Saturday, March 1, 2008

US stocks plunge following Fed Chairman Bernanke’s testimony before Congress

US stocks plunge following Fed Chairman Bernanke’s testimony before Congress

By Barry Grey

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Share prices on US stock markets fell sharply Thursday and Friday following congressional testimony by Federal Reserve Board Chairman Ben Bernanke.

The Dow Jones Industrial Average declined 112 points (0.9 percent) on Thursday and plummeted another 315 points (2.5 percent) on Friday, wiping out gains from the four previous trading days and leaving the stock index with four consecutive monthly losses.

The other major stock indexes also fell sharply on Friday, with the Standard & Poor’s 500 index falling 37 points (2.7 percent) and the Nasdaq Composite index down 60 points (2.6 percent). With Friday’s close, the S&P 500 index has suffered its worst start to a year since 1941.

Bernanke appeared Wednesday before the Financial Services Committee of the House of Representatives and Thursday before the Senate Banking Committee to deliver the Federal Reserve Board’s semi-annual report to Congress. While saying be believed the US could still avert a recession, he presented a grim picture of an economy reeling from a housing collapse, a credit and banking crisis, a slowdown in consumer spending, growing unemployment and virtually zero economic growth, combined with accelerating inflation and a weakening dollar.

Bernanke made it clear he intended to slash interest rates again when the Fed’s policy-making board, the Federal Open Market Committee, meets next on March 18. The Fed is expected to cut its federal funds rate by another 0.5 points, or even 0.75 points, which would be the sixth rate cut since last September. A 0.5 point reduction would bring the benchmark short-term rate down to 2.5 percent from its level of 5.25 percent last August, when the collapse of the US subprime mortgage market all but froze credit markets in the US and much of the world.

While Bernanke’s signals in regard to interest rates reassured Wall Street banks and investors, who have been pushing for rate cuts to pump liquidity into financial markets and aid banks facing billions in subprime-related losses, the gloomy substance of his testimony, combined with new recessionary indicators and record-high crude oil prices, sparked the sell-off of stocks.

In opening his remarks to the House committee, Bernanke said the economic situation had become “distinctly less favorable” since his previous report to Congress in July. He then cited persistent “strains” in financial markets, turmoil in credit markets leading to “tighter credit for many households and businesses,” a sharp contraction in economic growth, a decline in job creation and growth of unemployment.

He indicated that the collapse in the housing market would continue to weigh on the economy for at least another year and noted that consumer spending had slackened markedly since the end of 2007. He predicted that business investment would slow in the first half of 2008, and that nonresidential construction would “decelerate sharply.”

He projected a rise in the unemployment rate from the present 4.9 percent to 5.2 percent or 5.3 percent by the fourth quarter of this year.

He then warned that the reality could turn out considerably worse than his projections, citing the possibility that the housing market or the labor market could deteriorate more dramatically and that the credit crunch could worsen.

He took note of rising inflation and soaring energy and commodity prices and said the Fed would “monitor closely inflation and inflation expectations.” But he clearly placed the emphasis on the dangers of recession, saying the Fed would “act in a timely manner as needed to support growth and to provide adequate insurance against downside risks”—a euphemistic way of saying the Fed was prepared to cut interest rates further.

In his appearance the following day before the Senate Banking Committee, Bernanke said that the US economy faced a more difficult situation than in the aftermath of the dotcom stock market crash in 2001. He noted that the US was then running a budget surplus, that the US dollar was strong, and that inflation was low. He pointed out that in 2001, crude oil was selling at $20 a barrel, as compared to $100 a barrel today.

Today, the federal government is running huge budget deficits and the US dollar is weak and growing weaker. As a result, he said, “Congress and the Fed have less freedom to combat economic weakness...”

He added, in a remark that reverberated through both US and international markets, that “there will probably be some bank failures.” He said he had confidence that none of the major banks would collapse, but suggested that some smaller banks would inevitably fail.

Bernanke’s testimony had an immediate impact on global currency and commodity markets. His virtual pledge to continue cutting US interest rates, as well as his gloomy assessment of economic conditions, produced a sharp fall in the dollar. On Thursday, the dollar hit a record low against the euro, closing at $1.52 per euro. It also fell to a record low against the Swiss franc and a three-year low against the Japanese yen.

Over the past six years, the dollar has fallen more than 40 percent against the euro and more than 20 percent against a basket of currencies. With its decline this week, it fell to its lowest level since the US allowed the dollar to float freely in 1973.

The sinking dollar led Thursday to a $2.95 jump in the price of crude oil, which is traded in dollars, with the price-per-barrel settling at a record-high $102.59 on the New York Mercantile Exchange. Gold, corn and soybeans also hit or approached new highs, with gold closing at $970.74 an ounce.

The decline in the dollar, the world’s preeminent reserve and trading currency, has led to a sharp increase in commodities speculation, contributing to an upsurge in basic commodity prices. So far this year, natural gas prices have risen by 26 percent, coal has increased by 56 percent, platinum is up by 41 percent, wheat prices have jumped 32 percent, and cocoa has gone up by 38 percent.

The upward spiral in world commodity prices is increasingly hitting consumers in the US in the form of sharply higher costs for gasoline, home heating and food. Last week, the US Labor Department reported that the Consumer Price Index had risen in January by 4.3 percent over a year ago, and this week government figures showed a jump in producer, or wholesale, prices for the month of 7.4 percent compared with a year ago. This was the worst year-to-year increase in producer price inflation since 1981.

The signs of growing inflation coincided with a series of economic indicators suggesting an existing or imminent recession:

* The Labor Department reported that first-time unemployment claims rose last week by 19,000, to 373,000, the highest level since late January. Economists had expected an increase of only 4,000.

* The government confirmed that the gross domestic product rose by only 0.6 percent in the fourth quarter of 2007. The GDP for all of 2007 rose by only 2.2 percent, the weakest performance since 2002.

* The National Association of Realtors reported that sales of previously owned homes fell for the sixth consecutive month in January, dropping 0.4 percent. Median home prices also continued to fall, declining by 4.6 percent from a year ago.

A different index of home prices, the Standard & Poor’s/Case-Shiller index, which measures home prices in twenty metropolitan areas, reported a decline in December of 9.1 percent from a year ago, and projected an annual rate of home price declines of 20 percent.

* Two reports on consumer confidence showed sharp declines in January.

* Other reports showed consumer spending barely keeping pace with inflation and a sharp decline in business activity in the Chicago region.

Markets were further shaken by reports of more losses from the collapse of the mortgage market and the resulting banking crisis. Fannie Mae, the government-chartered mortgage-financing giant, reported a fourth quarter loss of $3.56 billion. The next day its smaller rival, Freddie Mac, reported its own fourth quarter loss of $2.5 billion and warned that it expected to lose billions more.

Financial analysts on Friday predicted that US and European banks stood to lose an additional $350 billion from the collapse of subprime-linked securities. On the same day, American International Group, the world’s largest insurance company, reported a record fourth-quarter loss of $5.29 billion, resulting mainly from a write-down of $11.12 billion in insurance contracts tied to mortgages.

An additional factor in the sell-off of financial stocks was a statement by Treasury Secretary Henry Paulson, seconded by President Bush at his Thursday press conference, rejecting proposals being worked out between Wall Street banks and Democratic legislators for a government-funded bailout of mortgage lenders, banks and financial institutions that are holding tens of billions in bad investments linked to subprime and other shaky mortgages.

U.S. banking sector headed for meltdown, official says

U.S. banking sector headed for meltdown, official says

Banks face massive loan losses because of defaults on debts and housing-price slide

Duncan Mavin

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TORONTO -- The U.S. banking sector is headed for a credit downturn that will be "the worst in generations," featuring widespread defaults on a range of debts and a national housing price slide not seen since the Great Depression, one of the most influential analysts on Wall Street says.

The banks face massive loan losses -- "far more dramatic" than most bank executives and ratings agencies have forecast -- as the next chapter in financial-sector turmoil unfolds, said Meredith Whitney, an analyst with Oppenheimer &Co. Inc.

"We believe loss rates will exceed the highest levels since 1990 by a significant margin," she said in a note Monday.

"Bank losses will be the highest in the past 20-plus years as a result of greater numbers of individual defaulting on mortgages and/or other loans and from [loan balances that] are far higher than they were in the last housing cycle."

Whitney -- who is also a panellist for Fox News and the No. 2-ranked analyst on a Forbes list of top stock pickers for 2007 -- shot to global infamy last year after her gloomy, but accurate, predictions about the scale of subprime problems facing Citigroup Inc. led to a worldwide sell-off of banking stocks.

In Monday's note, the Oppenheimer analyst slashed her already-depressed forecasts of what large U.S. banks will earn in 2008 by 29 per cent and by 13 per cent for 2009, citing concerns about mortgages, credit-card balances and other loans.

In contrast to Whitney's view, there was some good news Monday for big U.S. banks reeling from $92 billion US in collective writedowns tied to investments in the sub-prime-mortgage market.

