervision and the Office of the Comptroller of the Currency, which is part of the Treasury Department.

But even supporters acknowledge that a government rescue poses risks to taxpayers, who could be left holding a very expensive bag.

Ellen Seidman, a former director of the Office of Thrift Supervision and now a senior fellow at the moderate-to-liberal New America Foundation, said the government’s first challenge is to buy mortgages at their true current value. If the government overpaid or became caught by an even further decline in the market value of its mortgages, taxpayers would indeed be bailing out both the industry and imprudent home buyers.

“It’s not easy, but it’s not impossible,” Ms. Seidman said. “There are various auction mechanisms, both inside and outside government.”

A second challenge would be to start a program quickly enough to prevent the housing and credit markets from spiraling further downward. Industry executives and policy analysts said it would take too long to create an entirely new agency, as Bank of America suggested. But they expressed hope that the government could begin a program from inside an existing agency.

But even if the government did buy up millions of mortgages and force mortgage holders to take losses, the biggest problem could still lie ahead: deciding which struggling homeowners should receive breaks on their mortgages.

Administration officials have long insisted that they do not want to rescue speculators who took out no-money-down loans to buy and flip condominiums in Miami or Phoenix. And even Democrats like Representative Barney Frank of Massachusetts, chairman of the House Financial Services Committee, have said the government should not help those who borrowed more than they could ever hope to repay.

But identifying innocent victims has already proved complicated. The Bush administration’s Hope Now program offers to freeze interest rates for certain borrowers whose subprime mortgages were about to jump to much higher rates. But the eligibility rules are so narrow that some analysts estimate only 3 percent of subprime borrowers will benefit.

Bank executives, meanwhile, warn that the mortgage mess is much broader than people with subprime loans. Problems are mounting almost as rapidly in so-called Alt-A mortgages, made to people with good credit scores who did not document their incomes and borrowed far more than normal underwriting standards would allow.

Borrowers who overstated their incomes are not likely to get much sympathy. But industry executives and consumer advocates warn that foreclosed homes push down prices in surrounding neighborhoods, and a wave of foreclosures could lead to another, deeper plunge in home prices.

Right or wrong, the arguments for rescuing homeowners are likely to be blurred with arguments for rescuing home prices. At that point, industry executives are likely to argue that what is good for Bank of America is good for the rest of America.

Serbian settlers plan partition of Kosovo

Serbian settlers plan partition of Kosovo

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Kosovo, the world's newest state, is facing a partition of its territory only a week after it unilaterally declared independence from Serbia.

The mostly Serb-populated northern region around the divided town of Mitrovica, next to the Serbian border, has begun preparing a de facto secession from the newborn country that Serb officials consider "illegal".

On Friday, the bridge on the Ibar River that divides the Albanian and the Serb parts of Mitrovica was closed to traffic, guarded by UN police and Nato on one side, and Serb strongmen on the other.

At the same time, KFOR, the Nato-led peacekeeping force, sealed the border to Serbia, after angry mobs torched border crossings.

"This is a beginning of a secession of the northern part of Kosovo. I fear it will lead to attacks on the remaining Albanians living in northern Mitrovica to force them to flee across the river.

"The Albanians would then retaliate on the Serbian enclaves throughout Kosovo, and the ethnic cleansing will be completed under the eyes of the international community," Oliver Ivanovic, a Kosovo Serb leader from Mitrovica, told The Sunday Telegraph.

According to Mr Ivanovic, while the Serb government officially pledges never to accept Kosovo’s independence, some individual officials and their political groups are quietly orchestrating the secession.

He himself was sidelined as a moderate leader and his influence diminished as the situation escalated and Belgrade-sponsored extremists won the upper hand.

Slobodan Samardzic, the minister for Kosovo in the Serb government, deemed the attacks on the border crossings "legitimate" and said they were in "accordance with the Serbian government's policy."

Britain, the US and other Western countries have recognised independent Kosovo as a sovereign state, prompting criticism from countries such as Russia, a staunch Serb ally, but also China and some EU members, notably Spain, who claim the move to be a dangerous precedent that would weaken the rule of international law and encourage separatist movements across the world.

In the Serb part of Mitrovica, anti-independence rallies have been held every day since the independence declaration last Sunday, in an atmosphere of increasing tension and lawlessness instigated by Belgrade-paid agitators.

Serbian government officials address the angry crowds as rocks, bottles and fireworks are being hurled at the UN police guarding the bridge, while thugs in track suits and leather jackets cruise the town as self-appointed guardians of security.

Officers of the Kosovo Police Service (KPS), the multi-ethnic police force which serves in northern Mitrovica, said they will no longer take orders from Pristina following the independence declaration and have vowed to swap their uniforms for those of the Serbian police.

"I did not join the force to serve an illegal Albanian state. The capital of my state is Belgrade, as stipulated by the United Nations Resolution 1244. I will soon change this uniform for a Serbian one and continue to serve my people," a KPS officer serving in Mitrovica told the Sunday Telegraph under the condition of anonymity.

On the street dotted with Serbian and Russian flags and banners with anti-independence slogans, the police officer was engaged in a cordial conversation with one of the thugs known as 'bridge watchers', whose job is to make sure no Albanian crosses the bridge.

He said: "We will not create incidents but we will not tolerate any form of Albanian rule. This is and it will always remain Serbia. We may be small, but we have the full support of Serbia and Russia. And we have weapons, should we be forced to protect ourselves."

Russia has already threatened to use force in Kosovo, and Serbia has sent dozens of busloads of protesters to support the rallies in the north.

But following several days of unrest, KFOR decided to seal the border and halt the influx of potential protesters from Serbia.

"We have issued orders not to let buses through or any individuals who could pose a potential threat to the security of Kosovo. We are also fully able and ready to prevent any clashes between Serbs and Albanians, " a KFOR spokesperson said.

Indeed, dozens of armoured vehicles and tanks have been deployed at key points in the border region, after Belgrade officials announced that they would march into Kosovo in their thousands — albeit for peaceful rallies.

"KFOR troops are trained and well-equipped to answer any challenges coming from inside or outside of Kosovo," a radio advertisement, paid for by KFOR, warns Serbian listeners.

But Mr Ivanovic, is sceptical. "In case of real clashes KFOR will first protect themselves and then come to count the causalities. The Serbs here have access to weapons, and I know that the Albanians living on this side of the river have recently been armed.

"I see no reason for optimism."

NATO's Reign of Terror in Kosovo

NATO's Reign of Terror in Kosovo

By Michel Chossudovsky

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The following text was written in the immediate wake of the 1999 NATO bombings of Yugoslavia and the invasion of Kosovo by NATO troops.

It is now well established that the war was waged on a fabricated humanitarian pretext and that extensive war crimes were committed by NATO and the US.

In a bitter irony, the so-called International Criminal Tribunal for the former Yugoslavia (ICTY) in The Hague is controlled by those who have committed extensive war crimes. It was not President Milosevic, who was poisoned in his prison cell, but NATO who started the war in Yugoslavia.