The U.S. financial sector was buoyed by an announcement from rating agency Standard & Poor's that it is unlikely to downgrade bond insurer MBIA Inc. any time soon. S&P and other rating agencies have been reviewing MBIA and its peers after U.S. monolines posted record losses on collateralized debt obligations (CDOs) they guaranteed. Banks stood to lose as much as $70 billion US if the CDOs they owned no longer carried an automatic AAA rating because of the insurance.

Canadian banks have been praised for avoiding the worst lending excesses of their U.S. counterparts. But their first-quarter profit reports -- released over the next two weeks, starting with Canadian Imperial Bank of Commerce, Toronto-Dominion Bank and National Bank, all due out on Thursday -- will be scrutinized for signs of a serious spillover from deteriorating U.S. markets.

The Canadian banks have tens of billions of dollars in indirect exposure to a wide-variety of U.S. loans through various complex investments, such as CDOs and structured investment vehicles. Also, Toronto-Dominion Bank, Royal Bank of Canada and Bank of Montreal all have extensive retail-banking operations in the United States.

According to Whitney, consumer loans are now the main area of concern for the U.S banking sector.

"As far as consumer credit is concerned, we are in unchartered territory," the outspoken analyst said. "Housing prices, now down six per cent across the United States, have begun to decline on a national level, a phenomenon not seen since the Great Depression. We are of the belief that over the next 24 months, national home prices will decline by a factor of three times such levels."

The "sand" really hits the fan because liquidity is drying up as banks stay away from the sort of securitized structured investments that have burned them in recent months, Whitney noted. Highly leveraged loan commitments are another source of earnings pressure in early 2008, she said.

Whitney said the stock prices of big U.S. bank could fall by another 40 per cent.

In a separate note, she also predicted more woes for Citigroup. The world's largest bank must sell $100 billion US of assets to shore up its balance sheet, but in doing so risks losing profitable operations.

"Under duress, Citigroup will likely be forced to sell what it can and not what it should," she said. The Oppenheimer analyst slashed her forecast for Citigroup's earnings from $2.70 US to 75 cents -- the revised estimate "could still prove optimistic," she said -- and predicted the bank's stock price could fall as low as $16 US, compared with a 52-week high of $55.55 US.

Crude oil hits $103 following Ecuador pipeline break

Crude oil hits record high following Ecuador pipeline break

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Crude oil futures hit a record high above $103 per barrel in electronic trading Friday amid reports Ecuador's state-run oil company, Petroecuador, suspended operations at a key export pipeline after a landslide damaged infrastructure. Crude oil for April delivery rose 1 cent to $102.60 a barrel at midday in east Asia after touching a high of $103.05 a barrel earlier. Petroecuador has declared force majeure on its oil exports and will inform those affected by the supply disruption in an official notice Friday, according to wire reports.

George Bush Is Engaged in an Epic Battle to Cover His Ass

Immune to Reality

Why is telecom immunity so important to Bush?

By Allan Uthman

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Something astonishing happened the other day in the House: The Democratic leadership found some courage. After over a year of demoralizing, often inexplicable capitulation, they actually gathered the fortitude to push back slightly against Republicans on so-called national security issues. The Republicans' response was swift: They took their ball and went home, after a brief stop at a prearranged press conference on the Capitol steps.

Two issues caused the dispute: One, in a stunning display of rudimentary oversight, the House issued contempt citations for two former Bush staffers, Harriet Meiers and Josh Bolten, who've been ducking House subpoenas for months now. This was predictably dismissed by weepy Minority Whip John Boehner as a "partisan fishing expedition," a boilerplate clich if ever there was one.

The second issue, which the indignant Republicans preferred to discuss, for obvious reasons, was the House Democrats' refusal to cave on retroactive immunity for telecom companies, like AT&T and Sprint, for collaborating with the White House in spying on domestic internet and phone communications, which, to be clear, was tremendously illegal.

What's less encouraging, but interesting, is that the Democrats were ready to sign off on extending the repugnantly named Protect America Act, except for telecom immunity. To Bush, this made the bill dead on arrival. That's right; Bush promised to veto the bill if it reached his desk without a get out of jail free card for Comcast.

It's hard to line that up with the apocalyptic tenor of Bush's exhortations regarding the bill. If the warrantless domestic spying provisions of the Act were not renewed, Bush warned, Osama bin Laden would rain fire upon us all. But he was planning to veto them if they came to him without immunity. Naturally, this makes no fucking sense. Either Bush is willing to risk another 9/11 to embarrass the Democrats, or he's lying when it comes to the threat posed by having to get a FISA warrant -- retroactively, after the fact -- for domestic surveillance. I think he's lying, but I suppose it could be both.

It's interesting that these issues are what it takes to really outrage Republicans -- threaten huge corporate giants with lawsuits, or exercise congress's constitutional oversight powers. Of course, it's only natural that the Republicans would shudder at the prospect of effective investigations being conducted in the House. If the Democrats actually start following through on the legal options to compel testimony, it's only a matter of time before everyone's implicated. But telecom immunity?

Republicans are, of course, fundamentally pro-corporate, even more so than modern Democrats. But to go to bat this hard on behalf of an industry seems anomalous even for them. All a congressman usually has to do for his biennial bribe is vote in a corporation's interests, not engage in tantrum theatrics. There's more than pedestrian corruption at work here.

Of course, there is the terror issue, and in a most perilous election year, Republicans would like nothing more than to be able to run on the "Dems are sissies" platform. If they can keep people frightened and badly misinformed, they may manage to make telecom amnesty into a winning issue for them come November.

But to do that, they have to lie. A lot. They have to feign outrage, and actual concern for the wellbeing of their fellow Americans. They're doing their level best. To hear Republicans tell it, requiring a rubber-stamp warrant, after the fact, to spy on Americans is like mailing plutonium to Iran. Bush's spiel was grade A horseshit from start to finish:

"Because Congress failed to act, it will be harder for our government to keep you safe from terrorist attack. At midnight, the Attorney General and the Director of National Intelligence will be stripped of their power to authorize new surveillance against terrorist threats abroad. This means that as terrorists change their tactics to avoid our surveillance, we may not have the tools we need to continue tracking them--and we may lose a vital lead that could prevent an attack on America…. Instead, the House held partisan votes that do nothing to keep our country safer. House leaders chose politics over protecting the country--and our country is at greater risk as a result."

Then sign the bill without the telecom amnesty provision, and work on that part later. If it's nearly as vital as Bush says, he's providing aid and comfort to the enemy by not compromising, right?

"If the Protect America Act is allowed to expire, Americans will be at risk," echoed Boehner, despite having just voted against a three-week extension on the bill, like all his fellow Republicans in the House.

What the hell is going on here? When you compare the truths of this dispute with the rhetoric from the White House and its mouthpieces, there's really no other conclusion than that this country has gone fucking bonkers. Reality and public perception don't even share a zip code anymore. After years of constant, obvious lies, their ridiculousness compounded by countless revelations of their falsehood, Bush is still sticking with the same despicable, transparently manipulative bogeyman bullshit he started with. And like-minded jackasses in the media, like Bill Kristol on Fox News Sunday, still have the inconceivable gall to say things like, "I think it's kind of unbelievable, frankly, that -- it's a judgment call, we don't know -- not to give the administration the benefit of the doubt."

The benefit of the doubt? A judgment call? Sorry Bill, but fuck you. Your judgment's been shit; your President's judgment's been shit, and both of you are documented liars. So forgive the hell out of the rest of us if there's no doubt to benefit from when it comes to whether the president is a fucking fraud. The entire administration is a fraud. Every department is a fraud, staffed by fraudulent people, hostile to its stated mission and intent on it's nullification, by death or paralysis. There may never be proof, especially if Bush gets his way, but what thinking person can muster much doubt that the administration is listening not just for terrorist chatter, but to anyone they want -- political enemies, reporters, chicks they're into--whoever.

In 2006, after Andrea Mitchell asked New York Times reporter James Risen, who broke the domestic spying story, out of the blue, "You don't have any information, for instance, that a very prominent journalist, Christiane Amanpour, might have been eavesdropped upon?" Risen did not, but NBC scrubbed the question from its transcripts of the interview, later explaining that the story had been "released prematurely," that they had not "completed" their reporting. But they didn't call the allegation irresponsible, or speculative, or any other dismissive adjective they could have used. They essentially confirmed that they had reason to believe that Bush was secretly wiretapping a prominent CNN reporter.

And why the hell wouldn't he, after all? Without a reviewable record of warrants, it's not as if anyone can possibly find out -- unless somebody sues the telecoms, and specific, decidedly non-terrorist surveillance targets are identified in the ensuing discovery process. And that is why the Republicans are going apeshit over retroactive immunity, not just to protect the telecoms, but to cover their own asses. If it ever comes out that their secret, illegal domestic wiretaps were not targeting al Qaeda, but Al Gore, the jig is finally up. The entire "trust us, we're hunting terrorists" rationale, as thin as it always was, will lose any residual integrity, and the GOP may never recover. And they know it. And maybe, hopefully, the Democrats finally know it too.