According to Nuremberg jurisprudence, the ultimate war crime consists in starting a war.
According to William Rockler, former prosecutor of the Nuremberg War Crimes Tribunal:

"The [1999] bombing war violates and shreds the basic provisions of the United Nations Charter and other conventions and treaties; the attack on Yugoslavia constitutes the most brazen international aggression since the Nazis attacked Poland to prevent "Polish atrocities" against Germans. The United States has discarded pretensions to international legality and decency, and embarked on a course of raw imperialism run amok."

According to Nuremberg jurisprudence, NATO heads of State and heads of government are responsible for the supreme crime: "the crime against peace."

Reagan's NSDD 133 (1984) "Secret and Sensitive"

There is evidence that the US administration in liason with its allies took the decision in the early 1980s to destabilise and dismantle Yugoslavia.

The decsion to destroy Yugoslavia as a country and carve it up into a number of small proxy states was taken by the Reagan adminstration in the early 1980s.

A "Secret Sensitive" National Security Decision Directive (NSDD 133) entitled "US Policy towards Yugoslavia." sets the framework for the destabilization of Yugoslavia's model of market socialism and the establishment of a US sphere of influence in Southeastern Europe.

Yugoslavia was in many regards "an economic success story". In the two decades before 1980, annual gross domestic product (GDP) growth averaged 6.1 percent, medical care was free, the rate of literacy was 91 percent, and life expectancy was 72 years.

NSDD 133 set in motion a series of covert intelligence operations which consisted in creating and supporting secessionist paramilitary armies. These operations were combined with the destabilization of the Yugoslav economy, which ultimately led to the destruction of its industrial base, the demise of the workers' cooperative and the dramatic impoverishment of its population.

The record of US-NATO war crimes is important in assessing recent developments in Kosovo.

From the outset of their respective mandates in June 1999, both NATO and the UN Mission to Kosovo (UNMIK) have actively supported the KLA which from the outset of the NATO occupation has been involved in numerous atrocities. It is important to understand that these atrocities were ordered by the current and former prime ministers of the Kosovo "government".

Since 1999, State terrorism in Kosovo has become an integral part of NATO's design.
The present government of prime minister Hashim Thaci (a former KLA Commander), is an outgrowth of this reign of terror. It is not a government in the common sense of the word. It is remains a terrorist organization linked to organised crime. It is instrument of the foreign occupation.

Michel Chossudovsky, 23 February 2008


NATO HAS INSTALLED A REIGN OF TERROR IN KOSOVO

by Michel Chossudovsky

10 August 1999

This text was presented to the Independent Commission of Inquiry to Investigate U.S./NATO War Crimes Against The People of Yugoslavia, International Action Center, New York, July 31, 1999.

PART I: MASSACRES OF CIVILIANS IN KOSOVO

While the World focusses on troop movements and war crimes, the massacres of civilians in the wake of the bombings have been casually dismissed as "justifiable acts of revenge". In occupied Kosovo, "double standards" prevail in assessing alleged war crimes. The massacres directed against Serbs, ethnic Albanians, Roma and other ethnic groups have been conducted on the instructions of the military command of the Kosovo Liberation Army (KLA).

NATO ostensibly denies KLA involvement. These so-called "unmotivated acts of violence and retaliation" are not categorised as "war crimes" and are therefore not included in the mandate of the numerous FBI and Interpol police investigators dispatched to Kosovo under the auspices of the Hague War Crime's Tribunal (ICTY). Moreover, whereas NATO has tacitly endorsed the self-proclaimed KLA provisional government, KFOR the international security force in Kosovo has provided protection to the KLA military commanders responsible for the atrocities. In so doing both NATO and the UN Mission have acquiesced to the massacres of civilians. In turn, public opinion has been blatantly misled. In portraying the massacres, the Western media has casually overlooked the role of the KLA, not to mention its pervasive links to organised crime. In the words of National Security Advisor Samuel Berger, "these people [ethnic Albanians] come back ... with broken hearts and with some of those hearts filled with anger."1 While the massacres are seldom presented as the result of "deliberate decisions" by the KLA military command, the evidence (and history of the KLA) amply confirm that these atrocities are part of a policy of "ethnic cleansing" directed mainly against the Serb population but also against the Roma, Montenegrins, Goranis and Turks.

Serbian houses and business have been confiscated, looted, or burned, and Serbs have been beaten, raped, and killed. In one of the more dramatic of incidents, KLA troops ransacked a monastery, terrorized the priest and a group of nuns with gunfire, and raped at least one of the nuns. NATO's inability to control the situation and provide equal protection for all ethnic groups, and its apparent inability or unwillingness to fully disarm the KLA, has created a serious situation for NATO troops...2

The United Nations High Commissioner for Refugees (UNHCR), confirms in this regard that:

"more than 164,000 Serbs have left Kosovo during the seven weeks since... the NATO-led Kosovo Force (KFOR) entered the province... A wave of arson and looting of Serb and Roma homes throughout Kosovo has ensued. Serbs and Roma remaining in Kosovo have been subject to repeated incidents of harassment and intimidation, including severe beatings. Most seriously, there has been a spate of murders and abductions of Serbs since mid-June, including the late July massacre of Serb farmers."3

POLITICAL ASSASSINATIONS

The self-proclaimed Provisional Government of Kosovo (PGK) has also ordered assassinations directed against political opponents including "loyalist" ethnic Albanians and supporters of the Kosovo Democratic League (KDL). These acts are being carried out in a totally permissive environment. The leaders of the KLA rather than being arrested for war crimes, have been granted KFOR protection.

According to a report of the Foreign Policy Institute (published during the bombings):

"...the KLA have [no] qualms about murdering Rugova's collaborators, whom it accused of the `crime' of moderation... [T]he KLA declared Rugova a `traitor' yet another step toward eliminating any competitors for political power within Kosovo."4

Already in May [1999], Fehmi Agani, one of Rugova's closest collaborators in the Kosovo Democratic League (KDL) was killed. The Serbs were blamed by NATO spokesperson Jamie Shea for having assassinated Agani. According to Skopje's paper Makedonija Danas, Agani had been executed on the orders of the KLA's self-appointed Prime Minister Hashim Thaci.5 "If Thaci actually considered Rugova a threat, he would not hesitate to have Rugova removed from the Kosovo political landscape."6

In turn, the KLA has abducted and killed numerous professionals and intellectuals:

"Private and State properties are threatened, home and apartment owners are evicted en masse by force and threats, houses and entire villages are burned, cultural and religious monuments are destroyed... A particularly heavy blow... has been the violence against the hospital centre in Pristina, the maltreatment and expulsion of its professional management, doctors and medical staff."7

Both NATO and the UN prefer to turn a blind eye. UN Interim Administrator Bernard Kouchner (a former French Minister of Health) and KFOR Commander Sir Mike Jackson have established a routine working relationship with Prime Minister Hashim Thaci and KLA Chief of Staff Brigadier General Agim Ceku.

ATROCITIES COMMITTED AGAINST THE ROMA

Ethnic cleansing has also been directed against the Roma (which represented prior to the conflict a population group of 150,000 people). (According to figures provided by the Roma Community in New York). A large part of the Roma population has already escaped to Montenegro and Serbia. In turn, there are reports that Roma refugees who had fled by boat to Southern Italy have been expelled by the Italian authorities.8 The KLA has also ordered the systematic looting and torching of Romani homes and settlements:

"All houses and settlements of Romani, like 2,500 homes in the residential area called `Mahala' in the town of Kosovska Mitrovica, have been looted and burnt down".9

With regard to KLA atrocities committed against the Roma, the same media distortions prevail. According to the BBC: "Gypsies are accused by [Kosovar] Albanians of collaborating in Serb brutalities, which is why they've also become victims of revenge attacks. And the truth is, some probably did."10

INSTALLING A PARAMILITARY GOVERNMENT

As Western leaders trumpet their support for democracy, State terrorism in Kosovo has become an integral part of NATO's postwar design. The KLA's political role for the post-conflict period had been mapped out well in advance. Prior to Rambouillet Conference, the KLA had been promised a central role in the formation of a post-conflict government. The "hidden agenda" consisted in converting the KLA paramilitary into a legitimate and accomplished civilian administration. According to US State Department spokesman James Foley (February 1999):

"We want to develop a good relationship with them [the KLA] as they transform themselves into a politically-oriented organization, ...[W]e believe that we have a lot of advice and a lot of help that we can provide to them if they become precisely the kind of political actor we would like to see them become.'"11

In other words, the US State Department had already slated the KLA "provisional government" (PGK) to run civilian State institutions. Under NATO's "Indirect Rule", the KLA has taken over municipal governments and public services including schools and hospitals. Rame Buja, the KLA "Minister for Local Administration" has appointed local prefects in 23 out of 25 municipalities.12

Under NATO's regency, the KLA has replaced the duly elected (by ethnic Albanians) provisional Kosovar government of President Ibrahim Rugova. The self-proclaimed KLA administration has branded Rugova as a traitor declaring the (parallel) Kosovar parliamentary elections held in March 1998 to be invalid. This position has largely been upheld by the Organisation for Security and Cooperation in Europe (OSCE) entrusted by UNMIK with the postwar task of "democracy building" and "good governance". In turn, OSCE officials have already established a working rapport with KLA appointees.13

The KLA provisional government (PGK) is made up of the KLA's political wing together with the Democratic Union Movement (LBD), a coalition of five opposition parties opposed to Rugova's Democratic League (LDK). In addition to the position of prime minister, the KLA controls the ministries of finance, public order and defence. The KLA also has a controlling voice on the UN sponsored Kosovo Transitional Council set up by Mr. Bernard Kouchner. The PGK has also established links with a number of Western governments.

Whereas the KLA has been spearheaded into running civilian institutions (under the guidance of the OSCE), members of the duly elected Kosovar (provisional) government of the Democratic League (DKL) have been blatantly excluded from acquiring a meaningful political voice.

ESTABLISHING A KLA POLICE FORCE TO `PROTECT CIVILIANS'

Under NATO occupation, the rule of law has visibly been turned up side down. Criminals and terrorists are to become law enforcement officers. KLA troops which have already taken over police stations will eventually form a 4,000 strong "civilian" police force (to be trained by foreign police officers under the authority of the United Nations) with a mandate to "protect civilians". Canadian Prime Minister Jean Chretien has already pledged Canadian support to the formation of a civilian police force.14 The latter which has been entrusted to the OSCE will eventually operate under the jurisdiction of the KLA controlled "Ministry of Public Order".

US MILITARY AID

Despite NATO's commitment to disarming the KLA, the Kosovar paramilitary organisation is slated to be transformed into a modern military force. So-called "security assistance" has already been granted to the KLA by the US Congress under the "Kosovar Independence and Justice Act of 1999". Start-up funds of 20 million dollars will largely be "used for training and support for their [KLA] established self-defence forces."15 In the words of KLA Chief of Staff Agrim Ceku:

"The KLA wants to be transformed into something like the US National Guard, ... we accept the assistance of KFOR and the international community to rebuild an army according to NATO standards. ... These professionally trained soldiers of the next generation of the KLA would seek only to defend Kosova. At this decisive moment, we [the KLA] do not hide our ambitions; we want the participation of international military structures to assist in the pacific and humanitarian efforts we are attempting here." 16

While the KLA maintains its links to the Balkans narcotics trade which served to finance many of its terrorist activities, the paramilitary organisation has now been granted an official seal of approval as well as "legitimate" sources of funding. The pattern is similar to that followed in Croatia and in the Bosnian Muslim-Croatian Federation where so-called "equip and train" programmes were put together by the Pentagon. In turn, Washington's military aid package to the KLA has been entrusted to Military Professional Resources Inc. (MPRI) of Alexandria, Virginia, a private mercenary outfit run by high ranking former US military officers.

MPRI's training concepts which had already been tested in Croatia and Bosnia are based on imparting "offensive tactics... as the best form of defence".17 In the Kosovar context, this so- called "defensive doctrine" transforms the KLA paramilitary into a modern army without however eliminating its terrorist makeup.18 The objective is to ultimately transform an insurgent army into a modern military and police force which serves the Alliance's future strategic objectives in the Balkans. MPRI has currently "ninety-one highly experienced, former military professionals working in Bosnia & Herzegovina".19 The number of military officers working on contract with the KLA has not been disclosed.


PART II. FROM KRAJINA TO KOSOVO: THE SHAPE OF THINGS TO COME


A FORMER CROATIAN GENERAL APPOINTED KLA CHIEF OF STAFF

The massacres of civilians in Kosovo are not disconnected acts of revenge by civilians or by so-called "rogue elements" within the KLA as claimed by NATO and the United Nations. They are part of a consistent and coherent pattern. The intent (and result) of the KLA sponsored atrocities have been to trigger the "ethnic cleansing" of Serbs, Roma and other minorities in Kosovo.

KLA Commander Agim Ceku referring to the killings of 14 villagers at Gracko on July 24, claimed that: "We [the KLA] do not know who did it, but I sincerely believe these people have nothing to do with the KLA."20 In turn, KFOR Lieutenant General Sir Mike Jackson has commended his KLA counterpart, Commander Agim Ceku for "efforts undertaken" to disarm the KLA. In fact, very few KLA weapons have been handed in. Moreover, the deadline for turning in KLA weaponry has been extended. "I do not regard this as noncompliance" said Commander Jackson in a press conference, "but rather as an indication of the seriousness with which General Ceku is taking this important issue."21

Yet what Sir Mike Jackson failed to mention is that KLA Chief of Staff Commander Agim Ceku (although never indicted as a war criminal) was (according to Jane Defence Weekly June 10, 1999) "one of the key planners of the successful `Operation Storm'" led by the Croatian Armed Forces against Krajina Serbs in 1995.