Was the Clinton Era Good for the Working Class? Ohio Primary Will Tell

Postcards From Ohio

By JoAnn Wypijewski

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Three weeks before the primary there was hardly a yard sign to be seen for any of the presidential candidates. On the rise of frozen grass in front of Steel Workers Local 1123 bold red, white and blue letters urge Elect Hiles, State Representative. The Local's president, Randy Feemster, wore a T-shirt sporting the same message for Richard Hiles, who worked at the Timken steel plant here for thirty-eight years. "There are Democrats, and there are labor Democrats, you know what I mean?" Feemster said. He is a big man with a thick, powerful build. But "to tell you the truth," he said when we first met, "I feel like a little bird that was flying, flying and then hit the glass, and now I'm just lying there by the window, stunned." The Steel Workers had backed John Edwards, and when he dropped out, Feemster says, "we had our heart broken."

Across town at Communications Workers Local 4302, four out of five workers I spoke with were similarly dashed and undecided. Edwards had shown up on picket lines and at union rallies, embracing issues that, they said, involved them mentally, emotionally, financially. No other candidate has yet picked up that baton with the same conviction, and the CWA International has not endorsed a candidate because its membership is split. One of the workers I met, Blanche McKinney, 59, is backing Hillary Clinton, as is the Local's vice president, Bob Wise. Experience. Problem-solving. Day one. The reasons McKinney gave for her choice are bullet points of the Clinton campaign. And then there's Bill. "I feel Bill gave me eight good years," she said.

The standard narrative of 1990s prosperity, and thus Bill Clinton's most important remaining legacy, is on the line in Ohio's primary. That, as much as Hillary's flagging electoral fortunes, is why Ohio is a must-win for the Clintons. In the same way that South Carolina shattered the myth of Bill as America's first black President, Ohio could shatter the myth of generalized Clinton-era good times.

Other states' primaries might have done the same; Virginia and Wisconsin broke Hillary's presumed lock on the white working-class vote. But for myriad reasons, earlier primaries did not searingly confront the campaigns with the issue of working-class decline. Decline is everywhere apparent in Ohio, where as a direct result of the North American Free Trade Agreement, 45,734 jobs were lost between 1995 and 2003. That only skims the surface of loss, because for every shutdown factory there are concentric bands of devastation, from direct support industries to the small businesses that depended on the custom of hourly workers to the schools that can't win new levies because people are taxed out. NAFTA sliced the skin, and the bleeding continues. After LTV Steel closed in Cleveland in 2001, according to Don Singer, a former official who worked with the state labor department, 3,100 businesses went down with it. Between November 1999 and November 2003, according to Policy Matters Ohio, the state had a net loss of 244,000 nonagricultural jobs. Today Ohio is the seventh-worst state in the country for finding a job.

Local 1123 is down to 2,400 members, while also servicing 6,000 retirees, and neither Obama nor Clinton has an answer for Feemster and other union leaders who again and again concede on wages to maintain company-paid health benefits and retiree pensions. Even before Edwards dropped out, the Democratic Leadership Council was congratulating itself that none of the top contenders favored a single-payer health insurance system, which Feemster supports. Nevertheless, he was waiting to be wooed by one of the candidates.

It is remarkable that, when we met in mid-February, he hadn't been. Stark County is an important swing county, and Feemster has long been key to mobilizing labor support in elections. Elsewhere I met other experienced election organizers whose only contact with the campaigns has come through robocalls. My requests to both campaigns for their county coordinators' contact information went unanswered. It is as if no one had thought that Ohio would matter, that industrial unions would matter; as if these workers who say they often feel forgotten actually have been, even for the cynical aim of vote-rustling. In such circumstances, it is hard to know what might tip a vote. In Feemster's case it was a talk with Bill Clinton versus a meeting with Obama surrogates. The one, he said, gave specific answers to specific questions, even if Feemster didn't always agree; the others, no way as close to their candidate, danced around the issues. "Will Obama do away with NAFTA?" They waffled about legalisms; Bill said Hillary will fix it, and expounded beyond what Feemster had already heard about both candidates from the TV news shows that have become the background music in his house. Local 1123 cannot endorse a candidate, but with two weeks to go it rented part of its hall to the Clinton camp: "They were the first to ask." With less than a week to go, no one had yet shown up to work.


No question, Election '08 enlists white men in identity politics for the first time. What will lead them, their skin or their dick? A vote for Hillary might cover both propositions. Amid the arcing conveyors of splashy Chevy Cobalts and Pontiac G5s at the GM Lordstown plant, some of Hillary's white male supporters ticked off her plans, her ability to "hit the ground running." But sooner or later, usually sooner, it was Bill they admitted they'd be voting for. Bill will guide her. No one is as experienced as Bill. Because of their past failures, "the Clintons" are better positioned to get it right next time. NAFTA was a good idea that was badly implemented. In 2006, when Sherrod Brown swept away the Republican incumbent in the Senate race by hammering on trade deals, no Democrat called NAFTA a good idea. But the rationalization now is not as bizarre as it first seems. Organized labor rallied for Bill Clinton and the Democrats after he strong-armed Congress to pass the trade agreement, arguing in 1994 and again in '96 that he and the party could best control the downside. And the stock market bubble meant that, for a while at least, the economy expanded and some people had more money in their pockets.

Hillary reminded 200-plus assembled workers at the plant of those good days. They handed her a pair of boxing gloves, and she promised to fight the bankers, the corporations, the credit card companies, Wall Street, China. Afterward, as "She's an American girl…" blasted from the speakers, some workers said she had made the emotional connection they sought: "She actually seems like she's got feeling. Maybe it's because she's a woman. Women don't lie," said a white millwright named Mike. He has worked at GM for thirty years, and for thirteen of those, beginning in the '90s, he worked "seven twelves," twelve hours a day, seven days a week. "You don't make money unless you want to live here," a white man named John said. "You're kind of a slave." GM now wants to outsource most of Mike's work. Last year the United Auto Workers agreed to let the company hire new employees at about $13 an hour, half the rate of veteran workers, and rolled the dice by taking control over retiree health and pension benefits. In her speech, Hillary had said, "Some may call this the Rust Belt. That's not what I see. I see those shiny new cars. They look like the future to me." As Mike was explaining why he voted no on the GM contract, a company flak ordered him back to work and me off the premises.


Michelle Obama gives the talk her husband can't. "Things have gotten worse -- through Republican and Democratic Administrations," she says flatly. She didn't quite count the ways at Ohio State as she had when I saw her at a black church in South Carolina, but she deftly linked the shifting expectations for her husband's campaign with the constantly "moving bar" that has made people anxious wrecks. She projects herself as a class sister in telling of her "little unmiraculous life" -- the daughter of a disabled shift worker on Chicago's South Side, product of public schools who managed to get to Princeton, a life that is out of reach for more and more people. But she also represents the wife every straight man wants: beautiful, loyal and strong; the helper, the lover, "the rock." Charlie Bush, retired former president of UAW Local 402, which represents workers at International Truck and Engine in Springfield, told me he thought Michelle might be decisive in swaying the votes of more than a few men. She is like Hillary was in 1992, he said, "a supporter." An undecided Edwards voter when we met, Bush now says he's going with Hillary; his wife, Cheryl, is still undecided.


"That white's kickin' in, isn't it?" a friend said as I told him about my last day in this town in Clark County, typically a swing county in elections. But first things first. There was once money here, lots of it. Mansions, some moldering, line High Street, along with Frank Lloyd Wright's 1906 Wescott House -- saved from the wrecker's ball and now a museum. Before St. Louis, Springfield was the jumping-off point for the West, and for a time it was second only to Chicago for manufacturing in the Midwest. Not so long ago, International Harvester was the biggest private employer; today that title goes to a call center. International's workforce plunged from 4,500 to less than 1,000 over a six-year period through layoffs and outsourcing; it too has a new union contract allowing it to bring in new workers at about half the old $25 to $30 hourly rate. The call center pays $8 to $12. At CWA Local 4326, Paul Storms, an AT&T technician and the Local president, recited a litany of lost manufacturing: "Speco Aerospace, gone; Buffalo Road Roller, gone; Bomag earth movers, gone; White Motors, gone; Boise Cascade, gone; O-Cedar, gone; O.S. Kelly, gone; the foundries, gone; Robinson Meyers, gone." Solid, cheery housing in working-class parts of town -- going, going and sometimes gone.