General Jackson who had served in former Yugoslavia under the United Nations Protection Force (UNPROFOR) was fully cognizant of the activities of the Croatian High Command during that period including the responsibilities imparted to Brigadier General Agim Ceku. In February 1999, barely a month prior to the NATO bombings, Ceku left his position as Brigadier General with the Croatian Armed Forces to join the KLA as Commander in Chief.

FROM KRAJINA TO KOSOVO: THE SHAPE OF THINGS TO COME

According to the Croatian Helsinki Committee for Human Rights, Operation Storm resulted in the massacre of at least 410 civilians in the course of a three day operation (4 to 7 August 1995).22 An internal report of The Hague War Crimes Tribunal (leaked to the New York Times), confirmed that the Croatian Army had been responsible for carrying out:

"summary executions, indiscriminate shelling of civilian populations and "ethnic cleansing" in the Krajina region of Croatia...."23

In a section of the report entitled "The Indictment. Operation Storm, A Prima Facie Case.", the ICTY report confirms that:

"During the course of the military offensive, the Croatian armed forces and special police committed numerous violations of international humanitarian law, including but not limited to, shelling of Knin and other cities... During, and in the 100 days following the military offensive, at least 150 Serb civilians were summarily executed, and many hundreds disappeared. ...In a widespread and systematic manner, Croatian troops committed murder and other inhumane acts upon and against Croatian Serbs." 24

US `GENERALS FOR HIRE'

The internal 150 page report concluded that it has "sufficient material to establish that the three [Croatian] generals who commanded the military operation" could be held accountable under international law.25 The individuals named had been directly involved in the military operation "in theatre". Those involved in "the planning of Operation Storm" were not mentioned:

"The identity of the "American general" referred to by Fenrick [a Tribunal staff member] is not known. The tribunal would not allow Williamson or Fenrick to be interviewed. But Ms. Arbour, the tribunal's chief prosecutor, suggested in a telephone interview last week that Fenrick's comment had been `a joking observation'. Ms. Arbour had not been present during the meeting, and that is not how it was viewed by some who were there. Several people who were at the meeting assumed that Fenrick was referring to one of the retired U.S. generals who worked for Military Professional Resources Inc. ... Questions remain about the full extent of U.S. involvement. In the course of the three yearinvestigation into the assault, the United States has failed to provide critical evidence requested by the tribunal, according to tribunal documents and officials, adding to suspicion among some there that Washington is uneasy about the investigation... The Pentagon, however, has argued through U.S. lawyers at the tribunal that the shelling was a legitimate military activity, according to tribunal documents and officials".26

The Tribunal was attempting to hide what had already been revealed in several press reports published in the wake of Operation Storm. According to a US State Department spokesman, MPRI had been helping the Croatians "avoid excesses or atrocities in military operations."27 Fifteen senior US military advisers headed by retired two star General Richard Griffitts had been dispatched to Croatia barely seven months before Operation Storm. 28 According to one report, MPRI executive director General Carl E. Vuono: "held a secret top-level meeting at Brioni Island, off the coast of Croatia, with Gen. Varimar Cervenko, the architect of the Krajina campaign. In the five days preceding the attack, at least ten meetings were held between General Vuono and officers involved in the campaign..."29

According to Ed Soyster, a senior MPRI executive and former head of the Defence Intelligence Agency (DIA):

"MPRI's role in Croatia is limited to classroom instruction on military-civil relations and doesn't involve training in tactics or weapons. Other U.S. military men say whatever MPRI did for the Croats and many suspect more than classroom instruction was involved it was worth every penny." Carl Vuono and Butch [Crosbie] Saint are hired guns and in it for the money," says Charles Boyd, a recently retired four star Air Force general who was the Pentagon's No. 2 man in Europe until July [1995]. "They did a very good job for the Croats, and I have no doubt they'll do a good job in Bosnia."30

THE HAGUE TRIBUNAL'S COVER UP

The untimely leaking of the ICTY's internal report on the Krajina massacres barely a few days before the onslaught of NATO's air raids on Yugoslavia was the source of some embarrassment to the Tribunal's Chief Prosecutor Louise Arbour. The Tribunal (ICTY) attempted to cover up the matter and trivialise the report's findings (including the alleged role of the US military officers on contract with the Croatian Armed Forces). Several Tribunal officials including American Lawyer Clint Williamson sought to discredit the Canadian Peacekeeping officers' testimony who witnessed the Krajina massacres in 1995.31

Williamson, who described the shelling of Knin as a "minor incident," said that the Pentagon had told him that Knin was a legitimate military target... The [Tribunal's] review concluded by voting not to include the shelling of Knin in any indictment, a conclusion that stunned and angered many at the tribunal"...32

The findings of the Tribunal contained in the leaked ICTY documents were downplayed, their relevance was casually dismissed as "expressions of opinion, arguments and hypotheses from various staff members of the OTP during the investigative process".33 According to the Tribunal's spokesperson "the documents do not represent in any way the concluded decisions of the Prosecutor." 34

The internal 150 page report has not been released. The staff member who had leaked the documents is (according to a Croatian TV report) no longer working for the Tribunal. During the press Conference, the Tribunal's spokesman was asked: "about the consequences for the person who leaked the information", Blewitt [the ICTY spokesman] replied that he did not want to go into that. He said that the OTP would strengthen the existing procedures to prevent this from happening again, however he added that you could not stop people from talking".35

THE USE OF CHEMICAL WEAPONS IN CROATIA

The massacres conducted under Operation Storm "set the stage" for the "ethnic cleansing" of at least 180,000 Krajina Serbs (according to estimates of the Croatian Helsinki Committee and Amnesty International). According to other sources, the number of victims of ethnic cleansing in Krajina was much larger.

Moreover, there is evidence that chemical weapons had been used in the Yugoslav civil war (1991-95).36 Although there is no firm evidence of the use of chemical weapons against Croatian Serbs, an ongoing enquiry by the Canadian Minister of Defence (launched in July 1999) points to the possibility of toxic poisoning of Canadian Peacekeepers while on service in Croatia between 1993 and 1995:

"There was a smell of blood in the air during the past week as the media sensed they had a major scandal unfolding within the Department of National Defense over the medical files of those Canadians who served in Croatia in 1993. Allegations of destroyed documents, a coverup, and a defensive minister and senior officers..."37

The official release of the Department of National Defence (DND) refers to possibility of toxic "soil contamination" in Medak Pocket in 1993 (see below). Was it "soil contamination" or something far more serious? The criminal investigation by the Royal Canadian Mounted Police (RCMP) refers to the shredding of medical files of former Canadian peacekeepers by the DND. In other words did the DND have something to hide? The issue remains as to what types of shells and ammunitions were used by the Croatian Armed Forces ie. were chemical weapons used against Serb civilians?

OPERATION STORM: THE ACCOUNT OF THE ROYAL CANADIAN REGIMENT

Prior to the onslaught, Croatian radio had previously broadcasted a message by president Franjo Tudjman, calling upon "Croatian citizens of Serbian ethnicity... to remain in their homes and not to fear the Croatian authorities, which will respect their minority rights."38 Canadian peacekeepers of the Second Battalion of the Royal 22nd Regiment witnessed the atrocities committed by Croatian troops in the Krajina offensive in September 1995:

"Any Serb who had failed to evacuate their property were systematically "cleansed" by roving death squads. Every abandoned animal was slaughtered and any Serb household was ransacked and torched".39

Also confirmed by Canadian peacekeepers was the participation of German mercenaries in Operation Storm:

"Immediately behind the frontline Croatian combat troops and German mercenaries, a large number of hardline extremists had pushed into the Krajina. ...Many of these atrocities were carried out within the Canadian Sector, but as the peacekeepers were soon informed by the Croat authorities, the UN no longer had any formal authority in the region."40

How the Germans mercenaries were recruited was never officially revealed. An investigation by the United Nations Human Rights Commission (UNHRC) confirmed the that foreign mercenaries in Croatia had in some cases "been paid [and presumably recruited] outside Croatia and by third parties."41

THE 1993 MEDAK POCKET MASSACRE

According to Jane Defence Weekly (10 June 1999), Brigadier General Agim Ceku (now in charge of the KLA) also "masterminded the successful HV [Croatian Army] offensive at Medak" in September 1993. In Medak, the combat operation was entitled "Scorched Earth" resulting in the total destruction of the Serbian villages of Divoselo, Pocitelj and Citluk, and the massacre of over 100 civilians.42

These massacres were also witnessed by Canadian peacekeepers under UN mandate:

"As the sun rose over the horizon, it revealed a Medak Valley engulfed in smoke and flames. As the frustrated soldiers of 2PPCLI waited for the order to move forward into the pocket, shots and screams still rang out as the ethnic cleansing continued. ...About 20 members of the international press had tagged along, anxious to see the Medak battleground. Calvin [a Canadian officer] called an informal press conference at the head of the column and loudly accused the Croats of trying to hide war crimes against the Serb inhabitants. The Croats started withdrawing back to their old lines, taking with them whatever loot they hadn't destroyed. All livestock had been killed and houses torched. French reconnaissance troops and the Canadian command element pushed up the valley and soon began to find bodies of Serb civilians, some already decomposing, others freshly slaughtered. ...Finally, on the drizzly morning of Sept. 17, teams of UN civilian police arrived to probe the smouldering ruins for murder victims. Rotting corpses lying out in the open were catalogued, then turned over to the peacekeepers for burial."43

The massacres were reported to the Canadian Minister of Defence and to the United Nations:

"Senior defence bureaucrats back in Ottawa had no way of predicting the outcome of the engagement in terms of political fallout. To them, there was no point in calling media attention to a situation that might easily backfire. ...So Medak was relegated to the memory hole no publicity, no recriminations, no official record. Except for those soldiers involved, Canada's most lively military action since the Korean War simply never happened."44

PART III. NATO'S `POST CONFLICT' AGENDA IN KOSOVO.

Both the Medak Pocket massacre and Operation Storm bear a direct relationship to the ongoing security situation in Kosovo and the massacres and ethnic cleansing committed by KLA troops. While the circumstances are markedly different, several of today's actors in Kosovo were involved (under the auspices of the Croatian Armed Forces) in the planning of both these operations. Moreover, the US mercenary outfit MPRI which collaborated with the Croatian Armed Forces in 1995 is currently on contract with the KLA. NATO's casual response to the appointment of Brigadier General Agim Ceku as KLA Chief of Staff was communicated by Mr. Jamie Shea in a Press Briefing in May:

"I have always made it clear, and you have heard me say this, that NATO has no direct contacts with the KLA. Who they appoint as their leaders, that is entirely their own affair. I don't have any comment on that whatever."45

While NATO says it "has no direct contacts with the KLA", the evidence confirms the opposite. Amply documented, KLA terrorism has been installed with NATO's tacit approval. The KLA had (according to several reports) been receiving "covert support" and training from the CIA and Germany's Bundes Nachrichten Dienst (BND) since the mid-nineties. Moreover, MPRI collaboration with the KLA predates the onslaught of the bombing campaign.46 Moreover, the building up of KLA forces was part of NATO planning. Already by mid-1998, "covert support" had been replaced by official ("overt") support by the military Alliance in violation of UN Security Council Resolution UNSCR 1160 of 31 March 1998 which condemned: "...all acts of terrorism by the Kosovo Liberation Army or any other group or individual and all external support for terrorist activity in Kosovo, including finance, arms and training."

NATO officials, Western heads of State and heads of government, the United Nations Secretary General Kofi Annan not to mention ICTY chief Prosecutor Louise Arbour, were fully cognizant of General Brigadier Agim Ceku's involvement in the planning of Operation Storm and Operation Scorched Earth. Surely, some questions should have been asked...

Yet visibly what is shaping up in the wake of the bombings in Kosovo is the continuity of NATO's operation in the Balkans. Military personnel and UN bureaucrats previously stationed in Croatia and Bosnia have been routinely reassigned to Kosovo. KFOR Commander Mike Jackson had previously been responsible as IFOR Commander for organising the return of Serbs "to lands taken by Croatian HVO forces in the Krajina offensive".47 And in this capacity General Mike Jackson had "urged that the resettlement [of Krajina Serbs] not [be] rushed to avoid tension [with the Croatians]... while also warning returning Serbs "of the extent of the [land] mine threat."48 In retrospect, recalling the events of early 1996, very few Krajina Serbs were allowed to return to their homes under the protection of the United Nations.

And a similar process is unfolding in Kosovo, ie. the conduct of senior military officers conforms to a consistent pattern, the same key individuals are now involved in Kosovo. While token efforts are displayed to protect Serb and Roma civilians, those who have fled Kosovo are not encouraged to return under UN protection... In postwar Kosovo, "ethnic cleansing" implemented by the KLA has been accepted by the "international community" as a "fait accompli"...

While calling for democracy and "good governance" in the Balkans, the US and its allies have installed in Kosovo a paramilitary government with links to organised crime.

The foreseeable outcome is the outright "criminalisation" of civilian State institutions and the establishment of what is best described as a "Mafia State". The complicity of NATO and the Alliance governments (namely their relentless support to the KLA) points to the de facto "criminalisation" of KFOR and of the UN peacekeeping apparatus in Kosovo. The donor agencies and governments (eg. the funds approved by the US Congress in violation of several UN Security Council resolutions) providing financial support to the KLA are, in this regard, also "accessories" to the de facto criminalisation of State institutions. Through the intermediation of a paramilitary group (created and financed by Washington and Bonn), NATO ultimately bears the burden of responsibility for the massacres and ethnic cleansing of civilians in Kosovo.