Manufacturing began moving to the nonunion South in the '80s; in the '90s NAFTA ensured that it would never come back. Storms summed up the situation: "Corporate America, you give 'em an inch, they take a mile, and in this case they've taken our lives." Springfield today is a go-between city for people working in Dayton or Marysville, at the nonunion Honda plant. Local 4326 itself has only fifty-three members. Mayor Warren Copeland is trying to create an information technology park to bring in higher-paid jobs. What has mainly kept the town from imploding is Wright Patterson Air Force Base and earmarks. According to Copeland, "Community Development Block Grants were cut, UDAG grants were cut; what substituted was earmarks" -- up to $20 million annually. The source of that largesse, Appropriations Committee member Dave Hobson, is about to retire from Congress. Copeland, a white man, caucused for Obama in early January, when delegate slates were chosen. Three times as many people caucused for Hillary Clinton as for anyone else -- almost all the professional politicians, the known party regulars, some unions. Edwards drew union people. Copeland, who has been in Democratic Party politics a long time, knew only one person in the Obama group.

"When people are running they have all kinds of plans," he went on. "Once they get in office, neither one of their plans is going to be adopted, so that's a crazy debate. I'm much more interested in whether they will help people down-ticket. I think Hillary will energize Republicans, and people down-ticket will be hurt." In 2004 the conservative churches, buoyed by Ohio's antigay initiative, called out all their people to vote, and wherever there was no strong union presence in the state, Kerry lost. He lost Clark County by 1,406 votes.

In a conversation with five CWA members, one mixed-race man was leaning toward Obama, one white man was for Hillary ("I'm 61, and ever since I've been alive there's been a man, and that's my big selling point; I'm curious to see if a woman would make a difference"), two other white men were undecided but said they would be happy with either, and the only woman in the Local, a middle-aged white Republican, said she would decide in the booth. She veered between appreciating Hillary's moxie to run and expressing wariness about a woman who took what Bill dished out and who has "her foot in the door of the good-old-boy network." What united them all was a feeling, not yet cynicism, that Democrats and Republicans alike have abandoned unions, the working class and cities like Springfield, and that no matter who wins in November once they get behind closed doors there is no counting on anything.

It is for that reason, along with the similarity of Clinton's and Obama's plans, that gender, race, hope, energy -- the Democrats' equivalent of religion, abortion, marriage on the fundamentalist side -- count for so much this year. Some white professionals I talked with here were favoring Obama. He is new and didn't vote for the war. We talked about racism and the critique that a vote for Obama only makes white people feel better about themselves. These white people, most in their 50s or early 60s, did not think racism was as pervasive as it had been, but even acknowledging that it exists, an electronics engineer at Wright Patterson said, "The flip side of that is that we should feel bad about any progress. Do we have to feel bad all the time?"

There is plenty to feel bad about. There are de facto whites-only private key clubs in Springfield. The city is segregated by race and class the way most cities are. A ride-around one afternoon with local Obama backers stopping at various intersections with homemade signs urging, Honk and Wave, Obama suggested a fair amount of white support, until the group got to a crossing in a predominantly white neighborhood whose fortunes have been tumbling. There expressions were set, grim, like their wearers meant it. No honks. No waves.

"This is Hillary Clinton's base," said Kimberly Beard. "They are Democrats, and they vote. I've lived here for fifty years; I know these people. They're scared, and they can't see that something can be done. They are disillusioned, disconnected from any economic development in the county and disappointed. I've lived in different cities, but I've always come home because I like to be in a place where I can spot a racist from fifty yards away." Beard worked for Jesse Jackson in 1984 and 1988. "He got a delegate here, which was virtually unheard of."

Later that night at the Disabled American Veterans key club, a bar that does not require disability or veteran status for entry, only $17 a year and sponsorship by a member, all of whom are white, the women said, "It's time for a woman," "Women are more compassionate." None of them were hankering for Bill. It was a little different with the men. "I'm for Hillary. I love Hillary," a middle-aged man declared with increasing volume. He is a registered Republican, but he voted for Bill in '92 and '96, for Kerry in '04. He said he's never done worse than he's doing now and wants someone who can "bring down the costs of this goddamned healthcare." Really, though, he said he wishes he could vote for Bill a third time. Entrepreneurs have capitalized on this, selling buttons saying, Bring Back Peace and Prosperity and The Clintons over an image of the two.

If Hillary doesn't get the nomination, this man said, he'd not only vote for but work for McCain, "and I hate McCain."

"Why not Obama?"

"He's too inexperienced."

"And why else?" a woman down the bar asked.

"Because he's black."

"Thank you!" she replied.

More talk, a little heat, and the man exclaimed, "I'm not going to vote for the nigger!"

Some in the bar seemed tensed; they were "undecided." The man goaded them; that's not what they had discussed the other day. He laughed. Another man from across the bar said he knew whom he wasn't voting for: "the nigger."

The first man continued to proclaim, "I love Hillary." He and a friend said she probably should take the VP spot if it were offered; even if Obama gets the nomination, "he's not going to make it." Later he apologized for saying "nigger"; "I'm not a racist." In the hallway a young worker said quietly that I shouldn't pay much attention to the man, that for what it was worth he himself was just trying to figure things out politically, was worried about schools for his two young sons and that most of all he was sick of all the division in the country.


No "bridge to the twenty-first century" was ever built here in the 1990s. In place of the biggest steel plants, which left in the '70s and '80s, there are nonunion mini-mills, a steel museum, nursing homes and two prisons. The state university, where Obama was speaking, graduates more corrections officers than teachers. It used to be good at engineering. Cecil Monroe, a black man, 65, who works for the county government, said he doesn't want his mixed-race daughter to come back here after college: "I think if she comes back, it's just going to be death and destruction." The city is about even black and white, and that seemed roughly the mix of the 6,000-plus people who came to hear Obama. Only 83,000 people live in Youngstown now. The labor historian and radical lawyer Staughton Lynd, 78, who lives in nearby Niles, said it was "the most integrated crowd I've seen in thirty-two years." Also the most easy-spirited. A number of white adults I spoke with had been led by their kids, many of them too young to vote.

The day before, I had been in Toledo, where Bill Clinton spoke to an overwhelmingly white crowd of about 1,000. As in 1992, he emphasized the high-tech future, this time in green technology. Toledo has some infrastructure for such things; Youngstown does not. What Youngstown has is desperation. In that circumstance, it is easy to see why feeling good is no small thing. This is not a liberal town, and even if class clichés were valid the crowd could not be described as "latte-drinking, Prius-driving, Birkenstock-wearing trust fund babies" -- an insult the buffoonish president of the Machinists' Union, Tom Buffenbarger, threw at Obama supporters before introducing Hillary the next day at a Youngstown high school. The Obama rally was on Presidents' Day; people had the day off. Obama was introduced by a laid-off union pipefitter (white, female) carrying a baby in a sling. He ticked off the requisite class issues and took one brief, sharp shot at NAFTA, which drew big applause. But the greatest response was for issues of no direct consequence to Youngstown: closing Guantánamo, ending the debate on torture, restoring habeas corpus, restoring constitutional rights -- in other words, righting the wrongs that have only added shame on top of desperation.

Brook Park

By the old math, this should be Hillary country: a white ethnic working-class suburb of Cleveland. It might be, and Hillary has a passionate surrogate in Anthony D'Amico, president of the Brook Park Democratic Club, a retired Teamster who can tick off her plans and forcefully make the change-through-experience argument. He has organized campaigns for years and was once a city councilman, but as we talked, with less than two weeks to go to the primary, he said no one from the Hillary campaign had contacted him. As he gauges it, neither campaign is visible on the ground, so people are scrambling to do things ad hoc. He puts no faith in the polls, the phone banking: "People are being very standoffish. They hold voting very sacred, and they don't want to tell you shit." There is one other wild card in the deck: "Brook Park used to be 1,000 percent Democratic. Years ago when I was growing up [in the mid-'60s], they're making the signs in the backyard with the hammer and nails." Before the 2005 elections he looked at the registration rolls from the town's four wards, and it shocked him: Democrats, 4,448; Republicans, 882; independents, 6,508. "If you'd asked me even a few years ago, I'd have said there is no way independents are the majority. There's where you want to roll the dice."

North Canton

"Who said there was going to be a giant sucking sound? They made a fool of him, but he was absolutely right." Out his office window Jim Repace, president of the International Brotherhood of Electrical Workers Local 1985, could see the Hoover factory as he spoke. Hoover was once a Fortune 500 company, the number-one floor-care manufacturer in the world, the only unionized floor-care manufacturer in the country. A few years ago it was posting 30 percent profits; a few months ago it had workers disassembling machines right beside those still on the job. Now this beautiful 100-year-old brick specimen of a daylight factory is cold; 817 hourly workers (down from 2,400 as recently as 2000) will get full wages, health and pension benefits through June. Repace says the shutdown will affect 8,000 in the area; North Canton has a population of 16,000. Next-door to his office, the message board at St. Peter's Catholic Church reads, "God be our hope when life is difficult."

However profitable, Hoover could not compete here with its plants in Juárez/El Paso and China. The union went through the usual rounds of concessions and legal action to keep the plant open, and for fourteen years it almost worked. Hoover did some hiring in the '90s, but Repace could look toward other cities where NAFTA was killing plants, the broad scenario being a fight of all against all, with those left standing cutting living standards to avoid catastrophe. Behind the increases people saw in their CDs, the economy was going. No one who has not lived through this kind of shutdown can really understand the ruthlessness of it, or the fear that the pleasant streets around the plant, the park where workers ate lunch, are in preboarding for hell. NAFTA has not been emphasized in the election, and Repace says, "It's troubling me that it's not" because "it's still going on." He spent years defending Bill Clinton in the '90s, but "I'm just tired of the status quo. We've had eight years of Clinton, eight years of Bush. Enough is enough. I like a new perspective …. I truly believe Obama's going to go in there with something to prove. He is not going to want to be a failure."

A failure for whom is always the question. Sixteen years ago, at a blimp hangar a few miles away in Akron, 50,000 people cheered another fresh face in the general election. Bill Clinton played the working class, and if it were to repay him by proxy on March 4, '90s prosperity should finally enter the book of political fairy tales. However the vote turns, not just the people of Ohio will need some potent ways to show they won't be played again.

Librarians and archivists demand US return of stolen Iraqi documents

Librarians and archivists demand US return of stolen Iraqi documents

By Sandy English

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The removal of millions of pages of Interior Ministry documents from Iraq by the American military has prompted calls from organizations and individuals in the library and archives community for their return to the Iraqi people.

These documents, many of which detail the crimes of the regime of Saddam Hussein and his predecessors, are now in the United States in the hands of the military and intelligence agencies. Others are being held by a private foundation in the US headed by pro-occupation Iraqis.

Some 43,000 to 55,000 boxes, amounting to over 100 million pages, were seized from Baghdad by British and American forces in April 2003. These included, according to the Associated Press, “memos, training guides, reports, transcripts of conversations, audiotapes and videotapes.” At the urging of Republican Rep. Pete Hoekstra, chairman of the House Intelligence Committee, then-Director of National Intelligence John Negroponte posted a few hundred on a military web site, “Operation Iraqi Freedom Document Portal,” in March 2006.

The documents were removed from the Internet in November 2006 after the New York Times informed the government that it was publishing an article that alleged that the documents contained sensitive information on Iraq’s pre-1991 nuclear program, sparking a momentary crisis for the Bush Administration.

At the time, little of the controversy around these documents centered on the illegality of the United States holding, accessing, and publicizing material that was the property of the Iraqi people.

Today, the whereabouts of the originals are unknown to the public, either Iraqi or American. Digitized images of these documents now reside in the computer networks of the US government, accessible to no one without clearance from the American military-intelligence apparatus.

During a speaking tour in the United States between October and December, Dr. Saad Eskander, the director general of the Iraqi National Library and Archive (INLA), the country’s main repository of historical materials, called for the return of these documents to Iraq. (See: “Iraqi archivist demands US return seized documents”).

At its midwinter meeting last month in Philadelphia, the American Library Association central council passed a resolution that called for millions of stolen Iraqi documents now in the United States to be returned to INLA.

The resolution states that these documents “represent Iraqi social memory” and that the ALA “condemns the confiscation of documents ... by the United States and British forces and strongly advocates the immediate return of all documents.” This resolution has garnered support from professionals around the world.

But, aside from the ALA’s resolution and the demands of Eskander, little has been said in the media about the legality of these documents’ seizure or their continued presence in the United States under the tight control of the American government.

Another smaller selection of approximately 11 million pages of Iraqi documents has, however, provoked intense debate in the last two months. These are held by a private group called the Iraq Memory Foundation, based Washington, DC, which has digitized them and recently arranged that the original documents be delivered for safekeeping to the right-wing Hoover Institution.

An Iraqi named Kanan Makiya, a former associate of CIA asset Ahmed Chalabi and a vocal proponent of the American invasion of Iraq heads the Iraq Memory foundation. Under the pseudonym Samir al-Khalil, Makiya published his 1989 book Republic of Fear depicting life in the Baathist state.

His book was seized upon by elements in American ruling circles, especially the neo-conservatives, as ideological ammunition for promoting an invasion and conquest of Iraq, both during the Gulf War of 1991 and in the lead-up to the invasion of Iraq in 2003. According to George Packer’s The Assassin’s Gate, Makiya sat next to Bush and wept as he watched the toppling of Hussein’s statue in Baghdad’s Fardus Square, now known to be an event staged by the US military.

Makiya returned to Iraq on the coattails of the occupation, gaining entry to venues presumably secured by the Americans. According to a feature-piece by Dexter Filkins in the New York Times Magazine, “Since 2003 Makiya and his small staff have scoured Baath Party offices and dungeons, adding to a collection that would reach more than 11 million pages of records.”

Makiya has said that these documents were moved to his parents’ home in Baghdad’s Green Zone with the approval of the Coalition Provisional Authority. The article continues: “In February 2005, the Memory Foundation reached an agreement with the US military to have the Baath Party documents shipped to the United States. Government contractors here could complete the digitizing process much more quickly, the foundation concluded, and Baghdad was too volatile.”

Once in the United States, the exact use of the documents is unclear. In an article discussed below, Hassan Mneihmneh, the executive director of the Iraq Memory Foundation, said that in order to have the documents transported to the US and digitized, the foundation told the American military that the documents “could be of intelligence value and that the Baath party structure depicted in them might correspond to the insurgency.”

Harvard University pulled back from a proposal to store the documents fearing, apparently, that it might break international law by doing so. Dutch cultural heritage specialist Rene Teijgeler has noted that in 2005 he had advised a Harvard committee, on request, that “the legal owner [of the archives held by Makiya] was the Iraqi state and that at least they should contact the State Department. However, the State Department did not want to get involved.”

In a January 23 article in the Chronicle of Higher Education, journalist John Gravois revealed that the originals of the archives were now to be stored at the Hoover Institution at Stanford University in California. The Iraq Memory Foundation claims that it had the support of an Iraqi deputy prime minister for this transfer.

The article reported that Saad Eskander demanded the return of these documents to INLA because “they are the inalienable public property and belong in the national archive without delay.” In an interview with Gravois, Eskander emphasized that these documents belong to the Iraqi people and that “Makiya just represents himself.”

Makiya’s supercilious response was that “Baghdad is just not ready” for the return of the archives.

The article provoked an outcry among librarians, archivists, and academics. Jeffery Spurr, Islamic and Middle East Specialist at Harvard University’s Fine Arts Library, in an e-mail to the IraqCrisis discussion group observed, “That the newly-designated temporary custodian should be a private institution, and that notable bastion of conservative views, the Hoover Institution, should come as no surprise given that Mr. Makiya has perforce become a fellow traveler of the Neo-cons since he made common cause with the Bush Administration in the run-up to the invasion of Iraq. That such an institution in far-off California should consider itself the proper site for these documents as opposed to the national archives of Iraq is the height of arrogance.”

He further noted, “Dr. Eskander was rebuffed at every turn by the representatives of the IMF in Baghdad. In 2005, I myself encouraged Kanan Makiya to communicate with Dr. Eskander, with whom I had been in communication since 2004. Makiya was uninterested.”

Spurr was also critical of Gravois article, claiming that it appears to “privilege the self-serving arguments of Kanan Makiya and his colleagues, and employs quotations from Dr. Trudy Huskamp Peterson, a prominent expert on archives and international law relating to archives, in such a way as to support the plausibility of the refusal to return the originals to their proper custodian, the Iraq National Archive, and its Director General, Dr. Eskander.”

Perhaps in response to these and other criticisms, Gravois wrote a second article for the Chronicle of Higher Education, published on February 8. He provided some new information about the history of these archives, notably that the US Navy had held them for 21 months, and took a more conciliatory (and honest) tone, amending, for example, his representation of Trudy Huskamp Petersen. The new article quotes her as saying that when it comes to the issues of ownership of archives like those in the hands of the Iraq Memory Foundation, ownership can only be passed on by an act of the Iraqi parliament. “There’s tons of literature on this. There’s just no question.”

Nevertheless, the second Gravois article, like the first, serves to obscure the fundamental issues at hand in the removal of these documents from Iraq and their possession by Makiya’s Memory Foundation. Gravois portrays Makiya as a “liberal idealist who brought moral ballast to the case for deposing Saddam Hussein.”

While it does quote Eskander’s characterization of Makyia as “a spoiled child of the State Department,” the article frames the debate as though it were a “tug of war” (part of the title of the article) between two individuals, Kanan Makiya and Saad Eskander, equally concerned about the documents and both determined to protect them with a “remarkably similar vision.”

This is an intellectual dodge. Makiya is not only a “spoiled child” of the State Department; he is a collaborator with the United States in the sociocide of Iraq.

As professionals in the field have made amply clear, these archives are essential for the preservation of the social memory of the Iraqi people. The “tug of war” between the two men represents something entirely different than opposing opinions on the best way to preserve a set of archives.