STATE TERROR AND THE `FREE MARKET'

State terror and the "free market" seem to go hand in hand. The concurrent "criminalisation" of State institutions in Kosovo is not incompatible with the West's economic and strategic objectives in the Balkans. Notwithstanding the massacres of civilians, the self-proclaimed KLA administration has committed itself to establishing a "secure and stable environment" for foreign investors and international financial institutions. The Minister of Finance Adem Grobozci and other representatives of the provisional government invited to the various donor conferences are all KLA appointees. In contrast, members of the KDL of Ibrahim Rugova (duly elected in parliamentary elections) were not even invited to attend the Stabilisation Summit in Sarajevo in late July.

"Free market reforms" are envisaged for Kosovo under the supervision of the Bretton Woods institutions largely replicating the structures of the Rambouillet agreement. Article I (Chapter 4a) of the Rambouillet Agreement stipulated that: "The economy of Kosovo shall function in accordance with free market principles". The KLA government will largely be responsible for implementing these reforms and ensuring that loan conditionalities are met.

In close liaison with NATO, the Bretton Woods institutions had already analysed the consequences of an eventual military intervention leading to the military occupation of Kosovo: almost a year prior to the beginning of the War, the World Bank conducted "simulations" which "anticipated the possibility of an emergency scenario arising out of the tensions in Kosovo."49

The eventual "reconstruction" of Kosovo financed by international debt largely purports to transfer Kosovo's extensive wealth in mineral resources and coal to multinational capital. In this regard, the KLA has already occupied (pending their privatisation) the largest coal mine at Belacevac in Dobro Selo northwest of Pristina. In turn, foreign capital has its eyes rivetted on the massive Trepca mining complex which constitutes "the most valuable piece of real estate in the Balkans, worth at least $5 billion."50 The Trebca complex not only includes copper and large reserves of zinc but also cadmium, gold, and silver. It has several smelting plants, 17 metal treatment sites, a power plant and Yugoslavia's largest battery plant. Northern Kosovo also has estimated reserves of 17 billion tons of coal and lignite.

In the wake of the bombings, the management of many of the State owned enterprises and public utilities were taken over by KLA appointees. In turn, the leaders of Provisional Government of Kosovo (PGK) have become "the brokers" of multinational capital committed to handing over the Kosovar economy at bargain prices to foreign investors. The IMF's lethal "economic therapy" will be imposed, the provincial economy will be dismantled, agriculture will be deregulated, local industrial enterprises which have not been totally destroyed will be driven into bankruptcy.

The most profitable State assets will eventually be transferred into the hands of foreign capital under the World Bank sponsored privatisation programme. "Strong economic medicine" imposed by external creditors will contribute to further boosting a criminal economy (already firmly implanted in Albania) which feeds on poverty and economic dislocation. "The Allies will work with the rest of the international community to help rebuild Kosovo once the crisis is over: The International Monetary Fund and Group of Seven industrialized countries are among those who stand ready to offer financial help to the countries of the region. We want to ensure proper coordination of aid and help countries to respond to the effects of the crisis. This should go hand in hand with the necessary structural reforms in the countries affected helped by budget support from the international community."51

Morever, the so-called "reconstruction" of the Balkans by foreign capital will signify multibillion contracts to foreign firms to rebuild Kosovo's infrastructure. More generally, the proposed "Marshall Plan" for the Balkans financed by the World Bank and the European Development Bank (EBRD) as well as private creditors will largely benefit Western mining, petroleum and construction companies while fuelling the region's external debt well into the third millennium.

And Kosovo is slated to reimburse this debt through the laundering of dirty money. Yugoslav banks in Kosovo will be closed down, the banking system will be deregulated under the supervision of Western financial institutions. Narcodollars from the multibillion dollar Balkans drug trade will be recycled towards servicing the external debt as well as "financing" the costs of "reconstruction." The lucrative flow of narcodollars thus ensures that foreign investors involved in the "reconstruction" programme will be able reap substantial returns. In turn, the existence of a Kosovar "narco State" ensures the orderly reimbursement of international donors and creditors. The latter are prepared to turn blind eye. They have a tacit vested interest in installing a government which facilitates the laundering of drug money.

The pattern in Kosovo is, in this regard, similar to that observed in neighbouring Albania. Since the early 1990s (culminating with the collapse of the financial pyramids in 1996-97), the IMF's reforms have impoverished the Albanian population while spearheading the national economy into bankruptcy. The IMF's deadly economic therapy transforms countries into open territories. In Albania and to a lesser extent Macedonia, it has also contributed to fostering the growth of illicit trade and the criminalisation of State institutions.

ENDNOTES

1. Jim Lehrer News Maker Interview, PBS, 26 July 1999.
2. Stratfor Commentary, "Growing Threat of Serbian Paramilitary Action in Kosovo", 29 July 1999.
3. Human Rights Watch, 3 August 1999.
4. See Michael Radu, "Don't Arm the KLA", CNS Commentary from the Foreign Policy Research Institute, 7 April, 1999).
5. Tanjug Press Dispatch, 14 May 1999.
6. Stratfor Comment, "Rugova Faced with a Choice of Two Losses", Stratfor, 29 July 1999.
7. Federal Ministry for Foreign Affairs, Yugoslav Daily Survey, Belgrade, 29 June 1999.
8. Hina Press Dispatch, Zagreb, 26 July 1999.
9. Ibid.
10. BBC Report, London, 5 July 1999.
11. New York Times, 2 February 1999.
12. Financial Times, London, 4 August 1999.
13. See Organization for Security and Cooperation in Europe, Mission in Kosovo, Decision 305, Permanent Council, 237th Plenary Meeting, PC Journal No. 237, Agenda item 2, Vienna, 1 July 1999.
14. Statement at the Sarajevo Summit, 31 July 1999.
15. 106th Congress, April 15, HR 1425.
16. Interview with KLA Chief of Staff Commander Agim Ceku, Kosovapress, 31 July 1999.
17. See Tammy Arbucki, "Building a Bosnian Army", Jane International Defence Review, August 1997.
18. Ibid.
19. Military Professional Resources, Inc, "Personnel Needs", http://www.mpri.com/current/personnel.htm
20. Associated Press Report.
21. Ibid.
22. The actual number of civilians killed or missing was much larger.
23. Quoted in Raymond Bonner, War Crimes Panel Finds Croat Troops Cleansed the Serbs, New York Times, 21 March 1999).
24. Ibid.
25. Ibid.
26. Raymond Bonner, op cit.
27. Ken Silverstein, "Privatizing War", The Nation, New York, 27 July 1997.
28. See Mark Thompson et al, "Generals for Hire", Time Magazine, 15 January 1996, p. 34.
29. Quoted in Silverstein, op cit.
30. Mark Thompson et al, op cit.
31. Raymond Bonner, op cit.
32. Ibid.
33. ICTY Weekly Press Briefing, 24 March 1999).
34. Ibid.
35. Ibid.
36. See inter alia Reuters dispatch, 21 October 1993 on the use of chemical grenades, a New York Times report on 31 October 1992 on the use of poisoned gas).
37. Lewis MacKenzie, "Giving our soldiers the benefit of the doubt", National Post, 2 August 1999.
38. Slobodna Dalmacija, Split, Croatia, August 5 1996.
39. Scott Taylor and Brian Nolan, The Sunday Sun, Toronto, 2 November 1998.
40. Ibid.
41. United Nations Commission on Human Rights, Fifty-first session, Item 9 of the provisional agenda, Geneva, 21 December 1994).
42. (See Memorandum on the Violation of the Human and Civil Rights of the Serbian People in the Republic of Croatia,
http://serbianlinks.freehosting.net/memorandum.htm
43. Excerpts from the book of Scott Taylor and Brian Nolan published in the Toronto Sun, 1 November 1998.
44. Ibid.
45. NATO Press Briefing, 14 May 1999.
46. For further details see Michel Chossudovsky, Kosovo `Freedom Fighters' Financed by Organized Crime, CAQ, Spring-Summer 1999.
47. Jane's Defence Weekly, Vol 25, No. 7, 14 February 1996.
48. Ibid.
49. World Bank Development News, Washington, 27 April 1999.
50. New York Times, July 8, 1998, report by Chris Hedges.
51. Statement by Javier Solano, Secretary General of NATO, published in The National Post, Toronto May 1999.