Makiya is a defender of the rapacity of American imperialism and its willingness to take whatever it wants from a people that it has militarily overwhelmed. To commit a “sociocide”—the destruction of an entire culture—it is not enough to kill a million people and drive millions of others form their homes. Keeping the documents out of Iraq intellectually abases the Iraq people. It goes hand-in-hand with the destruction of education at all levels, the assassination of academics, and the fragmentation of common culture by ethnic cleansing, and the looting of archeological sites.

The demand to return the documents held by the Iraq Memory Foundation, as well as the larger group in the hands of the American military, represents the desire of the Iraqi people to understand their own history and to be able to determine their destiny though accurate and truthful knowledge of the past.

It is significant that this demand has found increasing popularity among educated people in the Europe and America. But the calls for the return of the documents, including the ALA’s, while principled, suffer from political myopia. Nearly five years of the unrestrained plunder of Iraq, funded by both Democrats and Republicans, have dismembered Iraqi culture, in itself a vital aspect of the world historical legacy.

These actions call for more than appeals to return looted documents and artifacts. The US government will not relent to these pleas, any more than it did to the mass anti-war protests of 2003. Archaeological, library and archival organizations must demand that the perpetrators of these crimes—ranging from Kanan Makiya to figures at the highest levels of the American government—be tried for war crimes. It is time to consider what political strategy will achieve this goal.

East Timorese government steps up repression in aftermath of alleged “coup attempt”

East Timorese government steps up repression in aftermath of alleged “coup attempt”

By Patrick O’Connor

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East Timorese Prime Minister Xanana Gusmao has seized upon the crisis sparked by the February 11 wounding of President Jose Ramos-Horta and killing of former major Alfredo Reinado to enforce a number of repressive measures aimed at consolidating his unstable government. A spokesperson for Gusmao’s government announced on Monday that the “state of siege”—which involves a 10 p.m. to 6 a.m. curfew and a ban on demonstrations and unauthorised meetings—has been extended to March 23. More than 200 people have already been arrested, mostly for violating the curfew, although opposition parliamentarians and journalists have also been targeted.

The Gusmao government’s rush to utilise authoritarian forms of rule raises yet again the many outstanding questions concerning the events surrounding Reinado’s killing. According to the official version promoted by the government and the Australian and international press, the rebel soldier was shot dead after he and his men attempted to either kill or kidnap both President Ramos-Horta and Prime Minister Gusmao as part of a failed coup attempt. This account represents the least likely explanation for what took place on February 11.

While details remain murky, what is known points to the possibility that Reinado was set up for assassination. The rebel soldier had earlier threatened to publicly release details of Gusmao’s alleged role in directly instigating a mutiny of soldiers (the “petitioners”) in 2006. The mutiny sparked a political crisis that culminated in the intervention of hundreds of Australian troops and the ousting of the former Fretilin government. Reinado’s allegation was issued via a DVD that was widely circulated in January throughout East Timor.

The old adage, cui bono (to whose benefit?), remains a standard rule in criminal investigations. In light of what has transpired over the past fortnight, the undisputed primary beneficiaries of Reinado’s death have been the Australian-led foreign military forces stationed in East Timor and Gusmao himself.

The prime minister’s adoption of dictatorial-style powers has been met with sharp criticism within the country’s parliament. A number of Fretilin parliamentarians opposed the extension of the “state of siege” on the grounds that the constitutional requirement for a “serious disturbance or threat of serious disturbance to the democratic constitutional order” no longer existed. During the debate, opposition even emerged from within Gusmao’s CNRT party. “I and my friends are really disappointed with the implementation of the ‘State of Emergency,’” CNRT parliamentarian Cecilio Caminha declared. “In the ‘State of Emergency’ there are no rules that permit the security apparatus to attack civilian houses at night, and to forbid people from holding meetings and demonstrations.”

Fretilin has accused Gusmao of using the crisis to undermine its position. On February 19, the party’s parliamentarian and media spokesman Jose Teixeira was detained in Dili after six car loads of armed Timorese police allegedly took him from his home. Teixeira later claimed that police had no arrest warrant and acted without the knowledge of the senior police investigating officer. He was released the next day after Mari Alkatiri, Fretilin’s general secretary and former Timorese prime minister, lodged a complaint. “This is political persecution—Teixeira is an effective media spokesman and someone in authority wants to shut him up,” he declared. “It is a disgraceful attempt to politicise the police force and use the investigation into the shooting of the president for party-political gain.”

Both Timorese police and Australian soldiers have also targeted journalists.

On February 23, the East Timor Posts senior layout editor, Agustinho Ta Pasea, was arrested while en route to the Dili printing presses with a computer file of the newspaper’s weekend edition. Post editor Mouzinho De Araujo told the Australian that Ta Pasea was stopped at 2 a.m., beaten by military police and then taken to a police station where he was assaulted again. De Araujo said his staff member was held for 11 hours on the grounds that he had violated the curfew, before being released with cuts and bruises on his face. “Maybe, it is because our newspaper has been tough on [the] authorities,” the editor said. Ta Pasea’s detention delayed the publication of that day’s Post edition. The Secretariat of State Security later issued a formal apology for the police officers’ use of what it described as “unjustified force”.

The incident came a few days after Time reporter Rory Callinan and photographer John Wilson were detained by Australian troops for three hours at gunpoint outside of Dili as they were attempting to reach the village of Dare. The Australian-dominated International Stabilisation Force (ISF) was conducting an operation in the area, supposedly in pursuit of Reinado’s followers allegedly involved in Ramos-Horta’s shooting. Journalists were refused entry through an ISF roadblock and were told they were barred from the “media free area”. Callinan and Wilson then walked for an hour through a jungle trail to try to access Dare by foot.

Callinan later told the Australian that when they neared the village: “Two Australians jumped out of the bushes wearing ‘camo’ paint, pointing their guns, ordering us to get down. We were told to hand over our mobile phones, all our camera equipment and passports and told to sit without talking. The guy said: ‘We’re detaining you for your own safety and I can’t tell you more.’ I said, ‘So we can’t move?’ He said, ‘I’m telling you, I am detaining you. I can physically detain you if I want, but I choose not to at this point.’ We were wondering why they were letting dozens of East Timorese wander about with no apparent concern for their safety.”

The two men were held in the jungle for three hours, until sundown, when they were told they would be allowed into Dare. After they later walked back to Dili they were held again for breaching curfew. “They confiscated our gear again,” Callinan said. “We said, ‘But you’ve already detained us for three hours, which is why we are in breach of the curfew....’ The East Timorese with us were saying this was the sort of thing that happened under Indonesian times.”

The incident underscores the neo-colonial character of the Australian occupation of “independent” East Timor. Utilising the political crisis for its own ends, the Rudd Labor government has bolstered the size of the intervention force and declared that Australian forces will remain “for as long as they are required.” As with the previous deployments in 1999 and 2006, the latest operation is above all driven by Canberra’s determination to maintain its domination over the strategically significant and oil-rich territory, and to shut out rival powers such as China and Portugal. Rudd and Gusmao appear to have reached a mutually beneficial arrangement in which the Timorese leader gives the Australian military a free hand, in return for the Australian government’s continued political backing. Rudd and his ministers have maintained a strict silence in relation to the Gusmao government’s recent authoritarian measures.

The ISF’s actions in Dare also raise the question as to what Australian troops were doing, that they did not want the media to monitor. The status of the Australian military’s supposed pursuit of Reinado’s wanted men remains unclear. More than 1,100 Australian troops, including at least 80 elite SAS personnel, are now on the ground in East Timor or stationed on naval warships offshore. Gusmao has reportedly authorised these forces to use lethal force. Yet despite the Australian military’s vast array of surveillance technology and extensive knowledge of Reinado’s group, amassed over the last two years, the occupying troops have apparently been unable to track down any of the alleged would-be assassins of Ramos-Horta.

Was Gusmao’s government facing dissolution?

Events since February 11 make clear just how convenient Reinado’s death was for both Gusmao and Canberra.

The former major’s accusation that the prime minister had deliberately instigated the petitioner’s protests in 2006 was seriously undermining Gusmao’s already unstable three-party coalition government. Just as Reinado’s accusations were circulating throughout East Timor, the government passed its first budget, slashing food rations for the 100,000 internally displaced refugees and cutting pensions. At the same time, the government boasted that it was lowering corporate and investment taxes to among the lowest levels in the world.

These measures, which will further increase social inequality in the deeply impoverished country, drew widespread opposition from ordinary Timorese and inflamed tensions and infighting within the government. Rumours spread in Dili that Fernando “La Sama” de Araujo, leader of the Democratic Party and now acting president, would withdraw from the coalition. Gusmao meanwhile was refusing to deny Reinado’s allegations and threatened to arrest those journalists pursuing the story. Alkatiri demanded that Gusmao resign and that fresh elections be called.

There is evidence indicating that President Ramos-Horta was preparing to publicly endorse such demands. According to the Timor News Line web site, which translates Timorese media reports into English, on February 11 (the same day Reinado was killed) the Diario Nacional reported that: “Fretilin Secretary General, Mari Alkatiri, said President Jose Ramos Horta and the UN Secretary General have agreed with Fretilin’s proposal of holding another election in the country”.

The latest issue of the Indonesian Tempo magazine features an interview with Alkatiri in which the former prime minister claims there was a connection between the events of February 11 and a meeting allegedly convened by President Ramos-Horta a week earlier.

“There was a meeting of politicians at Horta’s residence a week before the shootings,” Alkatiri said. “Attending the meeting were members of the Timorese Reconstruction National Party (CNRT) led by Xanana Gusmao, the Social Democrat Party, the Timor Social Democrat Party Association (ASDT) and the Fretilin Party ... President Horta welcomed the proposal of the Fretilin Party to the UN Secretary-General. Essentially it united all parties under the Parliamentary Majority Alliance (AMP) with the Fretilin, and forming an inclusive government, a national unity government. Fretilin itself refused to join in the national unity government like this one. The initiative was taken to resolve the problem of Alfredo Reinado, deserters led by Salsinha Gastao and also the refugees.”

Asked if any of Timor’s “party elites” were involved in Reinado’s killing, Alkatiri refused to directly answer or mention Gusmao by name, but said, “I will just say that the person behind Horta’s shooting perhaps disagreed with the President’s initiative to form a new government and hold another election.”

If Alkatiri’s account is true, it places in fresh perspective the secret deal struck between Ramos-Horta and Reinado just four weeks before the rebel soldier was killed. On January 13, the two men brokered a deal whereby Reinado would first submit to house arrest and then soon after be amnestied by Ramos-Horta. Could it be that the president, formerly a close ally of Gusmao, regarded the break-down in relations between Reinado and the prime minister as an intolerable threat to the agreement he had just brokered, which required the formation of a new coalition administration between Fretilin, the ASDT, and elements of the CNRT?

If so, the official version of Reinado’s killing becomes even more implausible. The former major would have been attempting to assassinate or kidnap Ramos-Horta, who had not only guaranteed his freedom, but was also preparing to lend his weight to the ousting of Gusmao, whom Reinado was accusing of being a criminal and a traitor. On the other hand, if the scenario suggested by Alkatiri’s statements is true, Gusmao would have had an even more powerful motive to eliminate Reinado, and trigger a political crisis through which he could extend his authority.

The possibility of such a conspiracy raises immediate questions regarding the Australian government’s role. There is little possibility that Australian authorities—which include highly placed government and military advisors as well as an extensive network of intelligence agents and informants—would have been ignorant of the various political ructions in Dili. The prospect of a return to a Fretilin-led government would have sounded alarm bells. The former Howard government, with the unstinting support of its Labor opposition, as well as the entire Australian press, expended considerable resources ousting the Alkatiri administration in 2006. Its protracted “regime change” campaign was driven by concern that the Fretilin government was too oriented towards rival powers and was unwilling to accede to all of Australia’s demands for possession of swathes of the Timor Sea’s oil and gas reserves. Gusmao’s recent moves—both in the lead up to the events of February 11 and since—were no doubt known, if not directly instigated, by Canberra.

None of these issues has been canvassed in the Australian press. Not a single outlet has even reported Alkatiri’s statements in Tempo. To the extent that any political assessment has been attempted of the events surrounding the shootings outside Ramos-Horta’s residence, Reinado’s potential motivations are simply put down to insanity, thereby excusing the logical implausibility of the official version. The media’s performance is consistent with its role in 1999 and 2006, when it functioned as the primary promoter of the Howard government’s military operations, under the banner of “humanitarian intervention” and “democracy”.

Judge rethinks prior restraint on Wikileaks site

Judge rethinks prior restraint on Wikileaks site

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The whistleblower site may resume its U.S. operation following a hearing in California federal court today, where Judge Jeffrey S. White dissolved a previous order that required the site to be taken offline and indicated he would not approve a second order prohibiting the site's publication.

The Feb. 15 orders had required domain name service provider Dynadot to cut off access to the Wikileaks site, disabling the Web address. A Swiss bank had asked the court to require the site to be taken down, arguing it disclosed private banking records.

Acting as a friend of the court, The Reporters Committee for Freedom of the Press and several other media organizations asked the judge earlier this week to take notice of the prior restraint that occurred as a result of those orders. Wikileaks had not appeared in court to defend against charges by the bank that it had improperly posted private information and no First Amendment concerns were raised before the Court.

White's order of today dissolved the injunction that had prohibited Dynadot from allowing to be accessible. It also "tentatively" denied the bank's request for an order that would keep Wikileaks from independently publishing itself online.

"It's not very often a federal judge does a 180 degree turn in a case and dissolves an order," said Reporters Committee Executive Director Lucy A. Dalglish. "But we're very pleased the judge recognized the constitutional implications in this prior restraint."

White is expected to issue a full opinion on the matter in the near future. The media coalition's brief in the case can be found at:

Mukasey refuses probe of Bush aides

Mukasey refuses probe of Bush aides


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Attorney General Michael Mukasey refused Friday to refer the House's contempt citations against two of President Bush's top aides to a federal grand jury. Mukasey said White House Chief of Staff Josh Bolten and former presidential counsel Harriet Miers committed no crime.

As promised, House Speaker Nancy Pelosi announced that she has given the Judiciary Committee authority to file a lawsuit against Bolten and Miers in federal court.

"The House shall do so promptly," she said in a statement.

Mukasey said Bolten and Miers were right in ignoring subpoenas to provide Congress with White House documents or testify about the firings of federal prosecutors.

"The department will not bring the congressional contempt citations before a grand jury or take any other action to prosecute Mr. Bolten or Ms. Miers," Mukasey wrote Pelosi.

Pelosi shot back that the aides can expect a lawsuit.

"The American people demand that we uphold the law," Pelosi said. "As public officials, we take an oath to uphold the Constitution and protect our system of checks and balances and our civil lawsuit seeks to do just that."

The suit had a political purpose too. Democrats have urged that the filing occur swiftly so that a judge might rule before the November elections, when all 435 House seats and a third of the Senate are up for grabs. Criticism of Bush's use of executive power is a key tenet of the Democrats' platform, from the presidential race on down.

The House voted two weeks ago to cite Bolten and Miers for contempt of Congress and seek a grand jury investigation. Most Republicans boycotted the vote.

Pelosi requested the grand jury investigation on Thursday and gave Mukasey a week to reply. She said the House would file a civil suit seeking enforcement of the contempt citations if federal prosecutors declined to seek misdemeanor charges against Bolten and Miers. The plaintiffs would be the entire Judiciary Committee, who would be represented by the House's lawyers, according to aides to Pelosi and committee Chairman John Conyers, D-Mich.

Mukasey took only a day to get back to her. But he had earlier joined his predecessor, Alberto Gonzales, in telling lawmakers they would refuse to refer any contempt citations to prosecutors because Bolten and Miers were acting at Bush's instruction.

A civil suit would drag out a slow-motion crawl to a constitutional struggle between a Democratic-run Congress and a Republican White House that has been simmering for more than a year.

Democrats say Bush's instructions to Miers and Bolten to ignore the House Judiciary Committee's subpoenas was an abuse of power and an effort to block an effort to find out whether the White House directed the firing of nine U.S. attorneys in 2006 for political reasons.

Republicans call the whole affair a political game and walked out of the House vote on the contempt citations in protest.

The 223-32 House vote on a resolution approving the contempt citations Feb. 14 was the first of its type in 25 years. The White House pointed out that it was the first time that such action had been taken against top White House officials who had been instructed by the president to remain silent to preserve executive privilege.

In his letter, received by the House early Friday evening, Mukasey pointed out that not only was Miers directed not to testify, she also was immune from congressional subpoenas and was right to not show up to the hearing to which she had been summoned.

"The contempt of Congress statute was not intended to apply and could not constitutionally be applied to an executive branch official who asserts the president's claim of executive privilege," Mukasey wrote, quoting Justice policy.

"Accordingly," Mukasey concluded, "the department has determined that the noncompliance by Mr. Bolten and Ms. Miers with the Judiciary Committee subpoenas did not constitute a crime."

Though they were not surprised, Democrats reacted to Mukasey's letter with outrage.

"Today's decision to shelve the contempt process, in violation of a federal statute, shows that the White House will go to any lengths to keep its role in the U.S. attorney firings hidden," said Conyers. "In the face of such extraordinary actions, we have no choice but to proceed with a lawsuit to enforce the committee's subpoenas."

The Proxy War - SCHIP and the Government's Role in Health Care Reform

The Proxy War - SCHIP and the Government's Role in Health Care Reform

By Sara Rosenbaum, J.D.