The Mad, Mad Middle Class

The Mad, Mad Middle Class

By Isaiah J. Poole

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You may not agree, as Sara Robinson provocatively suggests, that the country is primed for revolution. But there is no doubt that large numbers of middle-class people are mad, really mad, about the damage Bush-league conservatism has done to the country and to their futures.

In fact, comments in a new Democracy Corps report, based on focus groups of Republicans and Democrats in Orlando, Fla., and Columbus, Ohio, reveal deep anger and frustration over policies that favor the wealthy and pull the ability to meet their basic aspirations further from their grasp.

Note comments like these:

* Columbus man: "They talk about the economy as working for the very wealthy and I read in the New York Times that $200,000 per year is the new $100,000 per year in salary…That's the standard of living to feel like you've really made it in America, $200,000 a year. For most people, that's unattainable. They'll never see that in two lifetimes. So I think it's unfortunate that there is one-tenth of one percent of Americans own forty percent of the wealth in this country. That's an obscene number. It's a disgusting number."

* Orlando woman: "I don't like people having like no-bid contracts over there [in Iraq]. I think that has really escalated the cost of the war too. I mean this war is just unbelievable and the cost and the money could be going to help New Orleans, use it on domestic programs and helping other nations."

* Columbus woman: "The war in Iraq, the amount of money being spent over there, and the cost of oil. It's kind of all tied in. And then all of that filters down eventually to everyday people. And all of those costs eventually fall on our shoulders. On shoulders that are already pretty well packed."

From the rising costs of fuel to the effects of the mortgage crisis, the Democracy Corps sessions reflect a middle class that feels under siege. And the traditional conservative palliatives, as far as these people are concerned, no longer cut it.

When the focus groups were presented with two economic messages - one based on Republican stump speeches that focuses on making the 2003 tax cuts for the wealthy permanent and an alternative that emphasized such items as investment projects, extending unemployment insurance and child tax credits, these prospective voters were, in the Democracy Corps words, "overwhelmingly drawn" to the more progressive message.

Here's how a Columbus participant saw it:

It sounds like to me that the Republicans want to make the wealthy wealthier. Cut their stock dividend tax, they should have to pay taxes on that. I have to pay taxes if I pull my money out of my 401K. I have to pay a fee. So I think that they should be taxed just like we are, us working class people. The higher end market of people should be taxed just like I am. What taxes I pay, the percentage of the same taxes I pay should be the same taxes they pay for the money that they make.

And in Orlando...

You know if we start eliminating all those wonderful tax loopholes for corporations and requiring the wealthy and big corporations to pay their fair share we are going to have more money. It just makes sense.

Andrea Batista Schlesinger, who will be a featured speaker at Take Back America 2008, wrote about this middle-class anger almost two years ago in a way that now rings more true than ever. Her point was that "middle class does not equal middle ground":

Advocating for the middle class isn't inherently some kind of political compromise or centrist bargain, a la the Democratic Leadership Council. Raising the minimum wage is a middle class issue. Progressive immigration policy is a middle class issue. Reining in the power of industries to dictate our economic, energy, and health care policies is a middle class issue. Sound trade policy is a middle class issue. Just because you're talking about the middle class doesn't mean that your policy initiatives must consist only of tax credits and deductions that apply to a narrow income range. Advocating for the strengthening and expansion of our middle class shouldn't just be political code for "I'm inoffensive." It should mean that you're willing to do whatever it takes to create the economic policy that will directly benefit the overwhelming majority of Americans.

The seduction of Reagan-era sophistry - such as the line brandished by self-proclaimed conservatives campaigning for office that they trust the American people instead of the government, as if they had nothing to do with separating government from its role as an instrument of the people - has some residual strength. So does the conservative tactic of pitting groups against each other - hence the way illegal immigration, rather than bad trade and tax policies, surfaced as a reason why middle-class wage-earners were falling behind.

Still, the focus group analysis concludes, "voters are starving for a new economic vision that will strengthen the middle class and get our country back on the right track."

Progressives have the basics for that vision, but the challenges are to color in the details, inject it into the political debate in ways that touch both the anxieties and aspirations of middle-class families, and make sure that middle class voters know that there is an independent political force that will be fighting for their interests - working with the new White House leadership when it can, and confronting it when it must.

At Take Back America 2008 in March, progressive activists will have a prime opportunity to make that happen.

After the War, a New Battle to Become Citizens

After the War, a New Battle to Become Citizens

By Fernanda Santos

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Despite a 2002 promise from President Bush to put citizenship applications for immigrant members of the military on a fast track, some are finding themselves waiting months, or even years, because of bureaucratic backlogs. One, Sgt. Kendell K. Frederick of the Army, who had tried three times to file for citizenship, was killed by a roadside bomb in Iraq as he returned from submitting fingerprints for his application.

About 7,200 service members or people who have been recently discharged have citizenship applications pending, but neither the Department of Defense nor Citizenship and Immigration Services keeps track of how long they have been waiting. Immigration lawyers and politicians say they have received a significant number of complaints about delays because of background checks, misplaced paperwork, confusion about deployments and other problems.

"I've pretty much given up on finding out where my paperwork is, what's gone wrong, what happened to it," said Abdool Habibullah, 27, a Guyanese immigrant who first applied for citizenship in 2005 upon returning from a tour in Iraq and was honorably discharged from the Marines as a sergeant. "If what I've done for this country isn't enough for me to be a citizen, then I don't know what is."

The long waits are part of a broader problem plaguing the immigration service, which was flooded with 2.5 million applications for citizenship and visas last summer - twice as many as the previous year - in the face of 66 percent fee increases that took effect July 30. Officials have estimated that it will take an average of 18 months to process citizenship applications from legal immigrants through 2010, up from seven months last year.

But service members and veterans are supposed to go to the head of the line. After the Sept. 11 terrorist attacks, President Bush signed an executive order allowing noncitizens on active duty to file for citizenship right away, instead of having to first complete three years in the military. The federal government has since taken several steps to speed up the process, including training military officers to help service members fill out forms, assigning special teams to handle the paperwork, and allowing citizenship tests, interviews and ceremonies to take place overseas.

At the same time, post-9/11 security measures, including tougher guidelines for background checks that are part of the naturalization process, have slowed things down.

The Federal Bureau of Investigation, which checks the names of citizenship applicants against those in its more than 86 million investigative files, has been overwhelmed, handling an average of 90,000 name-check requests a week. In the fiscal year that ended in September, the F.B.I. was asked to check 4.1 million names, at least half of them for citizenship and green card applicants, a spokesman said.

"Most soldiers clear the checks within 30 to 60 days, or 60 to 90 days," said Leslie B. Lord, the Army's liaison to Citizenship and Immigration Services, the federal agency that processes citizenship applications. "But even the soldier with the cleanest of records, if he has a name that's very similar to one that's in the F.B.I. bad-boy and bad-girl list, things get delayed."

Such explanations are why Mr. Habibullah has decided that once he does become a citizen - if he ever becomes a citizen - he will change his name.

"I figured that's part of the reason things got delayed," he said. "You know, that I have a Muslim name."

Thousands of Muslim civilians have also found themselves waiting months or years for background checks, and have filed a class-action lawsuit in federal court in Denver. But advocates for the immigrant service members said that those with pending applications are from a variety of backgrounds and that they do not suspect a pattern of discrimination against Muslims.

Some 31,200 members of the military were sworn in as citizens between October 2002 and December 2007, according to the immigration service, but a spokeswoman, Chris Rhatigan, said she could not determine how long it took for them to be naturalized since the agency does not maintain a database tracking military cases.

Over all, 312,000 citizenship or green card applications are pending name checks, including 140,000 that have been waiting more than six months, immigration officials said. This month, immigration authorities eased background-check requirements for green cards, saying that if applicants had been waiting more than six months, they could be approved without an F.B.I. check, and approvals could be revoked later "in the unlikely event" that troubling information was found.

After hearing complaints from at least half a dozen service members over the past three months, Senator Charles E. Schumer of New York has drafted a bill to create a special clearinghouse to ensure that applications from active and returning members of the military are processed quickly and smoothly. A spokesman said several other lawmakers reported hearing many similar stories.

"These are men and women who are risking their lives for us," Mr. Schumer said in a telephone interview. "They've met all the requirements for citizenship, they have certainly proved their commitment to our country, and yet they could lose their lives while waiting for a bureaucratic snafu to untangle."

In interviews, immigration lawyers and military officials said that in general, the naturalization process takes service members between six months and a year, which is about half the current average wait for civilians. But some cases drag on much longer because of background-check delays or because applications are misplaced, or notices are mailed to stateside addresses after an applicant has been deployed, causing appointments to be missed.

"You try to resolve these things amicably, reaching out to the military, reaching out to immigration officials, but you hit roadblock after roadblock," said David E. Piver, a Pennsylvania lawyer who filed at least six petitions in federal court over the past five years on behalf of service members experiencing longer than usual delays on their citizenship applications.

"It's usually not any substantive issue that's causing those delays," he said. "What it boils down to are bureaucratic snafus."

Feyad Mohammed, an immigrant from Trinidad and Tobago who lives with his parents in Richmond Hill, Queens, was naturalized last month - four years after he filed the first of four citizenship applications, and six months after his honorable discharge from the Army as a sergeant.

Mr. Mohammed first applied in 2004, after he returned from the first of his two tours in Iraq. But the application seemed to have been lost; when he checked after a few months, he said, no one at the immigration service could tell him where it was or even if it had been received. He filed again in 2005, but missed his interview several months later; it had been scheduled in Iraq, during his second combat tour, but he was home on leave on the appointed day.

After he was discharged in July 2007, Mr. Mohammed filed another application. The paperwork was returned because he had not included a check covering the processing fee, he said, ignoring a Bush administration initiative that exempts combat veterans from application fees for up to a year after discharge. It was then that Mr. Mohammed reached out to Senator Schumer's office, which helped him file a fourth, and final, time.

When he was sworn in Jan. 25 at the federal courthouse in Downtown Brooklyn, Mr. Mohammed said, he felt "relieved."

"I was a citizen," he said. "I could finally move on with my life."

But Sergeant Frederick, a 21-year-old immigrant from Trinidad, would be awarded citizenship only posthumously, on the day of his burial. He is one of more than 90 immigrant service members to be naturalized after losing their lives in Iraq or Afghanistan.

Sergeant Frederick's mother, Michelle Murphy, said that he had filed his citizenship application a year before he was deployed to Iraq in 2005, but that his application was sent back to her Maryland home three times - once because of incomplete biographical information, again because he had left a box unchecked, and once more because he had not paid the fee.

Finally, Ms. Murphy said, Sergeant Frederick received a letter saying that the fingerprints he had included with his application could not be read and that he needed to submit new ones. She contacted immigration officials, who arranged for him to submit a new set of fingerprints on Oct. 19, 2005, near his base in Tikrit. On the way back from the appointment, his convoy hit a roadside bomb.

"If somebody is fighting for a country, if he's deployed, if he's in the middle of a war, it shouldn't be that hard for them to become a citizen," Ms. Murphy, 42, said in a telephone interview.

After his death, the immigration service began accepting enlistment fingerprints with service members' citizenship applications, provided applicants authorized the military to share their files with immigration officials. A bill to make such sharing automatic has been passed by the House and is pending a final Senate vote.

In the meantime, Mr. Habibullah is working as an aircraft hydraulics mechanic in Connecticut, though he hopes to get a better-paying job in the federal government once he is naturalized. In October, Mr. Habibullah's father and grandmother became citizens in separate ceremonies, though they applied fully two years after he did.

Mr. Habibullah has passed the citizenship test and been interviewed, and he said he does not know what to do to move his application through the backlog faster.

"Every time I ask about it, I get the same answer: it's pending the background check," Mr. Habibullah said as he looked over his military medals, which are displayed on a wall in the Mount Vernon, N.Y., apartment he shares with his wife and 1-month-old son. "I'm at the point right now that I've almost given up on it."