Go to Original

The conflagration over the reauthorization of the State Children's Health Insurance Program (SCHIP) offers a compelling example of Washington's current inability to address even seemingly uncontroversial matters such as improved health care coverage for children. After the House failed to override President George W. Bush's veto of a SCHIP expansion in October, Congressional leaders regrouped to develop a compromise measure that would address Bush's claim that the original bill "moves the health care system in the wrong direction." [1] SCHIP permits coverage of children in families whose incomes (according to evaluation methods developed by the states) are at or below 200% of the federal poverty level. Like the first bill that Congress passed in the fall, the second measure would have provided states with the authority to extend the standard to 300% of the poverty level (with a limit of 350% permitted in New Jersey) while reducing states' flexibility in determining what income counts in eligibility assessments. The bill also moved more aggressively to end SCHIP coverage of parents and other adults, imposed tougher citizenship-documentation requirements, and required states to try harder to avert health insurance crowd-out - the actual or potential tendency of one form of health insurance to substitute for other available coverage. [2]

The second measure passed the House and Senate, only to be vetoed by Bush on December 12; on January 23, 2008, the House failed to override the veto, quashing hope for the time being of reaching several million additional uninsured children. Ironically, the Congressional Budget Office projected that all but 500,000 of the 3.8 million previously uninsured children who would have received coverage by 2012 under the reauthorization in fact would have qualified under SCHIP's previous eligibility standards but would have benefited from the new legislation's expanded enrollment assistance. In other words, the measure truly "put poor children first," as demanded by the President.

Why would the President veto bipartisan legislation that does precisely what he insisted on - namely, aggressively enroll the poorest children? One might blame the poisonous atmosphere that pervades Washington these days, but other important social policy reforms have managed to get through.

One answer lies in a far larger dimension of SCHIP that is basic to any health insurance legislation - namely, the legislative architecture of the reform plan, its structural and operational approach. Viewed from this vantage point, the SCHIP battle turns out not to have been about family-income assistance levels or the mechanism for financing coverage subsidies (although both the Medicare managed-care industry and the tobacco companies weighed in noisily on the latter question). Instead, the issue became the role of government in organizing and overseeing the health care marketplace (see graphs). SCHIP uses the power of government to form insured groups, select qualified plans, oversee plan operations, and measure results. It is this architecture to which the President was referring when he said that the legislation would move the health care system in the wrong direction.

In the end, the SCHIP battle became a proxy war over the duties that government should assume in national health care reform. As SCHIP's reach has grown, the program has wandered into an enormous ideological divide over whether government should be permitted to act as a group sponsor and monitor of plan accountability. The use of government as purchaser and market overseer itself represents a crucial policy and political compromise between advocates of pure public insurance models and proponents of full market deregulation. Certain recent high-profile legislative reforms - Medicare Advantage, Medicare Part D, and the Massachusetts Connector Authority, for example - are evidence of the potential for architectural compromise. Given the need for a compromise providing a robust approach to managing an enterprise as vast as the purchasing of personal health care services, these hybrid systems appear to offer a means of breaking the policy logjam.

But it was such a solution that the administration sought to halt in the case of SCHIP, precisely because of its implications for broader future reforms. The effort to stop SCHIP was aided by the toxic atmosphere in Washington and the administration's labeling of SCHIP as a middle-class boondoggle. This allegation was made believable, according to one prominent Republican polling expert, because some families receiving assistance in certain states, such as New Jersey, had incomes that, though modest by regional standards, far exceeded the national median. The veto "played well in the South" for the administration, according to this expert; the maximum annual income of eligible New Jersey families seemed absurdly high to focus groups in poorer (and Republican) parts of the country, whose own SCHIP programs were far less generous. Reactions in these strongholds were powerful enough to reassure Republican House members that their support for the President's veto would not damage their chances in the 2008 elections.

It is tempting to pinpoint July 18, 2007, as the day that the first sign of real trouble for SCHIP emerged (see timeline). On that day, the President announced, even before the Senate Finance Committee had considered the legislation, that he would veto any measure that followed the broad outlines of a consensus proposed by chairman Max Baucus (D-MT) and ranking minority member Charles Grassley (R-IA), which would have extended SCHIP's allowable coverage to 300% of the federal poverty level. [3] But the opening salvo in this proxy war actually occurred early in 2007, when the White House unveiled a fiscal year 2008 budget calling for reductions in federal SCHIP spending over 5 years. The President coupled the reductions with a new system of individual tax breaks for people without employer-sponsored coverage and new limits on the aggregate value of tax benefits for people with access to such coverage. In keeping with his support for association health plans [4] - private entrepreneurial ventures that essentially create purchasing clubs, with the purported objective of providing a wide choice of health plans for members, while avoiding state insurance regulation - the President refrained from making any recommendation that would suggest a role for the government in overseeing health insurance arrangements.

The White House proposal went nowhere, and the House and Senate both produced legislation that built on the existing SCHIP program, which permits state governments to assume the role of health care purchasers in identifying, selecting, and overseeing children's health insurance products that meet broad criteria. As of 2007, nearly all state SCHIP programs used this purchasing approach, and the continuation of SCHIP's architecture (and implicit rejection of the President's architecture), coupled with funding expansions, set the stage for a legislative fight and two vetoes of a key children's health care measure.

The administration's war over efforts to move the health care system in the "wrong direction" has not been limited to vetoes. On August 17, 2007, the Department of Health and Human Services issued a letter to state SCHIP administrators to "clarify" existing statutory and regulatory requirements related to the extension of SCHIP to children with family incomes above 250% of the federal poverty level. [5]

This letter announced that the Centers for Medicare and Medicaid Services (CMS), which administers SCHIP, would deny federal funding to states that exceeded the 250% mark unless they could make certain assurances: that they were enrolling at least 95% of children with family incomes below 200% of the federal poverty level (an achievement that experts in voluntary health insurance systems consider impossible); that the proportion of children covered by private employers had not dropped by more than 2 percentage points over the previous 5 years (although the federal Employee Retirement Income Security Act [ERISA] prohibits states from regulating private, employer-sponsored group health benefit plans); and that they were in compliance with certain anti - crowd-out practices, the most astounding of which, from a public health point of view, is the imposition of a 12-month waiting period before permitting uninsured children of any family-income level to enroll in SCHIP.

The Georgetown University Center for Children and Families reported in September 2007 that children in 18 states and the District of Columbia would be affected by the CMS ruling, which gave states 12 months to comply or lose funding. By the end of 2007, several states had announced that they would be scrapping planned expansions of SCHIP to 300% of the poverty level - changes that affect thousands of children and families.

In sum, what the administration could not achieve through legislation it has sought to achieve by fiat, including administrative directives that appear to run afoul of other federal laws, such as ERISA. So determined does the administration appear to be to halt the growth of a health insurance architecture it opposes - at least in the case of working families and children not covered through the Federal Employees Health Benefits Plan - that it will flout the law and punish thousands of children in order to achieve its goals.

The President's own tax plan - which is not income-related - underscores the reality that the issue with regard to SCHIP was never the level of family income that would qualify children for a subsidy. Bush's tax proposal also suggests that the real concern is not health insurance crowd-out: estimates show that his tax-credit plan would have a far greater crowd-out effect than any proposed expansion of SCHIP and would result in a net gain of only 3 million insured people. The administration's policy recommendations related to non - means-tested tax subsidies and its support for association health plans lead to the conclusion that the real issue is the role of government in a reformed health care system. The war is over ideology, not money.

Americans have always had greater social tolerance for individual financial support when it is given in the form of tax assistance (which is commonly perceived as letting people keep more of their own money) than when it comes as direct subsidization. The ease with which opponents of direct financing were able to bring down SCHIP simply by translating into actual dollars financial support that is pegged to the federal poverty guidelines does suggest, however, that preventing the same results in broader reform means paying close attention to the political implications of the structure of the individual-subsidy transfer.

But no matter how a subsidy is structured, the matter of system architecture remains front and center. The precedents set by Medicare in the creation of its Advantage and Part D drug coverage plan, as well as by state reforms such as that of Massachusetts, demonstrate the existence of a broad consensus regarding responsible approaches to building a legislative architecture for health care reform. We can only hope that the next president and Congress will follow that consensus.

No potential conflict of interest relevant to this article was reported.

Source Information

Professor Rosenbaum is chair of the Department of Health Policy and a professor of health law and policy at the School of Public Health and Health Services and a professor of health care sciences at the School of Medicine and Law, George Washington University, Washington, DC.


[1] Bush GW. Message to the House of Representatives. October 3, 2007.
(Accessed February 7, 2008, at

[2] Ku L. "Crowd-out" is not the same as voluntarily dropping private health insurance for public program coverage.
Washington, DC: Center on Budget and Policy Priorities, September 27, 2007.
(Accessed February 7, 2008, at

[3] Lee C. Bush: no deal on children's health plan. Washington Post. July 19, 2007:A3.

[4] The White House. Association health plans. 2003.
(Accessed February 7, 2008, at

[5] Smith D. Letter to state health officials. Baltimore: Centers for Medicare & Medicaid Services, August 17, 2007. (SHO no. 07-001.)
(Accessed February 7, 2008, at